IT

Lecture 1. –

Positive side of IT, it allows

 increased efficiency  operational excellence eg. tax declaration.
 Explore new products, services, business models
Previously, companies
concentrated on a limited
amount of products that were
highly popular and that way
they could be profitable. In
contrast, today they can offer
a large range of products and
sell them world-wide. The
increased scope of sales
provides profitability even if
they are less popular.
Websites, platforms allow the
world-wide trade. Eg.
Amazon

 Improved decision making eg. which products are popular  fact-based decisions
 Competitive advantage eg. bol.com if you order something today you can have it
delivered tomorrow
 Survival in today’s competitive environment

Negative side of IT
 Omnipresence
 IT productivity paradox  chance to fail, more investments don’t necessarily lead to
higher productivity. The reason behind:
 Measurement errors eg. doesn’t show in GDP, because it aims at
customers’ satisfaction
 Time lags eg. they may be long term returns
 Mismanagement
 IT is not a one-time investment  TCO (Total Cost Ownership)
 IT tools are more and more complex
 IT and business alignment  has been among the top 3 problems for firms.
 IT becomes a product  software, converted product eg. music, film, embedded eg.
intelligent furniture
  Prone to failure

IT transforms business in 2 ways:

1. Technical change (doing the same, but digitally)
2. Business change (transform the business model into a digital form eg. banking sector)
In response to this
 customer change their behaviour eg. higher service expectations
 competitors keep up
 legislations catch up with the evolving trends
IT dependence is increased in each sector, online services are mandatory, superior digital
service may generate CA
The reason behind IT project failure: most factors are human related eg. lack of executive
support, limited user involvement, poor project planning, unclear objectives.
Not only IT investments are growing, but their relative % to total investments as well.

Fundamental concepts in IT:

Hardware: everything that is tangible  power supplies, motherboard eg. CPU, storage
devices eg. DVD, RAM, input or output peripherals eg. printer, screen.
Value of hardware: store and process information
Moore’s law: a number of components that a chip can stores information doubles every two
years (exponential growth), thus storing and processing becomes cheaper.
Interconnected devices at work  higher omnipresence
These products gather information of their user eg. smart watch, tracking products in the
value chain, anticipate when the product will need maintenance.

Software: instructions that can be performed on the processor of a computer. It uses data as
its input it performs instructions in forms of software and deliver data as output.
Programming language compiled into machine language that is translated in bits 1 and 0. The
programming language provide means to code instructions into a structured way by using:
sequences (of instruction eg. Hello world), iterations (repeats the same task in different
variations), selections (execute tasks based on their values).
Instructions can be grouped into modules
 to simplify them eg. large problems into several subproblems
 re-use: an existing good module can be used again.
 Evolvability: modify or change module and leave the rest unchanged.
 BUT even modules are too complex to maintain (eg. Lehman’s law)
Value of Software: it processes data in short time frame and can repeat it, low processing
costs, error free, they can communicate over large physical distances  automatization

Database: is an organised way to store data in a computer.

Most databases are relational databases.
Data is stored in a set of tables

They are crucial for enterprises. Data can be created, read, updated, deleted.
Data is input and output of software processing.
Databases are Oracle, DB2, MySQL, etcetera
Allows critical reflection on data.

IT doesn’t matter:
IT is not a CA, but a KSF. It can be seen as the broadly adapted technologies before: steam
engine, railroad, telegraph, telephone, electric generator. At the beginning they offer
advantage, but once their availability increased and cost decreased they become fundamental
inputs.
A distinction needs to be made between proprietary technologies and what might be called
infrastructural technologies.
Proprietary technologies can be owned, actually or effectively, by a single company.
Eg. A pharmaceutical firm, for example, may hold a patent on a particular compound that
serves as the basis for a family of drugs.
 proprietary technologies can be the foundations for longterm strategic advantages,
enabling companies to reap higher profits than their rivals.
Infrastructural technologies offer far more value when shared than when used in isolation.
Eg: railroads or telegraph lines or power generators become part of the general business
infrastructure.
 the window for gaining advantage from an infrastructural technology is open only
briefly
The only meaningful advantage most companies can hope to gain from an infrastructural
technology after its buildout is a cost advantage
IT is also highly replicable. The near-infinite scalability of many IT functions  most
business activities and processes have come to be embedded in software, they become
replicable, too.
Bill Joy, the chief scientist and cofounder of Sun Microsystems, posed what for him must
have been a painful question: “What if the reality is that people have already bought most of
the stuff they want to own?”
IT is close to complete buildout:
 IT’s power is outstripping most of the business needs it fulfils
 Low price
 Capacity of the Internet network meets demand
 IT vendors are rushing to position themselves as commodity suppliers or even as
utilities
 the investment bubble has burst
What should be done: Yet few companies have done a thorough job of identifying and
tempering their vulnerabilities
The greatest IT risk is, simply, overspending.
What’s important is to be able to separate essential investments from ones that are
discretionary, unnecessary, or even counterproductive.
At a high level, stronger cost management requires more rigor in evaluating expected returns
from systems investments, more creativity in exploring simpler and cheaper alternatives, and
a greater openness to outsourcing and other partnerships. But most companies can also reap
significant savings by simply cutting out waste.
 Spend less
 Follow don’t lead
 Focus on vulnerabilities not opportunities

Lecture 2.
Computer networks: allow communication and exchange data between information systems.
Internet can be seen as the largest computer network in the world. There are different types of
networks: geographical, organization, transmission media etc.
 They are crucial in the life of an organization to homogenise information in
contrast to “stove pipe”  stand alone systems.
  Functionality can be accessible from other computer and you don’t have install
data, eg. mailing server.
 Interorganizational connections: Vendor Managed Inventory (VMI), Electronic
Data Interchange (EDI)  useful for supply chain management.
You can connect to external software and databases.
Servers: offer services in a network eg. mail servers, web servers, application server, database
server.

Business process: is a set of steps to produce a product or service. It defines the way how
things are done in the organization.

Socio-technical approach: Human decision making is required in the process to align IT and
Business and human factors such as employees and their IT requirements need to be taken
into account. It is important that people adapt them into their tasks.
The technology acceptance model (Davis, 1985):
 Perceived usefulness – when a person believes that using a particular system
enhances his/her performance.
 Perceived ease of use – when a person believes that using a particular system
would be free from effort.
How do we choose the right business model? By taking into account:
 Skills
 Financial resources: ROI, which project is more profitable
 Competitors
 Risks
Part 2: Enterprise applications
Traditional office software tools are not sufficient for organizational purposes eg. Excel
failure to measure corona virus cases.
Porter’s value chain: a company is a set of types of activities which all add value to the final
product delivered to the customer. It contains: primary activities, and secondary /support
activities. Information systems support these diverse activities and make the process more
efficient, improve customer satisfaction, supplier intimacy.
Limitation of the model: it is mainly concerned by product producing. Eg. consulting and
service companies are not covered by it. Support activities are really only supportive ones?

Main types of enterprise applications – vertical typology:

 Transaction Processing Systems (TPS)
 Management Information Systems (MIS)
 Decision Support Systems (DSS)
 Executive Support Systems (ESS)
TPS: register transaction processes, transaction = elementary daily operation in an
organization eg. payment, order, shipment. Transactions are often a step in the business
processes.
 Allow monitoring these transactions by employees
 It is situated at lower operational levels – it contains highly detailed information
 Companies have many transaction records  high performance required especially if
real-time is required  in contrast to batch processing: first store, and then process
many transactions at once eg. banking.
 They are predefined and thus only allow decision making through fixed ways
 They allow the user to create, read, update, delete transactions
 They are critical operations
 They may occur at each part of the value chain
 Often serves as inputs for other systems
 Typically focuses administration and finance in support activities, and operation from
the main activities
UPS example: service request from customer, payment by customer, receipt of package,
delivery of package to customer etc.

MIS: deliver predefined reports of what’s the firm’s current performance.

 Regular basis eg. weekly
 When an event occurs eg. low stock
 Ad hoc basis – sales product A
 They are fixed in terms of incorporated data, the way data is aggregated, how data is
presented eg. text, graphs, only answers to routine questions with predefined solutions
 Typically used at operational level and middle-management.
  It aggregates information from TPS  can aggregate one or multiple activities in the
value chain
 It is a short-term related, less critical than TPS
 Data processing requirement is less critical, less demanding in terms of time.
 Eg. MIS can deliver useful information about which was the most profitable package
among the three of them:

UPS example: how many delivery services we sold in a certain period of time, area,

DSS: generating report for non-routine decision-making.

 Non-repetitive
 Ad hoc by definition, not ex ante
 Requires more human input of what kind of information should be generated
 It uses information from TPS and MIS, and can use external information eg market
trends, customer preferences
 Touches multiple domains within the value chain
 A model is required for the analysis, not merely aggregation of data to estimate the
impact of a marketing campaign, sales of a new product etc.
 It’s typically used by middle management
 It is referred as business intelligence
 It’s on administrative/finance infrastructure level and operational and sales &
marketing level in the value chain
UPS example: what is the impact on the revenue of a 10% discount on all international
deliveries? What will be the impact on delivery time if the traffic is keep growing? What is
the impact on our truck occupation rate if delivery requests increase with 10% in December?

ESS: assist strategic decision making eg. which market to enter, which product to launch,
impact of new competitor
 directed towards the CxO level,
 combined information from many sources (TPS, DSS, MIS, + external databases)
 highly summarised and aggregated information on the performance of the organization
in forms of eg. KPIs.
 It doesn’t suggest what action should be performed  high dependence on human
decision making
UPS example: what is the current cash flow, stock price, account receivable, market share,
inventory, online customer base.
These systems and the information flow among them should be well integrated, in reality we
see integration issues.

Geographical Information Systems (GIS): focuses on geographical related data.

 Relates to the increased importance of information gathering (IoT) – GPS enhanced
data
 TPS dimension: focus on the gathering transactions containing location related data
eg. tracking location of delivery trucks,
 MIS dimension: allows visualization of location related data in standardised reports
eg. what are the most frequent routes taken by our delivery trucks, what is the current
state of flooding in a particular state.
 DSS dimension: allow decision making, simulation, impact analysis of location related
issues eg. what would be the impact on our delivery time when rerouting certain
trucks? Calculate and visualise the response time to the flooding disasters along
certain intervention scenarios

Group Decision Support Systems (GDSS): help groups to take complex decisions in a
structured way while involving a broad set of stakeholders.
 Free-brainstorming opportunities, honest voting
 Can be used in several phases of the decision-making: relevance of problems, possible
solutions
 Has evolved with the requirement for conference rooms, from diverse locations to
collaborate and participate
 Importance of a good moderator
 Eg. pollev.com

Main types of enterprise applications – horizontal typology

 Enterprise Resource Planning (ERP)
 Supply Chain Management Systems (SCM)
 Customer Relationship Management Systems (CRM)
 Human Resource Management Systems (HRM, not discussed in detail)

ERP systems aim to support all administrative and data processes in the organization. It
combines all value chain activities in an integrated way.
 They are very complex
 Expensive
 Long implementation time eg. 2-3 years
 High potential benefits and returns
 It integrates the company: no duplication of data, global optimization instead of a local
one, one system can automatically trigger activities in another process eg. customer
places an order and the financial department receives the information and reacts
 Standardization / best practices: sometimes companies outsource these systems 
these systems are proven, domain knowledge
To overcome the ordering cost dilemma: the predecessor of ERP was Material Requirement
Planning (MRP) system is created.
MRP: determines the amount of raw materials required for a product
 It performs the calculations of the parts of Bill of material (BOM) eg. table consists of
a table leaf, 4 legs, 8 crews
Limitations of MRP: client demand unknown, production capacity is not taken into account
 MRP 2 overcomes these shortcomings  still not a complete ERP system, as the
focus was limited on manufacturing process and no integration with other
functional domains.
First real ERP system was developed in the late ‘70ies.  higher efficiency, one time data
input, real time processing, better production planning and lower safety inventory, better
arrangements with suppliers, better financial overview.
Integration among the functional domains were further increased during the ‘80ies with
support activities:
 Personnel & finance administration (HR administration)
 Personnel & production (planning)
 Technology & production (maintenance)
 Procurement for indirect goods as well
The added value becomes clear in terms of non-production companies.
In later stages, the system improved: available to promise (ATP), capable to produce (CTP).
These systems were introduced in other domains: marketing – to calculate customer lifetime
value, HR to provide their career development, finance – cost profit ratio analysis.
ERP systems become specialised in practices within different industries, languages,
currencies.
 Automatized orders, invoices, etc. supplier to customer operation via Electronic
Data Interchange,
 Organization and financial institutions via Electronic Fund Transfer
 Exchange of information via extensible markup language.
SCM system: inbound &outbound logistics
 places orders
 alignment with production schedule
 alignment with inventory level
 delivery orders
 Adoption of advanced inventory management systems eg. Vendor Managed Inventory
(Supplier needs to make sure there’s always enough product in our stock), Just in time
Shift in SCM  from push based to pull based model, avoidance of bull-whip effect.
These systems facilitate SCM planning (demand) and execution (tracking of items).
Communication is key in order to avoid bull-whip effect. Holding inventory has a cost, stock
break and late delivery also.

CRM system: primary activity in the value chain, it can replace the standard ERP, it deals
with specific functionalities regarding customers.
 Operational CRM: managing customer sales, customer service, marketing approaches
 Analytical CRM: analysing customer segments and profiles,
 360 degree view on customer thanks to integrated data from other departments
Well-known CRM providers include: Salesforce.com (Oracle), SAP AG, Sage CRM, Siebel
(Oracle), Microsoft Dynamics CRM.

Mastering the Three Worlds of Information Technology

One of the biggest problems companies face is coping with the abundance of technologies in
the marketplace.  what they do, which one to purchase, how to adopt.
Executives have three roles to play in managing IT:
 select technologies
 nurture their adoption
 ensure their exploitation
Economists and business historians agree that IT is the latest in a series of general-purpose
technologies (GPTs). The complements of process GPTs are organizational innovations, or
changes in the way companies get work done.  The new motors gave companies the
freedom to redesign work flows.
 1. (FIT) includes technologies that make the execution of stand-alone tasks more
efficient. Word processors and spreadsheets are the most common examples of this IT
category. Design engineers, accountants, doctors, graphic artists, and a host of other
specialists and knowledge workers use FIT all the time.
 They are powerful: Enhancing experimentation capacity, Increasing precision: The
company’s designers came to trust the software so much
2. (NIT) provides a means by which people can communicate with one another. Network
technologies include e-mail, instant messaging, blogs.
 NIT allows people to interact, but it doesn’t define how they should interact. It
gives people freedom to experiment instead of telling them what they must do.
 Unlike FIT, network IT brings complements with it but allows users to implement
and modify them over time.
3. (EIT) is the type of IT application that companies adopt to restructure interactions
among groups of employees or with business partners. Applications that define entire
business processes, such as CRM and SCM—as well as technologies, such as
electronic data interchange, that automate communications between companies
 Companies can’t adopt EIT without introducing new interdependencies, processes,
and decision rights. Changes become necessary as soon as the new systems go live

Managing the three types of IT:

Selection: this method of choosing applications reflects an outside-in approach: Executives
describe a technology that’s available in the outside world and propose that it should be
brought into the company. No one stops to think about whether the organization actually
needs the capabilities that the technology offers.
A more sensible question for executives to ask is “What do we need IT to do for us?” 
 Managers should also set IT priorities.
An inside-out approach puts the spotlight squarely on the business before evaluating the
technology landscape; it focuses on the capabilities that IT can provide rather than on the
technologies themselves. A discussion among executives about capabilities will highlight
what the business most wants to be good at—and it will show whether there’s agreement
about what the business needs to be good at. Typically, FIT delivers productivity and
optimization, NIT increases collaboration, and EIT helps standardize and monitor work. Thus,
when executives decide what capabilities they need, they will know what kind of IT to buy
and the nature of the initiatives they must manage.

Nurture the adaptation: At this stage, managers’ main responsibility is to help create the
complements that will maximize IT’s value. 
FIT doesn’t bring its complements with it, so managers must find ways of identifying them.
Because the use of NIT is voluntary rather than mandatory, they make users feel more, rather
than less, in control of their work. As a result, their adoption isn’t difficult
Enterprise IT is hard for companies to adopt. The benefits look great to people at the top, but
employees usually dislike EIT technologies.

Exploitation: Companies can best exploit FIT by fine-tuning organizational complements.

Employees exploit older NITs such as e-mail and instant messaging on their own, but
business leaders have a role to play in exploiting newer technologies like blogs and wikis. 
EIT’s exploitation is often easier than its adoption. Since the work of imposing new processes
is done by this stage, the manager’s task is to leverage already standardized data and work
flows.

Lecture 3.
ERP systems have high adoption, but uncertain effects: lower relative costs and higher ROI of
other systems, 70% of ERP are successful, 50% overrun budget, on average 3 years
implementation. If a project is huge and the systems fails it may have a catastrophic result eg.
bankruptcy.
ERP vendors: own development, SAP, Oracle, Microsoft.
Implementer: it can take the 60% of the project, own implementation, ERP vendor provides
specialist, consultants eg. Deloitte.
Maintainer: own deployment, specialised provider (CSC, IBM, EDS)
There are 4 important phases in the implementation of ERP package:
1. Ex ante evaluation:
 What are my business goals
  To what extent the system fits to my business goals
2. Implementation & testing: even if you go for vanilla implementation there are still
some configurations to be done
 Configuration
 Customization: companies want to adapt the system to their specificities
 Specification per location
 Migration of previously existing data and conversion into the new system
 Users should be trained as well
3. Go live: system is put into production
4. Maintenance:
 Make small adjustments, implement updates and new versions
 Support of users
Drawback of ERP:
 Huge and complex projects
 Encompassing the whole organisation  change of software, processes, people
 Requiring advanced skills
 Requiring top-management’s vision and budget, and operational change management
– buy-in
 Risky projects
 Most project implementation exceed 3 years
 Horror stories
 Costly
 More than 50% overrun projects
 Vendor lock-in in case of external ERP
Management decision:
 Sourcing (make or buy)
 Software
 Infrastructure
 Assuring Business IT alignment
 Architecture and integration
 Functionality
 Variability
 Maintenance, evolvability, adaptability

Sourcing:
Software: outsourcing or developing in-house?
 In-house:
 Maintains idiosyncrasy (your own way of working): core competencies, competitive
position, innovativeness, organizational culture. It does not include built-in predefined
vendor processes
 Con: neither it includes best practices, in-house responsibility now and in the future in
terms of maintenance, new technological trends, and IT skills
  Pro: It maintains independence, avoid vendor lock-in
 Buying it:
 Software vendor/implementer has a lot of technical knowledge, experience, resources
 It takes care of updates and follow-up new technologies
 Con: potential vendor lock-in which is important on the long term
 IT Business alignment:
a. If the external vendor specifically develops it for you, then there’s no issues,
 it should maintain idiosyncrasy
 con: requires customization  high cost now and in the future at every updates
 con: it doesn’t incorporate best practices from the industry
b. When buying a licence of an existing package, it raises concerns of IT-Business
alignment
 Minimize customization  lower costs
 It’s called vanilla implementation – no or very limited customization to the system
 Project implementation is short
 Adopts best practices
 Con: idiosyncrasy and uniqueness of processes at risk
 Possible employee resistance
The way in-between: functional-fit analysis

Infrastructure and hosting

 In-house provisioning:
 Full control over self-owned servers (privacy, security, and legal issues)
 Costs  long term or short term?
 Con: knowledge and competences are required
 Update of infrastructure and hosting software is in-house responsibility
  Buy: external cloud provider
 eg. AWS, Google, Microsoft Azure
 less in-house responsibilities as the provider takes care of infrastructure and updates,
provider allows rapid and flexible up-/down-scaling, and agreements are made via
service level agreement SLA  easier management
 costs  long term or short term? (as a service)
 con: some loss of control (privacy, security and legal issues)

Architecture and integration in terms of functionality: purchased in full or the result of a

best-of-breed combination of several packages.
 One integrated system:
 Integration is no issue in terms of technology (data formats, frameworks) and
semantics (standardised concept definition)
 Con: business IT alignment  it doesn’t perfectly fit for your needs
 Best-of-breed
 Better IT business alignment
 Exploits the strengths of multiple vendor specialist eg. CRM, SCM
 Con: integration issues may be very complex  technology, semantics, costs show up
at every update
Integration in terms of variability
 One standard approach for everyone
 No significant integration issues
 Easier to maintain and control
 Con: may not align with individual practices of every unit
 Applying different variants for different departments
 Better alignment with individual practices of the unit
 Con: integration is necessary at every update
 Con: overview might be complicated

ERP packages are difficult to adapt (Lehman’s law) and static

 Conflict with the business reality of agile companies
 Updates are complex eg. every 5 years which takes 3 years
 Vendor might push costly updates
 Maintenance issues
 Trend/goal: increased modularization of software
How do we want to develop an enterprise application?
 Which activities do we have, what order they should happen.
 What kind of information do we need to execute the task
 Which resources do we need? Knowledge, financial, human resources,
technology?
In general when we talk about project management in terms of enterprise application they call
it system developing lifecycle. The lifecycle that develops enterprise systems.

Planning
 Planning is crucial even if it’s a not 100% correct one. IT planning is complex.
 Need to define the scope of the project
 Ensure IT Business alignment
 Cost benefit analysis
 Feasibility analysis including risk and mitigation
 Planning of tasks and resources

1. First step in planning is having a clear view on business goals, then the IT goals can
support them.
 One way is to map IT goals and business goals and see whether they match (can be
differentiated by primary and secondary goals)

 Another way is Balanced Score Card:

e-BSC is similar to the previous traditional BSC:
Future orientation – Learning and Growth Perspective: our IT organization is well positioned
for future challenges
Operational excellence – Internal Business Process Perspective: we want to have efficient IT
operations
User orientation – Customer Perspective: mission is to be the preferred supplier of
information system
Corporate contribution – Financial Perspective: to what extent the firm perceives IT
applications as valuable?

-
2. Second step is defining the scope of the project
Scope document: short description why you need the IT project
 problem to solve by the project
 how does it fit into my company
 main functionalities/capabilities of the system: what will it do, who’s involved,
budget/timing?
  Expected benefits from the project: how does it solve the problem, how does it
contribute to reach the IT/Business goals, why this project is better than alternatives
 What is IN the scope of the project what is out  avoid scope creeping – when the
scope gets larger and larger

3. What can be the benefits of a new application?

- Higher performance
- Lower cost in working capital and late deliveries
- Increasing sales
Some benefits may be intangible
- Strategic initiative
- Higher customer satisfaction
- Improved decision making
- Ensuring security

4. Risks of the IT project

- Missing critical employees, consultants
- Legal issues eg. competition law, privacy law
- Organizational resistance
- Technological failure
- Natural disaster
 Likeliness of these to occur
 Impact
 Ways for remediation
These should be taken into cost assessment
5. Possible costs: make a distinction between one time and recurring developments costs
One time development costs:
- Salaries of analysts, developers, consultants
- Equipment/hardware
- Training
- Facilities
- Communication
- Licences
- Risk avoidance measures
Recurring costs:
- Connectivity costs
- Equipment maintenance
- Software maintenance
- Helpdesk support
One way of ranking the possible investments is by comparing their Net Present Value:
If it shows larger amount that 0, you can put it forward. Remark: not every benefit is tangible
benefit. Alternatives: payback period, ROI
6. Create an initial working schedule
- Which tasks have to be performed?
- How long do they take?
- Competencies needed?
- How many people do we need?
- Interdependent tasks?
- Helpful technique: work breakdown structure, PERT chart, Gantt chart

Work breakdown specify tasks, optionally duration, allocation, dependency.

This is more advanced than breakdown structure.
Critical path: the earliest and latest finish times are the same. If one of them is delayed, then
the whole project is delayed. Critical path is the one in the project that determines the
minimum execution time. As soon as one of them delays, the whole project delays as well.
A business case is a formal document with a structured overview of information that provides
justification of a specific investment based on well-founded investment decisions.
Requires continuous attention:
 Business case development
 Business case maintenance
 Business case review
 Business case process accommodation

IT business case document should include:

 Scope document: vision, IT/Business goals
 Expectations, detailed anticipated benefits and costs
 Anticipated risk
 Initial planning, feasibility
All the previously described items.

Typical documents during the planning phase:

 Scope document
 Cost-benefit-risk analysis
 Initial planning schemes (Gantt, PERT, WBS)
 All incorporated in a sound business case
Based on this, management should take a go/no-go decision. If it’s a go, they should inform
all stakeholders and show clear management commitment.
Many possible project vs limited resources result in need for program portfolio management:
which one should be started/continued/stopped?
Analysis
It identifies requirements of the IT system that needs to be developed in the project
 What should be the functionality of the system?
 This phase is situated at the border between business and IT  should have people
understanding both aspects
 The goal is to become the domain expert of the system to be developed
In order to have a clear view on how the business works in the organization (often it is in the
minds of people), for this different stakeholders should be contacted. Analyst should solve
possible inconsistences in description and make sure they get an exhaustive view of the
business processes. It’s possible that users don’t know their requirement of IT system.
How should we get the right information then?
 From existing document within (forms, procedures) outside of the company
(standards)
 Interviews with stakeholders eg. questionnaire
 Observation of how the company works
 Workshops, brainstorming with colleagues
 Develop intermediate prototypes so that users can test it and tell their opinions
 Or just adopt it as it is if it covers all that we need – vanilla implementation
Documents used for analysis:
 Use cases: an activity that the system should perform in response to a request by the
user
 Data models (ERD)
 Process models (BPMN)

1. Use case:
There are also use case descriptions that describes the steps which happen when an external
actor and a system interact. It mentions pre-conditions, the outcomes, possible scenarios, and
exceptions.

2. Data model: describes the things (entities) of which information should be stored in
the information system.
 Eg. customers, products, employees
 The entities have several instances – which are the rows of a table in the
database
 For each instances the system keeps track of attributes eg. name, age, street 
columns of a table
 See an example of it later on

3. Process model: it describes how processes are done in a company.  example later
on
This is often the first time someone studies how the organization works, therefore it may
reveal inefficiencies. This is an opportunity to resolve them. Since a new IT system already
requires change management.
Hammer and Champy (1993): don’t automate, obliterate: (Ford)
The three way match in accounting: (1) purchase order (what have we ordered), (2) receiving
report (what have we received), (3) vendor’s invoice match (and the payment)  the invoice
can be paid. It was a really inefficient process, so they reengineered it and then automate the
process.
Is your project turning into a black hole?
Black holes get there one day at a time through a process known as escalating commitment to
a failing course of action.1 While escalation of commitment can occur in any type of project,
it is particularly common in large technology-intensive projects, such as those with a strong
IT component. The complex and uncertain nature of these projects makes them particularly
prone to escalation. Without executive intervention, projects of this type will almost
inevitably turn into black holes.

In the NDS project, divergent opinions on both the project approach and the charter meant
that design decisions were repeatedly revisited and requirements were unclear, which led to
confusion and drifting.
The NDS project manager is replaced, but the new project manager is not up to the task, and
the project charter is not clarified or changed. 18 months into the project, the steering
committee and corporate management approve a revised project plan exceeding the initial
budget by 120%.
In response to criticism, the project manager argues that the project is no longer in need of
fixing. He also presents a well-devised, detailed strategy for migration from the old to the new
system that quells some of the criticism.
Solution: Two approaches are particularly effective: using intelligent project reporting and
developing a culture that encourages problem disclosure.
Using intelligent project reporting: Dashboard reporting—which often signals project status
as green, yellow, or red—can also be effective in providing busy executives with early
indicators of escalation. Objective third party should review the reporting.
To supplement these practices, there is the use of alarm bells—predefined thresholds for time
and budget overruns with predefined actions that need to be taken when these thresholds have
been reached. By predefining levels and actions, executives are relieved from being perceived
as playing “bad cop” with project managers
Develop a Culture that Encourages Problem Disclosure: An organization that fails to root out
the mum effect is fertile ground for project escalation to take hold and grow. Executives need
to demonstrate that reporting bad news is rewarded and that problems are dealt with openly
and forthrightly. The Toyota-inspired corporate norms is to “love deviations” because of the
learning opportunities they offer.
Drifting solution: Freeze or Reduce Headcount in the Project Temporarily, Get a Small, Good
Team to Reassess and Re-Plan, Make a Clear Go/No-Go Decision
Stop treating symptoms: Break the Habit of Solving Problems by Throwing Money at Them,
Stop any Futile Attempts to Fix the Project One Symptom at a Time, Put Your Best People on
the Project and Resolve the Root Causes
Stop Rationalizing Continuation: Cultivate Suspicion Towards New Rationales for Projects,
Bring in Outside Expertise for a Review, Halt the Project Temporarily, Create Transparency
and Visibility for a Broader Set of Stakeholders, Conduct a Series of Hearings
The three underlying themes for the actions we propose are: creating transparency, countering
skewed and biased thinking, and reducing or stopping momentum. In addition, it is useful to
ask for how long a specific pattern has been present. Consequently, in later stages of
escalation, the first priority should be to slow the momentum of the project. This takes a
measure of determination and political will, because strong forces that favor persistence will
need to be overcome.

Lecture 4.

Ford: we have 500 people doing the 3 way check, while competitors like Mazda they have 5.
The department spent most of its time on mismatches among these 3 operations.
Invoiceless processing: Ford simplified the process before including information technology,
1. Sending the order - registering it in the database – no hard copy of it 2. Accepting only
those goods that are corresponding to the order in the database (check the goods
immediately), 3. Sending the payment directly for the correctly received goods instead of
invoice. They used database for the purchase orders, but the purpose was not only automating
the process with IT, but reengineer it.
Results: Headcount went down with 75%, no invoices and hard copies of purchase, higher
accuracy
Hammer and Champy referred to BPR  Business Process Reengineering. BPR means the
fundamental redesign of business processes in order to achieve critical improvement in
performance such as costs, quality, service and speed.
They don’t automate inefficiencies, but asking difficult questions. Link with IT paradox 
it’s not IT itself that makes things efficient, the process should be efficient first.
It concentrates on a limited set of strategically important process, it makes radical changes not
small changes. Don’t automate, obliterate  start everything from scratch.
Consequences: risky  all or nothing with an uncertain result, expensive, high potential
impact. Assess effectiveness by measuring the performance before and after the intervention.
2 approaches in BPR:
- Clean state approach: start from scratch, concern about what would be the efficient
way to achieve this goal.
- Systematic redesign: you don’t have a new canvas, concerned about how can we
redesign it in a fundamental way.

Total Quality Management and Continuous Process Improvement:

- Introduced by Deming in 1950
- Goal: make the processes more customer oriented
- Keep existing processes and try to improve them  BPR clean state approach
- They are continuous efforts, while BPR is a one-time big project that is advised to be
done every 5 years.
Ways to optimise Business Processes:
1. Eliminate unnecessary tasks eg. requesting reimbursement of uniform shoes  one
approval of the shopping receipt  eliminate 2 approval  final decision.
2. Change the optionality of the task eg. cots under 500 euros do not need 2. Approval.
 3. Tasks to be executed in parallel eg. not waiting for the bank to confirm the account
balance but directly sending the invoice.
4. Tasks initiated earlier
5. Modify the starting conditions of tasks eg. university enrolment no need to process
further if the student is rejected at the first phase.
6. Automate the task eg. computers and machines, try to redesign the processes based on
the previous points first, eg. barcode scanning instead of human input operations.

Design
At this stage:
1. Defining the overall architecture of the application. We don’t ask ourselves anymore
what are the benefits of the application, but how can we execute it in order to
materialize its benefits?
 Which building blocks / modules should we have?
 How to integrate these different modules?
 How the application integrates with external applications?
 Which technologies we will use?
 It is not a simple 1:1 mapping problem.

2. Define the algorithms for the application

 How to calculate the route from A to B
Artefacts created are mainly data and process models enriched with technical details

Implementation
The programming part happens at this stage. It can be done in several ways:
 In-house programmers or hired consultants
 Through external consultants
 Buying and modifying an off-the-shelf application

Testing
At this stage the application is tested whether it matches with the requirements and promises.
Types of tests:
 Validation: Does the application meet the actual needs of the end users? Does our
costumer happy? Was it the right application to build?  this is the most critical
testing
 Verification: Does the application work according to requirements formulated
during the analysis phase?
 Unit test, system test, whole application and interactions
  Security application controls: application can only process authorised data, input
(right format) processing (correct calculation) output (correctly presented)
Artefacts as testing plans.

Go-live
Different go-live strategies:
 Big bang: all users need to make use of the system as of the same moment 
risky, possible mitigation (back up with old system until the new system proved its
value)
 Parallel strategy: less risky, more secure. Running both old and new systems in
parallel. It’s secure, but expensive.
 Pilot study: a part of the organization tries the system out and when it works the
rest follows it.
 Gradual way: functionalities are gradually introduced per business processes,
departments etc.
Implemented artefact.

Maintenance
Adapt the application, add new features, allow compliance with new technological
frameworks.
Types:
 Corrective: fixing identified problems, correct bugs
 Perfective: adding new functionalities (eg. higher performance)
 Adaptive: need to change the software because of other items are changing in the
technological environment eg. browser changes
 Preventive: refactoring the structure in order to have benefits in future, so that you
don’t have to correct it in the future.
Updated and revised software.
Remember maintenance can be a huge part of the total cost of ownership.
Law of increased complexity (Manny Lehman): As an evolving programme is continually
changed, its complexity is increased and it becomes more difficult to adapt and maintain it.
A software that was initially well designed may become very complex, this situation is even
worse when the initial design is not that simple and straightforward. It highlights the
importance of high quality design. Preventive measures are important from time to time
restructure the system.
Artefacts refer to things that need to be delivered at the end of each of the phases.
Relation to the IT paradox  increasing maintenance costs?
If it becomes too complex, its maintenance cost raise as well and at the end it will take more
costs than provide benefits. At one point it is rather worthy to develop a new programme than
using the old one due to its complexity and then consider it as a sunk cost (cannot use
anymore). IT paradox says it’s not because you invest more and more you get more value.
Lehman’s law: the more complex the programme, the more difficult to adapt it and the
costlier it becomes.

Project management:

Time & cost eg. first-mover advantage

Quality eg. security is the most important aspect when health of people is impacted.
Projects can be executed in two ways:
 Waterfall approach: linear way of executing tasks. Planning, analysis, design
etc.It’s a strict linear way and you only advance to the next phase of the sequence
once one is approved (document driven). Pros: beneficial for large and complex
projects
Cons:
- They are long projects so that the requirements identified in the beginning may
be outdated when the project is implemented.
- Throw over the wall: get things done in your phase of development, and push
problems over the next phase for other people to deal with it.
- The first time when the application is validated at the end of the project.
- It can be costly

 Iterative modelling (agile): go through each of the phases several times. It often
starts with the riskiest phase. It works with prototypes  you can show some
result to the end user during the project, if it’s not working properly you can adapt
it  throw away (drawings) or evolutionary prototypes (application).
Pros: end user involvement is high as they are involved in each of the phases, risk
management eg. outdatedness is reduced, you can deliver partly earlier than the
full project terminates.
 Cons: coordination is more difficult as more things may be executed in parallel

 Alternative approaches: end user development: domain experts with little or no

technical expertise perform parts of the development by 4 th generation
programming languages  you don’t need to tell How the system should perform
something, but what it should perform.
Pros: fast development, end-user is highly involved
Cons: Limited possibilities, often under the radar systems (shadow IT): lacking
decent tests, security, integration, and maintenance procedure.

Standish group publication 1994: Chaos report studying the success of IT projects:
 From 9 to 16% successful
 32% is cancelled
 42% achieves its planned scope and functionality
 50% has budget overrun of almost 100%
Project failure factors are related to human factors. When we take a look at project critical
success factors, they are mostly human related as well eg. user involvement, support from
upper management, clear system requirement definitions.
Sunk costs: All the investments that you made earlier should not be taken into account in
future investment decision  you cannot recover the costs.
How to be successful:
 Apply the suitable development methodology
 Apply best practices and be aware of escalation and failure factors
 Have experienced project manager who don’t underestimate the job
 Build the bridge between IT and Business

New business models and economic impact

Porter’s 5 forces model:
It is often IT that opens the path for offering new alternatives/ substitutes eg. Uber.
Laudon & Laudon (2014) propose 4 strategies where IT can help with these competitive
forces:
 Automatization of processes can provide competitive advantage: eg. Wall-Mart’s
continuous replenishment system: when the product is scanned at the counter, the
order is booked for the replacement, grouped orders are sent to the supplier,
supplier can check the required orders.  less storage cost, fewer stock breaks,
potential for customization per geographic region.
 Product differentiation: Either add new products, services to an existing product,
service as a value addition. Eg. Google with Google Maps, eBay with PayPal. Or
making your product different with mass customization eg. Dell allowing
 customers to choose their individual computer parts; Lands’ Ends personalised
clothing.
 Focus on niches: IT allows you to have much more information on customers.
One-on-one marketing: personalised messages based on their interests. One-on-
one service: give high value customers additional discounts.
 Intensify relationship between customer and supplier: information exchange is
easier, product suggestions, intense relationship increase the switching costs and
barriers for actors in the market.

Transaction cost theory: states that organizations tend to reduce their transaction costs.
Transaction costs refer to costs of buying products or services on the market due to looking
for suppliers, setting up communications, negotiating. One way for reducing transaction cost
is increasing the firm size.
IT allows to move the transaction curve and reduce the cost without changing the firm’s size,
because it allows to do all the operations in an easier and cheaper way. Eg. network
technology might allow car manufacturers to find the right supplier for each parts of their
operations.

Agency theory: considers a company as a web of contracts between individuals with their
own interest. Employee and employer have different interests, and the employer need to
invest more if his firm grows because there are more people to monitor.
IT allows to monitor large number of employees in an easier way, so that it lowers the agency
costs  allows to increase the turnover of a company without increasing the number of
middle-management people. Eg. automatic processing of online orders via a webshop allows
companies to grow without having to hire additional employees for this task.
Rise of E-business
The real benefits occur when the different sources of data are combined. 3 phases: 1. phase:
stovepipe systems, 2. Phase interdepartmental, intra-organisational integration eg. ERP,
agency theory, 3. Phase interorganisational integration eg. transaction theory.
Electronic integration between different systems inside and outside of the company by using
Internet infrastructure has given rise to e-business and e-commerce.
E-business: includes all electronic information exchange inside and outside of the company to
support business process.
E-commerce: includes all electronic information exchange between a firm and external
stakeholders eg. buy & sell products via the Internet.
Typical properties of e-commerce:
Omnipresence:
- Market place is created and there’s no need for physical presence, overcomes temporal
and special limitations.
- Transactions costs are lowered
Worldwide reach:
- Customers around the world can be reached
- Market = online world population eg. long tail
Universal standards:
- Technical standards used for e-commerce (internet) are generally accepted
- Each computer with Internet connection can be connected
 - Lowers offering cost (business) and searching costs (customer)
Information richness: (complexity of information)
- Online channels allow shops to be both rich in personal communication and in their
large offering.
Interactivity: (direction of communication)
- Online channels allow interactivity and mass communication eg. bots, social media,
pattern recognition,
Information density: (amount and quality of information)
- Low costs for gathering, storing, distributing high amount of information
- Possibility for price differentiation
Personalization / customization
- Messages can be adapted to personal profiles eg. names, interest
- Have notifications of things you find important, information wall be adapted based on
your clicking behaviour.
User generated content:
- Social networks allow to create texts, videos, audio
- Reviews on websites
- Even if it’s only personal, it affects commercial offerings

Disintermediation: elimination of intermediary players due to internet marketplace eg. travel

agencies
Re-intermediation: the creation of new intermediary players due to the internet marketplace
eg. price comparison and review sites in the traveling industry.
How to Launch Your Digital Platform?
Five basic questions an entrepreneur should ask himself in order to make the right strategic
decisions to build their own digital platform?
1. Can I Attract a Large Group of Users at Once? A new platform can do this only if at
least one of two conditions is true
 The company already has the users it needs on another platform eg. advertisers had
already joined Google’s popular AdWords platform for search engine advertising,
so that Google could easily transfer this success into its new advertising mode:
AdSense – Ads on websites.
 User data is publicly available eg. Zillow was able to gather information from
government records to present houses with neighbourhood and school district
information on its site.
Zillow’s approach typifies a three-step process for launching an advertising-
supported platform: (1) Collect data from public sources, and organize it to create
a useful service that attracts consumers. (2) Encourage users to submit improved
data directly to the platform. (3) Charge companies for preferred ad placement. 

2. Can I Offer Stand-Alone Value?

 VCR or that any studio offer content on videocassette
Stand-alone value can present difficulties when extra features require costly
hardware, but it’s easy to add functionality to a software program or an app
 Start with an industry niche eg. Yelp started with reviewing ethnic food in San
Francisco. As it grew, Yelp naturally expanded from reviews to other functions,
such as accepting reservations, forwarding online orders, and offering discounts
 Find or build small social groups eg. Skype
 Build audience by user invitation eg. video gamer who needs supply from a real
life acquaintance

3. How Will I Build Credibility with Customers?

 The basic strategy for credibility building is to attract a marquee platform
contributor eg. well-known game developer to provide a given game on the
console

4. How Should I Charge Users? The functionality of digital platforms offers increased
flexibility in making these choices
 Pay-as-you-go eg. Groupon charged restaurants only when a consumer bought a
voucher
 User subsidies: Whether it’s launching a cereal brand or opening a restaurant,
marketers widely use discounts and promotions to encourage consumers to try new
offerings. Eg. Having already paid drivers to be on call, Lyft could provide free
rides to promote the service at no additional cost. Subsidizing both sides of a
platform like this implies significant expenditures
 5. Can I Make My Platform Compatible with Legacy Systems? Building in compatibility
with legacy systems is often key to a successful launch, though it may involve
marrying yourself to outdated technology
 Paytrust made itself compatible with billers’ legacy systems, so the service was
useful to consumers even before billers “signed up.”
 Platforms typically rely on interoperability, data conversions, and information
synchronization to reduce the costs of switching. For example, a new Gmail user
often has an existing e-mail account that will continue to receive messages.
Google’s MailFetcher feature pulls those messages into Gmail, thereby reducing
the barrier to switching.
 It’s a delicate balance: Platforms must offer enough compatibility to showcase
potential benefits, yet not so much that users delay switching to reap those
benefits.

Lecture 5
E-commerce market positions:
- Manufacturer/ primary service provider: a company producing goods and directly
selling them to customers. Eg. physical products, media, services.
- Online reseller/ retailer: products of other manufacturers are provided through an
online channel.
- Online marketplace: a digital online environment in which sellers and buyers are
connected. It can be B2B, B2C, C2C
- Information and transaction broker: offering customers / companies products, price
and availability information. They aggregate and integrate underlying information,
critical point = user friendliness, eg. which company offers the cheapest vacuum
cleaner? It offers the functionality of transaction with these companies.
- Portal: first point of access eg. Yahoo

E-commerce revenue models:

- Direct sale of a product or service: per item, subscription model
- Advertising: banner ads, pop ups, introductory movies; variants: cost per mille (CPM
– charge by seen), cost per click (CPC), cost per acquisition (CPA), sponsorship
- Commission per transaction: for resellers and brokers
- Exploitation of customer data: e-mail marketing, market research
Pure play (only online shop), clicks and mortar (online and physical shop), bricks and mortar
(only physical shop)

E-commerce commercial models: how companies determine their prices

- Fixed price sale: price is determined upfront and non-negotiable by the customer eg.
most online retailer
 - Brokered or negotiated deal: price is a result of mutual discussion and negotiation
between the buyer and seller eg. 2dehands.be
- Auction: price is the result of the highest bidder for the product eg. eBay
- Variants: loyalty-based, promotions, bundling of services and products
According to participants:
- B2C eg. Amazon
- B2B eg. TradeKey,  some of them dominated by supplier, some by buyers, some by
both
- C2C eg. eBay, social networks
Chaffey included Government as a new player.
Internet and e-commerce give rise to additional dispersion of goods:
- Music, video, software, newspaper, books
Remarkable from an economic point of view: Netflix, Spotify etc.
- First production cost involves almost the whole cost of the product
- Marginal cost as of second unit almost = 0
- Storage distribution and delivery almost = 0
Taking e-commerce one step further: m-commerce – Shopping via wireless devices
(smartphones and tablets):
- Even more increased due to Covid
- It requires responsive design: adapting website or providing app for customers to
ensure a user-friendly experience on their device
- Important features: time critical purchases, can be done everywhere
E-commerce payment systems:
- Digital wallet: storing credit and identification data
- Digital accumulated balance system: debit amount is stored and periodically charged
- Online-stored value payments: PayPal
- Electronic invoicing systems: money transfer
Several apps go for immediate payments via smartphones or smartwatches eg. Apple Pay,
Google Pay

Dot com Bubble: Internet is great potential for businesses, but the online presence does not
embed success directly. Many new small businesses were created as hardware, software
infrastructure, internet tools eg. browsers, e-commerce websites.  e-commerce was hyped:
they did not have solid business plans – they weren’t user friendly, customers’ lack of trust at
the beginning
Around 2000 decline of the shares due to declining trust:
- Microsoft accused from monopolist practices
- Y2K problems
 - Huge capital spending of companies and lack of profits,

Problems:
- Too high ambitions
- Overconfidence due to well-known wealthy investors
- Lack of cash inflow and huge costs, lack of proper requirement analysis and risk
management  business issues
- Unknown technology and lack of experience of this magnitude  several markets,
languages, currencies, integration with other platforms.. only in 6 months?
- Even if it was technologically feasible, current Internet users could not always use it
 loading and downloading speed was low.
Results: bad user experience, few orders, low incoming cash flow. Global big launch  the
project was too complex, impossible to succeed in 6 months.

In turn, Firebox.com story:

Instead of a pureplay  multichannel approach: independent retailers, electronic and physical
catalogues. Steady growth. Customers could describe their experiences with the products.

Amazon: Founded in 1994 by Jeff Bezos.

- Inspiration: growing internet usage, which products are the most easily marketable
online? Books
- Grasped the first mover advantage: huge storage houses, several take overs of smaller
competitors abroad, despite its huge losses it survived due to the stable financial back-
up
- It started with books, but it evolved to sell anything  providing a web platform for
selling products of other vendors.
- Developing Kindle reader to offer digital books
 - Offering web services eg. computing and data storage services
- Producing content eg. Amazon Prime
- Controversial: tax avoidance, working conditions, too much power and concentration
- Impact on business environment: destruct business eg physical book stores, creates
business eg. specialised Amazon merchandisers.

Platform Economy:
Almost all e-commerce marketplaces are platforms
- The most valuable companies in 2019: Microsoft, Apple, Amazon, Facebook
- Bring together 2 market sides: generate value from network effect: Innovation
platforms eg. Android, iOS; Transaction platforms eg. Airbnb; or combination

E-commerce examples: SCM systems as Vendor Managed Inventory, ERP:

- It enables the shift from push to pull model to dynamically adapt itself to changes in
the market
E-SCM benefits:
- Reduced order to delivery time
- Reduced costs of manufacturing
- More effective management inventory
Procurement also benefits from Internet and e-business technologies  electronic
procurement systems (EPS)
- Search activities, ordering, link to logistics, payments,
Marketing as well:
- Personalization of products eg. Dell
- Personalization of customer experience  recommendations for customers
- Marketing analysis: data gathered of customer behaviour
- Maintain customer relationships

Current trends in IT

Blockchain: non-typical type of database. Blockchain allows you to store a list of items in a
decentralised way.
- No central controlling entity, but shared (public) register that can be seen by anyone in
the network.
- Verification happens via solving complex algorithms and hashcodes on the blocks and
their preceeding chain, so that hacking the chain becomes difficult.
First figure – regular database; Second figure – blockchain
Black points: people who want to get access to data. In the first option everyone can get
access to a central controlling entity, while the second option allows everyone to access it
individually. Everyone has a complete ledger.

Hashcode transfers each document into a set of characters.

The validity of transactions need to be proven, because everyone can create them. For this
reason, the algorithms provide some challenges / constraints that need to be solved by
computers, it requires time and effort which makes it very difficult for people to change them.
Hashcodes confirms the algorithms. As a consequence, it makes it very difficult to make up
fictitious transactions, because they need to find out a hashcode that is confirmed by the
algorithm. This guarantees that no one would be able to hack the system by fictitious
blockchain, because they simply don’t have the computing power to do so.
Where can it be applied?
- All kind of data can be stored in blockchain. The most well-known are currencies. Eg.
Bitcoin
- Documents
- Smart contracts: not only storing value transactions, but also bytecode (programmed
code) that is automatically executed when certain trigger effects occur.
- Business idea is always the same: eliminating the middle men
 Disintermediation.
Bitcoin: electronic payment system based on cryptographic proof – algorithms which are
difficult to solve.
- This way, you don’t need to trust a third party as a bank controlling your payments.
- No one can save the system if something goes wrong.
- High volatility – typical bubble?
- In some countries it’s not legal to use it.
- Illegal purposes.
- It uses a lot of energy  environmental concerns
Smart contracts:
- Pros: Elimination of middle man, transparency, determinism.
- Risks: bugs, lawyers need sufficient technical skills, very new
- Eg. Fizzy flight delay insurance

Artificial Intelligence:
A computer exhibits behaviour that is perceived as a human by another human. They are data
intensive and they use advanced statistical algorithms (often correlation based) in order to
take decisions. It generates and recognises things:
- Vision
- Speech & Sound: Automatic announcements of trains departing and arriving.
Recognise: Shazam.
- Text generation & recognition: Automatic press releases based on AI. Tweet about
your company – is it negative or positive?
- Advanced reasoning: corporate data is used for pattern recognition  next purchase of
the customer, chance of a particular client to be profitable, good way to segment client
base
- Sub-branches: machine learning, deep learning.
- Abundant data availability allows AI to work.
Challenges: transparency, privacy, representativeness of data, degree of autonomy, liability
(self-driving car hitting someone),

Internet of Things: IoT

Smart and connected products in our daily living environment.
It is the 3rd wave of IT (Porter, 2014): 1 st wave automation of individual activities in value
chain, 2nd wave coordination and integration across individual activities with customer,
supplier and channels, 3rd wave IT becomes part of the product itself. In each wave there’s a
significant productivity. Examples: Consumer goods, energy, health care, transport,
manufacturing.

IT outsourcing: Part of the IT activity is handed over to an external party.

- Acquiring the system, or managing the system
- Mostly concerned about development, but can be about implementation
- Arranged as service level agreements
- Reduce costs or don’t have in-house competencies

Service oriented architecture: SOA

We don’t have huge enterprise applications as ERP, but we split it up into small modules of
service which can connect to one another.
- We make them available through Internet.
- It offers flexibility  they can be combined to complete business processes
- Reusability

Open source software:

Source code is structured in a way that is readable for machines. Most software vendors only
allow you to have compiled code. Some software allow users to access this code – they can
inspect the code, modify, adapt, spread, sell. They are often free. Most well-known system is
Linux.

Security & Privacy:

- Be sure the critical systems are always up and running
- Be sure that information is not unintendedly disclosed
- Compliance with legal requirements eg. GDPR

Web 2.0. = The Information web, for hobbyists, or professionals. Easy way to store and
exchange reading information.
The user can deliver content himself in a user-friendly way. Social media is considered as
internet applications making use of the ideology and technology of Web 2.0.
The information  Social web
Maybe Web 3.0  semantic, intelligent. Giving meaning to books, images etc.

Underlying trends:
- Higher level of data gathering
- Distributed way
- Higher degree of connectedness
- Software itself is also created and distributed
- Business models: Low cost and distributedness
New opportunities:
- Monitoring and controlling devices remotely
- Advanced customer insight
- New / disappearing players
Threats:
- Security and privacy

A Better Way to Onboard AI

The article claims that many are scared of AI. Why?
But respondents to that survey also expressed fears that AI would take their jobs. They are not
alone. The Guardian recently reported that more than 6 million workers in the UK fear being
replaced by machines. These fears are echoed by academics and executives we meet at
conferences and seminars.
Identify and list the most important characteristics of the four phases the authors pro-
pose for the AI onboarding process. Discuss how the approach proposed by the authors
can help in overcoming the fear mentioned in the first bullet point.
Phase 1: The Assistant
This first phase of onboarding artificial intelligence is rather like the process of training an
assistant. You teach the new employee a few fundamental rules and hand over some basic but
time-consuming tasks you normally do.
 Natural-language processing, meanwhile, can identify the news most relevant to a
company.
 Software can help in choosing stocks to invest by immediately filtering stocks to
meet predefined investment criteria.
 Recommendations: help customers filter thousands of products and find the ones
most relevant to them—Amazon and Netflix being among the leaders in this
technology.
 AI would identify the choice an employee is most likely to make, given that
employee’s past choices, and would suggest that choice as a starting point when
 the employee is faced with multiple decisions—speeding up, rather than actually
doing, the job.
It should not be a stretch for managers to work with AI in this way. We already do so in our
personal lives, when we allow the autocomplete function to prefill forms for us online. In the
workplace a manager can, for example, define specific rules for an AI assistant to follow
when completing forms. In fact, many software tools currently used in the workplace (such as
credit-rating programs) are already just that: collections of human-defined decision rules. The
AI assistant can refine the rules by codifying the circumstances under which the manager
actually follows them. This learning needn’t involve any change in the manager’s behavior,
let alone any effort to “teach” the assistant.
Phase 2: The Monitor
 The next step is to set up the AI system to provide real-time feedback. AI can be
trained to accurately forecast what a user’s decision would be in a given situation
 Research in psychology, behavioral economics, and cognitive science shows that
humans have limited and imperfect reasoning capabilities, especially when it
comes to statistical and probabilistic problems, which are ubiquitous in business.
Several studies concerning legal decisions found that judges grant political asylum
more frequently before lunch than after, that they give lighter prison sentences if
their NFL team won the previous day than if it lost, and that they will go easier on
a defendant on the latter’s birthday. Clearly justice might be better served if human
decision makers were assisted by software that told them when a decision they
were planning to make was inconsistent with their prior decisions or with the
decision that an analysis of purely legal variables would predict.
 The approach translates well to other contexts. For example, when portfolio
managers (PMs) at Marble Bar Asset Management consider buy or sell decisions
that may raise the overall portfolio risk—for example, by increasing exposure to a
particular sector or geography—the system alerts them through a pop-up during a
computerized transaction process so that they can adjust appropriately.

To help employees retain their sense of control in phase 2, we advise managers and systems
designers to involve them in design: Engage them as experts to define the data that will be
used and to determine ground truth; familiarize them with models during development; and
provide training and interaction as those models are deployed.
Phase 3: The Coach
In a recent PwC survey nearly 60% of respondents said that they would like to get
performance feedback on a daily or a weekly basis. The trouble is that the only way to
discover strengths and opportunities for improvement is through a careful analysis of key
decisions and actions. Thus the feedback employees get usually comes from hierarchical
superiors during a review—not at a time or in a format of the recipient’s choosing.
The capabilities we’ve already mentioned could easily generate feedback for employees,
enabling them to look at their own performance and reflect on variations and errors. A
monthly summary analyzing data drawn from their past behavior might help them better
understand their decision patterns and practices.
The data can reveal interesting and varying biases among PMs. Some may be more loss-
averse than others, holding on to underperforming investments longer than they should.
Others may be overconfident, possibly taking on too large a position in a given investment.
The analysis identifies these behaviors and—like a coach—provides personalized feedback
that highlights behavioral changes over time, suggesting how to improve decisions.
If employees can relate to and control exchanges with artificial intelligence, they are more
likely to see it as a safe channel for feedback that aims to help rather than to assess
performance. Choosing the right interface is useful to this end. At MBAM, for example,
trading enhancement tools—visuals, for instance—are personalized to reflect a PM’s
preferences.
As Beane suggests, companies could use their artificial intelligence to create different and
better learning opportunities for their employees while improving the system by making it
more transparent and giving employees more control. Because future entrants to the
workforce will have grown up in a human-plus-machine workplace, they will almost certainly
be faster than their pre-AI colleagues at spotting opportunities to innovate and introduce
activities that add value and create jobs—which brings us to the final phase.
Phase 4: The Teammate
Edwin Hutchins, a cognitive anthropologist, developed what is known as the theory of
distributed cognition. It is based on his study of ship navigation, which, he showed, involved a
combination of sailors, charts, rulers, compasses, and a plotting tool. The theory broadly
relates to the concept of extended mind, which posits that cognitive processing, and associated
mental acts such as belief and intention, are not necessarily limited to the brain, or even the
body.
We believe that as AI improves through its interactions with individual users, analyzing and
even modeling expert users by drawing on data about their past decisions and behaviors, a
community of experts (humans and machines) will naturally emerge in organizations that
have fully integrated AI coachbots. For example, a purchasing manager who—with one click
at the moment of decision—could see what price someone else would give could benefit from
a customized collective of experts.
Although understanding has historically been a basis for building trust in human relationships,
it is potentially well suited to cultivating human–AI partnerships as well, because employees’
fear of artificial intelligence is usually grounded in a lack of understanding of how AI works.

Some practical AI examples are cited in the paper. Reflect on the potential “fears” they
might be associated with and how they relate to the proposed onboarding process.

Unfortunately, many AI systems are set up to usurp that autonomy. Once an algorithm has
flagged a bank transaction as possibly fraudulent, for example, employees are often unable to
approve the transaction without clearing it with a supervisor or even an outside auditor.
Sometimes undoing a machine’s choice is next to impossible—a persistent source of
frustration for both customers and customer service professionals.
Privacy is another big issue when machines collect data on the decisions people make. In
addition to giving humans control in their exchanges with AI, we need to guarantee that any
data it collects on them is kept confidential. A wall ought to separate the engineering team
from management; otherwise employees may worry that if they freely interact with the system
and make mistakes, they might later suffer for them.
As in phase 2, involving employees in designing the system is essential. When AI is a coach,
people will be even more fearful of disempowerment. It can easily seem like a competitor as
well as a partner—and who wants to feel less intelligent than a machine? Concerns about
autonomy and privacy may be even stronger. Working with a coach requires honesty, and
people may hesitate to be open with one that might share unflattering data with the folks in
HR.
Although the technology to create this kind of collective intelligence now exists, this phase is
fraught with challenges. For example, any such integration of AI must avoid building in old or
new biases and must respect human privacy concerns so that people can trust the AI as much
as they would a human partner. That in itself is a pretty big challenge, given the volume of
research demonstrating how hard it is to build trust among humans.

What is meant with the “black boxes” of AI, and what are “counterfactual explana-
tions”?
In building understanding, a particular challenge is defining what “explanation” means—let
alone “good explanation.” This challenge is the focus of a lot of research. For example, one of
us (Evgeniou) is working to open up machine-learning “black boxes” by means of so-called
counterfactual explanations. A counterfactual explanation illuminates a particular decision of
an AI system (for example, to approve credit for a given transaction) by identifying a short list
of transaction characteristics that drove the decision one way or another. Had any of the
characteristics been different (or counter to the fact), the system would have made a different
decision (credit would have been denied).
Evgeniou is also exploring what people perceive as good explanations for AI decisions. For
example, do they see an explanation as better when it’s presented in terms of a logical
combination of features (“The transaction was approved because it had X,Y,Z
characteristics”) or when it’s presented relative to other decisions

What type of potential ethical issues related to AI do you see after reading the paper?
Transparency, privacy, decision autonomy
Lecture 6 – Expressing and understanding functional
requirements: Entity Relationship Diagrams (ERD)
In order to clarify the ambiguity of requirements, a set of models are created in the analysis
phase of the development of an information system.  simplification of reality (easier to
grasp)  abstraction of reality (focus on the relevant properties)  specific (concepts need to
be defined)

Entity Relationship Modeling (ERD)

Rows = instances. Columns: properties

The end goal is to model these tables.
ERD can be used to model the data storage requirements regarding an information system:
what data should be stored?
 Entities (students, professors, courses)
 Attributes of entities (name, address)
 Relationship between entities (eg. relationship between students and courses)
Entities are categories of things of which you want to store information.
 They are related to one and another
 An instance of entity A can be related to 0/1/multiple instances of entity B eg. a
professor can teach one or multiple courses.
 The relationship is indicated by a straight line and specified by a description and 3
maximum cardinalities / multiplicities (1:1, 1:n, n:m)
Entities are often nouns. We form entities in singular forms.
Derivable relationship: possible hint may be triangles. It’s possible that a derivable
relationship is derivable only in a certain situation, but when it has special meaning eg.
handicapped students use certain rooms  it cannot be derived.
When eliminating many to many relationships, you have to create a new entity of which they
are connected to in “on-to-many” type of relationship.
Attributes: first name, last name, birthday, specialization, title, general domain, floor,
capacity.
Similar ways to draw ERD models: by UML Unified Modelling Language
For every one cardinality of an entity, add the key (ID) of the entity at the other side of the
relationship to its attribute list.

Lecture 7.
BPMN concentrates on the business processes. Business process is a set of steps in order to
produce a product. It defines how things are done in an organization, which tasks are done by
people or by machines.
The analysis phase is aimed to model the requirements of an application such as data and
processes, there are often inefficiencies occurring at this point which need to be reengineered
 Business process reengineering. BPMN can aid this process.
Business Process Modelling can also serve as a communication tool for new employees to
understand how the organization works. It enables a clear view on operations.
This is the most widely accepted standard for modelling business processes in organizations.
It is managed by Object Management Group, so no commercial vendor.
It should allow less technical people to build transactional applications by drawing simple
flow chart  business orientation
Good practice: read it from the left to the right.

A gateway has one incoming path and one or two outgoing path of which only one is
activated. The decision is taken one step before the gateway, not at the gateway.
Annotation can provide some additional information.
Adding an option of potentially purchasing the stamp add another gateway to the process.

We need to specify the following terms:

Swim lanes
Pools: represent a participant in a business process or can be used to name a business process.
A pool is obligatory.
Pools can be subdivided into several lanes (for business units, entity, department). Lanes are
not obligatory, but advised for clarity reasons.

Artefacts
Groups can highlight a set of objects.  They are highly optional, no real fixed meaning.
Annotations aim to express information that is not presented by any other item of the
diagram eg. it clarifies gateways, conditions.
A data object may represent data used as an input or produced as an output for an activity.
Connecting objects
Flow objects
Events indicate that something has happened.
It can be used to:
 Start the process “start event” represented by a thin circle  if there’s an image in
the circle, it indicates what is triggering the process (catches something)
 End process “end event” represented by bold circle  in case an image is inside
the circle, it indicates what signal is sent at the end of the process (throws
something)
 Happen during the process “intermediate event” which either pauses the process
“interrupting intermediate event” represented by full double circle or not “non-
interrupting intermediate event” represented by striped double circle  may be
throwing (dark) or catching (white).

Good practices: a process can have multiple end events  clearly label them.
The + gateway activates both branch lines.
Exclusive and parallel gateways cannot be used in the same process. The gateways should
match with each other.
For the inclusive gateway, it’s parallel gateway that closes the process.
Lecture 8 Structured Query Language
Turning data into information
SQL turns output data into information. It is a 4th generation language. 1st generation language
consists of 1 and 0, 2nd generation has a correlation with computer architecture but translated
into 1st gl, 3rd generation: how should the programme do something – procedural
 Fourth generation – what a programme should do? It’s close to human language.
SQL allows us to answer typical management questions: What was our revenue for January
2015? Which is the most popular product in each city we sell? Who is our most profitable
customers?
We mainly consult DQL.
= Sort them by alphabets.
=2

=5

 Quantity of ordered items

HAVING CAN ONLY BE USED WITH GROUP BY
Sqlfiddle.com