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1: Information Systems in Global Business Today

1.1 The Role of Information Systems in Business Today

The Old Economics of Enterprise o Land, Labor and Capital The Old View of Resources o Scarce Value linked to scarcity o Wealth linked to ownership Accumulate o Markets for transfer Used by transfer o Build organizations to acquire and store resources o Assets are not given away The Economics of Information & Knowledge o Information & knowledge are central wealth creation resource Have different characteristics than traditional resources -Intangible -Scarcity -Use -Transfer -Value o IT as an enabling device o The rise of the digital economy and digital firm Google, Youtube, itunes, Myspace

How Information Systems are Transforming Business

Increase in wireless technology use, Web sites Shifts in media and advertising New federal security and accounting laws Information technology investment, defined as hardware, software, and communications equipment, grew from 32% to 51% between 1980 and 2008. Globalization opportunities o Internet has drastically reduced costs of operating on global scale o Presents both challenges and opportunities INFS1602 1

Chapter 1: Information Systems in Global Business Today

Whats New In Management Information Systems?

Old systems are being creatively destroyed, and entirely new systems are taking their place. In the technology area there are three interrelated changes: 1. Emerging mobile digital platform (iPhones, BlackBerrys, and tiny Web-surfing netbooks) 2. Growth of online software as a service. 3. Growth in cloud computing where more and more business software runs over the Internet. All these changes contribute to a dynamic new global business economy

The Emerging Digital Firm

In the emerging, fully digital firm: o Significant business relationships with customers, suppliers, and employees are digitally enabled and mediated. o Core business processes are accomplished through digital networks spanning the entire organization or linking multiple organizations. o Key corporate assets are managed digitally E.g. intellectual property, core competencies, and financial & human assets Refer to the set of logically related tasks and behaviors the organizations develop over time to produce specific business results and the manner in which these activities are organized and coordinated. E.g. developing new product, generating and fulfilling an order, creating a marketing plan Ways organizations accomplish their business processes can be source of competitive strength. Digital firms offer greater flexibility in organization and management o Time shifting: o Refers to business being conducted continuously 24/7, rather than in narrow work day time bands of 9-5am. o Space shifting o Means that work takes place in a global workshop, as well as within national boundaries. o Work accomplished physically wherever in the world it is best accomplished. E.g. Cisco Systems & Dell Coputers are close to becoming digital firms, using internet to drive every aspect of their business. o Business processes

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Chapter 1: Information Systems in Global Business Today Most other companies are not fully digital, but are moving close to becoming digital integration with suppliers, customers, and employees.

Strategic Business Objectives of Information Systems

Growing interdependence between ability to use information technology and ability to implement corporate strategies and achieve corporate goals o E.g. Google, Amazon, eBay, etc. Business firms invest heavily in information systems to achieve six strategic business objectives: o Operational excellence o New products, services, and business models o Customer and supplier intimacy o Improved decision making o Competitive advantage o Survival Operational Excellence: o Improvement of efficiency to attain higher profitability o Information systems, technology an important tool in achieving greater efficiency and productivity o Wal-Marts RetailLink system links suppliers to stores for superior replenishment system New Products, Services, and Business Models: o Information systems and technology a major enabling tool for new products, services, business models o Business model: Describes how company produces, delivers, and sells product or service to create wealth o E.g. Apples iPod, iTunes, and iPhone, Netflixs Internet-based DVD rentals Customer and supplier intimacy: o Serving customers well leads to customers returning, which raises revenues and profits E.g. High-end hotels that use computers to track customer preferences and use to monitor and customize environment Develop individualized marketing campaigns based on customer preferences. E.g. J.C.Penneys information system which links sales records to contract manufacturer Reduce cost of storing inventory o Intimacy with suppliers allows them to provide vital inputs, which lowers costs INFS1602 3

Chapter 1: Information Systems in Global Business Today Improved decision making o Without accurate information: Managers must use forecasts, best guesses, luck Overproduction, underproduction of goods and services Misallocation of resources Poor response times Poor outcomes raise costs, lose customers o Leads to:

o Example: Verizons Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. o Using this information, managers can immediately allocate repair resources to affected areas, inform consumers of repair efforts, and restore service fast Summary of above objectives: o Operational excellence: Improvement of efficiency to attain higher profitability Enabled by technology Serving customers raises revenues and profits Better communication with suppliers lowers costs More accurate data leads to better decisions o New products, services, and business models: o Customer and supplier intimacy:

o Improved decision making When firms achieve one or more of the above business objectives above, chances are they have already achieved a competitive advantage. Competitive advantage o Delivering better performance o Charging less for superior products o Responding to customers and suppliers in real time o All add up to higher sales and higher profits that competitors cannot match. o E.g. Toyota and TPS (Toyota Production System) enjoy a considerable advantage over competitors INFS1602 Information systems are critical to the implementation of TPS High level of efficiency 4

Chapter 1: Information Systems in Global Business Today Survival o Information systems and technologies are necessities of doing business o May be driven by: Industry-level changes The Interdependence Between Organizations and Information Technology E.g. Citibanks introduction of ATMs E.g. Toxic Substances Control Act, Sarbanes-Oxley Act Governmental regulations requiring record-keeping Focuses on organizing work to eliminate waste Making continuous improvements Optimizing customer value.

In contemporary systems there is a growing interdependence between a firms information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do.

1.2 Perspectives on Information Systems

Information Technology (IT) o Consists of all the hardware and software that a firm needs to use in order to achieve its business objectives. o Includes not only computer machines, disk drives, and handheld mobile devices, but also software o e.g. Windows or Linux operating systems, and many thousands of computer programs.

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Chapter 1: Information Systems in Global Business Today

What is an Information System?

Information system: o Set of interrelated components; that o Collect, process, store, and distribute information; to o Support decision-making, coordination, and control o In an organization. May also help managers and workers analyze problems, visualize complex subjects, and create new products. Information vs. data o Data: 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 can understand and use. o Information: Data shaped into form that is meaningful and useful to human beings.

Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory. Three activities in an information system produce the information that organizations need to make decisions, control operations, analyze problems, and create new products or services: o Input: Captures or collects raw data from within the organization or from external environment Converts raw data into meaningful form 6 o Processing: INFS1602

Chapter 1: Information Systems in Global Business Today o Output: Transfers processed information to people or activities that use it Information systems also require Feedback: o Output returned to appropriate members of organization to help evaluate or correct input stage Functions of an Info System:

An information system contains information about an organization and its surrounding environment. Three basic activitiesinput, processing, and outputproduce the information organizations need. Feedback is output returned to appropriate people or activities in the organization to evaluate and refine the input. Environmental actors, such as customers, suppliers, competitors, stockholders, and regulatory agencies, interact with the organization and its information systems. Computer/Computer Program vs. Information System o Electronic computers and related software programs are the technical foundation, the tools and materials, of modern information systems. o Computer programs, or software are sets of operating instructions that direct and control computer processing. o Knowing how computers and computer programs work is important in designing solutions to organizational problems, but computers are only part of an information system and alone cannot produce the information a particular organization needs. o Analogy: houses are built with hammers, nails and wood, but these do not make a house.

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Chapter 1: Information Systems in Global Business Today Information Systems Are More Than Computers

Using information systems effectively requires an understanding of the organization, management, and information technology shaping the systems. An information system creates value for the firm as an organizational and management solution to challenges posed by the environment.

Dimensions of Information Systems

Information Systems Literacy o Understanding of the management and organizational dimensions of systems as well as the technical dimensions of systems. o And their power to provide solutions to challenges and problems in the business environment. Computer Literacy o Focuses primary on knowledge of information technology Management Information Systems (MIS) o Tries to achieve this broader information systems literacy o Deals with behavioral issues as well as technical issues surrounding the development, use, and impact of information systems used by managers and employees in the firm. Organizational dimension of information systems o Hierarchy of authority, responsibility Senior management - Makes long-range strategic decisions about products and services as well as ensures financial performance of the firm. Middle management - - INFS1602 Carries out the programs and plans of senior management Responsible for monitoring daily activities of the business 8 Operational management

Chapter 1: Information Systems in Global Business Today Knowledge workers - Engineers, scientists, or architects, design products or services and create new knowledge for the firm Data workers - - Secretaries or clerks, assist with paperwork at all levels of the firm. Produce the product and deliver the service Production or service workers

Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management. Information systems serve each of these levels. o Experts are employed and trained for separate business functions o Major Business Functions (chapter 5) Specialized tasks performed by business organizations Consist of: - - - - - - - INFS1602 9 Sales and marketing Human resources Finance and accounting Manufacturing and production Unique business processes Unique business culture Organizational politics

Chapter 1: Information Systems in Global Business Today o Most organizations business processes include formal rules that have been developed over a long time for accomplishing tasks. Guide employees in a variety of procedures Others are informal work practices Information systems automate many business processes. Fundamental set of assumptions, values, and ways of doing things, that has been accepted by most of its members. E.g. University culture that professors know more than students Management dimension of information systems o Managers set organizational strategy for responding to business challenges o Recognize challenges, make decisions, formulate action plans to solve organization problems. o Allocate the human and financial resources to coordinate the work and achieve success o In addition, managers must act creatively: Creation of new products and services Occasionally re-creating the organization

o Each organization has a unique culture

Technology dimension of information systems o Computer hardware Physical equipment used for input, processing, and output activities in an information system. Computers of various shapes and sizes, handheld mobile devices; various input, output, and storage devices; and telecommunications devices that link computers together. o Computer Software Consists of the detailed, preprogrammed instructions that control and coordinate the computer hardware components in an information system. o Data management technology (chapter 6) Consists of the software governing the organization of data on physical storage media Consisting of both physical devices and software, links the various pieces of hardware and transfers data from one physical location to another. Computers and communications equipment can be connected in networks for sharing voice, data, images, sound, and video. o Networking and telecommunications technology

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Chapter 1: Information Systems in Global Business Today o Network Links two or more computers to share data or resources, such as a printer. Worlds largest and most widely used network A global network of networks that uses universal standards to connect millions of different networks with more than 1.4 billions users in over 230 countries around the world. o Intranets Internal corporate networks Links different systems and networks within the firm Private intranets extended to authorized users outside the organization Used to coordinate their activities with other firms for making purchases, collaborating on design, and other interorganizational work. o World Wide Web Service provided by the Internet that uses universally accepted standards for storing, retrieving, formatting, and displaying information in a page format on the Internet. o Information Technology (IT) infrastructure Provides platform, or foundation, on which the firm can build its specific information systems. Firm must carefully design and manage its information technology infrastructure so that it has the set of technology services it needs for the work it wants to accomplish with information systems. Example: Dimensions of UPS tracking system o Organizational: Procedures for tracking packages and managing inventory and provide information Satisfy the needs of managers and workers Trained in both package delivery procedures and pickup and how to use package-tracking system so that they can work efficiently and effectively. o Management: INFS1602 11 Monitor service levels and costs Promoting companys strategy of combining low cost and superior service. o The Internet

o Extranets

Chapter 1: Information Systems in Global Business Today o Technology: Handheld computers, bar-code scanners, wired and wireless communications networks, desktop computers, UPS central computer, storage technology for the package delivery data, UPS in-house package tacking software, etc.

It Isnt Just Technology: A Business Perspective on Information Systems

Business perspective on information systems: o Information system is instrument for creating value o Investments in information technology will result in superior returns: Improve decision-making Improves execution of business processes Productivity increases Revenue increases Superior long-term strategic positioning

Business information value chain o Raw data acquired and transformed through stages that add value to that information o Value of information system determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits Business perspective: o Calls attention to organizational and managerial nature of information systems An information system represents an organizational and management solution, based on IT, to a challenge or problem posed by the environment.

From a business perspective, information systems are part of a series of value-adding activities for acquiring, transforming, and distributing information that managers can use to improve decision making, enhance organizational performance, and, ultimately, increase firm profitability. INFS1602 12

Chapter 1: Information Systems in Global Business Today

Complementary Assets: Organizational Capital & the Right Business Model

Awareness of the organizational and managerial dimensions of information systems can help us understand why some firms achieve better results from their information systems than others. Variation in Returns on Information Technology Investment

o Although, on average, investments in information technology produce returns far above those returned by other investments, there is considerable variation across firms. Some invest a great deal and receive a great deal (2nd quadrant); others invest an equal amount and receive few returns (4th quadrant). o Investing in information technology does not guarantee good returns o Considerable variation in the returns firms receive from systems investments o Factors: Adopting the right business model Investing in complementary assets (organizational and management capital)

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Chapter 1: Information Systems in Global Business Today Complementary assets: o Assets required to derive value from a primary investment o Firms supporting technology investments with investment in complementary assets receive superior returns E.g.: invest in technology and the people to make it work properly o These investments in organization and management are also known as organizational and management capital o Complementary assets include: Organizational investments, e.g. Efficiency & Effectiveness Appropriate business model Efficient business processes Decentralization of authority Highly distributed decision rights Strong information system (IS) development team Strong senior management support for change Incentive systems that monitor and reward for individual innovation Teamwork and collaborative work environments Training programs Management culture that values flexibility and knowledge The Internet and telecommunications infrastructure Technology standards Educational systems

Managerial investments, e.g.

Social investments, e.g.

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Chapter 1: Information Systems in Global Business Today

1.3 Contemporary Approaches to Information Systems

The study of information systems deals with issues and insights contributed from technical and behavioral disciplines. Major disciplines that contribute problems, issues and solutions in the study of information systems. Field can be divided into technical and behavioral approaches. Information systems are sociotechnical systems.

Technical approach
Emphasizes mathematically based models to study information systems, as well as the physical technology and formal capabilities of these systems. Disciplines that contribute to the technical approach: o Computer science Concerned with establishing theories of computability, methods of computation, and methods of efficient data storage and access. o Management science Emphasizes the development of models for decision-making and management practices. Focuses on mathematical techniques for optimizing selected parameters of organizations, such as transportation, inventory control, and transaction costs. INFS1602 15 o Operations research

Chapter 1: Information Systems in Global Business Today

Behavioral approach
Behavioral issues that arise in the development and long-term maintenance of information systems. o Strategic business integration, design, implementation, utilization, and management o Cannot be explored usefully with the models in the technical approach. o Does not ignore technology but concentrates on changes in attitudes, management and organizational policy, and behavior o Information systems technology is often stimulus for behavioral problem or issue. Different ways to study information systems: o Psychology how human decision makers perceive and use formal information o Economics understanding the production of digital goods, dynamics of digital markets, and how new information systems change the control and cost structures within the firm. o Sociology how groups and organizations shape the development and long-term maintenance of information systems

Management Information Systems (MIS)

Combines computer science, management science and operations research with practical orientation toward developing system solutions to real world problems and managing information technology resources. Also concerned with behavioral issues surrounding the development, use, and impact of information systems, which are typically discussed in the fields of sociology, economics and psychology. Four main actors o Suppliers of hardware and software (the technologists); o Business firms (making investments and seeking to obtain value from the technology); o Managers and employees (seeking to achieve business value and other goals) o Firms environment (legal, social, cultural context) No single approach effectively captures the reality of information systems. The successes and failures of information are rarely all technical or all behavioral

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Chapter 1: Information Systems in Global Business Today

Approach of this Book: Sociotechnical View

Optimal organizational performance achieved by jointly optimizing both social and technical systems used in production Helps avoid purely technological approach o E.g., fact that firm has recently installed an enterprise-wide financial reporting system does not necessarily mean it will be used, or used effectively. Need to optimize the firms performance as a whole. Both technical and behavioral components need attention. o Means that technology must be changed and designed in such a way as to fit organizational and individual needs. o Sometimes technology may have to be de-optimized to accomplish this fit o E.g. mobile phone users adapt this technology to their personal needs, and as a result manufacturer quickly seek to adjust the technology to conform with user expectations. o Organizations and individuals must also be changes through training, learning, and planned organizational change to allow the technology to operate and prosper.

In a sociotechnical perspective, the performance of a system is optimized when both the technology and the organization mutually adjust to one another until a satisfactory fit is obtained.

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