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GLOBAL GLOBAL
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Management Information
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Management Information Systems

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Managing the Digital Firm

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Managing the Digital Firm
FIFTEENTH EDITION
Kenneth C. Laudon • Jane P. Laudon
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MANAGEMENT
INFORMATION SYSTEMS
MANAGING THE DIGITAL FIRM
FIFTEENTH EDITION
GLOBAL EDITION
Kenneth C. Laudon
New York University
Jane P. Laudon
Azimuth Information Systems
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About the Authors
Kenneth C. Laudon is a Professor of Information Systems at New York University’s Stern

School of Business. He holds a B.A. in Economics from Stanford and a Ph.D. from Columbia
University. He has authored 12 books dealing with electronic commerce, information sys-
tems, organizations, and society. Professor Laudon has also written more than 40 articles
concerned with the social, organizational, and management impacts of information systems,
privacy, ethics, and multimedia technology.
Professor Laudon’s current research is on the planning and management of large-scale
information systems and multimedia information technology. He has received grants from
the National Science Foundation to study the evolution of national information systems at
the Social Security Administration, the IRS, and the FBI. Ken’s research focuses on enter-
prise system implementation, computer-related organizational and occupational changes in
large organizations, changes in management ideology, changes in public policy, and under-
standing productivity change in the knowledge sector.
Ken Laudon has testified as an expert before the United States Congress. He has been a
researcher and consultant to the Office of Technology Assessment (United States Congress),
the Department of Homeland Security, and the Office of the President, several executive
branch agencies, and Congressional Committees. Professor Laudon also acts as an in-house
educator for several consulting firms and as
a consultant on systems planning and strat-
egy to several Fortune 500 firms.
At NYU’s Stern School of Business, Ken
Laudon teaches courses on Managing the
Digital Firm, Information Technology
and Corporate Strategy, Professional
Responsibility (Ethics), and Electronic
Commerce and Digital Markets. Ken
Laudon’s hobby is sailing.
Jane Price Laudon is a management con-

sultant in the information systems area and
the author of seven books. Her special inter-
ests include systems analysis, data manage-
ment, MIS auditing, software evaluation, and
teaching business professionals how to design and use information systems.
Jane received her Ph.D. from Columbia University, her M.A. from Harvard University,
and her B.A. from Barnard College. She has taught at Columbia University and the New
York University Graduate School of Business. She maintains a lifelong interest in Oriental
languages and civilizations.
The Laudons have two daughters, Erica and Elisabeth, to whom this book is dedicated.
3
Brief Contents
PART ONE Organizations, Management, and the Networked

Enterprise 29
Chapter 1 Information Systems in Global Business Today 30
Chapter 2 Global E-business and Collaboration 68
Chapter 3 Information Systems, Organizations, and Strategy 106
Chapter 4 Ethical and Social Issues in Information Systems 150
PART TWO Information Technology Infrastructure 191

Chapter 5 IT Infrastructure and Emerging Technologies 192
Chapter 6 Foundations of Business Intelligence: Databases and Information
Management 238
Chapter 7 Telecommunications, the Internet, and Wireless Technology 276
Chapter 8 Securing Information Systems 320
PART THREE Key System Applications for the Digital Age 363
Chapter 9 Achieving Operational Excellence and Customer Intimacy: Enterprise
Applications 364
Chapter 10 E-commerce: Digital Markets, Digital Goods 398
Chapter 11 Managing Knowledge 444
Chapter 12 Enhancing Decision Making 480
PART FOUR Building and Managing Systems 513

Chapter 13 Building Information Systems 514
Chapter 14 Managing Projects 554
Chapter 15 Managing Global Systems 588
Glossary 619
Indexes 631
4
Complete Contents
PART ONE Organizations, Management, and the Networked

Enterprise 29
Opening Case: Rugby Football Union Tries Big Data 31
1-1 How are information systems transforming business, and why are they so
essential for running and managing a business today? 33
How Information Systems Are Transforming Business 34 • What's New in
Management Information Systems? 35
Interactive Session: Management The Mobile Pocket Office 37
Globalization Challenges and Opportunities: A Flattened World 39 • The
Emerging Digital Firm 40 • Strategic Business Objectives of Information
Systems 41
1-2 What is an information system? How does it work? What are its
management, organization, and technology components? Why are
complementary assets essential for ensuring that information systems
provide genuine value for organizations? 44
What Is an Information System? 44 • Dimensions of Information Systems 46
Interactive Session: Technology Digital Transformation of Healthcare at
Singapore's JurongHealth Services 51
It Isn't Just Technology: A Business Perspective on Information
Systems 52 • Complementary Assets: Organizational Capital and the Right
Business Model 54
1-3 What academic disciplines are used to study information systems,
and how does each contribute to an understanding of information
systems? 56
Technical Approach 56 • Behavioral Approach 57 • Approach of This Text:
Sociotechnical Systems 58
Review Summary 59 • Key Terms 60 • Review Questions 60 • Discussion
Questions 61
Hands-On MIS Projects 61
Collaboration and Teamwork Project 62
Case Study: Are Farms Becoming Digital Firms? 62
References: 66
5
6 Contents
Chapter 2 Global E-business and Collaboration 68

Opening Case: Enterprise Social Networking Helps ABB Innovate and Grow 69
2-1 What are business processes? How are they related to information
systems? 71
Business Processes 71 • How Information Technology Improves Business
Processes 73
2-2 How do systems serve the different management groups in a business,
and how do systems that link the enterprise improve organizational
performance? 74
Systems for Different Management Groups 74 • Systems for Linking the
Enterprise 79
Interactive Session: Organizations New Systems Help Plan International
Manage Its Human Resources 80
E-business, E-commerce, and E-government 84
2-3 Why are systems for collaboration and social business so important, and
what technologies do they use? 85
What Is Collaboration? 85 • What Is Social Business? 86 • Business Benefits
of Collaboration and Social Business 87 • Building a Collaborative Culture and
Business Processes 87 • Tools and Technologies for Collaboration and Social
Business 89
Interactive Session: Technology Collaborating the Glasscubes Way 91
2-4 What is the role of the information systems function in a business? 95
The Information Systems Department 96 • Organizing the Information Systems
Function 97
Questions 100
Case Study: Social Business: Full Speed Ahead or Proceed with Caution? 101
References: 104
Chapter 3 Information Systems, Organizations, and Strategy 106

Opening Case: Tate & Lyle Devise a Global IT Strategy 107
3-1 Which features of organizations do managers need to know about to
build and use information systems successfully? 109
What Is an Organization? 110 • Features of Organizations 112
3-2 What is the impact of information systems on organizations? 117
Economic Impacts 117 • Organizational and Behavioral Impacts 118
Interactive Session: Management Can Technology Replace Managers? 120
The Internet and Organizations 122 • Implications for the Design and
Understanding of Information Systems 122
Contents 7
3-3 How do Porter's competitive forces model, the value chain model,
synergies, core competencies, and network economics help companies
develop competitive strategies using information systems? 123
Porter's Competitive Forces Model 123 • Information System Strategies for
Dealing with Competitive Forces 125 • The Internet's Impact on Competitive
Advantage 128 • The Business Value Chain Model 129
Interactive Session: Technology Smart Products, Smart Companies 130
Synergies, Core Competencies, and Network-Based Strategies 134
3-4 What are the challenges posed by strategic information systems, and
how should they be addressed? 138
Sustaining Competitive Advantage 138 • Aligning IT with Business
Objectives 139 • Managing Strategic Transitions 140
Questions 142
Case Study: Deutsche Bank: The Cost of Legacy Systems 144
References: 147
Chapter 4 Ethical and Social Issues in Information Systems 150

Opening Case: The Dark Side of Big Data 151
4-1 What ethical, social, and political issues are raised by information
systems? 153
A Model for Thinking About Ethical, Social, and Political Issues 155 • Five Moral
Dimensions of the Information Age 156 • Key Technology Trends that Raise
Ethical Issues 156
4-2 What specific principles for conduct can be used to guide ethical
decisions? 158
Basic Concepts: Responsibility, Accountability, and Liability 159 • Ethical
Analysis 160 • Candidate Ethical Principles 160 • Professional Codes of
Conduct 161 • Some Real-World Ethical Dilemmas 161
4-3 Why do contemporary information systems technology and the Internet
pose challenges to the protection of individual privacy and intellectual
property? 162
Information Rights: Privacy and Freedom in the Internet Age 162 • Property
Rights: Intellectual Property 169
4-4 How have information systems affected laws for establishing
accountability and liability and the quality of everyday life? 172
Computer-Related Liability Problems 173 • System Quality: Data Quality and
System Errors 174 • Quality of Life: Equity, Access, and Boundaries 174
Interactive Session: Technology Monitoring in the Workplace 178
Health Risks: RSI, CVS, and Cognitive Decline 180
Interactive Session: Organizations Are We Relying Too Much on Computers to
Think for Us? 181
Questions 185
8 Contents

Case Study: Facebook Privacy: What Privacy? 186
References: 190
PART TWO Information Technology Infrastructure 191

Chapter 5 IT Infrastructure and Emerging Technologies 192
Opening Case: EasyJet Flies High with Cloud Computing 193
5-1 What is IT infrastructure, and what are the stages and drivers of IT
infrastructure evolution? 195
Defining IT Infrastructure 195 • Evolution of IT Infrastructure 197 • Technology
Drivers of Infrastructure Evolution 201
5-2 What are the components of IT infrastructure? 206
Computer Hardware Platforms 207 • Operating System Platforms 208
• Enterprise Software Applications 208 • Data Management and Storage 209
• Networking/Telecommunications Platforms 209 • Internet Platforms 209
• Consulting and System Integration Services 210
5-3 What are the current trends in computer hardware platforms? 210
The Mobile Digital Platform 210
Interactive Session: Technology Wearable Computers Change How We Work 211
Consumerization of IT and BYOD 212 • Quantum Computing 213
• Virtualization 213 • Cloud Computing 213
Interactive Session: Organizations Glory Finds Solutions in the Cloud 216
Green Computing 219 • High-Performance and Power-Saving Processors 220
5-4 What are the current computer software platforms and trends? 220
Linux and Open Source Software 220 • Software for the Web: Java, HTML, and
HTML5 221 • Web Services and Service-Oriented Architecture 222 • Software
Outsourcing and Cloud Services 224
5-5 What are the challenges of managing IT infrastructure and management
solutions? 226
Dealing with Platform and Infrastructure Change 226 • Management and
Governance 227 • Making Wise Infrastructure Investments 227
Questions 232
Case Study: BYOD: Business Opportunity or Big Headache? 234
References: 237
Chapter 6 Foundations of Business Intelligence: Databases

and Information Management 238
Opening Case: BAE Systems 239
6-1 What are the problems of managing data resources in a traditional file
environment? 241
Contents 9
File Organization Terms and Concepts 242 • Problems with the Traditional File
Environment 243
6-2 What are the major capabilities of database management systems
(DBMS), and why is a relational DBMS so powerful? 245
Database Management Systems 245 • Capabilities of Database Management
Systems 248 • Designing Databases 250 • Non-relational Databases and
Databases in the Cloud 253
6-3 What are the principal tools and technologies for accessing information
from databases to improve business performance and decision
making? 254
The Challenge of Big Data 254 • Business Intelligence Infrastructure 255
Interactive Session: Organizations Data-Driven Crime Fighting Goes Global
256
Analytical Tools: Relationships, Patterns, Trends 260 • Databases and the Web 263
6-4 Why are information policy, data administration, and data quality
assurance essential for managing the firm's data resources? 264
Establishing an Information Policy 264 • Ensuring Data Quality 265
Interactive Session: Management Societe Generale Builds an Intelligent
System to Manage Information Flow 267
Questions 270
Case Study: Lego's Enterprise Software Spurs Growth 272
References: 275
Chapter 7 Telecommunications, the Internet, and Wireless

Technology 276
Opening Case: Wireless Technology Makes Dundee Precious Metals Good as
Gold 277
7-1 What are the principal components of telecommunications networks and
key networking technologies? 279
Networking and Communication Trends 279 • What is a Computer
Network? 280 • Key Digital Networking Technologies 282
7-2 What are the different types of networks? 285
Signals: Digital Versus Analog 285 • Types of Networks 285 • Transmission
Media and Transmission Speed 287
7-3 How do the Internet and Internet technology work, and how do they
support communication and e-business? 287
What is the Internet? 288 • Internet Addressing and Architecture 288
Interactive Session: Organizations The Battle over Net Neutrality 291
Internet Services and Communication Tools 293
Interactive Session: Management Monitoring Employees on Networks:
Unethical or Good Business? 296
The Web 298
10 Contents
7-4 What are the principal technologies and standards for wireless
networking, communication, and Internet access? 306
Cellular Systems 306 • Wireless Computer Networks and Internet
Access 307 • RFID and Wireless Sensor Networks 309
Questions 314
Case Study: RFID Propels the Angkasa Library Management System 316
References: 319
Chapter 8 Securing Information Systems 320

Opening Case: Hackers Attack Singapore's Telecom Infrastructure 321
8-1 Why are information systems vulnerable to destruction, error, and
abuse? 323
Why Systems are Vulnerable 323 • Malicious Software: Viruses, Worms, Trojan
Horses, and Spyware 326 • Hackers and Computer Crime 329 • Internal
Threats: Employees 333 • Software Vulnerability 334
8-2 What is the business value of security and control? 335
Legal and Regulatory Requirements for Electronic Records Management 335
• Electronic Evidence and Computer Forensics 336
8-3 What are the components of an organizational framework for security
and control? 337
Information Systems Controls 337 • Risk Assessment 338
Interactive Session: Organizations Stuxnet and the Changing Face of
Cyberwarfare 339
Security Policy 341 • Disaster Recovery Planning and Business Continuity
Planning 342 • The Role of Auditing 343
8-4 What are the most important tools and technologies for safeguarding
information resources? 343
Identity Management and Authentication 344 • Firewalls, Intrusion
Detection Systems, and Antivirus Software 346 • Securing Wireless
Networks 348 • Encryption and Public Key Infrastructure 348 • Ensuring
System Availability 350 • Security Issues for Cloud Computing and the Mobile
Digital Platform 351 • Ensuring Software Quality 352
Interactive Session: Technology BYOD: A Security Nightmare? 353
Questions 357
Case Study: Information Security Threats and Policies in Europe 358
References: 361
Contents 11
PART THREE Key System Applications for the Digital Age 363
Chapter 9 Achieving Operational Excellence and Customer Intimacy:
Enterprise Applications 364
Opening Case: Alimentation Couche-Tard Competes Using Enterprise Systems
365
9-1 How do enterprise systems help businesses achieve operational
excellence? 367
What are Enterprise Systems? 368 • Enterprise Software 369 • Business Value
of Enterprise Systems 370
9-2 How do supply chain management systems coordinate planning,
production, and logistics with suppliers? 371
The Supply Chain 371 • Information Systems and Supply Chain
Management 372 • Supply Chain Management Software 373 • Global Supply
Chains and the Internet 375 • Business Value of Supply Chain Management
Systems 376
9-3 How do customer relationship management systems help firms achieve
customer intimacy? 377
What is Customer Relationship Management? 377
Interactive Session: Management Unilever Unifies Globally with Enhanced
ERP 378
Customer Relationship Management Software 381 • Operational and Analytical
CRM 383
Interactive Session: Organizations DP World Takes Port Management to the
Next Level with RFID 385
Business Value of Customer Relationship Management Systems 387
9-4 What are the challenges that enterprise applications pose, and how are
enterprise applications taking advantage of new technologies? 387
Enterprise Application Challenges 387 • Next-Generation Enterprise
Applications 388
Questions 392
Case Study: Customer Relationship Management Helps Celcom Become Number
One 394
References: 397
Chapter 10 E-commerce: Digital Markets, Digital Goods 398

Opening Case: Uber Storms Europe: Europe Strikes Back 399
10-1 What are the unique features of e-commerce, digital markets, and digital
goods? 401
12 Contents
E-commerce Today 402 • The New E-commerce: Social, Mobile, Local 403
• Why E-commerce is Different 405 • Key Concepts in E-commerce: Digital
Markets and Digital Goods in a Global Marketplace 408
10-2 What are the principal e-commerce business and revenue models? 412
Types of E-commerce 412 • E-commerce Business Models 412 • E-commerce
Revenue Models 415
10-3 How has e-commerce transformed marketing? 417
Behavioral Targeting 418 • Social E-Commerce and Social Network
Marketing 422
Interactive Session: Technology Getting Social with Customers 424
10-4 How has e-commerce affected business-to-business transactions? 426
Electronic Data Interchange (EDI) 426 • New Ways of B2B Buying and
Selling 427
10-5 What is the role of m-commerce in business, and what are the most
important m-commerce applications? 429
Location-Based Services and Applications 430
Interactive Session: Organizations Can Instacart Deliver? 431
Other Mobile Commerce Services 433
10-6 What issues must be addressed when building an e-commerce
presence? 433
Develop an E-Commerce Presence Map 434 • Develop a Timeline:
Milestones 435
Questions 437
Case Study: Walmart and Amazon Duke It Out for E-commerce Supremacy 439
References: 442
Chapter 11 Managing Knowledge 444

Opening Case: Fiat: Real Time Management with Business Intelligence 445
11-1 What is the role of knowledge management systems in business? 447
Important Dimensions of Knowledge 448 • The Knowledge Management Value
Chain 449 • Types of Knowledge Management Systems 452
11-2 What types of systems are used for enterprise-wide knowledgge
management, and how do they provide value for businesses? 453
Enterprise Content Management Systems 453
Interactive Session: Organizations ECM in the Cloud Empowers New Zealand
Department of Conservation 454
Locating and Sharing Expertise 456 • Learning Management Systems 456
11-3 What are the major types of knowledge work systems, and how do they
provide value for firms? 457
Knowledge Workers and Knowledge Work 457 • Requirements of Knowledge
Work Systems 457 • Examples of Knowledge Work Systems 458
11-4 What are the business benefits of using intelligent techniques for
knowledge management? 460
Contents 13
Capturing Knowledge: Expert Systems 460

Interactive Session: Technology Will Robots Replace People in Manufacturing?
461
Organizational Intelligence: Case-Based Reasoning 464 • Fuzzy Logic
Systems 465 • Machine Learning 467 • Intelligent Agents 470 • Hybrid AI
Systems 471
Questions 474
Case Study: Knowledge Management and Collaboration at Tata Consulting
Services 475
References: 479
Chapter 12 Enhancing Decision Making 480

Opening Case: Roche: Managing Diabetes with Big Data and Mobile Apps 481
12-1 What are the different types of decisions, and how does the decision-
making process work? 483
Business Value of Improved Decision Making 483 • Types of
Decisions 483 • The Decision-Making Process 485
12-2 How do information systems support the activities of managers and
management decision making? 486
Managerial Roles 486 • Real-World Decision Making 488 • High-Velocity
Automated Decision Making 489
12-3 How do business intelligence and business analytics support decision
making? 490
What is Business Intelligence? 490 • The Business Intelligence
Environment 491 • Business Intelligence and Analytics Capabilities 492
Interactive Session: Technology Singapore Sports Institute Uses Analytics for
SEA Games 495
Management Strategies for Developing BI and BA Capabilities 497
Interactive Session: Management Britain's National Health Service Jettisons
Choose and Book System 498
12-4 How do different decision-making constituencies in an organization
use business intelligence, and what is the role of information
systems in helping people working in a group make decisions more
efficiently? 500
Decision Support for Operational And Middle Management 500 • Decision
Support for Senior Management: Balanced Scorecard and Enterprise
Performance Management Methods 503 • Group Decision-Support Systems
(GDSS) 504
Questions 507
Case Study: GE Bets on the Internet of Things and Big Data Analytics 508
References: 512
14 Contents
PART FOUR Building and Managing Systems 513

Chapter 13 Building Information Systems 514
Opening Case: Angostura Builds a Mobile Sales System 515
13-1 How does building new systems produce organizational change? 517
Systems Development and Organizational Change 517 • Business Process
Redesign 519
13-2 What are the core activities in the systems development process? 522
Systems Analysis 523 • Systems Design 524 • Completing the Systems
Development Process 525
13-3 What are the principal methodologies for modeling and designing
systems? 528
Structured Methodologies 528 • Object-Oriented Development 530
• Computer-Aided Software Engineering 532
13-4 What are alternative methods for building information systems? 532
Traditional Systems Life Cycle 533 • Prototyping 534 • End-User
Development 535 • Application Software Packages, Software Services, and
Outsourcing 536
Interactive Session: Organizations Fujitsu Selects a SaaS Solution to Simplify
the Sales Process 537
13-5 What are new approaches for system building in the digital firm era? 540
Rapid Application Development (RAD), Agile Development, and DevOps 541 •
Component-Based Development and Web Services 542 • Mobile Application
Development: Designing for A Multiscreen World 542
Interactive Session: Technology Developing Mobile Apps: What's Different 544
Questions 548
Case Study: ConAgra's Recipe for a Better Human Resources System 550
References: 553
Chapter 14 Managing Projects 554

Opening Case: Intuit Counts on Project Management 555
14-1 What are the objectives of project management, and why is it so
essential in developing information systems? 557
Runaway Projects and System Failure 557 • Project Management
Objectives 558
14-2 What methods can be used for selecting and evaluating information
systems projects and aligning them with the firm's business goals? 559
Management Structure for Information Systems Projects 559 • Linking Systems
Projects to The Business Plan 560 • Information Requirements and Key
Performance Indicators 562 • Portfolio Analysis 562 • Scoring Models 563
14-3 How can firms assess the business value of information systems? 564
Information System Costs and Benefits 564 • Capital Budgeting for Information
Systems 565 • Limitations of Financial Models 566
Contents 15
14-4 What are the principal risk factors in information systems projects, and
how can they be managed? 566
Dimensions of Project Risk 566 • Change Management and the Concept of
Implementation 567
Interactive Session: Management Can the National Health Service Go
Paperless? 568
Controlling Risk Factors 571
Interactive Session: Technology Hilti AG: Putting Things Together with New
Project Management Tools 575
Designing for the Organization 577 • Project Management Software Tools 577
Questions 580
Case Study: A Shaky Start for Healthcare.gov 581
References: 585
Chapter 15 Managing Global Systems 588

Opening Case: The Bel Group: Laughing All the Way to Success 589
15-1 What major factors are driving the internationalization of business? 591
Developing an International Information Systems Architecture 592 • The Global
Environment: Business Drivers and Challenges 593 • State of the Art 596
15-2 What are the alternative strategies for developing global businesses? 597
Global Strategies and Business Organization 597 • Global Systems to Fit the
Strategy 598 • Reorganizing the Business 599
15-3 What are the challenges posed by global information systems and
management solutions for these challenges? 600
A Typical Scenario: Disorganization on a Global Scale 600 • Global Systems
Strategy 601 • The Management Solution: Implementation 603
15-4 What are the issues and technical alternatives to be considered when
developing international information systems? 604
Computing Platforms and Systems Integration 605 • Connectivity 605
Interactive Session: Organizations Indian E-commerce: Obstacles to
Opportunity 607
Software Localization 608
Interactive Session: Management Steelcase Designs Goes for Global Talent
Management 609
Questions 612
Case Study: Crocs Clambers to Global Efficiency 614
References: 618
Glossary 619
Indexes 631
Business Cases And Interactive Sessions
Here are some of the business firms you will find described in the cases and Interactive Sessions
of this book:
Chapter 1: Information Systems in Global Business Today

Rugby Football Union Tries Big Data
The Mobile Pocket Office
Digital Transformation of Healthcare at Singapore's JurongHealth Services
Are Farms Becoming Digital Firms?
Chapter 2: Global E-Business and Collaboration

Enterprise Social Networking Helps ABB Innovate and Grow
New Systems Help Plan International Manage Its Human Resources
Collaborating the Glasscubes Way
Social Business: Full Speed Ahead or Proceed with Caution?
Chapter 3: Information Systems, Organizations, and Strategy

Tate & Lyle Devise a Global IT Strategy
Can Technology Replace Managers?
Smart Products, Smart Companies
Deutsche Bank: The Cost of Legacy Systems
Chapter 4: Ethical and Social Issues in Information Systems

The Dark Side of Big Data
Monitoring in the Workplace
Are We Relying Too Much on Computers to Think for Us?
Facebook Privacy: What Privacy?
Chapter 5: IT Infrastructure and Emerging Technologies

EasyJet Flies High with Cloud Computing
Wearable Computers Change How We Work
Glory Finds Solutions in the Cloud
BYOD: Business Opportunity or Big Headache?
Chapter 6: Foundations of Business Intelligence: Databases and Information Management

BAE Systems
Data-Driven Crime Fighting Goes Global
Societe Generale Builds an Intelligent System to Manage Information Flow
Lego's Enterprise Software Spurs Growth
Chapter 7: Telecommunications, the Internet and Wireless Technology

Wireless Technology Makes Dundee Precious Metals Good as Gold
The Global Battle over Net Neutrality
Monitoring Employees on Networks: Unethical or Good Business?
RFID Propels the Angkasa Library Management System
16
Business Cases and Interactive Sessions 17
Chapter 8: Securing Information Systems

Hackers Attack Singapore's Telecom Infrastructure
Stuxnet and the Changing Face of Cyberwarfare
BYOD: A Security Nightmare?
Information Security Threats and Policies in Europe
Chapter 9: Achieving Operational Excellence and Customer Intimacy: Enterprise

Applications
Alimentation Couche-Tard Competes Using Enterprise Systems
Unilever Unifies Globally with Enhanced ERP
DP World Takes Port Management to the Next Level with RFID
Customer Relationship Management Helps Celcom Become Number One
Chapter 10: E-commerce: Digital Markets, Digital Goods

Uber Storms Europe: Europe Strikes Back
Getting Social with Customers
Can Instacart Deliver?
Walmart and Amazon Duke It Out for E-commerce Supremacy
Chapter 11: Managing Knowledge

Fiat: Real Time Management with Business Intelligence
ECM in the Cloud Empowers New Zealand Department of Conservation
Will Robots Replace People in Manufacturing?
Knowledge Management and Collaboration at Tata Consulting Services
Chapter 12: Enhancing Decision Making

Roche: Managing Diabetes with Big Data and Mobile Apps
Singapore Sports Institute Uses Analytics for SEA Games
Britain's National Health Service Jettisons Choose and Book System
GE Bets on the Internet of Things and Big Data Analytics
Chapter 13: Building Information Systems

Angostura Builds a Mobile Sales System
Fujitsu Selects a SaaS Solution to Simplify the Sales Process
Developing Mobile Apps: What’s Different
ConAgra’s Recipe for a Better Human Resources System
Chapter 14: Managing Projects

Intuit Counts on Project Management
Can the National Health Service Go Paperless?
Hilti AG: Putting Things Together with New Project Management Tools
A Shaky Start for Healthcare.gov
Chapter 15: Managing Global Systems

The Bel Group: Laughing All the Way to Success
Indian E-commerce: Obstacles to Opportunity
Steelcase Designs Goes for Global Talent Management
Crocs Clambers to Global Efficiency
Preface
The Global Edition is written for business school students in Europe, the
Middle East, South Africa, Australia, and the Pacific Asian region. Case studies
and examples focus on how firms in these regions use information systems.
We wrote this book for business school students who wanted an in-depth look
at how today's business firms use information technologies and systems to
achieve corporate objectives. Information systems are one of the major tools
available to business managers for achieving operational excellence, developing
new products and services, improving decision making, and achieving competi-
tive advantage. Students will find here the most up-to-date and comprehensive
overview of information systems used by business firms today. After reading
this book, we expect students will be able to participate in, and even lead, man-
agement discussions of information systems for their firms.
When interviewing potential employees, business firms often look for new
hires who know how to use information systems and technologies for achiev-
ing bottom-line business results. Regardless of whether you are an accounting,
finance, management, operations management, marketing, or information sys-
tems major, the knowledge and information you find in this book will be valu-
able throughout your business career.
What’s New in This Edition
Currency
The 15th edition features all new opening, closing, and Interactive Session
cases. The text, figures, tables, and cases have been updated through September
2016 with the latest sources from industry and MIS research.
New Features
• New Conceptual Videos collection includes 45 conceptual videos of 3
to 5 minutes in length. Ken Laudon walks students through three of the
most important concepts in each chapter using a contemporary anima-
tion platform. Available only in the MyLab MIS digital edition
• New Video Cases collection: 36 video cases (two or more per chapter)
and 10 additional instructional videos covering key concepts and experi-
ences in the MIS world. Video Cases are listed at the beginning of each
chapter.
• Learning Tracks: 47 Learning Tracks in MyLab MIS for additional cover-
age of selected topics.
New Topics
• Big Data and the Internet of Things: In-depth coverage of big data,
big data analytics, and the Internet of Things (IoT) in Chapters 1, 6,
7, and 12. Includes big data analytics, analyzing IoT data streams,
18
Preface 19
Hadoop, in-memory computing, non-relational databases, and analytic

platforms.
• Cloud Computing: Updated and expanded coverage of cloud computing
in Chapter 5 (IT infrastructure) with more detail on types of cloud ser-
vices, private and public clouds, hybrid clouds, managing cloud services,
and a new Interactive Session on using cloud services. Cloud computing
also covered in Chapter 6 (databases in the cloud), Chapter 8 (cloud secu-
rity), Chapter 9 (cloud-based CRM and ERP), Chapter 10 (e-commerce),
and Chapter 13 (cloud-based systems development).
• Social, Mobile, Local: New e-commerce content in Chapter 10 describ-
ing how social tools, mobile technology, and location-based services are
transforming marketing and advertising.
• Social Business: Expanded coverage of social business, introduced in
Chapter 2 and discussed in throughout the text. Detailed discussions of
enterprise (internal corporate) social networking as well as social net-
working in e-commerce.
• BYOD and mobile device management
• Smart products
• DevOps
• Zero-day vulnerabilities
• Machine learning
• Chatbots
• Near field communication (NFC)
• Native advertising
• Windows 10
• Microsoft Office 365
• Zero-day vulnerabilities
• Platforms
• Software-defined storage (SDS)
The 15th Edition: The Comprehensive Solution for the

MIS Curriculum
Since its inception, this text has helped to define the MIS course around the
globe. This edition continues to be authoritative but is also more customizable,
flexible, and geared to meeting the needs of different colleges, universities, and
individual instructors. Many of its learning tools are now available in digital
form. This book is now part of a complete learning package that includes the
core text, Video Case Package, and Learning Tracks.
The core text consists of 15 chapters with hands-on projects covering the
most essential topics in MIS. An important part of the core text is the Video
Case Study and Instructional Video Package: 36 video case studies (two to three
per chapter) plus 10 instructional videos that illustrate business uses of infor-
mation systems, explain new technologies, and explore concepts. Videos are
keyed to the topics of each chapter.
In addition, for students and instructors who want to go deeper into selected
topics, there are 47 Learning Tracks in MyLab MIS that cover a variety of MIS
topics in greater depth.
20 Preface
The CORE Text

The core text provides an overview of fundamental MIS concepts using an
integrated framework for describing and analyzing information systems. This
framework shows information systems composed of management, organiza-
tion, and technology elements and is reinforced in student projects and case
studies.
Chapter Organization
Each chapter contains the following elements:
• A Chapter Outline based on Learning Objectives
• Lists of all the Case Studies and Video Cases for each chapter
• A chapter-opening case describing a real-world organization to establish
the theme and importance of the chapter
• A diagram analyzing the opening case in terms of the management, orga-
nization, and technology model used throughout the text
• Two Interactive Sessions with Case Study Questions
• A Review Summary keyed to the Student Learning Objectives
• A list of Key Terms that students can use to review concepts
• Review questions for students to test their comprehension of chapter
material
• Discussion questions raised by the broader themes of the chapter
• A series of Hands-on MIS Projects consisting of two Management
Decision Problems, a hands-on application software project, and a project
to develop Internet skills
• A Collaboration and Teamwork Project to develop teamwork and presen-
tation skills with options for using open source collaboration tools
• A chapter-ending case study for students to apply chapter concepts
• Two assisted-graded writing questions with prebuilt grading rubrics
• Chapter references
Business
Challenges
• Monitor service level
and costs • Costly, unwieldy IT infrastructure
A diagram accompanying • Plan new IT • Low-cost provider
Management
each chapter-opening case infrastructure • Highly competitive industry
graphically illustrates how • Make IT infrastructure
investments
management, organization,
and technology elements work • Create new services Information Business
together to create an informa- and business Organization
System Solutions
tion system solution to the processes
business challenges discussed
Seat Allocation System • Improve customer
in the case. • Provide online seat selection service
• On-premises Technology
service • Increase revenue
reservation system
• Microsoft Azure cloud
computing services
Preface 21
Key Features
We have enhanced the text to make it more interactive, leading edge, and
appealing to both students and instructors. The features and learning tools are
described in the following sections.
Business-Driven with Real-World Business Cases and

Examples
The text helps students see the direct connection between information systems
and business performance. It describes the main business objectives driving the
use of information systems and technologies in corporations all over the world:
operational excellence, new products and services, customer and supplier inti-
macy, improved decision making, competitive advantage, and survival. In-text
examples and case studies show students how specific companies use informa-
tion systems to achieve these objectives.
We use only current (2016) examples from business and public organiza-
tions throughout the text to illustrate the important concepts in each chap-
ter. All the case studies describe companies or organizations that are familiar
to students, such as Nike, Rugby Football Union, Facebook, Walmart, Fiat,
Unilever, and GE.
Interactivity
There’s no better way to learn about MIS than by doing MIS! We provide differ-
ent kinds of hands-on projects where students can work with real-world busi-
ness scenarios and data and learn firsthand what MIS is all about. These proj-
ects heighten student involvement in this exciting subject.
• Online Video Case Package. Students can watch short videos online,
either in-class or at home or work, and then apply the concepts of the
book to the analysis of the video. Every chapter contains at least two
business video cases that explain how business firms and managers are
using information systems and explore concepts discussed in the chap-
ter. Each video case consists of one or more videos about a real-world
company, a background text case, and case study questions. These video
cases enhance students’ understanding of MIS topics and the relevance of
MIS to the business world. In addition, there are 10 Instructional Videos
that describe developments and concepts in MIS keyed to respective
chapters.
• Online Conceptual Videos [the digital edition only]. Forty-five video
animations where the authors walk students through three concepts from
each chapter.
• Interactive Sessions. Two short cases in each chapter have been rede-
signed as Interactive Sessions to be used in the classroom (or on Internet
discussion boards) to stimulate student interest and active learning. Each
case concludes with case study questions. The case study questions pro-
vide topics for class discussion, Internet discussion, or written assign-
ments.
• Hands-On MIS Projects. Every chapter concludes with a Hands-On
MIS Projects section containing three types of projects: two Management
Decision Problems; a hands-on application software exercise using
Microsoft Excel, Access, or web page and blog creation tools; and a proj-
ect that develops Internet business skills. A Dirt Bikes USA running case
in MyLab MIS provides additional hands-on projects for each chapter.
22 Preface
INTERACTIVE SESSION: TECHNOLOGY

Getting Social with Customers
Businesses of all sizes are finding Facebook, Twit- Lowe’s “In-a-Snap” Snapchat series tries to inspire
ter, and other social media to be powerful tools for young homeowners and renters to undertake sim-
engaging customers, amplifying product messages, ple home improvement projects such as installing
discovering trends and influencers, building brand shelves to build a study nook. During the Lowe’s
awareness, and taking action on customer requests Snapchat story, users can tap on the screen to put
and recommendations. Half of all Twitter users rec- a nail in a wall or chisel off an old tile. Lowe’s is
ommend products in their tweets. working on another series of video tutorials on Face-
About 1.6 billion people use Facebook, and more book and Instagram called “Home School” that uses
than 30 million businesses have active brand pages, drawings from chalk artists to animate maintenance
enabling users to interact with the brand through projects.
blogs, comment pages, contests, and offerings on the Lowe’s social media activities have helped
brand page. The “like” button gives users a chance to increase brand engagement. Although the company’s
share with their social network their feelings about social campaigns are designed to teach first-time
Each chapter contains two content and other objects they are viewing and web- homeowners or young renters about home improve-
ment, the company is also hoping they will encour-
Interactive Sessions on sites they are visiting. With like buttons on millions
of websites, Facebook can track user behavior on age consumers to think differently about the brand
Management, Organizations, other sites and then sell this information to market- beyond its products and services. Management
or Technology using real-world ers. Facebook also sells display ads to firms that believes millennials who are becoming first-time
show up in the right column of users’ home pages homeowners want to know the deeper meaning of
companies to illustrate chapter and most other pages in the Facebook interface such what a company is trying to stand for, not just the
concepts and issues. as photos and apps. products and services it offers.
Twitter has developed many new offerings to An estimated 90 percent of customers are influ-
interest advertisers, like “promoted tweets” and “pro- enced by online reviews, and nearly half of U.S.
moted trends.” These features give advertisers the social media users actively seek customer service
ability to have their tweets displayed more promi- through social media. As a result, marketing is now
nently when Twitter users search for certain key- placing much more emphasis on customer satisfac-
words. Many big advertisers are using Twitter’s Vine tion and customer service. Social media monitoring
service, which allows users to share short, repeating helps marketers and business owners understand
videos with a mobile-phone app or post them on more about likes, dislikes, and complaints concern-
other platforms such as Facebook. ing products, additional products or product modifi-
Lowe’s is using Facebook mobile video and Snap- cations customers want, and how people are talking
chat image messaging to help first-time millennial about a brand (positive or negative sentiment).
home buyers learn home improvement skills. The General Motors (GM) has 26 full-time social media
home improvement retailer launched a new series of customer care advisers for North America alone,
social videos in April 2016 to showcase spring clean- covering more than 150 company social channels
ing and do-it-yourself projects. Lowe’s believes this from GM, Chevrolet, Buick, GMC, and Cadillac, and
is a more immediate and interactive way to reach approximately 85 sites such as automotive enthusiast
, ,
Case Study Questions encour- CASE STUDY QUESTIONS

age students to apply chapter 1. Assess the management, organization, and tech- 3. Give an example of a business decision in this
concepts to real-world compa- nology issues for using social media technology to case study that was facilitated by using social
nies in class discussions, stu- engage with customers. media to interact with customers.
2. What are the advantages and disadvantages of 4. Should all companies use social media technology
dent presentations, or writing using social media for advertising, brand building, for customer service and marketing? Why or why
assignments. market research, and customer service? not? What kinds of companies are best suited to
use these platforms?
• Collaboration and Teamwork Projects. Each chapter features a col-

laborative project that encourages students working in teams to use
Google Drive, Google Docs, or other open source collaboration tools.
The first team project in Chapter 1 asks students to build a collaborative
Google site.
Assessment and AACSB Assessment Guidelines

The Association to Advance Collegiate Schools of Business (AACSB) is a not-
for-profit corporation of educational institutions, corporations, and other orga-
nizations that seeks to improve business education primarily by accrediting uni-
versity business programs. As a part of its accreditation activities, the AACSB has
Preface 23
Management Decision Problems

11-8 U.S. Pharma Corporation is headquartered in New Jersey but has research sites in Germany, France, the
United Kingdom, Switzerland, and Australia. Research and development of new pharmaceuticals is key to
ongoing profits, and U.S. Pharma researches and tests thousands of possible drugs. The company’s
researchers need to share information with others within and outside the company, including the U.S.
Food and Drug Administration, the World Health Organization, and the International Federation of Phar- Two real-world business sce-
maceutical Manufacturers & Associations. Also critical is access to health information sites, such as the narios per chapter provide
U.S. National Library of Medicine, and to industry conferences and professional journals. Design a knowl-
edge portal for U.S. Pharma’s researchers. Include in your design specifications relevant internal systems opportunities for students to
and databases, external sources of information, and internal and external communication and collabora- apply chapter concepts and
tion tools. Design a home page for your portal.
practice management decision
11-9 Canadian Tire is one of Canada’s largest companies, with 50,000 employees and 1,100 stores and gas bars
(gas stations) across Canada selling sports, leisure, home products, apparel, and financial services as well making.
as automotive and petroleum products. The retail outlets are independently owned and operated. Cana-
dian Tire has been using daily mailings and thick product catalogs to inform its dealers about new prod-
ucts, merchandise setups, best practices, product ordering, and problem resolution, and it is looking for a
better way to provide employees with human resources and administrative documents. Describe the prob-
lems created by this way of doing business and how knowledge management systems might help.
Students practice using soft-

ware in real-world settings for
achieving operational excel-
lence and enhancing decision
making.
Improving Decision Making: Using Web Tools to Configure and Price an Automobile
Software skills: Internet-based software
Business skills: Researching product information and pricing
Each chapter features a project
3-11 In this exercise, you will use software at car websites to find product information about a car of your choice
and use that information to make an important purchase decision. You will also evaluate two of these sites
to develop Internet skills for
as selling tools. accessing information, con-
You are interested in purchasing a new Ford Escape (or some other car of your choice). Go to the ducting research, and perform-
website of CarsDirect (www.carsdirect.com) and begin your investigation. Locate the Ford Escape. Research
the various Escape models, and choose one you prefer in terms of price, features, and safety ratings. Locate ing online calculations and
and read at least two reviews. Surf the website of the manufacturer, in this case Ford (www.ford.com). Com- analysis.
pare the information available on Ford’s website with that of CarsDirect for the Ford Escape. Try to locate
the lowest price for the car you want in a local dealer’s inventory. Suggest improvements for CarsDirect.com
and Ford.com.
developed an Assurance of Learning Program designed to ensure that schools

do in fact teach students what they promise. Schools are required to state a clear
mission, develop a coherent business program, identify student learning objec-
tives, and then prove that students do in fact achieve the objectives.
We have attempted in this book to support AACSB efforts to encourage assess-
ment-based education. The back end papers of this edition identify student
learning objectives and anticipated outcomes for our Hands-On MIS projects.
The authors will provide custom advice on how to use this text in colleges with
different missions and assessment needs. Please e-mail the authors or contact
your local Pearson representative for contact information.
24 Preface
For more information on the AACSB Assurance of Learning Program and

how this text supports assessment-based learning, please visit the website for
this book.
Customization and Flexibility: Learning Track Modules

Our Learning Tracks feature gives instructors the flexibility to provide in-depth
coverage of the topics they choose. There are 47 Learning Tracks in MyLab MIS
available to instructors and students. This supplementary content takes students
deeper into MIS topics, concepts, and debates; reviews basic technology concepts
in hardware, software, database design, telecommunications, and other areas.
Author-Certified Test Bank and Supplements

• Author-Certified Test Bank. The authors have worked closely with
skilled test item writers to ensure that higher-level cognitive skills are
tested. Test bank multiple-choice questions include questions on content
but also include many questions that require analysis, synthesis, and
evaluation skills.
• Annotated Slides. The authors have prepared a comprehensive collec-
tion of 50 PowerPoint slides for each chapter to be used in your lectures.
Many of these slides are the same as used by Ken Laudon in his MIS
classes and executive education presentations. Each of the slides is anno-
tated with teaching suggestions for asking students questions, developing
in-class lists that illustrate key concepts, and recommending other firms
as examples in addition to those provided in the text. The annotations
are like an Instructor’s Manual built into the slides and make it easier to
teach the course effectively.
Student Learning-Focused
Student Learning Objectives are organized around a set of study questions to
focus student attention. Each chapter concludes with a Review Summary and
Review Questions organized around these study questions, and each major
chapter section is based on a Learning Objective.
Career Resources
The Instructor Resources for this text include extensive Career Resources,
including job-hunting guides and instructions on how to build a Digital Portfolio
demonstrating the business knowledge, application software proficiency, and
Internet skills acquired from using the text. The portfolio can be included in a
resume or job application or used as a learning assessment tool for instructors.
Instructor Resources
At the Instructor Resource Center, www.pearsonglobaleditions.com/laudon,
instructors can easily register to gain access to a variety of instructor resources
available with this text in downloadable format. If assistance is needed, our
dedicated technical support team is ready to help with the media supplements
that accompany this text. Visit http://support.pearson.com for answers to fre-
quently asked questions and toll-free user support phone numbers.
The following supplements are available with this text:
• Instructor’s Resource Manual
• Test Bank
Preface 25
• TestGen® Computerized Test Bank

• PowerPoint Presentation
• Image Library
• Lecture Notes
Video Cases and Instructional Videos

Instructors can download step-by-step instructions for accessing the video cases
from the Instructor Resources Center. Video Cases and Instructional Videos are
listed at the beginning of each chapter as well as in the Preface.
Learning Tracks Modules

There are 47 Learning Tracks in MyLab MIS providing additional coverage
topics for students and instructors. See page 26 for a list of the Learning Tracks
available for this edition.
Video Cases and Instructional Videos

Chapter Video
Chapter 1: Information Systems in Global Business in the Cloud: Facebook and eBay Data Centers
Business Today UPS Global Operations with the DIAD
Instructional Video: Tour IBM's Raleigh Data Center
Chapter 2: Global E-business and Walmart's Retail Link Supply Chain
Collaboration CEMEX: Becoming a Social Business
Instructional Video: US Foodservice Grows Market with Oracle CRM on Demand
Chapter 3: Information Systems, GE Becomes a Digital Firm: The Emerging Industrial Internet
Organizations, and Strategy National Basketball Association: Competing on Global Delivery with Akamai OS Streaming
Chapter 4: Ethical and Social Issues in What Net Neutrality Means for You
Information Systems Facebook and Google Privacy: What Privacy?
The United States v. Terrorism: Data Mining for Terrorists and Innocents
Instructional Video: Viktor Mayer Schönberger on the Right to Be Forgotten
Chapter 5: IT Infrastructure and Emerging Rockwell Automation Fuels the Oil and Gas Industry with the Internet of Things (IoT)
Technologies ESPN.com: The Future of Sports Broadcasting in the Cloud
Netflix: Building a Business in the Cloud
Chapter 6: Foundations of Business Dubuque Uses Cloud Computing and Sensors to Build a Smarter City
Intelligence: Databases and Information Brooks Brothers Closes in on Omnichannel Retail
Management Maruti Suzuki Business Intelligence and Enterprise Databases
Chapter 7: Telecommunications, the Telepresence Moves out of the Boardroom and into the Field
Internet, and Wireless Technology Virtual Collaboration with IBMSametime
Chapter 8: Securing Information Systems Stuxnet and Cyberwarfare
Cyberespionage: The Chinese Threat
Instructional Video: Sony PlayStation Hacked; Data Stolen from 77 Million Users
Instructional Video: Meet the Hackers: Anonymous Statement on Hacking SONY
Chapter 9: Achieving Operational Life Time Fitness Gets in Shape with Salesforce CRM
Excellence and Customer Intimacy: Evolution Homecare Manages Patients with Microsoft CRM
Enterprise Applications Instructional Video: GSMS Protects Products and Patients by Serializing Every Bottle of Drugs
Chapter 10: E-commerce: Digital Markets, Walmart Takes on Amazon: A Battle of IT and Management Systems
Digital Goods Groupon: Deals Galore
Etsy: A Marketplace and Community
Instructional Video: Walmart's eCommerce Fulfillment Center Network
Instructional Video: Behind the Scenes of an Amazon Warehouse
Chapter 11: Managing Knowledge How IBM's Watson Became a Jeopardy Champion
Alfresco: Open Source Document Management and Collaboration
Chapter 12: Enhancing Decision Making PSEG Leverages Big Data and Business Analytics Using GE's PREDIX Platform
FreshDirect Uses Business Intelligence to Manage Its Online Grocery.
Business Intelligence Helps the Cincinnati Zoo Work Smarter
26 Preface
Video Cases and Instructional Videos (Continued)
Chapter Video
Chapter 13 Building Information Systems IBM: Business Process Management in a SaaS Environment
IBM Helps the City of Madrid with Real-Time BPM Software
Instructional Video: BPM: Business Process Management Customer Story
Instructional Video: Workflow Management Visualized
Chapter 14 Managing Projects Blue Cross Blue Shield: Smarter Computing Project
NASA Project Management Challenges
Chapter 15 Managing Global Systems Daum Runs Oracle Apps on Linux
Lean Manufacturing and Global ERP: Humanetics and Global Shop
Learning Tracks
Chapter Learning Tracks

Chapter 1: Information Systems in Global How Much Does IT Matter?
Business Today Information Systems and Your Career
The Mobile Digital Platform
Chapter 2: Global E-business and Systems From a Functional Perspective
Collaboration IT Enables Collaboration and Teamwork
Challenges of Using Business Information Systems
Organizing the Information Systems Function
Occupational and Career Outlook for Information Systems Majors 2014–2020
Chapter 3: Information Systems, The Changing Business Environment for IT
Organizations, and Strategy
Chapter 4: Ethical and Social Issues in Developing a Corporate Code of Ethics for IT
Information Systems
Chapter 5: IT Infrastructure and Emerging How Computer Hardware Works
Technologies How Computer Software Works
Service Level Agreements
The Open Source Software Initiative
Comparing Stages in IT Infrastructure Evolution
Cloud Computing
Chapter 6: Foundations of Business Database Design, Normalization, and Entity-Relationship Diagramming
Intelligence: Databases and Information Introduction to SQL
Management Hierarchical and Network Data Models
Chapter 7: Telecommunications, the Broadband Network Services and Technologies
Internet, and Wireless Technology Cellular System Generations
Wireless Applications for Customer Relationship Management, Supply Chain Management, and Healthcare
Introduction to Web 2.0
LAN Topologies
Chapter 8: Securing Information Systems The Booming Job Market in IT Security
The Sarbanes-Oxley Act
Computer Forensics
General and Application Controls for Information Systems
Management Challenges of Security and Control
Software Vulnerability and Reliability
Chapter 9: Achieving Operational SAP Business Process Map
Excellence and Customer Intimacy: Business Processes in Supply Chain Management and Supply Chain Metrics
Enterprise Applications Best-Practice Business Processes in CRM Software
Chapter 10: E-commerce: Digital Markets, E-commerce Challenges: The Story of Online Groceries
Digital Goods Build an E-commerce Business Plan
Hot New Careers in E-Commerce
E-commerce Payment Systems
Building an E-commerce Website
Chapter 11: Managing Knowledge Challenges of Knowledge Management Systems
Chapter 12: Enhancing Decision Making Building and Using Pivot Tables
Preface 27
Chapter Learning Tracks

Chapter 13: Building Information Systems Unified Modeling Language
Primer on Business Process Design and Documentation
Primer on Business Process Management
Fourth-Generation Languages
Chapter 14: Managing Projects Capital Budgeting Methods for Information Systems Investments
Enterprise Analysis (Business Systems Planning) and Critical Success Factors
Information Technology Investments and Productivity
MyLab MIS
Available in MyLab MIS
• MIS Video Exercises - Videos illustrating MIS concepts, paired with brief
quizzes
• MIS Decision Simulations - interactive exercises allowing students to play
the role of a manager and make business decisions
• Assisted-Graded writing exercises - taken from the end of chapter, with a
rubric provided
• Chapter Warm Ups, Chapter Quizzes - objective-based quizzing to test
knowledge
• Discussion Questions - taken from the end of chapter
• Dynamic Study Modules - on the go adaptive quizzing, also available on a
mobile phone
• Learning Catalytics - bring-your-own-device classroom response tools
• Enhanced eText - an accessible, mobile-friendly eText with Conceptual
Animations, which walk students through key concepts in the chapter by
making figures come to life
• Excel & Access Grader Projects - live in the application auto-graded
Grader projects provided inside MyLab MIS to support classes covering
Office tools
Acknowledgments
The production of any book involves valued contributions from a number of
persons. We would like to thank all of our editors for encouragement, insight,
and strong support for many years. We thank our editor Samantha McAfee
Lewis and project manager Katrina Ostler for their role in managing the project.
Our special thanks go to our supplement authors for their work, including the
following MyLab content contributors: John Hupp, Columbus State University;
Robert J. Mills, Utah State University; John P. Russo, Wentworth Institute of
Technology; and Michael L. Smith, SUNY Oswego. We are indebted to Robin
Pickering for her assistance with writing and to William Anderson and Megan
Miller for their help during production. We thank Diana R. Craig for her assis-
tance with database and software topics.
Special thanks to colleagues at the Stern School of Business at New York
University; to Professor Werner Schenk, Simon School of Business, University
of Rochester; to Professor Mark Gillenson, Fogelman College of Business and
Economics, University of Memphis; to Robert Kostrubanic, Indiana-Purdue
University Fort Wayne; to Professor Lawrence Andrew of Western Illinois
University; to Professor Detlef Schoder of the University of Cologne; to Professor
28 Preface
Walter Brenner of the University of St. Gallen; to Professor Lutz Kolbe of the
University of Gottingen; to Professor Donald Marchand of the International
Institute for Management Development; and to Professor Daniel Botha of
Stellenbosch University who provided additional suggestions for improvement.
Thank you to Professor Ken Kraemer, University of California at Irvine, and
Professor John King, University of Michigan, for more than a decade-long dis-
cussion of information systems and organizations. And a special remembrance
and dedication to Professor Rob Kling, University of Indiana, for being our friend
and colleague over so many years.
We also want to especially thank all our reviewers whose suggestions helped
improve our texts. Reviewers for Managing the Digital Firm include:
Charles Wankel, St. John's University

Ahmed Kamel, Concordia College
Deborah E Swain, North Carolina Central University
Jigish Zaveri, Morgan State University
Robert Gatewood, Mississippi College
James Drogan, SUNY Maritime College
Amiya Samantray, Marygrove College
John Miles, Keuka College
Werner Schenk, University of Rochester
Shuyuan Mary Ho, Florida State University
Brian Jones, Tennessee Technological University
Robert Fulkerth, Golden Gate University
Osman Guzide, Shepherd University
Pearson gratefully acknowledges and thanks the following people for their
contribution to the Global Edition:
Daniel Ortiz Arroyo, Aalborg University

June Clarke, Sheffield Hallam University
Andy Jones, Staffordshire University
Sahil Raj, Punjabi University
Neerja Sethi, Nanyang Technological University
Vijay Sethi, Nanyang Technological University
K.C.L.
J.P.L.
PART ONE
Organizations,
Management, and the
Networked Enterprise
Chapter 1 Chapter 3
Information Systems in Global Business Information Systems, Organizations,
Today and Strategy
Chapter 2 Chapter 4
Global E-business and Collaboration Ethical and Social Issues in
Information Systems
PART ONE introduces the major themes of this book, raising a series of important questions:
What is an information system, and what are its management, organization, and technology
dimensions? Why are information systems so essential in businesses today? Why are sys-
tems for collaboration and social business so important? How can information systems help
businesses become more competitive? What broader ethical and social issues are raised by
widespread use of information systems?
1
CHAP TER
Information Systems in Global

Business Today
Learning Objectives
After reading this chapter, you will be able to answer the following questions:
1-1 How are information systems transforming business, and why are they so
essential for running and managing a business today?
1-2 What is an information system? How does it work? What are its
management, organization, and technology components? Why are
complementary assets essential for ensuring that information systems
provide genuine value for organizations?
1-3 What academic disciplines are used to study information systems, and how
does each contribute to an understanding of information systems?
MyLab MIS™
Visit mymislab.com for simulations, tutorials, and end-of-chapter problems.
CHAPTER CASES
Digital Transformation of Healthcare at Singapore’s JurongHealth Services
VIDEO CASES
Business in the Cloud: Facebook and eBay Data Centers
UPS Global Operations with the DIAD
Instructional Video:
Tour IBM’s Raleigh Data Center
30
I
n 1871, twenty-one English clubs decided that their sport, officially called
rugby union but commonly referred to simply as rugby, needed an admin-
istrative body. The clubs formed The Rugby Football Union (RFU), which
today manages the English national team (England Rugby) in partnership
with Premier Rugby Limited. Responsible for the promotion of rugby at all
levels, the RFU organizes the Six Nations Championship, the unofficial north-
ern hemisphere championship featuring teams from England, Scotland, Wales,
Italy, Ireland, and France, and the Heineken Cup, its club-level counterpart.
Owned by its member clubs, the RFU’s mission is to maximize profits from
international ticket sales and vending
so that it can support the more than
60,000 volunteers who organize
matches and seminars, help secure
loans and insurance policies, fund-
raise, write grant proposals, provide
medical advice and support, and per-
form the clerical duties that keep the
lower-level clubs operating.
To succeed in this complicated
mission, the RFU entered into a five-
year deal with IBM to capture and
analyze Big Data that will be useful
to both fans, and later—it is hoped—
the players themselves. The system
is called TryTracker. In rugby, a try,
worth five points, is the highest scor-
ing opportunity. Teams get posses-
sion of the ball through a scrum, a ©Michal Sanca/Shutterstock
contest for the ball where eight players bind together and push against eight
players from the other team. The outcome determines who can control the
ball. To score a try, a team must break through the opposition’s defenses,
move into their in-goal area, and “ground” the ball. This is done in one of
two ways. A player can either hold the ball in one or both hands or arms and
then touch it to the ground in the in-goal area, or exert downward pressure
on a ball already on the ground using one or both hands or arms or the upper
front of the body (from the neck to the waistline).
The IBM TryTracker does not just track tries, however. It uses predictive
analytics to track three categories of data: keys to the game, momentum, and
key players. TryTracker uses over 8,000 measures of performance. Tradi-
tional rugby statistics on team and individual performance as well as live
31
32 Part One Organizations, Management, and the Networked Enterprise
text commentary complement the TryTracker data. The keys to the game
are determined ahead of a specific contest by analyzing a historical database
of past matchups between a pair. For example, in 2015 England’s key was
to average at least 3.2 meters per carry in the forwards; attempt an off load
from 10 percent of opposition tackles; and make more than 66 percent of total
line-breaks in the match. Fans can use their mobile devices to keep track of
how their favorite team is faring, concentrating on game elements that will
increase its winning chances. Key players for each team are selected after the
game by comparing a single score compiled using different criteria for each
position. Goal scoring is currently excluded so as not to overvalue kickers and
undervalue players who contribute to creating scoring opportunities.
Like the IBM SlamTracker used at the Grand Slam tennis tournaments,
the goal of TryTracker is to provide data visualization and real-time statis-
tics to draw in fans. To compete with more popular sports such as Premier
League football, the RFU hopes that enhanced communication will increase
fan engagement. In 2015, IBM TryTracker was an ever-present fixture of Eng-
landRugby.com’s extensive match coverage. As their understanding of game
mechanics and emotional investment in what their team needs to do in order
to prevail grows, casual fans will become dedicated fans who return again
and again. Beyond marketing strategy, the long-term potential of predictive
analysis is that it may provide tactical insights to players and coaches that will
improve match play and thus the overall product offered to fans.
In 2016 IBM has deployed the same predictive analytics technology to the
Australian New South Wales Waratahs Rugby team with an emphasis on pre-
dicting player injuries based on their general health, and performance data on
the field generated from GPS sensors that players wear.
Sources: IBM, “Building a Solid Foundation for Big Data Analytics,” IBM Systems Thought
Leadership Paper, 2016; IBM, “IBM Predictive Analytics Reduces Player Injury and Opti-
mises Team Performance for NSW Waratahs Rugby Team,” IBM.com, accessed November
14, 2016; IBM, “3 Ways Big Data and Analytics Will Change Sports,” by Preetam Kumar, IBM
Analytics, ibmbigdatahub.com, December 17, 2015; Simon Creasey, “Rugby Football Union
Uses IBM Predictive Analytics For Six Nations,” ComputerWeekly.com, 2016; “About Us,”
rfu.com, accessed December, 14, 2015; “TryTracker: Rugby Data Analysis,” Telegraph,
November 19, 2015; Oliver Pickup, “How Does TryTracker Work,” Telegraph, November 19,
2015; Simon Creasey, “Rugby Football Union Uses IBM Predictive Analytics for Six Nations,”
ComputerWeek, September 2015; “IBM Rugby Insight Summer 2015,” MSN.com/sports, Sep-
tember 3, 2015; “Live England vs. Scotland with IBM TryTracker,” www.englandrugby.
com, March 15, 2015; “IBM TryTracker Confirms Performance,” www.englandrugby.com/
ibmtrytracker/, November 29, 2014; IBM UK, “IBM TryTracker Rugby Insight: QBE Interna-
tionals 2014 England vs. Australia,” IBM Rugby Insight, November 27, 2014; Oliver Pickup,
“IBM TryTracker: How Does It Work?” Telegraph, October 31, 2013.
T he challenges facing the RFU demonstrate why information systems are so

essential today. The RFU is classified as a “Friendly Society,” somewhere
between a true company and a charity. It receives both government support
and corporate sponsorship money. But it must maximize revenues from ticket
sales, hospitality and catering, television rights, and its travel company in order
to support both grassroots and elite rugby in England.
The chapter-opening diagram calls attention to important points raised by

this case and this chapter. The RFU entered into a strategic partnership with
IBM to educate and engage fans. Using the data collected by sports data com-
pany Opta and the analytics developed by IBM, it may also be able to improve
coaching and game performance as an additional way of cultivating custom-
ers. IBM is also helping the RFU to develop a customer relationship manage-
ment (CRM) system integrated with its Web site.
Here are some questions to think about: What role does technology play
in the RFU’s success as the administrative head of rugby union in England?
Assess the contributions which these systems make to the future of RFU.
1-1 How are information systems transforming

global business, and why are they so essential
for running and managing a business today?
It’s not business as usual in the global economy anymore. Information sys-
tems and technologies are transforming the global business environment. In
2015, global firms and governments spent about €3.4 trillion on information
systems hardware, software, and telecommunications equipment. In addition,
they spent another €544 billion on business and management consulting and
services—much of which involves redesigning firms’ business operations to
take advantage of these new technologies (Gartner, 2016; IDC 2016; Shumsky,
2016). In fact, most of the business value of IT investment derives from these
organizational, management, and cultural changes inside firms (Saunders and
Brynjolfsson, 2016). It is not simply the technology that is changing. Figure 1.1
shows that between 2005 and 2015, global investment in information technology
consisting of hardware, software, and communications equipment grew from

€2.43 trillion to €3.18 trillion and is expected to expand to €3.55 trillion by 2020.
While America and Europe account for an estimated 70 percent of this invest-
ment, 30 percent is occurring in Asia Pacific, Latin America, the Middle East
and North Africa, and Eastern Europe. (Accelerance, 2016; IDC, 2016).
As managers, most of you will work for firms that are intensively using
information systems and making large investments in information technol-
ogy. You will certainly want to know how to invest this money wisely. If you
make wise choices, your firm can outperform competitors. If you make poor
choices, you will be wasting valuable capital. This book is dedicated to help-
ing you make wise decisions about information technology and information
systems.
How Information Systems Are Transforming Business

You can see the results of this large-scale spending around you every day
by observing how people conduct business. Changes in technology and
new, innovative business models have transformed social life and busi-
ness practices. Some 2.8 billion people worldwide have smartphones (50
percent of the world’s population), and an estimated 1.26 billion use their
smartphones for Internet access. More than 1 billion people use tablet
computers, about 15 percent of the global population. In developing and
emerging countries, phones and tablets are the primary means of access to
the Internet (Pew Research, 2016; eMarketer, 2015). An estimated 2.34 bil-
lion people now use social networks, with Facebook accounting for 1.7 bil-
lion people alone. Messaging services like WhatsApp, Facebook Messenger,
and Twitter collectively have over 2 billion monthly users. Smartphones,
FIGURE 1. 1 INFORMATION TECHNOLOGY CAPITAL INVESTMENT
€4.00
€3.75
Investment (trllions)
€3.50
€3.25
€3.00
€2.75
€2.50
2020201920182017201620
Global investment in information technology has expanded by 30 percent in the period 2005 to 2015.
IT investment now accounts for an estimated 20 percent of all capital investment.
Source: World Economic Outlook, International Monetary Fund, October 2016; industry sources; author estimates.
social networking, texting, e-mailing, and webinars have all become essen-
tial tools of business because that’s where your customers, suppliers, and
colleagues can be found (eMarketer, 2016a).
By June 2015, more than 150 million businesses worldwide had dot-com
Internet sites registered (Curtis, 2015). In 2016 1.62 billion Internet users will
purchase online, generating $1.9 billion in sales. Half of these sales will be
from mobile devices. While still only 8 percent of total retail global sales,
online commerce is growing at 6 percent annually, three times the growth
of traditional offline retail (eMarketer, 2016a). In 2015, FedEx moved about
11.5 million packages daily in 220 countries and territories around the world,
mostly overnight, and the United Parcel Service (UPS) moved more than
18 million packages daily. Businesses are using information technology to
sense and respond to rapidly changing customer demand, reduce inventories
to the lowest possible levels, and achieve higher levels of operational effi-
ciency. Supply chains have become more fast-paced, with companies of all
sizes depending on just-in-time inventory to reduce their overhead costs and
get to market faster.
In comparison with the 2.7 billion people who read a print newspaper,
online newspapers are read by one billion people, growing at 10 percent annu-
ally, far faster than print newspapers (WPT, 2016; Conaghan, 2015). An esti-
mated 1.7 billion people watch videos and feature films online, 100 million
post to a blog everyday, and 250 million read a blog, creating an explosion of
new writers and new forms of customer feedback that did not exist five years
ago. Social networking site Facebook attracted more than 1.7 billion monthly
visitors worldwide. Nearly all of the Fortune 2000 global firms now have Face-
book pages, Twitter accounts, and Tumblr sites.
Global e-commerce and Internet advertising continue to expand. Google’s
online ad revenues surpassed €80 billion in 2016, and Internet advertising con-
tinues to grow at more than 20 percent a year, reaching more than €194 billion
in revenues in 2016 (eMarketer, 2016c). That’s about one-third of all advertising
in the world.
These changes in information technology and systems, consumer behavior,
and commerce have spurred the annual growth of digital information to over
5 exabytes every few days, roughly equivalent to all the libraries in existence
(Pappas, 2016). A recent study concluded that the value of information flow-
ing between countries has grown 45 times since 2005, and the value of this
information now exceeds the value of goods and finance exchanged (McKen-
zie, 2016).
What’s New in Management Information Systems

Plenty. In fact, there’s a whole new world of doing business using new tech-
nologies for managing and organizing. What makes the MIS field the most
exciting area of study in schools of business is the continuous change in tech-
nology, management, and business processes. Five changes are of paramount
importance.
IT Innovations. A continuing stream of information technology innovations is

transforming the traditional business world. Examples include the emergence
of cloud computing, the growth of a mobile digital business platform based on
smartphones and tablet computers, big data, business analytics, and the use
of social networks by managers to achieve business objectives. Most of these
changes have occurred in the past few years. These innovations are enabling
entrepreneurs and innovative traditional firms to create new products and
services, develop new business models, and transform the day-to-day conduct
of business. In the process, some old businesses, even industries, are being
destroyed while new businesses are springing up.
New Business Models. For instance, the emergence of online video ser-
vices like Netflix for streaming, Apple iTunes, Amazon, and many others for
downloading video has forever changed how premium video is distributed
and even created. Netflix in 2016 attracted more than 75 million subscribers
worldwide to what it calls the “Internet TV” revolution. Netflix has moved
into premium TV show production with 30 original shows such as House of
Cards and Orange Is the New Black, challenging cable and broadcast produc-
ers of TV shows, and potentially disrupting cable network dominance of TV
show production. Apple’s iTunes now accounts for 67 percent of movie and
TV show downloads and has struck deals with major Hollywood studios for
recent movies and TV shows. A growing trickle of viewers are unplugging
from cable and using only the Internet for entertainment.
E-commerce Expanding. E-commerce generated about $600 billion in

revenues in 2016 and is estimated to grow to nearly $900 billion by 2020.
E-commerce is changing how firms design, produce, and deliver their prod-
ucts and services. E-commerce has reinvented itself again, disrupting the
traditional marketing and advertising industry and putting major media and
content firms in jeopardy. Facebook and other social networking sites such
as YouTube, Twitter, and Tumblr along with Netflix, Apple Beats music ser-
vice, and many other media firms exemplify the new face of e-commerce in
the twenty-first century. They sell services. When we think of e-commerce,
we tend to think of selling physical products. While this iconic vision of
e-commerce is still very powerful and the fastest-growing form of retail in
the United States, growing up alongside is a whole new value stream based
on selling services, not goods. It’s a services model of e-commerce. Growth
in social commerce is spurred by powerful growth of the mobile platform:
80 percent of Facebook’s users access the service from mobile phones and
tablets. Information systems and technologies are the foundation of this new
services-based e-commerce. Mobile e-commerce hit $130 billion in 2016 and
is growing at more than 30 percent a year.
Management Changes. The management of business firms has changed: With

new mobile smartphones, high-speed wireless Wi-Fi networks, and tablets,
remote salespeople on the road are only seconds away from their managers’
questions and oversight. Business is going mobile, along with consumers. Man-
agers on the move are in direct, continuous contact with their employees. The
growth of enterprise-wide information systems with extraordinarily rich data
means that managers no longer operate in a fog of confusion but instead have
online, nearly instant access to the really important information they need for
accurate and timely decisions. In addition to their public uses on the web, wikis
and blogs are becoming important corporate tools for communication, collabo-
ration, and information sharing.
Changes in Firms and Organizations. Compared to industrial organizations

of the previous century, new fast-growing twenty-first-century business firms
put less emphasis on hierarchy and structure and more emphasis on employees
INTERACTIVE SESSION: MANAGEMENT

Can you run your company out of your pocket? members go outside to the customer's vehicle and
Perhaps not entirely, but there are many business enter the repair order on an iPad on the spot.
functions today that can be performed using an SKF is a global engineering company headquar-
iPhone, iPad, or Android mobile handheld device. tered in Gothenburg, Sweden, with 140 manufac-
The smartphone has been called the “Swiss Army turing sites in 32 countries and 48,500 employees
knife of the digital age.” A flick of the finger turns it worldwide. SKF produces bearings, seals, lubrication
into a web browser, a telephone, a camera, a music systems, and services used in more than 40 indus-
or video player, an e-mail and messaging machine, tries, including mining, transportation, and manu-
and, increasingly, a gateway into corporate systems. facturing. SKF has developed more than 30 custom
New software applications for document sharing, col- iPhone and iPad applications for streamlining work-
laboration, sales, order processing, inventory man- flows and accessing critical corporate data from any-
agement, and production monitoring make these where in the world.
devices even more versatile business tools. Mobile For example, a virtual reality app uses the iPhone
pocket offices that fit into a purse or coat pocket are or iPad camera to identify a factory machine and
helping to run companies large and small. produce a 3-D overlay of the SKF parts it contains.
Sonic Automotive is one of the largest automo- A sensor-driven app called Shaft Align is used by SKF
tive retailers in the United States with more than service teams and customers in the field. Shaft Align
100 dealerships in 14 states. Every year Sonic sells connects via wireless Bluetooth sensors to a piece of
250,000 new and used cars from approximately 25 machinery such as a motor-driven fan to ensure that
different automotive brands, and it also sells auto the drive shaft is running in proper alignment. If not,
parts and maintenance, warranty, collision, and vehi- the app generates step-by-step instructions and a 3-D
cle financing services. Sonic Automotive managers rendering to show how to manually align the motor.
and employees do much of their work on the iPhone Then it checks the work and produces a report.
and iPad. A mobile app called MOST enables factory opera-
Sonic developed several custom iPhone and iPad tors to monitor some SKF factory production lines.
applications to speed up sales and service. Virtual MOST links to the back-end systems running the
Lot, a dealer inventory app, lets sales associates machinery and provides operators with key pieces of
quickly search for vehicles held in inventory by all data. Operators using this mobile app are able to use
Sonic dealerships. They have immediate access to secure instant messaging to communicate with man-
vehicle information, pricing, trade-in values, interest agers and each other, update maintenance logs, and
rates, special promotions, financing, and what com- track products in real time as they move through the
petitors are charging for identical vehicles. The asso- factory line.
ciates can quickly find the best selection for each SKF's Shelf mobile app allows sales engineers and
customer and often offer far more choices than the customers to access on demand more than 5,000
competition. Dealers are not limited to selling only pieces of product literature, catalogs, product speci-
their own inventory. fications, and interactive marketing materials. Sales
A mobile app called the Sonic Inventory Manage- teams can use Shelf to create custom “shelves” to
ment System (SIMS) has speeded up and simplified organize, annotate, and share materials with custom-
trade-in appraisals and pricing. Sonic staff use their ers right from their iPhones or iPads. The iPhone,
iPhones or iPads to take photos of a car, input the iPad, and Shelf app save company sales engineers
vehicle identification number (VIN) and mileage, as much as 25 minutes per day on processes and
and note any issues. The data are transmitted to cor- paperwork, freeing them up to spend more time
porate headquarters, which can quickly appraise the in the field supporting customers. This increase in
car. A Service Pad app simplifies the steps in repair productivity is equivalent to putting 200 more sales
and warranty work. In the past, customers with cars engineers in the field.
requiring repairs had to go inside the dealership and SKF auditors perform about 60 audits per year,
sit at a desk with a Sonic staff member who wrote and each audit used to take more than a month to
up the repair order by hand. Now the Sonic staff complete. With the SKF Data Collect app, auditors
are able to use their iPads to collect data and present Sources: “Sonic Automotive: Driving Growth with iPhone and iPad”
and “Driving Innovation in the Factory and in the Field with iOS,”
customers with detailed reports instantly.
iPhone in Business, www.apple.com, accessed March 31, 2016;
SKF Seals offers specifications and information www.skf.com, accessed March 31, 2016; www.sonicautomotive.com,
about SKF's machined and injection-molded seals accessed March 31, 2016; and “Why the Mobile Pocket Office Is Good
and plastic parts, while the Seal Select app helps For Business,” ITBusinesEdge.com, accessed March 6, 2015.
users select seals and accessories using several dif-

ferent input parameters to find the right solution for
their needs.
CASE STUDY QUESTIONS

1. What kinds of applications are described here? 4. One company deploying iPhones has said, “The
What business functions do they support? How do iPhone is not a game changer, it's an industry
they improve operational efficiency and decision changer. It changes the way that you can interact
making? with your customers” and “with your suppliers.”
2. Identify the problems that businesses in this case Discuss the implications of this statement.
study solved by using mobile digital devices.
3. What kinds of businesses are most likely to benefit
from equipping their employees with mobile digi-
tal devices such as iPhones and iPads?
taking on multiple roles and tasks and collaborating with others on a team.
They put greater emphasis on competency and skills rather than position in the
hierarchy. They emphasize higher speed and more accurate decision making
based on data and analysis. They are more aware of changes in technology, con-
sumer attitudes, and culture. They use social media to enter into conversations
with consumers and demonstrate a greater willingness to listen to consumers,
in part because they have no choice. They show better understanding of the
importance of information technology in creating and managing business firms
and other organizations. To the extent organizations and business firms demon-
strate these characteristics, they are twenty-first-century digital firms.
Whether it’s attending an

online meeting, checking
orders, working with files
iPhone and iPad Applications and documents, or
for Business obtaining business intelli-
gence, Apple's iPhone
1. Salesforce1 and iPad offer unlimited
2. Cisco WebEx Meetings possibilities for business
3. SAP Business One users. A stunning multi-
4. iWork touch display, full Internet
5. Evernote browsing, and capabilities
6. Adobe Acrobat Reader for messaging, video and
7. Oracle Business Intelli- audio transmission, and
gence Mobile document management
8. Dropbox make each an all-purpose
platform for mobile
computing.
© STANCA SANDA/Alamy Stock Photo
You can see some of these trends at work in the Interactive Session on Man-
agement. Millions of managers rely heavily on the mobile digital platform
to coordinate suppliers and shipments, satisfy customers, and manage their
employees. A business day without these mobile devices or Internet access
would be unthinkable.
Globalization Challenges and Opportunities:

A Flattened World
In 1492, Columbus reaffirmed what astronomers were long saying: the world was
round and the seas could be safely sailed. As it turned out, the world was popu-
lated by peoples and languages living in isolation from one another, with great
disparities in economic and scientific development. The world trade that ensued
after Columbus’s voyages has brought these peoples and cultures closer. The
“industrial revolution” was really a worldwide phenomenon energized by expan-
sion of trade among nations and the emergence of the first global economy.
In 2005, journalist Thomas Friedman wrote an influential book declaring the
world was now “flat,” by which he meant that the Internet and global communi-
cations had greatly reduced the economic and cultural advantages of developed
countries. Friedman argued that the United States and European countries
were in a fight for their economic lives, competing for jobs, markets, resources,
and even ideas with highly educated, motivated populations in low-wage areas
in the less developed world (Friedman, 2007). This “globalization” presents both
challenges and opportunities for business firms.
A significant percentage of the global economy depends on imports and
exports. In 2015, about 57 percent of the worlds €74 trillion GDP resulted from
imports and exports (World Bank, 2016). Many Fortune 1000 global firms derive
more than half their revenues from foreign operations. Tech companies are par-
ticularly dependent on offshore revenue: 85 percent of Intel’s revenues in 2015
came from overseas sales of its microprocessors, while Apple earned 60 percent
of its revenue outside of the United States. Eighty percent of the toys sold in
the United States are manufactured in China, while all iPhones and about 90
percent of the PCs assembled in China use American-made Qualcomm, Intel
or AMD chips.
It’s not just goods that move across borders; jobs do too, some of them high-
level jobs that pay well and require a college degree. In the past decade, the
United States lost 5 million manufacturing jobs to offshore, low-wage producers.
But manufacturing is now a very small part of U.S. employment (less than 12
percent of the labor force and declining). Manufacturing jobs in the last decade
have been replaced by service and retail jobs even as the value of manufactured
goods made in the U.S. has soared by 20 percent in the same period, largely
due to highly automated factories and enterprise information systems (Cassel-
man, 2016). In a normal year in the United States, about 300,000 service jobs
move offshore to lower-wage countries. On the plus side, the global labor force
expanded from 3.2 billion to 3.4 billion during the 2010−2015 period, an expan-
sion of 200 million new jobs. The U.S. economy creates more than 3.5 million
new jobs in a normal, non-recessionary year. Although only 1.1 million private
sector jobs were created due to slow recovery in 2011, by 2015 the U.S. econ-
omy was adding more than 2 million new jobs annually for the third straight
year. Employment in information systems and the other service occupations
is expanding, and wages in the tech sector are rising at 5 percent annually.
Outsourcing may have accelerated the development of new systems worldwide
as new systems could be developed and maintained in low-wage countries. In
part this explains why the job market for MIS and computer science graduates
is growing rapidly in the United States as well as Europe, the Middle East, and
Asia Pacific.
The challenge for you as a business student is to develop high-level skills
through education and on-the-job experience that cannot be outsourced. The
challenge for your business is to avoid markets for goods and services that can
be produced offshore much less expensively. The opportunities are equally
immense. Throughout this book, you will find examples of companies and indi-
viduals who either failed or succeeded in using information systems to adapt to
this new global environment.
What does globalization have to do with management information systems?
That’s simple: everything. The emergence of the Internet into a full-blown
international communications system has drastically reduced the costs of oper-
ating and transacting on a global scale. Communication between a factory floor
in Shanghai and a distribution center in Rapid City, South Dakota, or Antwerp,
Belgium, is now instant and virtually free. Customers can now shop in a world-
wide marketplace, obtaining price and quality information reliably 24 hours a
day. Firms producing goods and services on a global scale achieve extraordinary
cost reductions by finding low-cost suppliers and managing production facili-
ties in other countries. Internet service firms, such as Google, Netflix, Alibaba,
and eBay, are able to replicate their business models and services in multiple
countries without having to redesign their expensive fixed-cost information sys-
tems infrastructure. Briefly, information systems enable globalization.
The Emerging Digital Firm

All of the changes we have just described, coupled with equally significant orga-
nizational redesign, have created the conditions for a fully digital firm. A digital
firm can be defined along several dimensions. A digital firm is one in which
nearly all of the organization’s significant business relationships with customers,
suppliers, and employees are digitally enabled and mediated. Core business pro-
cesses are accomplished through digital networks spanning the entire organiza-
tion or linking multiple organizations.
Business processes refer to the set of logically related tasks and behaviors
that organizations develop over time to produce specific business results and
the unique manner in which these activities are organized and coordinated.
Developing a new product, generating and fulfilling an order, creating a mar-
keting plan, and hiring an employee are examples of business processes, and
the ways organizations accomplish their business processes can be a source of
competitive strength.(A detailed discussion of business processes can be found
in Chapter 2.)
Key corporate assets—intellectual property, core competencies, and financial
and human assets—are managed through digital means. In a digital firm, any
piece of information required to support key business decisions is available at
any time and anywhere in the firm.
Digital firms sense and respond to their environments far more rapidly than
traditional firms, giving them more flexibility to survive in turbulent times. Digi-
tal firms offer extraordinary opportunities for more flexible global organization
and management. In digital firms, both time shifting and space shifting are the
norm. Time shifting refers to business being conducted continuously, 24/7, rather
than in narrow “work day” time bands of 9 a.m. to 5 p.m. Space shifting means
that work takes place in a global workshop as well as within national boundaries.
Work is accomplished physically wherever in the world it is best accomplished.
Many firms, such as Cisco Systems, 3M, and GE (see the Chapter 12 end-
ing case), are close to becoming digital firms, using the Internet to drive every
aspect of their business. Most other companies are not fully digital, but they
are moving toward close digital integration with suppliers, customers, and
employees.
Strategic Business Objectives of Information Systems

What makes information systems so essential today? Why are businesses invest-
ing so much in information systems and technologies? In the United States,
more than 57 million managers and 120 million workers in the information and
knowledge sectors in the labor force rely on information systems to conduct
business. Information systems are essential for conducting day-to-day business
in most advanced countries as well as achieving strategic business objectives.
Entire sectors of the economy are nearly inconceivable without substan-
tial investments in information systems. E-commerce firms such as Amazon,
eBay, Google, and E*Trade simply would not exist. Today’s service industries—
finance, insurance, and real estate as well as personal services such as travel,
medicine, and education—could not operate without information systems. Sim-
ilarly, retail firms such as Walmart and Sears and manufacturing firms such as
General Motors, Volkswagen, Siemens, and GE require information systems to
survive and prosper. Just as offices, telephones, filing cabinets, and efficient tall
buildings with elevators were once the foundations of business in the twentieth
century, information technology is a foundation for business in the twenty-first
century.
There is a growing interdependence between a firm’s ability to use informa-
tion technology and its ability to implement corporate strategies and achieve
corporate goals (see Figure 1.2). What a business would like to do in five years
often depends on what its systems will be able to do. Increasing market share,
becoming the high-quality or low-cost producer, developing new products, and
increasing employee productivity depend more and more on the kinds and
FIGURE 1. 2 THE INTERDEPENDENCE BETWEEN ORGANIZATIONS AND

INFORMATION SYSTEMS
Hardware
Business Strategic
Objectives
Business Processes Software Data Management
Business Information Telecommunications

Firm System
In contemporary systems, there is a growing interdependence between a firm’s 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.
quality of information systems in the organization. The more you understand

about this relationship, the more valuable you will be as a manager.
Specifically, business firms invest heavily in information systems to achieve
six strategic business objectives: operational excellence; new products, services,
and business models; customer and supplier intimacy; improved decision mak-
ing; competitive advantage; and survival.
Operational Excellence
Businesses continuously seek to improve the efficiency of their operations in
order to achieve higher profitability. Information systems and technologies are
some of the most important tools available to managers for achieving higher
levels of efficiency and productivity in business operations, especially when
coupled with changes in business practices and management behavior.
Walmart, the largest retailer on earth, exemplifies the power of informa-
tion systems coupled with state of the art business practices and supportive
management to achieve world-class operational efficiency. In fiscal year 2016,
Walmart achieved $499 billion in sales—nearly one-tenth of retail sales in the
United States—in large part because of its Retail Link system, which digitally
links its suppliers to every one of Walmart’s stores. As soon as a customer pur-
chases an item, the supplier monitoring the item knows to ship a replacement
to the shelf. Walmart is the most efficient retail store in the industry, achieving
sales of more than $600 per square foot, compared with its closest competitor,
Target, at $425 a square foot and other large general merchandise retail firms
producing less than $200 a square foot.
New Products, Services, and Business Models

Information systems and technologies are a major enabling tool for firms to
Ứng dụng trong các create new products and services as well as entirely new business models. A
công ty sd giải pháp business model describes how a company produces, delivers, and sells a prod-
như grap/amazon/tiki. uct or service to create wealth.
Today’s music industry is vastly different from the industry a decade ago.
Nhờ sd IS, ra mắt 1 lợi Apple Inc. transformed an old business model of music distribution based on
ích kinh doanh mới, giải vinyl records, tapes, and CDs into an online, legal distribution model based
pháp mới cho công ty on its own iPod technology platform. Apple has prospered from a continuing
stream of innovations, including the iTunes music service, the iPad, and the
iPhone.
Customer and Supplier Intimacy

When a business really knows its customers and serves them well, the custom-
ers generally respond by returning and purchasing more. This raises revenues
Để gia tăng sự quay lại and profits. Likewise with suppliers, the more a business engages its suppli-
của khách hàng, họ thu ers, the better the suppliers can provide vital inputs. This lowers costs. How
thập dữ liệu, cá nhân to really know your customers or suppliers is a central problem for businesses
with millions of offline and online customers.
hoá trải nghiệm khách The Mandarin Oriental hotel group which operates hotels in Asia, Europe,
hàng. Vd: đối vs mỗi đối and the Americas, exemplifies the use of information systems and technolo-
tượng khách nhau, shop gies to achieve customer intimacy. These hotels use computers to keep track of
sẽ tung ra các mã guests’ preferences.When a customer arrives at one of these hotels, the system
khuyến mãi khác nhau, automatically changes the room conditions, such as dimming the lights, setting
the room temperature, or selecting appropriate music, based on the customer’s
dựa trên dữ liệu mà digital profile. The hotels also analyze their customer data to identify their best
khách hàng tương tác. customers and to develop individualized marketing campaigns based on cus-
tomers’ preferences.
Large national retailers in Europe, the U.S., and Asia exemplify the use of
information systems to enable supplier and customer intimacy. Every time a
dress shirt is bought at a store the record of the sale appears immediately on
computers of suppliers like TAL Apparel Ltd. in Hong Kong, a contract manu-
facturer that produces one in eight dress shirts sold in the United States and
Europe. TAL runs the numbers through a computer model it developed and
then decides how many replacement shirts to make and in what styles, colors,
and sizes. TAL then sends the shirts directly to retail stores, completely bypass-
ing retailers’ warehouses (European Commission, 2014).
Improved Decision Making Cần dữ liệu,... Để đưa

Many business managers operate in an information fog bank, never really
having the right information at the right time to make an informed decision. ra các quyết định đúng
Instead, managers rely on forecasts, best guesses, and luck. In the past decade, đắn hơn.
information systems and technologies have made it possible for managers to Vd: rep việt: dựa trên
use real-time data from the marketplace when making decisions. show này được nhiu
For instance, Privi Organics Ltd., a leading Indian company that manufac-
tương tác mà các show
tures, supplies, and exports aroma chemical products worldwide, uses the Ora-
cle Human Capital Management system for real-time insight into individual mời
employee information—including performance rating and compensation his-
tory. The system helps managers make faster human resource decisions, such
as promotions or transfers, by integrating all employee records across the orga-
nization. Managers are able to quickly review employee performance ratings
for the previous three years and drill down into more details.
Competitive Advantage
When firms achieve one or more of these business objectives—operational excel-
lence; new products, services, and business models; customer/supplier inti-
macy; and improved decision making—chances are they have already achieved vd: Lợi thế cạnh
a competitive advantage. Doing things better than your competitors, charging tranh về giá: các
less for superior products, and responding to customers and suppliers in real app mới ra:
time all add up to higher sales and higher profits that your competitors can- Vd: be sẽ đánh về
not match. Apple Inc., Walmart, and the Mandarin Group are industry leaders
because they know how to use information systems for this purpose.
giá, tạo ra các
chiến lược để cạnh
Survival tranh vs grab
Business firms also invest in information systems and technologies because
they are necessities of doing business. Sometimes these “necessities” are driven
by industry-level changes. Today, most national banks in the world have ATMs
and link to national and international ATM networks, such as CIRRUS. Provid-
ing ATM services to retail banking customers is simply a requirement of being
in and surviving in the retail banking business.
Most nations have statutes and regulations that create a legal duty for com-
panies and their employees to retain records, including digital records. For
instance, the European Council REACH law and the U.S. Toxic Substances Con-
trol Act (1976) regulate the exposure of workers to more than 75,000 toxic chem-
icals and require firms to retain records on employee exposure for 30 years Trong đợt covid, tmđt là
(European Commission, 2007). Financial regulatory agencies such as the U.S. phương pháp giải quyết
Securities and Exchange Commission (SEC), Financial Conduct Authority (FAC duy nhất.
UK), Financial Services Agency (FSA Japan), and the China Securities Regula-
tory Commission (CSRC People’s Republic of China) require certified public
accounting firms that audit public companies to retain audit working papers
and records, including all e-mails, for five years or longer. Many other pieces
of national and regional legislation in health care, financial services, education,

and privacy protection impose significant information retention and report-
ing requirements on global businesses. Firms turn to information systems and
technologies to provide the capability to respond to these record management
requirements.
1-2 What is an information system? How does it

work? What are its management, organization,
and technology components? Why are
complementary assets essential for ensuring
that information systems provide genuine value
for organizations?
So far we’ve used information systems and technologies informally without defin-
ing the terms. Information technology (IT) consists of all the hardware and
software that a firm needs to use in order to achieve its business objectives. This
includes not only computer machines, storage devices, and handheld mobile
devices but also software, such as the Windows or Linux operating systems, the
Microsoft Office desktop productivity suite, and the many thousands of com-
puter programs that can be found in a typical large firm. “Information systems”
are more complex and can be best understood by looking at them from both a
technology and a business perspective.
What Is an Information System?

An information system can be defined technically as a set of interrelated
desired outcome components that collect (or retrieve), process, store, and distribute information
to support decision making and control in an organization. In addition to sup-
porting decision making, coordination, and control, information systems may
also help managers and workers analyze problems, visualize complex subjects,
and create new products.
Information systems contain information about significant people, places, and
things within the organization or in the environment surrounding it. By infor-
mation we mean data that have been shaped into a form that is meaningful and
useful to human beings. Data, in contrast, are streams of raw facts representing
events occurring in organizations or the physical environment before they have
been organized and arranged into a form that people can understand and use.
A brief example contrasting information and data may prove useful. Super-
market checkout counters scan millions of pieces of data from bar codes, which
describe each product. Such pieces of data can be totaled and analyzed to pro-
vide meaningful information, such as the total number of bottles of dish deter-
gent sold at a particular store, which brands of dish detergent were selling the
most rapidly at that store or sales territory, or the total amount spent on that
brand of dish detergent at that store or sales region (see Figure 1.3).
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. These activities are input, process-
ing, and output (see Figure 1.4). Input captures or collects raw data from
within the organization or from its external environment. Processing con-
verts this raw input into a meaningful form. Output transfers the processed
FIGURE 1. 3 DATA AND INFORMATION
Da on
ta m ati
In for
331 Brite Dish Soap 1.29 Sales Region: Northwest

863 BL Hill Coffee 4.69 Store: Superstore #122
173 Meow Cat .79
331 Brite Dish Soap 1.29 Information ITEM NO. DESCRIPTION UNITS SOLD
663 Country Ham 3.29 System 331 Brite Dish Soap 7,156
524 Fiery Mustard 1.49
113 Ginger Root .85 YTD SALES
331 Brite Dish Soap 1.29
. $9,231.24
.
.
Raw data from a supermarket checkout counter can be processed and organized to produce meaningful informa-
tion, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific
store or sales territory.
information to the people who will use it or to the activities for which it will
be used. Information systems also require feedback, which is output that is
returned to appropriate members of the organization to help them evaluate or
correct the input stage.
FIGURE 1. 4 FUNCTIONS OF AN INFORMATION SYSTEM
ENVIRONMENT
Suppliers Customers
ORGANIZATION
INFORMATION SYSTEM
Processing
Classify
Input Output
Arrange
Calculate
Feedback
Regulatory Stockholders Competitors

Agencies
An information system contains information about an organization and its surrounding environment.
Three basic activities—input, processing, and output—produce 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.
In a professional sports team’s system for selling tickets, the raw input con-
sists of order data for tickets, such as the purchaser’s name, address, credit
card number, number of tickets ordered, and the date of the game for which
the ticket is being purchased. Another input would be the ticket price, which
would fluctuate based on computer analysis of how much could optimally
be charged for a ticket for a particular game. Computers store these data and
process them to calculate order totals, to track ticket purchases, and to send
requests for payment to credit card companies. The output consists of tickets
to print out, receipts for orders, and reports on online ticket orders. The sys-
tem provides meaningful information, such as the number of tickets sold for
a particular game or at a particular price, the total number of tickets sold each
year, and frequent customers.
Although computer-based information systems use computer technology
to process raw data into meaningful information, there is a sharp distinction
between a computer and a computer program on the one hand and an infor-
mation system on the other. Computers and related software programs are the
technical foundation, the tools and materials, of modern information systems.
Computers provide the equipment for storing and processing information.
Computer programs, or software, are sets of operating instructions that direct
and control computer processing. Knowing how computers and computer pro-
grams work is important in designing solutions to organizational problems, but
computers are only part of an information system.
A house is an appropriate analogy. Houses are built with hammers, nails,
and wood, but these do not make a house. The architecture, design, setting,
landscaping, and all of the decisions that lead to the creation of these features
are part of the house and are crucial for solving the problem of putting a roof
over one’s head. Computers and programs are the hammers, nails, and lum-
ber of computer-based information systems, but alone they cannot produce the
information a particular organization needs. To understand information sys-
tems, you must understand the problems they are designed to solve, their archi-
tectural and design elements, and the organizational processes that lead to the
solutions.
Dimensions of Information Systems

To fully understand information systems, you must understand the broader
organization, management, and information technology dimensions of sys-
tems (see Figure 1.5) and their power to provide solutions to challenges
and problems in the business environment. We refer to this broader under-
standing of information systems, which encompasses an understanding of
the management and organizational dimensions of systems as well as the
technical dimensions of systems, as information systems literacy. Com-
puter literacy, in contrast, focuses primarily on knowledge of information
technology.
The field of management information systems (MIS) tries to achieve this
broader information systems literacy. MIS deals with behavioral issues as well
as technical issues surrounding the development, use, and impact of informa-
tion systems used by managers and employees in the firm.
Let’s examine each of the dimensions of information systems—organizations,
management, and information technology.
FIGURE 1. 5 INFORMATION SYSTEMS ARE MORE THAN COMPUTERS
Organizations Technology
Information
Systems
Management
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.
Organizations
Information systems are an integral part of organizations. Indeed, for some
companies, such as credit reporting firms, there would be no business without
an information system. The key elements of an organization are its people,
structure, business processes, politics, and culture.We introduce these compo-
nents of organizations here and describe them in greater detail in Chapters 2
and 3.
Organizations have a structure that is composed of different levels and spe-
cialties. Their structures reveal a clear-cut division of labor. Authority and
responsibility in a business firm are organized as a hierarchy, or a pyramid
structure. The upper levels of the hierarchy consist of managerial, professional,
and technical employees, whereas the lower levels consist of operational
personnel.
Senior management makes long-range strategic decisions about products
and services as well as ensures financial performance of the firm. Middle
management carries out the programs and plans of senior management, and
operational management is responsible for monitoring the daily activities of
the business. Knowledge workers, such as engineers, scientists, or architects,
design products or services and create new knowledge for the firm, whereas
data workers, such as secretaries or clerks, assist with scheduling and com-
munications at all levels of the firm. Production or service workers actually
produce the product and deliver the service (see Figure 1.6).
Experts are employed and trained for different business functions. The
major business functions, or specialized tasks performed by business organi-
zations, consist of sales and marketing, manufacturing and production, finance
and accounting, and human resources (see Table 1.1). Chapter 2 provides more
detail on these business functions and the ways in which they are supported by
information systems.
An organization coordinates work through its hierarchy and through its
business processes. Most organizations’ business processes include formal rules
that have been developed over a long time for accomplishing tasks. These
FIGURE 1. 6 LEVELS IN A FIRM
knowledge strategies
Senior
Management
information tacties
Middle Management
Scientists and knowledge workers
Operational Management
data Production and service workers connect data
Data workers
Business organizations are hierarchies consisting of three principal levels: senior management, middle
management, and operational management. Information systems serve each of these levels. Scientists
and knowledge workers often work with middle management.
rules guide employees in a variety of procedures, from writing an invoice to

responding to customer complaints. Some of these business processes have
been written down, but others are informal work practices, such as a require-
ment to return telephone calls from coworkers or customers, that are not for-
mally documented. Information systems automate many business processes.
For instance, how a customer receives credit or how a customer is billed is
often determined by an information system that incorporates a set of formal
business processes.
Each organization has a unique culture, or fundamental set of assumptions,
values, and ways of doing things, that has been accepted by most of its mem-
bers. You can see organizational culture at work by looking around your univer-
sity or college. Some bedrock assumptions of university life are that professors
know more than students, that the reason students attend college is to learn,
and that classes follow a regular schedule.
Parts of an organization’s culture can always be found embedded in its infor-
mation systems. For instance, UPS’s first priority is customer service, which is
TABLE 1. 1 MAJOR BUSINESS FUNCTIONS

FUNCTION PURPOSE
Sales and marketing Selling the organization's products and services
Manufacturing and production Producing and delivering products and services
Finance and accounting Managing the organization's financial assets and
maintaining the organization's financial records
Human resources Attracting, developing, and maintaining the
organization's labor force; maintaining employee records
an aspect of its organizational culture that can be found in the company’s pack-
age tracking systems, which we describe later in this section.
Different levels and specialties in an organization create different interests
and points of view. These views often conflict over how the company should be
run and how resources and rewards should be distributed. Conflict is the basis
for organizational politics. Information systems come out of this cauldron of
differing perspectives, conflicts, compromises, and agreements that are a natu-
ral part of all organizations.In Chapter 3, we examine these features of organiza-
tions and their role in the development of information systems in greater detail.
Management
Management’s job is to make sense out of the many situations faced by orga-
nizations, make decisions, and formulate action plans to solve organizational
problems. Managers perceive business challenges in the environment, they set
the organizational strategy for responding to those challenges, and they allocate
the human and financial resources to coordinate the work and achieve success.
Throughout, they must exercise responsible leadership. The business informa-
tion systems described in this book reflect the hopes, dreams, and realities of
real-world managers.
But managers must do more than manage what already exists. They must
also create new products and services and even re-create the organization from
time to time. A substantial part of management responsibility is creative work
driven by new knowledge and information. Information technology can play
a powerful role in helping managers design and deliver new products and ser-
vices and redirecting and redesigning their organizations.Chapter 12 treats
management decision making in detail.
Information Technology
Information technology is one of many tools managers use to cope with change.
Computer hardware is the physical equipment used for input, processing, and
output activities in an information system. It consists of the following: comput-
ers of various sizes and shapes (including mobile handheld devices); various
input, output, and storage devices; and telecommunications devices that link
computers together.
Computer software consists of the detailed, preprogrammed instructions
that control and coordinate the computer hardware components in an infor-
mation system.Chapter 5 describes the contemporary software and hardware
platforms used by firms today in greater detail.
Data management technology consists of the software governing the orga-
nization of data on physical storage media.More detail on data organization and
access methods can be found in Chapter 6.
Networking and telecommunications technology, consisting of both
physical devices and software, links the various pieces of hardware and trans-
fers data from one physical location to another. Computers and communica-
tions equipment can be connected in networks for sharing voice, data, images,
sound, and video. A network links two or more computers to share data or
resources, such as a printer.
The world’s largest and most widely used network is the Internet. The Inter-
net is a global “network of networks” that uses universal standards (described in
Chapter 7) to connect millions of networks in more than 230 countries around
the world.
The Internet has created a new “universal” technology platform on which
to build new products, services, strategies, and business models. This same
technology platform has internal uses, providing the connectivity to link dif-
ferent systems and networks within the firm. Internal corporate networks
based on Internet technology are called intranets. Private intranets extended
to authorized users outside the organization are called extranets, and firms use
such networks to coordinate their activities with other firms for making pur-
chases, collaborating on design, and other interorganizational work. For most
business firms today, using Internet technology is both a business necessity
and a competitive advantage.
The World Wide Web is a service provided by the Internet that uses uni-
versally accepted standards for storing, retrieving, formatting, and displaying
information in a page format on the Internet. Web pages contain text, graphics,
animations, sound, and video and are linked to other web pages. By clicking on
highlighted words or buttons on a web page, you can link to related pages to find
additional information and links to other locations on the web. The web can
serve as the foundation for new kinds of information systems.
All of these technologies, along with the people required to run and man-
age them, represent resources that can be shared throughout the organization
and constitute the firm’s information technology (IT) infrastructure. The
IT infrastructure provides the foundation, or platform, on which the firm can
build its specific information systems. Each organization must carefully design
and manage its IT infrastructure so that it has the set of technology services it
needs for the work it wants to accomplish with information systems. Chapters 5
through 8 of this book examine each major technology component of informa-
tion technology infrastructure and show how they all work together to create
the technology platform for the organization.
For instance, UPS operates the largest global package delivery system in
the world. UPS invests heavily in information systems technology to make its
business more efficient and customer oriented. It uses an array of information
technologies, including bar code scanning systems, wireless networks, large
mainframe computers, handheld computers, the Internet, and many different
when anh where? pieces of software for tracking packages, calculating fees, maintaining customer
;oeem qam đếm các accounts, and managing logistics.
dpamj mgjoeek[ tiwk Let’s identify the organization, management, and technology elements in
review lại doanh the UPS package tracking system we have just described. The organization ele-
nghiệp và đến thời ment anchors the package tracking system in UPS’s sales and production func-
tions (the main product of UPS is a service—package delivery). It specifies the
điểm nào đó họ sẽ required procedures for identifying packages with both sender and recipient
triển khai lại information, taking inventory, tracking the packages en route, and providing
Những lúc cần tiền package status reports for UPS customers and customer service representatives.
thì ko ưu tiên cho The system must also provide information to satisfy the needs of managers
and workers. UPS drivers need to be trained in both package pickup and deliv-
cđs nhưng bây h thì
ery procedures and in how to use the package tracking system so that they can
rất phù hợp, biết họ work efficiently and effectively. UPS customers may need some training to use
ở thời điểm nào, triển UPS in-house package tracking software or the UPS website.
khai tất cả các cấp UPS’s management is responsible for monitoring service levels and costs and
hay chỉ 1 chỗ nào đó. for promoting the company’s strategy of combining low cost and superior ser-
vice. Management decided to use computer systems to increase the ease of
sending a package using UPS and of checking its delivery status, thereby reduc-
ing delivery costs and increasing sales revenues.
The technology supporting this system consists of handheld computers, bar
code scanners, desktop computers, wired and wireless communications net-
works, UPS’s data center, storage technology for the package delivery data, UPS
in-house package tracking software, and software to access the World Wide Web.
INTERACTIVE SESSION: TECHNOLOGY

Digital Transformation of Healthcare at Singapore’s JurongHealth Services
Jurong Health Services, or JurongHealth, is one of themselves and obtain an e-pass from the Visitor
Singapore’s six public healthcare clusters. Health- Registration counters that grants them access to the
care clusters provide holistic and integrated care wards that they want to visit. The identification card
when patients move from one care setting, like a or e-pass must then be scanned at the 2-in-1 Gantry
clinic, to another, like a hospital. Overall, Singapore’s when entering and leaving the ward. The 2-in-1 Gan-
healthcare system comprises 8 public hospitals, 10 try logs not only visitor information but also tracks
private hospitals, 8 national specialty centers, and staff, as they are also required to use the same gan-
an island-wide network of general medical practitio- tries to visit a particular ward. Through the imple-
ners. JurongHealth primarily manages the 700-bed mentation of the Visitor Management system, the
Ng Teng Fong General Hospital, the 400-bed Jurong hospital can control access to the wards, and visitors
Community Hospital, and the Jurong Medical Cen- or staff can be easily tracked and contacted in case of
ter, all of which are located in western Singapore. an epidemic.
JurongHealth’s goal is to provide transformative Another IT system implemented is the Warehouse
medical care for its patients through the use of inno- Management System, which eliminates the tedious
vative information technologies. Underscoring this process of manually counting inventory. The system
commitment, in September 2016 JurongHealth’s Ng uses passive radio frequency identification (RFID)
Teng Fong General Hospital was awarded the Health- technology and a two-bin shelving system to auto-
care Information and Management Systems Society mate inventory top-up requests and improve inven-
(HIMSS) Electronic Medical Record Adoption Model tory management. Once the primary compartment
(EMRAM) Stage 7 Award—there are 8 stages, from of the storage bin is empty, the clinical staff transfers
0 to 7, that measure a hospital’s implementation of the relevant RFID tag into a drop-box, where the
IT systems, and Stage 7 represents the highest level. reader automatically sends a request for drug replen-
Ng Teng Fong General thus became the first hospital ishment, thus avoiding stock-outs.
in Singapore and the ASEAN region, and fifth in the JurongHealth has also implemented a Real-Time
Asia Pacific, to receive the award. Location Tracking System to automatically track
JurongHealth has integrated more than 50 health- patients and medical equipment using Wi-Fi triangu-
care IT systems as part of the Project OneCare lation, low frequency exciters, and about 6,000 active
initiative. The systems’ implementation and integra- RFID tags attached to patients or medical equipment.
tion took four years and has enabled the hospital to These tags continuously communicate with the low-
become paperless, scriptless, chartless, and filmless. frequency exciters to transmit data to the backend
Among the many systems implemented by the hos- system for processing, allowing hospital staff to pre-
pital are self-service kiosks to enable patients to reg- cisely locate patients and equipment, thus eliminat-
ister themselves by merely scanning their national ing the need for tedious manual searching.
identification cards and obtaining a queue number In another major move, JurongHealth made a
generated by the Enterprise Queue Management conscious effort to ensure that the different IT sys-
System. This unique number is used throughout the tems would not be stand-alone. The hospital thus
patient’s visit that day for all service itineraries in implemented an integrated Electronic Medical
the hospital. Patients refer to live screens located in Record (EMR) system that combines all the func-
the waiting areas that display a real-time queue sta- tional modules of the hospital in addition to being
tus that shows their turn. This system has not only interfaced with 140 medical devices and equipment.
enabled JurongHealth to cut down on expenses but Using the vendor-neutral Medical Devices Middle-
also to improve efficiency, as patients do not need ware Integration System, data from these medical
different numbers for different services. It reduces devices is directly uploaded into the EMR system,
waiting time and increases patient satisfaction. and thus no time or effort is wasted by clinical staff
Similarly, the Visitor Management System self- having to manually enter such readings, and the hos-
service kiosks enable visitors to scan their identifi- pital no longer has to worry about charting errors.
cation cards and register themselves to gain access Being vendor-neutral also means the freedom to
to the hospital wards. Visitors can also register
adopt best-of-breed individual modules as well as a compares, and displays daily, weekly, and monthly
lack of reliance on a single vendor. statistics, which act as vital input for management
The EMR system has spurred other innovations decision making.
such as the Electronic Patient Information Board, IT has played a key role in enabling JurongHealth
which enables clinic staff and nurses to view essen- to achieve its mission of providing world-class medi-
tial patient information on digital tablets, unlike cal care at an affordable cost. As a result, Jurong-
most hospitals, which manually compile the informa- Health has developed a reputation as a leading
tion and display it at the bedside. Another example is technology-driven healthcare provider as well as a
the Inpatient Pharmacy Automation System, which role model not only in Singapore but also the entire
receives prescriptions entered by the doctors via the region. This is also evident from its many accolades,
EMR system and then sends machine-packed medi- which include awards for IT-driven transformation—
cines to the wards using Automated Guided Vehicles the Project of the Year 2015–16 award by SPMI, the
that travel on pre-programmed routes and help in Singapore branch of the global professional accredita-
moving not only medication but also linen, meals, tion body Project Management International—and
etc. At the ward, the patient’s wrist tag is scanned for overall organizational transformation—“Best Com-
and matched against the doctor’s prescription before panies to Work for in Asia 2014” by HR Asia.
the medicines can be retrieved from the medical
carts. Thus, only the required medication is supplied Sources: P. Bhunia, “The JurongHealth IT Journey—Integrating IT
and administered to the right patient. from the Ground-Up into a New Digital Hospital,” opengovasia.com,
November 13, 2016, accessed December 21, 2016; JurongHealth,
Another innovative use of technology is the Daily “Integrated Healthcare IT Systems at Ng Teng Fong General Hospital
Operations Dashboard, which integrates data from and Jurong Community Hospital win the Project of the Year Award
different systems to show key metrics for various at the SPMI Symposium 2016,” www.jmc.com.sg, accessed Decem-
ber 21, 2016; JurongHealth, “Our Milestones,” www.juronghealth.
departments, such as emergency, outpatient clinics, com.sg, October 2016, accessed December 21, 2016.
inpatient wards, and surgery areas. It also analyzes,
CASE STUDY QUESTIONS

1. What technologies are used by JurongHealth? 3. What information systems are implemented by
What purpose do they serve? JurongHealth? Describe the input, processing, and
2. Search the web for RFID. Suggest an example of output of any one such system.
using RFID for locating and tracking people. 4. Why are information systems important for
JurongHealth?
Case contributed by Neerja Sethi and Vijay Sethi,
Nanyang Technological University
The result is an information system solution to the business challenge of provid-

ing a high level of service with low prices in the face of mounting competition.
It Isn’t Just Technology: A Business Perspective on

Information Systems
Managers and business firms invest in information technology and systems
because they provide real economic value to the business. The decision to build
or maintain an information system assumes that the returns on this invest-
ment will be superior to other investments in buildings, machines, or other
assets. These superior returns will be expressed as increases in productivity,
as increases in revenues (which will increase the firm’s stock market value), or
perhaps as superior long-term strategic positioning of the firm in certain mar-
kets (which produce superior revenues in the future).
We can see that from a business perspective, an information system is an
important instrument for creating value for the firm. Information systems
enable the firm to increase its revenue or decrease its costs by providing
Using a handheld com-

puter called a Delivery
Information Acquisition
Device (DIAD), UPS drivers
automatically capture cus-
tomers’ signatures along
with pickup, delivery, and
time card information. UPS
information systems use
these data to track pack-
ages while they are being
transported.
© Bill Aron/PhotoEdit.Inc
information that helps managers make better decisions or that improves the
execution of business processes. For example, the information system for ana-
lyzing supermarket checkout data illustrated in Figure 1.3 can increase firm
profitability by helping managers make better decisions as to which products to
stock and promote in retail supermarkets.
Every business has an information value chain, illustrated in Figure 1.7, in
which raw information is systematically acquired and then transformed through
various stages that add value to that information. The value of an information
system to a business, as well as the decision to invest in any new information
system, is, in large part, determined by the extent to which the system will lead
to better management decisions, more efficient business processes, and higher
firm profitability. Although there are other reasons why systems are built, their
primary purpose is to contribute to corporate value.
The business perspective calls attention to the organizational and managerial
nature of information systems. An information system represents an organiza-
tional and management solution, based on information technology, to a chal-
lenge or problem posed by the environment.Every chapter in this book begins
with a short case study that illustrates this concept. A diagram at the beginning
of each chapter illustrates the relationship between a business challenge and
resulting management and organizational decisions to use IT as a solution to
challenges generated by the business environment. You can use this diagram
as a starting point for analyzing any information system or information system
problem you encounter.
Review the diagram at the beginning of this chapter. The diagram shows how
the Rugby Football Union’s systems solved the business problem presented by
the need to generate revenue in a highly competitive industry. These systems
created a solution that takes advantage of opportunities that new digital tech-
nology and the Internet provided. They opened up new channels for selling
tickets and interacting with customers, optimized ticket pricing, and used new
tools to analyze player performance. These systems were essential in improv-
ing the rugby teams’ overall business performance. The diagram also illustrates
FIGURE 1. 7 THE BUSINESS INFORMATION VALUE CHAIN
Business Processes
Supply Enterprise Customer Knowledge

Chain Management Management Management
Management
Firm
Profitability
and
Strategic
Data Transfor- Dissemination Position
Collection mation
and into Business
Storage Systems
Planning Coordinating Controlling Modeling and

Decision
Making
Information Processing Activities Management Activities
Business Value
From a business perspective, information systems are part of a series of value-adding activities for acquiring, trans-
forming, and distributing information that managers can use to improve decision making, enhance organizational
performance, and, ultimately, increase firm profitability.
how people, technology, and organizational elements work together to create

the systems.
Complementary Assets: Organizational Capital and

the Right Business Model
Awareness of the organizational and managerial dimensions of information sys-
tems can help us understand why some firms achieve better results from their
information systems than others. Studies of returns from information technol-
ogy investments show that there is considerable variation in the returns firms
receive (see Figure 1.8). Some firms invest a great deal and receive a great deal
(quadrant 2); others invest an equal amount and receive few returns (quadrant
4). Still other firms invest little and receive much (quadrant 1), whereas others
invest little and receive little (quadrant 3). This suggests that investing in infor-
mation technology does not by itself guarantee good returns. What accounts for
this variation among firms?
The answer lies in the concept of complementary assets. Information tech-
nology investments alone cannot make organizations and managers more
effective unless they are accompanied by supportive values, structures, and
behavior patterns in the organization and other complementary assets. Busi-
ness firms need to change how they do business before they can really reap the
advantages of new information technologies.
Complementary assets are those assets required to derive value from a pri-
mary investment (Teece, 1998). For instance, to realize value from automobiles
requires substantial complementary investments in highways, roads, gasoline
FIGURE 1. 8 VARIATION IN RETURNS ON INFORMATION TECHNOLOGY

INVESTMENT
4 .0
1 2
2 .0
Productivity
(relati ve to 1 .0
industry
average)
.5
.25
3 4
.12 .25 1 .0 4 .0 8 .0
IT Capital Stock (relati ve to industry average)
Although, on average, investments in information technology produce returns far above those returned
by other investments, there is considerable variation across firms.
Source: Based on Brynjolfsson and Hitt (2000).
stations, repair facilities, and a legal regulatory structure to set standards and
control drivers.
Research indicates that firms that support their technology investments
with investments in complementary assets, such as new business models, new
business processes, management behavior, organizational culture, or training,
receive superior returns, whereas those firms failing to make these complemen-
tary investments receive less or no returns on their information technology
investments (Brynjolfsson, 2005; Brynjolfsson and Hitt, 2000; Laudon, 1974).
These investments in organization and management are also known as organi-
zational and management capital.
Table 1.2 lists the major complementary investments that firms need to make
to realize value from their information technology investments. Some of this
investment involves tangible assets, such as buildings, machinery, and tools.
However, the value of investments in information technology depends to a
large extent on complementary investments in management and organization.
Key organizational complementary investments are a supportive business
culture that values efficiency and effectiveness, an appropriate business model,
efficient business processes, decentralization of authority, highly distributed
decision rights, and a strong information system (IS) development team.
Important managerial complementary assets are strong senior management
support for change, incentive systems that monitor and reward individual inno-
vation, an emphasis on teamwork and collaboration, training programs, and a
management culture that values flexibility and knowledge.
Important social investments (not made by the firm but by the society at large,
other firms, governments, and other key market actors) are the Internet and the
supporting Internet culture, educational systems, network and computing stan-
dards, regulations and laws, and the presence of technology and service firms.
Throughout the book we emphasize a framework of analysis that considers
technology, management, and organizational assets and their interactions. Per-
haps the single most important theme in the book, reflected in case studies and
TABLE 1. 2 COMPLEMENTARY SOCIAL, MANAGERIAL, AND

ORGANIZATIONAL ASSETS REQUIRED TO OPTIMIZE RETURNS
FROM INFORMATION TECHNOLOGY INVESTMENTS
Organizational assets Supportive organizational culture that values efficiency and effectiveness
Appropriate business model
Efficient business processes
Decentralized authority
Distributed decision-making rights
Strong IS development team
Managerial assets Strong senior management support for technology investment and change
Incentives for management innovation
Teamwork and collaborative work environments
Training programs to enhance management decision skills
Management culture that values flexibility and knowledge-based decision making.
Social assets The Internet and telecommunications infrastructure
IT-enriched educational programs raising labor force computer literacy
Standards (both government and private sector)
Laws and regulations creating fair, stable market environments
Technology and service firms in adjacent markets to assist implementation
exercises, is that managers need to consider the broader organization and man-
agement dimensions of information systems to understand current problems as
well as to derive substantial above-average returns from their information tech-
nology investments. As you will see throughout the text, firms that can address
these related dimensions of the IT investment are, on average, richly rewarded.
1-3 What academic disciplines are used to study

information systems, and how does each
contribute to an understanding of information
systems?
The study of information systems is a multidisciplinary field. No single theory
or perspective dominates. Figure 1.9 illustrates the major disciplines that con-
tribute problems, issues, and solutions in the study of information systems.
In general, the field can be divided into technical and behavioral approaches.
Information systems are sociotechnical systems. Though they are composed
of machines, devices, and “hard” physical technology, they require substan-
tial social, organizational, and intellectual investments to make them work
properly.
Technical Approach
The technical approach to information systems emphasizes mathematically
based models to study information systems as well as the physical technology
and formal capabilities of these systems. The disciplines that contribute to the
technical approach are computer science, management science, and operations
research.
FIGURE 1. 9 CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS
Technical
Approaches Computer Operations
Science Research
Management MIS Sociology

Science
Psychology Economics Behavioral

Approaches
The study of information systems deals with issues and insights contributed from technical and behav-
ioral disciplines.
Computer science is concerned with establishing theories of computability,

methods of computation, and methods of efficient data storage and access. Man-
agement science emphasizes the development of models for decision-making
and management practices. Operations research focuses on mathematical tech-
niques for optimizing selected parameters of organizations, such as transporta-
tion, inventory control, and transaction costs.
Behavioral Approach
An important part of the information systems field is concerned with behavioral
issues that arise in the development and long-term maintenance of information
systems. Issues such as strategic business integration, design, implementation,
utilization, and management cannot be explored usefully with the models used
in the technical approach. Other behavioral disciplines contribute important
concepts and methods.
For instance, sociologists study information systems with an eye toward how
groups and organizations shape the development of systems and also how sys-
tems affect individuals, groups, and organizations. Psychologists study infor-
mation systems with an interest in how human decision makers perceive and
use formal information. Economists study information systems with an interest
in understanding the production of digital goods, the dynamics of digital mar-
kets, and how new information systems change the control and cost structures
within the firm.
The behavioral approach does not ignore technology. Indeed, information
systems technology is often the stimulus for a behavioral problem or issue. But
the focus of this approach is generally not on technical solutions. Instead, it
concentrates on changes in attitudes, management and organizational policy,
and behavior.
Approach of This Text: Sociotechnical Systems

Throughout this book you will find a rich story with four main actors: suppliers
of hardware and software (the technologists); business firms making invest-
ments and seeking to obtain value from the technology; managers and employ-
ees seeking to achieve business value (and other goals); and the contemporary
legal, social, and cultural context (the firm’s environment). Together these
actors produce what we call management information systems.
The study of management information systems (MIS) arose to focus on the
use of computer-based information systems in business firms and government
agencies. MIS combines the work of computer science, management science,
and operations research with a practical orientation toward developing sys-
tem solutions to real-world problems and managing information technology
resources. It is also concerned with behavioral issues surrounding the develop-
ment, use, and impact of information systems, which are typically discussed in
the fields of sociology, economics, and psychology.
Our experience as academics and practitioners leads us to believe that no
single approach effectively captures the reality of information systems. The
successes and failures of information systems are rarely all technical or all
behavioral. Our best advice to students is to understand the perspectives of
many disciplines. Indeed, the challenge and excitement of the information sys-
tems field are that it requires an appreciation and tolerance of many different
approaches.
The view we adopt in this book is best characterized as the sociotech-
nical view of systems. In this view, optimal organizational performance is
achieved by jointly optimizing both the social and technical systems used in
production.
Adopting a sociotechnical systems perspective helps to avoid a purely tech-
nological approach to information systems. For instance, the fact that infor-
mation technology is rapidly declining in cost and growing in power does not
necessarily or easily translate into productivity enhancement or bottom-line
profits. The fact that a firm has recently installed an enterprise-wide finan-
cial reporting system does not necessarily mean that it will be used, or used
effectively. Likewise, the fact that a firm has recently introduced new business
procedures and processes does not necessarily mean employees will be more
productive in the absence of investments in new information systems to enable
those processes.
In this book, we stress the need to optimize the firm’s performance as a
whole. Both the technical and behavioral components need attention. This
means that technology must be changed and designed in such a way as to fit
organizational and individual needs. Sometimes, the technology may have
to be “de-optimized” to accomplish this fit. For instance, mobile phone users
adapt this technology to their personal needs, and as a result manufactur-
ers quickly seek to adjust the technology to conform with user expectations.
Organizations and individuals must also be changed through training, learn-
ing, and planned organizational change to allow the technology to operate
and prosper. Figure 1.10 illustrates this process of mutual adjustment in a
sociotechnical system.
FIGURE 1. 10 A SOCIOTECHNICAL PERSPECTIVE ON INFORMATION

SYSTEMS
TECHNOLOGY ORGANIZATION
Alternative Alternative
1 1
2 2
3 3
Final Final
Design of Design of
Technology Organization
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.
Review Summary
1-1 How are information systems transforming business, and why are they essential for running and
managing a business today?
E-mail, online conferencing, smartphones, and tablet computers have become essential tools for
conducting business. Information systems are the foundation of fast-paced supply chains. The Inter-
net allows many businesses to buy, sell, advertise, and solicit customer feedback online. Organiza-
tions are trying to become more competitive and efficient by digitally enabling their core business
processes and evolving into digital firms. The Internet has stimulated globalization by dramatically
reducing the costs of producing, buying, and selling goods on a global scale. New information system
trends include the emerging mobile digital platform, big data, and cloud computing.
Information systems are a foundation for conducting business today. In many industries, survival
and the ability to achieve strategic business goals are difficult without extensive use of information
technology. Businesses today use information systems to achieve six major objectives: operational
excellence; new products, services, and business models; customer/supplier intimacy; improved
decision making; competitive advantage; and day-to-day survival.
1-2 What is an information system? How does it work? What are its management, organization, and technology
components? Why are complementary assets essential for ensuring that information systems provide genu-
ine value for organizations?
From a technical perspective, an information system collects, stores, and disseminates informa-
tion from an organization’s environment and internal operations to support organizational functions
and decision making, communication, coordination, control, analysis, and visualization. Information
systems transform raw data into useful information through three basic activities: input, processing,
and output.
From a business perspective, an information system provides a solution to a problem or challenge
facing a firm and represents a combination of management, organization, and technology elements.
The management dimension of information systems involves issues such as leadership, strategy, and
management behavior. The technology dimension consists of computer hardware, software, data
management technology, and networking/telecommunications technology (including the Internet).
The organization dimension of information systems involves issues such as the organization’s hierar-
chy, functional specialties, business processes, culture, and political interest groups.
In order to obtain meaningful value from information systems, organizations must support their
technology investments with appropriate complementary investments in organizations and manage-
ment. These complementary assets include new business models and business processes, supportive
organizational culture and management behavior, and appropriate technology standards, regulations,
and laws. New information technology investments are unlikely to produce high returns unless busi-
nesses make the appropriate managerial and organizational changes to support the technology.
1-3 What academic disciplines are used to study information systems, and how does each contribute to an
understanding of information systems?
The study of information systems deals with issues and insights contributed from technical and
behavioral disciplines. The disciplines that contribute to the technical approach focusing on formal
models and capabilities of systems are computer science, management science, and operations
research. The disciplines contributing to the behavioral approach focusing on the design, implemen-
tation, management, and business impact of systems are psychology, sociology, and economics. A
sociotechnical view of systems considers both technical and social features of systems and solutions
that represent the best fit between them.
Key Terms
Business functions, 47 Information technology (IT) infrastructure, 50
Business model, 42 Input, 45
Business processes, 40 Internet, 49
Complementary assets, 54 Intranets, 50
Computer hardware, 49 Knowledge workers, 47
Computer literacy, 46 Management information systems (MIS), 46
Computer software, 49 Middle management, 47
Culture, 48 Network, 49
Data, 44 Networking and telecommunications
Data management technology, 49 technology, 49
Data workers, 47 Operational management, 47
Digital firm, 40 Organizational and management capital, 55
Extranets, 50 Output, 46
Feedback, 46 Processing, 45
Information, 44 Production or service workers, 47
Information system, 44 Senior management, 47
Information systems literacy, 46 Sociotechnical view, 58
Information technology (IT), 44 World Wide Web, 50
MyLab MIS
To complete the problems marked with the MyLab MIS, go to the EOC Discussion Questions in MyLab MIS.
Review Questions
1-1 How are information systems transforming • List and briefly describe the six strategic
business, and why are they so essential for run- business objectives of information systems.
ning and managing a business today?
1-2 What is an information system? How does it
• Describe how information systems have work? What are its management, organization,
changed the way businesses operate and and technology components? Why are comple-
their products and services. mentary assets essential for ensuring that infor-
• Identify three major new information sys- mation systems provide genuine value for
tem trends. organizations?
• Describe the characteristics of a digital firm. • Define an information system and describe
• Describe the challenges and opportunities the activities it performs.
of globalization in a “flattened” world.
• List and describe the organizational, man- optimize returns from information technol-
agement, and technology dimensions of ogy investments.
1-3 What academic disciplines are used to study
• Distinguish between data and information information systems, and how does each con-
and between information systems literacy tribute to an understanding of information
and computer literacy. systems?
• Explain how the Internet and the World • List and describe each discipline that con-
Wide Web are related to the other technol- tributes to a technical approach to informa-
ogy components of information systems. tion systems.
• Describe the flow of information through • List and describe each discipline that con-
the business information value chain.. tributes to a behavioral approach to informa-
• Describe the complementary social, mana- tion systems.
gerial, and organizational assets required to • Describe the sociotechnical perspective on
Discussion Questions
1-4 What does it mean to describe the world as 1-6 What do you think were some of the key
MyLabMIS MyLabMIS
“flat”? managerial and organizational decisions that
1-5 If you were setting up the website for a com- helped make JurongHealth Services’ IT
MyLabMIS
petitive rugby team, what management, orga- efforts so successful?
nization, and technology issues might you
encounter?
Hands-On MIS Projects

The projects in this section give you hands-on experience in analyzing financial reporting and inventory
management problems, using data management software to improve management decision making about
increasing sales, and using Internet software for researching job requirements. Visit MyLab MIS’s Multime-
dia Library to access this chapter’s Hands-On MIS Projects.
Management Decision Problems

1-7 Warbenton Snack Foods is a manufacturer of potato crisps and savoury snacks in the U.K. Warbenton’s
financial department uses spreadsheets and manual processes for much of its data gathering and reporting.
Warbenton’s financial analyst would spend the entire final week of every month collecting spreadsheets
from the heads of various departments. She would then consolidate and re-enter all the data into another
spreadsheet, which would serve as the company’s monthly profit-and-loss statement. If a department
needed to update its data after submitting the spreadsheet to the main office, the analyst had to return the
original spreadsheet and then wait for the department to resubmit its data before finally submitting the
updated data in the consolidated document. Assess the impact of this situation on business performance
and management decision making.
1-8 Rabatt operates deep-discount stores offering housewares, cleaning supplies, clothing, health and beauty
aids, and packaged food throughout Germany, with most items selling for 1 euro. Its business model calls
for keeping costs as low as possible. The company has no automated method for keeping track of inventory
at each store. Managers know approximately how many cases of a particular product the store is supposed
to receive when a delivery truck arrives, but the stores lack technology for scanning the cases or verifying
the item count inside the cases. Merchandise losses from theft or other mishaps have been rising and now
represent over 3 percent of total sales. What decisions have to be made before investing in an information
system solution?
Improving Decision Making: Using Databases to Analyze Sales Trends

Software skills: Database querying and reporting
Business skills: Sales trend analysis
1-9 In this project, you will start out with raw transactional sales data and use Microsoft Access database soft-
ware to develop queries and reports that help managers make better decisions about product pricing, sales
promotions, and inventory replenishment. In MyLab MIS, you can find a Store and Regional Sales Database
developed in Microsoft Access. The database contains raw data on weekly store sales of computer equip-
ment in various sales regions. The database includes fields for store identification number, sales region,
item number, item description, unit price, units sold, and the weekly sales period when the sales were
made. Use Access to develop some reports and queries to make this information more useful for running
the business. Sales and production managers want answers to the following questions:
• Which products should be restocked?
• Which stores and sales regions would benefit from a promotional campaign and additional marketing?
• When (what time of year) should products be offered at full price, and when should discounts be used?
You can easily modify the database table to find and report your answers. Print your reports and results of
queries.
Improving Decision Making: Using the Internet to Locate Jobs Requiring Information
Systems Knowledge
Software skills: Internet-based software
Business skills: Job searching
1-10 Visit a job-posting website such as Monster.com. Spend some time at the site examining jobs for account-
ing, finance, sales, marketing, and human resources. Find two or three descriptions of jobs that require
some information systems knowledge. What information systems knowledge do these jobs require? What
do you need to do to prepare for these jobs? Write a one- to two-page report summarizing your findings.
Collaboration and Teamwork Project

Selecting Team Collaboration Tools
1-11 Form a team with three or four classmates and review the capabilities of Google Drive and Google Sites for
your team collaboration work. Compare the capabilities of these two tools for storing team documents,
project announcements, source materials, work assignments, illustrations, electronic presentations, and
web pages of interest. Learn how each works with Google Docs. Explain why Google Drive or Google Sites
is more appropriate for your team. If possible, use Google Docs to brainstorm and develop a presentation of
your findings for the class. Organize and store your presentation using the Google tool you have selected.

CASE STUDY
Ohio farmer Mark Bryant raises corn, soybeans, and from the 20 or so iPhones and five iPads he has sup-
soft red winter wheat on 12,000 acres. But you’ll plied to employees who report on his acreage in real
hardly ever see him on a tractor because that isn’t time. Using software from a Google-funded startup
how farms work anymore. Bryant spends most of called Granular, Bryant analyzes the data along with
his time monitoring dashboards full of data gathered data gathered from aircraft, self-driving tractors, and
other forms of automated and remote sensors for are less wasteful, and this also promotes the health
yield, moisture, and soil quality. of the planet.
Tractors themselves have been morphed into Other large agricultural companies like Monsanto
pieces of intelligent equipment, and are now much and Dupont are big precision agriculture players,
smarter. Many tractors and combines today are providing data analysis and planting recommenda-
guided by Global Positioning System (GPS) satellite- tions to farmers who use their seeds, fertilizers, and
based navigation systems. The GPS computer herbicides. Because adjustments in planting depth or
receives signals from earth-orbiting satellites to track the distance between crop rows can make a big dif-
each piece of equipment’s location and where it has ference in crop yields, these companies want their
gone. The system helps steer the equipment so farm- computers to analyze the data generated during
ers are able to monitor progress on iPads and other computerized planting work to show farmers how to
tablet computers in their tractor cabs. further increase their crop output.
The world’s largest producer of autonomous four- The farmer provides data on his or her farm’s field
wheeled vehicles isn’t Tesla or Google, it’s John boundaries, historic crop yields, and soil conditions
Deere. The cab of one of Deere’s self-driving trac- to these companies or another agricultural data anal-
tors is now so full of screens and tablets that it looks ysis company, which analyzes the data along with
like the cockpit of a jet airplane. John Deere and other data it has collected about seed performance
its competitors aren’t just turning out tractors, com- and soil types in different areas. The company doing
bines, and trucks that can drive themselves, they the data analysis then sends a computer file with
are also turning out wirelessly connected sensors recommendations back to the farmer, who uploads
that map every field as well as planting and spraying the data into computerized planting equipment. The
machines that can use computerized instructions to farmer’s planting equipment follows the recommen-
apply seed and nutrients to a field. dations as it plants fields. For example, the recom-
Deere & Co. has embedded information technol- mendations might tell an Iowa corn farmer to lower
ogy in all of its farming equipment, creating an eco- the number of seeds planted per acre or to plant
system for controlling sprayers, balers, and planters. more seeds per acre in specified portions of the field
Deere products include AutoTrac GPS-controlled capable of growing more corn. The farmer might also
assisted-steering systems, which allow equipment receive advice on the exact type of seed to plant in
operators to take their hands off the wheel; JDLink, different areas. The data analysis company monitors
which enables machinery to automatically upload weather and other factors to advise farmers how to
data about fields to a remote computer center and manage crops as they grow.
farmers to download planting or fertilizing instruc- A software application developed by Monsanto
tions; and John Deere Machine Sync, which uses called FieldScripts takes into account variables such
GPS data to create maps based on aerial or satellite as the amount of sunlight and shade and variations
photos to improve planting, seeding, spraying, and in soil nitrogen and phosphorous content down to
nutrient application. an area as small as a 10-meter-by-10-meter grid.
Deere now ranks among the leading companies Monsanto analyzes the data in conjunction with
offering tools for farmers to practice what is known the genetic properties of its seeds, combines all this
as precision agriculture. Managing fields with this information with climate predictions, and delivers
level of computerized precision means farmers precise planting instructions or “scripts” to iPads
need to use fewer loads of fertilizer, potentially connected to planting equipment in the field. Tools
saving an individual farmer tens of thousands of such as FieldScripts would allow farmers to pinpoint
dollars. Some also see precision agriculture as the areas that need more or less fertilizer, saving them
solution to feeding the world’s exploding popula- the cost of spreading fertilizer everywhere while
tion. By 2050, the world’s population is predicted to boosting their yields in areas that have performed
be 9.2 billion people, 34 percent higher than today. more poorly and reducing the amount of excess
More people will have the means to purchase food fertilizer that enters the water table—good for the
that requires more land, water, and other resources environment.
to produce. To keep up with rising populations Prescriptive planting could help raise the aver-
and income growth, global food production must age corn harvest to more than 200 bushels an acre
increase by 70 percent and precision agriculture from the current 160 bushels, some experts say. On
could make this possible. Farmers using fertilizer, a larger scale, according to Monsanto, the world’s
water, and energy to run equipment more precisely largest seed company, data-driven planting advice
to farmers could increase worldwide crop produc- suspicious about what Monsanto and DuPont might
tion by about $20 billion a year. So far, output from do with the data collected about them. Others worry
prescriptive planting systems has not achieved those about seed prices rising too much because the big
spectacular levels. companies that developed prescriptive planting tech-
Is there a downside to all of this? For small farm- nology are the same ones that sell seeds. (There has
ers, the answer may be yes. The costs of investing been a surge in seed prices during the past 15 years
in the new technology and vendor service fees for as the biggest companies increased their market
some of these tools such as FieldScripts can amount share. Monsanto and DuPont now sell about 70 per-
to more than what many small farmers can earn cent of all corn seed in the United States.) Farmers
in extra yield from their farms. According to Sara also fear that rivals could use the data to their own
Olson of Lux Research Inc., the problem with preci- advantage. For instance, if nearby farmers saw crop-
sion agriculture is the diminishing returns that come yield information, they might rush to rent farmland,
along with costly technologies on smaller farms. pushing land and other costs higher. Other farmers
That means that only the really big farms are likely worry that Wall Street traders could use the data to
to benefit. make bets on futures contracts. If such bets push
Monsanto estimates that FieldScripts will improve futures-contract prices lower early in the growing
yields by five to 10 bushels per acre. With corn at season, it might squeeze the profits farmers might
about $4 per bushel, that’s an increase of $20 to $40 lock in for their crops by selling futures.
per acre. A small farm of about 500 acres could get There are not yet any publicly known examples
anywhere from $10,000 to $20,000 in extra revenue. where a farmer’s prescriptive-planting informa-
Monsanto charges around $10 per acre for the ser- tion has been misused. Monsanto and DuPont offi-
vice, so the farm will wind up paying about $5,000— cials say the companies have no plans to sell data
in addition to paying tens of thousands of dollars gathered from farmers. Monsanto has stated that it
to either retrofit its existing planting equipment or supports industrywide standards for managing infor-
buy more modern tractors that include the elec- mation collected from fields and that it wouldn’t
tronics gear that syncs the “scripts” provided by the access the data without permission from farmers.
Monsanto online service with the planter’s onboard Deere & Co., which has been working with DuPont
navigation systems. Monsanto also charges an extra and Dow Chemical Co. to formulate specialized
$15 per acre for its local climate prediction service. A seed-planting recommendations based on data from
small farm will most likely lose money or break even its tractors, combines, and other machinery, says it
for the first two years of using a service like Field- obtains consent from customers before sharing any
Scripts, according to Olson. of their data.
For a large farm of about 5,000 acres, FieldScripts Some farmers have discussed aggregating plant-
could increase revenues by between $100,000 and ing data on their own so they could decide what
$200,000. With Monsanto’s service costing about information to sell and at what price. Others are
$50,000, that farm’s total profits will run between working with smaller technology companies that are
$50,000 to $150,000, more than sufficient to offset trying to keep agricultural giants from dominating
the cost of updating farm machinery. Whether a the prescriptive-planting business. Startups such as
farm is big or small, the impact of FieldScripts would Farmobile LLC, Granular Inc., and Grower Informa-
be minimal in good years because yields would be tion Services Cooperative are developing informa-
high regardless. The technology is likely to have a tion systems that will enable farmers to capture data
bigger impact in years when conditions aren’t so streaming from their own tractors and combines,
propitious. A spokesperson for Monsanto stated that store the data in their own remote data centers, and
the outcome of its prescriptive planting system is market the data to seed, pesticide, and equipment
less about the size of the farm and more about the companies or futures traders if they so choose. Such
farmer’s technology know-how. According to Michael platforms could help farmers wring larger profits
Cox, codirector of investment research at securities from precision farming and give them more control
firm Piper Jaffray Cos., revenue from FieldScripts over the information generated on their fields.
and other technology-driven products and services Sources: “Precision Agriculture,” www.research.ibm.com, accessed
could account for 20 percent of Monsanto’s projected April 4, 2016; Matthew J. Grassi, “Agrible Launches Nutrient
growth in per-share earnings by 2018. Forecasting, Spray Smart Features,” PrecisionAg, March 9, 2016;
www.monsanto.com, accessed April 4, 2016; Jacob Bunge, ”On the
Although some farmers have embraced prescrip-
Farm: Startups Put Data in Farmers’ Hands,” Wall Street Journal,
tive planting, others are critical. Many farmers are
August 31, 2015; Mary K. Pratt, “How Technology Is Nourishing 1-14 How is information technology changing the
the Food Chain,” Computerworld, August 18, 2015; and Michael way farmers run their business?
Hickins, “For Small Farmers, Big Data Adds Modern Problems to
Ancient Ones,” Wall Street Journal, February 25, 2014. 1-15 How do the systems described in this case
improve farming operations?
CASE STUDY QUESTIONS 1-16 How do precision agriculture systems support
1-12 List and describe the technologies used in this decision making? Identify three different deci-
case study. sions that can be supported.
1-13 In what sense are U.S. farms now digital firms? 1-17 How helpful is precision agriculture to individ-
Explain your answer. ual farmers and the agricultural industry?
Explain your answer.
MyLab MIS
Go to the Assignments section of MyLab MIS to complete these writing exercises.
1-18 What are the strategic objectives that firms try to achieve by investing in information systems and technologies?
For each strategic objective, give an example of how a firm could use information systems to achieve the
objective.
1-19 Describe the complementary assets that firms need in order to optimize returns from their information system
investments. For each type of complementary asset, give an example of a specific asset a firm should have.
Chapter 1 References
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Brynjolfsson, Erik. “VII Pillars of IT Productivity.” Optimize (May Mithas, Sunil and Roland T. Rust, “How Information Technology
2005). Strategy and Investments Influence Firm Performance:
Bureau of Economic Analysis. National Income and Product Conjecture and Empirical Evidence.” MIS Quarterly (March
Accounts. www.bea.gov, accessed April 19, 2016. 2016).
Carr, Nicholas. “IT Doesn’t Matter.” Harvard Business Review (May Nevo, Saggi and Michael R. Wade. “The Formation and Value of
2003). IT-Enabled Resources: Antecedents and Consequences of
Chae, Ho-Chang, Chang E. Koh, and Victor Prybutok. “Information Synergistic Relationships.” MIS Quarterly 34, No. 1 (March
Technology Capability and Firm Performance: Contradictory 2010).
Findings and Their Possible Causes.” MIS Quarterly 38, No. 1 Otim, Samual, Kevin E. Dow, Varun Grover, and Jeffrey A. Wong.
(March 2014). “The Impact of Information Technology Investments on
Conaghan, Jim. “Newspaper Digital Audience Grew Twice as Fast Downside Risk of the Firm: Alternative Measurement of the
as the Internet in the Past 12 Months.” Newspaper Business Value of IT.” Journal of Management Information
Association of America (October 9, 2015). Systems 29, No. 1 (Summer 2012).
Curtis, Sophie. “Dot-com at 30: Will the World’s Best-Known Web Ren, Fei and Sanjeev Dewan. “Industry-Level Analysis of
Domain Soon Be Obsolete?” Telegraph.co.uk (March 15, Information Technology Return and Risk: What Explains the
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Dedrick, Jason, Vijay Gurbaxani, and Kenneth L. Kraemer. 2 (2015).
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GLOBAL GLOBAL

Management Information Systems

Managing the Digital Firm

Kenneth C. Laudon • Jane P. Laudon

purchased this book within the United States or Canada,

Pearson Global Edition

Laudon_15_129221175X_Final.indd 1 27/04/17 1:42 PM

Pearson Education Limited

and Associated Companies throughout the world

Visit us on the World Wide Web at:

© Pearson Education Limited 2018

ISBN 10: 1-292-21175-X

British Library Cataloguing-in-Publication Data

Typeset in 10.5/13 ITC Veljovic by Cenveo® Publisher Services.

Kenneth C. Laudon is a Professor of Information Systems at New York University’s Stern

Jane Price Laudon is a management con-

PART ONE Organizations, Management, and the Networked

PART TWO Information Technology Infrastructure 191

PART FOUR Building and Managing Systems 513

PART ONE Organizations, Management, and the Networked

Chapter 2 Global E-business and Collaboration 68

Chapter 3 Information Systems, Organizations, and Strategy 106

Chapter 4 Ethical and Social Issues in Information Systems 150

Collaboration and Teamwork Project 186

PART TWO Information Technology Infrastructure 191

Chapter 6 Foundations of Business Intelligence: Databases

Chapter 7 Telecommunications, the Internet, and Wireless

Chapter 8 Securing Information Systems 320

Chapter 10 E-commerce: Digital Markets, Digital Goods 398

Chapter 11 Managing Knowledge 444

Capturing Knowledge: Expert Systems 460

Chapter 12 Enhancing Decision Making 480

PART FOUR Building and Managing Systems 513

Chapter 14 Managing Projects 554

Chapter 15 Managing Global Systems 588

Chapter 1: Information Systems in Global Business Today

Chapter 2: Global E-Business and Collaboration

Chapter 3: Information Systems, Organizations, and Strategy

Chapter 4: Ethical and Social Issues in Information Systems

Chapter 5: IT Infrastructure and Emerging Technologies

Chapter 6: Foundations of Business Intelligence: Databases and Information Management

Chapter 7: Telecommunications, the Internet and Wireless Technology

Chapter 8: Securing Information Systems

Chapter 9: Achieving Operational Excellence and Customer Intimacy: Enterprise

Chapter 10: E-commerce: Digital Markets, Digital Goods

Chapter 11: Managing Knowledge

Chapter 12: Enhancing Decision Making

Chapter 13: Building Information Systems

Chapter 14: Managing Projects

Chapter 15: Managing Global Systems

What’s New in This Edition

Hadoop, in-memory computing, non-relational databases, and analytic

The 15th Edition: The Comprehensive Solution for the

The CORE Text

Business-Driven with Real-World Business Cases and

INTERACTIVE SESSION: TECHNOLOGY

Case Study Questions encour- CASE STUDY QUESTIONS

• Collaboration and Teamwork Projects. Each chapter features a col-

Assessment and AACSB Assessment Guidelines

Management Decision Problems

Students practice using soft-

developed an Assurance of Learning Program designed to ensure that schools

For more information on the AACSB Assurance of Learning Program and

Customization and Flexibility: Learning Track Modules