CHAPTER ONE

Introduction to MIS
MIS CONCEPTS AND DEFINITIONS
Information is the basis for every decision taken in an organization. The efficiency of management
depends upon the availability of regular and relevant information. Thus it is essential that an effective and
efficient reporting system be developed as part of accounting system. The main object of management
information is to obtain the required about the operating results of an organization regularly in order to
use them for future planning and control.
The old techniques like intuition, rule of thumb, personal whim and prestige, etc. are now considered
useless in the process of decision taking. Modern management is constantly on look out for such
quantitative and such information, which can help in analyzing the proposed alternative actions and
choosing one as its decision. Thus, modern management functions are information-oriented more
popularly known as “management by information”. And the system through which information is
communicated to the management is known as “management information system (MIS)”. The
management needs full information before taking any decision. Good decisions can minimize costs and
optimize results. Management information system can be helpful to the management in undertaking
management decisions smoothly and effectively.
DEFINITION OF MIS
It is combination of three words i.e. Management, Information and System. To better understand the
concept MIS, we will try to understand these three words.
MANAGEMENT
Management is the process of allocating an organization's inputs, including human and economic
resources, by planning, organizing, directing, and controlling for the purpose of producing goods or
services desired by customers so that organizational objectives are accomplished. If management has
knowledge of the planning, organizing, directing, and controlling of the business, its decisions can be
made on the basis of facts, and decisions are more accurate and timely as a result.
Management is art of getting things done through and with the people in formally organized groups. The
basic functions performed by a manager in an organization are: Planning, controlling, staffing,
organizing, and directing.
Information: Information is considered as valuable component of an organization. Information is data
that is processed and is presented in a form which assists decision maker.
Data Processing Information

Figure 1: Information Generation

System: A system is defined as a set of elements which are joined together to achieve a common
objective. The elements are interrelated and interdependent. Thus every system is said to be composed of
subsystems. A system has one or multiple inputs, these inputs are processed through a transformation
process to convert these input(s) to output.
These subsystems are interrelated through a process of a system:
Input - Throughout - Output
Input Transformation Process Output

Figure 2: A system
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DEFINITION
MANAGEMENT INFORMATION SYSTEM (MIS)
After discussing the three components of MIS, now we shall try to understand its definition. While
discussing the components: Management, Information and System, it has been cleared that decision
making is an important part of managerial functions. For taking adequate decisions, Management
Information (MI) is necessary as it works as a vital input.
'MIS' is a planned system of collecting, storing and disseminating data in the form of information
needed to carry out the functions of management.”
A system which consists of people, machines, procedures, databases and data models as its components is
known as Management Information System. This system collects data from external and internal sources
of an organization, analyzes it and supplies management information to managers and helps them in
making decisions.
Management Information Systems (MIS), referred to as Information Management and Systems, is the
discipline covering the application of people, technologies, and procedures collectively called information
systems, to solving business problems.
Academically, the term is commonly used to refer to the group of information management methods tied
to the automation or support for human decision making, e.g. Decision Support Systems, Expert Systems,
and Executive Information Systems.
IT AND MIS /IS
Information Technology (IT) is sometimes called as a technological side of an information system/MIS,
which includes hardware, software, networks and other devices. In other words, IT is a sub-system of an
information system/MIS.
FUNCTIONS OF MIS
According to Milind Gandhi MIS is set up by an organization with the prime objective to obtain
management information to be used by its managers in decision making. Thus, MIS must perform the
following functions in order to meet its objectives.
i. Data Capturing: MIS captures data from various internal and external sources of an organization.
Data capturing may be manual or through computer terminals. End users typically, record data
about transactions on some physical medium, such as a paper form, or enter it directly into a
computer system.
ii. Processing of Data: The captured data is processed to convert it into the required management
information. Processing of data is done by such activities as calculating, comparing, sorting,
classifying and summarizing. These activities organize, analyze, and manipulate data using
various statistical, mathematical, operations research and other business models.
iii. Storage of Information: MIS stores processed or unprocessed data for future use. If any
information is not immediately required, it is saved as an organizational record. In this activity,
data and information are retained in an organized manner for later use. Stored data is commonly
organized into fields, records, files and databases.
iv. Retrieval of Information: MIS retrieves information from its stores as and when required by
various users. As per the requirements of management users, the retrieved information is either
disseminated as such or it is processed again to meet the exact MI demands.
v. Dissemination of MI: Management Information, which is a finished product of MIS, is
disseminated to the users in the organization.

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 Source User

Data capturing Data Processing

Dissemination

Retrieval

Storage of data

Figure 3: Functions of MIS

CHARACTERISTICS OF MIS
 System Approach: The information system follows a System’s approach. The system’s approach
implies a holistic approach to the study of system and its performance in the light for the objective
for which it has been constituted.
 Management Oriented: This is an important characteristic of MIS. For designing of MIS, top-
down approach should be followed. Top-down approach suggests that the system development
starts from the determination of management needs and overall business objectives. The MIS
development plan should be derived from the overall business plan. Management oriented
characteristic of MIS also implies that the management actively directs the system development
efforts.
 Need Based: MIS design and development should be as per the information needs of managers at
different levels, strategic planning level, management control level and operational control level.
In other words, MIS should cater to the specific needs of managers in an organization’s hierarchy.

 Exception Based: MIS should be developed on the exception based reporting principle, which
means an abnormal situation, i.e. the maximum; minimum or expected values vary beyond
tolerance limits. In such situations, there should be exception reporting to the decision maker at
the required level.
 Future Oriented: Besides exception based reporting, MIS should also look at the future. In other
words MIS should not merely provide past or historical information; rather it should provide
information, on the basis of projections based on which actions may be initiated.
 Integrated: Integration is a necessary characteristic of a management information system.
Integration is significant because of its ability to produce more meaningful information. For
example, in order to develop an effective production scheduling system, it is necessary to balance
such factors as:
 Set-up costs,
 Work force
 Overtime rates
 Production capacity
 Inventory level
 Capital requirements
 Customer services

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  Long Term Planning: MIS is developed over relatively long periods. Such system does not
develop overnight. A heavy element of planning is involved. The MIS designer must have the
future objectives and needs of the company in mind.
 Sub-System Concept: The process of MIS development is quite complex and one is likely to lose
insight frequently. Thus, the system, though viewed as a single entity, must be broken down into
digestible sub-systems which are more meaningful at the planning stage.
 Central Database: A central database is the mortar that holds the functional systems together.
Each system requires access to the master file of data covering inventory, personnel, vendors,
customers, etc. If the data is stored efficiently and common usage in mind, one master file can
provide the data needed by any of the functional systems. It seems logical to gather data once, to
properly validate it and to place it on a central storage medium that can be accessed by any other
sub system.
ORGANIZATIONAL NEED FOR MIS IN A COMPANY
To facilitate the management decision making at all levels of company, the MIS must be integrated. MIS
units are companywide. MIS is available for the Top management. The top management of company
should play an active role in designing, modifying and maintenance of the total organization wide
management information system.
Information system and Information technology have become a vital component of any successful
business and are regarded as major functional areas just like any other functional area of a business
organization like marketing, finance, production and HR. Thus it is important to understand the area of
information system just like any other functional area in the business. MIS is important because all
businesses have a need for information about the tasks which are to be performed. Information and
technology is used as a tool for solving problems and providing opportunities for increasing productivity
and quality.
Information has always been important but it has never been so available, so current and so
overwhelming. Efforts have been made for collection and retrieval of information. However; challenges
still remain in the selection analysis and interpretation of the information that will further improve
decision making and productivity.
MIS FOR A BUSINESS ORGANIZATION
Support the Business Process: Treats inputs as a request from the customer and outputs as services to
customer. Supports current operations and use the system to influence further way of working.
Support Operation of a Business Organization: MIS supports operations of a business organization by
giving timely information, maintenance and enhancement which provides flexibility in the operation of
organizations.
To Support Decision Making: MIS supports the decision making by employee in their daily operations.
MIS also supports managers in decision making to meet the goals and objectives of the organization.
Different mathematical models and IT tools are used for the purpose evolving strategies to meet
competitive needs.
Strategies for an Organization: Today each business is running in a competitive market. MIS supports
the organization to evolve appropriate strategies for the business to assent in a competitive environment.

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FACTORS RESPONSIBLE FOR THE DEVELOPMENT OF MIS
Factors Responsible for the development of MIS are numerous and have been a prime concern for many
Researchers and Practitioners. Both Internal and external factors must be taken into account when trying
to understand and organization’s criteria for deciding about technology. The following are the factors
which are responsible for development of MIS:
1. External
2. Internal
External Factors: External Factors are conditions that exist in organization’s external environment. The
factors can be found at the industry level or in national policies.
i) Industry level: At the industry level, we are looking at characteristics as degree of diffusion of certain
technologies, the availability of external know-how, for example, technology suppliers, the degree of
innovativeness of the industry, the requirements imposed by major customers and external markets and
overall levels of competition and technology sophistication in the industry.
ii) National Policies: For the external factors the national policies also affect the organization that
indirectly affects the subsystems of the organization.
Internal Factors: Internal factors internal of the firm that may affect the development of MIS can be
grouped into three categories:
i) Past Experience with Technology: The organizations past experience about the technology in terms of
exposure and organizational learning ultimately affects its future in developing technology.
ii) Organizational Characteristics: An organization’s characteristic like size, influence the adoption of
MIS application in organization. The adoption of certain technologies may appear more appropriate for
the larger firms because of the large capital investments and the skilled human resources involve in the
implementation and operation of such technologies. Smaller firms are less affected by organizational
inertia and they show a greater degree of involvement of organizational member’s especially top
management during implementation. Ready to use software and less expensive equipments of MIS
application are more attractive to smaller firms.
iii) Organizational Pursued strategy: Internal factors deal with the organizations pursued strategy on
both orientation and technology policy.
An organization’s strategy reflects its action with market and technology, which ultimately modify its
experience and consequently its overall characteristics and capabilities. The need for a strong technology
has been advocated by a number of authors and investments in MIS should therefore be closely aligned
with overall corporate strategy.
Other Factors:
i) Customer Satisfaction: Development of MIS is affected by customer satisfaction. Customer of the
services should be satisfied by the presented system.
ii) Effective: Development should be effective in terms of organizational benefit & user satisfaction.
iii) Efficient: Development should use small resources, organization values efficiently.
ESSENTIAL REQUIREMENT OF AN EFFECTIVE MIS
(i) Qualified System and Management Staff: The prerequisite of an effective MIS is that it should be
managed by qualified officers. These officers should have a mutual understanding about the roles and
responsibilities of each other and be understand clearly the view of their fellow officers. For this, each
organization should have two categories of officers

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(a) System and Computer Experts who in addition to their expertise in their subject area , they should
also be capable of understanding management concepts to facilitate the understanding of problems asked
by concern. They should also be clear about the process of decision making and information requirements
for planning.
(b) Management experts who should also understand quite-clearly the concepts and operations of a
computer. This basic knowledge of computer will be useful will place them in a comfortable position,
while working with systems, technicians in designing or otherwise, of the information system.
(ii) Futuristic Perspective: An effective MIS should be capable of meeting the future requirements of its
executives as well. This capability can be achieved by regular monitoring and updating the MIS.
(iii) Support of Top Management: For a management information system to be effective, it must
receive the full support of top management. The Reasons for this are:
(a) Subordinate managers are usually lethargic about activities which do not receive the support of their
superiors.
(b) The resources involved in computer based information system are larger and are growing larger and
larger in view of importance gained by management information system.
(iv) Common Database: It is an integrated collection of data and information which is utilized by several
information subsystems of an organization. A common database may be defined as a super file which
consolidates and integrates data records formerly stored in a separate data file. Such a database can be
organized as an integrated collection of data records into a single super file or it can be organized as an
integrated collection of several data file.
(v) Control and maintenance of MIS: Control of the MIS means the operation of the system as it was
designed to operate. Sometimes, users develop their own procedures or short cut methods to use the
system which reduces its effectiveness.

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 CHAPTER TWO

FOUNDATIONAL CONCEPTS OF MIS

2.1 The Emerging Roles of IS in Business Management
Electronic Business and Commerce: 1990s-2000s
Internet based e-business and e- commerce systems
Web-enables enterprise and global e-business operations and electronic commerce on the
internet, intranets, extranets, and other networks
Strategic and End user Support: 1980s-1990s
End user computing systems
Direct computing support for end user productivity and work group collaboration
Executive Information Systems
Critical information for top management
Expert systems
Knowledge- based expert advice for end users
Strategic Information systems
Strategic products and services for competitive advantage
Decision Support: 1970s-1980s
Decision support systems
Interactive ad hoc support of the managerial decision making process
Management Reporting: 1960s-1970s
Management Information Systems
Management reports of pre specified information to support decision making
Data Processing: 1950s-1960s
Electronic data processing systems
Transaction Processing , record keeping, and traditional accounting applications

Components of CBIS
In an organization, information systems consist of the following components. These components will
formulate a system, which will help us to gather the required information for making decision in
various levels of management. We will now see these components in brief and discuss them in detail in
the later lectures.
Data - Input that the system takes to produce information
Hardware - Is a set of devices such as processor, monitor, keyboard and printers that accepts data and
information process then and display them. Computer itself and its peripheral equipment: input, output,
storage devices; includes data communication equipment
Software - is a set of programs that enable the hardware to process data. Sets of instructions that tell the
computer how to input, process, output and store data
Communication networks - is a connecting system that permits the sharing of resources by different
computer. Hardware and software specializing in transmission and reception of electronic data
People - are those individual who work with the system or use its output. IS professionals and users who
design, construct, operate and maintain IS

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Procedures - are the set of instructions about how to combine the above components in order to process
information and generate the desired output. Rules to process data, e.g. priorities in running different
applications, security measures, and routines for malfunctioning IS, etc.
Database: is a collection of related files, table’s relation, and so on, that stores data and the associations
among them.
Technology: that computer networks are systems of information processing components that use a
variety of hardware, software, data management, and telecommunications network technologies.
Input: involves capturing and assembling elements that enter the system to be process ex: raw material
Output: Involves transforming elements that have been produced by transformation process to their
ultimate destination. Ex: finished products
Processing: Involves transformation process that convert in to output ex: Manufacturing process.
Feedback: is data about the performance of a system ex: sales performance is feedback to a sales
manager.
Control: Involves monitoring and evaluating feedback to determine whether a system is moving toward
the achievement of its goal. The control function then makes necessary adjustment to systems input and
processing components to ensure that it produces proper output.

Information System Model

This model provides a conceptual framework that emphasizes four major concepts that can be applied to
all types of information systems.
 People, hardware, software, and data are the four basic resources of information systems.
 People resources include end users and IS specialists, hardware resources include machines and
media, software resources include both programs and procedures, data resources include data,
model, and knowledge bases
 Data resources are transformed by information processing activities into a variety of information
products for end users.
 Information processing consists of input, processing, output, storage, and control activities.

The following diagram illustrates the information system model.

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 People Resources: End users and IS specalists
Hardware Resources: Machines & Media

Control of system performance

Input of Processing Output of

Data Of data Data
Resources resources Resources

Storage of Data Resources

Data Resources: Data, Model, Knowlege Bases

Information System Resources

Every Information System is equipped with the following resources. The goals of information systems
can be easily achieved by employing these resources to their optimum level by keeping in view that the
purpose of using IS in an organization.
• People Resources
 End users
 IS specialists
• Hardware Resources
 Machines
 Media
• Software Resources
 Program
Operating Systems (OS)
Examples: Windows, Unix, etc.
Application Software
Examples: Excel, Access, MS-Word, etc.
Application software that makes people buy computers that can run the software.

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Example 1: Lotus 1-2-3 (a spreadsheet program): In early 1980s, personal computer market was
dominated by Apple (about 90% Apple, about 10 % IBM and its compatibles); Lotus 1-2-3 was
introduced and it could be run on only IBM's MS-DOS operating system; Companies all over the world
were impressed with Lotus 1-2-3, and wish to use the software. In order to run the software, they had to
purchase IBM PC or IBM PC compatibles that run on MS-DOS.
Example 2: email system. To use an email system (software), people buy computers.
 Procedures:
Operating instructions for the people who will use an information system
Examples: Instructions for filling out a paper form or using a software package.
 Data Resources:
Data vs. Information
 Data: Raw facts, observations, business transactions
Objective measurements of the attributes (characteristics) of entities (people, places, things, events, etc.)
Attributes can be last name, first name, gender, etc. for an entity of "people."
 Information:
Data that have been converted into a meaningful and useful context for specific end users
Processed data placed in a context that gives it value for specific end users.
1. Its form is aggregated, manipulated, and organized.
2. Its content is analyzed and evaluated.
3. It is placed in a proper context for a human user.
 Network Resources:
 Communications media
 Communications processors
 Network access & control software
Information system Resources and Products
People Resources Specialists -- system analyst, software developers, system
operators.
End Users -- Anyone else who uses information systems
Hardware Resources Machines—computers, video monitors, magnetic disk drivers,
printers, optical scanners
Media—floppy disks, magnetic tapes, optical disks, paper forms.
Software Resources Programs—operating system programs, spreadsheets programs,
word processing programs, payroll programs.
Procedures—data entry procedures, error correction procedures,
pay check distribution procedures
Data Resources Product descriptions, customer records, employee files, inventory
databases
Network Resources Communication media, communication processors, network
access and control software.
Information Products Management reports and business documents using text and
graphics displays, audio responses, and paper forms.

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Data, Information, Knowledge, and Wisdom
Let us consider the case of a retail store that is trying to increase sales. Some of the data available
includes sales levels for the last 36 months, advertising expenses, and customer comments from surveys.
By itself, this data may be interesting, but it must be organized and analyzed to be useful in making a
decision. For example, a manager might use economic and marketing models to forecast patterns and
determine relationships among various advertising expenses and sales.
The resulting information (presented in equations, charts, and tables) would clarify relationships among
the data and would be used to decide how to proceed It requires knowledge to determine how to analyze
data and make decisions.
Education and experience create knowledge in humans. A manager learns which data to collect, the
proper models to apply, and ways to analyze results for making better decisions. In some cases, this
knowledge can be transferred to specialized computer programs (expert systems).
Wisdom is more difficult to define but represents the ability to learn from experience and adapt to
changing conditions. In this example, wisdom would enable a manager to spot trends, identify potential
problems, and develop new techniques to analyze the data.
These 3 terms especially data and information are often used interchangeably. Data, information, and
knowledge can be inputs to an information sytem; they can also be outputs.
Contemporary Approaches to Information Systems
Although information systems are a collection of electrical and mechanical devices, they require the
organization, and the people that work within the organization for them to be successful.

1. Technical Approach
The technical approach uses mathematical models to test the capabilities of information systems.
These disciplines include:
• Computer Science - concerned with methods of computability, computation, and data storage and
access.
• Management Science - emphasized the development of models for decision making, and management
practices.
 Operations Research - focuses on mathematical techniques for optimizing selected parameters of
organizations.(inventory control, transaction costs).
 Think of this analogy: A "techie" looks at most things associated with computing as a series of zeroes
or ones. After all, everything in a computer is ultimately reduced to a zero or a one. So using the
technical approach, you could say that 2 + 2 = 4.
2. Behavioral Approach
• Deals with behavioral issues that arise in the development, and long term maintenance of the
information system.
• Different disciplines, such as psychologists, sociologists, Economists, study information systems, and
the impacts they have in the organizational environment. Behavioral changes can occur within the
organization during, and after information system development. The key to this approach is to find the
solution to the behaviour, which is not a technical issue.

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 The behavioral approach, takes into account the very nature of human beings. Nothing is totally black
and white. Therefore the behavioural approach to the same equation would be "2 + 2 = maybe 4 or
perhaps 3.5 to 5.5, but we'll have to put it before the committee and see what the next quarter's figures
say."
3. Socio technical approach
 Neither approach is better than the other, depending on the situation. Neither approach is more right
than the other, depending on the situation.
 An organization can't afford to view its information resources as belonging to either the techies
(technical approach) or the non-techies (behavioural approach). Responsibility for information
belongs to everyone in the organization. This is the socio technical approach, that is, a combination
of the two. Everyone has to work together to ensure that Information Systems serve the entire
organization.
 Information Systems and the use of technology belong to everyone in an organization. This concept is
best carried out through a socio technical approach, which allows both the technical and behavioural
approaches to be combined for the good of the organization.
Systems and Sub Systems
Systems may consist of numerous subsystems, each of which has elements, interactions, and objectives.
Subsystems perform specialized tasks related to the overall objectives of the total system. For example, an
educational system may consist of individual courses that are subsystems. Each course provides specific
knowledge that is a part of the overall educational system and contributes to its goals.

Two approaches to define subsystem

 Organizational Function Subsystem: Supports the various functions of an Organization. Ex.
Marketing, Production, Personnel etc.
 Activity Subsystem: Supports the activity for which they are used. Ex. Transactions, Operations
etc.

1. Organizational Function Subsystems

Major Functional Subsystems are some Uses Marketing Information System --Sales forecasting, Sales
planning, Sales analysis Manufacturing Information System Production planning & scheduling, cost
control analysis Personnel Information System Salary Administration, Planning HR requirement,
performance analysis, Accounting Information System, Financial Analysis, cost analysis, Capital
planning, etc. Logistics Information System Planning & control of Purchasing, inventories, distribution
Information Processing System, Planning of Information System, cost – effectiveness analysis, Top
Management System, Strategic Planning, resource allocation.
2. Activities Subsystems
Activity Subsystems Some Uses Transaction Processing System-- Processing of orders, shipments, &
receipts Operational Control System Scheduling of activities and performance reports Management
Control System Formulation of Budgets & resource allocation Strategic Planning System Formulation of
Objectives & strategic plan
Types of Information Systems
I. Operations Support Systems
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  TRANSACTION PROCESSING SYSTEMS

 Transaction processing systems record and process data resulting for business transactions.
 Typically examples are information systems that process sales, purchases, and inventory changes.
 These can be processed and used by management information systems, decision support systems,
and executive information systems.
 PROCESS CONTROL SYSTEMS

 Operation support systems also make routine decisions that control operational processes.
 Examples are automatic inventory reorder decisions and production control decisions.
 ENTERPRISE COLLABORATION SYSTEMS

 Enterprise collaboration systems are information systems that use a variety of information
technologies to help people work together.
 Enterprise collaboration systems help us collaborate to communicate ides, share resources, and
coordinate our cooperative work efforts as members of the many formal and informal process and
project teams and other workgroups.
II. Management Support Systems
 MANAGEMENT INFORMATION SYSTEMS:
 Management information systems (MIS) are the most common form of management support
systems.
 They provide managerial end users with information that support much of their day-to-day
decision-making needs.
 MIS provides a variety of reports and displays to management.
 DECISION SUPPORT SYSTEMS:
 A natural progression from information reporting systems and transaction processing systems.
 Decision support systems are interactive, computer-based information systems that use decision
models and specialized database to assist the decision making process of managerial end users.
 EXECUTIVE INFORMATION SYSTEMS:
 EIS are management information systems adapted to the strategic information needs of top
management.
 Top executives get the information they need from many sources, including letters, memos,
periodicals, and reports produced manually as well as by computer systems.
III. Other category of Information Systems
1. Expert Systems
2. Knowledge Base Information Systems
3. Strategic Information Systems
4. Functional Business Systems

Frame work of Information System

The field of information system encompasses many complex technologies, abstracted behavioural
concepts, and specialized applications in countless business and non-business areas. It is better to know a
useful conceptual framework that organized the knowledge presented in this text and outlines what you
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need to know about information system. It emphasizes that you should concentrate your efforts in the five
areas of IS knowledge.
Foundation Concepts:
o This Describes Fundamental behavioural, technical business and managerial concepts about the
components and roles of information systems. Examples include basic information system concepts
derived from general systems theory, or competitive strategy concepts used to develop business
applications of information technology for competitive advantage.
Information Technology:
o Major concepts developments and management issues in information technology-that is, hardware,
software, networks, data management and many inter-based technologies
 Business applications:
o The major uses of information systems is for the operations, management, and competitive advantage
of a business, Thus applications of information technology in the functional areas of business like
marketing, manufacturing, and accounting. Cross functional enterprise resource planning, electronic
commerce application and use of information systems and technologies to support decision making in
business.
Development processes:
o How business professional and information specialist plan, develop, and information system to meet
business opportunities, Several developmental methodologies are explored including the system
development life cycle and prototyping approaches to business application development.
Management Challenges:
The challenges of effectively and ethically managing information technologies at the end user,
enterprises, and global levels of a business, thus security challenges and security management issues in
the use of information technology, and some of the key methods business managers can use to manage
the information system function in a company with global business operations.
The Role of E-Business in Business
The internet and related technologies and applications have changed the way businesses are operated and
people work, and how information systems support business processes, decision making, and competitive
advantage. Thus, many businesses today are using Internet technologies to web-enabled business
processes and create innovative e-business applications.
E-Business: Use of internet technologies to work and empower business processes, electronic commerce,
and enterprise collaboration within a company and with its customers, suppliers, and other business
stakeholders.
In essence e-business can be more generally considered an online exchange of value. Any online
exchange of information, money, resources, services, or any combination thereof, falls under the e-
business umbrella. Most of the companies rely on e-business applications to;
1. Reengineer internal business processes.
2. Implement electronic commerce with their customers and suppliers, and
3. Promote enterprise collaboration among business teams and workgroups.
Enterprise Collaboration Systems involves the use of software tools to support communication,
collaboration, and collaboration among the members of networked teams and workgroups. A business
may use intranets, the internet and extranets, and other networks to implement such systems.

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Electronic Commerce Systems is the buying and selling, and marketing and servicing of products,
services, and information over a variety of computer networks. Many businesses now use the internet,
intranet, extranet and other networks to support every step of the commercial process this might include
everything from advertising sales, and customer support on the World Wide Web, to internet security and
payment mechanisms that ensure completion of delivery and payment procedure.

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 CHAPTER 3

Information Technology
Introduction

All computers are systems of input, processing, output, storage and control components. Today’s
computer system comes in variety of sizes, shapes, and computing capacities. Rapid hardware and
software developments and changing end user needs continue to drive the emerging of new models of
computers, from the smallest hand held computers to largest multiple CPU mainframes for the enterprise.

Definition: The concept of hardware resources includes all physical devices and material used in
information processing, nothing but combination of electronic devices which will execute an application.
Specifically, it includes not only machines, such as computer and other equipment, but also all data media
that is tangible objects on which data are recorded, from sheet of paper to magnetic or optical disks.

Hardware in computer based information systems are

1. Computer systems
2. Computer Peripherals
1. Computer Systems: are which consists of central processing units containing microprocessor, and a
variety of interconnected peripheral devices

Example: Handheld laptops, midrange computer systems

Based on access speed and storage capacity computers are divided into 3 groups

1. Micro Computers
2. Midrange computers
3. Mainframe computers
1. Micro computers---are the most important category of computers systems for business people and
consumers. Though usually called a personal computer, or pc, a micro computer is much more than a
small computer for use by an individual.

Micro computers come variety of sized and shapes for variety of purpose. For example PC’s are available
as handheld, notebook, laptops, and desktops, professional and flat standing model. Mostly we have 3
types of micro computers called

a. Computer terminals
b. Network computers
c. Information appliances
a. Computer Terminals- are undergoing a major conversion to networked computer devices. Dumb
terminals, which are keyboard/video monitor devices with limited processing capabilities, are being
replaced by intelligent terminals which are modified networked PC’s or network computers.

Intelligent terminals take many forms and can perform data entry and some information processing tasks
independently. This includes widespread use of transaction terminals in bank, retail stores, factories and
other work sites. Ex: ATM

b. Network Computers---are a micro computer category designed primarily for use with the internet
and corporate internets by clerical workers, operational employees, and knowledge base workers with

16
 specialized or limited computing applications. Users of NCs depend primarily on network servers for
their operating system and web browser, application software and data access and storage.
c. Information Appliances--- Hand held micro computer devices known as personal digital assistants
are some of the most popular devices in the information appliances category, web enabled PDA’s use
touch screens, pen based handwriting recognition, or keypads so mobile workers can send and receive
e-mail, access the web and exchange information such as appointments, to-do lists, and sales contacts
with their desktop PC’s web servers.

One of the latest entrants to PDA technology is the RIM Blackberry. A small pager sized device that can
perform all of the common PDA functions, plus act as a fully functional mobile telephone.

2. Midrange computers---are primarily high end network servers and other types of servers that can
handle the large-scale processing of many business applications. Midrange systems have become
popular as powerful network servers to help manage large internet websites, corporate internets and
extranets and other networks.
3. Mainframe Computers----are large, fast and powerful computer systems. For example mainframes
can process thousandth of million instructions per second (MIPS). Mainframe can also have large
primary storage capacities, their main memory capacity can range from hundreds of gigabytes to
many terabytes of primary storage.

Thus mainframe computers continue to handle the information processing needs of major corporations
and government’s agencies with high transaction processing volumes or complex computational problems

Computer systems concept

A computer is more than a high powered collection of electronic devices performing a variety of
information processing chores. A computer is a system, an inter related combination of components that
performs the basic system function of input, processing output, storage and control thus providing end
users with a powerful information processing tool.

Input Processing Output Storage Control

Keyboard CPU A. Video Control part will
Touch screens 1. ALU B. Audio Primary control the
Pens, mouse 2. CU C. Printing storage(ROM, software
Optical scanners 3. MU (Converting electronic RAM) instruction by
(convert the data information into human Secondary CU part of the
into electronic form) intelligible data) storage(flash, CD, CPU.
DVD, Floppy)

2. Computer Peripherals

Peripherals--- is the generic name given to all input output, and secondary storage devices that are part
of a computer system, but are not part of the CPU. Peripheral depend on direct connection or
telecommunication links to the central processing Unit of a computer system, Thus all peripherals are
online devices, that is they are separate ,but be electronically connected to and controlled a CPU.

Input Technologies---are known as by which you can enter data and commands directly by easily into a
computer system through pointing devices like electronic mouse and touch pads and technologies like
optical scanning, handwriting recognition, and voice recognition.

17
Example: 1. pointing devices

a. Electronic Mouse
b. Track ball
c. Pointing stick
d. Touch pads
e. Touch screens
4. Pen based computing
5. Speech recognition systems
6. Optical scanning

Output Technologies----Computer provide information to you in a variety of forms like

a. Video output
b. Audio output
c. Printing output
a. Inkjet printer
b. Laser Print

Database Management Systems

The key to establishing an effective, efficient database is to involve the entire organization as much as
possible, even if everyone seemingly will not be connected to it or be a user of it. Perhaps they won't be a
part of it in the beginning, but they very well could be later on.

You've heard the old saying, "Don't put all your eggs in one basket." When it comes to data, just the
opposite is true. You want to put all your corporate data in one system that will serve the organization as a
whole. A Database Management System (DBMS) is basically another software program like Word or
Excel or Email. This type of software is more complicated: it permits an organization to centralize data,
manage them efficiently, and provide access to the stored data by application programs.
A DBMS has 3 components, all of them important for the long-term success of the system.
• Data Definition Language (DDL). Marketing looks at customer addresses differently from
Shipping. So you must make sure that all users of the database are speaking the same language.
Think of it this way: Marketing is speaking French, Production is speaking German, and Human
Resources is speaking Japanese. They are all saying the same thing, but it's very difficult for them
to understand each other. Defining the data definition language itself sometimes gets
shortchanged. The programmers who are creating the language sometimes say "Hey, an address is
an address, so what." That's when it becomes critical to involve users in the development of the
Data Definition Language.
• Data Manipulation Language (DML). This is a formal language used by programmers to
manipulate the data in the database and make sure they are formulated into useful information.
The goal of this language should be to make it easy for users. The basic idea is to establish a
single data element that can serve multiple users in different departments depending on the
situation. Otherwise, you'll be tying up programmers to get information from the database that
users should be able to get on their own.
• Data Dictionary. Each data element or field should be carefully analyzed to determine what it will
be used for, who will be the primary user, and how it fits into the overall scheme of things. Then
write it all down and make it easily available to all users. This is one of the most important steps
in creating a good database.

18
Why is it so important to document the data dictionary? Let's say Suvidha, who was in on the initial
design and building of the database, moves on and Joe takes her place. It may not be so apparent to him
what all the data elements really mean, and he can easily make mistakes from not knowing or
understanding the correct use of the data. He will apply his own interpretation, which may or may not be
correct. Once again, it ultimately comes down to a persware problem.

Designing Databases
Every tool has its job. You wouldn't use a screwdriver to pound a nail in the wall (or maybe you would),
nor would you use a hammer to turn a bolt. Each type of database that we discuss in this section has its
own advantages and disadvantages, so you should choose the right type of database for the job you want
to do.
1. Hierarchical Databases
The hierarchical data model presents data to users in a treelike structure.
Think of a mother and her children. A child only has one mother and inherits some of her characteristics,
such as eye color or hair color. A mother might have one or more children to which she passes some of
her characteristics but usually not exact ones. The child then goes on to develop its own characteristics
separate from the mother.

A hierarchical database for a human resources system.

In a hierarchical database, characteristics from the parent are passed to the child by a pointer just as a
human mother will have a genetic connection to each human child. You can see how this database pointer
works by looking at the above figure..

2. Network Database

A network data model is a variation of the hierarchical model.

Take the same scenario with one parent and many children and add a father and perhaps a couple of
stepparents. Now the parents aren't restricted to only one (the mother) but to many parents. That is, a
parent can have many children and a child can have many parents. The parents pass on certain
characteristics to the children, but the children also have their own distinct characteristics.

The network data model.

19
As with hierarchical structures, each relationship in a network database must have a pointer from all the
parents to all the children and back, as the above figure demonstrates.
These two types of databases, the hierarchical and the network, work well together since they can easily
pass data back and forth. But because these database structures use pointers, which are actually additional
data elements, the size of the database can grow very quickly and cause maintenance and operation
problems.

3. Relational Data Model

A relational data model uses tables in which data are stored to extract and combine data in different
combinations. The tables are sometimes called files, although that is actually a misnomer, since you can
have multiple tables in one file.
In a relational database, each table contains a primary key, a unique identifier for each record. To make
sure the tables relate to each other, the primary key from one table is stored in a related table as a
secondary key. For instance, in the Customer table the primary key is the unique Customer ID. That
primary key is then stored in the Order Table as the secondary key so that the two tables have a direct
relationship.

Customer Table Order Table

Order Number Primary Key
Customer Name Self Explanatory Order Item Self Explanatory
Customer Address Self Explanatory Number of Items Self Explanatory
Ordered
Customer ID Primary Key----- Customer ID Secondary Key
>
Order Number Secondary Key

Use these three basic operations to develop relational databases:

• Select: create a subset of records meeting the stated criteria
• Join: combine related tables to provide more information than individual tables
 Project: create a new table from subsets of previous tables
The biggest problem with these databases is the misconception that every data element should be stored
in the same table. In fact, each data element should be analyzed in relation to other data elements with the
goal of making the tables as small in size as possible. The ideal relational database will have many small
tables, not one big one. On the surface that may seem like extra work and effort, but by keeping the tables
small, they can serve a wider audience because they are more flexible. This setup is especially helpful in
reducing redundancy and increasing the usefulness of data.

Comparing of
Database
Processing End-user Programming
Alternatives Flexibility
Efficiency friendliness Flexibility
Type of
Decisions
Hierarchical High Low Low High
Network Medium-High Low-Medium Low-Medium High
Low but
Relational High High Low
Improving

20
 Management Requirements

Key organizational elements in the database environment.

Nothing is ever as easy as it sounds. As the above figure shows, there is a lot more to a viable, useful
database than just its structure.

Data Administration

Ask any manager what his resources are and he's likely to list people, equipment, buildings, and money.
Very few managers will include information on the list, yet it can be more valuable than some of the
others. A data administration function, reporting to senior management, can help emphasize the
importance of this resource. This function can help define and structure the information requirements for
the entire organization to ensure it receives the attention it deserves

Data Administration is responsible for:

 Developing information policies

 Planning for data
 Overseeing logical database design
 Data dictionary development
 Monitoring the usage of information by techies and non-techies

No one part of the organization should feel it owns information to the exclusion of other departments
or people in the organization. A certain department may have the primary responsibility for updating
and maintaining the information, but that department still has to share it across the whole company.
Well-written information policies can outline the rules for using this important resource, including
how it will be shared, maintained, distributed, and updated.
Data planning
At the beginning we said that as many users as possible should be brought together to plan the
database. We believed it so much then that we'll say it again here. By excluding groups of users in the
planning stages, no matter how insignificant that group may seem a company courts trouble.

21
Database Technology, Management, and Users
Change isn't just something you experience by chance; in all likelihood, it will be required throughout the
corporate structure. You need to get the non-techies talking and working with the techies. Users will take
on more responsibility for accessing data on their own through query languages if they understand the
structure of the database. Users need to understand the role they play in treating information as an
important corporate resource. Not only will they require a user-friendly structure for the database, but
they will also need lots of training and hand holding up front. It will pay off in the long run.
Database administration functions can:
• Define and organize database structure and content.
• Develop security procedures to safeguard the database.
• Develop database documentation.
• Maintain the database management software.
As with any other resource, managers must administer data, plan their uses, and discover new
opportunities for the data to serve the organization through changing technologies.

Role of Information Technologies on the Emergence of New Organizational Forms or IT and

Organizational Design

An important and fast growing technological innovation during this century is computer-based
information systems. Computer-based information systems (CBIS or only IS) provide an opportunity for
businesses to improve their efficiency and effectiveness, and even to gain a competitive advantage. IT is
also a catalyst of fundamental changes in the structure, operations and management of organizations.
Most businesses in the industrial world could not compete, and many could not even survive without
computers and software. Now IT is an integral part of the products and services delivered to customers.

Competition leads to environmental uncertainty and increases both the need for and the rate of innovation
adoption. By adopting IS, businesses will be able to compete in three ways:
(1) IS can change the industry structure and, in doing so, alter the rules of competition;
(2) IS can also create competitive advantage by offering business new ways to outperform their rivals;
and
(3) IS spawn new businesses, often from within existing operations of the business.

During the last years, a consensus is emerging that to survive in the competitive turbulence that is
engulfing a growing number of industries, firms will need to pinpoint innovative practices rapidly, to
communicate them to their suppliers and to stimulate further innovation. In order to be competitive,
companies are forced to adopt less hierarchical and more flexible structures, and to define strategies able
to combine reduced costs, high quality, flexibility and a quick answer to customer requirements.
Nowadays, there are very few companies with enough resources to form its value chain on their own.

Therefore, some changes are taking place within individual companies and in their relations with other
organizations, creating new structures in which relationships between customers and suppliers are
suffering considerable changes. One of these changes is concerned with the formation of networks in
which there is a division of labour that allows each company to exploit their distinctive advantages, and
be more competitive globally.

In a network model, a set of juridically independent companies establish cooperative long term links in
order to achieve a higher level of competitiveness. The enterprises that belong to a network have not all

22
the elements needed for manufacturing a product or providing a service under their absolute control.
Therefore, the success of this kind of structures is conditioned by the coordination degree obtained along
the realization of inter-organizational activities, which requires an efficient communication system among
the partners. The Information Technology (IT) represents a supportive element that facilitates the transfer
of information across organizational boundaries. In this section we analyze the inclusion of the Inter
organizational Information Systems (IOS) concept within the network model and discuss the role IT plays
in enabling organizational transformation towards emergent forms of organization.

In order to attain relatively low costs in the last two decades the enterprises followed strategies of
backward-forward integration, based on the improvement of the effects of the experience curve and the
scale economies. We consider that this internal growth may be inadequate to face the new situations
appearing in the nineties and, no doubt, those that will appear in the next century. The individual
enterprise has less capability for foreseeing the consequences of the different business decisions;
however, the need for competing in a more and more complex context requires the adoption of quick
decisions, which facilitate the flexibility of the enterprise. New technologies, fast changing markets and
global competitiveness are revolutionizing relationships both within and between organizations. Thus, the
new environment requires from the enterprises a strategy able to agglutinate reduced costs, high quality,
flexibility, and a quick response to the needs of the customer.

Nowadays, the enterprises have to compete in a more and more turbulent scene, which obliges them to
adopt less hierarchical and more flexible structures. During the last years, a major transformation in the
strategy of many enterprises has been observed with a tendency to disintegration. This is accompanied by
a need for increasing the quality of the products or services offered, which requires more interdependency
among the different corporate units. As a consequence of it, several transformations both inside the
enterprises and in the relationships between them are taking place, which establishes new structures
through which the relationships among competitors, customers and suppliers are changing substantially.
One of these changes is the cooperation established among different enterprises, which allows them to
develop their competitive capability. Companies are forming strategic alliances because there is an
increasing acknowledgement that organizations operate in a relational context of environmental
connectedness and that organizational survival and performance depend upon connections with other
organizations.

The co-operation among enterprises allows their flexibility and their innovative capacity to be increased.
Current products are based on so many critical technologies that most of the enterprises cannot keep
constantly updated in all of them.

The Network Structure

The concept of the network’s form of organization has been particularly popular with management
writers for its potential to build the flexible organization with the ability to meet the challenges of a
changing and global environment. Despite both the abundant available literature and the existence of a
certain consensus on some aspects, there is still too much ambiguity in the concepts used in this area.
Taking into account the formation of networks, which is an interesting field of recent development with
strong repercussions on the inter-organizational relationships, it is necessary to clear the existing
terminological confusions in order to formulate its theory and to improve its implementation.

Starting from the definition, a network is a specific kind of relationship joining a particular group of
people, objects, or events. Two factors needed for constituting a network can be obtained from this
definition; first, a network is formed by a group of elements; second, these elements establish specific
23
relationships among them. We must show that the establishment of a co-operative network is not a
purpose itself but «it must be a dynamic structure that allows consolidating the competitive position of its
members».

By means of a network structure, the competitive position of the enterprises can be reinforced as these
concentrate on what they do best, and on what maintains their success in the market. In this way, other
enterprises make the activities left, in which they have distinctive competences too. The enterprises
outsource those activities that are ballast and bureaucratize them.

The enterprises that belong to a network have not all the elements needed for manufacturing a product or
providing a service under their absolute control. Within the networks, the involved elements belong to
independent enterprises and are placed along the value system of a product or service.

All this drives to an organizational structure in which the enterprises generate more value in those areas
where they have specific competencies. The success of these emergent organizational forms seems to be
based, on a great extent, on an effective co-ordination by means of the use of advanced information
systems, which are based on the Information Technologies (IT). There is an increasing interest in the
relationship between the emerging organizational ways and the function of the IT/IS insofar as the
progresses in each field have influenced the others.

Information Technology on the Emergence of Networks

At the moment, the most spectacular and potentially powerful uses of the information systems technology
go beyond the individual borders of the enterprises. In fact, the most important function of IT in the
nineties is the better management of the interdependencies among the enterprises. Information
Technology has to be the most powerful instrument to reduce the co-ordination costs». While the
traditional uses of IT tried to facilitate the internal processes of the enterprises, the Inter organizational
Information Systems (IOS) are addressed towards the efficiency of a group of enterprises.

Most of the studies about IOS have focused on the incidence of IT on the flows of information among the
organizations, its capability of reducing the transaction costs, and its potential to achieve competitive
advantages. Many authors have verified that:
• IT influences the nature, punctuality and detail level of the information shared by enterprises
• IT reduces the transaction costs, while it provides a better management of the risks
• IT reduces the co-ordination costs
In order to benefit from the advantages of IT, the enterprises have to keep in mind that IT cannot be
isolated from its organizational context». We do not agree with the existence of causation between the
implementation of IT and the organizational changes in the enterprise driving to an increase in the
competitiveness of the enterprises. On the contrary the technological and organizational implementations
are both sides of the same issue, since they depend on and determine each other». We think that, although
IT might have the above mentioned positive effects on the organizations, the will and capabilities of the
directors of the company are needed in order to make the most of those advantages.

In order to make the most of the whole potential of the IOS, it will be required that the managing directors
get involved with the project, since they have a wider and more strategic view of the company. In this
way, a system coherent with the objectives of the company would be implemented. This system would
allow taking even more profit from IT, what would have positive repercussions on the enterprise and
would facilitate the achievement of its objectives. The active participation of the Management Board in
the planning of the IOS brings a problem related to the fact that IT is a relatively new resource that did

24
not exist when most of the current managers were trained. Therefore, they usually do not feel comfortable
with these new technologies.
As a proof of this, we will consider an example. McKesson was a dealer company of chemical products.
This company knew that its success was linked to that of its customers, which were small stores, so it
established a close relationship with them. By means of an appropriate use of Information Technologies,
it helped its customers to maximize their profits, since it gave them useful information for competing with
the big pharmaceutical chains, which were getting a greater market share. The McKesson Corporation
directors’ idea was so successful that many other enterprises of the sector tried to imitate it, but they made
a terrible mistake. They thought that the network created by McKesson was just a computerized system
with terminals connected in other enterprises.

The secret of the success of this company were not the computer links; information technology did not
create the network. The network’s success was due to the fact that the directors of McKesson were aware
of both the relationships along the added value chain and the need to strengthen as much as possible every
link within the chain, so cooperative behaviors could be established in order to provide the share of
information and the quick response to the changes of the demand.

Another example, widely mentioned in the literature on Information Systems, is the one of the American
Hospital Supply Company whose success has shown up the need to consider the network established not
only as a mere system of electronic data exchange, but also as a better implementation of the technology
found within a context of changes in the commercial relationships between the enterprise and its main
customers.

They state that the implementation of this kind of technologies per se does not bring any competitive
advantages; on the contrary, they must be accompanied by some particular elements, generally intangible,
which facilitate the operation of the organization by means of a better distribution of the information and
the experience. They also reflect a collaborative attitude among the enterprises.
A positive consequence of the revolution of communication and Information Technologies is that there
are more available options for designing the labour now, because the technology can be used to increase
the capacities of the workforce, and the information can be transferred to those places were the labour is
carried out. Workers do not need to be located according to parameters of time and space to co-ordinate
any more.
We consider that technology, although it is not the ground for the emergence of a new and innovative way
of organizing the enterprises, plays an important role in its operation. Technology allows doing things in a
different way, which provides the directors some organizational possibilities that would be unthinkable
without its implementation. Thus, using a mathematical expression, we can state that Information
Technologies are necessary but they are not enough to achieve greater business competitiveness.

The Role of IOS within the Network Structure

The enterprises involved in an alliance must decide whether to use the manual management of all the
exchanged data, or to complement that management with the interconnection of their respective computer
applications. This interconnection may bring, however, compatibility problems in the integration of the
data from the different enterprises, since those applications would have possibly been designed without
taking into account any requirement of integration among enterprises. The establishment of co-operation
networks implies the need for wider communication in the organizational field, as well as the requirement
of capability to integrate the information systems from different enterprises.

25
The enterprises inside a network cannot operate properly if they have not the possibility to communicate
quickly, accurately, and over long distances. Within a network, it does not make any sense to restrict the
application of modern computer technologies to the individual borders of each enterprise. The
Management Board of the enterprises in the network must, on the contrary, consider the possibilities of
co-ordinating the processing of data outside the limits of their own organizations by means of an IOS.

The application of the IT which provides the electronic integration among the shareholders of an industry
may make easier the outsourcing of activities, as well as be a basic part of the proper operation of the
reticular structures. An IOS may play an important role in the coordination of interdependent activities,
which would be carried out by distant organizational units. Thus, the enterprises can reduce their
dependency on strategies of backward-forward integration in order to ensure the control over the
production process.

The concept of network emphasizes the interdependency among enterprises, which is provoked by the
presence and the sharing of the following key attributes: objectives, experience, labour, taking of
decisions, responsibility, trust, and acknowledgement or reward. The enterprises within a network will
adopt a common objective, namely to provide a quicker and better service to the final customer. With this
aim in view, independent organizations will have to establish close interrelationships, in which
Information Technologies have a vital role to play. In this way, the aim of optimizing the flow of profits
along the supply chain could be achieved too. IOSs are, basically, new means to facilitate the
relationships among organizations; they are, therefore, a strategic instrument. However, an IOS allows
obtaining operative advantages too, such as
• Reducing paper-work and manual operations;
• Reducing the stock levels;
• Accelerating the product and material flow;
• Standardizing of procedures;
• Accelerating the flow of information about changes on the demand;
• Reducing telecommunication costs.
The IT is a basic support that facilitates the co-ordination of different enterprises through EDI systems,
shared databases, e-mail, videoconferences, which will allow them to work together. They will be able to
share information on the markets, on the needs for materials, on stock levels, production schedules, and
delivery programs. A key factor in an efficient exchange of information within a network is the computer
connection of its members. The computer links accelerate the transference of information, since it
provides the automatic transmission of data between physically distant computers. These links can be
used as a strategic instrument to increase the competitiveness of the enterprise, binding it electronically
with its customers and suppliers through inter-organizational systems. The electronic connection
facilitates the approaching of the linked enterprises, which means that the companies may provide the
customers direct access to the internal databases, as well as just-in-time stock control.

IT-enabled Organizational Transformation

There is a growing body of conceptual papers and case studies on IT-enabled organizational
transformation in the information systems literature. Most of the studies suggest that the use of IT without
concomitant organizational changes is unlikely to yield significant gains in terms of organizational
performance.

Four R’s of Business Transformation

Business Transformation can be defined as “The orchestrated redesign of the genetic architecture of the
corporation, achieved simultaneously – although at different speed – along the four dimensions of
26
reframing, restructuring, revitalization and renewal.” By this definition a biological model has been
developed that we call the Four R’s of transformation: Reframing, Restructuring, Revitalization, and
Renewal.
The meaning of Four R’s:

Reframing is the shifting of a company’s conception of what it is and what it can achieve with new
visions and a new resolve.

Restructuring is a girding of corporate loins, getting it to achieve a competitive level of performance by

dealing with the body of corporation and competitiveness. The need to be lean and fit is the primary
consideration.

Revitalization is about igniting growth by linking the corporate body to the environment.

Renewal deals with the people side of transformation, and with the spirit of the company. It is about
investing individuals with new skills and new purposes, thus allowing the company to regenerate itself.

Five Levels of IT-induced Reconfiguration

The schematic representation of these five levels along two basic dimensions – the degree of business
transformation and the range of potential benefits from IT. Organizations thereby proceed to higher levels
of transformation as the demands of competition and value creation for customer increases. The first two
levels are evolutionary, requiring relatively incremental changes in the existing organizational processes.
In contrast, the other three levels are conceptualized as revolutionary, requiring fundamental changes in
the nature of business processes. These five levels are explained as following
• Level 1: Localized Exploitation (Automation), which is concerned with the exploitation of IT within
business functions.
• Level 2: Internal Integration, a logical extension of the first in the sense that IT capabilities are
exploited in all the possible activities within the business process. Two types of integration are
critical here: technical integration and the organizational integration by using common IT platform
to integrate the organization’s business processes to enhance efficiency and effectiveness.
 Level 3: Business Process Redesign, involving the reconfiguration of the business using IT as a
central lever.
• Level 4: Business Network Redesign concerned with the reconfiguration of the scope and tasks of
the business network involved in the creation and delivery of the products and services and
• Level 5: Business Scope Redefinition concerned with the underlying principle of a corporation,
pertaining to the possibilities of enlarging the business mission and scope (through related
products and services) as well as shifting the business (through substitution of traditional
capabilities with IT-enabled skills).

27
 Basic Strategies in the use of Information Technology
Lower Costs
 Use IT to substantial reduce the cost of business process
 Use IT to lower the costs of customers or suppliers
Differentiation
 Develop new IT software to differentiate products and services
 Use IT features to reduce the differentiation advantages of competitors
 Use IT features to focus products and services at selected market niches.

Innovative
 Create new products and services that include IT components
 Develop unique new products or market with the help of IT
 Make radical changes to business process with IT that dramatically cut costs, improve
quality, efficiency, or customer service, or shorten time to market.
Promote Growth
 Use IT to manage regional and global business expansion.
 Use IT to diversity and integrate into other products and services.
Develop Alliances
 Use IT to create virtual organizations of business partners
 Develop inter enterprises information system linked by the Internet extranet that support
strategies business relationship with customers, suppliers, subcontractors and other.

Example how companies have used information technology to implement five competitive
strategies for strategic advantage
Strategic use of Information
Strategy Company Business benefits
Technology
Cost Leadership Dell computer Online build to order Lower cost producer
Differentiation AVNET Customer/Supplier/E-commerce Increase in market share
Amazon.co
Innovation Online full service customer systems Market leadership
m
Merchandising ordering by global
Growth Wal –Mart Market leadership
satellite network
Protector& Automatic Inventory Replenishment Reduce inventory
Alliance
Gamble by supplier cost/increased sales.

Other strategic use of Information Technology

 Develop inter enterprise information systems whose convenience and efficiency create witching
costs that look in customer or suppliers.
 Make major investments in advance IT applications that build barriers to entry against competitors
or outsiders.
 Include IT components in products and services to make substitution of competing products or
services more difficult.
 Leverage investment in IS people, hardware, software, database, and networks from operational
uses into strategic application.

28
29
 Chapter 4
Business Applications of information technology

Cross-Functional Enterprise System: The applications are integrated cross-functional enterprise

systems such as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and
Supply Chain Management (SCM), enterprise collaboration system & executive support system (ESS).

These applications may be interconnected by enterprise application integration (EAI) system so that
business professional can more easily access the information resources they need to support the needs of
customer, supplier, and business partners.

 Enterprise resource planning (ERP) systems integrate all data and processes of an organization into
a unified system with the same database. For instance HR systems are not frequently integrated to this
extent, although they often link payroll administration with other HR functions. Integration of the HR
system with IT systems in the wider organization so that they can ‘talk to one another’ will aid human
capital reporting, comply with supply chain partner requirements, improve profitability, reduce
headcount and deliver against economic criteria. However, many HR functions retain stand-alone
systems, because they believe integration would compromise their own system, potential lack of
confidentiality and the cost and perceived risks involved.
 Enterprise Collaboration System: these are cross functional systems that support and enhance
communication, coordination, and collaboration among the teams and workgroups in an organization.
 Executive Support Systems (ESS): This Computer Based Information System (CBIS) is used by
senior managers for strategic decision making. The decisions at this level are non-routine and require
judgment and evaluation. They draw summarized information from internal MIS and Decision
Support Systems. These systems deal with external influences on an organization as well.
• New Tax laws
• Competitors
• Acquisitions, take-over’s, spin offs etc.

They filter, compress and track critical data so as to reduce time and effort required to obtain information
useful for executives. They are not designed to solve specific problems. They are generalized to be
capable of dealing with changing problems. Since executives have little contact with all levels of the
organization, ESS uses more graphical interface for quick decision making

Functional Business Systems: Functional business information systems support the business functions of
marketing, production, accounting, finance, and human resource management through variety of e-
business operational and management information.

I. Marketing Information Systems (MKIS)

MKIS is a type of Information System that helps the firm to achieve following objectives:
 Identification of customers for firm‘s products and services.
 Development of those products and services to meet customers’ needs
 Promotion of the products and services, and
 Provision of after sale customer support

Types of Marketing Information

Every information system is designed to capture some sort of information. Information requirements need
to be defined before the systems are made. While designing marketing information system, following
types of information should be designed.
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• Marketing Intelligence – information flowing from environment into the environment
• Internal Information – gathered within the firm
• Marketing Communication – Info flowing from firm to external environment
MKIS help in proper management and dissemination of all three kinds of information.

Benefits of Marketing IS
MKIS helps organizations in efficient channel management. Following can be identified as some of the
benefits of MKIS.
1. Customer profiles need to be maintained focusing on their habits and spending patterns. MKIS helps
in maintaining these profiles.
2. Information on what competitors have been up to is also critical marketing information. This should
not be taken as espionage on competitors.
3. A forecast of demand is also a critical part of marketing analysis. MKIS helps in achieving this as
well.
4. Field sales can also be monitored where sales agents are used to market products.
5. Customers can be quickly updated based on their information kept in MKIS.
6. Dealers involved in sale of product can also be monitored to help enhance revenue’s

Management Levels in MKIS

MKIS should cater for information requirements at each level, for instance
Strategic Level
1. Formulation of new sales products, and identifying new sales opportunities.
2. Planning support for new products and services
3. Monitoring competitors
Knowledge Level
 Market analysis based on demographics and customer behavior
Management level
1. Sales performance analysis is required to monitor how to enhance sales and address related issues.
2. Sales staff analysis is important to see how much of the sales portion has been contributed by each of
the employees.
Operational Level
1. Taking comments from customers for measuring satisfaction is a responsibility of the managerial
level.
2. Tracking sales, processing orders and customer support

New Dimensions in MKIS

Through extensive use of computers in marketing field, newer concepts are emerging in marketing field,
which are revolutionizing the way customers were dealt with;
 Customer Relationship management (CRM)
 Sales Force Automation (SFA)
 Call Centers
Marketing information systems support traditional and e-commerce process and
management of the marketing function. Major types of marketing information
systems include interactive marketing at e-commerce websites, sales force
automation, customer relationship management, sales management, product
management, targeted marketing, advertising and promotion, and market research.
Thus, marketing information systems assist marketing managers in electronic
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commerce product development and customer relationship decisions, as well as in
planning advertising and sales promotion strategies and develop products, and new
channels of distribution.
II. Manufacturing Information Systems
It is an information system which deals with the
 Planning, development and maintenance of production facilities
 Establishment of Production goals
 Availability of production materials
 Scheduling
Management Levels in Manufacturing Information System
Strategic level
1. Locating new plant which can save cost
2. Investment in new manufacturing technology
Knowledge Level
1. Distribute knowledge to drive the production process
2. Innovating new forms of manufacturing processes
Management level
1. Monitoring production costs and resources
Operational Level
1. Status of production tasks

The information needs were and are always there. Information systems used to exist when computerized
environments were not available. Automation has enhanced the availability of information. Every
industry has its own departmental structure which gives rise to a different set of sub-systems as part of the
information system. Here we would consider the sub-systems of a manufacturing system only.

a. Raw Material Procurement Sub-System

This is the commencement of the manufacturing process. Some might think of procurement as a simple
purchasing process like any other commodity but the spirit of having an all-embracing raw material
procurement sub-system is simply more than that.
Various factors which can play critical role are
• Who to purchase from – supplier selection
• When to purchase – time of delivery or raw materials
• How much to purchase – Ideal stock levels

 Parameters of Raw-material Procurement

Like with every system, there has to be a list of minimum specifications which every system or sub
system has to cover. Purchasing logistics of an entity critically affect time to market and other quality
related issues. Issues like selection of suppliers, choice between local purchase and import and delivery
time taken by the supplier. All these concerns are met and dealt with in the purchase subsystem.
The complexity of the purchase subsystem should depend on types of raw materials required, number of
suppliers to deal with and complexity of the terms of purchase agreements for long term. With higher
customer expectations, every organization wants to efficiently manage its suppliers and other internal
processes. Supply chain management spans all movement and storage of raw materials, work-in process
inventory, and finished goods from point-of-origin to point-of-consumption. A procurement system
should help in improving the supply chain of the organization.

b. Inventory Sub System

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Inventory subsystem focuses on maintaining records and movements on inventory levels and usage. This
control of inventory is critical to the organization since money lock-in of raw materials purchase
represents substantial investment. Timely production of finished goods require availability of right
quantity of material, maintenance of right stock levels, determination of lead times and flex times and
exchange of information with supplier at the right time. An inventory subsystem helps us to address these
issues. Inventory subsystems are critical where the organization is following Just in Time approach – a
philosophy which encourages zero tolerance for stock levels and placing orders exactly when they are
needed for manufacturing. Proper logistic management is important for the timely and quality production.
An efficient inventory subsystem helps us to deal with these issues in a time saving manner.

c. Production Sub System

It can be seen as the most critical part of the entire manufacturing sub system. Basically it tracks the flow
of the job through the entire production process. It also records change in form of goods or transfer of
goods from one place to the other.

Example
Consider a manufacturing entity working with three processing departments and one assembly
department. As raw materials pass through the processes, the sub system records the relevant information
at specific points or locations until the finished goods are transferred to stock room.

d. Maintenance & Scheduling Sub System

For efficient production, the machines should be timely available. Many a times, the machine is under
repair and is not available to be used for production. Without this subsystem, there is a possibility of
customer’s orders not being met on time. Certain issues that can be very important are
• Deciding delivery time in accordance with availability of machines.
• Any foreseen machine-down-time.
• Any major overhauling / tuning / replacement expected may result in unavailability of machine. An
overhauling schedule should be kept so that the production of finished goods is not halted.
• Avoiding duplication of jobs for the same machine.
e. Quality Sub system
This subsystem ensures the production made and end products being delivered to the customer are
conforming the quality standards set by the company. Quality covers aspects for the organization like
better quality raw materials and what is being purchased is according to organization’s standards and
improved finished goods in accordance with the customer specification.

The question now arises is why do we need a quality sub-system? It is defined and demanded by
customer, it has to be achieved by management, it is a firm wide responsibility and these subsystems
provide the firm’s managers with information that reveals the extent to which the firm’s products are
achieving the quality goals.

Computer-based manufacturing information systems help a company achieves computer integrated manufacturing
(CIM), and thus simplify automate, and integrate many of the activities needed to customer demands. For example,
computer aided design using collaborative manufacturing networks helps engineers collaborate on the design of
new products and processes. Then manufacturing resource planning system help plan the types of resources needed
in the production process. Finally, manufacturing execution systems factory floor through shop floor scheduling
and control machine tool (numerical control), or machines with some human links work capabilities (robotics)

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III. Accounting & Financial Information Systems

Accounting and financial information systems cater for the needs of Accounts & Finance Department.
These are responsible for managing financial assets in order to maximize return, like
 Cash
 Stocks
 Bonds
 Other investments
 Financial liabilities
 Capitalization of the firm through acquisition of new financial assets
It also produces the periodic and annual financial statements.

Importance of Accounting & financial Information Systems

Every transaction that an organization undertakes has a financial impact, to be recorded and reported by
the accounts & finance department. Hence there is a share of interest for every department in reports and
Information produced by this system. Financial Information Systems like other information systems
should cater for information requirements at each level, for instance.
Strategic level
1. Investment goals
2. Long range forecasts for firm’s financial performance
3. Acquisition of financial resources and goals
Knowledge Level
1. Analytical tools to design the right mix for investment
2. Portfolio updates
3. Market information analysis
Management level
1. Control over firm’s financial resources
2. Investment management
3. Budget management
4. Tax management
5. Profitability & Performance Evaluation
Operational Level
1. Cash flow statements through various transactions
2. Inventory and debtor’s management
3. Creditors Management

Accounting information systems record, report and analyze business transactions and events for the
management of the business enterprise. The six essential accounting systems including order
processing, inventory control, accounts receivable, account payable, payroll, and general ledger.
Information systems in finance support managers in decisions regarding the financing of a business
and the allocation of financial resources within a business. Financial information systems include cash
management, online investment management, capital budgeting, and financial forecasting and
planning.

III. Human Resource Information Systems

An HR information system (HRIS) is a computer-based information system for managing the
administration of HR processes and procedures. Tannenbaum (1990) defined an HRIS as any system that
helps an organization to ‘acquire, store, manipulate, analyze, retrieve and distribute information about an

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organization’s human resources’. Kettley and Reilly (2003) defined an HRIS as ‘a fully integrated,
organization-wide network of HR-related data, information, services, tools and transactions’.

It is an information system that combines many human resources functions, including benefits
administration, salary administration, recruiting and training, and performance analysis and review into
one package. It helps in
 Building database of employees
 Keeping track for new positions or vacancies
 Keeping master records for each employees
 Performance evaluations and training assessments

Human resource information system support human resource management in organizations. They
include information systems for staffing the organization, training and development, and
compensation administration. HRM websites on the Internet or corporate intranets have become
important tools for providing HR services to present and prospective employees.
The term ‘e-HR’ refers in more general terms to the use of computer technology within the HR function.

Reasons for introducing an HRIS

One survey established that the top 10 reasons for introducing an HRIS were:

1. To improve quality of information available.

2. To reduce administrative burden on the HR department.
3. To improve speed at which information is available.
4. To improve flexibility of information to support business planning.
5. To improve services to employees.
6. To produce HR metrics.
7. To aid human capital reporting.
8. To improve productivity.
9. To reduce operational costs.
10. To manage people’s working time more effectively

The survey found that the 10 most popular uses to which respondents put their HRIS were:

1. Absence management.
2. Training and development.
3. Rewards.
4. Managing diversity.
5. Recruitment and selection.
6. Other (usually payroll).
7. Appraisal/performance management.
8. HR planning.
9. Knowledge management.
10. Expenses.

Features of an HRIS

The features of particular interest in an HRIS system are the use of software, integration with other IT
systems in the organization, use of the intranet and provisions for self-service.

Use of software
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It is customary to buy software from an external supplier. There is a choice between buying a ‘vanilla
system’ (i.e. an ‘off-the-shelf’ system without any upgrades) or customize the supplier’s system to meet
specified business requirements. Extensive customization can make future upgrades problematic and
expensive, so it is important to limit it to what is absolutely necessary.

If an external supplier is used, the choice should be made as follows:

 Research HR software market through trade exhibitions and publications;

 Review HR processes and existing systems;
 Produce a specification of system requirements;
 Send an invitation to tender to several suppliers;
 Invite suppliers to demonstrate their products;
 Obtain references from existing customers, including site visits;
 Analyze and score the product against the specification.
 Integration

Intranet

An intranet system is one where computer terminals are linked so that they can share information within
an organization or within part of an organization. The scope of the information that can be shared across
terminals can be limited to preserve confidentiality and this security can be enhanced by using passwords.
HR intranet systems can be used for purposes such as updating personal details, applications for internal
jobs online, requests for training, access to e-learning, administration of queries and communication.

Self-service
A human resource self-service system (HRSS) allows managers and employees access to information and
the facility to interact with the system to input information or make choices of their own. This can operate
through an HR portal (a site that functions as a point of access to information on the intranet) that may be
specially designed to produce a brand image of the HR function. This is sometimes referred to as a
business to employees (B2E) portal.

For managers, self-service means that they can access information immediately. This might be HR
metrics (human capital reporting measures) in such areas as absenteeism, personal details, performance
management data, learning and development progress, and pay (as a basis for pay reviews). They can also
input data on their staff. This facilitates the devolution of responsibility to line managers and reduces the
administrative burden on HR.
Employees can also access information, input data about themselves, request training and apply for jobs
online.
Role of IT Department
Information by itself is proving to be the most critical resource for organizations. Such is the criticality
that other resources of the organization cannot be managed without it. This has lead to the evolution of
information systems to efficiently manage the information resource of the organization. This system is
usually employed by the Information Services department which is the major functional area of the
organization.

Evolution of the IT Department

IS department function has been evolving based on the needs of user departments
• Traditional Computing -- Initially User was not directly linked with using the computing facilities and
the IT workforce was involved in assisting user to achieve his computer related goals.

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No information system can exist in an organization without being linked with other functional
information systems. This linkage is important for the overall smooth functionality of the information
system since it allows easy transformation and usage of information.

Conclusion
• Marketing IS
Production subsystem needs to be linked with the marketing system so as to produce right amount of
product.
• Human resource IS
Most of the human resource is involved in the manufacturing process. Since factory premises have to be
working continuously, availability of relevant labor is critical.
• Accounts and Finance IS
Accounts should have a control over various recording points in the entire process from procurement to
finished goods store room. This would help both in recording transactions for financial statements and
approving and arranging for cash payments.
Accounting information system (AIS) is linked to all the information systems in an organization. This is
important because the data required for proper book keeping and generation of transactional reports is
extracted from all over the organization. For instance sales information can be sought only from
marketing information system and stock information is available in manufacturing information system.
Here we would consider an example to see how AIS records internal data describing manufacturing
operations – this requires use of data collection terminals at the manufacturing facility. It also records
external data describing firm’s transactions with its suppliers.

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 Chapter 5
Knowledge management (KM)
Knowledge Management Systems

Introduction

Many companies are build knowledge management systems (KMS) to manage organizational learning
and business know-how. The goal of such system is to help knowledge workers create, organize, and
make available important business knowledge, wherever and whenever it needs an organization.

To many companies today, lasting competitive advantage can only be theirs if they become Knowledge
companies or learning organizations. That means consistently creating new business knowledge,
disseminating it widely throughout the company, and quickly building the new knowledge into their
products and services.

Definition: Before we proceed with defining these systems, first we should have clear concept of
Knowledge Management. The set of processes developed in an organization to create, gather, store,
maintain and apply the firm’s knowledge is called Knowledge Management. Hence the systems that aid
in the creation and integration of new knowledge in the organization are called knowledge systems.

Knowledge Management (KM) comprises a range of strategies and practices used in an organization to
identify, create, represent, distribute, and enable adoption of insights and experiences. Such insights and
experiences comprise knowledge. Either embodied in individuals or embedded in organizational
processes or practice.

Knowledge Management involves the acquisition, storage, retrieval, application, generation, and review
of the knowledge assets of an organization in controlled way.

Knowledge Management efforts typically focus on organizational objectives such as improved

performance, competitive advantage, innovation, the sharing of lesson learned, integration and continuous
improvement of the organization.KM effort overlap with organizational learning, and may be
distinguished from that by a greater focus on the management of knowledge as a strategic asset and a
focus on encouraging the sharing of knowledge.

Dimensions of KM

Different frameworks of distinguishing between knowledge exist. One proposed framework for
categorizing the dimensions of knowledge distinguishes between tacit knowledge and explicit
knowledge. Tacit knowledge represents internalized knowledge that an individual may not be
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consciously aware of, such as how he or she accomplishes particular tasks. At the opposite end of the
spectrum, explicit k knowledge represents knowledge that the individual holds consciously in mental
focus, in a form that can easily be communicated to others.

There are major types of knowledge.

• Explicit knowledge – Structured internal knowledge e.g. product manuals, research reports, etc.
• External knowledge of competitors, products and markets
• Tacit knowledge – informal internal knowledge, which resides in the minds of the employees but has
not been documented in structured form. Knowledge systems promote organizational learning by
identifying, capturing and distributing these forms of knowledge

Knowledge Support Systems (KSS) / Intelligent Systems

These systems are used to automate the decision making process, due to its high-level-problem-solving
support. KSS also has the ability to explain the line of reasoning in reaching a particular solution, which
DSS does not have.

Intelligent Systems- Knowledge systems are also called intelligent systems. The reason is that once
knowledge system is up and running, it can also enable non experts to perform tasks previously done by
experts. This amounts to automation of decision making process i.e. system runs independently of the
person making decisions.

Artificial Intelligence
“Artificial intelligence is the ability of a machine to replicate the human thought processes. The way
humans proceed to analyze a problem and find appropriate solutions, similarly computers are geared up to
follow human logic to solve problems.” These knowledge-based applications of artificial intelligence
have enhanced productivity in business, science, engineering, and the military. With advances in the last
decade, today's expert systems clients can choose from dozens of commercial software packages with
easy-to-use interfaces. The most popular type of intelligent systems is the Expert System

Expert System
An expert system is a computer program that attempts to represent the knowledge of human experts in the
form of Heuristics. It simulates the judgment and behavior of a human or an organization that has expert
knowledge and experience in a particular field. Examples are:
• Medical diagnosis,
• Equipment repair,
• Investment analysis,
• Financial, estate and insurance planning,
• Vehicle routing,
• Contract bidding

Heuristics
Heuristic is the art and science of discovery and invention. The word comes from the same Greek root as
"eureka", which means "I have found it". A heuristic is a way of directing your attention fruitfully. It
relates to using a problem-solving technique, in which the most appropriate solution is found by
alternative methods. This solution is selected at successive stages of a program for use in the next step of
the program.

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Components of an Expert System
There are four main components of Expert systems
• User Interface: to enable the manager to enter instructions and information into an expert system to
receive information from it.
• Knowledge Base: it is the database of the expert system. It contains rules to express the logic of the
problem.
• Inference engine: it is the database management system of the expert system. It performs reasoning by
using the contents of the knowledge base.
• Development engine – it is used to create an expert system.

Neural Network
Hardware or software that attempt to emulate the processing patterns of the biological brain, It is a device,
modeled after the human brain, in which several interconnected elements process information
simultaneously, adapting and learning from past patterns.

Neural Network vs. Expert System

Expert systems seek to model a human expert’s way of solving problems. They are highly specific to
seeking solutions. Neural networks do not model human intelligence. They seek to put intelligence into
the hardware in the form of generalized capability to learn.

Fuzzy Logic
The word Fuzzy literally means vague, blurred, hazy, and not clear. Real life problems may not be solved
by an optimized solution. Hence allowance needs to be made for any imperfections which may be faced
while finding a solution to a problem. Fuzzy logic is a form of algebra employing a range of values from
“true” to “false” that is used in decision-making with imprecise data, as in artificial intelligence systems.
It is a rule based technology that tolerates imprecision by using non specific terms/ imprecise concepts
like "slightly", "quite" and "very" to solve problems. It is based on the Possibility theory, which is a
mathematical theory for dealing with certain types of uncertainty and is an alternative to probability
theory.

The Knowledge Spiral/interaction

As it is described by Nonaka & Takeuchi; early research suggested that a successful KM effort needs to
convert internalized tacit knowledge into explicit knowledge in order to share it, but the same effort must
also permit individual to internalize and make personally meaningful any codified knowledge retrieved
from the KM effort. Subsequent research into KM suggested that a distinction between tacit knowledge
an explicit knowledge represented an oversimplification and that the notion of explicit knowledge is self-
contradictory. Specifically, for knowledge to be made explicit, it must be translated into information.

Later on Ikujiro Nonaka proposed a model SECI or Socialization, Externalization, Combination,

Internalization which considers a spiraling knowledge process interaction between explicit knowledge
and tacit knowledge. In this model knowledge follows a cycle in which implicit knowledge is ‘extracted’
to become explicit knowledge, and explicit knowledge is‘re-internalized’ into implicit knowledge.

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Socialization: Exchange of tacit knowledge among members that create common mental models and
abilities. Socialization transfers tacit knowledge most frequently though the medium of shared
experience. Apprentices learn by observation and imitation of the expert’s behavior, as well as children,
in ancient societies and, less frequently, now days.

Externalization: The process of articulating tacit knowledge and transforming in to models, concepts,
analogies, stories and metaphors that can be communicated by language.

Externalization considered to be a key phase in the creation of new knowledge and is induced by
dialogue, collective reflection, writing. Writing about knowledge is a good example of the effort normally
required by externalization projects, as all humans have a whole life long knowledge experience.

Combination: Is the process of combining or reconfiguring bodies of existing explicit knowledge in

order to generate new explicit knowledge, by addition. It is the most common process in formal
education, in organizations; it is obtained by the exchange of explicit knowledge among members, as in
formal reunions.

Internalization: is the process of adding to explicit knowledge (principles, procedures, methodologies)

tacit new knowledge (in the form of sensations, memories, images) through.

More recently, together with George von Krogh, Nonaka returned to his earlier work in an attempt to
move the debate about knowledge conversion forwards.

A second proposed framework for categorizing the dimensions of knowledge distinguishes between
embedded knowledge of a system outside of a human individual and embodied knowledge representing
learned capability of a human body’s nervous and endocrine systems

A third framework for categorizing the dimensions of knowledge distinguishes between the exploratory
creation of “new knowledge” (i.e., innovation) vs. the transfer or exploration of “established knowledge”
within a group, organization, or community.

Collaborative environments such as communities of practice or the use of social computing tools can be
used for both knowledge creation and transfer.

Strategies to KM

Knowledge may be accessed at different stages: Before or after KM- related to activities.

One strategy to KM involves actively managing knowledge. In such an instance individual strive to
explicitly encode their knowledge into a shared knowledge repository, such as a database, as well as
retrieving knowledge they need that other individual have provide to the repository. This is commonly
known as the Codification approach to KM.
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Another strategy to knowledge management involves individual making knowledge requests of experts
associated with a particular subject on an ad-hoc basis. In such an instance, expert individual can provide
their insights to the particular person or people needing this. This is also commonly known as the
personalization approach to KM.

Other knowledge Management strategies and instruments for companies include:

 Rewards (as a means of motivating for knowledge sharing)

 Story telling (as means of transferring the tacit knowledge)
 Cross project learning
 After action review
 Knowledge mapping
 Communities of practice
 Knowledge fairs
 Comprehensive management
 Proximity & architecture
 Collaborative technologies
 Knowledge repositories.

Technologies to KM

One of the main objectives of information technology in knowledge management programs to accelerate
the speed of knowledge transfer and creation. The knowledge management tools intend to help the
processes of collecting and organizing the knowledge of groups of individual in order to make this
knowledge available in shared bases. Due to the largeness of the concept of knowledge, the software
market for knowledge management seems to be quite confusing. Technology vendors are developing
different implementations of the knowledge management concepts in their software products. Because of
the variety and quantity of knowledge management tool available on the market, a typology may be
valuable aid to organizations that are looking for answers to specific needs.

Knowledge Managers

“Knowledge Managers “is a role and designation that has gained popularity over the past decade. The role
has evolved drastically from that of one involving the creation and maintenance of knowledge
repositories to one that involves influencing the culture of an organization toward improved knowledge
sharing, reuse, learning, collaboration and innovation. Knowledge management function is associated
with different departments in different organizations. It may be combined by the KM motivation of that
particular organization.

Knowledge managers have varied backgrounds ranging from Information Sciences to Business
Management. An effective knowledge manager is likely to be someone who has a versatile skills portfolio
and is comfortable with the concepts of organizational behavior/culture, processes, branding & marketing
and collaborative technology.

Knowledge sharing

 Knowledge sharing is an activity through which knowledge (i.e. information, skills, or expertise) is

exchanged among people, friends, or members of a family, a community (e.g. Wikipedia) or
an organization.

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 Organizations have recognized that knowledge constitutes a valuable intangible asset for creating and
sustaining competitive advantages.  Knowledge sharing activities are generally supported
by knowledge management systems. However, technology constitutes only one of the many factors
that affect the sharing of knowledge in organizations, such as organizational culture, trust,
and incentives. The sharing of knowledge constitutes a major challenge in the field of knowledge
management because some employees tend to resist sharing their knowledge with the rest of the
organization.

 One prominent obstacle is the notion that knowledge is property and ownership thus very
important. In order to counteract this, individuals must be reassured that they will receive some type
of incentive for what they create. However, Dalkir (2005) identified the risk in knowledge sharing is
that individuals are most commonly rewarded for what they know, not what they share. If knowledge
is not shared, negative consequences such as isolation and resistance to ideas occur. Shared
knowledge offers different viewpoints and possible solutions to problems. To promote knowledge
sharing and remove knowledge sharing obstacles, the organizational culture should encourage
discovery and innovation. This will result in the creation of organizational culture.

The 3Cs of Knowledge Sharing: Culture, Cooperation and Commitment

One of the challenges of knowledge management is that of getting people to share their knowledge. Why
should people give up their hard-won knowledge, when it is one of their key sources of personal
advantage? In some organizations, sharing is natural. In others the old dictum "knowledge is power"
reigns. In this article we explore some of the barriers and offer some pointers to overcoming them.

Why Don't People Share?

 "Knowledge is power" - but how true is this really? My own view is that citing this reason is often a
cop out by managers or change agents who are not adequately addressing the human factors or
motivational aspects. In today's enterprise, where so much depends on teamwork and collective
knowledge, it is only a handful of people who have knowledge for which they can hold their peers
(and bosses) to ransom. It might be the owner-manager of a small company not wanting to lose trade
secrets; it may be a particular specialist who has been in the organization many years and built up his
or her own unique way of achieving success without perhaps even understanding the deep tacit
knowledge of how they do it. Don't get me wrong - knowledge IS power, but is typically not the
primary reason for lack of knowledge sharing.

 "Not invented here" syndrome - this is more common. People have pride in not having to seek advice
from others and in wanting to discover new ways for themselves.

 Not realizing how useful particular knowledge is to others - an individual may have knowledge used
in one situation but be unaware that other people at other times and places might face similar
situations. Additionally, knowledge derived for one need may be helpful in totally different contexts;
or it may be a trigger for innovation - many innovative developments come from making knowledge
connections across different disciplines and organizational boundaries.

 Lack of trust - if I share some of my knowledge, will you use it out of context, MIS-apply it (and then
blame me!), or pass it off as your own without giving any acknowledgement or recognition to me as
the source? 

 Lack of time - this, I suspect, is the major reason given in many organizations. There is pressure on
productivity, on deadlines, and it's a general rule that the more knowledgeable you are, the more there

43
 are people waiting to collar you for the next task. How can you possibly find time to add your lessons
learnt to the knowledge database or have a knowledge sharing session with your colleagues?

Other barriers cited by experts include functional silos, individualism, poor means of knowledge capture,
inadequate technology, internal competition and top-down decision making. Generally, a mix of structural
and infrastructure barriers is exacerbated by the predominance of human ones - social, behavioral and
psychological.

How can we overcome such barriers? Certainly address the issues of organizational structure and
inadequate technology. But give your focus to the three Cs of Culture, Co-opetition (a blend of co-
operation and competition), and Commitment.

Changing Culture

Culture change is never easy and takes time. But cultures can be changed. Culture is defined in many
ways, such as "commonly held beliefs, attitudes and values" (Institute of Personnel Development), "the
collective programming of the mind that distinguished one group from another" (Geert Hofstede), and in
many other ways that also embrace rituals, artifacts and other trappings of the work environment. I like
the simple but effective definition "the way we do things around here". There is no one place to start, but
most interventions are based on a simple layered model that portrays how people's observable actions and
behaviours are influenced by reportable attitudes and values based on more deep-rooted beliefs. Therefore
to change people's actions you have to address the more fundamental underlying layers. This can be done
as an organization-wide programme or in small groups or even individually. Here are some activities that
might be used to plan and induce change:

 A culture audit - conducting questionnaires, interviews and team sessions with a cross-section of the
organization. This is especially helpful in finding out the difference between what is articulated as
the desired culture and what is done (e.g. "we put quality first" but at the same time the organization
ships out less than perfect products at the end of a financial quarter to "make the numbers"). It is also
common to find several sub-cultures that conflict with overarching goals. Can you clearly identify
which values and behaviors conflict with better knowledge sharing and perhaps (more importantly)
which people should be the target for change?

 Challenge 'improper' behavior - if you identify people hoarding knowledge unnecessarily: challenge
them; though avoid "knowledge rage".

 Involvement - some of the best knowledge sharing cultures are where everybody (even novices and
newcomers) believes that their knowledge is respected, valued and used to inform decisions.

 Use of role models - identify those people whose behaviors are an example to others. Celebrate and
publicize them. Involve them with other groups.

 Team-building / organization development sessions - at regular team meetings, allocate time to

understand and improve internal processes; too many meetings are task and output focused, but fail
to address the means of achieving successful outcomes.

 Align rewards and recognition to support appropriate behaviors - too many schemes are based on
seniority or individual expertise, rather than team effectiveness.

 Change people - mover the knowledge sharers around; get industrial psychologists and behavioral
experts on board; perhaps fire some bosses (seriously!) - After all, it is quality of leadership that will
enable all the other culture change techniques to achieve their aims.
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Finally, remember that culture goes hand in hand with structure (roles and responsibilities). At every level
within the organization, there must be congruence between objectives, structures, processes, people and
supporting infrastructure. A good example of changing culture alongside an evolving knowledge
management programme is that of Siemens (see reference 3 and Knowledge Digest).

Challenging Through Co-opetition

Human beings are at the same time social cooperative beings and have a competitive streak. We all like to
do better than our peers and excel in something. Yet, in today's complex world, we need help from them
to achieve our aims. In an organization, lack of competition - both for individuals and teams - leads to
complacency. But competition must be done in a healthy manner. Some things to consider:

 In early stages of product development, don't simply approve one line of approach. Have several
"competing" projects under way but make sure there are mechanisms to exchange knowledge and
challenge / encourage each "runner" e.g. through people sharing, peer reviews etc.

 Continually benchmark internal processes and functions with other organizations and potential
suppliers. Encourage them to strive for improvement through learning from each other.

 Introduce 'competitions', such as the "knowledge champion of the year", the "innovators team
award", but invite everybody to the award ceremonies.

 Compete, not against other people or teams, but set goals vs. challenging targets or external
competitors.

Above all, let the apparent losers of such competitions share in success, celebrate what they have
achieved, and make them feel part of the winning team (the wider organization). In one organization I
know, whenever a competing development project was wound up, the best people were almost
universally attracted to the winning teams (since the healthy competition meant that each had good
knowledge of the other).

Commitment

This builds on the other two Cs. Organizations need to create a commitment to culture, to change, to
challenge, to compete and cooperate. If, as is often the case, time pressure leads to poor knowledge
sharing, then there must be a commitment to allow time for it to happen. Budget 5 percent of a project's
resources to distilling lessons and sharing. Include time to contribute to knowledge development and
sharing in people's job goals (and in the accompanying reward system). Build commitment into team
processes.

Commitment to knowledge sharing must be demonstrated throughout the organization. It is apparent

through what the leaders of the organization say and do. It is shown by commitment in the organizations'
processes, reward systems, development programmes etc. It is, above all, shown by individual throughout
the organization being committed to share their knowledge with others even if it is not formally part of
their 'day job'.

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 Chapter 6
Security management
Security, Ethical, and Societal Challenges of IT

The use of information technologies in business has had major impacts on society, and thus raises ethical
issues in the areas of crime, privacy, individuality, employment, health, and working conditions.

Ethical Responsibilities of Business professionals

As a business professional, you have a responsibility to promote ethical uses of information technology in
the workplace. That includes properly performing your role as a vital human resource in the business
systems you help develop and use in your organization. As a manager or business professional, it will be
your responsibility to make decisions about business activities and the use of information technologies

Business Ethics

Business ethics is concerned with the numerous ethical questions that managers must conform as part of
their daily business decision making. However, the social contract theory states that companies have
ethical responsibilities to all members of society, which allows corporations to exist based on social
contract

Basic categories of basic ethical issues

Information technology has caused ethical controversy in the areas of intellectual property rights,
customer and employee privacy, security of company information, and workplace safety.

Exercise of Corporate
Equity Rights Honesty
Power
Executive salaries Corporate due process Employee conflicts of Product Safety
comparable worth employee Health interest Environmental Issues
product pricing Screening Security of Company Disinvestment Corporate
Intellectual Customer Privacy Information contributions social issues
Property Rights Employee Privacy Inappropriate Gifts raised by Religious
Non-competitive Sexual Harassment Advertising Content Organizations Plant/Faculty
Agreements Affirmative Action Government contract Closures and Downsizing
Equal Employment Issues Political Action Committees
Opportunity Financial and Cash Workplace Safety
Shareholder Interests Management Procedures
Employment at will Questionable Business
whistle-Blowing Practices in Foreign
Countries

Technology Ethics

Another important ethical dimension deals specifically with the ethics of the use of any form of
technology. For example below figure outlines four principles of technology ethics. These principles can
serve as basic ethical requirements that companies should meet to help ensure the ethical implementation
of information technologies and information systems in business.

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One common example of technology ethics involves some of the health risks of using computer
workstation for extended periods in high-volume data entry job positions.

Principles of Technology Ethics

Proportionality: The good achieved by the technology must outweigh the harm or risk. Moreover, there
must be no alternative that achieves the same or comparable benefits with less harm or risk.
Informed Consent: Those affected by the technology should understand and accept the risk.
Justice: The benefits and burdens of the technology should be distributed fairly. Those who benefit
should bear their fair share of the risks, and those who do not benefit should not suffer a significant
increase in risk.
Minimized Risk: Even if judged acceptable by the other three guidelines, the technology must be
implemented so as to avoid all unnecessary risk.

Ethical Guidelines

Business and IS professionals would live up to their ethical responsibilities by voluntarily following such
guidelines. For Example, you can be a responsible professional by

1) Acting with integrity,

2) Increasing your professional competence,
3) Setting high standards of personal performance,
4) Accepting responsibility for your work, and
5) Advancing the health, privacy, and general welfare of the public. Then you would be demonstrating
ethical conduct, avoiding computer crime, and increasing the security of any information system you
develop or use.

Computer Crime

Computer Crime is defined by the Association of Information Technology Professionals (AITP) as

including 1) the unauthorized use, access, modification, and destruction of hardware, software, data , or
network resources; 2) the unauthorized release of information; 3) the unauthorized copying of software;
4) denying an end user access to his or her own hardware, software, data, or network resources; and 5)
Using or conspiring to use computer or network resources to illegally obtain information or tangible
property.

 Hacking
 Cyber Theft
 Unauthorized use at work
 Software Piracy
 Piracy of Intellectual Property
 Computer viruses and worms

Privacy Issues

Information technology makes it technical and economically feasible to collect, store, integrate,
interchange, and retrieve data and information quickly and easily. This characteristic has an important
beneficial effect on the efficiency and effectiveness of computer –based information systems. However
the power of information technology to store and retrieve information can have a negative effect on the
right to privacy of every individual.

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  Accessing individual private e-mail conversations and computer records, and collecting and
sharing information about individual gained from their visits to internet websites and newsgroups
(violation of privacy).
 Always knowing where a person is , especially as mobile and paging services become more
closely associated with people rather that places(Computer monitoring)
 Using customer information gained from, many sources to market additional business services
(Computer Matching)
 Collecting telephone numbers, e-mail addresses, credit card numbers, and other personal
information to build information to build individual customer profiles (Unauthorized personal
files)
Privacy on the Internet
Computer Matching
Privacy Laws
Computer Libel and Censorship
 Other Challenges
Employment Challenges
Computer Monitoring
Challenges in Working Conditions
Challenges to Individuality

Health Issues

The use of information technology in the workplace raises a variety of health issues. Heavy use of
computers is reportedly causing health problem like job stress, damaged arm and neck muscles, eye
strain, radiation exposure, and even death by cause of computer –related job stress. Workers, union, and
government official criticize computer monitoring as putting so much stress o employees that It leads to
health problems.

Ergonomics

Solutions to some of these health problems are based on the science of ergonomics, sometimes called
human factors engineering. The goal of ergonomics is to design healthy work environments that are safe,
comfortable, and pleasant for people to work in, thus increasing employee morale and productivity.

Societal Solutions

As we discussed in the beginning, the internet and other information technologies can have many
beneficial effects on society. We can use information technologies to solve human and social problems
through societal solutions such as medical diagnosis, computer-assisted instruction, and government
program planning, environmental quality control, and law enforcement. For example computer can help
diagnose an illness, prescribe necessary treatment, and monitor the progress of hospital patients.

Information technologies can be used for crime control through various law enforcement applications. For
example, computerized alarm systems allow police to identify and respond quickly to evidences of
criminal activity. It should be obvious to you that many of the detrimental effect of information
technology are caused by individuals or organizations that are not accepting the ethical responsibility for
their actions. Like other powerful technologies information technology possesses the potential for great
harm or great good for all humankind.

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Tools of Security Management

The goal of security management is the accuracy, integrity, and safety of an information system process
and resources. Thus, the effecting security management can minimize error, frauds, and losses in the
information systems that interconnect today’s companies and their customers, suppliers, and their stoke
holders.

Internet worked security defenses

Vital network links and business flows need to be protected from external attack by cyber criminals or
subversion by criminal or irresponsible acts of insiders.

Some important security defenses

 Encryption
 Firewalls
 Denial of services defences
 E-Mail monitoring
 Virus defences
Encryption: Important way to protect data and other computer networks resources especially on, internet,
intranet, and extranet. Password, file, messages, and other data can be transmitted in scrambled form and
unscrambled by computer systems for authorized users only. Encryption involves using especial
mathematical algorithms or key to transform digital data into scramble form be for they are transmitted
and to decode the data they are received. The most widely use of encryption method uses a pair of public
and private key unique to achieve individuals.

Encryption programs are sold as separate products or built into other software =used for the encryption
process. There are several competing software encryption standards, but the top two are RSA and PGP a
popular encryption program available on the internet.

Firewalls: A network firewall can be a communications processor, typically a router, or dedicated server,
along with firewall software. It serves as goalkeeper system that protect a company intranets and other
computer networks form intrusion by providing a filter and sage transfer point for access to form the
internet and other networks

It screens all networks traffic for proper passwords or other security codes and only allows authorized
transmissions in and out of the network. It also important for individual internet connection through cable
modems, because of their vulnerable “always on” connection status

Denial of Service Defenses: Internet is extremely vulnerable to a variety of assaults via the Internet
depend on three layers of networked computer systems 1) the victims website 2) the victims internet
service provider and 3) the sites of “zombie or slave computers that were commandeered by the cyber
criminal. For example in early 2000 hackers broke into hundreds of servers mostly poorly protected
servers at universities and planted Trojan Jorse.exe programs, which were then used to launch a barrage
of service requests In a concerted attack are e-commerce websites like yahoo and eBay.

E-Mail Monitoring: Internet and other online e-mail systems are one of the favorite avenues of attack by
hackers for spreading computer viruses or breaking into networked computer. E-mail is also the
battleground for attempts by companies to enforce policies against illegal, personal, or damaging
messages by employees and the demand of some employees and other who see such policies as violations
of privacy rights.

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Virus Defenses: Thus many companies are building defenses against the spread of viruses by centralizing
the distribution and updating antivirus software as a responsibility of there is departments. The antivirus
companies are also marketing security suits of software that integrate virus protection with firewalls, web
security and content blocking features.

Other Security Measures

Other security measure which used to protect business system & networks from unauthorized uses, These
include both Hardware and software tools like Fault internet computers, Security Monitors, Security
Policies &Procedures, Passwords and backup files.

Security Codes: Passwords are unique identification code or users ID that end user’s logs on to the
computer system to protect stored data resources. End user is then asked to enter a password in order to
gain access to the system

Backup Files: Involves storing copies of file from previous period, I current files are destroyed new
current file can be constructed by using previous period files; Master file may be kept for backup purpose.

Security Monitors: are specialized system software packages that provide security of a network which
protect computer system & network from unauthorized use, fraud, and destruction. Provide security
measure needed to allow only authorized user to access the network.

Biometric Security: Is a fast growing area if computer security these measure physical traits that make
each individual unique. This includes Voice verification, retina scanning, finger prints; hand geometry.
Biometric control devices use special purpose sensors.

Computer Failure control: Computer systems fail for several reasons

 Power failure
 Computer viruses
 Telecom Network Problems
 Hidden programming error
 Operator errors
Fault Tolerant Systems: These have processor, peripherals and software that provide a fail over
capability to back up components also it provide fail-safe & fail-soft capability when a system operate at
a reduce but acceptable level in the event of the major system failure.

Disaster Recovery: Disaster both natural and human made like Hurricanes, Fires, Criminal & terrorist
Earthquakes, flood human error can affect company’s special e-commerce retailer and whole sales,
airline, banks internet service providers. It involves Arrangement with other company and offsite storage
of an original database for use of alternative facilities as a disaster recovery.

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