Information Systems in Organizations: Ralph M. Stair - George W. Reynolds

Ralph M. Stair | George W.
Reynolds
Chapter 2
Information Systems in
Organizations
© 2016 Cengage Learning®. All Rights Reserved. May not be scanned, copied
or duplicated, or posted to a publicly accessible website, in whole or in part.
Principles and Learning Objectives:
Support Business Goals
• Information systems must be implemented

in such a manner that they are accepted
and work well within the context of an
organization and support its fundamental
business goals and strategies
– Define the term “value chain” and describe
the role that information systems play in an
organization’s supply chain
2
Working Within the Organization’s Context
• Information systems must be implemented

in such a manner that they are accepted
and work well within the context of an
organization and support its fundamental
business goals and strategies
– Identify and briefly describe four change
models that can be used to increase the
likelihood of successfully introducing a new
information system into an organization
3
Competitive Advantage
• Because information systems are so

important, businesses need to be sure that
improvements or completely new systems
help lower costs, increase profits, improve
service, or achieve a competitive
advantage
– Define the term “competitive advantage” and
identify the factors that lead firms to seek
competitive advantage
4
Planning for Competitive Advantage

advantage
– Discuss strategic planning for competitive
advantage
5
Assessing an IS Project

advantage
– Describe three methods for assessing the
financial attractiveness of an information
system project
6
Worker Functions
• The information system worker functions

at the intersection of business and
technology and designs, builds, and
implements solutions that allow
organizations to effectively leverage
information systems
– Define the types of roles, functions, and
careers available in the field of information
systems
7
Why Learn About Information Systems in
Organizations?
• Organizations of all types use information

systems to cut costs and increase profits
• Nearly all careers involve working with
computers and information systems
• Information systems help organizations
produce higher-quality products and
increase their return on investment
8
Organizations and Information Systems
• Organization: a group of people that is

structured and managed to meet its
mission or set of group goals
– There are relationships between members of
the organization and their various activities
– Processes are defined that assign roles,
responsibilities, and authority to complete the
various activities
• Organizations are open systems
9
General Model of an Organization
10
Organizations and Information Systems:
Value Chain
• Value chain: a series (chain) of activities

that an organization performs to transform
inputs into outputs
– The value of the input is increased
• Supply chain: key value chain in a
manufacturing organization
11
Supply Chain
12
Supply Chain Management (SCM)
• The management of all the activities

required to get the right product into the
right consumer’s hands in the right
quantity at the right time and at the right
cost
– Encompasses acquisition of raw materials
through customer delivery
13
Supply Chain Management (SCM)
(cont’d.)
• Supply chain organizations are “linked”

together through both physical flows and
information flows
– Physical: supplies and raw materials
– Information: participants communicating their
plans, coordinating their work, and managing
the efficient flow of goods and material
14
The Information System as Part of the
Supply Chain
• The information system can play an

integral role in the supply chain process:
– Providing input
– Aiding product transformation
– Producing output
• Organizations with integral IS
– Zara
– Coles
15
Organizational Structures
• Organizational structure
– Organizational subunits and the way they
relate to the overall organization
– Dependent upon an organization’s goals and
its approach to management
• Common types of organizational
structures
– Traditional – Project
– Team – Virtual
16
Traditional Hierarchical Organizational
Structure
• Also referred to as a functional structure

– The hierarchy of decision making and
authority flows from the strategic
management at the top down to operational
management and nonmanagement
employees
• Autocratic decision making is a weakness
17
Levels of Management
18
Traditional Organizational Structure
19
Flat Organizational Structure
• An organizational structure with a reduced

number of management layers
• Empowers employees at lower levels
– Gives employees and their managers more
responsibility and authority to make decisions
20
Traditional Versus Flat Organizational
Structure
21
Matrix Organization Structure
• An organization structure in which an

individual has two reporting superiors
(managers)—one functional and one
operational
– The functional manager oversees how the
work is done
– The operational manager decides what is to
be done
22
Matrix Organization Chart
23
Project Organizational Structure
• A structure focused on major products or

services
– Program managers are responsible for
directing one or more projects
– Effective for project-driven organizations such
as construction companies and companies
that work on government contracts
24
Project Organizational Structure (cont’d.)
25
Virtual Teams and Collaborative Work
• Virtual team: individual members are

distributed geographically; work as a
coherent unit through the use of information
systems technology
– Strength: the best available people are enlisted
to solve important organizational problems
– Supported by electronic communications: email,
instant messages, video conferences, etc.
26
Innovation
• A catalyst for the growth and success of

an organization
• Can lead to cutting-edge products
– New revenue streams
– Increased profits
• Types of innovation
– Sustaining innovation
– Disruptive innovation
27
Reengineering and Continuous
Improvement
• Reengineering (process design)

– The radical redesign of business processes,
organizational structures, information
systems, and values of the organization to
achieve a breakthrough in business results
• Continuous improvement
– Constantly seeking ways to improve business
processes and add value to products and
services
28
Reengineering
29
Table 2.3 Comparing Business Process
Reengineering to Continuous Improvement
Business Process Reengineering Continuous Improvement
Strong action taken to solve serious Routine action taken to make minor
problem improvements
Top-down change driven by senior Bottom-up change driven by workers

executives
Broad in scope; cuts across Narrow in scope; focuses on tasks in a

departments given area
Goal is to achieve a major Goal is continuous, gradual

breakthrough improvements
Often led by outsiders Usually led by workers close to the

business
Information systems are integral to the Information systems provide data to

solution guide the improvement team
30
Organizational Culture and Change
• Culture: a set of major understandings and

assumptions shared by a group
• Organizational culture: the major
understandings and assumptions for a
business, corporation, or other
organization
• Organizational change: how organizations
plan for, implement, and handle change
31
Organizational Culture and Change
(cont’d.)
• Change model: a representation of change

theories that identifies the phases of
change and the best way to implement
them
• A three-stage approach for change
1. Unfreezing: preparing for change
2. Moving: making the change
3. Refreezing: institutionalizing
32
Lewin’s Change Model
33
Organizational Culture and Change:
Leavitt’s Diamond
• A theory that proposes that every

organizational system is made up of four
main components—people, tasks,
structure, and technology—with an
interaction among the four components
– Any change in one of these elements will
necessitate a change in the other three
elements
34
Leavitt’s Diamond
35
Organizational Culture and Change:
Organizational Learning
• The adaptations and adjustments based

on experience and ideas over time
• Adjustments can require reengineering or
can result from continuous improvement
36
User Satisfaction and Technology
Acceptance
• Technology acceptance model (TAM)

– Specifies the factors that can lead to better
attitudes about the information system
37
Diffusion of Innovation Theory
• A theory developed by E.M. Rogers

• Explains how a new idea or product gains
acceptance and diffuses (or spreads)
through a specific population or subset of
an organization
38
Innovation Diffusion
39
Table 2.4 Five Categories of Innovation
Adopters
Adopter Characteristics Strategy to Use
Category
Innovator Risk takers, always the first to try Simply provide them with access
new products and ideas to the new system and get out of
their way
Early adopter Opinion leaders whom others Provide them assistance getting
listen to and follow, aware of the started
need for change
Early majority Listen to and follow the opinion Provide them with evidence of
leaders the system’s effectiveness and
success stories
Late majority Skeptical of change and new ideas Provide them data on how many
others have tried this and have
used it successfully
Laggards Very conservative and highly Have their peers demonstrate how
skeptical of change this change has helped them and
bring pressure to bear from other
adopters
40
Quality
• The ability of a product or service to meet

or exceed customer expectations
• Techniques used to ensure quality:
– Lean enterprise management
– Total quality management (TQM)
– Six Sigma
41
Quality: Lean Enterprise Management and
TQM
• Lean enterprise management

– A philosophy that considers the use of
resources for any purpose other than to
create value for the customer to be wasteful
and therefore a target for elimination
• TQM
– A management approach to long-term
organizational success through satisfying
customer needs
42
Quality: Six Sigma
• A measurement-based strategy to improve

processes and reduce variation through
completion of Six Sigma projects
– Incremental improvement through a process
of define, measure, analyze, improve, and
control (DMAIC)
– New product development through a process
of define, measure, analyze, design, and
verify (DMADV)
43
Outsourcing and Offshoring
• Outsourcing
– A long-term business arrangement in which a
company contracts for services with an
outside organization that has expertise in
providing a specific function
• Offshoring (offshore outsourcing)
– The service is located in a country different
than the firm obtaining the services
44
Downsizing
• Reducing the number of employees to cut

costs
• Also referred to as “rightsizing”
• Product quality and employee morale can
suffer
45
• Significant and ideally long-term benefit to

a company over its competition
• Firms that gain a competitive advantage
often emphasize the alignment of
organizational goals and IS goals
46
Table 2.5 How Some Companies Used
Technologies to Move from Good to Great
Company Business Competitive Use of Information

Systems
Gillette Shaving products Developed advanced computerized
manufacturing systems to produce
high-quality products at low cost
Walgreens Drug and convenience Developed satellite communication

stores systems to link local stores to
centralized computer systems
Wells Fargo Financial services Developed 24-hour banking, ATMs,

investments, and increased customer
service using information systems
47
Factors That Lead Firms to Seek
• The five forces model identifies five key

factors:
1. Rivalry among existing competitors
2. Threat of new entrants
3. Threat of substitute products and services
4. The bargaining power of buyers
5. The bargaining power of suppliers
48
Rivalry and New Entrants
• Rivalry among existing competitors

– Industries characterized by high fixed costs of
entering or leaving the industry, low degrees
of product differentiation, and many
competitors
• Threat of new entrants occurs when:
– Entry and exit costs to an industry are low
– Technology needed to start and maintain a
business is commonly available
49
Substitute Products and Services
• The more consumers can obtain similar

products and services that satisfy their
needs, the more likely firms are to try to
establish competitive advantage
50
Bargaining Powers of Customers and
Suppliers
• When customers have a lot of bargaining

power, companies increase their
competitive advantage to retain their
customers
• When the bargaining power of suppliers is
strong, companies need to improve their
competitive advantage to maintain their
bargaining position
51
Strategic Planning for Competitive
Advantage
• Strategies to attain competitive advantage

– Cost leadership
– Differentiation
– Niche strategy
– Altering the industry structure, e.g., forming a
strategic alliance (strategic partnership)
– Creating new products and services
– Improving existing product lines and service
52
Strategic Planning for Competitive
Advantage (cont’d.)
• Other strategies
– Growth in sales
– First to market
– Customizing products and services
– Hiring the best people
– Having agile information systems
– Combine two or more strategies
53
Financial Evaluation of Information
System Projects
• Cash flow: takes into account all the

increases and decreases in cash flow
associated with the project
• Time value of money: takes into account
the fact that a dollar today is worth more
than a dollar paid in the future
54
Table 2.6 Examples of Increases and
Decreases in Cash Flow
Type Examples (not exhaustive)
Increases in Any new revenue, such as additional sales generated and capture of
cash flow income earned but not collected under the old methods
Any cost savings associated with the project, such as savings from
reduction in staff, equipment rental fees, and outsourcing fees
Tax reduction generated from depreciation associated with any capital

expenditures
Decreases in Any capital investment required to buy equipment, software, or office
cash flow space
All ongoing operating costs such as equipment rental, software, office
space, additional staff required to operate or support the system, and
training of personnel
All ongoing maintenance costs for equipment and software
55
Financial Evaluation: Payback Period
• Payback period: takes into account all the

increases and decreases in cash flow
associated with the project
• Problems with this evaluation
– Time value of money is not considered
– Cash flows beyond the payback period are
not included
56
Financial Evaluation: Internal Rate of
Return
• Internal rate of return: the rate of return

that makes the net present value of all
cash flows (benefits and costs) generated
by a project equal to zero
• Shortcoming of this evaluation
– Difficulty in forecasting cash flow accurately
over a number of years
57
Financial Evaluation: Net Present Value
Method
• A method of evaluating a project is the

sum of the present value of the net cash
flow for each time period
• Limitation in this evaluation technique
– Difficulty in forecasting cash flow accurately
over a number of years
58
Careers in Information Systems
• Successful IS workers must:

– Enjoy working in a fast-paced, dynamic
environment
– Meet deadlines and solving unexpected
challenges
– Possess good communication skills
– Have solid analytical and decision-making
skills
59
Successful IS Workers’ Traits (cont’d.)
• Successful IS workers must:

– Develop effective team and leadership skills
– Be adept at implementing organization
change
– Be prepared to engage in life-long learning
60
Important Skills for IS Workers
• Mobile applications for smartphones,

tablet computers, and other mobile
devices
• Program and application development
• Help desk and technical support
• Project management
• Networking
61
Important Skills for IS Workers (cont’d.)
• Business intelligence
• Security
• Web 2.0 and Data center
• Telecommunications
62
Occupational Outlook for Selected
Information Systems Positions
63
Undergraduate Degrees in
IS Fields
64
Table 2.8 Best Places to Work as an IS
Professional
Rank According to Computerworld According to Business Insider
1 Quicken Loans Facebook
2 USAA Guidewire
3 Career Builder Riverbed Technology
4 Commonwealth Financial Riot Games
Network
5 World Wide Technology Google
6 Sharp Healthcare SAS Institute
7 Transocean Workday
8 Qualcomm Responsys
9 Genentech Exact Target
10 Pricewatercoopers Orbitz
65
Careers in IS: Visa Programs
• U.S. H-1B and L-1 visa programs seek to

allow skilled employees from foreign lands
into the United States
– Programs are limited and are high demand
– L-1 visa program is often used for
intracompany transfers for multinational
companies
– H-1B program can be used for new
employees
66
Roles, Functions, and Careers in IS
• In addition to technical skills, IS

professionals need:
– Skills in written and verbal communication
– An understanding of organizations and the
way they operate
– The ability to work with people and in groups
67
Three Primary Functions of the
Information Systems Organization
68
Typical IS Titles and Functions
• Chief information officer (CIO) employs the

IS department’s equipment and personnel
to help the organization attain its goals
• Senior IS Managers
– Vice president of information systems
– Manager of information systems
– Chief technology officer (CTO)
69
Typical IS Titles and Functions:
Operations Roles
• Data center managers are responsible for

the maintenance and operation of the
organization’s computing facilities
• System operators run and maintain IS
equipment
70
Operations Roles (cont’d.)
• IS security analysts are responsible for

maintaining the security and integrity of
their organizations’ systems and data
• Local area network (LAN) administrators
set up and manage the network hardware,
software, and security processes
71
Typical IS Titles and Functions:
Development Roles
• Software developers write the software

that customers and employees use
• Systems analysts frequently consult with
management and users, as well as convey
system requirements to software
developers and network architects
72
Development Roles (cont’d.)
• Programmers convert a program design

developed by a systems analyst or
software developer into one of many
computer languages
• Web developers design and maintain Web
sites, including site layout and function, to
meet the client’s requirements
73
Typical IS Titles and Functions: Support
• Database administrators (DBAs) design

and set up databases to meet an
organization’s needs
• Help desk support specialist respond to
telephone calls, email, and other inquiries
from computer users
74
Certification
• A process for testing skills and knowledge

– Results in a statement by the certifying
authority that confirms an individual is capable
of performing particular tasks
• Frequently involves specific, vendor-
provided or vendor-endorsed coursework
75
Other IS Careers
• Consulting opportunities
• Computer training
• Computer and computer-equipment sales
• Computer repair and maintenance
• Support services
• Employment with technology companies
• Entrepreneurial ventures
76
Working in Teams
• Most IS careers involve working in project

teams that can consist of many of the
positions and roles
• It is always good for IS professionals to:
– Have good communications skills and the
ability to work with other people
77
Finding a Job in IS
• Developing an online résumé can be

critical to finding a good job
• The Internet
– Online job sites
– Company Web sites
– Social networking sites
• Informal networks of colleagues or
business acquaintances
78
Summary – Principle 1
• Organizations are systems with inputs,

transformation mechanisms, and outputs
– An organization’s structure depends on its
goals and its approach to management
• Innovation is the catalyst for the growth
and success
• Organizational change deals with how
organizations successfully plan for and
implement change
79
• Information systems should help lower

costs, increase profits, improve service, or
support a competitive advantage
• Quality is the ability of a product or service
to meet or exceed customer expectations
• Financial analysis is performed to
determine whether a specific information
system project is worth doing
80
• The information system worker functions at

the intersection of business and technology
• Successful information system workers
need to have a variety of personal
characteristics and skills
• The IS organization has three primary
functions: operations, development, and
support
81
Summary – Principle 3 (cont’d.)
• Typical operations roles include data

center manager, system operators,
information system security analyst, and
LAN administrator
• Typical development roles include
software developer, systems analyst,
programmer, and Web developer
• Typical support roles include help desk
support specialist and DBA
82

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Ralph M. Stair | George W.

• Information systems must be implemented

• Information systems must be implemented

• Because information systems are so

• Because information systems are so

• Because information systems are so

• The information system worker functions

• Organizations of all types use information

• Organization: a group of people that is

• Value chain: a series (chain) of activities

• The management of all the activities

• Supply chain organizations are “linked”

• The information system can play an

• Also referred to as a functional structure

• An organizational structure with a reduced

• An organization structure in which an

• A structure focused on major products or

• Virtual team: individual members are

• A catalyst for the growth and success of

• Reengineering (process design)

Top-down change driven by senior Bottom-up change driven by workers

Broad in scope; cuts across Narrow in scope; focuses on tasks in a

Goal is to achieve a major Goal is continuous, gradual

Often led by outsiders Usually led by workers close to the

Information systems are integral to the Information systems provide data to

• Culture: a set of major understandings and

• Change model: a representation of change

• A theory that proposes that every

• The adaptations and adjustments based

• Technology acceptance model (TAM)

• A theory developed by E.M. Rogers

• The ability of a product or service to meet

• Lean enterprise management

• A measurement-based strategy to improve

• Reducing the number of employees to cut

• Significant and ideally long-term benefit to

Company Business Competitive Use of Information

Walgreens Drug and convenience Developed satellite communication

Wells Fargo Financial services Developed 24-hour banking, ATMs,

• The five forces model identifies five key

• Rivalry among existing competitors

• The more consumers can obtain similar

• When customers have a lot of bargaining

• Strategies to attain competitive advantage

• Cash flow: takes into account all the

Tax reduction generated from depreciation associated with any capital

All ongoing maintenance costs for equipment and software

• Payback period: takes into account all the

• Internal rate of return: the rate of return

• A method of evaluating a project is the

• Successful IS workers must:

• Successful IS workers must:

• Mobile applications for smartphones,

• U.S. H-1B and L-1 visa programs seek to

• In addition to technical skills, IS

• Chief information officer (CIO) employs the

• Data center managers are responsible for

• IS security analysts are responsible for

• Software developers write the software

• Programmers convert a program design

• Database administrators (DBAs) design

• A process for testing skills and knowledge

• Most IS careers involve working in project