Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

INTERORGANIZATIONAL AND GLOBAL INFORMATION SYSTEMS

CHAPTER 8

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Learning Objectives
Describe the role, benefits and structure of interorganizational systems Distinguish between interorganizational and global information systems Describe EDI and compare a traditional EDI with an Internet-base EDI Define extranets and explain their infrastructure, types and benefits Describe planning and other issues related to interorganizational and global systems

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Chapter Overview
Interorganizational Information Systems • Response to Business Pressures • Types of Interorganizational systems Global Information Systems • Who Needs Global Systems? • Benefits of Global IS • Issues in Electronic Global Trading • Global E-Commerce Implementing Extranets IOS • Components • Security • Ethical and Social and Structure • Types Issues • Benefits • Planning Electronic Data Inerchange and Electronic Funds Transfer • EDI and IOS • EFT and IOS

Case: The Harper Group Collaborates
 The Problem
highly competitive environment where hundreds of freight moving companies in the United States and abroad operate large amounts of information flow among several trading partners and support services

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

With Honda in International Trade

ATION? HOW TO EFFECTIVELY MANAGE THE INFORM HOW TO DO IT AT COMPETITIVE PRICES?

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Case (continued…)
 The Solution
Use information technology that links the computers of involved organizations, resulting in a paperless flow of routine information allows cheaper, faster, and more reliable information to flow among all business partners supports Harper’s global business maintains the company’s position as the second largest trading facilitator in the United States operates the company with thin profit margins adopted an intranet for improving the internal operations in 1997

The Results

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Case (continued…)
What have we learned from this case?? Global information system - EDI
» enables efficient flow of large amounts of transactional information among several business partners around the globe » keeps current customers » attracts new customers

Interorganizational Information Systems (IOS)
 Objective

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

efficient processing of transactions, such as transmitting orders, bills, and payments

 Major Characteristics
determine customer-supplier relationship in advance built around privately or publicly accessible networks
» employ value-added networks (VANs) when use telecommunications companies for communication

use the Internet with either an electronic data interchange (EDI), with extranets, or with EDI/Internet

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

IOS (continued …)
 IOS Response to Business Pressures
reduce the costs of routine business transactions improve the quality of the information flow by reducing or eliminating errors compress cycle time in the fulfilment of business transactions, regardless of geographical distance eliminate paper processing and its associated inefficiencies and costs make the transfer and processing of information easy for users

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

IOS (continued …)
Types of Interorganizational Systems
Global systems - information systems connecting two or more
companies in two or more countries

Electronic data interchange (EDI) - the electronic
using telecommunication networks

movement of standard business documents between business partners

Electronic funds transfer (EFT) - the transfer of money Extranets - link the intranets of business partners Shared databases - databases that can be shared by trading Integrated messaging - delivery of electronic mail and fax

partners, often used to reduce time in communicating information between parties as well as arranging cooperative activities documents through a single transmission system that can combine electronic mail and electronic business documents

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Global Information System
 Global Information System
connect companies located in two or more countries

 Who Uses Global Systems?
Multinational Companies
» companies that operate in several countries

International Companies
» companies that do business with other companies in different countries

Virtual Global Corporations
» joint ventures whose partners are form different countries

Benefits of Global Information System

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Effective communication at a reasonable cost Effective collaboration with groupware software, Group DSS, extranets, and teleconferencing devices Organizations access each other’s databases and frequently work on the same projects while their members are in different locations

Cultural Differences

Issues in Electronic Global Information System

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

many different aspects ranging from legal and ethical issues to what information is considered offensive localization - use different names, colors, sizes, and packaging for overseas products and services

Economic and Legal Differences
differ considerably in their economical and legal environments

Transfer of Data Across International Borders
cross-border data transfer - several countries impose strict laws to control the flow of corporate data across their borders; to protect the privacy of their citizens

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Global Electronic Commerce
Access to larger markets, the possibility of saving on taxes, and the flexibility to employ workers and manufacture products anywhere using a world telecommuting workforce Benefits
the Internet and the extranets resulted in an inexpensive and flexible infrastructure can do business anytime and from anywhere can do it rapidly at a reasonable cost

Global Electronic Commerce
Barriers

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

(continued …)

Legal barriers
» jurisdiction issues, export/import regulations and compliance; contacts » Intellectual property (enforcement of ), privacy, and content issues » Cryptography (encryption), security, authentication procedures, and notarized documents » Cross-border transactions, as described earlier » Consumer protection (e.g. liability for wrong transactions)

Market access barriers
» building a telecommunications infrastructure capable of accommodating all users and all types of data is a necessity

Global Electronic Commerce
 Barriers

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

(continued …)

Financial barriers Others

» including taxation, customs and electronic payment systems, different currencies » need to match buyers and sellers across international borders and establish trust between them » existence of cultural diversity » lack of sufficient international agreements » deciding on the collection of sales and other taxes » compliance with diversified export/import regulations and fees » need for language translation (the Web page, transactions)

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Electronic Data Interchange (EDI)
 Elements of EDI
Data formatting standards
» to shorten the length of the messages, reducing long distance telephone charges and eliminating data entry errors

EDI translators
» conversion of data into standard format

Private line (VANs) versus the Internet
VANs-based EDI - expensive, high security and capacity,
incompatible hardware and software of the telecommunication companies Internet-based EDI - less security and capacity as compare to VAN-based EDI, but cheaper; requires coordination and integration with the company’s back-end processing systems

Without EDI
Start Specifier Purchasing

Order-delivery Cycle With and Without EDI
Accounting Mailroom Shipping Receiving Buyer P.O. delivery Order confirmation Bill delivery Mailroom

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Sales Accounting

Shipping Receiving Seller

With EDI
Standardized PO PO Form EDI transmissions Automatic order confirmation • Approval • Prices • Availability Automatic billing Computer Generates Standardized P.O. Form
PO
ice In vo Fl rep ash or t

Start Specifier Receiving Buyer

Instant data to : •Sales •Manufacturing •Engineering

Shipping Seller

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Benefits of EDI
Benefits
Speed, volume

How the Benefit is Achieved?
 EDI enables companies to send and receive large amounts of routine transaction information quickly around the globe in a paperless environment  Sales and other information is delivered to manufacturers, shippers, and warehouse almost in real time  Once EDI documents are received ,they are automatically forwarded to the appropriate department for processing  There are very few errors in the transformed data as a result of computer-to-computer data transfer. Information is also consistent

Accuracy

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Benefits of EDI (continued …)
Benefits
Collaboration Commitment

How to Benefit is Achieved?
 Companies can access partners databases to retrieve and store standard transactions  EDI fosters true (and strategic) partnership relationships, since it involves a commitment to a long-term investment and the refinement of the system over time  The time for collecting payments can be shortened by several weeks, benefiting the recipients of payments  EDI creates a complete paperless transfer processing environment, saving money and increasing efficiency  EDI enables a just-in-time environment, which means lower (or no) inventories for manufacturers

Profit Cost saving

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

EDI Applications
Manufacturing - to communicate with suppliers,
customers, and other business partners Retailing - to streamline deliveries of goods from the suppliers to the stores and reduce inventories Global trade - to shorten the elapse time by 70% or more and to reduce administrative expenses by 30% Service Industry - used EDI and its companion, electronic funds transfer, for a long time Large trading networks - provide efficient and effective trading environments (e.g. TradeNet)

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Electronic Funds Transfer (EFT)
transfer of money to and from financial institutions using telecommunication networks used as an IOS, a global system, and a communication system among organizations and to individuals fast - reduces delays associated with sending hard-copy documents and it eliminates returned checks security issues - how can a business ensure that a hacker is not bilking corporate accounts by electronically transferring funds to his account, or that competitive snoops are not gaining a complete picture of corporate financial assets?

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

TradeNet (Singapore)
Trader (1) Trader fills up Inward declaration form on the terminal. TDB (2) TDB retrieves and approves Inward declaration (It is an import permit). (5) Trader prints a form for Customs clearance (trader may inquire status of declaration at any time). (6) Port Authority retrieves data Port Authority Tradenet required for delivery of cargo. Customers (4) Customers retrieves and approves Inward declaration (It is a customs permit).

(3) TradeNet automatically forwards approved Inward declaration to Customers

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Extranet
A network that links business partners to one another over the Internet by providing access to certain areas of each other’s corporate intranets Components Structure
Servers TCP/IP protocols E-mail Web browsers as the Internet
Company A
corporate data, e-mail, orders, customer data, inventory, documents

Extranet
Internet

Company B Intranet
Internet

Intranet

Internet
travelling or at home

Internet

Corporate employees

customers, suppliers, contractors, distributors, government

Other users

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Types of Extranet
A company and its dealers, customers, or suppliers
centered around one company

An industry’s extranet (Trading Network)
teamed up and created by the major players in an industry (e.g. the automotive industry)

Joint ventures and other business partnerships
used as a vehicle for communications and collaboration among several companies partnering in a joint venture

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

Benefits of Extranets (continues …)
Fewer help-desk employees are needed Improved quality Lower communications and travel costs Lower administrative and other overhead costs Faster processes and information flow Reductions in paperwork and delivery of accurate information in a timely manner Improved order entry and customer service Better communication

Security

Implementing Interorganizational Information System

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

protection mechanisms : firewalls and VPNs

Ethical and Societal Issues
takes a great risk for its trade secrets, the privacy of the employees and the controlling of some processes

Planning
complex IT planning when involving several organizations several IT planning teams should be created and supported by e-mail, extranets,and groupware

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

What’s in IT for Me?
For Accounting
procedures in multinational corporations and issues in taxation include data collection and transfer and auditing

For Finance
EDI and EFT have been the pioneering systems for over 20 years; now global financial services and trading

For Human Resource Management
recruitment, HR development and training in a local and multinational corporations can be improved by using IT

Introduction to Information Technology Turban, Rainer and Potter Chapter 8 Interorganizational and Global Information Systems

What’s in IT for Me?(continued …)
For Marketing
marketing and sales in global markets can be enhanced by appropriate information systems

For Production/Operations Management
the logistics systems can be greatly improved by using IOSs

For Non-Business
everyone will encounter interorganizational systems in almost any organization, public or private

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