post a 500-word synopsis of your understanding of the concepts reviewed.
M o d u l e I
Business Applications
Information Technologies
Development Processes
Management Challenges
Foundation Concepts
Chapter Highlights Section I Foundation Concepts: Information Systems in Business The Real World of Information Systems Real World Case: eCourier, Cablecom, and Bryan Cave: Delivering Value Through Business Intelligence The Fundamental Roles of IS in Business Trends in Information Systems The Role of e-Business in Business Types of Information Systems Managerial Challenges of Information Technology Section II Foundation Concepts: The Components of Information Systems System Concepts: A Foundation Real World Case: The New York Times and Boston Scientific: Two Different Ways of Innovating with Information Technology Components of Information Systems Information System Resources Information System Activities Recognizing Information Systems Real World Case: Sew What? Inc.: The Role of Information Technology in Small Business Success Real World Case: JetBlue and the Veterans Administration: The Critical Importance of IT Processes
Learning Objectives 1. Understand the concept of a system and how it
relates to information systems. 2. Explain why knowledge of information systems is
important for business professionals, and identify five areas of information systems knowledge that they need.
3. Give examples to illustrate how the business applications of information systems can support a firm’s business processes, managerial decision making, and strategies for competitive advantage.
4. Provide examples of several major types of infor- mation systems from your experiences with busi- ness organizations in the real world.
5. Identify several challenges that a business man- ager might face in managing the successful and ethical development and use of information tech- nology in a business.
6. Provide examples of the components of real world information systems. Illustrate that in an informa- tion system, people use hardware, software, data, and networks as resources to perform input, pro- cessing, output, storage, and control activities that transform data resources into information products.
7. Demonstrate familiarity with the myriad of career opportunities in information systems.
3
CHAPTER 1
FOUNDATIONS OF INFORMATION SYSTEMS IN BUSINESS
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4 ● Module I / Foundation Concepts
SECTION I Foundation Concepts: Information Systems in Business The question of why we need to study information systems and information technology has evolved into a moot issue. Information systems have become as integrated into our daily business activities as accounting, finance, operations management, marketing, hu- man resource management, or any other major business function. Information systems and technologies are vital components of successful businesses and organizations—some would say they are business imperatives. They thus constitute an essential field of study in business administration and management, which is why most business majors include a course in information systems. Since you probably intend to be a manager, entrepre- neur, or business professional, it is just as important to have a basic understanding of information systems as it is to understand any other functional area in business. Information technologies, including Internet-based information systems, are play- ing vital and expanding roles in business. Information technology can help all kinds of businesses improve the efficiency and effectiveness of their business processes, mana- gerial decision making, and workgroup collaboration, which strengthens their com- petitive positions in rapidly changing marketplaces. This benefit occurs irrespective of whether the information technology is used to support product development teams, customer support processes, e-commerce transactions, or any other business activity. Information technologies and systems are, quite simply, an essential ingredient for business success in today’s dynamic global environment.
Let’s take a moment to bring the real world into our discussion of the importance of information systems (IS) and information technology (IT). See Figure 1.1 , and read the Real World Case about using information technology to better understand and satisfy customer needs. If we are to understand information systems and their functions, we first need to be clear on the concept of a system. In its simplest form, a system is a set of interre- lated components, with a clearly defined boundary, working together to achieve a common set of objectives. Using this definition, it becomes easy to see that virtually everything you can think of is a system, and one system can be made up of other sys- tems or be part of a bigger system. We will expand on this concept later in the next section, but for now, this definition gives us a good foundation for understanding the focus of this textbook: information systems.
We begin with a simple definition that we can expand upon later in the chapter. An information system (IS) can be any organized combination of people, hardware, soft- ware, communications networks, data resources, and policies and procedures that stores, retrieves, transforms, and disseminates information in an organization. People rely on modern information systems to communicate with one another using a variety of physical devices (hardware) , information processing instructions and procedures (software) , communications channels (networks) , and stored data (data resources) . Al- though today’s information systems are typically thought of as having something to do with computers, we have been using information systems since the dawn of civiliza- tion. Even today we make regular use of information systems that have nothing to do with a computer. Consider some of the following examples of information systems:
• Smoke signals for communication were used as early as recorded history and can account for the human discovery of fire. The pattern of smoke transmitted valuable information to others who were too far to see or hear the sender.
• Card catalogs in a library are designed to store data about the books in an orga- nized manner that allows readers to locate a particular book by its title, author name, subject, or a variety of other approaches.
The Real World of Information Systems
What Is an Information System?
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Chapter 1 / Foundations of Information Systems in Business ● 5
eCourier, Cablecom, and Bryan Cave: Delivering Value through Business Intelligence
a market where many courier companies use telephone dis- patchers and guesswork about package whereabouts. Book- ing and tracking automation—although innovative—did not complete the customer happiness puzzle. Without leading- edge business intelligence, account managers could miss the same issues that plagued other courier services—late deliveries, surly couriers, or even an unnoticed ramp-up in deliveries. “We’re only one delivery away from someone deciding to use a different delivery firm,” says Bregman. So eCourier started to use software from a company called SeeWhy to try to generate customer data more quickly. “What’s unique about SeeWhy,” says Bregman, “is its ability to report what’s happening with customers instantly.” When a new booking enters eCourier’s database, the information is du- plicated and saved into a repository within SeeWhy. The soft- ware then interprets the data by comparing it with previous information and trends, and if it notices an anomaly, it takes action. If a customer typically places an eCourier order every Thursday morning between 9:30 and 10:00 and there’s been no contact during that time, eCourier’s CRM team will receive an alert shortly after 10:00 that includes the client’s history and the number of bookings it typically places in a day. Bregman says there’s a fair amount of fine-tuning to get the metrics right. For example, the company had to tweak the system to recognize expected shifts in activity so that it doesn’t send a slew of alerts once the after-Christmas drop in business occurs. Getting that perfect balance of when to send alerts and how best to opti- mize the system is an ongoing process, he says. The SeeWhy software is designed to establish a “normal” client booking pattern from the first use, which is deepened with each subsequent booking. A sharp drop-off in bookings, an increase in bookings, or a change in dormant account ac- tivity generates an alert that is sent to that client’s account manager; the manager uses the opportunity to problem-solve or, in the case of increased activity, upsell to overnight or in- ternational services. “These capabilities have provided a big payoff,” says Bregman. He also believes the system saves his company the expense of having to hire people to monitor “who’s happy and who’s not—we’re able to do a lot more on our customer team with a lot less.” Other approaches to judging customer dissatisfaction exist. Cablecom, a Swiss telecom company, used SPSS’s statistical software to mine customer data, primarily from trouble tickets—such as the average duration of a ticket, or how many tickets had been opened for a customer over a specific time period—to build a model that could flag when a customer was at a high risk of leaving. “But the model proved to be only about 70 percent accurate,” says Federico Cesconi, director of customer insight and retention. So Cesconi used SPSS’s Dimensions survey research software to create an online customer survey, and from that he was able to determine that customer dissatisfaction usu- ally begins around the ninth month of service, with the bulk of the customer losses occurring between months 12 and 14. Cesconi then created another survey that he now offers to
V isitors to the eCourier Web site are greeted with the words “How happy are you ? Take the eCourier happy test today!” Those words and the playful purple Web site represent the company’s customer satisfac- tion focus. And the company achieves that happiness through its focus on operational business intelligence. Business intelligence is moving out of the ivory tower of specialized analysts and is being brought to the front lines. In the case of eCourier, whose couriers carry 2,000 packages around London each day, operational business intelligence allows the company to keep real-time tabs on customer sat- isfaction. “This is a crucial differentiator in London’s com- petitive same-day courier market, where clients are far more likely to take their business elsewhere than they are to report a problem to their current courier,” says the company’s chief technology officer and cofounder Jay Bregman. Just one online directory, London Online, shows about 350 listings for courier services. Before implementing operational business intelligence, eCourier sought to define IT as a crucial differentiator. Cofounders Tom Allason, eCourier’s CEO, and Bregman ditched the idea of phone dispatchers and instead gave their couriers GPS-enabled handhelds so that couriers can be tracked and orders can be communicated electronically. They also focused on making online booking easy and rewarding, and much was invested in user-friendly applications: Cus- tomers can track online exactly where their courier is, elimi- nating the package delivery guesswork. Today, 95 percent of deliveries are booked online; this means that eCourier needs a much smaller staff for mon- itoring, tracking, and placing orders, which in turn makes the company more scalable. Bregman says this is notable in
REAL WORLD
CASE 1
F IGURE 1.1
Source: © Digital Vision/Alamy.
Access to quality information about customers helps companies succeed at delivering value to shareholders.
Chapter 1 / Foundations of Information Systems in Business ● 5
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6 ● Module I / Foundation Concepts
1. How do information technologies contribute to the busi- ness success of the companies depicted in the case? Pro- vide an example from each company explaining how the technology implemented led to improved performance.
2. In the case of law firm Bryan Cave discussed above, the use of BI technology to improve the availability, access, and presentation of existing information allowed them to provide tailored and innovative services to their custom- ers. What other professions could benefit from a similar use of these technologies, and how? Develop two differ- ent possibilities.
3. Cablecom developed a prediction model to better identify those customers at risk of switching to other company in the near future. In addition to those noted in the case, what other actions could be taken if that information were available? Give some examples of these. Would you consider letting some customers leave anyway? Why?
1. Use the Internet to research the latest offerings in business intelligence technologies and their uses by companies. What differences can you find with those reviewed in the case? Prepare a report to summarize your findings and highlight new and innovative uses of these technologies.
2. Why do some companies in a given industry, like eCourier above, adopt and deploy innovative technol- ogies while others in the same line of business do not? Break into small groups with your classmates to dis- cuss what characteristics of companies could influence their decision to innovate with the use of information technologies.
CASE STUDY QUESTIONS REAL WORLD ACTIVITIES
customers in the seventh month of service, which includes an area where they can type in specific complaints and problems. “Cablecom calls customers within 24 hours of completing the survey,” says Cesconi. “The two approaches together provide the best view of customers ready to bolt, and the best chance at retaining them.” In 2002, global law firm Bryan Cave faced the million- dollar question: How do you make the most money with your resources while simultaneously delivering the highest customer value? The problem was pressing. Clients of the firm, which now has 800 lawyers in 15 offices worldwide, were demanding alternatives to the traditional hourly fee structure. They wanted new models, such as fixed pricing and pricing that was adjusted during a project. But making money from these new billing strategies required the complicated balance of staffing and pricing. Projects weighted too heavily with a law partner’s time would be expensive (for the law firm) and not optimized for profit. Devoting too little of a partner’s time would leave cli- ents feeling undervalued. Optimizing profit and perceived value had to be achieved by spreading partners’ time through- out a number of cases and balancing the remaining resources needed for a case with the less-expensive fees of associates and paralegals. “Clients are most likely to stay with you if you deliver just the right mix,” says Bryan Cave’s CIO John Alber. The law firm’s traditional method of analyzing collected fees and profit used a spreadsheet that was complicated and took too long. “Spreadsheets provide a level of detail that can be valuable for analysts,” says Alber, “but the information in a spreadsheet can be confusing and difficult to work with.” Alber says he decided it was better to build an easy-to-understand in- terface using business intelligence tools. Although the company will not release specific figures, both profitability and hours lev- eraged—the hours worked by equity partners and all other fee earners at the firm—have increased substantially since the com- pany implemented its first BI tool in 2004, according to Alber. The tools also allow lawyers to track budgets in real time so that they can make adjustments quickly. The BI tools
even provide a diversity dashboard, which tracks the hourly mix of women and minorities working on the firm’s cases, a feature the company will license to Redwood Analytics for sale to other law firms. The firm developed this diversity tool to bring transparency to the diversity reporting process required by many clients. In other words, the tools provide Bryan Cave with a method of customizing its fees and help- ing clients better understand what they get for their money. As an illustration, Alber points to the customized pricing one lawyer gave to his real estate client. “Developers think in terms of square feet,” says Alber, “and this client couldn’t un- derstand why legal fees for a 400,000-square-foot building might be the same as for a 4,000-square-foot building, though it required the same amount of the lawyer’s time.” So the law- yer used the pricing and staffing modeling tools and historical analysis tools to determine whether it made sense for the law firm to charge clients based on the size of their projects. He found that while there was risk of underpricing large buildings, the deal volume in small buildings offset that risk for the law firm. The result made per-square-foot pricing possible. “It may be possible that someone with enough willpower or manpower could do that using traditional analysis,” says Alber, “but this lawyer had the information right at his fin- gertips.” Business intelligence enables “us to be in touch with clients and shift things around in response to what cus- tomers are asking,” says Alber. Adopting new and improved project management, pricing, and customer service capabili- ties required planning, appropriate pacing, and user buy-in. “In today’s environment, you can’t do value innovation without being in touch with the economics of your business, without really understanding where you make money and where you don’t, and that’s what business intelligence tools do,” says Alber. “Our goal,” he says, “is to build the best long- term relationships in the world.”
Source: Adapted from Diann Daniel, “Delivering Customer Happiness Through Operational Business Intelligence,” CIO Magazine , December 6, 2007; Diann Daniel, “How a Global Law Firm Used Business Intelligence to Fix Customer Billing Woes,” CIO Magazine , January 8, 2008; and Mary Weier, “Dear Customer: Please Don’t Leave,” InformationWeek , June 18, 2007.
6 ● Module I / Foundation Concepts
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Chapter 1 / Foundations of Information Systems in Business ● 7
• Your book bag, day planner, notebooks, and file folders are all part of an in- formation system designed to help you organize the inputs provided to you via handouts, lectures, presentations, and discussions. They also help you process these inputs into useful outputs: homework and good exam grades.
• The cash register at your favorite fast-food restaurant is part of a large infor- mation system that tracks the products sold, the time of a sale, inventory levels, and the amount of money in the cash drawer; it also contributes to the analysis of product sales in any combination of locations anywhere in the world.
• A paper-based accounting ledger as used before the advent of computer-based accounting systems is an iconic example of an information system. Businesses used this type of system for centuries to record the daily transactions and to keep a record of the balances in their various business and customer accounts.
Figure 1.2 illustrates a useful conceptual framework that organizes the knowledge presented in this text and outlines areas of knowledge you need about information systems. It emphasizes that you should concentrate your efforts in the following five areas of IS knowledge:
• Foundation Concepts. Fundamental behavioral, technical, business, and mana- gerial concepts about the components and roles of information systems. Exam- ples 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. Chapters 1 and 2 and other chapters of the text support this area of IS knowledge.
• Information Technologies. Major concepts, developments, and management issues in information technology—that is, hardware, software, networks, data management, and many Internet-based technologies. Chapters 3 and 4 provide an overview of computer hardware and software technologies, and Chapters 5 and 6 cover key data resource management and telecommunications network technologies for business.
• Business Applications. The major uses of information systems for the operations, management, and competitive advantage of a business. Chapters 7 and 8 cover applications of information technology in functional areas of business such as marketing, manufacturing, and accounting. Chapter 9 focuses on e-business ap- plications that most companies use to buy and sell products on the Internet, and Chapter 10 covers the use of information systems and technologies to support decision making in business.
• Development Processes. How business professionals and information specialists plan, develop, and implement information systems to meet business opportunities. Several developmental methodologies are explored in Chapters 11 and 12, including
F IGURE 1.2 A framework that outlines the major areas of information systems knowledge needed by business professionals.
Management
Challenges
Business
Applications
Information
Technologies
Foundation
Concepts
Development
Processes
Information
Systems
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8 ● Module I / Foundation Concepts
the systems development life cycle and prototyping approaches to business appli- cation development.
• Management Challenges. The challenges of effectively and ethically managing information technology at the end-user, enterprise, and global levels of a busi- ness. Thus, Chapter 13 focuses on security challenges and security management issues in the use of information technology, while Chapter 14 covers some of the key methods business managers can use to manage the information systems func- tion in a company with global business operations.
Although there are a seemingly endless number of software applications, there are three fundamental reasons for all business applications of information technology. They are found in the three vital roles that information systems can perform for a business enterprise:
• Support of business processes and operations. • Support of decision making by employees and managers. • Support of strategies for competitive advantage. Figure 1.3 illustrates how the fundamental roles interact in a typical organization. At any moment, information systems designed to support business processes and op- erations may also be providing data to, or accepting data from, systems focused on business decision making or achieving competitive advantage. The same is true for the other two fundamental roles of IS. Today’s organizations are constantly striving to achieve integration of their systems to allow information to flow freely through them, which adds even greater flexibility and business support than any of the individual system roles could provide. Let’s look at a typical retail store as a good example of how these roles of IS in business can be implemented.
The Fundamental Roles of IS in Business
Support Strategies
for Competitive Advantage
Support Business
Decision Making
Support Business Processes and Operations
Information Systems F IGURE 1.3 The three fundamental roles of the business applications of information systems. Information systems provide an organization with support for business processes and operations, decision making, and competitive advantage.
The Fundamental Roles of IS in Business
Support of Business Processes and Operations. As a consumer, you regularly encoun- ter information systems that support the business processes and operations at the many retail stores where you shop. For example, most retail stores now use computer-based information systems to help their employees record customer purchases, keep track of inventory, pay employees, buy new merchandise, and evaluate sales trends. Store operations would grind to a halt without the support of such information systems. Support of Business Decision Making. Information systems also help store man- agers and other business professionals make better decisions. For example, decisions about what lines of merchandise need to be added or discontinued and what kind of investments they require are typically made after an analysis provided by
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Chapter 1 / Foundations of Information Systems in Business ● 9
computer-based information systems. This function not only supports the decision making of store managers, buyers, and others, but also helps them look for ways to gain an advantage over other retailers in the competition for customers. Support of Strategies for Competitive Advantage. Gaining a strategic advantage over competitors requires the innovative application of information technologies. For example, store management might make a decision to install touch-screen kiosks in all stores, with links to the e-commerce Web site for online shopping. This offer- ing might attract new customers and build customer loyalty because of the ease of shopping and buying merchandise provided by such information systems. Thus, strategic information systems can help provide products and services that give a busi- ness a comparative advantage over its competitors.
Given dramatic fluctuations in gas prices, it’s no surprise that companies want to find ways to rein in transportation costs. One company finding success in that endeavor is Welch’s, a well-known purveyor of food and packaged consumer goods. The com- pany is tapping the power of business intelligence for better insight into its supply- chain operations, which in turn can help keep transportation expenses lower. Welch’s, the $654 million manufacturer known for its jams, jellies, and juices, recently in- stalled an on-demand BI application from Oco. One way Welch’s is leveraging the Oco BI application is to ensure that truckloads delivered by its carriers go out full. The idea is that customers are already paying for the full truck when it delivers goods, even if it’s only halfway or three-quarters loaded. With the BI system, Welch’s can tell if a buyer’s shipment is coming up short of full capacity and help them figure out what else they can order to max it out, thus saving on future shipping costs. “Welch’s can go to the customer and say, ‘You’re only ordering this much. Why not round out the load with other things you need? It will be a lot cheaper for you,’” says Bill Copacino, president and CEO of Oco. “If you’re able to put 4,000 more pounds on the 36,000-pound shipment, you’re getting a 10 percent discount on transportation costs,” he adds. “We’re essentially capturing every element—from the customer orders we re- ceive, to bills of lading on every shipment we make, as well as every data element on every freight bill we pay,” says Bill Coyne, director of purchasing and logistics for Welch’s. “We dump them all into one data warehouse [maintained by Oco], and we can mix-and-match and slice-and-dice any way we want.” Coyne says that Welch’s tries to ship its products five days a week out of its distribution center. “But we found ourselves just totally overwhelmed on Fridays,” he says. “We would complain, ‘How come there are so many orders on Friday?’” Now, the new system helps Welch’s balance its daily deliveries so that it uses about the same number of trucks, rather than hiring seven trucks on a Monday, five on a Tuesday, eight on a Wednesday, and so forth. The company reaps transportation savings by using a stable number of trucks daily—“as capacity is not jumping all over the place,” Copacino says. “We are gaining greater visibility into cost-savings opportunities, which is espe- cially important in light of rising fuel and transportation costs,” says Coyne. Welch’s spends more than $50 million each year on transportation expenses, and the Oco BI application and reporting features have become critical in a very short pe- riod of time. “We literally can’t go any amount of time without knowing this stuff,” Coyne says.
Source: Adapted from Ted Samson, “Welch’s Leverages BI to Reduce Transport Costs,” InfoWorld , October 16, 2008; and Thomas Wailgum, “Business Intelligence and On-Demand: The Perfect Marriage?” CIO Magazine , March 27, 2008.
Welch’s: Balancing Truckloads with Business Intelligence
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10 ● Module I / Foundation Concepts
The business applications of information systems have expanded significantly over the years. Figure 1.4 summarizes these changes. Until the 1960s, the role of most information systems was simple: transaction processing, record keeping, accounting, and other electronic data processing (EDP) ap- plications. Then another role was added, namely, the processing of all these data into useful, informative reports. Thus, the concept of management information systems (MIS) was born. This new role focused on developing business applications that provided managerial end users with predefined management reports that would give managers the information they needed for decision-making purposes. By the 1970s, it was evident that the prespecified information products produced by such management information systems were not adequately meeting the decision- making needs of management, so the concept of decision support systems (DSS) was born. The new role for information systems was to provide managerial end users with ad hoc, interactive support of their decision-making processes. This support would be tailored to the unique decisions and decision-making styles of managers as they con- fronted specific types of problems in the real world. In the 1980s, several new roles for information systems appeared. First, the rapid development of microcomputer processing power, application software packages, and telecommunications networks gave birth to the phenomenon of end-user computing .
Trends in Information Systems
FIGURE 1.4 The expanding roles of the business applications of information systems. Note how the roles of computer- based information systems have expanded over time. Also, note the impact of these changes on the end users and managers of an organization.
Electronic Business and Commerce: 1990s–2000s
Internet-based e-business and e-commerce systems
Enterprise Resource Planning and Business Intelligence: 2000s–2010s
Strategic and End-User Support: 1980s–1990s
End-user computing systems
Direct Direct computing support for end-user productivity and workgroup 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
Decison support systems
Interactive ad hoc support of the managerial decision-making process
Management Reporting: 1960s–1970s
Management information systems
Management reports of prespecified information to support decision making
Data Processing: 1950s–1960s
Electronic data processing systems
Transaction processing, record-keeping, and traditional accounting applications
T h
e E
x p
a n
d in
g R
o le
s o
f IS
i n
B u
s in
e s
s a
n d
M a n
a g
e m
e n
t
Web-enabled enterprise and global e-business operations and electronic commerce on the Internet, intranets, extranets, and other networks
Enterprisewide common-interface applications data mining and data visualization, customer relationship management, supply-chain management
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Chapter 1 / Foundations of Information Systems in Business ● 11
End users could now use their own computing resources to support their job require- ments instead of waiting for the indirect support of centralized corporate information services departments. Second, it became evident that most top corporate executives did not directly use either the reports of management information systems or the analytical modeling ca- pabilities of decision support systems, so the concept of executive information systems (EIS) developed. These information systems were created to give top executives an easy way to get the critical information they wanted, when they wanted it, and tailored to the formats they preferred. Third, breakthroughs occurred in the development and application of artificial intelligence (AI) techniques to business information systems. Today’s systems include intelligent software agents that can be programmed and deployed inside a system to act on behalf of their owner, system functions that can adapt themselves on the basis of the immediate needs of the user, virtual reality applications, advanced robotics, natural language processing, and a variety of applications for which artificial intelli- gence can replace the need for human intervention, thus freeing up knowledge work- ers for more complex tasks. Expert systems (ES) and other knowledge-based systems also forged a new role for information systems. Today, expert systems can serve as consult- ants to users by providing expert advice in limited subject areas. An important new role for information systems appeared in the 1980s and contin- ued through the 1990s: the concept of a strategic role for information systems, some- times called strategic information systems (SIS). In this concept, information technology becomes an integral component of business processes, products, and services that help a company gain a competitive advantage in the global marketplace. The mid- to late 1990s saw the revolutionary emergence of enterprise resource plan- ning (ERP) systems. This organization-specific form of a strategic information system integrates all facets of a firm, including its planning, manufacturing, sales, resource management, customer relations, inventory control, order tracking, financial manage- ment, human resources, and marketing—virtually every business function. The pri- mary advantage of these ERP systems lies in their common interface for all computer-based organizational functions and their tight integration and data sharing, necessary for flexible strategic decision making. We explore ERP and its associated functions in greater detail in Chapter 8. We are also entering an era where a fundamental role for IS is business intelligence (BI) . BI refers to all applications and technologies in the organization that are fo- cused on the gathering and analysis of data and information that can be used to drive strategic business decisions. Through the use of BI technologies and processes, or- ganizations can gain valuable insight into the key elements and factors—both internal and external—that affect their business and competitiveness in the marketplace. BI relies on sophisticated metrics and analytics to “see into the data” and find relation- ships and opportunities that can be turned into profits. We’ll look closer at BI in Chapter 10. Finally, the rapid growth of the Internet, intranets, extranets, and other inter- connected global networks in the 1990s dramatically changed the capabilities of in- formation systems in business at the beginning of the 21st century. Further, a fundamental shift in the role of information systems occurred. Internet-based and Web-enabled enterprises and global e-business and e-commerce systems are becom- ing commonplace in the operations and management of today’s business enterprises. Information systems is now solidly entrenched as a strategic resource in the modern organization. A closer look at Figure 1.4 suggests that though we have expanded our abilities with regard to using information systems for conducting business, today’s information systems are still doing the same basic things that they began doing more than 50 years ago. We still need to process transactions, keep records, provide management with
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12 ● Module I / Foundation Concepts
useful and informative reports, and support the foundational accounting systems and processes of the organization. What has changed, however, is that we now enjoy a much higher level of integration of system functions across applications, greater con- nectivity across both similar and dissimilar system components, and the ability to reallocate critical computing tasks such as data storage, processing, and presentation to take maximum advantage of business and strategic opportunities. Because of these increased capabilities, the systems of tomorrow will be focused on increasing both the speed and reach of our systems to provide even tighter integration, combined with greater flexibility.
The Internet and related technologies and applications have changed the ways busi- nesses operate and people work, as well as how information systems support business processes, decision making, and competitive advantage. Thus, many businesses today are using Internet technologies to Web-enable their business processes and create innovative e-business applications . See Figure 1.5 . In this text, we define e-business as the use of Internet technologies to work and empower business processes, e-commerce, and enterprise collaboration within a com- pany 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 ex- change of information, money, resources, services, or any combination thereof falls un- der the e-business umbrella. The Internet and Internet-like networks—those inside the enterprise (intranet) and between an enterprise and its trading partners (extranet) — have become the primary information technology infrastructure that supports the e-business applications of many companies. These companies rely on e-business applications to (1) reengineer internal business processes, (2) implement e-commerce systems with their customers and suppliers, and (3) promote enterprise collaboration among business teams and workgroups.
The Role of e-Business in Business
FIGURE 1.5 Businesses today depend on the Internet, intranets, and extranets to implement and manage innovative e-business applications.
The Internet Suppliers and Other Business Partners
Extranets Company Boundary
Intranets
Supply chain management: Procurement, distribution, and logistics
Consumers and Business Customers
Extranets
Intranets
Engineering and research
Manufacturing and production
Accounting and finance
Customer relationship management: Marketing Sales Customer service
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Chapter 1 / Foundations of Information Systems in Business ● 13
Enterprise collaboration systems involve the use of software tools to support com- munication, coordination, and collaboration among the members of networked teams and workgroups. A business may use intranets, the Internet, extranets, and other net- works to implement such systems. For example, employees and external consultants may form a virtual team that uses a corporate intranet and the Internet for e-mail, videoconferencing, e-discussion groups, and Web pages of work-in-progress informa- tion to collaborate on business projects. E-commerce is the buying, selling, marketing, and servicing of products, services, and information over a variety of computer networks. Many businesses now use the Internet, intranets, extranets, and other networks to support every step of the com- mercial process, including 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 processes. For example, e-commerce systems in- clude Internet Web sites for online sales, extranet access to inventory databases by large customers, and the use of corporate intranets by sales reps to access customer records for customer relationship management.
Conceptually, the applications of information systems that are implemented in today’s business world can be classified in several different ways. For example, several types of information systems can be classified as either operations or management information systems. Figure 1.6 illustrates this conceptual classification of information systems ap- plications. Information systems are categorized this way to spotlight the major roles each plays in the operations and management of a business. Let’s look briefly at some examples of such information systems categories.
Information systems have always been needed to process data generated by, and used in, business operations. Such operations support systems produce a variety of infor- mation products for internal and external use; however, they do not emphasize the
Types of Information Systems
Operations Support Systems
F IGURE 1.6 Operations and management classifications of information systems. Note how this conceptual overview emphasizes the main purposes of information systems that support business operations and managerial decision making.
Team and Workgroup
Collaboration
Prespecified Reporting
for Managers
Interactive Decision Support
Information Tailored for Executives
Processing Business
Transactions
Control of Industrial
Processes
Support of Managerial
Decision Making
Support of Business
Operations
Information Systems
Operations Support Systems
Management Support Systems
Transaction Processing Systems
Process Control
Systems
Enterprise Collaboration
Systems
Specialized Processing Systems
Management Information
Systems
Decision Support Systems
Executive Information
Systems
Specialized Processing Systems
Expert Systems
Knowledge Management
Systems
Strategic Information
Systems
Functional Business Systems
Expert Advice to
Decision Makers
Manage Organizational
Knowledge
Support Competitive Advantage
Support Basic Business Functions
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specific information products that can best be used by managers. Further processing by management information systems is usually required. The role of a business firm’s operations support systems is to process business transactions, control industrial proc- esses, support enterprise communications and collaborations, and update corporate databases efficiently. See Figure 1.7 . Transaction processing systems are important examples of operations support systems that record and process the data resulting from business transactions. They process transactions in two basic ways. In batch processing , transactions data are ac- cumulated over a period of time and processed periodically. In real-time (or online ) processing, data are processed immediately after a transaction occurs. For example, point-of-sale (POS) systems at many retail stores use electronic cash register termi- nals to capture and transmit sales data electronically over telecommunications links to regional computer centers for immediate (real-time) or nightly (batch) processing. Figure 1.8 is an example of software that automates accounting transaction processing. Process control systems monitor and control physical processes. For example, a petroleum refinery uses electronic sensors linked to computers to monitor chemical processes continually and make instant (real-time) adjustments that control the refin- ery process. Enterprise collaboration systems enhance team and workgroup communi- cations and productivity and include applications that are sometimes called office automation systems . For example, knowledge workers in a project team may use e-mail to send and receive e-messages or use videoconferencing to hold electronic meetings to coordinate their activities.
When information system applications focus on providing information and support for effective decision making by managers, they are called management support systems . Providing information and support for decision making by all types of managers
Management Support Systems
F IGURE 1.8 QuickBooks is a popular accounting package that automates small office or home office (SOHO) accounting transaction processing while providing business owners with management reports.
Source: Courtesy of Quickbooks.
F IGURE 1.7 A summary of operations support systems with examples.
Operations Support Systems
• Transaction processing systems. Process data resulting from business transactions, update operational databases, and produce business documents. Examples: sales and inventory processing and accounting systems.
• Process control systems. Monitor and control industrial processes. Examples: petroleum refining, power generation, and steel production systems.
• Enterprise collaboration systems. Support team, workgroup, and enterprise communications and collaborations. Examples: e-mail, chat, and videoconferencing groupware systems.
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Chapter 1 / Foundations of Information Systems in Business ● 15
and business professionals is a complex task. Conceptually, several major types of infor- mation systems support a variety of decision-making responsibilities: (1) management information systems, (2) decision support systems, and (3) executive information sys- tems. See Figure 1.9 . Management information systems (MIS) provide information in the form of reports and displays to managers and many business professionals. For example, sales managers may use their networked computers and Web browsers to receive instanta- neous displays about the sales results of their products and access their corporate intranet for daily sales analysis reports that evaluate sales made by each salesperson. Decision support systems (DSS) give direct computer support to managers during the decision-making process. For example, an advertising manager may use a DSS to perform a what-if analysis as part of the decision to determine how to spend advertis- ing dollars. A production manager may use a DSS to decide how much product to manufacture, based on the expected sales associated with a future promotion and the location and availability of the raw materials necessary to manufacture the product. Executive information systems (EIS) provide critical information from a wide vari- ety of internal and external sources in easy-to-use displays to executives and managers. For example, top executives may use touch-screen terminals to view instantly text and graphics displays that highlight key areas of organizational and competitive performance. Figure 1.10 is an example of an MIS report display.
Several other categories of information systems can support either operations or management applications. For example, expert systems can provide expert advice for operational chores like equipment diagnostics or managerial decisions such as loan portfolio management. Knowledge management systems are knowledge-based in- formation systems that support the creation, organization, and dissemination of busi- ness knowledge to employees and managers throughout a company. Information systems that focus on operational and managerial applications in support of basic business functions such as accounting or marketing are known as functional business systems . Finally, strategic information systems apply information technology to a firm’s products, services, or business processes to help it gain a strategic advantage over its competitors. See Figure 1.11 . It is also important to realize that business applications of information systems in the real world are typically integrated combinations of the several types of informa- tion systems just mentioned. That is because conceptual classifications of informa- tion systems are designed to emphasize the many different roles of information systems. In practice, these roles are combined into integrated or cross-functional informational systems that provide a variety of functions. Thus, most information systems are designed to produce information and support decision making for vari- ous levels of management and business functions, as well as perform record-keeping and transaction-processing chores. Whenever you analyze an information system,
Other Classifications of Information Systems
F IGURE 1.9 A summary of management support systems with examples.
Management Support Systems
• Management information systems. Provide information in the form of prespecified reports and displays to support business decision making. Examples: sales analysis, production performance, and cost trend reporting systems.
• Decision support systems. Provide interactive ad hoc support for the decision-making processes of managers and other business professionals. Examples: product pricing, profitability forecasting, and risk analysis systems.
• Executive information systems. Provide critical information from MIS, DSS, and other sources tailored to the infor- mation needs of executives. Examples: systems for easy access to analyses of business performance, actions of competi- tors, and economic developments to support strategic planning.
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16 ● Module I / Foundation Concepts
you probably see that it provides information for a variety of managerial levels and business functions.
Figure 1.12 illustrates the scope of the challenges and opportunities facing business managers and professionals in effectively managing information systems and technol- ogies. Success in today’s dynamic business environment depends heavily on maximiz- ing the use of Internet-based technologies and Web-enabled information systems to meet the competitive requirements of customers, suppliers, and other business part- ners in a global marketplace. Figure 1.12 also emphasizes that information systems
Managerial Challenges of Information Technology
Other Categories of Information Systems
• Expert systems. Knowledge-based systems that provide expert advice and act as expert consultants to users. Examples: credit application advisor, process monitor, and diagnostic maintenance systems.
• Knowledge management systems. Knowledge-based systems that support the creation, organization, and dissemination of business knowledge within the enterprise. Examples: intranet access to best business practices, sales proposal strategies, and customer problem resolution systems.
• Strategic information systems. Support operations or management processes that provide a firm with strategic products, services, and capabilities for competitive advantage. Examples: online stock trading, shipment tracking, and e-commerce Web systems.
• Functional business systems. Support a variety of operational and managerial applications of the basic business functions of a company. Examples: information systems that support applications in accounting, finance, marketing, operations management, and human resource management.
F IGURE 1.11 A summary of other categories of information systems with examples.
F IGURE 1.10 Management information systems provide information to business professionals in a variety of easy-to-use formats.
Source: Courtesy of Infor.
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Chapter 1 / Foundations of Information Systems in Business ● 17
and their technologies must be managed to support the business strategies, business processes, and organizational structures and culture of a business enterprise. That is because computer-based information systems, though heavily dependent on informa- tion technologies, are designed, operated, and used by people in a variety of organiza- tional settings and business environments. The goal of many companies today is to maximize their customer and business value by using information technology to help their employees implement cooperative business processes with customers, suppliers, and others.
By now you should be able to see that the success of an information system should not be measured only by its efficiency in terms of minimizing costs, time, and the use of information resources. Success should also be measured by the effectiveness of the in- formation technology in supporting an organization’s business strategies, enabling its business processes, enhancing its organizational structures and culture, and increasing the customer and business value of the enterprise. It is important to realize, however, that information technology and informa- tion systems can be mismanaged and misapplied in such a way that IS perform- ance problems create both technological and business failures. Let’s look at an example of what happens after these failures occur, as well as what can be done to avoid them.
Success and Failure with IT
F IGURE 1.12 Examples of the challenges and opportunities that business managers face in managing information systems and technologies to meet business goals.
The Business Enterprise
Strategies/Processes/Structure/Culture
Customer
Value
Business
Value
Information
Technology
Integration of e-business and e-commerce into the organization’s strategies, processes, structure, and culture.
Speed and flexibility requirements of product development, manufacturing, and delivery cycles. Reengineering and cross-functional integration of business processes using Internet technologies.
Business / IT Challenges
Use of the Internet, intranets, extranets, and the Web as the primary IT infrastructure. Diffusion of Web technology to internetwork employees, customers, and suppliers. Global networked computing, collaboration, and decision support systems.
Business / IT Developments
Give customers what they want, when and how they want it, at the lowest cost. Coordination of manufacturing and business processes with suppliers and customers. Marketing channel partnerships with suppliers and distributors.
Business / IT Goals
Your department—information technology—has just played a starring role in blow- ing a multimillion-dollar enterprise software project. The intense glare from the CEO, CFO and other business leaders is squarely focused on the CIO, VP of appli- cations, project managers and business analysts charged with making sure that this didn’t happen. Of course, IT is never 100 percent at fault for any massive project— whether an ERP or CRM implementation, mainframe migration, or networking up- grade. The business side usually plays its part.
Responsibility and Accountability for Project Success (and Failure)
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But the unfortunate and unfair fact is that because these initiatives are considered “technology projects,” the business will almost always look in IT’s direction when there’s blame to be tossed around. “That’s just a fact of life in IT,” says Chris Curran, who’s both a consulting partner at Diamond Management & Techonology Consult- ants and its Chief Technology Offer. No sane executive would dismiss the strategic importance of IT today. And most don’t: An IT Governance Institute study, consisting of more than 250 interviews with executives of both large and small companies in a variety of industry sectors, found that half of the respondents said that IT is “very important to the enterprise,” and three-quarters stated that they align IT and business strategies. When it came to IT project accountability, “executive management” was identi- fied as the group held accountable for IT governance in 71 percent of the enter- prises. That’s all well and good, but when it comes to walking the walk with technology projects, non-IT executives appear to fall back on familiar rhetoric. In a similar 2009 survey of more than 500 IT professionals by ISACA, a nonprofit trade group focusing on corporate governance, almost half of respondents said “the CIO is responsible for ensuring that stakeholder returns on IT-related investments are opti- mized,” notes the survey report. Curran takes those results a step further. “Business investments need to have business accountability,” Curran says. “But when a project goes south, especially high-profile ERP implementations, IT gets blamed—but it’s not an IT project.” Curran’s advice for such massive undertakings, which CIOs and analysts talk up but many don’t follow, is practical: Think bite-sized project chunks and set proper expectations. He also advises his clients and their IT shops to embrace change and transparency—even if it hurts at first. “The corporate culture—the status quo— tends to be: ‘Everything’s good. We don’t talk about problems until they are near unrecoverable, because we know people don’t like bad news,’” Curran says. But there are always going to be problems. That, also, is “just a fact of life in IT.”
Source: Adapted from Thomas Wailgum, “After a Massive Tech Project Failure: What IT Can Expect,” CIO.com , August 5, 2009.
Developing successful information system solutions to business problems is a major challenge for business managers and professionals today. As a business professional, you will be responsible for proposing or developing new or improved uses of infor- mation technologies for your company. As a business manager, you will frequently manage the development efforts of information systems specialists and other business end users. Most computer-based information systems are conceived, designed, and imple- mented using some form of systematic development process. Figure 1.13 shows that several major activities must be accomplished and managed in a complete IS develop- ment cycle. In this development process, end users and information specialists design information system applications on the basis of an analysis of the business require- ments of an organization. Examples of other activities include investigating the eco- nomic or technical feasibility of a proposed application, acquiring and learning how to use any software necessary to implement the new system, and making improvements to maintain the business value of a system. We discuss the details of the information systems development process in Chapters 11 and 12. We will explore many of the business and managerial challenges that arise in developing and implementing new uses of information technology in Chapters 13 and 14. Now let’s look at how a company changed its development practices to deliver the
Developing IS Solutions
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Chapter 1 / Foundations of Information Systems in Business ● 19
right functionality to users and become more responsive to their needs. This example emphasizes the importance of tailoring systems development practices to the needs of a business.
F IGURE 1.13 Developing information systems solutions to business problems can be implemented and managed as a multistep process or cycle.
Investigate
Analyze
Design
Implement
Maintain
Developing
Information
System
Solutions
In the old days, companies could spend months planning a technology project and then months or even years implementing it. Not anymore. Strategies are far more dynamic these days, especially as companies respond to challenging economic times. When someone has a good idea, it’s nice to see it come to fruition right away. At transportation company Con-Way—founded in 1929, with more than 26,000 em- ployees and 2008 revenue of more than $5 billion—almost all good ideas require technology to implement. Yet historically, ideas became cold by the time they made it through IT steering committees, project planning, and design reviews. Then, Con-Way became agile—that is, it adopted Agile development practices. Using Agile, software development is no longer accomplished through lengthy projects. Instead, the overall concept of the desired system is defined at a high level up front and then developed in short iterations. An iteration is typically no longer than one month, and the software is released for use after each iteration. As people use the software, they determine which features should be built next, providing a feedback loop that results in building the highest priority functionality. One big change for IT is that with Agile, an implementation date is always impending; team members never feel they are able to relax on a project. Meanwhile, developers, used to having private space, can feel that space is violated resulting from “pair programming,” which has two developers constructing the same piece of code at the same time, and colocation, which has team members sitting as close together as humanly possible. As for the business users, Agile requires them to take a much more active role throughout the entire process. They must work jointly with IT to determine the priorities for each iteration, and they must provide daily direction to IT on the needs for the functionality being built. “I made the case for change in IT by explaining how the business would benefit if we delivered the highest priority functionality faster. I also kept reiterating what was in it for them—and there was a lot,” says Jackie Barretta, vice president and CIO of Con-Way, Inc. “At the same time, I made the case for change to the business by preparing a solid ROI that quantified the benefits of increasing the efficiency of
Agile Systems Development at Con-Way, Inc.
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development processes, delivering the right functionality more quickly and reducing the overall amount of work in progress.” The change effort has been worth it: After nine months, Agile is delivering on its promises. The iterative approach to software development is providing a feedback loop that results in building the right functionality. “We no longer have the waste problem that was inherent in the old waterfall method. Agile is creating greater alignment between IT and the business because of the constant, daily interaction and because Agile techniques help IT personnel understand the business better,” says Barretta. “However, like anything that’s really going to pay off, Agile is a huge change for IT and the user community.”
Source: Adapted from Jackie Barretta, “How to Instill Agile Development Practices Among Your IT Team,” CIO Magazine , January 14, 2009.
As a prospective manager, business professional, or knowledge worker, you will be challenged by the ethical responsibilities generated by the use of information tech- nology. For example, what uses of information technology might be considered im- proper, irresponsible, or harmful to other people or to society? What is the proper business use of the Internet and an organization’s IT resources? What does it take to be a responsible end user of information technology? How can you protect yourself from computer crime and other risks of information technology? These are some of the questions that outline the ethical dimensions of information systems that we will discuss and illustrate with real world cases throughout this text. Figure 1.14 outlines some of the ethical risks that may arise in the use of several major applications of in- formation technology. The following example illustrates some of the security chal- lenges associated with conducting business over the Internet.
Challenges and Ethics of IT
F IGURE 1.14 Examples of some of the ethical challenges that must be faced by business managers who implement major applications of information technology.
Potential Risks
Potential Harms Possible Responses
Applications of IT
■ Customer Relationship Management
■ Human Resources Management
■ Business Intelligence Systems
Consumer boycotts
Work stoppages
Government intervention
■ Codes of ethics
■ Incentives
■ Certification
■ Infringements on privacy
■ Inaccurate information
■ Collusion
■
■
■
Hannaford Bros. may have started as a fruit and vegetable stand in 1883, but it has expanded from its Maine roots to become an upscale grocer with more than 160 stores throughout Maine, Massachusetts, New Hampshire, upstate New York, and Vermont. In March 2008, the supermarket chain disclosed a data security breach; Hannaford said in a notice to customers posted on its Web site that unknown intrud- ers had accessed its systems and stolen about 4.2 million credit and debit card numbers between December 7 and March 10. The breach affected all of Hannaford’s
Hannaford Bros.: The Importance of Securing Customer Data
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Chapter 1 / Foundations of Information Systems in Business ● 21
165 supermarkets in New England and New York, as well as 106 stores operated under the Sweetbay name in Florida and 23 independently owned markets that sell Hannaford products. In a likely precursor of what was yet to come, two class-action lawsuits were filed against the company within the week. The filers argued that inadequate data security at Hannaford had resulted in the compromise of the personal financial data of consumers, thereby exposing them to the risk of fraud. They also claimed the grocer also appeared not to have disclosed the breach to the public quickly enough after discovering it. Even though the Hannaford breach is relatively small compared with some other corporate security problems, it is likely to result in renewed calls for stricter regula- tions to be imposed on companies that fail to protect consumer data. In addition to facing the likelihood of consumer lawsuits, retailers who suffer breaches have to deal with banks and credit unions, which are getting increasingly anxious about having to shell out tens of thousands of dollars to pay for the cost of notifying their customers and reissuing credit and debit cards. Retailers, on the other hand, have argued that the commissions they pay to card companies on each transaction are supposed to cover fraud-related costs, making any additional payments a double penalty. They also have said that the only reason they store payment card data is because of requirements imposed on them by the major credit card companies. While the ultimate impact of these and other security breaches may be hard to quantify, it represents one of the most important challenges resulting from the ubiq- uitous use of electronic transaction processing and telecommunication networks in the modern networked enterprise, and one that is likely to keep growing every day. The security of customer and other sensitive data also represents one of the primary concerns of IT professionals.
Source: Adapted from Jaikumar Vijayan, “Hannaford Hit by Class-Action Lawsuits in Wake of Data-Breach Disclosure,” Computerworld , March 20, 2008.
Both information technology and the myriad of information systems it supports have created interesting, challenging, and lucrative career opportunities for millions of men and women all over the globe. At this point in your life you may still be uncertain about the career path you wish to follow, so learning more about information technol- ogy may help you decide if you want to pursue an IT-related career. In recent years, economic downturns have affected all job sectors, including IT. Further, rising labor costs in North America, Canada, and Europe have resulted in a large-scale movement to outsource basic software programming functions to India, the Middle East, and Asia-Pacific countries. Despite this move, employment opportunities in the informa- tion systems field are strong, with more new and exciting jobs emerging each day as organizations continue to expand their use of information technology. In addition, these new jobs pose constant human resource management challenges to all organiza- tions because shortages of qualified information systems personnel frequently occur. Dynamic developments in business and information technologies cause constantly changing job requirements in information systems, which will ensure that the long-term job outlook in IT remains both positive and exciting. Along with the myth that there are no jobs for IS professionals (we will dispel this one below!), another common myth is that IS professionals are computer geeks who live in a cubicle. Once again, nothing could be further from the truth! Today’s IS professional must be highly skilled in communication, dealing with people, and, most of all, articulate in the fundamentals of business. The marketplace is demanding a
Challenges of IT Careers
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business technologist with a big “B” and a big “T.” The world of the IS professional is filled with constant challenge, variety, social interaction, and cutting-edge decision making. No desks and cubicles here. If action is what you are after, then you have found it here. One major recruiter of IS professionals is the IT industry itself. Thousands of com- panies develop, manufacture, market, and service computer hardware, software, data, and network products and services. The industry can also provide e-business and e-commerce applications and services, end-user training, or business systems consulting. The biggest need for qualified people, however, comes from the millions of businesses, government agencies, and other organizations that use information technology. They need many types of IS professionals, such as systems analysts, software developers, and network managers to help them plan, develop, implement, and manage today’s Internet- based and Web-enabled business/IT applications. The accounting industry is a more recent major recruiter of IS professionals. Recent legislation, entitled the Sarbanes-Oxley Act of 2002, required major changes with regard to auditing practices by public accounting firms and internal control processes within publicly held organizations of all sizes and industries. Many of these changes directly affect the IT/IS practices of all parties involved. To facilitate the execution of the covenants of Sarbanes-Oxley, the accounting industry is ac- tively recruiting graduates from accounting programs that have a significant emphasis on IS education. In addition, they are spending equal energy to recruit IS/IT professionals to work within the accounting industry. In either case, the result is a significant increase in demand for graduates with an IS/IT background or em- phasis. Figure 1.15 lists just a few of the many career roles available to the modern IT professional. According to recent reports by the U.S. Department of Labor, computer systems analysts, database administrators, and other managerial-level IS positions are expected to be among the fastest-growing occupations through 2012. Employment of IS pro- fessionals is expected to grow more than 36 percent (much higher than average) for all occupations as organizations continue to adopt and integrate increasingly sophisti- cated technologies. Job increases will be driven by very rapid growth in computer system design and related services, which is projected to be one of the fastest-growing
F IGURE 1.15 Careers in IS are as diverse and exciting as the technologies used in them; IS professionals have career opportunities in every business environment and activity throughout the world.
Systems Analyst System Consultant Business Applications Consultant
Chief Information Officer Computer Operator Computer Serviceperson
Network Administrator Data Dictionary Network Manager Specialist
Database Administrator Database Analyst Documentation Specialist
IS Auditor End-User Computer Equipment Manufacturer Manager Representative
PC Sales Representative Programmer Program Librarian
Project Manager Records Manager Hardware Sales Representative
Scheduling and Control Security Officer Office Automation Specialist Person
Senior Project Leader Service Sales Software Sales Representative Representative
Technical Analyst Software Quality Technical Writer Evaluator
Telecommunications Training & Standards User Interface Specialist Specialist Manager
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Chapter 1 / Foundations of Information Systems in Business ● 23
industries in the U.S. economy. In addition, many job openings will arise annually from the need to replace workers who move into managerial positions or other occu- pations or who leave the labor force. Most important to you, IS/IT graduates generally receive one of the highest starting salaries in the school. Despite the recent economic downturn among information technology firms, IS professionals still enjoy favorable job prospects. The demand for networking to fa- cilitate sharing information, expanding client/server environments, and the need for specialists to use their knowledge and skills in a problem-solving capacity will be major factors in the rising demand for computer systems analysts, database adminis- trators, and other IS professionals. Moreover, falling prices of computer hardware and software should continue to induce more businesses to expand their computer- ized operations and integrate new technologies. To maintain a competitive edge and operate more efficiently, firms will keep demanding the services of professionals who are knowledgeable about the latest technologies and can apply them to meet the needs of businesses. Perhaps the time has come to put a sharper edge on this message: The field of in- formation systems is growing at an increasingly rapid pace, and there is no risk of being unemployed upon graduation! I believe that the concern over a lack of IT/IS-related jobs was fueled by the news media and is now, quite simply, unfounded. Headlines proclaimed the death of IS and the lack of jobs in the United States due to massive outsourcing and offshoring. The jobs that were being sent overseas were real ones, to be sure. They were, however, not the jobs that you or your fellow students were ever going to train for during your stay in college—unless, of course, you aspire to being a faceless voice in a call center. These jobs are service-related jobs that, while vital to the big picture, are not the management level, creative business technologist posi- tions that colleges and universities typically train their students to obtain. The real problem facing the IS field today is the lack of graduates! Students are choosing other professions because they fear low pay and unemployment, whereas recruiters are simultaneously begging for more graduates to feed their voracious appetites for more IS professionals. If you choose to avoid a career in information systems, it should not be because you think there are no jobs, that it does not have to do with people, or that it is no fun. Over the course of this book, we will dispel, with strong evidence, all of these rumors and myths. Let’s start with some facts related to the first one. The Bureau of Labor Statistics has some compelling evidence in favor of a career in information systems:
Prospects for qualified computer and information systems managers should be excellent. Fast-paced occupational growth and the limited supply of technical workers will lead to a wealth of opportunities for qualified individuals. While technical workers remain relatively scarce in the United States, the demand for them continues to rise. This situation was exacerbated by the economic downturn in the early 2000s, when many technical professionals lost their jobs. Since then, many workers have chosen to avoid this work since it is perceived to have poor prospects. People with management skills and an understanding of business practices and princi- ples will have excellent opportunities, as companies are increasingly looking to technology to drive their revenue. ( Bureau of Labor Statistics Occupational Outlook Handbook, 2008–2009)
Increasingly, more sophisticated and complex technology is being implemented across all organizations, which will continue to fuel the demand for these computer occupations. The demand for systems analysts continues to grow to help firms maxi- mize their efficiency with available technology. Expansion of e-commerce—doing busi- ness on the Internet—and the continuing need to build and maintain databases that store critical information about customers, inventory, and projects are fueling demand for database administrators familiar with the latest technology. Finally, the increasing
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importance placed on “cybersecurity”—the protection of electronic information—will result in a need for workers skilled in information security. Let’s take a look at the emerging role of business analysts as liaisons between IT specialists and their business customers.
For two decades, the CIO has been viewed as the ultimate broker between the business and technology functions. But while that may be an accurate perception in the executive boardroom, down in the trenches, business analysts (BA) have been the ones tasked with developing business cases for IT application develop- ment, in the process smoothing relations among competing parties and moving projects along. The 21st century business analyst is a liaison, bridge, and diplomat who balances the oftentimes incongruous supply of IT resources and demands of the business. A recent Forrester Research report found that those business analysts who were most successful were the ones who could “communicate, facilitate and analyze.” The busi- ness analyst is a hot commodity right now due to business reliance on technology, according to Jim McAssey, a principal at The W Group, a consulting firm. “The global delivery capabilities of technology today make the challenges of successfully bridging the gap between business and IT even harder,” he says. “Companies typically don’t invest in an IT project without a solid business case,” says Jeff Miller, senior vice president of Aetea, an IT staffing and consulting firm. A good business analyst is able to create a solution to a particular business prob- lem and act as a bridge to the technologists who can make it happen. “Without the BA role, CIOs are at significant risk that their projects will not solve the business problem for which they were intended,” says Miller. The ideal candidate will have 5 to 10 or more years of experience (preferably in a specific industry), a technical undergraduate degree, and an MBA. Strong risk assessment, negotiation, and problem resolution skills are key, and hands-on experience is critical. Business analysts must be process-driven and able to see a project through conflict and change, from start to finish. “The BA also must have the ability to learn new processes,” says Miller. “A good BA learns business concepts and can quickly relate them to the specific needs of the project.” In the end, the more business technology analysts that are working in the busi- ness, the better off the CIO and IT function will be—no matter if the business tech- nology analysts are reporting into IT or the business side. That’s because those IT-savvy analysts, who will have a more in-depth understanding of and more exper- tise in technologies, will “ultimately help the business make better decisions when it comes to its interactions with IT,” contend the Forrester analysts. And “CIOs have new allies in the business.” Salaries range from $45,000 (entry level) to $100,000 (senior business analyst) per year.
Source: Adapted from Thomas Wailgum, “Why Business Analysts Are So Important for IT and CIOs,” CIO Magazine , April 16, 2008; and Katherine Walsh, “Hot Jobs: Business Analyst,” CIO Magazine , June 19, 2007.
The Critical Role of Business Analysts
The successful management of information systems and technologies presents major challenges to business managers and professionals. Thus, the information systems function represents:
• A major functional area of business equally as important to business success as the functions of accounting, finance, operations management, marketing, and human resource management.
• An important contributor to operational efficiency, employee productivity and morale, and customer service and satisfaction.
The IS Function
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Chapter 1 / Foundations of Information Systems in Business ● 25
• A recognized source of value to the firm. • A major source of information and support needed to promote effective decision
making by managers and business professionals. • A vital ingredient in developing competitive products and services that give an
organization a strategic advantage in the global marketplace. • A dynamic, rewarding, and challenging career opportunity for millions of men
and women. • A key component of the resources, infrastructure, and capabilities of today’s net-
worked business enterprises. • A strategic resource.
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SECTION II Foundation Concepts: The Components of Information Systems System concepts underlie all business processes, as well as our understanding of infor- mation systems and technologies. That’s why we need to discuss how generic system concepts apply to business firms and the components and activities of information systems. Understanding system concepts will help you understand many other con- cepts in the technology, applications, development, and management of information systems that we cover in this text. For example, system concepts help us understand:
• Technology. Computer networks are systems of information processing compo- nents that use a variety of hardware, software, data management, and telecommu- nications network technologies.
• Applications. E-business and e-commerce applications involve interconnected business information systems.
• Development. Developing ways to use information technology in business in- cludes designing the basic components of information systems.
• Management. Managing information technology emphasizes the quality, strate- gic business value, and security of an organization’s information systems.
Read the Real World Case about how some companies are turning to IT to help them develop new products and services. We can learn a lot from this case regarding the various ways in which IT can be used to foster innovation. See Figure 1.16 .
We have used the term system more than 100 times already and will use it thousands more before we are done. It therefore seems reasonable that we focus our attention on ex- actly what a system is. As we discussed at the beginning of the chapter, a system is defined as a set of interrelated components, with a clearly defined boundary, working together to achieve a common set of objectives by accepting inputs and producing outputs in an organized transformation process . Many examples of systems can be found in the physical and bio- logical sciences, in modern technology, and in human society. Thus, we can talk of the physical system of the sun and its planets, the biological system of the human body, the technological system of an oil refinery, and the socioeconomic system of a business organization. Systems have three basic functions:
• Input involves capturing and assembling elements that enter the system to be processed. For example, raw materials, energy, data, and human effort must be secured and organized for processing.
• Processing involves transformation processes that convert input into output. Ex- amples are manufacturing processes, the human breathing process, or mathemati- cal calculations.
• Output involves transferring elements that have been produced by a transforma- tion process to their ultimate destination. For example, finished products, human services, and management information must be transmitted to their human users.
Example. A manufacturing system accepts raw materials as input and produces fin- ished goods as output. An information system is a system that accepts resources (data) as input and processes them into products (information) as output. A business organi- zation is a system in which human and economic resources are transformed by various business processes into goods and services.
System Concepts: A Foundation
What Is a System?
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and the resources to turn their ideas into reality. Typical projects are measured against criteria like revenue potential or journalis- tic value. R&D projects aren’t. “Since we build software, there’s no huge capital investment up front,” Frons says, “which allows us to experiment. The emphasis is on rapid development.” Times Widgets, a widget-making platform, was a con- test winner, as was the recently launched Times Wire, a near real-time customizable interface for online content. “We’re trying to solve specific problems and think about where the business is going,” Frons says. Frons is focused on enhanc- ing revenue, cutting costs, and increasing efficiency through process improvements and automation. The New York Times has launched a cool interactive map that shows the most popular Netflix rentals across 12 U.S. metropolitan areas: New York, San Francisco/Bay Area, Boston, Chicago, Washington, Los Angeles, Seattle, Minne- apolis, Denver, Atlanta, Dallas, and Miami. If you’re a Netflix junkie and a closet Twilight fan (and you live in a major U.S. city), your rental habits are now on display. To create the map, The New York Times partnered with Netflix. The map is a graphical database of the top 100 most-rented Netflix films of 2009 laid on top of maps. With it you can graphically explore top 2009 Netflix movies based on three criteria: films that were hated or loved by critics, an alphabetical list, and most rented. For example, select most rented, and when you place the mouse over a zip code, a window pops up showing you what the top Netflix rentals are for that specific region. Some trends are not surprising: The most popular Netf- lix movie of 2009 was The Curious Case of Benjamin Button , although Slumdog Millionaire and Twilight were both in the top 10. Milk, the story of San Franciscan activist Harvey Milk, was popular in San Francisco and other city centers, but not so much in the suburbs of southern cities (such as Dallas and Atlanta). Mad Men , the 1960s-set drama about advertising execs, was hot in parts of Manhattan and Brook- lyn, but not in any other major cities. It barely got mention in Denver and Dallas, and not at all in Miami. The map does show some interesting trends: Big block- busters were not as popular in city centers ( Wanted and Trans- formers: Revenge of the Fallen , barely made a splash in the city centers of Manhattan and San Francisco), although this could be due to the fact that a lot of people see blockbusters in movie theaters. Last Chance Harvey , a romantic comedy star- ring Dustin Hoffman and Emma Thompson, was enjoyed in wealthier suburbs (such as Scarsdale), but not in city centers (such as Manhattan). Tyler Perry’s movies (Tyler Perry’s Madea Goes to Jail and Tyler Perry’s The Family That Preys ) were popular in predominantly black neighborhoods. Much of what has been innovative thus far at The New York Times can be classified as process or product innovation. Typically, a healthy and growing company should be con- tent with focusing 90 to 95 percent of its innovation dollars on such core business innovation and 5 percent or 10 per- cent on new business models, says Mark Johnson, chairman
A lmost everybody has a theory about how to save the U.S. newspaper industry. The only consensus, it seems, is that it needs to change fundamentally or it could all but disappear. At The New York Times, tough times have elevated IT-enabled innovation to the top of the agenda. A research and development group, created in 2006, op- erates as a shared service across nearly two dozen newspa- pers, a radio station, and more than 50 Web sites. “Our role is to accelerate our entry onto new platforms by identifying opportunities, conceptualizing, and prototyp- ing ideas,” explains Michael Zimbalist, the company’s vice president of R&D. Zimbalist’s staff of 12 includes experts in rapid prototyp- ing, specialists in areas like mobile or cloud computing and data miners who probe Web site data for insight into what visitors do. They work within a common framework based on idea generation, development, and diffusion throughout the business. Recent projects included prototypes for new display ad concepts, as well as BlackBerry applications for Boston.com and the expert site About.com . The team’s work is intended to supplement and support innovation taking place within the business units. For example, the team is prototyping E-Ink, an emerging display technology; some business units can’t spare the resources to investigate it. At NYTimes.com , the design and product development group of Marc Frons, CTO of Digital Operations, worked with Zimbalist’s team and Adobe developers on the Times Reader 2.0 application, the next generation, on-screen reading system it developed on the Adobe AIR platform. Frons further encour- ages forward thinking among his 120-person team with twice- annual innovation contests. Winners receive cash, recognition
The New York Times and Boston Scientific: Two Different Ways of Innovating with Information Technology
REAL WORLD
CASE 2
IT can enable innovation initiatives as companies seek to develop new products and services.
Source: © Stockbyte/Getty Images.
F IGURE 1.16
Chapter 1 / Foundations of Information Systems in Business ● 27
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of strategic innovation consultancy Innosight. However, he adds, “The newspaper industry is in so much trouble that business model innovation is more important than ever.” Now is a good—and bad—time for fostering such innova- tion. “You’ve got the leadership’s attention you need,” says Johnson. “But it’s harder in the sense that there’s an urgency to fix the financials, and being patient in the way you need to be for a new business model to unfold is a very difficult thing to do.” The New York Times is focused on experimenting with a number of different initiatives, but Boston Scientific faces a much different challenge: how to foster innovation without risking the disclosure and leakage of very valuable intellec- tual property. And the company has turned to technology to help find the right mix of access and security. Boston Scientific wants to tear down barriers that prevent product developers from accessing the research that went into its successful medical devices so that they can create new prod- ucts faster. But making data too easily accessible could open the way to theft of information potentially worth millions or billions of dollars. It’s a classic corporate data privacy problem. “The more info you give knowledge workers, the more effective they can be in creating a lot of value for the com- pany,” says Boris Evelson, a principal analyst at Forrester. “This creates disclosure risks—that someone’s going to walk away with the data and give it to a competitor.” This tension compels the $8 billion company to seek out software that allows the broader engineering community to share knowledge while managing access to product development data, says Jude Currier, cardiovascular knowledge manage- ment and innovation practices lead at Boston Scientific. “Ac- tive security is the way to address this problem,” Currier says. That is, regularly monitor who’s accessing what, and ad- just permissions as business conditions change. Keeping the pipeline of new stents, pacemakers, and catheters fresh is especially important because heart-related items account for 80 percent of Boston Scientific’s sales. Over the past few years, engineers have been focused on
quality system improvements, Currier says. Boston Scientific had inherited regulatory problems from acquisitions it made during that time. Now that those situations are addressed, the company is ready to reinvigorate internal innovation. Boston Scientific is piloting Invention Machine’s Gold- fire software, which, Currier says, provides the right mix of openness and security for data. Before, Boston Scientific’s product developers worked in silos with limited access to re- search by colleagues on different product lines. Information was so locked down that even if scientists found something useful from a past project, they often didn’t have access to it. “We’re changing that,” Currier says. Goldfire makes an automated workflow out of such tasks as analyzing markets and milking a company’s intellectual property. It combines internal company data with information from public sources, such as federal government databases. Researchers can use the software to find connections among different sources, for instance by highlighting similar ideas. Engineers can use such analysis to get ideas for new products and begin to study their feasibility. The goal is to have any engineer be able to access any other engineer’s research. “The people in the trenches can’t wait for that day to arrive,” he says. Although the goal is more openness, not all data stay open forever. For example, as a project gets closer to the patent application stage, access to the data about it is clipped to fewer people, Currier says. He adds that since installing Goldfire, patent applica- tions are up compared to similar engineering groups that do not use the Goldfire tool. “We have had to educate people that we aren’t throwing security out the window but making valuable knowledge available to the organization,” he says.
Source: Adapted from Stephanie Overby, “Rapid Prototyping Provides Innova- tion that Fits at the New York Times,” CIO.com , June 24, 2009; Sarah Jacobson, “Netflix Map Shows What’s Hot in Your Neighborhood,” PCWorld.com , January 11, 2010; and Kim S. Nash, “Innovation: How Boston Scientific Shares Data Securely to Foster Product Development,” CIO.com , November 23, 2009.
1. As stated in the case, The New York Times chose to de- ploy their innovation support group as a shared service across business units. What do you think this means? What are the advantages of choosing this approach? Are there any disadvantages?
2. Boston Scientific faced the challenge of balancing open- ness and sharing with security and the need for restrict- ing access to information. How did the use of technology allow the company to achieve both objectives at the same time? What kind of cultural changes were required for this to be possible? Are these more important than the technology-related issues? Develop a few examples to justify your answer.
3. The video rental map developed by The New York Times and Netflix graphically displays movie popularity across neighborhoods from major U.S. cities. How would Netflix use this information to improve their business? Could other companies also take advantage of these data? How? Provide some examples.
1. The newspaper industry has been facing serious chal- lenges to its viability ever since the Internet made news available online. In addition to those initiatives described in the case, how are The New York Times and other leading newspapers coping with these challenges? What do you think the industry will look like 5 or 10 years from now? Go online to research these issues and prepare a report to share your findings.
2. Go online and search the Internet for other examples of companies using technology to help them innovate and develop new products or services. Break into small groups with your classmates to share your findings and discuss any trends or patterns you see in current uses of technology in this regard.
CASE STUDY QUESTIONS REAL WORLD ACTIVITIES
28 ● Module I / Foundation Concepts
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Chapter 1 / Foundations of Information Systems in Business ● 29
The system concept becomes even more useful by including two additional elements: feedback and control. A system with feedback and control functions is sometimes called a cybernetic system, that is, a self-monitoring, self-regulating system.
• Feedback is data about the performance of a system. For example, data about sales performance are feedback to a sales manager. Data about the speed, altitude, attitude, and direction of an aircraft are feedback to the aircraft’s pilot or autopilot.
• Control involves monitoring and evaluating feedback to determine whether a system is moving toward the achievement of its goal. The control function then makes the necessary adjustments to a system’s input and processing components to ensure that it produces proper output. For example, a sales manager exercises control when reassigning salespersons to new sales territo- ries after evaluating feedback about their sales performance. An airline pilot, or the aircraft’s autopilot, makes minute adjustments after evaluating the feedback from the instruments to ensure that the plane is exactly where the pilot wants it to be.
Example. Figure 1.17 illustrates a familiar example of a self-monitoring, self-regulating, thermostat-controlled heating system found in many homes; it automatically monitors and regulates itself to maintain a desired temperature. Another example is the human body, which can be regarded as a cybernetic system that automatically monitors and adjusts many of its functions, such as temperature, heartbeat, and breathing. A busi- ness also has many control activities. For example, computers may monitor and con- trol manufacturing processes, accounting procedures help control financial systems, data entry displays provide control of data entry activities, and sales quotas and sales bonuses attempt to control sales performance.
Figure 1.18 uses a business organization to illustrate the fundamental components of a system, as well as several other system characteristics. Note that a system does not exist in a vacuum; rather, it exists and functions in an environment containing other systems. If a system is one of the components of a larger system, it is a subsystem , and the larger system is its environment. Several systems may share the same environment. Some of these systems may be connected to one another by means of a shared boundary, or interface . Figure 1.18 also illustrates the concept of an open system , that is, a system that interacts with other sys- tems in its environment. In this diagram, the system exchanges inputs and outputs with its environment. Thus, we could say that it is connected to its environment by input and output interfaces. Finally, a system that has the ability to change itself or its environment to survive is an adaptive system .
Feedback and Control
Other System Characteristics
F IGURE 1.17 A common cybernetic system is a home temperature control system. The thermostat accepts the desired room temperature as input and sends voltage to open the gas valve, which fires the furnace. The resulting hot air goes into the room, and the thermometer in the thermostat provides feedback to shut the system down when the desired temperature is reached.
Desired Room
Temperature
Actual Room
Temperature
Temperature Feedback
Thermostat Gas Valve Furnace Room Voltage
Gas Fuel
Heat Loss
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30 ● Module I / Foundation Concepts
Example. Organizations such as businesses and government agencies are good exam- ples of the systems in society, which is their environment. Society contains a multitude of such systems, including individuals and their social, political, and economic institu- tions. Organizations themselves consist of many subsystems, such as departments, divisions, process teams, and other workgroups. Organizations are examples of open systems because they interface and interact with other systems in their environment. Finally, organizations are examples of adaptive systems because they can modify them- selves to meet the demands of a changing environment. If we apply our understanding of general system concepts to information systems, it should be easy to see the parallels. Information systems are made up of interrelated components:
• People, hardware, software, peripherals, and networks. They have clearly defined boundaries:
• Functions, modules, type of application, department, or end-user group. All the interrelated components work together to achieve a common goal by a ccepting inputs and producing outputs in an organized transformation process:
• Using raw materials, hiring new people, manufacturing products for sale, and disseminating information to others.
Information systems make extensive use of feedback and control to improve their effectiveness:
• Error messages, dialog boxes, passwords, and user rights management.
F IGURE 1.18 A business is an example of an organizational system in which economic resources (input) are transformed by various business processes (processing) into goods and services (output). Information systems provide information (feedback) about the operations of the system to management for the direction and maintenance of the system (control) as it exchanges inputs and outputs with its environment.
Feedback
Input Processing Output
Business Processes:
Market, Develop, Produce, and Deliver Products and Services Support Customers Other Processes
Goods and Services:
Products Services Payments Contributions Information Other Effects
Stakeholders in the Business Environment
Management
Information Systems
The Community Competitors
Labor UnionsFinancial Institutions
G ov
er nm
en t A
ge nc
ie s
S up
pl ie
rs
C us
to m
er s
S to
ck ho
ld er
s
Economic Resources:
People Money Material Machines Land Facilities Energy Information
Control
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Chapter 1 / Foundations of Information Systems in Business ● 31
Many information systems are designed to change in relation to their environ- ments and are adaptive:
• Intelligent software agents, expert systems, and highly specialized decision support systems.
Information systems are systems just like any other system. Their value to the modern organization, however, is unlike any other system ever created.
We have noted that an information system is a system that accepts data resources as input and processes them into information products as output. How does an informa- tion system accomplish this task? What system components and activities are involved? Figure 1.19 illustrates an information system model that expresses a fundamental conceptual framework for the major components and activities of information systems. An information system depends on the resources of people (end users and IS special- ists), hardware (machines and media), software (programs and procedures), data (data and knowledge bases), and networks (communications media and network support) to perform input, processing, output, storage, and control activities that transform data resources into information products. This information system model highlights the relationships among the compo- nents and activities of information systems. It also provides a framework that empha- sizes four major concepts that can be applied to all types of information systems:
• People, hardware, software, data, and networks are the five basic resources of information systems.
• People resources include end users and IS specialists, hardware resources consist of machines and media, software resources include both programs and proce- dures, data resources include data and knowledge bases, and network resources include communications media and networks.
Components of Information Systems
FIGURE 1.19 The components of an information system. All information systems use people, hardware, software, data, and network resources to perform input, processing, output, storage, and control activities that transform data resources into information products.
Network Resources
Communications Media and Network Support
P eo
p le
R es
o u rc
es
En d U
se rs
an d I
S S pe
cia list
s Softw are R
esources
Programs and Procedures
H a rd
w a r e R
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M ac
hi ne
s an
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ed iaDa
ta R
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u rc
e s
D ata and K
now ledge B
ases
Storage of Data Resources
Processing Data into
Information
Input of
Data Resources
Output of
Information Products
Control of System Performance
System Activities
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32 ● Module I / Foundation Concepts
• Data resources are transformed by information processing activities into a variety of information products for end users.
• Information processing consists of the system activities of input, processing, out- put, storage, and control.
Our basic IS model shows that an information system consists of five major resources: people, hardware, software, data, and networks. Let’s briefly discuss several basic con- cepts and examples of the roles these resources play as the fundamental components of information systems. You should be able to recognize these five components at work in any type of information system you encounter in the real world. Figure 1.20 out- lines several examples of typical information system resources and products.
People are the essential ingredient for the successful operation of all information sys- tems. These people resources include end users and IS specialists.
• End users (also called users or clients) are people who use an information system or the information it produces. They can be customers, salespersons, engineers, clerks, accountants, or managers and are found at all levels of an organization. In fact, most of us are information system end users. Most end users in business are knowledge workers , that is, people who spend most of their time communicating and collaborating in teams and workgroups and creating, using, and distributing information.
• IS specialists are people who develop and operate information systems. They include systems analysts, software developers, system operators, and other mana- gerial, technical, and clerical IS personnel. Briefly, systems analysts design infor- mation systems based on the information requirements of end users, software developers create computer programs based on the specifications of systems analysts, and system operators help monitor and operate large computer systems and networks.
The concept of hardware resources includes all physical devices and materials used in information processing. Specifically, it includes not only machines , such as computers
Information System Resources
People Resources
Hardware Resources
F IGURE 1.20 Examples of information system resources and products.
Information System Resources and Products
People Resources Specialists—systems analysts, software developers, systems operators. End Users—anyone else who uses information systems.
Hardware Resources Machines—computers, video monitors, magnetic disk drives, printers, optical scanners. Media—floppy disks, magnetic tape, optical disks, plastic cards, paper forms.
Software Resources Programs—operating system programs, spreadsheet programs, word processing programs, payroll programs. Procedures—data entry procedures, error correction procedures, paycheck distribution procedures.
Data Resources Product descriptions, customer records, employee files, inventory databases.
Network Resources Communications media, communications processors, network access, control software.
Information Products Management reports and business documents using text and graphics displays, audio responses, and paper forms.
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Chapter 1 / Foundations of Information Systems in Business ● 33
and other equipment, but also all data media , that is, tangible objects on which data are recorded, from sheets of paper to magnetic or optical disks. Examples of hardware in computer-based information systems are:
• Computer systems , which consist of central processing units containing micro- processors and a variety of interconnected peripheral devices such as printers, scanners, monitors, and so on. Examples are handheld, laptop, tablet, or desktop microcomputer systems, midrange computer systems, and large mainframe com- puter systems.
• Computer peripherals , which are devices such as a keyboard, electronic mouse, trackball, or stylus for the input of data and commands, a video screen or printer for the output of information, and magnetic or optical disk drives for the storage of data resources.
The concept of software resources includes all sets of information processing instruc- tions. This generic concept of software includes not only the sets of operating instruc- tions called programs , which direct and control computer hardware, but also the sets of information processing instructions called procedures that people need. It is important to understand that even information systems that do not use com- puters have a software resource component. This claim is true even for the informa- tion systems of ancient times or the manual and machine-supported information systems still used in the world today. They all require software resources in the form of information processing instructions and procedures to properly capture, process, and disseminate information to their users. The following are examples of software resources:
• System software, such as an operating system program, which controls and sup- ports the operations of a computer system. Microsoft Windows and Unix are two examples of popular computer operating systems.
• Application software, which are programs that direct processing for a particular use of computers by end users. Examples are sales analysis, payroll, and word pro- cessing programs.
• Procedures, which are operating instructions for the people who will use an in- formation system. Examples are instructions for filling out a paper form or using a software package.
Data are more than the raw material of information systems. The concept of data resources has been broadened by managers and information systems professionals. They realize that data constitute valuable organizational resources. Thus, you should view data just as you would any organizational resource that must be managed effec- tively to benefit all stakeholders in an organization. The concept of data as an organizational resource has resulted in a variety of changes in the modern organization. Data that previously were captured as a result of a common transaction are now stored, processed, and analyzed using sophisticated software applications that can reveal complex relationships among sales, customers, competitors, and markets. In today’s wired world, the data to create a simple list of an organization’s customers are protected with the same energy as the cash in a bank vault. Data are the lifeblood of today’s organizations, and the effective and efficient management of data is considered an integral part of organizational strategy. Data can take many forms, including traditional alphanumeric data, composed of numbers, letters, and other characters that describe business transactions and other events and entities; text data, consisting of sentences and paragraphs used in written communications; image data, such as graphic shapes and figures or photographic and video images; and audio data, including the human voice and other sounds.
Software Resources
Data Resources
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34 ● Module I / Foundation Concepts
The data resources of information systems are typically organized, stored, and accessed by a variety of data resource management technologies into:
• Databases that hold processed and organized data. • Knowledge bases that hold knowledge in a variety of forms, such as facts, rules,
and case examples about successful business practices.
For example, data about sales transactions may be accumulated, processed, and stored in a Web-enabled sales database that can be accessed for sales analysis reports by managers and marketing professionals. Knowledge bases are used by knowledge management systems and expert systems to share knowledge or give expert advice on specific subjects. We explore these concepts further in subsequent chapters.
Data versus Information. The word data is the plural of datum , though data com- monly represents both singular and plural forms. Data are raw facts or observations, typically about physical phenomena or business transactions. For example, a spacecraft launch or the sale of an automobile would generate a lot of data describing those events. More specifically, data are objective measurements of the attributes (the char- acteristics) of entities (e.g., people, places, things, events).
Example. Business transactions, such as buying a car or an airline ticket, can produce a lot of data. Just think of the hundreds of facts needed to describe the characteristics of the car you want and its financing or the intricate details for even the simplest air- line reservation. People often use the terms data and information interchangeably. However, it is better to view data as raw material resources that are processed into finished informa- tion products. Then we can define information as data that have been converted into a meaningful and useful context for specific end users. Thus, data are usually subjected to a value-added process ( data processing or information processing ) during which (1) their form is aggregated, manipulated, and organized; (2) their content is analyzed and evaluated; and (3) they are placed in a proper context for a human user. The issue of context is really at the heart of understanding the difference between information and data. Data can be thought of as context independent: A list of num- bers or names, by itself, does not provide any understanding of the context in which it was recorded. In fact, the same list could be recorded in a variety of contexts. In con- trast, for data to become information, both the context of the data and the perspective of the person accessing the data become essential. The same data may be considered valuable information to one person and completely irrelevant to the next. Just think of data as potentially valuable to all and information as valuable relative to its user.
Example. Names, quantities, and dollar amounts recorded on sales forms represent data about sales transactions. However, a sales manager may not regard these as infor- mation. Only after such facts are properly organized and manipulated can meaningful sales information be furnished and specify, for example, the amount of sales by prod- uct type, sales territory, or salesperson.
Telecommunications technologies and networks like the Internet, intranets, and extranets are essential to the successful e-business and e-commerce operations of all types of organizations and their computer-based information systems. Telecommuni- cations networks consist of computers, communications processors, and other devices interconnected by communications media and controlled by communications soft- ware. The concept of network resources emphasizes that communications technolo- gies and networks are fundamental resource components of all information systems. Network resources include:
• Communications media . Examples include twisted-pair wire, coaxial and fiber- optic cables, and microwave, cellular, and satellite wireless technologies.
Network Resources
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Chapter 1 / Foundations of Information Systems in Business ● 35
• Network infrastructure. This generic category emphasizes that many hardware, software, and data technologies are needed to support the operation and use of a communications network. Examples include communications processors, such as modems and inter-network processors, and communications control software, such as network operating systems and Internet browser packages.
Regardless of the type of information system, the same basic information system activities occur. Let’s take a closer look now at each of the basic data or information processing activities. You should be able to recognize input, processing, output, stor- age, and control activities taking place in any information system you are studying. Figure 1.21 lists business examples that illustrate each of these information system activities.
Data about business transactions and other events must be captured and prepared for processing by the input activity. Input typically takes the form of data entry activities such as recording and editing. End users usually enter data directly into a computer system or record data about transactions on some type of physical medium such as a paper form. This entry includes a variety of editing activities to ensure that they have recorded the data correctly. Once entered, data may be transferred onto a machine- readable medium, such as a magnetic disk, until needed for processing. For example, data about sales transactions may be recorded on source documents such as paper order forms. (A source document is the original, formal record of a transaction.) Alternatively, salespersons might capture sales data using computer key- boards or optical scanning devices; they are visually prompted to enter data correctly by video displays. This method provides them with a more convenient and efficient user interface, that is, methods of end-user input and output with a computer system. Methods such as optical scanning and displays of menus, prompts, and fill-in-the-blank formats make it easier for end users to enter data correctly into an information system.
Data are typically subjected to processing activities, such as calculating, comparing, sorting, classifying, and summarizing. These activities organize, analyze, and manipu- late data, thus converting them into information for end users. The quality of any data stored in an information system also must be maintained by a continual process of cor- recting and updating activities.
Example. Data received about a purchase can be (1) added to a running total of sales re- sults, (2) compared to a standard to determine eligibility for a sales discount, (3) sorted in numerical order based on product identification numbers, (4) classified into product cate- gories (e.g., food and nonfood items), (5) summarized to provide a sales manager with in- formation about various product categories, and finally (6) used to update sales records.
Information in various forms is transmitted to end users and made available to them in the output activity. The goal of information systems is the production of appropriate information products for end users. Common information products include messages,
Information System Activities
Input of Data Resources
Processing of Data into Information
Output of Information Products
F IGURE 1.21 Business examples of the basic activities of information systems.
Information System Activities
• Input. Optical scanning of bar-coded tags on merchandise. • Processing. Calculating employee pay, taxes, and other payroll deductions. • Output. Producing reports and displays about sales performance. • Storage. Maintaining records on customers, employees, and products. • Control. Generating audible signals to indicate proper entry of sales data.
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36 ● Module I / Foundation Concepts
reports, forms, and graphic images, which may be provided by video displays, audio responses, paper products, and multimedia. We routinely use the information pro- vided by these products as we work in organizations and live in society. For example, a sales manager may view a video display to check on the performance of a salesperson, accept a computer-produced voice message by telephone, and receive a printout of monthly sales results.
Storage is a basic system component of information systems. Storage is the informa- tion system activity in which data are retained in an organized manner for later use. For example, just as written text material gets organized into words, sentences, para- graphs, and documents, stored data are commonly organized into a variety of data ele- ments and databases. This organization facilitates their later use in processing or retrieval as output when needed by users of a system. Such data elements and data- bases are discussed further in Chapter 5, Data Resource Management.
An important information system activity is the control of system performance. An information system should produce feedback about its input, processing, output, and storage activities. This feedback must be monitored and evaluated to determine whether the system is meeting established performance standards. Then appropriate sys- tem activities must be adjusted so that proper information products are produced for end users. For example, a manager may discover that subtotals of sales amounts in a sales re- port do not add up to total sales. This conflict might mean that data entry or process- ing procedures need to be corrected. Then changes would have to be made to ensure that all sales transactions would be properly captured and processed by a sales infor- mation system.
As a business professional, you should be able to recognize the fundamental compo- nents of information systems you encounter in the real world. This demand means that you should be able to identify:
• The people, hardware, software, data, and network resources they use. • The types of information products they produce. • The way they perform input, processing, output, storage, and control activities. This kind of understanding will help you be a better user, developer, and manager of information systems. As we have pointed out in this chapter, this is important to your future success as a manager, entrepreneur, business professional, or modern busi- ness technologist.
Storage of Data Resources
Control of System Performance
Recognizing Information Systems
• IS Framework for Business Professionals. The IS knowledge that a business manager or professional needs to know is illustrated in Figure 1.2 and covered in this chapter and text. This knowledge includes (1) foundation concepts: fundamental behavioral, techni- cal, business, and managerial concepts like system components and functions, or competitive strategies; (2) information technologies: concepts, developments, or management issues regarding hardware, software, data management, networks, and other technologies;
(3) business applications: major uses of IT for business processes, operations, decision making, and strategic/ competitive advantage; (4) development processes: how end users and IS specialists develop and implement business/IT solutions to problems and opportunities arising in business; and (5) management challenges: how to manage the IS function and IT resources effectively and ethically to achieve top performance and business value in support of the business strate- gies of the enterprise.
S u m m a r y
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Chapter 1 / Foundations of Information Systems in Business ● 37
• Business Roles of Information Systems. Informa- tion systems perform three vital roles in business firms. Business applications of IS support an organization’s business processes and operations, business decision making, and strategic competitive advantage. Major application categories of information systems include operations support systems, such as transaction processing systems, process control systems, and enter- prise collaboration systems; and management support systems, such as management information systems, decision support systems, and executive information systems. Other major categories are expert systems, knowledge management systems, strategic information systems, and functional business systems. However, in the real world, most application categories are com- bined into cross-functional information systems that provide information and support for decision making and also performing operational information process- ing activities. Refer to Figures 1.7 , 1.9 , and 1.11 for summaries of the major application categories of infor- mation systems.
• System Concepts. A system is a group of interrelated components, with a clearly defined boundary, working toward the attainment of a common goal by accepting inputs and producing outputs in an organized transfor- mation process. Feedback is data about the performance of a system. Control is the component that monitors
and evaluates feedback and makes any necessary adjust- ments to the input and processing components to en- sure that proper output is produced.
• Information System Model. An information system uses the resources of people, hardware, software, data, and networks to perform input, processing, output, storage, and control activities that convert data re- sources into information products. Data are first col- lected and converted to a form that is suitable for processing (input). Then the data are manipulated and converted into information (processing), stored for fu- ture use (storage), or communicated to their ultimate user (output) according to correct processing proce- dures (control).
• IS Resources and Products. Hardware resources include machines and media used in information processing. Software resources include computerized in- structions (programs) and instructions for people (proce- dures). People resources include information systems specialists and users. Data resources include alphanu- meric, text, image, video, audio, and other forms of data. Network resources include communications media and network support. Information products produced by an information system can take a variety of forms, including paper reports, visual displays, multimedia documents, e-messages, graphics images, and audio responses.
1. Computer-based information system (8)
2. Control (29)
3. Data (34)
4. Data or information processing (35)
5. Data resources (33)
6. Developing successful information system solutions (18)
7. E-business (12)
8. E-business applications (12)
9. E-commerce (13)
10. Enterprise collaboration systems (13)
11. Extranet (12)
12. Feedback (29)
13. Hardware resources (32)
a. Machines (32) b. Media (33)
14. Information (34)
a. Information products (35)
15. Information system (4)
16. Information system activities (35)
a. Input (35) b. Processing (35) c. Output (35) d. Storage (36) e. Control (36)
17. Information system model (31)
18. Intranet (12)
19. Knowledge workers (32)
20. Management information systems (15)
21. Network resources (34)
22. People resources (32)
a. IS specialists (32) b. End users (32)
23. Roles of IS in business (8)
a. Support of business processes and operations (8)
b. Support of business decision making (8)
c. Support of strategies for competitive advantage (9)
24. Software resources (33)
a. Programs (33) b. Procedures (33)
25. System (26)
26. Types of information systems (13)
a. Cross-functional informational systems (15)
b. Management support systems (14)
c. Operations support systems (13) d. Functional business systems (15) e. Transaction processing
systems (14) f. Process control systems (14) g. Enterprise collaboration
systems (14)
These are the key terms and concepts of this chapter. The page number of their first explanation appears in parentheses.
K e y Te r m s a n d C o n c e p t s
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38 ● Module I / Foundation Concepts
1. People who spend most of their workday creating, using, and distributing information.
2. Information systems support an organization’s business processes, operations, decision making, and strategies for competitive advantage.
3. Using IT to reengineer business processes to support e-business operations.
4. Using Web-based decision support systems to support sales managers.
5. Using information technology for e-commerce to gain a strategic advantage over competitors.
6. A system that uses people, hardware, software, and network resources to collect, transform, and dis- seminate information within an organization.
7. An information system that uses computers and their hardware and software.
8. Anyone who uses an information system or the in- formation it produces.
9. Applications using the Internet, corporate intranets, and interorganizational extranets for e-business operations, e-commerce, and enterprise collaboration.
10. The buying, selling, marketing, and servicing of products over the Internet and other networks.
11. Groupware tools to support collaboration among networked teams.
12. A group of interrelated components with a clearly defined boundary working together toward the attainment of a common goal.
13. Data about a system’s performance.
14. Making adjustments to a system’s components so that it operates properly.
15. Facts or observations.
16. Data that have been placed into a meaningful context for an end user.
17. Converting data into information is a type of this kind of activity.
18. An information system uses people, hardware, software, network, and data resources to perform input, processing, output, storage, and control activities that transform data resources into information products.
19. Machines and media.
20. Computers, disk drives, video monitors, and printers are examples.
21. Magnetic disks, optical disks, and paper forms are examples.
22. Programs and procedures.
23. A set of instructions for a computer.
24. A set of instructions for people.
25. End users and information systems professionals.
26. Using the keyboard of a computer to enter data.
27. Computing loan payments.
28. Printing a letter you wrote using a computer.
29. Saving a copy of the letter on a magnetic disk.
30. Having a sales receipt as proof of a purchase.
31. Information systems can be classified into operations, management, and other categories.
32. Includes transaction processing, process control, and end-user collaboration systems.
33. Includes management information, decision support, and executive information systems.
34. Information systems that perform transaction processing and provide information to managers across the boundaries of functional business areas.
35. Internet-like networks and Web sites inside a company.
36. Interorganizational Internet-like networks among trading partners.
37. Using the Internet, intranets, and extranets to empower internal business operations, e-commerce, and enterprise collaboration.
38. Information systems that focus on operational and managerial applications in support of basic business functions such as accounting or marketing.
39. Data should be viewed the same way as any organizational resource that must be managed effectively to benefit all stakeholders in an organization.
40. A major challenge for business managers and pro- fessionals today in solving business problems.
41. Examples include messages, reports, forms, and graphic images, which may be provided by video displays, audio responses, paper products, and multimedia.
42. These include communications media and network infrastructure.
43. People who develop and operate information systems.
44. The execution of a set of activities in order to convert data into information.
R e v i e w Q u i z
Match one of the previous key terms and concepts with one of the following brief examples or definitions. Look for the best fit for answers that seem to fit more than one key term or concept. Defend your choices.
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Chapter 1 / Foundations of Information Systems in Business ● 39
45. Those systems implemented in order to direct physical conversion processes, such as oil refinement.
46. The second stage of information systems evolu- tion, focused on providing managerial users with information relevant to decision making in the form of predefined reports.
47. A type of operation support systems geared toward the recording and processing of data captured as a result of business transactions.
48. A type of operation support systems that en- hance team and workgroup communication and productivity.
1. How can information technology support a company’s business processes and decision making and give it a competitive advantage? Give examples to illustrate your answer.
2. How does the use of the Internet, intranets, and ex- tranets by companies today support their business pro- cesses and activities?
3. Refer to the Real Word Case on eCourier, Cablecom, and Bryan Cave in the chapter. Jay Bregman, CTO and cofounder of eCourier, notes that the company hopes their innovative use of technology will become a differentiator in their competitive market. More generally, to what extent do specific technologies help companies gain an edge over their competitors? How easy or difficult would it be to imitate such advantages?
4. Why do big companies still fail in their use of informa- tion technology? What should they be doing differently?
5. How can a manager demonstrate that he or she is a re- sponsible end user of information systems? Give several examples.
6. Refer to the Real World Case on The New York Times and Boston Scientific in the chapter, and think about any technology-enabled innovations that you have read about or come across recently. To what extent is innovation about the technology itself, and to what extent is it about changing the underlying ways that companies do business?
7. What are some of the toughest management challenges in developing IT solutions to solve business problems and meet new business opportunities?
8. Why are there so many conceptual classifications of in- formation systems? Why are they typically integrated in the information systems found in the real world?
9. In what major ways have information systems in busi- ness changed during the last 40 years? What is one ma- jor change you think will happen in the next 10 years? Refer to Figure 1.4 to help you answer.
10. Refer to the real world example about responsibility and accountability for project failures in the chapter. Are these IT projects, or business projects with a signif- icant IT component? Who should be responsible for ensuring their success? Explain.
D i s c u s s i o n Q u e s t i o n s
3. Skydive Chicago: Efficiency and Feedback Digital Data
Skydive Chicago ( www.SkydiveChicago.com ) is one of the premier skydiving resorts in the United States, ser- ving skydivers ranging in skills from first-time jumpers to internationally competitive freefly teams. Each student in Skydive Chicago’s training program makes a series of progressive training jumps under the di- rect supervision of a United States Parachute Association– rated jumpmaster. The training program gears each jump in the series toward teaching one or two new skills. Jumpmasters video their students’ jumps. Stu- dents use the feedback these videos provide to identify mistakes. They often copy their videos onto a personal tape for future reference. Jumpmasters may also copy well-executed student skydives to the facility’s tape library. All students are given access to the dropzone’s training room and are encouraged to watch video clips in preparation for their next training jump. This step saves jumpmasters, who are paid per jump, considerable time. Jumpmasters also
1. Understanding the Information System The Library as an Information System
A library makes an excellent information systems model. It serves as a very large information storage fa- cility with text, audio, and video data archives. Look up the definitions for each term listed below and briefly explain a library’s equivalents.
a. Input b. Processing c. Output d. Storage e. Control f. Feedback 2. Career Research on the Web Comparing Information Sources
Select a job title for a career you would like to pursue as a summer intern or new graduate. Provide a real-world example of each element in Figure 1.19 . You may need to interview someone familiar with this position to find the information you require.
A n a l y s i s E x e rc i s e s
Complete the following exercises as individual or group projects that apply chapter concepts to real-world business situations.
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40 ● Module I / Foundation Concepts
use these videos to evaluate their training method’s effectiveness .
a. How can this information system benefit the skydiv- ing student?
b. How can this information system benefit Skydive Chicago?
c. Draw an information systems model ( Figure 1.19 ). Fill in your diagram with the information about people, hardware, software, and other resources from this exercise.
4. Are Textbooks History? Trends in Information Systems
The wealth of free information available via the Inter- net continues to grow at incredible rates. Search en- gines such as Google make locating useful information practical. This textbook often explores the Internet’s impact on various industries, and the textbook industry is no exception. Is it possible that free Internet content might one day replace textbooks?
a. Go to www.google.com and use the search box to look up “End user.” Were any of Google’s first five search results useful with respect to this course?
b. Go to www.wikipedia.com and use the search box to look up “Knowledge worker.” Compare Wikipedia’s article with the information provided within this textbook. Which source did you find easiest to use?
What advantages did Wikipedia provide? What ad- vantages did this textbook provide?
c. Did Google, Wikipedia, or this textbook provide the most useful information about “Intranets”? Why?
5. Careers in IS Disaster Recovery
“How important are your data to you?” “What would happen if . . . ?” While business managers focus on solving business problems and determining what their information systems should do, disaster recovery con- sultants ask what would happen if things go wrong. With careful advance planning, disaster recovery specialists help their clients prevent calamity. Although this topic covers a wide variety of software issues, instal- lation configuration issues, and security threats, exam- ining common end-user mistakes may also prove enlightening. Common end-user mistakes include:
• Failure to save work in progress frequently. • Failure to make a backup copy. • Failure to store original and backup copies in differ-
ent locations.
For each of the common end-user mistakes listed above, answer the following questions:
a. How might this mistake result in data loss? b. What procedures could you follow to prevent this
risk?
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went full time in 1997 and incorporated in 1998. The im- portant role technology plays in running a successful small business hit home when she lost a big contract. The poten- tial client said that without a Web site, her company “lacked credibility.” “Before losing that contract, I thought, ‘I run a sewing business, a cottage craft. I don’t need a Web site,’” she says. Duckett admits she was rather cocky, mainly be- cause she had grown her business “quite well” by word of mouth alone. “I quickly learned the error of that thought process. You can’t have that attitude and stick around,” she acknowledges. Losing the contract also coincided with a period of low growth between 2001 and 2002. That’s when Duckett de- cided to embrace technology. Using Microsoft Publisher, she designed and built her own Web site. “You figure things out and learn how to do it yourself when budgets are thin,” she admits. Duckett kept working to improve the site and make it better for her customers. A year later, feeling that the site needed refreshing, she signed up for a 10-week course in Dreamweaver and again completely rebuilt the site. Yet an- other Web site reconstruction helped Sew What? grow into a company with customers around the world and a clientele list that includes international rock stars, Gucci, and Rolling Stone magazine. In 2005, Duckett decided she needed to improve the site’s navigation because “I wanted it to be sleek and to pro- vide a really good customer experience. That was beyond my abilities, so we hired a Web marketing consulting company to build a custom navigation system for the site.” She worked with the hired guns on branding, search en- gine optimization, overall design, and site layout. Duckett still provides all the content, including text and images. There’s also a Spanish version of the site, and the profession- als tuned up the main site’s search features to include spell- ing variants for different English-speaking countries. For example, you can search for the American spelling of theater or the British and Australian version, theatre. The site also lets potential customers review all kinds of color swatches and teaches them how to calculate accu- rate measurements for their projects; the differences be- tween a scrim, a tormentor, and a traveler curtain; the proper care and feeding of a variety of drapery materials; and a lot more. While perusing the Dell Web site one day, Duckett saw a news article about the Dell/NFIB Small Business Excel- lence Award. The National Federation of Independent Busi- nesses (NFIB) and Dell Inc. present this annual prize to one small business in recognition of its innovative use of tech- nology to improve its customers’ experience. The winner receives $30,000 worth of Dell products and services, a life- time membership to the NFIB, and a day at Dell’s headquar- ters with Michael Dell and other senior executives.
What do Sting, Elton John, and Madonna have in common? Besides being international rock stars, they all use theatrical backdrops designed and manufactured by custom drapery maker Sew What? Inc. Based in Rancho Dominguez, California, Sew What? pro- vides custom theatrical draperies and fabrics for stages, concerts, fashion shows, and special events worldwide and has become an industry leader in rock-and-roll staging. Founded in 1992 by Australian-born Megan Duckett, Sew What? has grown from a tiny kitchen-and-garage op- eration to a multimillion-dollar enterprise, thanks to Duck- ett’s never-say-no approach to customer satisfaction. “When I see a problem, I just don’t back down. I find a way to over- come it and I use everybody I know to help me,” she says. What made it possible for a one-woman business that started in a kitchen to evolve and grow into a multimillion- dollar company with 35 employees? Megan Duckett at- tributes her success to hard work, quality workmanship, and especially information technology. Sew What? has enjoyed explosive growth in recent years, reaching $4 million per year in sales by the end of 2006. Company president Duckett credits much of her firm’s rapid growth to its ability to leverage information technology and the Internet to drive sales. “Before we put up our Web site, sewwhatinc.com , our business was almost all local,” says Duckett. “But after launching the Web site three years ago, we now have clients all over the world. In fact, last year our revenue grew 45 percent on the previous year’s sales, and this year we are on target to enjoy a 65 percent increase on 2005 sales. And nearly all that growth came from Web-driven sales.” Although the company’s Web site may take center stage, managing all the business the site brings in requires a lot of effort behind the scenes. In particular, Duckett relies on a solid IT infrastructure to help keep the company running smoothly. “We are a customer-centric company,” notes Duckett. “It’s critical that we have excellent back-office in- formation technology to manage the business and deliver outstanding service to our customers.” Sew What? runs most of its business with Intuit’s Quick- Books Enterprise Solutions Manufacturing and Wholesale Edition software and Microsoft’s Windows Server operating system installed on a Dell PowerEdge 860 server, sporting an Intel Xeon processor and 146 gigabytes of disk storage. According to Duckett, “Running our business requires a lot of storage. In addition to customer information and vital operational and financial QuickBooks files, we need to store thousands of drapery and fabric image files, customer instruc- tion document files, and other types of data.” Sew What?’s additional computer support includes an older Dell Pow- erEdge 500 server dedicated to a few smaller applications and a variety of Dell desktop PC systems for employees. Sew What? started in 1992 as a part-time endeavor, with Duckett cutting and sewing fabric on her kitchen table. She
Sew What? Inc.: The Role of Information Technology in Small Business Success
REAL WORLD
CASE 3 Chapter 1 / Foundations of Information Systems in Business ● 41
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