Discussion - Enterprise Information Systems(300 words)

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PART 1 Information Systemsin Perspective

Chapter 1 An Introduction to Information Systems

Chapter 2 Information Systems in Organizations

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CHAPTER

1 An Introduction to Information Systems

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Know?Did Yo u

• The number of smartphones sold worldwide in 2015 exceeded 1.4 billion—over twice the combined sales of desktop, laptop, and tablet computers. The smartphone is increasingly becoming the device of choice for accessing the Internet and corporate databases.

• Although the success rate has improved over time with improved methods, training, and tools, 94 percent of very large software projects fail or are challenged. For example, Federal officials badly managed the develop- ment of a Web site to sell health insurance under the

Affordable Care Act, costing taxpayers hundreds of millions of dollars in cost overruns.

• Financial losses from cybercrime and the cost of hard- ware, software, and various countermeasures imple- mented to fight cybercrime are estimated to be as high as $400 billion annually worldwide. A data breach at Target exposed personal information about 110 million customers, led the CEO to resign, and cost the com- pany an estimated $148 million.

Principles Learning Objectives

• The value of information is directly linked to how it helps decision makers achieve the organization’s goals.

• Information systems are composed of fundamen- tal components that must be carefully assembled and integrated to work well together.

• Managers have an essential role to play in the successful implementation and use of information systems—that role changes depending on which type of IS system is being implemented.

• An organization’s infrastructure technology forms the foundation upon which its systems and appli- cations are built.

• Organizations employ a variety of information systems to improve the way they conduct busi- ness and make fact-based decisions.

• Many challenges and potential benefits are asso- ciated with harnessing the rapid growth of data within organizations.

• Strategic planning and project management are keys to ensuring that the organization is working effectively on the right projects.

• Information systems must be applied thoughtfully and carefully so that society, organizations, and individuals around the globe can reap their enor- mous benefits.

• Distinguish data from information and knowl- edge, and describe the characteristics of quality data.

• Identify the fundamental components of an information system and describe their function.

• Identify the three fundamental information system types and explain what organizational comple- ments must be in place to ensure successful implementation and use of the system.

• Identify and briefly describe the role of each component of an organization’s technology infrastructure.

• Identify the basic types of business information systems, including who uses them, how they are used, and what kinds of benefits they deliver.

• Describe how organizations are using business intelligence and business analytics to capitalize on the vast amount of data becoming available.

• Discuss why it is critical for business objectives and IS activities to be well aligned through system planning, development, and acquisition.

• Identify several major IT security threats as well as some of the legal, social, and ethical issues associated with information systems.

Why Learn about Information Systems? We live in an information economy. Information itself has real value, and in order to stay competitive, organizations require a steady flow of information about their business partners, competitors, customers, employees, markets, and suppliers. Information systems are increasingly being used to gather, store, digest, analyze, and make sense out of all this information. Indeed, information systems are even embedded in and control many of the products we use on a daily basis. Using information systems, individuals communicate instantaneously with one another; consumers make purchases online using mobile devices; project members dispersed globally and across multiple organizations collaborate effectively; financial institutions manage billions of dollars in assets around the world; and manufacturers partner with suppliers and customers to track inventory, order supplies, and distribute goods faster than ever before.

Information systems will continue to change businesses and the way we live. Indeed, many corporate leaders are using technology to rework every aspect of their organization from product and service creation through production, delivery, and customer service. To prepare to participate in and lead these innovations, you must be familiar with fundamental information concepts. Regardless of your college major or chosen career, knowledge of information systems is indispensable in helping you land your first job. The ability to recognize and capitalize on information system opportunities can make you an even more valuable member of your organization and will ultimately help advance your career.

As you read this chapter, consider the following:

• How are organizations using information systems to accomplish their objectives and meet ever-changing business needs?

• What role might you have in identifying the need for, acquiring, or using such systems?

This chapter presents an overview of the material covered in the text. The chapter is divided into five major sections corresponding to the five sections of the text. The chapters included in each section of the text are highlighted as a subsection and briefly summarized. The essential material will receive fuller treatment in subsequent chapters.

Part 1: Information Systems in Perspective

We begin by examining the topics covered in “Part 1: Information Systems in Perspective,” which includes an “An Introduction to Information Systems” and a discussion of “Information Systems in Organizations.”

An Introduction to Information Systems Information is a central concept of this book. The term is used in the title of the book, in this section, and in every chapter. To be an effective manager in any area of business, you need to understand that information is one of an organization’s most valuable resources. Information is not the same thing as data, and knowledge is different from both data and information. These con- cepts will now be explained.

Data, Information, and Knowledge Data consists of raw facts, such as an employee number, total hours worked in a week, an inventory part number, or the number of units produced on a production line. As shown in Table 1.1, several types of data can represent these facts. Information is a collection of data organized and processed so that it has additional value beyond the value of the individual facts. For exam- ple, a sales manager may want individual sales data summarized so it shows the total sales for the month. Providing information to customers can also

data: Raw facts such as an employee number or total hours worked in a week.

information: A collection of data organized and processed so that it has additional value beyond the value of the individual facts.

4 PART 1 • Information Systems in Perspective

help companies increase revenues and profits. For example, social shopping Web site Kaboodle brings shoppers and sellers together electronically so they can share information and make recommendations while shopping online. The free exchange of information stimulates sales and helps ensure shoppers find better values.

Another way to appreciate the difference between data and information is to think of data as the individual items in a grocery list—crackers, bread, soup, cereal, coffee, dishwashing soap, and so on. The grocery list becomes much more valuable if the items in the list are arranged in order by the aisle in which they are found in the store—bread and cereal in aisle 1, crackers and soup in aisle 2, and so on. Data and information work the same way. Rules and relationships can be set up to organize data so it becomes useful, valuable information.

The value of the information created depends on the relationships defined among existing data. For instance, you could add specific identifiers to the items in the list to ensure that the shopper brings home the correct item—whole wheat bread and Kashi cereal in aisle 1, saltine crackers and chicken noodle soup in aisle 2, and so on. By doing so, you create a more useful grocery list.

Turning data into information is a process, or a set of logically related tasks performed to achieve a defined outcome. The process of defining rela- tionships among data to create useful information requires knowledge, which is the awareness and understanding of a set of information and the ways in which that information can be made useful to support a specific task or reach a decision. In other words, information is essentially data made more useful through the application of knowledge. For instance, there are many brands and varieties of most items on a typical grocery list. To shop effectively, the grocery shopper needs to have an understanding of the needs and desires of those being shopped for so that he knows to purchase one can of Campbell’s (not the store brand!) low-sodium chicken noodle soup for the family member who is diabetic along with two cans of Campbell’s regular chicken noodle soup for everyone else.

In some cases, people organize or process data mentally or manually. In other cases, they use a computer. This transformation process is shown in Figure 1.1.

The Value of Information The value of information is directly linked to how it helps decision makers achieve their organization’s goals. Valuable information can help people per- form tasks more efficiently and effectively. Many businesses assume that reports are based on correct, quality information, but, unfortunately, that is not always true. For example, Experian (a global information services firm that provides credit services, marketing services, decision analytics, and con- sumer services) estimates that on average, 22 percent of an organization’s cus- tomer contact data is wrong.1 Companies can easily waste over $100 per inaccurate customer contact data record on things like direct-mail marketing sent to wrong addresses and the inability to properly track leads. For an

TABLE 1.1 Types of data Data Represented By

Alphanumeric data Numbers, letters, and other characters

Audio data Sounds, noises, or tones

Image data Graphic images and pictures

Video data Moving images or pictures

process: A set of logically related tasks performed to achieve a defined outcome.

knowledge: The awareness and understanding of a set of information and the ways that information can be made useful to support a specific task or reach a decision.

CHAPTER 1 • An Introduction to Information Systems 5

organization with 100,000 customers and a 22 percent error rate, that projects to a loss of $2.2 million.2

Characteristics of Quality Information Fundamental to the quality of a decision is the quality of the information used to reach that decision. Any organization that stresses the use of advanced infor- mation systems and sophisticated data analysis before information quality is doomed to make many wrong decisions. Table 1.2 lists the characteristics that determine the quality of information. The importance of each of these charac- teristics varies depending on the situation and the kind of decision you are try- ing to make. For example, with market intelligence data, some inaccuracy and incompleteness is acceptable, but timeliness is essential. Market intelligence data may alert you that a competitor is about to make a major price cut. The exact details and timing of the price cut may not be as important as being warned far enough in advance to plan how to react. On the other hand, accu- racy and completeness are critical for data used in accounting for the manage- ment of company assets, such as cash, inventory, and equipment.

What Is an Information System? Another central concept of this book is that of an information system. People and organizations use information systems every day. An information system (IS) is a set of interrelated components that collect, process, store, and disseminate data and information; an information system provides a feedback mechanism to monitor and control its operation to make sure it continues to meet its goals and objectives. The feedback mechanism is critical to helping organizations achieve their goals, such as increasing profits or improving customer service.

A computer-based information system (CBIS) is a single set of hard- ware, software, databases, networks, people, and procedures that are config- ured to collect, manipulate, store, and process data into information. Increasingly, companies are incorporating computer-based information systems

FIGURE 1.1 Process of transforming data into information Transforming data into information starts by selecting data, then orga- nizing it, and finally manipulating the data.

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information system (IS): A set of interrelated components that collect, process, store, and disseminate data and information; an information system provides a feedback mechanism to monitor and control its operation to make sure it continues to meet its goals and objectives.

computer-based information system (CBIS): A single set of hardware, software, databases, net- works, people, and procedures that are configured to collect, manipulate, store, and process data into information.

6 PART 1 • Information Systems in Perspective

into their products and services. Investment companies offer their customers a wide range of powerful investment tools, including access to extensive online research. Automobiles are available with advanced navigation systems that not only guide you to your destination but also incorporate information regarding the latest weather and traffic conditions to help you avoid congestion and traf- fic delays. Watches, digital cameras, mobile phones, music players, and other devices rely on CBIS to bring their users the latest and greatest features.

The components of a CBIS are illustrated in Figure 1.2. An organization’s technology infrastructure includes all the hardware, software, databases, networks, people, and procedures that are configured to collect, manipulate,

TABLE 1.2 Characteristics of quality information Characteristic Definition

Accessible Information should be easily accessible by authorized users so they can obtain it in the right format and at the right time to meet their needs.

Accurate Accurate information is error free. In some cases, inaccurate information is generated because inaccurate data is fed into the transformation process. This is commonly called garbage in, garbage out.

Complete Complete information contains all the important facts. For example, an investment report that does not include all important costs is not complete.

Economical Information should also be relatively economical to produce. Decision makers must always balance the value of information with the cost of producing it.

Flexible Flexible information can be used for a variety of purposes. For example, information on how much inventory is on hand for a particular part can be used by a sales representative in closing a sale, by a production manager to determine whether more inventory is needed, and by a financial executive to determine the amount of money the company has invested in inventory.

Relevant Relevant information is important to the decision maker. Information showing that lumber prices might drop is proba- bly not relevant to a computer chip manufacturer.

Reliable Reliable information can be trusted by users. In many cases, the reliability of the information depends on the reliability of the data-collection method. In other instances, reliability depends on the source of the information. A rumor from an unknown source that oil prices might go up may not be reliable.

Secure Information should be secure from access by unauthorized users.

Simple Information should be simple, not complex. Sophisticated and detailed information might not be needed. In fact, too much information can cause information overload, whereby a deci- sion maker has too much information and is unable to deter- mine what is really important.

Timely Timely information is delivered when it is needed. Knowing last week’s weather conditions will not help when trying to decide what coat to wear today.

Verifiable Information should be verifiable. This means that you can check it to make sure it is correct, perhaps by checking many sources for the same information.

technology infrastructure: All the hardware, software, databases, networks, people, and procedures that are configured to collect, manipulate, store, and process data into information.

CHAPTER 1 • An Introduction to Information Systems 7

store, and process data into information. The technology infrastructure is a set of shared IS resources that form the foundation of each computer-based infor- mation system.

People make the difference between success and failure in all organiza- tions. Jim Collins, in his book, Good to Great, said, “Those who build great companies understand that the ultimate throttle on growth for any great com- pany is not markets, or technology, or competition, or products. It is one thing above all others: the ability to get and keep enough of the right people.”3 Thus, it comes as no surprise that people are the most important element in computer-based information systems.

Good systems can enable people to produce extraordinary results. They can also boost job satisfaction and worker productivity.4 Information systems personnel include all the people who manage, run, program, and maintain the system, including the chief information officer (CIO), who leads the IS organization. End users are people who work directly with information sys- tems to get results. They include financial executives, marketing representa- tives, and manufacturing line operators.

A procedure defines the steps to follow to achieve a specific end result, such as enter a customer order, pay a supplier invoice, or request a current inventory report. Good procedures describe how to achieve the desired end result, who does what and when, and what to do in the event something goes wrong. When people are well trained and follow effective procedures, they can get work done faster, cut costs, make better use of resources, and more easily adapt to change. When procedures are well documented, they can greatly reduce training costs and shorten the learning curve.

Using a CBIS involves setting and following many procedures, including those for the operation, maintenance, and security of the system. For

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FIGURE 1.2 Components of a computer-based information system Hardware, software, networks, people, and procedures are part of a business’s technology infrastructure.

procedure: A set of steps that need to be followed to achieve a specific end result, such as enter a customer order, pay a supplier invoice, or request a current inventory report.

8 PART 1 • Information Systems in Perspective

example, some procedures describe how to gain access to the system through the use of some log-on procedure and a password. Others describe who can access facts in the database or what to do if a disaster, such as a fire, earthquake, or hurricane, renders the CBIS unusable. Good procedures can help companies take advantage of new opportunities and avoid lengthy business disruptions in the event of natural disasters. Poorly developed and inadequately implemented procedures, however, can cause people to waste their time on useless rules or result in inadequate responses to disasters.

Information Systems in Organizations Most organizations have a number of different information systems. When considering the role of business managers in working with IS, it is useful to divide information systems into three types: personal IS, group IS, and enter- prise IS.

Personal IS includes information systems that improve the productivity of individual users in performing stand-alone tasks. Examples include per- sonal productivity software, such as word-processing, presentation, and spreadsheet software.

In today’s fast-moving, global work environment, success depends on our ability to communicate and collaborate with others, including colleagues, cli- ents, and customers. Group IS includes information systems that improve communications and support collaboration among members of a workgroup. Examples include Web conferencing software, wikis, and electronic corporate directories.

Enterprise IS includes information systems that organizations use to define structured interactions among their own employees and/or with external customers, suppliers, government agencies, and other business part- ners. Successful implementation of these systems often requires the radical redesign of fundamental work processes and the automation of new pro- cesses. Target processes may include purely internal activities within the organization (such as payroll) or those that support activities with external customers and suppliers (order processing and purchasing). Three examples of enterprise IT are transaction processing, enterprise, and interorganiza- tional systems.

For each type of IS, certain key organizational complements must be in place to ensure successful implementation and use of the system. These com- plements include:

● Well-trained workers. Employees must be well trained and understand the need for the new system, what their role is in using or operating the system, and how to get the results they need from the system.

● System support. Trained and experienced users who can show others how to gain value from the system and overcome start-up problems.

● Better teamwork. Employees must understand and be motivated to work together to achieve the anticipated benefits of the system.

● Redesigned processes. New systems often require radical redesign of existing work processes as well as the automation of new processes.

● New decision rights. Employees must understand and accept their new roles and responsibilities including who is responsible for making what decisions. Roles and responsibilities often change with introduction of a new system.

Managers have an essential role to play in the successful implementation and use of information systems. That role changes depending on which type of IS system is being implemented, as shown in Table 1.3, which also high- lights other characteristics and provides examples of each type.

personal IS: An information system that improves the productivity of indi- vidual users in performing stand-alone tasks.

group IS: An information system that improves communications and support collaboration among members of a workgroup.

enterprise IS: An information sys- tem that an organization uses to define structured interactions among its own employees and/or with external custo- mers, suppliers, government agencies, and other business partners.

organizational complement: A key component that must be in place to ensure successful implementation and use of an information system.

CHAPTER 1 • An Introduction to Information Systems 9

Critical Thinking Exercise

Kroger’s QueVision System Improves Customer Service Kroger has annual sales in excess of $100 billion and operates stores across the United States under various names, including Kroger’s, Ralph’s, and Harris Teeter. In surveys, Kroger’s customers have consistently rated waiting at the checkout lane as the worst part of the grocery shopping experience. In response, Kroger developed its QueVision computer-based information system, which relies on real-time data feeds from point-of-sale systems as well as infrared sensors over store doors and cash registers to count customers entering the store and standing at checkout lanes. The system also uses historical point-of-sale records to forecast the number of shoppers that can be expected and, therefore, the number of cash- iers that will be needed. All this was done to achieve the goal of ensuring that customers never have more than one person ahead of them in the checkout lane. The system provides feedback by displaying customer checkout time on a screen that both employees and customers can see—delivering a visible measure of how well the whole system is working. The system is now deployed at over 2,300 stores in 31 states and has cut the average time a customer must wait to begin checkout from four minutes to 30 seconds.5

You are a new store manager at a Kroger store where the QueVision system has been deployed for two years. Unfortunately, since you took charge of this store two weeks ago, you have received numerous complaints about the system from store cash- iers and baggers. These employees are requesting that you either turn off the screen that displays customer checkout time or add more cashiers and baggers to each shift to reduce checkout times, which are currently averaging over six minutes.

Review Questions 1. Would you classify the QueVision system as a personal, group, or enterprise

system? 2. Four key organizational complements must be in place to ensure successful

implementation and use of a new system. Which two of these components seem to be missing at your store?

TABLE 1.3 Examples and characteristics of each type of information system Personal IS Group IS Enterprise IS

Examples Personal productivity soft- ware, decision-support system

Email, instant messaging, project management software

Transaction processing systems, enterprise sys- tems, interorganizational systems

Benefits Improved productivity Increased collaboration Increased standardization and ability to monitor work

Organizational comple- ments (including well- trained workers, better teamwork, redesigned processes, and new decision rights)

● Does not bring com- plements with it

● Partial benefits can be achieved without all complements being in place

● At least some comple- ments must be in place when IS “goes live”

● Allows users to imple- ment and modify com- plements over time

● Full complements must be in place when IS “goes live”

Manager’s role ● Ensure that employees understand and con- nect to the change

● Encourage use ● Challenge workers to

find new uses

● Demonstrate how technology can be used

● Set norms for participation

● Identify and put into place the full set of organizational comple- ments prior to adoption

● Intervene forcefully and continually to ensure adoption

10 PART 1 • Information Systems in Perspective

Critical Thinking Questions 1. Employees are requesting that you turn off the screen that displays customer

checkout time or add more cashiers and baggers to each shift to reduce wait times. What action would you take to address the concerns of the cashiers and baggers?

a. Turn off the QueVision system now. b. Add more cashiers and baggers to each shift as soon as possible. c. Observe the checkout process and performance of cashiers and baggers

for a few days before taking action. d. Tell the cashiers and baggers their performance is unacceptable and to

“step it up.”

2. Provide a brief rationale for your recommended course of action.

Part 2: Information Technology Concepts

Next, we look at the topics covered in “Part 2: Information Technology Con- cepts,” including “Hardware and Mobile Devices,” “Software and Mobile Applications,” “Database Systems and Big Data,” and “Networks and Cloud Computing.” This discussion will help you understand basic concepts and pre- pare you for more in-depth coverage in the individual chapters.

Hardware and Mobile Devices Hardware consists of computer equipment used to perform input, proces- sing, storage, and output activities. The trend in the computer industry is to produce smaller, faster, and more mobile hardware, such as smartphones, lap- tops, and tablet computers. In addition, hardware manufacturers and entre- preneurs are hard at work developing innovative new hardware devices, such as the following:

● Advanced keyboards that turn individual keys on a keyboard into trackpad-covered buttons where certain dual-purpose keys could be depressed to multiple levels to complete different tasks; the spacebar, for example, can serve its usual purpose. But add capacitive touch and it becomes a cursor; press a little harder to generate a mouse click. (Capaci- tive touch relies on the electrical properties of the human body to detect when and where on a display the user touches. Because of this, capacitive displays can be controlled with very light touches of a finger.)

● Laptops and displays that connect wirelessly, thus eliminating the need for expensive HDMI or DisplayPort display cables

● Computing devices with embedded 3D cameras, which will be able to recognize objects and even measure distances between things

● Keyboards that enable users to log in to Web sites via fingerprint authen- tication so they won’t have to remember dozens of passwords for differ- ent sites

● Very-high resolution display devices that will show content in incredible detail and dramatically improve the viewing experience (think clarity and resolution way beyond 1080p HD)

● Computerized event data recorders (EDRs) that, like an airplane’s black box, record vehicle speed, possible engine problems, driver performance, and more

While desktop, laptop, and tablet computers continue to be used in a vari- ety of settings, smartphones have become the primary device used by people around the world to communicate, go online, and access and share

hardware: Computer equipment used to perform input, processing, storage, and output activities.

CHAPTER 1 • An Introduction to Information Systems 11

information. In 2013, the number of smartphone users first exceeded the number of personal computer users, and the gap keeps growing, with the number of smartphones sold worldwide far exceeding the combined sale of desktops, laptops, and tablets as shown in Figure 1.3. This rapid growth has been spurred by the improving affordability and capability of smartphones, the increasing speed and coverage of wireless networks, longer battery life, and the availability of hundreds of thousands of smartphone applications and games. For many people in developing countries, a smartphone is their first computer and their only Internet-connected device. For those in developed countries, it is common for individuals who do have a computer to also have a smartphone. It is projected that roughly one-third of the world’s population will own a smartphone by 2018.6

Software and Mobile Applications Software consists of the computer programs that govern the operation of a particular computing device, be it desktop computer, laptop, tablet, smart- phone, or some other device. There are two types of software: system soft- ware and application software. System software—such as Google’s Android or Apple’s iOS—oversees basic computer operations such as start-up, controls access to system resources, and manages memory and files. Application soft- ware, such as Microsoft Office, allows you to accomplish specific tasks, including editing text documents, creating graphs, and playing games. Both system software and application software are needed for all types of compu- ters, from small handheld devices to large supercomputers. In choosing appli- cation software, you must choose software that will work with the operating system installed on your computing device.

As of June 2015, 1.6 million applications were available for devices that run under the Android operating system and roughly the same (1.5 million) available for download from Apple’s App Store.8,9 The number of apps for each operating system is increasing by roughly 25,000 to 50,000 per month.

Business application software can be categorized by whether it is intended to be used by an individual, a small business, or a large multina- tional enterprise. For example, Quicken has long been a favorite accounting application for individuals who need money management and budgeting tools to help them watch their spending, increase their savings, and avoid late fees with alerts on upcoming payment due dates. QuickBooks, an accounting application popular with small businesses, enables users to create

FIGURE 1.3 Millions of computing devices sold worldwide7 The number of smartphones sold worldwide far exceeds the combined number of desktop, laptop, and tablet computers.

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software: The computer programs that govern the operation of a particular computing device, be it desktop, laptop, tablet, smartphone, or some other device.

12 PART 1 • Information Systems in Perspective

invoices, track sales and expenses, process credit card payments, run payroll, and generate financial, tax, and sales reports. SAP ERP Financials is an accounting application used by many large, multinational organizations to manage the complexities of global accounting and reporting requirements. SAP’s software records all financial transactions in a comprehensive general ledger; supports sophisticated reporting requirements; provides management accounting tools for orders, projects, cost centers, and profit centers; enables the speedy and accurate closing of the firm’s books; and helps manage risk and compliance across accounting and finance.

An important trend in the design of business application software is the attempt to imitate the look, feel, and intuitive ease of use associated with con- sumer apps that can be downloaded from the Google Play Store and the Apple App Store. Indeed, usability and user-interface design are key factors in delivering apps that business users will actually use. In some organizations, employees can log on to enterprise app stores to acquire the latest company software and software upgrades. This trend of consumer technology practices influencing the way business software is designed and delivered is called the consumerization of IT.

CDW is a leading provider of integrated information solutions to corpo- rate customers in small, medium, and large private and public organizations in the United States and Canada. The firm has established its App Marketplace Web site (http://appmarketplace.cdw.com) where customers’ employees can identify leading enterprise mobile app solutions. The Web site is easy to navi- gate with apps organized by industry and app functions. The apps there have already been vetted by CDW to perform effectively and reliably. In addition, for those needing custom mobile apps, the Web site identifies mobile app partners who have a proven track record of building, deploying, and updating top enterprise applications.

Database Systems and Big Data A database is an organized collection of facts and information, typically con- sisting of two or more related data files. An organization’s database can con- tain facts and information on customers, employees, inventory, sales, online purchases, and much more. A database is essential to the operation of a computer-based information system.

As anyone who works in marketing or sales knows, one of the biggest challenges that any business faces is the ability to generate new leads in an effort to locate customers. As businesses have looked for ways to meet this challenge, numerous vendors have seized the opportunity by offering access to databases of potential clients in various industries, as shown in Table 1.4.

TABLE 1.4 Sample of marketing databases used to generate sales leads Industry Database Vendor Number of Records (Thousands)

Auto dealers Oddity Software 110

Barber shops Usable Databases 53

Dry cleaning/laundry Oddity Software 42

Gas stations with convenience stores CHD 56

Healthcare providers and decision makers

SK & A 2,100

Music retail outlets Almighty Music Marketing 10

Nursing and retirement homes MCH 34

Pet shops and pet supply stores Oddity Software 15

consumerization of IT: The trend of consumer technology practices influencing the way business software is designed and delivered.

database: An organized collection of facts and information, typically consist- ing of two or more related data files.

CHAPTER 1 • An Introduction to Information Systems 13

A data warehouse is a database that stores large amounts of historical data in a form that readily supports analysis and management decision mak- ing. In a process called the extract-transform-load (ETL) process, raw data is extracted from various sources, transformed into a format that will support the analysis to be performed, and then loaded into the data warehouse. Data warehouses frequently hold a huge amount of data; they often contain five years or more of data. Many organizations employ data warehouses to hold the data they need to make key business decisions:

● Walmart operates separate data warehouses for Walmart and Sam’s Club. Through these data warehouses, the company allows suppliers access to almost any data they could possibly need to determine which of their products are selling, how fast, and even whether they should redesign their packaging to fit more product on store shelves.10

● Harrah’s (part of the Caesar’s Entertainment casino empire) uses a data warehouse to determine how much money particular gamblers are willing to lose in a day before they will decide not to come back the next day.11

● Continental Airlines uses a data warehouse to help it determine who its most valuable customers are and to find ways to keep them satisfied—for example, by proactively making alternative travel arrangements for them if their flights get delayed.12

● Macy’s uses a terabyte-sized data warehouse to target improvements in four key areas of its e-commerce business: measuring the profitability and effectiveness of banner advertising, analyzing customer interactions and paths through its Web site, improving fulfillment capabilities, and corre- lating online sales with store sales to cross-sell and upsell customers across its distribution channels.13

The digital universe (the collection of all data that exists) is doubling in size every two years as shown in Figure 1.4.14 Organizations are challenged by this rapid growth and at the same time scrambling to take advantage of the opportunities provided by this data. Big data is a term used to describe data collections that are so enormous (think petabytes or larger) and complex (from sensor data to social media data) that traditional data management soft- ware, hardware, and analysis processes are incapable of dealing with them. To gain a perspective on the quantity of data some organizations are strug- gling to manage, consider that the amount of data traveling over mobile net- works alone is expected to exceed 10 exabytes per month by 2016.15

Table 1.5 defines the units of measure for data.

FIGURE 1.4 The size of the digital universe (zettabytes) doubles every two years The amount of digital data is expected to double every two years.

100

2014 2016 2018 2020 2022

data warehouse: A database that stores large amounts of historical data in a form that readily supports analysis and management decision making.

extract-transform-load (ETL): The process by which raw data is extracted from various sources, trans- formed into a format to support the analysis to be performed, and loaded into the data warehouse.

big data: A term used to describe data collections that are so enormous (think petabytes or larger) and complex (from sensor data to social media data) that traditional data management soft- ware, hardware, and analysis pro- cesses are incapable of dealing with them.

14 PART 1 • Information Systems in Perspective

To avoid being paralyzed by information overload, organizations and indeed society itself must find a way to deal with this oncoming tsunami of data. This challenge has several aspects, including how to choose which sub- set of data to keep, where and how to store the data, how to find the nuggets of useful data that are relevant to the decision making at hand, and how to derive real value from the relevant data.

Ideally, the many challenges associated with big data will be conquered, and more data will lead to more accurate, insightful analyses and better deci- sion making, which in turn, will result in deliberate actions and improved business results. For that to happen, society will need to address the many issues associated with big data, including concerns over invasions of privacy and the potential for overly intrusive monitoring of individuals by govern- ments and organizations.

Networks and Cloud Computing Networks connect computers and equipment in a room, building, campus, city, across the country, or around the world to enable electronic communica- tion. Wireless transmission networks enable the use of mobile devices, such as smartphones and tablets. Telecommunication companies are now working on fifth-generation wireless communications that will enable transmission speeds 10 times faster than currently available on wireless networks—with greater coverage area and lower battery consumption—possibly as soon as the year 2020. Such technology will be needed to support the increased demand for faster transfer of data and video.

The Internet is the world’s largest computer network, consisting of thou- sands of interconnected networks, all freely exchanging information. People use the Internet to research information, buy and sell products and services, email and instant message one another, participate in social networks (e.g., Facebook and LinkedIn), make travel arrangements, complete banking trans- actions, make investments, download music and videos, read books, and watch movies among other activities.

With public cloud computing, a service provider organization owns and manages the hardware, software, networking, and storage devices, with cloud user organizations (called tenants) accessing slices of shared resources via the Internet. The service provider can deliver increasing amounts of computing, network, and storage capacity on demand and without requiring any capital investment on the part of the cloud users. Thus, public cloud computing is a great solution for organizations whose computing needs vary greatly

TABLE 1.5 Units of measure for data Unit of Measure Size Equivalent To

Byte 1 byte One alphanumeric character

Kilobyte 1,000 bytes The text of a joke or very short story

Megabyte 1,000 kilobytes 800 pages of text

Gigabyte 1,000 megabytes 7 minutes of HD-TV

Terabyte 1,000 gigabytes The Hubble Space Telescope collected more than 45 terabytes of data in its first 20 years of observations

Petabyte 1,000 terabytes 50 years’ worth of DVD-quality video

Exabyte 1,000 petabytes 44 billion 25 gigabytes Blu-ray discs

Zettabyte 1,000 exabytes The amount of text created by every man, woman, and child on earth tweet- ing continuously for 100 years

Yottabyte 1,000 zettabytes One thousand times the grains of sand on all of Earth’s beaches

network: A group or system of con- nected computers and equipment—in a room, building, campus, city, across the country, or around the world—that enables electronic communication.

Internet: The world’s largest com- puter network, consisting of thousands of interconnected networks, all freely exchanging information.

public cloud computing: A means of providing computing services wherein a service provider organization owns and manages the hardware, software, networking, and storage devices, with cloud user organizations (called tenants) accessing slices of shared resources via the Internet.

CHAPTER 1 • An Introduction to Information Systems 15

depending on changes in demand. Amazon, Cisco Systems, IBM, Microsoft, Rack- space, Verizon Communications Inc., and VMWare are among the largest cloud computing service providers. These firms typically offer a monthly or annual sub- scription service model; they may also provide training, support, and data inte- gration services.16 Online content provider Netflix uses the Amazon Web Services (AWS) cloud computing service to provide global delivery of some 10 billion hours of content per month. AWS enables Netflix users anywhere in the world to stream TV shows and movies to computers and mobile devices.17

The World Wide Web (WWW), better known simply as “the Web,” is a network of links on the Internet to files containing text, graphics, video, and sound. Information about the documents and access to them are controlled and provided by tens of thousands of specialized computers called Web ser- vers. The Web is one of many services available over the Internet, and it pro- vides access to millions of files. New Internet technologies and increased Internet communications and collaboration are collectively called Web 2.0.

The technology used to create the Internet is also being applied within organizations to create intranets, which enable communication, collaboration, search functions, and information sharing between the members of an organi- zation’s team using a Web browser. For example, the Swiss Medical Group, based in Buenos Aires, Argentina, is a network of professionals, clinics, and laboratories that provide healthcare services and postgraduate medical educa- tion programs. It employs an intranet to provide its 9,000 employees with communication tools, company and industry news from various sources, announcements regarding new assignments for employees, tutorials, an online phone directory, videos, and document management services.18

An extranet is a network based on Web technologies that allows selected outsiders, such as business partners and customers, to access authorized resources of a company’s intranet. Many people use extranets every day without realizing it—to order products from their suppliers, track shipped goods, or access customer assistance from other companies. Federal Express (FedEx) was one of the first large companies to empower customers to serve themselves at their convenience through the use of a corporate extranet. A fundamental FedEx belief is that the information it provides customers about its services is more important than the services themselves. Customers can access the FedEx extranet to obtain a full range of shipping, billing, and tracking services. See Figure 1.5.

FIGURE 1.5 Extranets When you sign in to the FedEx site (www.fedex.com) to check the status of a package, you are using an extranet. So

ur ce : w w w .fe de x. co m

World Wide Web (WWW): A net- work of links on the Internet to files containing text, graphics, video, and sound.

intranet: A network that enables communication, collaboration, search functions, and information sharing between the members of an organiza- tion’s team using a Web browser.

extranet: A network based on Web technologies that allows selected out- siders, such as business partners and customers, to access authorized resources of a company’s intranet.

16 PART 1 • Information Systems in Perspective

The Internet of Things (IoT) is a network of physical objects or “things” embedded with sensors, processors, software, and network connec- tivity capability to enable them to exchange data with the manufacturer of the device, device operators, and other connected devices. In theory, the IoT would enable us to connect almost any device with an on/off switch to a network—automobiles, appliances, components of an aircraft engine, heart monitor implants, packing labels, ingestible pills, wearable devices, and even highway sensors that can warn of traffic and hazardous road condi- tions. Each thing is uniquely identifiable and capable of interoperating with other “things” within the existing IoT infrastructure, often by connecting to a central hub. The IoT also includes cloud services, which enable the collec- tion and analysis of data so people can process the data and take appropri- ate action via mobile apps.

Until recently, the IoT has been most closely associated with machine- to-machine communications, such as that employed in the manufacturing, gas, oil, and power industries. For example, in oil and gas drilling operations, remote sensors can measure important parameters such as pressure, flow rates, temperatures, and fuel levels in on-site equipment. These variables are transmitted to a computer that automatically adjusts the operation of the equipment to optimize hydrocarbon production, improve operational safety, and protect the environment.

The Internet of Everything (IoE) encompasses not only machine- to-machine but also people-to-people and people-to-machine connections. It is estimated that the total number of devices supported by the IoE could reach 50 billion by the end of 202019 See Figure 1.6. This rapid growth is being fueled by the increasing availability of network access, the creation of more inexpensive smart devices with sensors and network capabilities built into them, the rapid growth in smartphone penetration, and the creativity and innovation of people who are able to see and capitalize on the almost unlim- ited opportunities.20

General Electric (GE) is making a major strategic investment in the Inter- net of Things by offering its Predix Cloud service for industrial data and ana- lytics. Predix will enable GE customers to connect sensors placed on industrial machinery such as jet engines, wind turbines, and locomotives to remote computing centers “in the cloud,” where the data from the sensors can be processed and analyzed to determine settings for optimal operating efficiencies and to schedule preventative maintenance to avoid unexpected failures.21

FIGURE 1.6 Growth of the Internet of Everything (IoE) The Internet of Everything will con- nect tens of billions of devices.

1995 2000 2013 2020

50B

“Fixed”computing (you go to the device)

Mobility/BYOD (the device

goes with you)

Internet of things (age of devices)

Internet of everything (people, process,

data, things)

200M

10B

N u

m b

er o

f co

n n

ec te

d d

ev ic

Internet of Things (IoT): A net- work of physical objects or “things” embedded with sensors, processors, software, and network connectivity capability to enable them to exchange data with the manufacturer of the device, device operators, and other connected devices.

Internet of Everything: A network that encompasses not only machine- to-machine but also people-to-people and people-to-machine connections.

CHAPTER 1 • An Introduction to Information Systems 17

Critical Thinking Exercise

NARCOMS Database to Aid MS Victims Multiple sclerosis (MS) causes a disruption in the transmission of nerve signals between the brain, spinal cord, and the rest of the body. Disrupted nerve signals cause the symptoms of MS, which can vary from one person to another, but often include difficulty walking, dizziness, fatigue, involuntary muscle spasms, pain, stiffness, tremors, vision problems, and weakness.

The North American Registry for Care and Research in Multiple Sclerosis (NARCOMS) is a database created to capture the real-life experiences of people living with MS. The database contains information about each patient’s symptoms and their severity over time, medications taken, and courses of treatment. Physi- cians, scientists, and pharmaceutical companies can use this data to better under- stand MS by tracking patients’ disease course, comparing results of alternative courses of treatment, measuring the effectiveness of medications, and identifying useful indicators of the severity of the disease.22

Anyone with a diagnosis of MS can participate in NARCOMS and contribute to its research studies. Participants are asked to fill out an initial enrollment ques- tionnaire and then complete surveys twice a year. Although roughly 400,000 peo- ple in the United States have been diagnosed with MS, fewer than 40,000 have elected to participate. More participants are needed in order for the database to be fully representative of people living with MS.23

Review Questions 1. Identify the fundamental hardware components that are likely included in the

NARCOMS system. 2. Assume that a record for each participant in the NARCOMS database contains

between 200 and 500 bytes of data. What is the maximum size of the database in gigabytes for the total 100,000 target number of participants? Would NAR- COMS qualify as a big data project?

Critical Thinking Questions You are a member of a highly successful advertising agency whose CEO suffers from MS. She has asked you to develop a proposal for the National Multiple Scle- rosis Society to increase the number of participants in NARCRMS to 100,000 peo- ple within 12 months. There will be no charge to the society for this work, but the CEO has set a budget of $2 million. She has asked your full-time effort for the next year to lead this effort to success. 1. Identify three strong reasons why some MS victims might elect to participate

in NARCOMS while most do not. 2. Outline a course of action that you think would successfully increase the num-

ber of NARCOMS participants by 60,000 over the next 12 months.

Part 3: Business Information Systems

Information systems are used in all functional areas of business organizations, as summarized here:

● Accounting and finance. Information systems are used to forecast reven- ues and expenses, determine the best sources and uses of funds, manage cash and other financial resources, analyze investments, and perform audits to make sure that the organization is financially sound and that all financial reports and documents are accurate.

● Customer service. Information systems are used to capture data about customers and their interactions with the company to better understand their needs and issues and enable superior customer service.

18 PART 1 • Information Systems in Perspective

● Human resources. Information systems help human resource staff screen job applicants, administer performance tests to employees, monitor employee productivity, and generate required government reports.

● Manufacturing. Information systems are used to process customer orders, develop production schedules, control inventory levels, and moni- tor product quality.

● Research and development. Information systems help R&D staff design products, gather input from customers that leads to new ideas and improvements, and enable the sharing of information with a worldwide community of researchers.

● Sales and marketing. Information systems help sales and marketing per- sonnel develop new goods and services (product analysis), determine the best advertising and sales approaches (promotion analysis), and set opti- mal product prices to get the highest total revenues (price analysis).

Information systems are also used in nearly every industry, as the following examples show:

● Agriculture. Farmers attach a yield monitor and a global positioning unit to their combines to determine how much grain should be harvested in each field. This data is entered in a system that produces a color-coded map that predicts the expected yield. From this, farmers can determine where they should add soil additives or fertilizer, for example, to increase the yield.

● Finance. Banks use information systems to help make sound decisions regarding loans, invest wisely, and provide online services, such as bill payment and account transfers for account holders.

● Health care. Healthcare organizations use information systems to diagnose illnesses, plan medical treatment, track patient records, and bill patients See Figure 1.7. Health insurance companies and health maintenance orga- nizations (HMOs) use Web technology to access patients’ insurance eligibil- ity information, pay medical claims, and analyze data to manage costs.

● Mining. Companies use global positioning systems to identify and evalu- ate promising areas for mineral exploration, model mine construction, and display geochemical and hydrological data. Mining companies also

FIGURE 1.7 Information systems in health care Healthcare organizations use infor- mation systems to diagnose ill- nesses, plan medical treatment, track patient records, and bill patients. iSt

oc kp ho to .c om

/S us an

Ch ia ng

CHAPTER 1 • An Introduction to Information Systems 19

use information systems to gather the necessary data when applying for mining permits, to assess the environmental impacts of a proposed mine, and to design mine closure and reclamation plans.

● Professional services. Accounting, tax preparation, and investment firms use information systems to improve the speed and quality of the services they provide to customers.

● Retail. Companies use information systems to help market products and services, manage inventory levels, control the supply chain, and forecast demand, as well as take orders directly from customers over the Web.

This part will discuss “Electronic and Mobile Commerce,” “Enterprise Systems,” “Business Intelligence and Analytics,” and “Knowledge Management and Specialized Information Systems.”

Electronic and Mobile Commerce E-commerce involves the exchange of money for goods and services over elec- tronic networks, and it encompasses many of an organization’s outward-facing processes—such as sales, marketing, order taking, delivery, procurement of goods and services, and customer service—that touch customers, suppliers, and other business partners (Figure 1.8).

E-commerce enables organizations and individuals to build new revenue streams, to create and enhance relationships with customers and business partners, and to improve operating efficiencies (see Table 1.6). E-commerce is critically important to many businesses.

Greyston Bakery is a $12 million company with 130 employees that makes brownies and cookies for wholesale and retail distribution. Sales to its largest client Ben & Jerry’s generates more than half its revenues. The busi- ness was started in the mid-1980s as a means to provide employment for the

FIGURE 1.8 The scope of e-commerce E-commerce covers a wide range of business activities.

Marketing

Customers

Suppliers

Business partners

Order takingDelivery

Customer service

Procurement

Sales

e-commerce: Involves the exchange of money for goods and services over electronic networks and encompasses many of an organization’s outward- facing processes—such as sales, mar- keting, order taking, delivery, procure- ment of goods and services, and customer service—that touch custo- mers, suppliers, and other business partners.

20 PART 1 • Information Systems in Perspective

poor and homeless in Yonkers, New York. To meet this goal, Greyston follows an open-hiring policy, taking people directly off the street without background or reference checks. The highly successful bakery has expanded its operation to include sales from its Web site, further boosting its revenues and enabling it to hire more workers.24

Mobile commerce (m-commerce) is the buying and selling of goods and/or services using a mobile device, such as a tablet, smartphone, or other portable device. Mobile commerce can be used to support all forms of e-commerce—business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C), and government-to-citizen (G2C).

Electronic business (e-business) goes beyond e-commerce by using information systems and networks to perform business-related tasks and func- tions, such as:

● Gathering product demand forecasts directly from the distributors of your product in order to aggregate them and develop a master production schedule (rather than internally generating a forecast based on historical data, with no input from your distributors)

● Sharing product data (e.g., design specifications and bills of material) electronically with suppliers and contract manufacturers as your products evolve through research and development, product design, prototyping, process design, and manufacturing

Enterprise Systems Computers have been used to perform common business applications since the 1950s. These early systems were designed to reduce costs by automating routine, labor-intensive business transactions. A transaction is any business- related exchange such as a payment to an employee, a sale to a customer, or a payment to a supplier. A transaction processing system (TPS) is an orga- nized collection of people, procedures, software, databases, and devices used to process and record business transactions.

One of the first business systems to be computerized was the payroll sys- tem. The primary inputs for a payroll TPS are the number of employee hours worked during the week and the pay rate. The primary output consists of paychecks. Early payroll systems produced employee paychecks and related reports required by state and federal agencies, such as the Internal Revenue Service (IRS). The cost of these early systems was more than offset by the reduction in the number of people required to complete payroll processing. Other high-volume, repetitive processes, such as order processing, customer billing, and inventory control, were soon computerized as well.

TABLE 1.6 Benefits of e-commerce Benefit How Achieved

Build new revenue streams ● Reach a broader geographic dispersion of consumers

Create and enhance rela- tionships with customers and business partners

● Increase customer engagement ● Improve loyalty of customers who initially

buy offline ● Increase opportunity to build loyalty through

multiple channels

Improve operating efficiencies

● Lower customer acquisition cost ● Lower operating costs per sale ● Reduce the expense of supporting and ser-

vicing existing customers

mobile commerce (m-commerce): The buying and selling of goods and/or services using a mobile device, such as a tablet, smart- phone, or other portable device.

electronic business (e-business): The use of information systems and networks to perform business-related tasks and functions beyond those performed for e-commerce.

transaction: Any business-related exchange such as a payment to an employee, a sale to a customer, or a payment to a supplier.

transaction processing system (TPS): An organized collection of people, procedures, software, data- bases, and devices used to process and record business transactions.

CHAPTER 1 • An Introduction to Information Systems 21

A management information system (MIS) is an organized collection of people, procedures, software, databases, and devices that provides routine information to managers and decision makers. MISs were first developed in the 1960s and were typically used to produce managerial reports. In many cases, these early reports were produced periodically—daily, weekly, monthly, or yearly. Because of their value to managers, MISs proliferated throughout the management ranks. Manufacturing, marketing, production, finance, and other functional areas of an organization were often supported by their own TPS and MIS. An MIS typically provides standard reports gener- ated using data from a TPS. See Figure 1.9.

The TPS receives input from various sources, which it then edits and pro- cesses to create various outputs and to update a database of valid transac- tions. This database can be accessed by an MIS to create various reports, including periodic reports, exception reports, summary reports, drill-down reports, and on-demand reports.

Information systems that process business transactions (e.g., sales, ship- ments, payments) have evolved over the years and offer important solutions for organizations of all sizes. Traditional transaction processing systems (TPSs) and management information systems (MIS) are still being used today, but increasingly, companies are turning to enterprise resource planning systems.

An isolated information system that is not easily capable of exchanging information with other information systems is called an information silo. The “silo mentality” is a way of thinking that occurs when groups of people do not share information, goals, tools, priorities, and processes with other departments. Such thinking degrades operations, reduces employee produc- tivity, and can lead to the overall failure of a company or its products and ser- vices. Unfortunately, this sort of silo mentality was the basis for the design of many TPS and MIS systems.

In recent years, more organizations have begun implementing enterprise resource planning (ERP) systems that support their routine business processes, maintain records about those processes, and provide extensive reporting and data analysis capabilities. These systems employ a database of key operational and planning data that can be shared by all employees across all organizational units and, when appropriate, with customers and suppliers—eliminating the problems of missing and inconsistent information caused by multiple transaction processing systems that support only one busi- ness function or one department in an organization. ERP systems have expanded in scope so that they now provide support for business analytics and e-business. Although ERPs were initially thought to be cost effective only for very large companies, these systems have since been implemented by many small and midsized companies.

FIGURE 1.9 TPS and MIS The TPS and MIS work together to process business transaction and create standard management reports.

Various inputs

Transaction processing system

Management information systemDatabase

Management reports

Reports, checks purchase orders, etc.

management information system: An organized collection of people, procedures, software, data- bases, and devices that provides rou- tine information to managers and decision makers.

information silo: An isolated infor- mation system not easily capable of exchanging information with other information systems.

enterprise resource planning (ERP) system: A system that sup- ports an organization’s routine busi- ness processes, maintains records about those processes, and provides extensive reporting and data analysis capabilities.

22 PART 1 • Information Systems in Perspective

Every industry has its own unique business practices. In order to address these differences, ERP software vendors offer specially tailored software mod- ules designed to meet the needs of specific industries, such as consumer- packaged-goods manufacturing, higher education, utilities, banking, oil and gas, retail, and the public sector. Most ERP software packages are designed so that an organization does not have to implement the entire package at once. Companies can pick and choose which software modules to install based on their business needs. Many organizations choose to implement some modules but delay implementing others until the necessary resources are available. Table 1.7 and Figure 1.10 illustrate and explain the primary components of an ERP system, and Figure 1.11 offers a look at the user inter- face for SAP ERP, a popular ERP software.

The primary reasons for implementing an enterprise system include eas- ing adoption of improved work processes (best practices), increasing access to timely data for decision making, and eliminating obsolete transaction pro- cessing systems and associated infrastructure. When implemented effectively, ERP systems can deliver the following benefits:

● Provide a global view of operational and planning data, enabling compa- nies to identify issues and opportunities and to address them proactively

● Lower the cost of doing business through the elimination of redundant processes and systems

● Ensure compliance with various financial and manufacturing standards ● Automate core business operations—such as lead-to-cash, order-to-

fulfillment, and procure-to-pay processes—using industry best practices ● Improve customer service by providing one source for billing and rela-

tionship tracking

TABLE 1.7 Primary components of an ERP system for a manufacturing organization

Module Business Functions Addressed

Supply chain management

Manages all activities involved in sourcing and procuring raw materials, converting raw materials to finished product, warehousing, and delivering finished product to customers

Customer rela- tionship management

Automates and integrates the sales, marketing, and cus- tomer service functions to capture and store customer and prospect contact information, account data, and sales opportunities in one central location

Product lifecycle management

Manages product information throughout the entire life cycle of a product from ideation, design and manufacture, through service and remaining product disposal—across all departments, contractors, and suppliers

Maintenance, repair, and operations

Automates and supports activities involved with the plan- ning and scheduling of maintenance and repairs for any sort of mechanical, plumbing, or electrical device, along with the tracking of inventory and ordering of necessary parts and supplies

Accounting Tracks the flow of data related to all the cash flows that affect an organization; manages functions related to setting up and maintaining the general ledger, accounts payable, accounts receivable, and payroll

Human resource management

Supports activities related to previous, current, and poten- tial employees of the organization; provides tools for work- force analysis and planning, hiring, training, job and task assignment, performance evaluation, salary administration, managing employee benefits, retirement, and outplacement

CHAPTER 1 • An Introduction to Information Systems 23

● Reduce time to market by sharing evolving product data across all con- tractors and suppliers involved in the concept design, detail design, and production of new products

FIGURE 1.10 ERP components An ERP system consists of many components that provide shared access to a database of business information.

Supply chain management

Accounting Human

resources

Customer relationship

management

Maintenance, repair, and overhaul

Business analytics

E-Commerce

Product lifecycle management

FIGURE 1.11 Enterprise resource planning (ERP) software SAP AG, a German software com- pany, is one of the leading suppliers of ERP software. The company employs more than 50,000 people in more than 130 countries. So

ur ce : w w w .s ap .c om

24 PART 1 • Information Systems in Perspective

Many ERP vendors are making their software products and services avail- able in the cloud. This approach can provide additional benefits, including:

● Safe access to data in the cloud from virtually anywhere, on any device ● Reduced infrastructure, hardware, and IS management costs ● Increased flexibility to scale infrastructure up or down as business needs

dictate ● Opportunities to redirect IS resources away from managing infrastructure

to working on strategic projects ● The ability to get up and running in days instead of months

Business Intelligence and Analytics Things, individuals, and organizations generate massive amounts of data as a by-product of their activities. In addition, many individuals and organizations seek out third-party data providers, such as market research firms, govern- ment agencies, and social network operators, in an attempt to satisfy their unquenchable thirst for more and more data. To be of any value, all this data must be stored, analyzed, and reported.

Just as different music and movie stars have been popular over the years, different terms have been used to describe the technology and processes used to support management reporting and decision making. Over time, deci- sion support systems, executive information systems, online analytical proces- sing, business intelligence, and business analytics have gained in capabilities and expanded in scope to add new functionality but all have had the goal of deriving the most value out of the data available.

Business intelligence (BI) includes a wide range of applications, prac- tices, and technologies for the extraction, transformation, integration, visuali- zation, analysis, interpretation, and presentation of data to support improved decision making.

Business analytics can be simply defined as the extensive use of data and quantitative analysis to support fact-based decision making within organi- zations. It can be used to gain a better understanding of current business per- formance, reveal new business patterns and relationships, explain why certain results occurred, optimize current operations, and forecast future business results. Business analytics includes software components for accessing, trans- forming, storing, analyzing, modeling, and tracking information, as well as components for communicating the results of all that analysis.

A number of components must be in place for an organization to get real value from its business analytics efforts. Most importantly, an organization needs creative data scientists—people who understand the business and the business analytics technology, while also recognizing the limitations of their data, tools, and techniques. A data scientist puts all of this together to deliver real improvements in decision making within an organization. To ensure the success of a business analytics program, the management team within an organization must have a strong commitment to data-driven decision making. Organizations that can put the necessary components in place can act quickly to make superior decisions in uncertain and changing environments to gain a strong competitive advantage.

Knowledge Management and Specialized Information Systems A knowledge management system (KMS) is an organized collection of peo- ple, procedures, software, databases, and devices that stores and retrieves knowledge, improves collaboration, locates knowledge sources, captures and uses knowledge, or in some other way enhances the knowledge management process. Consulting firms often use a KMS to capture and provide the collec- tive knowledge of its consultants to one another. This makes each consultant

business intelligence (BI): A wide range of applications, practices, and technologies for the extraction, transformation, integration, visualiza- tion, analysis, interpretation, and pre- sentation of data to support improved decision making.

business analytics: The extensive use of data and quantitative analysis to support fact-based decision making within organizations.

data scientist: A person who understands the business and the business analytics technology, while also recognizing the limitations of their data, tools, and techniques; a data sci- entist puts all of this together to deliver real improvements in decision making with an organization.

knowledge management sys- tem (KMS): An organized collection of people, procedures, software, data- bases, and devices that stores and retrieves knowledge, improves collab- oration, locates knowledge sources, captures and uses knowledge, or in some other way enhances the knowl- edge management process.

CHAPTER 1 • An Introduction to Information Systems 25

Critical Thinking Exercise

much more valuable and avoids “re-inventing the wheel” to solve similar pro- blems for different clients.

The workforce at NASA is aging, and it is essential for the organization’s future success that critical knowledge not be lost as workers retire. Rather, their specialized knowledge must be captured and retained for future use. NASA employs knowledge management to document and integrate lessons learned from decades of missions to effectively manage the risk involved in future space exploration and human space flight.25

Specialized information systems include a wide range of artificial intelli- gence systems (robotics, vision systems, natural language processing and voice recognition systems, learning systems, and expert systems) that can sim- ulate human intelligence processes. Multimedia systems, virtual reality sys- tems, assistive technology systems, and systems based on game theory are additional types of specialized information systems.

Business Analytics for Gaming Firm Penn National Gaming, through its subsidiaries, owns and operates more than 25 horseracing and casino gaming facilities throughout the United States and in Canada. It is the operator of the popular Hollywood Casinos around the country plus the M Resort Spa Casino and Tropicana Las Vegas. In aggregate, its opera- tions include some 33,000 gaming machines, 800 table games, 4,500 hotel rooms, and 10 million square feet of property.26 Millions of patrons visit Penn National Gaming facilities each year.

The firm is considering developing a large database to capture the data gener- ated at each property. This will be augmented with data about each patron—their demographics, purchases, gambling preferences and habits, and the services they request as a guest. The data will be used by the firm’s management to make quick, well-informed decisions to maximize Penn National Gaming’s income while packing more entertainment value into each patron’s visit. The data will also be used to develop targeted direct mail campaigns, customize offers for spe- cific customer segments, and adapt programs for individual casinos.

Review Questions 1. Collecting and analyzing all this data will draw Penn National Gaming in to

the realm of big data and business analytics. How would you define the term business analytics?

2. Penn National Gaming will also need to recruit new kinds of human resources including data scientists. What do data scientists do?

Critical Thinking Questions 1. Identify three data sources that might be tapped to obtain the desired data

about its patrons. 2. What sort of data privacy issues might be associated with the establishment of

its patron database?

Part 4: Planning, Acquiring, and Building Systems

A project is a temporary endeavor undertaken to create a unique product, ser- vice, or result. A project attempts to achieve specific business objectives and is subject to certain constraints, such as total cost and completion date. Projects are the way that much of an organization’s work gets done. For example, a con- sumer goods company executes a project to launch a new product, an opera- tions manager leads a project to outsource part of a firm’s operations to a

project: A temporary endeavor undertaken to create a unique product, service, or result.

26 PART 1 • Information Systems in Perspective

contract manufacturer, a hospital executes a project to load an app onto physi- cians’ smartphones that enables them to access patient data anywhere. At any point in time, an organization may have dozens of ongoing projects, including multiple information system-related projects. However, since every organization has a limit to its available resources, it is essential that projects are directed at supporting key business objectives and goals, as outlined in the firm’s strategic plan. This part will cover the topics of “Strategic Planning and Project Manage- ment” and “System Acquisition and Development.”

Strategic Planning and Project Management Ever since the dawn of the computer age, various surveys of business and IT executives have stressed the need to use strategic planning to improve align- ment between the needs of the business and the activities of the information systems organization. In this context, alignment means that the IS organiza- tion and its resources are focused on efforts that support the key objectives defined in the strategic plan of the business. This implies that IS and business managers have a shared vision of where the organization is headed and agree on its key strategies. This shared vision will guide the IS organization in hir- ing the right people with the correct skills and competencies, choosing the right technologies and vendors to explore and develop, installing the right systems, and focusing on those projects that are needed to move the organiza- tion closer to its vision and meeting its mission.

In an organization where the IS and business managers have a shared vision, the impact of the IS staff on the rest of the organization will be extremely positive, and the IS group will be viewed as a well-respected busi- ness partner. An IT organization not aligned with the key objectives of the business will find it difficult to even gain management support for its pro- posed efforts. Much of its work will fail to hit the mark and it will not be well received by the rest of the organization.

The Standish Group has been tracking the success rate of projects for over 20 years. Although the success rate has improved over time due to improved methods, training, and tools, 94 percent of very large (multimillion dollar efforts) software projects still fail or are challenged (i.e., are late, over budget, or lack required features) as shown in Figure 1.12.27

No matter what the industry and no matter whether the organization is a for-profit company or a nonprofit organization—large or small, multina- tional or local—good project management is a positive force that enables an organization to get results from its efforts. At any point in time, an

FIGURE 1.12 Resolution of very large software projects 2003–2012 Over 90 percent of large software projects are challenged or fail.

Challenged

Failed

Successful

42% 52%

CHAPTER 1 • An Introduction to Information Systems 27

organization may have dozens or even hundreds of active projects aimed at accomplishing a wide range of results. Over the next few years, it is expected that many organizations will focus on projects that apply ana- lytics to large amounts of business data, take advantage of cloud comput- ing, and create more mobile applications for their customers and employees.

System Acquisition and Development System acquisition is the process used to obtain the information system resources needed to provide the services necessary to meet a specific set of needs. Those needs may be very broad and encompass many users, such as in the acquisition of a new enterprise resource planning system. Or they may be very narrow in scope, affecting just a single user, such as in the acquisition of personal computer software to enable an individual to prepare a federal tax return. There are two fundamental strategies for system acquisition: buy off- the-shelf software or build a custom application.

Buying existing software developed by a software manufacturer enables an organization to test drive and evaluate it before making a major commit- ment to purchase it and install it. Once purchased, the existing software can be installed with minimal disruption so that user needs can be quickly met and the organization can begin reaping the benefits from the information sys- tem. Buyers of the software do not actually own the software, nor can they access it to make changes or improvements; they are simply licensed to use the software on a computer. With no access to the underlying source code, user organizations must pay maintenance and support costs to the manufac- turer or to a third party authorized to fix bugs or add new functionality. For some organizations, these costs can become excessive. As a result, many orga- nizations are turning to open source software, which is software distributed for free, with access permitted to the source code so that it can be studied, changed, and improved by software professionals at the various user organizations—with no maintenance charges. Indeed, the amount and quality of support for open source software is dependent on whether or not there are people, resources, and interest among the user community to develop updates and fix bugs.

The activity of building information systems to meet users’ needs is called system development. Systems development projects can range from small to very large and are conducted in fields as diverse as nuclear science research and video game development. If an organization elects to build a system, it can use its own employees (perhaps augmented with contractors) to develop the system, or it can hire an outside company to manage and/or perform all of the system development work. The latter approach allows an organization to focus on what it does best, by delegating software development to compa- nies that have world-class development capabilities. This can be important since the system development efforts for even relatively small projects can require months, with large projects requiring years of effort. Unfortunately, as already pointed out, in spite of everyone’s best efforts, a significant number of large system development projects are likely to fail.

By choosing a software service provider, users can gain access to needed software remotely, as a Web-based service via the cloud. Pricing is based on a monthly or per user fee and typically results in lower costs than a licensed application. Because the software is hosted remotely, users do not need to purchase and install additional hardware to provide increased capacity. Fur- thermore, the service provider handles necessary software maintenance and upgrades.

Table 1.8 summarizes the three basic alternatives for obtaining software to meet users’ needs.

system acquisition: The process used to obtain the information system resources needed to provide the ser- vices necessary to meet a specific set of needs.

open source software: Software that is distributed for free, with access permitted to the source code so that it can be studied, changed, and improved by software professionals at the various user organizations—with no mainte- nance charges.

system development: The activity of building information systems to meet users’ needs.

28 PART 1 • Information Systems in Perspective

Critical Thinking Exercise

Strategic Plan Review You are a member of the finance organization of a midsized manufacturer, with two years of experience with the firm. Your manager serves as a liaison between the finance group and the IS organization for budget review. The IS organization has just completed its annual strategic planning and budgeting process. Their plans, which include a $25 million budget (a 6 percent increase over last year), were forwarded to your manager for review. Your manager shared the IS strategic plan and budget with you a week ago and scheduled a meeting today to get your input and perspective.

Review Questions 1. What do you think are the hallmarks of a good strategic plan? 2. Would you expect to see more funds allocated to system development or to

buying existing software and using software service providers? Why?

Critical Thinking Questions 1. Your manager shocks you when she announces that she has recom-

mended you for promotion and that one of your new responsibilities would be to serve as the new finance liaison with the IS organization. She asks, “What do you feel needs to be done to help prepare you for this new responsibility?”

2. Finally, she asks, “What steps would you take and what resources would you use to review the current IS strategic plan and budget?”

Part 5: Information Systems in Business and Society

Information systems have been developed to meet the needs of all types of organizations and people. The speed and widespread use of information sys- tems, however, opens users to a variety of threats from unethical people. Computer criminals and terrorists, for example, have used the Internet to steal millions of dollars and promote terrorism and violence. Computer- related attacks can come from individuals, groups, companies, and even

TABLE 1.8 Alternatives for meeting users’ information system needs Strategy Pros Cons

Buy off-the-shelf software

þ A software solution can be acquired and deployed relatively quickly. þ An organization can “test drive” software before acquiring it.

� Unmodified, the software may not be a good match to an organization’s needs. � Maintenance and support costs can become excessive.

Build custom application

þ Customized software is more likely to be a good match to an organization’s needs. þ A custom application provides the potential to achieve competitive advantage.

� The cost to build a system can be quite high compared to the cost of purchasing of off-the-shelf software. � Customizing software can mean it will be months or even years before the software solution is ready to deploy.

Choose a software service provider

þ Users do not need to purchase and install additional hardware or software. þ The service provider handles necessary hardware and software maintenance and upgrades.

� Complex pricing arrangements and hidden costs may reduce expected cost savings. � Performance issues may cause wide variations in performance over time.

CHAPTER 1 • An Introduction to Information Systems 29

countries; however, some studies have shown that most of corporate security attacks come from people inside the company.

This part will cover “Cybercrime and Information System Security” and the “Ethical, Legal, and Social Issues of Information Systems.”

Cybercrime and Information System Security Information systems provide a highly profitable venue for cybercriminals, who take advantage of the opportunity to reach millions of potential victims. Cybercriminals are motivated by the potential for monetary gain; they hack into computer systems to steal, often by transferring money from one account to another or by stealing and reselling credit card numbers, personal identi- ties, and financial account information. Financial losses related to cybercrime—including the cost of the hardware, software, and various coun- termeasures implemented to fight cybercrime—are estimated to be as high as $400 billion annually worldwide.28 Figure 1.13 shows some commonly occur- ring cybercrime incidents.

Cyberterrorism is an increasing concern for organizations and countries around the globe. Cyberterrorism is the intimidation of a government or a civilian population by using information technology to disable critical national infrastructure (e.g., energy, transportation, financial, law enforcement, emer- gency response) to achieve political, religious, or ideological goals. Cyberter- rorists try on a daily basis to gain unauthorized access to a number of important and sensitive sites, such as the computer systems of foreign intelli- gence agencies and government ministries as well as private companies around the world. In particular, companies in the oil and gas industry are seen as high-value targets. Some cyberterrorists are interested in taking con- trol over the flow of oil and natural gas in computer-controlled refineries and the movement of oil through pipelines. This could result in devastating consequences—with oil and gas being cut off from freezing populations in the dead of winter or skyrocketing prices at the gasoline pumps.

With organizations relying on information systems to accomplish their mission and remain in operation, the security of information systems and their data is of utmost importance. Organizations must safeguard their sys- tems and confidential company data, including private customer and employee information, against malicious acts of theft and disruption. How- ever, the need for computer security must be balanced against other business

FIGURE 1.13 Commonly occurring cybercrime incidences Cybercrime is a serious issue for organizations.

Malware infection

Loss of mobile device

Corporate espionage

Distributed denial-of-service

P er

ce n

t or

g an

iz at

io n

s re

p or

ti n

g t

h is

in ci

d en

2011 2012 2013 2014

cybercriminal: A computer hacker who is motivated by the potential for monetary gain; cybercriminals hack into computer systems to steal, often by transferring money from one account to another or by stealing and reselling credit card numbers, personal identi- ties, and financial account information.

cyberterrorism: The intimidation of a government or a civilian population by using information technology to disable critical national infrastructure (e.g., energy, transportation, financial, law enforcement, emergency response) to achieve political, religious, or ideologi- cal goals.

30 PART 1 • Information Systems in Perspective

needs. Business managers, IS professionals, and IS users all face a number of complex trade-offs regarding IS security, such as the following:

● How much effort and money should be spent to safeguard against com- puter crime? (In other words, how safe is safe enough?)

● What should be done if recommended computer security safeguards make conducting business more difficult for customers and employees, resulting in lost sales and increased costs?

● If a firm becomes a victim of a computer crime, should it pursue prosecu- tion of the criminals at all costs, maintain a low profile to avoid the nega- tive publicity, inform affected customers, or take some other action?

A strong security program begins by assessing threats to the organization’s computers and network, identifying actions that address the most serious vul- nerabilities, and educating end users about the risks involved and the actions they must take to prevent a security incident. An organization’s IS security group must lead the effort to prevent security breaches by implementing secu- rity policies and procedures, as well as effectively employing available hardware and software tools. However, no security system is perfect, so systems and pro- cedures must be monitored to detect a possible intrusion. If an intrusion occurs, there must be a clear reaction plan that addresses notification, evidence protec- tion, activity log maintenance, containment, eradication, and recovery.

Ethical, Legal, and Social Issues of Information Systems The use of information systems raises a number of ethical, legal, and social issues, including job losses caused by increasingly sophisticated, humanlike systems, invasion of privacy through various data collection programs, free- dom of expression versus censorship, and the issues caused by unequal access to computer technology and the Internet.

Many organizations and professional associations have developed codes of ethics to help guide their members in making difficult decisions, including those connected to the use of information systems. Ethics is a set of beliefs about right and wrong behavior. Ethical behavior conforms to generally accepted social norms—many of which are almost universally accepted. In many situations, the decision on what course of action to take is further com- plicated because it involves significant value conflicts among the various sta- keholders as to what is the fairest option to pursue. Such a decision represents an ethical dilemma, and all parties involved can benefit when ethi- cal considerations are introduced into the decision-making process.

The use of information about people (employees, customers, business partners, etc.) requires balancing the needs of those who want to use the information against the rights and desires of the people whose information may be used. On the one hand, information about people is gathered, stored, analyzed, and reported because organizations can use it to make better deci- sions (see Figure 1.14). Some of these decisions can affect people’s lives profoundly—whether or not to extend credit to a new customer, to hire one job candidate versus another, or to offer a scholarship or not. In addition, increased competitiveness in the global marketplace has intensified the need to understand consumers’ purchasing habits and financial condition. Compa- nies use information they gather about people to target marketing efforts to consumers who are most likely to buy their products and services. Organiza- tions also need basic information about existing customers in order to serve them better. It is hard to imagine an organization having a relationship with its customers without having data about them. Thus, many organizations implement customer relationship management (CRM) systems that collect and store key data from every interaction they have with a customer.

On the other hand, many people object to the data collection policies of gov- ernment and other organizations because they believe such policies strip people

ethics: A set of beliefs about right and wrong behavior. Ethical behavior conforms to generally accepted social norms—many of which are almost universally accepted.

CHAPTER 1 • An Introduction to Information Systems 31

of the power to control their own personal information. In addition, many peo- ple are concerned not only about the potential abuse that control of such data may bring but also about the potential for data breaches, resulting in disclosure of personal data. A combination of approaches—new laws, technical solutions, and privacy policies—is required to effectively balance the needs of all sides.

Internet censorship is the control or suppression of the publishing or accessing of information on the Internet. Censorship can take many forms— such as limiting access to certain Web sites, allowing access to only some con- tent or modified content at certain Web sites, rejecting the use of certain key words in search engine searches, tracking and monitoring the Internet activities of individuals, and harassing or even jailing individuals for their Internet use. For those fortunate enough to live in a nonauthoritarian country, it may be dif- ficult to even imagine that Internet censorship goes on. Yet many authoritarian regimes rely on a mix of sophisticated technology and old-fashioned intimida- tion to ensure that dissent and the flow of free information online is repressed.

The digital divide is a term used to describe the gulf between those who do and those who don’t have access to modern information and communica- tions technology such as smartphones, personal computers, and the Internet. Roughly 40 percent of the world’s population or around 3 billion people have an Internet connection, but the worldwide distribution of Internet users varies greatly from region to region.

Net neutrality is the principle that Internet service providers (ISPs) should be required to treat all Internet traffic running over their wired and wireless broadband networks the same—without favoring content from some sources and/or blocking or slowing (also known as throttling) content from others. The debate over net neutrality raises questions about how best to keep the Internet open and impartial, while still offering ISPs sufficient incentive to expand their networks to serve more customers and to support new services.

The rapid growth of the Internet of Things is being fueled by the increas- ing availability of network access, the creation of more inexpensive smart devices with sensors and network capabilities built into them, the rapid growth

FIGURE 1.14 Much information is being gathered about people Personal privacy is difficult to safeguard.

Web browsing behavior

Educational records

Financial data

Location data

Medical history

Police record

Work history

Sexual orientation

Associates and

affiliations

Driving record

Who are

you?

Internet censorship: The control or suppression of the publishing or accessing of information on the Internet.

digital divide: The gulf between those who do and those who don’t have access to modern information and communications technology such as smartphones, personal computers, and the Internet.

net neutrality: The principle that Internet service providers (ISPs) should be required to treat all Internet traffic running over their wired and wireless broadband networks the same— without favoring content from some sources and/or blocking or slowing (also known as throttling) content from others.

32 PART 1 • Information Systems in Perspective

Critical Thinking Exercise

in smartphone penetration, and the creativity and innovation of people who are able to see and capitalize on the almost unlimited opportunities.29 Clearly the growth of the IoT will present major issues around Internet access.

Robo-Advice for Millennials Your investment firm has been working hard to develop a robo-adviser service that uses computer algorithms to provide financial planning for its millennial cli- ents. There is widespread consensus across the investment community that millen- nials raised in an environment of video games and social networks are looking for just this kind of investment robo-advice service.

You are a member of a field test unit for the robo-advice service. Your team of 12 people has trained some 250 people (in the 25 to 35 target age range) in the basics of investing and how to take best advantage of the robo-advice service. The trial results have been discouraging. Many of the trial clients ignored the robo-advice completely and simply turned into hyperactive traders, executing multiple trades per week. Alarmingly, even those who followed the robo-advice did not fare well, losing an average of 5 percent on their investments even though the market (as measured by the S&P 500) increased nearly 4 percent during the six-month trial period.

Review Questions 1. What other fields besides investing might benefit from the use of a robo-

advice system? 2. What sort of legal, ethical, and social issues are raised when creating a robo-

advice type of system? Do the builders of such a robo-advice system owe a special duty or responsibility to its users?

Critical Thinking Questions The members of the field trial team are gathered to discuss their findings and develop conclusions in advance of a meeting next week with the firm’s senior man- agement team. Just 10 minutes into the meeting, it is clear that none of the field trial team members feels confident that the new service is offering sound advice. However, some members of the trial team argue that the roll-out of the service should commence as planned; they maintain that problems can be identified and fixed as more users come on board and the firm gains more experience working with investors and the robo-advice system. Their rationale is based at least in part on self-survival—to recommend against roll-out is probably a career-ending move, as the firm has already invested so much in the program, which it has already begun promoting to customers. Others members of the team argue that the product is simply not ready for large-scale use. They argue that the current system should be scrapped and the firm should forget about the idea of a robo-advice service. 1. Are there other alternative strategies for the robo-advice service that make

sense? Which approach would you recommend and why? 2. How might you present your approach to senior management in such a way

that it has a good chance of being accepted—and that the risk to your future employment is minimized?

Summary

Principle: The value of information is directly linked to how it helps decision makers achieve the organization’s goals.

Data consists of raw facts; information is a collection of data organized and processed so that it has additional value beyond the value of the individual facts. The value of information created depends on the relationships defined

CHAPTER 1 • An Introduction to Information Systems 33

among existing data. Turning data into information is a process performed to achieve a defined outcome. This process requires knowledge, which is the aware- ness and understanding of a set of information and the ways in which that infor- mation can be made useful to support a specific task or reach a decision.

Information has many different characteristics. It can be accessible, accu- rate, complete, economical to produce, flexible, relevant, reliable, secure, sim- ple to understand, timely, and verifiable. The importance of each of these characteristics varies depending on the situation and the kind of decision you are trying to make. The value of information is directly linked to how it helps people achieve their organizations’ goals.

Principle: Information systems are composed of fundamental components that must be carefully assembled and integrated to work well together.

An information system (IS) is a set of interrelated components that collect, process, store, and disseminate data and information; an information system provides a feedback mechanism to monitor and control its operation to make sure it continues to meet its goals and objectives.

A computer-based information system (CBIS) is a single set of hardware, software, databases, networks, people, and procedures that are configured to collect, manipulate, store, and process data into information.

An organization’s technology infrastructure includes all the hardware, soft- ware, databases, networks, people, and procedures that are configured to col- lect, manipulate, store, and process data into information.

Principle: Managers have an essential role to play in the successful implementation and use of information systems—that role changes depending on which type of IS system is being implemented.

When considering the role of business managers in working with IS, it is useful to divide information systems into three types: personal IS, group IS, and enterprise IS.

For each type of IS, certain key organizational complements must be in place to ensure successful implementation and use of the system. These com- plements include well-trained workers, better teamwork, redesigned processes, and new decision rights.

Principle: An organization’s infrastructure technology forms the foundation upon which its systems and applications are built.

Hardware consists of computer equipment used to perform input, proces- sing, storage, and output activities.

Smartphones have become the primary device used by people around the world to communicate, go online, and access and share information.

Software consists of computer programs that govern the operation of a particular computing device, be it desktop, laptop, tablet, smartphone, or some other device.

The trend of consumer technology practices influencing the way business software is designed and delivered is called the consumerization of IT.

A database is an organized collection of facts and information, typically consisting of two or more related files.

A data warehouse is a database that stores large amounts of historical data in a form that readily supports analysis and decision making. An extract- transform-load process is used to prepare the data for the data warehouse.

34 PART 1 • Information Systems in Perspective

Big data is a term used to describe collections of data that are so large and complex that traditional database management software, hardware, and analy- sis processes are incapable of dealing with them.

Networks connect computers and equipment in a room, building, campus, city, across the country, or around the world to enable electronic communications.

With public cloud computing, a service organization owns and manages the hardware, software, networking, and storage devices, with cloud user orga- nizations (called tenants) accessing slices of shared resources via the Internet.

The Internet of Things (IoT) is a network of physical objects or things embedded with sensors, processors, software, and network connectivity capa- bility to enable them to exchange data with the manufacturer of the device, device operators, and other connected devices.

The Internet of Everything (IoE) encompasses not only machine- to-machine but also people-to-people and people-to machine connections. It is estimated that the total number of devices connected to the Internet of Every- thing could exceed 50 billion by the end of 2020.

Principle: Organizations employ a variety of information systems to improve the way they conduct business and make fact-based decisions.

E-commerce involves the exchange of money for goods and services over electronic networks, and it encompasses many of an organization’s outward- facing processes. Electronic business goes beyond e-commerce by using infor- mation systems and networks to perform business-related tasks and functions.

A transaction processing system (TPS) is an information system used to process and record business transactions.

A management information system (MIS) is an information system that pro- vides routine information to managers and decision makers.

Many organizations are replacing their transaction processing systems and management information systems with enterprise resource planning (ERP) sys- tems that support their routine business processes, maintain records about those processes, and provide extensive reporting and even data analysis capa- bilities. At the core of a modern enterprise resource planning system is the capability to support e-business and business analytics.

Business analytics is the extensive use of data and quantitative analysis to support fact-based decision making within organizations.

Data scientists are people who understand the business and the business analytics technology, while also recognizing the limitations of their data, tools, and techniques. A data scientist puts all of this together to deliver real improve- ments in decision making. To ensure the success of a business analytics pro- gram, the management team within an organization must have a strong commitment to data-driven decision making. Organizations that can put the necessary components in place can act quickly to make superior decisions in uncertain and changing environments to gain a strong competitive advantage.

A knowledge management system is an information system that stores and retrieves knowledge, improves collaboration, locates knowledge sources, cap- tures and uses knowledge, or in some other way enhances the knowledge man- agement process.

Principle: Strategic planning and project management are keys to ensuring that the organization is working effectively on the right projects.

Strategic planning is a means to improve alignment between the business and the information systems organization so that the IS organization and its resources are focused on efforts that support the key objectives that are

CHAPTER 1 • An Introduction to Information Systems 35

important to the organization. This implies that IS and business managers have a shared vision of where the organization is headed and agree on its key strat- egies. This shared vision will guide the IS organization in hiring the right peo- ple with the correct skills and competencies, choosing the right technologies and vendors to explore and develop, installing the right systems, and focusing on those projects that are needed to move the organization closer to its vision and meeting its mission.

System acquisition is the process used to obtain information system resources needed to provide the services necessary to meet a specific set of needs.

The three basic alternatives for obtaining software to meet users’ needs are: buy off-the-shelf software, build a custom application, or choose a software service provider.

Principle: Information systems must be applied thoughtfully and carefully so that society, organizations, and individuals around the globe can reap their enormous benefits.

Cybercriminals are motivated by the potential for monetary gain. The finan- cial losses from cybercrime—including the cost of the hardware, software, and various countermeasures implemented to fight cybercrime—are estimated to be as high as $400 billion annually worldwide. Cyberterrorism is also an increas- ing concern for organizations and countries around the globe.

Information systems play a fundamental and ever-expanding role in soci- ety, business, and industry. But their use also raises a number of serious ethical, legal, and social issues, including job losses caused by increasingly sophisti- cated, humanlike systems; invasion of privacy through various data collection programs; freedom of expression versus censorship; and the issues caused by unequal access to computer technology and the Internet.

Many organizations and professional associations have developed codes of ethics to help guide their members in making difficult decisions.

Key Terms

big data

business analytics

business intelligence (BI)

computer-based information system (CBIS)

consumerization of IT

cybercriminal

cyberterrorism

data

data scientist

data warehouse

database

digital divide

e-commerce

electronic business (e-business)

enterprise IS

enterprise resource planning (ERP) system

ethics

extract-transform-load (ETL)

extranet

group IS

hardware

information

information silo

information system (IS)

Internet

Internet censorship

Internet of Everything (IoE)

Internet of Things (IoT)

intranet

knowledge

36 PART 1 • Information Systems in Perspective

knowledge management system (KMS)

management information system (MIS)

mobile commerce (m-commerce)

net neutrality

networks

open source software

organizational complements

personal IS

procedure

process

project

public cloud computing

software

system acquisition

system development

technology infrastructure

transaction

transaction processing system (TPS)

World Wide Web (WWW)

Chapter 1: Self-Assessment Test

The value of information is directly linked to how it helps decision makers achieve the organization’s goals.

1. is a collection of raw facts orga- nized and processed so that it has additional value beyond the value of the individual facts. a. Data b. Information c. Knowledge d. Expertise

2. Turning data into information is a , or a set of logically related tasks performed to achieve a defined outcome.

3. Two quality characteristics that are critical for data used in accounting for the management of company assets, such as cash, inventory, and equipment are . a. flexibility and accuracy b. security and relevancy c. accuracy and completeness d. relevancy and economical

Information systems are composed of fundamental components that must be carefully assembled and integrated to work well together.

4. Technology infrastructure includes all the hard- ware, software, , networks, people, and procedures that are configured to collect, manipulate, store, and process data into information.

5. According to Jim Collins in his book Good to Great, those who build great companies under- stand that the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products; rather, it is one thing above all others: . a. great customers b. great systems c. great leadership d. great people

Managers have an essential role to play in the suc- cessful implementation and use of information systems—the role changes depending on which type of IS system is being implemented.

6. When considering the role of business managers in working with IS, it is useful to divide informa- tion systems into these three types: . a. enterprise IS, group IS, and personal IS b. small and simple, medium and multifaceted,

and large and complex c. operational, tactical, and strategic d. management support, operational, and enter-

prise systems 7. Which of the following is not a key organizational

complement that must be in place to ensure suc- cessful implementation and use of the system? a. well-trained workers b. better teamwork c. the latest technology d. new decision rights

An organization’s technology infrastructure forms the foundation upon which its systems and applica- tions are built.

8. are the primary device type used by people around the world to communicate, go online, and access and share information. a. Personal computers b. Laptops c. Smartphones d. Tablets

9. The trend of consumer technology practices influ- encing the way business software is designed and delivered is called the .

10. is a computing environment in which a service provider organization owns and manages the hardware, software, networking, and storage devices, with cloud user organiza- tions (called tenants) accessing slices of shared resources via the Internet.

CHAPTER 1 • An Introduction to Information Systems 37

Organizations employ a variety of information sys- tems to improve the way they conduct business and make fact-based decisions.

11. involves the exchange of money for goods and services over electronic networks, and it encompasses many of an organization’s outward-facing processes—such as sales, mar- keting, order taking, delivery, procurement of goods and services, and customer service—that touch customers, suppliers, and other business partners.

12. A is an organized collection of people, procedures, software, databases, and devices that provides routine information to managers and decision makers. a. transaction processing system (TPS) b. management information system (MIS) c. enterprise resource planning (ERP) system d. supply chain management system

13. Over time, decision support systems, executive information systems, online analytical processing, business intelligence, and business analytics have gained in capabilities and expanded in scope to add new functionality, but they have all had the goal of . a. processing business transactions as rapidly

and accurately as possible b. deriving the most value out of the data

available c. providing routine information to managers d. enabling the sharing of information across

organizations units 14. An organized collection of people, procedures,

software, databases, and devices that stores and retrieves knowledge, improves collaboration, locates knowledge sources, and captures and uses knowledge is called a .

Strategic planning and project management are keys to ensuring that the organization is working effectively on the right projects.

15. An IT organization not aligned with the key objectives of the business will . a. be recognized as a technology leader in its

industry b. find it difficult to even gain management

support for its proposed efforts c. be positioned to deliver a series of break-

through projects d. be viewed as a partner with the business

16. The two fundamental strategies for system acquisition are: . a. customize an existing package and acquire

open source software b. use a standard software package or customize

software c. build software in-house or contract for

software d. buy off-the-shelf software or build a custom

application

Information systems must be applied thoughtfully and carefully so that society, organizations, and individuals around the globe can reap their enor- mous benefits.

17. Which of the following statements about com- puter security is not true? a. Cyberterrorism is an increasing concern for

organizations and countries around the globe. b. Information systems provide a new and

highly profitable venue for cybercriminals. c. The need for computer security must be bal-

anced against other business needs. d. Educating end users about the risks involved

and the actions they must take to prevent a security incident is a not key part of any security program.

18. is a term used to describe the gulf between those who do and those who don’t have access to modern information and communica- tions technology such as smartphones, personal computers, and the Internet.

Chapter 1: Self-Assessment Test Answers

1. b 2. process 3. c 4. databases 5. d 6. a 7. c 8. c 9. consumerization of IT

10. Cloud computing 11. E-commerce 12. b 13. b 14. knowledge management system 15. b 16. d 17. d 18. Digital divide

38 PART 1 • Information Systems in Perspective

Review Questions

1. How is data different from information? How is information different from knowledge?

2. Identify and briefly define six characteristics that describe the quality of data.

3. What is an information system? What is the role of feedback in a system?

4. Identify the six basic components of any computer-based information system.

5. What is meant by an organization’s technology infrastructure?

6. When considering the role of business managers in working with IS, it is useful to divide informa- tion systems into three types. Name and briefly describe those three types.

7. Identify and briefly describe the four key organi- zational complements that must be in place to ensure successful implementation and use of an information system.

8. Define the term “software.” What are the two primary types of software? How are they different?

9. What is meant by the phrase consumerization of IT? 10. What is the extract-transform-load process? 11. Define the term “big data.”

12. What is cloud computing? 13. What is an extranet and how is one used? 14. How is the Internet of Everything different from

the Internet of Things? 15. How would you distinguish between e-commerce

and e-business? 16. Briefly describe the differences among transac-

tion processing systems, management informa- tion systems, and enterprise resource planning systems.

17. What is meant by the term “business analytics”? What other terms have been used for business analytics systems?

18. What is knowledge management? How might it be used?

19. What are the components of a shared vision on which the business and IS organization must agree?

20. Identify an advantage and a potential disadvan- tage of using open source software.

21. What is the difference between a cybercriminal and a cyberterrorist?

22. Identify three specific social issues associated with the use of information systems.

Discussion Questions

1. What do you hope to learn from this course that will make it worthwhile for you? Do you think a basic understanding of information systems is important to you? Why or why not?

2. Describe how you might use information systems in a career area of interest to you.

3. How might completing this course help you in some of the courses you will take during your academic career?

4. It has been estimated that the amount of digi- tal data is doubling every two years. Discuss some technological and social implications and issues associated with this rapid growth of data.

5. What are some of the social implications of the use of smartphones by an increasing percentage of the world’s population?

6. Which of your school’s information systems is the worst or most difficult for you to deal with? Describe an ideal system that would replace this one. What role might students play in defining and building this replacement system?

7. Discuss why it is critical for information systems to be linked to the business objectives of an organization.

8. For an industry of your choice, describe how a CBIS could be used to reduce costs or increase profits.

9. An organization has struggled for over three years in an attempt to implement and use an ERP system. It has finally decided to scrap this system, at great cost, and convert to a new ERP system from a different vendor. Identify and discuss actions management should take to ensure the success of the new system.

10. Identify specific benefits of the cloud computing model. Can you identify any potential risks asso- ciated with using this approach?

11. Describe three exciting new applications that are becoming feasible as a result of the growth of the Internet of Everything.

12. Do research to identify a company that has gone beyond e-commerce to use information systems and networks to achieve an e-business environ- ment to perform business-related tasks and func- tions. Briefly describe the scope of the company’s e-business functions.

13. Identify a specific company that could benefit from the use of big data and business analytics. What sort of data is required? How might this data be used in decision making?

14. What are the cornerstones to an organization’s security program?

CHAPTER 1 • An Introduction to Information Systems 39

Problem-Solving Exercises

1. Prepare a data disk and a backup disk (using USB flash drives) for the problem-solving exercises and other computer-based assignments you will complete in this class. Create one folder for each chapter in the textbook (you will need 14 folders total). As you complete the problem-solving exercises and other work for each computer, save your assignments in the appropriate chapter folder. Designate one disk as your working copy and the other as your backup.

2. Create a table that lists 10 or more possible career areas—including estimated annual salaries and brief job descriptions. Rate how much you think

you would like each potential career area on a scale from 1 (“don’t like”) to 10 (“like the most”). Sort the careers from high to low rating and print the results. Sort the table according to annual salaries, from high to low, and then print the resulting table. Sort the table from the most liked to least liked, and then print the results.

3. Use presentation software to create a set of three slides that identifies the top three things you hope to learn from this course and why each is important to you. If requested, share your find- ings with the instructor and/or class.

Team Activities

1. Before you can do a team activity, you need a team. As a class member, you might create your own team, or your instructor might assign mem- bers to groups. After your group has been formed, meet and introduce yourselves to each other. Find out the first name and contact infor- mation for each member. Find out one interesting fact about each member of your team as well. Brainstorm a name for your team. Put the infor- mation on each team member into a database and print enough copies for each team member and your instructor.

2. With the other members of your group, use word- processing or group collaboration software to write a summary of the members of your team,

the courses each team member has taken, a summary of employment, and the expected graduation date of each team member. Send the report to your instructor via email.

3. With your team, use an Internet search engine or skim through several business periodicals (Bloomberg Businessweek, Computerworld, Forbes, InformationWeek, PC World, Wall Street Journal, Wired, etc.) to find recent arti- cles that describe potential social or ethical issues related to the use of the Internet of Things. Use word-processing software to write a one-page report summarizing your findings. Identify one or two issues that you think are most significant.

Web Exercises

1. Throughout this book, you will see how the Internet provides a vast amount of information to individuals and organizations, and you will examine the important role the Web plays. Most large universities and organizations have an address on the Internet (a Web site or home page). The address of the Web site for this publisher is www.cengage.com. You can gain access to the Internet through a browser, such as Internet Explorer or Firefox. Using an Inter- net browser, go to the Web site for this pub- lisher. What did you find? Try to obtain information about this book. You might be asked to develop a report or send an email

message to your instructor about what you found.

2. Do research on the Web to find information on Internet censorship. Identify those countries with the strongest degree of Internet censorship, and state specific reasons why those countries are so poorly rated.

3. Go to the Web site for the U.S. Bureau of Labor Statistics, and find information about the occu- pations with the greatest projected job growth in terms of the number of people who will be needed. Use a graphics program to illustrate the growth of the 10 fastest growing occupations. Write a brief summary of your findings.

40 PART 1 • Information Systems in Perspective

Career Exercises

1. In the Career Exercises section found at the end of every chapter, you will explore how material in the chapter can help you excel in your college major or chosen career. Identify 10 job charac- teristics that are important to you in selecting your career (e.g., involves travel to foreign coun- tries, requires working in a project team). Place

these characteristics in rank order based on their relative importance to you.

2. Research two or three possible careers that inter- est you. Create a report describing the job opportunities, job responsibilities, job character- istics, and possible starting salaries for each career area.

Case Studies

Case One

Connecting Patient Monitoring Devices to EHRs An electronic health record (EHR) is a computer-readable record of health-related information on an individual. The compiled data in an EHR can include information about patient demographics, medical history, family history, immunization records, laboratory data, ongoing health problems, progress notes, medications, vital signs, and radiology reports. Ideally, EHRs incorporate data from all healthcare facilities a patient uses, making the data easily accessible to healthcare professionals.

EHRs hold out the promise of improving health care and reducing costs, but for now, many hospitals are struggling to automate the capture of raw data from the various patient monitoring devices—such as vital sign monitors, ventilators, and electrocardiogram machines—and pass the data directly into each patient’s EHR. This task is made more difficult because different devices and/or vendors often use different standards for communicating over the network. As a result, specialized software is required to receive the data and translate it into a form suitable for updating the EHR. Until communications standards are implemented across the healthcare industry, each new piece of monitoring equipment that outputs a nonstandard signal requires a new interface with the EHR. So if a promising new vital sign monitoring device is developed, some hospitals looking to use the device may be required to create a new software middleware layer to connect the new device to the EHR. Connecting monitoring devices and EHRs is expected to become a major business growth area over the next decade.

Many software vendors and device manufacturers are moving quickly to capitalize on the opportunities involved with automating the many clinical-support activities that involve monitoring devices. The Center for Medical Interoperability has enlisted many of the nation’s largest healthcare systems as part of its effort to strongly encourage device vendors to adopt communications standards that will ease the problems with interoperability. The Food and Drug Administration is working to encourage the development of interoperable devices by defining some 25 device standards. Solving the interoperability problem will require an agreement on standards through the cooperation of multiple stakeholders.

Critical Thinking Questions: 1. What benefits can be achieved through the successful

implementation of EHRs? What additional benefits will be gained by feeding data directly from patient moni- toring devices directly into EHRs?

2. Can you identify any legal, ethical or social concerns with the use EHRs? What additional concerns arise from connecting patient monitoring devices to the IoT?

3. What actions need to be taken by EHR software ven- dors, patient monitoring device vendors, government agencies, and hospital administrators to enable patient monitoring devices to be safely and reliably connected to EHRs?

SOURCES: Atherton, Jim, “Development of the Electronic Health Record,” AMA Journal of Ethics, March 2011, http://journalofethics.ama- assn.org/2011/03/mhst1-1103.html; Tahir, Dennis, “Getting the Data Stream Flowing: Hospitals Want Monitoring Devices and EHRs to Communicate,” Modern Healthcare, May 9, 2015, www.modernhealth care.com/article/20150509/MAGAZINE/305099980.

Case Two

BMW: Automaker Competes on the Digital Front One of the biggest trends driving competition in the auto industry in recent years is the race to offer new and better “connected-car” technologies—including those that enhance safety, monitor maintenance requirements, provide Internet connectivity, and offer seamless integration with smartphones and wearable devices. A 2015 study of the worldwide auto industry projected that customer spending on connected-car technologies will exceed €40 billion ($42 billion) in 2016; that number is expected to more than triple to €122 billion ($129 billion) by 2021. Tech-savvy consumers increasingly expect their cars to serve as extensions of their personal technology, and one company working hard to exceed those expectations is German automaker Bayerische Motoren Werke AG—or BMW, as it is more commonly known.

BMW was founded in 1916 as a manufacturer of aircraft engines, but the company soon branched out into other areas. Today, the BMW Group manufactures motorcycles in addition to its three premium car brands (BMW, MINI, and Rolls-Royce), and it is now represented in over 140

CHAPTER 1 • An Introduction to Information Systems 41

countries—including 30 production locations in 14 countries. With close to 2 million cars sold in 2014, BMW is one of the world’s most-recognized luxury car brands, with a reputation for consistently delivering high-quality cars built on a foundation of advanced mechanical engineering. To maintain its edge, BMW is now expanding its focus to find ways to improve its cars through cutting-edge technological innovations.

According to Dieter May, BMW’s digital business models senior vice president, “Our competitor is not Audi, Jaguar Land Rover or Mercedes, but the space of consumer electronics players.” As May sees it, one of the biggest questions facing BMW—and other auto makers—in the coming years is “How do we take the connected home, personal digital assistants, and advanced sensor technology, and connect all these trends?”

BMW has responded to this question by building an extensive array of new technologies into its latest models. Through BMW’s iDrive information and entertainment system, drivers can access ConnectedDrive, a portal offering a wide range of location-based services, including concierge services, real-time traffic information, and access to more than 12.6 million searchable “points of interest,” ranging from gas stations to restaurants to tourist attractions. Another ConnectedDrive feature, the Head-Up Display, projects important driving information—such as current speed and warnings from the car’s night vision system—on the windshield, allowing the driver to keep his or her eyes on the road. The Speed Limit Info feature uses a car-mounted camera along with data from the navigation system to keep drivers informed of current speed limits, including those in effect due to road construction and weather conditions. ConnectedDrive, which can be controlled from the driver’s smartphone, also offers mobile office features, such the ability to dictate and send messages, and a ConnectedDrive Store, where users can purchase apps and services directly through the iDrive interface. And at the high end of BMW’s model line, the 7 Series full-size sedan, BMW’s flagship vehicle, is the first model to accept gesture-control commands for the iDrive display as well as a completely automated self-park feature that can be operated when the driver is outside the vehicle.

BMW is also working to ensure that the car-buying experience is keeping up with customers’ expectations by encouraging its dealerships to create more digital showrooms, with flat screen displays and virtual demonstrations to appeal to the many customers who are accustomed to the online shopping experience. In addition, BMW is adding “product geniuses”—like those found in Apple’s retail stores—to its showrooms. The specialists have no responsibility to sell; their job is simply to spend whatever time is necessary to explain and demonstrate each car’s various technological features to potential BMW customers.

To continue to develop the complex technological innovations it needs to maintain its edge over competitors,

BMW has explored possible partnerships with technology companies such as Apple. Currently, however, the auto maker is focused on building up its in-house expertise and speeding up its internal software development cycles. In 2014, BMW spent over €4.5 billion ($4.75 billion) on research and development, and it spent, on average, more than €6,000 ($6,370) per car on connected-car technology. BMW is making it clear to potential customers and competitors alike that is committed to competing and winning on the digital front.

Critical Thinking Questions: 1. Other than selling more cars, what potential benefits

do connected-car technologies offer auto makers such as BMW in terms of enhancing long-term customer relationships?

2. What responsibilities does BMW have to its customers regarding the data it captures via the various connected car technologies that it builds into its cars?

3. Of the primary components of an ERP system that were identified in this chapter, which modules are likely to be of highest importance to BMW if it con- tinues to focus on in-house development of new tech- nological features and services rather than partnering with an established personal technology company, such as Google or Apple? Would those tools need to change if BMW establishes a long-term partnership with a technology company?

SOURCES: Muller, Joann, “5 Big Trends Driving The Auto Industry in 2015,” Forbes, January 19, 2015, www.forbes.com/sites/joannmuller /2015/01/05/5-big-trends-driving-the-auto-industry-in-2015; Vierecki, Richard, Ahlemann, Dietmar, Koster, Alex, and Jursch, Sebastian, “Connected Car Study 2015: Racing Ahead with Autonomous Cars and Digital Innovation,” Strategy&, September 15, 2015, www.strategyand. pwc.com/global/home/what-we-think/reports-white-papers/article-dis play/connected-car-2015-study; “Annual Report 2014,” BMW Group, www.bmwgroup.com/e/0_0_www_bmwgroup_com/investor_relations /finanzberichte/geschaeftsberichte/2014/_pdf/12507_GB_2014_en_Fi nanzbericht_Online.pdf, accessed November 23, 2015; Murphy, Margi, “BMW Internalizes IT to Claw Back Customer Data,” ComputerworldUK, June 24, 2015, www.computerworlduk.com/news/data/bmw-our-compe titor-is-not-audi-jaguar-land-rover-or-mercedes-but-consumer-electro nics-players-3616944; Green, Chloe, “Rise of the Intelligent Car,” InformationAge, July 7, 2015, www.information-age.com/industry/soft ware/123459790/rise-intelligent-car-how-digital-technologies-are-creat ing-third-wave-car-makers; “BMW ConnectedDrive,” BMW USA, www .bmwusa.com/standard/content/innovations/bmwconnecteddrive/con necteddrive.aspx#home, accessed November 28, 2015; “7 Series,” BMW USA, www.bmwusa.com/bmw/7series, accessed November 28, 2015; Taylor, Edward and Love, Julia, “Tim Cook Visited BMW in Germany to Learn How to Build an Electric Car,” Business Insider, July 31, 2015, www.businessinsider.com/r-apple-bmw-in-courtship-with-an-eye-on -car-collaboration-2015-7; “BMW Tosses Salesmen for ‘Geniuses,” The Wall Street Journal, February 19, 2014, www.wsj.com/articles /SB10001424052702304450904579364833799765354.

42 PART 1 • Information Systems in Perspective

Notes

1. Haselkorn, Erin, “To Be a Marketing Master Mind, You Need Quality Data,” Experian Marketing Services, April 15, 2014, www.experian.com/blogs/marketing-forward/ 2014/04/15/to-be-a-marketing-mastermind-you-need- quality-data.

2. Shah, Jay, “Calculate the Cost of Bad Data Using This Easy Equation,” Informed Logix, April 2, 2015, www. infogix.com/calculate-cost-bad-data-easy-equation.

3. Collins, Jim, Good to Great: Why Some Companies Make the Leap and Others Don’t, New York: Harper Business, 2001.

4. Carroll, Ron, “People Are the Most Important System Component,” Box Theory, www.boxtheorygold.com/ blog/bid/12164/People-Are-the-Most-Important-System- Component, accessed June 10, 2015.

5. Laurianne McLaughlin, “Kroger Solves Top Customer Issue: Long Lines,” InformationWeek, April 2, 2014, www.informationweek.com/strategic-cio/executive- insights-and-innovation/kroger-solves-top-customer- issue-long-lines/d/d-id/1141541.

6. “2 Billion Consumers Worldwide to Get Smart(phones) by 2015,” eMarketer, December 11, 2014, www.emark eter.com/Article/2-Billion-Consumers-Worldwide-Smart phones-by-2016/1011694.

7. “Global Smartphone Shipments Forecast from 2010 to 2019 (in million units),” The Statistics Portal, www.sta tista.com/statistics/263441/global-smartphone-shipments- forecast, accessed June 11, 2015 and “Forecast for Global Shipments of Tablets, Laptops and Desktop PCs from 2010 to 2019 (in million units),” Statistica, www.statista. com/statistics/272595/global-shipments-forecast-for- tablets-laptops-and-desktop-pcs, accessed June 10, 2015.

8. “Number of Android Applications,” App Brain Stats, June 11, 2015, www.appbrain.com/stats/number-of-android- apps.

9. “Number of Apps Available in Leading App Stores as of May 2015,” The Statistics Portal, www.statista.com/statis tics/276623/number-of-apps-available-in-leading-app- stores, accessed June 12, 2015.

10. Harris, Derrick, “Why Apple, eBay, and Walmart Have Some of the Biggest Data Warehouses You’ve Ever Seen,” GIGAOM, March 27, 2013, https://gigaom.com/ 2013/03/27/why-apple-ebay-and-walmart-have-some- of-the-biggest-data-warehouses-youve-ever-seen.

11. Ibid. 12. Ibid. 13. Vowler, Julia, “US Data Warehousing to Make the Most

of Web Data,” ComputerWeekly.com, www.computer weekly.com/feature/US-data-warehousing-to-make-the- most-of-Web-data, accessed January 19, 2014.

14. Williams, David, “EMC: World’s Data Doubling Every Two Years...,” IT Brief, April 15, 2014, http://itbrief.co. nz/story/emc-worlds-data-doubling-every-two-years.

15. “Big Data: A New World of Opportunities,” NESSI, December 2012, www.nessi-europe.com/Files/Private/ NESSI_WhitePaper_BigData.pdf.

16. “Cloud Computing Options,” PC Today, June 2014. 17. “AWS Case Study: Netflix,” Amazon Web Services,

https://aws.amazon.com/solutions/case-studies/netflix/? pg=main-customer-success-page, accessed September 26, 2015.

18. “Implementation of Intranets,” Innovaction Research Group, www.innovactiongroup.com/Corporate-Intra nets, accessed June 16, 2015.

19. “Internet of Things: FTC Staff Report and a New Publi- cation for Businesses,” Federal Trade Commission, Jan- uary 2015, www.ftc.gov/system/files/documents/reports/ federal-trade-commission-staff-report-november-2013- workshop-entitled-internet-things-privacy/150127iotrpt. pdf.

20. Bradley, Joseph, Barbier, Joel, and Handler, Doug, “Embracing the Internet of Everything to Capture Your Share of $14.4 Trillion,” Cisco White Paper, www. cisco.com/web/about/ac79/docs/innov/IoE_Economy. pdf.

21. Kuehner-Hebert, Katie, “GE to Launch ‘Internet of Things’ Service,” CFO, August 5, 2015, http://ww2.cfo. com/the-cloud/2015/08/ge-launch-internet-things- service.

22. “NARCOMS MS Research Effort Seeks Participants: MS Registry Enables Researchers to Find Solutions for Peo- ple with MS,” National Multiple Sclerosis Society, March 16, 2015, www.nationalmssociety.org/About-the-Society/ News/NARCOMS-MS-Research-Effort-Seeks-Participants- MS-R.

23. Schwartz, C.E., Bode, R.K., and Vollmer, T, “The Symp- tom Inventory Disability-Specific Shorts Forms for MS: Reliability and Factorial Structure,” Archives of Physical Medicine and Rehabilitation. March 21, 2012, www. ncbi.nlm.nih.gov/pubmed/22446293.

24. Buchanan, Leigh, “The New York Bakery That Hires Everyone, No Questions Asked,” Inc., September 21, 2015, www.inc.com/leigh-buchanan/greyston-bakery- hires-everyone-no-questions-asked.html.

25. Luttrell, Anne, “NASA’s PMO: Building and Sustaining a Learning Organization,” Project Management Institute, www.pmi.org/Learning/articles/nasa.aspx, accessed June 26, 2015.

26. “About|Penn National Gaming,” www.pngaming.com/ About, accessed November 4, 2015.

27. “Big, Bang Boom,” Huffington Post, http://big.assets.huf fingtonpost.com/BigBangBoom.pdf, accessed May 30, 2015.

28. Durbin, Steve, “Cyber Crime: Battling a Growth Indus- try,” The Connected Business, September 5, 2014, www. ft.com/cms/s/2/34cb2b04-34cf-11e4-ba5d-00144feabdc0. html#axzz3atmza4RA.

29. Morgan, Jacob, “A Simple Explanation of ‘The Internet of Things’,” Forbes, May 13, 2014, www.forbes.com/sites/ jacobmorgan/2014/05/13/simple-explanation-internet- things-that-anyone-can-understand.

CHAPTER 1 • An Introduction to Information Systems 43

CHAPTER

2 Information Systems in Organizations

Rawpixel.com/Shutterstock.com

Know?Did Yo u

• Outsourcing can be an effective strategy, but it doesn’t always work. Boeing made a strategic decision to out- source development of the 787 Dreamliner aircraft with a goal of reducing costs and cutting development time by two years. However, complications led to a temporary worldwide grounding of the aircraft a little more than a year after its launch, denting the plane’s public reputation.

• Successful companies such as General Electric have developed strategies for addressing the “soft side of

implementing change.” These strategies are designed to help employees embrace change and the new way of working and can mean the difference between success and failure of change efforts.

• Technology is one of the fastest-growing areas in the U.S. economy, and information systems professionals such as software developers, computer systems ana- lysts, computer support specialists, and data scientists are in high demand.

Principles Learning Objectives

• Organizations are open systems that affect and are affected by their surrounding environment.

• Positive change is a key ingredient for any successful organization.

• Information systems must be implemented in such a manner that they are accepted and work well within the context of an organization and support its fundamental business goals and strategies.

• The information system worker functions at the intersection of business and technology and designs, builds, and implements solutions that allow organizations to effectively leverage information technology systems.

• Sketch a general model of an organization show- ing how information systems support and work within the automated portions of an organizational process.

• Define the term value chain and identify several examples within a typical manufacturing or ser- vice organization.

• Define the term innovation and identify two types.

• Define reengineering and continuous improve- ment and explain how they are different.

• Discuss the pros and cons of outsourcing, off- shoring, and downsizing.

• Define the term “the soft side of implementing change,” and explain why it is a critical factor in the successful adoption of any major change.

• Identify and briefly describe four change models that can be used to increase the likelihood of successfully introducing a new information system into an organization.

• Define the types of roles, functions, and careers available in the field of information systems.

Why Learn about Information Systems in Organizations? After graduating, a management major might be hired by a transportation company and be assigned to an information system project designed to improve employee productivity. A marketing major might use a software application to analyze customer needs in different areas of the country for a national retailer. An accounting major might work for a consulting firm using an information system to audit a client company’s financial records. A real estate major might work in a virtual team with clients, builders, and a legal team whose members are located around the world. A biochemist might conduct research for a drug company and use a computer model to evaluate the potential of a new cancer treatment. An entrepreneur might use information systems to advertise and sell products and bill customers.

Although your job might be different from those in the above examples, throughout your career, you will almost certainly use information systems to help you and your organization become more efficient, effective, productive, and competitive. However, the implementation of new information systems has a major impact on an organization, affecting people’s roles and responsibilities, their day-to-day routines and processes for accomplishing work, who they interact with, what skills and knowledge they need, and how they are rewarded and compensated. The resulting changes can be highly disruptive and agonizing to work through, and as a result, the introduction of a new system often faces considerable resistance. As a manager in an organization undergoing such change, you must anticipate resistance and work actively to mitigate it. Failure to rise to this challenge can lead to the failure of a promising information system project.

This chapter provides the information and tools you need to better understand people’s resistance to change and management’s role in overcoming this resistance.

As you read this chapter, consider the following:

• Why is there a natural resistance to the implementation of new information systems?

• What must leaders do to prepare their organization for the changes that accompany the successful adoption of a new information system?

Information systems (IS) continue to have a major impact on the role of workers and on how organizations as a whole function. While information systems were once used primarily to automate manual processes, today they are transforming the nature of work itself and, in many cases, the nature of the products and services offered. Organizational leaders have an essential role in preparing the organization to not just accept but to embrace the changes necessary for success. In this chapter and throughout the book, you will explore the benefits and issues associated with the use of information systems in today’s organizations around the globe.

Organizations and Information Systems

An organization is a group of people that is structured and managed to meet its mission or set of group goals. “Structured” means that there are defined relationships between members of the organization and their various activi- ties, and that processes are defined that assign roles, responsibilities, and authority to complete the various activities. In many cases, the processes are automated using well-defined information systems. Organizations are consid- ered to be open systems, meaning that they affect and are affected by their surrounding environment. See Figure 2.1.

Providing value to a stakeholder—customer, supplier, partner, share- holder, or employee—is the primary goal of any organization. The value chain, first described by Michael Porter in a classic 1985 Harvard Business Review article titled “How Information Gives You Competitive Advantage,”

organization: A group of people that is structured and managed to meet its mission or set of group goals.

46 PART 1 • Information Systems in Perspective

reveals how organizations can add value to their products and services. The value chain is a series (chain) of activities that an organization performs to transform inputs into outputs in such a way that the value of the input is increased. An organization may have many value chains, and different organi- zations in different industries will have different value chains. As an example of a simple value chain, the gift wrapping department of an upscale retail store takes packages from customers, covers them with appropriate, decora- tive wrapping paper, and gives the package back to the customer, thus increasing the customer’s (and the recipient’s) perceived value of the gift.

In a manufacturing organization, the supply chain is a key value chain whose primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and service. See Figure 2.2. These primary

Environment - Customers - Suppliers - Technology

Inputs - Capital - Equipment - Facilities - Materials - Supplies - Labor - Knowledge

Transformation process - Alteration - Manufacture - Transportation - Storage

Corrective actions

Feedback data

Goods and services

Corrective actions

Feedback data

Monitoring and control

Outputs - Goods - Services - Feedback

- Economy - Business partners - Industry

- Competition - Shareholder - Governments

FIGURE 2.1 General model of an organization Information systems support and work within the automated portions of an organizational process.

FIGURE 2.2 Supply chain The primary and support activities of the manufacturing supply chain are concerned with creating or deliver- ing a product or service.

Suppliers Raw material Transportation Storage

Inbound logistics

Outbound logistics

Marketing and sales Services

Technology infrastructure, including information systems

Human resource management

Accounting and finance

Procurement

Operations

Customer serviceAdvertising Promoting Selling

Receiving Storage Manufacturing

Storage Shipping

value chain: A series (chain) of activities that an organization performs to transform inputs into outputs in such a way that the value of the input is increased.

supply chain: A key value chain whose primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and service.

CHAPTER 2 • Information Systems in Organizations 47

activities are directly concerned with the creation and/or delivery of the prod- uct or service. The supply chain also includes four main areas of support activities, including technology infrastructure, human resource management, accounting and finance, and procurement. (Technology infrastructure includes not only research and development but also information systems hardware, software, databases, and networks.)

The concept of value chain is also meaningful to companies that don’t manufacture products, including tax preparers, restaurants, book publishers, legal firms, and other service providers. By adding a significant amount of value to their products and services, companies ensure their success.

Supply chain management (SCM) encompasses all the activities required to get the right product into the right consumer’s hands in the right quantity at the right time and at the right cost—from the identification of suppliers and the acquisition of raw materials through manufacture and customer delivery. The organizations that compose the supply chain are “linked” together through both physical flows and information flows. Physical flows involve the transformation, movement, and storage of sup- plies and raw materials. Information flows allow participants in the supply chain to communicate their plans, coordinate their work, and manage the efficient flow of goods and material up and down the supply chain. See Figure 2.3.

Organizations are constantly fine-tuning and adjusting their supply chain. For example, many companies are increasing their use of free shipping to cus- tomers in hopes of increasing sales and profits. Amazon is experimenting with AmazonFresh, a Web site that offers fast, free delivery of groceries on orders over $35 and other products in the Los Angeles and Seattle areas. Customers can place an order by 10 am and have it by dinner; orders placed by 10 pm will be delivered by breakfast time. The e-commerce giant is also experiment- ing with a new drive-up store concept that will allow consumers to order gro- cery items online and then schedule a pickup at a dedicated facility. Many organizations are also outsourcing much of their outbound distribution activi- ties, including the storage and shipping of finished products to customers

FIGURE 2.3 Ford Motor Company assembly line Ford Motor Company’s use of infor- mation systems is a critical support activity of its supply chain. The company gives suppliers access to its inventory system so that the sup- pliers can monitor the database and automatically send another shipment of parts, such as engine parts or bumpers, eliminating the need for purchase orders. This procedure speeds delivery and assembly time and lowers Ford’s inventory-carrying costs. Na

ta liy a H or a/ Sh ut te rs to ck .c om

supply chain management (SCM): The management of all the activities required to get the right prod- uct into the right consumer’s hands in the right quantity at the right time and at the right cost—from the identification of suppliers and the acquisition of raw materials through manufacture and customer delivery.

48 PART 1 • Information Systems in Perspective

and the return of items from customers. Amazon, DHL, FedEx, Rakuten, Ship- wire, UPS, and other companies are highly skilled and efficient at performing these functions.

What role do information systems play in supply chain management activ- ities and other organizational activities? A traditional view of information sys- tems holds that organizations use them to control and monitor processes and to ensure effectiveness and efficiency. In this view, information systems are external to the supply chain management process and serve to monitor or control it.

A more contemporary view, however, holds that information systems are often so intimately involved that they are part of the process itself. From this perspective, the information system plays an integral role in the process, whether providing input, aiding product transformation, or producing output. Zara and Coles are two examples of organizations that have incorporated information systems into the supply chain and made them integral parts of this process.

Zara is a Spanish clothing and accessories retailer with headquarters in Arteixo, Spain, and 2,000 stores spread across 88 countries.1 Its founder, Amancio Ortega, had humble origins, but today is the third richest man in the world. Consumer clothing trends are constantly changing, creating a highly competitive environment in which companies compete not only on price but also on their ability to deliver products that are new and stimulat- ing to their customers. To meet this challenge, Zara has developed an extremely responsive supply chain that enables it to go from design stage to sales floor in a maximum of three weeks rather than the six-month indus- try average. Zara can deliver new products twice a week to its stores around the world. Mobile computers and point-of-sales systems are used to capture and review data from stores on an hourly basis to spot new trends as early as possible. This data includes sales and inventory data and anec- dotal information gleaned by sales assistants as they chat with customers and as the sales assistants gather unsold items that customers tried on, but left in fitting rooms. All this data is sent to Zara’s headquarters where it is carefully analyzed by design teams who decide what new designs will be prototyped and produced in small quantities to see what sells. In addition, inventory optimization models help the company determine the quantities and sizes of existing items that should be delivered to each store. Zara’s outstanding supply chain (which includes information systems as an integral component) has led to improved customer satisfaction, decreased risks of overstocking the wrong items, reduced total costs, and increased sales.2

Coles is the second largest supermarket chain in Australia. The company employs advanced analytics to improve consumer demand forecasts, and it uses sophisticated customer-loyalty analysis tools to deepen its understanding of customer buying patterns so it can plan effective marketing programs. Coles uses a supplier portal that supports effective working relationships between the chain and its more than 3,000 suppliers, providing better coordi- nation and communications, which, in turn, help the company reduce costs and achieve consistent delivery times along the supply chain. The portal also provides suppliers with information they can use to assess their performance and identify opportunities of improvement. Coles works closely with suppliers to take effective measures toward continuous improvement, including frank discussions about opportunities for improvement.3 All these actions have gone a long way toward reducing the number 1 complaint from Coles’ customers—item stockouts. They have also paved the way for improved inventory management and better supplier relationships.4

CHAPTER 2 • Information Systems in Organizations 49

Virtual Teams and Collaborative Work A virtual team is a group of individuals whose members are distributed geo- graphically, but who collaborate and complete work through the use of infor- mation systems. The virtual team may be composed of individuals from a single organization or from multiple organizations. The team can consist of just two people up to hundreds of team members. One benefit of virtual teams is that they enable organizations to enlist the best people in different geographical regions to solve important organizational problems. Another benefit is that they provide the ability to staff a team with people who have a range of experience and knowledge that stems from a variety of professional experiences and cultural backgrounds.

Often, it is difficult for members of a large virtual organization to meet at a time that is convenient for everyone on the team due to the time zone dif- ferences in their various geographic locations. Thus, members of a virtual team may seldom meet face to face. However, quick communication exchanges among members can be key to project success. Thus, virtual team members may need to continually monitor their email, instant messages, and team Web site and be prepared to participate in an audio or video teleconfer- ence on short notice. See Figure 2.4. Virtual team members must be prepared to do work anywhere, anytime. As a result, members of a virtual team may feel that their work day never ends.

Communications are greatly improved when participants can see one another and pick up facial expressions and body language. Thus, even with sophisticated information system tools, virtual teams still benefit from occa- sional face-to-face meetings. This is particularly true at the beginning of

VG st oc ks tu di o/ Sh ut te rs to ck .c om

FIGURE 2.4 Group videoconference A virtual organizational structure allows collaborative work in which managers and employees can effectively work in groups, even those composed of members from around the world.

virtual team: A group of individuals whose members are distributed geo- graphically, but who collaborate and complete work through the use of information systems.

50 PART 1 • Information Systems in Perspective

Critical Thinking Exercise

new projects when the team is just forming and defining goals, roles, and expectations on how its members will work together. Virtual organization members must also be sensitive to the different cultures and practices of the various team members to avoid misunderstandings that can destroy team chemistry. It helps if virtual team members take the time to get to know one another by sharing experiences and personal background information.

International advertising, marketing, and public relations firm Ogilvy & Mather maintains offices in 161 cities all over the world and employs some 15,000 workers. The firm promotes the brands of its multinational clients by combining local market know-how with a worldwide network of resources to build powerful campaigns that address local market needs while also reinfor- cing global brand identity. The firm relies on multiple virtual teams across the organization to implement this strategy.5

Reducing New Product Stockouts at Coles You have been employed in the supply chain management organization of Coles for the past two years. You are very excited when you are asked to join a team being formed to address serious inventory management problems often associated with the introduction of new products. Too often, customers who make a trip to Coles to purchase a highly advertised new product are disappointed to find the store is out of stock of that particular item. Such stockouts result in lost sales for both Coles and the product supplier and the potential loss of customers as shoppers look elsewhere to find the new product. The resulting loss of customer goodwill can have a long- term effect on sales. Solving this problem will require a balancing act; the company needs to carry sufficient inventory of new products to meet customer demand while avoiding excessive inventory levels that increase costs.

The team you have joined consists of nine people representing the finance, marketing, and supply chain management organizations at both Coles and two of Coles’ largest suppliers. The team is charged with looking at a wide range of solu- tions, including improved analytics and forecasting systems, customer-loyalty anal- ysis tools to provide insights into customer buying patterns, and improved distribution methods to cut costs and delivery times.

Review Questions 1. Identify some of the advantages of running a virtual team such as this. What

are some of the keys to success when working with a virtual team? 2. What sort of complications might be expected when forming a multiorganiza-

tional virtual team?

Critical Thinking Questions 1. The leader of the team has asked that each member share a brief personal

background paragraph that outlines the individual’s knowledge and experi- ence relevant to solving this problem. Create a paragraph for a team member who is a well-qualified, but relatively inexperienced representative of the Coles supply chain management organization.

2. What actions would you recommend to minimize potential start-up issues for this virtual team?

Change in the Organization

Your organization’s current products, services, and ways of accomplishing work are doomed to obsolescence. Fail to change and your competition will take away your customers and your profits. Positive change is a key

CHAPTER 2 • Information Systems in Organizations 51

ingredient for any successful organization. This section will discuss important topics related to change, including innovation, reengineering, continuous improvement, outsourcing, offshoring, and downsizing.

Innovation Innovation is the application of new ideas to the products, processes, and activities of a firm, leading to increased value. Innovation is the catalyst for the growth and success of any organization. It can build and sustain profits, create new challenges for the competition, and provide added value for custo- mers. Innovation and change are absolutely required in today’s highly com- petitive global environment; without both, the organization is at risk of losing its competiveness and becoming obsolete. The following is a list of just a few of today’s most innovative products:

● Tile is an innovative new product that helps solve a universal problem that we all encounter—occasionally misplacing everyday items and wast- ing time trying to find them. Tile is a smartphone app combined with small devices (tiles) that consumers can stick on their keys, TV remote controls, purses, and wallets. A proximity sensor plays a musical sound through the smartphone app when you come within 100 feet of the tile, so you can walk around to see if the missing item is hiding nearby.

● Healthcare technology company iHealth has introduced several different sensors that can measure and report on a wide array of biometric data, including steps taken, distance covered, and calories burned; sleep effi- ciency; blood pressure; glucose level; and blood oxygen saturation level and pulse rate.

● Butterfleye offers a new, economical home security product that employs a megapixel camera smart enough to recognize you, members of your family, and even your pets. If a stranger is caught inside your home within view of the camera, Butterfleye uses your home Wi-Fi system to alert you via an app.

● NeuroMetrix created Quell, an FDA-approved device that stimulates the brain to block pain receptors for patients with chronic conditions. The device is worn around the calf and calibrated to the user’s body to ensure that it delivers the exact amount of relief needed. Quell performs func- tions similar to existing devices that today must be surgically implanted at much higher cost.

Various authors and researchers have identified different ways of classify- ing innovation. A simple classification developed by Clayton Christensen, a leading researcher in this field, is to think of two types of innovation— sustaining and disruptive.6

Sustaining innovation results in enhancements to existing products, ser- vices, and ways of operating. Such innovations are important because they enable an organization to continually increase profits, lower costs, and gain market share. Procter and Gamble has invested hundreds of millions of dol- lars into making sustaining innovations to its leading laundry detergent, Tide, which was first introduced in 1946. The innovations include: the reformula- tion of Tide so it works as well in cold water as it does in hot water; the crea- tion of concentrated Tide, which reduces packaging and distribution costs; and the addition of scent, which makes clothes smell fresher. These innova- tions have allowed Tide to remain one of the leading detergents for several decades, with around $5 billion in worldwide annual sales.7 The brand cur- rently holds a 38 percent share of the North American laundry soap business.8

A disruptive innovation is one that initially provides a lower level of per- formance than the marketplace has grown to accept. Over time, however, the disruptive innovation is improved to provide new performance characteristics,

innovation: The application of new ideas to the products, processes, and activities of a firm, leading to increased value.

52 PART 1 • Information Systems in Perspective

becoming more attractive to users in a new market. As it continues to improve and begins to provide a higher level of performance, it eventually displaces the former product or way of doing things. The cell phone is a good example of a disruptive innovation. The first commercial handheld cell phone was invented in 1973. It weighed 2.5 pounds, had a battery life of less than 30 minutes, cost more than $3,000, and had extremely poor sound quality.9

Compare that with today’s ubiquitous cell phones that have one-tenth the weight, one-fifteenth the cost, and 25 times longer battery life; smartphones can not only place calls but also serve as a camera, a video recorder, and a handheld computer that can run applications and access the Internet.

Reengineering and Continuous Improvement To stay competitive, organizations must occasionally make fundamental changes in the way they do business. In other words, they must innovate and change the activities, tasks, or processes they use to achieve their goals. Reengineering, also called process redesign and business process reengi- neering (BPR), involves the radical redesign of business processes, organiza- tional structures, information systems, and values of the organization to achieve a breakthrough in business results. See Figure 2.5. Successful reengi- neering can reduce delivery time, increase product and service quality, enhance customer satisfaction, and increase revenues and profitability.

General Electric employs a strategy it calls GE Advantage to reengineer business processes to increase its speed to market, improve the quality of its products and services, reduce costs, and achieve competitive advantage. This strategy has been applied to its new product introduction process to reduce the time it takes to bring a new product to market (in some cases by more than 50 percent), improve the quality of its designs, and lower development costs.

In contrast to reengineering, the idea of continuous improvement (often referred to by the Japanese word “Kaizen”) is a form of innovation that con- stantly seeks ways to improve business processes and add value to products and services. This continual change will increase customer satisfaction and loyalty and ensure long-term profitability. Manufacturing companies make continual product changes and improvements. Service organizations regularly

FIGURE 2.5 Reengineering Reengineering involves the radical redesign of business processes, organizational structure, information systems, and the values of an organization to achieve a break- through in business results.

Reengineering— Business process redesign

Changes to organizational structure

Changes to organizational values

Changes to information systems

reengineering (process redesign/business process reengineering, BPR): The radical redesign of business processes, organizational structures, information systems, and values of the organization to achieve a breakthrough in business results.

continuous improvement: Constantly seeking ways to improve business processes and add value to products and services.

CHAPTER 2 • Information Systems in Organizations 53

find ways to provide faster and more effective assistance to customers. By doing so, organizations increase customer loyalty, minimize the chance of cus- tomer dissatisfaction, and diminish the opportunity for competitive inroads.

Boeing has a long tradition and culture supportive of continuous improve- ment, which has yielded many positive results. For example, the time to assemble its popular long-range, wide-body, twin-engine 777 jet airliner has been reduced almost in half through the implementation of many small improvements—from 71 days in 1998 to just 37 days today.10 Table 2.1 compares the strategies of busi- ness process reengineering and continuous improvement.

Outsourcing, Offshoring, and Downsizing A significant portion of expenses for most organizations goes toward hiring, training, and compensating employees. Naturally, organizations try to control costs by determining the number of employees they need to maintain high- quality goods and services without being overstaffed. Strategies to contain these personnel costs include outsourcing, offshoring, and downsizing.

Outsourcing is a long-term business arrangement in which a company contracts for services with an outside organization that has expertise in pro- viding a specific function. Organizations often outsource a process so they can focus more closely on their core business—and target their limited resources to meet strategic goals. Typically, the outsourcing firm has expertise and other resources that enable it to perform the service better, faster, and/or more cheaply. As a result, many companies now outsource jobs such as call center services, payroll activities, information system operations, computer support services, and security services.

Offshore outsourcing (also called offshoring) is an outsourcing arrange- ment in which the organization providing the service is located in a country different from the firm obtaining the services. Offshoring of tasks that require significant customer interaction has led to problems due to culture and lan- guage differences for some companies. As a result, many companies are ree- valuating their decision to offshore their call center and customer support services, as well as the outsourcing of other activities.

Deutsche Bank has extended an offshore outsourcing agreement with Accenture to provide its procurement and accounts payable services. The original contract was signed in 2004 and was set to expire in 2016. Through its agree- ment with Accenture, Deutsche Bank was looking to reduce operational costs, improve spending control, and simplify its sourcing and procurement services.

TABLE 2.1 Comparing business process reengineering with continuous improvement

Business Process Reengineering Continuous Improvement

Strong action taken to solve serious problem

Routine action taken to make minor improvements

Top-down change driven by senior executives

Bottom-up change driven by workers

Broad in scope; cuts across departments

Narrow in scope; focuses on tasks in a given area

Goal is to achieve a major breakthrough

Goal is continuous, gradual improvements

Often led by resources from outside the company

Usually led by workers close to the business

Information systems are integral to the solution

Information systems provide data to guide the improvement team

outsourcing: A long-term business arrangement in which a company contracts for services with an outside organization that has expertise in providing a specific function.

offshore outsourcing (offshoring): An outsourcing arrangement where the organization providing the service is located in a country different from the firm obtaining the services.

54 PART 1 • Information Systems in Perspective

Critical Thinking Exercise

The arrangement has worked well, and the two organizations recently signed a new contract to extend the initial agreement through the end of 2021.11

Citizens Bank of Rhode Island signed a five-year agreement with IBM to outsource its information systems services, with the goal of increasing effi- ciencies, lowering costs, and improving service. The bank’s information sys- tems employees are training replacements who work for IBM in India, where the average salary of IBM workers is about $17,000.12 It is estimated that some 250 to 350 current employees and existing contractors will lose their jobs at Citizen Bank as a result of the offshore outsourcing move.13

Companies considering outsourcing need to take into account many factors. A growing number of organizations are finding that outsourcing does not neces- sarily lead to reduced costs. One of the primary reasons for cost increases is poorly written contracts that allow the service provider to tack on unexpected charges. Other potential drawbacks of outsourcing include loss of control and flexibility, the potential for data breaches of information stored on the service provider’s computer hardware, overlooked opportunities to strengthen core com- petencies of the firm’s own employees, and low employee morale. In addition, organizations often find that it takes years of ongoing effort and a large up-front investment to develop a good working relationship with an outsourcing firm. Finding a reputable outsourcing partner can be especially difficult for a small or midsized firm that lacks experience in identifying and vetting contractors.

Outsourcing part or all of a business process introduces significant risks that the service provider will introduce quality problems into the supply chain. For example, Boeing made a strategic decision to partially outsource development of the 787 Dreamliner aircraft, with a goal of reducing costs by $4 billion and cutting development time by two years. However, the develop- ment effort spiraled out of control—the project was ultimately billions of dol- lars over budget and three years behind schedule. And outsourcing complications led to severe quality challenges, including problems with the aircraft’s lithium ion batteries, which resulted in a worldwide temporary grounding of the aircraft a little more than a year after its launch.14

Downsizing, a term frequently associated with outsourcing, involves reducing the number of employees to cut costs. The euphemistic term “right- sizing” is sometimes also used. When downsizing, companies usually look to downsize across the entire company, rather than picking a specific business process to downsize. Downsizing clearly reduces total payroll costs, although the quality of products and services and employee morale can suffer. Shortly after Heinz merged with Kraft in March 2015, the food and beverage company announced that it would downsize its 46,000 employees in the United States and Canada by 2,500 people to save $1.5 billion in annual costs.15

Outsourcing Accounting Functions You have been employed for two years in the accounting department of a midsized multinational consumer products company. Your performance has been outstand- ing, and it is clear that management feels you have great potential with the firm. However, you are quite surprised when your manager calls you into her office to tell you that you have been chosen to lead an effort to identify an outsourcing part- ner for the payroll, accounts payable, and accounts receivable functions. She assures you that there will be an excellent assignment for you after the outsourcing is successfully completed and all is functioning well in one to two years.

Review Questions 1. What benefits might your organization gain from outsourcing basic accounting

functions? 2. Identify at least three major organizational challenges associated with transi-

tioning these functions to an outsourcing firm.

downsizing: Reducing the number of employees to cut costs.

CHAPTER 2 • Information Systems in Organizations 55

Critical Thinking Questions 1. What concerns do you have about taking on responsibility for outsourcing

these business functions? 2. What questions about this assignment would you like to have addressed?

Organizational Culture and Change

Culture is a set of major understandings and assumptions shared by a group, such as within an ethnic group or a country. Organizational culture consists of the major understandings and assumptions for an organization. The under- standings, which can include common beliefs, values, and approaches to deci- sion making, are often not stated or documented as goals or formal policies. For example, salaried employees might be expected to check their email and instant messages around the clock and be highly responsive to all such messages.

Mark Twain said, “It’s not the progress I mind, it’s the change I don’t like.” Organizational change deals with how organizations successfully plan for, implement, and handle change. Change can be caused by internal factors, such as those initiated by employees at all levels, or by external factors, such as those wrought by competitors, stockholders, federal and state laws, com- munity regulations, natural disasters, and general economic conditions.

Implementing change, such as a new information system introduces con- flict, confusion, and disruption. People must stop doing things the way they are accustomed to and begin doing them differently. Successful implementa- tion of change only happens when people accept the need for change and believe that the change will improve their productivity and enable them to better meet their customers’ needs. The so-called soft side of implementing change involves work designed to help employees embrace a new informa- tion system and way of working. This effort represents the biggest challenge to successful change implementation; yet, it is often overlooked or down- played, resulting in project failure. Indeed, both the Standish Group and Gartner, two highly respected organizations that track project implementa- tions globally, believe that a significant contributor to project failures is over- looking the need to address employee adoption and resistance jointly.16

Another resource claims that 30 to 70 percent of large information systems projects fail, at least in part, due to a failure to prepare the business users for the actual change to come.17

The California Department of Consumer Affairs is made up of more than 40 entities (including multiple boards, bureaus, committees, and one com- mission) that regulate and license professional and vocational occupations that serve the people of California. Each year, the department processes over 350,000 applications for professional licensure along with some 1.2 million license renewals. The BreEZe project was initiated in 2009 to stream- line the way the department does its business and interacts with its license applicants and consumers.18 The resulting information system was intended to eliminate many paper-based processes and speed up the entire licensing process. Unfortunately, the project team failed to adequately involve the business users in the definition of the system requirements and instead made many erroneous decisions about how the system should work. The initial cost estimate for the system was $28 million; however, as of early 2015, project costs exceeded $37 million and less than half the licensing and regulatory boards were using the system. It is estimated that it will cost a total of $96 million to complete the project. Much of the delay and over- spending could have been avoided had the project team work better with the business users to understand their needs.19

culture: A set of major understand- ings and assumptions shared by a group, such as within an ethnic group or a country.

organizational culture: The major understandings and assumptions for a business, corporation, or other organization.

organizational change: How for- profit and nonprofit organizations plan for, implement, and handle change.

soft side of implementing change: The work designed to help employees embrace a new information system and way of working.

56 PART 1 • Information Systems in Perspective

The dynamics of how change is implemented can be viewed in terms of a change management model. A change management model describes the phases an individual or organization goes through in making a change and provides principles for successful implementation of change. A number of models for dealing with the soft side of implementing change will now be introduced.

Lewin’s Change Model Kurt Lewin and Edgar Schein proposed a three-stage approach for change called Lewin’s change model. See Figure 2.6. The first stage, unfreezing, is ceasing old habits and creating a climate that is receptive to change. Moving, the second stage, involves learning new work methods, behaviors, and sys- tems. The final stage, refreezing, involves reinforcing changes to make the new process second nature, accepted, and part of the job.

Lewin’s Force Field Analysis A frequently encountered stumbling block to the successful implementation of change, including the implementation of a new system, is negative user reac- tion. People affected by the change may fear that their positions may be elim- inated or their work altered in a way they do not like. Or they may see the introduction of a new information system as a threat to their power and influ- ence. Such fears can lead to resentment, lack of cooperation, or outright resis- tance. Any of these reactions can doom a change project, no matter how carefully the rest of the project is planned.

Lewin extended his change model theory to include force field analysis, which identifies both the driving (positive) and restraining (negative) forces that influence whether change can occur. The driving forces are beliefs, expectations, and cultural norms that tend to encourage a change and give it momentum. Restraining forces are those that make it difficult to accept a change or to work to implement a change. For a change to occur, the strength of the driving forces must exceed the strength of the restraining forces.20

FIGURE 2.6 Lewin’s change model Change involves three stages: unfreezing (preparing for change), moving (making the change), and refreezing (institutionalizing the change).

Moving Making the change

Refreezing Institutionalizing

Unfreezing Preparing for change

Key Tasks

Monitor progress against success criteria

Establish processes, systems to institutionalize change

Establish controls to ensure change is occurring

Recognize and reward individuals for exhibiting new behavior

Provide feedback, motivation, additional training to individuals not exhibiting new behavior

Key Tasks

Communicate what, why, when, who, how

Draw on others, and seek input, ideas

Define objectives, success criteria, resources, schedule, budget

Finalize work plans

Assign leaders and implementation teams

Key Tasks

Motivate individuals involved or affected

Coach, train, lead, encou- rage, manage

Provide appropriate resources

Provide on-going feedback

change management model: A description of the phases an individual or organization goes through in making a change and principles for successful implementation of change.

Lewin’s change model: A three- stage approach for implementing change that involves unfreezing, moving, and refreezing.

force field analysis: An approach to identifying both the driving (positive) and restraining (negative) forces that influence whether change can occur.

driving forces: The beliefs, expec- tations, and cultural norms that tend to encourage a change and give it momentum.

restraining forces: Forces that make it difficult to accept a change or to work to implement a change.

CHAPTER 2 • Information Systems in Organizations 57

This can be done in one of two ways: first, by creating new driving forces or making existing driving forces stronger and, second, by eliminating or weak- ening existing restraining forces.20

Figure 2.7 is an example of a force-field analysis of a group of workers after they first learn that a new information system is to be installed. The feelings shown on the left side are restraining forces against the change. The feelings shown on the right side are driving forces that support the change. The length of the arrow represents the relative strength of that feeling. In this example, fear of loss of job is the strongest restraining force.

Negative feelings must be reduced or eliminated in order for a new system to gain acceptance. The fear of losing one’s job can be eliminated by making it clear that the individual will remain employed by the company. The fear of major changes in one’s job can be reduced by allowing the individual to participate in developing one’s own new job description. If this is not possible, the person should be thoroughly informed of the new job requirements and provided any necessary training. The positive impact of the change should be stressed.

It is not enough to reduce or neutralize negative feelings. Positive feel- ings must also be created to truly motivate the individual. Managers must take the time to explain the many tangible and intangible benefits for the organization as well as for the individual. For instance, in many information system efforts, the new system may lead to job enrichment by enabling the individual to take on more responsibility or to work in a new and more interesting way.

Figure 2.8 is an example of a force field analysis of workers after man- agers have effectively prepared them to accept the system. At this point, the workers should recognize several things: (1) their role is essential to the suc- cess of the system, and they are making an important contribution to the organization, (2) the development of new skills and knowledge will enhance their career growth, and (3) each individual has an important responsibility to perform within the project to secure the potential benefits for both the individual and the organization.

FIGURE 2.7 Lewin’s force field analysis before addressing concerns Many strong restraining forces will make it difficult to implement this change.

Driving forcesRestraining forces

Fear of loss of job Somehow this may be best for the organization

Uncomfortable with changes in job

Require training

Distrust of project team

58 PART 1 • Information Systems in Perspective

Leavitt’s Diamond Leavitt’s diamond is another organizational change model that is extremely helpful in successfully implementing change. Leavitt’s diamond proposes that every organizational system is made up of four main components—people, tasks, structure, and technology—that all interact; any change in one of these elements will necessitate a change in the other three elements. Thus, to success- fully implement a new information system, appropriate changes must be made to the people, structure, and tasks affected by the new system. See Figure 2.9.

People are the key to the successful implementation of any change. They must be convinced to adopt a positive attitude about the change and be willing to exhibit new behaviors consistent with the change. This is likely to require a

FIGURE 2.8 Lewin’s force field analysis after addressing concerns Restraining forces have been weak- ened and driving forces strength- ened so there is a much likelihood of successfully implementing this change.

Driving forcesRestraining forces

Fear of loss of job

Uncomfortable with changes in job

Require training

Distrust of project team

Will improve my productivity and enable me to better serve our customers

Provides opportunity to perform work in a new and interesting way

There are many benefits for the organization

FIGURE 2.9 Leavitt’s diamond Any change in technology, people, task, or structure will necessitate a change in the other three components.

People

- Attitudes

- Behavior

- Skills

- Reward system

Information

system

- Hardware

- Software

- Network Tasks

- Workflow

- Tools

- Standards

- Measures

Structure

- Roles

- Responsibilities

- Authority

Leavitt’s diamond: An organiza- tional change model that proposes that every organizational system is made up of four main components—people, tasks, structure, and technology—that all interact; any change in one of these elements will necessitate a change in the other three elements.

CHAPTER 2 • Information Systems in Organizations 59

change in the reward system to recognize those who exhibit the desired new behaviors. Thorough training in any required new skills is also needed.

The organization structure must be modified with appropriate changes in roles, responsibilities, and lines of authority. Along with these changes are required changes in communication patterns, relationships, and coordination among those affected by the change.

The tasks required to complete the work and the flow of work between tasks also need to be changed. For each task, standards on how the work is to be performed and measures for the quality of completion need to be estab- lished. New tools may be required to perform the tasks.

As a result, the major challenges to successful implementation of an infor- mation system are often more behavioral issues than technical. Successful introduction of an information system into an organization requires a mix of both good organizational change skills and technical skills. Strong, effective leadership is required to overcome the behavioral resistance to change and achieve a smooth and successful system introduction.

Organizational learning is closely related to organizational change. All organizations adapt to new conditions or alter their practices over time— some better than others. Collectively, these adaptations and adjustments based on experience and ideas are called organizational learning. Hourly workers, support staff, managers, and executives learn better ways of fulfilling their role and then incorporate them into their day-to-day activities. In some cases, the adjustments can require a radical redesign of business processes (reengineering). In other cases, adjustments can be more incremental (contin- uous improvement). Both adjustments reflect an organization’s strategy, the long-term plan of action for achieving its goals.

User Satisfaction and Technology Acceptance Reengineering and continuous improvement efforts (including implementa- tion of new information systems) must be adopted and used to achieve the defined business objectives by targeted users. The technology acceptance model (TAM) specifies the factors that can lead to better attitudes about the use of a new information system, along with its higher acceptance and usage. See Figure 2.10. In this model, “perceived usefulness” is defined as the degree to which individuals believe that use of the system will improve their perfor- mance. The “perceived ease of use” is the degree to which individuals believe that the system will be easy to learn and use. Both the perceived usefulness and ease of use can be strongly influenced by the expressed opinions of

organizational learning: The adaptations and adjustments made within an organization based on experience and ideas over time.

technology acceptance model (TAM): A model that specifies the factors that can lead to better attitudes about an information system, along with higher acceptance and usage of it.

External

variables

Perceived

usefulness (U)

Attitude

toward

using (A)

Behavioral

intention to

use (BI)

Actual

system use

Perceived

ease of use (E)

FIGURE 2.10 Technology acceptance model Perceived usefulness (U) and perceived ease of use (E) strongly influence whether someone will use an informa- tion system. Management can improve that perception by demonstrating that others have used the system effec- tively and by providing user training and support.

60 PART 1 • Information Systems in Perspective

others who have used the system and the degree to which the organization supports use of the system (e.g., providing incentives and offering training and coaching from key users). Perceived usefulness and ease of use in turn influence an individual’s attitude toward the system, which affect their behav- ioral intention to use the system.21

Avon Products is an international manufacturer and direct seller of beauty, household, and personal care products. Avon products are sold through six million independent and mostly part-time sales representatives worldwide who sell direct to family, friends, and personal contacts.22 In 2013, Avon piloted a new sales system in Canada. The system was intended to streamline the ordering process through the use of iPads, which would allow the sales rep to display products to customers and then check inven- tory and place orders online. It was estimated that the project would gener- ate some $40 million per year in cost savings and increased sales. Unfortunately, the system was poorly designed and did not meet the sales rep’s expectations in terms of ease of use. Sales reps were often unable to log in to the system, and when they did get logged in, the system frequently would not accept orders, save orders correctly, or reserve inventory based on the orders placed. The system was neither useful nor easy to use. As a result, one Avon executive sales manager estimates that as many as 16,000 Canadian sales reps quit in large part out of frustration with the new system. The pilot was such a disaster that Avon wrote off the project at a cost of nearly $125 million.23

Diffusion of Innovation Theory The diffusion of innovation theory was developed by E.M. Rogers to explain how a new idea or product gains acceptance and diffuses (or spreads) through a specific population or subset of an organization. A key point of this theory is that adoption of any innovation does not happen all at once for all members of the targeted population; rather, it is a drawn-out process, with some people quicker to adopt the innovation than others. See Figure 2.11. Rogers defined five categories of adopters, shown in Table 2.2, each with dif- ferent attitudes toward innovation. When promoting an innovation to a target

Innovators

2.5% Early

adopters

13.5%

Early majority

34%

Late majority

34%

Laggards

16%

FIGURE 2.11 Innovation diffusion Adoption of any innovation does not happen all at once for all members of the targeted population; rather, it is a drawn-out process, with some people quicker to adopt the innovation than others. Source: Everett Rogers, Diffusion of Innovations.

diffusion of innovation theory: A theory developed by E.M. Rogers to explain how a new idea or product gains acceptance and diffuses (or spreads) through a specific population or subset of an organization.

CHAPTER 2 • Information Systems in Organizations 61

Critical Thinking Exercise

population, it is important to understand the characteristics of the target pop- ulation that will help or hinder adoption of the innovation and then to apply the appropriate strategy. This theory can be useful in planning the roll-out of a new information system.

Change Management for ERP System Project You are a member of the human resources organization of a midsized manufacturing company that is implementing a new enterprise resource planning system that will have a major impact on the way some 50 members of the com- pany perform their jobs. In addition, many other employees will need to be retrained on how to obtain the management reports and perform the data analysis they need for decision making.

Review Questions 1. How could Lewin’s force field analysis be applied to this project? 2. How might the diffusion of innovation theory be applied to this project?

Critical Thinking Questions 1. You have been asked by the human resources department manager to assess

the project plans to prepare the business users for the major changes to come. How might you proceed to make this assessment in a manner that will build rapport and trust with the project manager?

2. Imagine that your assessment shows that no plans have been developed to prepare the business users for the major changes to come other than training them a few weeks before the system is to be implemented. What suggestions would you make?

Careers in Information Systems

Today, most organizations cannot function or compete effectively without computer-based information systems. Indeed, organizations often attribute their productivity improvement, superior customer service, or competitive advantage in the marketplace to their information systems. The information system worker functions at the intersection of business and technology and designs and builds the solutions that allow organizations to effectively lever- age information technology.

TABLE 2.2 Five categories of innovation adopters Adopter Category Characteristics Strategy to Use

Innovator Risk takers; always the first to try new products and ideas

Simply provide them with access to the new system and get out of their way

Early adopter Opinion leaders whom others listen to and follow; aware of the need for change

Provide them assistance getting started

Early majority Listen to and follow the opinion leaders Provide them with evidence of the system’s effectiveness and success stories

Late majority Skeptical of change and new ideas Provide them data on how many others have tried this and have used it successfully

Laggards Very conservative and highly skeptical of change

Have their peers demonstrate how this change has helped them and bring pressure to bear from other adopters

62 PART 1 • Information Systems in Perspective

Successful information system workers must enjoy working in a fast- paced, dynamic environment where the underlying technology changes all the time. They must be comfortable with meeting deadlines and solving unex- pected challenges. They need good communication skills and often serve as translators between business needs and technology-based solutions. Success- ful information systems workers must have solid analytical and decision- making skills and be able to translate ill-defined business problems and opportunities into effective technology-based solutions. They must develop effective team and leadership skills and be adept at implementing organiza- tional change. Last, but not least, they need to be prepared to engage in life- long learning in a rapidly changing field.

Specific technical skills that some experts believe are important for IS workers to possess include the following, all of which are discussed in vari- ous chapters throughout this book:

● Capability to analyze large amounts of structured and unstructured data ● Ability to design and build applications for mobile devices ● Traditional programming and application development skills ● Technical support expertise ● Project management skills ● Knowledge of networking and cloud computing ● Ability to audit systems and implement necessary security measures ● Web design and development skills ● Knowledge of data center operations

Technology is one of the fastest-growing areas of the U.S. economy, and information systems professionals are in high demand. The U.S. Bureau of Labor Statistics (BLS) forecasts an increase of 1.2 million new computing jobs in the time period 2012 to 2022, as shown in Table 2.3. This is an average of 124,000 new jobs per year.

TABLE 2.3 BLS projections of computer-related jobs, 2012 to 2022

National Employment Matrix Title

Number

Change

Job Openings due to Growth and Replacements2012 2022

Computer and math occupations (all numbers in thousands)

Computer and information research scientists

26.7 30.8 4.1 8.3

Computer systems analysts 520.6 648.4 127.8 209.6

Information security analysts 75.1 102.5 27.4 39.2

Computer programmers 343.7 372.1 28.4 118.1

Software developers, applications 613.0 752.9 139.9 218.5

Software developers, system software 405.0 487.8 82.8 134.7

Web developers 141.4 169.9 28.5 50.7

Database administrators 118.7 136.6 17.9 40.3

Network and computer systems administrators

366.4 409.4 43.0 100.5

Computer network architects 143.4 164.3 20.9 43.5

Computer support specialists 722.3 845.3 123.0 236.5

Computer occupations, all other 205.8 213.6 7.8 40.2

Total 3,682.1 4,333.6 651.5 1,240.1

Yearly average 124.0

Source: “Employment by Detailed Occupation 2012–2022,” Bureau of Labor Statistics, www.bls.gov/emp/ep_table_102.htm, accessed August 13, 2015.

CHAPTER 2 • Information Systems in Organizations 63

While a career in information systems can be challenging, exciting, and rewarding, there are also some drawbacks to such a career. As reliance on technol- ogy increases, organizations have increasing expectations of their information sys- tem workers—so much so that many workers feel constant pressure to increase productivity, take on new tasks, and work more than 40 hours per week. A high degree of stress can accompany the responsibility to fix major systems or network problems that are impacting a large number of users. One must often interact with end users or customers who are frustrated and not in the best of moods.

Figure 2.12 identifies the occupations that the BLS predicts will be the fastest-growing IS positions from 2012 to 2022 along with the median salary for those positions in 2015 (half the people employed in this position make more than this amount; half make less).

Numerous schools have degree programs with titles such as business information systems, computer engineering, computer science, and manage- ment information systems. Figure 2.13 shows an estimate of the annual num- ber of degrees awarded in computer science, computer engineering, and information (including information systems, information science, information technology, and informatics) in the United States and Canada. It appears that there will be a shortfall of about 33,900 workers per year.

Opportunities in information systems are also available to people from foreign countries. The U.S. L-1 and H-1B visa programs seek to allow skilled employees from foreign lands into the United States. Opportunities in these programs, however, are limited and are usually in high demand. The L-1 visa

$100,000

$90,000

$80,000

$70,000

$60,000

$50,000

$40,000

$30,000

$20,000

$10,000

$0 0.0 50.0 100.0 150.0 200.0 250.0

Expected new job openings 2012–2022

2 0

1 5

M e

d ia

n s

a la

r y

Web developer

Information security analyst

Database administrator

Computer programmer

Application software developer

Computer systems analyst

Computer support specialist

FIGURE 2.12 Occupational outlook for selected information systems positions This chart shows the IS positions that BLS predicts will be among the fastest growing in the near future, along with the median salary for those positions in 2015.

64 PART 1 • Information Systems in Perspective

program is often used for intracompany transfers for multinational companies. The H-1B program can be used for new employees. The United States distri- butes its annual 85,000 allotment of visas via a lottery system wherein small tech companies submitting a single H-1B visa application must compete against large organizations that submit thousands of applications to increase their odds of winning the lottery.24

As part of the application process to obtain H-1B approval from the Labor Department, an employer is required to attest that the H-1B workers will not adversely affect the working conditions of workers similarly employed. However, in some cases, it appears that companies are hiring lower-paid H-1B workers to replace existing employees. For instance, in 2015, about 400 information system workers at Southern California Edison were fired and their work was shifted to H- 1B contractors from Tata and Infosys. Another 100 or so information system work- ers at Northeast Utilities in Connecticut also lost their jobs to H-1B contractors.25

Proponents of the H-1B program believe that it is invaluable to the U.S. economy and its competitiveness. Table 2.4 shows the top 15 users of H-1B

FIGURE 2.13 Supply versus demand for IS workers The total number of IS-related job openings is expected to average about 124,000 per year between 2012 and 2022, while the number of IS-related graduates is expected to average about 88,100 per year—for a shortfall of 35,900 workers. Source: “Computer Science Job Statistics”, Exploring Computer Science, www .exploringcs.org/resources/cs-statistics, accessed August 19, 2015.

140

120

100

0 Associate Bachelor Master PhD Total Openings

T h

o u

s a

n d

s o

f g

r a

d u

a te

s /

n e

w j

o b

o p

e n

in g

TABLE 2.4 Top H-1B visa employers in 2013 to 2014 Visas Granted

Rank Company Headquarters 2013 2014 Total

1 Tata India 6,258 7,149 13,407

2 Cognizant United States 5,186 5,228 10,414

3 Infosys India 6,298 4,022 10,320

4 Wipro India 2,644 3,246 5,890

5 Accenture Ireland 3,346 2,376 5,722

6 Tech Mahindra India 1,589 1,850 3,439

7 IBM United States 1,624 1,513 3,137

8 HCL India 1,766 927 2,693

9 Larsen & Toubro India 1,580 1,001 2,581

10 Syntel United States 1,041 1,149 2,190

11 IGATE Technologies United States 1,157 927 2,084

12 Microsoft United States 1,048 712 1,760

13 Amazon United States 881 811 1,692

14 Google United States 753 696 1,449

15 CapGemini France 500 699 1,199

Source: Thibodeau, Patrick and Machlis, Sharon, “Despite H-1B Lottery, Offshore Firms Dominate Visa Use,” Computerworld, July 30, 2015; Machlis, Sharon and Thibodeau, Patrick, “Offshore Firms Took 50% of H-1B Visas in 2013,” Computerworld, April 1, 2014.

CHAPTER 2 • Information Systems in Organizations 65

visas for computer-related workers in 2013 to 2014. Engineering, medicine, science, and law are other job categories in which large numbers of H-1B visas are granted.

Some of the best places to work as an IS professional are listed in Table 2.5. These organizations rate high for a variety of reasons, including benefits, career development opportunities, diversity, company facilities (including, in some cases, an employee gym or swimming pool), training pro- grams, and the nature of the work. For example, Sharp HealthCare, based in the San Diego area, offers opportunities to work with cutting-edge technol- ogy, such as telemedicine, and many formal and informal training classes. Avanade ensures that employees are kept up-to-date by requiring 80 hours of training per year; the company also provides a $2,000 annual allowance to improve its workers’ work–life balance. Serv1Tech offers employees up to $5,000 per year for tuition or certification, and it makes an annual $5,000 con- tribution to each employee’s 401(k) fund.26

Roles, Functions, and Careers in IS IS offers many exciting and rewarding careers. Professionals with careers in information systems can work in an IS department or outside a traditional IS department as Web developers, computer programmers, systems analysts, com- puter operators, and in many other positions. Opportunities for IS professionals also exist in the public sector. In addition to technical skills, IS professionals need skills in written and verbal communication, an understanding of organiza- tions and the way they operate, and the ability to work with people and in groups. At the end of every chapter in this book, you will find career exercises that will help you explore careers in IS and career areas that interest you.

Most medium to large organizations manage information system resources through an IS department. In smaller businesses, one or more people might manage information resources, with support from outsourced services. (Recall that outsourcing is also popular with many organizations.) As shown in Figure 2.14, the typical IS organization is divided into three main functions: operations, development, and support.

TABLE 2.5 Best places to work as an IS professional

Rank Small (<1,000 Employees) Medium (1,001 to 4,999 Employees) Large (> 5,000 Employees)

1 Noah Consulting Credit Acceptance Quicken Loans

2 Sev1Tech Lafayette General Health USAA

3 Commonwealth Financial Network

Avanade Erickson Living

4 Secure-24 Autodesk Sharp HealthCare

5 Connectria Nicklaus Children’s Hospital Prudential Financial

6 Axxess Financial Industry Regulatory Authority

7 GlobalScape CHG Health Services Owens Corning

8 Bounce Exchange NuStar Energy DHL Express

9 Liquidnet Akamai University of Notre Dame

10 National Rural Electric Cooperative Association

Halifax Health Genentech

Source: “2015 100 Best Places to Work in IT,” Computerworld, July 2015.

66 PART 1 • Information Systems in Perspective

Typical IS Titles and Functions The organizational chart shown in Figure 2.14 is a simplified model of an IS department in a typical medium-sized or large organization. The following sections provide a brief description of these roles. Smaller firms often com- bine the roles shown in Figure 2.14 into fewer formal positions.

Chief Information Officer The role of the chief information officer (CIO) is to employ an IS department’s equipment and personnel to help the organization attain its goals. CIOs also understand the importance of finance, accounting, and return on investment. They can help companies avoid damaging ethical challenges by monitoring how their firms are complying with a large number of laws and regulations. A good CIO is typically a visionary who provides leadership and direction to the IS department to help an organization achieve its goals. CIOs need techni- cal, business, and personal skills.

Senior IS Managers A large organization may have several people employed in senior IS manage- rial levels with job titles such as vice president of information systems, man- ager of information systems, and chief technology officer (CTO). A central role of all these people is to communicate with other areas of the organization to determine changing business needs. Managers outside the IS organization may be part of an advisory or steering committee that helps the CIO and other IS managers make decisions about the use of information systems. Together, they can best decide what information systems will support

Chief information officer

Chief technology officer

Operations

Systems analyst

Database administrator

Help desk support specialist

Programmer

Web developer

Development Support

Data center manager

System operator

Information systems security analyst

LAN administrator

System developer

FIGURE 2.14 Three primary functions of the information systems organization Each of these functions—operations, development, and support—encompasses several different IS roles.

CHAPTER 2 • Information Systems in Organizations 67

corporate goals. The CTO, for example, typically works under a CIO and spe- cializes in networks and related equipment and technology.

Operations Roles The operations group is responsible for the day-to-day running of IS hard- ware to process the organization’s information systems workload. It must also do capacity planning to expand and upgrade equipment to meet changing business needs. The operations group is constantly looking for ways to reduce the overall cost and increase the reliability of the organization’s com- puting. This group is also responsible for protecting the company’s IS systems and data from unauthorized access. Professionals in the operations group include those in the following positions:

● Data center manager. Data center managers are responsible for the maintenance and operation of the organization’s computing facilities that may house a variety of hardware devices—mainframe and or supercom- puters, large numbers of servers, storage devices, and networking equip- ment. Data center managers supervise other operations workers to accomplish the day-to-day work needed to support business operations as well as complete software and hardware upgrades. They also plan for capacity changes and develop business contingency plans in the event of a business disruption due to a fire, power outage, or natural disaster.

● System operator. System operators run and maintain IS equipment. They are responsible for efficiently starting, stopping, and correctly operating mainframe systems, networks, tape drives, disk devices, printers, and so on. Other operations include scheduling, maintaining hardware, and pre- paring input and output.

● Information systems security analyst. IS security analysts are responsi- ble for maintaining the security and integrity of their organizations’ sys- tems and data. They analyze the security measures of the organization and identify and implement changes to make improvement. Security ana- lysts are responsible for developing and delivering training on proper security measures. They also are responsible for creating action plans in the event of a security breach.

● LAN administrator. Local area network (LAN) administrators set up and manage network hardware, software, and security processes. They man- age the addition of new users, software, and devices to the network. They also isolate and fix operations problems.

Development Roles The development group is responsible for implementing the new information systems required to support the organization’s existing and future business needs. Importantly, they must also modify existing information systems as the needs of the organization evolve and change. They are constantly on the watch for new ways to use information systems to improve the competitive- ness of the firm. Professionals in the development group include those in the following positions:

● Software developer. These individuals are involved in writing the soft- ware that customers and employees use. This includes testing and debug- ging the software as well as maintaining and upgrading software after it is released for operation. Software developers frequently collaborate with management, clients, and others to build a software product from scratch, according to a customer’s specifications, or to modify existing software to meet new business needs.

● Systems analyst. Systems analysts frequently consult with management and users, and they convey system requirements to software developers

68 PART 1 • Information Systems in Perspective

and network architects. They also assist in choosing and configuring hardware and software, matching technology to users’ needs, monitoring and testing the system in operation, and troubleshooting problems after implementation.

● Programmer. Programmers convert a program design developed by a systems analyst or software developer into one of many computer lan- guages. To do this, they must write, debug, and test the program to ensure that it will operate in a way that it will meet the users’ needs.

● Web developers. These professionals design and maintain Web sites, including site layout and function, to meet the client’s requirements. The creative side of the job includes creating a user-friendly design, ensuring easy navigation, organizing content, and integrating graphics and audio (Figure 2.15). The more technical responsibilities include monitoring Web site performance and capacity.

Support The support group provides customer service for the employees, customers, and business partners who rely on the firm’s information systems and service to accomplish their work. The support group responds to queries from these constituents and attempts to be proactive in eliminating problems before they occur. They often develop and provide training to users to enable them to better use information systems services and equipment. Professionals in the support group include those in the following positions:

● Database administrator. Database administrators (DBAs) design and set up databases to meet an organization’s needs. DBAs ensure that the data- bases operate efficiently, and they perform fine-tuning, upgrading, and

Sc yt he r5 /S hu tt er st oc k. co m

FIGURE 2.15 Web developers Web developers create and maintain company Web sites.

CHAPTER 2 • Information Systems in Organizations 69

testing modifications as needed. They are also responsible for implement- ing security measures to safeguard the company’s most sensitive data.

● System support specialist. These skilled specialists respond to telephone calls, electronic mail, and other inquiries from computer users regarding hardware, software, networking, or other IS-related problems or needs. System support specialists diagnose the problem through dialogue with the user, research solutions, and implement a plan to resolve the problem or refer the issue to specialized IS staff. Many organizations set up “drop- in” centers, where users can come to meet face-to-face with the help desk specialists to get help.

IS-Related Roles outside the IS Organization In addition to IS workers placed within the IS organization, some companies have people who take on IS-related roles but reside outside the IS organization. For example, data scientists, can be found in the marketing, sales, and supply chain management departments of large organizations. Data scientists are respon- sible for understanding the business analytics technology as well as the business, and then putting all of that together to deliver improvements in decision making.

Based on a recent survey of 165 organizations representing over $45 bil- lion in information technology spending in Europe and the United States, only about 60 percent of all information technology outlays are controlled by the information systems department. This means other business units are responsible for 40 percent of the total information technology costs within an organization.27 Shadow IT is a term used to describe the information systems and solutions built and deployed by departments other than the information systems department. In many cases, the information systems department may not even be aware of these efforts.

At one time, shadow IT was limited to employee or departmental pur- chases of nonstandard computing devices and off-the-shelf software from office supply stores. However, the scope of shadow IT spending has greatly expanded, largely due to cloud computing and the availability of enterprise software, file-sharing apps, and collaboration tools as a service. Cloud service providers can deliver increasing amounts of computing, network, and storage capacity on demand and without requiring any capital investment on the part of the cloud users. These cloud providers typically offer a monthly or annual subscription service model; they may also provide training, support, and data integration services. All of this makes it easier for department managers to skirt formal procedures associated with the purchase of large capital expense items—including scrutiny by the information system department.

Shadow IT enables business managers to quickly create highly innovative solutions to real business problems and to test out these solutions. Such sys- tems may serve as prototypes that evolve into future approved IT solutions. However, shadow IT solutions frequently employ nonapproved vendors, soft- ware, or hardware and may not meet the IS department standards for control, documentation, security, support, and reliability. This raises security risks and issues in regard to compliance with essential government and industry stan- dards, such as Basel III (international standards for the banking industry), FISMA (Federal Information Security Management Act of 2002), GAAP (Gener- ally Accepted Accounting Principles), HIPAA (Health Insurance Portability and Accountability Act), IFRS (International Financial Reporting Standards), and Sarbanes-Oxley Act (accounting regulations for publicly traded companies).

Issues often arise when a shadow IT solution “breaks” and questions are raised about who is responsible for fixing it and supporting the end users. The IS department may not have developed it, or not even been aware of it, but business users expect their help in “fixing” it. Table 2.6 presents a sum- mary of the pros and cons associated with shadow IT.

shadow IT: The information systems and solutions built and deployed by departments other than the information systems department. In many cases, the information systems department may not even be aware of these efforts.

70 PART 1 • Information Systems in Perspective

The information systems department may become more comfortable with shadow IT if it sees the IS department’s role as maximizing the effective use of technology in the company rather than controlling the use of technology. Also shadow IT provides another source of funds to tackle high-priority projects.

Certification Often, the people-filling IS roles have completed some form of certification. Certification is a process for testing skills and knowledge; successful com- pletion of a certification exam results in an endorsement by the certifying authority that an individual is capable of performing particular tasks or jobs. Certification frequently involves specific, vendor-provided, or vendor- endorsed coursework. Popular certification programs include Microsoft Cer- tified Systems Engineer (MCSE), Certified Information Systems Security Professional (CISSP), Oracle Certified Professional, and Cisco Certified Security Professional (CCSP). Getting certified from a software, database, or network company may open the door to new career possibilities or result in an increase in pay. According to a recent survey, 65 percent of employers use IT certifications to differentiate between equally qualified candidates, while 72 percent of employers require some form of IT certification as a requirement for certain job roles. In some organizations, earning certain certifications can result in a pay increase or eligibility for a new role. The following is a list of some of the more in demand certifications.28

● Citrix Certified Enterprise Engineer ● Comp TIA Security+ ● GIAC Certified Windows System Administrator ● Certified Computer Examiner ● AWS Certified SysOps Administrator-Associate (Cloud) ● EC-Council Certified Security Analyst ● Mongo DB Certified DBA ● Microsoft Certified Solution Developer: Applications Lifecycle

Management ● Cisco Certified Design Associate

TABLE 2.6 Pros and cons of shadow IT efforts Pros Cons

Enables the business to test quick solutions to business needs without delays brought on by involvement of information systems.

The systems and processes developed may lack necessary levels of security required to meet compliance standards.

Can create an innovative, synergistic partnership between the information systems department and other business units.

Can create tension between the CIO who has responsibility for technology within the organization and business managers who want more of a role in the information system decisions.

Provides the opportunity to evaluate and test many more information sys- tem initiatives.

Individual departments may buy ser- vices, software, and hardware that the company could get a better deal through central purchasing.

May be wasteful and duplicate work already being done by the IS organization.

Issues can arise over responsibility to fix “nonapproved” solutions.

certification: A process for testing skills and knowledge; successful com- pletion of a certification exam results in a statement by the certifying authority that confirms an individual is capable of performing particular tasks.

CHAPTER 2 • Information Systems in Organizations 71

Other IS Careers In addition to working for an IS department in an organization, IS personnel can work for large consulting firms, such as Accenture, IBM, and Hewlett- Packard. Some consulting jobs entail frequent travel because consultants are assigned to work on various projects, wherever the client is. Such jobs require excellent project management and people skills in addition to IS technical skills. Related career opportunities include computer training, computer and computer-equipment sales, and computer equipment repair and maintenance.

Other IS career opportunities include being employed by technology com- panies, such as Oracle, IBM, HP, Microsoft, Google, and Dell. Such a career enables an individual to work on the cutting edge of technology, which can be challenging and exciting.

As some computer companies cut their services to customers, new compa- nies are being formed to fill the need. With names such as Speak with a Geek and Geek Squad, these companies are helping people and organizations with computer-related problems that computer vendors are no longer solving.

Some people decide to start their own IS businesses rather than continue to work for someone else. One such entrepreneur, Lavanya Purushothaman, started ATS Solutions, a UK-based company that offers software development services and consulting to a wide range of industries and business areas. Small business owners like Purushothaman often prefer to be their own boss, with the freedom to think innovatively and take on new challenges.29 Other people become IS entrepreneurs or freelancers, working from home writing programs, working on IS projects with larger businesses, or developing new applications for the iPhone or similar devices. Some Internet sites, such as www.freelancer.com, post projects online and offer information and advice for people working on their own. Many freelancers work for small- to medium-sized enterprises in the U.S. market. People doing freelance or con- sulting work must be creative in pursuing new business, while also protecting themselves financially. Freelancers and consultants must aggressively market their talents, and to ensure they are paid, should insist that some or all of their fees for a given project are put into an escrow account.

Working in Teams Most IS careers involve working in project teams that can consist of many of the positions and roles discussed earlier. Thus, it is always good for IS professionals to have good communication skills and the ability to work with other people. Many colleges and universities have courses in information systems and related areas that require students to work in project teams. At the end of every chapter in this book are team activities that require teamwork to complete a project. You may be required to complete one or more of these team-oriented assignments.

Finding a Job in IS Traditional approaches to finding a job in the information systems area include attending on-campus visits from recruiters and getting referrals from professors, friends, and family members. People who have quit jobs or been laid off often use informal networks of colleagues or business acquaintances from their previous jobs to help find new jobs.

Many colleges and universities have excellent programs to help students develop résumés and conduct job interviews. Developing an online résumé can be critical to finding a good job. Many companies only accept résumés online and screen job candidates using software to search for key words and skills. Consequently, mentioning the right key words and skills in your resume can mean the difference between getting and not getting a job inter- view. Some corporate recruiters, however, are starting to actively search for

72 PART 1 • Information Systems in Perspective

Critical Thinking Exercise

employees rather than sifting through thousands of online résumés or posting jobs on their Web sites. Instead, these corporate recruiters do their own Internet searches and check with professional job sites such as www.branchout.com, www.indeed.com, www.linkedin.com, and www.ziprecruiter.com to name just a few. Other companies hire college students to help them market products and services to other students. In addition to being paid, students can get invaluable career experience. In some cases, it can help them get jobs after graduation.

Students who use the Internet to access other nontraditional sources to find IS jobs have more opportunities to land a job. Many Web sites, such as Mon- ster, Career Builders, Indeed, Simply Hired, Snagged a Job, TheLadders, Linke- dIn, and ComputerJobs, post job opportunities for information system careers as well as more traditional careers. Most large companies list job opportunities on their corporate Web sites. These sites allow prospective job hunters to browse job opportunities and get information on job location, salary, and bene- fits. In addition, some sites allow job hunters to post their résumés. Many peo- ple use social networking sites such as Facebook to help get job leads. Corporate recruiters also use the Internet and social network sites to gather information on current job candidates or to locate new job candidates.

Many professional organizations and online user groups can be helpful in finding a job, staying current once employed, and seeking new career oppor- tunities. These groups include the Association for Computer Machinery (ACM: www.acm.org), the Association of Information Technology Professionals (AITP: www.aitp.org), Apple User Groups (www.apple.com/usergroups), and Linux user groups based in various countries around the world.

Many companies use Twitter to advertise job openings in industries such as advertising and public relations, consulting, consumer products, and educa- tion, among others. Many organizations in the information systems industry, including Google (@googlejobs), Intel (@jobsatIntel), Microsoft (@Microsoft_- Jobs), and Yahoo (@EngRecruiter), also use Twitter to advertise job openings.

Students should review and edit what is posted about them on social media sites, as employers often search the Internet to get information about potential employees before they make hiring decisions. Over 90 percent of respondents to a recent survey either use or plan to use some form of social media—such as Facebook, LinkedIn, or Twitter—in their recruiting.30

Product Supply Turns to Shadow IT You are a section manager in the product supply department of a midsized manufacturing firm. The department manager has called a meeting of all section managers to outline his plan to contract with a cloud service provider to provide sales forecasting and inventory management software and services. The goal is to reduce the number of out-of-stock occurrences while maintaining a minimum level of finished product inventory. The cloud service provider requires detailed order, shipment, and promotion data for the past three years in addition to ongoing current data. Members of the product supply department will be able to access the software to develop sales forecasts and make better manufacturing and inventory decisions.

Review Questions 1. What are the arguments for and against shadow IT? 2. What are the possible motivations for your manager to recommend the use of

shadow IT?

Critical Thinking Questions 1. What potential issues could arise from this proposed project? 2. The department manager has just completed his discussion and is asking for

comments and questions. What would you say?

CHAPTER 2 • Information Systems in Organizations 73

Summary

Principle: Organizations are open systems that affect and are affected by their surrounding environment.

An organization is a group of people that is structured and managed to meet its mission or set of group goals. Organizations affect and are affected by their environment.

The value chain is a series of activities that an organization performs to trans- form inputs into outputs in such a way that the value of the input is increased.

The supply chain is a key value chain whose primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and service. Supply chain management encompasses all the activities required to get the right product into the right consumer’s hands in the right quantity at the right time and at the right cost.

Information systems have transformed the nature of work and the shape of organizations themselves. They are often so intimately involved in the activities of the value chain that they are a part of the process itself.

A virtual team is a group of individuals whose members are distributed geographically, but who collaborate and complete work through the use of information systems.

Principle: Positive change is a key ingredient for any successful organization.

Innovation is the application of new ideas to the products, processes, and activities of a firm, leading to increased value. Innovation is the catalyst for the growth and success of any organization. Innovation may be classified as sustaining or disruptive.

Business process reengineering is a form of innovation that involves the radical redesign of business processes, organizational structures, information systems, and values of the organization to achieve a breakthrough in results. Continuous improvement is a form of innovation that continually improves business processes to add value to products and services.

Outsourcing is a long-term business arrangement in which a company con- tracts for services with an outside organization that has expertise in providing a specific function. Offshore outsourcing is an outsourcing arrangement in which the organization providing the service is located in a country different from the firm obtaining the services. Downsizing involves reducing the number of employ- ees to cut costs. All these staffing alternatives are an attempt to reduce costs or improve services. Each approach has its own associated ethical issues and risks.

Principle: Information systems must be implemented in such a manner that they are accepted and work well within the context of an organization and support its fundamental business goals and strategies.

Organizational culture consists of the major understandings and assump- tions for a business, a corporation, or an organization. According to the con- cept of organizational learning, organizations adapt to new conditions or alter practices over time.

Organizational change deals with how organizations successfully plan for, implement, and handle change. The ability to introduce change effectively is critical to the success of any information system project.

Several change models can be used to increase the likelihood of success- fully introducing a new information system into an organization.

74 PART 1 • Information Systems in Perspective

Lewin’s three-stage organization change model divides the change imple- mentation process into three stages: unfreezing, moving, and refreezing. The model also identifies key tasks that need to be performed during each stage.

Lewin’s force field analysis is an approach to identifying the driving (pos- itive) and restraining (negative) forces that influence whether change can occur.

Leavitt’s diamond proposes that every organizational system is made up of four main components—people, tasks, structure, and technology—that all inter- act. To successfully implement a new information system, appropriate changes must be made to the people, structure, and tasks affected by the new system.

The user satisfaction and technology acceptance model specifies the factors that can lead to better attitudes about the use of a new information system, along with higher acceptance and use of it.

The diffusion of innovation theory explains how a new idea or product gains acceptance and diffuses through a specific population or subset of an organization. A key point of this theory is that adoption of any innovation does not happen all at once for all people; rather, it is a drawn-out process, with some people quicker to adopt the innovation than others. The theory groups adopters into five categories and recommends a different adoption strategy for each category.

Principle: The information system worker functions at the intersection of busi- ness and technology and designs, builds, and implements solutions that allow organizations to effectively leverage information technology systems.

Successful information system workers need to have a variety of personal characteristics and skills, including the ability to work well under pressure, good communication skills, solid analytical and decision-making skills, effective team and leadership skills, and adeptness at implementing organizational change.

Technology is one of the fastest-growing areas of the U.S. economy, which has a strong demand for information system workers.

Opportunities in information systems are available to people from foreign countries under the H-1B and L-1 visa programs.

The IS organization has three primary functions: operations, development, and support.

Typical operations roles include data center manager, system operator, information system security analyst, and LAN administrator.

Typical development roles include software developer, systems analyst, programmer, and Web developer.

Typical support roles include database administrator and system support specialist.

Only about 60 percent of all information technology outlays are controlled by the information systems department. Shadow IT is a term used to describe the information systems and solutions built and deployed by departments other than the information systems department. In many cases, the information sys- tems department may not even be aware of these efforts.

Certification is a process for testing skills and knowledge; successful com- pletion of a certification exam results in an endorsement by the certifying authority that an individual is capable of performing particular tasks or jobs. Certification frequently involves specific, vendor-provided, or vendor-endorsed coursework.

Besides working for an IS department in an organization, IS personnel can work for a large consulting firm or a hardware or software manufacturer. Developing or selling products for a hardware or software vendor is another IS career opportunity.

CHAPTER 2 • Information Systems in Organizations 75

Key Terms

business process reengineering (BPR)

certification

change management model

continuous improvement

culture

diffusion of innovation theory

downsizing

driving forces

force field analysis

innovation

Leavitt’s diamond

Lewin’s change model

offshore outsourcing

offshoring

organization

organizational change

organizational culture

organizational learning

outsourcing

process redesign

reengineering

restraining forces

shadow IT

soft side of implementing change

supply chain

supply chain management (SCM)

technology acceptance model (TAM)

value chain

virtual team

Chapter 2: Self-Assessment Test

Organizations are open systems that affect and are affected by their surrounding environment.

1. Organizations are considered to be systems, meaning that can affect and are affected by their surrounding environment.

2. The is a series of activities that an organization performs to transform inputs into outputs in such a way that the value of the input is increased. a. supply chain b. inbound logistics c. value chain d. manufacturing

3. encompasses all the activities required to get the right product into the right customer’s hands in the right quantity at the right time and at the right cost.

4. Which of the following is not a true statement regarding the use of virtual teams? a. Virtual teams enable the organization to enlist

the best people in different geographical regions to solve important organizational problems.

b. The use of virtual teams provides the ability to staff a team with people who have a wide range of experience and knowledge that stems from a variety of professional experi- ences and cultural backgrounds.

c. It is usually easy and convenient for all mem- bers of a virtual team to meet at the same time and physical location.

d. Members of a virtual team may feel that their work day never ends.

Positive change is a key ingredient for any suc- cessful organization.

5. Continuous enhancement of an existing product is an example of innovation.

6. A long-term business arrangement in which a company contracts for services with an outside organization located in another country to provide a specific business function is called . a. business process reengineering b. outsourcing c. downsizing d. offshore outsourcing

7. of large information system projects fail, at least in part, due to a failure to prepare business users for the actual change to come. a. Less than 15 percent b. Over 80 percent c. About 48 percent d. Between 30 and 70 percent

Information systems must be implemented in such a manner that they are accepted and work well within the context of an organization and support its fundamental business goals and strategies.

8. The three stages of Lewin’s change model include (1) ceasing old habits and creating a climate that is receptive to change; (2) learning new work methods, behaviors, and systems; and (3) . a. reinforcing changes to make the new process

second nature, accepted, and part of the job

76 PART 1 • Information Systems in Perspective

b. fine-tuning existing work processes and sys- tems so they become more streamlined and efficient

c. replacing existing users that refuse to accept the change

d. rewarding those responsible for the change 9. The change model is helpful in

identifying and addressing negative feelings that make it difficult for users to accept the move to a new information system. a. Leavitt’s diamond b. Lewin’s force field analysis c. Diffusion of innovation theory d. Lewin’s change model

The information system worker functions at the intersection of business and technology and designs, builds, and implements solutions that allow

organizations to effectively leverage information tech- nology systems.

10. The Bureau of Labor Statistics forecasts an increase of new computing jobs in the time period 2012 to 2022. a. .12 million b. .5 million c. 1.0 million d. 1.2 million

11. The typical information systems organization is typically divided into three functions, including support, development, and .

12. is a process for testing skills and knowledge; successful completion of a certifica- tion exam results in an endorsement by the cer- tifying authority that an individual is capable of performing particular tasks or jobs.

Chapter 2: Self-Assessment Test Answers

1. open 2. c 3. Supply chain management 4. c 5. sustaining 6. d

7. d 8. d 9. b 10. d 11. operations 12. Certification

Review Questions

1. What is the difference between a value chain and a supply chain?

2. What activities are encompassed by supply chain management?

3. What are some of the characteristics of a virtual team?

4. Identify and briefly describe the differences between the two types of innovation discussed in the chapter.

5. Briefly define the term “business process reengineering.”

6. What is meant by continuous improvement?

7. What is outsourcing? How is it different from offshoring?

8. What is meant by the term “the soft side of implementing change”?

9. What do the terms “organizational culture” and “organizational learning” mean?

10. Sketch and briefly describe Leavitt’s diamond. 11. List and describe three popular job-finding Web

sites. 12. Describe the role of a CIO within an organization. 13. What is meant by the term “shadow IT”?

Discussion Questions

1. Discuss a value chain of which you are a part. What is the purpose of the value chain? What is your role? How do you interact with other members of the value chain? How is the effectiveness of the value chain measured?

2. Discuss a virtual team of which you are a mem- ber. What is the role of the team? How were the members of the team chosen, and what unique skills and experiences does each member bring to the team? How does the team communicate and share information?

CHAPTER 2 • Information Systems in Organizations 77

3. What things might managers in an organization do that could unintentionally discourage innova- tion by their employees? How can innovation be encouraged?

4. Identify and briefly discuss the similarities and differences between outsourcing and downsizing. How might an enlightened management team deal with the negative impacts of either down- sizing or outsourcing?

5. Identify several aspects of the culture shared by members of a group to which you belong. Are there any aspects of this culture that you think are negative and detract from what the group is trying to accomplish?

6. Your manager has asked for your input on ideas for how to improve the likelihood of successful adop- tion of a major new information system that will be used by members of the company’s finance department. What suggestions would you offer?

7. You have been asked to assess the success of a recently implemented system that has been deployed across the entire supply chain of a large organization. How might you go about trying to measure the technology diffusion of this system? How else might you assess the success of this system?

8. Describe the advantages and disadvantages of using the Internet to search for a job.

9. Assume you are a member of a committee responsible for replacing your organization’s retiring CIO. What characteristics would you want in a new CIO? How would you go about identifying qualified candidates?

10. Identify several personal characteristics needed to be successful in an information system career. Which of these characteristics do you think you possess?

Problem-Solving Exercises

1. Figure 2.15 presents the occupational outlook (median salary and number of job openings) for selected information systems positions. Obtain data from the U.S. Bureau of Labor Statistics and use a spreadsheet program to create a similar figure for five occupations of your choice.

2. Use graphics software to develop a force field analysis of the restraining forces and driving

forces that would impact your decision to change majors or to seek a new job.

3. Do research to learn more about GE’s Change Acceleration Management process. Prepare a slide presentation that summarizes the key steps in the process and outlines the advantages of this process.

Team Activities

1. With your team, interview a manager in a suc- cessful organization about that organization’s culture. Try to identify both positive and negative aspects of that culture. Discuss whether the manager employs any organizational change model when introducing a major change.

2. Develop a set of interview questions and outline a process that you and your team might follow to

assess the degree of user satisfaction and tech- nology acceptance of a major new system.

3. Do research to learn about the use of focus groups to gain insight into how people view a new product or idea. With your team, design a set of focus group questions that could be used to assess a work groups feelings about a new infor- mation system to be implemented.

Web Exercises

1. Do research online to identify the number of new H-1B visas granted this year by job category— administrative specializations, education, engi- neering, information systems, law, medicine and health, math and physical science, and other.

2. Identify the three top-ranked places to work as an IS professional. What makes these places so

attractive? Are these features and benefits of importance to you?

3. Do research on the Web to learn about how recruiters use social network data to help screen job applicants. Does what you learn raise any concerns about how you could be viewed?

78 PART 1 • Information Systems in Perspective

Career Exercises

1. Do research on an entrepreneur that you admire. Write a brief description of how the individual was able to start a business. What challenges had to be overcome? Did the individual encounter failure before becoming a success?

2. For you, what would be the most positive aspects of a career in information systems? What would be the least positive aspects of such a career?

3. Use presentation software (e.g., Microsoft PowerPoint) to prepare a brief slide presentation that describes your idea job in terms of role, responsibilities, interaction with others, degree of decision-making authority, and other characteris- tics important to you.

Case Studies

Case One

Railroads Struggle to Implement Positive Train Control Positive train control (PTC) is a complex system designed to prevent the human errors that cause roughly 40 percent of train accidents, including train-to-train collisions, derailments caused by excess speed, train movement through track switches left in the wrong position, and unauthorized incursion into work zones. PTC uses wireless communications to relay visual and audible data to train crew members regarding when the train needs to be slowed or stopped. This guidance is based on several factors, including the train’s location and speed, as determined by GPS, track geometry, the status and position of approaching switches, and speed limits at approaching curves, crossings, and other speed-restriction areas. PTC communicates with the train’s onboard computer, which audibly warns the engineer and displays the train’s safe- braking distance, based on conditions at that time. Should the engineer fail to respond appropriately, the onboard computer will activate the brakes and safely slow or stop the train.

The National Transportation Safety Board (NTSB) has investigated 145 “PTC-preventable” railroad accidents that occurred since 1969. The NTSB estimates that some 300 deaths and over 6,700 injuries could have been prevented had PTC systems been in place. Congress mandated in the Rail Safety Improvement Act of 2008 that railroads implement PTC systems on rail lines that (1) carry more than 5 million tons annually, (2) carry poisonous or toxic materials, or (3) carry commuter rail passenger service. The act specified a deadline of December 31, 2015, for implementation of PTC.

Metrolink is a commuter rail system serving southern California and the greater Los Angeles area. A 2008 Metrolink accident that killed 25 and injured 100 is often cited as the event that drove Congress to pass the Rail Safety Improvement Act. In that accident, a Metrolink commuter train collided head-on with a Union Pacific train because the Metrolink engineer, who had been texting, failed to stop for a red signal.

An executive of the Association of American Railroads estimates that PTC has been installed on

8,200 miles out of the 60,000 miles where PTC technology is mandated. He also believes that, for a number of reasons, the railroads cannot complete the installation of PTC until the end of 2018 and that it will take an additional two years to test that all the system components work together correctly.

The Federal Railroad Administration (FRA) estimates the cost of the PTC system to be $52,000 per mile of track—for a total of more than $3 billion for the 60,000 miles of track to be covered. Meanwhile, the railroads estimate the total cost will be more than $9 billion and claim they have spent $5.2 billion on this effort already.

One complicating factor relates to the fact that PTC systems require access to a wireless frequency in order to operate. The Federal Communications Commission regulates the use of radio frequencies and grants exclusive access or licenses to certain frequencies. This ensures that operators don’t interfere with one another by broadcasting signals over the same frequency. Demand for access to frequencies in the wireless broadband spectrum has soared due to the rapid growth in use of cell phones, smartphones, and mobile computing devices. The railroads must acquire a license to operate their wireless PTC system at a certain frequency, but another company may already own the rights to that frequency band in a certain area. In some cases, railroads have struggled for years to buy the rights to airwaves to operate their PTC equipment.

Tracks on which multiple carriers operate present a higher risk of collisions. The continued smooth, uninterrupted operations of each PTC system as the train crosses tracks operated by different rail carriers is critical even when that carrier’s PTC system is built on hardware, software, and track switches from an entirely different set of vendors.

Critical Thinking Questions 1. Develop a force field analysis that approximates the

strength of the driving and restraining forces for PTC. 2. The high cost of implementing changes to infrastruc-

ture always raises questions about priorities. Should investments in infrastructure be made to address high-impact, low-probability events (such as human- error-caused accidents) or should investments be

CHAPTER 2 • Information Systems in Organizations 79

focused on low-impact, high-probability events (such as the need for ongoing cleaning and maintenance of train stations and installing air conditioning)? Make an argument in favor of accelerating deployment of PTC giving three strong reasons supporting this decision. Now take the other side and present a strong argument against PTC deployment and offering an alternative solution.

3. Do research to determine the current status of PTC deployment. Summarize your findings in a couple of paragraphs.

SOURCES: “An Introduction to Positive Train Control,” metrolinktrains.com/agency/page/title/ptc, accessed October 3, 2015; “Report to Congress on the Status of Positive Train Control Implemen- tation,” U.S. Department of Transportation Federal Railroad Adminis- tration, August 7, 2015, www.fra.dot.gov/eLib/details/L16962; Shear, Michael D. and Mouawad, Jad, “Amtrak Says Shortfalls and Rules Delayed Its Safety System,” New York Times, May 14, 2015, nytimes.com/2015/05/15/us/amtrak-says-it-was-just-months-away- from-installing-safety-system.html?_r=0; “Investigating the Philadelphia Amtrak Train Derailment,” New York Times, May 12, 2015, nytimes.com/interactive/2015/05/13/us/investigating-the-philadelphia- amtrak-train-crash.html; “About Us,” www.metrolinktrains.com/ agency/page/title/member_agencies, accessed October 3, 2015.

Case Two

Nordstrom’s Innovation Efforts Recognize the Importance of the Soft Side of Implementing Change Based in Seattle, Washington, Nordstrom Inc. is an upscale department store chain that operates more than 300 stores across the United States and Canada. The company got its start in 1901 as a small shoe store in downtown Seattle, and it has since grown into a well-regarded fashion specialty chain with net sales of more than $13.1 billion in 2014. Nordstrom has built a loyal customer following through its quality products and its almost legendary customer service. The company prides itself on its culture, which supports and empowers employees, and for the last decade, the company has consistently been named one of Fortune magazine’s “100 Best Companies to Work For.”

In keeping with its commitment to quality, Nordstrom has invested heavily in innovation throughout its organization—by embracing omnichannel retailing strategies that allow customers to make purchases in the store, online, and via mobile devices, and through its approach to developing and supporting the variety of information systems that fuel the company’s growth.

For instance, Nordstrom looked for innovative solutions to help it revamp its approach to developing mobile apps after a detailed analysis of internal processes determined that its typical development cycle for updating customer mobile apps was 22 to 28 weeks—far too long to keep the company competitive in the rapidly changing mobile marketplace. The project was successful (cutting development cycles down to 30 days or less) because the company took the time to thoroughly map all of the processes—and then shared that detail with employees and other stakeholders. Through that process it became clear to everyone involved how much

change was needed in order for the company to stay competitive on the digital front. In addition, having every step mapped out showed each individual team how it needed to change.

According to Courtney Kissler, Nordstrom’s vice president of e-commerce and store technologies, the process analysis work that Nordstrom performed at the start of the project provided the data that helped build momentum for change within the organization. Kissler’s advice to other teams looking to make such a transformation is, “Make the conversation as much about data as possible and not about emotion. A lot of the skeptics come around once they see [the data].”

In another effort to strengthen its innovation practices, the retailer recently made changes to its “Innovation Lab,” which it established in 2010 to focus on jumpstarting technology projects. Over time, the company came to realize that those efforts needed to be better integrated into the business groups in order to spur collaboration between the technology innovators and other Nordstrom employees—and encourage acceptance of new initiatives. Therefore, the company moved most of its technologists out of its central lab and into the different business groups so they could work more closely with end users, especially those who work directly with customers. This approach “works better because we have a broader intake of new ideas from both business and technology teams,” according to Nordstrom CIO Dan Little.

These changes in the way Nordstrom is innovating and providing the information systems that support its core business mean that Nordstrom employees—both on the technical and the business side—need to learn new ways of working with technology and the development process. However, the changes also mean that new innovations have a higher chance of adoption and acceptance because end users are more connected to the innovation process.

Keeping an organization as large as Nordstrom competitive and innovative requires all employees to embrace change. And for Nordstrom, its focus on the soft side of implementing change is paying off. Nordstrom has been able to build on its organizational culture to encourage innovation and acceptance of change. As Sam Hogenson, vice president of technology at Nordstrom, puts it, “If you don’t pay attention to culture, everything is really hard to do. But if you do, everything else works.”

Critical Thinking Questions 1. How might Nordstrom’s decision to move many of its

technology innovators out of its central Innovation Lab and into the business groups allow the retailer to better focus on the soft side of implementing change?

2. What resistance from the business units might have inhibited the movement of technology innovators into business groups? What strategies or actions could management have taken to reduce this resistance?

3. Nordstrom’s Vice President of E-Commerce and Store Technologies, Courtney Kissler, is a strong proponent of innovating through continuous improvement. How do you think Nordstrom’s organizational culture and

80 PART 1 • Information Systems in Perspective

its focus on the soft side of implementing change could enhance its continuous improvement initiatives?

SOURCES: “Nordstrom Company History,” Nordstrom, Inc., http://shop .nordstrom.com/c/company-history?origin=leftnav, accessed December 6, 2015; “The World’s Biggest Public Companies: #864 Nordstrom,” Forbes, May 2015, www.forbes.com/companies/nordstrom; “100 Best Companies to Work For: 2015,” Fortune, http://fortune.com/best-compa nies, accessed December 7, 2015; Murphy, Chris, “Nordstrom VP: Take Emotion Out of Agile Transformation,” InformationWeek, May 4, 2015,

www.informationweek.com/strategic-cio/digital-business/nordstrom-vp- take-emotion-out-of-agile-transformation/a/d-id/1320242; “DOES14 - Courtney Kissler - Nordstrom - Transforming to a Culture of Continuous Improvement,” DevOps Enterprise Summit 2014, October 29, 2014, www.youtube.com/watch?v=0ZAcsrZBSlo; Nash, Kim S., “Nordstrom’s Innovation Revamp Leads to E-commerce Texting App,” Wall Street Journal (CIO Journal blog), May 28, 2015, http://blogs.wsj.com/cio/2015 /05/28/nordstroms-innovation-revamp-leads-to-e-commerce-texting -app; Reed, J. Paul, “DevOps in Practice: Nordstrom,” O’Reilly, www .oreilly.com/ideas/devops-in-practice/page/2/nordstrom.

Notes

1. “Zara,” Inditex, www.inditex.com/brands/zara, accessed July 28, 2015.

2. Ruddick, Graham, “How Zara Became the World’s Big- gest Fashion Retailer,” Telegraph, October 20, 2014, www.telegraph.co.uk/finance/newsbysector/retailand consumer/11172562/How-Inditex-became-the-worlds -biggest-fashion-retailer.html.

3. “Coles Supplier Portal,” Coles, www.supplierportal.coles .com.au/csp/wps/portal/web/Home, accessed July 28, 2015.

4. Braue, David, “Coles Supply-Chain Revamp Means Stockouts Are Down (Down, Down,)” ZDNet, August 15, 2013, www.zdnet.com/coles-supply-chain-revamp -means-stockouts-are-down-down-down-7000019419.

5. “Ogilvy & Mather Worldwide,” Ogilvy & Mather World- wide, www.wpp.com/wpp/companies/ogilvy-mather -worldwide, accessed July 28, 2015.

6. Christensen, Clayton, “Disruptive Innovation,” Clayton Christensen, www.claytonchristensen.com/key-concepts, accessed July 29, 2015.

7. “P&G,” ad brands.net, www.adbrands.net/us/pg_us .htm, accessed August 18, 2015.

8. “P&G Boosts Prices to Offset Cheaper Tide,” Cincinnati Business Enquirer, February 11, 2014, www.bizjournals .com/cincinnati/morning_call/2014/02/pg-boosts-prices -to-offset-cheaper-tide.html.

9. Buck, Stephanie, “Cell-ebration! 40 Years of Cellphone History,” Mashable, April 3, 2013, http://mashable.com /2013/04/03/anniversary-of-cellphone.

10. Phillips, Abagail, “Continuous Innovation at Boeing Leads to Success in a Highly Competitive Industry,” Lean, October 24, 2014, www.manufacturingglobal. com/lean/199/Continuous-innovation-at-Boeing-leads -to-success-in-a-highly-competitive-industry.

11. Jain, Rahul, “Deutsche Bank Extends Accenture BPO Procurement Contract,” The Outsource Blog, July 3, 2015, www.theoutsourceblog.com/2015/07/detusche -bank-extends-accenture-bpo-procurement-contract.

12. Thibodeau, Patrick, “In a Symbolic Shift, IBM’s India Workforce Likely Exceeds U.S.,” Computerworld, November 29, 2012, www.computerworld.com/article /2493565/it-careers/in-a-symbolic-shift--ibm-s-india -workforce-likely-exceeds-u-s-.html.

13. Thibodeau, Patrick, “As It Sets IT Layoffs, Citizens Bank Shifts Work to India by Web,” Computerworld, August 13, 2015, www.computerworld.com/article/2970435 /it-outsourcing/as-it-sets-it-layoffs-citizens-bank-shifts -work-to-india-via-web.html.

14. Denning, Steve, “What Went Wrong at Boeing?,” Forbes, January 21, 2013, www.forbes.com/sites/stevedenning /2013/01/21/what-went-wrong-at-boeing.

15. “Kraft Heinz Announces Job Cuts in U.S. and Canada,” Reuters, August 12, 2015, www.nytimes.com/2015/08 /13/business/kraft-heinz-announces-job-cuts-in-us-and -canada.html?ref=topics&_r=0.

16. Hornstein, Henry, “The Need to Integrate Project Man- agement and Organizational Change,” Ivey Business Journal, March/April 2012, http://iveybusinessjournal .com/publication/the-need-to-integrate-project-manag ement-and-organizational-change.

17. Zhu, Pearl, “Five ‘Super Pitfalls’ Why Large IT Projects Fail, Future CIO, May 2014, http://futureofcio.blogspot .com/2013/03/five-super-pitfalls-why-large-it.html.

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19. Ortiz, Jon, “$96 Million California IT Project Late, Flawed, Busting Budget,” State Worker, February 12, 2015, www.sacbee.com/news/politics-government/the -state-worker/article9918857.html.

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82 PART 1 • Information Systems in Perspective