-BM, CHP 1

1.1 The Role of Information Systems in Business Today

Whats new in MIS

Technology :

Cloud computing platform emerges as a major business area of innovation

More powerful energy efficient computer processing and storage devices.

Growth in software as a service (SaaS)

Netbooks emerge as a growing presence in the PC marketplace often using OS software

A mobile digital platform emerges to compete with the PC as a business system.

Management:

Managers adopt online collaboration and social networking software to improve coordination, collaboration
and knowledge sharing

Business intelligence applications accelerate

Managers adopt millions of mobile tools such as smart-phones and mobile internet devices to accelerate
decision making and improve performance.

Virtual meetings proliferate

Organizations:

Web 2.0 applications are widely adopted by firms

Telework gains momentum in the workplace

Outsourcing production

Co-creation of business value

The Emerging Digital Firm:

a [DIGITAL FIRM] is one in which nearly all of the organizations significant business relationships with
customers, suppliers and employees are digitally enabled and mediated. Core business processes are
accomplished through digital networks spanning the entire organization or linking multiple orgs.

[BUSINESS PROCESSES] refer to the set of logically related tasks and behaviors that organizations
develop over time to produce specific business results and the unique manner in which these activities are
organized and coordinated.

STRATEGIC BUSINESS OBJECTIVES OF INFORMATION SYSTEMS

> Operational Excellence

> New Products, Services, and Business models
> Customer and Supplier Intimacy
> Improved decision making
> Competitive Advantage
> Survival
New Products, Services and Business Models:

A [BUSINESS MODEL] describes how a company produces, delivers and sells a product or services to
create wealth

1.2 Perspectives on Information Systems

[INFORMATION TECHNOLOGY] consists of all the hardware and software that a firm needs to use in order
to achieve its business objectives.

WHAT IS AN INFORMATION SYSTEM?

An [INFORMATION SYSTEM] can be defined technically as a set of interrelated components that collect (or
retrieve), process, store, and distribute information to support decision making and control in an organization.

[INFORMATION] data that have been shaped into a form that is meaningful and useful to humans.

[DATA] in contrast are streams of raw facts representing events occurring in organizations or the physical
environment before they have been organized and arranged into a form that people cal understand and use.

3 Activities in an information system produce the information that organizations need to make decisions,
control operations, analyze problems and create new products or services. These activities are:

INPUT , PROCESSING , OUTPUT.

DIMENSIONS OF INFORMATION SYSTEMS

[INFORMATION SYSTEMS LITERACY] The broader understanding of information systems, which

encompasses an understanding of the management and organizational dimensions of systems as well as
the technical dimensions of systems.

[COMPUTER LITERACY] Focuses primarily on knowledge of information technology.

> Organizations

The key elements of an organization are its people, structure, business processes, politics and culture.

Levels in a Firm:

 Senior Management:
Makes long range strategic decisions about products and services as well as ensures financial
performance of the firm

 Middle management: carries out the programs and plans of senior management and
 Operational Management is responsible for monitoring the daily activities of the business.

 Knowledge workers such as engineers, scientist or architects design products or services and create
new knowledge for the firm.
 Data Workers such as secretaries or clerks assist with the the paperwork at all levels of the firm.
 Production or services workers actually produce the product and deliver the service.

Major Business functions:

Sales & Marketing, Manufacturing and Production, Finance and accounting, Human Resources.
>Technology:

[COMPUTER HARDWARE] the physical equipment used for input, processing and output activities in an
information system.

[COMPUTER SOFTWARE] consist of detailed, preprogrammed instructions that control and coordinate the
computer hardware, components in and information system.

[DATA MANAGEMENT TECHNOLOGY] consist of the software governing the organization of data on
physical storage media.

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COMPLEMENTARY ASSETS – ORGANIZATIONAL CAPITAL AND THE RIGHT BUSS> MODEL

[COMPLEMENTARY ASSETS] are those assets required to derive value from a primary investment.

− the investments in organization and management are also known as [ORGANIZATIONAL AND
MANAGMENT CAPITAL]

Table : Complimentary social, managerial, and organizational assets required to optimize returns from
Information technology investments
Organizational Assets Supportive organizational culture that values
efficiency and effectiveness
Appropriate business model
Efficient business processes
Decentralized authority
Distributed decision making rights
Strong IS development team
Managerial Assets Strong senior management support for technology
investment and change
Incentives for management innovation
Teamwork and collaborative work investments
Training programs to enhance management decision
skills
Management culture that values flexibility and
knowledge-based decision making
Social Assets The Internet and telecommunications infrastructure
IT-enriched educational programs raising labor force
computer literacy
Standards
Laws and regulations creating fair,stable market
environments

1.3 CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS.

Study of information systems is a multidisciplinary field, the field can be divided into technical and behavioral
approaches.
1, TECNICAL APPROACH

The approach emphasizes mathematically based models to study information systems, as well as the
physical technology and formal capabilities of these systems. The disciplines that contribute to the technical
approach are computer science, management science, and operations research.

2. BEHAVIORAL APPROACH

Concerned with the behavioral issues that arise in the development and long-term maintenance of
information systems. Issues such as strategic business integration, design, implementation,utilization, and
management cannot be explored usefully with the models used in the technical approach. Other behavioral
disciplines contribute important concepts and methods.

The behavioral approach does not ignore technology, indeed information systems technology is often the
stimulus for a behavioral problem or issue. But the focus of this approach is generally not on technical
solutions – instead it concentrates on changes and attitudes, management and organizational policy and
behavior

Review Summary Page 64

CHP 2 – GLOBAL e-BUSINESS: How Businesses use Information Systems.

2.1 BUSINESS PROCESSES AND INFORMATION SYSTEMS.

BUSINESS PROCESSES>

refer to the manner in which work is organized, coordinated, and focused to produce valuable product or
service. Business processes are concrete workflows of material, information and knowledge – sets of
activities. Also refers to unique ways in which organizations coordinate work, information, and knowledge,
and the ways in which management chooses to coordinate work

Table 2.1 Functional Business Processes

Manufacturing and production Assembling the product
Checking for quality
Producing bills of materials
Sales and marketing Identifying customers
making customers aware of the product
Selling the product
Finance and Accounting Paying creditors
Creating financial statements
Managing cash accounts
Human resources Hiring employees
Evaluating employees job performance
Enrolling employees in benefits plan

2.2 TYPES OF INFORMATION SYSTEMS

TRANSACTION PROCESSING SYSTEMS>

Operational Managers need systems that keep track of the elementary activities and transactions of the
organization, such as sales, receipts, cash deposits, payroll, credit decisions and the flow of materials in a
factory.

[TRANSACTION PROCESSING SYSTEMS (TPS)] provide this kind of information – it’s a computerized
system that performs and records the daily routine transactions necessary to conduct business, such as
sales order entry, hotel reservations, payroll etc

MANAGEMENT INFORMATION SYSTEMS AND DECISION SUPPORT SYSTEMS>

The term [MANAGEMENT INFORMATION SYSTEMS (MIS) also designates a specific category of
information systems serving middle management. MIS provide middle managers with report on the
organization's current performance. This information is used to monitor and conrol the business and predict
future performance.

MIS summarize and report on the company's basic operations using data supplied by transaction processing
systems.

[DECISION SUPPORT SYSTEMS (DSS)] support non routine decision making for middle management.
They focus on problems that are unique and rapidly changing for which the procedure for arriving at a
solution may not be fully predifined in advance.

Although DSS use internal information from TPS (Transaction Processing Systems) and MIS, they often
bring in information from external sources, such as current stock prices or product prices of competitors.
EXECUTIVE SUPPORT SYSTEMS FOR SENIOR MANAGEMENT>

[EXECUTIVE SUPPORT SYSTEMS] help senior management make these decisions – being strategic
issues and long-term trends. They are concerned with questions such as What will employee levels be in 5
years, What are the long term industry cost trends, and where does our firm fit in.

ESS addresses non routine decisions requiring judgment, evaluation, and insight because there is no agreed
on procedure for arriving at a solution.

2.3 SYSTEMS THAT SPAN THE ENTERPRISE

ENTERPRISE APPLICATIONS>

[ENTERPRISE APPLICATIONS] which are systems that span functional areas, focus on executing business
processes across the business firm, and include all elvels of management.

4 major Enterprise Applications:

> Enterprise Systems:

[ENTERPRISE SYSTEMS] aka ENTERPRISE RESOURCE PLANNING (ERP) systems, solve the problem
of fragmentation of systems and data, by collecting data from various key business processes in
manufacturing and production, finance and accounting, sales and marketing, and human resources, and
storing the data in a singe central data repository.

> Supply chain Management Systems (SCM)

[SUPPLY CHAIN MANAGEMENT SYSTEMS] help businesses manage relationships with their suppliers.
These systems help suppliers, purchasing firms, distributors, and logistics companies share information
about orders, production, inventory levels, and delivery of products and services so that they can make
better decisions about how to organize and schedule sourcing, production, and distribution.

Supply Chain Management systems are one type of [INTERORGANIZATIONAL SYSTEMS] because they
automate the flow of information across organizational boundaries.

> Customer Relationship Management Systems:

[CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS (CRM)] help firms manage their relationships
with their customers. CRM systems provide information to coordinate all of the business processes that deal
with customers in sales and marketing, and service ot optimize revenue, customer satisfaction, and customer
retention.

CRM systems consolidate and integrate customer information from multiple communication channels –
telephone, email, wireless devices, retail outlets, or the Web.

> Knowledge Management Systems:

[KNOWLEDGE MANAGEMENT SYSTEMS [KMS)] enable organizations to better manage processes for
capturing and applying knowledge and expertise. These systems collect all relevant knowledge and
experience in the firm, and make it available wherever and whenever it is needed to improve business
processes and management decisions. They also link the firm to external sources of knowledge.

ENTERPRISE WIDE INFORMATION SYSTEM SOLUTIONS USED BY BUSINESSES:

 Internet Based Collaboration Environments

Teams who work together from many different locations, around the world need tools to support
workgroup collaboration. These tools provide storage space for team documents, a space separate
 from corporate email for team communications, group calendars, and audio-visual environment
where members can meet face to face in live video conferencing

 E-mail and instant messaging (IM)

E-mail and instant messaging have been embraced by corporations as a major communication and
collaboration tool supporting interaction jobs

 Cell phones and Smart phones:

Cell phones are today a basic part of a firms telecommunications infrastructure for supporting
professionals and other employees whose primary job is talk with one another, with customers and
vendors, and managers. Cell phones, iPhones and BlackBerrys are digital devices, and the data
generated by their communications may be stored in large corporate systems for later review and
use in legal proceedings

 Social Networking:

LinkedIn provide networking services to business professionals, while other niche sites have sprung
up to serve lawyers, doctors, engineers and dentists. Social networking tools are quickly becoming a
corporate tool for sharing ideas and collaborating among interaction-based jobs in the firm.

 Wikis:

Wikis are the ideal tool for storing and sharing company knowledge and insights. Wikis are destined
to become a major repository for unstructured corporate knowledge in part because they are so
much less costly that formal knowledge management systems and they can be much more dynamic
and current.

 Virtual Worlds:

Companies use virtual worlds and avatars representing individuals to held meetings, training
sessions and lounges. Real world people represented by avatars meet, interact, and exchange ideas
at these virtual locations.

E-BUSINESS, E-COMMERCE, AND E-GOVERNMENT

[ELECTRONIC BUSINESS / E-BUSINESS] refers to the use of digital technology and the Internet to
execute the major business processes in the enterprise.

[ELECTRONIC COMMERCE / E-COMMERCE] is the part of e-business that deals with the buying and
selling of goods and services over the Internet.

[E-GOVERNMENT] refers to the application of the Internet and networking technologies to digitally enable
government and public sector agencies relationships with citizens, businesses, and other arms of
government.

2.4 THE INFORMATION SYSTEMS FUNCTION IN BUSINESS

 THE INFORMATION SYSTEMS DEPARTMENT:

Consists of specialists, such as programmers, systems analysts, project leaders, and information systems
managers.

- Programmers – are highly trained technical specialists who write the software instructions for
computers.
- Systems Analysts constitute the principal liaisons between the information systems groups and the
 rest of the organization- to translate business problems and requirements into information
requirements and systems.
- Information Systems Managers – are leaders of teams of programmers and analysts, project
managers, physical facility managers, telecommunications managers, or database specialist.
- Chief Information Officer (CIO), in many companies the information systems department is headed
by a CIO. The CIO is a senior manager who overseas the use of information technology in the firm.
- Chief Security Officer (CSO) is in charge of information systems security for the firm and is
responsible for enforcing the firms information security policy. The CSO is responsible for educating
and training users and information systems specialists about security.
- Chief Privacy Officer (CPO) – is responsible for ensuring that the company complies with existing
data privacy laws.
- Chief Knowledge Officer (CKO) is responsible for the firms knowledge management program.
- End Users – are representatives of departments outside of the information systems group for whom
applications are developed

 IT GOVERNANCE:

The question of how the information systems department should be organized is part of the larger
issue of IT governance
IT GOVERNANCE includes the strategy and policies for using information technology within an
organization. IT specifies the decision rights and framework for accountability to ensure that the use
of information technology supports the organizations strategies and objectives.

REVIEW Page 99
 Chapt3 : Information Systems, Organizations, and Strategy.:

3.1 ORGANIZATIONS AND INFORMATION SYSTEMS.

 WHAT IS AN ORGANIZATION ?

An [ORGANIZATION] is a stable, formal social structure that takes resources from the environment and
processes them to produce outputs. This technical definition focuses on three elements of an
organization.
Capital and labor are primary production factors provided by the environment.

 FEATURES OF ORGANIZATIONS:

1. Routines and Business Processes.

Aka Standard Operating Procedures – are precise rules, procedures and practices that have
been developed to cope with virtually all expected situations. As employees learn these routines,
they become highly productive and efficient.

2 Organizational Politics

Peoples different viewpoints, specialties’, concerns and perspectives affecting decisions in company
and IS.

3. Organizational Culture:

Organizational culture encompasses the set of assumptions what products the organization should
produce, how it should produce them, where and for whom. The culture can be a powerful restraint
on change especially technology change.

4. Organizational Environments:

Organizations reside in environments from which they draw resources and to which they supply
goods and services .They are open to and depend on, the social and physical environment that
surrounds them.

 IMPLICATIONS FOR THE DESIGN AND UNDERSTANDING OF INFORMATION SYSTEMS

Central organizational factors to consider when planning a new system are the following:

• The invornment in which the organization must function

• The structure of the organization: hierarchy, specialization, routines and business processes
• The organization culture and politics
• The type of organization and its style of leadership
• The principle interest groups affected by the system and the attitude of workers who will be using the
system.
• The kinds of tasks, decisions, and business processes that the information system is designed to
assist

3.3 USING INFORMATION SYSTEMS TO ACHIEVE COMPETITIVE ADVANTAGE

 Porters Competitive forces model

Porters model is all about the firms general business environment. In this model, five competitive forces
shape the state of the firm.

1) Traditional Competitors

Firms share market space with other competitors out to better their services and products.
 2) New Market Entrants:
New companies always enter market, some industries have low barriers to entry and other more
complicated. New companies have advantages : not locked into old plans and equipment, hire younger
workers (less expensive but also more innovative), are more hungry and highly motivated.

3) Substitute Products and Services.

Substitutes that your customers might use if your prices become too high

4) Customers
Profitable company depends in large measure to its ability to attract and retain customers.and charge high
prices.

5) Suppliers

The market power of suppliers can have a significant impact on firm profits, especially when the firm
cannot raise prices as fast as can suppliers.

INFORMATION SYSTEM STRATEGIES FOR DEALING WIHT COMPETITIVE FORCES>

− Low-Cost leadership

use Information Systems to achieve the lowest operational costs and the lowest pricess

Wal-Mart continuous replenishment system is also example of an efficient customer response

system.

− Product Differentiation

Use Information Systes to enable new products and services, or greatly change the customer
convenience in using your existing products and services

− Focus on Market Niche

Use Information Systems to enable a specific market fokus, and serve this narrow target market
better than the competition can.

− Strengthen Customer and Supplier Intimacy

Use Information Systems to lighten linkages with suppliers and develop intimacy with customers. Strong
linkages to customers and suppliers increase switching costs (the cost of switching from one product to a
competiting product)

THE BUSINESS VALUE CHAIN MODEL

To achieve operational excellence, you need the business value chain model.

The [VALUE CHAIN MODEL] highlights specific activities in the business where competitive strategies can
best be applied and where information systems are most likely to have a strategic impact. The value chain
model views the firm as a series or chain of basic activities that add a margin of value to a firms products or
services

[PRIMARY ACTIVITIES] are most directly related to the production and distribution of the firms products and
services, which create value for the customer. Primary activities include inbound logistics, operations,
oubound logistics, sales and marketing, and service.

[SUPPORT ACTIVITIES] make the delivery of the primary activities possible and consist of organization
infrastructure (management and administration), human resources, technology, and procurement

[BENCHMARING] involves comparing the efficiency and effectiveness of your business processes against
strict standards and then measuring performance against those standards.

Industry [BEST PRACTICES] are usually identified by consulting companies, research organizations,
government agencies, and industry associations as the most successful solutions or problem solving
methods for consistency and effectively achieving a business objective.

Extending the Value Chain: The Value Web

A firms value chain is linked to the value chains of its suppliers, distributors, and customers. I.S systems can
be used to strategic advantage at the industry level by working with other firms, industry participants can use
IT to develop industry-wide standards for exchanging information or business transactions electronically
which forces all market participants to subscribe to similar standards.

[VALUE WEB] is a collection of independent firms that use information technology to coordinate their value
chains to produce a product or service for a market collectively, more customer driven and operates in a less
linear fashion than the traditional value chain.

Enhancing Core Competencies:

Another way to use IS for competitive advantage is to think about ways that systems can enhance core
competencies. The argument is that the performance of all business units will increase insofar as these
business units develop, or create, a central core of competencies.

A [CORE COMPETENCY] is an activity for which a firm is a world-class leader. It may involve being the
worlds best miniature parts designer, best delivery service.

Network-Based Strategies:

Internet and Networking technology have inspired strategies that can take advantage of firms abilities to
create networks or network with each other. Network-based strategies include the use of network economics,
a virtual company model, and business ecosystem

→ Network Economics – Business models based on a network may help firms strategically by taking
advantage of network economics.

→ Virtual Company Model – also know as a virtual organization, uses networks to link people, assets and
ideas, enabling it to ally with other companies to create and distribute products and services without being
limited by traditional organizational boundaries or physical locations

− Business Ecosystems : Keystone and Niche Firms : is another term for these loosely coupled but
interdependent networks of suppliers, distributors, outsourcing firms, transportation service firms and
technology manufacturers.

3.4 Using Systems for Competitive Advantage: Management Issues

> Sustaining Competitive Advantage:

>> Aligning it with Business ObjecTIVES

Performing a Strategic Systems Analysis:

To align IT with the business and use Information Systems effectively for competitive advantage, managers
need to perform a strategic systems analysis. To identify the types of systems that provide a strategic
advantage to their firms, managers should ask the following question:

1. What is the structure of the industry in which the firm is located?

 What are some of the competitive forces at work in the industry ? Are there new entrants to the
industry? What is the relative power of suppliers, customers and substitute products and services
over prices
 Is the basis of competition quality, price or brand?
 What are the direction and nature of change within the industry?
 How is the industry currently using IT – is the organization behind or ahead of the industry in its
application of information systems

2. What are the business, firm, and industry value chains for this particular firm?

 How is the company creating value for the customer – through lower prices and transaction costs or
higher quality? And where can it create more value
 Does the firm understand and manage its business processes using the best practices available? Is
it taking maximum advantage of supply chain management, customer relationship management and
enterprise systems?
 Does the firm leverage its core competences?
 Is the industry supply chain and customer base changing in ways that benefit or harm the business?
 Can the firm benefit from strategic partnerships and value webs?
 Where in the value chain will information systems provide the greatest value to the firm?

3. Have we aligned IT with our business strategy and goals?

 Have we correctly articulated our business strategy and goals ?

 Is IT improving the right business processes and activities to promote this strategy?
 Are we using the right metrics to measure progress towards these goals?

[STRATEGIC TRANSITIONS] – a movement between levels of socio-technical systems.

− Review and Summary Page : 142