3.1 © 2004 by Prentice Hall RELATIONSHIP BETWEEN INFORMATION SYSTEMS, ORGANIZATIONS AND BUSINESS PROCESSES

3.2 © 2004 by Prentice Hall What do managers need to know about organizations in order to build and use information systems successfully?What do managers need to know about organizations in order to build and use information systems successfully? What impact do information systems have on organizations?What impact do information systems have on organizations? How do information systems support the activities of managers in organizations?How do information systems support the activities of managers in organizations? OBJECTIVES

3.3 © 2004 by Prentice Hall Sustainability of competitive advantage.Sustainability of competitive advantage. Fitting technology to the organization ( or vice-versa)Fitting technology to the organization ( or vice-versa) MANAGEMENT CHALLENGES

3.4 © 2004 by Prentice Hall ORGANIZATIONS AND INFORMATION SYSTEMS Figure 3-1 MEDIATING FACTORS: Environment Culture Structure Standard Procedures Politics Management Decisions Chance ORGANIZATIONS INFORMATION TECHNOLOGY The Two-Way Relationship Between Organizations and Information Technology

3.5 © 2004 by Prentice Hall Organization: Stable, formal structureStable, formal structure Takes resources from environment and processes them to produce outputsTakes resources from environment and processes them to produce outputs ORGANIZATIONS AND INFORMATION SYSTEMS

3.6 © 2004 by Prentice Hall Technical Microeconomic Definition of the Organization ORGANIZATIONS AND INFORMATION SYSTEMS Figure 3-2

3.7 © 2004 by Prentice Hall Behavioral definition of Organization: Collection of rights, privileges, obligations, responsibilitiesCollection of rights, privileges, obligations, responsibilities Delicately balancedDelicately balanced Conflict resolutionConflict resolution ORGANIZATIONS AND INFORMATION SYSTEMS

3.8 © 2004 by Prentice Hall COMMON FEATURES OF ORGANIZATIONS The Behavioral View of Organizations Figure 3-3

3.9 © 2004 by Prentice Hall 1. Organizations are bureaucracies that have certain structural features 2. Structural Characteristics of Organizations: Clear division of laborClear division of labor HierarchyHierarchy Explicit rules and proceduresExplicit rules and procedures Impartial judgmentsImpartial judgments ORGANIZATIONS AND INFORMATION SYSTEMS Common Features of Organizations

3.10 © 2004 by Prentice Hall Structural Characteristics of Organizations (cont.): Technical qualifications for positionsTechnical qualifications for positions Maximum organizational efficiencyMaximum organizational efficiency ORGANIZATIONS AND INFORMATION SYSTEMS Common Features of Organizations

3.11 © 2004 by Prentice Hall Standard Operating Procedures: Precise rules, procedures, and practicesPrecise rules, procedures, and practices Enable organizations to cope with all expected situationsEnable organizations to cope with all expected situations ORGANIZATIONS AND INFORMATION SYSTEMS Common Features of Organizations

3.12 © 2004 by Prentice Hall Organizational Politics: Divergent viewpoints leads to political struggle, competition, and conflictDivergent viewpoints leads to political struggle, competition, and conflict Hamper organizational changeHamper organizational change ORGANIZATIONS AND INFORMATION SYSTEMS Common Features of Organizations

3.13 © 2004 by Prentice Hall Organizational Culture: A set of fundamental assumptions about: What products the organization should produceWhat products the organization should produce How and where it should produce themHow and where it should produce them For whom they should be producedFor whom they should be produced ORGANIZATIONS AND INFORMATION SYSTEMS Common Features of Organizations

3.14 © 2004 by Prentice Hall All organizations have different: Structures/Organizational typesStructures/Organizational types GoalsGoals ConstituenciesConstituencies Leadership Styles, TasksLeadership Styles, Tasks Surrounding EnvironmentSurrounding Environment ORGANIZATIONS & INFORMATION SYSTEMS Unique Features of Organizations

3.15 © 2004 by Prentice Hall Entrepreneurial: Start up businessEntrepreneurial: Start up business Machine bureaucracy: Midsize manufacturing firmMachine bureaucracy: Midsize manufacturing firm Divisionalized bureaucracy: Fortune 500Divisionalized bureaucracy: Fortune 500 Professional bureaucracy: Law firms, hospitals, school systemsProfessional bureaucracy: Law firms, hospitals, school systems Adhocracy: Consulting firmAdhocracy: Consulting firm ORGANIZATIONS & INFORMATION SYSTEMS Organizational Structures

3.16 © 2004 by Prentice Hall Figure 3-4 Organization and Its Environment ORGANIZATIONS & INFORMATION SYSTEMS

3.17 © 2004 by Prentice Hall Ultimate goalUltimate goal Different groups and constituenciesDifferent groups and constituencies Nature of leadershipNature of leadership Tasks and technologyTasks and technology ORGANIZATIONS AND INFORMATION SYSTEMS Other Differences Among Organizations

3.18 © 2004 by Prentice Hall THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS Information systems department: Formal organizational unitFormal organizational unit Responsible for information systems in the organizationResponsible for information systems in the organization Information Technology Infrastructure and Information Technology Services

3.19 © 2004 by Prentice Hall Figure 3-5 THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS Information Technology Services

3.20 © 2004 by Prentice Hall THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS Includes specialists: Programmers: Highly trained, write softwareProgrammers: Highly trained, write software Systems analysts: Translate business problems into solutions, act as liaisons between the information systems department and rest of the organizationSystems analysts: Translate business problems into solutions, act as liaisons between the information systems department and rest of the organization Information Technology Infrastructure and Information Technology Services

3.21 © 2004 by Prentice Hall THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS Specialists (cont.): Information system managers: Leaders of various specialists teamsInformation system managers: Leaders of various specialists teams Chief information officer (CIO): Senior manager in charge of information systems function in the firmChief information officer (CIO): Senior manager in charge of information systems function in the firm End users: Department representatives outside the information system department for whom applications are developedEnd users: Department representatives outside the information system department for whom applications are developed Information Technology Infrastructure and Information Technology Services

3.22 © 2004 by Prentice Hall Economic Theories : Information technology is a factor of production, like capital and labor.Information technology is a factor of production, like capital and labor. Transaction Cost Theory: Firms can conduct marketplace transactions internally more cheaply to grow larger.Firms can conduct marketplace transactions internally more cheaply to grow larger. THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS How Information Systems Affect Organizations ECONOMIC IMPACTS

3.23 © 2004 by Prentice Hall Transaction Cost Theory Figure 3-6 THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

3.24 © 2004 by Prentice Hall Agency Cost Theory: Firm is nexus of contracts among self-interested parties requiring supervision.Agency Cost Theory: Firm is nexus of contracts among self-interested parties requiring supervision. THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS How Information Systems Affect Organizations ECONOMIC IMPACTS (contd.)

3.25 © 2004 by Prentice Hall Agency Cost Theory Figure 3-7 THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

3.26 © 2004 by Prentice Hall Behavioral Changes : Information technology could change hierarchy of decision makingInformation technology could change hierarchy of decision making Lower cost of information acquisitionLower cost of information acquisition Broadens the distribution of informationBroadens the distribution of information THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS How Information Systems Affect Organizations ORGANIZATIONAL AND BEHAVIORAL IMPACTS

3.27 © 2004 by Prentice Hall Virtual Organization: Task force networked organizations.Task force networked organizations. Uses networks to link people, assets, and ideas to create and distribute products and services without being limited to physical locationsUses networks to link people, assets, and ideas to create and distribute products and services without being limited to physical locations THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS How Information Systems Affect Organizations Organizational & Behavioral Impact (contd.)

3.28 © 2004 by Prentice Hall Increasing the Flexibility of Organization 1. Increasing the ability : –To sense and respond to changes in marketplace. –To take advantage of new opportunities, 2. Mass customization, 3. Micromarketing for niche products THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS How Information Systems Affect Organizations Organizational & Behavioral Impacts (cotd.)

3.29 © 2004 by Prentice Hall Figure 3-8 Implementing Change and Managing Organizational Resistance Made Easier THE CHANGING ROLE OF INFORMATION SYSTEMS IN ORGANIZATIONS

3.30 © 2004 by Prentice Hall 2. Affect on Roles of Managers in Organizations : Interpersonal: Managers act as figureheads and leadersInterpersonal: Managers act as figureheads and leaders Informational: Managers receive and disseminate critical information, nerve centersInformational: Managers receive and disseminate critical information, nerve centers Decisional: Managers initiate activities, allocate resources, and negotiate conflictsDecisional: Managers initiate activities, allocate resources, and negotiate conflicts IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING 1. I.T. has reduced information uncertainty.

3.31 © 2004 by Prentice Hall Process of Decision Making at Various Management levels : Strategic Decision Making: Determines long-term objectives, resources, and policiesStrategic Decision Making: Determines long-term objectives, resources, and policies. Management Control: Monitors effective or efficient usage of resources and performance of operational unitsManagement Control: Monitors effective or efficient usage of resources and performance of operational units IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Managers and Decision Making

3.32 © 2004 by Prentice Hall Operational Control: Determines how to perform specific tasks set by strategic and middle-management decision makersOperational Control: Determines how to perform specific tasks set by strategic and middle-management decision makers Knowledge-level Decision Making: Evaluates new ideas for products, services, ways to communicate new knowledge, ways to distribute informationKnowledge-level Decision Making: Evaluates new ideas for products, services, ways to communicate new knowledge, ways to distribute information IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Managers and Decision Making Process of Decision Making at Various Management Levels (contd.)

3.33 © 2004 by Prentice Hall Decisions are classified as: Unstructured: Non routine, decision maker provides judgment, evaluation, and insights into problem definition, no agreed-upon procedure for decision making.Unstructured: Non routine, decision maker provides judgment, evaluation, and insights into problem definition, no agreed-upon procedure for decision making. Structured: Repetitive, routine, handled using a definite procedure.Structured: Repetitive, routine, handled using a definite procedure. IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Managers and Decision Making

3.34 © 2004 by Prentice Hall TPS Organizational Level OAS MIS KWS DSS ESS TYPE OF DECISIONOPERATIONALKNOWLEDGEMANAGEMENTSTRATEGIC STRUCTURED ACCOUNTS RECEIVABLE ELECTRONIC PRODUCTION SCHEDULING COST OVERRUNS SEMI- BUDGET STRUCTURED PREPARATION PROJECT SCHEDULING FACILITY LOCATION UNSTRUCTUREDPRODUCT DESIGN NEW PRODUCTS NEW MARKETS Figure 3-9 IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Different Kinds of Information Systems

3.35 © 2004 by Prentice Hall Intelligence: Collect information, identify problem.Intelligence: Collect information, identify problem. Design: Conceive alternative solution to a problemDesign: Conceive alternative solution to a problem Choice: Select among the alternative solutionsChoice: Select among the alternative solutions Implementation: Put decision into effect and provide report on the progress of solutionImplementation: Put decision into effect and provide report on the progress of solution IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Stages of Decision Making (all supported by IT)

3.36 © 2004 by Prentice Hall Figure 3-10 IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Decision-Making Process

3.37 © 2004 by Prentice Hall Rational Model: Choosing best alternative rationally.Rational Model: Choosing best alternative rationally. Organizational Model : Group decision.Organizational Model : Group decision. Bureaucratic Model : Based on SOPBureaucratic Model : Based on SOP Political Model : Compromises.Political Model : Compromises. IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Models of Decision Making

3.38 © 2004 by Prentice Hall Factors to consider while planning a new system: Organizational environmentOrganizational environment Organizational structure, hierarchy, specialization, standard operating proceduresOrganizational structure, hierarchy, specialization, standard operating procedures IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Implications for the Design and Understanding of Information Systems

3.39 © 2004 by Prentice Hall Culture and politics of the organizationCulture and politics of the organization Type of organization and its style of leadership.Type of organization and its style of leadership. Groups affected by the system and the attitudes of workers who will be using the system.Groups affected by the system and the attitudes of workers who will be using the system. Kinds of tasks, decisions, and business processes, information system is designed to assist.Kinds of tasks, decisions, and business processes, information system is designed to assist. IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Factors to Consider while Planning a New Systems (contd.)

3.40 © 2004 by Prentice Hall System Characteristics to be kept in mind while designing new systems: Flexibility and multiple options for handling data and evaluating informationFlexibility and multiple options for handling data and evaluating information Capability to support a variety of styles, skills, and knowledgeCapability to support a variety of styles, skills, and knowledge IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Implications for the Design and Understanding of Information Systems

3.41 © 2004 by Prentice Hall System Characteristics to be kept in mind while designing new systems: Capability to keep track of many alternatives and consequencesCapability to keep track of many alternatives and consequences Sensitivity to the organization’s bureaucratic and political requirements.Sensitivity to the organization’s bureaucratic and political requirements. IMPACT OF INFORMATION TECHNOLOGY ON MANAGEMENT DECISION MAKING Implications for the Design and Understanding of Information Systems

3.42 © 2004 by Prentice Hall MANAGEMENT CHALLENGES IN COMPLEX RELATIONSHIP BETWEEN I.S. AND ORGANIZATIONAL PERFORMANCE 1. Difficulties in Sustaining Competitive Advantage :- - Advantage is for a significant period of time, - Experience and knowledge helps in new investment. 2.Difficulties in Managing System Related Change : - Change is slowed due to inertia of organizations - Process of change is complicated and slow.

3.43 © 2004 by Prentice Hall Solution Guidelines : 1.Perform a Strategic System Analysis : - Study competitive structure of industry of firm, - Analyze current business, industry and firm’s value chain 2.Managing Strategic Transitions ( Changes in goals, relationships with customers / suppliers, internal operations and information architecture) : - Devise new business processes for successful transitions MANAGEMENT CHALLENGES IN COMPLEX RELATIONSHIP BETWEEN I.S. AND ORGANIZATIONAL PERFORMANCE

3.44 © 2004 by Prentice Hall RELATIONSHIP BETWEEN INFORMATION SYSTEMS, ORGANIZATIONS AND BUSINESS PROCESSES