Principles of Information Systems, Sixth Edition 1 Information Systems in Organizations Chapter 2

Principles of Information Systems, Sixth Edition 2 Chapter 2 Outline Organizations and Information Systems Competitive Advantage Performance-Based Information Systems Careers in Information Systems

Principles of Information Systems, Sixth Edition 3 Organizations & Information Systems

Principles of Information Systems, Sixth Edition 4 Value Chain

Principles of Information Systems, Sixth Edition 5 Porter’s Firm Value Chain* Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Materials handling delivery Primary Activities Support Activities Mfg. & assembly Order processing Shipping Product Pricing Promotion Place Customer service Repair

Principles of Information Systems, Sixth Edition 6 Supplier’s value chain Firm’s value chain Channel’s value chains Buyer’s value chains “The Value System”: interconnecting Relationships between organizations*

Principles of Information Systems, Sixth Edition 7 Example of strategic targets* Suppliers: Raw materials Information Labor Capital Insurance Utilities Transportation Customers: Channel distributors Consumers Industrial Reseller Government International Competitors: Direct Potential Substitute

Principles of Information Systems, Sixth Edition 8 Organizational Structure Organizational subunits and their relationship with the overall organization Categories of organizational structure: –Team –Traditional –Multidimensional –Project –Virtual

Principles of Information Systems, Sixth Edition 9 Traditional Organizational Structure

Principles of Information Systems, Sixth Edition 10 Traditional Organizational Structure

Principles of Information Systems, Sixth Edition 11 Hierarchical (Traditional) Organizational Structures* In hierarchical (traditional) organizations, middle managers tell subordinates what to do and tell superiors the outcomes. The information system supports this hierarchy.

Principles of Information Systems, Sixth Edition 12 Project/Team Organizational Structure (Here, we will assume project & team organizational structure are the same). Organizational unit is often temporary project- based teams assembled from members of various functional areas, then disbanded at the end of the project Project teams vary in size, often work groups Projects are usually based on major products and services

Principles of Information Systems, Sixth Edition 13 Project Organizational Structure

Principles of Information Systems, Sixth Edition 14 Multidimensional Organizational Structure May incorporate several structures at the same time Advantage: –ability to simultaneously stress both traditional corporate areas and important product lines Disadvantage: –multiple lines of authority

Principles of Information Systems, Sixth Edition 15 Multidimensional Organizational Structure

Principles of Information Systems, Sixth Edition 16 Matrix Organizational Structure* In matrixed organizations, work is organized in small work groups and integrated regionally and nationally/globally. IS reduces operating expenses by allowing information to be easily shared among different managerial functions. Region Industry Region 1 Region 2 Region 3 Ind. 1Position for Ind. 1 in region 1 Pos. for Ind.1 in region 2 Pos. for Ind.1 in region 3 Ind. 2Pos. for Ind.2 in region 1 Pos. for Ind.2 in region 2 Pos. for Ind.2 in region 3 Ind. 3Pos. for Ind.3 in region 1 Pos. for Ind.3 in region 2 Pos. for Ind.3 in region 3

Principles of Information Systems, Sixth Edition 17 Virtual Organizational Structure* Virtual organization refers to the extensive use of IS and electronic links to create an extremely flexible organization –Employs business units in geographically dispersed areas –People may never meet face to face –Can be permanent or temporary

Principles of Information Systems, Sixth Edition 18 Virtual Organizations* IT has made it possible for an individual to work for an organization and live anywhere Virtual organization structure is “networked”. Extensive collaboration takes place electronically, esp. Managers in a virtual environment monitor results, not progress Forms are electronic, tech. support through a web interface Business processes are also usually through the Web

Principles of Information Systems, Sixth Edition 19 Flat Organizational Structures* In flat structured organizations, work is more flexible and employee do whatever is needed. IS allows offloading extra work and supports intra-firm communications.

Principles of Information Systems, Sixth Edition 20 The “Networked” Virtual Organization* Instead of rigid hierarchies, all parts of the company are connected by formal and informal communications.

Principles of Information Systems, Sixth Edition 21 Organizational Culture and Change

Principles of Information Systems, Sixth Edition 22 Organizational Culture Shared understandings, values, and assumptions in an organization Influences information systems

Principles of Information Systems, Sixth Edition 23 Organizational Change

Principles of Information Systems, Sixth Edition 24 Reengineering

Principles of Information Systems, Sixth Edition 25 Reengineering

Principles of Information Systems, Sixth Edition 26 Continuous Improvement Constantly seeking ways to improve business processes Benefits: –Increased customer loyalty –Reduction in customer dissatisfaction –Reduced opportunity for competitive inroads

Principles of Information Systems, Sixth Edition 27 Continuous Improvement vs. Reengineering

Principles of Information Systems, Sixth Edition 28 Technology Diffusion, Infusion, and Acceptance Technology diffusion - measure of widespread use of technology Technology infusion - extent to which technology permeates a department Technology Acceptance Model (TAM) - specifies factors that can lead to higher usage of technology

Principles of Information Systems, Sixth Edition 29 Total Quality Management (TQM) Quality: ability of a product or service to meet or exceed customer expectations TQM: approaches and techniques used to achieve quality throughout the organization

Principles of Information Systems, Sixth Edition 30 Outsourcing and Downsizing Outsourcing: contracting with outside professionals Downsizing: cutting the number of employees

Principles of Information Systems, Sixth Edition 31 Outsourcing* Why Outsource? –Means of cost control: e.g., maintenance Classic model: only outsource functions that don’t give a competitive advantage Later (90s): sometime outsourcing even CA functions is a good idea if done by outside experts (but this is risky). Now, “selective outsourcing”: choose which IT capabilities to retain in-house and which to outsource.

Principles of Information Systems, Sixth Edition 32 Factors driving outsourcing* Cost savings Highly qualified IT staff are difficult to find and retain By bringing in outside expertise, management needs to focus less on IS operations and more on the information itself. Outsourcers are specialists, should understand how to manage IS staff more effectively. Outsourcers may have larger IS resources that provide greater capacity on demand.

Principles of Information Systems, Sixth Edition 33 Disadvantages of outsourcing* Abdication of control High switching costs Lack of technological innovation Loss of ownership

Principles of Information Systems, Sixth Edition 34 Competitive Advantage

Principles of Information Systems, Sixth Edition 35 Competitive Advantage Competitive Advantage: a significant, long- term benefit to a company over its competition The ability to establish and maintain a competitive advantage is vital to the company’s success

Principles of Information Systems, Sixth Edition 36 Competitive Advantage Five forces motivate firms to seek competitive advantage –Rivalry among existing competition –Threat of new entrants –Threat of substitutions –Buyers’ bargaining power –Suppliers’ bargaining power

Principles of Information Systems, Sixth Edition 37 Potential threat of new entrants Bargaining power of buyers Bargaining power of suppliers Industry competitors Threat of substitutes Strategic use Cost effectiveness Market access Differentiation of product or service Strategic use Selection of supplier Threat of backward integration Strategic use Switching costs Access to dist. channels Economics of scale Strategic use Redefine products and services Improve price/performance Strategic use Buyer selection Switching costs Differentiation Porter’s competitive forces with potential strategic use of information*

Principles of Information Systems, Sixth Edition 38 Strategic Planning for Competitive Advantage

Principles of Information Systems, Sixth Edition 39 Strategic Planning for Competitive Advantage Change the structure of the industry Create new products or services Improve existing products or services

Principles of Information Systems, Sixth Edition 40 Use information systems for strategic planning Initially IS used to reduce costs Later, improve efficiency & meet corp. strategic goals Usually embodied in a product or service (SABRE is a classic example) Competitive advantage is often only temporary This is partly due to companies using IS to compete with others who have created successful IS-based products and services

Principles of Information Systems, Sixth Edition 41 Performance-Based Information Systems

Principles of Information Systems, Sixth Edition 42 Productivity Productivity: a measure of output achieved divided by input required A higher level of output for a given level of input means increased productivity The text implicitly discusses “labor productivity”, i.e., the level of output for a given unit of labor.

Principles of Information Systems, Sixth Edition 43 Return on Investments and the Value of Information Systems Earnings growth Market share Customer awareness and satisfaction Total cost of ownership (TCO): includes indirect costs

Principles of Information Systems, Sixth Edition 44 Justifying Information Systems Information Systems can be justified by solving the “risk/reward” equation. Many IS departments try to formally assess and manage risk. –Assess risks –Identify benefits

Principles of Information Systems, Sixth Edition 45 Justifying Information Systems Assessment of Risk: –1. How well are the requirements understood? –2. To what degree does the project require pioneering effort in technology? –3. Is there a risk of severe business repercussions if the project is poorly implemented?

Principles of Information Systems, Sixth Edition 46 Justifying Information Systems The benefits from most IS projects fall into one of the following categories: –Tangible Savings –Intangible Savings –Needed to meet a Legal Requirement –Keep the company modernized –Pilot Project to gain experience in a new area

Principles of Information Systems, Sixth Edition 47 Careers in Information Systems

Principles of Information Systems, Sixth Edition 48 The 10 Best Places to Work for IS

Principles of Information Systems, Sixth Edition 49 Roles, Functions, and Careers in Information Systems Department Operations - focuses on the efficiency of information Systems development - focuses on specific development projects and ongoing maintenance and review Support - provides user assistance

Principles of Information Systems, Sixth Edition 50 Typical IS Titles and Functions Chief Information Officer (CIO) - employs the IS department’s equipment and personnel to help the organization attain its goals LAN administrators - set up and manage the network hardware, software, and security processes Internet careers –Strategists –Programmers –Website operators –Chief Internet Officer Consulting firms

Principles of Information Systems, Sixth Edition 51 Chief Information Officer (CIO)* Gartner group definition: “To provide technology vision and leadership for developing and implementing IT initiatives that create and maintain leadership for the enterprise in a constantly changing and intensely competitive marketplace.”

Principles of Information Systems, Sixth Edition 52 The Three Primary Responsibilities of Information Systems

Principles of Information Systems, Sixth Edition 53 Summary Value-added processes increase the relative worth of combined inputs on their way to becoming final outputs Business process reengineering involves the radical redesign of business processes, organizational structures, and information systems Information systems personnel typically work in an IS department that headed by a CIO and includes systems analysts, and computer programmers

Principles of Information Systems, Sixth Edition 54 Principles and Learning Objectives –Identify the value-added processes in the supply chain and describe the role of information systems within them. –Provide a clear definition of the terms organizational structure, culture, and change and discuss how they affect the implementation of information systems. –Identify some of the strategies employed to lower costs or improve service. –Define the term competitive advantage and discuss how organizations are using information systems to gain such an advantage. –Discuss how organizations justify the need for information systems. –Define the types of roles, functions, and careers available in information systems.

Principles of Information Systems, Sixth Edition 55 End of Chapter 2