1. 1.1 © 2010 by Prentice Hall 1 Lecture Information Systems in Global Business Today

2. 1.2 © 2010 by Prentice Hall The Role of Information Systems in Business Today How information systems are transforming business Increase in wireless technology use, Web sites Shifts in media and advertising New federal security and accounting laws Globalization opportunities Internet has drastically reduced costs of operating on global scale Presents both challenges and opportunities Management Information Systems Chapter 1 Information Systems in Global Business Today

3. 1.3 © 2010 by Prentice Hall Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today Information Technology Capital Investment Figure 1-1 Information technology investment, defined as hardware, software, and communications equipment, grew from 32% to 51% between 1980 and 2008. Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2008.

4. 1.4 © 2010 by Prentice Hall In the emerging, fully digital firm –Significant business relationships are digitally enabled and mediated –Core business processes are accomplished through digital networks –Key corporate assets are managed digitally Digital firms offer greater flexibility in organization and management –Time shifting, space shifting Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

5. 1.5 © 2010 by Prentice Hall Growing interdependence between ability to use information technology and ability to implement corporate strategies and achieve corporate goals Business firms invest heavily in information systems to achieve six strategic business objectives: –Operational excellence –New products, services, and business models –Customer and supplier intimacy –Improved decision making –Competitive advantage –Survival Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

6. 1.6 © 2010 by Prentice Hall Operational excellence: –Improvement of efficiency to attain higher profitability –Information systems, technology an important tool in achieving greater efficiency and productivity –Wal-Mart’s RetailLink system links suppliers to stores for superior replenishment system Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

7. 1.7 © 2010 by Prentice Hall New products, services, and business models: –Business model: describes how company produces, delivers, and sells product or service to create wealth –Information systems and technology a major enabling tool for new products, services, business models Examples: Apple’s iPod, iTunes, and iPhone, Netflix’s Internet-based DVD rentals Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

8. 1.8 © 2010 by Prentice Hall Customer and supplier intimacy: –Serving customers well leads to customers returning, which raises revenues and profits Example: High-end hotels that use computers to track customer preferences and use to monitor and customize environment –Intimacy with suppliers allows them to provide vital inputs, which lowers costs Example: J.C.Penney’s information system which links sales records to contract manufacturer Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

9. 1.9 © 2010 by Prentice Hall Improved decision making –Without accurate information: Managers must use forecasts, best guesses, luck Leads to: –Overproduction, underproduction of goods and services –Misallocation of resources –Poor response times Poor outcomes raise costs, lose customers –Example: Verizon’s Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc. Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

10. 1.10 © 2010 by Prentice Hall Operational excellence: –Improvement of efficiency to attain higher profitability New products, services, and business models: –Enabled by technology Customer and supplier intimacy: –Serving customers raises revenues and profits –Better communication with suppliers lowers costs Improved decision making –More accurate data leads to better decisions Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

11. 1.11 © 2010 by Prentice Hall Competitive advantage –Delivering better performance –Charging less for superior products –Responding to customers and suppliers in real time –Example: Toyota and TPS (Toyota Production System) enjoy a considerable advantage over competitors – information systems are critical to the implementation of TPS Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

12. 1.12 © 2010 by Prentice Hall Survival –Information technologies as necessity of business –May be: Industry-level changes, e.g. Citibank’s introduction of ATMs Governmental regulations requiring record-keeping –Examples: Toxic Substances Control Act, Sarbanes- Oxley Act Management Information Systems Chapter 1 Information Systems in Global Business Today The Role of Information Systems in Business Today

13. 1.13 © 2010 by Prentice Hall The Role of Information Systems in Business Today Management Information Systems Chapter 1 Information Systems in Global Business Today The Interdependence Between Organizations and Information Technology In contemporary systems there is a growing interdependence between a firm’s information systems and its business capabilities. Changes in strategy, rules, and business processes increasingly require changes in hardware, software, databases, and telecommunications. Often, what the organization would like to do depends on what its systems will permit it to do. Figure 1-2

14. 1.14 © 2010 by Prentice Hall Information system: –Set of interrelated components –Collect, process, store, and distribute information –Support decision making, coordination, and control Information vs. data –Data are streams of raw facts –Information is data shaped into meaningful form Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

15. 1.15 © 2010 by Prentice Hall Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today Raw data from a supermarket checkout counter can be processed and organized to produce meaningful information, such as the total unit sales of dish detergent or the total sales revenue from dish detergent for a specific store or sales territory. Figure 1-3 Data and Information

16. 1.16 © 2010 by Prentice Hall Information system: Three activities produce information organizations need –Input: Captures raw data from organization or external environment –Processing: Converts raw data into meaningful form –Output: Transfers processed information to people or activities that use it Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

17. 1.17 © 2010 by Prentice Hall Feedback: –Output returned to appropriate members of organization to help evaluate or correct input stage Computer/Computer program vs. information system –Computers and software are technical foundation and tools, similar to the material and tools used to build a house Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

18. 1.18 © 2010 by Prentice Hall Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today An information system contains information about an organization and its surrounding environment. Three basic activities—input, processing, and output—produce the information organizations need. Feedback is output returned to appropriate people or activities in the organization to evaluate and refine the input. Environmental actors, such as customers, suppliers, competitors, stockholders, and regulatory agencies, interact with the organization and its information systems. Figure 1-4 Functions of an Information System

19. 1.19 © 2010 by Prentice Hall Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today Using information systems effectively requires an understanding of the organization, management, and information technology shaping the systems. An information system creates value for the firm as an organizational and management solution to challenges posed by the environment. Figure 1-5 Information Systems Are More Than Computers

20. 1.20 © 2010 by Prentice Hall Organizational dimension of information systems –Hierarchy of authority, responsibility Senior management Middle management Operational management Knowledge workers Data workers Production or service workers Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

21. 1.21 © 2010 by Prentice Hall Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management. Information systems serve each of these levels. Scientists and knowledge workers often work with middle management. Figure 1-6 Levels in a Firm

22. 1.22 © 2010 by Prentice Hall Organizational dimension of information systems (cont.) –Separation of business functions Sales and marketing Human resources Finance and accounting Manufacturing and production –Unique business processes –Unique business culture –Organizational politics Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

23. 1.23 © 2010 by Prentice Hall Management dimension of information systems –Managers set organizational strategy for responding to business challenges –In addition, managers must act creatively: Creation of new products and services Occasionally re-creating the organization Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

24. 1.24 © 2010 by Prentice Hall Technology dimension of information systems –Computer hardware and software –Data management technology –Networking and telecommunications technology Networks, the Internet, intranets and extranets, World Wide Web – IT infrastructure: provides platform that system is built on Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

25. 1.25 © 2010 by Prentice Hall Dimensions of UPS tracking system –Organizational: Procedures for tracking packages and managing inventory and provide information –Management: Monitor service levels and costs –Technology: Handheld computers, bar-code scanners, networks, desktop computers, etc. Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

26. 1.26 © 2010 by Prentice Hall Business perspective on information systems: –Information system is instrument for creating value –Investments in information technology will result in superior returns: Productivity increases Revenue increases Superior long-term strategic positioning Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

27. 1.27 © 2010 by Prentice Hall Business information value chain –Raw data acquired and transformed through stages that add value to that information –Value of information system determined in part by extent to which it leads to better decisions, greater efficiency, and higher profits Business perspective: Calls attention to organizational and managerial nature of information systems Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

28. 1.28 © 2010 by Prentice Hall Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today From a business perspective, information systems are part of a series of value-adding activities for acquiring, transforming, and distributing information that managers can use to improve decision making, enhance organizational performance, and, ultimately, increase firm profitability. Figure 1-7 The Business Information Value Chain

29. 1.29 © 2010 by Prentice Hall Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today Although, on average, investments in information technology produce returns far above those returned by other investments, there is considerable variation across firms. Figure 1-8 Variation in Returns on Information Technology Investment

30. 1.30 © 2010 by Prentice Hall Investing in information technology does not guarantee good returns Considerable variation in the returns firms receive from systems investments Factors: –Adopting the right business model –Investing in complementary assets (organizational and management capital) Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

31. 1.31 © 2010 by Prentice Hall Complementary assets: –Assets required to derive value from a primary investment –Firms supporting technology investments with investment in complementary assets receive superior returns –E.g.: invest in technology and the people to make it work properly Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

32. 1.32 © 2010 by Prentice Hall Complementary assets include: –Organizational investments, e.g. Appropriate business model Efficient business processes –Managerial investments, e.g. Incentives for management innovation Teamwork and collaborative work environments –Social investments, e.g. The Internet and telecommunications infrastructure Technology standards Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

33. 1.33 © 2010 by Prentice Hall Perspectives on Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today The study of information systems deals with issues and insights contributed from technical and behavioral disciplines. Figure 1-9 Contemporary Approaches to Information Systems

34. 1.34 © 2010 by Prentice Hall Technical approach Emphasizes mathematically based models Computer science, management science, operations research Behavioral approach Behavioral issues (strategic business integration, implementation, etc.) Psychology, economics, sociology Contemporary Approaches to Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

35. 1.35 © 2010 by Prentice Hall Management Information Systems Combines computer science, management science, operations research and practical orientation with behavioral issues Four main actors Suppliers of hardware and software Business firms Managers and employees Firm’s environment (legal, social, cultural context) Contemporary Approaches to Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

36. 1.36 © 2010 by Prentice Hall Approach of this book: Sociotechnical view Optimal organizational performance achieved by jointly optimizing both social and technical systems used in production Helps avoid purely technological approach Contemporary Approaches to Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today

37. 1.37 © 2010 by Prentice Hall Contemporary Approaches to Information Systems Management Information Systems Chapter 1 Information Systems in Global Business Today In a sociotechnical perspective, the performance of a system is optimized when both the technology and the organization mutually adjust to one another until a satisfactory fit is obtained. Figure 1-10 A Sociotechnical Perspective on Information Systems

38. 1.38 © 2010 by Prentice Hall Global E-Business: How Businesses Use Information Systems

39. 1.39 © 2010 by Prentice Hall Business Processes and Information Systems Business processes: Workflows of material, information, knowledge Sets of activities, steps May be tied to functional area or be cross- functional Businesses: Can be seen as collection of business processes Business processes may be assets or liabilities Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

40. 1.40 © 2010 by Prentice Hall Examples of functional business processes –Manufacturing and production Assembling the product –Sales and marketing Identifying customers –Finance and accounting Creating financial statements –Human resources Hiring employees Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems Business Processes and Information Systems

41. 1.41 © 2010 by Prentice Hall The Order Fulfillment Process Figure 2-1 Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and manufacturing functions. Business Processes and Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

42. 1.42 © 2010 by Prentice Hall Business Processes and Information Systems Information technology enhances business processes in two main ways: Increasing efficiency of existing processes Automating steps that were manual Enabling entirely new processes that are capable of transforming the businesses Change flow of information Replace sequential steps with parallel steps Eliminate delays in decision making Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

43. 1.43 © 2010 by Prentice Hall Transaction processing systems –Perform and record daily routine transactions necessary to conduct business Examples: sales order entry, payroll, shipping –Allow managers to monitor status of operations and relations with external environment –Serve operational levels –Serve predefined, structured goals and decision making Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

44. 1.44 © 2010 by Prentice Hall A Payroll TPS Figure 2-2 A TPS for payroll processing captures employee payment transaction data (such as a time card). System outputs include online and hard-copy reports for management and employee paychecks. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

45. 1.45 © 2010 by Prentice Hall Management information systems –Serve middle management –Provide reports on firm ’ s current performance, based on data from TPS –Provide answers to routine questions with predefined procedure for answering them –Typically have little analytic capability Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

46. 1.46 © 2010 by Prentice Hall Decision support systems –Serve middle management –Support nonroutine decision making Example: What is impact on production schedule if December sales doubled? –Often use external information as well from TPS and MIS –Model driven DSS Voyage-estimating systems –Data driven DSS Intrawest ’ s marketing analysis systems Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

47. 1.47 © 2010 by Prentice Hall How Management Information Systems Obtain Their Data from the Organization’s TPS Figure 2-3 In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS reporting system at the end of the time period. Managers gain access to the organizational data through the MIS, which provides them with the appropriate reports. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

48. 1.48 © 2010 by Prentice Hall Sample MIS Report Figure 2-4 This report, showing summarized annual sales data, was produced by the MIS in Figure 2-3. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

49. 1.49 © 2010 by Prentice Hall Voyage-Estimating Decision Support System Figure 2-5 This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping contracts. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

50. 1.50 © 2010 by Prentice Hall Executive support systems –Support senior management –Address nonroutine decisions requiring judgment, evaluation, and insight –Incorporate data about external events (e.g. new tax laws or competitors) as well as summarized information from internal MIS and DSS –Example: ESS that provides minute-to-minute view of firm ’ s financial performance as measured by working capital, accounts receivable, accounts payable, cash flow, and inventory Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

51. 1.51 © 2010 by Prentice Hall Model of an Executive Support System Figure 2-6 This system pools data from diverse internal and external sources and makes them available to executives in easy-to-use form. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

52. 1.52 © 2010 by Prentice Hall Systems from a constituency perspective –Transaction processing systems: supporting operational level employees –Management information systems and decision-support systems: supporting managers –Executive support systems: supporting executives Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

53. 1.53 © 2010 by Prentice Hall Relationship of systems to one another –TPS: Major source of data for other systems –ESS: Recipient of data from lower-level systems –Data may be exchanged between systems –In reality, most businesses ’ systems only loosely integrated Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

54. 1.54 © 2010 by Prentice Hall Enterprise applications Span functional areas Execute business processes across firm Include all levels of management Four major applications: Enterprise systems Supply chain management systems Customer relationship management systems Knowledge management systems Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

55. 1.55 © 2010 by Prentice Hall Enterprise Application Architecture Figure 2-7 Enterprise applications automate processes that span multiple business functions and organizational levels and may extend outside the organization. Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

56. 1.56 © 2010 by Prentice Hall Enterprise systems Collects data from different firm functions and stores data in single central data repository Resolves problem of fragmented, redundant data sets and systems Enable: Coordination of daily activities Efficient response to customer orders (production, inventory) Provide valuable information for improving management decision making Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

57. 1.57 © 2010 by Prentice Hall Enterprise Systems Figure 2-8 Enterprise systems integrate the key business processes of an entire firm into a single software system that enables information to flow seamlessly throughout the organization. These systems focus primarily on internal processes but may include transactions with customers and vendors. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

58. 1.58 © 2010 by Prentice Hall Supply chain management systems Manage firm’s relationships with suppliers Share information about Orders, production, inventory levels, delivery of products and services Goal: Right amount of products to destination with least amount of time and lowest cost Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

59. 1.59 © 2010 by Prentice Hall Example of a Supply Chain Management System Figure 2-9 Customer orders, shipping notifications, optimized shipping plans, and other supply chain information flow among Haworth’s Warehouse Management System (WMS), Transportation Management System (TMS), and its back-end corporate systems. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

60. 1.60 © 2010 by Prentice Hall Customer relationship management systems: Provide information to coordinate all of the business processes that deal with customers in sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention Integrate firm’s customer-related processes and consolidate customer information from multiple communication channels Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

61. 1.61 © 2010 by Prentice Hall Salesforce.com Executive Team Dashboard Illustrated here are some of the capabilities of Salesforce.com, a market-leading provider of on-demand customer relationship management (CRM) software. CRM systems integrate information from sales, marketing, and customer service. Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

62. 1.62 © 2010 by Prentice Hall Knowledge management systems Support processes for acquiring, creating, storing, distributing, applying, integrating knowledge Collect internal knowledge and link to external knowledge Include enterprise-wide systems for: Managing documents, graphics and other digital knowledge objects Directories of employees with expertise Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

63. 1.63 © 2010 by Prentice Hall Intranets: Internal networks built with same tools and standards as Internet Used for internal distribution of information to employees Typically utilize private portal providing single point of access to several systems May connect to company’s transaction systems Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

64. 1.64 © 2010 by Prentice Hall Extranets: Intranets extended to authorized users outside the company Expedite flow of information between firm and its suppliers and customers Can be used to allow different firms to collaborate on product design, marketing, and production Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

65. 1.65 © 2010 by Prentice Hall Collaboration and communication systems ‘Interaction’ jobs a major part of global economy Methods include: Internet-based collaboration environments E-mail and instant messaging (IM) Cell phones and smartphones Social networking Wikis Virtual worlds Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

66. 1.66 © 2010 by Prentice Hall E-business (Electronic business): Use of digital technology and Internet to execute major business processes in the enterprise Includes e-commerce (electronic commerce): InternetBuying and selling of goods over Internet E-government: The application of Internet and networking technologies to digitally enable government and public sector agencies’ relationships with citizens, businesses, and other arms of government Systems That Span the Enterprise Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

67. 1.67 © 2010 by Prentice Hall Information systems department: Formal organizational unit responsible for information technology services Includes programmers, systems analysts, project leaders, information systems managers Often headed by chief information officer (CIO), also includes chief security officer (CSO) and chief knowledge officer (CKO) End-users : Representatives of other departments, for whom applications are developed The Information Systems Function in Business Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

68. 1.68 © 2010 by Prentice Hall Small firm may not have formal information systems group Larger companies typically have separate department which may be organized along one of several different lines: Decentralized (within each functional area) Separate department under central control Each division has separate group but all under central control The Information Systems Function in Business Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

69. 1.69 © 2010 by Prentice Hall Organization of the Information Systems Function Figure 2-10 There are alternative ways of organizing the information systems function within the business: within each functional area (A), as a separate department under central control (B), or represented in each division of a large multidivisional company but under centralized control (C). Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

70. 1.70 © 2010 by Prentice Hall Organization of the Information Systems Function Figure 2-10 (cont) B: A separate department under central control Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems

71. 1.71 © 2010 by Prentice Hall Organization of the Information Systems Function Figure 2-10 (cont) C: Represented in each division of a large multidivisional company but under centralized control Types of Business Information Systems Management Information Systems Chapter 2 Global E-Business: How Businesses Use Information Systems