Introduction to Information Systems, 2nd Canadian Edition Rainer, Cegielski, Splettstoesser-Hogeterp by Ace Test Banks

Introduction to Information Systems, 2nd Canadian Edition By Rainer, Cegielski, Splettstoesser-Hogeterp, Sanchez-Rodriguez

Email: Richard@qwconsultancy.com

Rainer, Cegielski, Splettstoesser-Hogeterp, Sanchez-Rodriguez

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Introduction to Information Systems, 2Ce

The Modern Organization in the Global, Web-Based Environment

Learning Objectives 1.1

Link effective information technology planning to business planning.

1.2

Describe business processes and explain how business process management helps to improve how businesses function.

1.3

Explain the role of data, information, and knowledge. Differentiate between information technology architecture and information technology infrastructure.

1.4

Describe the global business environment and how globalization has affected organizations.

1.5

Discuss the relationships among business pressures, organizational responses, and information systems.

1.6

Provide examples of the relevance of information systems to individuals and organizations.

1.7

Describe the plan of this book.

Teaching Tips and Strategies Getting Students Interested It is necessary for students to learn the basic terms that define the foundation of Management Information Systems, but students will often find this task boring or uneventful. Students often fail to see the importance of Management Information Systems (MIS) and how it relates to them. In order to involve students in the class, it is vital to let them know what is in it for them. This should be done early to engage the students from the beginning. You may want to find out each student’s major course of study and show them how MIS knowledge can enhance their major and their chosen careers. Knowing each student’s major and career goals will help you tailor examples, classroom assignments and discussion to the interests of the students. Point out the end of the chapter What’s In IT For Me section so that students know there are links to each major for each chapter. Explaining how MIS has affected businesses as well as workers alike helps to get students interested in this class. It helps students to understand the importance when they are told stories of how computers have evolved and how MIS and DSS applications have made management decision-making easier and more reliable.

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IT Salaries The importance of computer technology is underscored by examples of how companies save money by using e-mail as another option to the postal service. Students should be introduced to the concept that IT is important to business leaders all over the world. The website www.canadavisa.com/canadian-salary-survey.html, provides a summary of the range of salaries that are currently being earned by professionals in various occupations. Salary information gets students’ attention, especially if they realize that by being more technology savvy, they will tend to make more money. This really seems to get their interest.

Review Questions Section 1.2 - Before you go on… 1. Why is IT planning important to organizations? Organizations operate under a strategic business plan, which is usually supported by an IT plan. Therefore IT planning is used to analyze the need for new information systems and justify these in terms of cost and benefits. The costbenefit justification must look at the wisdom of investing in a specific IT system versus spending the funds on alternative projects. . 2. What is the purpose of an IT steering committee? The purpose of the IT steering committee is to establish IT priorities and to ensure that the MIS function is meeting the enterprise’s needs. The committee’s major tasks are to link corporate strategy and IT strategy, to approve the allocation of resources for the MIS function, and to establish performance measures for the MIS function and ensure that they are met. 3. How is the IT operational plan related to the IT strategic plan? An IT operational plan must facilitate and support the IT strategic plan. The operational plan consists of a clear set of projects that the IS department and the functional area managers will execute in support of the IT strategic plan Section 1.3 – Before you go on… 1.

What is a business process?

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A business process is a collection of related activities that produce a product or a service of value to the organization, its business partners, and/or its customers. A process has inputs and outputs, and its activities can be measured.

What is business process management, and why is it so important to organizations? Business process management is a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes. It is a less radical, less disruptive, and more incremental approach to business process reengineering, which is an attempt to radically redesign business processes to lower costs and increase quality in order to become more competitive. An organization’s performance depends on how well it manages its business processes. BPM helps companies improve profitability by decreasing costs and increasing revenues. Over time, BPM can create a competitive advantage by improving organizational flexibility. For many companies, BPM can provide cost benefits and increase customer satisfaction.

Section 1.4 – Before you go on… 1. Provide an example of data items, information, and knowledge. Data item - the marks a student earned in an exam Information – the student’s GPA Knowledge – impact of GPA on student performance in a program 2. Distinguish between an IT infrastructure and an IT platform. An organization’s information technology (IT) infrastructure consists of the physical facilities, IT components, IT services, and IT personnel that support the entire organization An IT platform consists only of the technical IT components. Therefore, a platform is part of the IT infrastructure.

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“IT’s About Business” Questions 1.1 – Drug-Dispensing Kiosks Improve Customer Service 1. What might be some of the long-range goals of a new company such as PCA Services Inc.? Long-range goals may include increasing the number of automated drug kiosks, increasing the number of different types of drugs offered and/or introducing kiosks to other types of locations, e.g. hospitals. 2. Explain how the information systems in use at the drug-dispensing kiosks help to support the business requirements of PCA Services Inc. The IS enables and/or provides support for: • proper identification of the customer • detecting customers who may be “doctor shopping” • communications between the customer and pharmacist • the prescription being scanned and verified • drug interactions can be discussed • RFID tagging ensures accuracy of the drug • encryption of data for secure transmission and storage of information.

1.2 - Zero-Footprint Information Technology at State Street 1. Discuss the relationship between State Street’s zero-footprint IT model and the global, web-based platform. With its “zero-footprint “IT model, State Street is able to access various network services and process its business transactions from a local site, that is connected to global and regional data centres that support on-site servers, business applications, and data. This global, web-based platform is worldwide and supported by the Internet and the functionality of the World Wide Web. The platform enables individuals to connect, compute, communicate, collaborate, and compete anywhere and anytime. 2. What are potential disadvantages of State Street’s zero-footprint IT model? Potential disadvantages might include: • the vulnerability of employing a centralized system, which can seriously impact a larger area of operations in case of failure or problems • having a “one size fits all” approach could introduce negative cultural and/or political differences • time variances could also be an issue. Instructor’s Manual . ..

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1.3 - The Internet Facilitates Linkages between Borrowers and Lenders 1.

Discuss how the Internet facilitates the linkage between borrowers and donors at Kiva and the autism societies. The Internet provides a fast, easy and secure connection between donors and borrows. It facilitates the flow of information between them, as well as connects them to other related agencies. Web tools can be used to market the program, products and handle financial transactions worldwide.

Discuss how Kiva and the autism societies would maintain quality control over their donations. Quality control may be maintained by: • utilizing free payment processing from PayPal, which provides secure, encrypted transactions and reduces administrative costs • providing lenders with the risk rating of borrowers and ongoing information about their loans • connecting donors to individual provincial links or to local chapters, so they can decide where to invest their money or time • capping individual donations, which encourages younger, older, and less-well-off people to sign up, discourages speculators

1.4 – Verizon Communications and Delcan Corporation 1. Consider Verizon and Delcan’s customers, such as cities that would like to manage their traffic. Which comes first: the business strategy, or information technology? Support your answer in both cases. The business strategy. An organization must first set its strategic goals, before it can determine what information technology would be required to support them. In the case of Verizon, three business units share centralized functions, (purchasing, accounting, and IT). Each unit’s IT group, led by IT management reporting to the corporate IT executives, support its unit’s strategic business initiatives. The centralized IT functions include managing Verizon’s corporate networks, the help desk, and the data centre. However, the unit IT groups keep up with new technologies and advise corporate executives on how these technologies might be integrated with the company’s existing IT systems. Delcan, which creates information systems and network solutions for a variety of clients around the globe, establishes a local project office whenever the company contracts for a major development in transportation, water, or information technology. It also integrates multiple types of Instructor’s Manual .

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technology to provide customized solutions for city officials in accordance with their strategic plans. They can decide how much to invest in traffic management and provide information to service providers and the community. 2. Define business–information technology alignment and discuss how Verizon and Delcan would align their business strategy and information technology function. Aligning information technology with business requires metrics compatible with financial performance. IT project managers may evaluate projects in terms of customer satisfaction, quality and efficiency, but business executives look at the bottom line. Therefore, alignment is the capacity to demonstrate a positive relationship between information technologies and the accepted financial measures of performance. With both Verizon and Delcan, their information technology functions are designed to support their strategic plans and contribute to improved financial performance. This is accomplished by first organizing IT to support their business organizational structures and processes; and then ensuring that IT provides the support required to handle business operations in terms of new technologies, information flows and transaction processing

Discussion Questions 1.

List and explain the typical components of an IS operational plan. An IS operational plan specifies a clear set of projects that the IS department and the functional area managers will execute in support of the IT strategic plan. A typical IS operational plan contains the following elements: • Mission - The mission of the IS function, as specified in the IT strategy. • IS environment - A summary of the information needs of the functional areas and of the organization as a whole. • Objectives of the IS function - The best current estimate of the goals of the IS function. • Constraints on the IS function - Technological, financial, personnel, and other resource limitations on the IS function. • The application portfolio - A prioritized inventory of present applications and a detailed plan of projects to be developed or continued during the current year. • Resource allocation and project management - A listing of who is going to do what, how, and when.

2. Why does an organization need both an organizational strategic plan and an IT strategic plan? Instructor’s Manual .

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The organization’s strategic plan states the firm’s overall mission, the goals that follow from that mission, and the broad steps necessary to achieve these goals. The organizational strategic plan and the existing IT architecture provide the inputs in developing the IT strategic plan. The IT architecture specifies the way an organization’s information resources should be used to accomplish its mission. The IT strategic plan is a set of long-range goals that describe the IT infrastructure and identify the major IT initiatives needed to achieve the organization’s goals. 3. Describe various business processes in your university. Students should be able to identify and describe the typical functional business processes e.g. marketing, accounting, etc., as well as the major academic processes, e.g. registration, examinations, grade management, etc.. 4. Describe the enabling role of IT in business process management. Business Process Management (BPM), is a management technique that includes the methods and tools to support the design, analysis, implementation, management, and optimization of business processes. BPM helps companies improve profitability by decreasing costs and increasing revenues and over time, can create a competitive advantage by improving organizational flexibility. Therefore to achieve these objectives, IT plays a very important role in supporting planning, management and operations. For example, by collecting, storing and analyzing data, providing timely, accurate information and automating processes. 5. Describe how IT architecture and IT infrastructure are interrelated. IT Architecture is a high-level map or plan of information assets in an organization. IT infrastructure is the physical facilities and components which are reflected in the plan and are supported by personnel who help to provide the services indicated by the plan. 6. Is the Internet an infrastructure, an architecture, or an application program? Explain your answer. Use your understanding of the components of the Internet to explain its nature. In information technology, infrastructure may be defined as the physical hardware used to interconnect computers and users. Infrastructure includes the transmission media, both physical and microwave, and other devices that control transmission paths. Infrastructure may also include the software used to send, receive, and manage the communication signals.

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Architecture refers to both the process and the outcome of analyzing and specifying the overall structure, logical components and interrelationships of a computer system or network. An architecture can be a reference model, e.g. Open Systems Interconnection (OSI), intended as a model for specific system, or it can be a specific product architecture, e.g. Intel Pentium microprocessor. An application program is a set of instructions specifying the algorithm or logic to solve a particular problem by a computer. It typically refers to business or enduser problems, (as opposed to system problems.) Students should clearly recognize how infrastructure and architecture apply to the Internet and explain how its components define its nature. 7. How has the global, web-based platform affected relationships among organizations? The global, web-based platform, defined by the Internet and Web spans the world, enabling organizations to connect, communicate, collaborate, and transact business anywhere and anytime. It provides access to vast amounts of information, services, and entertainment. It permits organizations to exchange knowledge and to produce and sell goods and services. This platform has been the basis of globalization.

8. Explain why IT is both a business pressure and a business helper that can be used to counter business pressures. Rapid changes in information technology and capabilities force business to adapt or go out of business. On the other hand, IT assists companies in their efforts to stay up on the latest strategies to provide the best customer service, to provide better quality products, and new and different delivery methods.

9. What does a flat world mean to you in your choice of a major? In your choice of a career? Will you have to be a “lifelong learner”? Why or why not? It means that you need to think about who across the world you might be competing against. You not only will have to think about those in your immediate vicinity, but due to the far reaching impact of the new global, web-based platform which will continue to grow, you will be competing with anyone who has access to a cell phone or a computer. You clearly will be a lifelong learner since there will be new devices, new applications and new ways in which they are used. Anyone who stops learning will be left behind very quickly.

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10. What will the impact of a flat world be on your standard of living? Resources that were previously very expensive or unattainable will become increasingly more available. Your ability to find inexpensive travel options are a good example.

Problem-Solving Activities 1. Surf the Internet for information about the federal department called Public Safety Canada. Examine the available information, and comment on the potential role of information technologies in managing national information banks. Students should explore the responsibilities, departments and services offered by Public Safety Canada, and prepare to comment on the role of IT in managing national information banks. Students will gather information such as the responsibilities of Public Safety Canada (e.g. Emergency Management, National Security, Crime Prevention, etc.), the organization of the department and the services it provides. They can also explore the How do I… feature to obtain useful information on preparing an emergency kit, business continuity planning, etc. 2. Access www.digitalenterprise.org. Prepare a report regarding the latest electronic commerce developments in the digital age. This site, Managing the Digital Enterprise, is an open educational resource that surveys the opportunities and challenges managers face in an increasingly digital world. Students should report on the latest developments in this area. 3. Enter the website of UPS (www.ups.com). a. Find out what information is available to customers before they send a package. b. Find out about the “package tracking” system and identify the data that it requires. c. Calculate the cost of delivering a 10-inch × 20-inch × 15-inch box weighing 40 pounds (note that the UPS Canada site uses inches) from your hometown to Vancouver, British Columbia (or to Halifax, Nova Scotia, if you live in or near Vancouver). Compare the fastest delivery against the least cost. On visiting this site, students will obtain information on sending packages and tracking them. They should also check the costs for the test deliveries specified and perform the required comparisons. Information available regarding time and cost, pickup schedule, labels, closest locations and how to prepare packages should be listed. Students will follow the above directions and produce a printout directly from the UPS site which lists the delivery times and costs. They will compare and determine the best option. Instructor’s Manual . ..

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4. Discuss the impacts of the global, web-based platform on the residential real estate industry. Select examples of local real estate brokers and explain how the broker is using technology to market real estate worldwide. Be specific regarding the websites that you use for examples. Students should research how the real estate industry has been affected by web technologies in terms of communicating information, the type and quality of information, accessibility, availability, convenience, costs and other relevant factors. They will also provide the local broker examples as required. 5. Experience customization by designing your own shoes at www.nike.com, a car at www.jaguar.com, and a CD at www.easternrecording.com; find out how to obtain your business card for free at www.vistaprint.ca and create your own diamond ring at www.bluenile.com. Summarize your experiences. Students will perform the specified web operations and summarize their customization experience for each site. Students should explore the websites, and compare the ease of use, flexibility, and creativity of each. 6. Visit some websites that offer employment opportunities in IT. Prominent examples are: www.canada.plusjobs.com, www.dice.com, www.monster.com, www.quintcareers.com, www.roberthalftechnology.com, and www.workopolis.com. Compare the IT salaries with salaries offered to accountants, marketing personnel, financial personnel, operations personnel, and human resources personnel. For other information on IT salaries, check IT World’s salary calculator at www.itworldcanada.com/salarycalculator, or a similar calculator at http://workingcanada.salary.com. These sites also provide job descriptions for positions listed. Students will provide comparisons using the sites listed.

Team Assignments 1. Create an online group for studying IT or a part of it you are interested in. Each member of the group must have a Yahoo! e-mail account (free). Go to Yahoo! Groups (groups.yahoo.com) and at the bottom see a section titled “Create Your Own Group.” Step 1: Click on “Start a Group Now.” Step 2: Select a category that best describes your group (use the Search Group Categories, or use Browse Group Categories tool). You must find a category. Step 3: Describe the purposes of the group and give it a name. Instructor’s Manual .

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Step 4: Set up an e-mail address for sending messages to all group members. Step 5: Each member must join the group (select a “profile”); click on “Join this Group.” Step 6: Go to Word Verification Section; follow the instructions. Step 7: Finish by clicking “Continue.” Step 8: Select a group moderator. Conduct a discussion online of at least two topics of interest to the group. Step 9: Arrange for messages from the members to reach the moderator at least once a week. Step 10: Find a similar group (use Yahoo!’s “find a group” and make a connection). Write a report for your instructor. 2. Review The Globe and Mail, National Post, Business Week, and local newspapers for the last three months to find stories about the use of web-based technologies in organizations. Each group will prepare a report describing five applications. The reports should emphasize the role of the web and its benefit to the organizations. Cover issues described in this chapter, such as productivity, competitive strategies, and globalization. Present and discuss your work.

Closing Case Pippalily.com The Business Problem Patricia Blythe started a small business in the production of comfortable, customized baby slings. Patricia wants to grow the business without major investments in equipment, people, or technology. She used word-of-mouth to gradually increase sales to friends and local businesses. However, she lacked the expertise in some areas, such as marketing and fashion design, and many tasks took a long time. The IT Solution The company used a website, where customers can customize and order slings in different sizes, colours and fabrics. Payments and order information are also received electronically. Patricia outsourced her specialized needs to individuals who charge by the hour. By working from virtual offices, they use the phone and groupware software to reduce the need to visit Patricia.

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The Results Since products are manufactured only for confirmed orders, inventory is kept low, as are costs. The use of on-line payment methods helps ensure that products are paid for before they are manufactured, reducing the need to borrow money to finance the production of goods. Using outsourcing for specialized help reduces costs, paying only for work that needs to be done. Pippalily.com has been so successful with marketing the idea that other organizations are now available selling these types of slings, such as www.lussobaby.ca.

Questions 1. What business pressures affect Pippalily.com? How could Patricia deal with these pressures? Some of the pressures are: • the owner Patricia is trying to grow the business • she has to keep costs down - growth has to be handled in such a way that investments in equipment, people, or technology are minimized • she lacks the expertise in some areas, such as marketing and fashion design • many tasks take her a long time • difficulty in maintaining their competitive advantage. Patricia could deal with these pressures, by: • using the website where customers can customize and order slings • customers can see what the product looks like in the different colours using graphic images • payment and order information is received electronically • outsourcing specialized needs to individuals who charge by the hour • using the phone and groupware software to handle documents together without physical travel time • using word-of-mouth to increase sales to friends and local businesses.

2. What are some additional methods that Pippalily.com could use to market its products using current technology? • • • •

Pippalily.com can use social networking (e.g. Facebook, Blogs) to develop their customer base and interaction they can establish links to other businesses and organizations that deal with baby issues (e.g. baby foods, nurseries) utilize specialized software to assist in fashion design maintain a customer contact database as a basis for marketing promotions.

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CLUB IT Planning a New Website for Ruby’s Club Go to the Ruby’s Club link at the Student Companion website or WileyPLUS where you will find a description of your internship at Ruby’s Club, a downtown music venue, and information for your assignment. Your assignment will include providing input on Ruby’s new website design in a memo to the club’s managers.

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The data contained in these files are protected by copyright. This manual is furnished under licence and may be used only in accordance with the terms of such licence. The material provided herein may not be downloaded, reproduced, stored in a retrieval system, modified, made available on a network, used to create derivative works, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise without the prior written permission of ..

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CHAPTER 2:

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Information Systems: Concepts and Management

Learning Objectives 2.1

Define IT governance and explain why information systems need to be effectively managed

2.2

Describe the components, types, and purposes of information systems

2.3

Describe Porter’s competitive forces model and his value chain model, explaining five strategies companies can use to improve their competitive positions

2.4

Explain the importance of information systems to organizations and society and describe how information resources are managed

Teaching Tips and Strategies In this chapter, the student is introduced to the basic concepts of information systems in the organization and we explore how businesses use information systems in every facet of their operations. The role of information systems in helping companies obtain and maintain a competitive edge is explained. Examples of failed IS efforts are given. It is very important for students to make the connection between information systems and a company’s success. Mentioning that companies have failed when they do not keep state-of-the-art information systems is a point that helps to get the students’ attention. The Universality of IT One way to exemplify this is to illustrate how universal Information Technology is in companies today. Students will work with companies that utilize a variety of technologies at various levels of the organization. Instructors might want to open the lecture with a class discussion about the universal use of information technologies in many aspects of Canadian life. Some examples are • • •

ATM machines and banks in general; Grocery store checkout line cash registers with bar code scanners and the ability to use bank cards and credit cards for purchases; Educational institutions rely on IT. The registrar’s office, financial aid office and the library are just a few examples.

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IT at School You might want to explain to students that the university/college at which you teach uses information technology in different ways. Use examples of how the office that handles registration/grades is on a different network or server, because this helps limit the number of users that can modify grades or view students’ records. A discussion could be introduced regarding computer labs and how when they are used. Students can get to software applications such as Microsoft Word, and check e-mail. You could let them know that faculty are provided access to different programs and different parts of the campus network that they cannot access and the reasons for that. Explain that it would cost much more to have the IT department install Microsoft Office, and other programs on every machine, not to mention the complications that would happen when students or faculty would change or install other programs on the computer. By utilizing a network, the school saves money and has the ability to control what information or programs students and faculty members can access. One method companies have used to manage information through the use of IT is to limit access. For example, in most organizations, each user has a pass code and linked to that pass code is a level of security clearance which limits what information the employee can access. That access is based on a user’s need which ensures that they can accomplish the work that they need to complete, yet cannot access other parts of the system. IT at Work Many tasks performed by an employee are the same every week (such as payroll) and that process can be automated including time sheets etc. Mentioning payroll often gets students interested in information systems since it has a universal interest for all employees, whether they are an MIS major or not. In today’s interconnected world, we have access to so much data that it is often overwhelming for managers to know where the best data resides, and how to access it. With the advent of sophisticated computer systems, managers can now view a worker’s Internet use by the click of a button. Managers can see what products are selling and what products are not. This information can be used to better help management run the day-today operations of a business. For example: A hotel manager finds that s/he is almost sold out of rooms for the month of May. It might behoove him/her to raise the prices of the vacant rooms left to increase revenue for the hotel. The reverse strategy can also be implemented when the manager notices vacancies are running at a higher rate then normal. What IT Means for Students This chapter is a very important one that sets the foundation for the importance of information systems. Students should begin to realize that this is important for them to understand and use in their careers. Once students start to understand that information Instructor’s Manual .

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technologies not only change the way business is done in organizations, but also help organizations to share information and make better-educated decisions that help their companies thrive in a competitive environment, they can apply this knowledge to their specific major. Getting the Most Out of IT The phrase “information technology systems in an organization” is composed of three distinct parts: (1) an organization and its structure, (2) the data and information in an organization, and (3) information technology hardware, software and connectivity in an organization. What is less clear about information technology is how business executives can ensure that their organizations benefit from new opportunities afforded by information technology and avoid its well-known, often-repeated pitfalls. Some of the pitfalls or problems companies have had as a result of utilizing IT are • • • • •

botched development projects escalating costs with no apparent benefits organization disruption support problems technical glitches

Managing information technology is not an easy task. The information systems function has implementation problems in many organizations. In many documented cases, the promised benefits of information technology have not occurred. It is important for students to understand that there is a great need for businesses to understand what is involved with IT because of the interdependence that exists between business and technology. IT is now being used in all aspects of business. There are very few transactions in business that are not in one way or another directly affected by IT. The Continuing Evolution of IT It is also important to emphasize that technology has slowly evolved into scalable systems. This means that industries now expect information technology solutions to be seamlessly interconnected and upgradeable. Businesses that can upgrade their systems can save millions of dollars not just on equipment costs, but save money by not having to retrain customers or employees on new system interfaces when they are implemented. Does the reader remember when new computer programs would come out and most computer users would have to buy a new computer to take advantage of the features of the new programs? Today, most computer owners no longer have to buy new computers to run the latest programs. They may not have to do anything, or only have to upgrade their memory, video card, modem or processor to take advantage of these new programs/new technologies. By upgrading instead of buying new computer systems, this helps to keep costs lower. It also helps businesses/consumers to adapt more quickly to new technology. Instructor’s Manual .

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This chapter is one of the most important in the book for students. This chapter helps students to realize that looking at adapting or changing technology in a company is not as easy as just installing a new software program. They must analyze future needs and make sure that the programs/technologies they are implementing will not only work today, but be able to work in the future with new technologies.

Review Questions Section 2.1 – Before you go on… 1. Why is IT governance important? IT governance is important because it enables management to meet the organization’s goals, increase revenues and reduce costs, and improve the security of systems and information. IT governance is about managing IT throughout the organization. This includes the planning, acquisition, implementation, and ongoing support, as well as monitoring and evaluation of systems, so that proper and effective decisions can be made. Without effective IT governance, the organization faces significant business, operational and security risks.

Using the three parts of the IT governance definition, explain why a restaurant would need effective IT governance. In defining relationships and processes, the restaurant can effectively and efficiently process and store its ordering and sales transactions. Thus supplier and customer data is properly managed. This adds value by using these transactions to manage supplier and customer relationships. This would enable the restaurant to better select suppliers and reduce costs, as well as satisfy customer needs and enable marketing. Balancing profits and risks means installing adequate system security to prevent hacking and other attacks. In this way customer information is kept secure, avoiding financial liability and loss of customer satisfaction.

Section 2.2 - Before you go on… 1. What is the difference between applications and computer-based information systems? An application is one or more computer programs (software) designed to support a specific task or business process, such as payroll. A computer-based Instructor’s Manual . John Wiley &

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information system is a broader term, which includes the hardware and software that collect, process, store, analyze, and disseminate information for a specific purpose or task. Generally, a CBIS contains many different applications and includes the hardware, data, procedures and networking needed to support the functions. 2. Explain how information systems provide support for knowledge workers. Knowledge workers make decisions about situations that can significantly change the manner in which business is done. Information systems provide the databases, communications, and applications which allow them to store and use critical data for analysis and tactical decision-making. 3 As we move up the organization’s hierarchy from clerical workers to executives, how does the type of support provided by information systems change? At the lower organizational levels, systems are used primarily to automate routine tasks and provide detailed data and reports. Moving up in the organization, systems are used to analyze and provide information for decision-making purposes. These are generally presented in summarized reports. Section 2.3 - Before you go on… 1. According to Porter, what are the five forces that could endanger a firm’s position in its industry or marketplaces? • • • • •

The threat of entry of new competitors The bargaining power of suppliers The bargaining power of customers The threat of substitute products or services The rivalry among existing firms in the industry

2. Describe Porter’s value chain model. Differentiate between Porter’s competitive forces model and his value chain model. Porter’s value chain model is designed to identify the specific business activities where a competitive strategy can be applied to achieve the greatest impact. The model also identifies points where an organization can use information technology to gain a competitive advantage. The activities conducted in any organization can be divided into primary activities and support activities. The primary activities are those business activities that relate to the production and distribution of the firm’s products and services, thereby creating value for

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which customers are willing to pay (e.g. purchasing materials, processing materials into products, and delivering products to customers.) The support activities do not add value directly to the firm’s products or services, but they contribute to the firm’s competitive advantage by supporting the primary activities (e.g. the firm’s infrastructure, human resources management, product and technology development and procurement). Porter’s competitive forces model is a framework for analyzing competitiveness in order to develop strategies to increase the competitive edge of the firm. It identifies five major forces that could endanger or enhance a company’s position in a given industry and also demonstrates how IT can make a company more competitive. However, the value chain model identifies the specific business activities where a competitive strategy can be applied to achieve the greatest impact. Organizations continually try to develop strategies to counter the five competitive forces identified by Porter. To achieve and sustain a competitive advantage with IT, a firm must understand every component of the value chain.

3. What strategies might companies use to gain competitive advantage? Companies may use one of the following strategies: • Cost leadership • Differentiation • Innovation • Operational effectiveness 4. Besides our inability to predict the future, what are other reasons that IT projects might fail? Answers will vary, but can include: • Lack of understanding of the business problem • Lack of user involvement • A schedule which is too aggressive • Inadequate testing • Trying to make too many changes at one time • Poor planning • Lack of commitment by management Section2.4 – Before you go on… 1. Describe three examples of how information technology can assist individuals who have visual or auditory impairments. Three examples are:

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Adding audible screen tips and voice interfaces – voice is used to provide assistance to the visually impaired two-way writing telephones – phone system which uses text instead of voice optical scanner and a Braille printer – the optical scanner converts text into ASCII code (or proprietary word processing format.), which is then translated into Braille for printing.

2. How important are end users to the management of the organization’s information resources? End users are very important to the management of the organization’s information resources because they are the key users of those resources. Generally speaking, end users are closest to the data, and are therefore often given responsibility over departmental information resources. 3. Where do you think the IT staff should be located? Should they be decentralized in the functional areas? Centralized at the corporate level? A combination of the two? Explain your answer. There is not a single recommendation that fits all organizations. In many organizations today, however, a combination approach is used. In order to improve understanding and responsiveness to the end users, some IT staff is placed within the functional areas. In order to provide centralized planning and control, some IT staff is centralized.

“IT’s About Business” Questions 2.1 – CGI Provides Technology To The Large And The Small 1.

What kind of questions would credit union management ask of a service provider such as CGI before deciding to hire it to provide information systems? Important questions for management to ask would include: • What experience the service provider has with similar (credit union) organizations? • What security measures are implemented? • How well-trained and experienced are their technical staff? • Have they had any intrusion incidents in the past? • How can they guarantee the privacy of client information? • What recovery measures and backup are available in case of system failure? • What training is provided to their clients?

Review the industry sectors that CGI services. What kind of software do those industries use?

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The major industry sectors are: financial, banking (credit unions, trust companies) and retail. Software applications would likely include: electronic banking, eCommerce, eTrading, web services, online transaction processing, customer resource management, database management and supply chain management. 2.2 – Information Technology And The National Football League 1.

Identify the various computer-based information systems used by the NFL. These include: global positioning systems (GPS), electronic commerce, wired and wireless networking, logistics, customer relationship management, and project management.

What is the NFL’s biggest competitive advantage over other major sports, both amateur and professional? Is this advantage related to information systems? Support your answer. The NFL’s competitive advantage is that it can better manage logistics and customer relations, and securely store data needed for the teams and the media. Yes – it involves the information systems identified in 1. above.

Can the NFL sustain its competitive advantage? Why or why not? Hint: What are the barriers to entry for the NFL? Student responses may vary. But the key issue is the barriers to entry, which in this case would involve the heavy financial investment required, the implementation and operation of major IT systems and the customer loyalty among others.

2.3 – Under Armour Moves Into Running Shoes 1. Is Under Armour pursuing a viable strategy in moving into the running shoe business? Analyze Under Armour’s risk with this strategy. Discuss the impact of information technology on the level of risk that Under Armour is assuming. The strategy would be potentially viable, depending on the student’s perspective. Under Armour is moving into a new market and has a formidable, much larger and well-established competitor in Nike. But it has some strengths going for it: It uses SAP enterprise resource planning software. The SAP applications will permit Under Armour to keep track of its inventory and effectively manage the supply chain. They can ship shoes directly from the factory to distributors. Instructor’s Manual .

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Data management software will also help them design shoes that meet profit goals and deadlines. The use of IT can also impact on the level of risk. For example, Under Armour’s use of an electronic treadmill, which records biometric data on what feet, legs, and other body parts look like when in motion. This information permits shoe designers to make sure their products can best support and stabilize feet. Also, three-dimensional software enables managers to make better decisions on the shoe design and aesthetics. This also reduces production time and time to market. 2. Will Under Armour’s use of information technology in developing a running shoe line of products lead to a competitive advantage? Why or why not? Support your answer. The application of IT in developing running shoes can provide a competitive advantage for Under Armour: • The SAP applications improve their ERP and supply chain to meet profit goals and deadline. • The specialized software improves design, quality and time to market of their products.

2.4– Pitney Bowes 1. Describe the role of Pitney Bowes’s IT department. Is the IT department of strategic importance to the company? Support your answer. Pitney Bowes supports one global IT department, under the responsibility of the company’s CIO. It focuses on both internal and external customers. Internally, IT is used to provide reliable and efficient services, and to better solve their business problems. Externally, IT ‘s role is to offer more value to customers in end-to-end solutions for the critical mail and document processes that drive business. The IT department concentrates on applications such as enterprise resource planning, customer relationship management, mobile capabilities, and greater use of the Web. The IT department is of strategic importance because they must integrate with major national mail systems and compete with document management companies and other service providers of document messaging/imaging technologies. Consequently, Pitney Bowes builds a business case to show that a new system will support a current or an emerging business need. So, for a new project to be approved, it must either cut costs or improve service without costing more. Instructor’s Manual .

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2. What is the relationship between Pitney Bowes’s IT department and Wipro? Is Wipro of strategic importance to Pitney Bowes? What is the role of Pitney Bowes’s IT department with regard to Wipro? Wipro Technologies is a services partner with whom Pitney Bowes outsources extensively. Wipro handles most of their software application development and maintenance. The partnership with Wipro has saved PB money, given the company access to a larger pool of labour and skills, and provided products of higher quality. Therefore, Wipro is of strategic importance. The IT department has 200 employees, plus an additional 427 people who work on Pitney Bowes projects through Wipro Technologies

Discussion Questions 1. Explain why large organizations need IT governance. IT governance enables management to meet the organization’s goals, increase revenues and reduce costs. It also serves to provide system security and effective data protection. These objectives are particularly challenging for large organizations. 2. Should all organizations have IT governance? Why or why not? Meeting management goals and effective decision-making for increase profits are important for all organizations. While it may be more difficult to achieve and maintain in larger organizations, IT governance is relevant to all organizations that use IT to support management and operations. 3.

Discuss the logic of building information systems in accordance with the organization’s structure. Information systems are designed to support the needs of individuals and groups within the organization. Therefore they should follow the structure of organizations, in terms of management and operational functions, as well as the business functions, such as marketing, finance, productions, etc.

Knowledge workers make up the largest segment of the workforce in North American business today. However, many industries need skilled workers who are not knowledge workers. What are some examples of these industries? What (people, machines, or both) might replace these skilled workers? When might our economy need more skilled workers than knowledge workers?

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Skilled workers who are not knowledge workers may be found in industries like healthcare, service, food, trades, manufacturing (assembly-line), arts, etc. Robotics and automation are replacing workers in many industries, e.g. manufacturing and design. An aging society or one that offers more recreation time may require more skilled than knowledge workers. Also, the unlikely shift to a more manual, agrarian economy may require more skilled workers. 5. Using Figure 2.2 as your guide, draw a model of a supply chain with your university as the central focus. Keep in mind that every university has suppliers and customers. Students will submit their own version of a model. They should include such basic services as hard supplies like book and office supplies, equipment, food services etc., and soft products like the registration for classes, housing, part-time jobs, etc. 6. Is IT a strategic weapon or a survival tool? Discuss. It is both. Used to establish a competitive advantage in an industry, IT helps an organization implement its strategic goals and increase its performance and productivity. As a survival tool, it is used to fend off various threats such as new entrants, suppliers and customers bargaining power, substitute products or services, and rivalries among existing firms in the industry. 7. Why might it be difficult to justify a strategic information system? SISs are often very complex and very expensive to develop. 8. Describe the five forces in Porter’s competitive forces model, and explain how the Internet has affected each one. • • •

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The threat of entry of new competitors – In the CarMax case we saw how the use of communications and the Internet allow a company to gain an advantage by providing access to its inventory. The bargaining power of suppliers – Companies can find potential suppliers and compare prices giving buyers a better chance to negotiate terms. The bargaining power of customers – Customers’ power has increased tremendously with the availability of information on the Internet. Much the same as suppliers above, they have much more information about sources of goods and services and pricing to help them when they are making purchasing decisions. (The demon customer case drives this point home.) The threat of substitute products or services – Any industry which is primarily based on digitized information is at risk, and must take the threat of Internetdelivered products and services seriously.

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The rivalry among existing firms in the industry – The Internet makes competition more intense. Keeping anything secret is impossible once it is available on the Internet. Competitors can see the systems and match their features to remain competitive.

9. Describe Porter’s value chain model. What is the relationship between the competitive forces model and the value chain model? The competitive forces model is useful for identifying general strategies; organizations use the value chain model to identify specific activities where they can use competitive strategies for greatest impact. 10. Why has the Internet been called the creator of new business models? The Internet has provided companies with the flexibility to structure its divisions/departments in almost any way they would like. It is no longer necessary to structure a company in a hierarchical fashion or to provide expertise at each major location. Experts can collaborate across the globe using groupware tools. 11. Discuss the idea that an information system by itself can rarely provide a sustainable competitive advantage. Information Technology is a tool. It is management’s responsibility to use it to the best advantage that will help to sustain a competitive advantage. 12. Discuss the reasons why some information systems fail. • • • • • • • • • •

Answers will vary, but can include: Lack of understanding of the business problem Lack of user involvement A schedule which is too aggressive Inadequate testing Trying to make too many changes at one time Inadequate planning Poor project management Failure to obtain proper approvals Lack of commitment by management Failure to set clear goals/boundaries

13. Explain how information systems affect managers and other employees. IT will reduce the number of Middle Managers. IT makes managers more productive, and it increases the number of employees who can report to a single manager. In these ways IT ultimately decreases the number of managers and experts. IT will also change the manager’s job. One of the most important tasks of Instructor’s Manual .

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managers is making decisions. IT can change the manner in which managers make many of their decisions. IT also affects employee perceptions of job security; IT creates psychological effects as many people experience a loss of identity because of computerization. IT affects employee’s health and safety however it also provides opportunities for people with disabilities and other impairments. 14. Describe the functions of a typical information systems department. • • • • • • • • • •

Answers will vary, but can include: Initiating and designing specific strategic information systems Incorporating the Internet and electronic commerce into the business Managing system integration, including the Internet, intranets, and extranets Educating the non-IS managers about IT Educating the IS staff about the business Supporting end-user computing Partnering with the executives Managing outsourcing Proactively using business and technical knowledge to seed innovation ideas about IT Creating business alliance with vendors and IS departments in other organizations

Problem-Solving Activities 1. Access TRUSTe (www.truste.org) and find the guidelines that websites displaying its logo must follow. What are the guidelines? Why is it important for websites to be able to display the TRUSTe logo on their sites? How does satisfying the TRUSTe guidelines contribute to effective IT governance? 2. Greenville Hospital is a modern facility that prides itself on having accurate patient information and well-integrated accounting systems. The hospital is always looking for new ways to use computer systems so that its medical staff can spend more time with patients. The hospital has an up-to-date hardware and software infrastructure using wire-based systems. For each of the following information system types, provide a definition and an example system, explaining how the example system could be used by Greenville Hospital. TPS – Transaction Processing System OAS – Office Automation System (also known as Office System) MIS – Management Information System DSS – Decision Support System SIS – Strategic Information System

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3. Characterize each of the following systems as one (or more) of the IT support systems: a. A student registration system in a university b. A system that advises physicians about which antibiotics to use for a particular infection c. A patient-admission system in a hospital d. A system that provides a human resources manager with reports regarding employee compensation by years of service e. A robotic system that paints cars in a factory 4. Compare and contrast the two companies, Google and Amazon, on their strategies, business models, IT infrastructures, service offerings, and products. 5. Apply Porter’s value chain model to Costco (www.costco.com). What is Costco’s competitive strategy? Who are Costco’s major competitors? Describe Costco’s business model. Describe the tasks that Costco must accomplish for each primary value chain activity. How would Costco’s information systems contribute to Costco’s competitive strategy, given the nature of its business? 6. The market for optical copiers is shrinking rapidly. It is estimated that as much as 90 percent of all duplicated documents are done on computer printers. Can a company such as Xerox Corporation survive? a. Read about the problems and solutions of Xerox from 2000 to 2010 at www.fortune.com, www.fi ndarticles.com, and www.google.com. b. Identify all the business pressures on Xerox. c. Find some of Xerox’s response strategies (see www.xerox.com, www.yahoo.com, and www.google.com). d. Identify the role of IT as a contributor to the business technology pressures (for example, obsolescence). e. Identify the role of IT as a facilitator of Xerox’s critical response activities. 7. Enter www.dell.ca, and fi nd the current information systems used by the company. Explain how the systems’ innovations contribute to Dell’s success. 8. Enter www.cio.com and fi nd recent information on the changing role of the CIO and the ISD. What is the role of the CIO in organizations today?

Web Activities 1. The market for optical copiers is shrinking rapidly. It is expected that by 2008 up to 90 percent of all duplicated documents will be done on computer printers. Can a company such as Xerox Corp. survive? a. Read about the problems and solutions of Xerox in 2000-2003 at www.fortune.com, www.findarticles.com, and www.google.ca. b. Identify all of the business pressures on Xerox.

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c. Find some of Xerox’s response strategies (see www.xerox.ca, www.yahoo.ca, and www.google.ca). d. Identify the role of IT as a contributor to Xerox’s various business technology pressures (for example, obsolescence). e. Identify the role of IT as a facilitator of Xerox’s critical response activities. After visiting the sites listed above students’ responses will vary but should include a discussion of some of the strategies Xerox is using and the role of IT in their solutions. 2. Enter the site of www.dell.com, and find the current information systems used by the company. Explain how the systems’ innovations contribute to Dell’s success. Responses will vary. Dell has perfected the mass customization technique and their web ordering systems support this very effectively. 3. Access TRUSTe (www.truste.org), and find the guidelines that websites displaying its logo must follow. What are the guidelines? Why is it important for websites to be able to display the Truste logo on their sites? Below is the information from the TRUSTe website ________________________________________________________________________ ALL TRUSTe®-licensed sites must provide: User controls, including:

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An e-mail unsubscribe function

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An opt-out function limiting the sharing of personally identifiable information (PII) with outside parties

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Access management permitting users to update stored PII or have it changed by the Licensee

Security measures, ensuring:

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Secured Socket Layers (SSLs), or other comparable technology, that encrypts pages collecting sensitive information such as credit card numbers

A complaint resolution process, providing:

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Comprehensive contact information for appropriate Web site employees

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A link to the TRUSTe Watchdog site for third-party dispute resolution

A privacy statement, including the following disclosures:

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What PII is collected and how it will be used

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Identity of the party collecting PII

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Whether PII is shared with third parties

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The use of any tracking technology

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Whether PII is supplemented with information from other sources

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Choice options available to consumers

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How consumers can access PII they have provided

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That there are security measures in place

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Procedures for filing and addressing consumer complaints

In addition, the privacy statement must:

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Be linked from the home page and from every page where PII is collected

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Bear the TRUSTe "Click to Verify" link so consumers know whether the company is a TRUSTe licensee or not

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Companies benefit from this association because it builds customer confidence and drives revenue up by letting customers know that they can trust you with their personal information.

4. Enter CIO Canada at www.itworldcanada.com/publication/CIO.htm and find recent information on the changing role of the CIO and the ISD. What is the role of the CIO in organizations today? The CIO in an organization today is no longer just a technical expert. The CIO must know the business and be a part of the high-level decision-making activities in the organization.

Team Assignments 1. Observe your local Wal-Mart checkout counter. Find material on the web that describes how the scanned code is translated into the price that the customers pay. Hint: Look at www.howstuffworks.com and do a search on “bar code.” a. Identify the following components of the Wal-Mart system: inputs, processes, and outputs. b. What kind of a system is the scanner (TPS, DSS, EIS, ES, etc.)? Why did you classify it as you did? Instructor’s Manual .

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c. Having the information electronically in the system may provide opportunities for additional managerial uses of that information. Identify such uses. d. Checkout systems are now being replaced by self-service checkout kiosks and scanners. Compare the two in terms of speed, ease of use, and problems that may arise (for example, an item that the scanner does not recognize). 2. Assign group members to UPS (www.ups.com), FedEx (www.fedex.com), Purolator (www.purolator.com), and Canada Post (www.canadapost.ca). Have each group study the e-commerce strategies of one organization. Then have members present the organization, explaining why it is the best. 3. Divide the class into teams. Have each team select a country and visit its official, government website (for example, try Australia, Canada, Denmark, France, Germany, the Netherlands, New Zealand, Norway, Singapore, the United Kingdom, or the United States). The official web portal for Canada is www.canada.gc.ca/and for the U.S. government is www.usa.gov. Review and compare the services offered by each country. How does Canada compare? Are you surprised at the number of services offered by countries through websites? Which country offers the most services? The least?

Closing Case Letting the Computer Read to You… The Business Problem As an employer, you would like to be inclusive and hire employees who have special needs. For example, some employees may be visually impaired and require special assistance. There is technology that can be used to increase the size of text displayed on computer screens, but it is could be rather cumbersome and inconvenient for mobile use. The IT Solution However, the Intel Reader, can read and convert text into audio form. The reader can hold up to 600 pages of both images and text, and up to 500,000 pages of text only.

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The important advantage of this reader, (if it is accurate for technical language,) is that text can be scanned in and converted without the need for human intervention. An automatic focus camera and a fixed stand to which you attach the reader are used to scan the documents. Software then converts the captured pages to audio – either vocalized or spelled (to clarify pronunciation or meaning.) . The Results This would reduce the support staff needed to assist visually impaired workers. The reader can also be used as a portable device for meetings and travelling. The reader can also reduce eye strain and help prevent more rapid visual degeneration in users with impaired vision and assist those with reading impairments, such as dyslexia.

Questions 1. Is the Intel Reader a strategic information system for the company that employs the visually impaired executive? Why or why not? Support your answer. No; Since it is not really an information system (in the technical sense) and it does not fulfill a strategic role (helping the organization implement its strategic goals and increase its performance and productivity) for the company with a visually impaired executive. 2. How would a company like Intel use information technology to develop, produce, and market the Intel Reader? For each use of information technology, identify the type of technology and how it would be used. The Intel Reader requires an optical scanner to manipulate and capture the document text and/or images. It also needs powerful software to process the electronic document and convert the text to its phonetic output, as well as decompose words into its component letters.

CLUB IT Starting Your Internship at Club IT Go to the Club IT link on the WileyPLUS website. There you will find a description of your internship at this downtown music venue, as well as some assignments that will help you learn how to apply IT solutions to a virtual business.

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Ethics, Privacy, and Information Security

Learning Objectives 1. Describe and provide examples of the major ethical issues related to information technology, with a focus on privacy. 2. Identify the many threats to information security. 3. Explain methods used to protect information systems, including the role of planning for disaster recovery and and Information System Auditing.

Teaching Tips and Strategies The subject matter of this chapter is particularly interesting in today’s business environment. One of the considerations is security versus personal privacy in the sense that technology will allow future employers to watch an employee’s different movements in the workplace. It is suggested that your initial discussion begin with the implications of employers being able to monitor what we as employees do in the workplace. E-mail: User Beware E-mail permits extremely easy and fast transmission of messages. It is so common and pervasive, that users often compose and send messages without careful thought about the content, the recipients and the consequences. One notorious case occurred in July 2007, when a Government of Ontario employee in the cabinet office sent an extremely racist and offensive e-mail to a colleague about a job applicant. The applicant was of African descent. The message contained the statement “This is the ghetto dude that I spoke to before”. However, the e-mail was inadvertently cc’d to the actual applicant, who after some ambivalence and careful consideration went public with the issue. This caused a major embarrassment for the government. The employee was fired or asked to resign (she no longer works for the government), but on the more positive side, the government was forced to provide sensitivity and diversity training for its employees. Bill Gates and Bill Clinton were both charged with crimes based partially on evidence in e-mails. (Clinton, with lying under oath, and Gates with violating the consent decree his company signed with the U.S. Justice Department.) Even more current examples of email trails left by influential people are the cases of Martha Stewart and her attempt to cover up her activity right after she ordered her broker to sell her shares of Imclone stock and the trail left by President Bush’s long-time adviser and confidant, Karl Rove, in the ongoing investigation of who identified the CIA operative married to former Ambassador Joseph Wilson IV (who went to Niger to track down whether Iraq tried to get uranium from them). Both of these individuals have had to deal with criticism and investigations Instructor’s Manual .

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based on various contacts and particularly e-mails that were records of their communications. If they are in such prominent positions, how is it that their e-mails are available for others to hold against them? Is e-mail forever? A discussion, keeping the class focused away from a political debate, is a good way to explore the reasons we have to be careful in our use of e-mail. Stories of e-mail mishaps are all too common: There are tales about employees who accidentally send a non-work related e-mail to everyone at their office and, of course, the one about the employee who sends a note with a questionable comment about a boss/ colleague/client and accidentally includes that person. Another example of the rules of e-mail being dangerously less articulate concerns e-mail signatures or sign-offs. One creative employee at a media company has a sign-off for his e-mail that is definitely creative, but far from appropriate. It is a quote that says something along the lines of "it only matters how good a creative idea is and if it's good enough no one cares who came up with it, even if it was a brutal serial killer." While employees are free to think and feel what they like, free speech at work, especially when what you say affects your employers and colleagues, should be limited. Stephen Friedman, Financial Post The first two individuals were indicted based on evidence from e-mails. (In the common law system, an indictment is a formal accusation of having committed a criminal offence.) The point is: if the president of the United States cannot get rid of damaging e-mails, it is almost impossible for anyone else to as well. If the world’s richest man cannot control who gets his e-mails then how can anyone expect their e-mails to not be used against them? It isn’t being suggested that either Clinton or Gates tried to get rid of e-mails in any type of illegal way. Martha Stewart did alter her e-mail, but then realized that it would be fruitless, and changed it back. The point is, if these influential people have had e-mails used against them, how in the world do you expect that e-mails you are writing today will not be used against you? This can lead to some very heated discussions. Classroom Scenarios You might use the following scenario. Write on the board: “Is e-mail forever?” Give an example where Student 1 sends Student 2 an e-mail. How many copies of that e-mail are out there? Most students will respond with “two.” But that is not true; illustrate on the board how the e-mails had to go through different servers, etc. This illustration will usually cause the students’ ears to perk up. Then, create the scenario that Student 1 has sent an e-mail to Student 2, we hire someone Instructor’s Manual .

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to destroy Student 2’s computer, and wipe out all of the server information that had that e-mail on it. What if we burn Student 1’s computer to get rid of the e-mail off of the computer? Could that e-mail still exist? Most students will respond, “No way—both computers are destroyed and the servers have been cleared.” Then ask, “How do we know if Student 2, when he/she received the e-mail, didn’t e-mail it to someone else?” Would all of the illegal activity have gotten rid of the e-mail? Then ask what if Student 2 put the e-mail on a disk and mailed it somewhere. Students start to see the complications and that e-mail really is forever. Let the students know that Student 2 might have simply thought a joke you sent them was funny and decided to e-mail it to some friends. But, the problem is the e-mail is spreading, and there is no way we can stop it. Another question that I ask students is, “When was the last time someone forwarded one of your e-mails when you did not really want it to be forwarded?” Another scenario is: If we worked for a company and sent each other dirty jokes or pornographic pictures three years ago at work (violating company policy), but we were never caught, we might think there was no harm done. But what if the scenario is followed by actions of someone with whom we used to be friendly, but now gets angry and goes to management with an e-mail we sent from years ago. Could we still be fired? Most students will get angry and state, “No way! That was three years ago.” But, the correct response is, “Exactly, but the courts have agreed with employers regarding this issue. It doesn’t matter if it was five years ago, it was still violating company policy.” At this point, students are starting to understand that unlike ten years ago, when workers in break rooms told dirty jokes, unless someone was offended at that moment the chance of getting in trouble was small. Now if employees are using e-mail, employers have the ability to go back to the day the e-mail was sent and pull it up. These examples are not intended to scare the students but get them to realize that employers can/will be monitoring them at work and that the e-mail sent via their school servers can also be monitored. A review of the different software applications that can help employers monitor non-work related use of the Internet is appropriate at this step. The book has examples of employees that have been fired from major companies for using the Internet for personal use. Preventing E-mail Pitfalls The discussion can end with following advice: • Never use the office computer for anything but business-related work. That will take care of 95% of this problem. • Do not send an e-mail that you wouldn’t want your parents to read. This will take care of all the problems of figuring out which e-mails are okay to send and which aren’t. • Limit giving your work e-mail address to friends/relatives. This will help to keep down on the number of e-mails. (It also helps to avoid having things sent via email that violate company policy.) • When using your computer, pretend that someone was hiding behind the screen Instructor’s Manual .

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and watching everything you do. Many programs have been developed over the last couple of years that can monitor everything done on a computer, down to the keystroke. This will help prevent anyone from having disciplinary problems due to computer use.

Professional Codes of Ethics Historically, IS professionals have not been bound by law to adhere to any ethical and professional standards. Those of us who engage in the design, development, implementation and maintenance of ISs are generally recognized as members of an important profession—the IT profession. Many organizations depend on IT professionals to develop and maintain their mission-critical information systems, a service for which they are highly remunerated. As more and more businesses have come to depend on IT, we are hearing more about incidents where IT projects are abandoned, because we “professionals” have miscalculated time and money resources, or because they simply lacked the expertise to develop good systems. Virtually all other professions including law, medicine, accountancy, and others have established a code of professional standards under the law. But what professional rules bind IT “professionals”? Currently, there are none. Several professional organizations have issued their own codes of ethics, but none is enforceable under the law. It may take years for a standard code of ethics to be adopted by the IT profession. It may take even longer for certification and other measures to be mandated by law. Until we have these measures in place, it is incumbent upon all of us in the profession to think ethically about the many issues discussed in this chapter so that we can exercise our best judgement at all times on all IT projects. CIPS In Canada, IT professionals are represented by the Canadian Information Processing Society (CIPS). CIPS, headquartered in Mississauga, Ontario, is the professional association for Information Technology (IT) practitioners in Canada. It is a non-profit organization that deals with important issues affecting the IT industry and profession. CIPS is dedicated to IT excellence through its work on public policy, setting standards within the profession and providing IT support to its community. Some CIPS national programs include • certification of IT professionals (Information Systems Professional - I.S.P. designation) • accreditation of computer science, software engineering, and MIS programs in Canadian colleges and universities • organization of a Women in IT program to educate female high school students about career opportunities in IT CIPS also offers other benefits and services to its members ranging from a Code of Ethics and Standards of Conduct to educational conferences (e.g. INFORMATICS) and Instructor’s Manual .

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networking opportunities. A recent market survey conducted by CIPS indicated that Information Technology (IT) professionalism and standards of practice are important. The results of the surveys showed that organizations expect their IT staff to set high standards of professional practice and to possess the IT education and experience to practise in the field. Based on the results of the market survey, CIPS developed a new vision focused on IT professionalism entitled CIPS in the 21st Century. In support of this vision, CIPS developed a Canadian IT Body of Knowledge (BOK). In addition, CIPS also strengthened its Code of Ethics and Information Systems Professional (I.S.P.) designation.

Opening Case How many years does it take to get privacy “right”? The Business Problem The social networking site Facebook generates revenue by selling information about its users. Facebook has encouraged the development of applications by providing access to user information. It has also routinely provided member information to other users (“friends”). For example, in May 2010 it was noted that new Facebook applications were automatically added to user accounts, without their consent. Researchers also found that Facebook sent real user names to advertisers, who could readily obtain the real identities users. This infringes on privacy legislation around the world. Facebook may have believed that it needed to comply only with privacy regulations in the United States (its home base.) However, Canadian courts have ruled that organizations that retain data about Canadians are subject to Canadian privacy regulations.

Attempts at a Solution After lengthy negotiations, Facebook developed a new privacy policy. However, users must make as many as 150 different settings changes to set privacy. As of May 2010, Facebook had dealt with the four areas that were identified by the Canadian privacy commissioner as being at issue.

What do you think? 1. How should default settings on social networking sites such as Facebook be organized; in other words, what type of information should be shared and how? Instructor’s Manual .

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Potential suggestions, include: • Implement different levels of “friendship” selected by the user; the amount and type (sensitivity) of information controlled by corresponding settings • The lowest level would contain very basic, biographic information that is intrinsically harmless (e.g. name, photo, general interests, etc.) • Default settings (the lowest level) would automatically apply to new accounts • Higher levels will contain friends, and more personal bio/information • Users can explicitly (de)escalate their setting level, and manage their friends list with immediate effect

2. What type of processes should Facebook have in place to deal with privacy concerns raised by users of the site? To deal with the privacy concerns raised by users, Facebook should implement the following processes: • Implement opt-in versus opt-out policy – i.e. allow users to decide and select the options and services they want • Refrain from providing user data to others without explicit consent • Refrain from adding new applications in user account without previous warning/consent (adding new options should be initiated by the user) • Do not provide user data directly to advertisers, but create “packages” of applications, where advertisers can choose to run their ads • A simple, straightforward procedure to delete (or modify) an account • Ensure all user data is completely removed on account deletion • The accounts of deceased users should be handled with sensitivity and privacy in mind (in conjunction with next-of-kin, who should notify Facebook)

Review Questions Section 3.1 - Before You Go On… 1. Define ethics, and list its four categories as they apply to IT. Ethics is a branch of philosophy that deals with what is considered to be right or wrong. There are many definitions of ethics, such as “codes of morals of a particular profession,” “agreement among people to do the right and to avoid the wrong.” However, ethics may be defined as “the set of moral, cultural values or principles that serve to govern the conduct of an individual or a group.” With regard to IT, ethical issues fall into one of four categories: privacy, accuracy, property, and accessibility. Instructor’s Manual .

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2. Describe the issue of privacy as it is affected by IT. Privacy, the right of people not to have information about themselves revealed to others, is affected by IT. Issues arise in data collection, data accuracy and data confidentiality. The proliferation of personal computers, powerful software, large databases, and connectivity (especially the Internet), have created an entirely new dimension of accessing and using personal data, which poses serious threats to the privacy of information. 3. What does a code of ethics contain? A code of ethics is a document containing a set of principles and guidelines that specify the appropriate behaviour expected of members of a company or an organization. 4. Describe the relationship between IT and privacy. Information technology enables an organization to gather, maintain and protect the data/information required for its operation. However, technology can itself be used to pose threats to the organization’s information. Therefore, it is critical for the organization to know its vulnerabilities and to be able to protect its information resources, so that its employees, customers, and other business partners know that their private information is secure. Section 3.2 - Before You Go On… 1. Give an example of one type of unintentional threat to a computer system. Poorly trained employees using computer systems can cause unintentional harm by entering data or instructions incorrectly. Many times the error checking or controls that are built into a system do not prevent all of the possible ways that bad data or instructions can affect a system. Weather and other environmental conditions (e.g. lightning) can also cause an unintentional threat. Even poorly located computer rooms can permit water to leak into and damage computer systems. 2. Describe the various types of software attacks. Students should identify and include descriptions of phishing, viruses, worms, Trojan horses, logic bombs, back doors, denial or service attacks, password dictionary attacks, and alien software (malware) such as adware, spyware, etc.

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3. Describe the issue of intellectual property protection. Any original work of art, writing, coding (computer program) or music has protection under trade secret, patent, and/or copyright laws. This body of law protects the work product of an individual. The Canadian Intellectual Property Office (CIPO) is responsible for the administration and processing of intellectual property (e.g. patents, trademarks, copyrights, etc.) under the Copyright Act. It is critical for students to grasp this concept and to understand that copying the work of other individuals is illegal. The discussion of the loss of over $30 billion in global trade as a result of software piracy alone is substantial. Section 3.5 - Before You Go On… 1. Describe the major types of controls for information systems. •

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General controls—designed to protect the system regardless of the type of applications that are being run. Included are physical controls, access controls, data security controls, communications controls, and administration controls. Application controls—designed to protect the inputs, processing and outputs of the application.

2. What is information system auditing? Companies need to implement security controls to ensure that information systems work properly. These controls may be installed in the original system, or added after a system is in operation. Installing controls is necessary, but not sufficient to provide adequate security. In addition, people responsible for security need to answer questions such as: • Are all controls installed as intended? • Are they effective? • Has any breach of security occurred? If so, what actions are required to prevent future breaches? These questions must be answered by independent and unbiased observers (auditors) by conducting what is called an information systems audit. An audit involves the accumulation and evaluation of evidence that is used to prepare a report about the information or controls that are being examined, using established criteria and standards. In an IS environment, an audit is an examination of information systems, their control environment, general controls, or application controls (inputs, outputs, and processing).

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IS auditing is usually conducted as part of the controls evaluation for the financial statement audit or as part of internal auditing, which looks at the efficiency or effectiveness of systems. IS auditing focuses on topics such as: • operations • data integrity • software applications • security and privacy • budgets and expenditures • cost control, and • productivity Guidelines are available to assist auditors in their jobs, such as those from the Institute of Internal Auditors (www.theiia.org) or the Information Systems Audit and Control Association (www.isaca.org). Information systems auditors often seek a Certified Information Systems Auditor (CISA) designation. The major content (domain) areas covered under the CISA are: • audit process • management planning and organization of IS • technical infrastructure and operational practices • protection of information assets • disaster recovery and business continuity • business application system development, acquisition, implementation and maintenance • business process evaluation and risk management Auditors employ IT in the actual conduct of their audit by using software to create test data for evaluating the systems and for generating the final reports, etc. 3. What is the purpose of a disaster recovery plan? A disaster recovery plan is a set of procedures that are designed to prevent damage and to manage the chain of events required to recover if a disaster impacts a computer system. The main goal of the disaster recovery plan is to keep the business running after a disaster occurs. Essential components of the plan include: risk analysis and a disaster recovery audit. The important stakeholders would include the IT department, management and end-users.

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“IT’s About Business” Questions 3.1 The Internet as a Multi-way Street? 1. Should there be rules against examining employee e-mails? Why or why not? Which information should be considered private? It is a generally accepted legal principle that organizations have the right to examine employee e-mails (on company computers.). However, in the interest of good IT governance, this guideline should be clearly communicated in the company’s IT Policy Manual (Code of Conduct) and properly communicated to employees. Any information contained on corporate computers is the property of the company and may not be considered “private” to the employee. 2. How can organizations prevent having confidential material such as recorded audio from being publicly posted? How can organizations identify which material is more confidential than others? Confidential material, such as recorded audio can be made secure by implementing procedural safeguards, e.g. a) authorization to record sensitive material b) responsibility for the recording of such material c) appropriate electronic and physical security (e.g. ID, passwords, etc.) on access to such material d) ensuring that security software (antivirus, firewall, etc.) are kept up-to-date The level of confidentiality assigned to material would be the responsibility of the owner and/or appropriate management. 3. Should organizations like Amazon have the right to remove material from your equipment (such as Kindle)? Who owns this material? .Organizations such as Amazon (and Facebook) should not have the right to remove material from your equipment, without your expressed permission. Ownership of this material will be dictated by copyright and trade laws.

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3.2 Computer infection affects many people 1. Who is responsible when an organization’s computers are infected by a botnet and data such as e-mails are used to target phishing attacks? Who is responsible when a user responds to the phishing attack and believes it is a legitimate request? The security and protection of an organization’s computer system are the responsibility of both corporate and IT management. However, if the system becomes infected from botnets and other attacks, the primary responsibility would lie with IT management. Whether a user’s response to a phishing attack is considered responsible, would depend on whether: a) IT management appropriately informed users of potential risks b) The user exercised reasonable caution before opening the email

2. Should organizations limit their implementation of e-commerce based services due to the threat of botnet attacks or other types of unauthorized access? e-commerce based services can be so vital to an organization’s business, that limiting teir implementation because of potential botnet attacks could be counterproductive. A better approach would be to implement a robust security system and properly educate users. 3.3 Vulnerabilities in Supervisory Control and Data Acquisition Systems 1. Could legislation be used to strengthen SCADA defences against cyber-attacks? Support your answer. If not, what do you think utility companies should do to protect their SCADA systems? Legislation could provide some deterrence by imposing stiffer fines/penalties on cyber attackers. However, it would be ineffective as a defence, i.e. it would not provide an electronic or technological barrier to attackers. Utility companies can protect their SCADA systems by redesigning or overhauling them to include security as an integral component of its design - not as an add-on. They could also implement more robust operating procedures and training of their technicians.

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2. Discuss the trade-offs for utility companies between having their control systems connected to their business systems or not. Utility companies can benefit from having their control systems connected to their business systems, but there are trade-offs. They include: Pros: a) the ability to operate more efficiently by having remote access to customer data b) reduced labour costs c) using the information for strategic advantage d) providing consumers with cost-saving options Cons: a) increased vulnerability to cyber attacks b) large conversion costs for improved security c) risks to consumer privacy d) exploiting consumer information e) threats to corporate liability and image in case of system failures.

3.4 Using Your Own Password to Steal Cash! 1. Why is it so important for organizations to provide least privilege to employees, both to prevent theft of cash, but also access to other assets? Similar to the “need-to-know” principle (where confidential information is provided only to those who need it), so too employees who do not need to perform certain business transactions or access cash and other resources, should be restricted from them by the application of passwords and physical access control. This can also be supported by assigning specific, controlled computers on which to perform these transactions. Without these controls employees would be able to perform illegal transactions and there will be no audit trail.

2. What are possible disadvantages of least privilege? Possible disadvantages may include the lack of flexibility in performing business transactions, i.e. designated employees and computers must be available in order to access the asst or information. This requirement, as well as the limiting of transactions to business hours could lead the loss of business income, and customer/supplier dissatisfaction. Instructor’s Manual Copyright © 2010 ..

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Costs may also increase costs for the organization, banks and service providers, due to the need for increased security, monitoring and control.

Discussion Questions 1. Access the Computer Ethics Institute’s website at www.cpsr.org/issues/ethics/cei. The site offers the “Ten Commandments of Computer Ethics.” Should any others be added? (LO 1) Students should be encouraged to access their university’s Code of Ethics or Principles in the Use of IT, which prescribes the terms and conditions under which a student is permitted use of the university’s IT resources. (Universities typically post these online.) This document should provide some ideas on which other activities are proscribed by their university. This could lead to a healthy discussion on whether the use of the university’s computing facilities is a “right” or a “privilege” 2. What would you do if you purchased a computer that had confidential information about individuals stored on it? (LO 1) One would expect (hope) a student to take an ethical approach and delete the data or inform the seller to have him/her check it and delete personally. Certainly, keeping the data, using or disseminating it would be unethical and even illegal. 3. Why are computer systems so vulnerable? (LO 2) Computer systems are vulnerable because of the numerous threats they are exposed to. These threats fall under five main categories: 1. unintentional acts 2. natural disasters 3. technical failures 4. management failures 5. deliberate acts. •

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Unintentional acts: those with no malicious intent. They include: human errors, deviations in the quality of service from service providers, and environmental hazards. Employees can also make mistakes as a result of deliberate actions by an attacker (e.g. social engineering and reverse social engineering.) Natural disasters: these include floods, earthquakes, hurricanes, tornados, lightning, and in some cases, fires. In many cases, weather disturbances can cause catastrophic loss of systems and data. Technical failures: technical failures include problems with hardware and software (e.g. hard drive failure, or software errors)

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Management failures: these may involve a lack of funding and/or support for information security efforts. This lack of leadership will cause the information security of the organization to suffer. Deliberate acts: by internal (employees) or external perpetrators who deliberately compromise the security of the IS. Examples are: o illegal trespass o information extortion o sabotage, hacking or vandalism o theft of equipment, identity or information

4. Why should information security be of prime concern to management? (LO 2) Information security should be of prime concern to management because of the risks and liabilities involved in not making reasonable efforts to secure the organization’s IS and data: • Current legislation (e.g. PIPEDA, FIPPA) requires organizations to be accountable for the information they keep • Downtime could be very expensive • System failures also negatively impact on partners, customers, suppliers, etc. • The cost of protection and recovery (in case of a breach) is high PIPEDA – Canada’s Personal Information Protection and Electronic Documents Act applies to the private sector and establishes the Privacy Commissioner of Canada as the ombudsman for complaints under the new law. The act specifies a number of “Fair Information Principles”: • Be accountable. • Identify the purpose of data collection. • Obtain consent. • Limit collection. • Limit use, disclosure and retention. • Be accurate. • Use appropriate safeguards. • Be open. • Give individuals access. • Provide recourse. FIPPA – Most provinces have enacted freedom of information and privacy legislation. For example, the Ontario government's management of personal information is governed by the Freedom of Information and Protection of Privacy Act (FIPPA), under the responsibility of the Office of the Chief Information and Privacy Officer (OCIPO), Ministry of Government Services.

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The act requires that service providers under contract to provide online services on behalf of the government, must follow the practices required of Government of Ontario organizations. Any record of information, regardless of how it was recorded is subject to the act. It binds ministries, agencies, boards, commissions, universities, community colleges, municipalities and their boards; as well as information submitted by a third party such as a private citizen, a corporation, another government or their departments. The purposes of this Act are to: (a) provide a right of access to information under the control of institutions in accordance with the principles that, (i) information should be available to the public, (ii) necessary exemptions from the right of access should be limited and specific, and (iii) decisions on the disclosure of government information should be reviewed independently of government; and (b) protect the privacy of individuals with respect to personal information about themselves held by institutions and to provide individuals with a right of access to that information. (R.S.O. 1990, c. F.31, s. 1.) © Queen's Printer for Ontario Various Municipal Freedom of Information and Protection of Privacy Acts also require municipalities, school boards and all other municipal service boards (institutions), established under provincial municipal acts (e.g. Ontario Municipal Act, 2001,) to (a) provide a right of access to information under the control of institutions in accordance with FIPPA principles; and (b) protect the privacy of individuals with respect to personal information about themselves held by institutions and to provide individuals with a right of access to that information. (R.S.O. 1990, c. M.56, s. 1.) Companies also understand the importance of data security and privacy to their customers. Management need to develop policies to ensure the security of their IT operations and treat what they learn about customers as confidential. For example, not giving or selling confidential or personal information about customers to any third party not required for the transaction. An example of a corporate privacy policy can be found at: http://www.ups.com/content/corp/privacy_policy.html

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5. Compare information security in an organization with insuring a house. (LO 2) Generally, insurance is an expense to provide coverage (reimbursement) in the event of loss or damage. Like home insurance, the financial benefits are only realized in case of a disastrous event. While some may declare that money is wasted if nothing untoward occurs, information security like insurance provides that protection and peace of mind. Of course, it also ensures compliance with laws and regulations. 6. Why are authentication and authorization important to e-commerce? (LO 3) Authentication confirms the identity of the individual and authorization determines what they are allowed to do. These activities are vital in ensuring ecommerce transactions are accurately and properly performed, with regard to customers, suppliers, credit card companies and banks. 7. Why is cross-border cybercrime expanding rapidly? Discuss possible solutions. (LO 3) International organized crime is taking over cybercrime, which is illegal activity taking place over computer networks. The online commerce industry is not particularly willing to install safeguards that would make it harder to complete transactions. It would be possible to demand passwords or personal ID numbers for all credit card transactions. Companies are developing software and services that deliver early warnings of trouble. These early-warning systems are proactive, scanning the Web for new viruses and alerting companies to the danger. 8. Discuss why the Sarbanes-Oxley Act and its Canadian equivalent, Bill 198, The Budget Measures Act, are having an impact on information security. (LO 3) The Sarbanes-Oxley Act (SOX) requires companies to implement effective internal controls, and the SEC has been rigorously enforcing that requirement. SOX also increased the penalties for false financial reporting. Therefore, directors and senior executives would actively try to minimize the risk that their financial statements are materially inaccurate or that their company’s controls do not meet the statutory requirements. Similarly, the Canadian Securities Administrators (CSA), through Bill 198, will also require publicly held companies to implement internal controls over financial reporting. Companies must also evaluate the effectiveness of those controls and perform external audits of their financial reporting. This has had significant IT and information security implications because the financial reporting and operations of most companies depend heavily on Instructor’s Manual 3-16 Chapter 3 Copyright © 2010 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.

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information technology to support the control, evaluation and disclosure of information. 9. What types of user authentication are used at your university and/or place of work? Do these authentication measures seem to be effective? What if a higher level of authentication were implemented? Would it be worth it, or would it decrease productivity? (LO 3) Student responses will vary according to their particular university or workplace. You may find that users tend to resent change or stricter authentication; but at least, they should appreciate the value of improved security, in spite of the inconvenience.

Problem-Solving Activities 1. Complete the computer ethics quiz at http://web.cs.bgsu.edu/maner/xxicee/html/welcome.htm. (LO 1)

2. An information security manager routinely monitored the web surfing among her company’s employees. She discovered that many employees were visiting the “sinful six” websites. (Note: The sinful six are websites with material related to pornography, gambling, hate, illegal activities, tastelessness, and violence). She then prepared a list of the employees and their surfing histories and gave the list to management. Some managers punished their employees. Some employees, in turn, objected to the monitoring, claiming that they should have a right to privacy. (LO 1) a. Is monitoring of web surfing by managers ethical? (Is it legal?) Support your answer. Yes; Monitoring of e-mails is ethical and moreover, it is an important duty of the network security person. Monitoring serves to detect unethical use of the system. However, an organization should clearly indicate its policy on the use of IT resources for personal matters and the consequences of failing to do so. This can be implemented by having employees read and sign an “Acceptable Use Policy” (AUP). If this is not done on a professional basis, the company is open to legal action should the resources be used for criminal/illegal activity and/or someone is harmed as a result of an employee’s misuse of the system. b. Is employee web surfing on the “sinful six” ethical? Support your answer. Personal use of the company’s e-mail system, while not illegal, is normally stipulated in the company policies as unauthorized, therefore unethical. Instructor’s Manual 3-17 Chapter 3 Copyright © 2010 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.

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Employees are supposed to be working, not wasting company resources. Even during their lunch hour or after hours, they are still “stealing” resources, e.g., disk space, bandwidth, etc. However, in the interests of employee morale, convenience or emergency situations it would be wise to permit some controlled/limited use of e-mail for personal reasons, (as specified in policy). c. Is the security manager’s submission of the list of abusers to management ethical? Why or why not? While it is not unethical to turn this information over to management, a better way to handle the situation might be to first send a communication out to all employees reminding them of the Acceptable Use Policy However, if there are employees who continue to disregard the policy, they should be given a warning cc’d to management, who should then inform them that they risk serious punishment (including suspension/dismissal) if they contravene the policy again. d. Is punishing the abusers ethical? Why or why not? If yes, then what types of punishment are acceptable? Punishment is just as ethical for an infraction of the e-mail policy as it would be for any abuse of company policy, from tardiness, to absenteeism, to any other stated policy on the books. But, an escalation approach from reminder to warning to dismissal should be applied. e. What should the company do in order to rectify the situation? Continual updating and occasional reminders to employees of the company policy are needed. The policy should include a clear description of what the consequences will be if an employee commits an offense. Monitoring by upper management to ensure consistent handling by the managers would make the future handling fair and consistent. Once the policy and consequences are clear, the security manager should notify the immediate manager and copy upper management with details of problem situations. 3. Frank Abagnale Jr., the criminal played by Leonardo DiCaprio in the motion picture Catch Me If You Can, ended up in prison. However, when he left prison, he went to work as a consultant to many companies on matters of fraud. a. Why do so many companies not report computer crimes? Companies often under-report such crimes to protect their reputation with their customer base. Banks especially want their customers to feel that their money is safe. They don’t want anyone to know that their systems were compromised. b. Why do these companies hire the perpetrators (if caught) as consultants? Is this a good idea? Instructor’s Manual .

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In some cases, they may even hire the individual who broke into their system, because that person knows the weak spots in the security. Whether it is a good idea or not depends on the situation. (There is also “white-hat” or ethical hacking, where the benign hacker detects vulnerabilities in systems, but informs the owners so that they can secure them. Courses are sometimes offered in this area.) Students can offer some opinions on pros and cons. c. You are the CEO of a company. Discuss the ethical implications of hiring Frank Abignale as a consultant to your company. Student responses may vary, but some of the key issues should focus on: • whether they feel that Mr. Abignale is sincerely reformed • do you trust him with your company’s systems • what impact hiring him will have on employees and customers • what are his fees • ensuring adequate legal and audit controls 4. Assume that the daily probability of a tornado in Brampton is 0.07 of a percent. The chance of your computer centre being damaged during such a tornado is 5.0 percent. If the centre is damaged, the average estimated damage will be $4.0 million. (LO 2) a. Calculate the expected loss in dollars. The expected loss due to a tornado strike at your computer centre would depend first on the probability of a tornado occurrence, and then the probability of being affected by it. Therefore, this is a case of serial risk. Probability of a tornado occurring on any day in Brampton: 0.07 of a percent. = 0.0007 (Assume this is an average daily probability, because in Canada, tornadoes are not likely to occur except in the summer.) The probability of the tornado striking the centre: 5.0 percent = .05 The combined probability for serial events will be: 0.0007 x .05 = 0.000035 The expected loss (Single Loss Expectancy) is: the probability of occurrence x damage = .000035 x $4,000,000 = $140 b. An insurance agent is willing to insure your facility for an annual fee of $25,000. Analyze the offer, and discuss whether to accept it. Since the annual insurance of $25,000 will mitigate a potential loss of only $140, it would not be worth accepting.

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5. A critical problem is assessing how far a company is legally obligated to go in order to secure personal data. Because there is no such thing as perfect security (i.e., there is always more that you can do), resolving this question can significantly affect cost. (LO 1 and 3) a. When are security measures that a company implements sufficient to comply with its obligations? In law, we use the “reasonable man” test. When a company has tested every possible aspect of its security such that a reasonable person would consider sufficient, it should be okay. However, most company security staff like to go beyond that level of security. We never know if we have done enough until we find a deficiency. b. Is there any way for a company to know if its security measures are sufficient? Can you devise a method for any organization to determine if its security measures are sufficient? There are many technical and organizational measures that can be implemented to enhance security. For example, the use of firewalls, knowledgeable security staff and effective monitoring: most security software will send a notification when there is an attempted breach. A company will get a clue about their effectiveness in this area if they watch what is happening with those attempts. It is difficult to know if all of your efforts are sufficient, but an organization should continually revise its security policy. It is like the old saying “no news is good news.”

6. A company receives 50,000 e-mail messages each year. Currently, the organization has no firewalls. On the average, there are two successful hackings each year. Each successful hacking results in a loss to the company of about $150,000. A firewall is proposed at a cost of $75,000 and an annual maintenance fee of $6,000. The estimated useful life is three years. The chance that an intruder will break through this firewall is 0.00002 percent. In such a case, there is a 30 percent chance that the damage will total $100,000, a 50 percent chance that the damage will total $200,000, and a 20 percent chance that there will be no damage at all. (LO 3) a. Should management buy this firewall? This problem examines the costs and benefits (cost-benefit analysis) of deploying a security measure (firewall), given the risk of a hack attack. First, examine the potential benefit – the Expected Loss averted: Annual number of successful hackings (Annual Risk of Occurrence): 2 (ARO) The Single Loss Expectancy of such an attack: $150,000 (SLE) Instructor’s Manual .

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(Assume this includes all service and recovery costs) The Annualized Loss Expectancy (ALE) without the firewall is: SLE x ARO ALE = $150,000 x 2 = $300,000 Therefore, the Total Expected Loss (“Benefit”) will be the present value of $300,000 over 3 years = $816,974 (Assume an annual interest rate of 5%) Now, calculate the cost of deploying the firewall: Capital cost of firewall: $75,000 Operational cost of maintaining it: $6,000 per annum (over 3 years) Total Cost: $75,000 + PV of $6,000 over 3 years = $75,000 + $16,340 = $91,340 (Again assuming an annual interest rate of 5%) There is also the potential cost of breaking through the firewall: (The assumption is that this risk is due to the firewall.) The damage is based on its probability: The probability of breaking the firewall: .00002 percent = 0.0000002 Then, there is: i) 30% chance of $100,000 damage Expected damage: 0.0000002 x 0.3 x 100,000 = $0.01 ii) 50% chance of $200,000 damage Expected damage: 0.0000002 x 0.5 x 200,000 = $0.02 Total damage risk: $0.01 + $0.02 = $0.03 Therefore, the Total Cost of deploying the firewall: $91,340 + $0.03 = $91,340 This means, over three years, spending $91,340 will avert a potential loss of $816,974. Comparing the costs and benefits it would be prudent for management to install the firewall. b. An improved firewall that is 99.9988 percent effective and that costs $90,000, with a useful life of three years and an annual maintenance cost of $18,000 is available. Should the company purchase this firewall instead of the first one? First, examine the potential benefit – the Expected Loss averted: Annual number of successful hackings (Annual Risk of Occurrence): 2 (ARO) The Single Loss Expectancy of such an attack: $150,000 (SLE) (Assume this includes all service and recovery costs) The Annualized Loss Expectancy (without the firewall) is: SLE x ARO ALE = $150,000 x 2 = $300,000 Therefore, the Total Expected Loss (“Benefit”) will be the present value of $300,000 over 3 years = $816,974 (Assume an annual interest rate of 5%) Instructor’s Manual .

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Now, calculate the cost of deploying the firewall: Capital cost of firewall: $90,000 Operational cost of maintaining it: $18,000 per annum (over 3 years) Total Cost: $90,000 + PV of $18,000 over 3 years = $90,000 + $49,018 = $139,018 (Again assuming an annual interest rate of 5%) There is also the potential cost of breaking through the firewall: The damage is based on its probability: The probability of breaking the firewall: .0012 percent = 0.000012 Then, there is: i) 30% chance of $100,000 damage Expected damage: 0.000012 x 0.3 x 100,000 = $0.36 ii) 50% chance of $200,000 damage Expected damage: 0.000012 x 0.5 x 200,000 = $1.20 Total damage risk: $0.36 + $1.20 = $1.56 Therefore, the Total Cost of deploying the firewall: $139,018 + $1.56 = $139,019.56 This would still be a very good investment. 7. Enter www.scambusters.org. Find out what the organization does. Learn about e-mail scams and website scams. Report your findings. (LO 2)

8. Visit www.rcmp-grc.gc.ca/qc/services/gict-itcu/accueil-gict-itcu-home-eng.htm (the RCMP Integrated Technological Crime Unit) and find out about the types of information technology crime that the RCMP investigates. Prepare a report for your class. (LO 3)

9. Enter www.alltrustnetworks.com and search for other vendors of biometrics. Describe the devices they make that can be used to control access to information systems. Prepare a list of products and major capabilities of each. (LO 3) The students’ lists should include biometric devices for: • • • • •

physical access control PC and network access financial transaction logical access control time and attendance

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10. Software piracy is a global problem. Access the following websites: www.bsa.org and www.microsoft.com/piracy. What can organizations do to mitigate this problem? Are some organizations dealing with the problem better than others? (LO 2) There are many steps that organizations can take to mitigate the software piracy problem. These include: a. being well informed b. respect intellectual property rights c. avoid the use of counterfeit software d. ensure each computer has its own full software licenses e. report incidences of pirated software

11. Go to http://crazedmonkey.com/toronto-transit-map/. This map was created by combining data from other sources. Is it legal? Why or why not? (LO 1) From the site owner’s blog, it seems that the site is quite useful and popular, as well as technically sophisticated!. However, although the TTC has not taken any legal action against him (the map helps them?), it appears that the map was developed using TTC data. The key issues are: is this public information and if not, did he obtain their expressed permission? If the answer is “no” to both questions, then the map is illegal.

Team Assignments 1. Access www.fcac-acfc.gc.ca to learn more about how financial organizations would work together to improve security over credit cards. Search the Internet to look for statistics about credit card fraud. Provide a report for your class. 2. Read the article: “The Security Tools You Need” at www.pcworld.com/downloads/collection/collid,1525/files.html. Each team should download a security product and discuss its pros and cons for the class. Be sure to take a look at all the comments posted about this article.

Closing Case Information Security at the International Fund for Animal Welfare The Business Problem The non-profit International Fund for Animal Welfare (www.ifaw.org), the world’s leading international animal welfare organization, contends that “the fate and future of all Instructor’s Manual .

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animals on Earth are inextricably linked to mankind.” IFAW has approximately 375 experienced campaigners, legal and political experts, and internationally acclaimed scientists working from offices in 15 countries. The organization targets everything from baby seal hunts in Canada to the illegal trade in elephant tusks and rhinoceros horns in Africa. Three characteristics impact the organization’s information security: • an extremely dispersed organization, dealing with information security on a large international scale. • they use laptops that must be protected for use outside IFAW’s network, yet connect safely to the • the IFAW is a controversial force in conservation and is therefore targeted by individuals, organizations, and even governments, objecting to their activities. IFAW has experienced probing attacks on laptops, denial-of-service and custombuilt malicious software attacks, for the purpose of spying on their operations. The Solution The organization is aware of the problems associated with relying exclusively on antimalware software to protect its computers. Anti-malware software offers little protection against unknown malware, because it relies on the digital signatures of known malware. IFAW still uses commercial anti-malware software, as well as intrusion detection software from SourceFire (www.sourcefire.com) . It has also installed network access control software (Procurve) from Hewlett-Packard (www.procurve.com). IFAW’s most effective defence, though, has been whitelisting technology from Check Point Endpoint Security (www.checkpoint.com). Whitelisting permits only known “good” software programs to run (while preventing all other programs). The Results Check Point software implements very restrictive controls on the software it allows to run. Therefore, the organization must explicitly decide on each trusted application. This immediately reduced (by 75%) the number of infections and exploitations of security vulnerabilities. Whitelisting also enabled IFAW to improve its software licensing compliance, because the organization now knew exactly what software was running on its computers. However, there was still one problem - how to manage the computers of partner organizations, needing to connect to IFAW’s network. As a result, IFAW now gives its partners only the minimum necessary access to its network and closely monitors their users.

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Questions 1. Does the whitelisting process place more of a burden on the IT group at IFAW? Why or why not? Support your answer. Not likely, because of the following reasons: • the whitelist process permits only known good software to run (unknown and potentially hazardous applications are prohibited) • the whitelist has proven very effective • they can still use commercial anti-malware software • the whitelisting process is handled automatically by commercial software (Check Point EndPointSecurity) • whitelisting also handles software licensing compliance However, the IT group would be responsible for licensing, installing and maintaining the whitelisting software.

2. Analyze the risk involved in IFAW’s allowing users from its partner organizations to access the IFAW network. Having “outside” users access the corporate network is always a risk, since it is difficult to implement the levels of security and control available to “inside” users. Some of the risks include: • partner users (especially those not using the whitelist) pose a potential security breach • partners may not implement sufficiently robust anti-malware and intrusion detection software on their own networks • by restricting their access (to minimum level), their effectiveness may be limited • therefore, there is a vital need to continually monitor partner users and their machines

Interactive Case Developing information security measures for Ruby’s Club

Go to the Ruby’s Club link at the Student Companion website or WileyPLUS for information about your current internship assignment. You will investigate security policies at other clubs, make suggestions for Ruby’s information security system, and build security measures into the spreadsheet that currently maintains member information. Instructor’s Manual .

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Data, Information, and Knowledge Management

Learning Objectives 4.1 Recognize the importance of data, the issues involved in managing them and understand the data life cycle. 4.2 Explain the advantages of the database approach. 4.3

Describe the main characteristics of the relational database model.

4.4 Explain how a data warehouse operates and how it supports decision making. 4.5 Define data governance and explain how it helps produce high-quality data. 4.6 Define knowledge, and differentiate between explicit and tacit knowledge.

Teaching Tips and Strategies To get students interested in the importance of data mining and data warehousing, it is important that they understand the amount of information that companies collect. To spark their interest, it is helpful to give the example of how much data is being collected on them by a website when they purchase an item online or when they engage in e-commerce activities online. You can start by asking the class if anyone has ever purchased an item online. Then, demonstrate to students the amount of data that Internet companies collect during a single online transaction. Use the purchase of this text on Amazon as an example: Introduction to Management Information Systems by Turban et al. at www.amazon.com. Search for the book by author and then Amazon will access its database to find books that match the criteria. Explain to the class, using a fictitious name as an example, the information that Amazon collects: Information that Amazon.com collects during a typical purchase • Name of purchaser • E-mail address • Type of credit card (Visa, MasterCard) • Past buying history if any • Type of book purchased and author (this information can be used later to tailor advertising efforts to users to let them know that the author has released a new book or another author has released a book that others that bought this book purchased). Instructor’s Manual .

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Address of purchaser Telephone number of purchaser

Then discuss how Amazon.com can use that information to modify its advertising and to contact customers that have not purchased recently. This demonstration signifies to students how much information is being collected about them when they are online. In this example, because it helps students to understand that during most transactions we leave some data behind, the most important point is how companies can turn that data into information. Managing the Data We live in the information age. Companies/students have more data at their fingertips then ever before. However, data is useless unless individuals can find what they need. This issue becomes very clear when we try to conduct research on the internet. The problem is usually that we find too much information and then we have to modify our search criteria to narrow it down. We need a way to manage all this data into some real information that we can use without reading through hundreds of articles. This is no different from the information overload managers experience with data in real-time each day. Students are in the same situation. How do they determine the difference between meaningful and useless data? This chapter will provide students with some guidelines to help them make these decisions.

Review Questions Section 4.1 – Before you go on… 1. Describe the data life cycle. The data life cycle refers to the transformation of data into information, knowledge and then to solutions. First the data is acquired from internal, external, and personal sources. This data is typically stored in databases. Then, the data is converted into the format required for a data warehouse and/or data mart, so that it can be analyzed with data analysis and data mining tools. The result is generation of decision support and knowledge that provides solutions to organizational problems. 2. What are the various sources for data? •

Internal data sources – the organization’s internal data about people, products, services, and products; generated by internal systems and stored in internal databases

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Personal data sources – employees’ personal facts, concepts, thoughts, and opinions External data sources – data available from a multitude of sources outside the organization, including the Internet and commercial database services

Section 4.2 - Before you go on… 1. What is a data model? A data model is a diagram that represents entities in the database and their relationships to one another. 2. What is a primary key? A secondary key? A primary key is the field in a record that uniquely identifies that record so that it can be retrieved, updated and sorted. A secondary key is any other field that has some identifying information but typically does not identify the specific record. 3. What is an entity? A relationship? An entity is a person, place, thing or event about which information is maintained. A relationship is the way in which entities are associated with each other. There are three types, one to one, one to many, and many to many.

Section 4.3 - Before you go on 1. What are the advantages and disadvantages of relational databases? Relational databases provide greater flexibility and ease of understanding, but if the overall design is too complex, they can have slow search and access times. 2. What are the benefits of data dictionaries? Data dictionaries provide names and standard definitions for all attributes; they reduce the chances that the same attribute will be used in different applications but with a different name and they enable programmers to develop programs more quickly since they do not have to create new data names. 3. Describe how structured query language works. SQL enables people to perform complicated searches by using relatively simple statements or key words such as SELECT (the attribute), FROM (table to be used) and WHERE (specify conditions).

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Section 4.4 - Before you go on 1. What are the characteristics of a data warehouse? The characteristics of a data warehouse are: • it is organized by business dimension or subject (e.g. customer, vendor, product, etc.) and contain information relevant for decision support and data analysis • data are consistent in format and representation • data are historical (i.e. to observe trends) • data are nonvolatile • on-line analytical processing can be applied • it uses a multidimensional data structures • it can integrate with relational databases.

2. Differentiate between relational and multi-dimensional databases.. In a relational database, data are represented in two dimensions where columns represent data elements or fields (e.g. Product, Region, Sales) and rows are actual values for each field. In a multidimensional database, the data would be represented by a three-dimensional matrix (or data cube), where the third dimension reflects another field (e.g. Year). 3. What is a data mart? A data mart is a small, less-expensive, scaled-down version of a data warehouse that is designed to support end user decision-making in a strategic business unit (SBU) or a department. Data marts can be implemented more quickly, they provide more rapid response and are easier to learn and navigate. Typically, they support local rather than centralized control within an organization. Section 4.5 – Before you go on… 1. Describe data governance. Data governance is an approach to managing information in an organization. It involves a formal set of business processes and policies designed to ensure that data are handled according to well-defined principles throughout the data cycle. The objective is to make information secure, available, transparent and useful to authorized users. 2. What is the difference between transaction data and master data? Instructor’s Manual .

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Transaction data , generated and captured by operational systems, describe the activities, or events (transactions) of the business. Master data are core data on entities, (e.g. customer, product, employee, vendor, etc.), that span the enterprise information systems. Master data are applied to multiple transactions and are used to categorize, aggregate, and evaluate the transaction data. 3. Describe master data management. Master data management is a process that spans all organizational business processes and applications. It provides companies with the ability to store, maintain, exchange, and synchronize a consistent, accurate, and timely “single version of the truth” for the company’s core master data. Section 4.6 – Before you go on… 1. What is knowledge management? Knowledge management is a process that helps organizations identify, select, organize, disseminate, transfer, and apply information and expertise that are a part of the organization’s memory and that typically reside within the organization in an unstructured manner. 2. What is the difference between tacit knowledge and explicit knowledge? Explicit knowledge is the more objective, rational, and technical type of knowledge. It is knowledge that has been codified in a form that can be distributed to others or transformed into a process or strategy. Tacit knowledge is the cumulative store of the experiences, insights, expertise, know-how, trade secrets, skill sets, understanding, and learning that an organization has. Tacit knowledge is highly personal and unstructured and is hard to formalize. 3. Describe the knowledge management system cycle. The knowledge management system cycle involves six steps that are performed iteratively as knowledge is dynamically refined over time. The steps are: 1. create knowledge 2. capture knowledge 3. refine knowledge 4. store knowledge 5. manage knowledge 6. disseminate knowledge

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“IT’s About Business” Questions 4.1 – Mediatech Direct Works To Remove Data Errors

1. 1. How important are accurate data for on-line businesses? Data accuracy is critical since inaccurate data and/or poor data integrity result in lost sales opportunities and the consequent revenues. Data errors can also degrade system performance and be very expensive to correct if detected. 2. Is technology sufficient to guarantee that data errors will not occur? If not, then what other factors should a business need to consider? Technology of itself will not guarantee the prevention of errors. Beginning with appropriate data management policies, a business needs to ensure that data is effectively checked, cleansed and securely stored. Processing must also be audited to ensure the integrity and accuracy of information. 3. Provide examples of cost savings that can be achieved by reducing data errors. • •

Mediatech estimated that reconciling the data in one customer file would save the company more than $250,000 annually. The company also estimated that overall cost savings through the elimination of data errors could approach $3 million per year.

4.2– Sunnybrook Hospital Turns To Electronic Medical Records 1. What additional advantages result from storing your health records in a database? Give examples. Additional advantages include: • fast access to your health data in case of emergency • access to your records from other medical institutions • the ability to share your data with other medical specialists • more effective management of drug regimens and interactions 2. What are the disadvantages of storing your health records in a database? Give examples. Possible disadvantages include: • compromised data security/privacy • unavailability due to system failure • misdiagnoses or improper treatment due to data errors Instructor’s Manual .

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3. Why is it difficult to build a nationwide electronic medical record system? • Politics • The large number of different systems already in place • Turf protection • Poor management planning/decisions (Note: cost is not a factor, since so much $ has already been wasted in Ontario!) 4.3– Data Warehousing At The Hudson’s Bay Company 1. Why was it necessary for HBC to develop a data warehouse? Because of the large size of the company (500 retail stores across Canada employing more than 70,000 people) and the diverse retail stores they owned (The Bay, Zellers, Home Outfitters, and Fields), HBC found it necessary to use data warehousing. 2. What are the challenges of having a data warehouse? What could management do to overcome those challenges? The challenges include: • the vast amounts of data that have to be managed • the expertise and training required to operate the warehouse • the diversity of users • the planning and cost required to implement To overcome these challenges, management could: • • • • •

ensure adequate, secure and robust storage facilities ensure the technical and user staff are well trained perform the proper systems analysis, planning and budgeting to ensure the system is feasible and meets user needs effective communication between functional areas carefully examine outsourcing options

3. Provide examples of how different areas of the Hudson’s Bay Company (finance, accounting, marketing, operations, MIS) could benefit from the use of the data warehouse. • • •

Marketing - helps with making decisions such as what products to advertise Operations - how much inventory to keep and what products to keep in which stores. Accounting – information on revenues and expenses and in evaluating sales performance

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MIS – all users have greater flexibility to extract the information they need, when and/or in the format they need it.

Discussion Questions 1. Explain the difficulties involved in managing data. Because the amount of data in organizations is so large, and it is stored in different systems, databases, formats and languages, keeping it secure and maintaining the integrity is difficult. 2. What are the problems associated with poor-quality data? The can be customer relationship problems, sales problems, poor decisions based on flawed data, etc. 3. What is master data management? What does it have to do with high-quality data? Master data management is a process that provides companies with the ability to store, maintain, exchange and synchronize a consistent, accurate, and timely “single version of the truth” for the company’s core master data. It ensures that there is one “source of truth” for the data that is being accessed. 4. Describe the advantages of relational databases. The great flexibility of relational databases is the greatest strength. Ease of design, maintenance and query and reporting capability are also advantages. 5. Discuss the benefits of data warehousing to end users. End users can more quickly and easily access data because they are located in one place. Extensive analyses can be performed, often in ways that are not possible without the data warehouse. Finally, end users can have a consolidated view of organizational data. 6. What is the relationship between a company’s databases and its data warehouse? Data are extracted from various databases and loaded into the company’s warehouse which contains historical data organized by subject to support analytical needs of decision makers in the organization. 7. Distinguish between data warehouses and data marts. Instructor’s Manual .

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A data mart is a small scale data warehouse, typically designed to serve a strategic business unit or department rather than the entire organization. Data marts are cheaper to develop than data warehouses and take considerably less time. Because the data mart contains less data than a data warehouse, it is easier to keep up to date and easier for users to understand and navigate. 8. Explain why master data management is so important in companies that have multiple data sources. Master data management is particularly important with these companies because it is designed to synchronize and manage data across all organizational business processes and applications. It provides a consistent, accurate, and timely “single version of the truth” for the company’s core master data. 9. Explain why it is important to capture and manage knowledge. Knowledge is information that is contextual, relevant, and actionable. The goal of knowledge management is to be aware of individual and collective knowledge so that the most effective use of the knowledge is made. By capturing and managing knowledge, an organization makes the expertise of its human capital widely accessible. 10. Compare and contrast tacit knowledge and explicit knowledge. Explicit knowledge is the more objective, rational, and technical type of knowledge. It is knowledge that has been codified in a form that can be distributed to others or transformed into a process or strategy. Tacit knowledge is the cumulative store of the experiences, insights, expertise, know-how, trade secrets, skill sets, understanding, and learning that an organization has. Tacit knowledge is highly personal and unstructured and is hard to formalize.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 1.

Access various employment websites (for example, www.canada.plusjobs.com, www.monster.com and www.dice.com) and find several job descriptions for a database administrator. Are the job descriptions similar? What are the salaries offered in these positions?

2. Access the websites of several real estate companies. Find the sites that take you through a step-by-step process for buying a home, that provide virtual reality tours of homes in your price range and location, that provide mortgage and interest rate calculators, and that offer financing for your home. Analyze the website and build a Instructor’s Manual .

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table indicating for each feature available on the website the data that needs to be collected and its source. 3. It is possible to find many websites that provide demographic information. Access several of these sites and see what they offer. Do the sites differ in the types of demographic information they offer? If so, how? Do the sites require a fee for the information they offer? Would demographic information be useful to you if you wanted to start a new business? If so, how and why? 4.

The Internet contains many websites that provide information on financial aid resources for students. Access several of these sites. Think about all the data that needs to be collected and how it would appear in a relational database. Draw some examples of tables and their relationships.

5. Draw an entity-relationship diagram for a small retail store. You wish to keep track of the product name, description, unit price, and number of items of that product sold to each customer. You also wish to record customer name, mailing address, and billing address. You must track each transaction (sale), as to date, product purchased, unit price, number of units, tax, and total amount of the sale.

Web Activities 1. Access the websites of IBM (www.ibm.com), Sybase (www.sybase.com), and Oracle (www.oracle.com) and trace the capabilities of their latest database management systems. 2. Access the websites of two of the major data warehouse vendors, such as NCR (www.ncr.com) and SAS (www.sas.com). Describe their products and how they are related to the web. 3. Enter the website of the Gartner, Inc. (www.gartner.com). Examine its research studies pertaining to data management and data warehousing. Prepare a report on the state of the art. 4. Calculate your personal digital footprint at ww.emc.com/digital_universe/downloads/web/personal-ticker.htm. 5. Access http://academicprograms.teradata.com/tun/ and sign in under the student registration option, Choose one of the topics related to database and data warehouse that are available on the website and prepare a short presentation for your class.

Team Assignments

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1. Each team will select an online database to explore, such as AOL Music (http://music.aol.com), or the Internet Movie Database (www.imdb.com). Explore these websites to see what information they provide for you. List the entities and the attributes that the websites must track in their databases. Diagram the relationship between the entities you have identified.

2. In groups, create a data model for a pet store to include: • customer data • product data • employee data • financial data • vendor data • sales data • inventory data • building data • other data (specify) Create attributes (four or more) for each entity. Create relationships between the entities, name the relationships, and create an entity-relationship diagram for the pet store.

Closing Case Document Management At Procter & Gamble The Business Problem The consumer goods giant Procter & Gamble, a huge firm with reported sales of US$79 billion in 2009, develops drugs and over-the-counter medications, among many other products. P&G used advanced IT and business processes, but faced problems managing the vast amounts of documents required for regulatory issues, R&D, and potential litigation. As a result, P&G wanted to gain control of its company documents to reduce administrative oversight of its paper documents, reduce costs, accelerate R&D initiatives, and improve tracking and signature compliance. To do this, they moved from paperbased to electronic document management. A document management system (DMS) converts paper documents into electronic form, and then indexes and stores them according to company policy. But the transition from paper to electronic required major changes in workflow and how new products are approved. Any delay in bringing a product to market can be costly (more than $1 million a day). During the approval process, documents are sent back and forth between researchers, quality-control personnel, clinicians, marketing specialists, Instructor’s Manual . ..

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and external partners. Under the manual system, P&G used microfiche and stored them in rented warehouses, using indexes that were time-consuming and not always accurate. The IT Solution Moving to an electronic system required archival methods, and signatures that were digitally-reproduced, authenticated and legally binding. For this P&G adopted the pharmaceutical industry’s Signatures and Authentication for Everyone (SAFE) BioPharma Association standard. P&G also chose Adobe LiveCycle Reader Extensions and Adobe LiveCycle PDF Generator, which were implemented by IT integrator Cardinal Solutions. The software was integrated with P&G’s existing eLab Notebook program. The Adobe products can take large R&D files (experiment notes and other documents from a variety of software) in many formats, and convert them into documents that can be reviewed, approved, and signed electronically. LiveCycle Reader embeds usage rights within the document, locking out any unauthorized users. The Results With a digital signature affixed to a file, an auditor can immediately view the document and all related activity (audit trail.) The DMS is estimated to save each employee an average of 30 minutes of signing and archiving time per week, which in a huge company like P&G, can add up to tens of millions of dollars in productivity gains. The system also facilitates quick and easy retrieval of data that may be required by government regulators or business partners. P&G’s German operations now use digital signatures for its marketing department, to approve instructions to retailers, on how products should be displayed in stores. However, P&G has to provide training to overcome any employee reluctance in using the new technology.

Questions 1. Company documents are one type of data that companies must manage. Compare the benefits of P&G’s document management system with the benefits of database technology. Do you notice any differences? Support your answer. Electronic documents are stored on digital media and are made accessible via data access technologies, similar to database technologies. Like a DBMS, document management systems: • provide easy and fast retrieval of documents • reduce storage costs • facilitate processing • can offer better security of documents Instructor’s Manual .

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facilitate the sharing of documents.

One difference is the compliance and legal requirements for converting, storing and retrieving documents, e.g. digital signatures, audit trails, etc. Another might be the diversity of input sources and formats. 2. This case has described numerous advantages of P&G’s move to electronic documents. Describe the disadvantages of electronic documents. Disadvantages may include: • difficulty of acceptance by users • conversion cost and effort • vulnerability due to documents being online

CLUB IT Databases at Club IT Go to the Club IT link on the WileyPLUS website. There you will find assignments that will ask you to advise the club owners on how they can use databases to track information for their business.

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Network Applications

Chapter Outline 5.1 Describe the three major applications of computer networks. 5.2 Discuss the various technologies, applications, and websites that fall under the umbrella of Web 2.0. 5.3 Differentiate between e-learning and distance learning. 5.4 Understand the advantages and disadvantages of telecommuting for employers and employees.

Teaching Tips and Strategies LANs This chapter will help students to learn the importance of telecommunications. You could start the class off by discussing computer labs at your university. Let students know that a computer lab is set up on a LAN and demonstrate to students that it doesn’t matter which computer you log on to, the network will remember the settings. Then discuss the different types of software that are available in the computer lab by writing a list on the board (such as Word, Internet Explorer, Excel, Antivirus software). Ask students what the drawbacks would be to putting a copy of each of these software applications on the computer. General responses are, “It would take too much time.” “The IT department would spend a lot of time installing software updates to the system.” Discuss how none of the software is installed on the computers in the lab, and all the software is actually on a central server. This not only gives the network administrator the ability to update software, limit access to different software and areas of the school, but also it makes it easier to protect the network from hackers and viruses. When the network administrator updates antivirus software it updates it on all of the computers etc. After the students have a good understanding of LANs, move the discussion toward their experiences using the Internet (this gets them involved). Many universities have access to T1 lines in dorm rooms. Ask them if their Internet connections ever slow down. The point is to show them that when too many users are accessing the Internet/network, this causes the systems to slow down due to lack of bandwidth. You could wrap up the discussion regarding the importance of bandwidth and explain to students the importance of LANs in offices, retail operations, warehouses, etc. Students seem to relate to LANs because most students have some type of experience using them. How the Internet Has Changed The Internet was developed in the early 1960’s by scientists at the US government Department of Defense (ARPA.) It took nearly three decades to develop the necessary Instructor’s Manual .

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advancements in telecommunications and networks, to bring it to the current level of usage and popularity. America is now a global economy and owes much of that success to telecommunications and networks. Companies that have offices in America and Japan can now know each other’s sales or daily operations in real time. The advent of e-mail has changed the way employees interact in a business. Fifteen years ago, employees communicated mostly in the region that they worked. The ‘corporate office’ would send faxes or memos via the postal service, but many employees didn’t even know this information existed, not to mention the time and cost involved in this process. Today, companies are networked together and communicate via e-mail. The corporate office can communicate with field offices from all over the world. The number of employees in many Human Resource departments has been reduced and much of the information has been placed online or on a shared network. For instance, many employees can now check their company pension plans or RSPs and make contributions or changes online. Some companies have put their human resource manual online and saved a great deal of money in printing costs. As Telecommunication/Networks continue to advance, business models of many corporations are improving. For example: Fidelity, Scotiabank, and many other mutual fund managers have been able to reduce telephone staff because they now have customers’ accounts online. Customers can go to these Internet sites 24/7 and make changes to their accounts, or view their account information online. This not only increases customer satisfaction (no longer have to wait on hold, or have to have someone else tell you what your account balance is), it also reduces costs for these fund giants.

Review Questions Section 5.1 – Before you go on… 1. Describe the three network applications that were discussed in this section and the tools and technologies that support each one. The three applications are discovery, communications, and collaboration. Discovery tools are search engines, metasearch engines, sites with material in foreign languages and portals. Communication tools are e-mail, call centers, chat rooms and VoIP. Collaboration tools include workflow technologies, document management, groupware, tele/videoconferencing, instant messaging and whiteboards. 2. Identify the business conditions that have made videoconferencing more important. Some of the business conditions include • the increased costs related to air travel, food and hotels • inconvenience/delays and risks related to security in airports and aircraft Instructor’s Manual .

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increased pressures to be competitive the time away from the office the need to include more participants and make quality decisions

Section 5.2 – Before you go on… 1. Describe the underlying technologies that support Web 2.0. Web 2.0 websites are interactive and technologies include: • AJAX – a technique that allows portions of web pages to reload with fresh data instead of requiring the entire web page to reload • Tagging – allows users to place information in multiple, overlapping associations rather than in rigid categories • Blogs – websites open to the public in which the site creator expresses his or her feelings or opinions • Wikis – site in which anyone can post material and make changes to other material • RSS – allows users to receive information they want when they want it without having to surf thousands of websites. RSS allows anyone to syndicate (publish) a blog or any other content • Podcasts – digital audio file that is distributed over the Web using RSS for playback on portable media players or personal computers • Videocasts – same as a podcast, but it is a digital video file 2. What are the main categories of Web 2.0 sites? The three main categories are: • Social Networking - easy, interactive way to communicate and collaborate with others on the Web, e.g. Facebook, Twitter, YouTube • Aggregators – websites that provide collections of content from the Web, e.g. Bloglines, Digg • Mashups - take different content from a number of other websites and mix them together to create a new kind of content, e.g. Yahoo Pipes Section 5.3 – Before you go on… 1. Differentiate between e-learning and distance learning. E-learning refers to learning supported by web technologies, e.g. Desire2Learn and Blackboard. Distance learning refers to any learning situation in which the teachers and students do not meet face to face. E-learning can be used in conventional classroom situations. When e-learning is used in situations where students and teachers do not meet face to face, it is a type of distance learning. 2.

Describe virtual universities.

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Virtual universities are online universities from which students take classes from their homes or from any off-site location, via the Internet. Some universities offer thousands of courses and dozens of degrees to students worldwide, others offer limited courses and degrees but use innovative teaching methods and multimedia support in the traditional classroom. Section 5.4 – Before you go on… 1. What is telecommuting? Do you think you would like to telecommute? Telecommuting is an arrangement whereby employees can work at home, at a customer’s premises, in special work places, or while traveling, using a computer linked to their place of employment. While most students may prefer to telecommute, some may have good reasons not to. 2. What are the advantages and disadvantages of telecommuting from the viewpoint of the employee? From the viewpoint of the organization? The advantages from an employee’s perspective are the flexibility and reduced travel costs. It can also reduce stress and improve family life partly because travel to work is eliminated. There are some disadvantages for the employee such as feelings of isolation, in come cases lower pay and different benefits. They may also have no workplace visibility, potentially slower promotions, lack of socialization, and face greater distractions. From the employer’s perspective the advantages often mean increased productivity, reduced real estate costs, the ability to retain skilled employees and the ability to attract employees, who live outside a reasonable commuting distance. Disadvantages include difficulty in supervising work, potential connectivity and security problems, and training costs along with high cost of providing and maintaining equipment. There is also the risk that it might be misused by some employees.

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“IT’s About Business” Questions 5.1 – Centre For Addiction And Mental Health Portal 1. What type of portal is KnowledgeX? KnowledgeX is an affinity portal. 2. How do mental health professionals benefit from using this portal? The portal enables the collaboration and sharing of resources and best practices based on the expertise and experience of other experts in the field. Resources include include videos, podcasts, toolkits, research papers, conference presentations, and collaboration tools. This enables the professionals to keep up with best practices and provide the best care for patients. 3. What challenges can KnowledgeX pose for CAMH? As with all new technologies, there is ongoing change and CAMH will have to adapt to these changes. This will require adequate budgeting and training for their staff. Ensuring proper security and privacy are also concerns. 5.2 – Starting A Restaurant With The Help Of A Few Friends 1. In planning for and developing the Elements restaurant, what are the advantages of crowdsourcing? The disadvantages? The major advantages include: • no major cash outlay is required and the issues were explored quickly at little cost • financial payment is not required • the entrepreneurs were able to tap a wider range of talent • by listening to the crowd, they gained first-hand insight on their customers' desires • by distributing operational tasks to the group members best suited to perform them, crowdsourcing puts the wisdom of the group to work. • there is an earned sense of ownership through contribution and collaboration • group members can earn points towards a share in the profit (if any) allocated to community members. • crowdsourcing helps to build community, which is rewarding and beneficial. Disadvantages may be: • the community may be limited in size and/or interest (depending on the idea) Instructor’s Manual .

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financial rewards are limited the task is outsourced to an undefined public rather than a specific group risk of incompetent members or members with a conflicting agenda

2. Can the Elements restaurant be successful if “it’s not about the money, it’s the community?” Why or why not? Support your answer. Yes – since many people are now interested in protecting the environment, healthy eating and building community. Also, many may not be motivated only by money. 5.3 – How Does A Small Vineyard Build Its Brand? 1. Visit Stormhoek’s website at www.stormhoek.com. Discuss the advantages and disadvantages of Stormhoek’s having a blog for a website. Students’ impressions will vary, but some advantages of having a blog for a website should be evident: • it’s different and likely to attract attention • the viewer is immediately connected with Stormhoek’s customers • the feedback it provides to management • it utilizes social networking (viral marketing) principles • it generates a vested interest in consumers • it is less expensive and time-consuming to maintain the website On the other hand, the downside would be: • Stormhoek may have very little control over where the blog goes • the impact of negative comments • it does not facilitate ecommerce transactions • the difficulty in maintaining momentum (interest may fade over time).

2. Should Stormhoek use traditional marketing methods to go along with its Web 2.0 marketing efforts? How? Why? Support your answer. Student responses could incorporate the points discussed in 1. above. 5.4 – Twitter Becomes Surprisingly Useful 1. What other challenges could businesses face when using Twitter? Some challenges to consider are: • the effect of advertising messages in multithreaded conversation between their customer Instructor’s Manual .

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social networking can impact nearly every function of a business, so which department has responsibility? tweet sources can be external or internal, so the organization has to listen carefully and develop rules for how they deal with all types of responses (compliments to inappropriate messages). how to suitably reflect the organizational culture to customers and employees in new ways. the need to upgrade their HR and legal protocols (i.e. guidelines and training). how to measure the results and report the ROI on social networking.

2. How could your university benefit from the use of Twitter? Provide specific examples. Students should examine the organizational, cultural and academic nature of their university to determine the benefits and provide examples.

Discussion Questions 1. How would you describe Web 2.0 to someone who has not taken a course in information systems? In the first generation of the Web, communications were one-way. Web 2.0 provides two-way communications using many options such as blogs, chat rooms, wikis, workflow technologies, groupware and others. 2. If you were the CEO of a company, would you pay any attention to blogs about your company? Why or why not? If yes, would you consider some blogs to be more important or reliable than others? If so, which ones? How would you find blogs relating to your company? Definitely, it is a prime opportunity to learn what customers have to say and to monitor the tone of the feedback. It is crucial, particularly if the feedback is negative, that the company respond when necessary to set the record straight. The blogs that deal with the company’s products and services or those of their competitors would be more important. Blogs usually provide a search function. 3. Is it a good idea for a business major to join LinkedIn (www.linkedin.com) as a student? Why or why not? Any opportunity that business students have to participate in networking opportunities should be taken. LinkedIn makes its money from advertising and service for recruiting, sales and investment. Instructor’s Manual .

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4. How are the network applications of communication and collaboration related? Do communication tools also support collaboration? Give examples. Collaboration is dependent upon communication. The method of communicating and what tools are available dictate what type of collaboration tools can be used and how fast they will carry the data needed for audio, visual and data transmissions. Video conferencing, for example, depends on high-speed lines to provide uninterrupted audio and a good display. Students may provide examples of white board use, and audio conferencing as well as groupware dependent upon WAN connectivity. 5. Access this article from The Atlantic: “Is Google Making Us Stupid?” (www.theatlantic.com/doc/200807/google). Do you think Google is making us stupid? Support your answer. Nicholas Carr proposes that the Internet (Google) is affecting our brains. Spending a lot of time online, searching and surfing, he believes the Net is becoming a universal medium - the conduit for most of the information that flows through our mind. But this facility, he believes comes at a price. As Marshall McLuhan pointed out, media are not just passive channels of information, but they also shape the process of thought. Carr feels the Net is chipping away our capacity for concentration and contemplation. Our minds now expects to take in information the way the Net distributes it: in a swiftly moving stream of particles. He also points out that a recent study of online research habits, conducted by scholars at University College London, reported that “It is clear that users are not reading online in the traditional sense; indeed there are signs that new forms of “reading” are emerging as users “power browse” horizontally through titles, contents pages and abstracts going for quick wins. It almost seems that they go online to avoid reading in the traditional sense. “ Google continually refines the algorithms that control how people find information and extract meaning from it. The company has declared that its mission is “to organize the world’s information and make it universally accessible and useful.” It seeks to develop “the perfect search engine,” which it defines as something that “understands exactly what you mean and gives you back exactly what you want.” In Google’s view, “information is a kind of commodity that can be mined and processed with industrial efficiency. The more pieces of information we can access and the faster we can extract their gist, the more productive we become as thinkers. “ These points briefly summarize the article and could provide a framework for students’ arguments for or against the thesis of the article.

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6. Search Google for recent news about telecommuting in Canada. Identify obstacles to telecommuting and report on why firms don’t use telecommuting more often? Are these factors the same for every province in Canada? Are they the same for every country? Answers will vary.

Closing Case Canadian Firm Helps Build Social Networks The Business Problem Business firms now use social networking technologies for different purposes and in different ways, e.g. to attract new customers, keep existing ones, get feedback from customers, and to advertise and create awareness. Twitter and Facebook are among the most popular social networking websites used by business. However, for more personalized and interactive contact with their customers, firms need other technology tools to provide them with the flexibility to change content and permit customers to personalize their interaction.

The IT Solution A Toronto firm Filemobile, provides the technical tools and consulting services for firms to create their own mini social network site, which can connect to their Facebook or Twitter sites and act as a back end for these sites. This provides much more functionality than the generic Facebook or Twitter, by allowing users to upload videos and send comments. Many companies include these two websites as integral parts of their marketing campaigns. The Results For example, MSN launched a website using Filemobile to track the Olympic torch relay across Canada, leading up to the 2010 Winter Games in Vancouver. In addition to mapping the trek, the site allowed users to share their own relay stories. The CBC ran a very successful campaign to find a replacement song for its popular show Hockey Night in Canada. The Filemobile website allowed users to upload their songs. Hasbro set up an on-line version of their popular Monopoly game, attracting five million participants. Monopoly City Streets used a mashup of the game and Google Maps to permit users to virtually buy and build on millions of streets around the globe. Mars (maker of Skittles candy), set up a website where visitors could create their own personalized Skittle avatars. The ultimate aim is to gain points by getting fans to support your avatar. Instructor’s Manual .

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Questions

1. What is different about Filemobile and traditional social networking websites such as Facebook or Twitter? LO2 Filemobile provides the technical tools and consulting services for the user to first create their own (mini) social networking site, which then uses Facebook or Twitter as the front-end to connect to the public. 2.

Provide examples of how your university could take advantage of social networking technology using Filemobile. LO3 Students should come up with creative ways their university can use Filemobile.

Problem-Solving Activities 1. You plan to take a two-week vacation in Australia this year. Using the Internet, find information that will help you plan the trip. Such information includes, but is not limited to, the following: a. b. c. d. e. f. g. h. i. j. k.

geographical location and weather conditions at the time of your trip; major tourist attractions and recreational facilities; travel arrangements (airlines, approximate fares); car rental and local tours; alternatives for accommodation (within a moderate budget) and food; estimated cost of the vacation (travel, lodging, food, recreation, shopping, etc.); country regulations regarding the entrance of your dog, which you would like to take with you; shopping; passport information (either to obtain one or to renew one); and information on the country’s language and culture. What else do you think you should research before going to Australia? Students will research the Australian vacation details and provide answers to the items listed as well as think of some additional aspects of this vacation location.

2. From your own experience or from the vendor’s information, list the major capabilities of Lotus Notes/Domino. Do the same for Microsoft Exchange. Compare and contrast the products. Explain how the products can be used to support knowledge workers and managers. Students will research both pieces of groupware and compare them in a short report. Instructor’s Manual .

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3. Visit websites of companies that manufacture telepresence products for the Internet. Prepare a report. Differentiate between telepresence products and videoconferencing products. Students will locate conferencing product descriptions and organize it into a report. 4. Access Google videos and search for “Cisco Magic.” This video shows Cisco’s nextgeneration telepresence system. Compare and contrast it with current telepresence systems. Students will access and view the video material and prepare the report as required. 5. Access the website of your university. Does the website provide high-quality information (right amount, clear, accurate, etc.)? Do you think a high-school student who is thinking of attending your university would feel the same way? Student will access their university website and answer based on its content. 6. Enter www.programmableweb.com and study the various services that the website offers. Learn about how to create mashups and then propose a mashup of your own. Present your mashup to the class. Students will access the website, note their services and use the tutorial on mashups to create one of their own. Prepare to present in class.

7. Compare and contrast Google Sites (www.google.com/sites) and Microsoft Office Live (www.liveoffi ce.com). Which site would you use to create your own website? Explain your choice. Students will access the websites and explore how to use them to create a website of their own. They should indicate their preference and be prepared to explain why. 8. Research the companies involved in Internet telephony (voice over IP). Compare their offerings as to price, necessary technologies, ease of installation, etc. Which company is the most attractive to you? Which company might be the most attractive for a large business looking to use VoIP? Students should discuss their preferences for voice communications and compare them with those of a large company.

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9. Access some of the alternative search engines at www.readwriteweb.com/archives/top_100_alternative_search_engines.php. Search for the same terms on several of the alternative search engines and on Google. Compare the results on breadth (number of results found) and precision (results are what you were looking for). L01 Students should search for various terms and present their results in a report format.. 10. Second Life (www.secondlife.com) is a three-dimensional, on-line world built and owned by its residents. Residents of Second Life are avatars who have been created by real-world people. Access Second Life, learn about it, and create your own avatar to explore this world. Make a presentation to your class as to how it could be used as a learning tool in this course or any other course in your major. LO2 Students should explore the virtual world of Second Life and prepare a presentation on how it can support learning. 11. Access the Boeing Supplier Portal information page at www.boeing.com/companyoffi ces/doingbiz/supplier_portal/Supplier_Portal.htm. Describe some of the many services offered there for Boeing’s suppliers. Students should explore the Boeing Supplier portal and note the many services offered there. 12. Surf the Web to find a procurement (sourcing) portal and a distribution portal. (Other than the examples in this chapter.) List the features they have in common and those features that are unique. Students should locate a procurement and a distribution portal and note the common features and those that are unique.

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Team Assignments 1. Assign each group member to an integrated group support tool kit (e.g., SharePoint Workspace, Jive, Google Docs, SharePoint, or Quickr). Have each member visit the website of the commercial developer and obtain information about this product. As a group, prepare a comparative table of the major similarities and differences among the kits. LO1 2. Have each team download a free trial of SharePoint Workspace from http://sharepoint.microsoft.com/en-us/Pages/Try-It.aspx. Install the software on the members’ PCs and arrange collaborative sessions. What can the free software do for you? What are its limitations? LO1 3. Each team should pick a subject that needs aggregation. Set up the plans for an aggregator website to accomplish this mission. Present to the class. LO2 4. Each team will pick one of the following: Art in Canada (http://www.artincanada.com/) CanadianArt (http://www.canadianart.ca/) and Canada Council for the Arts (http://www.canadacouncil.ca/). Compare and contrast these sites as to features and ease of use. Present each product to the class. Each group will collaborate on writing a report on its product using Google Docs. 5. Enter www.podcasting-tools.com. Explain how to record a podcast and make it available on the web. Each team will create a podcast on some idea in this course and make it available online.

CLUB IT Telecommunications at Club IT Go to the Club IT link on the WileyPLUS website. There you will find assignments that ask you to advise the club owners on how they can use databases to track information for their business.

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LEGAL NOTICE

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E-Business and E-Commerce

Chapter Outline 6.1

Describe the different types of electronic commerce, its mechanisms, and its limitations.

6.2.

Describe B2C electronic commerce, e-tailing, and on-line advertising.

6.3.

Describe the main types of B2B electronic commerce

6.4.

Explain the main types of on-line electronic payment methods.

6.5.

Explain the main ethical and legal issues relating to e-commerce.

Teaching Tips and Strategies Most students will remember that Amazon.com was the first online book retailer. Students might remember that eBay was the first auction company. To initiate discussion, you might ask students if they have heard of companies such as eToys.com (online toy store), Pets.com (online pet store), Webvan.com (online grocery store), Boo.com (first fashion e-tailer on the Internet), Borders.com (online bookstore), and Wingspan.com (first online bank). The Failure of Early E-business models Ask students to explain what the websites had in common. The answers will vary, but the point I suggest that you want to make is that all of the above mentioned companies no longer operate as an e-business. To effectively push this point, explain that none of the above companies are operating today as e-businesses (Borders.com is now being run by Amazon.com). Ask students to speculate as to the reasons for such failures. Some of the reasons for failure are: •

The business models were all wrong. Some of the businesses were never going to make money from day one. For instance: Did anyone stop to figure out how much it was going to cost to mail a bag of 50lb dog food from Pets.com? Or the more obvious question: Is the customer willing to pay the postage?

•

Individuals tend to overestimate the demand for a new technology. When E-commerce became the topic of choice during the middle 1990’s, consumers and companies alike thought that this new phenomenon was going to change business forever. With the launch of eToys.com, many analysts predicted

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the demise of Toys “R” Us as we know it. Bricks-and-mortar companies were in serious trouble; no longer would people go to stores and buy items, because they could save time by doing it online. The bricks-and-mortar stores immediately launched a counter attack and started creating their own online stores. Money was no object, and the old-economy companies as we knew them were facing extinction (or so it was perceived). Racing to help get a piece of the bricks-andmortars market share, companies without strong business plans rushed to the Internet to try to get the first mover advantage. This set off a chain of events not just in the stock market, but within bricks-and-mortar companies. Bricks-andmortar companies were forced to give these ventures billions of dollars in funding only to find that it costs a lot of money to operate an Internet company, such as warehouse costs, distribution costs, advertising costs, logistics etc. Some experts in the field feel that it costs more to run an Internet website than a bricks-andmortar retailer. Not to mention, some consumers would never want to buy items online, or are capable of buying items online. As with the Y2K bug, most of the dire predictions of the bricks-and mortarcompanies collapsing never came true. Toys “R” Us is still here (and they created an alliance with Amazon.com to distribute their toys; they are no longer in the Internet retail business), Wal-Mart is still the leading department store, with Target/Kohl’s a close second, while eToys and many other dotcoms are distant memories of what used to be. So, what went wrong? Are the Internet entrepreneurs, stockholders, and venture capitalists idiots? Maybe it’s how we as humans overrate technology (Casey, 2001). •

Bricks-and-mortar stores will no longer exist because of the costs savings involved with being a 100% online store (less overhead, no physical store etc.) This type of thinking is reversing itself. The trend now is for bricks-and-mortar stores to add an online component. When we look at the failure of Webvan, the literature tells us that the most significant reason for their failure was warehouse costs. Safeway/Kroger, in certain cities, offers online grocery services for a fee. Unlike Webvan, which invested millions of dollars in warehouses, Safeway/Kroger utilized their physical store location to distribute groceries to customers that wished to order online. This type of strategy may improve the likelihood of online profitability.

Startup.com There is a video that you can rent at your local video store called Startup.com. It is a documentary that follows the entrepreneurs themselves from launch through the demise of the company. It includes the actual entrepreneurs and it takes the viewer through the process of trying to get venture capital, to the actual launch of the website and then through the demise of Govworks.com. After students watch this movie they start to understand that many different websites were built on speculation and not an accurate business plan. I have watched Startup.com over five times and I still cannot tell you how Instructor’s Manual .

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they were going to make money. This is the number one reason that so many e-commerce companies failed. Without profit, companies will not survive. To wrap up this chapter you might discuss, “What will the future of e-commerce be?” This tends to get students excited. Some possible suggestions for where e-commerce is heading are in this chapter: online job ads, market research, online payments and ethical aspects of e-commerce. Evolving E-business Models The reasons for e-commerce failures, 1999-2000, according to Boston Consulting Group (2001):

Reason Poor revenue, cost, and profit model No competitive advantage Lack of benefit to consumers Problems in organization and execution Ineffective warehouse management and fulfillment Firm’s website conflicted with existing business partners *Note: for some companies, failure was attributed to more than one reason

Number of companies* 59 55 34 15 8 6 Source: Boston Consulting Group 2001

This table illustrates that the number one reason for dotcom failures is poor business models. Many e-commerce companies were launched with the mentality, “If we build it they will come and make us rich.” Many e-commerce companies went out of business due to high fulfillment costs. The table below illustrates the point (explanations were added so that you can get a better understanding of why online costs are higher). Online’s high fulfillment costs Average sale (discount)

superstores $US100 -10.00

Shipping and handling

---

Sales tax

7.00 This cost is not applicable to online stores and was

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online $US100 -20.00 Notice that the discount for web-based businesses is twice that of a bricks-andmortar store 11.00 This cost is one of the reasons that many companies offer the above discounts to help subsidize the costs --Chapter 6

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Customer pays

supposed to give the e-tailers a cost advantage 97.00

Cost of sales

67.41

Shipping and handling Gross profit

2.88 26.71

Operating Expenses Rent

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Labour

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Total

10.75 Stores have more employees --2.50 Bricks-and-mortar stores still need to advertise, but at a lower rate than pure Internet companies. For instance, if you are driving down the road and see a Chapters, you might drop in to get a book. You won’t know to buy a book at Amazon.ca unless you are aware of it, because they have no physical stores. 14.21

Operating Cost per order

12.50

Website development Marketing

91.00 Notice the customer is still paying less… 57.60 Notice that the costs of an online e-tailer is lower 9.90 23.50 The costs for an online etailer are lower, yet the gross profit is smaller. This is a problem…

4.55 Online stores were supposed to have fewer costs, because they only needed warehouses and should have been able get space cheaper. This never materialized. Many dotcoms found that running a pure e-tailer cost more in warehouses than first imagined. --2.90 17.29 One of the drawbacks of online stores is that unless the business advertises quite a bit, the customer will not know they exist.

24.74 -1.24 Is it any wonder that hundreds of e-commerce companies went out of business?

Source: Thomas Wetzel Partners

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Looking at the above table, it is easy to see that pure-play Internet companies have serious disadvantages that are hard to overcome. Other studies have been done that signify that marketing costs of an online retailer are the primary disadvantages to being a totally online retailer. Red Herring and Forrester Research (2000) found that pure-play Internet companies spend 90 percent of their revenue on Marketing costs compared to 24 percent for bricks-and-mortar with online operations. With a paltry 10 percent of revenue left over, it is no wonder that dotcom companies were failing at an alarming rate. Do all of these statistics mean that e-commerce cannot be successful? That is not what the data is describing. E-commerce has changed the way companies do business and the way we as consumers interact with companies. Business models are evolving to make ecommerce more profitable. The trend currently is for companies that have bricks-andmortar operations to extend to the Internet, and to use the competitive advantages these companies have created to forge ahead with e-commerce.

Review Questions Section 6.1 - Before You Go On… 1. Define e-commerce, and distinguish it from e-business. Electronic Commerce (EC) describes the buying and selling of products, services and information via computer networks, primarily the Internet. The term Electronic Business attempts to expand the definition of EC to include more than buying and selling, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization. In this book we use the term electronic commerce in its broadest scope, as basically equivalent to electronic business. 2. Differentiate among B2C, B2B, C2C and B2E electronic commerce. Business-to-consumer EC involves companies selling directly to consumers over the Internet. A company that has been specifically created to do business on the Internet may do business-to-consumer sales, or an existing company may open its own online business. Business-to-business EC occurs when two or more businesses make transactions electronically. Consumer-to-consumer EC occurs when consumers transact business over sites which allow direct selling of goods or services to other consumers, such as eBay.com, or other auction sites. Business-to-employee occurs when an employer uses EC internally to provide information and services to its employees such as training, discounted insurance, travel packages and tickets to events. 3. Define e-government. Instructor’s Manual .

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E-government is the use of Internet technology in general and e-commerce in particular to deliver information and public services to citizens, public employees, business partners, and suppliers. It is also an efficient way to do business within the government. 4. Describe forward and reverse auctions. A forward auction is used by sellers as a selling channel to many potential buyers. The buyers competitively bid on the item until the auction closes with the highest bidder winning. In reverse auctions, the buyer, usually an organization, seeks to buy a product or service and suppliers submit bids. Generally, the lowest-price bidder wins. 5. List some benefits and limitations of e-commerce. Benefits • makes national and international markets more accessible • lowers the costs of processing, distributing and retrieving information • customers are able to access products and services around the clock • major benefit to society is the ability to easily and conveniently deliver information, services and products to people in cities, rural areas and developing countries Limitations • lack of universally accepted security standards • insufficient bandwidth • expensive accessibility • unresolved legal issues • perception of being insecure • lacking in critical mass of sellers and buyers Section 6.2 - Before You Go On… 1. Describe electronic storefronts and malls. Electronic storefronts provide consumer and business access to electronic retailing usually by way of an online electronic catalog. Referred to as solo storefronts, these businesses maintain their own Internet name and web site and may be extensions of physical stores. An electronic mall, also know as a cybermall, is a collection of individual shops under one Internet address. The basic idea of an electronic mall is the same as that of a regular shopping mall—to provide a one-stop shopping place that offers many products and services. 2. Describe various types of online services (for example, cyberbanking, securities trading, job searches, travel services). Instructor’s Manual .

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Students will describe the features of various online services including the benefits of convenience, fast response, security, confidence, easy and effective search, accurate and up-to-date information, transaction tracking 3. List the major issues related to e-tailing. • • • • •

Channel conflict – Regular distributors may be alienated when a company decides to sell directly online. Companies need to recognize this problem and possibly find a way to restructure distributor relationships. Conflicts within clicks-and-mortar organizations – This is conflict between the existing organization and the ‘click’ side, resulting in disagreements on pricing, resource allocation, and logistics services. Order fulfillment and logistics – The task of arranging to fill very small orders to many customers and arrange for the correct handling of returns is difficult. Viability and risk of online e-tailers – It is very easy to enter into e-tailing, but difficult to stay afloat due to heavy competition and problems associated with order fulfillment and demand forecasting. Appropriate revenue models – Basing e-tailing success on advertising revenues has not proved to be viable.

4. Describe online advertising, its methods, and its benefits. Online advertising is an attempt to disseminate information by way of the Internet in order to affect a buyer-seller transaction. Online advertising can be customized to make it media-rich, dynamic and interactive. Online ads can efficiently use the convergence of text, audio, graphics and animation, and they can be interactive and targeted to specific interest groups and/or individuals. Among the benefits of online advertising is that ads can be updated any time at minimal cost. Online ads can reach a very large numbers of potential buyers all over the world. Online ads are sometimes cheaper in comparison to print, radio, or television ads. Finally, the use of the Internet itself is growing very rapidly, and more viewers are moving to the Internet at the expense of TV. 5. What are spamming, permission marketing and viral marketing? Spamming is the indiscriminate distribution of electronic ads without permission of the receiver. Spamming can be done via e-mail or pop-up/pop-under ads. Spam often contains objectionable content as well. Most computer users are inundated with spam and try to reduce the flow by blocking and filtering software. By contrast, in permission marketing, senders ask recipients’ permission to receive online advertising and e-mail. Users can select in and easily select out. Viral marketing refers to online “word-of-mouth” marketing. It relies on people to forward messages to friends, suggesting that they “check this out.” Section 6.3 - Before You Go On… Instructor’s Manual .

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1. Briefly differentiate between the sell-side marketplace and the buy-side marketplace. The sell-side marketplace is a B2B model in which organizations sell to other organizations from their own private e-marketplace and/or from a third-party site. Electronic catalogues and forward auctions are used extensively. This is similar to B2C, but the customer is another organization rather than an individual. The buy-side marketplace is a B2B model in which organizations buy needed products or services from other organizations electronically. This marketplace often uses a reverse-auction environment.

2. Briefly differentiate among vertical exchanges, horizontal exchanges and functional exchanges. Exchanges are e-marketplaces in which there are many sellers and many buyers; entry is open to all. These are frequently owned and operated by third parties or a consortium of the major businesses in the industry. Participants in exchanges can reduce cycle trading time and cost and can find new markets and trading partners around the globe through the exchange. ▪ ▪ ▪

Vertical exchanges connect buyers and sellers in a given industry. Horizontal exchanges connect buyers and sellers across many industries and are used mainly for MRO materials. Functional exchanges help businesses when needed services such as temporary help or extra office space are traded on an “as-needed” basis.

Section 6.4 - Before You Go On… 1. List the various electronic payment mechanisms. Which of these mechanisms are most often used for B2B payments? The following instruments are acceptable means of electronic payment: electronic credit cards, electronic checks, purchasing cards, electronic cash (stored-value money cards, smart cards, and person-to-person payments), and electronic bill presentation and payment. In B2B, electronic checks are most commonly used for payments. 2. What are micropayments? Micropayments are small payments of a few dollars or less. Smart cards are ideal for making payments of such small amounts needed for coffee shop purchases or train or subway fares. Section 6.5 - Before You Go On… Instructor’s Manual .

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1. List some ethical issues in EC. Many of the ethical issues related to IT apply also to EC. Four key issues are privacy, the human element, web tracking, and disintermediation. Privacy. Central issues are: (1) protecting the buyer’s identity and (2) monitoring employee use of the Internet. The human element. The implementation of EC broaches the issue of who is to control the selling process. Commissioned salespeople are accustomed to being in control of the flow of certain information. EC sales can lead to sales personnel dissatisfaction, as customers bypass the salesperson and commissions become more distributed throughout the company. Web tracking. Programs and “cookie” files raise a batch of privacy concerns. These programs and files can be stored on your PC, organized by website, and then accessed every time you revisit that website. Disintermediation. The use of EC may result in the elimination of some of a company’s employees as well as traditional intermediaries such as brokers and agents. This result is called disintermediation, that is, “eliminating the intermediary.” The manner in which these people, especially employees, are treated may raise ethical issues, such as how to handle their displacement. 2. List the major legal issues of EC. • •

•

• •

Fraud on the Internet is a major concern, involving deception on the part of the buyers and/or the sellers. Among the major legal issues of EC are taxes and other fees. Federal, provincial, and local authorities are scrambling to figure out how to get a piece of the revenue created electronically. The problem is particularly complex for interprovincial and international commerce. For example, some claim that even the province in which a server is located deserves to receive some sales tax from an EC transaction. Another opinion is that the province in which the seller is located deserves the entire sales tax. In addition to sales tax, there is a question about where (and, in some case whether) electronic sellers should pay business license tax, income tax, franchise fees, gross-receipts tax, excise tax, privilege tax, and utility tax. Moreover, how should the tax be controlled? Domain name. Domain names cause problems when several companies that have similar names compete over a domain name that is not a registered trademark. Copyright. Intellectual property in EC, in its various forms, is protected by copyright laws and cannot be used freely.

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Other legal issues. Several other issues are emerging as challenges to the existing system. o What are the rules of electronic contracting, and whose jurisdiction prevails when buyers, broker, and sellers are in different provinces and/or countries? o When are electronic documents admissible as evidence in the courts of law? What is the alternative if they are not? o Liability of errors, malfunction of software, or theft and fraudulent use of data may be difficult to prove. How is such liability determined? o What is considered misrepresentation? Where should you take legal action against misrepresentation? o The use of multiple networks and trading partners makes the documentation of responsibility difficult. How is such a problem overcome?

3. Describe buyer protection in EC. Buyer protection in EC is just a listing of tips for safe electronic shopping: • Look for reliable brand names at sites like Wal-Mart Online, Disney Online, and Amazon.com. (Make sure the sites are authentic before purchasing, perhaps by phoning the parent company.) • Search any unfamiliar selling site for the company’s address and phone and fax numbers. Call up and quiz the employees about the sellers. • Check out the seller with the local Chamber of Commerce or Better Business Bureau. Look for seals of authenticity such as TRUSTe. • Investigate how secure the seller’s site is by reading the posted privacy notice, and evaluate how well the site is organized (which might reflect how much effort has gone into its development and subsequent security). • Examine the money-back guarantees, warranties, and service agreements. • Compare prices to those in bricks-and-mortar stores; prices that are too low are too good to be true and some “catch” is probably involved. • Ask friends what they know. Find testimonials and endorsements. • Find out what your rights are in case of a dispute. • Consult the National Fraud Information Center www.fraud.org or the RCMP www.rcmp.ca/fio/commercial_crime_e.htm. • Check www.consumerworld.org for a listing of useful resources. 4. Describe seller protection in EC. Seller protection includes authentication, non-repudiation, and escrow services. These help protect against: • consumers who refuse to pay or pay with bad checks • consumers who claim merchandise did not arrive • the illegal/unauthorized use of a person’s name • the use of their unique words and phrases, slogans, and web addresses Instructor’s Manual .

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“IT’s About Business” Questions 6.1 –Zappos And Twitter 1. 1. If you were shopping for shoes, would a text message update from the CEO of Zappos influence your purchase decision? Why or why not? Students can reflect on their feelings about social networking (and Twitter in particular) to come up with answers. 2.

Many e-marketers are championing the use of technologies like Twitter as an electronic form of wordof-mouth marketing. In your opinion, will this strategy be effective? Why or why not?

Again have students consider how as users of Twitter, they will relate to SN technologies as “word-of-mouth” marketing. Defend their answers. 6.2 – Canadian Tire Closes Its On-Line Store 1. What reasons led Canadian Tire to stop its on-line operations? The reasons included cost savings and focusing on its core businesses. High shipping costs were also to blame for the decision, as some of the merchandise available, were large bulky items. 2. What future implications (positive or negative) could this decision have for Canadian Tire? Discuss the opportunities and threats derived from this decision. As other large retailers (e.g. Walmart and HBC) do not sell on-line, Canadian Tire is not threatened by this decision. Furthermore, there is a high market entry cost for competitors, who will face the same issue of high shipping costs for large items. However, they could face threats from competitors in niche areas, (e.g. clothing, sporting goods, etc.) moving into ecommerce. Also, Sears Canada has developed a new on-line strategy, redesigned and launched a new on-line store. In fact, Canadian Tire is not abandoning their online strategy completely, as they will continue to operate their informational website and sell gift cards on-line. Also, in 2011 the company plans to test a new service in selected markets allowing shoppers to buy merchandise on-line and pick up the items at a store. However, Canadian Tire CEO Stephen Wetmore indicated that the goal for the future will be to reinstate an e-commerce site. 3. What characteristics make a product suitable for on-line shopping?

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The product should be light in weight, small in size, not fragile or perishable and compliant with government regulations. 6.3 – Google Opens Apps On-Line Marketplace 1. What type of B2B electronic commerce would the new Google on-line marketplace fit into? This would fit into buy-side marketplace.

2. Would an electronic auction (forward or reverse) be appropriate for the Google online application marketplace? Why or why not? The new Google Apps Marketplace is intended to sell applications and professional services that complement Google apps and other Google enterprise products, from third-party developers. Therefore, a competitive process (auction) in which either a seller solicits consecutive bids from buyers or a buyer solicits bids from sellers, would not be appropriate. A consistent price and quick procurement would be in Google’s (and the buyers’) interest. However, students may argue the benefits of an electronic auction.

Discussion Questions 1. Discuss the major limitations of e-commerce. Which of these limitations are likely to disappear? Why? LO1 Many technical limitations will disappear with the universal acceptance of standards for software features, quality, and security. Bandwidth increases through the new Internet initiative will eliminate much of the current strain that is placed upon networks by multimedia EC applications. Asynchronous Transfer Mode (ATM) as an architecture for the new high-bandwidth environment will give a needed boost to Internet response time. Internet access will become more ubiquitous as service providers are consolidated and monthly fees are reduced. Discuss the anticipated implementation of Internet Protocol (IP) version six (IPv6) under TCP/IP and its potential to eliminate the current shortage of IP addresses. Non-technical limitations include legal issues as yet unresolved. Many buyers are unwilling to switch from bricks-and-mortar stores to online, and there is a general lack of trust in Internet security. Many sellers and buyers are waiting for EC to stabilize before they participate in electronic transactions; in many product areas there is an insufficient number of sellers and buyers needed for profitable EC operations. Instructor’s Manual .

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As experience accumulates and technology improves, the ratio of EC benefits to cost will increase, resulting in an even greater rate of EC adoption. Effective jurisprudence to address the myriad of legal issues will likely improve as more cases are tried and law schools design curriculum specific to EC. 2. Discuss the reasons for having multiple EC business models. LO1 There are multiple EC business models because there are many ways to generate revenues via electronic commerce. 3. Distinguish between business-to-business forward auctions and buyers’ bids for requests for quotation. LO1 Business-to-business auctions take place when several companies engage in bartering by selling their products or services to an exchange member, instead of receiving cash they receive trade dollars (credits). The transaction is much like a credit card transaction with the use of a plastic card and an authorization number requested by the seller for transactions over a pre-specified amount. Other members of the trade exchange can then use the trade dollars earned. The trade dollar system simplifies the old cumbersome barter system that was limited to the exchange of products and services between two parties. Buyer’s bids for RFQs involve the bidder entering their offered price and the highest bidder wins the available inventory at their offered price. Typically the detailed list of all the product specifications, warranties, and so forth, is included, and purchases are made using a credit card. EBay.com is perhaps among the best examples of buyers’ bidding RFQs via the Web, with hundreds of thousands of different items are offered in several types of auctions. 4. Discuss the benefits to sellers and buyers of a B2B exchange. LO3 Participants in B2B exchanges reduce cycle trading time and cost. They can also find new markets and trading partners around the globe through the exchange. 5. What are the major benefits of G2C electronic commerce? LO3 One of the major benefits of G2C EC is giving the people a chance to see what the government does every day and to give feedback. For instance, any individual from any state can now contact their MPs or MPPs with a couple clicks of their mouse. 6. Discuss the various ways to pay online in B2C. Which one(s) would you prefer and why? LO4

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Electronic credit cards, electronic cash (stored value money cards, smart cards, person to person payments). Students will have their own preferences. 7. Why is order fulfillment in B2C considered difficult? LO2 It is difficult to find the products to be shipped quickly, pack the products, deliver products purchased online to the customer quickly, collect payment, and handle returned goods. 8. Discuss the reasons for EC failures. LO2 Some of the reasons include: • incorrect revenue model • lack of strategy and contingency funding • inability to attract enough customers • lack of funding • channel conflict with distributors • too much online competition in standard products • poor order-fulfillment infrastructure • lack of qualified management 9. Should Mr. Coffee sell coffee makers online? Hint: Take a look at the discussion of channel conflict in this chapter. LO2 Channel conflict can be an issue with online sales for clicks-and-mortar organizations; however, to forgo online sales entirely just because it poses a challenge may not be a wise decision.

CLOSING CASE Sales Growth At The Heart Of Sears Canada’s New E-Commerce Website The Business Problem Sears Canada, one of the largest retail store chains in Canada, has been losing sales (6.3 percent recently.) On-line sales have also slowed down to single-digit growth at 10 percent of total sales. Other competitors are also entering the e-commerce space e.g. Sport Chek, Lululemon, Harry Rosen and Gap Inc. As competition intensifies, the pressure for Sears Canada to improve its on-line operations has increased. Sears e-commerce website run by Amazon, needed to improve its customer experience on-line, as its platform was not flexible enough to respond to customer inquiries in a timely and effective manner. . Instructor’s Manual .

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The IT Solution Sears Canada decided to update its e-commerce website. They developed a new on-line strategy and redesigned its on-line store. The new website, launched in late 2009, has several interactive features, such as on-line chats, demo videos, and even connections with Facebook and Twitter. It is now able to carry every item that is in the retail stores and catalogues. Appealing to younger buyers, the e-commerce website is continuously updated with new products such as sports collectibles, eco-clothing, and other items that are not carried in Sears’s stores or catalogues. The customer experience is further improved by the site’s automatic search technique that suggests related products and services when a shopper looks for an item. The Results The new e-commerce website has provided Sears with the flexibility to respond to customers’ questions interactively. Sears also saves on inventory costs since suppliers can ship merchandize directly to customers. One of the greatest benefits is the enormous range of products it carries: about 350,000 items are available online - more than twice the number in a typical Sears department store. They also plan to expand their e-commerce team and implement a number of additional web initiatives, such as mobile phone applications, and an application for drive-through purchase pickups. The company is even considering an e-marketplace where other businesses could sell their wares at Sears.ca, for a commission. The new Sears.ca e-commerce website should help Sears Canada achieve its most important business goal: sales growth. Questions 1. Why was Sears Canada so focused on improving the customer experience in its new ecommerce website? LO2 Sears Canada was pressured to improve its on-line operations, run by e-tailing giant Amazon. They needed to improve their customer experience on-line, as their platform was not flexible enough to respond to customer inquiries in a timely and effective manner. For example, not all products available in the retail and catalogue channels were available on-line. Also, other firms in direct competition with Sears, like Sport Chek, Lululemon and Harry Rosen are entering the e-commerce space. As competition increased, Sears sales decreased by 6.3 percent in a recent year and on-line sales also slowed down to single-digit growth to 10 percent of total sales.

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2. What role do new social media tools play in on-line stores such as Sears.ca? What are the benefits? What are the disadvantages? LO1 Social media tools can be used to: • project the organization culture out to the public • communicate effectively with customers • obtain customer input in shaping their brand and products • build a sense of community with customers • focus on a particular demographic (e.g. young consumers) • handle customer issues and respond to customers’ questions interactively However, on the other hand they can be used to express consumer discontent and distract from actual e-commerce transactions. 3. Visit Sears Canada’s website and evaluate its website. How appealing is it for the younger shoppers? How could Sears Canada make its website more appealing to this market segment? LO4 Student responses will vary depending on their preferences and experience.

4. Identify any other on-line business models that Sears Canada could benefit from. LO1 Student should evaluate the models listed in the chapter and be prepared to justify their choices. Likely considerations might be: On-line direct marketing, Viral marketing, Product customization, Electronic marketplaces/exchanges, and Membership Only 5. What are the main obstacles Sears Canada faces with its new e-commerce strategy? LO1 Likely obstacles may include the challenge of: • keeping the site current with product information • responding quickly to customer requests/issues • keeping the e-commerce team well-trained and committed • maintaining good supplier relationships • keeping the website technically operational and current with emerging social media tools • maintaining the competitive advantage.

6. Is channel conflict a problem for Sears Canada? Explain why or why not. LO2 Instructor’s Manual .

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This should not be an issue since Sears is not a supplier to other retailers. Their suppliers can ship directly to the customer and customers may choose to pick up their items at a store or the proposed drive-thru.

Problem-Solving Activities 1. Assume you are interested in buying a car. You can find information about cars at numerous websites. Access five of them for information about new and used cars, financing, and insurance. Decide what car you want to buy. Configure your car by going to the car manufacturer’s website. Finally, try to find the car from www.autobytel.com. What information is most supportive of your decision-making process? Write a report about your experience. Student responses will vary about their individual preferences and experiences online. 2. Compare the various electronic payment methods. Specifically, collect information from the vendors cited in the chapter and find more using Google. Pay attention to security level, speed, cost, and convenience. Student responses will vary depending on which vendor sites they visit. 3. Conduct a study on selling diamonds and gems online. Access such sites as www.bluenile.com, www.diamond.com, www.thaigem.com, www.tiffany.com, and www.jewelryexchange.com. a. What features are used in these sites to educate buyers about gemstones? Several sites have “education” links with comprehensive information about how to evaluate and select gems. b. How do these sites attract buyers? A very powerful way is by simply keying in “diamonds” to Yahoo! and Google. Several of the sites appeared at the top of the list. c. How do these sites increase trust for online purchasing? These sites have enhanced security features, making visitors to the site more comfortable with the prospect of doing business with them. d. What customer service features do these sites provide? In addition to financing and insurance, some of the sites provide options to design you own jewelry, and tell your proposal stories. Instructor’s Manual .

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4. Access www.nacha.org. What is NACHA? What is its role? What is the ACH? Who are the key participants in an ACH e-payment? Describe the “pilot” projects currently underway at ACH. NACHA is an electronic payments system organization with 11,000 financial institutions. ACH is an automated clearing house. The key participants in the ACH e-payment process are financial institutions. One of the pilots is the DCT Pilot, a description from the website follows. “Today, depository financial institutions that receive image or paper check deposits from their customers may clear them through image exchange with Paying Banks that are image enabled and with which exchange agreements exist. If check images cannot be exchanged, the Collecting Bank must present either the original paper check or a substitute check/Image Replacement Document (IRD) for payment. Image exchange volume is showing rapid growth, but many financial institutions expect that a significant number of paper clearings will remain by 2009. With thousands of Paying Banks unable to accept images for presentment, billions of checks are still processed by exchanging paper. The DCT Pilot will help determine what role the ACH Network can play in facilitating the clearing and settlement of low-value consumer paper checks as the industry searches for further cost savings and product enhancements in this period of convergence.” 5. Access www.theshoppingnetwork.com. What are the different ways in which it generates revenue? C.I. Interactive, Inc. is a full service internet marketing and development company. They analysis clients’ business and determine viable uses of the internet for the business. C.I. generates revenue by developing the business strategy, Website design and technical tools necessary to achieve marketing goals. Their services and tools cover the full range of internet services, including custom website design, application development, Flash animation, e-commerce solutions, e-mail marketing and SEO.

6. Access www.queendom.com. Examine its offerings and try some of them. What type of electronic commerce is this? How does this website generate revenue? This B2C site generates is revenue from sponsor advertising, and subscriptions. Professionals in various areas such as Human Resources can subscribe and set up testing and results tracking for groups of employees. 7. Access www.ediets.com. Prepare a list of all the services the company provides. Identify its revenue model. Instructor’s Manual .

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This site provides many services including recipes, meal plans and meal delivery, and support plans. 8. Access www.theknot.com. Identify its revenue sources. Revenues are from business partner advertising on this wedding oriented website which provides suggestions and advice for wedding planning. 9. Access www.mint.com. Identify its revenue model. What are the risks of giving this website your credit and debit card numbers, as well as your bank account number? Mint provides online money management services, keeping track of your financial assets and investments. The software offers advice on maximizing returns. Since this service is free, Mint will most likely look to advertising to generate real income. While it does not actually maintain a copy of users’ financial data (it is stored elsewhere on Yodlee), having sensitive data online always poses risks, especially since user passwords can be compromised. 10. Access www.bytheowner.com. Prepare a list of services available on this site. Then prepare a list of advantages derived by the users and advantages to realtors. Are there any disadvantages? For whom? LO1 Services are available for both buyer and seller. They include such things as multiple listings, market information, financing availability and rates, credit information, home values, etc. They offer tiered services at pro-rated fees, which reduce the potential income of real estate agents. 11. Enter www.alibaba.com. Identify the site’s capabilities. Look at the site’s private trading room. Write a report. How can such a site help a person who is making a purchase? LO4 This is an extensive B2B site offering many different products. Using this intermediary for contact and purchase is a safeguard in the same way as eBay and Paypal. 12. Enter www.campusfood.com. Explore the site. Why is the site so successful? Could you start a competing one? Why or why not? LO1 & LO2 This site provides a consolidated view of area restaurants around campuses, and handles delivery and payments with online payment mechanisms. 13. Enter www.dell.ca, go to “desktops,” and configure a system. Register to“my cart” (no obligation). What calculators are used there? What are the advantages of this Instructor’s Manual .

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process as compared with buying a computer in a physical store? What are the disadvantages? LO1 & LO2 Each student will have a customized result and should submit findings. 14. Enter www.checkfree.fiserv.com and www.lmlpayment.com and find their services. Prepare a report. LO4 Both sites are online payment processors, clearing houses for cheque processing. Students will expand and add their own observations. 15. Access various travel sites such as www.travelocity.ca, www.orbitz.com, www.expedia.ca, and www.sidestep.com. Compare these websites for ease of use and usefulness. Note differences among the sites. If you ask each site for the itinerary, which one gives you the best information and the best deals? LO2 The above sites will provide students with a variety of conditional options and pricing – like comparing apples and oranges! 16. Access www.outofservice.com and answer the musical taste and personality survey. When you have finished, click on Results and see what your musical tastes say about your personality. How accurate are the findings about you? LO2 Students may find the results interesting, if not accurate.

Team Assignments 1. Have each team study a major bank or credit union with an extensive EC strategy. For examples, look at ING Direct (www.ingdirect.ca), Desjardins (www.desjardins.com), Scotiabank (www.scotiabank.ca), and HSBC (www.hsbc.ca). Each team should attempt to convince the class that its e-bank activities are the best. LO2 2. Assign each team to one industry vertical. An industry vertical is a group of industries in the same business, such as financial services, insurance, healthcare, manufacturing, telecommunications, pharmaceuticals, chemicals, and so on. Each team will find five real-world applications of the major business-to-business models listed in the chapter. (Try success stories of vendors and EC-related magazines.) Examine the problems they solve or the opportunities they exploit. LO1 3. Have teams investigate how B2B payments are made in global trade. Consider instruments such as electronic letters of credit and e-cheques. Visit www.tradecard.com and examine its services to small and medium size enterprises (SMEs). Also, investigate what Visa and MasterCard are offering. Finally, check Citicorp and some German and Japanese banks. LO4 Instructor’s Manual .

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CLUB IT E-commerce at Club IT Go to the Club IT link on the WileyPLUS website to find assignments that will ask you to help Club IT’s owners leverage e-commerce.

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Wireless, Mobile Computing, and Mobile Commerce

Learning Objectives 7.1

Discuss today’s wireless devices and wireless transmission media.

7.2

Describe wireless networks according to their effective distance.

7.3

Define mobile computing and mobile commerce and describe m-commerce applications.

7.4

Define pervasive computing and its underlying technologies.

7.5

Examine threats to wireless networks.

Teaching Tips and Strategies This is an eye-opening chapter for students. Most students will not need to be told, “What’s in it for me?” While most students have a personal computer and some type of Internet connection, there will probably not be as much familiarity with mobile computing applications other than simple cell phone usage. Discussion Suggestions I suggest starting the class by having students brainstorm information and services that they would like to have available through mobile computing. Focus especially on location-based commerce to really pique their interest. Then, have them think about what it means for the businesses that would have to provide that information and services. In other words, how will businesses have to transform themselves to satisfy consumer demands for mobile computing applications? Then, lead into a discussion of the benefits and drawbacks of mobile computing. Next, discuss privacy rights associated with mobile computing, especially RFID and Auto-ID. Most students feel that the government and employers have no right to monitor your movements and location. This leads to a great discussion. I sometimes will break the class into different groups and assign them different perspectives. One point of view would be from the employer. I ask the students: If you were an employer of mobile workers (such as service technicians), would you want to pay for an employee to run personal errands while on the job? The other perspective would be the employee’s. Isn’t it all right to use company time and equipment to stop at the dry cleaners while on the job? When having this discussion with students, try to remain impartial, at least at first. Remaining impartial helps students to complete their thoughts on the benefits and drawbacks of mobile computing and related privacy concerns. Instructor’s Manual .

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Review Questions Section 7.1 - Before You Go On… 1. Describe today’s wireless devices. Pagers – one way wireless devices PDA – personal digital assistant, a small hand-held wireless device. GPS – global position system, a satellite-based tracking system that enables the determination of a GPS device’s location. Smartphone – Internet-enabled cell phones that can support mobile applications. BlackBerry - a wireless email device for mobile professionals, providing easy access to office email ‘anytime and anywhere.’ 2. Describe the various types of wireless transmission media. Microwave, satellite and infrared are line-of-sight methods while radio signals travel through the air and can pass through walls. Section 7.2 - Before You Go On… 1. What is Bluetooth? What is a WLAN? Bluetooth is a device used to create small wireless radio-based personal networks for up to 8 devices within 10 meters on low power. WLANs, or Wireless local area networks, are local area networks without the cables; used to transmit and receive data via radio waves. 2. Describe Wi-Fi, cellular service, and WiMax. Wireless Fidelity known as Wi-Fi, is based on IEEE standards: 802.11a transmits up to 54 Mbps within 10-30 metres 802.11b transmits up to 11 Mbps within 30-50 metres 802.11g transmits up to 54 Mbps and is compatible with 802.11b 802.11n is the new (to be released late 2008) standard based on a multi-streaming technique. It transmits up to 74Mbps and there are already many products on the market using it. Major benefits are low cost and the ability to provide simple Internet access. Cellular services communicate with radio antennas placed within adjacent areas called cells. It uses digital signals and can transmit voice and data up to 384 Kbps when the device is used while walking, 128 Kbps while in a car, and up to 2Mbps when the device is in a fixed location. Instructor’s Manual .

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WiMax – worldwide interoperability for microwave access has a range of up to 50 km compared to 91 meters for Wi-Fi and 9 meters for Bluetooth. It has a transfer rate of 75 Mbps. Section 7.3 - Before You Go On… 1. What are the major drivers of mobile computing? • • • • • •

widespread availability of mobile devices no need for a PC the “Cell Phone Culture” declining Prices bandwidth improvement convenience

2. Describe mobile portals and voice portals. Mobile portals - A customer interaction channel that aggregates content and services for mobile users. Services include news, sports, e-mail, entertainment, travel information, restaurant and event information, games, TV and movie listings, community services, and stock trading. Voice Portals – A website with an audio interface. Voice portals are not websites in the normal sense, but rather are phone numbers which connect to a website where you can request information verbally. The system finds the information and then translates it into a computer generated voice reply. An example is 511, the travel information line developed by Tellme.com. 3. Describe wireless financial services. These services include banking, wireless payments and micropayments, wireless wallets, bill-payment services, brokerage services, and money transfers. They provide a convenient way to transact business regardless of time and place. 4. List some of the major intrabusiness wireless applications. • • •

There are applications which help owners of rental vehicles, commercial transport and heavy equipment fleets. They can determine location of the vehicles and control messages which are sent to and from vehicles. Insurance companies use wireless digital cameras to take pictures at accident scenes and transmit to processing centres. Mystery customers who use hand-held devices to file reports after evaluating national restaurant franchise locations.

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Section 7.4 - Before You Go On… 1. Define pervasive computing, RFID, and wireless sensor networks. Pervasive computing is invisible “everywhere computing” that is embedded in the objects around us, including the floor, light fixtures, cars, the washing machine, cell phones, our clothes, etc. RFID is the technology which allows manufacturers to attach tags with antennae and computer chips on goods. They can then track their movement using radio signals. This technology was developed to replace barcodes. Wireless sensor networks are networks of interconnected, battery-powered, wireless sensors called motes that are placed into the physical environment. The motes collect data from many points over an extended space. Each mote contains processing, storage, and radio frequency sensors and antennae. This technology enables more accurate information to be gathered. 2. Differentiate between RFID and RuBee and describe the benefits of each. RFID is a group of technologies used to help machines identify objects. It provides automatic identification using radio waves to identify bulk or individual items. (See 7.4 Before You Go On…, Q.1) RuBee is a bidirectional protocol based on magnetic waves. Superior in many ways to RFID, it works in harsh environments (near metal and water and in the presence of electromagnetic noise). Though slower than RFID, it can support networks of many thousands of tags and has an area range of 3 meters to 15 meters. Section 7.5 - Before You Go On… 1. Describe the four major threats to the security of wireless networks. The four threats are rogue access points, war driving, eavesdropping, and RF jamming. 2. Which of these threats is the most dangerous for a business? Which is the most dangerous for an individual? Support your answers. Threats most dangerous for a business are war driving and RF jamming while rogue access points are most effective with public hotspots. Eavesdropping is effective for both business and individual networks.

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“IT’s About Business” Questions 7.1 – “Sci-Fi” Wireless Communications Comes To Toronto East General Hospital 1. Discuss the reasons that it is more difficult to implement a WLAN in a hospital than in another type of organization. Some of the reasons include: • the many regulations and security requirements of a health-care environment makes it extremely complicated • caregivers are highly mobile, their job duties are time-critical and impact people’s lives • care givers often require the use of both hands, limiting the types of devices • older hospitals tend to be constructed of concrete block and steel making wireless transmission difficult. 2. There are a large variety of end users in a hospital, including physicians, nurses, pharmacists, and laboratory technicians on the clinical side, as well as executives, managers, and other personnel on the business side. Discuss how you would gather end-user requirements for a WLAN from these diverse groups. Would you expect to encounter conflicting requirements? If so, how would you manage the user requirements process? Because of the diverse groups and varying interests students may want to consider the use of surveys/questionnaires, focus group, townhall meetings and other means of inclusive communication. Conflicting requirements can be expected to arise and frequent discussions and feedback would help in managing the requirements process. The use of prototypes will also be very useful. 3.

Describe ways that physicians, nurses, pharmacists, or laboratory technicians could use the Vocera system to improve productivity or workplace Safety. • • • • •

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The Vocera system, a wireless LAN with VOIP enables hands-free communication with voice recognition It is simple - users tap a communication device around their neck, to activate it It offers hands-free usage – voice can be used for emergencies or for broadcasts Vocera is integrated into the hospital communications network e.g. cellular phone system It has also improved employee and patient safety – users can double-tap an emergency button for security or to indicate a patient crisis requiring immediate assistance. 7-5

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7.2 – Starbucks’ “Third Place” Strategy 1.

Compare the strategies of Starbucks and McDonald’s. How does making Wi-Fi available in their outlets affect each strategy? Starbucks’ strategy is to entertain - it wants its customers to think of their stores as the third place they go after home and the office to get a coffee and relax. So they encourage their customers to sit around by providing free Wi-Fi access and mood music. Whereas, McDonald’s (as typical of fast-food places) encourage a fast turnaround - purchase and consume as quickly as possible. Providing WiFi would conflict with this strategy.

2. Discuss possible security problems for Starbucks customers as they use a public WiFi hotspot. Hint: We discuss wireless security in Section 7.5. Since wireless is essentially a radio broadcast, it is inherently insecure. It is susceptible to a number of types of active, passive or jamming attacks, e.g. rouge access points, evil twin and war driving. While encryption (WPA/WEP) and other security measures may be applied, in the Starbucks environment they want the system available to all their customers, so this puts customers at risk. They should certainly isolate their business system from the free public network. 7.3 – Radio-Frequency Identification At The Beijing Olympics 1. Describe the advantages of using RFID and sensors for food and beverage tracking versus using bar codes. By combining the two technologies, Olympic coordinators were not only able to track the shipments, but also ensure that the contents met the stipulated conditions and temperature requirements. 2. The RFID-enabled tickets were much more expensive than an ordinary printed ticket (particularly when you add in the readers). Discuss the advantages of the RFIDenabled tickets that outweighed the extra costs. The small size of the RFID chip (0.3 square millimeters and 50 microns in thickness) made it very light and convenient for ticket holders. Including the ticket holder's information on the chip eliminated counterfeiting of the tickets. RFID technology permitted more data to be carried than printed tickets and offered greater flexibility in handling the various types of tickets. Instructor’s Manual .

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RFID tickets were more efficient and faster to process. The RFID system was paired with sensor technology, to record the temperature of food shipments.

7.4 - Wireless Common Sense 1.

Describe controls that should be present over wireless networks that can prevent unauthorized access. Both technical and organizational controls should be applied. For example: • Implement MAC ID filtering, static IP addressing, rigorous 802.11 WiFi security (technical) • Define effective wireless security policies that guard against unauthorized access and require the use of strong passwords (organizational)

What are some good practices that users of smart phones can engage in to help prevent infection by spyware or other viruses? • • •

Be cautious about downloading software upgrades and third party apps – ensure they are approved by the manufacturer or from a trusted provider Install some type of intrusion detection software Research and keep informed on current threats

Discuss the advantages and disadvantages of a wireless network to organizations such as Lakehead University. Advantages: • Less expensive that wired networks • Easier to install • Provides flexibility and ease of use • Can cover wider areas (campus-wide coverage) • Compatible with current technology and familiar to users Disadvantages: • Security risks • Health concerns with WiFi waves (especially on the young) • More difficult to monitor and control

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Discussion Questions 1. Discuss how m-commerce can expand the reach of e-business. (LO 3) In the traditional computing environment, users have to come to a computer in order to utilize its applications. The need to be linked by wires to computing resources limited their usefulness to people who must be mobile while on the job. M-commerce is a natural extension of e-business, only done in a wireless environment. M-commerce serves the needs of an increasingly mobile work force and consumer population. 2. Discuss how mobile computing can solve some of the problems of the digital divide. (LO 1) With wireless devices becoming cheaper and cheaper, and the individual’s ability to take those devices to locations where they can connect, often for free, it enables the user who may not have access to a computer at home, to be able to use the devices to connect to the Internet and to gain the benefits that otherwise would not be available. 3. List three to four major advantages of wireless commerce to consumers, and explain what benefits they provide to consumers. (LO 3) •

•

• •

Access to expertise. For example, medical service providers in remote locations could communicate in real time with specialists in other places to provide specialized consultations. Consumers would benefit due to better access to specialized expertise without the inconvenience or expense of traveling to a different location for the consultation. Access to information. For example, mobile portals provide consumers access to a personalized set of content and services regardless of location. This enables the consumer to always have specified information available regardless of location. Customized advertising. For example, location-based advertising can deliver information and coupons to inform consumers about shops, malls, and restaurants close to their current location. Access to services. For example, wireless banking enables consumers to carry out various financial transactions from any location, further eliminating the need to go to a bank or an ATM machine to do banking business.

4. Discuss the ways in which Wi-Fi is being used to support mobile computing and mcommerce. Describe the ways in which Wi-Fi is affecting the use of cellular phones for m-commerce. (LO 3) Wi-Fi is the technical standard underlying most of today’s wireless local area networks (WLANs). A mobile computing device can connect to the Internet Instructor’s Manual .

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easily from public assess points called hotspots. Mobile computing and mcommerce applications can be delivered easily in this environment at adequate communication speeds. Wi-Fi is reducing the need for wireless wide area networks (WWANs) based on cellular technology. 5. You can use location-based tools to help you find your car or the closest gas station. However, some people see location-based tools as an invasion of privacy. Discuss the pros and cons of location-based tools. (LO 1,5) The benefits of location-based tools include the ability to request and receive information that is tailored to your exact location. The concerns about this capability arise from the fact that ‘someone’ can obtain information about your exact location and movements and could use that information in illicit ways. 6. Discuss the benefits of telemetry in health care for the elderly. (LO 3) The devices that are available for seniors to wear around their neck are examples of telemetry that is valuable for seniors who need emergency assistance after a fall or when there is some other medical problem. 7. Discuss how wireless devices can help people with disabilities. (LO 3) Sensors which assist the disabled with the ability to communicate with their computer and other household devices are helpful in allowing them to interface with their environment when they otherwise would not be able to accomplish even basic activities. 8. Some experts say that Wi-Fi is winning the battle with 3G cellular service. Others disagree. Discuss both sides of the argument, and support each one. (LO 2) Students will discuss this in terms of speed, distance and cost and why one of these is preferred over the other. 9. Which of the applications of pervasive computing do you think are likely to gain the greatest market acceptance over the next few years? Why? (LO 4) While student answers will vary, it is likely that applications that add convenience without violating privacy will be the ones to gain market acceptance. For example, an application that provides information about an object for diagnostic and repair purposes would be useful so that the consumer could arrange for repair before the product fails.

Problem-Solving Activities

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1. Enter www.kyocera-wireless.com and view the demos. What is a smart phone? What are its capabilities? How does it differ from a regular cell phone? (LO 1) A smartphone is a mobile phone offering advanced capabilities beyond a typical mobile phone, including PC-like functionality. There is no industry-standard definition of a smartphone and they are made by many manufacturers. The following is an example of smart phone capabilities. (It is taken from http://www.kyocera-wireless.com/2200-phone/features.htm): The Kyocera 2200 Series cell phone takes communication to a new level of convenience, comfort and fun. The lightweight and ergonomic design includes easy-to-use navigation keys, a cool-blue backlit display and keypad, and productivity tools such as voice memos and a contact directory to help streamline your life. Personalized Features: Additional ringers, backlit

keypad,

games,

on-screen

icons

Productivity Features: Alarm clock, Calculator, Contact directory, Headset jack, Installed car kit, Predictive text-input, Speed dialing, Stopwatch Communication Features: 2-way text messaging, Connect to a PC, Data capable, Email, Multiple language options (2255 only), Vibrate alert, Voice memo, Voiceactivated dialing, Web access 2.

Explore www.nokia.com. Prepare a summary of the types of mobile services and applications Nokia currently supports and plans to support in the future. (LO 1) Nokia’s services and apps fall into the following groups: * Ovi by Nokia * Maps * Media Sharing * Messaging * Play Students will investigate each of these and prepare a summary.

Enter www.packetvideo.com. Examine the demos and products and list their capabilities. (LO 1) Students will examine the demos and products and report their findings.

Access www.bluetooth.com. Examine the types of products being enhanced with Bluetooth technology. Present two of these products to the class and explain how they are enhanced by Bluetooth technology. (LO 2)

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Students should enter the Bluetooth Product Zone and elect two products to research and present to the class. 5.

Research the status of 3G and 4G cellular service by visiting www.itu.int, www.4g.co.uk, and www.3gnewsroom.com. Prepare a report on the status of 3G and 4G service based on your findings. (LO 2) Students will visit the sites to determine and compare the status of these services. They should also prepare a status report.

Enter www.pbinsight.com,go to MapInfo Professional and look for location-based services demos. Try all the demos. Find all of the wireless services. Summarize your findings. (LO 3) Under the Resources tab in MapInfo Professional, students will find a trove of video demos and other support materials on PB wireless services. They should summarize their findings.

Enter www.ibm.com. Search for wireless e-business. Research the resulting stories to determine the types of wireless capabilities and applications that IBM’s software and hardware supports. Describe some of the ways these applications have helped specific businesses and industries. (LO 3) Searching for wireless e-business and selecting “Canada” as country, students will find numerous reports on the topic. They should research them and report on their findings.

8. Investigate commercial applications of voice portals. Visit several vendors (e.g., www.tellme.com, www.nuance.com, and others). What capabilities and applications do these vendors offer? (LO 3) Students will research voice portals and report their findings. 9. Investigate commercial uses of GPS. Start with http://gpshome.ssc.nasa.gov; then go to www.neigps. com. Can some of the consumer-oriented products be used in industry? Prepare a report on your findings. Students will investigate and list products that can cross over between the consumer and industry markets. 10. Enter www.onstar.com. What types of fleet services does OnStar provide? Are these any different from the services OnStar provides to individual car owners? (Play the movie.) (LO 3)

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Students will investigate the OnStar fleet services and compare them to those of individual car owners. 11. Access www.itu.int/osg/spu/publications/internetofthings/InternetofThings_summary.pdf. Read about the Internet of Things. What is it? What types of technologies are necessary to support it? Why is it important? (LO 4) This report on “always on” communications, in which new technologies like radio-frequency identification (RFID) and smart computing, promise a world of networked and interconnected devices, should prove interesting to students. They should be able to identify the current technologies and justify their importance. 12. Examine how new data capture devices such as RFID tags help organizations accurately identify and segment their customers for activities such as targeted marketing. Browse the web and develop five potential new applications for RFID technology, not listed in this chapter. What issues would arise if a country’s laws mandated that such devices be embedded in everyone’s body as a national identification system? Students should enjoy researching this topic and describe these wearable devices, as well as the legal, ethical and privacy issues that may arise.

Team Assignments 1. Each team should examine a major vendor of mobile devices (Nokia, Kyocera, Motorola, Palm, BlackBerry, and so on). Each team will research the capabilities and prices of the devices offered by each company and then make a class presentation, the objective of which is to convince the rest of the class that they should buy that company’s products. 2. Each team should explore the commercial applications of m-commerce in one of the following areas: financial services, including banking, stocks, and insurance; marketing and advertising; manufacturing; travel and transportation; human resources management; public services; and health care. Each team will present a report to the class based on their findings. (Start at www. mobiforum.org.) 3. Each team should take one of the following areas—homes, cars, appliances, or other consumer goods such as clothing—and investigate how embedded microprocessors are currently being used and will be used in the future to support consumer-centric services. Each team will present a report to the class based on their findings

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Hats Off To Top Hat For Learning The Business Problem Many different types of software and hardware are used in the classroom. Students use devices (notebooks, laptops, and cell phones), of varying brands and capabilities. They also use the Internet extensively for information and networking. Today, some instructors require multiple textbooks or provide a printed course reader package; others use videos, web-based media and other new technologies. Therefore, educational institutions are looking at ways to engage their students and reduce costs, without investing in additional hardware and software. The IT Solution In 2009, a group of students, faculty, and other technology experts at the University of Waterloo in Ontario, developed a learning platform that would facilitate the use of technology by students. The application enables devices (such as PCs, smart phones or PDAs) to be used in the classroom for quizzes, asking questions and exchanging information between student and teacher. Called monocleCAT (Computer Assisted Teaching), the new application was field tested in early 2010 and combined with Liquid Textbooks (by Toronto-based Symtext), which provides a more fluid capability to books. This service will enable users to request portions of a variety of books in e-book format. The Results It is still too early to tell the impact of monocleCAT and Liquid Textbooks. However, these products may be useful at schools (such as Blyth Academy in Toronto) want to replace textbooks with e-readers. Blyth provided students with Amazon Kindle readers and purchased licenses for textbooks, which are stored on the school’s central server. Licenses for customized on-line texts, such as those provided by Symtext can also be purchased. This cuts costs, reduces the use of paper, provides better tailored educational products, and the facility of using devices that students already possess.

Questions 1. Think about the last few courses that you have taken and the type of work that you completed. How could it have been done using your smart phone, laptop, or an e-book reader? Students can provide a critical assessment and feedback on the application of their smart technologies in previous courses. 2.

What underlying infrastructure, hardware, and software would be needed to effectively use monocleCat or Liquid Textbooks?

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The underlying infrastructure and technology would include: • Institutional LAN with communication and database servers • ISP/Internet access • PCs, tablets, (e.g. iPad), smartphones, (e.g.Blackberry, iPhone and Google's Android), or cell phones. • monocleCAT and Liquid textbook applications • SMS and other social networking apps.

CLUB IT Pervasive Computing at Club IT Go to the Club IT section of the WileyPLUS website to find assignments about using wireless technologies at Club IT.

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Organizational Information Systems

Learning Objectives 8.1

Describe transaction processing systems.

8.2

Describe functional area information systems and the support they provide for each functional area of the organization.

8.3

Describe enterprise resource planning systems, their benefits, and limitations.

Teaching Tips and Strategies This chapter is loaded with information and terminology. Most students will not be familiar with these types of systems. Therefore, focus on the concepts of data needed for management decision-making, supply chain management and how it affects customer service. It would also be useful to discuss the familiar Internet transactions that students make, to order books and other items online. Students will be less likely to be overwhelmed. Retailers and E-tailers It is suggested that you start this chapter by discussing with students why companies such as eToys and Toys “R” Us had trouble delivering goods on time for Christmas. Most students believe it was just mismanagement on the part of the e-tailer. Explain to students that before e-commerce companies existed, only catalogue companies focused on sending a couple of items to many different locations. Another strategy is to give them an example of a company such as Proctor & Gamble. Discuss how P&G is a consumer products company, but they sell all of their products through retailers. They package items such as Crest and sell truckloads to different retailers. The retailers then distribute the items to their stores. Scenario 1 – eToys and Barbies Now with the advent of e-commerce, online e-tailers are in the costly business of sending one or two items to millions of different households. To illustrate the point of how this changes the supply chain you can give the following example: Let’s pretend for a moment that we work for eToys and we get a thousand orders for Barbie in one day. Break the class up into groups and ask them to let you know what will be involved in delivering those Barbies. The students will usually answer that someone will have to go

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pick the Barbies in the warehouse, create an address label for each customer and then package the doll and ship it. Next, remind students that it is even more intricate than that. For example: • • •

The payment process will need to be run (hopefully that system is automated). After the workers pick 1,000 Barbies (and in this example we are assuming that all the Barbies ordered are the same) and labels/invoices are printed automatically, Barbie is boxed, then the package is weighed and postage affixed. Finally, there is the coordination with UPS or FedEx to pick up the package.

The above scenario assumes that eToys has 1,000 Barbies in stock. What if we only had 500? Now we have a backorder problem. Ask students, “If 1,000 Barbies were available to you right now with invoices/labels, how long would it take to box those Barbies up and mail them?” The answers again vary, but students start to realize that the fulfillment process/supply chain is not as easy as it would seem. So, is it any wonder that eToys couldn’t fulfill all their orders? What happens in the above example when we get another 500 orders the next day for Barbie? What if Mattel suddenly doesn’t ship more Barbies to us on time? It changes everything. This is one of the reasons that companies like Circuit City have created relationships with Amazon.com to handle their online store and the delivery process. Going over this example (or one like it) helps students to see how important the supply chain is in the business environment. The example demonstrates how one company’s supply chain can affect another company’s supply chain. Students tend to walk away from this chapter with a better understanding of how much companies rely on each other to do business. Scenario 2 – Car Dealers Many companies have lost business or gone out of business due to supply chain issues. The supply chain is one of the most important variables in a company’s success or failure. Auto dealers have been aware of this type of problem for decades. For example, a car dealer had five green Camrys on his lot. His customers wanted blue, turquoise and red. So, those customers went to a competing dealer and bought their car that day, instead of ordering it from the first dealer. The dealer had the right car, but not in the right colour(s). In this case, because he did not have the desired colour, it cost him three sales. We might not think that is a very big deal, but a $20,000 car x 3 = $60,000 in lost sales! Mismanagement of a supply chain can cost companies ten times that number. The dealer realized he shouldn’t have ordered so many of the same colour of the same model. With the advancement of technology, companies now have more tools then ever before to successfully manage their supply chain. How do companies manage their supply chains better?

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By integrating their systems so that all of the departments can talk to one other (including outside vendors). By being able to track inventory and sales in real time. This will help management to make crucial decisions regarding resources.

Review Questions Section 8.1 - Before You Go On… 1. Define TPS. Transaction processing involves the capture, storage, manipulation and monitoring of data generated from all business activities. These data are inputs to the organization’s database. Transaction Processing Systems (TPSs) must handle high transaction volumes, avoid errors, and provide a highly secure and stable environment. 2. List the key objectives of a TPS. Objectives of a TPS are to • handle large volumes of data • avoid errors • handle large variations in volume (peak times) • avoid downtime • never lose results • maintain privacy and security • facilitate the access to and processing of data Section 8.2 - Before You Go On… 1. What is a functional area information system? List its major characteristics. A functional area information system is one in which the functionality supports one particular area or department such as HR systems, accounting systems, marketing systems and production systems. Typically these were developed independent of each other, resulting in “information silos.” They were designed to increase internal effectiveness and efficiency. 2.

How do information systems benefit the finance and accounting functional area? The accounting and finance functional areas are responsible for managing the money flows into, within, and out of organizations. Information systems can support the major functions, including:

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Financial Planning and Budgeting – to assist in managing the financial assets of the firm Financial Transactions – to manage the transactions generated from sales, purchasing, cash flows, order processing, invoicing, inventory control, payroll, etc. Investment Management – to assist in the complex task of managing the organization’s investments in shares, bonds, real estate, and other assets Control and Auditing - to forecast and/or secure sufficient cashflow for business operation.

3. Explain how POM personnel use information systems to perform their jobs more effectively and efficiently. The POM function is responsible for the processes that transform inputs into useful outputs and for the operation of the business. POM personnel use information systems for many operations, including: in-house logistics and materials management, supply chain management, planning production and operation, computer-integrated manufacturing (CIM), and product life cycle management (PLM). The following are examples of how IS can enable them to perform their jobs more effectively and efficiently: • •

• •

•

In-House Logistics and Materials Management – to assist with ordering, purchasing, inbound logistics (receiving), and outbound logistics (shipping) activities. This improves ordering and manufacturing operations. Inventory Management - determining how much inventory to keep available for manufacturing or for sale to customers. This assists in making the basic decisions of - when to order and how much to order, thereby minimizing carrying costs and ensuring product availability. Quality Control - to provide information about the quality of incoming material and parts, semi-finished and finished products. This reduces losses due to defective parts and delayed processing. Planning Production and Operations - MRP and MRP II MRP - to integrate production, purchasing, and inventory management of interdependent items dealing with production scheduling and inventories. MRP II – to assist in more complex planning involving the allocation of related resources (e.g., money and labour) and integrating MRP with financing and labour activities. MRP I and II support more efficient and cost effective operations; MRP II permits many large companies to allow their suppliers to monitor their inventory levels and ship products as they are needed, thereby eliminating the need to submit purchase orders. Computer-Integrated Manufacturing - Computer-integrated manufacturing: integrates various automated factory systems, to: - simplify manufacturing technologies and techniques - automate as many of the manufacturing processes as possible, and

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- integrate and coordinate design, manufacturing, and related functions via computer systems. Product Life Cycle Management - enables manufacturers to share productrelated data to support product design and development and supply chain operations. Applying web-based collaborative technologies to product development, PLM can integrate disparate functions, such as a manufacturing process and the logistics that support it. This collaboration forms a single team that manages the product from inception through completion.

What are the most important HRIS applications? The most important HRIS applications are: • Recruitment - finding potential employees, evaluating them, and deciding which ones to hire. • Human Resources Maintenance and Development – for continual evaluation, maintenance, training, and development of employees. • Human Resources Planning and Management – planning and managing fundamental human resources functions, e.g. Payroll, Benefits Administration and Employee Relationship Management.

5. How does an FAIS support management by exception? How does it support ondemand reports? Management by exception requires the ability to establish certain criteria and produce reports using only the necessary and sufficient data that meets those criteria. This aids management by giving them only the information that is necessary for a particular decision. Therefore, all of the other data that is gathered, which is within the norms established by management, can be processed and stored without human intervention, saving many man hours of human scrutiny and evaluation. An FAIS system has the capability of producing reports on-demand by using its flexible, interactive reporting capabilities. This permits managers to query by specifying the appropriate criteria, e.g. timeframes, departments, product lines, etc. Section 8.3 - Before You Go On… 1. Define ERP, and describe its functionalities. Enterprise Resource Planning (ERP) is business software systems that are used for operational planning and administration and for optimizing internal business processes. The best-known vendor of these systems is SAP. It supports every Instructor’s Manual .

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aspect of a company and integrates all functions, such as managing orders, inventory, accounting, human resources, material flows, etc. 2. What are ERP II systems? ERP II systems are interorganizational ERP systems that provide web-enabled links between a company’s key business systems (such as inventory and production) and its customers, suppliers, distributors, and others. These links integrate internal-facing ERP applications with the external-focused applications of supply chain management and customer relationship management. The goal of these systems is to enable companies to operate most of their business processes using a single web-enabled system of integrated software rather than a variety of separate e-business applications. 3. Differentiate between core ERP modules and extended ERP modules. Core ERP modules include those to support the traditional functions of financial management, operations management, and human resource management. Extended ERP modules also include the following: • • • •

Customer relationship management – to support all aspects of a customer’s relationship with the organization. Supply chain management – to manage the information flows between the stages in a supply chain, to maximize efficiency and effectiveness Business intelligence – to collect information used throughout the organization, organize it, and apply analytical tools to assist managers with decision making; and E-business – to provide two channels of access into ERP system information: one for customers (B2C) and the other for suppliers and partners (B2B).

4. List some drawbacks of ERP software. ERP systems can be extremely complex, expensive and time-consuming to implement. Also, companies may need to change an existing business process to fit the predefined business process of the software. In addition, companies must purchase the entire software package even if they only want to use a few of the modules.

“IT’s About Business” Questions 8.1 - Transaction Processing Systems At Elavon 1. Explain why TPSs are essential to Elavon. Instructor’s Manual .

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Elavon provides secure payment services to a very large global base of customers. As a merchant acquirer, Elavon recruits and underwrites merchants who will accept bank-generated credit cards. Their customers include restaurants, stores, hotels, mail-order businesses, and government agencies. The company processes millions of transactions every day on behalf of its merchant customers, who pay for goods and services using cheques, debit cards, credit cards, and prepaid gift cards. Elavon supplies the hardware and software for systems, such as cash registers, gas pump terminals, and printers. To continue to grow, Elavon must provide consistently fast, high-quality and secure customer service. Therefore, it is essential that their transaction processing systems (TPSs) must be resilient, reliable, secure, always available, and scalable. 2. How do Elavon’s TPSs help the firm adhere to PCI standards? Elavon must adhere to the Payment Card Industry (PCI) Data Security Standards, which prescribe procedures for processing transactions. (If it doesn’t follow these rules, it could be barred from processing transactions.) The PCI standards also require Elavon to demonstrate a separation of duties among employees involved with online transactions, to help reduce errors and fraud. (For example, the person(s) handling cash must not be involved in reconciling bank statements.) Therefore, Elavon has to keep an audit trail – an electronic or paper trail to show the flow of transactions, for any system changes to its TPSs. This attention to its TPSs has helped the company control costs, simplify and maintain regulatory compliance and audits. 8.2 – The World’s Cheapest Car 1. Describe how computer-integrated manufacturing technology enabled Tata to produce the world’s cheapest car. Tata relied on CIM technology (DELMIA) to make a safe and affordable car. The software allowed Tata to not only design the cars, but also to design the processes for building them and even the layouts of the plants. Using existing production lines, the software simulates what the new techniques will do. A computer model is also used to simulate and modify the components, eliminating the need for expensive physical models. Plant efficiency has improved drastically, e.g. reducing the time to change a die on the assembly line. The company’s capacity utilization is now one of the best in the entire global automotive industry and the use of electronic procurement to obtain its inbound products, has provided an average 7 percent saving on its supplies. This enables Tata to produce the world’s cheapest car. 2. The company’s chairman plans to produce the Nano as a kit and encourage entrepreneurs throughout India to assemble and service the car. Discuss the advantages and disadvantages of this policy, first from the perspective of the company and then from Instructor’s Manual .

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the perspective of a prospective entrepreneur. Would you consider setting up a Nano dealership in Canada? Why or why not? Advantages of the modular car for Tata include: • making the car more widely available • simplifying its distribution channels • reducing assembly and testing costs • reducing shipping costs • increasing sales Disadvantages might be: • lowering of quality control and/or service levels • loss of customer contact • threats to customer satisfaction • reduced marketing potential • difficulty of “controlling” entrepreneurs With regard to a prospective entrepreneur, advantages are: • entry into a new, strategic market • opportunities for increased business • developing new skills and techniques The downside: • requires large initial investment and training • competitive market Students should think of the Canadian business and consumer culture and consider the pros and cons, to decide if a Nano dealership would be a worthwhile investment in Canada. 8.3 – The World Bank Undergoes a Transformation 1. Why did the World Bank deploy an ERP system before the other information systems? The ERP system was deployed first to consolidate the various administrative systems to standardize procedures at headquarters and in the field offices. Eight SAP modules were implemented to improve its procurement, materials management, project management, and financial reporting processes. These formed the core of its operations. 2. Was the World Bank’s transformation primarily a result of strategic vision or the effective implementation of information technology? Support your answer. The World Bank transformed itself from a hierarchical source of low-interest loans to a decentralized organization that uses knowledge-sharing technologies to fight poverty and disease in developing nations that are often technologically disenfranchised. Instructor’s Manual .

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The bank’s ambitious goal was to share tools and knowledge with its clients, to not only improve their lives but also their national economies. To accomplish this goal, the bank had to completely overhaul its IT infrastructure and its global communications network. This transformation suggests the result of a strategic vision rather than a consequence of IT improvements.

3. Provide examples of different types of transaction processing that could be completed by the World Bank’s ERP systems. The bank’s ERP systems could provide transaction processing for: • administrative systems – internal accounting, finance and HR processing • records/document management – acquiring, storing, processing and managing the enormous volume of internal and external records/documents • supply chain management – managing the logistics of acquiring and distributing its products and services .

Discussion Questions 1. Describe the role of a TPS in a service organization. (LO 1) Customer orders/requests are entered into the TPS, and are then available for the department which will handle the order. Data is passed to other systems such as CRM, DSS, knowledge management and e-commerce as needed. 2. Describe the relationship between TPS and FAIS. (LO 1, 2) TPSs monitor, store, collect, and process data transactions generated from all business activity. These transactions are the inputs into the organization’s database to be used for subsequent processing. A functional area information system (FAIS) is designed to use those transactions to support lower- and mid-level managers in functional areas. FAISs generate reports (routine, ad-hoc, and exception) and provide information to managers relevant to their specific functional areas. 3. Discuss how IT facilitates the budgeting process. (LO 2) Budgeting is the ability to predict what incomes and expenditures will be for a certain period in the future, with the objective of ensuring that the latter is less than the former or at least balancing the two. This requires knowledge of past performance, as well as the transactional activity in the current period. IT facilitates budgeting by collecting, storing, processing and reporting on this Instructor’s Manual .

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activity. Software tools can also be used to analyse and predict future activity based on the stored data. 4. How can the Internet support investment decisions? (LO 2) Investment decisions require managers to evaluate financial and economic activity, based on reports and financial data provided by diverse institutions, including federal and provincial agencies, universities, research institutions, and financial services firms. Most of this information is available on websites – either free or by subscription. To monitor, interpret, and analyze the huge amounts of on-line financial data, investment analysts would utilize Internet search engines. 5. Why is it logical to organize IT applications by functional areas? (LO 2) Data is collected and flows through an organization based on the functions of various departments. IT systems that mirror those functions in departments support a smooth operation. 6. Discuss the role that IT plays in support of auditing. (LO 2) Organizations need to forecast and secure sufficient cash flow for their operations. Underestimating expenses, overspending, engaging in fraud, and mismanaging financial records can lead to disaster. Consequently, it is essential that organizations effectively control their finances. Internal auditors evaluate the controls within the organization and evaluate the organization’s risk assessment and governance processes. They also prepare for periodic external audits by outside public accounting firms. To assist auditors in these tasks, IT plays a vital role by collecting, analyzing, processing and reporting on the organization’s finances based on their financial data. 7. Investigate the role of the Web in human resources management. (LO 2) After employees are recruited, they must be evaluated, maintained, and developed. The web may be used to support these activities in various ways: • Training – many websites, both internal and external, may deliver corporate training modules/facilities to employees • Payroll – this function is typically automated with paycheques being transferred electronically into employees’ bank accounts. It may also support communication with service providers and government • Benefits administration – this function often requires interaction with insurers, service providers and government • Employee relationship management - to better manage and strengthen relationships with employees, companies can utilize an online call centre for employee information and/or problems. Instructor’s Manual .

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8. Describe the benefits of integrated accounting software packages. (LO 3) Integrated accounting software packages offer the benefits of: • modules that are compatible and work well together • less expensive than acquiring separate modules • easier and faster to implement • they are usually tried and tested • support is simpler and easier to obtain 9. What is the relationship between information silos and enterprise resource planning? (LO 3) Traditional data processing was based on decentralized silos of data reflecting departmental or functional operations. ERP takes a business process view of the overall organization, to integrate the planning, management, and use of all of an organization’s resources and operations. ERP employs a common software platform and database to provide organizational flexibility and agility. Therefore, organizations can react more quickly and suitably to changing business conditions; they can also capitalize on new business opportunities.

Problem-Solving Activities 1. Examine the capabilities of the following (and similar) financial software packages: Financial Analyzer (from Oracle) and CFO Vision (from SAS Institute). Prepare a report comparing the capabilities of the software packages. (LO 1, 2) Students should evaluate the capabilities of the financial packages and prepare a report. 2. Surf the Net and find three free accounting software packages (try www.shareware.com, www.rkom.com, www.tucows.com, and www.passtheshareware.com). Download the software and try it. Compare the ease of use and usefulness of each software package. (LO 1, 2) On selecting the accounting packages, students should evaluate them and perform the comparisons. 3. Examine the capabilities of the following financial software packages: TekPortal (from www.teknowledge.com), Financial Analyzer (from www.oracle.com), and Financial Management (from www.sas.com). Prepare a report comparing the capabilities of the software packages. (LO 1, 2) Students should evaluate the capabilities of the financial packages and prepare a report. Instructor’s Manual .

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4. Find Simply Accounting Basic from Sage Software (http://www.simplyaccounting.com/products/basic) and select the link for First Step. Why is this product recommended for small businesses? (LO 1, 2) NOTE: Students will need to click on Products & Services -> Accounting Solutions to locate First Step. Students will find reasons why it is recommended for small businesses. 5. Enter www.iemployee.com and find the support it provides to human resources management activities. View the demos and prepare a report on the capabilities of the products. (LO 2) Students will prepare a report on the capabilities of their HR products, after reviewing them and using the demos.

6. Enter www.microsoft.com/dynamics/sl/product/demos.mspx. View three of the demos in different functional areas of your choice. Prepare a report on each product’s capabilities. (LO 2) On viewing the demos, students will report on the capabilities of each product they choose. 7. Enter www.sas.com and access revenue optimization there. Explain how the software helps in optimizing prices. (LO 3) Students should evaluate their revenue optimization software and explain its role in optimizing prices.

8. Go to www.caplus.com/articles.aspx?aid=160 and read the success stories. What type of financial software are these organizations implementing? What are the advantages and disadvantages of the software? (LO 1, 2, 3) On reading the success stories of CA-Plus business implementations, students will determine the types of financial applications and their advantages and disadvantages.

Team Assignments Students will follow directions on these activities and submit a thoughtful report on each. 1. The class is divided into groups. Each group member represents a major functional area: accounting/finance, sales/marketing, production/operations management, and Instructor’s Manual .

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human resources. Find and describe several examples of processes that require the integration of functional information systems in a company of your choice. Each group will also show the interfaces to the other functional areas. 2. Each group is to investigate an HRM software vendor (Oracle, Peoplesoft [now owned by Oracle], SAP, Lawson Software, and others) The group should prepare a list of all HRM functionalities supported by the software. Then each of the groups makes a presentation to convince the class that its vendor is the best. 3. Each group in the class will be assigned to a major ERP vendor such as SAP, Oracle, Lawson Software, and others. Members of the groups will investigate topics such as (a) web connections, (b) use of business intelligence tools, (c) relationship to CRM and to EC, and (d) major capabilities by the specific vendor. Each group will prepare a presentation for the class, trying to convince the class why the group’s software is best for a local company known to the students (for example, a supermarket chain).

Closing Case The No-Fly Zone The Business Problem Following 9/11, the U.S. government sought to improve the intelligence data accessible to key agencies. For example, suspicions of an FBI agent about Middle Eastern men training in Arizona flight schools prior to September 2001, were ignored by the agent’s superiors. These men turned out to be among the 9/11 hijackers. Therefore, the government’s objectives were to prevent such lapses in the future, and to foresee future attacks by consolidating and sharing data among intelligence and law-enforcement agencies and the White House. The IT Solutions The Bush administration established the National Counterterrorism Center (NCTC) to organize and standardize information about suspected terrorists from multiple government agencies into a single database. As a result, the NCTC faced one of the most complex database challenges ever encountered. The NCTC feeds data to the FBI’s Terrorist Screening Center (TSC), which is responsible for maintaining a database of suspected terrorists. Such individuals appear on a report called the watch list, which contains over a million names. The watch list is distributed to many government agencies in the United States and around the world. Airlines must use the data for prescreening passengers. NoFly passengers are not allowed on the plane and others are subject to extra searches and additional questioning. The Results Instructor’s Manual .

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Thousands of Americans, whose names match a name or an alias used by a suspected terrorist on the list, must have their identification verified further. In a high-profile Canadian case, Maher Arar was deported to Syria (where he was jailed and tortured), by the United States, because his name appeared on the watch list. Canadians and Americans have demanded that the list be fixed to prevent the misidentification problems, which lead to delays, intensive questioning and searches, and missed flights. The problem has become so severe, that the DHS developed the Traveler Redress Inquiry Program, to clear people who are routinely subjected to extra airport security screening and even detention simply because their names are on the watch list. Questions 1. Is the watch list program a success or a failure? Support your answer. Deciding whether the list is a success or a failure will depend on the criteria for “success”. In terms of detecting potential terrorists (and terrorist acts), that is subject to debate, since no precise data is given, and there have been breaches since. With regard to the obstruction to air traffic and passenger misidentifications, the list certainly appears to be a liability. However, according to the government’s specified objectives – “to prevent lapses (missing critical information) in the future and to foresee future attacks by consolidating and sharing data among intelligence and law-enforcement agencies,” it seems to be a success. 2. Are the problems with the watch list the result of technology? If so, how? If not, what is the cause of the problems with the watch list? Support your answer. The problems do not appear to be as a “result” of technology, but due to the misapplication of technology and/or policy, as well as politics. That is, proper policies and procedures could eliminate many of the problems. For example, including other identification other than name only (e.g. birthdate, educational institution attended, biometric data, etc.), would reduce much of the misidentification and delay. Also politically, less generalization or suspicion of passengers would reduce the number of persons on the list.

CLUB IT Improving Transaction Processing For Ruby’s Club Go to the Ruby’s Club link at the Student Companion website or WileyPLUS for information about your current internship assignment. You will outline a plan to help Ruby’s managers effectively collect and analyze their organizational data.

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LEGAL NOTICE

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Customer Relationship Management

Learning Objectives 9.1

Define customer relationship management (CRM) and discuss the objectives of CRM.

9.2

Describe operational CRM and its major components.

9.3

Describe analytical CRM.

9.4

Discuss mobile CRM, on-demand CRM, and open-source CRM.

Teaching Tips and Strategies This chapter covers a topic that is very familiar to most students as consumers or customers in their real lives, even though they may not know of the formal terms and system names. The teaching strategy that works best is to relate this myriad of CRM terminology back to aspects of CRM that the students have experienced in their real lives. In this chapter we discuss the various aspects of building long-term customer relationships through CRM. We first define the CRM concept and then turn our attention to the two major aspects of CRM, operational CRM and analytical CRM. We conclude the chapter with a look at additional types of CRM, which include mobile CRM, ondemand CRM, and open-source CRM. Most students will not be familiar with these types of systems. Focus on concepts of data needed for supporting effective customer service. Students will be familiar with many Internet transactions that students use to order books and other items. As operations become more and more streamlined and firms move away from personalized customer service through humans, computers or CRM are/is replacing the void created. CRM is critical to the success of modern businesses as customers are supremely important to all organizations. Regardless of the particular job students perform, they will have either a direct or an indirect impact on the firm’s customers. Therefore, it is important that all students possess a working knowledge of CRM.

Review Questions Section 9.1 - Before You Go On… 1. What is the definition of customer relationship management? Instructor’s Manual .

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Customer relationship management (CRM) is an organizational strategy that is customer-focused and customer-driven. That is, organizations concentrate on satisfying customers by assessing their requirements for products and services, and then providing high-quality, responsive service. CRM is not a process or a technology per-se; rather, it is a way of thinking and acting in a customer-centric fashion. 2. Why is CRM so important to any organization? CRM builds sustainable long-term customer relationships that create value for the company as well as for the customer. That is, CRM helps companies acquire new customers, retain existing profitable customers, and grow the relationships with existing customers. The customers are the core of a successful enterprise, and the success of the enterprise depends on effectively managing relationships with them, which CRM allows them to perform. 3. Define and give examples of customer touch points. Customer touch points include telephone calls, email, chat sessions, promotions, and the company web site. Anywhere a customer comes in contact with the organization is a touch point. Section 9.3 - Before You Go On… 1. What is the main objective of analytical CRM? The main objective of analytical CRM is to analyze customer behaviour and perceptions in order to provide actionable business intelligence. For example, analytical CRM systems typically provide information on customer requests and transactions, as well as on customer responses to an organization’s marketing, sales, and service initiatives. These systems also create statistical models of customer behaviour and the value of customer relationships over time, as well as forecasts of customer acquisition, retention, and loss. 2. What is the relationship between operational CRM and analytical CRM? Operational CRM is the component of CRM that supports the front-office business processes. These processes are those that directly interact with customers; that is, sales, marketing, and service. Whereas operational CRM supports front-office business processes, analytical CRM systems analyze customer behavior and perceptions in order to provide actionable business intelligence.

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“IT’s About Business” Questions 9.1 – The Aftermath of the “Miracle on the Hudson” 1. Describe the various CRM aspects of U.S. Airways’ response to the Flight 1549 incident. Could the airline have done anything else? If so, what? Clearly, U.S. Airways response to the passengers who were affected by the incident was quite thorough and well planned. Several employees were dispatched with various emergency response items for the passengers - cases of prepaid cell phones and sweat suits for anyone who needed dry clothes. U.S. Airways staff members escorted each passenger to either a new flight or a local New York hotel, where the company arranged for round-the-clock buffets. It also arranged train tickets and rental cars for those passengers who (understandably) did not want to fly. Further, the airline contacted executives at Hertz and Amtrak to make certain that passengers who had lost their driver’s licenses did not have any trouble renting a car or purchasing a train ticket. Finally, the airline retained locksmiths to help passengers who lost their keys get back into their cars and homes. U.S. Airways customer relationship continued after the passengers were rescued and attended to. They sent a ticket refund to each passenger and a $5,000 advance check to help cover the costs of replacing their possessions. Finally, U.S. Airways upgraded all passengers on board Flight 1549 to “Chairman’s Preferred” status, entitling them to automatic upgrades, exemptions from baggage fees, and bonus miles for a year. All of these efforts were aimed at customer relationship management. 2. Do you think that the U.S. Airways’ responses to the incident will be sufficient to forestall any lawsuits arising from Flight 1549’s emergency landing? Why or why not? U.S. Airways CRM efforts after the incident were remarkable and exceeded the norm; but it is difficult to predict if customers will sue or not. (U.S. Airways did not even put a caveat on the compensation paid to passengers!) Some passengers may have been severely affected and need to file a suit if US Airways does not respond to their claims. But if US Airways responds in a reasonable way, then there may not be the need to file a lawsuit. 9.2 – Amazon Extends the Customer Experience to Vendors 1. Describe the distinction between customer service and the customer experience at Amazon. Customer service is a component of customer experience. Customer experience includes offering both the lowest price and the fastest delivery. In addition, the entire process must be so reliable that customers do not need to contact an actual person. Customer service involves direct interactions between customers and Instructor’s Manual .

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Amazon wants those situations to be the exception rather than the rule. That is, Amazon limits customer service to truly unusual situations, such as a customer receiving a book with missing pages, while the regular sales process is the customer experience. 2. Discuss how Amazon rates customer service by its outside vendors. Amazon has instituted many internal safeguards to ensure superb customer service by their affiliated retailers. First, Amazon’s customers can rate their experience with merchants. Second, merchants who sell through Amazon have to use an e-mail service on the Amazon Web site to communicate with customers so that Amazon can monitor the conversations. Third, Amazon uses metrics such as how frequently customers complain about a merchant and how often a merchant cancels an order because the product is not in stock. Merchants who have problems with more than 1 percent of their orders may be removed from Amazon’s Web site. 9 3 – Fraud at Subway Leads to New Loyalty Program 1. Discuss the advantages of Subway’s new loyalty card versus its old loyalty program. The risk of fraud has been reduced due to the use of cards with a magnetic strip for the new loyalty program. However, the card with a magnetic strip enables the customer and Subway to do more. Each card has a unique 16-digit identification number. Customers can use this card to make payments, access instant loyalty rewards, and track highly targeted promotions. At the same time, the card enables Subway to gather data on customers from its point-of-sale (POS) terminals to its CRM applications. 2.

Will Subway’s new loyalty card provide the restaurant chain with sustainable competitive advantage? Why or why not? If not, then what other steps could Subway take in the area of CRM to achieve and maintain a competitive advantage? Yes. It provides a sustainable competitive advantage for some period of time. It will take a competitor some time to install the same type of systems to implement such a program.

9.4 – Airlines Try To Know Their Customers Better 1. Customer surveys have found that customers really want a hassle-free flight rather than the extra services discussed here. If you were an airline chief information officer, would the survey findings affect the resources that you were planning to allocate to a data warehouse and data-mining tools? If so, where would you spend your scarce resources? Instructor’s Manual .

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Data mining is intended to extract the trends and patterns as contained in the historical data from passengers. That customer surveys would suggest otherwise, should indicate to an airline CIO the need for deeper analysis in terms of the demographics and flying experience of the survey respondents. The CIO and VP Marketing would need to resolve the issues of: • how can the CRM benefits of data mining reduce the hassle of flying • where best to apply their resources by doing a cost-benefit analysis. 2. In addition to the ones mentioned here, what other extra services could the airlines provide to make your flying experience more enjoyable? Flight attendants offering special services (e.g. free drinks, better meals, more attention, etc.) to passengers in the same class, could be a liability for the airline; i.e. other passengers could become very upset! Therefore, the airline should focus on rewards that are not visible to others in-flight e.g. reduced fares, better counter service, easier check-in, (payment) vouchers for in-flight services (meals, drinks), etc. 9.5 – Disney Re-Defines Its CRM Effort 1. Discuss the advantage of Pal Mickey for visitors to Disney theme parks. Pal Mickey provides families with relevant information during their park experience, and it entertains children during the down time between rides and events. With a squeeze of Pal Mickey’s hand, families receive real-time updates regarding which rides have the shortest wait times. 2. Discuss possible disadvantages of using Pal Mickey as a CRM tool. Pal Mickey is only intended for use inside the theme park. Disney also needs to keep in touch with customers outside the theme park. This is done using Destination Disney which is linked to their web site and allows visitors to plan their visit to Disney beforehand.

Discussion Questions 1. How do customer relationship management systems help organizations achieve customer intimacy?(LO 1) With this customer intimacy, businesses can use information about each customer (for example, previous purchases, needs, and wants) to create offers that customers are more likely to accept. That is, the CRM approach is designed to achieve customer intimacy. This CRM approach is enabled by information technology. Instructor’s Manual .

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2. What is the relationship between data consolidation and CRM? (LO 1) Data consolidation and the 360-degree view of the customer enable the organization’s functional areas to readily share information about customers. This sharing of customer information leads to collaborative CRM. 3. Discuss the relationship between CRM and customer privacy. (LO 1) CRM collects and uses a lot of data. Without adequate safeguards, this strategy may not have worked. If the data is not secured then security problems can result. 4. Distinguish between operational CRM and analytical CRM. (LO 2) Operational CRM is the component of CRM that supports the front-office business processes. These processes are those that directly interact with customers; that is, sales, marketing, and service. Whereas operational CRM supports front-office business processes, analytical CRM systems analyze customer behavior and perceptions in order to provide actionable business intelligence.

5. Differentiate between customer-facing CRM applications and customer-touching CRM applications. (LO 2) The two major components of operational CRM are customer-facing applications and customer-touching applications. Customer-facing CRM applications are the areas where customers directly interact with the enterprise. These areas include customer service and support, sales force automation, marketing, and campaign management. Customer-touching applications (also called electronic CRM applications) include those technologies with which customers interact and typically help themselves. These applications include search and comparison capabilities, technical and other information and services, customized products and services, personalized Web pages, FAQs, e-mail and automated response, and loyalty programs. 6. Explain why Web-based customer interaction centers are critical for successful CRM. (LO 2) Organizations have implemented customer interaction centers (CIC) thru multiple communication channels such as the Web, telephone, fax, and face-to-face interactions to support the communication preferences of customers. The CIC manages several different types of customer interaction. Web based CIC are low cost and provide the greatest automation for these customer interactions. Hence they are critical for successful CRM. 7. Why are companies so interested in e-CRM applications? (LO 2)

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The term electronic CRM (or e-CRM) appeared in the mid-1990s, when organizations began using the Internet, the Web, and other electronic touch points (e.g., e-mail, point-of-sale terminals) to manage customer relationships. Customers interact directly with these technologies and applications rather than interact with a company representative as is the case with customer-facing applications. Such applications are called customer-touching CRM applications or electronic CRM (e-CRM) applications. Using these applications, customers typically are able to help themselves. 8. Discuss why it is difficult to justify CRM applications. (LO 1) Many CRM applications do not directly make the company any money. They are important because they improve the customer experience markedly. Hence, these intangible benefits are difficult to quantify and justify for executives. 9. You are the CIO of a small company with a rapidly growing customer base. Which CRM system would you use: on-premise CRM system, on-demand CRM system, or open-source CRM system? Remember that open-source CRM systems may be implemented either on-premise or on-demand. Discuss the pros and cons of each type of CRM system for your business. (LO 4) I will use on-demand CRM as its demands on infrastructure are smaller. An ondemand CRM system is hosted by an external vendor in the vendor’s data center. For a small company this is a cheaper and leaner solution.

Problem Solving Activities 1. Access www.ups.com and www.fedex.com. Examine some of the IT-supported customer services and tools provided by the two companies. Compare and contrast the customer support provided on the two companies’ websites. Student answers will vary. Have students make a list of the different CIC offered by these two sites as well. 2. Enter www.holtrenfrew.com, www.hermes.com, and www.tiffany.com. Compare and contrast the customer service activities offered by these companies on their websites. Do you see marked similarities? Differences? Student answers will vary. So too will the different CIC offered – the different communication options that customers can subscribe to: MySpace, Facebook, Twitter, email, live chat, etc,. Point out how each site is engaging the customer long term – e.g. from social networking to newsletters. 10. Access your college or university’s website. Investigate how it provides for customer relationship management. Hint: First decide who your university’s customers are. Instructor’s Manual .

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Student answers will vary. Generally the customers are current, prospective and past students (and parents!). 11. Enter www.livechatinc.com and www.websitealive.com and view their demos. Write a report about how live chat works. Be sure to discuss all the available features. Student answers will vary. Some organizations block chat sites, so that may pose problems with this activity. 12. Access www.infor.com and view the demo (registration required). Prepare a report on the demo to the class. Student answers will vary. Beware that registration is required for this activity. 13. Access www.sugarcrm.com and take the interactive tour. Prepare a report on SugarCRM’s functionality to the class. Sugar CRM is an open source CRM tool that allows the management of the interactions with customers in different domains – sales, support, reporting, administration, etc. SugarCRM can be deployed on-demand (on our servers) or onsite (inside your firewall). Customers receive both a license key to download the software and an On-Demand account when they become a customer of Sugar Enterprise and Sugar Professional. Regardless of deployment options, all Sugar information is accessible through a standard web browser. Moreover, it has an open programming interface so that other applications can be interfaced to this system. 7. Enter the Teradata website (http://www.teradata.com/) and search for "Customer Relationship Management case studies". Choose one of the case studies and prepare a presentation outlining the business problem, the IT solution, and the results. Complete your the case study by searching for additional information about the same company Student answers will vary. Registration is required for this activity.

TEAM ASSIGNMENTS Students will follow directions on these activities and submit a thoughtful report on each. 1. Each group will be assigned to an open-source CRM vendor. Each group should examine the vendor, its products, and the capabilities of those products. Each group will make a presentation to the class detailing how its vendor product is superior to the other open-source CRM products. See SugarCRM (www.sugarcrm.com), Concursive (www.concursive.com), vtiger (www.vtiger.com), SplendidCRM Software

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(www.splendidcrm.com), (www.opencrx.com).

Compiere

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(www.compiere.com),

and

openCRX

2. Each group will be assigned to an on-demand CRM vendor. Each group should examine each vendor, its products, and the capabilities of those products. Each group will make a presentation to the class detailing how its vendor product is superior to the other open-source CRM products. See Salesforce (www.salesforce.com), Oracle (http://crmondemand.oracle.com), Aplicor (www.aplicor.com), NetSuite (www.netsuite.com), SalesNexus (www.salesnexus.com), SageCRM (www.sagecrm.com), and Commence (www.commence.com.

3. Create groups to investigate the major CRM applications and their vendors. • • • •

Sales force automation (Microsoft Dynamics, Oracle, FrontRange Solutions, RightNow Technologies, Maximizer Software) Call centers (LivePerson, Cisco, Oracle) Marketing automation (SalesNexus, Marketo, Chordiant, Infor, Consona, Pivotal, Oracle) Customer service (Oracle, Amazon, Dell)

Start with http://www.searchcrm.com and www.customerthink.com (to ask questions about CRM solutions). Each group will present arguments to convince the class members to use the product(s) the group investigated.

Closing Case Tesco Returns to the Corner Shops of England’s Past The Business Problem Tesco (www.tesco.com) was not always the U.K.’s largest grocer. Tesco had deteriorating same-store sales. Moreover, poor customer retention had eroded the company’s market position and profitability. Tesco’s business problem was apparent. How could the grocery chain improve its sales, market share, and profitability? The IT Solution In an attempt to improve sagging sales in many of its stores, Tesco implemented a loyalty program, called the Tesco Club Card. The system enables Tesco to collect, store, and analyze the data generated by Tesco Club Card customers and other customers as well. Specifically, it places each customer into one of three categories: cost-conscious, midmarket, and up-market. These segments are further segmented into shopping tendencies such as healthy, gourmet, convenient, family living, and others. Tesco then targets communications to each customer segment. Instructor’s Manual .

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The Results Tesco’s Club Card program now boasts 10 million active households. Tesco’s CRM system provides multidimensional customer segmentation and tailored communications. Recently, Tesco printed and mailed 4 million unique quarterly club mailings with coupons targeted toward very specific customer segments. Club Card coupon redemption is in the range of 20 to 40 percent, and cost per redemption has decreased since Tesco instituted the program. In the five- year period following the implementation of the program, Tesco sales increased by 52 percent, and they continue to grow at a higher rate than the industry average. In addition, store openings and expansions have increased Tesco’s floor space by 150 percent.

Questions: 1. Explain what a customer-driven action plan is. Are such plans designed to keep existing customers or to attract new customers? Support your answer. The in-depth understanding of its customers changed the company’s way of thinking about both the customers and the business. The company moved away from thinking about an “average customer.” Tesco committed itself to a truly customer-based business; one that sees each customer as an individual. Therefore the Tesco motto became “changing the way they think about us.” Tesco’s Chairman, Sir Terry Leahy, placed this mission statement in the center of one of the company’s annual reports: “Continually increasing value for customers to earn their lifetime loyalty.” 2. Describe how Dunnhumby helps its client companies achieve greater customer intimacy. Is dunnhumby invading customers’ privacy? Support your answer. Dunnhumby is a British marketing research firm that mines data from credit card transactions and customer loyalty programs to uncover hidden and potentially lucrative facts about its clients’ current customers. For example, dunnhumby can identify customers who might be interested in a particular sale or who will not go back to a store if it does not offer a particular product. Dunnhumby analyzes three types of data: customer data (e.g., from a loyalty card program), sales data (e.g., from electronic point-of-sale), and traditional market research data. These analyses provide company managers and analysts with valuable insights into customer behavior. Dunnhumby then uses these insights to create customer-driven action plans, which are strategies to build a client’s business by better matching all aspects of the client’s retail operations with the customers’ needs and aspirations. In this case, Tesco used the insights provided by dunnhumby to help shape its Club Card program.

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3. Will Tesco’s CRM strategy allow the grocer to achieve a sustainable competitive advantage? Why or why not? Yes, they have achieved a sustainable competitive advantage. They have successfully collected operational data and deployed information based on that data in an IT infrastructure that will be difficult to emulate by competitors. 4. Based on Tesco’s experience, what managerial and organizational factors are necessary for a CRM system to be successful? Key factors for a successful CRM implementation are: • putting the customer needs front and central, above economic or business rules • recognition that customers are not all the same – identify the differences and segment accordingly • tailoring communications appropriately to suit each segment • willingness to outsource operations that are best performed by outside professionals • recognizing the value of mining customer data to determine customer preferences and patterns

CLUB IT Planning CRM Solutions For Ruby’s Club Go to the Ruby’s Club link at the Student Companion website or WileyPLUS for information about your current internship assignment. You will investigate how CRM can help retain customers at Ruby’s Club.

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LEGAL NOTICE

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CHAPTER 10: Supply Chain Management Learning Objectives 10.1

Describe the structure of a supply chain.

10.2

Identify various problems that can occur along supply chains and possible solutions to them.

10.3

Explain what a supply chain management system and related technologies are.

Teaching Tips and Strategies It is suggested that you start this chapter by discussing with students why companies such as Etoys and Toysrus had trouble delivering goods on time for Christmas. Most students believe it was just mismanagement on the part of the etailer. Explain to students that before Ecommerce companies existed only catalog companies focused on sending a couple of items to many different residences. Another strategy is to give them an example of a company such as Proctor & Gamble and discuss how P&G is a consumer products company but they sell all of their products through retailers. They package items such as Crest and sell truckloads to different retailers. The retailers then distribute the items to their stores. Now with the advent of Ecommerce, online etailers are in the costly business of sending one or two items to millions of different households. To illustrate the point of how this changes the supply chain you can give the following example. Let’s pretend for a moment that we work for Etoys and we get a thousand orders for Barbie in one day. Break the class up into groups and ask them to let you know what will be involved in delivering those Barbies. The students will usually answer that someone will have to go pick the Barbies in the warehouse, create an address label for each customer and then box up the order and ship it. Next, remind students that it is even more intricate than that. For example: ▪ The payment process will need to be run (hopefully that system is automated). ▪ After the workers pick 1,000 Barbies (and in this example we are assuming that all the Barbies ordered are the same) and labels/invoices are printed automatically, Barbie is boxed up, then the package is weighed and postage affixed. ▪ Finally the coordination with UPS or FedEx to pick up the package. The above scenario assumes that Etoys has 1,000 Barbies in stock. What if we only had 500? Now we have a backorder problem. Ask students “If 1,000 Barbies were available Instructor’s Manual .

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to you right now with invoices/labels, how long would it take to box those Barbies up and mail them?” The answers again vary, but students start to realize that the fulfillment process/supply chain is not as easy as it would seem. So, is it any wonder that Etoys couldn’t fulfill all their orders? What happens in the above example, when we get another 500 orders the next day for Barbie? What if Mattel suddenly doesn’t ship more Barbies to us on time? It changes everything. This is one of the reasons that companies like Circuit City have created relationships with Amazon.com to handle their online store and the delivery process. By going over this example (or one like it) it helps students to see how important the supply chain is in the business environment. The example demonstrates how one company’s supply chain can disturb another company’s supply chain. Students tend to walk away from this chapter with a better understanding of how much companies rely on each other to do business. Many companies have lost business or gone out of business due to supply chain issues. The supply chain is one of the most important variables in a company’s success or failure. Auto dealers have been aware of this type of problem for decades. An example is a car dealer who had five green Camrys on his lot. The customers wanted blue, turquoise and red. So, those customers went to a competing dealer and bought their car that day instead of ordering it from the dealer I knew. The dealer had the right car, but not the right color car. In this instance, because he did not have the desired color, it cost him three sales. We might not think that is a very big deal, but a $20,000 car * 3 = $60,000 in lost sales! Mismanagement of a supply chain can cost companies ten times that number. The dealer realized he shouldn’t have ordered so many of the same color of the same model. With the advancement of technology, companies now have more tools then ever before to successfully manage their supply chain. How do companies manage their supply chains better? ▪ By integrating their systems so that all of the departments can talk to each other (including outside vendors). ▪ By being able to track inventory and sales in real-time. This will help management to make crucial decisions regarding resources.

Review Questions Section 10.1 - Before You Go On… 1. Describe the three segments of a supply chain. The supply chain consists of three parts: (1) Upstream supply chain, where sourcing or procurement from external suppliers occurs; (2) Internal supply chain, where packaging, assembly or manufacturing takes place; and (3) Downstream

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supply chains, where distribution or dispersal takes place, frequently be external distributors. 2. Describe the flows in a supply chain. There are typically three flows in the supply chain: materials, information, and financial. Material flows are the physical products, raw materials, supplies, and so forth that flow along the chain. Material flows also include reverse flows (or reverse logistics) – returned products, recycled products, and disposal of materials or products. Information flows consist of data that are related to demand, shipments, orders, returns, and schedules, as well as changes in any of these data. Finally, financial flows involve money transfers, payments, credit card information and authorization, payment schedules, e-payments, and credit-related data. Section 10.2 - Before You Go On… 1. Describe various problems that can occur along the supply chain. The problems along the supply chain stem primarily from two sources: (1) uncertainties, and (2) the need to coordinate several activities, internal units, and business partners. A major source of supply chain uncertainties is the demand forecast. Demand for a product can be influenced by numerous factors such as competition, prices, weather conditions, technological developments, economic conditions, and customers’ general confidence. Another uncertainty is delivery times, which depend on factors ranging from production machine failures to road construction and traffic jams. In addition, quality problems in materials and parts can create production delays, which also lead to supply chain problems. 2. Discuss possible solutions to problems along the supply chain. Various solutions can be used to address supply chain problems. Vertical integration is a business strategy in which a company buys its upstream suppliers to ensure that its essential supplies are available as soon as they are needed. Building up inventories is another way of solving supply chain problems. Another common way to solve supply chain problems, and especially to improve demand forecasts, is sharing information along the supply chain. Information sharing can be facilitated by electronic data interchange and extranets, topics we discuss in the next section. One of the most notable examples of information sharing occurs between large manufacturers and retailers. For example, Wal-Mart provides Procter & Gamble with access to daily sales information from every store for every item P&G makes for Wal-Mart. This access enables P&G to manage the inventory replenishment for Wal-Mart’s stores. By monitoring inventory levels, P&G knows when inventories fall below the threshold for each product at any Wal-Mart store. These data trigger an immediate shipment. Instructor’s Manual .

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Section 10.3 - Before You Go On… 1.

Define EDI and list its major benefits and limitations. EDI is the communication standard that enables business partners to exchange routine documents using agreed-upon formats. Its major benefits are: ▪ It minimizes data entry errors ▪ The length of the message can be shorted ▪ Messages are secured ▪ It reduces cycle time ▪ Increases productivity ▪ Enhances customer service ▪ Minimizes paper usage and storage Major limitations are: ▪ It requires a significant initial investment ▪ Ongoing costs are high due to the use of private VANs ▪ The traditional system is inflexible ▪ Often requires a long startup period ▪ Business process may have to be restructured to fit EDI requirements ▪ Multiple standards exist.

Explain how web services contribute to supply chain management. Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. Web services provide a cross-industry standard to enable companies to exchange business documents with their trading partners electronically. This permits companies to trade more efficiently (as much as large-scale companies,) without the large implementation costs. Web services, delivered over the Internet allow users to select and combine through almost any device, from personal computers to mobile phones. By using a set of shared protocols and standards, these applications permit different systems to “talk” with one another—that is, share data and services—without requiring human beings to translate the conversations. Web services can also be used in a variety of environments: over the Internet, on an intranet inside a corporate firewall, or on an extranet set up by business partners. Web services perform a wide variety of tasks, from automating business processes to integrating components of an enterprise-wide system to streamlining on-line buying and selling.

Define an extranet and explain its infrastructure.

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An extranet is a series of interconnected intranets for which business partners have given access to certain parts to each other to enable collaborative operations. They use an Internet based communication channel called a virtual private network (VPN). 4.

List and briefly define the major types of extranets. There are three major types of extranets. • A Company and Its Dealers, Customers, or Suppliers. This type of extranet is centered around a single company. An example is the FedEx extranet that allows customers to track the status of a delivery. • An Industry’s Extranet. Just as a single company can set up an extranet. The major players in an industry can team up to create an extranet that will benefit all of them. For example, ANXeBusiness (www.anx.com) enables companies to collaborate effectively through a network that provides a secure global medium for B2B information exchange. • Joint Ventures and Other Business Partnerships. In this type of extranet, the partners in a joint venture use the extranet as a vehicle for communications and collaboration. An example is Bank of America’s extranet for commercial loans. The partners involved in making these loans include a lender, a loan broker, an escrow company, and a title company. The extranet connects lenders, loan applicants, and the loan organizer, Bank of America. A similar case is Lending Tree (www.lendingtree.com), a company that provides mortgage quotes for your home and also sells mortgages online. Lending Tree uses an extranet for its business partners (for example, the lenders).

“IT’s About Business” Questions 10.1 – Disney Goes Digital 1. Draw the supply chain for Disney and identify the different upstream, internal, and downstream components, including its supply chain flows. The supply chain components for Disney are: Upstream – Camera/equipment manufacturers, storage media manufacturers, actors (guild), directors, suppliers for location, materials, shipping, food, etc. Internal - production (filming), storage, and distribution. Downstream – distributors, cinemas, audiences, press/media.

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Intermidiates

Suppliers Directors Actors

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Movies

Disney Studios

Distributors Cinemas Customers

2. What are the differences between a supply chain for digital products versus a supply chain for physical goods? The major differences are: • the “inventory” storage for digital products is physically smaller • distribution is faster and less expensive for digital media • shorter time to market 10.2 – OfficeMax Gets a Handle on Its Inventory 1. Discuss the importance of analyzing a company’s business model before analyzing its supply chain. OfficeMax’s business model of direct to store was flawed. It caused the need to keep excessive inventory, delays in filling stores with goods and inability to avail of volume discounts from manufacturers of goods on an international basis. To change the business model, they had to rearrange its supply chain and use distribution centers to accumulate regional goods and send them to stores. 2. Describe the problems that OfficeMax experienced with its direct-to-store supply chain model. There were many other problems with the direct-to-store environment. The company had no intermediate distribution points, so its entire inventory had to be located in its stores. This problem was so acute that it affected store layouts. Stores had inventory stacked up to the ceiling, blocking much of the lighting. Not only did customers not like the dimness, but they complained that they had difficulty navigating through the store once they entered the “big valleys.” In addition, associates in the stores had to manage inbound shipments rather than spending time with customers. Retail stores had to wait more than a month to receive replenishment stock, and individual stores received hundreds of small shipments every week. Further, the company could not take advantage of quantity pricing from suppliers because individual stores did not order enough products to qualify for quantity discounts. The suppliers were not satisfied either, because they had to ship to thousands of places, a very inefficient and expensive process. 3. Explain how the new supply chain model has benefited OfficeMax. Instructor’s Manual .

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The new arrangement using intermediate distribution centers has benefited the company in many ways. First, the distribution centers enable aggregation of demand across stores and have substantially reduced the number of deliveries to each store. Also, the replenishment cycle time for OfficeMax stores has improved from 35 days to 8 days. Finally, the company has reduced $400 million in inventory. 10.3 – Supply Chain Management Drives The Success Of Inditex 1. Describe the “fast fashion” process at Inditex. How do supply chain management systems enable this process? Inditex produces creative and quality designs along with a rapid response to market demands. They sell relatively inexpensive yet trendy clothes, and can put new clothes on the rack in as little as two weeks from first conception. To accomplish this, the company closely monitors every link in its supply chain. Demand starts on the sales floor, as store managers monitor daily sales and respond quickly and accurately to trends. Inditex not only produces half of its items in-house, but it keeps production close to home, and only outsources basic items such as T-shirts. Inditex achieves savings on both time and money because its plants are closer to the stores, and it uses just-in-time systems to control inventory. Warehouses are located in Spain, from where it supplies its European stores within a day. Stores in the Americas and Asia can be supplied within two days using commercial airliners. Though more expensive than ocean shipping, there is a business case for this - Inditex products are made in smaller batches, resulting in a higher turnover of items; there is a greater demand from customers wanting new and exclusive fashions. 2. Do you anticipate that other apparel firms will adopt similar SCM systems to Inditex? Why or why not? It is very likely that competitors will adopt a similar system, as it is built on a sound business model – customer-centric, simple, flexible, and requiring smaller financial investment. 3. Why does Inditex not have to drastically cut prices to sell out-of-season stock? By using smaller production runs and responding quickly to consumer trends inventory is minimized. Therefore there is less need for massive stock clearance sales. 10.4 - Extranet For Product Recalls Helps Canadian Manufacturers And Retailers 1. Why is it so important for manufacturers to trace their products in the supply chain?

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In product safety situations where it is necessary to issue a recall, manufacturers need to know where the products are in the supply chain - identifying which retailers bought contaminated/defective products and how to communicate with them to handle the product recall.

2. Could upstream members in the supply chain such as suppliers of meat manufacturers benefit from the GS1 Canada product recall website? Why or why not? Upstream members could also benefit, since they can be alerted early to any contamination related to livestock and trace the source from farm to factory. They can also use the information to prepare for any potential compensation or liability issues. 3. Why do you think GS1 Canada selected the use of web technology for its product recall service? Web technology offers a fast, broad-based, inexpensive, secure, flexible medium and one with which most people are familiar. 4. Do more research about product traceability and find out what other information technology innovations are used to trace products along the supply chain. (Web searches by students will provide this information.)

Discussion Questions 1. List and explain the important components of a supply chain. (LO 1) A supply chain refers to the flow of materials, information, money, and services from raw material suppliers, through factories and warehouses, to the end customers. A supply chain involves three segments: upstream, where sourcing or procurement from external suppliers occurs; internal, where packaging, assembly, or manufacturing takes place; and downstream, where distribution takes place, frequently by external distributors. 2.

Refer to IT’s About Business 10.2 about OfficeMax. Draw the supply chain for OfficeMax. Label the upstream, internal, and downstream components. (LO 1)

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Office Products

OfficeMax Distribution Centre

Retail Stores Businesses Consumers

3. Explain how a supply chain approach may be part of a company’s overall strategy. (LO 1) The supply chain drives the business operations of the company. It has to be closely aligned with its overall strategy. As seen from the previous case studies, the overall business strategy is JIT or low cost. The mechanics of the supply chain needs to reflect the business strategy. 4. Explain the import role that information systems play in supporting a supply chain strategy. (LO 3) Information systems are particularly important to ensure efficiency in the supply chain operations. By exchanging information coordination can be improved among the firms linked in the supply chain. This can solve a lot of potential problems in the supply chain. For example, information sharing between Wal-Mart and P&G is done automatically. It is part of a vendor-managed inventory strategy. Vendor-managed inventory (VMI) occurs when a retailer does not manage the inventory for a particular product or group of products. Instead, the supplier manages the entire inventory process. P&G has similar agreements with other major retailers. The benefit for P&G is accurate and timely information on consumer demand for its products. Thus, P&G can plan production more accurately, minimizing the bullwhip effect.

5. Would Rolls-Royce Motorcars (www.rolls-roycemotorcars.com) use a push model or a pull model in its supply chain? Support your answer. (LO2) Given the limited number of cars that they produce and each one customized to the car’s ultimate customer – they should use a pull model for its supply chain.

6. Why is planning so important in supply chain management? (LO 2) The planning of supply chain management is extremely important because supply and demand can change so fast. Moreover, supply chain problems can result in poor customer satisfaction, lost revenues and reduced profits. Therefore management Instructor’s Manual .

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plays a major role in the supply chain. In many organizations, the production/operations management staff may even lead the supply chain integration process because of their extensive knowledge of the manufacturing components of the organization. 7. Differentiate between EDI and extranets. (LO 3) Electronic data interchange (EDI) is a communication standard that enables the electronic transfer of routine documents, such as purchasing orders, between business partners. It formats these documents according to agreed-upon standards. In contrast, Extranets are networks that link business partners to osne another over the Internet by providing access to certain areas of one another’s corporate intranets. The main goal of extranets is to foster collaboration among business partners.

Problem-Solving Activities 1. Go to a bank and find out the process and steps of obtaining a mortgage for a house. Draw the supply chain in this case. Student answers will vary depending on which bank site they visit. 2. GXS (www.gxs.com) is one of the largest providers of EDI services worldwide. Review what EDI products it provides and prepare a report. Would a small company be able to implement these solutions? Prepare a report with your analysis. On accessing the GXS website and investigating their products and services, students should consider the factors that determine use of their services and prepare the report. Student answers may vary. 3. Enter Teradata University Network (http://academicprograms.teradata.com/tun/) and find the podcasts that deal with supply chains (by Jill Dyche). Identify the benefits cited in the podcasts. Students will investigate the podcasts and identify the benefits cited.

4. Access www.ups.com and www.fedex.com. Examine some of the IT-supported customer services and tools provided by the two companies. Write a report on how the two companies contribute to supply chain improvements. On examining the IT-supported customer services and tools, students will determine how they contribute to improving SCM and write the report. 5. Enter www.supply-chain.org, www.cio.com, www.findarticles.com, and www.google.com and search for recent information on supply chain management. Instructor’s Manual .

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Team Assignments Students will follow directions on these activities and submit a thoughtful report on each. 1.

Each group in the class will be assigned to a major supply chain management vendor, such as SAP, Oracle, i2, IBM, and so on. Each group will investigate topics such as: (a) the products; (b) major capabilities; (c) relationship to customer relationship management; and (d) customer success stories. Each group will prepare a presentation for the class, trying to convince the class why that group’s software product is best.

Have each team locate several organizations that use IOSs, including one with a global reach. Students should contact the companies to find what IOS technology support they use (for example, an EDI, extranet, web services). Then find out what issues they faced in implementation. Prepare a report.

Closing Case Chrysler Benefits From Web-Based EDI The Business Problem In 1990, Chrysler which has a commitment to using information technologies to communicate with its business partners, made it mandatory for high-volume suppliers to use electronic data interchange (EDI) to send purchase orders and invoices. The initiative turned out to be a success and reduced the time to process purchase orders. However, most of Chrysler’s suppliers who are small and medium enterprises with low volume transactions, could not afford the set-up costs of EDI. Therefore, their paperbased POs and invoices took several weeks to process. Chrysler had to find a solution that could accommodate the company’s needs and be affordable enough for small suppliers. The IT Solution Chrysler found a solution by developing a web-based exchange portal in partnership with GXS, a company specializing in IT solutions for trading partners. The new system allowed Chrysler’s low-volume suppliers to send their purchase orders, invoices, and other business documents using EDI technology. Suppliers needed only a PC and an Internet connection to access the GXS portal. The Results

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Chrysler and its suppliers have benefited greatly since it introduced the exchange portal for small suppliers. The company has saved millions annually in processing POs, invoices, and other trading documents, which can now be transmitted in a matter of minutes instead of weeks. The new system has also improved the accuracy of information. Also payments from the Chrysler Group are now processed within one month instead of several months and the time to correct errors greatly reduced. Questions: 1. Should a company ensure connectivity with larger supply chain partners at the risk of losing connectivity with smaller supply chain partners? Support your answer. Students should recognize the disadvantages to linking with large supply chain partners at the expense of their smaller partners – e.g. loss of access to valuable products and at best, long delays in delivery. However, with the technology available today (Internet), even smaller firms can adopt SCM services cost-effectively.

2. Sometimes the use of communication technologies between trading partners is imposed by the larger partner. Discuss this situation from the perspective of the supplier and the manufacturer. The larger partners are most likely to achieve greater improvement gains and have the resources to implement new communications technologies. Hence, they are usually the first to adopt and tend to impose them on their smaller partners. Therefore suppliers and manufacturers who deal with smaller retailers will be faced with the issue of getting them to move to newer technologies. Sometimes large retailers at the leading edge of technology (e.g. Walmart in RFID) impose the requirement on their suppliers/manufacturers.

3. What other business documents could be transferred using EDI? Indicate the types of business documents and business partners (e.g., supplier, government agency, customer). Students should be able to identify common business documents shared between partners, e.g. those used by: • Manufacturers/Suppliers - planning schedule, bill of materials, inventory lists, shipping notice/label, manifests, bills of lading, catalogs • Government Agencies - forms (application, tax, etc.), certificates (compliance, registrations, etc.), licenses • Customers - P.O. acknowledgement/change, receipts, registrations/warranty.

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CLUB IT Creating Supply Chain Management Solutions For Ruby’s Club Go to the Ruby’s Club link at the Student Companion website or WileyPLUS for information about your current internship assignment. You will help Ruby’s managers build a better forecast for purchasing food and drinks using past data.

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LEGAL NOTICE

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CHAPTER 11: Managerial Support Systems Learning Objectives 11.1

Describe the concepts of management, decision making, and computerized support for decision making.

11.2

Describe business intelligence systems, including multidimensional data analysis, data mining, and decision support systems and digital dashboards.

11.3

Describe data visualization, including geographical information systems and virtual reality.

11.4

Describe artificial intelligence, including expert systems, natural language processing, and neural networks.

Teaching Tips and Strategies The goal of this chapter is to convey the importance of information systems in helping individuals make informed decisions. Often students approach this chapter with indecision and insecurity. They see acronyms such as DSS, GDSS, ESS, and ES and get a little intimidated, or overwhelmed. It helps to get students interested and relaxed by explaining how IT has made making decisions easier than ever before. The Advancements Made by IT Information overload is a problem that many managers all over the world face in various types of companies. Managers may receive a hundred e-mails in their inbox but have difficulty knowing which e-mails should take precedence. Brand managers have reams of data showing consumers buying habits or brand preferences. How does he/she figure out what data is important to his/her brand? This is the paradox of the information revolution. There is so much data, but turning that data into useful information is a challenge. There is hope. Information Technology has advanced to make the data more meaningful. For example, the ProQuest library allows users to do an expert search where they can enter attributes such as authors, title of journal, type of publication, year written, etc. A student performing a search can narrow the search down to the type of industry. This helps to lessen the number of hits a student gets and gives them the opportunity to conduct a more productive search for information. Amazon.com Emphasize that managers now rely on IT systems such as DSS to make more informed decisions. An example is Amazon.com and the amount of information that they are able Instructor’s Manual .

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to collect on a single individual. We agreed that Amazon.com collects the following information on customers: • • • • •

credit card information name, address, phone number, e-mail address type of books ordered, e.g. horror, business etc… previous order history, including type of book bought total amount of money spent at Amazon.com

With the above data, Amazon still doesn’t have sufficient information to target their advertising or to increase sales. With the use of a DSS and data mining techniques, Amazon managers can input descriptors, such as customers who have not purchased anything in the last six months. They can send an e-mail to those customers soliciting new business or offer them a discount if they act within a couple of days. All this can be easily done using IT, to automatically send out e-mails to those customers. Management could also see how well the campaign worked by analyzing the number of coupons sent out and the number validated. If managers wanted to target their advertising, they could generate coupons for specific types of books that individuals might be interested in. This could further induce the consumer to purchase. Students then begin to appreciate the importance of data, information and its analysis. Many of them will be using similar support systems as Amazon, to determine how to run the business more effectively. Microsoft Word Demonstrate to students that AI is not only machine based. Give them the example of using Word for writing applications. Go over with them how when we spell a word incorrectly in Word most of the time it detects it. Ask, “How does Word know when you have spelled a word incorrectly?” Is it magic? Hardly, spell-checks use an extensive dictionary of words, based on nationality. Each word that is typed in, is searched for in the database. The word is flagged if there is no match. (That is why some correctly spelt words may be flagged if they are not in the dictionary, e.g., colour in the U.S. dictionary.) What type of system is Word utilizing? The answer is an expert system. As you know, an expert system is a technology that replaces an expert. In this case, Word is replacing the English teacher/dictionary. What happens when Word doesn’t recognize a word we commonly use? Word will keep mistaking the spelling as an error. One way around this is to click on the “Add to dictionary” function (this is available when using Spell-check). That way, Word “learns” the new Word. Illustrate this point to the class to let them know that an expert system is great, but it is not really functional, unless you can add to the database to keep meeting your needs. It is important to update databases to keep them functional for the specific tasks. AI Technology and Voice Recognition Instructor’s Manual .

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Students tend to understand the importance of AI and different expert systems. They realize that these systems are used not only in science fiction movies such as Star Trek. A good example of an AI technology that is not catching on due to its poor quality and difficulty of use is voice recognition. There are several types of voice recognition software on the market. They have some serious problems that need to be corrected before they can go mainstream. It was suggested that by the early 2000s, keyboards (as well as the mouse) would be useless; we were going to use computers by talking to them. No longer would you have to type notes; you simply sit at the computer and start talking away. But this has not come close to fruition. One of the reasons that early voice recognition systems were not successful was that the CPUs were not sufficiently powerful and memory was limited (prohibitively expensive). Both of these are required for voice recognition to work well. By the year 2000, the price of memory decreased and CPUs became much more powerful. Manufacturers of voice recognition software started rapidly adding features. Consumers started buying the latest and best voice recognition software. But then, after about a week of using the software, the consumer would usually give up in frustration. What went wrong? For voice recognition, we now have the technical capability (resources) to make the software work. But the problem is the variation of the user’s voice. Individuals speak differently—different rates, accents and dialects. It is impossible to accommodate the numerous ways in which people speak. Users of voice recognition software are required to ‘train’ the software. The software is calibrated by speaking into a microphone and repeating a set of words. Although this was a major improvement, many of the training sessions confused the computer as well as the user. Even when the system had been calibrated, the software continued to misinterpret certain words. Users would finally give up in frustration. Hopefully, the above example will help students understand that computers, even though a powerful tool, are not always easy to program or use. It may be a long time before we have voice recognition software that is capable of overcoming these problems. The Decision-Making Process – Buying a New Car To put this chapter into perspective, the following is an example of supporting all phases of the decision-making process. The example—making a decision about a new automobile—illustrates some of the activities that take place during the decision-making process. If you were going to buy a new car, you might go through the following steps:

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Intelligence – Review automobile maintenance records showing chronic transmission problems. Seek information from dealers, consumer reports and friends about new automobiles. Design – Establish objectives and criteria for evaluating automobiles. Establish weights illustrating the relative importance of these criteria. Analyze alternative possibilities. Choice – Generate summary statistics on the evaluation of each automobile.

Chronic problems with an existing automobile might create a situation in which you need to make a decision about purchasing a new car. During the design phase, you may select safety, price and performance as three important criteria for buying a car. You can assign weights to these criteria and create a “features matrix.” The weighting is used to establish the importance of each of these factors, e.g. safety, 25 points; price, 25 points; and performance, 50 points. You could obtain information from dealers, owners, and magazines to help you make comparisons among alternatives and then use summary statistics to provide overall scores for each alternative. These scores would provide evidence supporting a reasonable choice on your part. This small example illustrates the systematic process of decision-making that has long been promoted by management scientists. Our challenge is to educate students about current high-level approaches to solving unstructured managerial problems. The fields of DSS, EIS, AI and its spin-off discipline, Intelligent Systems, have created these new possibilities.

Review Questions Section 11.1 - Before You Go On… 1. Describe the decision-making process proposed by Simon. Simon proposed a three-stage process consisting of: • • •

Intelligence – in which managers examine a situation and identify and define the problem Design – in which decision makers construct a model that simplifies the problem Choice – in which a solution is selected.

2. Why do managers need IT support? It is impossible to make good decisions without information in each phase and activity of the decision-making process. Making decisions while processing information manually is growing increasingly difficult due to the increasing number of alternatives, time pressure, decision complexity, and gaining access to remote information and expertise. While these trends complicate decisionInstructor’s Manual .

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making, computerized support can be of enormous help. For example, computerized modeling can examine numerous alternatives very quickly, provide a systematic risk analysis, be integrated with communications systems and databases, and be used to support group work. 3. Describe the decision matrix. Figure 9.2 illustrates the nine-cell decision-support framework. The framework includes three primary phases of decision-making and three broad categories of decisions, all combined in a nine-cell decision-support matrix. Low-level managers usually perform the structured and operational control-oriented tasks (cells 1, 2, and 4). Tasks in cells 6, 8, 9 are mainly the responsibility of top executives. The task in cells 3, 5, and 7 are usually the responsibility of middle managers and professional staff. Section 11.2 - Before You Go On… 1. Describe the capabilities of data mining. Data mining is the process of searching for valuable business information in a large data store. It can perform two basic operations: predicting trends and behaviours and identifying previously unknown patterns. 2. What are the major differences between a GDSS and an ODSS? Group decision support systems (GDSS) “is an interactive computer-based system that facilitates the solution of semi-structured and unstructured problems by a group of decision makers.” Organizational decision support systems (ODSS) supports several units or problems at one time, across departments and levels of the organization. It uses IT communication technologies and integrates with enterprise-wide IT such as ESS. 3. What are some of the capabilities of digital dashboards? Digital dashboards provide quick and intuitive access to timely information and management reports, for example: • Drill-down - the ability to go down (via menus or queries) to greater levels of detail • Critical success factor (CSF) – to calculate the factors most critical to the success of the business • Key performance indicator (KPI) - specific measures of CSFs. • Status access - the latest data available on KPI or some other metric • Trend analysis - using forecasting methods to detect the trend of KPIs or other metrics Instructor’s Manual .

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Ad-hoc analysis - analyses made upon demand, specifying any relevant factors and /or relationships. Exception reporting - reports that highlight deviations beyond specified thresholds.

4. What is a management cockpit? A management cockpit is an application of digital dashboards to support the informational needs of executives. It is a strategic management room containing an elaborate set of digital dashboards that enable top-level decision makers to better manage or ‘pilot’ their business operation. The objective is to create an environment that encourages more efficient management meetings and boost team performance via effective communication. To do this, key performance indicators and information relating to critical success factors are displayed graphically on the walls of a meeting room, called the management cockpit room. The cockpitlike arrangement of instrument panels and displays helps managers understand how all the different factors in the business impact on one another. Section 11.3 - Before You Go On… 1. Why is data visualization important? It often helps the users to understand better when data can be presented as text, graphics, and tables. 2. What is a geographical information system? A GIS is a computer-based system for capturing, integrating, manipulating and displaying data using digitized maps. Every digital object has an identified geographical location. 3. What is virtual reality and how does it contribute to data visualization? VR is interactive, computer-generated, three-dimensional real-time graphics delivered to the user through a head-mounted display. As a powerful medium for communication and learning, VR can assist data visualization. By interacting with the artificial environment, the user can have a better understanding of the ‘problem.’ Also, more than one user can share and interact with the system. Section 11.4 - Before You Go On… 1. Describe what is meant by intelligent behaviour. Intelligent behaviour is characterized by learning or understanding from experience, making sense of ambiguous or contradictory messages, and responding quickly and successful to a new situation. Instructor’s Manual .

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2. Compare artificial and natural intelligence. Advantages of artificial intelligence over natural intelligence include the following: • • • •

Artificial intelligence is more permanent than natural intelligence. This is because workers take their knowledge with them when they leave their jobs. AI is less expensive than natural intelligence. Having to hire, train, and pay employees for carrying out tasks is expensive. AI is consistent and thorough. Most of the time, AI will do a more thorough and accurate analysis than a human. AI can be duplicated easily, unlike humans, who have to explain their knowledge and hope that the listener understands and retains it for future use. With an AI system, a user transfers information that the AI has stored or developed to another system.

Advantages of natural intelligence over artificial intelligence include the following: • • •

Natural intelligence allows for creativity. AI does only what it is programmed to do. Natural intelligence helps individuals to recognize relationships between events and objects better than AI. Natural intelligence allows for inputs from a broader focus than AI does.

3. What are the benefits of expert systems? The benefits of ES are: • increased output and productivity • increased quality • capture and dissemination of scarce expertise • operation in hazardous environments • accessibility to knowledge and help desks • reliability • ability to work with incomplete or uncertain information • provision of training • enhancement of decision-making and problem-solving capabilities • decreased decision-making time • reduced downtime

4. What are the advantages and disadvantages of natural language processing? Among the benefits of NLP are: Instructor’s Manual .

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ease of access – many more people can speak than type speed – a competent typist can speak more quickly than type manual freedom – hands-free use is beneficial to many users (aircraft pilots, executives, product assembly workers)

Among the limitations of NLP are: • inability to recognize long sentences • better performance requires higher costs • need to combine speech with keyboard interaction, slowing communication 5. What are the advantages and disadvantages of artificial neural networks? Major benefits of neural networking include: • Pattern recognition – can analyze large quantities of data to establish patterns and characteristics in situations where the logic or rules are not known. • Fault tolerance – since there are many processing nodes, damage to a few nodes or links will not bring the system to a halt. • Generalization – when a neural network is presented with an incomplete or previously unseen input, it can generalize to produce a reasonable response. • Adaptability – the network learns in new environments. New cases are used immediately to retrain the program and keep it updated. • Forecasting capabilities – predictions can be made based on historical data. A major limitation of neural networking is the need to analyze large quantities of data in order to establish patterns and characteristics in situations where logic or rules are not known. 6. What is fuzzy logic? Fuzzy logic is computer reasoning that deals with uncertainties by simulating the process of human reasoning. It is able to handle ‘maybe’ situations better than conventional decision support.

“IT’s About Business” Questions 11.1 – Corporate Performance Management At Sharp Corporation 1. What characteristics should business intelligence technology have if it is to be used in corporate performance management? Discuss issues around data, technology, and management. Business intelligence technology should permit managers to respond quickly to changes in the business environment, by continuously providing them with current and timely information. Instructor’s Manual Copyright © 2010 ..

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The data should be presented to management in a meaningful way – e.g. key performance indicators in critical business areas such as sales, production, and/or inventory, can be presented graphically. Exception reporting – an alert system to immediately warn managers when key performance indicators reach specified thresholds, would be very useful. The system should also be simple and easy to use. Large volumes of data (transactions) are generated in normal, daily business operations. These data are required to provide information for management decision-making. Data storage, software and communications technology are applied to store, process and analyze these transactions and finally communicate the resulting information to management. There are also business intelligence applications that provide deeper data analysis (e.g. multidimensional data analysis, CSF, KPI, etc.), and present information graphically and flexibly (e.g. digital dashboards). 2. Visit the websites of some of the leading business intelligence software applications and prepare a table listing the benefits that they offer to an organization. Students can Google “business intelligence software” to prepare a list of companies and their applications. Major players should include SAP, Oracle, Sybase, IBM and Microsoft. Include the table listing their benefits. 11.2 – Enterprise GIS Makes Sears More Efficient 1. Discuss the benefits of geographical information systems to Sears. Discuss additional GIS applications that could benefit Sears. GIS applications can provide more and better routing options, such as finding the optimal (though not necessarily the shortest) path between service stops. GIS also permits Sears to better track the location of service technicians. Additional applications may include: • obtaining demographic information on areas of maximum/minimum service calls • targeting customer service needs and planning marketing campaigns • logistical planning and scheduling and • managing delivery, vehicle servicing and fuel costs. 2. Are there drawbacks to the CAMS and CARS systems from the perspective of Sears? From the perspective of the company’s employees? Support your answer. Possible drawbacks to Sears are: • Sears is now dependent on ESRI for its customer servicing and vehicle scheduling • corporate intelligence resides with an outside company Instructor’s Manual 11-9 Chapter 11 Copyright © 2010 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.

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the potential risks of over-extending their district territories due to improved efficiencies With regard to employees: • increased efficiencies led to the downsizing of employees • the negative psychological impact of close monitoring

Discussion Questions 1. Your company is considering opening a new factory in China. List several typical activities in each phase of the decision (intelligence, design, choice, and implementation). (LO 1) Each of the phases can be used to explain the approach of decision support systems (DSS). • Intelligence Phase – the starting point where reality is examined and the problem is defined. o Determine if opening a factory in China is commensurate with organizational objectives. o Conduct a search for relevant information about doing business in China. o Collect and classify data according to problem definition. o Develop a business problem statement. • Design Phase – design and construct a model or simplified representation of reality o Select the model according to the degree of abstraction required. o Validate the model by way of experiments and analysis. o Set criteria for evaluation of alternative potential solutions that are identified. (Attempt to forecast how a factory in China will solve business problems identified in previous phase.) o Generate alternative solutions to the problem (how best to conduct business with a factory in China). • Choice Phase – selecting a solution to test “on paper.” o Perform testing by experimenting with different “China business” scenarios. o Select the best solution and generate criteria to test. (Is doing business in China economically feasible?) • Implementation Phase – implement the solution that is most economically feasible. 2. Your company announced that it was interested in acquiring a U.S. company in the health maintenance organization (HMO) field. Two decisions were involved in this act: (1) the decision to acquire an HMO, and (2) the decision of which HMO to acquire. How can your company use BI systems, expert systems and digital dashboards to assist it in this endeavour? (LO 1) Instructor’s Manual .

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DSS applications support upper management in company acquisition decisions by providing analyses based on the decision maker’s initial definition of the situation including managerial intuition and judgment. The DSS can utilize financial modeling and sensitivity analysis to evaluate multiple interdependent variables. ES applications can be used to provide consistent expert analyses relevant to the acquisition and selection process. Digital dashboards could be used to provide “drill down” capabilities to locate key information about HMOs under consideration. Drill down is important because it eliminates the need for intermediaries for consultation and analysis of the data. The DD can also connect to online information services to seek additional intelligence from external sources. 3. A major difference between a conventional BI system and an expert system is that the former can explain a “how” question whereas the latter can explain a “why” question. Discuss the implications of this statement. (LO 2) BI systems provide access to vast amounts of data and help managers in consolidating and analyzing that data, to make better business and strategic decisions. A conventional BI system enables the decision maker to study a model and understand more fully the relationship between variables in the model. So, it helps reveal how things fit together. The ES has the ability to explain why it reached a particular judgment, so the decision maker can understand it’s reasoning with the facts provided about the situation. 4. Discuss the strategic benefits of BI systems. (LO 2) Business intelligence systems support managerial decision making by enabling decision makers to quickly ascertain the status of a business enterprise by looking at key performance indicators. In providing access to vast amounts of data and helping managers consolidate and analyze that data, they can make better business and strategic decisions. 5. Will BI systems replace business analysts? (Hint: See W. McKnight, “Building Business Intelligence: Will Business Intelligence Replace the Business Analyst?” DMReview, February 2005). (LO 2) BI systems will never replace business analysts altogether; they will aid them in doing a better job of analyzing all sorts of business data. 6. Why is the combination of GIS and GPS becoming so popular? Examine some applications of GIS/GPS combinations related to data management. (LO 3)

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Being able to see data in map format is very helpful and allows the users to visualize the situation better than just seeing a listing. Applications such as planning marketing or election campaigns, locating and dispatching ambulances, assisting construction personnel, showing crime trends, and helping to plan trucking routes are examples. It would also be useful in analyzing demographic patterns with regard to commerce, education, politics, etc.

Problem-Solving Activities Students will research and submit reports as per instructions. 1. The city of London (U.K.) has an entrance fee for automobiles and trucks into the city centre. About 1,000 digital cameras photograph the licence plate of every vehicle passing by. Computers read the plate numbers and match them against records in a database of cars for which the fee has been paid for that day. If the computer does not find a match, the car owner receives a citation (ticket) by mail. Examine the issues pertaining to how this process is accomplished, the mistakes it can make, and the consequences of those mistakes. Also examine how well the system is working by checking news reports. Finally, relate the process to business intelligence. 2. Enter the site for Cognos BI and FPm at http://www01.ibm.com/software/data/cognos/ and visit the demos on the right side of the page. Prepare a report on the various features shown in each demo. 3. Enter www.fico.com and find products for fraud detection and risk analysis. Prepare a report. 4. Visit www.dwexplorer.com/products/producttour/default.aspx and work through the DataWarehouse Explorer information. Answer the following questions: a. What are the different functions provided by the DataWarehouse Explorer? b. What strategic advantages could be realized when implementing this product for inventory management? c. Did you find the product self-explanatory? What type of training would be required when implementing this type of product? 5. Go to http://www.ibm.com/us/en/ and do a search for the “Business Intelligence Tutorial”. Open the first link in the list of results answer the following questions: a. What technology components are required to implement business intelligence systems? b. Who are the potential users of BI at TBC, The Beverage Company? What would each type of user attempt to achieve? c. What type of training would be required for the employees involved in implementing and testing the business intelligence systems at TBC?

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6. Access www.ted.com/index.php/talks/view/id/92 to find the video of Hans Rosling’s fascinating presentation. Comment on his data visualization techniques. 7. Access http://businessintelligence.ittoolbox.com. Identify all types of business intelligence software. Join a discussion group about topics discussed in this chapter. Prepare a report. 8. Visit the sites of some GIS vendors (such as www.pbinsight.com/welcome/mapinfo/, www.esri.com, www.autodesk.com). Join a newsgroup and discuss new applications in marketing, banking, and transportation. Download a demo. What are some of the most important capabilities and applications? 9. Analyze Microsoft Bing Maps (www.microsoft.com/maps/) as a business intelligence tool. (Hint: Access www.microsoft.com/Industry/government/solutions/virtual_earth/demo/ps_gbi.html). What are the business intelligence features of this product? 10. Visit www.kdnuggets.com/education/usa-canada.html and select three courses or programs on data mining. Compare the programs. Which would you take if you had the choice? Why? 11. Enter www.visualmining.com. Explore the relationship between visualization and business intelligence. See how business intelligence is related to dashboards.

Team Assignments Make team assignments and have students complete as per instructions. 1. Access www.dmreview.com/more/product_reviews. Examine the list of products, and identify software with analytical capabilities. Each group prepares a report on five companies. Use Google to find combined GIS/GPS applications. Also, look at various vendor sites to find success stories. For GPS vendors, look at http://biz.yahoo.com (directory) and Google. Each group will make a presentation of five applications and their benefits. 2. Each group will access a leading business intelligence vendor’s website (for example, MicroStrategy, Oracle, Microsoft, SAS, SPSS, IBM Cognos and Business Objects). Each group will present a report on a vendor, highlighting each vendor’s BI.

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Closing Case Business Intelligence At Dorel The Business Problem Dorel Industries with annual sales of over $2 billion is the leading marketer of juvenile products and bicycles in North America. It sells its products under a suite of brands, in over 60 countries worldwide. The company is organized in several operating divisions and subsidiaries in three market segments: juvenile, recreational/leisure, and home furnishings. Each of these business segments and the business units within them operates independently, although the organization strives to maximize cross-selling, crossmarketing, procurement, and other complementary opportunities. Dorel struggled with a common problem across the board - too much data without timely or consistent access to it. This was jeopardizing the company’s major strengths: innovation, product quality, and strong brands.

The IT Solution To find a solution to its problem, the company interviewed managers across its subsidiaries to understand their information needs. The goal of the project was to select an IT solution that would address the needs of the global organization. Dorel implemented the IBM Cognos business intelligence (BI) suite. This software provided financial integration for all the business units and subsidiaries worldwide and helped with reporting, scorecarding, and performance monitoring. Performance management was further enabled through a worldwide portal where managers could access relevant reports through the use of digital dashboards. Future Impact and Results The implementation of BI helped Dorel in several ways. It improved access to data across the organization. Consequently, senior managers gained a much better understanding of the company’s global operations. The new BI software has also improved the effectiveness and flexibility in generating business reports. Operations and financial managers can now spend more time analyzing data trends rather than collecting the data. The forecasting capabilities of the BI application permit managers to make better ordering and work scheduling decisions. Managers also found the dashboards very helpful and feel more confident when reporting to senior management or stakeholders.

Questions: 1. Describe the various benefits that Dorel is seeing from its business intelligence system. Instructor’s Manual .

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The benefits include: • improved access to data across the business, regardless of location or currency in use • managers have a much better understanding of the company’s global operations • it helps to visualize corporate operations and connect business activity • improved effectiveness and flexibility in generating business reports • managers can spend more time analyzing data trends and less time collecting data • managers can use the forecasting capabilities of the BI application to get better support for business decisions (e.g. ordering and scheduling) • instant and improved access to up-to-date information, which increases confidence in reporting to senior management and other stakeholders. 2. Discuss additional analyses that Dorel managers and analysts could run that would benefit the company and its business units and provide competitive advantage. Additional analyses may include: • comparing profitability across divisions, market segments and/or product lines • incorporating GIS to show demographic operations and profitability • to maximize crossselling, cross-marketing, procurement, and other complementary opportunities • to optimize supply chain logistics • to develop the company’s major strengths: innovation, product quality, and strong brands. 3. How could visualization technologies be used to support Dorel’s senior managers’ decision-making process? Visualization technologies enable managers to quickly view various aspects of operations and performance indicators in a simple, graphical manner. They also provide the flexibility to display synoptic views of multiple activities and to easily drill down to the underlying data flows. 4. Identify different ways in which intelligent systems could be used at Dorel. Build a table identifying the type of intelligent system, how it would work, and the benefits for the company. Students should investigate the application of intelligent systems – e.g. Expert Systems and Voice Technologies in management decision-making in marketing, production, financial management, etc.; also Natural Language Processing and Voice Technologies could be applied in product development - and incorporate them into their tabular report. Instructor’s Manual .

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CLUB IT Developing Information Security Measures For Ruby’s Club Go to the Ruby’s Club link at the Student Companion website or WileyPLUS for information about your current internship assignment. You will analyze and recommend managerial support systems to help the club’s managers better understand their monthly goals and how to achieve them.

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LEGAL NOTICE

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CHAPTER 12: Acquiring Information Systems and Applications Learning Objectives 12.1

Define project management and describe how projects should be managed and controlled.

12.2

Provide alternatives for justifying IT investments.

12.3

Identify and describe the advantages and disadvantages of the major alternative strategies for acquiring information systems.

12.4

Describe the SDLC (systems development life cycle) approach.

12.5

Explain how the IT development process can be modified and why.

12.6

Describe the process for vendor and software selection.

Teaching Tips and Strategies The main goal in this chapter is to introduce how to develop a new information system. I would suggest investing time detailing the opportunities and pitfalls of systems development. Among the key points is to ensure that students gain an appreciation for the human relations side of systems development. Once a development project is underway, many people from different disciplines are involved in the effort. Emphasize that project management and communications skills are extremely important for successful results. Challenges in Creating New Systems It is important to demonstrate to students that when companies are planning new information systems, sometimes the development committees hit a stone wall regarding development and implementation. Managers from different divisions have different (and often hidden) agendas for the new system. Many times these hidden agendas do not become apparent until it is too late. Get students to organize into groups and come up with some ideas of how to get around the hidden agendas. It is important that the expectation be that the new information system must benefit everyone equally. Student understanding of the systems development life cycle (SDLC) will help bring order to the complex process of creating a new system. Students with business work experience can relate to SDLC activities if they have participated as end-users or have casually used a computer in a business setting. Other students without experience may mistakenly view the SDLC as a conceptual concern of management and assume that Instructor’s Manual .

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system components will come together behind the scenes without their help. Make sure students appreciate the traditional difficulties involved in systems development. Spend some time describing how many companies have struggled with bringing order to the process of system development and instead let their users develop their own applications. Much time is needed for the transition from these islands of information and “private databases” to a well-designed, enterprise-wide information strategy. This is especially true in the all-too-likely case where IS failed to determine the applications that users should or should not develop, as well as the appropriate tools to use. More companies are choosing outsourcing to cope with the need to quickly implement systems. Consequently, these same organizations are losing control over IT systems development and operations, as well as the flexibility to adapt their ISs to new business needs and opportunities. Will the outsourcing stampede continue? Not necessarily. Engage your students in a debate over the pros and cons of outsourcing and “insourcing.” Succeeding in IS Development According to the 2003 CHAOS studies published by The Standish Group, the lost-dollar value for U.S. information technology projects (including cancelled projects and cost overruns) in 2002 was estimated at $55 billion, compared to $140 billion in 1994. This 2003 report shows a vast improvement, even though nearly half of the projects were over budget. They reported that 43 percent of projects exceeded dollar estimates. Companies usually embark on a systematic development of information systems when they find out they are losing competitive ground because they have an inefficient business process or no IS at all. What often occurs is that top management will initiate an impetus for change and throw their unwavering support behind the effort. This could mean that the project could get off to a great start, but the same sense of urgency will typically cause inappropriate short cuts to be taken by project managers. It is imperative for top management to let their employees know that time is money, and the project plan is the blueprint for successful development. A successful approach to systems development is to rely on modular methodology and to exercise good technical judgment. The key part to successful project completion, however, has little to do with technology, but rather, human relations and communications techniques. Therefore, it is prudent to mix the study of information systems development with sociological topics!

Review Questions Section 12.1 - Before You Go On… 1. What are the triple constraints of any project? Instructor’s Manual .

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The triple constraints of a project are: • Time - the window of opportunity in which a project must be completed to provide a benefit to the organization • Cost - the actual amount of resources, including cash and labour, that an organization can commit to completing the project, and • Scope - the processes that ensure that the project includes all the work required—and only the work required—to complete the project successfully 2. Describe the phases of a project. Project Initiation - to clearly define the problem that the project is intended to solve, and the goals that it is to achieve. It is also necessary to identify and secure the necessary resources, analyze the costs and benefits, and identify potential risks. Project Planning - in this phase every project objective and all its associated activities must be identified and sequenced, using logical tools such as, PERT, CPM, and Gantt charts. Project Execution - the work defined in the project management plan is performed to accomplish the project’s objectives. This coordinates people and resources, and integrates and performs project activities in accordance with the plan. Project Monitoring and Control - to determine whether the project is progressing as planned: • monitoring project activities to determine “where we are” • comparing project variables with the actual plan to see “where we should be” • identifying corrective actions to “get back on track”. Project Completion - the project is completed when it is “signed off” and formally accepted by the organization. All activities are finalized, and all contracts are fulfilled and settled. 3. What is a runaway project? Runaway projects are those that are so far over budget and past deadline that they must be abandoned, typically with large monetary loss. Section 12.2 - Before You Go On… 1. What are some problems associated with assessing the costs of IT? Problems include the allocation of fixed costs among different IT projects, and the unexpected or unplanned costs due to project creep, system failures and maintenance. Another difficulty is that system costs continue after the system is Instructor’s Manual .

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installed. It is important to calculate the Total Cost of Ownership, a formula for calculating the cost of acquiring, operating and controlling an IT system. 2. What difficulties accompany the intangible benefits from IT? By definition, intangible benefits are very difficult to place an accurate monetary value on. It is important not to ignore these benefits, however, since they are real and valuable to the organization. Therefore, they must be approximated. Overestimation will result in projects being accepted that do not produce the expected benefits, and underestimation will result in valuable projects being rejected. 3. Define NPV, ROI, break-even analysis, and business case approaches. The NPV method compares the present value of a project’s cash inflows with the present value of its cash outflows, discounted at the organization’s cost of capital. An NPV that is $0 or greater suggests the project is acceptable. The ROI method computes a rate of return that is generated by the project based on the project’s net income divided by the average assets invested in the project. Break-even analysis determines the point at which the cumulative dollar value of the benefits from a project equals the investment made in the project. Break-even analysis is attractive for its simplicity, but is flawed because it ignores the value of system benefits after the break-even point. A business case is a written document that is used by managers to garner funding for one or more specific applications or projects. Its major emphasis is the justification for a specific required investment. The business case helps to clarify how the organization can best use its resources to accomplish the IT strategy. Section 12.3 - Before You Go On… 1. Describe the advantages and disadvantages of acquiring or leasing standard software. Acquiring or leasing an existing package can be a cost-effective and time-saving strategy. The advantages are: • the software is less expensive than developing in-house • many different types or options of software may be available • the software can be tried out and tested before purchase • development and implementation time is eliminated • the software has usually been rigorously tested • no need to hire and train personnel specifically for project. Disadvantages include: • the software may not exactly meet the company’s needs and be difficult or impossible to modify • it may require huge business process changes to implement Instructor’s Manual Copyright © 2010 ..

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• • • • •

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the company will not have control over software improvements and new versions the software may be difficult to integrate with existing systems the vendor may discontinue the software and/or go out of business the software is controlled by another company with its own priorities and business considerations the company lacks intimate knowledge and understanding of how the software works.

2. Define ASPs, and discuss the advantages to companies using them. Application Service Providers are agents or vendors who assemble the software needed by an enterprise and packages it with outsourced development, operations, maintenance and other services. Advantages include cost savings in initial development, maintenance, upgrades and user training, and flexibility to adapt the software over time as needs change.

3. Explain the advantages of outsourcing IT services. Companies outsource IT services to achieve various advantages: • to reduce IT costs • to obtain external expertise • with limited IT resources, their IT needs are best served by outside contractors • to permit an existing IT department to experiment with new IT technologies without making a substantial up-front investment. Section 12.4 - Before You Go On… 1. Describe the feasibility study. The feasibility study involves defining the business problem or new opportunity, investigating options available for the best solution, making a recommendation, and estimating the probability of success. 2. What is the difference between systems analysis and systems design? Systems analysis is the detailed study and documentation of the “as is” situation and the requirements for the new system. Systems design is the development of a technical specification which details the system inputs, outputs and interfaces, hardware, software, databases, telecommunications, personnel, and procedures needed to provide a solution for the requirements developed in the analysis stage. 3. Describe structured programming. Instructor’s Manual .

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In order to establish a uniform approach to programming, one that is understood by successive iterations of staff, structured programming techniques are used. • Each module has only one function. • Each module has only one entrance and one exit. • GO TO statements are not allowed. 4. What are the four conversion methods? Parallel – running old and new systems concurrently for a period of time. Direct – moving the new system into production at the same time the old system is made inaccessible. Pilot – introducing the new system in one part of the organization when it is determined that it is stable, then it is rolled out to other areas. Phased – introducing select components of the new system in stages. When it is determined that the modules are stable, other parts are rolled out. Section 12.5 - Before You Go On… 1. Describe the tools that augment the traditional SDLC. Prototyping involves building a model of the system based on user feedback. It is an iterative approach which helps users visualize what the new system will look like. Joint application development (JAD) involves all of the end-users meeting with the IS project team to develop requirements and reach consensus. It can save a lot of time, but is intense and will only work well if all departments are represented. CASE tools are specialized tools which automate many of the tasks in the SDLC. Long-term maintenance on systems developed with CASE tools can be less expensive, however initial development can cost more. Rapid application development (RAD) can involve the other three tools to produce high-quality systems rapidly. JAD sessions are used to collect requirements. CASE tools are used to structure requirements and develop prototypes. 2. Describe the alternate methods that can be used for systems development, other than the traditional SDLC. The two methods are end-user development and object-oriented development. End-user development is very popular today because of the availability and familiarity with “personal” databases such as MS-Access and spreadsheet applications. Instructor’s Manual .

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As long as these databases are relatively small, and the users document what they have done, it can work well. If not, the IS department is usually called on to rewrite, rework and document the system. Object-Oriented Development is based on a different view of computer systems. Objects are self-contained units of data and instructions that perform a particular task. OOD is based on a library of objects, from which the developer selects the appropriate objects to perform the given task(s) modeling real world activity. Section 12.6 - Before You Go On… 1. List the major steps in the selection of a vendor and a software package. 1. 2. 3. 4. 5. 6.

Identify potential vendors. Determine evaluation criteria. Evaluate vendors and packages. Select vendor and package. Negotiate a contract. Establish a Service Level Agreement.

2. Describe a request for proposal (RFP). A Request for Proposal (RFP) is a document that is sent to potential vendors inviting them to submit a proposal describing their software package, costs, timelines, etc., and how it would meet the company’s needs.

3. Explain why SLAs play an important role in systems development. Service level agreements are formal contracts that specify the division of work and responsibility between vendors and the company. The SLA plays an important role, because it: • specifies the work divisions based on a set of agreed-upon milestones, quality checks, and what-if situations • describes how quality checks will be made and what is to be done in case of dispute, and • includes such issues as performance, availability, backup and recovery, upgrades, and hardware and software ownership.

“IT’s About Business” Questions 12.1 - Westjet Customers Wait, And Wait, And Wait ... 1. Why might WestJet have initially attempted to obtain its software as a new, customdeveloped system? Instructor’s Manual .

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Perhaps WestJet wanted to have more control and flexibility with the new system; they thought they could save costs; the new system might give them a competitive advantage and to avoid sharing any business intelligence with their competitors. 2. What are the disadvantages of going with a new vendor of software? The disadvantages of going with a new vendor are: • they may not have the technical experience for the particular project • they may lack the necessary project management expertise • they may lack the necessary technical resources • they may not have the capital assets to weather unexpected market fluctuations • they are vulnerable to their own internal HR and staffing issues. 12.2 – Dupont’s Focus: Chemicals, Not Information Technology

1. Why do you think more organizations have not adopted the model of outsourcing IT functions that DuPont has? Most large organizations would choose not outsource their entire IT operations because of many reasons, including the perceived cost and complexity, the dislocation and/or opposition of staff, the risk of relinquishing control, and the fear of failure. 2. What disadvantages do you see with this type of outsourcing agreement? The disadvantages might include long-term costs, loss of control, disruption of operations, failure of the vendor, the difficulty of “repatriating” the system later on… 12.3 – What Is Your Programmer Doing? 1. Provide examples of methods that HMRC could use to test its data or programs before sending it to individuals. HMRC should create a separate testing unit of well-trained, experienced analysts responsible for generating test data, developing the software to properly test the data and carefully scrutinizing the program test outputs. Their role would include developing the proper selection criteria for creating the data to circulate and the software to match data from customers with mailing data. Furthermore, staff should perform random checks on outputs before actual mailings are done. Instructor’s Manual .

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2. What can organizations such as Goldman Sachs do to protect their proprietary software? Steps organizations can take include: • implementing stringent hiring practices for programmers • develop proper technical and ethical training • establishing clear, well-documented IT policy • implementing a division of duties policy, i.e. programmers do not have access to live data • ensuring programmers take their allocated vacation or time off • installing keystroke monitoring and other security software.

3. Why would Goldman Sachs have custom-developed software rather than packaged software? Typically to satisfy their unique requirements, to maintain confidentiality, and for competitive advantage.

Discussion Questions 1. Describe the phases of project management and how they can be applied to the acquisition of information systems technology. (LO 1) Project Initiation - to clearly define the problem that the project is intended to solve, and the goals that it is to achieve. It is also necessary to identify and secure the necessary resources, analyze the costs and benefits, and identify potential risks. Project Planning - in this phase every project objective and all its associated activities must be identified and sequenced, using logical tools such as, PERT, CPM, and Gantt charts. Project Execution - the work defined in the project management plan is performed to accomplish the project’s objectives. This coordinates people and resources, and integrates and performs project activities in accordance with the plan. Project Monitoring and Control - to determine whether the project is progressing as planned: • monitoring project activities to determine “where we are” • comparing project variables with the actual plan to see “where we should be” • identifying corrective actions to “get back on track”. Project Completion - the project is completed when it is “signed off” and formally accepted by the organization. All activities are finalized, and all contracts are fulfilled and settled.

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2. ABC Company is considering implementing a software system that costs about $25,000. Describe the methods that can be used to justify spending this sum. (LO 2) ABC can use a number of methods to justify their spending on the system: • The NPV method compares the present value of a project’s cash inflows with the present value of its cash outflows, discounted at the organization’s cost of capital. An NPV that is $0 or greater suggests the project is acceptable. • The ROI method computes a rate of return that is generated by the project based on the project’s net income divided by the average assets invested in the project. • Break-even analysis determines the point at which the cumulative dollar value of the benefits from a project equals the investment made in the project.. • A business case is a document that is used to justify a proposed investment. The business case helps to clarify how the organization can best use its resources to accomplish its objective.

3. Discuss the advantages of an information systems acquisition as a lease option versus a buy option. (LO 3) Leasing has the advantages of lower upfront costs and more flexibility to change and adapt the applications used over time as needs change. 4. Why is it important for everyone in business organizations to have a basic understanding of the systems development process? (LO 4) End-user department staff have the business knowledge needed to work with the IS staff to develop all of the components of the system’s design. Without the input of the various departments involved in the operation of the process which is being designed, there could be errors in the requirements specification and/or logic. Assumptions are not a good basis for computer systems, user business knowledge is critical to the design. 5. Discuss the various types of feasibility studies. Why are they all needed? (LO 4) Technical, economic, behavioural, and organizational feasibilities are different facets of the analysis. Technical – determines if the current hardware and software platform is appropriate, whether the system should be developed in house or purchased from a vendor. Economic – determines if the project has an acceptable financial risk and whether the organization can afford it. Instructor’s Manual .

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Behavioural – determines if the corporate culture is open to the change. Organizational – determines whether the organization has any external issues that would preclude the project from being successful and whether the project meshes with the company’s strategic plan. They all impact the successful outcome of a project. 6. Discuss the issue of assessing intangible benefits and the proposed solutions. (LO 4) Intangible benefits are often very hard to quantify. IS staff responsible for the cost benefit analysis should collaborate with users of the system to place a value on the benefit, even if it is less than scientific. Very often, it is the quantifying of the intangible benefit that will make the biggest impact on the decision to move ahead with a new system. 7. Should prototyping be used on every systems development project? Why or why not? (LO 5) The SDLC provides the basic structure of the development process. Prototyping can be used within that structure to experiment with new technology or clarify requirements. It should not replace the traditional SDLC for highly complex systems. 8. Discuss the reasons why end-user-developed information systems can be of poor quality. What can be done to improve this situation? (LO 5) Putting development tools in the hands of end-users can result in some very innovative work. One of the biggest problems, however, is that in many cases they do not know the most efficient way to design a system. Therefore, when working with a small amount of data, it may seem like everything is okay, but as soon as they try to function in a full-blown production environment, the application grinds to a halt or stops completely. End-users also tend to be unaware of the overall systems environment. This can lead to errors and incompatibility issues. One way to avoid this problem is education. If, for example, the user knows how to design a relational database, then they have a better chance of developing an efficient application. Another way would be to have the applications run through a quality assurance process with IS to ensure that they are not only developing software that can be used, but also documenting their work. 9. Why is the attractiveness of ASPs increasing? (LO 5)

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Application service providers bundle products and services for an organization to provide applications, operations, and maintenance. These agreements enable the firm to avoid a major upfront purchase of IT resources and free the firm from operating and maintaining those resources. They also ensure the compatibility and continuity of systems. As needs change over time, the resources being utilized can be changed. These providers are particularly attractive to smaller and medium-sized businesses that cannot afford to have their own in-house IT staff.

Problem-Solving Activities 1. Your company is thinking of implementing new local area network software (purchase of an upgraded office suite with accounting software). Using the phases of project management, describe how this project should be managed. 2. In addition to saving money, what are some of the additional benefits that organizations would achieve from implementing a new customer relationship management system? 3. Your organization is thinking of switching from using its own in-house payroll system to using a payroll service by another organization. Describe how this change would be justified. 4. Rather than purchasing software for its accounting system, your company is thinking of using an ASP (application service provider). What are the advantages and disadvantages of purchasing versus using an application service provider? 5. Enter the websites of Gartner, Inc. (www.gartnergroup.com), the Yankee Group (www.yankeegroup.com), and CIO (www.cio.com). Search for recent material about ASPs and outsourcing, and prepare a report on your findings. 6. Enter www.ibm.com/software. Find its WebSphere product. Read recent customers’ success stories. What makes this software so popular? What would be the advantages of acquiring this software versus developing your own software? 7. Access www.ecommerce-guide.com. Find the product review area. Read reviews of three software payment solutions. Assess them as possible components within a major systems development process. State the advantages of using these components. 8. Use an Internet search engine to obtain information on CASE and ICASE tools. Select several vendors and compare and contrast their offerings.

Team Assignments

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1. Assessing the functionality of an application is a part of the planning process (Step 1) of acquiring software. Select three to fi ve websites catering to the same type of buyer (for instance, several websites that offer CDs or computer hardware), and divide the sites among the teams. Each team will assess the functionality of its assigned website by preparing an analysis of the different sorts of functions provided by the sites. In addition, the team should compare the strong and weak points of each site from the buyer’s perspective. 2. Divide into groups, with each group visiting a local company (include your university or college). At each organization, study the systems acquisition process. Find out the methodology or methodologies used by each organization and the type of application each methodology applies to. Prepare a report and present it to the class. 3. As a group, design an information system for a startup business of your choice. Describe your chosen IT resource acquisition strategy, and justify your choices of hardware, software, telecommunications support, and other aspects of a proposed system.

Closing Case Canada Revenue Agency: Improving Systems Development The Business Problem The Canada Revenue Agency (CRA) processes millions of tax transactions, as well as collects taxes, analyzes tax returns (personal, corporate, sales and excise taxes), and processes collections for other departments within the government. Employing about 4,000 IT professionals and with a $500 million annual IT budget, the CRA was challenged to replace aging systems and reduce costs while doing so. In 2006, the Office of the Auditor General of Canada (OAG), found that governance of IT projects was inadequate, including poor preparation of business cases. In 2008, six of eight projects audited in detail did not meet the agency’s own project management guidelines. These deficiencies were particularly important because the CRA was in the process of preparing a catalogue of its systems to decide which ones needed to be updated. The CRA had to update numerous unsupported, undocumented or obsolete applications. With a limited IT budget, they needed to set priorities and find a better method to decide which projects would be implemented and how. The IT Solution The CRA used an integrated risk management framework, which identifies risks and considers their likelihood and their impact. The CRA completed the inventory of

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its information systems, and assessed the fit of the systems in the organization. It also developed a multi-year strategic investment plan that considered its business and information needs. These included the replacement of a data centre and requirements for supporting its IT infrastructure. Management involvement in the planning process was high, making sure that teams from multiple functional units were involved in the planning, and considered short- and long-term business requirements and priorities. The Results In 2010, the OAG found that of five government organizations assessed, the CRA was the only agency effectively identifying its risks, and managing and monitoring those risks. Based upon that risk analysis, the CRA was the only one that had looked at its needs strategically over a period of years, rather than simply asking for funds on a project-by-project basis. Questions 1. What are some other ways that the Canada Revenue Agency can improve the process of managing the development of its information systems? The Canada Revenue Agency can improve the process of managing the development of its information systems by performing a cost/benefit analysis justifying the IT investment by assessing and comparing the costs and benefits. They can use a number of methods to justify their spending on the system. These include: • The NPV method compares the present value of a project’s cash inflows with the present value of its cash outflows, discounted at the organization’s cost of capital. • The ROI method computes a rate of return that is generated by the project based on the project’s net income divided by the average assets invested in the project. • Break-even analysis determines the point at which the cumulative dollar value of the benefits from a project equals the investment made in the project.. • A business case is a document that is used to justify a proposed investment. The business case helps to clarify how the organization can best use its resources to accomplish its objective. They could also evaluate other development options: • Outsourcing - acquiring IT applications from outside contractors or external organizations • Application service provider (ASP) – service provider who develops or assembles the required software along with the services, such as development, operations, and maintenance. The customer then accesses the applications via the Internet, or Instructor’s Manual .

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Software-as-a-service (SaaS) - a vendor hosts the applications and provides them as a service to customers over a network, typically the Internet. CRA will not own the software, but pay for using it. They will not install and run the application on their own computers, thereby saving them the expense (money, time, IT staff) of buying, operating, and maintaining the software.

2. Provide examples of some uses of technology that you think would be suitable for the CRA to implement. The CRA is responsible for a multitude of services, e.g. • managing and operating Tax Centres • collecting and distributing benefit payments to millions of families on behalf of the federal, provincial, and territorial governments • processing corporate and private income tax returns • processing federal tax (e.g. GST, HST) returns and payments • audit/accounting, etc. Students will realize there is a lot of scope for using technology (both hardware and software) to manage and support CRA operations. Some uses of technology might include: • automatically optimizing the tax benefits/credits on tax returns (or alternatively – minimizing the tax liability); • providing reliable, definitive, consistent online information and support • using bank records to detect tax cheats e.g. in foreign investments • using tax records to garnish defaulting debtors e.g. child support • applying social networking tools (Facebook, twitter) in the taxation process • incorporating smart devices (e.g. smart phones, PDAs) into realtime tax calculation and payment operations.

CLUB IT Acquiring Systems For Ruby’s Club Go to the Ruby’s Club link at the Student Companion website or WileyPLUS for information about your current internship assignment. You will help the club’s managers make decisions about purchasing, outsourcing, or building new systems for Ruby’s.

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Technology Guide 1: Computer Hardware Learning Objectives TG1.1 Identify the major hardware components of a computer system. TG1.2 Discuss strategic issues that link hardware design to business strategy. TG1.3 Discuss the innovations in hardware utilization. TG1.4 Describe the hierarchy of computers according to power and their respective roles TG1.5 Differentiate the various types of input and output technologies and their uses. TG1.6 Describe the design and functioning of the central processing unit, and the relationship between memory and performance. TG1.7 Discuss the relationships between microprocessor component designs, storage systems, and performance.

Teaching Tips and Strategies Simplifying Memory Most students have grown up with computers. It is surprising that many students cannot distinguish between an 800 MHz Pentium III and a 1.2 GHz Pentium III. Often students think the faster the chip, the better the PC. This chapter should help students understand better how speed is not the best predictor of performance, that each part in the computer system affects the performance of the computer. For instance, an 800 MHz processor with a bus speed of 266MHz will perform better than a 1.2 GHz processor with 100MHz bus speed. It is like the difference between a Corvette stuck behind a line of traffic on a two-lane highway and a Volkswagen traveling at the speed limit on the freeway. Even though the Corvette is capable of running at higher speeds, it will be slower than the Volkswagen because of the constraint of the type of thoroughfare over which it is traveling. Terms such as bus speed, MHz (megahertz), and RAM (Random Access Memory) may confuse students. Try equating CPU speed with vehicle speed by substituting MPH for MHz So, an 800 MHz (or MPH) machine is slower than a 1.2 GHz (gigahertz) machine (or 1200 MPH). Students seem to grasp this type of terminology better. When discussing with students the importance of memory, go over the different types of memory such as EDO, SDRAM and DDR, and how these different types of RAM run at different speeds. Explain to them that another way to understand 128MB DDR RAM is to relate it to 128 gallons of water. This illustrates to students that RAM is the amount of memory a computer has. (For instance, 256MB DDR RAM, means it can hold double the amount of 128MB DDR RAM or another 128 gallons of water!) Instructor’s Manual .

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How Gaming Technology Has Changed Question the students to get them thinking about why the Commodore 64 only had 64KB of memory compared to the average computer today with 4-8 GB. Bring this point up to reinforce to students that the costs of computer technology have gone way down. As technology costs go down, more businesses and consumers will convert to the newer technology because they can afford it. It wasn’t that long ago that 4 MB of RAM cost over $200! Currently, 2 GB of RAM costs about $49.95, shipping included! Another example you can give students is that laptops used to cost $4,000 for an entry level machine, and now the average cost is under $1,000. This leads to some very involved discussions. Next, it is helpful to go over a brief history of computers. Students are very involved in game machines such as the Xbox, Playstation 2, and Gamecube. Ask the class if they remember their first game system. Then, ask what their thoughts are about the playability and graphics of the machine. Proceed to a discussion about the older technology that was involved with those machines compared to the newer technology of today. Students will find themselves interested and aware of how quickly technology changes and how if they do not keep up with technology, they might become like has-beens such as Atari, Coleco Vision, Intellevision, Sega Dreamcast. Better Technology, Lower Prices Have students take out their calculators. Ask them how someone centuries ago who wanted to calculate 50 + 75 + 89 + 10 – 12 would do it. There will be interesting comments, such as the cavemen would use pebbles and lay them out and keep adding them, or the Chinese would use the abacus (counting beads). Ask students how we would do it now, and most will reply, “Using a calculator or doing it by hand.” Then let them know that the calculator hasn’t been around that long. The first calculator cost around $1,000 and could only add, subtract, divide, and multiply. Ask how much their calculators cost nowadays. Most will reply, “$10 or $20.” Reinforce to students that as technology becomes more mainstream, prices go down. AT&T’s Big Mistake Technology changes so fast it can leave companies losing market share through no fault of their own. A good example is AT&T. When the government determined that AT&T was a monopoly and had them split the company, AT&T held on to the long distance communications arm of the business. “Baby Bells” (regional telephone companies) were then created to handle the local markets. Who knew that almost two decades later that this would be a huge strategic mistake? What AT&T didn’t know was that cellular phones, which used to have spotty service and be very expensive, would now become mainstream and cheap. Calling plans were created that let consumers call anywhere in the U.S. for a low monthly fee. This has hurt AT&T’s business due to the fact that many Instructor’s Manual .

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consumers are using cell phones instead of their home (landline) phone. Also, many consumers and businesses now send e-mail instead of using long-distance telephone service. The goal of this discussion is to get students to realize that technology is important and changes at a very fast pace. As future managers, they will be required to stay ahead of the technology curve.

Review Questions Section TG 1.1 – Before you go on… 1. Decisions about hardware focus on what three factors? The three factors are: capability (power and appropriateness for the task), speed, and cost. 2. What are the overall trends in hardware? The overall trends are that hardware is becoming smaller, faster, cheaper, and more powerful over time. So quickly in fact, that it is difficult to decide when to purchase (or upgrade) hardware. However, delaying hardware purchases means one can obtain more powerful hardware for the same amount of money. 3. Define hardware, and list the major hardware components. Hardware refers to the physical equipment used for the input, processing, output, storage, and communications activities of a computer system. It consists of: • • • • • •

Central processing unit: (CPU) – manipulates the data and controls the tasks performed by the other components. Primary storage – internal to the CPU; temporarily stores data and program instructions during processing. Secondary storage – external to the CPU; stores data and programs permanently for future use Input technologies – accept data and instructions and convert them to a form that the computer can understand. Output technologies – present data and information in a form people can understand. Communication technologies – provide for the flow of data from external computer networks (e.g., the Internet and intranets) to the CPU, and from the CPU to computer networks.

Section TG 1.2 – Before you go on…

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1. How do you think the various types of computer hardware affect personal productivity? Organizational productivity? Hardware technology can affect both personal and organizational productivity. Advances in miniaturization of microprocessor and memory devices are ushering in ever-smaller computing and communication devices that can assist employees in achieving a productive, non-traditional work style. The power and performance of devices, as well as new types of devices (e.g. scanners, digital cameras, etc.) offer more productive ways of working. This is particularly true for professionals who work largely out of the office. Hardware improvements in microprocessor, storage and communication devices continue to increase worker and organization productivity. Organizations need to invest considerable time to understand whether the new innovations will bolster their specific business processing needs. Section TG 1.3 – Before you go on… 1. 1. What are server farms? Virtualization? Grid computing? Utility computing? Cloud computing? Edge computing? Autonomic computing? •

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Server farms – A server farm is a collection of computer servers, used to provide server needs far beyond the capability of a single machine. Server farms will often have both primary and backup servers allocated to a task, so that in the event of the failure of a primary server, a backup server will take over. Uses: o A common use of server farms is for web hosting, referred to as web farms. o Server farms are also commonly used for cluster computing. Many modern supercomputers are comprised of giant server farms of high-speed processors connected by Gigabit Ethernet. Server farms provide redundancy and fault tolerance, and they require major support—massive amounts of electrical power, air conditioning, backup generators, and security. Virtualization is a technique of dividing the resources of a computer into multiple execution environments by applying one or more concepts or technologies. It hides the physical characteristics of computing resources from the way in which other systems, applications, or end-users interact with those resources. Examples: o making a single physical resource (such as a server, application, or storage device) appear to function as multiple logical resources, or o making one physical resource appear (with somewhat different characteristics) as one logical resource

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Grid computing is applying the resources of many computers in a network to a single problem at the same time, usually to a scientific or technical problem that requires a great number of computer processing cycles or access to large amounts of data. It requires the use of software to divide and farm out pieces of an application to many computers (as many as several thousand!) o A well-known example of grid computing in the public domain is the ongoing SETI (Search for Extraterrestrial Intelligence) @Home project in which thousands of people are sharing the unused processor cycles of their PCs in the vast search for signs of "rational" signals from outer space. Utility computing makes computing resources and infrastructure management available to customers as needed at a specific usage rate as opposed to a flat fee. Utility computing enables companies to efficiently meet fluctuating demands for computing power by lowering the cost of owning hardware infrastructure. In Cloud Computing tasks are performed by computers physically removed from the user and accessed over a network, in particular the Internet. The “cloud” is composed of the computers, the software on those computers, and the network connections among those computers. The computers in the cloud are typically located in data centres, or server farms, which can be located anywhere in the world and accessed from anywhere in the world. Edge computing pushes applications, data and computing resources away from centralized points to the logical extremes of a network, closer to the user. It reduces the flow of data and improves efficiency. For example, parts of website content and processing can be located close to the user to decrease response time and lower processing costs. Autonomic computing systems manage themselves without direct human intervention.

2. What is nanotechnology? Provide an example of a practical use for nanotechnology. Nanotechnology refers to a field of applied science and technology, whose unifying theme is the control of matter on the atomic and molecular scale, i.e.1 to 100 nanometres (billionths of a metre). It deals with the fabrication of devices with critical dimensions that lie within that size range. A practical example is the WaterStick, which uses carbon nanomaterials to absorb contaminants from water. This would be particularly beneficial in many areas of the developing world, where clean drinking water is in critically short supply. Section TG 1.4– Before you go on… 1. Describe the computer hierarchy from the largest to the smallest computers. The computer hierarchy, beginning the most powerful and ending with the least powerful: • Supercomputers are the computers with the most processing power. The primary application of supercomputers has been in scientific, academic Instructor’s Manual TG1-5 TG1 Copyright © 2010 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.

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research and military work, but their use is growing rapidly in business as their price decreases. Supercomputers are especially valuable for large simulation models of real-world phenomena, where complex mathematical representations and calculations are required, or for image creation and processing. Examples of supercomputer applications include genome research, weather modeling for better weather prediction, nondestructive weapons testing, aircraft design, and motion picture production. Supercomputers generally operate at four to ten times faster than the next most powerful class, the mainframe. Mainframe computers. Large corporations use mainframe computers for centralized data processing and maintaining large databases. Applications that run on a mainframe can be large and complex, allowing for data and information to be shared by thousands of users throughout the organization. Examples of mainframe applications include airline reservation systems, corporate payroll, and student grade calculation and reporting. Midrange, also called minicomputers and servers, are relatively small, inexpensive, and compact computers that perform the same function as mainframe computers, but to a more limited extent. Minicomputers are usually designed to accomplish specific tasks such as process control, scientific research, office automation, and engineering applications. IBM is the market leader with its AS/400 series of computers. Servers are smaller midrange computers that are used to support networks. Workstations were originally developed for engineers requiring high levels of processing performance. They are typically based on RISC (reduced instruction set computing) architecture and provide both very high-speed calculations and high-resolution graphic displays. These machines have found widespread acceptance with the scientific community and, more recently, within the business community. Personal Computers. The distinction between workstations and personal computers is rapidly blurring. The latest personal computers have the computing power of recent workstations. Low-end workstations are now indistinguishable from high-end personal computers. o Microcomputers (also called micros, personal computers, or PCs) are the smallest and least expensive category of general-purpose computers. They can be subdivided into three classifications based on their size: desktops, laptops and notebooks, network computers, and palmtops. o Desktop PCs are the typical, familiar microcomputer systems that have become a standard tool for business and, increasingly, the home. It is usually modular in design, with separate but connected monitor, keyboard, and CPU. o Personal digital assistants (PDAs), also known as palmtops are small hand-held computers. They are typically used for: clock/calendar, accessing the Internet, sending and receiving e-mails, address book, etc. Most can run basic office software (word processing, spreadsheets, etc.), and audio capabilities enable them to be used as mobile phones (smart phones), web browsers, or portable media players.

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2. Differentiate between laptop computers and ultra-mobile PCs. Ultra mobile PCs have the full functionality of a desktop computer, but are smaller and lighter than traditional laptop and notebook computers. 3. Contrast the uses of supercomputers with the uses of mainframe computers. Supercomputers are especially valuable for large simulation models of real-world phenomena, where complex mathematical representations and calculations are required, or for image creation and processing. Typical supercomputer applications include genome research, weather modelling for better weather prediction, nondestructive weapons testing, aircraft design, and motion picture production. Supercomputers have also been used to compete (quite successfully!) with humans in chess games. Mainframes are less powerful and generally less expensive than supercomputers. A mainframe system can have terabytes of primary storage. Secondary storage may use high-capacity magnetic and optical storage media with capacities of many terabytes. Typically, thousands of on-line PCs/workstations can be linked to a single mainframe. Mainframes remain popular in large enterprises for extensive computing applications that are accessed by thousands of users at one time. Examples of mainframe applications are airline reservation systems, corporate payroll programs, website transaction processing systems, and university administrative systems. Section TG 1.5– Before you go on… 1. Distinguish between human data-input devices and source-data automation. Human data-input devices allow people to communicate with the computer. Some of these devices are very common, such as the keyboard and the mouse. Others, such as the touch-screen, stylus, trackball, joystick, and microphone, are used for somewhat more specialized purposes. The objective of source-data automation is to input data with minimal human intervention. These technologies speed up data collection, reduce errors, and can gather data at the source of a transaction or other event. Common devices in source data automation are automated teller machines (ATMs), point-of-sale (POS) terminals, bar code scanners, and optical mark readers. Voice recognition systems (VRS) are an emerging source data automation tool used in conjunction with microphones, to input speech into computers. Finally, sensors collect data from the environment and input them into a computer system. Examples include heating, ventilation and air-condition (HVAC) control sensors in building automation systems, and the myriad types of sensors built into a modern aircraft. 2. What are the differences among various types of monitors? Instructor’s Manual .

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Like television sets, monitors come in a variety of sizes and colour/resolution quality. And like television sets, the common desktop monitor uses cathode ray tube (CRT) technology to shoot beams of electrons to the screen. The electrons illuminate the picture elements (pixels) that deliver the resolution. Newer monitors and laptops use a flat screen that employs liquid crystal display (LCD) technology, as opposed to CRT. LCD monitors may be passive matrix, which have somewhat less display speed and brightness compared to active matrix monitors, which function somewhat differently (and cost slightly more). Active matrix monitors are now coming standard on certain PC configurations from HP, Sony, Compaq and Dell. Organic light-emitting displays (OLEDs) are brighter, thinner, lighter, cheaper, and faster diodes. 3. What are the main types of printers? How do they work? The three main types are impact printers, non-impact printers, and plotters. • Impact printers work like typewriters, using some kind of striking action. A raised metal character strikes an inked ribbon that makes a printed impression of the character on the paper. • Non-impact printers use alternative methods (e.g. inkjet, heat or laser) to generate the output. Laser printers generate output a page at a time. They first create the page image on the surface of a drum coated with photo-sensitive material (toner). The paper picks up the image as it is passed over the drum and the image is then fused by heat. Inkjet printers work differently, by shooting fine streams of coloured ink onto the paper. Thermal printers use heated wires to generate the output on specially treated paper. • Plotters use computer-directed pens for creating high-quality images. 4. Describe the concept of multimedia, and give an example of a multimedia system. Multimedia is the computer-based integration of text, sound, still images, animation, and digitized motion video. It merges the capabilities of computers with televisions, VCRs, CD players, video and audio recording equipment, and music and gaming technologies. Multimedia usually represents a collection of various input and output technologies. Examples include the multimedia systems (PC, DVD, data projector, document camera, etc.), commonly used in classrooms to support teaching. Section TG 1.6– Before you go on… 1. Briefly describe the components of the CPU. The CPU or microprocessor has three main parts: Instructor’s Manual .

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the control unit (CU) - directs the flow of data and instructions to and from the ALU, the registers, and other storage devices. It also controls the operation of the entire system. the arithmetic-logic unit (ALU) - performs the mathematical computations and logical operations, and registers (storage buffers) - high-speed storage areas that store data and instructions on entry to the CPU, as well as the results of processing before exit to output/storage devices.

2. How are microprocessor designs advancing? Intel co-founder Gordon Moore predicted in 1965, that the number of transistors on a chip will double about every two years. This is popularly known as Moore's Law. This phenomenon implies that microprocessor complexity and power would double every two years. Intel microprocessor design has followed this trend since the rollout of the original Intel 8086 chip in 1980. Transistors are increasingly miniaturized; the physical layout of the chips continues to be made more compact and efficient; newer materials improve the conductivity of electricity; and the chip’s instruction set is enhanced. Chip prices have also seen a similar decline over time. Section TG 1.7– Before you go on… 1. Describe the four main types of primary storage. • • • •

RAM (Random Access Memory) is used to hold program instructions and data while a program is running. It is volatile (temporary) semiconductor storage, fast and relatively limited in capacity (about 1-2 GB in current PCs.) Registers, located in the CPU, store the instructions and data that are actually being processed in the CPU. Cache memory is a type of high-speed memory that enables the computer to temporarily store blocks of data that are used often, so the processor can access them more readily. ROM (Read-only Memory) is another type of semiconductor memory, used to store system information. Also known as firmware, it is permanent (via use of a battery) and is required for booting up the computer.

2. Describe different types of secondary storage. •

Magnetic media (hard disks, floppy disks or tape). They are of large capacity, inexpensive, and can be easily rewritten. Hard drives are used to store the operating system, application programs and data.

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Optical storage devices (CDs, DVDs). Written and read by a laser, they are slower and of less capacity than magnetic drives, but are more robust and portable. Often used for the distribution of software and for backups. Flash memory devices (e.g. thumb drives). These are a newer type of nonvolatile, semiconductor medium. They are small, removable and convenient for transporting data.

3. How does primary storage differ from secondary storage in terms of speed, cost, and capacity? • •

Primary storage is made from semiconductor material and is volatile. Secondary storage is usually magnetic (hard drive) or optical (CD/DVD). Primary storage is much faster, has a smaller capacity and more expensive than secondary storage.

4. Describe the three types of enterprise storage systems. •

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Redundant Arrays of Inexpensive Disks (RAID) combines physical hard disks into a single logical unit for greater performance, reliability (through redundancy), and larger disk capacity (through aggregation). RAID is implemented to provide automatic data protection and recovery in case of disk failure, using the following techniques: o mirroring – the copying of data to more than one disk o striping – the splitting of data across more than one disk and o error correction – where redundant data is stored to allow problems to be detected and possibly fixed (known as fault tolerance). Storage Area Networks (SAN) is an architecture for building special dedicated networks with rapid and reliable access to storage devices by multiple servers. Network-attached Storage (NAS), is file-level data storage connected to a computer network, providing data access to heterogeneous network clients. NAS typically uses a special-purpose server to provide the file storage to users who access the device over a network.

Discussion Questions 1. Describe the hardware components included in a typical desktop computer. (LO 1) A typical desktop would consist of: • system unit – the main case that contains, o the CPU — controls the processing and other devices in the system o RAM – memory for storing instructions and data temporarily o hard drive - permanent magnetic storage of software and data o CD/DVD drives – optical storage options o adapters and chip sets – to control other system functions, e.g. video, sound, communications, etc. Instructor’s Manual .

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monitor – to display output keyboard and mouse – for input

2. What is the value of server farms and virtualization to any large organization? (LO 2) They permit large organizations to reduce costs, increase security and operational efficiency, and help them maintain a competitive strategy. 3. If you were the chief information officer (CIO) of a firm, how would you explain the workings, benefits, and limitations of cloud computing? (LO 3) In Cloud Computing tasks are performed by computers physically removed from the user and accessed over a network, in particular the Internet. The “cloud” is composed of the computers, the software on those computers, and the network connections among those computers. The computers in the cloud are typically located in data centres, or server farms, which can be located anywhere in the world and accessed from anywhere in the world. The cloud provides as many computers as are needed for a particular task (see grid computing) and users pay for the amount of actual processing and storage used (see utility computing). The advantages of cloud computing include, much lower infrastructure costs, increased storage and flexibility. The disadvantages consist of its dependence on networks and there are privacy, security, and reliability concerns. 4.

What is the value of cloud computing to a small organization? (LO 3) Cloud computing can be valuable to small organizations by eliminating the need (and costs) for an IT infrastructure and IT staff. Computing and storage capacity can be rented as required - paying for only what is used.

5. Where might you find embedded computers at home, at school, and/or at work? (LO 4) Embedded computers may be found in: • Healthcare: equipment for controlling devices, monitoring patients and remote diagnosis of vital health signs. • Home: sensors for monitoring home security, comfort and control and to deliver emergency signals from homes to monitoring stations • Work: systems for monitoring and controlling the physical plant and the office environment 6. What are some of the input and output technologies that would be used by a typical retail organization? Describe how the technology would be used. (LO 5)

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Source-Data Automation Input Devices include magnetic stripe readers, point-ofsale terminals and barcode scanners. These technologies speed up data collection, reduce errors, and gather data at the source of a retail transaction. An example of an input device used in a retail environment would be an RFID tag that would wirelessly transmit product information to electronic readers. An example of an output device would be a point of sale terminal with a monitor that would help a customer through self checkout.

7. What factors affect the speed of a microprocessor? (LO 6) The speed is commonly measured by the number of instructions the chip processes per second: machine instructions cycles per second, or MIPS. This number depends on the following four factors: • The preset speed of the clock that times all chip activities, measured in gigahertz (GHz). A gigahertz is one billion cycles per second. The faster the clock speed, the faster the chip (a 500 MHz chip is half as slow as a 1.0 GHz chip). • The word length, which is the number of bits (0s and 1s) that can be processed at any time. Today’s chips are designed to handle 32-bit or 64-bit word length. The larger the word length, the faster the chip. • The bus width. The wider the bus (the physical avenues down which the data and information travel as electrical impulses), the more data can be moved and the faster the processing. Buses are measured in microns (millionths of a metre). • The physical design of the chip. Generally, a greater number of transistors and shorter line width (distance between transistors) give faster processing speeds. 8.

If you were the CIO of a firm, what factors would you consider when selecting secondary storage media for your company’s records (files)? (LO 6) • • • • • • •

cost per byte of storage amount of storage capacity required archival storage requirements back up considerations retrieval speed portability and cross-platform support storage technology available

9. Given that Moore’s Law has proved itself over the past two decades, speculate on what chip capabilities will be in 10 years. What might your desktop PC be able to do? (LO 6) The brightest prospects for desktop computers in 10 years are in multimedia systems design. While sound, video, and animation are still most important for Instructor’s Manual .

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educational and game software, multimedia PCs have already begun to play a major role in many business applications as well. The cost of videoconferencing has plummeted while its quality has improved. Film clips and animations are enhancing tutorials and training materials. Shared documents with voice-digitized photographs, or 3-D graphics are beginning to make the rounds on the company network. 10. If you were the chief information officer (CIO) of a firm, how would you explain the workings, benefits, and limitations of thin clients as opposed to using fat clients? (LO 6) CIOs can focus on the total cost of ownership (TCO) aspect of thin clients versus fat clients. Thin client-based systems are not only less expensive to buy than standard personal computers, but they accrue additional cost benefits over the life of the computer. Savings can be achieved with thin clients through minimizing technical support, less training for users and less frequent replacement. It is good to have a choice for client computing and it is unlikely that thin clients will make today’s fat client obsolete. There are scenarios where both client systems work best. 11. Describe how and why a large organization, such as a bank, would use storage systems. (LO 7) Large organizations have to deal with enormous and ever-expanding volumes of data. Therefore they employ enterprise storage systems - independent, external systems that include multiple storage devices. These systems provide large storage capacity, high-performance data transfer, a high degree of reliability, security and availability, and sophisticated management tools. These are all critical for storing customer/client and business data and for supporting the daily operational transactions. Three major enterprise storage options are: redundant arrays of independent disks, storage area networks, and network-attached storage.

Problem-Solving Activities Students will follow instructions, make choices based on the directions in each activity and prepare a short report. 1. Access the websites of the major chip manufacturers, for example Intel (www.intel.com), Motorola (www.motorola.com), and Advanced Micro Devices (www.amd.com), and obtain the latest information regarding new and planned chips. Compare performance and costs across these vendors. Prepare a report for your class.

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2. Access the Journey Inside on Intel’s website (http://educate.intel.com/en/thejourneyinside/). Select one of the lessons that interest you and prepare a summary for your classmates. 3. Investigate the status of cloud computing by having each person research the offerings of one of these leading vendors. Note any inhibitors to cloud computing. Compare your notes and prepare a presentation for your class. • Dell (see www.dell.com/cloudcomputing) • Oracle (see www.oracle.com/technetwork/topics/cloud/whatsnew/index.html) • IBM (see www.ibm.com/ibm/cloud) • Amazon (see http://aws.amazon.com) • Microsoft (see www.microsoft.com/azure/default.mspx) • Google (see e.g., www.technologyreview.com/biztech/19785/?a=f)

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Technology Guide 2: Computer Software Learning Objectives TG2.1 Define software and differentiate between system and application software. TG2.2 Describe the general functions of the operating system. TG2.3 Describe the major types of application software. TG2.4 Discuss the advantages and disadvantages of open-source software. TG2.5 Explain how software has evolved, and consider trends for the future.

Teaching Tips and Strategies Most students might be more impressed with computer hardware because it is visible, tangible and looks impressive. However, it is the software that really generates the performance of a computer system. There are two main classes of software: 1. System software 2. Application software System Software System software consists of the software that is used to manage, control and support the hardware and execution of other software. It includes the software to monitor devices, handle communications and the running of the computer system. By far, the most important and widely known component of system software is the Operating System. Operating Systems An operating system (OS) is the set of system programs to control the operation of the computer and all of its resources. Some of these tasks include: • allocating and managing memory • processing key strokes and mouse movements • sending signals to peripheral devices (e.g. the display monitor) • reading and writing disk files • controlling the processing/running of other programs OS examples are MS Windows, Mac OS X, Unix, and Linux Application Software Application software consists of the programs that perform a particular task or business function. Application programs may be general purpose, (e.g. word processing, spreadsheet, database) or special purpose (e.g. scientific, tax, registration). Instructor’s Manual .

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Distinctions may also be made under horizontal (across industries), vertical (constrained to one industry) and specialized (a particular task/application) market applications. Common sources of application software are in-house, off-the-shelf, and custom developed. (See below) Another important type of software is firmware. This is a special class of software embedded in hardware (programmable hardware). Examples are software that is installed in special, read-only memory on devices like printers, graphics cards, communication devices, etc. The Hardware and Software Relationship Just as the most advanced engines in the world will not run optimally on bad fuel, computer hardware is limited by the design and efficiency of the software it is running. Poor software performance can lead to major problems. For example, many of us have experienced “the blue screen of death” (Windows Fatal Exception Error). This is caused by Windows software instructions being overwritten in the computer’s memory. Computer hardware can only follow the instructions provided by the software running them. Computers require logically correct and accurate instructions in order to perform properly; if not, they run the risk of “locking up” or crashing. Conversely, very sophisticated software requires adequate computing power. For example, you may explain to students that some of the features introduced in Word 2003 could not be fully utilized when they were introduced, because much of the existing hardware was inadequate or new hardware prohibitively expensive. Emphasize that without the proper hardware we will not be able to have all of the software functionality and that software is required to optimize the use of the hardware. That is, hardware and software are interdependent. Programming languages and techniques have also evolved over the years. We have moved from “spaghetti” coding using “second- and third-generation” languages through “structured programming” to visual and object-oriented programming. The objective has been to make programming simpler, more user-oriented and easier to maintain. The “Make or Buy” Decision Consequently, a major decision faced by organizations when developing or maintaining their information systems is the “make or buy” decision. That is, whether to develop the software “in-house” (using their own technical staff/programmers) or to purchase the software “off-the-shelf.” Another option is to hire software consultants to develop the software. There are pros and cons for each option: • Purchasing “off-the-shelf” is usually cheaper, has a much shorter lead time and is tried and tested, offering better standardization and support.

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In-house may provide better compatibility and goodness of fit with existing software by utilizing internal knowledge and expertise, but takes longer to deploy and may not meet professional/commercial standards.

On the other hand, many businesses may not have the expertise or the resources to design and develop their own systems. Furthermore, their technical staff may be deeply involved in other projects and maintenance. They may therefore hire outside consultants to develop the new systems, sometimes working along with the internal staff. This approach is often more expensive and may run into delays and budget overruns. Like any other business undertaking, careful planning and thought must go into these decisions. Regardless of the approach adopted, end-user involvement is crucial to system development. End-users are the ones to clearly specify their requirements, assist in testing and ensure that the system meets expectations. Being involved also empowers users and increases their motivation. Students should be aware that these “make-or-buy” managerial decisions are very important and will depend on a number of factors relating to the particular organization. However, this chapter will help provide students with the necessary tools to aid them in making better or more informed decisions regarding software development.

Review Questions Section TG 2.1 – Before you go on… 1. What is the importance of software in a computer system? Except for computer hardware with built in instructions (firmware), external instructions are required to direct and control the system components, including the CPU, RAM, storage and other peripheral devices. This is called system software. Then, in order to perform the end-user tasks to which the computer is being applied application software is necessary. Consequently, software plays a vital role in the operation and application of a computer system. 2. What is the significance of software defects in computer systems? Since software is the set of instructions that control and guide the computer system to operate properly and perform its required tasks, defects in the logic of those instructions can have a significant impact - from introducing application errors to terminal failure of the system. 3. What are the differences between systems software and application software? The major differences are: Instructor’s Manual .

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System software is the set of programs to control the operation of the computer and all of its resources. It acts as an intermediary between the application software and the hardware. Application software includes the programs that are designed to perform tasks for the end-users, e.g. for business, education or recreation (games). System software is designed to work with a particular CPU technology, e.g. Intel, Motorola, etc. Application software is designed to work with a particular operating system (system software). System software is very complex and often requires greater technical skill to use and maintain. Application software is intended for use by knowledgeable end-users and requires less technical skill on their part. System software will run without application software. The converse is not true.

Section TG 2.2 – Before you go on… 1. What are the two main types of systems software? The two main types of operating systems software are systems control software and systems support software. Systems control programs control the use of the hardware, software, and data resources of a computer system. The main systems control program is the operating system. The second type of systems software, systems support programs, supports the operations, management, and users of a computer system by providing a variety of support services. Systems utility programs, performance monitors, and security monitors are examples of systems support programs. 2. What are the major differences among mobile device, desktop, and mainframe operating systems? Operating systems for mobile devices are designed to support a single person using a mobile, hand-held device or information appliance. They are consequently “small” (a scaled-down version of the desktop version). Desktop operating systems (notebooks, laptops, desktops, and workstations) are designed to support a single user or a small workgroup of users. They provide more functionality than the mobile O/S. Greater technical skill is required to use effectively. The user interface is designed to be user-friendly and very intuitive to use. Mainframe operating systems (midrange computers and mainframes) typically support between a few dozen and thousands of concurrent users. They are very large, powerful and complex. They offer much greater functionality than the other types, including reliability, backup, security, fault tolerance, etc. However, the user interface may not be as user-friendly and graphical as the desktop. Instructor’s Manual .

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Section TG 2.3 – Before you go on… 1. Which classes of personal application software are essential for the productivity of a business or other organization with which you are familiar? Which are nonessential? The classes of personal application software that are used to enhance the productivity of business and other organizations include: • Office Productivity Suites (e.g. MS-Office, Corel) – used to perform the typical office spreadsheet, word processing, presentation and data management activities • Desktop Publishing (e.g. MS-Publisher, QuarkXPress) – extends word processing to produce finished, camera-ready documents, which may contain diverse fonts, graphics and images • Illustration & Design (e.g. Illustrator, Corel Draw) – allows users to create, maintain and print charts, graphs, images and drawings • Video Editing (e.g. PowerDirector, Nero) – specifically designed to handle editing of video • Photo & Imaging (e.g. Adobe Photoshop) – specifically designed to handle editing of photos and images • Groupware/Collaboration (e.g. Lotus Notes, Outlook, Project Manager) – the class of software designed to support collaborative activity among a group of users. Groupware provides three main sets of tools, depending on the level of collaboration—communication, conferencing and collaborative management (coordination) tools • Personal Information Management (MS-One Note, Time manager) – a type of application software that functions as a personal organizer. Its purpose is to facilitate the recording, tracking, and management of certain types of “personal information” required in the office • Web Authoring (e.g. Dreamweaver, MS-FrontPage) – assists the user in developing and maintaining web pages in a relatively easy-to-use, visual manner, bypassing the direct coding in HTML Of these, the least essential, (depending on the type of business) would be: • Illustration & Design • Video Editing • Photo & Imaging • Web Authoring 2. What do you see as the advantages of speech recognition software? Disadvantages? Speech recognition converts spoken words to machine-readable input (i.e. to the binary code for a string of character codes). The term voice recognition more precisely refers to speaker recognition, which attempts to identify the person speaking, as opposed to what is being said. Instructor’s Manual .

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Speech recognition applications include: • voice dialing (e.g. "Call office") • call routing (e.g. "I would like to make a collect call") • appliance control and content-based spoken audio search (e.g. find a podcast where particular words were spoken) • simple data entry (e.g. entering a credit card number) • preparation of structured documents (e.g. a radiology report) • speech-to-text processing (e.g. word processors or e-mails), and • in aircraft cockpits (usually termed Direct Voice Input). Speech recognition solutions are readily applicable in the following industries: health care, legal, customer support, education, government, military, air traffic, and assistive technologies. Vendors now claim accuracy rates as high as 99% while dictating. The benefits include: • greater efficiency – faster than the typical typing speed • reduces costs – eliminates transcription fees • accuracy – reduces the risk of transcription errors • convenience – eliminates the need for handwritten notes, typing and storage for documents • flexibility – users can work (compose email, memos, reports, lists, etc.) anywhere using a miniature voice recorder • accommodates disabilities – assists in a number of disabilities (e.g. carpal tunnel and other overuse syndromes, speech impairments and hearing difficulties). However, there are disadvantages or operational issues, which include: • semantics – variation in the use of the language, i.e. dialects, colloquialisms, differences in style, etc. • phonetic – differences in pitch, enunciation, pronunciation, etc. • dictation speed – users need to speak slowly • unable to detect/handle emotion • need to train/calibrate the system for new users • technical issues – compatibility with hardware and operating system; resource intensive Section TG 2.4 – Before you go on… 1. What is the difference between open-source software and open systems? Open source is a method for developing non-proprietary software that harnesses the power of distributed peer review and transparency of process. The source code for open-source software is available at no cost to developers or users. Instructor’s Manual .

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The concept of open systems refers to a model of computing products that work together, through the use of the same operating system. Within an organization, compatible software on different computers would interact with one another. For example, application software will run across all computer platforms. 1. What are the advantages and disadvantages of open-source software? The advantages of open-source software are: • better quality • higher reliability • more flexibility • lower cost, and • independence from exploitation and lock-in by proprietary vendors. Disadvantages include: • the need to acquire maintenance/support contracts from a third party if there is no in-house technical expert • there might be concerns about the ease of use of open-source software, • the amount of time and expense needed to train users, and • incompatibility with existing systems or with those of business partners. Section TG 2.5 – Before you go on… 1. Differentiate between HTML and XML. HTML is the lingua franca for publishing hypertext on the World Wide Web. It is a non-proprietary format based upon SGML (Standard Generalized Markup Language), and can be created and processed by a wide range of tools, from simple plain-text editors (type in the text and tags) to sophisticated WYSIWYG authoring tools. HTML uses tags such as <h1> and </h1> to structure text into headings, paragraphs, lists, hypertext links, etc. Some of the limitations of HTML include: • tags have no consistent meaning • has a fixed/limited number of tags • mixes format, content, and structure Extensible Markup Language (XML) is a simple, very flexible text format derived from SGML (ISO 8879). Originally designed to meet the challenges of large-scale electronic publishing, XML is also playing an increasingly important role in the exchange of a wide variety of data on the Web and elsewhere. XML is the ‘new’ markup language standard for sharing structured information on the Web. Major XML characteristics are: • provides flexible document formats • separates structure, content and format • document contains content and format Instructor’s Manual .

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specifies rules for defining own tags de facto standard for web processing applications

2. What are the strategic advantages of using an object-oriented programming language? The main strategic advantages of object-oriented languages are reusability, inheritance and encapsulation. Reusability means that objects created for one purpose can be used in a different OOP program if required. For example, if an object has instructions that solve a very difficult computation problem, that problem does not have to be solved again by another programmer. Instead, the object is just copied into the new program. This feature of O-O languages can represent a tremendous reduction in programming costs. The strategic advantage of the inheritance feature of O-O languages is that data and instructions located in an object can be shared by subclasses of that object. This makes OOP very cost effective in applications where data and instructions require frequent revisions. The encapsulation feature of O-O languages is based on the idea of taking a small amount of data and the instructions about what to do with that data and putting them together in what is called an object. The strategic advantage here relates to the reduction of time needed to develop and maintain separate files for programs and data.

Discussion Questions 1. You are the CIO of your company and you have to develop an application of strategic importance to your firm. What are the advantages and disadvantages of using opensource software? (LO 4) As CIO you are responsible for ensuring that the firm’s information technology investments are aligned with its strategic business objectives. You will influence and manage the information technology-related spending to ensure the organization develops and maintains its information processing and IT assets in line with the firm's business goals. Therefore, you will first need to consider how well the application will support the strategic objectives of your firm and the operational and financial implications of adopting it. Open-source software will offer the following advantages: • it can be used to develop a better application in terms of quality and robustness • the app could be better integrated into the corporate IT system • the app would be more reliable and flexible • development and maintenance costs would be lower • the software infrastructure would not be vendor-dependent or locked in to proprietary software. Disadvantages may include: Instructor’s Manual .

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a large investment in training tech and user staff may be necessary the need to outsource maintenance/support if there is no in-house technical expertise there might be internal resistance to the use of (new) open-source software the need for a major overhaul of existing systems to be compatible with those of business partners.

2. You have to take a programming course, or maybe more than one, in your MIS program. Which programming language(s) would you choose to study? Why? Should you even have to learn a programming language? Why or why not? (LO 5) Today, it is important for an MIS major to learn the languages that will be used to develop applications for strategic advantage. It would be prudent to learn a visual language such as Visual Basic.NET, and also would learn web development languages such as HTML and Java. Learning a programming language is key to understanding how computers perform input, processing, and output routines. In a general sense, knowledge of programming is good for anyone working with information. 3. What type of personal application software would a university student require? What type of application software does a professor need to teach a class? (LO3) Answers may vary. Examples of personal application software that a student might require would include: • Spreadsheets • Word Processing • Desktop Publishing • Graphics • Presentation • Communications Examples of personal application software that a professor might require would include: • Spreadsheets • Word Processing • Desktop Publishing • Data Management • Presentation • Personal Information Management • Communications Microsoft Office is a well known example of a Software Suite that might combine some of these packages and integrate their functions.

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Problem-Solving Activities Students will follow instructions, make choices based on the directions in each activity and prepare a short report. 1. A great deal of software is available free over the Internet. Go to www.pcmag.com/article2/0,2817,2338803,00.asp and look at all the software that is available for free. Choose one software program and download it to your computer. Prepare a brief discussion about the software for your class. 2. Enter the IBM website (www.ibm.com) and search for “software.” Click on the drop box for Products, and notice how many software products IBM provides. Is IBM only a hardware company? 3. Compare the following proprietary software packages with their open-source software counterparts. Prepare your comparison for the class. Proprietary Open Source Microsoft Office Google Docs, Oracle Open Office Adobe Photoshop Picnik.com, Google Picasa 4. Compare the Microsoft Surface interface (www.microsoft.com/surface/) with Oblong Industries’ g-speak spatial operating environment (http://oblong.com/). Demonstrate examples of each to the class. What are the advantages and disadvantages of each interface?

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Protecting Your Information Assets

Learning Objectives TG3.1 Identify the various behavioural actions you can take to protect your information assets based upon your risk assessment of information asset risks. TG3.2 Identify the various computer-based actions you can take to protect your information assets based upon your information asset risks.

Teaching Tips and Strategies The major IS threats faced by organizations are due to: • human error • malicious human activity • natural events and disasters Inadequate security may affect data, service, and infrastructure. Therefore, organizations need to implement a security policy and properly manage security risks. Controls Controls are mechanisms used to safeguard the corporate IS. Safeguards apply to resources, data, and organizational procedures. Various types of controls may be applied. For example: • identification and authentication • require users to login with a username and password • use of strong passwords • forcing periodic password changes • encryption of data • use of digital signatures • firewalls Security Planning Beyond the protection of resources, organizations need to recognize the importance of security and disaster recovery planning. To safeguard corporate IT resources, a Disaster Preparedness Policy is essential: • Locate IT resources with regard to possible disasters. • Ensure safety and security of facilities. • Employ a sound backup/recovery plan. • Use hot sites or backup facility. Instructor’s Manual .

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Implement an Incident Response Plan (specifies how employees are to respond to security problems).

Review Questions Section TG 3.1 – Before you go on… 1. Why is it so important for you to protect your information assets? It is essential for individuals to protect their information as it can be used to compromise their privacy and security. Criminals can use their personal and/or confidential information (e.g identity, SIN, credit card data, etc.) to commit various types of fraud. Organizations face many threats and risks to their information systems due to human error, malicious human activity, natural disasters and plain system failure. Individuals are also vulnerable to attack by hackers and cyber-criminals, putting their personal, medical and financial information, as well as their economic resources at risk. Consequently, it is vital to protect both corporate and personal information assets. 2.

Describe behavioural actions you can take to protect your information assets. Behavioural actions include such things as: • protecting your personal information (e.g. SIN, identity, etc.) whether on the telephone, in person or online; • exercise caution in disposing of hard copy or electronic media (e.g. disk drives) • using strong passwords; and • using caution in responding to spam (unsolicited e-mail) and visiting websites.

Section TG 3.2 – Before you go on… 1. Identify problems that can arise on your computer due to hackers, viruses, or worms. Many problems can arise due to a compromised computer: • theft or loss of data • equipment malfunction or failure • loss of time and money in recovery • spreading the (virus) infection • use of the computer as a “bot” to affect other computers 2.

Describe the computer-based actions that you can take to mitigate the likelihood of the problems you described. Computer-based actions may include:

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the use of legitimate software use of antivirus software performing regular backups encrypting passwords and data (especially for wifi) updating software to incorporate the latest security fixes keeping current all virus protection and anti-spyware software implementing secure firewall(s) not leaving your computer (physically) unprotected.

Discussion Questions 1. Why is it so important for you to protect your information assets? Can you assume that your organization’s MIS department will do it for you? (LO 1) Information is critically important to all organizations. Should their information be lost or damaged, most companies would be irreparably harmed. Therefore, organizations must ensure that their information resources are adequately protected. It is the responsibility of the IS department to implement the necessary security measures and protocols to ensure the safety of its IS assets. But employees also have the responsibility to follow IS policies and take the necessary safeguards to ensure that information is protected. 2. Discuss the differences between behavioural actions that you should take to protect your information assets and computer-based actions that you should take. (LO 1, 2) Behavioural actions include physical controls such as securing files and documents (locking doors and file cabinets), use of strong passwords, performing backups, protecting your identity/privacy, etc. Computer-based actions include safeguards such as implementing backup systems, installing robust security software and firewalls, and keeping software patches up-to-date.

Problem-Solving Activities Students will follow instructions, make choices based on the directions in each activity and prepare a short report. 1. Using one product suggested in this technology guide or a product you find, do the following: • Test or scan your computer for malware. • Test your firewall. • Scan your computer for spyware.

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2. Follow the steps in this technology guide to see if you have a Trojan horse on your computer.

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LEGAL NOTICE

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Technology Guide 4: Telecommunications, Networks, and the World Wide Web Learning Objectives TG4.1 Understand the basics of telecommunications systems and the different transmission technologies TG4.2 Describe the two major types of networks. TG4.3 Describe the Ethernet and TCP/IP protocols TG4.3.1Differentiate between client/server computing and peer-to-peer computing TG4.4 Explain how the Internet operates TG4.5 Differentiate among the Internet, the World Wide Web, intranets, and extranets.

Teaching Tips and Strategies This Technology Guide provides material for you to present to students. It explains the concepts, components and characteristics of a telecommunication system. Most students will have already used telecommunications in some form, but they may not understand the components or how they work. Networks A computer network is a system of interconnected IT resources, communications devices and channels, designed to permit sharing and collaboration among many users. There are many reasons for establishing networks: • to share hardware and/or software resources • to share data and information • to share expertise • to exchange messages • to collaborate on projects Networks may be classified into a number of categories, depending on their extent or purpose: •

Local Area Networks (LAN) connect computers within a single geographic location (i.e. the ‘campus’ of the organization that operates it).

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Metropolitan Area Networks (MAN) extend beyond a single localized area and spread over a city or metropolitan area. Wide Area Networks (WAN) connect computers and networks at remote geographic sites (across the country or world). The Internet is the global network of networks using a variety of communications methods, devices and protocols.

Network Architectures The relationship among the devices in a network, serve to define the architecture: • Peer-to-Peer (P2P) o a network without a central file server or host o devices may be connected via hub or router o each computer in the network has access to the public files located on the others • Client/Server (Two-tiered) o Client – a computer under the control of a server; can request data/resources from the server o Server – the computer that provides the data/resources in response to client requests o Client/server Network – a network model where most of the back-end processing takes place on a server, while the front-end processing is handled by the clients Communications Devices A number of devices are designed to facilitate communications in a network: • Network Interface Cards (NIC) – used by computers to connect to the network • Modems – convert signals to/from digital and analog • Hubs – connect computers in a LAN • Routers – use IP addresses to route packets more efficiently on networks • Switches – provide high-speed traffic handling, filtering, etc. • Bridges – connect similar networks • Gateways – connect dissimilar networks Protocols A communications protocol is the set of rules that govern and coordinate the communication between two or more computers/devices on a network. The devices must agree to and follow the protocol, as they send messages back and forth. For example: The TCP/IP protocol used on the Internet (Packet Switching): • Messages are divided into fixed-length packets (TCP). Instructor’s Manual .

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Each packet includes the destination IP address, data, and other header information. Packets travel independently over the network/Internet to their destination (IP).

Communications Media The communications medium is the channel/cable along which signals are sent. The medium may be physical wires or electromagnetic waves. Physical • Twisted-pair wire • Coaxial cable • Fibre-optic cable Electromagnetic • Microwave systems (terrestrial/satellite) • Wireless systems (radio/infrared) Wireless Networks Wireless channels are now often incorporated into networks. Wireless Fidelity (Wi-Fi) is a means of linking computers using infrared or radio signals. Current wireless devices include: • cellular phones and pagers • global positioning systems (GPS) • cordless computer peripherals • home entertainment system control boxes • two-way radios • satellite television Media Characteristics The laws of physics dictate the properties of communication signals: • Frequency – cycles per sec (MHz) • Wavelength – short (micro)/long • Amplitude – height of wave • Bandwidth – range of frequency • Baud (Rate) – speed (bits per sec)

Review Questions Section TG 4.1 – Before you go on… Instructor’s Manual .

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1. Describe the basic telecommunications system. A basic telecommunications system is comprised of: • computers (acting as the processors, sources and destinations of information) • communications processors (for example, modems, multiplexers, and front-end processors) • communications channels and media • networking software 2. .Compare and contrast the three wireline communications channels. • • •

Twisted-pair is the most prevalent form, inexpensive, but slow and subject to interference. Coaxial cable is less susceptible to electrical interference and can carry more data. It is more expensive than twisted-pair and more difficult to work with because it is inflexible. Fibre optics are expensive, but offer much greater capacity, speed and security than either of the others. They are more fragile and have a problem with signal strength over a long distance.

3. Describe the various technologies that enable users to send high-volume data over any network. • • • • •

ISDN is an older international telephone standard which allows users to transmit voice, image, video and data simultaneously. DSL provides high-speed digital data transmission from homes and businesses over existing telephone lines. Special modems are required to handle the digital transmission over analog lines. ATM permits almost unlimited bandwidth. Currently requires fibre-optic cable, therefore is more expensive. SONET is an interface standard for transporting digital signals over fibreoptic lines to integrate transmission from multiple vendors. T-Carrier is a digital transmission system that defines circuits that operate at different rates.

4. Compare and contrast the ATM, SONET, and T-carrier systems. ATM networks allow for almost unlimited bandwidth on demand and currently requires fibre-optic cable. It can transmit up to 2.5 gigabits per second and offers several advantages, including: it makes possible large increases in bandwidth and supports data, video, and voice transmissions on a single communications line. On the downside, ATM is expensive.

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SONET is an interface standard for transporting digital signals over fibre-optic cables and permits users to integrate transmissions from multiple vendors. SONET defines optical line rates, known as optical carrier (OC) signals. The base rate is 51.84 Mbps (OC-1), and higher rates are direct multiples of the base rate. T-carrier is a digital transmission system that defines circuits operating at different rates, all of which are multiples of the basic 64 Kbps used to transport a single voice call. These circuits include T1 (1.544 Mbps, equivalent to 24 channels); T2 (6.312 Mbps, equivalent to 96 channels); T3 (44.736 Mbps, equivalent to 672 channels); and T4 (274.176 Mbps, equivalent to 4,032 channels). Section TG 4.2 – Before you go on… 1. What are the main business reasons for using networks? Networks are used to share IT resources (data, devices and software), as well as to provide connectivity for collaboration and exchanging messages among multiple users. Networks also put businesses in contact with suppliers, partners and customers. 2. What is the difference between LANs and WANs? • •

LANs are geographically limited to a building or campus, under the control of one entity (the owner organization). They are predominantly used by the employees of that organization. WANs are usually commercially owned and supported by common carriers such as telephone companies. They provide a communications service to a broader population of users. When businesses have to transmit and receive data beyond the confines of their local area network, they typically use a wide area network, which connects multiple LANs and the Internet.

3. Describe an enterprise network. Early networking consisted of local area networks connecting computers in departments and workgroups. Decisions on what type of computers and networks to install usually rested with department-level managers. Eventually, organizations saw benefits in building enterprise networks that would let users throughout the organization exchange e-mail and work together using collaborative software. An enterprise network (EN) connects all the isolated departmental or workgroup networks into an intra-company network, with the potential for allowing all computer users in a company to access any data or computing resource. ENs provide interoperability and scalability among different systems and have the eventual goal of reducing the number of communication protocols in use. Internet protocols (TCP/IP) and web technologies (e.g. browsers) are widely employed. Instructor’s Manual .

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An enterprise network is both local and wide area in scope, integrating all the systems within an organization, regardless of O/S or size. The Encyclopedia of Networking and Telecommunications. Section TG 4.3 – Before you go on… 1. What is a network protocol? A network protocol is the set of rules that govern and coordinate the communication between two or more computers/devices on a network. The devices must agree to and follow the protocol, as they send messages back and forth. 2. Describe the Ethernet and TCP/IP protocols. Ethernet, originally developed by Xerox, is the most widely installed local area network (LAN) technology. Specified in the IEEE 802.3 standard, an Ethernet LAN typically uses coaxial cable or special grades of twisted-pair wires. Ethernet is also used in wireless LANs. The most commonly installed Ethernet systems are called 10BASE-T and provide transmission speeds up to 100 Mbps. Devices are connected to the cable and compete for access using a Carrier Sense Multiple Access with Collision Detection (CSMA/CD) protocol. Ethernet is typically used for LAN backbone systems, supporting workstations with 10BASE-T cards. Gigabit Ethernet provides an even higher level of backbone support at 1,000 megabits per second (1 Gigabit or 1 billion bits per second). 10-Gigabit Ethernet provides up to 10 billion bits per second. TCP/IP (Transmission Control Protocol/Internet Protocol) is a suite of Internet communications protocols. As with all other communications protocols, TCP/IP is composed of layers. Each layer solves a set of problems involving the transmission of data, and provides a well-defined service to the upper-layer protocols based on using services from some lower layers. The two most important protocols in the suite are: Transmission Control Protocol – breaks up data into packets and is responsible for verifying the correct delivery of data from client to server. (Data can be lost in the intermediate network.) TCP adds support to detect errors or lost data and to trigger retransmission until the data is correctly and completely received. Internet Protocol – finds the best route to transmit the packets and is responsible for moving packets of data from node to node. IP forwards each packet based on a fourbyte destination address (the IP number). The Internet authorities assign ranges of numbers to different organizations. The organizations assign groups of their numbers

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to departments. IP operates on gateway machines that move data from department to organization to region and then around the world. RFC 1122: Requirements for Internet Hosts—Communication Layers 3. Differentiate between client/server computing and peer-to-peer processing. Client/server computing links two or more computers in an arrangement in which some machines called servers control and provide computing services for the user PCs, or clients. Peer-to-peer processing is an arrangement in which each computer acts as both a client and a server. All computers operate at the same level (hence the term ‘peer’). Each computer can access all shared files on all other computers. Section TG 4.4 – Before you go on… 1. Describe the evolution of the Internet, and describe Internet2. The Internet was originally conceived in the late sixties for the U.S. military, as a means of allowing a network of government and military computers to share information over distance. By decentralizing control, it also offered security in case of “enemy” attacks on a particular city. Later development was encouraged for research purposes before its commercialization. The body in charge of setting up the network was the Advanced Research Projects Agency (ARPA). In 1967, ARPA enlisted the help of the Stanford Research Institute in Menlo Park, California, to design the system. Within a year, Stanford researchers had designed a framework, which ARPA contracted out for implementation. Internet2 is a not-for-profit advanced networking consortium comprising more than 200 U.S. universities in cooperation with many leading corporations, government agencies, laboratories and other institutions of higher learning. There are also a number of international partner organizations. Internet2 members leverage a high-performance network infrastructure and extensive worldwide partnerships to support and enhance educational and research missions. Beyond just providing network capacity, Internet2 actively engages the community in the development of important new technology including middleware, security, network research and performance measurement capabilities which are critical to the progress of the Internet. By bringing research and academia together with technology leaders from industry, government, and the international community, Internet2 promotes collaboration and innovation that has a fundamental impact on the future of the Internet. http://www.internet2.edu Instructor’s Manual .

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2. Describe the various ways you can connect to the Internet. There are several ways to access the Internet: • An organization’s LAN (Ethernet) – The Internet can be accessed from the office or your university. An organization’s backbone connects all the various LANs and servers in the organization to the Internet. Users may also access the Internet from other locations (e.g. public centres, hotels, etc.) while on the road, via another organization’s LAN. Connections may be either wireline or wireless. •

An Online Service – Access can be achieved by opening an account with an Internet Service Provider (ISP). An ISP is a company that offers Internet connections for a fee (e.g. Bell Sympatico, Rogers Yahoo! ISPs offer both dial-up and Digital Subscriber Line (DSL) access methods). In addition, many telephone providers and cable companies sell Internet access. To use this service, a modem and standard communications software are required.

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Internet Kiosks – booths located in public places like libraries and airports for use by people who do not have their own computers. Internet cafes that offer paid access are a common business service in many countries.

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Cellular Networks – There is a growing market for hand-helds (e.g. Blackberrys, pagers and mobiles) to access the Internet via their service provider’s cellular network.

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Hotspots – Many cities and small private groups offer free wireless access to the Internet. However, caution must be exercised in using unauthorized networks, since they can be a venue for identity theft and fraud.

3. Describe the parts of an Internet address. Every computer connected to the Internet is identified by a unique four-part string, known as its Internet Protocol (IP) address. An IP address consists of four numbers (each between 0 and 255) separated by periods, (e.g. 192.54.244.15). (Each of these numbers is stored in 8 bits [binary digits], providing the range of zero to 255.) . An IP address is comprised of two main parts: • the network part – the first three sets of numbers. All machines on the same network (LAN) will have the same left (network) part. • the machine part – the last set of numbers. This part identifies the machine to which it is allocated.

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Note: Most computers also have names, which are easier than IP addresses for people to remember. These names are derived from a naming system called the Domain Name System (DNS). Special companies are accredited to register domain names by the Internet Corporation for Assigned Names and Numbers (ICANN) Section TG 4.5 – Before you go on… 1. What are the roles of browsers? Browsers are application programs that permit user access to the Web. When a user clicks on a web page (link), the browser sends a request to the web server for the page, using the Hypertext Transfer Protocol (HTTP). The web server responds by sending the page and its component files (links) to the browser. The role of the browser is then to assemble the page, including its components, and display it on the user’s monitor. Browsers provide a graphical interface that enable users to point-and-click pages on the Web, a process called surfing. Web browsers provide universal access to the web, since their look-and-feel is consistent on any operating system under which they run. Leading browsers include MS Internet Explorer, Firefox from Mozilla, and Safari from Apple. 2. Describe the difference between the Internet and the World Wide Web. The Internet is the global network of networks that link computers across the world. The Internet handles a variety of protocols including, SMTP (mail), FTP (files), TCP/IP, HTTP, etc. The Web is a subset of the Internet that handles only web pages using the HTTP protocol. 3. What is a URL? An addressing scheme is used to find resources on the Internet. A URL (Uniform Resource Locator) is such a scheme. For example: http://www.wiley.com The first part of the address (http) is called a protocol identifier and it indicates what protocol to use. The second part (www.wiley.com) is the resource name and it specifies the IP address or the domain name where the resource is located. The protocol identifier and the resource name are separated by a colon and two forward slashes. Instructor’s Manual .

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Discussion Questions 1. What are the implications of having fibre-optic cable to everyone’s home? (LO 1) Speed and capacity would be very good; it would be more secure, but the cost could be very high. 2. What are the implications of BitTorrent for the music industry? For the motion picture industry? (LO 3) From Wikipedia: A growing number of individuals and organizations are using BitTorrent to distribute their own or licensed material. Independent adopters report that without using BitTorrent technology, with its dramatically reduced demands on networking hardware and bandwidth, they could not afford to distribute their files. Film, video and music BitTorrent Inc. has amassed a number of licenses from Hollywood studios for distributing popular content at the company's website. 3. Discuss the pros and cons of P2P networks. (LO 3) There are three types of P2P networks: 1. The first accesses unused CPU power among networked computers. 2. The second is a real-time, person-to-person collaboration application that uses buddy lists to establish a connection. 3. The third is advanced search and file sharing such as BitTorrent. This new file sharing application allows users to access many audio or video files in a way that is different from the older Napster-style sharing. It divides large files into tiny pieces and requires users to upload a file as they are downloading so that it is a more equitable way of operating. P2P file-sharing networks include key characteristics: • the user interface runs outsides of a Web browser • computers in the system can act as both clients and servers • the software is easy to use and well-integrated • the application includes tools to support users wanting to create content or add functionality • the application makes connections with other users • the application does something new or exciting • the software supports "cross-network" protocols like SOAP or XML-RPC However, there are negative aspects relating to data security, confidentiality, and legal/copyright issues. Instructor’s Manual .

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4. Should the Internet be regulated? If so, by whom? (LO 4, 5) Student answers may vary on this question. They could explore various regulation options, e.g. commercial organizations, governments, academe/research, non-profit bodies, individuals, etc. However, they should consider the issues of efficiency, expense, monopolization, open-source access, free speech and vested interests. 5. Discuss the pros and cons of delivering this book over the Internet. (LO 4, 5) Common issues concerning electronic publications may include: • price – the electronic version should be less expensive • convenience and/or ease of access – students can easily access the online version; but it is not as easy to take with them unless they have a mobile computer • lead time – publishers can get a new edition out to the market more quickly than the printed version • timeliness of updates – authors can continually update contents to improve the text • threats to academic integrity – students can more easily copy and share the contents 6. Explain how the Internet works. Assume you are talking with someone who has no knowledge of information technology (in other words, keep it very simple). (LO 4, 5) The Internet is a global network of networks, linking millions of computers and communications devices. This network permits data to be transferred from one computer to another. The following provides some insight into what happens to a piece of data (eg. a web page, file or e-mail) when it is transferred over the Internet: 1. The data is broken up into many same-sized pieces (called packets). 2. A header is added to each packet that explains where it came from, where it should end up and how it fits in with the rest of the packets. 3. Each packet is sent from computer to computer until it finds its way to its destination. Each computer along the way decides where next to send the packet. (This could depend on things like how busy the other computers are when the packet was received. The packets may not all take the same route.) 4. At the destination, the packets are examined. If there are any packets missing or damaged, a message is sent asking for those packets to be resent. This continues until all the packets have been received intact. Instructor’s Manual .

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5. The packets are then reassembled into their original form. Each computer connected to the Internet has software called TCP/IP (Transmission Control Protocol/Internet Protocol) which is responsible for receiving, sending and checking packets. TCP/IP is the underlying protocol of the Internet. 7. Do some web pages take longer to download than others? If so, why? Explain your answer. (LO 5) The time taken to download web pages may vary according to certain factors: • size of the page – Naturally a large document will take more time. • speed of the connection – Users may be connected to the Internet in various ways under different connection speeds. Therefore, a slower connection will take longer. • the client computer system – The performance of your PC hardware and/or software will also have an impact. • the communications system – If your connection is overloaded, downloads will take longer. They will depend on how many people are using the system at the time.

Problem-Solving Activities 1. Access several P2P applications such as SETI@home. Describe the purpose of each and which ones you would like to join. 2. Access www.ipv6.org and learn about more advantages of IPv6. 3. Access www.icann.org and learn more about this important organization. 4. You want to set up your own website using your name for the domain name (for example, KellyRainer). a) Explain the process for registering a domain. b) Which top-level domain will you use and why? c) Access www.icann.org and obtain the name of an agency or company that can register a domain for the TLD that you selected. What is the name of that agency or company? d) Access the website for that agency or company to learn the process that you must use. How much will it initially cost to register your domain name? How much will it cost to maintain that name in the future?

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Chapter: Technology Guide 1: Computer Hardware

True/False

1. The rapid rate of innovation in the computer industry makes hardware decisions very complex. *True False

2. The arithmetic-logic unit controls the flow of information in the CPU. True *False

3. Moore’s Law states that microprocessor complexity will double approximately every two years. *True False

4. Bits are any numeric digits between 0 and 9. True *False

5. A terabyte is approximately one trillion bits. True *False

6. Cache is a type of high-speed primary storage that facilitates the transfer of data during processing, between the CPU and random access memory. *True False

7. Secondary storage is designed to store very large amounts of data for short periods of time. True *False

8. The small computer systems interface (SCSI) disk drive interface is faster than the enhanced integrated drive electronics (EIDE) disk drive interface. *True False

9. Sequential access provides direct access, to specific data. True *False

10. Minicomputers are usually designed to support specific tasks such as process control and engineering applications. *True False

11. Laptops and notebooks are the smallest and most expensive computing devices on the market. True *False

12. Liquid crystal displays (LCD’s) take less power to run than any other output device True *False

Multiple Choice

1. Why should we as students learn about hardware? A) Hardware is better than software. B) Hardware is more expensive than software. C) Hardware lasts longer. *D) You may be making hardware-related decisions. E) all of the above

2. A _______________enables users to share files and software. A) bus width *B) server C) ROM D) grid E) OLED

3. The type of primary storage that offers the least capacity is: A) read-only memory *B) registers C) random access memory D) cache memory E) flash memory

4. A personal computer with a quad-core chip has _______ gigabytes of RAM. A) eleven *B) six C) four D) ten

5. Read Only Memory (ROM) is used primarily: A) as an alternative to RAM *B) to store instructions used during the booting process C) to store important personal information, such as passwords D) to replace hard disks E) for data backup

6. Recentralization is defined as: A) moving away from mainframes to a set of many smaller systems B) creating a distributed system of minicomputers *C) moving away from many smaller systems to mainframes D) centralizing the processes in an organization E) storing hardware in a centralized location

7. What are the two major types of printers? *A) laser and inkjet B) inkjet and officejet C) plotter and laser D) cache and flash E) personal and office

8. Server farms contain: A) thousands of cows B) thousands of horses *C) thousands of networked servers D) hundreds of cowboys E) all of the above

Chapter: Technology Guide 2: Computer Software

True/False

1. The first computer software applications in business were developed in the late 1960s. True *False

2. Today, software comprises a much larger percentage of the cost of modern computer systems than it did in the 1950s. *True False

3. The cost of computer hardware has increased over the years while software has remained the same. True * False

4. Application software consists of the programs that provide specific functionality for a user. *True False

5. The main system control program in a computer system is the operating system. *True False

6. Multiprocessing involves the simultaneous processing of programs on different computers in a network. True *False

7. Plug-and-play is a feature that automates the installation of new hardware by enabling the operating system to recognize new hardware and install the necessary software automatically. *True False

8. Proprietary application software is a licensed software package that becomes the property of the purchaser. True *False

9. An example of a spreadsheet application software is QuarkXpress. True * False

10. Since current software is so easy to use, training employees is not a major concern. True *False

11. An advantage of procedural languages is that non-technical users can use them to develop applications for specific functional tasks. True *False

12. Visual languages employ a graphical environment, using a mouse, icons and pull-down menus to make programming easier. *True False

Multiple Choice

1. The _____ complexity of software implies that there is a(n) _____ potential for errors. A) decreasing, decreasing B) decreasing, increasing C) increasing, decreasing D) increasing, level *E) increasing, increasing

2. Which components of a computer system do not include physical devices? A) hardware *B) software C) memory D) storage E) display

3. _____ means that two or more programs can run concurrently on a single CPU. A) Multithreading *B) Multitasking C) Time-sharing D) Scalability E) Multiprocessing

4. The class of software responsible for allocating resources when an application program is running, is known as the __________. A) memory manager B) resource allocation manager *C) operating system D) application software E) compiler

5. Off-the-shelf application software may be _________: A) purchased B) leased C) rented *D) all of the above E) none of the above

6. In order to protect their computer systems and resources from unauthorized users, vendors use: A) encryption B) private security agents *C) system security monitors D) internet-based distribution methods E) passwords

7. _________ is software whose source code is available at no cost to developers or users. A) Read-only software B) Free software C) Random access software D) Contract software *E) Open-source software

8. Java is used to develop small applications called _______, which can be included in HTML pages on websites. A) Internet software B) software drivers C) utility programs *D) applets E) apples

Chapter: Technology Guide 3: Protecting Your Information Assets

True/False

1. The level of protection required for information assets should be geared to the type of information that is being stored or transported. *True False

2. Behavioural and technical are two types of actions an organization can take to protect its information assets. True *False

3. Behavioural actions to protect information assets consist of those actions that specifically involve a computer. True *False

4. As a user, you can protect your online identity by signing up with a company that provides proactive protection of your personal information. *True False

5. The source of identify theft could be through someone hacking into the places where you bank or conduct your normal banking transactions. *True False

6. Increasing your use of debit cards is an effective way to protect your information assets. True *False

7. Installing free anti-malware programs is not advisable, because they are inadequate. True *False

8. ZoneAlarm and Symantec are widely-used commercial firewall security vendors. *True

False

9. Using a browser other than Microsoft IE 7.0 is not a safe practice. True *False

10. Two-factor authentication means that you must have two forms of identification to access your laptop or notebook *True False

11. If your computer automatically connects itself to the Internet, it is a sign that it might be infected with a worm. *True False

12. Peer-to-peer (P2P) networks are file-sharing systems that are based on central file servers. True *False

Multiple Choice

1. Protecting your information is more critical today, as organized crime is increasingly ___________. A) focusing on business B) becoming more dangerous *C) turning its attention to home users D) spending more money E) all of the above

2. The use of credit cards with your picture on them is a good practice, because: A) you can use it as an ID card at the airport *B) a cashier can compare your face with your picture C) you don’t need to sign the receipts any more D) it makes the card more attractive E) all of the above

3. Which of the following is not a behavioural action for protecting your information? A) Pay close attention to your credit card billing cycles. B) Protect your social insurance number. C) Limit your use of debit cards. *D) Use strong passwords for the network.

E) Shred discarded mail or old records containing confidential identification.

4. To determine if your computer system is infected with malicious software, look for the following signs: A) Your computer shuts down unexpectedly by itself.. B) Your computer does not start normally. C) Programs take longer than normal to load. D) Programs act erratically. *E) all of the above

5. Which of the following statements is false? *A) It is safe to post personal information on social networking sites. B) Chat rooms pose risks. C) You should review any entries that you make in Facebook. D) Potential employers search social networking sites for information about prospective employees. E) Once information is posted on the web, it is impossible to retract it completely.

6. Which of the following statements about firewalls is true? A) A personal firewall is software that prevents communications to and from a computer. *B) A firewall controls communications based on its security settings. C) A personal firewall will protect all the computers connected to it. D) Firewalls should not alert you to suspicious behaviour. E) Firewalls should respond to Internet requests to every port.

7. Periodic software releases designed to fix flaws in existing software are known as: A) versions B) malware C) firmware D) upgrades *E) patches

8. All of the following are means of protecting portable devices and their data, except: A) encryption B) two-factor authentication *C) padlocks D) use of alarms E) using an inconspicuous case or bag

Chapter: Technology Guide 4: Telecommunications, Networks, and the World Wide Web

True/False

1. In a communications system, processing devices use analog signals while the channels are digital. True *False

2. Cable modems are designed for handling communications over the basic twisted-pair telephone wires. True *False

3. Multiplexing combines the signals from a number of low-speed lines into a high-speed line and vice-versa. *True False

4. Twisted-pair wire is the most prevalent form of communications wiring today. *True False

5. Every device connected to a LAN needs to have a network interface card (NIC). *True False

6. A local area network (LAN) is designed to connect devices over an extensive geographical region. True *False

7. All networks, regardless of size, require one or more modems. True *False

8. Ethernet is a LAN protocol providing data transmission speeds of ten billion bits per second. *True False

9. The Transmission Control Protocol (TCP) is responsible for routing data packets among the various Internet servers. True *False

10. The Internet is a global network of networks, enabling users to communicate, collaborate, and exchange information seamlessly around the world, if they use the same type of equipment. True *False

11. CAnet 4 and Internet2 are advanced networks supporting international collaboration on topics such as remote medical diagnosis, digital libraries, etc. *True False

12. The Internet and the web are identical networks using use the same protocols, except that the web serves fewer countries. True *False

Multiple Choice

1. DSL modems operate on the same lines as: A) cable TV wires *B) telephone wires C) Ethernet wires D) fibre optical wires E) all of the above

2. Which of the following is not specifically designed to support the operation of a network? A) gateway B) switch *C) computer D) router E) server

3. All of the following are physical communications channels, except: A) fibre B) twisted-pair C) coax D) copper *E) microwave

4. A network _________connects the LAN to external networks. A) router B) bridge C) switch *D) gateway E) none of the above

5. Which of the following statements is false? *A) A LAN is unlimited in the number of devices it connects. B) A switch is a device that supports communication. C) A printer can be connected to a network. D) To join a network, a PC needs an NIC. E) A server is a computer that serves data on a network.

6. Peer-to-peer (P2P) processing is a type of client/server distributed processing where each computer acts as_____________. A) a client B) a server *C) both a client and a server D) neither a client nor server E) a host

7. The set of rules and procedures that govern transmission across a network is called a _________. A) process B) program C) modem D) firewall *E) protocol

8. Which of the following is used to locate a website on the Internet? A) FTP *B) URL C) TCP/IP D) HTTP E) POP3

Chapter : Chapter 1 : The Modern Organization in the Global, Web-Based Environment

True/False

1. The term “Information Technology” refers only to the hardware and software used in information systems. True *False

2. Information has meaning and value to a recipient. *True False

3. An organization’s information technology architecture is a high-level plan of the information assets in an organization. *True False

4. All information systems must be computerized. True *False

5. An application program supports a specific task or business process. *True False

6. Globalization is the integration and interdependence of economic, social and cultural aspects of life, within geographic boundaries. True *False

7. The global web-based platform enables individuals to connect, compute, communicate and collaborate ubiquitously and asynchronously. *True False

8. Internet Explorer played a major role in the leveling of global competition. True *False

9. An important pressure that exists for businesses in a global market is the need for real-time operations. *True False

10. The Sarbanes-Oxley act was passed to force organizations to upgrade their information systems. True *False

11. Made-to-order and mass customization are business commerce responses driven by the Internet. *True False

12. Organizations have many types of information systems resources from multiple vendors. *True False

Multiple Choice

1. An organization’s _____ is a high-level plan of the information assets in an organization. A) information technology infrastructure *B) information technology architecture C) information technology D) information system E) computer-based information system

2. _____ include data management, systems development, and security concerns. A) IT components *B) IT services C) Information technologies D) Information systems E) Computer-based information systems

3. Which of the following is not a major capability of information systems? A) perform high-speed, high-volume, numerical computations B) provide fast and accurate communications among organizations *C) allow quick, but expensive access to vast amounts of data worldwide D) facilitate data interpretation E) automate semiautomatic business processes

4. Which of the following is not included in Friedman’s 10 major forces of globalization? A) outsourcing B) supply chain management C) unification of Germany D) wireless technologies *E) growth of China’s economy

5. Friedman’s ten forces, or “flatteners,” contributed to the emergence of era 3.0 and the flat world. What is he referring to by the word “flat”? A) the world is not round. B) the deserts of the world C) economic growth is becoming flat *D) the global competitive playing field is being leveled E) none of the above

6. The digital divide refers to the wide gap between those who have and those who do not have: A) the resources to feed people *B) access to information and communications technology C) access to highways and railroads D) money to buy digital cameras E) all of the above

7. Which of the following has been made possible only through IT? *A) register for classes from home B) research class papers and presentations C) perform banking transactions D) pay your bills E) make travel reservations (hotel, airline, rental car).

8) Becoming knowledgeable about IT can improve your chances of landing a good job, because: A) information technology is vital to the operation of modern businesses B) they think that you are smart C) they think that you can fix their computers D) they think that you work faster *E) all of the above

Chapter : Chapter 2 : Information Systems : Concepts and Management

True/False

1. One of the functions of an information system is to convert information to data. True *False

2. Software may be classified into two major classes — system and application. *True False

3. Information systems are designed to support only individual business functions. True *False

4. Knowledge workers are professional employees such as financial and marketing analysts, and engineers, who create knowledge and are experts in IT. True *False

5. Competitive advantage helps a company increase control of market segment in order to increase profits. *True False

6. Strategic information systems reduce competitive advantage by helping an organization implement its strategic goals and decrease its performance and productivity. True *False

7. For most firms, the Internet decreases the threat of new competitors. True *False

8. Targeting a narrow segment of a market and being the best in quality, speed, or cost in that market is known as the differentiation strategy. True *False

9. As computers gain in intelligence and capabilities, the competitive advantage of replacing people with machines is increasing rapidly. *True False

10. Information systems could adversely affect the health and safety of individuals. *True False

11. In many organizations today, their information resources are independent of the IT resources. True *False

12. The role of the director of the IS department is changing from a technical manager to a senior executive, who is often called the chief intelligent officer. True *False

Multiple Choice

1. The major capabilities of information systems in organizations would not include: A) performing high-speed, high-volume, numerical computations B) providing effective communication and collaboration within organizations C) storing huge amounts of data efficiently *D) permitting everyone with easy access to their hardware and data E) increasing the effectiveness and efficiency of employees’ work

2. Which of the following is not characteristic of a transaction processing system (TPS)? *A) provides decision support B) collects and stores transactions C) can be incorporated into a point-of-sale system D) provides input to corporate databases E) considered critical to the success of any enterprise

3. Today, competitors may only need to set up a website to enter a particular market. Because of this facility, we say that the web: A) can make the companies smarter B) can make the companies look small *C) can eliminate the entry barriers

D) can be used to give wrong impressions E) all of the above

4. Porter’s competitive forces model identifies five major forces that could threaten a company’s position in a given industry. These forces do not include: *A) the threat of new technology B) the bargaining power of suppliers C) the bargaining power of customers D) the threat of substitute products or services E) the rivalries among existing firms in the industry

5. A possible impact of IT provides quality-of-life improvements. What are some of the significant implications? A) The workplace can be anywhere at anytime B) People with disabilities can work with computers C) Robotic devices are being developed for both the military and agricultural sector D) Medical personnel can make better and faster diagnoses and monitor patients more accurately *E) All of the above

6. “Information resources” is a general term that includes all of the following, except: A) hardware B) applications C) data D) network servers *E) raw materials

7. The role of the chief information officer (CIO) in an organization would not likely include: A) setting the strategic direction of IT *B) installing the latest hardware C) managing the outsourcing of projects D) creating business alliances with vendors E) the ability to work closely with external organizations

Chapter: Chapter 3: Ethics, Privacy and Information Security

True/False

1. Ethics is a branch of philosophy that deals with what is considered to be right and wrong. Ans: True Feedback: Please review section 3.1 Ethical Issues

2. Past court decisions have stated that privacy must supersede the needs of society. Ans: False Feedback: Please review section 3.1 Ethical Issues

3. The law basically does not support an employer’s right to read electronic mail and other electronic documents. Ans: False Feedback: Please review section 3.1 Ethical Issues

4. Personal information kept on individuals is restricted to educational, health and government databases. Ans: False Feedback: Please review section 3.1 Ethical Issues

5. Industrial espionage is an unintentional threat to information resources. Ans: False Feedback: Please review section 3.2 Threats to Information Security

6. Cookies can be used to invade your privacy. Ans: True Feedback: Please review section 3.2 Threats to Information Security

7. Software piracy is a major concern today, but only in developing countries. Ans: False Feedback: Please review section 3.2 Threats to Information Security

8. A recovery plan to keep a business running after a disaster is called business continuity. Ans: True Feedback: Please review section 3.3 Protecting Information Resources

9. A pass phrase is an excellent way to generate highly secure passwords. Ans: True Feedback: Please review section 3.3 Protecting Information Resources

10. The goal of risk management is to ensure that there is adequate insurance protection to cover the costs of an intrusion or disaster. Ans: False Feedback: Please review section 3.3 Protecting Information Resources

11. Mechanisms implemented to safeguard assets and prevent or detect errors are known as biometrics. Ans: False Feedback: Please review section 3.3 Protecting Information Resources

12. A firewall is hardware and/or software that prevent unauthorized Internet users from accessing private networks or computers. Ans: True Feedback: Please review section 3.3 Protecting Information Resources

Multiple Choice

1. Ethical issues may be categorized into all of the following, except: a) privacy b) accuracy c) property d) accessibility e) efficiency Ans: e Feedback: Please review section 3.1 Ethical Issues

2. Defending information resources is not a simple or inexpensive task for which of the following reasons?

a) Hundreds of potential threats exist. b) Computing resources are located in many locations. c) Untrusted computer networks are linked to your corporate network. d) Rapid technological changes can make some controls obsolete as soon as they are implemented. e) all of the above Ans: e Feedback: Please review section 3.2 Threats to Information Security

3. A person who penetrates a computer system, usually with no malicious intent, is a _____. a) hacktivist b) stalker c) white hacker d) corporate spy e) cyberterrorist Ans: c Feedback: Please review section 3.2 Threats to Information Security

4. Computers that have been turned into zombies are most closely associated with what kind of attack? a) worm attack b) virus attack c) denial-of-service attack d) distributed denial-of-service attack e) phishing attack Ans: d Feedback: Please review section 3.2 Threats to Information Security

5. If a piece of software does not come with an uninstaller program, the software is likely to be: a) alien software b) spam c) firmware d) a virus e) a worm Ans: a Feedback: Please review section 3.2 Threats to Information Security

6. Effective passwords have all of the following characteristics, except: a) should be difficult to guess b) should contain characters so that it can be remembered easily c) should not be a recognizable word d) should be longer rather than shorter e) should not be a recognizable string of numbers Ans: b Feedback: Please review section 3.3 Protecting Information Resources

7. Authentication and authorization are two majors functions used in access controls. Which one should be performed first? a) authentication b) authorization c) does not matter d) they must be performed simultaneously e) none of the above Ans: a Feedback: Please review section 3.3 Protecting Information Resources

8. The major difficulties involved in protecting information resources include all of the following, except: a) Rapid technological changes make some controls obsolete as soon as they are installed. b) Computing resources may be geographically dispersed. c) Many individuals control information assets. d) The cost of preventing hazards can be very high. e) The number of potential threats today is very small. Ans: e Feedback: Please review section 3.3 Protecting Information Resources

Chapter : Chapter 4 : Data, Information, and Knowledge Management

True/False

1. The rate of data acquisition by organizations is consistent over time. True *False

2. The end result of the Data Life Cycle is the generation of decision support and knowledge. *True False

3. A logical grouping of characters into a string of text and/or digits is known as a field. *True False

4. A database is basically a logical arrangement of large disk drives. True *False

5. Entity-relationship modeling is the process of designing a database by organizing data entities to be used and identifying the relationships among them. *True False

6. SQL allows people to perform complicated mathematical calculations by using relatively simple statements or key words. True *False

7. All data collected by an organization must be stored in its data warehouse. True *False

8. Searching for valuable business information, such as previously unknown patterns in a large database or data warehouse, is known as data mining. *True False

9. Government regulations (e.g. Canada’s PIPEDA and Bill 198) have made it easier for organizations to manage their data resources. True *False

10. Knowledge may be defined as the intellectual capital of an organization derived from its employees. *True False

11. Knowledge is created mainly by applying sophisticated mathematical algorithms to data. True *False

12. Organizational knowledge may be described with terms such as codified or subjective. *True False

Multiple Choice

1. It is very difficult to manage data for which of the following reasons? *A) The amount of data increases exponentially over time. B) Data is centralized in organizations. C) The decreasing amount of external data needs to be considered. D) Data security is easy to maintain. E) Data is stored in the same format throughout organizations.

2. _____ data is collected about user behavior and browsing patterns by monitoring users’ activities when they visit a website. A) Transaction B) Analytical C) Visual D) Spatial *E) Clickstream

3. Which of the following represents the data life cycle? A) information, data, knowledge, expertise *B) data, information, knowledge, solutions C) data, knowledge, expertise, solutions D) expertise, knowledge, solutions, information

E) information, knowledge, expertise, solutions

4. Which of the following would not be an entity in a database? A) person B) place C) thing D) event *E) product code

5. Which one of the following is a benefit that data dictionaries provide to the organization? A) They provide diverse formats of the data. B) They make it easier for programmers to develop program logic. *C) They provide consistent data naming. D) They exclude usage information on attributes. E) They provide the definitions of words.

6. Compared to data warehouses, data marts have which one of the following characteristics? A) They cost more. *B) They have shorter lead time for implementation. C) They have central rather than local control. D) They contain more information. E) They are harder to navigate.

7. Consistent, historical and nonvolatile are some of the basic characteristics of (a): A) database B) data dictionary C) data marts *D) data warehouse E) all of the above

8. Which of the following is an example of tacit knowledge? *A) understanding B) reports C) designs D) products E) core competencies

Chapter : Chapter 5 : Network Applications

True/False

1. A computer network is a system that connects computers via communications media so that data and messages can be transmitted among them. *True False

2. The Internet’s discovery capability permits users to access information located on every computer in the world. True *False

3. A search engine is software that uses an index of billions of web pages to search the web for specific information by keywords or text. *True False

4. Collaboration refers to the effort of two or more people (as individuals, teams, groups, etc.) to work together to accomplish a particular task. *True False

5. Web 2.0 was the first generation of the web, which permitted the creation of websites and the commercialization of the web. True *False

6. An extranet uses web technologies to connect organizations with external customers and partners. *True False

7. Packets traveling across the Internet must follow the same path to be able to arrive in sequence at their destination. True *False

8. E-learning refers to learning supported by the web, but would not include students working on the web in the same classroom. True *False

9. Some universities such as Athabasca offer their courses and degrees exclusively online. *True False

10. Students do not necessarily have to be computer literate to benefit from e-learning. True *False

11. Distributed workers who have no permanent office at their company location, but work from home or on the road, are said to perform distributed processing. True *False

12. The need for telecommuting was driven by globalization and the need for flexibility. *True False

Multiple Choice

1. Webcrawlers are computer programs that browse the web and index pages as part of a: A) network B) client computer *C) search engine D) web page E) browser

2. A personalized, single point of web browser access to critical business information located both internally and externally to an organization, is known as a: *A) portal B) browser C) webcrawler D) search engine E) gateway

3. Which of the following best describes the technologies/applications used by Web 2.0 sites?

A) XML B) AJAX C) wikis D) blogs *E) all of the above

4. To start using RSS, you need a __________that displays RSS content feeds from selected websites. *A) special news reader B) AJAX reader C) wikis reader D) blogger E) all of the above

5. The set of rules that defines how messages can be exchanged among different network systems and applications on the Internet, is known as: A) XML *B) SOAP C) web services D) WSDI E) UDDI

6. Blackboard is an example of a(n): A) computerized blackboard B) financial application that helps students C) tool to help teachers to take attendance *D) advanced e-learning support environment E) none of the above

7. The benefits of e-learning do not include: A) providing more current content B) consistency of presentation *C) replacing the classroom interaction D) flexibility to learn from anywhere E) more people can be trained within a given time frame

8. Which one of the following is not a disadvantage of telecommuting? A) increased feelings of isolation B) possible loss of fringe benefits C) lower pay D) no workplace visibility *E) time wasted in commuting

Chapter: Chapter 6: E-Business and E-Commerce

True/False

1. Electronic commerce is a term that implies a broader context than electronic business. True *False

2. In pure electronic commerce, the product or service, the process, and the delivery agent are entirely digital. *True False

3. A good example of pure electronic commerce is eBay. True *False

4. Companies that are engaged only in electronic commerce are considered click-and-mortar organizations. True *False

5. By volume, the vast majority of electronic commerce is business-to-business. *True False

6. Even though the Internet works well for job seekers and companies trying to hire new people, the costs are higher than with traditional “help wanted” ads. True *False

7. Channel conflict occurs when pure-play companies engage in B2C electronic commerce. True *False

8. An electronic storefront is a windowed front of a building, in which electronic merchandise is displayed. True *False

9. In the buy-side marketplace, electronic commerce technology is used to reduce both the cost of items purchased and the administrative cost of procurement. *True False

10. Public exchanges are open to all business organizations, where there is one buyer and multiple sellers. True *False

11. Electronic payment systems enable purchasers to pay for goods and services electronically, and are not restricted to B2B transactions. *True False

12. Organizations that track individuals’ activities on their website using cookies are performing an illegal action. True *False

Multiple Choice

1. In this type of e-commerce, the sellers are organizations and the buyers are individuals. A) government-to-citizen B) consumer-to-consumer C) business-to-business *D) business-to-consumer E) none of the above

2. In which of the following business models do customers specify a need and an intermediary compares providers and shows the lowest price? *A) find-the-best-price B) electronic tendering system C) name-your-own-price D) online direct marketing E) affiliate marketing

3. Which of the following is not an advantage of the online job market? A) low cost *B) recruiting company is guaranteed the best applicant for the job C) ease of transmitting information and documents D) recruiting company saves time on data entry by using electronic forms E) broad access to applicants

4. E-tailing is: _________. A) the electronic tails attached to toy animals B) the action of following a car closely *C) the direct sale of products on the web D) the term refers to stores selling electronics in retail E) none of the above

5. What is the main difference between vertical and horizontal exchanges? A) Horizontal exchanges are for a given industry; vertical exchanges are for across many industries. *B) Vertical exchanges are for a given industry; horizontal exchanges are for across many industries. C) Vertical exchanges are for returning products; horizontal exchanges are for refunding money. D) A vertical exchange is in a multi-story building; a horizontal exchange is in a single-story building. E) There is no difference; both refer to exchanging goods.

6. True smart cards contain a ______that can store a considerable amount of information. A) picture of the bank B) magnetic strip C) card number *D) chip E) all of the above

7. Unethical and illegal use of the Internet is: A) increasing slowly B) decreasing rapidly *C) increasing rapidly D) decreasing slowly E) staying about the same

8. The use of similar, but not identical domain names reflects a rapidly growing activity called: A) name tasting *B) domain tasting C) domain stealing D) name scavenging E) domain copying

Chapter: Chapter 7: Wireless, Mobile Computing, and Mobile Commerce

True/False

1. Mobile commerce is any electronic commerce done in a wireless environment, especially via the Internet. *True False

2. The BlackBerry is a Canadian-developed e-mail handheld device. *True False

3. Microbrowsers are very small screens used by laptops to display web-based information and services. True *False

4. Both microwave and infrared transmissions are line-of-sight. *True False

5. In general, as we have progressed through the generations of cellular technology, available bandwidth has remained about the same. True *False

6. Wi-Fi provides simple Internet access, but at relatively high cost. True *False

7. A voice portal is a website with an audio interface. *True False

8. The term ubiquitous computing refers to connectivity which can provide data and communication regardless of the user’s location. *True False

9. The major problem with radio frequency identification has been its expense. *True False

10. In wireless sensor networks, each mote contains processing, storage, and sensors which activate continually. *True False

11. Since wireless signals are sent through the air and are easily intercepted, the best way to prevent unauthorized access is to encrypt the information. *True False

12. A rogue access point is an authorized access point to a wireless network. True *False

Multiple Choice

1. _____ satellites provide the communications for global positioning systems. A) GEO B) Polar orbit C) LEO D) Equatorial orbit *E) MEO

2. _____ satellites move the most rapidly with respect to a point on the earth’s surface. A) GEO B) Polar orbit *C) LEO D) Equatorial orbit E) MEO

3. _____ refers to the 802.11 set of standards on which most of the wireless local area networks run. A) Bluetooth B) Wireless application protocol C) Short message service D) Global positioning system *E) Wi-Fi

4. Symbols on sidewalks and walls to indicate nearby wireless network hotspots are called: *A) war chalking B) war driving C) war hacking D) war cracking E) war writing

5. With regard to mobile computing, _____ means that information can be customized and sent to individual users. A) ubiquity B) convenience C) instant connectivity *D) personalization E) localization of products and services

6. The world’s best-known mobile portal, with many millions of mostly Japanese subscribers, is: A) Vodafone B) Cingular C) Verizon D) Sprint PCS *E) i-mode

7. The growth of cell phone usage enables developing countries to leapfrog to m-commerce, because: A) a PC is not needed — cell phones can be used to access the Internet B) the cell phone culture enables users to purchase via cell phones C) of the declining cost of mobiles D) bandwidth improvements make it easier *E) all of the above

8. Radio-frequency identification (RFID) technology allows manufacturers to track the movement of their goods through__________. A) infrared signals *B) radio signals C) electrical signals D) optical signals E) smoke signals

Chapter: Chapter 8: Organizational Information Systems

True/False

1. Functional information systems derive inputs from transaction processing systems. *True False

2. In batch processing, the system collects transactions as they occur and processes them immediately. True *False

3. Managers obtain information from functional information systems, mainly in the form of reports. *True False

4. Historically, information systems were designed for the organization as a whole. They support it by increasing its internal effectiveness and efficiency. True *False

5. Information silos led to inefficiency among the organization’s functional areas. *True False

6. Business processes are confined to specific functional areas. True *False

7. Companies usually do not need to change existing business processes to fit the format of ERP software. True *False

8. Enterprise resource planning systems are extremely complex to implement. *True False

9. CRM involves much more than sales and marketing. *True False

10. Batch processing is a collection of data and transactions that are placed in groups and processed at a later time. *True False

11. The costs of on-line recruitment is more costly than traditional methods such as advertising in newspapers, etc. True *False

12. EMA refers to the automation of data concerned with travel expenses and entertainment. *True False

Multiple Choice

1. In online transaction processing (OLTP), A) transactions are processed after all transactions are received *B) transactions are processed online as soon as they occur C) transactions are stored for later processing D) transactions are processed before they occur E) all of the above

2. Which of the following is not accurate about Transaction Processing Systems? A) TPS monitor, collect, store, and process data. B) TPS data is stored in the organization’s database. *C) TPS data is derived from internal business activities only. D) TPS are the foundation of the functional information systems. E) TPS directly support lower-level managers.

3. Historically, the functional area information systems were developed independently of one another, resulting in _____________. A) information depots B) systems silos C) knowledge silos *D) information silos E) data silos

4. Functional information systems produce reports with various characteristics, which do not include: A) reports produced at scheduled intervals B) detailed transaction reports C) reports on-demand D) reports that highlight performance beyond established limits *E) reports that integrate the activities of multiple departments

5. What are the main drawbacks of ERP systems? A) complex, inexpensive, and time-consuming to use B) simple, expensive, but faster to implement *C) complex, expensive, and time-consuming to implement D) simplistic, and not flexible E) none of the above

6. ______ deals with ordering, purchasing, receiving and shipping A) Internal auditing B) Quality Control *C) In-house logistics and materials management D) Inventory Management E) None of the above

7. The primary goal of the ERP system is to: A) Manage a particular area of the organization B) Establish sales quotas *C) Enable information to flow across all areas of an organization D) Schedule the acquisition of raw materials

8. Which one of the following is a major benefit of the ERP System? A) Improvement of customer service B) The ability to make timely decisions C) Reduction of hardware and software costs D) Benefit from new business opportunities *E) all of the above

Chapter: Chapter 9: Customer Relationship Management

True/False

1. Customer Relationship Management strives to treat each customer the same even though their needs differ. True *False

2. Mass customization allows customers to configure their own products. *True False

3. Frequent flyer points are an example of a loyalty program. *True False

4. It is relatively easy for customers to find products and services that they are interested in on the World Wide Web. True *False

5. Customers are unable to access information, such as the shipping status of merchandise, using their smartphones. True *False

6. E-mail is the least popular way of answering inquiries from customers. True *False

7. One benefit of operational CRM is the ability to access a complete history of interactions with a particular customer. *True False

8. Operational CRM can identify the most profitable customers and as a result provide a high level of service to that customer. *True False

9. Analytical CRM technologies track customer behavior and deliver this information to organizations in the form of reports. *True False

10. Operational CRM is a technological process that gathers statistical information about products. True *False

11. On-demand CRM is hosted externally in a vendor’s data centre. *True False

12. Many organizations believe that Mobile CRM is the way of the future for interacting with customers. *True False

Multiple Choice

1. Customer facing applications include one of the following: A) data warehouse B) loyalty program *C) service and support D) personal web site E) all of the above

2. A simple tool for answering repetitive customer queries is called: *A) FAQs B) loyalty program C) collaborative CRM D) configurator

3. A Sales Force Automation (SFA) system includes which of the following elements: *A) contact management system B) outbound telesales C) upselling D) campaign management

4. By marketing to customers as individuals, organizations have the opportunity to: A) create special offers B) retain existing customers C) create long-term relationships D) achieve customer intimacy *E) all of the above

5. Increasing customer satisfaction by even 1 percent can increase a company’s market capitalization by: A) 15% B) 25% *C) 300% D) 100%

6. A _______________ is where representatives communicate directly with customers. *A) customer interaction centre B) World Wide Web C) data warehouse D) product knowledge system

7. A snapshot of a buyer’s purchasing habits is also known as a: A) configurator B) touch point *C) purchasing profile D) dashboard

8. A potential problem with respect to on-demand customer relationship management consists of: A) difficulties with integrating the organizations software with the vendor’s B) vendor could be unreliable C) software that is hosted could be difficult to modify D) offering customer data carries risk *E) all of the above

Chapter: Chapter 10: Supply Chain Management

True/False

1. Distribution of products is defined as “downstream” in the supply chain. *True False

2. Recycled and returned products are referred to as reversed logistics. *True False

3. The bullwhip effect is a term used to describe irregular shifts in orders throughout the supply chain. *True False

4. Purchasing an upstream supplier to ensure supplies are always available is known as vertical integration. *True False

5. A forecast is an educated guess about customer requirements and demands. *True False

6. Make-to-order is another way to describe the term pull model. *True False

7. Suppliers who monitor retail outlet inventories and provide replenishments when needed is an example of a vendor-managed inventory strategy. *True False

8. Information flowing among two or more organizations is known as inter-organization information. *True False

9. Electronic data interchange is a technology used to resolve supply chain management problems. *True False

10. One benefit of an IOS is the reduction of time in performing business transactions. *True False

11. Electronic Data Exchange remains popular among small business partners. True *False

12. Traditional Electronic Data Interchange (EDI) systems are very flexible. True *False

Multiple Choice

1. Functions included in the information flow of a supply chain are: *A) billings B) manufacturing parts C) preparing goods for delivery D) handling returned products E) none of the above

2. The role of a SC Manager includes: A) scheduling production activities B) monitoring worker productivity C) selecting suppliers D) developing pricing *E) all of the above

3. Distribution centres can be effective in the supply chain by: A) ensuring all product is distributed simultaneously B) analyzing the established supply chain *C) handling bulk orders D) selling products to businesses E) all of the above

4. A make-to-order process is also referred to as a: A) supply chain component B) just-in-time system *C) pull model D) vertical integration process E) none of the above

5. Web services can be used in one of the following ways: A) automating business processes B) streamlining on-line buying and selling C) over an intranet D) can be used with many devices *E) all of the above

6. Vertical Integration is a term used to describe a business strategy that: *A) buys its upstream suppliers B) creates a new supply chain C) manages inbound shipments D) connects partners for joint ventures E) none of the above

7. A _____________ system monitors and replenishes an organization’s inventories. *A) vendor-managed inventory B) just-In-time C) inter-organizational information D) electronic data interchange E) none of the above

8. Connecting an IOS system to various partners creates a (n) ________________. A) World Wide Web B) intranet *C) extranet D) virtual private network E) none of the above

Chapter: Chapter 11: Managerial Support Systems

True/False

1. Decision-making is a process by which organizational goals are achieved through the use of IT resources. True *False

2. In the design phase of the decision-making process, managers examine a situation and identify and define the problem. True *False

3. Decisions today are becoming more complex, due to increased uncertainty in the environment. *True False

4. Unstructured decisions address complex problems for which there are no cut-and-dried solutions. *True False

5. Sensitivity analysis is the study of the impact that changes in one (or more) parts of a model have on other parts. *True False

6. An organizational decision support system supports an activity that involves a sequence of operations and decision makers. *True False

7. An executive information system is a transaction processing system, designed to provide detailed information to meet the needs of the organization’s senior managers. True *False

8. The effectiveness of a digital dashboard could be compromised if it does not provide reasons why a particular target is not being achieved. *True

False

9. Due to the flexibility of GISs, it is not a requirement that every digital object have a geographic location. True *False

10. Artificial intelligence, a branch of psychology, is concerned with studying the thought processes of machines. True *False

11. Expert systems attempt to mimic human experts by applying expertise in a specific domain. *True False

12. Natural language systems are concerned with simplifying and learning first-generation programming languages. True *False

Multiple Choice

1. A manager’s success is often measured by the ratio between inputs and outputs for which he or she is responsible. This ratio is an indication of the organization’s ___________. A) decisiveness B) intelligence *C) productivity D) profit E) earning ratio

2. Because of the widespread availability of information, making decisions is becoming increasingly _____________. A) easy *B) difficult C) impossible D) effective E) inexpensive

3. Often, the major intent of using data mining is ______________. A) to start a new database project B) to determine whether there is a mine C) to find certain information in a database

*D) to identify a business opportunity E) all of the above

4. _______ studies the impact of change to the decision making model in relation to its effect on different parts of the organization A) Input analysis B) Goal-Sesek analysis C) Information analysts *D) Sensitivity Analysis

5. Bloomberg is an example of a successful ______________. A) digital television *B) digital dashboard C) mayor D) stock broker E) all of the above

6. The process of identifying the geographical location of every object is called _________. A) Geographic Information Systems B) GPS *C) geocoding D) location aware systems E) none of the above

7. “Diagnosis” is a generic category of any expert system and addresses: A) the development of plans to achieve goals B) remedies for any malfunctions C) diagnosing, debugging and correcting *D) deducing system malfunctions by observation E) monitoring system behavior

8. The flow of knowledge from an expert to an expert system and then to the user involves all of the following activities, except: A) acquire the knowledge from experts B) make inferences from the stored knowledge C) transfer the knowledge to the user D) organize the knowledge as rules *E) determine the value of the knowledge

Chapter: Chapter 12: Acquiring Information Systems and Applications

True/False

1. Organizations typically move rapidly to acquire new information technologies to improve efficiencies and gain strategic advantage. *True False

2. The IT planning process should begin with an analysis of the organizational strategic plan. *True False

3. The cost of all IT services within an organization would be considered a variable cost. True * False

4. In reality, most systems are implemented on time and within budget. True *False

5. The costs of a system decreases over a specified period of time. True * False

6. A single software package always satisfies an organization’s needs in achieving its goals. True * False

7. Companies can customize open-source software providing they acquire a license. * True False

8. The outsourcing trend is rising in tandem with relocating operations offshore. * True False

9. Systems analysis describes what a system must do to solve the business problem, and systems design describes how the system will accomplish the task. *True False

10. A feasibility study is completed in the final phase of the systems development life cycle. True * False

11. Direct conversion is the process where the old system and the new system operate concurrently for a period of time. True *False

12. Prototyping is a form of system development, used where the specifications are clearly defined at the start and careful planning is required. True *False

Multiple Choice

1. The group that determines a “go/no-go” decision is called: A) caucus B) go/no-go committee C) management team *D) steering committee E) none of the above

2. SOA is a term used to describe the following: A) completion and finalization of all contracts involved within the organization B) the allocation of IT development resources among competing projects C) a traditional approach to project management *D) an architecture that allows an organization to make its computing resources available when necessary

3. The _____ approach to cost/benefit analysis delivers a written document used by managers to obtain funding for one or more specific applications or projects. A) net present value B) sensitivity analysis C) return on investment D) internal rate of return *E) business case

4. Which of the following is not an advantage of the buy option? A) software can be tried out *B) helps clarify user requirements C) software has been used for similar problems in other organizations D) reduces time spent for analysis, design, and programming E) usually has good documentation

5. In the CASE approach to system development, developers use a set of ________ tools to automate the process. A) complex *B) specialized C) tested D) hardware E) object

6. One disadvantage of integrated computer-assisted software engineering is: A) poor quality control B) may create lower-quality system *C) often more expensive to build and maintain D) difficult to customize

7. One example of an object within an object-oriented system is: A) identification number B) name C) address D) account number *E) all of the above

8. ______________must meet a user’s most immediate needs. A) rapid application development *B) agile development C) component-based development D) end-user development