Introduction to Information Systems Enabling and Transforming Business, 3rd Edition International St

Introduction to Information Systems Enabling and Transforming Business, 3rd Edition International Student By Rainer, Turban, Potter, Cegielski

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CHAPTER 1: The Modern Organization Functioning in a Global Environment Chapter Overview 1.1 1.2 1.3 1.4

1.5 1.6

Business Processes and Business Process Management Information Systems: Concepts and Definitions The Global Web-Based Platform Business Pressures, Organizational Responses, and It Support Why are Information Systems Important to Me? The Plan of the Book

Teaching Tips and Strategies 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.

The importance of computer technology is underscored by examples of how companies save money by using email as another option to the postal service. Students should be introduced to the concept that IT must be paired with business processes to harness IT’s potential. IT is important to business leaders all over the world. There are salary statistics for all majors (you can get this information from USA Today’s website www.usatoday.com). Salary information gets student’s attention, especially if they realize that if they are more technology savvy they will tend to make more money. This really seems to get their interest.

Review Questions

Page 2 Section 1.1 – Before you go on…

1. What is a business process?

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.

2. What is business process management, and why is BPM so important to organizations?

Organizations use business process management (BPM) to support the design, analysis, implementation, management, and optimization of their business processes.

Short term, BPM can help companies improve profitability by decreasing costs, improve customer satisfaction and increasing revenues. Long time, BPM can create a competitive advantage by improving organizational flexibility.

Section 1.3 - Before you go on…

1. What are the characteristics of the modern business environment?

The environment is global, massively interconnected, intensely competitive, 24/7/365, real-time, rapidly changing, and information-intensive.

2. Describe the Web-based, global platform.

This platform spans the world and is best represented by the Internet and the functionality of the World Wide Web. It enables individuals to connect, compute, communicate, collaborate, and compete everywhere, anytime and to access limitless information, services and entertainment. It allows for the exchange of knowledge, and production and sale of goods and services without concern for geography, time, distance or language barriers.

3. Describe the global, Web-based platform used by modern organizations.

The global, Web-based platform that most organizations use spans the world and is based on the Internet and the World Wide Web. By connecting to the internet, any user can use this platform. The platform enables individuals to connect, compute, communicate, collaborate, and compete from everywhere and anywhere, anytime and all the time; to access limitless amounts of information, services, and entertainment; to exchange knowledge; and to produce and sell goods and services. It operates without regard to geography, time, distance, and even language barriers.

Page 3 Section 1.4 – Before you go on…

1. Describe some of the pressures that characterize the modern global business environment.

Pressures are generated by the • global economy and strong competition facilitated by the global, Webbased platform • the changing nature of the workforce which is becoming more diversified, and able to work from home • powerful customers whose expectations increase as the become more knowledgeable about products and services • technology innovations, and in some cases, overload • societal issues 2. What are some of the organizational responses to these pressures? Are any of the responses specific to a particular pressure? If so, which ones?

Some responses are: • Strategic systems • Customer focus • Make to order and Mass customization • E-business Yes, some of the responses are related to specific pressures.

Strategic systems are directly related to global economy and strong competition and the changing nature of the workforce. Customer focus and make to order/mass customization are specific to pressure from powerful customers.

Section 1.5 – Before you go on…

1. What are the major reasons why it is important for employees in all functional areas to become familiar with IT? Information systems are important for several reasons, regardless of the employee’s functional area of responsibility. (1) IT facilitates the organizational activities and processes of today’s businesses. (2) Most jobs students will go to after graduating will require some knowledge of information technology. (3) Employees’ that are able to use information technology will be able to give themselves an important advantage over their peers in the workplace. (4) Students will find that information systems will make their job easier and more efficient.

2. Why is it important to become knowledgeable about IT if you are not working as an IT employee?

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Information technology is vital for every functional area of an organization, and IT systems are integral to every functional area. Knowledge of information systems will make students more effective, productive, and valuable to the organization.

“IT’s About Business” Questions 1.1 – 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.

For a very low cost, individuals can now connect to the Internet and be in contact when previously they were unable to because there were no land lines. Once connected, they have accesses to State Street’s resources all over the world. This allows the company to not have to distribute its IT resources all over, but rather have data centers in a few locations. State Street’s IT model is built on the global web based platform.

2. What are potential disadvantages of State Street’s zero-footprint IT model?

The company is usually able to deploy resources and have an office or operation running within a few weeks. The firm is able to reduce IT infrastructure requirements by leveraging applications and support servers operating in its secure data centers. State Street has to focus only on the relocation of business staff, because there are no systems or data that need to be relocated. This approach also saves them money in less energy usage for cooling and IT equipment.

On the downside, networks become critical and downtime and the potential for loss of service is greater in the zero footprint IT model.

1.2 – The Internet Facilitates Linkages between Borrowers and Lenders 1. Discuss how the Internet facilitates the linkage between borrowers and donors at Kiva and DonorsChoose.

Kiva’s system provides a way to link First World lenders with developing-world entrepreneurs. In Kiva’s system, users pledge interest-free loans rather than taxdeductible donations. The systems lists potential lenders who submit funding proposals and a potential donor can search these proposals based on their area of interests and contribute whatever they can afford.

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2. Discuss how Kiva and DonorsChoose maintain quality control over their donations.

Kiva provides risk assessment upfront and a steady stream of post-investment information. Every borrower has an associated risk rating. The number of defaults is posted on Kiva’s Web site and is approximately 2.5 percent of all loans, a very small number. The organization discloses scams immediately, as well as good news from the entrepreneurs themselves to help lenders keep track of the use of their money.

1.3 – Verizon Communications

1. Consider Verizon and NetApp. Which comes first: the business strategy, or information technology? Support your answer in both cases.

The alignment of IT functions and business strategy is important for the effective use of IT in the organization. In Verizon’s case, IT executives keep up with developments in new technologies and advise business executives on how these technologies can be integrated with existing IT systems to support business strategies.

For NetApp, the business strategy and IT strategy are jointly built to achieve alignment. The business purpose is supported with suitable IT investment. The combined project is tracked.

2. Define business – information technology alignment and discuss how each company aligns its business strategy and its information technology function.

Business-information technology alignment refers to the appropriate use of IT in conjunction with business strategies. This ensures that the technologies match the business needs of the company.

1.4 – Build Your Own Multinational Company

1. Describe the advantages and disadvantages of outsourcing work overseas.

The advantages are in the cost of the function as labor is cheaper overseas.

Outsourcing can also put you closer to international customers and incorporate

Page 6 unique skill sets. Loss of control, difficulties in coordination and poor quality can be drawbacks.

2. Can anyone do what Randy and Nicola Wilburn are doing? Does what the couple is doing require any special qualifications or knowledge? Support your answer.

Students answers will vary, but they should include details about connectivity using resources available online.

DISCUSSION QUESTIONS 1. Describe various business processes in your university.

Some processes are: recruiting students, hiring faculty, registration, paying student fees, ordering books, processing student grades.

2. Describe the enabling role of IT in business process management.

IT allows data to be captured on business processes so that a process can be effectively managed and controlled. IT also enables the workers in completing a business process more efficiently.

3. 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.

4. Is the Internet an infrastructure, an architecture, or an application program? Explain your answer. If it is none of the above, then what is it?

It is more than an infrastructure or an architecture or an application program.

The Internet is a global, Web-based platform which spans the world and enables individuals to connect, compute, communicate, collaborate, and compete everywhere and anywhere, anytime.

5. How has the global, Web-based platform affected competition?

Due to the move to the global economy, competition has become much stronger. The increase in world trade, the rise of India and China as economic powerhouses, and access to cheap labor in many countries has caused competition to increase.

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6. Explain why IT is both a business pressure and an enabler of response activities that 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, new and different delivery methods..

7. 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..

8. 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.

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PROBLEM SOLVING ACTIVITIES 1. Visit some Web sites that offer employment opportunities in IT. Prominent examples are : www.dice.com, www.hotjobs.com, www.monster.com, www.collegerecruiter.com, www.careerbuilder.com, www.jobcentral.com, www.job.com, www.career.com, www.simplyhired.com and www.trucareers.com.

Compare the IT salaries offered to accountants, marketing personnel, financial personnel, operations personnel, and human resources personnel. For other information on IT salaries check Computerworld’s annual salary survey.

Students will provide comparisons about IT positions (suggest classifications – analyst, developers, support) and salary ranges using the sites listed.

Page 8 2. Discuss the impacts of the global, Web-based platform on the residential real estate industry. Be specific with Web sites that you use for examples.

Suggest some websites – some are national level, some at international level, others are by individual realtors or a realtor office. List some of the features of these sites and discus how customers may use them.

3. Enter the Web site of UPS (www.ups.com). a. Find out what information is available to customers before they send a package.

The site provides a detailed interface to interact with the company and information about its multitude of services. b. Find out about the “package tracking” system.

Visit http://www.ups.com/content/us/en/resources/track/check/index.html?WT.svl=Foo ter to get information about the Tracking system and its policies. c. Compute the cost of delivering a 10” x 20” x 15” box, weighing 40 pounds, from your hometown to Long Beach, California (or to Lansing, Michigan, if you live in or near Long Beach). Compare the fastest delivery against the least cost.

Cost can vary from ~ $200 for overnight to $42 for slowest option.

4. Surf the Internet for information about the Department of Homeland Security.

Examine the available information, and comment on the role of information technologies in the department.

Students will discuss their findings after searching the internet.

5. Access www.digitalenterprise.org. Prepare a report regarding the latest electronic commerce developments in the digital age.

Students will need to access several sections of the website –models, channels and governance to prepare a report of the latest eCommerce developments. A review of the cases on the site is recommended as well.

6. Access www.x-home.com for information about the home of the future. Describe “smart home” technology.

Students will discuss smart home automation technology, cool gadgets, and healthy home products found on the web site.

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7. Experience customization by designing your own shoes at www.nike.com, your car at www.jaguar.com, your CD at www.easternrecording.com, your business card at www.iprint.com, and your diamond ring at www.bluenile.com. Summarize your experiences.

Students will discuss various aspects of the website and their experiences.

Suggest a set of criteria that they could use to evaluate the websites – design, currency, speed, access, etc.

8. Access www.go4customer.com. What does this company do and where is it located? Who are its customers? Which of Friedman’s flatteners does this company fit? Provide examples of how a U.S. company would use its services.

Go4Customer is an India-based Call Center Outsourcing Services company that provides performance-driven and high quality outsourcing services. This company fits the Outsourcing, Offshoring flatners. Have the students suggest how a company may use its services.

9. Enter Wal-Mart China (www.wal-martchina.com/english/index.htm). How does Wal-Mart China differ from your local Wal-Mart (consider products, prices, services, etc.)? Describe these differences.

Students will discuss various aspects of the localization of the website for China.

Who is the target user for the Wal-mart China website? Compare with their US website.

TEAM ASSIGNMENTS 1. (a) 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 (http://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.

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.”

Page 10 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. (b) Now follow the same steps for Google Groups. (c) Compare Yahoo Groups and Google Groups.

Students will come up their report based on comparing their experiences at the two sites.

2. Review the Wall Street Journal, Fortune, BusinessWeek, 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. Focus on issues described in this chapter, such as productivity, competitive strategies, and globalization. Present and discuss your work.

Students will come up their report based on selected article.

CLOSING CASE – Amazon: From Book Seller to Service Provider Business Problem In spite of being the largest online retailer with sales in excess of $10 billion, Amazon’s profits have fallen. Competition is increasing with Google, MySpace and YouTube being places where people gather online and shop.

IT Solution The company has developed a series of computing, storage and other services and made them available to companies and individuals to help them run te technical and logistical parts of their business.

The Results Thousands of companies are using Amazon services. Webmail.us says that using Amazon has cut is data backup costs by 75% overnight. Powerset uses Amazon processing capacity.

Page 11 While the jury is still out as to whether Amazon will become more profitable as a result of this effort, it is making a strong effort to become a major player in the development of a Web-based, global computer platform. .

Questions 1. What is Amazon’s strategy? Is the company moving away from its core competency of being a leading online retailer? Support your answer.

Amazon is diversifying and finding ways to utilize resources rather than allowing them to sit idle at times. They are still pursuing their original line of business, while exploring ways to become more profitable through the marketing of the processing power and storage capacity that was not being used at times.

2. Why is Amazon competing with Google and Microsoft? Is this a wise strategy?

Compare the strategies of Amazon, Google, and Microsoft.

Amazon is competing with Google and Microsoft as a way to make money on resources that it already owns as part of its original business model. It is a wise strategy since the processing power and storage are available to be used during periods of time.

Google and Microsoft are Web-based, global computing platforms which are provided to consumers for a price. Amazon is following their lead since the resources are available.

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CHAPTER 2 : Information Systems and the Modern Organization Chapter Outline 2.1

Types of Information Systems

2.2

Competitive Advantage and Strategic Information Systems

2.3

Why Are Information Systems Important to Organizations and Society?

2.4

Managing Information Resources

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 a company to 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 student’s attention.

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 American 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.

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, 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 and when they are used. Students can get to

Page 2 software programs such as Microsoft Word and check email. You could let them know that faculty gets 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.

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-to-day operations of a business. For example: A hotel manager finds that 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. This strategy can also be implemented when the manager notices vacancies are running at a higher rate than normal.

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 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.

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 some of the problems companies have had as a result of utilizing IT are:

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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. It is also important to emphasize that technology has slowly evolved into open 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 new programs features? In the new millennium, 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 to new technology quicker.

This chapter is one of the most important in the book for students. This chapter helps students to realize that when looking at adapting or changing technology in a company it 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. 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 information system is a broader term which includes the hardware and software

Page 4 that collects, processes, stores, analyzes, and disseminates information for a specific purpose using computer technology to perform some or all of its tasks.

Generally, a CBIS contains many different applications and includes the hardware 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 critical data used in 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. Moving up in the organization, systems are used to analyze information for decision making purposes.

Section 2.2 - Before you go on…

1. What are strategic information systems?

Any information system which helps an organization gain a competitive advantage or reduce a competitive disadvantage is a strategic information system.

2. 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

3. Describe Porter’s value chain model. Differentiate between Porter’s competitive forces model and his value chain model.

Porter’s competitive forces model is focused on analyzing the company’s external environment and how competitive the industry is. The value chain model is focused on the internal operations of the company and is a model to allow the firm to analyze its own processes.

4. What strategies might companies use to gain competitive advantage?

•

Cost leadership

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Differentiation Innovation Operational effectiveness

Section 2.3 - Before you go on…

1. Why do SISs support many corporate strategies?

Strategic information systems are generally integrated across departments in the organization which means that they support many of the corporate functions, initiatives and goals within the organization.

2. 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 Section 2.4 – Before you go on…

1. 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.

2. Where do you think the IT staff should be located? Should they be decentralized in the functional areas? Centralized at 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 – Information Technology and the National Football League

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1. Identify the various computer-based information systems used by the NFL Key information technologies are in place to support the NFL’s business model, their broadcasts, merchandize sales, marketing and box office revenue. These include global positioning systems (GPS), electronic commerce, wired and wireless networking, voice over Internet Protocol (VoIP), data security, storage, and project management.

2. 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 is a monopoly in professional football, and any competition needs to have to set up capabilities and infrastructure that is very expensive. NFL has a very centralized interaction with its fans through their customer relationship management systems and various marketing arrangements with other companies.

Other leagues are behind in this centralized approach and lack the IS capabilities that have helped the NFL create a “brand” over and above the identity of their teams.

3. Can the NFL sustain its competitive advantage? Why or why not? Hint: What are the barriers to entry for the NFL? They should be able to sustain a competitive advantage because there are very high capital startup costs for anyone entering the NFL. That alone helps NFL maintain its edge, along with their state of the art Information Systems.

2.2– 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.

Under Armour is targeting an underserved segment of the market. They are using technology to design and build a better product and bring it to market quicker.

By shipping directly from manufacturing shops to retail shops it can reduce inventory and accommodate the large variety in sizes, styles that their target market demands. The strategic use of IT is minimizing their risk.

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.

They are not the only ones using this technology. Other bigger running shoe makers are entrenched and using similar IT to support their operations.

Their

Page 7 use of IT to develop a running shoe may not lead to a competitive advantage as it already being done by competitors. .

3. What should Under Armour do to decide if the recession caused its weak financial results in January 2009 or its other factors (such as the company’s running shoe strategy) contributed?

Several answers are possible. Cross marketing is a possibility. Under Armour‘s clothing brand has a great following perhaps marketing shoes and promoting together may be of benefit.

2.3– The Chubb Group 1. Describe how Chubb’s information systems have enhanced the relationship among the company, agents, and customers.

Chubb has relied on information technology to increase its ability to speed claims processing and develop a closer relationship with agents. They also built a system to claims management system to enable the company to share information with agents. They built an online collaboration system for documents, claims, and real-time data that provides customizable data feeds to agents and brokers. A proprietary collaborative platform offers the firm’s agents and brokers the ability to automatically view personal and commercial claim information. Agents who use the system are able to provide more responsive claims service to policyholders throughout the entire claims process – from loss to final resolution.

The systems provide automatic updates, including initial loss notifications, payments, and key status updates. Agents and brokers receive near real-time (updated every two hours) information about important claim activities, including loss notifications, status information, and changes in adjustor assignments. The systems also reduce phone calls, faxes, and written exchanges between the company’s service center and agents.

2. What strategies can Chubb use to encourage agents to adopt the company’s information systems?

Many answers are possible. Perhaps encourage training, help them set up their systems to get what information they want. Use early adopters as champions for the late adopters.

3. Can Chubb’s information systems also be an example of the customer orientation strategy (discussed next)? Support your answer.

By allowing the agents to better serve their customer, Chubb is following a customer orientation strategy.

2.4– Pitney Bowes

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1. Describe the role of Pitney Bowes’ IT department. Is the IT department of strategic importance to the company? Support your answer.

The centralized IT organization supports all the business units. The goals of the IT organization were to provide internal customers with reliable, efficient delivery of services; to find ways to solve more business problems; and to use IT to offer more value to its external customers. Yes. It is a strategic importance to the company as it partners with other departments to support their business strategies.

2. What is the relationship between Pitney Bowes’ IT department and Wipro? Is Wipro of strategic importance to Pitney Bowes? What is the role of Pitney Bowes’ IT department with regard to Wipro?

Wipro has provided PB with cost savings, access to a larger pool of labor and skills, and a higher-quality end product. Wipro also made PB adopt more stringent software quality measures. Wipro is providing skilled talent that supports PB’s IT needs. Wipro is strategic to PB. They understand PB’s IT Infrastructure and systems; hence it will be difficult to replace Wipro with another vendor. PB’s IT department collects the needs of the systems and manages the projects that are delivered by Wipro.

DISCUSSION QUESTIONS 1. Discuss the logic of building information systems in accordance with the organization’s hierarchical structure.

Information systems must be designed to provide a match between the needs of organizational entities and the support provided by IT. Information systems can be classified according to organizational structure. The vast majority of organizations still have a traditional hierarchical structure. Therefore, the most common arrangement of information systems is one that follows the hierarchical structure.

There are information systems and applications built for headquarters, for divisions, for departments, and for specific teams. Other systems are enterprise-wide, interorganizational, and global (international). Information systems can be either standalone or inter-connected.

2. Knowledge workers comprise the largest segment of the workforce in U.S. 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 the U.S. economy need more skilled workers than knowledge workers?

Page 9 The auto industry and computer part manufacturers need skilled workers as well as restaurants, hair salons and other types of service industries. There are some skilled workers that can be replaced by robots and other computerized solutions. As functions such as securing a loan can be accomplished over the internet, we can eliminate the knowledge workers that work at banks and provide that service now.

In the near future many more of those types of jobs will be eliminated and therefore create a situation where more skilled workers will be needed.

3. 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 things as hard supplies like office supplies, equipment, etc. and soft products like the registration for classes.

4. 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.

5.

Why might it be difficult to justify a strategic information system?

SISs are often very complex and very expensive to develop and outcomes may take years to observe and measure.

6.

Describe the five forces in Porter’s competitive forces model and explain how the Internet has affected each one.

• • •

•

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 a 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 Internet delivered products and services seriously.

Page 10 •

7.

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.

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 us the value chain model to identify specific activities where they can use competitive strategies for greatest impact.

8.

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.

9.

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.

10. 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

.

PROBLEM SOLVING ACTIVITIES 1. Characterize each of the following systems as one (or more) of the IT support systems: a.

A student registration system in a university.

TPS, MIS

Page 11 b. c. d. e.

A system that advises physicians about which antibiotics to use for a particular infection. EIS A patient-admission system in a hospital. TPS,MIS A system that provides a human resources manager with reports regarding employee compensation by years of service. MIS A robotic system that paints cars in a factory. EIS

2. Compare and contrast the two companies, Google and Amazon, on their strategies, their business models, their IT infrastructures, their service offerings, and their products. After you have finished with your analysis, explain why Google has a larger market capitalization than Amazon and is more profitable.

Google and Amazon started out in two different areas, Google as a search engine, Amazon as an Internet retailer primarily selling books. Now, each as adjusted their strategies and business models as discussed in Chapter 1. Their IT infrastructures are more similar today with excess capacity being used to offer other companies the ability to use their resources. Students’ responses will vary regarding capitalization and profitability.

3. 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?

Costco’s business model is to sell premium merchandize at a lower price to members (captive group of shoppers). Sam’s club is their biggest competitor.

They need to procure the right merchandise mix targeting their members by building a strong understanding of their base of members. They need to have an efficient supply chain and then be able to track the success of their promotions and marketing efforts.

4. Apply Porter’s Value Chain Model to Dell (www.dell.com). What is Dell’s competitive strategy? Who are Dell’s major competitors? Describe Dell’s business model. Describe the tasks that Dell must accomplish for each primary value chain activity. How would Dell’s information systems contribute to Costco’s competitive strategy, given the nature of its business?

Dells strategy is to offer high end computers with premium features and components at a lower price and allow for customers to customize their systems using a web based interface. Dell must support a highly efficient supply chain system and reduce their inventory costs. They need to track new components and offer them to their customers and then track the quality of their components as they are introduced into their systems.

Page 12 5.

The market for optical copiers is shrinking rapidly. It is expected that by 2010 as much as 90 percent of all duplicated documents will be done on computer printers. Can a company such as Xerox Corporation survive? a. Read about the problems and solutions of Xerox from 2000-2010 at www.fortune.com, www.findarticles.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.

Xerox needs to identify new business models and new ways to introduce their technology into products that can support their customers.

6. Enter www.dell.com, and find the current information systems used by the company. Explain how the systems’ innovations contribute to Dell’s success.

Dell has state of the art supply chain management systems and place stringent requirements for JIT delivery of computer components on their suppliers.

7. Access Truste (www.truste.org), and find the guidelines that Web sites displaying its logo must follow. What are the guidelines? Why is it important for Web sites to be able to display the Truste logo on their sites?

Truste has several programs that certify the information privacy and security policies of the web site. It is an important certification that can build user trust in their web sites.

Below is the information from the truste website __________________________________________________________________ ALL TRUSTe®-licensed sites must provide: User controls, including: • An email unsubscribe function • An opt-out function limiting the sharing of personally identifiable information (PII) with outside parties • Access management permitting users to update stored PII or have it changed by the Licensee Security measures, ensuring: • Secured Socket Layers (SSLs), or other comparable technology, that encrypts pages collecting sensitive information such as credit card numbers A complaint resolution process, providing: • Comprehensive contact information for appropriate Web site employees • A link to the TRUSTe Watchdog site for third-party dispute resolution A privacy statement, including the following disclosures: • What PII is collected and how it will be used • Identity of the party collecting PII

Page 13 • Whether PII is shared with third parties • The use of any tracking technology • Whether PII is supplemented with information from other sources • Choice options available to consumers • How consumers can access PII they have provided • That there are security measures in place • Procedures for filing and addressing consumer complaints In addition, the privacy statement must: • Be linked from the home page and from every page where PII is collected • Bear the TRUSTe "Click to Verify" link so consumers know whether the company is a TRUSTe licensee or not __________________________________________________________________ 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.

8. Enter www.cio.com 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 role has changed to be a strategic role. The CIO is required to be a partner with business units and be in strategy and planning together. They need to understand aspects of the business and be able to suggest how technology can be used to support those business activities.

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. a.

Identify the following components of the Wal-Mart system: inputs, processes, and outputs.

Scanners, cash registers, belt, optical reader, key pad, display, printer, etc. b.

What kind of a system is the scanner (TPS, DSS, EIS, ES, etc.)? Why did you classify it as you did?

TPS c.

Having the information electronically in the system may provide opportunities for additional managerial uses of that information. Identify such uses.

Data mining, inventory control

Page 14 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).

Customer can experience problems scanning, finding the bar code, size of the item, coupons and discounts, etc.

2.

Assign group members to UPS (www.ups.com), FedEx (www.fedex.com), DHL (www.dhl.com), and the U.S. Postal Service (www.usps.com). Have each group study the e-commerce strategies of one organization. Then have members present the organization, explaining why it is the best.

Student answers will vary. Put emphasis on identifying the forces on each organization and what type of strategy is used.

3.

Divide the class into teams. Each team will select a country government and visit its official Web site (for example, try the United States, Australia, New Zealand, Singapore, Norway, Canada, the United Kingdom, the Netherlands, Denmark, Germany, and France). For example, the official Web portal for the U.S. government is www.firstgov.gov. Review and compare the services offered by each country. How does the United States stack up? Are you surprised at the number of services offered by countries through Web sites? Which country offers the most services? The least?

Students will come up with a report comparing the different countries.

CLOSING CASE – Todd Pacific Shipyards Makes Effective Use of Information Systems The Business Problem: Todd Pacific Shipyard needed to replace its old traditional time card system because it was slow, inaccurate, and it took too many clerical people to use it while not providing enough information.

Questions: 1. If you are the CIO at Todd Pacific, to what other applications could you link the Time and Tracking application?

The time and attendance system could be linked to an activity scheduling system, a productivity reporting system, customer billing and a payroll system 2. Skilled union workers typically have a degree of autonomy. If you are a skilled worker at Todd Pacific, do you have any privacy concerns about being wirelessly monitored? Why or why not?

Page 15 While employees might have some concerns initially, once they see the 50 percent reduction in workplace injuries and other benefits to having the new system, they should realize the tradeoff.

3. Would the new system at Todd Pacific improve or damage the company’s relationship with its unions? Support your answer.

It would improve the relationship. In addition to the safety issues, wages were considered. The shipyard incorporated the logic for the union wage payment rules into the PDA so that extra pay can be awarded without any extra paperwork.

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CHAPTER 3: Information Systems: Ethics, Privacy, and Security Chapter Overview 3.1 Ethical Issues 3.2 Threats to Information 3.3 Protecting Information Resources

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.

Bill Gates and Bill Clinton were both charged with crimes based partially on evidence in emails. (Clinton, with lying under oath, and Gates violating the consent decree his company signed with the 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 based on various contacts and, particularly, emails that were records of their communications.

If they are in such prominent positions, how is it that their emails are available for others to hold against them? Is email 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 email.

The first two individuals were indicted based on evidence from emails. The point is: if the President of the United States cannot get rid of damaging emails, it is almost impossible for anyone else to as well. If the world’s richest man cannot control who gets his emails then how can anyone expect their emails to not be used against them. It isn’t being suggested that either Clinton or Gates tried to get rid of emails in any type of illegal way. Martha Stewart did alter her email, but then realized that it would be fruitless, and changed it back. The point is, if these influential people have had emails used against them, how in the world do you expect that emails you are writing today will not be used against you? This can lead to some very heated discussions.

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A scenario which you might use is to write on the board the following: “Is email forever?” Give an example of if Student 1 sends Student 2 an email. How many copies of that email are out there? Most students will respond, “Two”. But that is not true; illustrate on the board how the emails 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 email to Student 2, we hire someone to destroy Student 2’s computer, and wipe out all of the server information that had that email on it. What if we burn Student 1’s computer to get rid of the email off of the computer? Could that email 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 email didn’t email it to someone else?”

Would all of the illegal activity have gotten rid of the email? Then ask what if Student 2 put the email on a disk and mailed it somewhere? Students start to see the complications and that email really is forever. Let the students know that Student 2 might have simply thought a joke you sent them was funny and decided to email it to some friends. But, the problem is the email is spreading, and there is no way we can stop it.

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 email 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 email, employers have the ability to go back to the day the email 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. 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.

The discussion can end with the following advice. First, never use the computer for anything but business related work. That will take care of 95% of this problem.

Secondly, do not send an email that you wouldn’t want your parents to read. This will take care of all the problems of figuring out which emails are okay to send and which aren’t. Thirdly, limit giving your work email address to friends/relatives. This will help to keep down on the number of emails (it also helps to avoid having things sent via email that violate company policy). Fourth, when using your computer, pretend that someone was hiding behind the screen and watching everything you do. Many programs have

Page 3 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.

Natural and “man-made” menaces have become risks that organizations can no longer dismiss. A scenario was once noted by a colleague and computer expert, “The only truly secure system is powered off, cast in a block of concrete, and sealed in a lead room with armed guards, and even then I have my doubts”. Given this amusing picture, the author is correct. What if were able to align ourselves with the armed guards and gain access to the system?

Frankly, there is no way to fully secure an information system against every potential mishap, but there are lots of ways to significantly reduce the risks and recover the losses.

The best organizations recognize that fast recovery is good business. The days are behind us when organizations could continue serving their customers for several days or even weeks without the aid of IT. Information rich industries are totally dependent on the technology. Imagine a university that cannot bill its students; imagine an insurance company that has no access to its customers’ computerized policies; or, imagine a bank that cannot provide you with your checking account balance! We are reminded of the familiar request we received from customer service personnel: “The computer is down, could you come back later?”, which seems more and more unacceptable as technology makes its way into every aspect of our lives.

A long-held view of ethics and IT can be shared. Historically, IS professionals are not 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 emerging profession, the IT profession. Many organizations are depending on us as specialists, who collect and summarize large sums of money for their services. 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, medical, 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 judgment at all times on all IT projects.

Review Questions Section 3.1 - Before You Go On…

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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 and wrong. There are many definitions of ethics, such as “codes of morals of a particular profession”, “agreement among people to do the right thing and to avoid the wrong”, and so on. Ethical issues are categorized into: privacy, accuracy, property, and accessibility.

2. Describe the issue of privacy as it is affected by IT. The issue of privacy as it is affected by IT addresses the issues of data collection, data accuracy, and data confidentiality. The proliferation of personal computers, powerful software, large databases, and the Internet have created an entirely new dimension of accessing and using personal data.

3. What does a code of ethics contain?

A code of ethics is a collection of principles intended as a guide for members of a company or an organization.

4. Describe the relationship between IT and privacy.

Information technology enables companies’ to gather, maintain, and protect data/information critical for its operation. A company’s information can also become vulnerable because of technology. It is critical for the organization to know its vulnerabilities and to be able to ensure its employees, customers, and other business partners that their private information is protected.

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 incorrectly. Many times the error checking that is built into a system does not prevent all of the possible ways that bad data can enter a system.

Weather can also cause an unintentional threat. Even poorly positioned computer rooms can set up a scenario for water from floors above to leak into computer systems.

2. Describe the various types of software attacks.

Students should list an explanation of viruses, worms, Trojan horses, logic bombs, back doors, denial or service attacks, alien software such as adware, spyware, etc.

3. Describe the issue of intellectual property protection.

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Any original work of art, writing, computer program, or music has protection under trade secret, patent, or copyright laws. This body of law protects the work product of an individual. It is critical for students to grasp this concept and to understand that copying these individual works is illegal. The discussion of the loss of over $30 billion global trade as a result of software piracy alone is substantial.

Section 3.3 - Before You Go On… 1. Describe the two major types of controls for information systems.

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?

These are the three (3) classifications of IS auditing procedures: Auditing around the computer means verifying processing by checking for known outputs using specific inputs. This approach is fast and inexpensive, but it may give false results. For example, two errors may compensate for each other resulting in seemingly correct output.

Auditing through the computer means that input, outputs, and processing are checked. Auditors review program logic, test data, and controlling processing and reprocessing.

Auditing with the computer—means using a combination of client data, auditor software, and client and auditor hardware. It allows the auditor to perform tasks such as simulating payroll program logic using live data.

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. Both the IT department and line management should be involved in preparation of the plan.

“IT’s About Business” Questions 3.1 – You Be the Judge 1. Is Childs guilty of the charges against him, namely computer tampering?

Page 6 (a) Discuss this case from the perspective of the Prosecutor of the City of San Francisco. (b) Discuss this case from the perspective of Childs’ defense lawyer. (c) The class will sit as the jury and vote on Childs’ innocence or guilt after the discussion.

No (a) Childs, as a network administrator, had many responsibilities to protect the network from intruders and put security policies in place. He did a through job.

However, the city, his employer, has the right to know details about the passwords and security schemes and may need to have additional access rights. If Childs was asked for these from higher ups and refused them, then that is a violation of his employment contract. (b) Childs, as a network administrator, had many responsibilities to protect the network from intruders and place security policies in place. While the job he did seems to be quite through and robust from a technical aspect, it should have been pointed out to him from his supervisors to get these policies approved by his higher ups before they were implemented in the network.

This later policy document/planning document is missing and is a gross negligence of the city administration and Child’s higher ups.

2. A single point of failure is a part of a system which, if it fails, will stop the entire system from working. A single point of failure is undesirable, whether it is a person, network, or application. Is Childs an example of a single point of failure? Why or why not? If so, how should the City of San Francisco (or any organization) protect itself from such a person?

Yes. Childs is a single point of failure. If he were to face a tragedy, who else knows about the network and the passwords and security schemes? There needs to be a delegate, backup, or cross-trained person to handle this crisis.

3.2 – CheckFree Hijacked 1. Which company, CheckFree or Network Solutions, is at fault in this successful attack?

Support your answer. Include in your answer a discussion of whether each company is practicing due diligence with its information security measures.

The evidence shows that hackers were able to hijack the CheckFree Web site by stealing a user name and password needed to make account changes at the Web site of Network Solutions (www.networksolutions.com), CheckFree’s domain registrar. The user name and password could have been stolen after a CheckFree employee’s computer was infected with password-stealing malware. Another possibility is that an employee was tricked into giving his or her user name and password through a phishing scam. The facts

Page 7 show that CheckFree was not the only site that the attackers hijacked and redirected back to the Ukrainian server. Internet Identity (www.internetidentity.com), an anti-phishing company, found at least 71 other domains pointing to the same Ukrainian Internet address during the period of the CheckFree attack. Hence, the finger should point to Network Solutions and their security policies perhaps not being robust enough.

Checkfree should also be required to audit its security policies and see where they might be beefed up.

2. How should the two companies, working together, prevent further attacks of this nature?

With better intrusion detection tools coupled with monitoring their network activity and defining better security policies and enforcement of them, the two companies can prevent further attacks.

3.3 – Vulnerabilities in Supervisory Control and Data Acquisition Systems 1. Will legislation be enough to strengthen SCADA defenses against cyber-attacks?

Support your answer. If not, what do you think utility companies should do to protect their SCADA systems?

Utility companies should design and enforce better security policies. How could a bunch of responsible business IS managers give access to their entire network to consulting without doing their due diligence? Clearly some IS management changes and lots of training are necessary at these “Old model” companies in addition to legislation.

2. Discuss the trade-offs for utility companies between having their control systems connected to their business systems or not.

Advantages are clear- more flexibility and faster configuration and changes.

The disadvantage is the exposure to cyber attacks and hacking and break in security issues.

3.4– Cigna’s Approach to Least Privilege 1.

Why is it so important for organizations to provide least privilege to employees?

It is important for Cigna to keep information private. Proprietary company information is also an important set of data to protect. The advantage of this least privilege policy is that Cigna is able to keep its information tightly controlled and only provide access to those who need it. Better safe than sorry!

2.

What are possible disadvantages of least privilege?

Page 8 Bureaucracy and time delays can result from this policy. Employees may be frustrated from the controls and having to apply for permissions to access information.

DISCUSSION QUESTIONS 1. Why are computer systems so vulnerable?

The level of complexity makes it difficult to understand all of the vulnerabilities.

There are many threats internal and external, intentional and unintentional.

2. Why should information security be of prime concern to management?

Most companies would be severely impacted if their systems were interrupted.

3. Is security a technical issue? A business issue? Both? Support your answer.

Hint: Read Kim Nash, “Why Technology Isn’t the Answer to Better Security,” CIO (www.cio.com), October 15, 2008.

Both. Technology creates security holes and allows hackers to break in, but businesses must adopt policies and controls to minimize these break-ins.

4. Compare information security in an organization with insuring a house.

We pay for insurance but hope that we never have to worry about using it.

5. Why are authentication and authorization important to e-commerce?

Authentication confirms the identity of the individual and authorization determines what they are allowed to do.

6. Why is cross-border cyber-crime expanding rapidly? Discuss possible solutions.

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.

7. Discuss why the Sarbanes-Oxley Act is having an impact on information security.

Page 9 The Sarbanes-Oxley Act requires certain safeguards to be built into systems and has strict audit requirements.

8. In 2008, the Massachusetts Bay Transportation Authority (MBTA) obtained a temporary restraining order barring three Massachusetts Institute of Technology students from showing what they claimed to be a way to get “free subway rides for life.” The 10-day injunction prohibited the students from revealing vulnerabilities of the MBTA’s fare card. The students were scheduled to present their findings in Las Vegas at the Defcon computer hacking conference. Are the students’ actions legal? Are their actions ethical? Discuss your answer from the perspective of the students and then from the perspective of the MBTA. The students found a way to exploit the system’s vulnerability. Not paying the fare and riding the subway is clearly an unethical activity, if not illegal. It does not matter what perspective one takes, these types of activities cannot be tolerated.

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?

Students can answer based on their environments.

PROBLEM SOLVING ACTIVITIES 1. An information security manager routinely monitored the Web surfing among her company’s employees. She discovered that many employees were visiting the “sinful six” Web sites. (Note: The sinful six are Web sites 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. a. Is monitoring of Web surfing by managers ethical (It is legal.) Support your answer.

Yes, monitoring of web surfing is ethical and moreover, it is an important duty of the network security person. Unethical use of the system is only detected by this scrutiny. If this is not done on a professional basis, the company is open to legal action should someone be harmed as a result of an employee’s use of the system.

Moreover, there is potential for malware to be introduced into the company’s network. b. Is employee Web surfing on the “sinful six” ethical? Support your answer Personal use of the company’s internet system, while not illegal, is normally stipulated in the company policies as unauthorized, therefore unethical. Employees

Page 10 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.

Visiting sites with pornographic material, gambling sites, etc. could also lead to other actions which could jeopardize the company since the tracking of IP addresses is something that would lead an investigation right back to the company equipment which was being used at the time. 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 reiterating what is okay and not okay in terms of internet usage and put them on notice that infraction will be made known to management. If there are employees that continue to operate out of policy, then they would be dealt with by submitting their details to management. d. Is punishing the abuses ethical? Why or why not? If yes, then what types of punishment are acceptable?

Punishment is just as ethical for an infraction of the internet use policy as it would be for any abuse of company policy, from tardiness to absenteeism to any other stated policy on the books. Employers need to act in good faith. A policy needs to be circulated along employees with 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. Possible warning, suspension, and ultimate termination may be appropriate punishment for violation of any company policy not limited to improper internet usage. e. What should the company do in order to rectify the situation?

The company should institute a policy for personal internet use and review with their employees. Employees should be allowed some flexibility, such as allowing two or three 15 minutes intervals of personal surfing during the day. Objectionable sites cannot be visited. This allows for employees to take a break from their work and perform some personal surfing, while confining their activity to small blocks of time.

2.

Frank Abignale, the criminal played by Leonardo di Caprio in the motion picture Catch Me If You Can up in prison. However, when he left prison, he went to work as a consultant to many companies on matter of fraud. a. Why do so many companies not report computer crimes?

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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 they their systems were compromised. b. Why do these companies hire the perpetrators (if caught) as consultants? Is this a good idea?

In some cases, they 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. 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.

Students can offer some opinions on pros and cons. It may seem as if rewarding a person for their past criminal behavior is not an ethical precedent that a company should set in its hiring policies. The wrong message may be sent to customers about the quality and background of their employees and endanger other employees working with Frank Abignale.

3.

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. a. When are security measures that a company implements sufficient to comply with the obligations?

Security measures are sufficient when they have completed a comprehensive risk analysis and determined that they have covered all threats that have a reasonable likelihood of happening and provided protection against those threats.

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 is nothing absolute in this world of technology, knowing that some individuals consider it a challenge to see if they can break through any safeguard that is implemented. The only sure way to know is if there are no breaches.

Monitoring and staying vigilant are the best ways to protect against intrusions.

4.

Assume that the daily probability of a major earthquake in Los Angeles is .07 percent. The chance of your computer center being damaged during such a quake is 5 percent. If the center is damaged, the average estimated damage will be $4.0 million.

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a. Calculate the expected loss in dollars.

Expected Annual Damage = .07 * .05 * $4,000,000 = $14,000 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.

Insurance is costing more than the expected damage. Should refuse the offer.

5.

A company receives 50,000 messages each year. Currently, the organization has no firewalls. On the average, there are 2 successful hackings each year. Each successful hacking results in loss to the company of about $150,000. A firewall is proposed at an initial cost of $75,000 and an annual maintenance fee of $6,000. The estimated useful life is 3 years. The chance that an intruder will break through this firewall is 0.00002.

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. a. Should management buy this firewall?

YES Estimated Loss from hacking = $300,000/yr Estimated cost of firewall = 25000 + 6000 + .00002 *(.3 * 100000 + .5 * 200000) = 31000/yr. b. An improved firewall that is 99.9988 percent effective and that costs $90,000, with a useful life of 3 years and annual maintenance cost of $18,000 is available. Should the company purchase this firewall instead of the first one?

Estimated cost of firewall = 30000 + 18000 + .000012 *(.3 * 100000 + .5 * 200000) = 48000/yr.

NO 6. Complete the computer ethics quiz at http://web.cs.bgsu.edu/maner/xxocee/html/welcome.htm.

7.

Enter www.scambusters.org Find out what the organization does. Learn about email scams and Web site scams. Report your findings.

“ScamBusters Has Helped People Protect Themselves From Clever Internet Scams, Identity Theft and Urban Legends Since 1994” Students responses will vary.

Page 13 8. Visit www.dhs.gov/dhspublic (Department of Homeland Security). Search the site for “National Strategy to Secure Cyberspace” and write a report on their agenda and accomplishments to date.

Students will use the search function on the site to locate the document. It is a 76 page document which will provide material student responses.

9.

Enter www.alltrustnetworks.com and other vendors of biometrics. Find the devices they make that can be used to control access into information systems. Prepare a list of products and major capabilities of each.

When students use the link, they can select “merchants” and it will take them to a menu which will allow them to select “Biopay technology”.

10. Access The Computer Ethics Institute’s Web site at www.cpsr.org/issues/ethics/cei.

The site offers the “Ten Commandments of Computer Ethics.” Study these 10 and decide if any should be added.

Students should provide thoughtful answers to the above.

11. Software piracy is a global problem. Access the following Web sites: http://www.bsa.org and http://www.microsoft.com/piracy/ What can organizations do to mitigate this problem? Are some organizations dealing with the problem better than others?

Students should enter a search argument of “software piracy” after entering the bsa.org site and access any number of links on the topic to complete their assignment. The Microsoft site offers a variety of links to explore options available to organizations.

12.

Access www.eightmaps.com.. Is the use of data on this Web site illegal?

Unethical? Support your answer.

To display the personal address of individuals if that information is not publicly available in another place is an issue. Donations for political causes need to be posted so that the general public is aware of who is behind what initiative.

TEAM ASSIGNMENTS 1.

Access www.ftc.gov/sentinel to learn more about how law enforcement agencies around the world work together to fight consumer fraud. Each team should obtain current statistics on one of the top five consumer complaint categories and prepare a report. Are any categories growing faster than others? Are any categories more prevalent in certain parts of the world?

Page 14 2.

Read In the Matter of BJ’s Wholesale Club, Inc., Agreement containing Consent Order, FTC File No. 042 3160, June 16, 2005 at www.ftc.gov/opa/2005/06/bjswholesale.htm. Describe the security breach at BJ’s Wholesale Club. What was the reason for this agreement? Identify some of the causes of the security breach and how BJ’s can better defend itself against hackers and legal liability.

3. Read the article: “The Security Tools You Need” at http://www.pcworld.com/downloads/collection/collid,1525/files.html. Each team should download a 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 IFAW has three characteristics that impact the organization’s information security. First, as an extremely dispersed organization, the IFAW must deal with information security on a large, international scale. Second, the IFAW’s mobile users carry laptops that must be protected for use outside the IFAW’s network, yet remain safe enough to return to the network without causing damage when the user returns from trips out in the field. Third, the IFAW is a controversial force in conservation and therefore finds itself targeted by individuals, organizations, and even governments who object to the organization’s activities.

The IT Solution IFAW has deployed various security software to limit its threats and protect its information assets – (1) anti-malware software, (2) IDS, (3) network access control software, (4) software preventing suspect programs from executing. If a program is not whitelisted, it will not run until someone in the IFAW’s IT department allows it to run The Result IFAW needed to control what got access into its network as well as detect and deactivate any malicious programs that may have brought back by its travelling employees. If a program is not whitelisted, it will not run until someone in the IFAW’s IT department allows it to run. Their security incidents dropped by some 75 percent. In addition, the whitelisting system enabled the IFAW to improve its software licensing compliance, because the organization now knew exactly what software was running on its computers.

Questions: 1. Does the whitelisting process place more of a burden on the IT group at IFAW? Why or why not? Support your answer.

Page 15 More burden is not necessarily placed. It is important for IT to have control over what is installed and executed on employee computers. Since the computers are taken off their network often and placed into other networks, potential for various programs and content to get installed is a big threat. Hence, this program is just helping the IT department manage its resources.

2. Analyze the risk involved in the IFAW allowing users from its partner organizations to access the IFAW network.

Opening their network to the outside to any user from its partners can lead to major problems. Intrusions are more likely and can cause disruptions to network service.

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CHAPTER 4:

Managing Knowledge and Data

Chapter Overview 4.1 Managing Data 4.2 The Database Approach 4.3 Database Management Systems 4.4 Data Warehousing 4.5 Data Governance 4.6 Knowledge Management

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 on-line or when they engage in ecommerce activities on-line.

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. Search for the book by author and then Amazon would 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 • Email address • Type of credit card (Visa, MasterCard) • Address of purchaser • 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.)

• 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

Page 2 leave some data behind, the most important point is how companies can turn that data into information.

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.

With the increase the types and volume of data in the organization, organizations need to adopt policies and procedures for managing the data across the organization. These are subject to laws and regulations which vary by industry. This is the focus of data governance. Organizations need to follow unambiguous rules for creating, collecting, handling, and protecting its information. – both from inside and outside the firm.

Encourage students to explore what regulations might exist for their industry of work or interest. Healthcare data is governed by HIPAA, while financial data is governed by Sarbanes-Oxley.

Review Questions Section 4.1 – Before you go on…

1. What are some of the difficulties in managing data?

• • • •

Huge quantities of data that must be kept for a long time Data are scattered in multiple locations throughout the organization External data must be included to support decision making Data security, quality, and integrity are essential but difficult to ensure

2. Describe the data life cycle.

The data life cycle refers to the transformation of data into knowledge and 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.

3. What are the various sources for data?

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• • •

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

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 each other.

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 too 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 great flexibility, but if the overall design is too complex, 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).

Section 4.6 – Before you go on…

1. What is knowledge management?

Page 4 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

“IT’s About Business” Questions 4.1– A Database for Electronic Medical Records.

1.

What are additional advantages that you see with storing your health records online in a database? Give examples.

The advantages of storing health records online is that it can be accessed anywhere and cannot be lost. Since a typical patient may visit multiple healthcare providers and facilities, a single electronic storage of medical records can be a major benefit.

2.

What are the disadvantages of storing your health records online in a database? Give examples.

The disadvantage is the potential for inappropriate access and use of the medical records. There is potential for break in and exploitation of confidential medical histories. There could also be a financial impact.

Page 5 4.2– The Unum Group 1. Why was it necessary for Unum to develop a data warehouse?

Since the company was formed out of mergers, each of the earlier companies had their own databases with different data fields and field definitions. It was necessary to build a data warehouse to standardize these databases, fields and field definitions. The data warehouse allowed it to integrate data and centralize reporting across a consistent set of performance metrics for the combined companies. Management could track sales and a variety of other activity and profitability measures in order to enhance their understanding of product performance and distribution channels for the new, merged company.

2. Describe the two roles of Unum’s Teradata Warehouse.

One role relates to performance, and the other is operational in nature. In its performance role, the data warehouse has become the business intelligence platform for the company’s business. It provides pricing, valuation, and forecasting analyses. In its operational role, it plays an important role in customer service..

4.3– Knowledge Management Transforms CNA 1. What aspects of corporate culture are particularly important for the successful implementation of a knowledge management program like the one at CNA? Clearly a knowledge management system is a system that relies heavily on the adoption and use of the systems by staff. The agents have all been working in “silos” and focused on their own specialties and lines of insurance business. But for CAN to grow business and be successful, they need to integrate these agents and their knowledge and expertise. CAN needs to build a culture of how the agents should always look for opportunities to collect and share knowledge that can benefit other agents. Rewards and recognition can help.

2. If it is difficult to quantify the benefits of the new KMS at CNA, what other measures could the company use to measure its benefits?

The new system is a “soft, person-based idea”; therefore, it is difficult to quantify its benefits. But certain metrics may be developed, such as the number of cross sales achieved, the number of times the KMS was used by the agents, how effective the entries in the KMS are, etc.

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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.

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.

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8. Explain why master data management is so important in companies that have multiple data sources.

The format and meaning of the data can be different in different data sources. These need to be reconciled for master data management.

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 Web sites (e.g., 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?

Students will prepare a report of salaried for types of database administrator positions base d on roles and responsibilities and technologies involved.

2.

Access the Web sites 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. Do the sites require that you register to access their services? Can you request that an e-mail be sent to you when properties in which you might be interested become available?

Visit various local agent web sites and explore features. Sign up for email on real estate searches and news.

Page 8 3.

It is possible to find many Web sites 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? 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?

Buydemographics.com, www.nielson.com, www.geolytics.com are a few sites. Have students compare theses sites and choose one they would use if they were to start a business. Business planning and projecting potential customers would be a way to use this information.

4.

The Internet contains many Web sites that provide information on financial aid resources for students. Access several of these sites. Do you have to register to access the information? Can you apply for financial aid on the sites, or do you have to request paper applications that you must complete and return?

Several sites are available. Most sites require registration and can help students identify sources of financial aid.

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), date, product purchased, unit price, number of units, tax, and total amount of the sale.

Students will come up entities for Product number, (name, description, unit price, tax rate), Customer (number, name, mailing address and billing address) and Order (customer number, product number, and number of units, tax and total amount). The relationship between Customer to Order is one too many and the Order to Product is many too many.

WEB ACTIVITIES

1.

Access the Web sites of IBM (www.ibm.com), Sybase (www.sybase.com), and Oracle (www.oracle.com) and trace the capabilities of their latest products, including Web connections.

Students will compare features of these database products.

2.

Access the Web sites 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. Students will compare features of these data warehouse products.

Page 9 3.

Enter the Web site of the Gartner Group (www.gartner.com). Examine their research studies pertaining to data management and data warehousing. Prepare a report on the state of the art.

Suggest some free reports available to the students.

4.

Access www.teradatastudentnetwork.com, read and answer the questions of the assignment entitled: “Data Warehouse Failures.” Choose one of the cases and discuss the failure and the potential remedy.

Registration to the site is required. Cases can be accessed at www.Teradata.com without registration.

5.

Calculate your personal digital footprint at http://www.emc.com/digital_universe.

Students will come up with their own answers from the web site.

TEAM ASSIGNMENTS 1. Each team will select an online database to explore, such as AOL Music (http://music.aol.com), iGo (www.igo.com), or the Internet Movie Database (www.imdb.com). Explore these Web sites to see what information they provide for you.

List the entities and the attributes that the Web sites must track in their databases.

Diagram the relationship between the entities you have identified.

Students need to identify the major entities in each system – customer, product and their relationships and attributes.

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.

Answers will vary by student. Encourage students to come up with attributes that are important for the pet store system.

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CLOSING CASE – Document Management at Procter & Gamble The Business Problem P&G faced problems managing the vast amounts of paper required for a company that develops drugs and over-the-counter (OTC) medications. Regulatory issues, research and development (R&D), and potential litigation generate even more paper documents and files. As a result, P&G wanted to gain control of its company documents, reduce administrative oversight of its paper documents, reduce costs, accelerate R&D initiatives, and improve tracking and signature compliance. P&G decided to adopt an electronic document management system.

When P&G moved to electronic documents, it had to ensure that it could authenticate digital signatures and build signing and storage processes into its daily workflow.

Further, P&G’s legal department wanted to ensure that it had a legally enforceable signature on file.

The IT Solution P&G turned to IT integrator Cardinal Solutions (www.cardinalsolutions.com) to implement Adobe LiveCycle Reader Extensions and Adobe LiveCycle PDF Generator (www.adobe.com), which would function with P&G’s eLab Notebook program. These software packages would manage, review, approve, and sign the huge volume of R&D information, including files created with Microsoft Word, Excel, and PowerPoint.

P&G adopted the pharmaceutical industry’s Signatures and Authentication for Everyone (SAFE) BioPharma Association standard. This standard was established to help companies go paperless and still interact with regulatory authorities on a global scale.

P&G’s initiative focused on implementing methods to manage digital signatures and creating a method to confirm the identity of the signer. The company’s IT and legal departments agreed that the standard met the company’s business needs and risk requirements.

Instead of recording information from experiments in paper notebooks – along with numbering each page, signing it and having a witness sign it – researchers can now use word processing programs, spreadsheets, presentation software, and similar tools to generate project notes and other necessary documentation. After a researcher has collected all the data, LiveCycle PDG Generator creates a PDF document and prompts the person creating the file to add a digital signature. The system requires the use of a USB token for authentication. At that point, LiveCycle Reader Extensions embeds usage rights within the document.

The Result Today, once a digital signature is added to a file, an auditor can immediately view the document and all activity related to the document. The auditor right-clicks on the signature and views the entire audit trail. The signature can also be appended as a last page of the file so that it can be shared externally when necessary, such as in a court of

Page 11 law. The system saves P&G time and money. Researchers no longer have to spend several hours per week archiving paper files from their experiments. In addition, P&G is able to quickly retrieve large volumes of data that may be needed for government regulators or business partners. P&G projects that it will achieve tens of millions of dollars in productivity gains by using the system. The typical employee will save approximately 30 minutes of signing and archiving time per week.. _________________________________________________________ Questions 1.

Company documents are one type of data that companies must manage.

Compare the benefits of P&G’s document management system to the benefits of database technology. Do you notice any differences? Support your answer.

Document management is similar yet different from database technology.

Documents are more unstructured and do not normally conform to each having many different formats and types. Hence it is difficult to manage documents using a typical database. A document management system is necessary. The commonalities include assigning different access roles and having searched and retrieve capabilities, such as a variety of indexes.

2. This case has described numerous advantages of P&G’s move to electronic documents. Describe the disadvantages of electronic documents.

Disadvantages to electronic documents stem from the fear of employees to adopt the system. They fear inflexibility and loss of control of information entered into electronic documents. Hence it is a problem it to convince its employees to accept the new system and learn how to use the eLab Notebook application. To address this problem, P&G is providing training to overcome any employee’s reluctance to use the new technology.

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CHAPTER 5: Network Applications, Web 2.0, Distance Learning, and Telecommuting Chapter Overview 5.1 Network applications 5.2 Web 2.0 5.3 E-Learning and Distance Learning 5.4 Telecommuting

Teaching Tips and Strategies This chapter will help students to learn the importance of telecommunications. You could start the class off by discussing the computer lab at your University. Let students know that the computer lab is set-up on a LAN and demonstrate to students that it doesn’t matter which computer you log on, 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 programs 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 LAN’s, 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 LAN’s in offices, retail operations, warehouses, etc. Students seem to relate to LAN’s because most of them have some type of experience using them.

In the 1960’s, the Internet was developed by government scientists. The reason that the Internet didn’t become popular until three decades later was due to the advancements in telecommunications and networks. America is now a global economy and owes much of that success to telecommunications and networks.

Page 2 Companies that have offices in America and Japan can now know each other’s sales or daily operations in real-time. The advent of email 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 email. 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 401k and make contributions or changes totally 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, Vanguard, and many others have been able to reduce telephone staff because they now have customer’s 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 cost for these fund giants.

Review Questions Section 5.1 – Before you go on…

1. Describe the three network applications that we 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 email, call centers, chat rooms and VoIP. Collaboration tools are workflow technologies, groupware, teleconferencing, and whiteboards.

2. Identify the business conditions that have made videoconferencing more important.

Increased costs related to air travel, food and hotels as well as inconvenience/delays related to security in airports are reasons. Also included are increased pressures to be competitive and make quality decisions.

Section 5.2 – Before you go on…

Page 3 1. Describe the underlying technologies, applications and types of Web sites that comprise 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 Web sites. 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. Describe the function of Web services.

Web services are applications delivered over the Internet. Users can select and combine through almost any device, from personal computers to mobile phones.

Using a set of shared protocols and standards, these applications permit different systems to share data and service without requiring humans to translate.

3. Describe the function of service-oriented architectures.

SOA is an architecture that makes it possible to construct business applications using Web services. Web services can be reused across an organization in other applications.

Section 5.3 – Before you go on…

1. Differentiate between e-learning and distance learning.

E-learning refers to learning supported by the Web. 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.

Page 4 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 linking to their place of employment. There are advantages and disadvantages to telecommuting – flexibility and no commute are clearly advantages; while the lack of face to face interaction and limited access to other business resources may be disadvantages.

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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 perspective are that it can 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 have no workplace visibility, potentially slower promotions and lack of socialization.

From the employer perspective the advantages often mean increased productivity, 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.

“IT’s About Business” Questions 5.1 – 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?

A large group providing diverse input and feedback on the business ideaoften leads to a better business model. The disadvantages are in the lack of formality and organizational challenges of communications within such a large group, making a decision and implementing.

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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.

The goals of the restaurant are beyond turning a profit. It is an organization that wants to support fresh produce farming, community involvement and work and create a meeting place that is central to the community. The goals are related to building a community more than turning a profit. As long as supporters are ready to contribute money and time and necessary resources, this model should be sustainable.

5.2 – How Does a Small Vineyard Build Its Brand?

1. Visit Stormhoek’s Web site at www.stormhoek.com. Discuss the advantages and disadvantages of Stormhoek’s having a blog for a Web site.

Blogs provided the interactive Web 2.0 environment which Stormhoek used for input about products and service allowing customers to partake in the 1:1 or personalized marketing environment. While customers can easily participate in the site, the organization may have difficulty in controlling the message and content that is posted.

2. Should Stormhoek use traditional marketing methods to go along with its Web 2.0 marketing efforts? How? Why? Support your answer.

Word of mouth is a good advertising strategy. Stomhoek is able to build a community among its customers, supporting their marketing strategy. The risk is a bad comment or negative blog may turn customers away. There is less control over the Web 2.0 content and what is posted. It is more cost effective for a small organization to go this route.

5.3 – Twitter Becomes Surprisingly Useful 1. What are the disadvantages of using Twitter?

Twitter can be a useful communication and collaboration vehicle. The volume of messages can be a distraction.

2. Describe potential uses for Twitter at your university.

Student responses will vary. However, we should encourage students to understand how to collaborate on a real time basis with other students and faculty as they work on projects and assignments. Twitter is a good tool for that – as it is based on a text messaging platform.

5.4 – Hyper-News by YourStreet

Page 6 1. 1. In your opinion, can YourStreet attract enough visitors from targeted marketing to be profitable? Why or why not? Support your answer.

Providing a way to discuss stories is not a new feature. Many news sites are offering that capability. Local stories are also being captured and displayed by many sites. The unique capability of YourStreet might be the customization by a user of what they want to receive. Any site that can help users manage information overload has a chance to succeed.

2. YourStreet is a mashup. What other data sources would you recommend to help the site attract more visitors?

Possible sites are endless. Students should propose many alternatives. Twitter, Facebook, etc.

DISCUSSION QUESTIONS 1. Apply Porter’s competitive forces model, which we discussed in Chapter 2, to Google. Address each component of the model as it pertains to Google. Can Google maintain its competitive advantage? If so, how? If not, why not?

Students should incorporate each of the forces into a discussion of Google’s approach to their business. Google’s aggressive approach to meeting the forces would indicate that they have a good chance of maintaining their competitive advantage. If they cannot innovate and offer new services, they will not be able to maintain their advantage.

2. How would you describe Web 2.0 to someone who has not taken an information systems course?

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.

3. 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?

It is definitely 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 are visited more often and have a larger following are more

Page 7 important than others. Users need to search on product names and company names to find the blogs of interest.

4. Is it a good idea for a business major to join LinkedIn 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.

5. 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 a good display. Students may provide examples of white board use, and audio conferencing as well as groupware dependent upon WAN connectivity.

6. Access this article from The Atlantic: “Is Google Making Us Stupid?” (http://www.theatlantic.com/doc/200807/google). Is Google making us stupid?

Support your answer.

The argument is that by instantly going online and using Google to search up a topic, we are limiting our thinking and using our imagination and memory. The less use received by the later, results in atrophy over the years. The short articles and “to the point” style of writing on the internet with emphasis on “efficiency” and “immediacy” may be weakening our capacity for the kind of deep reading and thought and reflection that is so important for knowledge synthesis. Of course we want to avoid reinventing the wheel, but maybe there is a new wheel to be invented – unless we stretch our imagination, we may never get there.

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. Geographical location and weather conditions at the time of your trip. b. Major tourist attractions and recreational facilities. c. Travel arrangements (airlines, approximate fares). d. Car rental; local tours. e. Alternatives for accommodation (within a moderate budget) and food. f. Estimated cost of the vacation (travel, lodging, food, recreation, shopping, etc).

Page 8 g. Country regulations regarding the entrance of your dog that you would like to take with you. h. Shopping. i. Passport information (either to obtain one or renew one). j. Information on the country’s language and culture. k. 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.

3. Visit Web sites of companies that manufacture telepresence products for the Internet.

Prepare a report. Differentiate between telepresence products and videoconferencing products.

Telepresence enables people in different locations to collaborate face-to-face as if they were in the same room. Increased features of telepresence over teleconferencing include support for meeting in many rooms at once-up to 48 locations in one meeting and recording high-quality video, etc.

4. Access Google videos and search for “Cisco Magic.” This video shows Cisco’s next generation telepresence system. Compare and contrast it with current telepresence systems.

Students will locate conferencing product descriptions and organize into a report.

5. Access the Web site of your university. Does the Web site 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 Web site and answer based on its content.

Instructors may help students identify some criteria to evaluate what is high quality.

6. Enter www.programmableweb.com and study the various services that the Web site offers. Learn about how to create mashups and then propose a mashup of your own.

Present your mashup to the class.

Suggest students to go to the forum and review some of the better mashups on the site. Also look at the frequency of use of API’s in popular mashups to guide their own mashup selection.

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7. Compare and contrast Google Sites (www.google.com/sites) and Microsoft Office Live (www.liveoffice.com). Which site would you use to create your own Web site?

Explain your choice.

Suggest to students to visit both sites and make a list of features that each offers. The google site offers a mechanism to set up a web site and has several templates to get started on customization. While the liveoffice site offers a mechanism to manage and archive email, which is particularly important for compliance issues. Stress to students that both are necessary when a web site needs to be created.

8. Access the Web site of the Recording Industry Association of America (www.riaa.com). Discuss what you find there regarding copyright infringement (that is, downloading music files). How do you feel about the RIAA’s efforts to stop music downloads? Debate this issue from your point of view and from the RIAA’s point of view.

Encourage the students to visit the RIAA website. The Recording Industry Association of America (RIAA) collects and compiles information on both shipment and purchasing trends of recorded music in the United States. This data is an estimate of the size of the U.S. recorded music industry based on data collected directly from the major music companies (which create and/or distribute about 85% of the music sold in the U.S.) and estimates for other parts of the market. While piracy can be a major burden on the industry and needs to be fought vigorously by players such as the RIAA, legitimate sharing of music should not be put in the same light. Why is sharing music (the right to listen to music) among friends any different from sharing a text book or sporting equipment? Encourage discussion among students on what the limits are to each of the above.

9. Visit www.cdt.org. Find what technologies are available to track users’ activities on the Internet.

The Center for Democracy and Technology (CDT) is a non-profit public interest organization working to keep the Internet open, innovative, and free. With expertise in law, technology, and policy, CDT seeks practical solutions to enhance free expression and privacy in communications technologies. CDT is dedicated to building consensus among all parties interested in the future of the Internet and other new communications media. There are several interesting articles on tracking of web site usage and collecting information on users that may be on the edge of violating privacy rights - cookies are the biggest technology used to achieve this. Consumers need to realize that with every click of the mouse they are leaving electronic footprints that can be tracked, collected, stored, collated, aggregated and massaged to create a stunningly accurate personal profile of their online activities, preferences and behaviors. There is the gist of behavioral tracking.

Page 10 10. 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 company?

Selections will vary by region. Students should find different alternatives and use a set of evaluation criteria to compare them. Help the class to come up with common evaluation criteria.

11. Access some of the alternative search engines at http://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).

Suggest students to evaluate the results of common search strings.

12. Second Life (www.secondlife.com) is a three-dimensional, online 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. Learn about the thousands of people who are making “real world” money from operations in Second Life.

Students should list some models to doing business in this online world. How would they engage the community to support their business model?

13. Access the Altavista (http://babelfish.altavista.com) or Google (www.google.com/language_tools) translation pages. Type in a paragraph in English and select, for example, English-to-French. When you see the translated paragraph in French, copy it into the text box, and select French-to-English. Is the paragraph that you first entered the same as the one you are looking at now? Why or why not? Support your answer.

Some interpretation and translation changes may occur. More complex paragraphs will result more deviations.

TEAM ASSIGNMENTS 1. Assign each group member to a collaboration product (e.g., Groove, Jive, Google Docs, SharePoint, or Quickr). Have each member visit the Web site of the product and obtain information about it. As a group, prepare a comparative table of the major similarities and differences among the products.

Page 11 Comparison of features and capabilities of each to be prepared by the students.

2. Have each team download a free copy of Groove from www.groove.net. Install the software on the members’ PCs and arrange collaborative sessions. What can the free software do for you? What are its limitations?

Students should be encouraged to describe their experience with using the system.

Did they have to establish some procedures to complement the system to use it effectively? What were they?

3. Each team should pick a subject that needs aggregation. Set up the plans for an aggregator Web site to accomplish this mission. Present to the class.

Encourage students to visit Google news to get an idea of aggregator sites. Then think up some ideas of their own.

4. Each team will pick one of the following: YourStreet, Platial, Topix, or Google Earth. Compare and contrast these products 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.

Students should be encouraged to describe their experience with using the Google docs system. Did they have to establish some procedures to complement the system to use it effectively? What were they?

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.

Students should discuss how they created and distributed a pod cast in a report format.

CLOSING CASE Service Oriented Architecture at TD Banknorth Business Problem TD Banknorth expanded rapidly and could not integrate the information systems of the banks it acquired with its own.

The IT Solution The implemented an SOA beginning with a small project first, then went on to larger project, its online banking system.

The Results Payback on the original development cost of $467,000 is projected to be $11 million

Page 12 Development time on subsequent applications was shorter because the bank could reuse the services in other applications.

Questions 1. Why did TD Banknorth implement a services-oriented architecture?

They enabled the applications in individual functional areas of the business to communicate with each other. It provided an opportunity for shorter development times and lower development costs.

2. Given the advantages discussed in this case, discuss pote4ntial disadvantages of TD Banknorth’s use of SOA ?

There is the possibility that there will be too much information available and there could be security concerns with a high level of integration.

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CHAPTER 6: Electronic Commerce: Applications and Issues Chapter Overview 6.1 Overview of E-Business and E-Commerce 6.2 Business-to-Consumer (B2C) Electronic Commerce 6.3 Business-to-Business (B2B) Electronic Commerce 6.4 Electronic Payments 6.5 Ethical and Legal Issues in E-Business

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), Borders.com (online bookstore), and bestbuy.com (electronics retailer).

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 (Borders.com is now being run by Amazon.com). I then 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 over estimate the demand for a new technology.

When Ecommerce 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 the demise of Toys ‘R Us as we know it. Brick 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 brick and mortar stores immediately 1

Page 2 launched a counter attack and started creating their own online stores. Money was no object, the old economy companies as we knew them were facing extinction (or so it was perceived). Racing to help get a piece of the brick and mortars’ market share, companies without strong business plans rushed to the Internet to try to get the first mover advantage. By doing this it sets off a chain of events not just in the stock market, but within brick and mortar companies. Brick and mortar 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 brick and mortar retailer. Not to mention, some consumers would never want to buy items online, or are incapable of buying items online.

As with the Y2K bug, most of the dire predictions of the brick and mortar companies 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).

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Brick 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 brick and mortar stores to add an online component. When we look at the failure of bestbuy.com the literature tells us that the most significant reason for their failure was warehouse cost. 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.

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 they were going to make money. This is the number one reason that so many ECommerce companies failed. Without Profit….companies will not survive.

To wrap up this chapter you might discuss, “What will the future of ECommerce be?”

This tends to get students excited. Some possible suggestions for where Ecommerce is

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Page 3 heading are in this chapter: Online job ads, market research, online payments and ethical aspects of ECommerce.

According to Boston Consulting Group (2001) the reason for ECommerce failures, 19992000:

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 Web site 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 one of the number one reasons for dotcom failures is poor business models. Many ECommerce companies were launched with the mentality, “If we build it they will come and make us rich.”

Do all of these reasons mean that ECommerce cannot be successful? That is not what the data is describing. ECommerce 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. Customers benefit by being able to access a vast number of products and services, around the clock. The 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. Despite all these benefits, EC has some limitations, both technological and non-technological, that have slowed its growth and acceptance. Technological limitations include the lack of universally accepted security standards and expensive accessibility. Non-technological limitations include the perceptions that EC is insecure, has unresolved legal issues, and lacks a critical mass of sellers and buyers. As time passes, the limitations, especially the technological ones, will lessen or be overcome.

Typical eCommerce business models are based on marketing – a commission for getting the word out, while others are based on exchange or auctions and others are based on membership fees for some type of service.

The trend currently is for companies that have brick and mortar operations to extend to the Internet and to use the competitive advantages these companies have created to forge ahead with E-Commerce. A click-mortar strategy is seen to work better, as customers can avail of the advantages of both channels.

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Page 4 Introduce the students to social networking sites such as Facebook.com, linkedin.com, classmates.com. What is their business model? Why are these sites able to survive and attract so much attention? They make money from the visits and traffic and have premium services for paying customers. Introduce the Crest Whitestrips marketing promotion – would that be possible without a facebook site? Viral marketing – or word of mouth - is a way many companies are putting their message out.

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 eBusiness.

2. Distinguish 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.

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.

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Page 5 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 priced bidder wins.

5. List some benefits and limitations of e-commerce.

Benefits o It makes national and international markets more accessible o Lowers the costs of processing, distributing and retrieving information o Customers are able to access products and services around the clock o 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 o Lack of universally accepted security standards o Insufficient bandwidth o Expensive accessibility o Unresolved legal issues o Perception of being insecure o 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 businesses 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 (e.g., cyberbanking, securities trading, job searches, travel services).

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, and transaction tracking.

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Page 6 3. List the major issues relating to e-tailing.

• Channel conflict – Regular distributors may be alienated when a company decides to sell directly on-line. Companies need to recognize this problem and possibly find a way to restructure distributor relationships.

• Conflicts within click and mortar organizations – 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 number 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 email or pop-up/pop-under ads. Spam often contains objectionable content as well. Most computer users are inundated by 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 email. 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… 1. Briefly differentiate between the sell-side marketplace and the buy-side marketplace.

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Page 7 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 catalogs 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 between 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 payment of such small amounts needed for coffee shop purchase or train or subway fares.

Section 6.5 - Before You Go On…

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Page 8 1. List some ethical issues in EC. Many of the ethical issues related to IT apply also to EC. Three (4) key issues are privacy, the human element, Web tracking, and disintermediation.

Privacy. Central issues are: (1) protecting the buyer’s identity. (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 web site, and then accessed every time you revisit that web site.

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; “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, state, and local authorities are scrambling to figure out how to get a piece of the revenue created electronically. The problem is particularly complex for interstate and international commerce. For example, some claim that even the state in which a server is located deserves to receive some sales tax from an EC transaction. Another opinion is that the state 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 registered trademark.

Copyright. Intellectual property in EC, in its various forms, is protected by copyright laws and cannot be used freely.

Other legal issues. Several other issues are emerging as challenges to the existing system.

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Page 9 • • • • •

What are the rules of electronic contracting, and whose jurisdiction prevails when buyers, broker, and sellers are in different states and/or countries?

When are electronic documents admissible as evidence in the courts of law? What is the alternative if they are not?

Liability of errors, malfunction of software, or theft and fraudulent use of data may be difficult to prove. How is such liability determined?

What is considered misrepresentation? Where should you take legal action against misrepresentation?

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 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 “on-ground” stores; too low prices 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 • Check www.consumerworld.org for a listing of useful resources.

4. Describe seller protection in EC. Seller protection includes authentication, nonrepudiation, and escrow services. These help protect against: • consumers who refuse to pay or pay with bad checks.

• consumers who claim merchandise did not arrive.

• others who use their name.

• the use of their unique words and phrases, slogans, and Web addresses.

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“IT’s About Business” Questions 6.1 – Zappos and Twitter 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?

Student responses will vary. Some will like the personal touch and like the relationship aspects. Others may be too busy to appreciate the touch or don’t care. But it does offer a dimension to an online store that was severely lacking in early eTailers.

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

It is a spontaneous type of marketing. One of the difficulties is the limited control over the message, however the messages are more authentic and may have more impact on the customer. It is a good complement to a more structured and traditional marketing message.

6.2 – REI Realigns to Support a Unified Multichannel Shopping Experience 1. What is the importance of data availability in this case?

REI realigned its channel management structures and used its information systems to enable its various business units to share and exchange data. This system eliminated data silos, where which each department maintained its own data rather than share these data with other departments. This allowed REI to consolidate its company-wide logistics and support and integrate multiple channels – bricks and clicks, thus better serving their customers. Multichannel integration significantly improved the level of REI’s customer satisfaction.

2. What other advantages could REI’s restructured information systems provide to the company beyond an improved customer experience?

Streamlined business processes and supply chain management are some other benefits that can come to REI. Most importantly, the company can present an integrated, unified retail experience for its customers whether they shop in a store, through a catalog, or online.

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Page 11 6.3 –PayPal Provides a Solution for Chocolate Lovers 1. Dan researched several options for customer payments. Access the Web to find other payment options that Dan could have used.

Apart from PayPal, here are the other online payment options for a site: Credit card processing If you were only going to offer one online payment option to prospective buyers, this would be the one to choose. To set up credit card processing on your website, (MasterCard, Visa, American Express, Discover), you need to get an Internet merchant account. You can get an Internet merchant account through your local banks. You can also get an Internet merchant account through a third party merchant account provider, such as Beanstream, Moneris, PSiGate or InternetSecure.

Debit Card processing Interac Online is one option that allows your customers to pay for goods and services online directly from their bank accounts. It's convenient and secure for customers because they don't have to share any of their card numbers or financial details when making a purchase; payment is completed through their own financial institutions.

2. What are the advantages that Dan gained from using PayPal? Were there any disadvantages? If so, do the advantages outweigh the disadvantages, or vice versa?

First, the PayPal solution provides Dan and his staff with a convenient and hasslefree reporting system for customer transactions through an online reporting tool.

Second, PayPal, with its Merchant and Customer Protection policies, secures and protects sensitive customer transactions (for example, transactions involving credit card or debit numbers) and uses encryption.

The disadvantage is that some customers may not want to commit to using PayPal. 6.4 Verizon Wins a Cybersquatting Verdict 1. Should cybersquatting be outlawed? Why or why not?

This is a complicated issue and an over arching policy may be difficult to reach. If a company is using the domain name and there is a valid reason for it to use the name, then it should be allowed. If another business is being harmed, then some remediation is needed.

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2. If your name is David Sony and you want to register www.davidsony.com, should you be prohibited from doing so because Sony is also the name of a major international company? Access http://www.digest.com/Big_Story.php and build your case.?

"Cyber squatting" is defined in the United States federal law –the Anticybersquatting Consumer Protection Act. It can involve registering, trafficking in, or using a domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else. The cybersquatter then may further try to sell the domain to the person or company who owns a trademark contained within the name at an inflated price.

These disputes can be tricky and quite lengthy. In fact, since it is so new, the law is being defined as cases are argued and judged in courts throughout the world. In general, cases are being decided in favor of bigger companies. However, in the case of Nissan.net, the case has been ruled in favor of the smaller company - Nissan computer. The important point is to make sure that the company is using the domain name in legitimate business and not just holding a domain name to resell later on. Some business activities must be happening on the web site and the domain name must be put to use, otherwise they have no right to it and may be forced to give it up.

Discussion Questions 1. Discuss the major limitations of e-commerce. Which of these limitations are likely to disappear? Why? 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 “on-ground” 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 are insufficient number of sellers and buyers needed for profitable EC operations.

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.

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2. Discuss the reasons for having multiple EC business models.

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 RFQs. 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 wining 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 buyer’s bidding RFQs via the web, 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.

Participants in B2B exchanges can reduce cycle trading time and cost as well as find new markets and trading partners around the globe through the exchange.

5. What are the major benefits of G2C electronic commerce?

One of the major benefits of G2C EC is giving the people a chance to see what the government does everyday and to give feedback. For instance, any individual from any state can now contact their Senators or Representatives 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?

B2C payments can include electronic credit cards and electronic cash (stored value money cards, smart cards, person to person payments).

7. Why is order fulfillment in B2C considered difficult?

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Page 14 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.

• • • • • • • •

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.

Channel conflict can be an issue with online sales for click and mortar organizations, however to forego online sales entirely just because it possesses a challenge may not be a wise decision.

PROBLEM-SOLVING ACTIVITIES 1.

Assume you are interested in buying a car. You can find information about cars at numerous Web sites. 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 Web site. 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 experiences online.

2.

Compare the various electronic payment methods. Specifically, collect information from the vendors cited in the chapter and find more with google.com. 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?

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Page 15 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 appear 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.

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 epayment 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.espn.com. Identify at least five different ways it generates revenue.

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Page 16 Students should list items such as selling links to advertisers, and memberships to the site.

6. Access www.queendom.com. Examine its offerings and try some of them. What type of electronic commerce is this? How does this Web site generate revenue?

This B2C site generates its 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.

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 Web site your credit and debit card numbers, as well as your bank account number?

This revenue model includes marketing and revenues from partner advertising. They sell any type of financial product as well as provide references to financial planners, investment brokers, and setting up financial plans.

Account numbers would be risky to give out, even though it has Truste sign. Account numbers can be easily stolen which is just too risky.

WEB ACTIVITIES Students will visit various sites and respond per directions with their experiences.

1. Access the Stock Market Game Worldwide (www.smgww.org). You will be bankrolled with $100,000 in a trading account every month. Play the game and relate your experiences with regard to information technology.

Each result will be unique.

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Page 17 2. Access www.realtor.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? To whom?

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. Regardless of the information placed in the website, nothing beats visiting the house in person. Buyers often cannot understand how the same house can be so different!

3. 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?

This is an extensive B2B sit with many different products. Using this intermediary for contact and purchase is a safeguard in the same way as ebay and paypal.

4. Enter www.campusfood.com. Explore the site. Why is the site so successful?

Could you start a competing one? Why or why not?

A consolidated view of area restaurants around campuses which handles delivery and payments with online payment mechanisms makes this site successful.

5. Enter www.dell.com, go to “desktops,” and configure a system. Register to “my cart” (no obligation). What calculators are used there? What are the advantages of this process as compared with buying a computer in a physical store? What are the disadvantages?

Each student will have a customized result and should submit findings.

6. Enter www.checkfree.com and www.lmlpayment.com find their services. Prepare a report.

Both sites are online payment processors, clearing houses for check processing.

Students will expand and add their own observations.

7. Access various travel sites such as www.travelocity.com, www.orbitz.com, www.expedia.com, www.sidestep.com, and www.pinpoint.com. Compare these Web sites 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?

Each website offers something unique and these offers can vary as promotions are launched. Travelocity and orbits offers similar interface and services. Sidestep offers a search engine for getting data from multiple travel vendor sites. Pinpoint is a tool

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Page 18 for getting local companies for a given location. The last site is useful for business planning but the others are travel related sites.

8. 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?

Students should take the survey and report on their score and discuss with other students to compare how accurate the assessment is to their real personalities.

TEAM ASSIGNMENTS 1. 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, retain, telecommunications, pharmaceuticals and chemicals, and so on. Each team will find five real-world applications of the major business-tobusiness models listed in the chapter. (Try success stories of vendors and EC-related magazines.) Examine the problems they solve or the opportunities they exploit.

2. Have teams investigate how B2B payments are made in global trade. Consider instruments such as electronic letters of credit and e-checks. Visit www.tradecard.com and examine their 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.

CLOSING CASE Just How Predictable Are You? The Business Problem Marketers need ways of finding what customers are likely to purchase.

The IT Solution Recommender sites ave developed algorithms which gather information from site which customers have visited and the products that they are looking up and base recommendations for other product purchases.

The Results

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Page 19 Pandora and other recommender companies are still in the start up stage, results are not in. Even Google does not comment on whether they have a recommendation application in the works.

Questions 1.

What are the implications of recommenders? What is the relationship between your privacy and recommendation engines? Are recommendation engines the ultimate form of 1:1, or personalized, marketing?

Recommenders can be a boon to the marketing profession. They can provide Goodbye, context-based advertising and Hello, personality-based advertising. Privacy must be balanced with this style of technology. It could feel very intrusive to many customers. They can be the ultimate form of 1:1 or personalized advertising and make customers feel very special. It is a balancing act.

1. What are the implications for a recommender like Pandora with regard to copyright violations?

As in all areas, Pandora must be careful to develop its recommendations uniquely and to not duplicate material which is protected by copyright laws.

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CHAPTER 7: Wireless Technologies and the Modern Organization Chapter Overview 7.1

Wireless Technologies

7.2

Wireless Computer Networks and Internet Access

7.3

Mobile Computing and Mobile Commerce

7.4

Pervasive Computing

7.5

Wireless Security

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. Assert the difference between wireless and mobile - wireless, means exactly what it says: without wires. The term, mobile, refers to something that changes its location over time. Wireless networks can be mobile (e.g. internet over cell phones) or fixed (e.g. WiFi).

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.

By remaining impartial it helps students to complete their thoughts on the benefits and drawbacks of mobile computing and related privacy concerns.

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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 handheld 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.

2. Describe the various types of 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.

- 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. 802.11a transmits up to 54 Mbps within 10-30 meters 802.11b transmits up to 11 Mbps within 30-50 802.11g transmits up to 54 Mbps and is compatible with 802.11b Major benefits are low cost and the ability to provide simple Internet access.

Cellular services - communicate with radio antenna placed within adjacent areas called cells. It uses digital signals and can transmit voice and data up to 384 Kbps when device is used while walking, 128 Kbps while in a car, and up to 2Mbps when device is in a fixed location.

WiMax - worldwide interoperability for microwave access has a range of up to 31 miles compared to 300 feet for Wi-Fi and 30 feet for Bluetooth. It has a transfer rate of 75 Mbps.

Section 7.3 - Before You Go On…

3 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

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 Web site with an audio interface. Voice portals are not Web sites in the normal sense, but rather are phone numbers which connect to a Web site 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.

The services provide a convenient way to transact business regardless of where they are or what time it is. These services include banking, wireless payments and micropayments, wireless wallets, bill-payment services, brokerage services, and money transfers.

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 centers.

Mystery customers who file reports after evaluating locations of a national restaurant franchise use hand-held devices to file reports.

Section 7.4 - Before You Go On… 1. Define pervasive computing, RFID, and wireless sensor networks.

4 Pervasive computing is invisible “everywhere computing” that is embedded in the objects around us, including the floor, lights, 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 and then track their movement through 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 include the benefits of each one.

RFID is a technology based on electrical energy. RuBee, on the other hand, is a magnetic technology. RuBee works better in harsh environments near metal and water and in the presence of electromagnetic noise.

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, eaves dropping 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 and eavesdropping is effective for both business and individual networks.

“IT’s About Business” Questions 7.1 – Deploying the Wireless Local Area Network at Intermountain Healthcare 1. Discuss the reasons why it is more difficult to implement a WLAN in a healthcare company than in another type of company.

Deploying a wireless local area network (WLAN) in a healthcare environment, with its many regulations and security requirements, is extremely complicated.

The fear of a break-in and eavesdropping of data is a challenge. Wireless signals can also interfere with other electronic equipment operating in a healthcare facility. .

5 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?

All user groups would need to be interviewed and their applications and work flows documented to ensure that the network will meet their needs. There are likely to be conflicting requirements. It is best to define roles and each role should be allowed to access data and applications views based on their roles.

7.2 – Starbucks “Third Place” Strategy 1. Compare the strategies of Starbucks and McDonalds. How does making Wi-Fi available in their stores affect each strategy?

Starbucks benefits by keeping their customers in their store longer, while McDonalds is for fast in and out. Wifi is an attraction for customers and hence it may end up increasing the customer traffic and sales per customer.

2. Discuss possible security problems for Starbucks customers as they use a public Wi-Fi hotspot. Hint: We discuss Wireless Security in Section 7.5.

Wireless security is a problem. Anyone in the vicinity can pick up packets and infect computers in the wireless network. Customers need to use these free wireless networks at their own risk.

7.3 – Radio Frequency Identification at the Beijing Olympics 1. Discuss the advantages of using RFID and sensors for food and beverage tracking versus using bar codes.

The RFID and sensor system allowed officials with readers to determine whether a food had been subjected to temperatures outside a specified range, rather than just reading a bar code to determine that the correct food was in the correct box. .

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 RFID-enabled tickets that outweighed the large extra costs.

This technology provides added safety features, and also a means to guard against counterfeiting. The tickets can be programmed dynamically and visitors with a given ticket can be tracked as they go around the venues.

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7.4 – A “Smart” Electric Grid 1. Discuss the advantages and disadvantages of smart readers from the perspective of a utility company. Then discuss them from the perspective of a meter reader for a utility company.

Greenbox system gets a detailed view of how each home uses electricity. It then translates the raw data into information that homeowners can understand and use.

Greenbox claims that this user interface is the most important part of a smart electrical grid, because it creates an opportunity for technology to interact with humans and change how we behave. Homeowners using Greenbox can log on to a Web site and track their energy use almost to the minute. They can turn off their stereos, refresh the Greenbox Web site, and see the drop in energy consumption.

Meter readers may need to be given other jobs as the meter reading is being automated by these devices.

2. As a utility company, how would you determine if the smart meters were a good investment? That is, weigh the costs of the meters and their installation against any cost savings.

Conversation and managing peaks of usage are important for a utility company.

Saver switches have been used for many years to lower peak usage that can cause black outs. If they can smooth the usage and reduce peak demand, then the device is worth the cost as the utilities do not need to build expensive generation plants. Greenbox also produces customized suggestions for saving electricity. In addition, it can compare a household with similarly sized houses in the neighborhood, thereby helping energy wasters realize that they might have a problem.

Discussion Questions 1. Discuss how m-commerce can expand the reach of e-business.

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. Mcommerce 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.

7 2. Discuss how mobile computing can solve some of the problems of the digital divide.

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.

•

• • •

Access to expertise: For example, medical service providers in remote locations could communicate 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 carry out needed 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.

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 easily from public assess points called hotspots. Mobile computing and m-commerce 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.

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.

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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.

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.

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? 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 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?

An example of smart phone capabilities found on-line: The Kyocera 2200 Series cell phones take 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.

Additional ringers, backlit keypad, Games, On-screen icons

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

Investigate commercial applications of voice portals. Visit several vendors (e.g., www.tellme.com, www.bevocal.com, etc.). What capabilities and applications are offered by the various vendors?

Students will research voice portals and report their findings.

3. Using a search engine, try to determine whether there are any commercial Wi-Fi hotspots in your area (Hint: Access http://v4.jiwire.com/search-hotspotlocations.htm.) Enter www.wardriving.com. Based on information provided at this site, what sorts of equipment and procedures could you use to locate hotspots in your area?

Students will discuss use of handhelds, laptops, etc. after locating WI-Fi spots in their area.

4. 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.

5. Investigate commercial uses of GPS. Start with http://gpshome.ssc.nasa.gov, then go to www.gpsstore.com Can some of the consumer-oriented product be used in industry? Prepare a report on your findings.

Students will investigate and list products that can cross over between the end consumer and industry markets.

5. 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.

10 Various categories of products are listed in the web site. Students will investigate and prepare a report on two of these products. Students also examine any drawbacks to having Bluetooth used in the product.

6. 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.

Students will investigate and prepare a report.

7. Enter www.ibm.com. Search for wireless e-business. Research the resulting stories to determine the types of wireless capabilities and applications IBM’s software and hardware supports. Describe some of the ways these applications have helped specific businesses and industries.

Students are to look into the published case studies in the ibm.com web site under “SOLUTIONS” and find some examples of cases that they can share with the class.

8. 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 based on your findings.

Students will investigate and prepare a report.

9. Enter www.mapinfo.com, and look for the location-based services demos. Try all the demos. Find all of the wireless services. Summarize your findings.

Students will investigate and prepare a report.

11. Enter www.packetvideo.com. Examine the demos and products, and list their capabilities.

PV provides software to deliver mobile media services. PV's software gives users greater access and control over their media experience. The CORE product provides a universal structure for mobile multimedia applications. MediaFusion is a white-label client-server software application that enables rapid development and launch on-device portals for rich media services.

12. 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.)

Students will play the movie and relate their experience.

13. Access www.itu.int/osg/spu/publications/internetofthings/InternetofThings_summary.pdf.

11 Read about the Internet of Things. What is it? What types of technologies are necessary to support it? Why is it important?

By embedding communications technology in everyday things in order to increase the reach and access of the internet can be increased to many remote areas that do not have internet access infrastructure. By embedding internet access in common devices like a fridge or oven, it is more likely to support access in remote areas.

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 why one should buy that company’s products.

Students will research the capabilities and prepare a report. Focus on features supported by the models, what bandwidth is needed to support the features and the quality of network service and cost that is required by each.

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.)

Lots of possibilities, particularly in the financial industry. Students will research the capabilities and prepare a report.

3.

Each team should take one of the following areas—homes, cars, appliances, or other consumer goods like 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.

Students will research the capabilities and prepare a report.

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Closing Case: Webster Forest Nursery Goes Wireless The Business Problem Keeping track of 8-10 Million seeds and their origin The IT Solution A new inventory tracking system with handheld computers.

The Results Workers now enter data in real time from the field reducing errors. Seedlings are more likely to be planted in appropriate locations. The system has freed up staff and enabled the nursery to expand. In addition, the nursery integrated its sales data into RIMS making it easier to track performance and to project future revenues.

Questions: 1) Now that the nursery is using wireless handheld computers to enter accurate seedling data, what would you recommend as the net technological step? Hint: Refer to the section on wireless sensor networks in this chapter.

Using RFID or some other type of sensor device would speed up the process of inventory management.

2) What are other advantages that wireless handheld technology can provide for the nursery?

Students should list advantages related to time and cost savings as well as any accuracy that might be gained.

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CHAPTER 8: Information Systems that Support Organizations Chapter Overview 8.1 Transaction Processing Systems 8.2 Functional Area Information Systems 8.3 Enterprise Resource Planning Systems

Teaching Tips and Strategies The focus of this chapter is organizational information systems. It is suggested that you start this chapter by discussing with students why these can become quite complicated from both technical and managerial perspectives. Significant performance and uptime requirements impose technical challenges, while coordination and usability for a large diverse group of users pose managerial challenges. These are highlighted in the UPS and Elavon cases.

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.

With the advancement of technology, companies now have more tools then ever before to successfully deploy information systems that can integrate their operations and reduce processing time. How do companies manage their processes better?

▪ By integrating their systems so that all of the departments can talk to each other (including outside vendors).

▪ By being able to track business process relevant data from across the organization 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.

2 Transaction processing involves the capture, storage and monitoring of data generated from all business transactions. These data are input to the organization’s database.

TPSs must handle high volumes, avoid errors, and provide a highly secure and stable environment.

2. List the key objectives of a TPS. Objectives of a TPS are: o Handle large volumes of data o Avoid errors o Handle large variations in volume (peak times) o Avoid downtime o Never lose results o Maintain privacy and security 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?

Accounting and finance involves managing how money flows into, within, and out of organizations. This mission is very broad because money is involved in all functions of an organization. Planning activities involves analyzing operational data to help forecast and project business activities and budgeting to support these activities. These then define the amount of money that is needed to finance the firm’s operations and how that money can be raised from the financial markets and at what cost. All this involves many transactions and data points. To achieve a level of automation in these activities, information systems are necessary.

3. Explain how POM personnel use information systems to perform their jobs more effectively and efficiently.

The production and operations management (POM) function in an organization is responsible for the processes that transform inputs into useful outputs and for the operation of the business. Because of the breadth and variety of POM functions, we present only four here: in-house logistics and materials management, planning production and operation, computer-integrated manufacturing (CIM), and product life cycle management (PLM). The POM function is also responsible for

3 managing the organization’s supply chain. Because supply chain management is vital to the success of modern organizations, Chapter 10 is devoted to this topic.

4. What are the most important HRIS applications?

These modules support personnel administration (including workforce planning, employee recruitment, assignment tracking, personnel planning and development, and performance management and reviews), time accounting, payroll, compensation, benefits accounting, and regulatory requirements.

5. How does an FAIS support management by exception? How does it support ondemand reports?

FAIS has the ability to establish criteria ranges and produce reports with just the data that meets that criteria and aids management by giving them only the data that is necessary for some action. Therefore, all of the other data that is gathered which is within the norms establish 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 the flexible interactive reporting capabilities allowing managers to query by timeframes, departments, product lines, or other criteria which may be appropriate.

Section 8.3 - Before You Go On… 1. Define ERP and describe its functionalities.

Enterprise resource planning (ERP) was created to control all major business processes with single software architecture in real time. ERP integrates all department and functional information flows across a company onto a single computer system that can serve all of the enterprise’s needs.

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. Figure 8.3 illustrates the organization and functions of an ERP II system 3. Differentiate between core ERP modules and extended ERP modules.

4 ERP II systems include a variety of modules, which are divided into core ERP modules (financial management, operations management, and human resource management) and extended ERP modules (customer relationship management, supply chain management, business intelligence, and e-business). Table 8.2 describes each of these modules.

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 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.

Elavon processes millions of transactions every day on behalf of its merchant customers. These transactions range from checks and debit and credit card payments to prepaid gift cards. Elavon also provides payment terminals (for example, point-of-sale terminals and pay-at-the-pump). Elavon’s TPSs are at the heart of the company’s daily operations and are critical to its success. TPSs have helped the company control costs, simplify regulatory compliance and audits, rapidly and accurately process 1 billion customer payments per year, and maintain consistently high levels of customer service.

2. How do Elevon’s TPSs help the firm adhere to PCI standards?

TPS also allows Elavon to separate its business activities and demonstrate separation of duties. This audit trail is critical for demonstrating a separation of duties, which is required by the PCI standards. That is, separate individuals must perform key tasks. For example, companies must not combine roles such as depositing cash and reconciling bank statements or approving time cards and having custody of pay checks.

8.2 – The World’s Cheapest Car 1. Describe how computer-integrated manufacturing technology enabled Tata to produce the world’s cheapest car.

5 Tata deployed CIM technology, specifically the Digital Enterprise Lean Manufacturing Interactive Application (DELMIA), produced by Dassault Systems. DELMIA automates the product design and production engineering planning processes, thereby enabling Tata to plan manufacturing processes and to design plant layouts. The CIM technology has enabled Tata to reduce the cost of development. It was able to simulate and model parts and changes using a computer rather than produce expensive prototypes.

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 the perspective of a prospective entrepreneur. Would you consider setting up a Nano dealership in the U.S.? Why or why not.

The advantage to the company is the better production planning and meeting local market demand around the world. A disadvantage may be quality control for so many assembly plants and wide variation of local practices. If I want to join the auto industry then this may be a way to enter. Of course the demand for the Nano was asserted first and if the local market is small then I will not do this.

8 3 – The World Bank Undergoes a Transformation.

1.

Why did the World Bank deploy an ERP system before the other information systems?

The World Bank needed to transform itself from a hierarchical source of lowinterest loans to a decentralized organization that uses knowledge-sharing technologies to fight poverty and disease in developing nations. Allowing localized operations to function independently, yet integrate with the centralized operations was at the core of the bank’s strategy. The bank wanted to empower its clients – many of them technologically disenfranchised – with the tools and knowledge-sharing capabilities they needed to improve their lives and enter the mainstream world economy. To accomplish these goals, the bank had to completely overhaul its IT infrastructure and its global communications network and introduce an ERP system.

2. Was the World Bank’s transformation primarily a result of strategic vision or the effective implementation of information technology? Support your answer.

Both. The ERP systems allowed the bank to implement its strategic vision.

Without streamlining its disparate systems, there was no way the bank could have become decentralized and move away from its centralized hierarchical structure.

Of course, the bank needed to come up with a solid strategy and vision for its business before it embarked on its transformation and IT changes.

6 3. Why did the World Bank have to implement so many IT initiatives before it could deploy its knowledge management system? Support your answer?

Absolutely. The bank created the Global Development Learning Network (GDLN), which makes advanced information and communications technologies, such as interactive videoconferencing, available to individual bank employees, teams, clients, and affiliated organizations working in development around the world. These individuals use GDLN to communicate, share knowledge, and learn from others’ experiences in a timely and cost-effective manner.

Discussion Questions 1. Why is it logical to organize IT applications by functional areas?

Data is collected and flows through an organization based on functions of various departments. IT systems that mirror those functions in departments support a smooth operation.

2. Describe the role of a TPS in a service organization.

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.

3. Describe the relationship between TPS and FAIS. FAIS provides information primarily to lower- and middle-level managers in the various functional areas. Managers use this information to help plan, organize, and control operations. The information is provided in a variety of reports. Of course the reports need to be based on data, and that is the role of the TPS to generate the data from the business operations.

4. Discuss how IT facilitates the budgeting process.

The budget allows management to distribute resources in the way that best supports the organization’s mission and goals.

Budgeting software supports budget preparation and control and facilitates communication, review and approval among participants in the budget process. These packages can reduce the time involved in the budget process. Further, they can automatically monitor exceptions for patterns and trends as well.

5. How can the Internet support investment decisions?

The internet is a massive repository of company and financial information. There are several web sites that provide financial information and these can be used by an investor to make investment decisions.

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6. Describe the benefits of integrated accounting software packages.

Integrated accounting packages allow the automation of several business processes – expense management, investment management, control and auditing, managing multiple currencies, and virtual close. By integrating accounting with financial management, many vendors have allowed this automation to be supported.

7. Discuss the role that IT plays in support of auditing.

One major reason that organizations go out of business is their inability to forecast and/or secure a sufficient cash flow. Underestimating expenses, overspending, engaging in fraud, and mismanaging financial statements can lead to disaster.

Consequently, it is essential that organizations effectively control their finances and financial statements. We discuss several forms of financial control next. Auditing has two basic purposes: (1) to monitor how the organization’s monies are being spent, and (2) to assess the organization’s financial health. Internal auditing is performed by the organization’s accounting/finance personnel. These employees also prepare for periodic external audits by outside CPA firms.

8. Investigate the role of the Web in human resources management.

Many HRIS applications are delivered via an HR portal. Key HR functions are: recruitment, HR maintenance and development, and HR planning and management.

Recruitment involves finding potential employees, evaluating them, and deciding which ones to hire. Companies are trying to find appropriate candidates on the Web, usually with the help of specialized search engines. Companies also advertise hundreds of thousands of jobs on the Web. Online recruiting can reach more candidates, which may bring in better applicants. In addition, the costs of online recruitment are usually lower than traditional recruiting methods such as advertising in newspapers or in trade journals. After employees are recruited, they become part of the corporate human resources pool, which means they must be evaluated, maintained, and developed. IT provides support for these activities. IT also plays an important role in training and retraining. Some of the most innovative developments are taking place in the areas of intelligent, computer-aided instruction and the application of multimedia support for instructional activities. For example, much corporate training is delivered over the company’s intranet or via the Web. IT can also provide support for payroll and employees’ records, benefits administration as well. This is known as ERM – Employee resource management.

9. What is the relationship between information silos and enterprise resource planning?

ERP allows for integration of business operations and can break silos by sharing data from different parts of the business and integrating business processes.

8 PROBLEM-SOLVING ACTIVITIES 1.

Finding a job on the Internet is challenging as there are almost too many places to look. Visit the following sites: www.careerbuilder.com, www.craigslist.org, www.linkedin.com, www.careermag.com, http://hotjobs.yahoo.com, www.jobcentral.com, and www.monster.com. What does each of these sites provide you as a job seeker?

Students prepare a list of capabilities for each of the sites. Building profiles, searching for jobs, responding to job ads, evaluate the job market, etc.

Enter www.sas.com and access revenue optimization there. Explain how the software helps in optimizing prices.

2.

SAS is a statistical data analysis package and allows for advance mining of data to help in business planning.

3.

Enter www.eleapsoftware.com and review the product that helps with online training (training systems). What are the most attractive features of this product?

While different features may appeal to different students, tracking progress and completion and multi format delivery of the content are very attractive capabilities.

4.

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.

Student answers will vary based on the demo they view.

WEB ACIVITIES Students will follow directions on these activities and submit a thoughtful report on each 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.

2.

Surf the Net and find free accounting software (try www.shareware.com, www.rkom.com, www.tucows.com, www.passtheshareware.com, and www.freeware-guide.com). Download the software and try it. Compare the ease of use and usefulness of each software package.

9 Encourage students to download software, but remind them of the security issues.

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.

4.

Find Simply Accounting Basic from Sage Software (www.simplyaccounting.com/products/basic). Why is this product recommended for small businesses?

5.

Enter www.halogensoftware.com and www.successfactors.com. Examine their software products and compare them.

6.

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.

TEAM ASSIGNMENTS Groups 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 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/SCM 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).

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CLOSING CASE : The No-Fly Zone The Business Problem In the weeks following the attacks of September 11, 2001, Americans looked to their government to respond quickly and forcefully. Accordingly, the White House and Congress sought ways to increase the amount of intelligence data accessible to all agents and key agencies in the form of meaningful reports.

The IT Solution 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. The NCTC data contain information on individuals suspected of having ties to international terrorism. Such individuals appear on a report called the watch list. In turn, the FBI provides the watch list to the TSC concerning individuals with ties to domestic terrorism. As of mid-2009, the watch list contained more than 1 million names, and it was growing at the rate of 20,000 names per month.

The Results Information from the watch list is distributed to many government agencies, among them the TSA. Airlines use data supplied by the TSA system in their NoFly and Selectee lists for prescreening passengers. NoFly passengers are not allowed on the plane. Selectee passengers can fly, but they are subject to extra searches and possible additional questioning. But this can cause false alarms as well for many passengers, as misidentification prevails.

Questions: 1. Is the watch list program a success or a failure? Support your answer.

Something needed to be done after the attacks. This is a solution and can prevent attacks. However as with any system, it can have problems and they need to be worked out.

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.

Partially, as names are not the way to uniquely identify a person. People are considered “misidentified” if they are matched in the TSC database and then, upon further examination, are found not to match. They are usually misidentified

11 because they have the same name as someone in the database. Misidentifications typically lead to delays, intensive questioning and searches, and missed flights.

More than 30,000 airline passengers who have been misidentified have asked the TSA to have their names cleared from the watch list. The problem has become so severe that the DHS developed the Traveler Redress Inquiry Program, or TRIP to clear people.

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CHAPTER 9: Information Systems, Management, and Decision Making Chapter Overview 9.1 Defining Customer Relationship Management 9.2 Operational Customer Relationship Management 9.3 Analytical Customer Relationship Management 9.4 Other types of Customer Relationship Management Applications

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?

2 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 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.

2. What are some of the functions of analytical CRM? 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 behavior and the value of customer relationships over time, as well as forecasts of customer acquisition, retention, and loss. Some functions might include: • • • •

Designing and executing targeted marketing campaigns; Increasing customer acquisition, cross selling, and up-selling; Providing input into decisions relating to products and services; Providing financial forecasting and customer profitability analysis.

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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? If you were a passenger on Flight 1549, would you consider suing the airline? Why or why not?

It is difficult to predict if customers will sue or not. Some passengers may have been severely affected and need to file a suit if US Airways does not respond to their claims. I feel the same way. If US Airways responds to me and my claims in a reasonable way, then I do not 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

4 person. Customer service involves direct interactions between customers and 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 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

5 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?

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.

2. What is the relationship between data consolidation and CRM? 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.

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. 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.

The two major components of operational CRM are customer-facing applications and customer-touching applications. Customer-facing CRM applications are the areas

6 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. 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?

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.

Many CRM applications do not 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.

I will use on demand CRM as its demands on infrastructure is smaller. An on demand, a 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.

WEB ACTIVITIES

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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’ Web sites.

Student answers will vary. Have students make a list of the different CIC offered by these two sites as well.

2. Enter www.anntaylor.com, www.hermes.com, and www.tiffany.com. Compare and contrast the customer service activities offered by these companies on their Web sites. Do you see marked similarities? Differences?

Student answers will vary. Focus on the different CIC offered – email, live chat, 800 number, etc, on these sites. Point out how each site is engaging the customer long term – e.g. newsletters.

3. Access your university’s Web site. Investigate how your university provides for customer relationship management. Hint: First decide who your university’s customers are.

Student answers will vary. Generally the customers are current, prospective and past students.

4. 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.

5. 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.

6. 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 on-site (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.

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7. Enter the Teradata Student Network (http://www.teradata.com/td/page/144826/index.html) and find the First American Corporation case (by Watson, Wixom, and Goodhue), which focuses on CRM implementation. Answer the questions at the end of the case 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 (www.splendidcrm.com), Compiere (www.compiere.com), Hipergate (www.hipergate.com), and openCRX (www.opencrx.com).

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), Commence (www.commence.com), Saffront (www.saffront.com), and eSalesTrack (www.esalestrack.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 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.

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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.

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.”

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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.

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.

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CHAPTER 10: Planning for, Acquiring, and Maintaining Information Systems Chapter Overview 10.1

Supply Chains

10.2

Supply Chain Management Systems

10.3

Information Technology Support for Supply Chain Management

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

2 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. What is a supply chain?

Supply Chain refers to the flow of materials, information, payments and services; from raw material suppliers, through factories and warehouses to the end customers. It includes the organizations and processes involved. Supply chain

3 management is the planning, organizing, and coordinating of all the supply chain’s activities.

2. 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 supply chains, where distribution or dispersal takes place, frequently be external distributors.

3. 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. Differentiate between the push model and the pull model.

In the push model (also known as make-to-stock), the production process begins with a forecast, which is simply an educated guess as to customer demand. The forecast must predict which products customers will want as well as the quantity of each product. The company then produces the amount of products in the forecast, typically by using mass production, and sells, or “pushes,” those products to consumers. Unfortunately, these forecasts are often incorrect. To avoid these inaccuracies, companies can use the pull model. In the pull model – also known as make-to-order – the production process begins with a customer order. Therefore, companies make only what customers want, a process closely aligned with mass customization. A prominent example of a company that uses the pull model is Dell Computer. Dell’s production process begins with a customer order.

2. 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

4 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.

3. 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.

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.

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2.

Define an extranet and explain its infrastructure.

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).

3.

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).

4.

Differentiate between procurement portals and distribution portals.

There are two basic types of corporate portals: procurement (sourcing) portals for a company’s suppliers (upstream in the supply chain), and distribution portals for a company’s customers (downstream in the supply chain). Procurement portals automate the business processes involved in purchasing or procuring products between a single buyer and multiple suppliers. For example, Boeing has deployed a procurement portal called the Boeing Supplier Portal through which it conducts business with its suppliers. Distribution portals automate the business processes involved in selling or distributing products from a single supplier to multiple buyers.

“IT’s About Business” Questions 10.1 – Supply Chain Management Drives the Success of Inditex

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1. Describe the “fast fashion” process at Inditex. How does supply chain management enable this process?

The mission of Inditex is to produce creative and quality designs coupled with a rapid response to market demands. The company closely monitors every link in its supply chain. As a result, Inditex can move designs from sketch pad to store rack in as little as two weeks. Inditex store managers monitor daily sales. With up to 70 percent of their salaries coming from commission, managers have great incentive to respond to trends quickly and correctly. Thus, they track everything from current sales trends to merchandise that customers want but cannot find in stores. They then send orders to Inditex’s 300 designers, to whom fashion what is needed almost instantly.

2. Why does Inditex not have to drastically cut prices to sell out-of-season stock?

Inditex uses JIT (just in time) systems to cut down on mass production and decrease shipment delays. Inditex supplies all of its markets from warehouses in Spain, and the company is able to place new merchandise in European stores within 24 hours. Further, by flying goods via commercial airliners, Inditex can place new products in stores in the Americas and Asia in 48 hours or less. The company produces smaller batches of clothing, adding an air of exclusivity that encourages customers to shop often. As a result, the company does not have to cut prices by 50 percent, as its rivals often must, in order to move mass quantities of out-of-season stock.

3. Do you anticipate that other apparel firms will adopt similar SCM systems to Inditex? Why or why not?

Every apparel firm has a different strategy to market. Some use cheaper labor and bulk produce at a lower cost and ship using sea freight at much lower costs.

These are decisions that each firm makes for its business model. Firms can use the Inditex model, but information flow is critical to be successful.

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.

7 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. 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 – Mount Vernon Mills Adopts EDI. 1. Should a company ensure connectivity with larger supply chain partners at the risk of losing connectivity with smaller supply chain partners? Is there a middle ground? Support your answer.

The EDI solution enabled Mount Vernon Mills to exchange data instantaneously and cost effectively with its supply chain partners who were EDI-enabled. These were mostly the larger suppliers. They also accepted non-traditional EDI documents such as spreadsheets, flat files, and even e-mails from smaller suppliers, who were not EDI enabled. This was a middle ground strategy of being flexible to be able to work with their suppliers, who had differing capabilities.

2. What benefits did Mount Vernon Mills realize from implementing EDI? Mount Vernon Mills was able to process orders much more efficiently. In addition, the system reduced the number of labor-intensive hours dedicated to reentering hard copy data from both customers and suppliers. This process allowed the company to eliminate overhead and duplication of resources.

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Discussion Questions 1. List and explain the important components of a supply chain.

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 the chapter opening case on Disney. Differentiate between supply chains for digital products versus supply chains for physical goods. Draw the supply chain for Disney. Label the upstream, internal, and downstream components.

Intermidiates

Movie Directors

Movies

Disney Studios

Movie Customers

3. Explain how a supply chain approach may be part of a company’s overall strategy.

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.

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.

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5. Would Rolls-Royce Motorcars (www.rolls-roycemotorcars.com) use a push model or a pull model in its supply chain? Support your answer.

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?

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 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.

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 one 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. General Electric Information Systems is the largest provider of EDI services.

Investigate what services GEIS and other EDI vendors provide. If you were to evaluate their services for your company, how would you plan to approach the evaluation? Prepare a report.

Student answers will vary.

WEB ACTIVITIES Students will follow directions on these activities and submit a thoughtful report on each.

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1.

Enter Teradata Student Network and find the podcasts that deal with supply chains (by Jill Dyche). Identify the benefits cited in the podcasts.

2.

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.

3.

Enter www.supply-chain.org, www.cio.com, www.findarticles.com, and www.google.com and search for recent information on supply chain management.

4.

Access the Boeing Supplier Portal information page at http://www.boeing.com/companyoffices/doingbiz/supplier_portal/Supplier_Po rtal.htm. Describe some of the many services offered there for Boeing’s suppliers.

5.

Surf the Web to find a procurement (sourcing) portal, a distribution portal, and an exchange. (Other than the examples in this chapter.) List the features they have in common and those features that are unique.

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.

2.

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, etc.). Then find out what issues they faced in implementation. Prepare a report.

11 Closing Case - Huge Problems at Britain’s National Health System

The Business Problem The National Health Service is controlled by the British government, has over 1 million workers and provides healthcare to 60 million citizens. In 2001 it was a mostly paper based system, but did have multiple vendors providing systems to many of the hospitals which were operating at differing levels of functionality.

The IT solution The effort was divided into 5 regional projects with an estimate of $12 million. Work was awarded to different vendors and little progress has been made. It has cost $24 million already, with no final product in sight.

The Results There have been huge cost overruns, with little progress, dissatisfaction on the part of the medical community and little support from the staff. The healthcare system itself is in dire financial straights, but the projections is that this effort alone will cost another $15 billion Questions 1. You are the director of Britain’s National Health Service. What would you do to get the project back on track?

It is possible that a “best practices” approach could be taken which would allow them to award the project to one vendor, develop it in a “pilot” location and then roll out to the whole health system. A project team comprised of representatives from each region and including representatives of each functional area could collaborate on a design flexible enough to work for the whole system.

2. Is the NPIT project simply too big for anyone to attempt? Why or why not?

While it is a very large project, if there were a common design, it could be replicated in 5 areas. If a pilot project were developed in one and then rolled out in the other 4, it could be manageable.

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CHAPTER 11: Managerial Support Systems Chapter Overview 11.1

Managers and Decision Making

11.2

Business Intelligence

11.3

Data Visualization Technologies

11.4

Intelligent Systems

Teaching Tips and Strategies The goal of this chapter is to convey the importance of information systems in aiding individuals in making 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 then ever before.

Information overload is a problem that many managers all over the world face in various types of companies. Managers may receive a hundred emails in their inbox but have difficulty knowing which emails 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 useable information is a challenge.

There is hope. Information technology has advanced to make the data more meaningful.

According to a Gartner report (www.gartner.com), most of the Fortune 1000 companies worldwide currently use data mining. This use is now widespread in all areas of business – marketing, finance, management, operations, etc. For example: The Blue Mountain resorts needed efficient financial reporting and built an IT solution using Cognos to streamline its performance management process. Even several consumer facing websites in ecommerce allow users to search and drill down based on multiple criteria. Users performing a search can narrow the search down to the meet their needs – an example of data driven decision making. By discussing these examples, students really get a feel for how important this chapter is and how they can leverage all the data out there to conduct whatever their business more productively.

Emphasize that managers now RELY on IT systems such as DSS to make more informed decisions. But the right data needs to be collected and analyzed. An example is Amazon.com and the amount of information that they are able to collect on a single individual. What data does Amazon.com collect from users? At minimum, the following information:

2

• • • • •

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

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 email to those customers soliciting new business or give them a discount if they act within the next couple of days. All this can be done with the click of a couple of keystrokes. Then the computer would automatically be programmed to send out emails to those customers. The manager could even see how well the campaign worked by analyzing the number of coupons sent out and the number of coupons validated. If managers wanted to target their advertising even further, they could send coupons good only for the type of books that individuals buy which might compel the consumer to purchase.

Students start to understand the importance of data and information and analysis after the lecture. Many of them will be using similar support systems as Amazon to determine how to run the business more effectively.

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 knows it. Ask, “How does Word know when you have spelled a word wrong?” Is it magic? Hardly, the programmers have put in a database of commonly misspelled words with the different incorrect variations people tend to use. Once Word sees that the word is spelled wrong it will put a red line under the word and offer alternatives. The only reason that Word knows the different spellings is that someone has programmed them in there.

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 a lot? Word will keep mistaking the spelling as an error. One way around this is to click on 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.

Students tend to understand the importance of AI and different expert systems. They realize that these systems are not only used in science fiction pictures such as Star Trek.

A good example of an AI technology that is not catching on due to poor quality and nonease of use is voice recognition. There are several types of voice recognition software on

3 the market. They have some serious problems that need to be corrected before they can go mainstream. It was suggested that in the new millennium keyboards would be useless (along with the mouse). We were going to use computers by talking to them. No longer did notes have to be typed. A user would sit down in front of the computer and start talking away. This has not come close to fruition.

One of the reasons in the 90’s that voice recognition software did not take off was the processors in computers were not fast enough to perform natural language processing, and memory was prohibitively expensive. You need both of these to make voice recognition work well. As the 2000’s approached, prices of memory and CPUs became very reasonable.

Manufacturers of voice recognition software started adding features at a rapid clip.

Consumers flocked to buy the latest and greatest voice recognition software. Then, about a week after purchasing the software the consumer would usually give up in disgust.

What went wrong?

In the case of voice recognition technology we now have the capability (resources) to make the software work. The problem is our voices. All individuals speak differently, at different rates, and in different dialects. It is impossible for programmers to program the thousands of different ways we would speak. Users of voice recognition software are forced to train the software by speaking into a microphone and repeating words over and over. Although this is a nice improvement, many of the training sessions confused the computer as well as the user. Even when the computer had been trained the software continued to misinterpret different words. Users ended up disgusted and would finally give up.

Hopefully, using the above example will help students understand that computers, although an asset, are not always easy things to program or use. It may be decades before we are using voice recognition software that is capable of overcoming these problems.

To put this chapter into fundamental perspective, here is a classic example of support for 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: • • •

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

4 safety, price and performance as three important criteria for buying a car. A features matrix with weighting establishing the importance of each of these factors, such as safety (25 points), price (25 points), and performance (50 points), also need to be set. You could get 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 should provide evidence supporting a reasonable choice on your part.

This tiny example illustrates the systemic process of decision-making long promoted by management scientists. Our challenge is to educate students about current high-level approaches to solving managerial problems that are not structured. The fields of DSS, EIS, AI and its spin-off discipline Intelligent Systems, created this new realm of possibility.

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 decision making, computerized support can be of enormous help. For example, computerized modeling can examine numerous alternatives very quickly, can provide a systematic risk analysis, can be integrated with communications systems and databases, and can be used to support group work.

3. Describe the decision matrix.

The framework includes three primary phases of decision making and three broad categories of decisions, all combined in a nine-cell decision support matrix. Lowlevel managers usually perform the structured and operational control-oriented tasks (cell 1, 2, and 4). Tasks in cells 6, 8, 9 are mainly the responsibility of top

5 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 behaviors 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.”

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?

A digital dashboard provides rapid access to timely information and direct access to management reports. It is user friendly and is supported by graphics. It enables managers to examine exception reports and drill-down reports.

4. What is a management cockpit?

A management cockpit is a strategic management room containing an elaborate set of digital dashboards that enables top-level decision makers to pilot their business better.

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.

6 3. What is virtual reality, and how does it contribute to data visualization?

VR is interactive, computer-generated, three-dimensional graphics delivered to the user through a head-mounted display. More than one person can share and interact in the same artificial environment.

Section 11.4 - Before You Go On… 1. Describe what is meant by intelligent behavior.

Intelligent behavior is characterized by learning or understanding from experience, making sense of ambiguous or contradictory messages, and responding quickly and successful to a new situation.

2. Compare artificial and natural intelligence.

Advantages of artificial intelligence over natural intelligence include: • Artificial intelligence is more permanent then natural intelligence. This is because workers can walk off the job, and when they do they take their knowledge with them.

• 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, mistake-free analysis than a human.

• AI can be duplicated easily. Unlike with humans, they would have to explain their knowledge and hope that the listener could retain it to use. With an AI system a user transfers information that he AI has stored or developed to another system.

Advantages of natural intelligence over artificial intelligence include: • Natural intelligence allows for creativity. AI does only what it is programmed to do.

• Natural intelligence helps individuals to recognize relationships between objects better than AI can do.

• Natural intelligence allows for input from a broader focus unlike a very narrow focus for AI.

3. Describe the transfer of expertise from human expert(s) to a computer and then to a user.

•

The expert’s knowledge is acquired and loaded into the knowledge base, containing knowledge necessary for understanding, formulating, and solving problems. It includes two basic elements: (1) facts, such as the problem in its various states, and (2) rules that direct the use of knowledge to solve specific problems in a particular domain.

7 •

•

•

•

The user of the ES interacts with the system using the user interface, allowing for user-computer dialog, which can be best carried out in a natural language, usually presented as questions and answers, and sometimes supplemented by graphics.

The blackboard is an area of working memory set aside for the description of a current problem, as specified by the input data. It is also used for recording intermediate results. It is a temporary database used by the inference engine to execute its tasks.

The question-and-answer dialogue triggers the inference engine to match the problem symptoms with the knowledge in the knowledge base and to generate advice. The “brain” of the ES is the inference engine, which is essentially a computer program that provides a methodology for reasoning and formulating conclusions.

The explanation subsystem can trace responsibility for conclusions to their source, which is crucial both in the transfer of expertise and in problem solving. This subsystem explains the ES’s behavior by interactively answering questions such as the following: Why were certain questions asked by the expert system? How was certain conclusion reached? Why was a certain alternative rejected? Or, what is the plan to reach the solution?

4. What are the benefits and limitations of expert systems?

• • • • • • • • • • •

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

The limitations relate to the fact that ESs are not infallible. Sometimes, they may not be able to arrive at any conclusion. Sometimes their recommendations are incorrect.

5. What are the advantages and disadvantages of natural language understanding?

Among the benefits of NLP are: • Ease of access - many more people can speak than type • Speed - Competent typist can speak more quickly than they can type • Manual freedom - Hands-free use is beneficial to many users (aircraft pilots, executives, product assembly workers)

8

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 6. 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.

7. 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 Insurance.com 1. Describe the ways that the corporate performance management software improves operations at Insurance.com.

Insurance.com chose the IBM Cognos Now! (www.cognos.com) continuous monitoring solution to help manage their widely spread business. The first application for Insurance.com was the performance of its information technology platform – the engine for its comparison car insurance quotes. The company integrated alerts from multiple sources, such as third-party vendors, insurance companies, and internal systems, into the system. It then implemented a set of rules to notify personnel when performance fell below certain levels.

Insurance.com is now able to monitor all the critical applications in its production environment so that all concerned parties can get an accurate picture of how the system is performing.

9

2. As an exclusively Internet-based company, does Insurance.com need a corporate performance management system more than a traditional automobile insurance company would? Why or why not? Support your answer.

Being exclusively Internet based, they do not have the “eyes and ears” of real live agents in the field. Hence they need systems to ensure that they are monitoring field conditions very closely. Because their entire operation depended on its Internet delivery model, Insurance.com needed an application to ensure that its information systems were running at optimal performance. In addition, the company had to be able to identify potential performance issues before they had a negative impact on either the participating insurance companies or customers.

11.2 – 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 findings of the survey impact 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?

Any airline CEO should try and meet the needs of their customers. They should use past data to plan their operations in the most efficient manner possible. It is possible to collect data on customer behavior – such as meal purchase, baggage check ins, online check in, etc. and use that to plan staffing at the optimal level for their flights. This will help them keep costs down and offer the best deal to their customers.

2. In addition to the ones mentioned here, what other extra services could the airlines provide to make your flying experience more enjoyable?

The needs of different passengers are different. While travel may often be stressful, it is best to accommodate the needs of their passengers and make the experience have the least amount of hassle.

11.3 – Enterprise GIS Makes Sears More Efficient 1. Discuss the benefits of geographical information systems to Sears. Discuss additional GIS applications that could benefit Sears.

Sears uses a GIS application, known as CARS and CAMS to manage the planned capacity of available service technicians assigned to geographic work areas.

CARS provides daily nationwide street-level geocoding and optimized routing for Sears mobile service technicians. CARS also provides in-vehicle navigation capabilities to assist technicians in finding service locations and minimizing travel

10 time. Other GIS applications they can utilize in the future include marketing and promotions.

2. Are there drawbacks to the CARS and CAMS systems from the perspective of Sears? From the perspective of the company’s employees? Support your answer.

Sears has improved operations of its technical support force to a large extent. For example, CARS enables dispatchers to handle 3 to 5 times the number of technicians they could previously. As a result, Sears was able to reduce the number of dispatchers by 75 percent. It has also increased the size of the district territories, thereby reducing the number of other support associates needed.

Employees may be faced with layoffs and closer monitoring as a result.

11.4– Reality Mining 1. Is reality mining a threat to privacy? Why or why not? Support your answer?

Reality mining involves using real time data to determine if a course of action needs to be taken. An example could be to allow health officials to track and contain outbreaks of infectious diseases. Suppose health officials in a city suspect that passengers arriving at an airport have been exposed to Avian flu. The officials can enlist cellular operators and use reality mining to monitor clusters of individuals thought to be at risk. Phone records could reveal that an unusual number of passengers on the flight are staying home from work or are in the hospital. While this borders on “Big Brother” and invasive surveillance, it can have benefits in certain situations.

2. Is reality mining a potential benefit to society? Why or why not? Support your answer?

It could have benefits to society as it can prevent very serious situations.

However, it is at the cost of privacy and can lead to problems later on if these systems fall into the wrong hands.

3. Discuss the balance between the disadvantages and advantages to society of any new technology.

Technology can have a serious impact on society and closer attention needs to be paid to these sociological impacts in the field of information systems.

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).

11

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 model according to 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 problem 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 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. American Can Company announced that it was interested in acquiring a 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 the company use -BI systems, expert systems and digital dashboards to assist it in this endeavor?

Dashboards, expert systems and BI 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. BI systems can help analyze the data and build models to understand the relationships among the variables so to be able to build a more comprehensive picture of the problem and the solution chosen.

Dashboards could be used to provide “drill down” capabilities to locate key information about HMOs under consideration. Drill down is important because it

12 eliminates the need for intermediaries for consultation and analysis of the data. The Dashboard can also connect to online information services to seek additional intelligence from external sources.

3. A major difference between a conventional BI 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.

A conventional BI enables the decision maker to study a model and understand more fully the relationship between variables in the model. So, it helps reveal what the data shows and how things fit together. The expert system has the ability to provide a course of action and explain why it reached that 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.

These applications consolidate, analyze and provide access to vast amounts of data to help users make better business decisions.

5. Will BI systems replace business analysts? (Hint: See W. McKnight, “Business Intelligence: Will business Intelligence Replace the Business Analyst? DMReview, February 2005).

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.

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 locating and dispatching ambulances, assisting construction personnel, showing crime trends and helping to plan trucking routes are examples.

PROBLEM-SOLVING ACTIVITIES Students will research and submit reports per instructions.

1. The city of London (U.K.) has an entrance fee for automobiles and trucks in the central city district. About 1,000 digital cameras photograph the license 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 a match is not found, the car owner receives a citation by mail. Examine the issues pertaining to how this process is accomplished, the mistakes that can be made, and the

13 consequences of those mistakes. Also examine how well the system is working by checking press reports. Finally, relate the process to business intelligence.

The system tracks cars that enter the city can be used for many planning functions parking, events, public transportation, etc.

2. Enter www.cognos.com and visit the demos on the right side of the page.

Prepare a report on the various features shown in each demo.

Encourage students to understand how these BI tools such as Cognos are integrated into the business processes of these companies from the demos.

3. Enter www.fairisaac.com and find products for fraud detection and risk analysis.

Prepare a report.

Students will prepare a list and report on these products.

4. Enter www.teradatastudentnetwork.com (TSN) (you will need a password), and find the paper titled “Data Warehousing Supports Corporate Strategy at First American Corporation” (by Watson, Wixom, and Goodhue). Read the paper and answer the following questions: a. What were the drivers for the data warehouse/business intelligence project in the company? b. What strategic advantages were realized? c. What were the critical success factors for the project?

Advise students that they will need to create a login to access the paper.

5. Enter www.teradatastudentnetwork.com, and find the Web seminar titled: “Enterprise Business Intelligence: Strategies and Technologies for Deploying BI on Large Scale” (by Eckerson and Howson). View the Web seminar, and answer the following questions: a. What are the benefits of deploying BI to many employees? b. Who are the potential users of BI? What does each type of user attempt to achieve? c. What BI implementation lessons did you learn from the seminar?

Advise students that they will need to create a login to access the paper.

6. Enter www.gapminder.org. Access www.ted.com/index.php/talks/view/id/92 to find the video of Hans Rosling’s presentation. Comment on his data visualization techniques.

14 Graphical display of data is easier to understand and use. The representation of an extra dimension is very interesting in this video. The motion can be distracting to some.

7. Enter www.visualmining.com . Explore the relationship between visualization and business intelligence. See how business intelligence is related to dashboards.

Visualization refers to data graphs and displaying data in a visual form while BI refers to understanding the relationships and rules from the data.

8. 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.

Students can find BI tools that are suited to their major of study or their career interests.

9. Visit the sites of some GIS vendors (such as www.mapinfo.com, www.esri.com, or 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?

Students can find tools that relate to their area of interest.

10. Analyze Microsoft Virtual Earth (www.microsoft.com/virtualearth) as a business intelligence tool. (Hint: Access http://www.microsoft.com/Industry/government/solutions/virtual_earth/demo/ps_gbi. html). What are the business intelligence features of this product?

Visualization of data and mapping to specific geographic areas on the screen.

TEAM ASSIGNMENTS Make team assignments and have student groups complete them per instructions.

1.

Using data mining, it is possible not only to capture information that has been buried in distant courthouses but also to manipulate and index it. This process can benefit law enforcement but invade privacy. In 1996, Lexis-Nexis, the online information service, was accused of permitting access to sensitive information on individuals. The company argued that it was unfairly targeted because it provided only basic residential data for lawyers and law enforcement personnel.

Should Lexis-Nexis be prohibited from allowing access to such information?

Debate the issue.

2.

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

15 (directory) and Google. Each group will make a presentation of five applications and their benefits.

3.

Each group will access a leading business intelligence vendor’s Web site. (For example, MicroStrategy, Oracle, Hyperion, Microsoft, SAS, SPSS, Cognos, Applix, Business Objects). Each group will present a report on a vendor, noting each vendor’s BI capabilities.

CLOSING CASE – Operational Business Intelligence Means Better Pizza at Papa Gino’s The Business Problem Papa Gino’s (www.papaginos.com), the Dedham, Massachusetts, restaurant, generates massive amounts of data in its daily operations. The data include everything from statistics on how long it takes customers to receive pizza deliveries to how well restaurants stack up against local competition. Until May 2007, business managers gathered data, via e-mail each day from a variety of sources. The process was difficult and time-consuming, as district managers, who are typically responsible for 8 to 12 restaurants, accumulated data and passed it on to regional vice presidents for further analysis. They wanted to make this process of data collection and analysis better.

The IT Solution To accomplish these goals, Papa Gino’s deployed operational business intelligence (BI) software. Operational business intelligence is the process of using business intelligence to drive and optimize business operations and decision making on a daily basis, or sometimes several times per day. The operational BI software at Papa Gino’s placed reporting and analytics applications in the hands of business users who could analyze information to identify strategies for working more efficiently and improving results. In all, some 100 managers at Papa Gino’s use the BI application.

The Results Papa Gino’s managers now receive data much more quickly. It is generally available to all key decision makers in the organization by 6:30 every morning. With the software, Papa Gino’s managers use dashboards to quickly analyze financial data, such as revenue, at individual restaurants by week, month, or year. They then compare the revenue data with similar data from the same restaurant in previous periods, with revenue goals set by management, and with revenue at other restaurants in the same region or state. The system also reports and analyzes operational data – such as how many customers visit a restaurant during various times, what types of menu items customers are ordering, and how many hours employees are logging – so managers can see how each restaurant is performing.

16 Questions: 1. Describe the various benefits that Papa Gino’s is seeing from its operational business intelligence system.

Using the BI system, Papa Gino’s is able to run several processes more efficiently.

They collect data from their stores much faster and use the data in their daily decision making. They use manage-by-exception strategy to look at data that falls outside of the norm, which makes their data analysis much easier. They also make better decisions on their food delivery decisions that account for one third of their costs.

They also look at phone order wait times and see if they need to be adjusted when calls are being abandoned due to longer waits. The BI has made a great impact on Papa Gino’s business.

2. Discuss additional analyses that Papa Gino’s managers and analysts could run that would benefit the company and its restaurants and provide competitive advantage.

One of the advantages of the BI system is that operations and finance managers now spend more time analyzing data trends and less time collecting data. Another benefit is that managers can use the forecasting capabilities of the BI application to get a better idea of how much product they should order and how many workers they should schedule, which improves the overall efficiency of operations. Likewise, they can use the data to understand which products are more popular and what the profiles of their customers are. This will help in business planning and operations.

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CHAPTER 12: Acquiring Information Systems and Applications Chapter Overview 12.1

Information Technology Project Management

12.2

Planning for and Justifying IT Applications

12.3

Strategies for Acquiring IT Applications

12.4

The Traditional System Development Life Cycle

12.5

Alternative Methods and Tools for Systems Development

12.6

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. Remind students that people are an extremely important component of an information system. 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.

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. Working-adult students can relate to SDLC activities if they have participated as an end-user 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 system components will come together behind the scenes without their help. Make sure students appreciate the ways to effectively participate in these SDLC processes so as to represent their needs into the development cycle.

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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 and should not develop, and the tools they should use as well.

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 blue print 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?

The triple constraints of a project are: time, cost, and scope. Time refers to the window of opportunity in which a project must be completed to provide a benefit to the organization. Cost is the actual amount of resources, including cash and labor, that an organization can commit to completing a project. Finally, scope refers to the processes that ensure that the project includes all the work required – and only the work required – to complete the project successfully; a formula for calculating the cost of acquiring, operating and controlling an IT system.

2. Describe the phases of a project.

Project management divides every project into five distinct phases: initiation, planning, execution, monitoring and control, and completion.

Initiation refers to the phase when the problem is defined in terms of what the project is intended to solve and the goals that it is to achieve. In project planning, every project objective and every activity associated with that objective must be identified and sequenced. In the execution phase, the work defined in the project

3 management plan is performed to accomplish the project’s requirements.

Execution coordinates people and resources, and it integrates and performs project activities in accordance with the plan. The purpose of monitoring and control is to determine whether the progress is progressing as planned. The project is completed when it is formally accepted by the organization. All activities are finalized, and all contracts are fulfilled and settled. In addition, all files are archived and all lessons learned are documented.

3. What is a runaway project?

Runaway projects refer to projects that are out of control. They 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? One problem is the allocation of fixed costs among different IT projects. Another difficulty is that system costs continue after the system is 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, but underestimation will result in valuable projects being rejected.

3. Describe the NPV, ROI, breakeven 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. Breakeven analysis provides an estimated date when the money spent on the systems development process is recouped from the benefits earned in the business it is used in.

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

4 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 12.4 - 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.

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.

5 Joint application development (JAD) involves all of the end users meeting with the IS project team to develop requirements and reach a 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 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 small databases such as Access and spreadsheet applications.

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.

Object Oriented Development is based on a different view of computer systems.

OO are based on real world activity which must be modeled to perform the given task.

Section 12.6 - Before You Go On… 1. List the major steps of 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 and how it would meet the company’s needs.

6 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. These divisions are based on a set of agreed-upon milestones, quality checks, and what-if situations – all of which need to be specified in an SLA. They describe how quality checks will be made and what is to be done in case disputes and quality standards are specified

“IT’s About Business” Questions 12.1 – Charter Communications Relies on IT Project Management Software 1. What were Charter’s business problems that led the company to deploy the Clarity project management software?

Charter had grown through acquisitions and mergers. As a result, they lack common process and tools for project management across the organization. The business unit had its own IS department and there was no standardization of project management methodologies – e.g. no cost justification process for projects, therefore anyone who had an idea, could generate a project, even if it was a duplicate of something already underway in another business unit, or even if it had no real value to the company.

2. What results did Charter see from using the Clarity software?

Charter adopted a project management system known as Clarity. Clarity replaced Charter’s previous system, which consisted only of spreadsheets and PowerPointdriven dashboards. Clarity enables Charter to evaluate projects under consideration and to manage the projects already in process. The Clarity system allowed more visibility into projects and allowed them to complete projects on time and within budget.

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?

DuPont opted to outsource its entire IT function to a single solution provider: Computer Science Corporation. This is a risky approach, unlike outsourcing to multiple vendors. Several potential risks may be difficulties in managing the relationship with that vendor, the vendor going out of business, the vendor not able to support DuPont’s needs, etc. In all these scenarios, DuPont will have a difficult time to select and switch to a different vendor.

2. What disadvantages do you see with this type of outsourcing agreement?

7 There are many disadvantages to this type of outsourcing agreement – putting all eggs in one basket. They include potential problems in managing a huge contract and relationship with that vendor, the vendor going out of business, the vendor not able to support DuPont’s needs, etc. In all these scenarios, DuPont will have a difficult time selecting and switching to a different vendor.

12.3 – Protecting Us from Harmful Products 1. Describe the benefits provided by ACE. More than 71,000 cargo containers enter U.S. seaports every day. To better track these containers, the U.S. Department of Homeland Security (DHS) developed a new online system, the Automated Commercial Environment (ACE), to track the contents of those containers. The ACE system contains at least a dozen key data elements required for national security and anti-terrorism programs, as well as vast amounts of data for customs about the contents of each shipment, its manufacturer, and the importer. .

2. What are the difficulties involved in implementing ACE? The major obstacle involves integrating ACE with existing CBP systems. To introduce ACE the U.S. government adopted a gradual, phased conversion approach. Thus, if the entire system was implemented at one time and did not function properly, the nation’s security would be seriously compromised. The biggest integration problem is between ACE and its mainframe-based predecessor, the Automated Control System (ACS), which is a 20-year-old system. As a result, ACE is being deployed in phases over several years.

3. Was the government correct in adopting a phased conversion, or should it have selected a different strategy?

Student answers will vary.

Discussion Questions 1. Discuss the advantages of a lease option over a buy option.

Leasing has the advantages of lower upfront costs and more flexibility to change and adapt the applications used over time as needs change.

2. Why is it important for all business managers to understand the issues of IT resource acquisition?

Because information systems are so critical to competitive advantage in so many companies, a system’s timely and careful development is a very high priority.

System development is a team effort that should involve the entire organization.

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3. Why is it important for everyone in business organizations to have a basic understanding of the systems development process?

End user department staff has 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 logic errors. Assumptions are not a good basis for computer systems, user business knowledge is critical to the design.

4. Should prototyping be used on every systems development project? Why or why not?

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.

5. Discuss the various types of feasibility studies. Why are they all needed?

Technical, economic, behavioral, 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.

Behavioral – 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.

6. Discuss the issue of assessing intangible benefits and the proposed solutions.

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.

9 7.

Discuss the reasons why end-user-developed information systems can be of poor quality. What can be done to improve this situation?

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.

One way that this problem can be avoided 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.

8.

Why is the attractiveness of ASP’s increasing?

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. As needs change over time, the resources being utilized can be changed. These providers are particularly attractive to smaller and medium sized businesses who cannot afford to have their own in-house IT staff because there are economical and flexible.

PROBLEM-SOLVING ACTIVITIES Students will research as directed and prepare a thoughtful report on their findings.

1.

Access www.ecommerce-guide.com. Find the product review area. Read reviews of three software payment solutions. Assess the payment solutions as possible components.

2.

Use an Internet search engine to obtain information on CASE and ICASE tools. Select several vendors and compare and contrast their offerings.

3.

Access www.ning.com, www.coghead.com, www.teglo.com, and www.dabbledb.com. Observe how each site provides components for you to use to build applications. Build a small application at each site.

WEB ACTIVITIES

10 Results of the various on-line activities should be organized into report format and submitted after research activities are completed.

1. Enter www.ibm.com/software. Find its WebSphere product. Read recent customers’ success stories. What makes this software so popular?

2. Enter the Web sites of the GartnerGroup (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.

3. StoreFront (www.storefront.net) is a vendor of e-business software. At its site, the company provides demonstrations illustrating the types of storefronts that it can create for shoppers. The site also provides demonstrations of how the company’s software is used to create a store. a.

Run the StoreFroont demonstration to see how this is done. b.

What features does StoreFront provide? c.

Does StoreFront support smaller or larger stores? d.

What other products does storefront offer for creating online stores?

What types of stores do these products support?

TEAM ASSIGNMENTS 1. Assessing the functionality of an application is part of the planning process (Step 1) Select three to five Web sites that cater to the same type of buyer (for instance several Web sites that offer CDs or computer hardware), and divide the sites among the teams. Each team will assess the functionality of its assigned Web site 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). At each firm, study the systems acquisition process. Find out the methodology or methodologies used by each organization and the type of application each methodology applies. 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.

11 Closing Case - The City of Lincoln, Nebraska: Developing Systems for the Taxpayers

The Business Problem The Lincoln/Lancaster was concerned about providing the highest level of governmental services possible given its specific budgetary constraints. In 2001, the municipality deployed Palm handheld computers to its animal control officers in an effort to streamline the processes involved in managing the area’s growing pet population. In 2008, the City and County wanted to again effectively use technology, this time involving the city police, county sheriffs, and firefighters.

The IT solution The Lincoln/Lancaster government’s IT staff undertook an enterprisewide systems development project that would enable the governmental staff and citizens to utilize smart phones to access a variety of governmental services. The initial project was the development of a smart phone-enabled system for parking services. Follow-up projects subsequently expanded into the sanitation and weed control departments.

The Results Citizens’ responses to the systems developed by the Lincoln/Lancaster government and deployed via smart phones have been very positive. In a recent ranking published by the Center for Digital Government, Lincoln/Lancaster was ranked the second-most technologically progressive municipal/county government in the United States.

Questions 1. Is this use of information technology an appropriate use of tax-payer dollars? Why or why not?

The technology based projects have enabled the city to provide better service to the tax payers and also made the city employees more efficient in their job. These benefits can be quantified in financial terms and show that the tax payers are benefiting from these projects. So, these projects are appropriate use of tax payer dollars.

2. Can you think of any other possible uses for this type of technology in local or state government?

There are many potential projects. Involving the citizens in the governance process and means of interacting with the city are useful projects that can be based on technology.

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Technology Guide 1: Computer Hardware Chapter Overview TG1.1 TG1.2 TG1.3 TG1.4 TG1.5 TG1.6 TG1.7

Introduction Strategic Hardware Issues Innovations in Hardware Utilization Computer Hierarchy Input and Output Technologies The Central Processing Unit Computer Memory

Teaching Tips and Strategies Most students have grown up with computers. It is surprising that many students cannot distinguish the difference 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 then a 1.2 GH 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, and RAM (Random Access Memory) confuse students.

Use another word for MHZ such as MPH. So, an 800 MHZ (or MPH) machine is slower then a 1.2 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 128 DDR RAM is to say 128 gallons of water. This illustrates to students that RAM is the amount of memory a computer has (for instance, 256 DDR Ram, means it can hold double the amount of 128 DDR RAM or another 128 gallons of water!).

Next, it is helpful to go over a brief overview of the history of computers.

Students are very involved in game machines such as the Xbox, Playstation 3, and Wii. 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. Because of this discussion 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 the has-beens of yesterday such as Atari, Coleco Vision, Intellevision, and Sega Dreamcast.

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Question the students to get them thinking about why the Commodore 64 only had 64kb of memory compared to the average computer today with 128mb of memory. Bring this point up to reinforce to students that the costs of computer technology have gone way down. As technology costs go down more and 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 $200.00!!! Currently, 128 MB of ram costs about $28.95 shipping included! Another example you can give students is that laptops used to cost $4000.00 for an entry level machine, and now the average cost is around $1300.00. This leads to some very involved discussions.

This is a great chapter to signify how computers have changed every aspect of our lives and how businesses communicate on a daily basis.

Have students take out their calculators. Ask them how someone centuries ago that wanted to add 50 + 75 + 89 + 10 – 12 would go through this process. 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 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 and the first calculator was around $1,000.00 and could only add, subtract, divide, and multiply. Ask how much their calculators cost nowadays. Most will reply, “$10.00-20.00.” Reinforce to students that as technology becomes more mainstream prices go down.

Technology changes so fast it can leave companies losing market share with no fault of their own. A good example is AT&T. When the government determined that AT&T was a monopoly and divided the company, AT&T held onto the long distance portion. Baby Bells 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 US for a cheap monthly fee. This has hurt AT&T’s business due to the fact that many consumers are using cell phones instead of their home phone. Also, many consumers and businesses now send email, instead of using long distance telephone service.

The goal of this discussion is to get students to realize that technology is important and changing 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?

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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 in hardware are that it becomes smaller, faster, cheaper, and more powerful over time. In fact, these trends are so rapid that they make it difficult to know when to purchase (or upgrade) hardware. This difficulty lies in the fact that companies that delay hardware purchases will, more than likely, be able to buy more powerful hardware for the same amount of money in the future.

3. Define hardware and list the major hardware components.

Hardware refers to the physical equipment used for the input, processing, output, and storage 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 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…

1. How do you think the various types of computer hardware affect personal productivity? Organization 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, nontraditional work style. This is particularly true for professionals who work largely out of the office.

Hardware improvements in microprocessor and storage 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.

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Section TG 1.3– Before you go on…

1. What are server farms? Virtualization? Grid computing? Utility computing? Edge computing? Autonomic computing?

▪ Server farms – Large numbers of servers providing redundancy and fault tolerance requiring massive amounts of electrical power, air conditioning, backup generators, and security.

▪ Virtualization is the software-based partitioning to create multiple virtual servers on a single physical server.

▪ Grid computing is applying the resources of many computers in a network to a single problem at the same time.

▪ Utility computing is when a service provider makes computing resources and infrastructure management available to a customer as needed for a price.

▪ Edge computing is the process in which parts of a Web site content and processing are 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?

Nanotechnology is the creation of materials, devices, and systems at a scale of 1 to 100 nanometers (billionths of a meter).

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 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. Example supercomputer applications include weather modeling for better weather prediction, nondestructive weapons testing, aircraft design, and motion picture production. Supercomputers generally operate at 4 to 10 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

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•

•

•

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.

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 system that has become a standard tool for business and, increasingly, the home. It is usually modular in design, with separate but connected monitor, keyboard, and CPU.

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. Example supercomputer applications include weather modeling for better weather prediction, nondestructive weapons testing, aircraft design, and motion picture production. Hand-held computers are useful for simple computing tasks such as data entry, mobile communications, and providing mobile access to the Web.

6 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, ventilating 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 between various types of monitors?

Like television sets, monitors come in a variety of sizes and color/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 resolution. Portable computers use a flat screen that uses liquid crystal display (LCD) technology, not 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 laser beams to write information on photo-sensitive drums, whole pages at a time; then the paper passes over the drum and picks up the image with toner (similar to ink). Ink jet printers worked differently, by shooting fine streams of colored ink onto the 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.

7

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 inputs and output technologies.

Section TG 1.6– Before you go on…

1. Briefly describe how a microprocessor functions.

A microprocessor fundamentally accepts inputs, stores them until needed, at which point they are retrieved and processed and the output is stored and delivered somewhere.

2. What factors determine the speed of the microprocessor?

Microprocessor speed is rated in machine instruction cycles per second, or MIPS. MIPS are determined by the following factors: • The preset speed of the clock that times all chip activities, measured in megahertz (MHz). 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 meter).

• The physical design of the chip. Specifically, the distance between transistors is known as line width. The smaller the line width, the more transistors, and the faster the chip.

3. How are microprocessor designs advancing?

The phenomena known as Moore’s Law suggests a trend wherein microprocessor complexity would double every two years; Intel microprocessor design has followed this trend since rollout of the original 80x86 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.

Section TG 1.7 – Before you go on…

8 1.

Describe the four main types of primary storage.

▪ RAM holds a program and small accounts of data for processing and is volatile.

▪ Registers have the least capacity, storing instructions and data for a short time before processing.

▪ 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 rapidly.

▪ ROM is a type of chip where certain critical instructions are safeguarded and is not volatile.

2.

Describe different types of secondary storage.

▪ Magnetic media (such as hard disks, floppy disks or tape) ▪ Optical media - read by a laser, slower than magnetic drives, but are less fragile

3

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

Primary storage is faster, but more costly and has a smaller capacity than secondary storage.

4.

Describe the three types of enterprise storage systems.

▪ Redundant arrays of independent disks provide duplicate copies of all data to ensure that in case of a crash, or other disruption no data is lost.

▪ Storage area networks is an architecture for building special dedicated networks with rapid and reliable access to storage devices by multiple servers.

▪ Network-attached storage is a special purpose server that provides files storage to user who access the device over a network.

Discussion Questions 1. What is the value of server farms and virtualization to any large organization?

Large organizations must use whatever new technologies they can find to help reduce costs, increase security and efficiency, and help them maintain a competitive strategy.

2. If you were the chief information officer (CIO) of a firm, how would you explain the workings, benefits, and limitations of cloud computing?

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 advantages of cloud computing include much lower

9 infrastructure costs, and the disadvantages consist of privacy, security, and reliability concerns.

3. What is the value of cloud computing to a small organization?

Cloud computing can be used effectively by small businesses and entrepreneurs as well. These companies can avoid the costs of an IT infrastructure and IT staff by renting as much computing and storage capacity that they need, and paying for only what they use.

4. What factors affect the speed of a microprocessor?

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 megahertz (MHz). 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 meter).

• The physical design of the chip. Generally, a greater number of transistors and shorter line width (distance between transistors) give faster processing speeds.

5. If you were the chief information officer (CIO) of a firm, what factors would you consider when selecting secondary storage media for your company’s records (files)?

Factors a CIO might consider when selecting secondary storage media for company records: • Cost per byte of storage • Amount of storage capacity required • Archival storage requirements • Back up considerations • Retrieval speed • Portability and cross platform support 6. Given that Moore’s Law has proven itself over the past two decades, speculate on what chip capabilities will be in 10 years in the future. What might your desktop PC be able to do?

The brightest prospects for desktop computers in 10 years are in multimedia systems design. While sound, video, and animation are still most important for educational and game software, multimedia PCs has already begun to suffice business

10 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. The next generation Internet initiative will deliver a highly graphical Web, for good or ill, will be more commonplace as bad coffee in today’s office.

7. 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?

CIOs can focus on the total cost of ownership (TCO) aspect of thin client versus fat client. 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 were both client systems work best.

8. Where might you find embedded computers at home, at school, and/or at work?

• • •

Embedded computers for improved healthcare. Applications based on remote diagnosis of vital health signs.

Embedded computers and sensors for monitoring all aspects relating to home security, comfort and control.

Embedded computers to deliver emergency signals from homes to monitoring stations.

PROBLEM- SOLVING ACTIVITIES Students will follow instructions for each activity and prepare a thoughtful report on their findings.

1.

Access the Web sites 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. Be sure to take a close look at the various multicore chips (e.g., look at The Cell chip on Wikipedia).

2.

Access The Journey Inside on Intel’s Web site (http://www.intel.com/education/journey/index.htm). Prepare a presentation of each step in the machine instruction cycle.

11 3.

Investigate the status of cloud computing by researching the offerings of these leading vendors. Compare and contrast them to highlight current progress and possible future directions. Note any inhibitors to cloud computing.

• Dell (see e.g., www.dell.com/cloudcomputing) • Oracle (see e.g., www.oracle.com/technology/tech/cloud/index.html) • IBM (see e.g., www.ibm.com/ibm/cloud) • Amazon (see e.g., http://aws.amazon.com) • Microsoft (see http://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 Chapter Overview TG2.1 TG2.2 TG2.3 TG2.4 TG2.5

Significance of Software Software Issues Systems Software Application Software Programming Languages

Teaching Tips and Strategies The fastest engine in the world will not run optimally on bad gasoline. Computer hardware can only run at the speed and performance based on the design of the software it is running. For example, many of us have experienced the blue screen of death (Windows Fatal Exception Error). When we get the blue screen of death it is because (most of the time) the software (the code) is giving improper instructions to the hardware, thus causing an error. This is no different than putting diesel fuel in a gasoline engine.

The car will not run or will only run for a short time. Computers are only as smart or sophisticated as the programs that are running them. Computers require clear instructions in order to perform at their best. So, if the system experiences something it doesn’t understand most of the time the software will respond by locking up or crashing.

Explain to students that some of the features available in Word 10.0 were not possible back when they were developed, because the hardware to run these functions was either prohibitively expensive or not yet available. Finish the teaching session with reinforcing Hardware + Software = Programs and functions. Without the proper hardware we will not be able to have all of the functions in certain programs and vice versa (hardware and software are interdependent).

For those of you who grew up with the Commodore 64 you know that it took countless hours typing and thousands of lines of code to have the Commodore 64 perform certain functions. What used to take months to program (not to mention finding the typing errors that caused the program to crash) can be done in minutes on programs such as JAVA, Visual Basic, and C++.

It is important for students to understand that the above specified types of programs are cheaper to buy than a functioning software program. This is one of the biggest dilemmas that companies face when looking at implementing software or upgrading their information systems. Do they develop the software in-house? This is usually cheaper than contracting out the software functions to other companies. Developing software inhouse can save companies money and enables them to be self sufficient rather than rely on outside vendors for help in upgrading and/or replacing the code. One additional benefit from developing code in-house is that the software will be compatible (or should be) with all of the systems in that business.

2 On the other hand, many businesses do not have the expertise or the resources to design a system from scratch. These businesses pay companies to customize applications to run their business. By doing this, businesses are paying for the ‘expertise’ of these outside vendors to help make their information systems more efficient. Some of the drawbacks to this approach are: (1) Expense, (2) Sometimes vendors’ software is not compatible with existing software in use (this can lead to serious problems; for example, if the finance department’s software is not compatible with the payroll departments it will cause inefficiencies and errors).

One of the toughest decisions for IT departments to perform is to decide if they will develop or purchase software. Software vendors have developed methods of marketing their products such that it may appear that a company will be allocating resources properly toward a particular software package. If the company is not clear on its expectations and how they intend to establish, maintain and then run the software, the end-users may find themselves dissatisfied and with a system that is useless at worst and one with problems at best. Another issue is the end-users (individuals using the software).

End-users can be difficult to entirely satisfy, especially where specifications are not clearly defined or have not been verified and agreed upon in advance. Once we know and agree upon the final technical specifications we encounter the challenges of final selection based on initial and subsequent costs and other factors.

This chapter cannot recommend whether a company should purchase or develop their own software package, because the best solution depends on each set of circumstances.

This chapter will help provide students with the necessary tools to aid them in making better or more informed decisions regarding software.

Review Questions Section TG 2.1 – Before you go on…

1. What does the statement mean: “Hardware is useless without software”?

By itself, hardware has no inherent capabilities. Hardware can only be made useful through the instructions that are executed on it. Those instructions are contained in software. Therefore, hardware is ‘nothing’ without software.

2. What are differences between systems software and applications software?

Systems software is a set of instructions that serves primarily as an intermediary between computer hardware and application programs. It provides important selfregulatory functions for computer systems, such as loading itself when the computer is first turned on, managing hardware resources such as secondary storage for all applications, and providing commonly used sets of instructions for all applications to use.

3

Section TG 2.2 – Before you go on…

1. What are some of the legal issues involved in acquiring and using software in most business organizations?

Business organizations implementing purchased software must comply with U.S. copyright laws. The Software Publisher’s Association (SPA) enforces software copyright laws in corporations through a set of guidelines. These guidelines state that when information systems managers cannot find proof of purchase for software, they should get rid of the software or purchase new licenses for its use. The SPA audits companies to see that the software used is properly licensed. Fines are heavy for improper use of software.

As the number of desktop computers continues to increase and businesses continue to decentralize, it becomes more and more difficult for IS managers to manage their software assets. Companies should consider the services of firms that specialize in tracking software licenses for a fee. This will ensure the company’s compliance with U.S. copyright laws.

2. What are some of the criteria used for evaluating software when planning a purchase?

Ease of development; use and learning (for developers and users); reporting capability; general functionality; data handling; graphic presentation; performance; output options; environments and hardware; security; documentation; maintenance; vendor support; cost.

3. What is open source software and what are its advantages? Can you think of any disadvantages?

Open source software is a movement by computer programmers worldwide to help thwart the dominance of the Microsoft monopoly. The Netscape Mozilla browser is an example of open source software. They will allow anyone to have a copy of the computer code and users are allowed to modify the software as they wish. In return, users will share with Netscape Mozilla any changes or modifications they used to make the software. Advantages of open source software are that companies do not have to pay programmers to improve their product. Programmers from all levels of expertise will work to make your software better. It is cheaper than having to hire programmers and paying for costly revision. Disadvantages may stem from the licensing which requires that any modifications must be made publicly available and the lack of support for these open source products that are mostly unsupported.

Section TG 2.3 – Before you go on…

4 1. What are the two main types of system software?

The two main types of operating system software are systems control software and systems support software. System control programs control the use of the hardware, software, and data resources of a computer system. The main system 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. System utility programs, performance monitors, and security monitors are examples of system support programs.

2. What are the major differences among mobile device, desktop, and mainframe operating systems?

Operating systems (OS) can be categorized by the number of users they support as well as by their level of sophistication. Mobile device operating systems are designed to support a single person using a mobile, handheld device or information appliance.

Desktop operating systems are designed to support a single user or a small work group of users. Mainframe operating systems offer the greatest functionality (reliability, backup, security, fault tolerance, and rapid processing speeds). An important exception is the user interface, which is most sophisticated on desktop operating systems and the least sophisticated on enterprise operating systems.

Section TG 2.4 – Before you go on…

1. What classes of personal applications software are essential for the productivity of a business or other organization with which you are familiar? Which are nonessential?

Groupware is a class of software products that facilitates communication, coordination, and collaboration among people. In an online university academic affairs department, groupware is important because it allows school administration work groups to communicate and share information, even when they are widely geographically dispersed. Also important in this setting would be typical applications such as word processing, spreadsheets, presentation graphics, and data management.

Communication software is critically important.

Idea generation/creativity software is nonessential in the online university academic affairs setting. This environment currently benefits from an abundance of ideas and creativity.

2. What do you see as advantages of speech recognition software? Disadvantages?

Speech recognition software has improved considerably since its inception. It is extremely accurate and will likely be built in to almost every device, appliance and machine that people use. It is still limited when dealing with poor reception, bad microphones, and heavy accents, or unclear human speech.

5 Section TG 2.5 – Before you go on…

1. Differentiate between HTML and XML. HTML is used for creating and formatting documents on the Web. XML improves the functionality of Web documents by describing what the data in documents actually mean as well as the business purpose of the documents themselves.

2. What are the strategic advantages of using object-oriented programming languages?

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 in 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 need to develop and maintain separate files for programs and data.

Discussion Questions 1. You are the CIO of your company and have to develop an application of strategic importance to your firm. What are the advantages of disadvantages of using opensource software?

Open-source software can be an option if a company has programmers that can maintain applications, but there can be compatibility issues as well as support issues with this type of software. The final choice for strategic applications should involve a rigorous needs assessment and subsequent software evaluation and acquisition process and the availability of support for the software as it is deployed.

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?

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

6 understanding how computers perform input, processing, output routines. In a general sense, knowledge of programming is good for anyone working with information.

WEB ACTIVITIES Student 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/article2/0,1895,2090787,00.asp and observe all the software 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 Web site (www.ibm.com) and search on “software.” Click on the drop box for Products, and notice how many software products IBM produces. 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 Microsoft Office Adobe Photoshop

4.

Open Source Google Docs, OpenOffice Picnik.com, Google Picasa

Compare the Microsoft Surface interface with Oblong Industries’ g-speak spatial operating environment. Demonstrate examples of each to the class. What are the advantages and disadvantages of each interface?

1

Technology Guide 3: Protecting Your Information Assets Chapter Overview TG3.1 TG3.2 TG3.3

Introduction Behavioral Actions to Protect Your Information Assets Computer-Based Actions to Protect Your Information Assets

Teaching Tips and Strategies We live in a world of ubiquitous computing and in this new world there are a great number of dangers. Dangers exist for us personally and for our information and our technology. We must take actions to protect ourselves and our information assets. This Technology Guide addresses a number of the dangers and gives the student some practical suggestions as to how to protect against these forces.

Review Questions Section TG 3.1 – Before you go on…

1. Why is it so important for you to protect yourself?

The world of computing is different today, it is more critical than ever to protect ourselves because online transactions are being targeted more and more. In 2003 your personal computer would be attacked within 15 minutes, today it will be attacked within seconds.

2. What are the two types of actions you can take to protect yourself?

Behavioral actions include such things as protecting your Social Security number or any other personal information whether on the telephone, in person or on online.

Computer-based actions include the use of the most up-to-date operating systems which have the best security and the best firewall and virus protection software.

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?

Information is the basis of most companies today. Given a disruption in its flow, or a loss of data, most companies would be irreparably harmed. We all have to do whatever is necessary to protect our information assets. It is fair to believe that the IS department will perform the appropriate backups for systems and networks, but everyone plays a key role in making sure that information is protected.

2

2. Discuss the differences between behavioral and computer-based actions that you should take.

Behavioral actions include all of the physical controls such as locked doors and file cabinets and care in giving out little or no information about our personal activities.

Computer-based actions include safeguards such as installing the best security software and firewalls.

PROBLEM – SOLVING ACTIVITIES Student will follow instructions, make choices based on the directions in each activity and prepare a short report.

1. Using one product suggested in this Tech Guide or a product you find, do the following: • Test or scan your computer for malware; • Test your firewall; • Scan your computer for spyware.

2.

Follow the steps in this Tech Guide to see if you have a Trojan Horse on your computer.

1

Technology Guide 4: Basics of Telecommunications and Networks Chapter Overview TG4.1 TG4.2 TG4.3

The Telecommunications System Types of Networks Network Fundamentals

Teaching Tips and Strategies This Technology Guide provides material for you to present to students which explains the components of the telecommunication system. Most students will have already used telecommunications in some form, but they do not understand the components or how they work.

Review Questions Section TG 4.1 – Before you go on…

1. Describe the basic telecommunications system.

A telecommunication system consists of hardware and software that transmit information from one location to another using two basic signals, analog or digital.

Communications are two-way devices serving as both transmitters and receivers.

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.

Fiber optics are expensive, but much faster 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.

2 ▪ ▪ ▪

ATM permits almost unlimited bandwidth. Currently requires fiber-optic cable therefore is more expensive.

SONET is an interface standard for transporting digital signals over fiberoptic lines to integrate transmission from multiple vendors.

T-Carrier is a digital transmission system that defines circuits that operate at different rates.

Section TG 4.2 – Before you go on…

1. What are the main business reasons for using networks?

Networks are used to share devices and data, and to provide connectivity between computers.

2. What is the difference between LANs and WANs? When businesses have to transmit and receive data beyond the confines of the local area network they must use a wide area network which connects multiple LANs and is supported by common carriers such as telephone companies and the internet.

3. Describe an enterprise network.

Organizations connect multiple LANs and may have multiple WANs which are interconnected to form an enterprise network.

Section TG 4.3 – Before you go on…

1. Compare and contrast the ATM, SONET, and T-carrier systems.

▪ ▪ ▪

ATM permits almost unlimited bandwidth. Currently requires fiber-optic cable therefore is more expensive.

SONET is an interface standard for transporting digital signals over fiberoptic lines to integrate transmission from multiple vendors.

T-Carrier is a digital transmission system that defines circuits that operate at different rates.

2. What is a network protocol?

A protocol is a common set of rules that enable the nodes on a network to communicate.

3. Describe the Ethernet and TCP/IP protocols.

Ethernet is a gigabit per second protocol. The distinguishing characteristic of the TCP/IP protocol is that each transmission is broken into packets, transmitted and then reassembled at the other end.

3

4. Differentiate between client/server computing and peer-to-peer processing.

Client serve computing links two or more computers in an arrangement with which some machines, called servers, provide computing services for the user PCs, or clients.

Peer-to-peer processing is a scenario in which each computer acts as both a client and a server. Each computer can access all files on all other computers.

Discussion Questions 1. What are the implications of having fiber-optic cable to everyone’s home?

The speed in a fiber-optic cable would be very good as well as 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?

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.

There are three types of P2P networks. The first accesses unused CPU power among networked computers. The second is a real-time, person-to-person collaboration application that uses buddy lists to establish a connection. 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 fair way of operating.

PROBLEM – SOLVING EXERCISE Student will follow instructions and prepare a short report.

1. Access several P2P applications such as SETI@home. Describe the purpose of each and which ones you would like to join.

1

Technology Guide 5: Basics of the Internet and the World Wide Web Chapter Overview TG5.1 TG5.2

The Internet The World Wide Web

Teaching Tips and Strategies Today’s students are more in tune with what is available online that ever before. It is typical that they are able to navigate around the Web, but may have little understanding of the pieces that make up the Internet. The material in this technology guide will help to establish the background needed and provide the basics of the Internet and the World Wide Web.

Review Questions Section TG 5.1 – Before you go on…

1. Describe the evolution of the internet and describe Internet2.

The Internet was developed by the U.S. Department of Defense as a project which began in 1969 called ARPAnet. The DOD was joined by researchers and educators to develop what we know today as the Internet. Its scope and potential are mammoth, yet the speed is too slow for some very large applications.

Therefore, more than 200 US Universities have been working with industry and government to establish Internet2. It is not separate, but rather an enhancement of sections of the Internet to allow certain large applications to be fast, always on, and everywhere, which being easy to use and secure.

2. Describe the various ways that you can connect to the Internet.

There are several ways to access the Internet.

▪ By way of your university or company LAN ▪ By opening an account with an ISP ▪ By way of internet kiosks ▪ By cell phones, smart phones 3. Describe the parts of an Internet address.

2 Each computer has an address and IP address which is composed of 4 sets of numbers. Easier to remember though, is the address consisting of the domain name, top-level domain name and the particular machine on which the site resides.

Section TG 5.2 – Before you go on…

1. What are the roles of browsers?

Browsers provide a graphical frontend that enables users to point-and-click their way across the Web. They are software applications which provide a means of universal access.

2. Describe the difference between the Internet and the World Wide Web. The Internet is a global network of computer networks, using a common communications protocol, TCP/IP. The World Wide Web is a system that stores, retrieves, formats and displays information accessible through a browser. It is a subset of the Internet.

3. What is a URL? To access a Web site, the user must specify a URL which points to the address (includes the domain name) of a specific resource on the Web. An example http://www.mocrosoft.com. .

Discussion Questions 1. Should the Internet be regulated? If so, by whom?

There are individuals who would argue that the Internet should be regulated. There are some reasons, such as protecting children from predators that stalk them over the Internet. It is reasonable to want the Internet to be monitored, but regulation is another story. If it would be regulated, it would be extremely difficult to decide who should do it.

2. Discuss the pros and cons of delivering this book over the Internet.

Setting up an account and allowing students to access this text over the Internet is an option that some would find attractive because the cost is much less than the cost to deliver the book in hard copy form. However, it is not a convenient option for everyone. Many students still like to have a textbook to read rather than reading on the monitor.

3. 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).

3 In order to use the Internet you must have a device such as a computer, or a cell phone, PDA, or smartphone with browser software. You then must have a connection, typically an internet service provider (ISP), which is your entryway into the Internet, and then you can type in any address that you would like to visit on this interconnected information highway made up of thousands of pathways of connections.

4. Do some Web pages take longer to download than others? If so, why? Explain your answer.

Yes, some Web pages have been designed more efficiently than others, and some contain more graphical images and pictures than others. If the page has video, animation, extensive graphics, it will generally take longer to download especially if the connection which is being used is not a high speed connection.

PROBLEM –SOLVING EXERCISES Student will follow instructions and prepare a short report as directed.

1. Access www.ipv6.org and learn about more advantages of IPv6 2. Access www.icann.org and learn more about this important organization.

3. You want to set up your own Web site 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 Web site 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?

1 Electronic Monitoring

In the 1920s, Frederick Taylor used time and motion studies to analyse the work practices of various types of employee. His theory has been criticised for treating some employees like machines, making them work to the detriment of their physical and psychological health.

In the late 1950s, McGregor developed his X-Y Theory to explain how people work According to Theory X, the average person dislikes work and therefore must be controlled and threatened with punishment to ensure that work is done. Most people prefer to be treated in this way, having relatively little ambition. According to Theory Y, working is as natural as playing or resting, with people naturally exercising self-control when trying to achieve their objectives. The average person learns to accept and to seek responsibility.

The ability to be imaginative and creative when solving problems is a skill possessed by most people.

In the 21st century, electronic monitoring is increasingly used to measure the productivity of employees. This monitoring can include measurements of typing speed and programme coding speed as well as clickstream analysis and the amount of time spent on non-work activities (e.g. toilet breaks, lunch breaks, etc.). At the same time, employees are increasingly concerned about their privacy, the quality of their work place and task environment, and their innate human dignity.

Imagine that you are an IT consultant who has been given the task of preparing a report for the Management Board of a Software House that is currently thinking of implementing electronic monitoring throughout its operations. Your task is to prepare a concise report that considers the relevant issues in Electronic Monitoring and makes recommendations. Your report should include a discussion of the current trend to use electronic monitoring to measure employee productivity, bearing in mind the theories of Taylor and McGregor. Make a recommendation to the Management Board about what it should do. You should include the key ethical issues and the stakeholders involved. You must justify your ideas and recommendations. You should also attempt to analyse how the impacts that electronic monitoring is likely to exert would affect you personally, as an employee.

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