Management Information Systems, Moving Business Forward Solution Manual

Management Information Systems, Moving Business Forward By Rainer, Watson

Page 1

CHAPTER 1:

Introduction to Information Systems

Chapter Overview 1.1 Why Should I Study Information Systems?

1.2 Overview of Computer-Based Information Systems 1.3 How Does IT Impact Organizations?

1.4 Importance of Information Systems to Society

Learning Objectives 1. Begin the process of becoming an informed user of your organizations’ information systems.

2. Define the terms data, information, and knowledge, and give examples of each.

3. Define the terms information technology, information system, computer-based information system, and application.

4. Identify three ways in which you depend on information technology in your daily life.

5. Discuss three ways in which information technology can impact managers and three ways in which it can impact non-managerial workers.

6. List three positive and three negative societal effects of the increased use of information technology.

Teaching Tips and Strategies Most students believe that they possess an extensive knowledge of information systems because they use the Internet. In reality, they have only scratched the surface of the power of modern technology when they use Facebook or Twitter. Businesses have been using information technology and information systems for decades, far longer than the newest social media sites have been available.

An example that you can use to illustrate the power of technology is your school.

One suggestion for bringing the technology to the students is to invite someone from either the help desk or the information technology department to talk to the students about how computers help the school function. Some examples are student records, including grades; human resources; and specialized software used in some departments

Page 2 (such as the sciences, mathematics, engineering, and others). An explanation of how the computer laboratories are designed and used, including access to the Internet, will be of interest to the students.

Technology also exists in the smart phones and tablet devices that are prevalent today. Students have become used to using these devices, and they don’t realize that what they are really using is a hand-held computer. The devices have an operating system, just like the laptop or desktop computer that they own. Pointing this out to students will give them a new understanding of the power of technology.

Although the text is aimed at business students, there may be some students who are interested in a career in the IT world. Once again, the information technology department could provide a guest speaker to discuss the positions that are available in that department. The world of e-commerce has also opened opportunities for IT jobs, and many business students may be interested in that area for the future. The director of your IT department would also be a good guest speaker. If you have access to a smart classroom, you could even invite someone from an IT department in a business to speak to the students virtually.

It is very important to link computer systems to the business world. Business students are aware of the need for information systems in marketing, accounting, finance, and other aspects of business. Information technology ranks right up there with those critical systems in a business, and it is important to emphasize this to students.

Computers are used for much more than simply playing games and keeping up with friends. Rather, they are a very important part of the business world today.

OPENING CASE – E-Mealz 1. Provide two examples of how Jane uses information technology to provide her service.

Jane uses a Web site to host her E-Mealz plans. She also uses Twitter and Facebook to stay in contact with her customers as well as to advertise her products. The Web site provides the opportunity to sign up for a newsletter, set up meal plans, and access nutritional information.

2. Provide two additional examples of how Jane might use information technology to improve her service. Be specific.

The Web site could be used to create reminders (sent via e-mail, Facebook, or Twitter) to users about upcoming events and meal plans for holidays, as well as to provide coupons from online grocers. One way to promote use of the site would be to create a recipe contest. Jane already allows participants to post recipes, so a contest would involve giving away something that relates directly to her E-Mealz Web site.

Review Questions Section 1.1 – Before you go on…

1. Rate yourself as an informed user. (Be honest; this isn’t a test!)

Page 3 The definition of ‘informed user’ is someone who is knowledgeable about information systems and information technology. Students may list the things they know about how to use the Internet (downloading music and movies, using Facebook and Twitter, using e-mail), but most non-technical students have only scratched the surface of information technology. You can give them some examples from business about how computers are used. (For example, do they know that an ATM machine at a bank is really a computer terminal?) Knowing more about this technology will enhance their use of it in the future.

2. Explain the benefits of being an informed user of information systems.

Being an informed user helps users to understand what information systems can do so that they can make better decisions about how to apply this technology in the business world. Employees can make a better contribution to their work (and home) environment when they understand what the technology can do for them.

Being able to recommend an aspect of information systems that may not have been introduced in the past will make a new graduate a more valuable asset to an organization. Keeping up with technology is very difficult in today’s fast-paced, constantly changing technological world. Knowing about the technology and where to find information is critical to keeping up with that technology.

3. Discuss the various career opportunities offered in the IT field.

The primary IT career positions are programmers, business analysts, systems analysts, and designers. These are the traditional positions that are filled in an IT department. Newer positions have also been added because of the extensive use of the Internet by organizations. Security, mobile commerce, networks, and telecommunications and multimedia are some of the newer career positions in IT. Many managerial positions also exist, including: CIO; Director of IS; Computer Center Manager; Project, Systems, Operations, and Programming Managers; Network and Database Managers; Database Administrator; Webmaster and Web Designer.

Section 1.2 - Before you go on…

1. What is a computer-based information system?

A computer-based information system gathers information, processes and analyzes the information, and then distributes that information to those employees in the organization who will use the information for business purposes. These processes are performed by a computer system of some type, either a PC or a mainframe that is maintained by the organization 2. Describe the components of computer-based information systems.

A computer-based information system is composed of six parts: (1) hardware, which is the physical computer itself; (2) software, which refers to the programs that do the work required of the computer; (3) a database, which is made up of files that are related in some way; (4) the network, which is the way that all the computers talk to one another in the organization (and outside of it); (5) procedures —sometimes called protocols — which are the rules or instructions on

Page 4 how all the other components work together to generate the required information; and (6) people; specifically, the individuals who provide the input and use the output from the computer system.

3. What is an application program?

An application program performs a specific function in a computer system. For instance, an organization might use a payroll program to collect information on all of its employees, keep track of changes in employment status, and generate paychecks. Only one department accesses this application program. Other specific application programs could be a set of programs for the accounting department, programs that run machinery in a production department, or application programs that provide information for stockholders. Office productivity software such as word processors and spreadsheets are also application programs.

4. Explain how information systems provide support of knowledge workers.

Knowledge workers are those employees who have specific knowledge about a certain aspect of the organization. Information systems that support these workers need to be those application programs that provide information specific to their area of expertise. This involves application programs that allow the knowledge workers to provide information to upper management to help the organization reach its goals.

5. As we move up the organization’s hierarchy from clerical workers to executives, how does the type of support provided by information systems change?

Information is needed in different formats and for different reasons as you move up the organization’s hierarchy. The data and knowledge needed at the lowest levels of the hierarchy are used for interacting directly with customers or suppliers (office automation software). Middle managers need more general information to allow them to make decisions about sales data or inventory analysis. Upper management needs systems like decision-support systems or expert systems to make long-term decisions based on past data and to provide information needed to forecast future trends for the organization.

Section 1.3 - Before you go on 1. Why should employees in all functional areas become knowledgeable about IT? Computer systems are a part of most jobs today. As information systems become more sophisticated, they make employees more efficient, allowing a company to operate with fewer employees in some positions (particularly middle management). Because modern companies value employees who possess computer skills, it is in the employees’ best interest to stay educated about the computers used in their jobs.

2. Describe how IT might change the manager’s job.

Page 5 Information technology systems have provided managers with a wide array of information in a real-time environment. This gives the manager much more information to use to make decisions, while also making the job somewhat more stressful. However, because the manager can now control many of the applications himself/herself, it is possible to get information faster than it was previously, when the manager had to wait for information from the IT department. IT also allows employees to work at geographically dispersed locations. The manager may have to supervise employees who are not located in a single place.

3. Discuss several ways in which IT impacts employees at work.

Computerized systems can have some negative impacts on employees. For example, the increased use of computers and the requirement to constantly learn new systems can generate job stress. Employees can also suffer from injuries related to the constant use of the keyboard, particularly carpal tunnel syndrome. On the positive side, computers with larger print screens and graphical user interfaces have provided opportunities for individuals with disabilities to work in an environment that might have been inaccessible in the past.

Section 1.4 – Before you go on…

1. What are some of the quality-of-life improvements made possible by IT? Has IT had any negative effects on our quality of life?

Information technology has made it easier to work in an anytime/any place environment. This flexibility (if allowed by an employer) can help working parents to care for their children, children to care for elderly or ill parents, and employees around the world to work for any company in any country. A drawback is that some employers expect employees to check e-mail and text messages at all times, reducing the number of free hours for relaxation away from the job.

2. Describe the robotic revolution, and consider its possible implications for humans.

Robotics can make life easier for humans, by doing mundane, repetitive tasks.

Such robots have been used in factories for some time (e.g. automotive factories), but they have now moved into the home market in the form of robotic vacuum cleaners and lawn mowers. Some robots are also used in a hospital environment.

3. Explain how IT has improved healthcare practices.

Information technology has allowed healthcare workers to better serve their patients. Doctors can make faster diagnoses by utilizing expert systems that collect data on many patients and then determine the source of an illness based on the previous information that has been stored in the computer. IT has also been used to research and develop new drugs, to plan complex

Page 6 surgeries, and allows doctors to discuss complex problems interactively through videoconferencing

“IT’s About Business” Questions 1.1– Build Your Own Multinational Company 1. Identify and evaluate the advantages and disadvantages of outsourcing work overseas.

Advantages of outsourcing include the availability of more low-wage workers; having access to skilled workers that a company cannot afford to hire; and access to software and services that a company cannot afford to buy.

Disadvantages include diminished control over employees who are located elsewhere geographically, loss of jobs that are sent overseas rather than kept in this country, and greater difficulties in securing assistance with software.

2. Can anyone do what Randy and Nicola Wilburn are doing? Or, does their strategy require special qualifications or knowledge? Support your answer.

Anyone who has the incentive and desire to do the research to find people to whom they can outsource their various activities can do what Randy and Nicola are doing. The only knowledge or qualifications that are needed is knowledge about the business they are running. If you are running a business, then you would have the requisite knowledge to do this type of outsourcing.

It may take some energy and research, but any reasonable person should be able to do it.

3. Explain how global outsourcing can affect people who are starting their own business. Hint: Consider capital outlay, labor costs, IT infrastructure costs, etc.

Outsourcing can be a good thing for a new business, because outsourcing the work may cost less than either doing it in-house or hiring a consultant locally.

A small company may not have the funds to buy all the computer equipment and networking equipment needed to run their business, so outsourcing basic functions to another company is generally a cheaper alternative. Labor costs overseas can also be less expensive than hiring employees because you may have to pay healthcare and social security taxes for those employees. If that labor is outsourced, those costs are included in the hourly wage you pay.

4. Would you like to be a digital nomad? Why or why not? Be specific.

Many students may think that this is an ideal way to work: Your office can be the entire world, whether that is on the beach, at a café, or at home. However, there are drawbacks such as disciplining yourself to get the required work done and dealing with many distractions that are not present in an office environment. Digital nomads need to be self-motivated and be able to isolate themselves to get work done if they work from home. It is very easy to drift off into the habit of playing games if no one is looking over your shoulder to

Page 7 be sure you are focusing on your work. A digital nomad type of life is great for some people, but it is not feasible for others..

1.2– Electronic E-Discovery Software Replaces Lawyers 1. What are the advantages of e-discovery software? Provide specific examples.

E-discovery software can reduce the time and costs involved in finding information. The software can be used to analyze documents for relevant terms (Blackstone Discovery), to analyze documents for information pertaining to the activities and interactions of people (Cataphora), and to search for concepts rather than simply looking for specific keywords (Clearwell).

2. What are the disadvantages of e-discovery software? Provide specific examples.

The biggest disadvantage is the reduction in the number of lawyers needed for manual discovery. This could reduce the jobs available for students coming out of law school. As with any computer program, there may also be problems with the type of documents that are identified by the computer. If the input information is inaccurate or incomplete, the output may not reveal all the necessary information, or some documents may be ignored that should have been included. This is the concept of ‘Garbage In, Garbage Out (GIGO).’

3. Based on this scenario, how do you think e-discovery software will affect the legal profession?

E-discovery may cut down on the time and costs associated with the discovery phase of a case. Consequently, many lawyers may need to find other things to do.

Discussion Questions 1. Describe a business that you would like to start. Discuss how you would use global outsourcing to accomplish your goals.

Students will have various answers to this question. Starting a business in today’s digital world is much easier than it was in the past, as long as a person has the drive to do some research on the product/service they want to sell and is motivated to pursue his or her goal. Outsourcing is a good way to get started, and many companies have been successful with this method. One humorous TV show, called Outsourced, has highlighted some of the problems with outsourcing to a foreign company. Showing clips of this show is a way to illustrate some problems or advantages of using outsourcing. Students are much more technology savvy than those of the past, and starting an online business is something they may be interested in pursuing.

Page 8 2. Your university wants to recruit high-quality high school students from your state. Provide examples of (1) the data that your recruiters would gather in this process, (2) the information that your recruiters would process from these data, and (3) the types of knowledge that your recruiters would infer from this information.

(1) Recruiters would gather high school students’ names, addresses, phone numbers, gender, high school names, clubs to which the students belonged, outside organizations to which they belonged, and parents’ and siblings’ names.

(2) The recruiters would create a database with this information to identify regions of the country where the students are located, gender statistics, and statistics on organizations.

(3) From this information, the recruiters could determine the interests of incoming students and the types of activities in which they might participate.

3. Can the terms data, information, and knowledge have different meanings for different people? Support your answer with examples.

People often confuse the topics of data, information, and knowledge and use the terms interchangeably. To a computer programmer, data are the input to a computer program, but to a stock trader, data could be a list of stocks and their prices. Data and information are often used to mean the same thing. Someone may ask you to provide data on a topic (such as the details about a house for sale), but in reality what you are providing is information because it is organized statistics that relate to a specific house. Knowledge is generally defined as what you know, but in the context of information technology, knowledge means interrelated information brought together to form a higher understanding.

4. Information technology makes it possible to “never be out of touch.” Discuss the pros and cons of always being available to your employers and clients (regardless of where you are or what you are doing.)

Our society has evolved into one where most people have cell phones or other technology to reach anyone at any time. This is an advantage, for instance, for parents of young children who can keep in touch with them when the children are away from home at school or at friends’ homes. It also allows people to install cameras in their home so they can check on pets or just the condition of the home when they away. From a different perspective, some employers want their employees to be available 24 hours a day, 7 days a week. For some people this is fine, for others it is not. This totally connected environment can have some harmful effects on the psyche. Some people are addicted to their technology and have a hard time doing anything that does not involve the technology.

Page 9 5. Robots have the positive impact of being able to relieve humans from working in dangerous conditions. What are some negative impacts of robots in the workplace?

Robots can take jobs away from humans. Such has been the case in the automotive industry, where jobs previously held by humans are now performed by robotic machines. The robots can also malfunction. Robots that are used in a medical environment need to be closely monitored so that they do not cause harm to a human being undergoing an operation. The use of robots can make the human workers worry that someday they will be replaced by a robot.

6. Is it possible to endanger yourself by accessing too much medical information on the Web? Why or why not? Support your answer.

While Web sites like WebMD and Mayo Clinic offer good information for the casual reader, accessing the information and self-diagnosing an illness is very dangerous. Some symptoms of illnesses may be common among many illnesses and unless someone sees a doctor to get an accurate diagnosis, they will not know if what they are witnessing is a real illness or not. Selfprescribing medications to cure an illness based on a Web site is not a good thing.

7. Is the vast amount of medical information on the Web a good thing? Answer from the standpoint of a patient and from the standpoint of a physician.

Many people like to obtain second opinions about medical conditions, and the Internet can be one way to do this. For patients, the vast amount of information on the Web offers different viewpoints on various conditions (such as knee replacement surgery) and may provide excellent definitions for terms that a patient needs to understand in order to make medical decisions.

To physicians, however, the amount of information can actually undermine what they are trying to do for their patients. Not all information on the Web is accurate, and if a patient comes into the doctor’s office with a specific diagnosis he or she obtained from the Web, the physician may have a hard time convincing the patient that his or her diagnosis is wrong.

8. Describe other potential impacts of IT on societies as a whole.

Information technology can open up the world to societies that have not had access to worldwide information in the past. The Internet provides many news outlets to show what is going on in the world. One drawback to this is that some news outlets may have a biased opinion and therefore provide information from only one point of view. The Internet can also be used for showing the world what is going on in a specific country, as was seen in the Middle East in 2011 when the official news organizations were showing one side of the conflict, but social media sites were showing videos taken by regular citizens of the actual conflict.

IT can also be a dividing force within societies. There are some technology deserts where citizens do not have access to technology and therefore are

Page 10 being left out of the digital world. This is called the digital divide, and many organizations are attempting to correct it.

9. What are the major reasons why it is important for employees in all functional areas to become familiar with IT? IT has permeated all parts of organizations. The responsibility to maintain an organization’s technology is no longer restricted to the IT department.

Instead, all employees are more valuable to an organization if they are knowledgeable about IT in their area. That knowledge can then be used to provide information to higher management. In addition, knowledge of technology in general is transferable to other areas. Therefore, if an employee is transferred to another functional area, his or her IT experience will help the employee adapt to the new environment.

10. Refer to the study at Princess Alexandra Hospital (in section on Improvements in Healthcare). How do you feel about Google searches finding the correct diagnosis in 57 percent of the cases? Are you impressed with these results?

Why or why not? What are the implications of this study for self-diagnosis?

Normally, a success rate of 57% might seem impressive, but in a medical environment, 57% success in diagnosis is not extraordinary. A much higher success rate should be expected for a medical diagnosis. Most people would want a much higher percentage (say 90 or 95%) chance of a successful diagnosis of a medical condition (such as heart disease). With this result, it is clear that self-diagnosis using information from the Internet is not very reliable, and a doctor should be the one who makes the final diagnosis.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 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.truecareers.com. Compare the IT salaries to 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.

IT salaries should compare favorably with the other business professions listed. In fact, some of the IT positions such as networking analyst, security specialist, and IT managers should be listed even higher than some business personnel salaries.

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

Page 11 Customers can find out how to ship a package, track it, cancel a shipment, schedule a pickup, determine how much it will cost to ship a package, order supplies, and obtain information about international shipping. b. Find out about the “package tracking” system.

UPS provides a unique shipping number to every customer when he or she ships a package. This ‘package tracking’ system allows the shipper to see where the package is located at all stages of the shipment. The locations listed are the UPS terminals through which the package travels. The system lists the time and date the package arrives at each terminal and the time and date it leaves. It also provides the estimated arrival date for final delivery. 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.

Students will have a variety of answers to this question. To ship a 40lb. box from Chicago (60601) to Long Beach (90749) via next-day air costs $253.56.

3. Surf the Internet for information about the Department of Homeland Security (DHS). Examine the available information, and comment on the role of information technologies in the department.

Most government agencies provide a wide array of information on their Web sites. The DHS has many options on its Web site to gather information, such as finding information about terrorism advisories, finding a job with DHS, contacting the department with information, filing a complaint about travel, and learning about electronic identity verification. Someone can contact the Department electronically to find information about anything that is connected to national security or to travel-related security.

4. Access www.irobot.com, and investigate the company’s Education and Research Robots. Surf the Web for other companies that manufacture robots, and compare their products with those of iRobot.

The www.irobot.com Web site has many resources for students and faculty to use to learn about robots. Some of the activities are interactive. Some comparisons can be made using the robots.net Web site or robotstore.com.

Team Assignments 1. (a) Create an online group for studying IT or an aspect of IT that you are interested in. Each member of the group must establish a Yahoo e-mail account (free). Go to http://groups.yahoo.com.

Step 1: Click on “Start Your Group.”

Step 2: Select a category that best describes your group (use Search Group Categories, or use the Browse Group Categories tool). Yahoo will force you to be very specific in categorizing your group. Continue until you see the button: “Place My Group Here.”

Step 3: Name your group.

Page 12 Step 4: Enter your group e-mail address.

Step 5: Describe your group.

Step 6: Select your Yahoo! Profile and e-mail addresses for your group.

Step 7: Now you can customize your group and invite people to join.

Step 8: Conduct a discussion online of at least two topics of interest to the group.

Step 9: 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.

The instructor may want to choose IT topics for this online discussion forum. It is also helpful to provide some questions to go along with the discussion forum for the students to research.

2. Review the Wall Street Journal, Fortune, BusinessWeek, and local newspapers for the last three months to find stories about the use of computerbased information systems in organizations. Each group will prepare a report describing five applications. The reports should emphasize the role of each application and its benefit to the organization. Present and discuss your work.

Since IT is so prevalent in the business environment, finding these topics should be an easy task. However, the students may have some trouble understanding technical topics such as ATM.

CLOSING CASE 1– Revolution!

Questions 1. Describe how information technology enabled the Jasmine and Egyptian revolutions.

Social media and news reports broadcast over the Internet allowed this story to take on a life of its own, sparking the protests. No leaders were needed, simply a group of people with a like mindset who wanted to avenge the death of this young Tunisian.

2. Describe efforts by Tunisian and Egyptian governments to quell the revolution. In particular, describe the efforts that were directed at information technology.

The governments attempted to stop the revolution by creating firewalls through which the information about the riots could not pass. Internet providers were turned off, not allowing any Internet traffic to take place.

However, the government could not stop the dialogue that occurred over Facebook and other social networks.

3. Discuss how information technology contributed to higher oil prices and higher prices you pay for gasoline.

Page 13 The social network communications spread the revolutions throughout the Middle East, causing unrest in these countries along with distrust of the governments in power. This unrest has disrupted the flow of oil, leading to higher oil prices around the world.

CLOSING CASE 2– L’Oreal Retools Its Information Systems Questions 1. Describe several reasons why L’Oreal needed to reengineer its information systems.

L’Oreal had many different ERP systems located throughout the world that could not effectively communicate with one another. In order to expand its operations into a worldwide product line, L’Oreal needed to consolidate and simplify its IT software.

2. Describe the benefits of L’Oreal’s new information systems. Explain how the benefits you describe are related to L’Oreal’s strategic goals, using specific examples to support your arguments.

Because L’Oreal now has an integrated system installed, the company can more easily bring their factories up to speed and bring them online. In addition, they can add new factories that they purchase (such as the Yves St. Laurent factory) to the system easily. The new system also reduces the chances of human error in the use of special recipes for the company’s cosmetics. Finally, the new software has increased L’Oreal’s production capacity.

Page 1

CHAPTER 2:

Organizational Strategy, Competitive Advantage, and Information Systems

Chapter Overview 2.1 Business Pressures, Organizational Responses, and Information Technology Support 2.2 Competitive Advantage and Strategic Information Systems 2.3 Business-Information Technology Alignment

Learning Objectives 1. List and provide examples of the three types of business pressures, and describe one IT response to each.

2. Identify the five competitive forces described by Porter, and explain how the Web impacts each one.

3. Describe the strategies that organizations typically adopt to counter the five competitive forces and achieve competitive advantage.

4. Define business – information technology alignment, and describe the characteristics of effective alignment.

Teaching Tips and Strategies The modern business environment forces organizations to rely heavily on information technology for everyday operations. Those businesses that do not keep up with technology will find themselves at a strategic disadvantage with their competitors.

Until students are actually working in a business, they may not understand how important strategic advantage is to an organization. A focus of this chapter is to illustrate how IT can enable a business to become more competitive.

Students can relate to some of the competition among businesses that is out there.

A good example is the demise of Borders in 2011. Show students examples of how Amazon.com and barnesandnoble.com were in a better competitive position than Borders, and how this lead to their going out of business. A good question for students would be: What could Borders have done to remain competitive? Perhaps the answer

Page 2 would be that there was nothing they could do (is the market saturated with book sellers?). Was IT a factor in their downfall?

The three eras of globalization can be illustrated by examples of what happened during those years. In essence, the global economy progressed from a non-mechanized environment utilizing horses and steam power that lasted for more than 300 years, to the 200-year second globalization era where companies became multinational and made use of increased mechanization and better transportation (a modern society), and finally to the current environment where the world has been made smaller by the Internet and intense competition.

It is also important to point out how both the workforce and customers have changed. Consumers are more tech-savvy than in the past (for the most part), and businesses have to realize that. Customers want information very quickly and accurately, and if they don’t get it, they will switch to a competitor who can provide that information.

The workforce is increasingly comprised of people who have grown up with technology and who can bring innovation to organizations. Allowing employees to provide suggestions to improve Web presence and other IT-related ideas are important factors.

The students are probably aware of the ways that goods and services can be exchanged over the Internet. They may not be aware of how much is given away for free. This is a good chance to have the students come up with ideas or find Web sites they like on this topic and then report to the class. This encouragement may help them decide to become contributors to the new digital society.

OPENING CASE – Before the Stores 1. Provide specific examples of the services that Fulfillment by Amazon provided for Amar.

Fulfillment by Amazon provided the following services for Amar: Listing products, inventories and prices easily; order taking; taking payment; and scheduling deliveries.

2. Provide specific examples of the value that Amar provides his customers.

Amar provides his customers with the ability to buy products that are normally sold on TV before they become available in stores. Customers can also buy products through Amazon that they might have heard about elsewhere.

Review Questions Section2.1 – Before you go on…

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

The modern business environment is very competitive. The operations of an organization are affected by a combination of social, legal, economic, physical, and political factors.

2. Discuss some of the pressures that characterize the modern global business environment.

Page 3 Pressures that characterize the modern global business environment include the following: Globalization, the changing nature of the workforce, powerful customers, technology pressures, technological innovation and obsolescence, information overload, societal/political/legal pressures, social responsibility, compliance with government regulations, protection against terrorist attacks, and ethical issues.

3. Identify some of the organizational responses to these pressures. Are any of these responses specific to a particular pressure? If so, which ones?

Organizations respond to these pressures through strategic systems, customer focus, make-to-order and mass customization, and e-business. Strategic systems address the pressure of competition by allowing an organization to increase market share and profits, improve negotiation with suppliers, and prevent competitors from entering their market. Make-to-order customization allows a business to focus on the needs of individual, powerful customers, thereby discouraging those customers from going to the competition. E-business addresses a number of needs. It helps organizations avoid technological obsolescence, and it enhances competitiveness.

Section 2.2 - Before you go on…

1. What are strategic information systems?

Strategic information systems give a business a competitive advantage by assisting the business in achieving its strategic goals and improving performance and productivity. These benefits apply to any form of information system.

2. According to Porter, what are the five forces that could endanger a firm’s position in its industry or marketplace? (a) The threat of entry of new competitors. (b) The bargaining power of suppliers. (c) The bargaining power of customers (buyers). (d) The threat of substitute products or services. (e) 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 value chain model identifies specific activities (primary and secondary) that an organization should use to create the biggest competitive impact. It also indicates where information technology can provide the greatest competitive advantage.

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

Many strategies can be employed to gain a competitive advantage by countering the competitive forces identified by Porter. Five of those strategies are: (1) Cost leadership strategy (where an organization becomes the low-cost leader in their industry), (2) differentiation strategy (a business offers different products or services than their competitors), (3) innovation strategy (offer new products or

Page 4 services, or add new features to existing products or services), (4) operational effectiveness strategy (improve internal processes within the organization), and (5) customer-orientation strategy (concentrate on making customers happy).

Section 2.3 - Before you go on 1. What is business-IT alignment?

Business-IT alignment is a tight integration of the IT function with the strategy, mission, and goals of the organization.

2. Give examples of business-IT alignment at your university, regarding student systems. (HINT: What are the “business” goals of your university with regard to student registration, fee payment, grade posting, etc.?)

Students should come up with many different ideas for this answer. Some examples are: online registration, online fee payment, online transcripts and plans of study, and online grade posting. They may also suggest things like the HR component of a university for employees (employees can see their benefits and payroll information online), scheduling of rooms electronically, the use of networks to connect computer labs around the entire campus, etc.

“IT’s About Business” Questions 2.1– Sleek Audio 1. Which of Friedman’s flatteners apply to Sleek Audio’s decision to bring its manufacturing back to the United States? Support your answer.

Sleek Auto used “Insourcing,” delegating operations within a business to another company. They hired Dynamic Innovations to produce earphones, rather than a company in China that had lax quality control and shipping problems. They also used The Steroids by utilizing robots to assemble the earphones, thereby reducing the number of human workers involved, as well as cost and errors.

2. Identify some potential negative implications of Sleek Audio’s increasing reliance on robots in its manufacturing process.

The reduction in the workforce has a negative impact on the economy in the surrounding community. The robots can fail, if their computer components fail, thus causing delays and increasing costs. Replacing or repairing the robots can be expensive.

2.2– The Internet Facilitates Generosity 1. Discuss why people will give away their time and knowledge for free.

Some people feel good when they give away information on topics about which they are very knowledgeable. Self-esteem can be enhanced when such individuals perceive that they are helping others.

Page 5 2. Describe the various ways in which the Internet can facilitate generosity.

The Internet allows a peer-to-peer sharing of products and services that would not be possible in the pre-Internet world. Individuals can advertise items or services that they are willing to give away or trade to anyone around the world rather than simply in their own local area. People can also collaborate on projects over the Internet. For those who wish to volunteer, the Internet provides an abundance of volunteer opportunities. Some universities even offer online courses and learning materials for no fee, enabling faculty and students to make use of materials to which they might not otherwise have access.

2.3-Progressive 1. Consider the cases of Progressive and Zappos. What does it mean that the business strategy and information technology go hand-in-hand? (That is, neither comes before the other.)

In each of these companies, the business strategy is built around information technology. Progressive uses information technology to provide its customers with all the information they need to make informed decisions about their insurance requirements. The system is interactive, and customers can make changes to a policy online and see what impact it will have on the cost of the insurance. Progressive could not do this without a high-powered computer software program. Zappos is an Internet-based company that could not operate without information technology. Their business strategy is to provide free shipping both ways on purchases (in other words, when you buy an item, you don’t pay for shipping, and if you return an item, you don’t pay for the shipping). They also offer shoes from a wide variety of manufacturers.

Zappos could not implement these strategies without a sophisticated computer program and system.

2. Provide specific examples of problems that could occur at Progressive and Zappos if the firms’ business strategy and information technology are not aligned.

If the business strategy and information technology at these two organizations were not aligned, what is advertised on the Web site (or, in the case of Progressive, in TV advertisements) might not be what the customer gets when he or she goes to the respective Web sites. For instance, if a glitch develops in the software at Progressive and a customer is given an incorrect quote for insurance, then Progressive might lose that customer to a competitor. For Zappos, if their computer system started adding shipping charges to a customer order, the customer could claim false advertising because the Zappos Web site promises free shipping to its customers.

Discussion Questions 1. Explain why IT is both a business pressure and an enabler of response activities that counter business pressures.

Page 6 IT is a business pressure because a business must keep up with technology in order to compete. Computer systems and related technologies change constantly, and a business needs to find a balance in keeping up with the changes and making those changes work for their organization. At the same time, IT can help an organization respond to business pressures by serving as the catalyst for change in the organization. The change can enhance the organization’s competitive edge and enable the organization to enter the global marketplace that has only been possible since the widespread integration of the Internet into the business environment.

2. What does a flat world mean to you in your choice of major? In your choice of a career? Will you have to be a “lifelong learner”? Why or why not?

A flat world means that workers now have the chance to compete globally in their field of choice. In the early days of the Internet, this meant that workers outside of the United States had a much better chance of competing for jobs in this country. Today, U.S. workers can compete in the global workforce.

Everyone must be a lifelong learner in order to keep their edge in the business environment. Additional degrees or simply training in new software and procedures will enable workers to keep their skills current and allow them to move on to new opportunities as they arise, whether it is near home or in another country.

3. What might the impact of a flat world be on your standard of living?

The standard of living in developing countries can be significantly impacted by a flat world. There are more jobs available to people in such countries, giving them more income to buy durable goods. In a developed country such as the U.S., there may be a worsening of the standard of living if a significant number of jobs are moved overseas. If a large organization moves its operations to another country and no other industry is available to the workers in that community, the standard of living will fall because fewer people will be employed and have sufficient income to buy necessities.

4. Is IT a strategic weapon or a survival tool? Discuss.

It can be argued that IT is both a strategic weapon and a survival tool. It is a strategic weapon because businesses must use IT to achieve a competitive advantage. At the same time, if an organization does not use IT, it will likely not survive.

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

Organizations traditionally have considered information systems to be ‘overhead.’ The IT department does not generate a physical product and therefore is difficult to justify. The costs of hardware and software plus the personnel to write and maintain software can be a contentious issue when budgets are being examined. The bottom line in any corporation is to make

Page 7 money, and because the IT department generally does not contribute directly to the bottom line in the organization, it is hard to justify the expense.

6. Describe five forces in Porter’s competitive forces model, and explain how the Internet has affected each one. a) The threat of new competitors means that new businesses can enter the market to compete with your product/service. The Internet has actually caused this threat to become a bigger problem, because everything is global, and more competitors exist worldwide. b) The bargaining power of suppliers is a force because you may be forced to pay more or choose from fewer options if there are a limited number of suppliers of the products you need. The Internet has reduced this force because there are many more suppliers available around the world.

Suppliers can attempt to counter this force by locking in customers, preventing them from shopping around for other suppliers. c) The bargaining power of customers (buyers) is enhanced when customers have more choices. The Internet allows a much larger number of choices.

Organizations can respond by offering incentive programs that encourage customer loyalty. d) The threat of substitute products or services means that there are many products available that may draw customers away from a business. An example is wireless versus landline telephones. Many customers have chosen to eliminate their landline phones, resulting in less business for those telephone companies that only offer that service. Searching for such substitutes has been made significantly easier through the introduction of Internet searches. e) The rivalry among existing firms in the industry is a force that exists when there are many competitors in a specific industry. The Internet has made it very difficult to keep proprietary systems secret, thus allowing more competitors into many markets. When many businesses share the same features in their products, competition can become more intense as each business tries to single itself out as the best company with superior products.

7. Describe Porter’s value chain model. What is the relationship between the competitive forces model and the value chain model?

The value chain model describes how companies can use IT to gain competitive advantage. All of the activities of the organization are defined as primary or support activities that turn inputs into valuable outputs for the organization. The value chain model relates to the competitive forces model because organizations use the latter to design general strategies and then use the former to refine those general strategies into specific activities that can be used to create value for the organization.

8. Discuss the idea that an information system by itself can rarely provide a sustainable competitive advantage.

Page 8 An information system without the relationship to a business cannot provide a sustainable competitive advantage. The business-IT connection is critical to strategic advantage. Understanding how the business works is important for IT managers, and understanding how to put IT to work for the business is important for the upper management of the organization.

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

Most government agencies provide a wide array of information on their Web sites. The DHS has many options on its Web site to gather information, such as finding information about terrorism advisories, finding a job with DHS, contacting the department with information, filing a complaint about travel, and learning about electronic identity verification. Someone can contact the Department electronically to find information about anything that is connected to national security or to travel-related security.

2. 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 should have a good time with this exercise, coming up with some customized items. Their creativity can be reflected in the item that they choose to customize. This activity can demonstrate how a company’s Web site can convince customers to come back to a company when the site is easy to use and gives customers what they want.

3. 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.

This organization is a call center located in India. It also conducts market research. Its customers are organizations that want an overseas call center to handle orders. The company fits into Friedman’s Outsourcing flatteners. A U.S. company could use the call center for order placement, debt collection, market surveys, and product promotion.

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

I’m not sure how the author expects students to compare the China version of Walmart to the U.S. because all the circulars online are in Chinese (there was no English version available).

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5. Apply Porter’s value chain model to Costco (www.costco.com). What is Costco’s competitive strategy? Who are Costco’s major competitors?

Describe Costco’s business model. Describe the tasks that Costco must accomplish for each primary value chain activity. How would Costco’s information systems contribute to Costco’s competitive strategy, given the nature of its business?

Costco strives to be a low-cost leader, using its quantity discounts to reduce its prices. Its primary competitor is Sam’s Club from Walmart and BJ’s Wholesale Club. Costco’s business model is to sell a high volume of products at a low price. It does not buy products from multiple brand names; rather, it purchases large quantities of products from single suppliers. Students should list the value chain activities and the tasks for each activity. Costco’s competitive strategy would not be possible without an IT system that could search out the best deals and keep track of the organization’s huge inventory.

6. 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?

Dell’s competitive strategy is to provide computer products and services to specific niches of the business/personal world. The company has separate divisions that produce computers for businesses and homes, respectively.

They were the first company to implement the user-configuration model for selling computer systems. Their major competitors are: Hewlett-Packard (HP), Acer, Toshiba, Gateway, Sony, Asus, Lenovo, IBM, Samsung, Apple, and Oracle. Students should list the value chain activities and the tasks for each activity. The user-configuration techniques would be very difficult to perform without a sophisticated IT system that enables Dell to customize each order. Customers can even create a customized computer online and determine the cost before they order it.

7. The market for optical copiers is shrinking rapidly. It is expected that by 2010 as much as 90 percent of 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.

Students should come up with issues such as competition around the world and the overwhelming number of people who no longer make copies but simply import documents into a computer. The cost of making copies is generally higher than that of printing from a computer. c. Find some of Xerox’s response strategies (see www.xerox.com, www.yahoo.com, and www.google.com).

Page 10 Xerox has moved into the printer business in an attempt to keep its business from failing. They offer many types of printers (multifunction, color, black and white), scanners, and digital copiers. d. Identify the role of IT as a contributor to the business technology pressures (for example, obsolescence).

Every business is interested in reducing its costs, because copying can be a huge expense. IT for Xerox has introduced a way for businesses to reduce their copying costs by either eliminating it (sending copies of products through e-mail) or by printing using computer-connected printers. This has place pressure on Xerox to find other ways to stay in business by using this IT pressure to diversify its products. e. Identify the role of IT as a facilitator of Xerox’ critical response activities.

Students should come up with suggestions for using IT to respond to adverse situations. Xerox used IT as the mechanism to facilitate research into ways to transform their copy technology into something that would work in the digital world.

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.”

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 should create a report on how the Yahoo and Google groups are similar and dissimilar. They should include any difficulties that they encountered and perhaps what they did or did not like about the two types of groups. Using this technology in the future for the class would be a good way to get the students accustomed to using the groups.

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2. 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?

Answers will vary widely. The instructor may want to assign the countries to compare, perhaps having one team compare the U.S. and China and another team compare the U.S. and Canada. Comparing one country with several other countries could bring out some interesting differences. Have the students prepare a PowerPoint presentation and share it with the rest of the class.

CLOSING CASE 1– Double Trouble for BP Questions 1. Describe BP’s first problem, which involved the firm’s IT function. Discuss BP’s solution to this problem.

The IT department was considered too big and complex. The goal was to increase revenues, which required IT to become smaller, more focused, and more concerned with performance and accountability than they had been in the past. The goal was to reduce the IT budget by $800 million, reduce the number of IT vendors by half, evaluate the 4,200 IT employees, reduce the number of software applications worldwide, and transform the IT department into a business-driven, strategic component of the organization.

2. Discuss BP’s handling of its second problem, the well-head explosion.

BP did not handle the well-head explosion very well. They bought ads in Google, but those ads routed people to a Web site that contained inaccurate information. BP was not forthcoming with information concerning the results of the spill that both the U.S. government and the general public wanted. In addition, their Web site did not display any pictures of the actual spill.

3. Why did BP believe that its business information systems were of strategic importance to the firm (in the company’s first problem), but that its drilling information systems were not of comparable strategic importance? Provide examples to support your answer.

BP believed that its information systems were of strategic importance to the firm in the first problem but they realized that they could not be competitive without a large computer system to handle their day-to-day operations. In the oil well disaster, BP did not realize that the engineers could not monitor and analyze so many complex pieces of information from the drilling platform.

The existing IT systems were not capable of providing backup for the

Page 12 engineers. Those systems should have been configured to alert engineers that a problem existed.

CLOSING CASE 2– Two Financial Giants Merge Questions 1. Provide two specific examples of why it was so important for Wells Fargo and Wachovia to integrate their information systems so as to ensure the success of the merger.

When two large organizations merge, it is vitally important that their information systems are integrated so that customers do not see a change in the way they access the new organization. In the case of banking, if one bank has a very centralized computer system and the other bank uses decentralized computer systems, there will be a disconnect with how those computers interact until a single plan has been devised on how to coordinate the computer networks that control all the computers. In addition, because each bank may have had its own brand or way of doing business as seen by consumers (delivered by IT), the new company needs to consolidate these brands and come up with a new brand to identify itself as a new entity to consumers.

2. Provide two specific examples of difficulties the companies experienced in integrating their information systems.

First, there were over 4,000 IT systems. The challenge was to choose one business process, select one application for that process, and then educate employees on how to use the selected application. Mortgage lending and online banking are two of the processes that had to be merged into a single IT system. Second, because the merger involved combining different IT teams, it was very important that all employees be given a chance to voice their opinion about the IT systems that the new organization planned to use.

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CHAPTER 3:

Data and Knowledge Management

Chapter Overview 3.1 Managing Data 3.2 The Database Approach 3.3 Database Management Systems 3.4 Data Warehousing 3.5 Knowledge Management

Learning Objectives 1. List three common challenges in managing data and describe one way each can be addressed using data governance.

2. Name six problems minimized by using the database approach.

3. Demonstrate how to interpret relationships depicted in an entity-relationship diagram.

4. List one main advantage and one main disadvantage of relational databases.

5. Identify and explain the advantages of the four characteristics of data warehouses.

6. Demonstrate the use of a multidimensional model to store and analyze data.

7. List two main advantages of using knowledge management, and describe the steps in the knowledge management system cycle.

Teaching Tips and Strategies This chapter deals with databases and the information that is contained within them. It is important to emphasize to students how critical data are to the success of organizations. Organizations use data, information, and knowledge to develop their business models, and keeping those data secure is very important.

The chapter uses many examples related to a university environment to show how to create a database. It would be useful in class for the instructor to either use one of the examples in the chapter or to create another example from a business environment and

Page 2 build a database (a very simple one with a couple of tables) during class. Most business students will need to have knowledge of how to build and use a database at some point in their business career, so explaining to them how to create a simple database is appropriate in this chapter.

Once the database is built, demonstrating how those individual pieces of data are formed into knowledge is also very important. Using an example of knowledge based on current events is helpful to convey this concept. Amazon.com, for example, has a vast array of corporate knowledge on how to get and retain customers. Logging into their Web site and showing students how they suggest items based on previous purchases can illustrate how an organization can use a database to create knowledge about a customer and to personalize the customer’s experience.

You may have experience in business or industry that you could use to illustrate how corporate knowledge is created. The popular saying that much corporate knowledge leaves when someone who has been with a company for many years retires is very true.

This chapter points out how that may leave a gap in the corporate knowledge. Sometimes people acquire knowledge concerning their job that is never written down and therefore never becomes a part of the organization’s knowledge base. If that person leaves, then the company has lost his or her knowledge.

OPENING CASE – Crabby Bill’s 1. Why did Crabby Bill’s develop multiple databases for their data? Are there any advantages in this approach? Support your answer.

Crabby Bill’s used multiple databases to separate the different types of data that they were using (inventory, accounting, payroll, etc.). Creating separate databases is easy, and if they are not interconnected (which is stated in this case, they did not communicate with one another), they are easy to maintain. Other than this advantage, there are few reasons to keep separate databases. Because communication is a major challenge, maintaining separate databases creates many problems for employees who have to use data from these databases.

2. What are disadvantages to the multiple database approach (other than the disadvantages mentioned in this case.)?

Some additional disadvantages include having redundant data, having to maintain separate databases, and allowing employees access only to select data on certain databases. One reason to use a database is to keep an organization’s data in a single place, using a single format so that it is easier to access. Multiple databases can hinder that goal.

Review Questions Section 3.1 – Before you go on…

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

Page 3 There are many sources of data, and the data may not all be in the same format.

Keeping track of which data are vital to an organization is critical to the successful achievement of the organization’s goals. Once the data are stored in the preferred format, they must be available to people within the organization who will use them. Data need to be accurate, complete, timely, consistent, accessible, relevant, and concise. Most organizations accumulate a large amount of data over time, and those data need to be stored and made available to those who need them. The data may be spread throughout the organization. In such cases they need to be consolidated in a common location. The storage media on which data are kept may deteriorate over time, causing the data to be lost. Finally, government regulations state how much data need to be kept and for what length of time.

2. Define data governance, master data, and transactional data.

Data governance is a formal set of business processes and policies that ensure that data are handled in a certain, well-defined manner.

Master data are a set of core data (such as customer, product, employee, vendor, etc.) that are common across the entire organization. Master data categorize, aggregate, and evaluate transactional data.

Transactional data are data that are captured by individual transactions of the information systems that actually operate the business. These transactions define the activities of the business.

Section 3.2 - Before you go on…

1. What is a data model?

A data model is a diagram that represents the entities (person, place, thing, event) in a database and how they relate to one another (called relationships).

2. What is a primary key? A secondary key?

A primary key is a field in the database that is used to uniquely identify a record so that it can be retrieved, updated, and sorted.

A secondary key is another field(s) in the database that has some additional indentifying information but cannot identify an individual record uniquely.

3. What is an entity? An attribute?

An entity is a person, place, thing, or event that can be identified in the user’s work environment. Entities are contained in the organization’s database.

Each characteristic or quality of a particular entity is called an attribute. For example, if our entities were a customer, an employee, and a product, entity attributes would include customer name, employee number, and product color.

Section 3.3 - Before you go on 1. What are the advantages and disadvantages of relational databases?

The advantages of a relational database include the fact that the multiple related tables can be linked together, enabling complex queries of the data within the tables. The large number of tables, however, is also a disadvantage

Page 4 because the overall design can become quite complex. Consequently, searching for data can become time consuming, thereby slowing down access to the data.

2. What are the benefits of data dictionaries?

A data dictionary is used to describe the format for the data that are entered into the database. Data dictionaries thus provide users with the specific information they need about each attribute (such as name, whether it is a key, type of data, valid values) so that when they are entering data, they enter correct data. The data dictionary also provides an inventory of the data resources for an organization.

3. Describe how structured query language works.

Structured query language (SQL) allows people to do complicated searches using simple statements or key words. The query uses words such as SELECT, FROM and WHERE to create a question that is used to search the database. An example is: SELECT address FROM employee file WHERE city=New York and state=New York. This query would produce a list of all employees who live in New York, New York.

Section 3.4 – Before you go on 1. Differentiate between data warehouses and data marts.

A data warehouse is contains historical data. The data are organized according to subject so that they are easier to access. Organizations often place data from older computer systems (called “legacy systems”) into a data warehouse for future access.

A data mart is a smaller version of a data warehouse, containing only the information needed by an individual department or strategic business unit. It is easier to implement and maintain a data mart because it is smaller, and data access is faster.

2. Describe the characteristics of a data warehouse.

• Organized by business dimension or subject such as customer, vendor, or product so that the data are easily searchable • Uses online analytical processing, meaning the database analyzes the data that have been accumulated by end users, rather than the current transactional data • Integrated, meaning that data are collected from multiple systems and are then organized around subjects • Time variant, meaning that time is used as a variable in the database, because data warehouses collect historical data, not simply current data • Nonvolatile, meaning that no one can change or update the data • Multidimensional, meaning that a data warehouse stores data in more than two dimensions. Remember that a relational database stores data in a two-dimensional table.

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3. What are three possible architectures for data warehouses and data marts in an organization?

Data warehouses and data marts can be stored as: (1) one, central enterprise data warehouse architecture, (2) independent data marts architecture, or (3) a hub-and-spoke architecture.

Section 3.5 – Before you go on 1. What is knowledge management?

Knowledge management is the process that allows an organization to manipulate information that is an important part of the organization’s memory. This knowledge is usually unstructured.

2. What is the difference between tacit knowledge and explicit knowledge?

Explicit knowledge is objective, rational, and technical knowledge. Examples are policies, procedural guides, reports, products, strategies, goals, core competencies, and the IT infrastructure.

Tacit knowledge is the accumulation of subjective or experiential learning. An organization’s experiences, insights, expertise, know-how, trade secrets, skill sets, understanding, and learning are all examples of tacit knowledge.

3. Describe the knowledge management cycle.

The knowledge management cycle is made up of six steps: • Create knowledge: Knowledge is created as people determine new ways to do things; • Capture knowledge, where knowledge is identified as valuable; • Refine knowledge, which means placing knowledge in context so it can be used; • Store knowledge, meaning to put it in a format that others can use; • Manage knowledge, or reviewing it regularly so that it does not become outdated; • Disseminate knowledge, which refers to making it available to those who need it, when they need it.

“IT’s About Business” Questions 3.1– A Database for Cell Phone Owners in Mexico 1. What types of problems did the cell phone database experience?

The database was incomplete, because not all cell phone owners submitted their information to the government. Also, the data in the database were not accurate, and accuracy is a critical component of a good database. In addition, the database was not secure. In fact, anyone could purchase the data stored in the database.

2. Why did the cell phone database experience these problems?

Page 6 The citizens did not trust the government and therefore were not willing to submit their personal information to populate the new database. One fear is that criminals will obtain the information for private citizens.

3. Would you classify the Mexican cell phone database a success? A failure?

Partially successful? Why or why not? Support your answer.

The Mexican cell phone database is a failure. Without complete data and without verifiable information, any queries that utilized the data cannot be considered to be accurate. This is a good example of how incomplete or inaccurate data can ruin a database. There is no complete report that could be generated from this database.

3.2– The Data Warehouse at the Isle of Capri Casinos 1. Why was it necessary for The Isle of Capri Casinos to develop a data warehouse?

The casino needed a data warehouse to store the massive amounts of data that it collected and to analyze those data to make every customer’s experience enjoyable.

2. Describe the variety of benefits that The Isle realized from its data warehouse.

The Isle was able to identify key markets and direct mail information to customers in each market through the information mined from the data warehouse. The number of times a customer visited a casino was used to determine the incentive that was offered to get that customer to come back to the casino. Information from the casino, the hotel, and the slot machines allowed The Isle to better target customers based on their past playing habits to encourage them to spend more time and money at the casino.

3.3 - Building a Comprehensive Picture of the World 1. Compare and contrast Quora to an organization’s knowledge management system. Could a Quora-type knowledge management system be used inside an organization? Why or why not? Support your answer.

Quora is actually very similar to an organization’s knowledge management system. It is attempting to gather the ‘knowledge’ of ‘experts’ to provide intelligent, in-depth answers to questions. This type of knowledge management system could be used within an organization. We often talk about how knowledge is lost when someone retires or dies while still working.

If a Quora-type knowledge base were developed by interviewing seasoned employees or by having such employees answer questions, it would be a valuable resource for the organization after those individuals leave the organization.

2. Provide examples of how Quora can fill in the gaps in its knowledgegathering efforts.

Quora needs to have editors updating the postings on its site on an ongoing basis. It also might use some incentive to lure additional people to its site

Page 7 (e.g., a contest that gives away a sponsored product to people who post and enter the contest). Integrating more knowledge into the database will make its knowledge-gathering efforts more fruitful.

Discussion Questions 1. Explain the difficulties involved in managing data.

The amount of data increases exponentially with the passage of time. Those data are also often scattered throughout an organization, making it hard to keep track of which data are available. Data also come from different sources, so they may be in many different formats. New sources of data such as blogs, podcasts, and RFID tags are saved in yet another format and might have to be reprogrammed to be included in a corporate database. Further, data may deteriorate over time, based on the quality of the recording medium. In addition, there are legal and government requirements for the storage of data.

Different departments within an organization may have different information systems developed for their own use and may also have different needs for the information.

2. What are the problems associated with poor-quality data?

Poor-quality data can result in incorrect reporting, and they can cause problems for an organization with regard to its suppliers and customers. If data are inconsistent across an organization, different information systems within the organization may come up with different results for the same queries. If a database is not updated with current customer information, then incorrect mailings could be generated and then returned to the company due to invalid mailing addresses, creating additional costs. If a database connected to a business Web site has incorrect data, customers may find a product they want to buy on the Web site, but the item may no longer be available. Such a situation would cause the customer to lose confidence in that organization’s Web site.

3. What is master data management? What does it have to do with high-quality data?

Master data management enables a company to store, maintain, exchange, and synchronize its master data. It also verifies that the data are verified and correct. Such data management follows from data governance, where a company establishes policies about how it collects, stores and disseminates data so that it is confident that the data are correct. Organizations use master data to analyze transaction data in order to identify trends and to predict future needs.

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

Corporations that have multiple data sources need master data management to ensure that the data are consistent. Transaction data in the various databases

Page 8 can have errors and be in different formats. The master data reflect the corporate version of elements such as customer, product, employee, and vendor information so that transaction data can be compared against them for analysis. Discrepancies can be tagged, and corrections can be made. Because today’s Web sites allow customers to enter their own data when placing an order, it is important to maintain a master data management system so that any errors entered by a customer can be identified before incorrect information is added to the information system.

5. Describe the advantages of relational databases.

A relational database is relatively simple and can be easily built and used by a non-IT professional in a business environment. It is created by linking together smaller tables. Relational databases reduce redundant data, and they are easier to create than a flat file. The design of the relational database makes creating queries a simple task, and it allows the queries to be processed quickly.

6. Explain why it is important to capture and manage knowledge.

An organization can be successful only if its corporate knowledge (which can be considered a form of capital) can be captured and stored in a format that other people within the organization can utilize. Because knowledge is information in action, it is critical that the data and information that make up the corporate reality are maintained and managed effectively.

7. Compare and contrast tacit knowledge and explicit knowledge.

Explicit knowledge is something that you can see, feel, or touch. An example is an organization’s policy on vacations. This is something that is searchable on the company’s Web site and can be used for planning purposes. Any policy, guide, report, product, strategy, goal, or core competency of the organization can be considered explicit knowledge.

Tacit knowledge is not something that can be seen. It is the knowledge that people within the organization hold within themselves, things that have been developed over the years. This type of knowledge is exemplified by an organization’s experiences, trade secrets, skill sets, understanding, insights, and expertise. These are things that typically are not written down, but they are known by persons within the organization.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 1. Access various employment Web sites (for example, 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?

Page 9 From www.monster.com “Currently, we are seeking a Database Administrator for an immediate opportunity in the Richmond, VA area. Qualified candidates will have at least five (5) years of experience working with SQL databases for a marketing, advertising, and/or entertainment company. The ideal candidate will be able to work across multiple platforms, be willing to take on leadership responsibilities, and have a desire to work for a company that seeks creative/inventive people. $65,000 - $100,000” From www.dice.com “Responsible for supporting and remotely administering Oracle 11g/10g/9i/8i databases, including RMAN backup and restore, creating test instances using DBCOPY, and configuring and resizing production data files in critical hospital production environments. Must periodically participate in 24/7 on-call rotation schedule. Must have strong written and verbal communication skills, and be able to work remotely with hospital IT staff and partner with UNIX/Linux remote systems administrators in resolving customer issues.” No salary specified.

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?

If you access www.prudential.com/realestate and click on “Resources,” the site offers a step-by-step process for buying a home. There are virtual tours of homes, as well as calculators to determine mortgages and interest rates. You do have to register to use some of the features and to receive e-mail. Students will have various sites they have found that offer these services.

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? If so, how? Do the sites require a fee for the information they offer? Would demographic information be useful to you if you wanted to start a new business? If so, how and why? www.census.gov offers free access to demographic information.

Zipskinny.com also offers free demographic information based on zip code.

Pathfinders (ipl.org/div/pf/entry/48461) provides demographics based on occupation.

Students will come up with many other options. People looking to start a new business would benefit from knowing the demographics of the area in which the business will be located. Information about income levels, ethnicity, ages, and so forth can help determine how marketing should be designed and delivered as well as what types of products should be sold.

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

Page 10 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?

Some sites include: Wells Fargo (https://www.wellsfargo.com/jump/EFS/studentloans )- you need to register to apply and get information.

Sun Trust (http://academicanswer.suntrusteducation.com/index.html?ref=DTCPSGOOG NGEN2984 )- you can get information without registering, but you must register to apply.

Federal Student Aid (FAFSA) (http://studentaid.ed.gov/PORTALSWebApp/students/english/index.jsp )-you don’t need to register to get information.

Students will have many other sites. All these sites allow online applications.

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

Student Answers will vary as there are many different formats for an entity relationship diagram.

6. Draw the entity-relationship diagram for this patient appointment system. The business rules of this system are the following: A doctor can be scheduled for many appointments, but may not have any scheduled at all. Each appointment is scheduled with exactly 1 doctor. A patient can schedule 1 or more appointments. One appointment is scheduled with exactly one patient. An appointment must generate exactly one bill, and a bill is generated by only one appointment. One payment is applied to exactly one bill, and one bill can be paid off over time by several payments. A bill can be outstanding, having nothing yet paid on it at all. One patient can make many payments, but a single payment is made by only one patient. Some patients are insured by an insurance company. If they are insured, they can only carry insurance with one insurance company. An insurance company can have many patients carry their policies. For patients that carry insurance, the insurance company will make payments, with each single insurance payment made by exactly one insurance company.

Student Answers will vary as there are many different formats for an entity relationship diagram.

Page 11

Web Assignments 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 data management products, including Web connections.

IBM has a product call ‘InfoSphere’ that provides “a physical master repository that delivers a single version of truth of an organization’s critical data entities – customer, product, supplier and more - helping them make better decisions and achieve better business outcomes.”

Sybase offers SQL Anywhere that offers “Developers can use the database and synchronization technologies in SQL Anywhere to power data-driven applications in server, mobile and remote workgroup environments. SQL Anywhere supports the unwired enterprise by enabling line-of-business applications to run in remote locations and on all major laptops, enterprise handheld and Smartphone devices.”

Oracle offers Oracle Enterprise Manager “Oracle Enterprise Manager 11g Database Management Packs provide industry-leading support for Oracle Database 11g Release 2 through its unique database management automation, so you can: * Maximize your database performance with a 100% ROI * Drive resource and asset utilization by 70% * Accelerate patching and provisioning by up to 80% * Cut testing efforts by 50% * Boost administrator productivity by 40% * Save 63% in time and effort managing configurations * Trim server spending by 20%” Students may come up with other items for this list.

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

There are several reports the students can download from this site. Their reports will vary based on which case they choose.

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

Answers will vary. This is a fun activity for the students to pursue. The instructor should have the students create a report on their findings.

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

Page 12 track in their databases. Diagram the relationship between the entities you have identified.

Students should first choose an online database and then list what types of information they can find. They can create a report that lists the entities and attributes (which will be different based on the kind of database they choose).

They can then create a diagram from those entities 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.

Some examples of attributes are: Customer-data - name, address, city, state, zip, phone; Product data – dry dog food, canned dog food, parakeet food, cat treats, dog bowls, etc.; Employee data-name, address, phone, position; and so on for the entire list. The students should then take the attributes they have chosen, create a data model, and then construct an entity-relationship diagram.

CLOSING CASE 1– Big Data Questions 1. Is Big Data really the problem, or is it the use, control, and security of the data? Provide specific examples to support your answer.

We can all be overwhelmed by the amounts of data that are thrown at us every day. Although Big Data may be a problem for some people, the real problem is interpreting, sorting, and eliminating data. How much data do we really need? For instance, look at one of the cable news networks, such as CNN. There is often so much information on the screen that it can give you a headache just looking at it. The intelligent viewer chooses a single area of the screen on which to concentrate (such as stock prices or news feeds) and ignores the other things on the screen. This type of video screening can be done with data as well. If the data are separated into their relevant components, we can take what we need and ignore the rest.

2. What are the implications of having incorrect data points in your Big Data?

What if customer information is incorrect or duplicated? How good are decisions made based on bad information derived from incorrect data?

Page 13 Incorrect data points in any Big Data are a major problem. If customer information is duplicated, multiple e-mails or physical mailings may be sent, causing aggravation on the part of the consumer and costing the organization more money. If the organization analyzes incorrect data, then it will make erroneous decisions. For instance, if a database contains multiple copies of customer information and a corporation wants to determine how big its customer base has become, it will calculate an inflated number because the data in its corporate database are incorrect.

CLOSING CASE 2– Company Strategy Thrives with Database Strategy Questions 1. Describe the problems in the commercial real estate market that led to Andrew Florance founding the CoStar Group.

In the 1980s, commercial real estate properties were not listed in the same way that residential real estate was. Data were listed in many different places such as guidebooks, public records, and real estate listings. What was needed was a consolidated list of all commercial property for sale that could be easily searched. That is what prompted Andrew Florance to found the CoStar Group.

2. Discuss the reasons why the established commercial real estate brokers felt that the CoStar Group was a competitive threat.

The commercial real estate brokers did not want the sale of commercial properties to be transparent. They may have believed that they had an advantage in the selling of properties if they had a tighter control over who had access to the commercial property information.

Page 1

CHAPTER 4:

Telecommunications and Networking

Chapter Overview 4.1 What Is a Computer Network?

4.2 Network Fundamentals 4.3 The Internet and the World Wide Web 4.4 Network Applications

Learning Objectives 1. Define the term computer network, and compare and contrast the two major types of networks.

2. Describe the differences among the three types of wireline communications media, and discuss the main advantages and disadvantages of each type.

3. Differentiate between the Internet and the World Wide Web, and describe the most common methods for accessing the Internet.

4. Identify six major categories of network applications, provide an example of each one, and explain how that application supports business functions.

Teaching Tips and Strategies Networks are the backbone of all computing today. Very few people use a standalone computer, even in their home environments. Not only are our computers connected to a LAN or WAN in the workplace, but our smart phones and other mobile devices are also connected to a network. One way to introduce this chapter is to ask the students if they know how their smart phone or tablet connects to the Internet. Some may say WiFi (you might want to ask them if they know what that is), and others may list a specific communications carrier (such as AT&T or Verizon). It is important to make them aware that these devices do not connect to the Internet by magic. There is technology behind it.

In the business world, people who understand network technology terminology have a competitive advantage over those who do not. When dealing with technicians, either when they are setting up a new system or repairing existing technologies, it is always helpful to understand what they is talking about. Employees who simply allow

Page 2 the organization’s IT personnel to ‘do their thing’ are less likely to end up with the technology they need to do their job efficiently.

Knowing the types of cabling available, the protocols used for networks, and the differences among the various types of networks is critical in today’s business environment. A network analyst from an organization would be a good guest speaker to explain how their organization’s network functions. (Hopefully you can find someone who can relate to the students and speak in business terms, rather than simply spout technical jargon). It would then be useful to compare the network from a business organization to the network(s) that are used at your school. The students are familiar with using the networks (or they should be after discussing this chapter), but they may not realize everything that goes on in the network, or how the LANs in the various buildings on campus are interconnected. Finding a network diagram would help them understand the concepts in this chapter.

It is also useful for students to see the actual cable that makes up a network.

Because networks are made up of hardware and software, bringing in some network cable examples can help solidify students’ ideas about the physical network. Twisted-pair and coaxial cables are relatively easy to obtain, whereas fiber-optic cable may be a little harder. However, an electronics store such as Radio Shack should carry it (car dashboards use fiber-optic cable rather than light bulbs), although the cable they carry generally has a plastic inner cable, rather than the glass cable that is typically used in networks. You can demonstrate how fast data can travel using light by shining a flashlight at one end of the fiber-optic cable and showing the students the other end.

OPENING CASE – Child’s Play Charity 1. Explain why networks were essential for Mike and Jerry to grow their business.

Without networks, Mike and Jerry would not have been able to reach as many people as they did for their charity project. The Internet is the ultimate network, connecting millions of people around the world. It is the easiest way to communicate and share information in our current generation of technology.

Trying to spread their message by word of mouth would have been very slow and could not have reached very many people. Postal mailings would have been expensive and slow. By using networks and technology, Mike and Jerry were able to achieve and surpass their goals.

2. Propose a charitable organization (or function) that you could set up at your university, and explain how you would use networks to make it a success.

Various types of charities could be proposed: Food for pets of low-income families, books for children, food for a food pantry. Students should propose how they could use the Internet or the network at your university to collect money or tangible products for their charity.

Review Questions Section 4.1 – Before you go on…

1. What are the primary business reasons for using networks?

Page 3 Networks allow computers to communicate with other computers within and outside the organization. Thus, they make organizations more flexible by enabling them to change as the business environment changes. Hardware, computer applications, and data can be shared among other workers inside the organization and with other organizations. Employees who are located in distant geographical areas can share documents and ideas easily using a network. Networks also link the organization to other businesses, business partners, and customers.

2. What is the difference between LANs and WANs? A local area network (LAN) connects networks that are in a limited geographical location, such as within a building or among several close buildings. Generally, a LAN is owned by the business that uses it. A wide area network (WAN) is a network that spans a large geographical region. The Internet is a WAN. WANs are made up of lines owned by telephone companies and global communication companies and have a much larger data transmission capacity than a LAN. 3. Describe an enterprise network.

An enterprise network is the combination of LANs and WANs that make up a network that is used by an organization. The networks are interconnected so that anyone on any of the various components of the different networks can communicate with anyone else on that that network. The enterprise network has a single backbone network to which all the other LANs and WANs are connected.

Section 4.2 - Before you go on…

1. Compare and contrast the three wireline communications channels.

The three types of wireline communications channels are twisted-pair, coaxial cable and fiber-optic cable. Twisted-pair is the original type of cable, a form of which was originally used for home telephone networks. It is inexpensive, widely available, and easy to use. However, it is very slow by today’s communication standards, easy to tap, and subject to interference. Coaxial cable allows transmission of higher bandwidth (more data) and is less susceptible to interference. It is more expensive that twisted-pair and inflexible. Coaxial cable is also easily tapped into and difficult to work with. Fiber-optic cable allows very high transmission speeds (high bandwidth), is relatively inexpensive, and is difficult to tap (making it very secure). The disadvantage is that it is difficult and expensive to work with.

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

Digital subscriber line (DSL) uses existing telephone lines to provide high-speed data transmission. This technology allows data and telephone transmissions over the same physical lines. Asynchronous transfer mode (ATM) allows the transmission of data, voice, and video at high speeds over a single communications line. Synchronous optical network (SONET) utilizes fiber-optic lines to carry large volumes of data over very long distances. The T-carrier system is a digital transmission system that defines circuits that operate at

Page 4 different rates, all of which are multiples of the basic 64 Kbps used to transport a single voice call. The faster the transmission line, the most expensive it is to use.

3. Describe the Ethernet and TCP/IP protocols.

Ethernet is a LAN protocol that is used to transmit data at speeds that vary from 10 gigabits per second up to 100 gigabits per second. This is the most common protocol used in LANs. TCP/IP is the protocol used by the Internet. This is really a suite of different protocols, each of which has a different function. TCP manages the packets — small, fixed bundles of data —as they travel between computers. It ensures that the packets are in the correct sequence, and it acknowledges that the packets have been transmitted. The IP protocol disassembles, delivers, and reassembles the data during transmission.

4. Differentiate between client/server computing and peer-to-peer processing.

Client/server computing connects two or more computers in a network. Some computers are called servers, and they provide programs and data to other computers, called clients. The servers control what data can be accessed by which computers. In this type of network, the server computers are basically ‘in control’ of the network. In peer-to-peer networks, each computer is equal, acting as both a server and a client computer. All computers on the network can access all of the files and data found on any other computer on the network.

Section 4.3 - Before you go on 1. Describe the various ways that you can connect to the Internet.

• Via an organization’s LAN • Through an online service provider (Internet service provider, or ISP) • Smart phones • iPads • WiFi 2. Identify the parts of an Internet address.

If you use www.technology.osu.edu: The top-level domain is ‘edu’, the company (in this case Ohio State University) is ‘osu’, and the particular computer is named ‘technology’.

3. What are the functions of browsers?

A browser is a program that gives users a graphical way to access Web sites.

They are a universal way to access the World Wide Web. 4. Describe the difference between the Internet and the World Wide Web. The Internet is basically a text-based transport mechanism to send information to other users. The World Wide Web is a graphical application program that uses the functions of the Internet. The World Wide Web is a standard that has been developed using graphical user interfaces (GUIs) so that anyone can understand it.

Page 5 Section 4.4 – Before you go on 1. Discuss the network applications that you studied in this section and the tools and technologies that support each one.

Discovery allows users to gather information from all over the world, not just their local environment. This can be overwhelming, given that so much information is available on the Web. Communication has been enhanced because of the use of networks. Users can now communicate with others either on the other side of town or the other side of the world, via both written communication (e-mail) and visual communication (Skype). Collaboration has been made easier through the use of networks because users can work on the same documents by storing them in a common place online, so that everyone can work on a single version of a document. E-learning and distance learning are used by many people, both for completing degrees and for getting additional course-work that may be required by their employer. The Internet has made getting this information much easier. Virtual universities allow large numbers of people to work on a college degree, whether they are located near a university or not, using the Internet. Telecommuting allows workers to work from home, using the Internet or virtual private networks set up by their employer.

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

Videoconferencing is important because many times the participants are in distance locations and the best way to hold a meeting is online. A phone conference does not allow the sharing of data, pictures and graphics.

Videoconferencing allows all those things to be viewed by anyone connected to the conference. Utilizing videoconferencing allows meetings to be held without the expense of everyone traveling to a single location for the meeting.

3. Differentiate between e-learning and distance learning.

E-learning is defined as using the Internet to enhance learning. This can be using Web-based materials in a classroom, or having the students do some online activities outside of class. In distance learning, the teachers and students do not meet face-to-face.

4. Describe virtual universities.

In virtual universities, students take classes using the Internet as their classroom. In such an environment, the students never come to a classroom, but do all their interaction with teachers and advisors online.

5. What is telecommuting? Do you think you would like to telecommute? Why or why not?

Telecommuting enables workers to perform their job at any place, and at any time. Employees can stay at home to take care of children or elderly parents and yet still keep up with their job. Students may at first think this is a great idea, but telecommuters must be motivated to work on their own. They must

Page 6 be self-starters who don’t need someone looking over their shoulder to complete their assignments. Also, some employers don’t believe that telecommuters will actually do their job. Despite these concerns, however, many people enjoy this form of work and are very productive.

“IT’s About Business” Questions 4.1– Browser Competition Heats Up 1. Given that all browsers are free, what features do the major browser companies focus on to gain competitive advantage?

Major browser companies upgrade their products and services to keep their customers. These upgrades are free, and users can download and install them automatically if their computers are properly configured. Security is also a very big issue, and the major browser companies concentrate on maximizing their browsers’ safety.

2. Which browser do you use? Why? Provide examples of why you use this particular browser.

Students should know which browser they use, and they should be able to come up with some reasons such as the following: • Easy to use • Uses up less space on the hard drive • More secure • Fewer problems with the specific software they use • Hardware specific (such as using Safari on Apple) • Came with the computer 4.2– Informative Videos on the Fly 1. Describe the advantages of Qwiki over conventional search and metasearch engines.

Qwiki provides a multimedia presentation instead of simply a list of links when a search is complete. It compiles a video of information and graphics in real time.

2. Does Qwiki have a competitive advantage over conventional search and metasearch engines? Why or why not? Provide examples to support your answer.

Because other search engines do not compile information into a presentation, Qwiki does have an advantage over the others. It is also designed for the future. One idea is to personalize the information. For example, an alarm clock that can also provide weather and traffic in the user’s area would have a significant competitive advantage. Qwiki appears to be poised to open a new era of search engines.

4.3 – Online AP Classes Are Big Business

Page 7 1. Identify and discuss the disadvantages of taking online AP classes. Provide specific examples of disadvantages that are not mentioned in this case.

AP classes offered online limit the amount of personal interaction a student has with other classmates and with the teacher. Because high school students are still acquiring social skills, this could hinder their development. It may also be intimidating for students in these classes to contact their instructor if they have questions.

2. Apply your thoughts in Question 1 to college education by discussing the advantages and disadvantages of taking college courses online. Extend your answer here to completing entire degree programs online.

Online college courses allow students to take additional courses that don’t interfere with their on-campus courses, potentially allowing them to graduate sooner. Students can work and still go to school because the work is done at their own pace. Students with families can spend less time travelling to school and thus spend more time with their family. Disadvantages include the motivation factor (students must work on their own), lack of interaction (faceto-face), and in some cases, higher tuition. Online degree programs offer the same convenience as online courses, but a student could complete the program without having to be in close proximity to the campus. Therefore a student could complete a plan of study in a topic that is not available at his or her local university, without the expense and time involved in enrolling and living on a residential campus.

3. After you answer Question 1 and 2, speculate on the future of online universities.

Online universities currently have some issues with credibility. For-profit institutions are being required by the federal government to justify their degrees and ensure that the students are getting the quality education that they are paying for. There will always be a need for online education as an addition to on-campus education. The two can coexist.

Discussion Questions 1. What are the implications of having fiber-optic cable to everyone’s home?

The cost to install fiber-optic cable to everyone’s home would be prohibitive.

It would require new cabling to each home in addition to new connections to provide access to the overall network.

2. What are the implications of BitTorrent for the music industry? For the motion picture industry?

BitTorrent enables the music and motion picture industries to reduce the impact of distributing their files on servers. The BitTorrent protocols allow users to download and upload files from one another simultaneously, thereby reducing the required time and capacity. This protocol can work over slower

Page 8 networks, so that files can be distributed to other users via mobile devices.

Files are divided into smaller parts (thus the term ‘bit’), enabling many people to share multiple files at the same time.

3. Discuss the pros and cons of P2P networks.

P2P networks allow computers to act as both a client and as a server.

Therefore, the data files as well as the computing power of all the computers on a network can be shared. Grid computing actually takes advantage of this feature by enabling the unused CPU cycles of many computers to be combined and utilized to allow massive computing projects to take place without the necessity of buying a huge mainframe computer.

4. Should the Internet be regulated? If so, by whom?

The Internet actually works pretty well the way it is currently configured, where the operation is shared among many organizations and the cost is shared among thousands of nodes. This arrangement keeps the cost for any one organization very low. ICANN coordinates the IP addresses, but it does not control the Internet. Because the Internet is not a single network but is comprised of many interconnected networks, it would be difficult for one organization to regulate it. Think about the fact that the Internet operates over the entire world and that an organization from a single country might want to impose controls over the Internet that are unique to that country. Other users might not like those rules. Therefore, it seems logical to leave the regulation of the Internet to a consortium of organizations.

5. Discuss the pros and cons of delivering this book over the Internet.

Delivering a textbook over the Internet is a less-expensive way to buy a book.

The information contained in the book can be interactive and can change with current world conditions. Students could have access to a 3-D animation or an interactive activity. If the book were designed so that chapters could be ordered individually, an instructor could request that the students read chapters 1,2,3,5,6,8,11,12 (for instance), in which case students would have to buy only the required chapters. some people howeverdo not like to read pages and pages of material online, so they might want to print the book from the Internet. This defeats the purpose of online books by wasting the paper and ink required to print it.

6. Explain how the Internet works. Assume you are talking with someone who has no knowledge of information technology (in other words, keep it very simple).

The Internet is a connection of many different networks around the world. The networks are connected via computers called network access points. These points are used to route the messages where they need to go. Anyone can connect to the Internet through a computer, a cell phone, or other mobile devices. You must have access to either a WiFi network (wireless network) or

Page 9 an Internet service provider (ISP, such as AT&T, Verizon, and Comcast).

When you access the Internet, your computer sends information over the network. The information is encoded so that other computers can understand it. The message includes an address that instructs the access points on the Internet where to send the information. For instance, if you type in the address www.amazon.com, the Internet technology can translate that address and decipher that you want to talk to or get information from the computer at the Amazon Web site. Similarly, when you send an e-mail message, the address (or addresses) to which you are sending it is an actual address, and the routers on the Internet can interpret that address and deliver your message to the correct mailbox on the Internet, just as a mail carrier delivers your mail to the addressee’s home.

7. How are the network applications of communication and collaboration related? Do communication tools also support collaboration? Give examples.

Communication refers to the methods that people and organizations can use to connect with others. Collaboration exists when people are working together to perform and complete some tasks. It would be fair to say that communication can exist without collaboration, but collaboration could not exist without communication. A work group cannot accomplish its task unless it has one or more means of communication to allow it to share ideas and materials. E-mail and voice communication can be used to send files; video conferencing and Skype can be used for team meetings; and electronic chat rooms and online conferencing can be used for virtual meetings.

8. 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.

Some students may argue that Google is making us stupid, and others may argue that it is actually making us smarter (or at least appearing to be smarter).

What is true is that it no longer makes sense to memorize lots and lots of facts that are widely available through reliable sites on the Web; for instance historical dates and events. Anyone can look these things up instantly, using a mobile device or a computer. There is compelling evidence, however, that the more we use our brains, the less likelihood there is that we will lose brain matter as we age. Therefore, while it is very easy to use Google to look up who stared in a particular movie in 2001, it is equally important that we know how to calculate the tip we need to leave for our meal. Looking up trivial information on Google is not the same as learning truths and beliefs that we all need to live in today’s society. There is a place for both, without making us stupid.

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

Page 10 1. Calculate how much bandwidth you consume when using the Internet every day. How many e-mails do you send daily and what is the size of each? (Your e-mail program may have e-mail file size information.) How many music and video clips do you download (or upload) daily and what is the size of each? If you view YouTube often, surf the Web to find out the size of a typical YouTube file. Add up the number of e-mail, audio, and video files you transmit or receive on a typical day. When you have calculated your daily Internet usage, determine if you are a “normal” Internet user or a “power” Internet user.

What impact does network neutrality have on you as a “normal” user? As a “power” user?

All e-mail systems have a column that indicates the size of the e-mail (e.g., 4K for text only, 40K for text and graphics, larger sizes for e-mail with attachments). The students should add up their e-mail for a day and come up with a total KB or MB for their e-mail files. They can do the same with music and video (much larger files). If they use, for instance, 65Kb, then they are normal or less-than-normal Internet users. If they exceed 1000Kb, then they are getting into the “power” category. Net neutrality means that normal and power users are treated the same. Normal users may might experience slower Internet speeds because of excessive downloads by power users.

2. Access several P2P applications, such as SETI@home. Describe the purpose of each and which ones you would like to join.

SETI@home is a network of PC users who join together to search for extraterrestrials. Individuals can participate by downloading a program that downloads and interprets radio telescope data. Sounds like fun!

Napster is an MP3 file-sharing P2P network. eDonkey is also a file-sharing network. Some other popular sharing networks include BitTorrent, Gnutella, eMule, and LimeWire.

3. Access www.ipv6.org and learn about more advantages of IPv6.

IPv6 is the current version of the Internet Protocol. It has some advantages over its predecessor, IPv4: • Solves the problem of running out of addresses in IPv4 • Uses 128-bit addresses, allowing 2128 addresses (3.4x1038) • Allows for many new devices and users on the Internet • Adds advanced features not available in IPv4 (address assignment, network renumbering, and router announcements) • Adds network security into the address 4. Access www.icann.org and learn more about this important organization.

ICANN is a not-for-profit organization that coordinates the Internet addresses for users around the world. ICANN controls the naming policies on the Internet and develops policies related to the unique identifiers used on the Internet. ICANN is concerned with the IP addresses, ensuring that no two entities use the same address. ICANN draws up contracts with each registry

Page 11 organization that provides addresses in the domain name system (DNS), so that the addresses are assigned correctly on the Internet. It does this for both individuals and computers on the Internet.

5. You want to set up your own Web site using your name for the domain name (for example, KellyRainer).

• Explain the process for registering a domain.

• Which top-level domain will you use and why?

To register a domain, you need to contact a domain name registrar.

GoDaddy.com, dotster.com, and register.com are some examples. You go to the Web site for the registrar and type in the domain name you want. The site then checks your proposed name against a list of existing names. If your proposed name is already in use, then you much choose a different name. If the name is accepted, then you need to pay using a credit card or a PayPal account. Costs vary, usually depending on the type of domain you have chosen. Some names can cost as little as $10.00 per year.

Students may want to use a .com for a commercial site, .net for a networking site, .biz for business, .info for general information, .name because it is a domain name based on their name, or .org for any organization. Many of the remaining top domain levels are reserved for specific purposes.

6. 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 the agency or company?

Godaddy.com could register a domain. Students may come up with other agencies or companies.

7. Access the Web site for the agency or company to learn the process that you much use. How much will it initially cost to register your domain name? How much will it cost to maintain that name in the future?

At godaddy.com, the domain costs $11.99 per year and remains constant for up to 10 years. Students may find other domain registers that have different pricing structures.

8. 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, recreating, shopping, etc.) g. Country regulations regarding the entrance of your dog which you would like to take with you.

Page 12 h. Shopping i. Passport information (either to obtain one or to renew one). j. Information on the country’s language and culture. k. What else do you think you should research before going to Australia?

Some helpful Web sites are: • Zicasso.com • www.australia.com • http://www.australia.com/planning/getting_there.aspx • The following is required to visit Australia: o a valid passport or other acceptable travel document o a valid visa or authority to enter Australia (including electronic visas) o a completed and signed Incoming Passenger Card, including health and character declaration.

• http://www.lonelyplanet.com/australia All of these sites have information that the students can use to create a report with the information listed in each of the items above. Students might also want to know how to drive in Australia (the right or left side of the road), other countries in the area (New Zealand), and how much their travel will cost.

9. 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.

Lotus Notes (From the IBM Web site): • Extends messaging with built-in collaboration tools • Offers flexibility and choice in hardware platform, operating system, directory, and client access • Provides industry-leading security features to help safeguard businesscritical information • Helps maintain a low cost of ownership for messaging and collaboration infrastructure by optimizing the use of supporting resources such as CPU, network bandwidth, disk storage, servers, and floor space.

• Maximizes server availability with advanced clustering, transaction logging, server fault recovery, and automated diagnostic tools • Easy to administrate, requiring a minimal number of support staff to deploy, manage, and upgrade • Supports Web services and open standards and offers tools for integration with existing applications • Can contribute to rapid return on investment (ROI) with Lotus Domino software-powered solutions for your business processes, such as Customer Relationship Management, Supply Chain, and Project Tracking • Security-rich architecture helps protect your vital business data.

Microsoft Exchange (from the Microsoft Web site):

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Microsoft Exchange combines built-in anti-spam and encryption technologies with an advanced antivirus infrastructure for efficient management of a wide range of security threats.

• Outlook Web App in Microsoft Exchange helps users be more efficient and productive across platforms and locations by giving them access to e-mail, voice mail, instant messaging, SMS text messages, and more inside all popular browsers.

• With Exchange ActiveSync, mobile users can access a universal inbox with e-mail, voice mail, rights-protected messages, and instant message conversations on their smartphones.

• Microsoft Exchange introduces built-in integrated e-mail archiving, retention, and discovery capabilities that save costs and simplify the process of preserving business communications.

• Microsoft Exchange Server includes a new, unified solution for high availability, disaster recovery, and backup with fast, automatic, database-level recovery from database, server, and network failures.

• Microsoft Exchange tools monitor sensitive content in e-mail and control accidental and unauthorized distribution. These tools include automated alerts about organizational policies and rules that block, redirect, encrypt, and modify messages.

• Microsoft Exchange offers users single inbox access to voice mail and e-mail, while allowing IT to manage both systems from a single platform. Voice-mail messages appear as both text and audio for added productivity.

• Microsoft Exchange helps reduce the cost of managing e-mail by allowing IT administrators to delegate permissions to users such as managing distribution lists, editing personal information, and performing multi-mailbox searches.

• Microsoft Exchange provides IT professionals with an unprecedented choice of deployment options including on-premises, in the cloud, or a combination of the two, which can reduce costs and help meet regulatory requirements.

Students can construct a table to compare the two products.

10. Visit Web sites of companies that manufacture telepresence products for the Internet. Prepare a report. Differentiate between telepresence products and videoconferencing products.

Telepresence is enhanced videoconferencing that is more technologically sophisticated than traditional videoconferencing. Due to its improved technology and sound fidelity, telepresence makes participants feel as though they are actually in the same room with the other participants. The technology used to implement telepresence is called a Codec video system.

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

Page 14 In the Cisco Magic video, John Chambers (CEO of Cisco) is at a presentation in India, and he has one of his managers who is in California ‘attend’ the presentation through new technology. In the new telepresence, the subject looks as though he is actually in the room with you. This technology uses very-high-definition audio and video to give the illusion that someone is there (almost like a hologram). In traditional telepresence systems, the other participants are visible, but they appear on a video screen.

12. 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?

Each university has a different set of standards concerning the look and feel of its Web site. Some things that should be mentioned would be how easy it is to find necessary information (for instance, can the students easily find out how to set up a schedule online), how inviting the site looks to anyone outside the university, whether it contain a map that is easy to navigate, whether it lists student activities, and whether students can find information about their professors. The students may come up with other things they like or don’t like about the school’s Web site. This will also determine whether they think a high school student would like the site.

13. Compare and contrast Goolge 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.

Liveoffice.com is not a Web hosting site. It provides hosting for e-mail from many different e-mail products. GoogleSites is designed to allow a nontechnical person to create a very simple Web site. If you ar elooking to create your own website GoogelSites is an appropriate choice..

14. 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 RIAA’s point of view.

The Web site has a section called “Piracy” that defines copyright infringement. Within that definition there are examples of what it means to copy music illegally. For instance, a person can legally make an MP3 copy of a CD he or she purchased. However, it is illegal to post the MP3 file to an open Web site and allow other people to download the music. Illegally downloading and sharing music is a huge problem. It’s no different than a teacher making copies of a textbook and simply handing them out to the students, so the students don’t have to buy the book. Illegal downloads take money away from the artists who did work to create the music and should be compensated for it. Students may have many opinions about this topic.

Page 15 15. 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?

Name

Technology

Vonage

Vonage adapter, Ethernet cable, power supply Adapter Router Converter

Voipo Phone.com VYL Media

Ease of Price Installation Easy $25.99/mo Easy Easy Easy

$15.00/mo $17.88/mo $23.97/mo

Students can find much more information by searching the Web for these and other companies. Most of the Web sites also include information on installation fees and charges for businesses.

16. 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 Google. Compare the results on breadth (number of results found) and precision (results are what you were looking for).

Search for “What is a wookie” on several sites, and this is what you get: • Google – 2,460,000 results • Bing – 1,110,000 results • Yahoo – 1,120,000 results • ChaCha 0 – about 25 results With millions of results, there would be many that are not relevant. Being able to refine the search will result in a better, more reasonable number of hits for a topic.

17. 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 have a good time with this activity, especially if they have never used Second Life before. Some may already have an avatar in Second Life, and they can report on what the avatar has found. Have them write a report and present it to the class, so that everyone can benefit from what goes on in Second Life.

18. Access the Altavista (http://babelfish.altavista.com) or Google (www.google.com/languag_tools) translation pages. Type in a paragraph in English and select, for example, English-to-French. When you see the

Page 16 translated paragraph in French, copy it into the text box, and select Frenchto-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.

In the Babel Fish Web site, if you choose a short sentence (like “The quick black cat jumps over the river”) and translate it to Chinese, then translate it back to English it works just fine. However, if you perform the same exercise but translate it from English to French and then French to English, the final result is “The quick black cat jumps over to rivet”. The explanation is that there are some words that do not translate directly from French into English.

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.

This is a class project. Each team should visit the site of one of the products and come up with a list of features. Each team should then contribute what they found to a table that can be shared with the class. A good way to do this would be to use one of the collaboration products and allow the students to complete the project online, outside class. Then the entire class can see the results as presented by the teacher.

2. Have each team download a free copy of Groove from www.groove.net .

Install the software on the members’ PC and arrange collaborative sessions.

What can free software do for you? What are its limitations?

Free software is just like anything else, you get what you pay for. Some free software is quite good because there are groups and individuals who provide some level of support and update the product when problems occur. Other free software is just out there, and there is no support. Users must be very careful in using free software because if it causes some problem on your computer system, there may be no one available to fix it.

3. Each team will pick one of the following: YourStreet, Platial, Topix, or Google Earth. Compare and contrast these products as to features and easeof-use. Present each product to the class. Each group will collaborate on writing a report on its product using Google Docs.

This would be a good project for students to complete online using Google Docs or other collaborative software. The entire class can participate, and the individual teams can post the information they found. The teams can then create a report that compares their product to the others using the collaborative report that was created by the entire class.

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CLOSING CASE 1– The Network Neutrality Wars Questions 1. How do you feel over the Net Neutrality issue? Should higher bandwidth users pay for more bandwidth? Should wireless carriers operate under different rules than wireline carriers?

Individuals who download many movies and music files would argue that Net neutrality should be maintained. Those who do not, however, would like to see the high-volume users pay more for their usage. If everyone wants to have viable Internet access in the future, the telecommunications companies must be allowed to charge enough to be profitable. Otherwise they will have no incentive to maintain and improve their networks. It does not seem logical for the wireless and wireline companies to be treated differently. If they all transmit data and voice traffic, as well as video, they should be treated the same.

2. Should businesses get involved and monitor network usage? Do you think there is a problem with employees using company purchased bandwidth for personal use?

Internet usage at a work site has always been a problem. Some companies have a firewall in place that blocks employee access to outside Web sites.

Employees waste much time at work downloading and viewing non-workrelated files. Businesses would be wise to monitor their network usage and investigate any huge volumes of data that are downloaded from a single location on their local network.

CLOSING CASE 2– The City of Los Angeles Turns to Google Apps Questions 1. Describe the reasons that Los Angeles decided to use Google Apps instead of upgrading their Microsoft system.

The first reason was that Google Apps is available for many different devices, whereas Microsoft software is not always compatible with mobile devices.

The city was also under a budget crunch, and Google Apps would save them millions of dollars in licensing fees. It also reduced the number of servers needed to store e-mail. The city needed a new e-mail system, because theirs was running out of capacity.

2. What are potential problems that could result from deploying Google Apps for such a large number of users?

Because the data are stored at Google, there are security concerns. In addition, Google is relatively new in the field of application software, and the users need to be assured that Google can handle technical questions about their software that might arise. There could also be issues with customization and administrative services with Google Apps. As more and more users

Page 18 subscribe to this service, there will be additional information on how well Google handles the increased usage.

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CHAPTER 5:

Business Intelligence

Chapter Overview 5.1 Managers and Decision Making 5.2 What Is Business Intelligence?

5.3 Business Intelligence Applications for Data Analysis 5.4 Business Intelligence Applications for Presenting Results 5.5 Business Intelligence in Action: Corporate Performance Management

Learning Objectives 1. Identify the phases in the decision-making process, and use a decision-support framework to demonstrate how technology supports managerial decision making.

2. Describe and provide examples of the three different ways that organizations use BI. 3. Specify the BI applications available to users for data analysis, and provide examples of how each one might be used to solve a business problem at your university.

4. Describe three BI applications that present the results of data analyses to users, and offer examples of how businesses and government agencies can use each of these technologies.

5. Describe corporate performance management, and provide an example of how your university could use CPM.

Teaching Tips and Strategies Business intelligence and all the software associated with it are critical to the success of modern businesses. Software allows managers to analyze sales data and customer preferences in order to personalize their Web sites and to market their products to the correct customers.

A useful exercise for this chapter is to have the students do a paper-and-pencil exercise for a ‘what-if’ scenario. A simple example is to determine their major. They can choose a major (such as business marketing) and compare it to a different major, such as

Page 2 astronomy. What would happen if they chose one career over the other? What would be the difference in the classes they take and in how long it would take them to complete their degree?

Another simply example is a ‘what-if’ scenario comparing the purchase of two different homes. Have students find a couple of Web sites from realty companies that use the MLS. They can pick a couple of houses and then compare them to see which one would best suit their needs. If the students have enough experience in Excel, they could input their information into an Excel spreadsheet and come up with their analysis.

To illustrate the three phases of BI decision making (intelligence, design, choice), choose a project that is going on around campus or something of great importance in your town. Have the students study the project and then come up with proposed solutions to the problem or complete the project using the three phases. The students can also investigate the types of software that could make the project easier to complete.

OPENING CASE – Adelaide Brighton Cement 1. Provide specific examples of the advantages of the myDIALS package to Adelaide.

• No additional hardware needed because myDIALS is hosted on the myDIALS servers • Less expensive than implementing a BI application locally • Minimal risk • Existing systems did not need to be changed • Incident hazard and reporting system is better • New information is now available for making better decisions 2. What were the reasons why Vince Aurora decided not to implement an ERP system? Was this an appropriate decision? Why or why not?

The ERP system was very expensive and complicated. It would also have involved changing the current systems, which could have disrupted the smooth operation of the company. The ERP system would have taken months to install and get up to speed on the required reports. For this organization, it appears that the hosted BI system was a better choice.

Review Questions Section 5.1 – Before you go on…

1. Describe the decision-making process proposed by Simon.

Simon’s decision-making process consists of intelligence, design, and choice.

The intelligence phase involves analyzing the situation and defining the problem to find a good solution. In the design phase, a model for the situation is constructed. All of the existing variables are defined, and their relationships are constructed. The model is then testing using valid data. The decision makers then decide which criteria will be used to determine whether the solution(s) have been

Page 3 successful. Finally, the choice phase is concerned with choosing the solution that best solves the problem. When the choice has been made, it is implemented.

2. You are registering for classes next semester. Apply the decision-making process to your decision about how many and which courses to take. Is your decision structured, semistructured, or unstructured?

Choosing course would fall into the semistructured decision-making process.

There is a structured procedure for deciding which courses to take (based on a plan of study), but the human elements of choice and judgment must also be taken into consideration. Students may have jobs, families, or other commitments that affect their judgments about which classes to take.

3. Consider your decision-making process when registering for classes next semester. Explain how information technology supports (or does not support) each phase of this process.

The decision-making process for registering for classes would be only partially supported by information technology. Although class listings and the actual scheduling procedure are most likely available via the Internet or on a computer, students probably don’t use information technology to make their decisions. Some students may have a matrix of courses and the semesters they want to take them stored on a computer, but that does not determine the decision-making process.

Section 5.2 - Before you go on…

1. Define BI. Business intelligence consists of a set of software tools that allow managers to analyze the data stored in warehouses and data marts. The software allows many parts of the organization to utilize data, including incorporating the data into a warehouse or mart and getting the data out through the applications. It also allows managers, front-line personnel, suppliers, customers, and regulators to have access to the most current information about the company.

2. Discuss the breadth of support provided by BI applications to organizational employees.

BI applications can range from simple Excel spreadsheets used by small organizations to enterprisewide software packages (such as SAS or Cognos) that provide features such as data mining, predictive analytics, dashboards, and data visualization. BI is critical to the competitive advantage for some organizations.

3. Identify and discuss the three basic targets of BI. • The development of a single or few related BI applications-this target is used when BI is needed by a single department. The downside is that the data that are used for this instance of BI need to be consistent with the data used by the rest of the organization.

• The development of infrastructure to support enterprisewide BI-this target provides useful information for the entire enterprise. Upper management generally supports and funds this type of BI.

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Support for organizational transformation-this target supports the competitive strategy for the organization within its marketplace. The purpose is to support a new business model.

Section 5.3 - Before you go on 1. Describe multidimensional analysis, and construct a data cube with information from IT’s About Business 5.1 (Hint: You must decide which three business dimensions you would like to analyze in your data cube.)

Multidimensional data analysis describes data based on various dimensions, such as time, region, city, date, and values. It enables individuals both to aggregate the data and to examine them in greater detail. One example of creating the data cube would involve using the make and model of a car, the year, and the car’s value.

2. What are the two basic operations of data mining?

(1) Predicting trends and behaviors-finding information in data bases that can help determine marketing trends, for instance. Rather than performing this task by hand, data mining software can be used to report the data.

(2) Identifying previously unknown patterns-software is used to identify previously unknown relationships between products that people purchase.

Another use is to detect credit card fraud. If unusual patterns suddenly develop with purchases on a credit card, the consumer can be notified, and the card can be cancelled.

3. What is the purpose of decision support systems?

Decision support systems are computer systems that combine simplified examples of reality (called models) with data to analyze problems. A DSS can help a manager determine which course of action to take when dealing with certain situations. One of the main uses of a DSS is for what-if analysis, where the manager can input criteria and then ask questions to determine what could happen in a scenario based on different input data.

Section 5.4 – Before you go on 1. What is a dashboard? Why are dashboards so valuable to employees?

A dashboard is a graphical software package that provides employees with easy access to timely information and management reports. A dashboard is very user friendly. It can be used in many types of meetings with all levels of individuals within an organization, and everyone can understand the data that are presented because of the dashboard’s user-friendly format.

2. Explain the difference between geographic information systems and reality mining, and provide examples of how each of these technologies can be used by business and government agencies.

A GIS collects data and displays them on digitized maps in graphical form, making them easy to visualize. Some examples of GIS use are showing trends in population growth, the environmental impact of traffic congestion, and the

Page 5 locations of potholes or graffiti. Reality mining combines the mapping capability of GIS with GPS technology to map usage patterns for mobile phones and other wireless devices.

3. What is real-time BI, and why is this technology valuable to an organization’s managers and executives?

Real-time BI uses current, live data to make business decisions, rather than depending on historical data stored in data warehouses or data marts.

Interactions with customers and business decisions can be made based on today’s environment. This gives an organization a competitive advantage because they can react to data immediately.

Section 5.5 – Before you go on 1. What is corporate performance management?

CPM is the process of monitoring and managing the performance of an organization based on its key performance indicators. Budgeting, forecasting, workflow analysis, and reporting are included in CPM. The purpose is to determine whether an organization is meeting its performance objectives.

2. How do BI applications contribute to corporate performance management?

BI applications help measure revenue, return on investment, overhead, and operational costs. These are the key performance indicators that are monitored and managed by corporate performance management.

“IT’s About Business” Questions 5.1– Data Analytics Helps Kelley Blue Book Remain Competitive 1. Provide specific examples of other revenue-generating applications that Kelley could develop from its data-mining application.

Kelley could maintain some information about the customers who access the company’s Web site and track the types of information the customers seek.

The company could then ask customers to list any additional information they would like to see the company provide about vehicles.

2. Analyze this case in terms of the three phases of the decision-making model (intelligence, design, and choice).

Intelligence-the company knew that it wanted to use the information that it had gathered in a better way. Discovering what types of data were being collected and finding new ways to use it were an intelligence-based choice.

Design-Kelley chose to create a data warehouse, and it purchased business intelligence and data analytics software to analyze the data in the warehouse.

Choice-Kelly chose to better utilize its employees, shifting their focus away from manually entering information by writing it down and faxing it to headquarters. The new system collected data electronically. This change saved time and reduced the likelihood of errors.

Page 6 5.2– North Carolina State University Uses Business Analytics to Monetize Intellectual Property 1. What advantages does the analytics software provide for the Office of Technology Transfer?

• It reduced the length of time needed for the triage process from several weeks to 7-10 days.

• It helped the university discover hidden business opportunities.

• It ranks partners according to how well they meet the university’s specifications.

• It freed up the time of the licensing professionals to do other tasks.

2. Should the analytics software in the Office of Technology Transfer be used in other departments in the university? Why or why not? Support your answer.

Given the benefits realized from using the analytics software, it would be wise to use it in other departments. There are most likely other departments that match data and personnel manually that would benefit from using the software. The dollar savings from using the software should justify using it in several departments.

5.3 – 1-800 CONTACTS 1. Interpret the phrase “that which gets watched, gets done.” Give an example from your personal life.

The phrase means that people often work better when they know that they are being watched. In this case, the ‘watching’ is not intrusive because a supervisor does not have to stand over the employees to watch the way they work. The dashboard software does it for them. An example could be that children who are given the task to clean up their room will get it done faster if they know that their parent is keeping an eye on their task. If the parent is absent, the children may go back to playing video games and not complete the required task.

2. Would you like to work in a job where you compensation is based on your performance relative to your coworkers? Discuss.

Some people may see this as competition, and many people work well when under that type of pressure. Others may think that it is too intrusive and that their pay should be based on their own work and not compared to someone else’s work. Many employers already do this, in an indirect way. The example in this case uses an electronic means to compare the employee’s performance.

Discussion Questions 1. Your company is considering opening a new factory in China. List several typical activities involved in each phase of the decision (intelligence, design, and choice).

Page 7 Intelligence-The economic situation in China needs to be examined. What areas would be the most productive for the factory? How well would the product sell in China? What is the political climate in China, and are there any government incentives for factories to locate there?

Design-Using the information collected in the intelligence phase, the company can determine the type of factory they could construct. Data entered into the model for this project would include getting raw materials, the availability of labor and management personnel, shipping possibilities (rail, ship, air), and how marketing can be done in China.

Choice-Weighing all the options considered in the first two phases, the company needs to choose a site that best fits the corporate environment and will provide the best strategic advantage. Implementation would involve building the factory and beginning production of the product(s).

2. Recall that data mining found that young men tend to buy beer and diapers at the same time when they shop at a convenience store. Now that you know this relationship exists, can you provide a rationale for it?

Young men tend to drink beer and they are also young enough to have babies in the house. Because it is easier to buy everything you need in a single shopping trip, it makes sense to buy beer and diapers at the same time. In addition, because this study was done at a convenience store, the items purchased are usually things that a family runs out of frequently, which would also account for the beer and diapers connection.

3. 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 to assist it in this endeavor?

This acquisition appears to be a transformational situation, where American Can Company wants to expand its corporation into the HMO field. This would fall under the ‘Support for organizational transformation’ target for Business intelligence. American Can needs to determine the corporate support for this change, the individuals within the organization who need to approve the acquisition (upper management, board of directors?), and the funding needs.

‘What-if’ scenarios are a good way to determine whether this purchase would enhance the company’s competitive advantage.

4. Discuss the strategic benefits of BI systems.

BI systems provide many strategic benefits. Companies can benefit from sales predictions, prevention of theft and fraud, and controlling inventory. Banks benefit from forecasts that predict bad loans and fraudulent credit card use.

Banks can also use BI as a marketing technique to market credit cards to selected consumers based on predictions of credit card spending. In manufacturing, BI can be used to predict machinery failures and to identify

Page 8 factors that can optimize manufacturing capacity. For the insurance industry, it is important to forecast claim amounts and medical coverage costs, as well as to predict which group of consumers will buy new insurance policies. BI can perform these analyses. Law enforcement uses BI to track patterns of crime, analyze criminal behavior, and identify attributes that are similar when solving crimes. In the healthcare industry, BI can be used to study demographic data about critically ill patients to develop treatments for the illness.

5. Will BI replace business analysts?

Business analysts are still needed in business, even with the widespread use of business intelligence. The BI systems are simply a tool to gather, analyze, and disseminate the required information. To effectively use the information, businesses need someone to apply that information to the organization’s business model. In addition, although applications like dashboards can provide a user-friendly way to present the data, the organization often requires more-sophisticated reports. Business analysts have seen their jobs change, but these jobs will not be eliminated by the use of BI.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 1. The city of London (U.K.) charges an entrance fee for automobiles and trucks into 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 the computer does not find a match, the car owner receives a citation by mail. Examine the issues pertaining to how this process is accomplished, the mistakes it can make, and the consequences of those mistakes. Also examine how well the system is working by checking press reports. Finally, relate the process to business intelligence.

There could be many issues with this system: • License plates can be altered, causing citations to be sent to the wrong individual; • It is very difficult to charge drivers from outside the UK because international laws complicate the process of collecting the penalties; • The recording of plate numbers is only 90% accurate, resulting in the wrong people getting a notification of nonpayment; • The multiple systems used to do the monitoring can malfunction, causing problems.

Students will have many examples they can add to this list. This is a BI system, because the city was attempting to cut down on congestion by establishing a toll for drivers who entered the city. The system uses an automated system that also records the traffic patterns and provides detailed information to the analysts.

Page 9 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.

The product demos include the following: IBM Cognos Business Intelligence, Cognos Business Insight: The new BI workspace, Cognos TM1, Cognos Express, Cognos Analytic Applications, The Analytics Experience.

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

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?

5. 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.

His data visualization techniques are interactive. Rather than simply showing the difference between how lifespans and family size, for instance, have changed over the years by comparing two graphs, his graph moves with the progression of time, making it very interesting and effectively illustrating the relationships between the variables. The animated presentation displays the changes in income and highlights the differences in a way most people can easily understand.

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

Taken from the Web site “NetCharts business intelligence software solutions help to manage business performance from anywhere - via mobile or from the office. With your data visualized in NetCharts Web dashboards without additional software to download, you can easily navigate mobile business intelligence data visualizations on any mobile device, including our iPad dashboard.”

Students should analyze the various products and present a report that shows how this software applies to Business Intelligence.

7. Access http://businessintelligence.ittoolbox.com. Identify all types of business intelligence software. Join a discussion group about topics discussed in this chapter. Prepare a report.

Topics included on this Web site are:

Page 10 Ad hoc Analysis, Ad hoc Query, Ad hoc Reporting , API Availability, Benchmarking, Budgeting & Forecasting, Compliance Management, Custom User Interface, Customizable Fields, Customizable Functionality, Customizable Reporting Dashboard, Data Import/Export Data Management, GPRS Reporting, Graphical Data Presentation, iButton Technology, Key Performance Indicators, Legacy System Integration, Mashboards, Mobile Access, Multi-Currency, Multi-Language, OLAP, Performance Metrics, Predictive Analytics, Profitability Analysis, Reporting, Software Development Kit, Strategic Planning, Trend / Problem Indicators, Workflow Management.

8. Visit the sites of some GIS vendors (such as www.mapinfo.com, www.esri.com, or www.autodesk.com). Download a demo. What are some of the most important capabilities and applications?

ArcGIS, for example, has the following capabilities “ArcGIS is a system that lets you easily author data, maps, globes, and models on the desktop and serve them out for use on a desktop, in a browser, or in the field via mobile devices.” Other products chosen by the students will vary in their capabilities and applications.

9. Analyze Microsoft Virtual Earth (www.microsoft.com/virtualearth) as a business intelligence tool. (Hint: Access http://www.microsoft.com/Industry/Governmnet/solutions/virtual_earth/demo/ ps_gbi.html). What are the business intelligence features of this product? www.microsoft.com/virtualearth is no longer a valid Web site. Direct students to Bing Maps instead Bing Maps allows the following (from their Web site): “Agencies benefit from Bing Maps in such functions as land-use planning and traffic control.

Federal agencies currently use the platform for environmental tracking, public safety collaboration systems, crisis management, public information dissemination, and weather tracking and reporting, among many other applications.” The BI features include the intelligence that is gathered from using the mapping software to make decisions and the choices made based on the information supplied.

Team Assignments 1. Using data mining, it is possible not only to capture information that has been buried in distance 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.

There are many privacy issues that arise when any type of data warehouse is designed, and sharing the data with anyone outside an organization is tricky.

Students can find other incidents where sensitive information was shared (a

Page 11 current example is WikiLeaks). Have the students do the research and then present their individual sides to the class. One team should also find reasons that such information needs to be collected and shared with some segment of the population (such as law enforcement).

2. Use a search engine of your choice to find combined GIS/GPS applications.

Also, look at various vendor sites to find success stories. For GPS vendors, look at http://biz.yahoo.com (directory) and Google. Each group will make a presentation of five applications and their benefits.

ArcGIS Desktop- http://www.esri.com/library/bestpractices/using-gis-withgps.pdf http://www.gisvisionmag.com/software_reviews/gps.pdf has a number of products for GIS/GPS. Garminhttp://www.dnr.state.mn.us/mis/gis/tools/arcview/extensions/DNRGarmin/DN RGarmin.html CMT Inc.- http://www.cmtinc.com/ 3. Each group will access a leading business intelligence vendor’s Web site (for example, MicroStrategy, Oracle, Hyperion, Microsoft, SAS, SPSS, Cognos, and Business Objects). Each group will present a report on a vendor, highlighting each vendor’s BI capabilities.

MicroStrategy- http://www.microstrategy.com/BI-Applications/ Oracle- http://www.oracle.com/us/solutions/ent-performance-bi/guidentextensibility-bi-apps-wp-070085.pdf Microsoft- http://www.microsoft.com/BI/en-us/pages/home.aspx SAS- http://www.sas.com/technologies/bi/ SPSShttp://www.sas.com/reg/gen/corp/733414?gclid=CIWEwK3whqsCFQbrKgod 2VSK3g Each report will be different, but all of the reports should have some common elements because all of the companies provide good BI software, even though each one has its unique features.

CLOSING CASE 1– Quality Assurance at Daimler AG Questions 1. Why is it so important to have a solid understanding of Business Intelligence and the possibilities that surround information-supported decision making?

This case gives a good example of why it is important. In any customer-based enterprise, keeping customers happy is very important so that they continue to come back and purchase your products. BI helps an organization realize where flaws exist in its existing flow of data and how combining and analyzing data can lead to better customer service and better performance by the organization as a whole. Decision making is enhanced by the use of these tools, so it is

Page 12 important that all everyone involved in management make use of the tools at their disposal to maintain their competitive advantage.

2. Can you think of any situation you are in where you freely provide Business Intelligence to a company as their customer? Do you ever sign up for a discount card at your local grocery store? What do you think they do with your transaction history?

Supplying input to questionnaires by organizations is one way to provide BI to a company. Many car makers send out a questionnaire to customers who purchase their automobiles in order to collect data on the demographics of the car buyers. They then incorporate these data into to their decision-making process. Customers also frequently write reviews of the products they have purchased, which provide the organization with additional information for their BI system. Another valuable resource for organizations is store cards because they track which products are purchased and which times of the day, month, or year they are most likely to be purchased. Organizations can use this information in their BI systems to manage inventory and track consumer trends.

CLOSING CASE 2– Norfolk Southern Questions 1. What is the importance of allowing external parties to access data in Norfolk Southern’s data warehouse? What are the risks and rewards of allowing such access?

By allowing external parties to access the data warehouse, Norfolk Southern enables their customers to obtain information about their product as it is being transported. Rather than calling the transportation company to check on shipments, the customer can simply access the data and find the answer immediately. This arrangement makes the company appear technologically up-to-date while giving customers the satisfaction of knowing they can access the information they need whenever they need it. The risk is that if there is a problem, the customer also knows that immediately as well. A breakdown or derailment or other issue is also reported via the data, so customers may be upset if they receive this news, and they may demand to know how and when their shipment will be completed.

2. Describe other applications Norfolk Southern could develop using data warehouse. (One hint: Remember that a railroad has to track trains, railcars, people, and cargo).

Another BI application would be to schedule personnel. With so many trains to manage, scheduling personnel is very difficult. Vacations need to be scheduled, workers take sick days, and personal emergencies occur. An application could be used to track all employees and determine how to use them effectively. It could also be used to allow the employees to track their schedules and determine where they will be working. Tracking specific cargo

Page 13 could also be handled with similar software. Customers could then track their cargo just as they can track a package being shipped by UPS. They would know when it crossed into their state or was arriving at a terminal for pickup.

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CHAPTER 6: Ethics and Privacy Chapter Overview 6.1 Ethical Issues 6.2 Privacy

Chapter Overview 1.

Define ethics, list and describe the three fundamental tenets of ethics, and

describe the four categories of ethical issues related to information technology.

2.

Identify three places that store personal data, and, for each one, discuss at least

one potential threat to the privacy of the data stored there.

Teaching Tips and Strategies The topics discussed in this chapter and the next chapter (Chapter 7: Information Security) may be two of the most important chapters for your students. Business ethics and individual and personal privacy have become important issues in today’s global business environment.

One of the considerations is security versus personal privacy in the sense that technology will enable future employers to monitor their employees’ movements in the workplace.

Your initial discussion could begin with the implications of this scenario.

Bill Gates and Bill Clinton were both charged with crimes based partially on evidence contained in e-mails. (Clinton was charged with lying under oath, and Gates with violating the consent decree his company signed with the Justice Department.) More current examples of e-mail trails left by influential people include Martha Stewart and her attempt to cover up her activity 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 Valerie Plame, the CIA operative married to former Ambassador Joseph Wilson IV, after Wilson had traveled to Niger to investigate whether Iraq tried to obtain uranium from that country. Both of these individuals have had to deal with criticism and investigations based on various contacts and, particularly, e-mails that revealed their communications.

If people hold prominent positions, how is it that their e-mails are available for others to use against them? Does or should e-mail last forever?

I strongly suggest you keep this discussion focused away from anything that might resemble a current political topic.

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Clinton and Gates were indicted based on evidence contained in their e-mails. The point is: If the President of the United States cannot get rid of damaging e-mails, it is almost impossible for anyone else to do so. If one of the world’s richest men cannot control who can access his e-mails, then how can the rest of us expect that our e-mails will never be used against us? This can lead to some very heated discussions.

(I am not suggesting that either Clinton or Gates tried to get rid of their e-mails in any illegal manner. Martha Stewart did alter her e-mail, but she then realized that it was fruitless, so she changed it back.)

A scenario that you might use is to write the following on the board: “Is e-mail forever?”

Provide an example where Student 1 sends Student 2 an e-mail. How many copies of that e-mail are circulating on the Internet? Most students will respond, “Two.” This answer is not true. Illustrate on the board how the e-mails had to go through different servers, etc. This illustration will usually cause the students’ ears to perk up.

Then, create a more complex scenario: Student 1 has sent an e-mail to Student 2, and we have hired someone to destroy Student 2’s computer and wipe out all of the server information that contained that e-mail. Next we burn Student 1’s computer to get rid of the e-mail. Could that e-mail still exist? Most students will respond, “No way. Both computers have been destroyed, and the servers have been cleared.” Then ask, “How do we know whether Student 2 forwarded the e-mail to someone else?” Would all of our efforts have eliminated the e-mail? Then ask, What if Student 2 had copied the e-mail onto a disk and mailed it somewhere? Students start to see the complications and understand that e-mail really is forever. Perhaps Student 2 simply thought a joke you sent her was funny and decided to e-mail it to some friends. Although her intentions were entirely innocent, the e-mail nevertheless is spreading, and there is no way we can stop it.

Another scenario is: If we worked for the same company and sent each other dirty jokes or pornographic pictures at work three years ago (violating company policy), but we were never caught, we might think there was no harm done. But, suppose someone with whom we used to be friendly but have since fallen out with goes to management with copies of these communications. Could we still be fired? Most students will get angry and state, “No way! That was three years ago.” In fact, the correct response is, “Exactly, but the courts have sided with employers regarding this issue. It doesn’t matter if it was five years ago; it was still a violation of company policy.” At this point, students are starting to understand that today’s environment is very different from ten years ago, when workers in break rooms told dirty jokes and, unless someone was offended at that moment, the chances of getting in trouble were miniscule. Today, if employees are using e-mail, employers have the ability to go back to the day the e-mail was sent and pull it up.

In fact, many programs have been developed over the last couple of years that can monitor everything we do on a computer, down to individual keystrokes.

These examples are not intended to scare the students, but rather to get them to realize that employers can and will monitor them at work. A review of the different software

Page 3 applications that can help employers monitor non-work-related use of the Internet is appropriate at this step. The book provides examples of employees who have been fired from major companies for using the Internet for personal use.

The discussion can end with the following pieces of advice. First, never use a company computer for anything except business-related work. This strategy by itself will eliminate 95% of this problem. Second, do not send an e-mail that you wouldn’t want your parents to read. This will take care of all the problems of figuring out which e-mails are okay to send and which aren’t. Third, limit giving your work e-mail address to friends and relatives. This will help to keep down the number of e-mails you receive at work, and it will also help to avoid having e-mail messages sent to you that violate company policy. Finally, when using your computer, pretend that someone is hiding behind the screen and watching everything you do. This will help you avoid disciplinary problems due to improper computer use.

A long-held view of ethics and IT can be shared. Historically, IS professionals have not been bound by law to adhere to any ethical and professional standards. Those of us who engage in the design, development, implementation, and maintenance of ISs are generally recognized as members of an emerging profession, the IT profession. Many organizations are depending on us as specialists, and they pay us large sums of money for our 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 we simply lacked the expertise to develop good systems. Virtually all other professions, including law, medicine, and accounting, have established a legal code of professional standards. 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 the IT profession to adopt a standard code of ethics. It may take even longer for certification and other measures to be mandated by law. Until these measures are 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.

OPENING CASE 1- MidTown Bank Questions 1. Do you feel that the co-worker’s advice to ShaNiqua was correct? Why or why not?

Students could answer either way. However, the co-worker’s answer is arguably incorrect. ShaNiqua should set up a meeting to talk to her immediate boss about her concerns and ask for his or her advice on what she should do.

If the co-worker was correct, i.e., the bank’s managers are trying to deal with the situation, ShaNiqua’s boss might tell her to do the same (i.e., leave the issues alone). However, if the co-worker was incorrect (i.e., the bank’s managers were not aware of the situation) then ShaNiqua did the right thing.

Page 4 Hopefully, her actions will convince the bank to address the problems before it is too late.

2. What should the bank managers do to handle this problem? Are there other possibilities not mentioned in the case? If so, what are these possibilities?

The bank managers should start with the “soft” approach by educating employees about the legal implications of misusing customer information.

They could then follow up by implementing more rigorous security controls such as limiting account access and separating employees’ duties. Current employees can be introduced to these new measures at various training sessions. Managers must emphasize the importance of data security, not only from the bank’s perspective, but also from the employees’ perspectives. If the bank continues to lose customers, the employees could ultimately pay the consequence by losing their jobs.

Review Questions Section 6.1 – Before you go on…

1. 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.

2. Describe the fundamental tenets of ethics.

• Responsibility – Accepting the consequences of one’s decisions and actions.

• Accountability – Determining who is responsible for actions that were taken.

• Liability – A legal concept that gives individuals the right to recover the damages done to them by other individuals, organizations, or systems.

Section 6.2 - Before you go on…

1. 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.

2. Discuss how privacy issues can impact transborder data flows.

Transborder data flows refer to the flow of information across national boundaries. The affected parties, in general, are subject to the privacy standards implemented in their own countries. However, different countries hold different standards. For example, a U.S. company collects information from European customers where privacy laws are more stringent. Should the company honor the European privacy practice or, because the customers are conducting the business, by law, in the US, should they follow the U.S. standards? Alternatively, consider the scenario of a U.S. company that has

Page 5 operations in a country where privacy standards are less stringent than those in the US. If the transborder data are stored in the less-stringent country, does the company need to abide by that country’s laws or U.S. laws?

“IT’s About Business” Questions 6.1– Big Brother Is Watching You 1. Apply the general framework for ethical decision making to the practices of photo tagging and geotagging.

The general framework for ethical decision making consists of recognizing an ethical issue, getting the facts, evaluating alternative actions, making decisions and testing them, and acting and reflecting on the outcomes of your decision.

In terms of photo tagging and geotagging: • Recognize an ethical issue – The issue is clearly an ethical issue because our actions are not as “private” anymore.

• Get the facts – Organizations implement photo tagging and geotagging technologies in order to provide better products and services to the public. However, it’s not clear how organizations collect and protect the data. Moreover, users are not always aware of what information is captured.

• Evaluate alternative actions o Utilitarian approach - Which option will produce the most good and do the least harm? Continuing the use of tracking technology provides better products and services to the public overall. o Rights approach - Which option best respects the rights of all stakeholders? Disallowing the tracking technology is the best way to protect the privacy rights of stakeholders. o Fairness approach - Which option treats people equally? If the organizations want to continue using the tracking technologies, then steps should be implemented to ensure that personal data are properly captured and protected. o Common good approach - Which option best serves the community as a whole, and not just some members?

Ultimately, tracking technologies will allow organizations to tailor their products and services to best fit the needs of the public.

• Make a decision and test it. Considering the four approaches described above, allowing tracking technologies could provide the best benefit to all stakeholders involved.

• Act and reflect on the outcome of your decision 2. Discuss and provide examples of the benefits and the drawbacks of photo tagging and geotagging.

Potential benefits of photo tagging and geotagging include (1) enabling organizations to customize the consumer experience by tailoring products or

Page 6 services to fit customer needs and behaviors; and (2) helping law enforcement to serve the public more efficiently (e.g., locating criminals, fugitives, and lost persons). However, the technologies also raise issues involving (1) loss of privacy, (2) the risk of unintentional sharing of information in public, (3) the risk of losing captured information.

3. Are users responsible for their loss of privacy if they do not know that their photos can be tagged and that they can be located with GPS sensors?

Yes. Ultimately, users are responsible for their loss of privacy in this case even if they do not know that their photos can be tagged. That is the reason why learning about ethics and privacy is very important in information age.

6.2– Your Privacy on Facebook 1. Why did Facebook change its privacy policies in December 2009?

Facebook CEO Mark Zuckerberg claimed that the popularity of social media in the recent years changed popular attitudes. He observed: “People have really gotten comfortable not only sharing more information and different kinds, but more openly and with more people ... [Privacy as a] social norm is just something that has evolved over time.” Additionally, Facebook likely knew that there were some strategic reasons why changing the privacy policies would benefit the company (e.g., potentially higher profits).

2. Make the argument in support of the privacy policy changes that Facebook instituted in December 2009.

There are two different reasons why the privacy policy change is acceptable.

One reason is that Facebook is not mandating the privacy policies for users.

The company is making changes, but users can configure their privacy settings to be as private or as public as they like. A second reason is that Facebook is a business, so it has to make money to stay afloat. One of the primary reasons why Facebook is able to offer its services for free is that it can raise money in various ways. Without these revenue streams, Facebook would likely have to charge for its services.

3. Make the argument against the privacy policy changes that Facebook instituted in December 2009.

Users of technology, including Facebook users, have expectations of privacy.

Users may choose to share information (through postings, message boards, blogs, etc.), but this involves sharing of information that users approve of.

What is different in the Facebook case is that users did not necessarily want to share more information, but the Facebook privacy policy change would result in their doing so unintentionally. Additionally, many users might not know how to restrict their privacy policies.

4. Discuss the trade-offs between conveniently sharing information and protecting privacy.

Page 7 There are definite tradeoffs. Conveniently sharing information is often beneficial for companies and perhaps even for the marketplace as a whole. By sharing information, companies and individuals are able to make better decisions.

From the opposite perspective, users have expectations of privacy.

Individuals, organizations, and other users can choose to share as much information as they would like, but it needs to be their choice. The default should be that companies protect the privacy of their users. In addition, if they have a legitimate reason to share users’ information, they should alert the users that they are doing so.

Discussion Questions 1. In 2008, the Massachusetts Bay Transportation Authority (MBTA) obtained a temporary restraining order barring three Massachusetts Institute of Technology (MIT) students from publicly displaying what they claimed to be a way to get “free subway rides for life.” Specifically, 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.

2. Frank Abagnale, the criminal played by Leonardo DiCaprio in the motion picture Catch Me if You Can, ended up in prison. However, when he left prison, he went to work as a consultant to many companies on matters of fraud. (a) Why do these companies hire the perpetrators (if caught) as consultants?

Is this a good idea?

Companies often underreport 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) You are the CEO of a company. Discuss the ethical implications of hiring Frank Abagnale as a consultant.

Students can offer their opinions on the pros and cons. They might contend that rewarding a person for their past criminal behavior is not an ethical precedent that a company should set in its hiring policies. This practice could send the wrong message to customers about the quality and background of the company’s employees.

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Problem-Solving Activities Each student will have different ideas of what to include in the following: 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 legal and, moreover, it is an important duty of the network security person. Unethical use of the system can be detected only by this type of scrutiny. If this is not done on a professional basis, then the company is open to legal action should someone be harmed as a result of an employee’s use of the system. Moreover, this type of Web surfing could introduce malware 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. Employees are supposed to be working, not wasting company resources. Even during their lunch hour or after hours, they are still “stealing” resources, e.g., disk space, bandwidth, etc.

Visiting pornographic sites, gambling sites, etc., could also lead to other actions that could jeopardize the company because the tracking of IP addresses would lead an investigation back to the company equipment that 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?

Although 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 to all employees reiterating what is acceptable and unacceptable in terms of Internet usage and putting all employees on notice that all future infractions will be made known to management. If some employees continue to violate the company policy, then management would be informed of their actions. d. Is punishing the abusers ethical? Why or why not? If yes, then what types of punishment are acceptable?

Punishment is just as ethical for an infraction of the Internet use policy as it would be for any abuse of company policy., . Employers need to act in good

Commented [RW1]: For Q1-4, see 4e page 8.

Page 9 faith. Management needs to circulate a policy among 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. Warnings, suspension, and ultimate termination may be appropriate punishment for violating any company policies, not just those involving improper Internet usage. e. What should the company do in this situation? (Note: There are a variety of possibilities here.)

The company should institute a policy for personal Internet use and review it with their employees. The policy should provide some flexibility, such as allowing employees two or three 15-minute intervals of personal surfing during the day, with the understanding that employees cannot visit objectionable Web sites. This approach allows employees to take a break from their work and perform some personal surfing, while confining their activity to small blocks of time.

2. 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 rules, and decide if any others should be added.

Students should provide thoughtful answers to the above.

3. Access the Association for Computing Machinery’s code of ethics for its members (see www.acm.org/constitution/code.html). Discuss the major points of this code. Is this code complete? Why or why not? Support your answer.

Some of the major points of ACM’s code of ethics are that it focuses on general moral and organizational leadership imperatives as well as other more specific professional responsibilities (e.g., know the laws, and acquire and maintain professional competence). The code does appear to be complete as it hits on some of the most important aspects for professionals in this industry and even goes as far as to tell how violations of the code will be treated.

4. 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.

5. The Electronic Frontier Foundation (www.eff.org) has a mission of protecting rights and promoting freedom in the “electronic frontier.” Review the

Page 10 organization’s suggestions about how to protect your online privacy, and summarize what you can do to protect yourself.

Some of the things that you can do to protect yourself are to know what your rights are, be aware that when you accept the “terms and rules” of an online Web site you are essentially giving them access to your information, learn how to reduce the amount of information collected about you by third parties, to get involved with legislation and government to help restrict what organizations can do with your information, and replace plainly readable data with encrypted files for storage with third parties.

6. Access your university’s guidelines for ethical computer and Internet use. Are there limitations as to the types of Web sites that you can visit and the types of material you can view? Are you allowed to change the programs on the lab computers? Are you allowed to download software from the lab computers for your personal use? Are there rules governing the personal use of computers and e-mail?

These answers will be based on the specific university and its policies.

Although policies/guidelines are likely to differ from one university to the next, there should be some similarities. In most universities, for example, you probably cannot change programs or download software onto lab computers unless you have administrative authorization to do so.

7. Access http://www.albion.com/netiquette/corerules.html. What do you think of this code of ethics? Should it be expanded? Is it too general?

These core rules are highly valuable in netiquette, which is becoming more important as online communication is increasing. Regarding the expansion of the core rules, having 10 rules makes them manageable but also sufficient to cover the important topics. This code is clearly not too general. As long as people adhere to these ethics when conducting online communications, improvements will be realized in netiquette and computer-mediated communication.

8. Access www.cookiecentral.com and www.epubliceye.com. Do these sites provide information that helps you protect your privacy? If so, then explain how.

Both of these sites maintain that consumers need to be aware of what information Web sites and merchants are storing and collecting. To help protect users’ privacy, these sites provide suggestions. In addition, ePublicEye identifies merchants that are noted as being “monitored 24 hours;” some merchants even have “Platinum” certification. Both of these measures help reassure consumers that the companies are reliable and that consumers can shop more safely.

9. Do you believe that your university should be allowed to monitor e-mail sent and received on university computers? Why or why not? Support your answer.

Page 11 Some students might regard the e-mail they send and receive on university computers as their personal correspondence and therefore believe that they are entitled to privacy. Conversely, universities may believe that anything sent or received on their computers can be monitored, because the university is paying for the physical equipment (and Internet access), and it could be held liable for actions that take place on its computers.

An interesting question to pose to students would be to ask them how they feel about this question as students and how they likely would feel if they were university administrators or IT personnel.

Team Assignments 1. Access www.ftc.gov/sentinel to learn 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?

The teams can either be assigned a consumer complaint, or they can choose one that is listed by the instructor. Their report should include how their complaint compares with the others listed and where the complaints are most prevalent around the world.

CLOSING CASE 1– What to Do About WikiLeaks The Business Problem One of the major controversies generated by the Vietnam War occurred in 1971, when The New York Times and other sources publicized excerpts from a secret study commissioned by the Department of Defense —quickly labeled The Pentagon Papers — that detailed the history of U.S. involvement in Southeast Asia. These documents had been copied by defense analyst Daniel Ellsberg, one of the contributors to the study.

Given the existing technologies, Ellsberg had to photocopy thousands of documents by hand. Today, whistleblowers — employees with insider knowledge of an organization — can capture huge amounts of incriminating documents on a laptop, memory stick, or portable hard drive. They can send the information through personal e-mail accounts or online drop sites, or they can simply submit it directly to WikiLeaks (www.wikileaks.org).

WikiLeaks was officially unveiled in December 2006. Julian Assange, one of the founders, was reportedly inspired by the leak of the Pentagon Papers. Assange intended WikiLeaks to serve as a dropbox for anyone, anywhere, who disagreed with any organization’s activities or secrets. According to its Web site, Wikileaks focuses on material of ethical, political, and historical significance. In its first year, the organization’s database expanded to 1.2 million documents. In addition, WikiLeaks receives approximately 10,000 new documents every day. Since its inception, WikiLeaks has had significant impacts on both businesses and governments. We discuss several examples below.

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In January 2008, WikiLeaks posted documents alleging that the Swiss bank Julius Baer (www.juliusbaer.com) hid its clients’ profits from even the Swiss government by concealing them in what seemed to be shell companies in the Cayman Islands. The bank filed a lawsuit against WikiLeaks for publishing data that it claimed had been stolen from its clients. Baer later dropped the lawsuit – but only after generating embarrassing publicity for itself.

In October 2008, Iceland’s Kaupthing Bank collapsed, saddling the country with $128 billion in debts. Ten months later, Bogi Agustsson, the anchor for Icelandic national broadcaster RUV, appeared on the evening news and explained that a legal injunction had prevented the station from airing an exposé on the bank. Viewers who wanted to see the material, he suggested, should visit WikiLeaks. People who took Agustsson’s advice found a summary of Kaupthing’s loans posted on the Web site, detailing more than $6 billion funneled from the bank to its owners and companies they owned, often with little or no collateral. WikiLeaks promptly became a household name in Iceland.

The following year, WikiLeaks published documents from a pharmaceutical trade group implying that its lobbyists were receiving confidential documents from, and exerting influence over, a World Health Organization (WHO) project to fund drug research in the developing world. The resulting attention helped to terminate the project.

In September 2009, commodities company Trafigura (www.trafigura.com) requested an injunction from the courts preventing the British media from mentioning a damaging internal report. The report indicated that the company had dumped tons of toxic waste in the Ivory Coast that sickened 100,000 local inhabitants. Although Trafigura could prevent the official media from reporting this story, however, it could not stop WikiLeaks from publishing the information. The public became aware of the transgression, and Trafigura eventually had to pay out more than $200 million in settlements.

As consequential as these business leaks were, probably the most controversial WikiLeaks exposé involved the U.S. government. From November 2009 to April 2010, U.S. Army Private First class Bradley Manning downloaded hundreds of thousands of diplomatic cables to a CD at an outpost in Iraq. He then passed the information to WikiLeaks. In doing so, Manning violated 18 U.S. Code Section 1030(a)(1), which criminalizes unauthorized computer downloads. Beginning on November 28, 2010, WikiLeaks published the contents of more than 250,000 diplomatic cables, the largest unauthorized release of contemporary classified information in history. Among these cables were 11,000 documents marked secret. The U.S. government’s definition of a secret document is one that, if released, would cause “serious damage to national security.”

Diplomatic flaps quickly ensued. For example, North Korean leader Kim Jong Il learned that China would consider supporting the unification of the peninsula under the leadership of the South Korean government. Similarly, Iranian President Mahmoud

Page 13 Ahmadinejad discovered that his Arab neighbors were pleading with the U.S. to launch an attack against Tehran’s nuclear program.

Not surprisingly, the release of the cables also had wide-ranging repercussions within the United States. The government ordered a clampdown on intelligence sharing between agencies, and it established new measures to control electronically stored documents.

U.S. Secretary of State Hilary Clinton charged that the massive cable leak “puts people’s lives in danger, threatens national security, and undermines our efforts to work with other countries to solve shared problems.” From the opposite perspective, many individuals and groups supported WikiLeaks’s actions, including Daniel Ellsberg.

The problem then, boils down to this: How can governments, organizations, and even individuals prevent future disclosures. Is it possible to accomplish this task, given that the sources of WikiLeaks’s information appear to be internal?

The Solution In the initial moments after the release of the State Department cables, unknown hackers tried to shut down WikiLeaks by exposing its Web site to denial of service attacks (discussed in Chapter 7. It is unclear whether the hackers were working on behalf of the U.S. government, but they seemed to endorse the government’s claims that the disclosures threatened national security.

WikiLeaks’s supporters retaliated with anonymous hacktivism, attacking the Web sites of companies such as Amazon, which had thrown WikiLeaks off its servers, and MasterCard and PayPal, which had frozen the organization’s accounts and prevented its supporters from donating to the cause.

Ultimately, all attempts to stifle WikiLeaks have proved futile. When the organization is blocked from one host server, it simply jumps to another. Further, the number of mirror Web sites – essentially clones of WikiLeaks’s main content pages had mushroomed to 1,300 by the end of 2010.

Prior to 9/11, the U.S. State Department had operated its own internal cable system and encrypted documents to ensure security. After the attacks, the State Department system was merged into a new digital records system controlled by the Department of Defense.

Since the WikiLeaks disclosures, the State Department has temporarily severed its connection to the new system while it takes steps to prevent future unauthorized downloads.

In other attempts at thwarting WikiLeaks, governments and companies have turned to cybersecurity. Since 2007, every major security software vendor (for example, McAfee, www.mcafee.com, Symantec, www.symantec.com, and Trend Micro, www.trendmicro.com) has spent hundreds of millions of dollars to acquire companies in the data leak prevention (DLP) industry. These companies produce software that locates and tags sensitive information and then guards against its being stolen or illegally duplicated. Unfortunately, to date, DLP software has not been effective.

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The failure of DLP software has prompted organizations to turn to network forensics, which is the process of constantly collecting every digital “fingerprint” on an organization’s servers to trace and identify an intruder who has broken into the system.

Although this software gathers data and makes them easily available, it does not identify the culprits.

The Result How can organizations and governments respond to WikiLeaks? Lawsuits will not work, because WikiLeaks is legally protected in the U.S. by its role as a mere conduit for documents. Moreover, even if a company or a government somehow won a judgment against WikiLeaks, that would not shut down the company, because its assets are spread all over the world.

In fact, WikiLeaks has a nation-sized ally — Iceland. Since WikiLeaks discovered the corrupt loans that helped destroy Iceland’s biggest bank, the country has set out to become the conduit for a global flood of leaks. Birgitta Jonsdottir, a member of Iceland’s parliament, created the Icelandic Modern Media Initiative (IMMI). This initiative seeks to bring to Iceland all the laws that support protecting anonymous sources, freedom of information, and transparency from around the world. It would then set up a Nobel-style international award for activities supporting free expression. IMMI would also make Iceland the world’s most friendly legal base for whistleblowers. As of May 2011, IMMI had yet to become law.

Should WikiLeaks falter, other Web sites around the world are ready to take its place. For example, Greenleaks (www.greenleaks.org) is a Web site for whistleblowers on environmental issues. Openleaks (www.openleaks.org) is a Web site that will not openly publish information sent to it, but will give it to reporters and human rights organizations to disseminate. Perhaps the most controversial site is Anonymous, the hacker collective.

What is the best protection against unauthorized leaks? Icelandic WikiLeaks staffer Kristinn Hrafnsson suggested, rather drily, that companies — and perhaps governments to some extent — reform their practices to avoid being targeted. _________________________________________________________ Questions 3. If the Constitution of the United States of America protects freedom of speech, should the government that upholds the Constitution restrict certain information and communication technologies in the name of security?

As discussed in the WikiLeaks case, there are certain categories of information (often security based) that might need to be restricted. For example, if the Navy Seals were going to conduct an operation in a certain area, leaking this information would likely jeopardize their lives, the lives of innocent people (e.g., civilians, the spouses and children of the military personnel); and the success of the operation. In a case such as this one — or

Page 15 information concerning the spies and military personnel who killed Osama Bin Laden —that information should be restricted.

4. To what extent should unethical practices be punishable by law?

This is a tough question because unethical practices aren’t necessarily illegal.

If the unethical practice is against the law, then it should be punished.

However, if a practice is simply unethical, then law enforcement should likely not get involved. If it turns out the unethical practice clearly has harmful consequences, then the government should pass laws that criminalize the practices. Future violations could then be punished under the law.

CLOSING CASE 2– You Be the Judge Terry Childs worked in San Francisco’s information technology department for five years as a highly valued network administrator. Childs, who holds a Cisco Certified Internetwork Expert certification, the highest level of certification offered by Cisco, built San Francisco’s new multimillion-dollar computer network, the FiberWAN. He handled most of the implementation, including the acquisition, configuration, and installation of all the routers and switches that comprise the network. The FiberWAN contains essential city information such as officials’ e-mails, city payroll files, confidential law enforcement documents, and jail inmates’ booking information.

On July 13, 2008, Childs was arrested and charged with four felony counts of computer tampering. Authorities accused him of commandeering the FiberWAN by creating passwords that granted him exclusive access to the system. In addition to refusing to give city officials the passwords necessary to access the FiberWAN, Childs is accused of other actions. Authorities allege that he implemented a tracing system to monitor what administrators were saying and doing. Authorities also discovered dial-up and digital subscriber line (DSL) modems (discussed in Chapter 9) that would enable an unauthorized user to connect to the FiberWAN. They also found that he had placed a command on several devices on the network that would erase critical configuration data in the event that anyone tried to restore administrative access to the devices. Further, he allegedly collected pages of user names and passwords, including his supervisor’s, to use their network login information. He was also charged with downloading terabytes of city data to a personal encrypted storage device. The extent of Child’s activities was not known until a June 2008 computer audit.

Childs had been disciplined on the job in the months leading up to his arrest, and his supervisors had tried to fire him. Those attempts were unsuccessful, in part because of his exclusive knowledge of the city’s FiberWAN. After his arrest, Childs kept the necessary passwords to himself for ten days, and then gave them to the mayor of San Francisco in a secret meeting in the city jail. What was he thinking? Had he become a rogue employee? His lawyer paints a different picture of the man and his situation.

Page 16 Childs seems to have taken his job very seriously, to the point of arrogance. He worked very hard, including evenings and weekends, and rarely took vacations. Because the FiberWAN was so complex and Childs did not involve any of the other network engineers in his unit, he was the only person who fully understood the network’s configuration. He apparently trusted no one but himself with the details of the network, including its configuration and login information.

Childs had a poor relationship with his superiors, who were all managerially oriented rather than technically oriented. He considered his direct supervisor to be intrusive, incompetent, and obstructive, and he believed the managers above him had no real concept of the FiberWAN. In fact, he felt that his superiors were more interested in office politics than in getting anything done. He also complained that he was overworked and that many of his colleagues were incompetent freeloaders.

Childs’s lawyer maintained that his client had been the victim of a “bad faith” effort to force him out of his post by incompetent city officials whose meddling was jeopardizing the network that Childs had built. He further charged that in the past Childs’s supervisors and co-workers had damaged the FiberWAN themselves, hindered Childs’s ability to maintain the system, and shown complete indifference to maintaining it themselves.

Childs was the only person in the department capable of operating the FiberWAN. Despite this fact, the department had established no policies as to the appropriate person to whom Childs could give the passwords. Childs maintains that none of the persons who requested the passwords from him was qualified to have them.

Childs’ lawyer raised the question: “How could the department say his performance was poor when he had been doing what no one else was able or willing to do?” Interestingly, the FiberWAN continued to run smoothly while Childs was holding the passwords.

As of May 2011, San Francisco officials maintained they had paid Cisco contractors almost $200,000 to fix the problems with the FiberWAN. The city has retained a security consulting firm, Secure DNA (www.secure-dna.com), to conduct a vulnerability assessment of its network. It has also set aside a further $800,000 to address potential ongoing problems.

On April 27, 2010, after nearly three days of deliberation, a jury convicted Childs of one count of felony computer tampering for withholding passwords to the city’s FiberWAN network. On August 9, 2010, the judge sentenced Childs to four years in prison. _________________________________________________________ Questions 1. Do you agree with the jury that Childs is guilty of computer tampering? (a) Discuss the case from the perspective of the prosecutor of the City of San Francisco. (b) Discuss the case from the perspective of Childs’s defense lawyer.

Page 17 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 thorough 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 component of a system that, if it fails, will prevent the entire system from functioning. For this reason, a single point of failure is clearly undesirable, whether it is a person, a network, or an application. Is Childs an example of a single point of failure? Why or why not? If he is guilty, then 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.

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CHAPTER 7:

Information Security

Chapter Overview 7.1 Introduction to Information Security 7.2 Unintentional Threats to Information Systems 7.3 Deliberate Threats to Information Systems 7.4 What Organizations Are Doing to Protect Information Resources 7.5 Information Security Controls

Teaching Tips and Strategies Protecting the security of their information systems is one of the highest priorities confronting modern businesses. One strategy to open the discussions for this chapter is to ask students for examples from their own experiences where security on their computer was compromised. It could be a virus or hacker that attacked their computer, a problem with identity theft that resulted from using a credit card online, or any number of other security problems.

Although most students understand that they need to install antivirus software on their computers, some may not understand that it is also important to install anti-spyware software. You can demonstrate the use of Spybot (http://www.safernetworking.org/en/index.html) or AdAware (http://www.lavasoft.com/) software or any other spyware-detecting software with which you are familiar.

When the class has completed discussing their personal security issues, you can delve into how information security affects businesses. Describe the difference between protecting a single computer or a few computers at home versus protecting hundreds or thousands of computers in an organization. The IS department is generally responsible for the security of the organization’s computers. Therefore, it has a huge responsibility in keeping the computers, programs, and data safe from intruders.

With students going out into the workplace and using computers on a regular basis, it is important for them to understand that any actions they can take to a keep an organization’s computers safe is a high priority. Bringing in or downloading questionable software is a major way that computers are compromised. If your school computer has experienced a hacking attack in the recent past, this would be a good example to use to illustrate how such an attack can create problems for many people. It is possible that a severe security breach could make the computers and/or data unavailable for a considerable length of time, rendering the company unable to perform its operations.

Page 2 OPENING CASE 1- You Be the Judge

Review Questions Section 7.1 – Before you go on…

1. Define information security.

Protecting an organization’s information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction.

2. Define a threat, an exposure, and a vulnerability.

• Threat – Any danger to which a system may be exposed.

• Exposure – The harm, loss, or damage that can result if a threat compromises that resource.

• Vulnerability – The possibility that the system will suffer harm by a threat.

3. Why are the skills needed to be a hacker decreasing?

The reason is that the Internet contains information and computer programs called scripts that users with few skills can download and use to attack any information system connected to the Internet.

Section 7.2 - Before you go on…

1. What is an unintentional threat to an information system?

Unintentional threats are those acts that users perform with no malicious intent. They include human errors, deviations in the quality of service by service providers, and environmental hazards.

2. Compare and contrast social engineering and reverse social engineering.

Social engineering is an attack in which the perpetrator uses social skills to trick or manipulate a legitimate employee into providing confidential company information such as passwords. In reverse social engineering, the employees approach the attacker. For example, the attacker gains employment at a company and, in informal conversations with his coworkers, lets it be known that he is “good with computers.” As is often the case, employees then ask him for help with their computer problems. While he is helping them, he loads Trojan horses on their computers that e-mail him with their passwords and information about their machines.

Section 7.3 - Before you go on 1. Why has the theft of computing devices become more serious over time?

Computing devices and storage devices are becoming smaller yet more powerful with vastly increased storage (for example, laptops, BlackBerrys, personal digital assistants, smart phones, digital cameras, thumb drives, and iPods). As a result, these devices are becoming easier to steal and easier for attackers to use to steal information.

2. What are the three types of software attacks?

Page 3 Remote attacks needing user action Remote attacks needing no user action Software attacks by programmers during the development of a system.

3. Define alien software.

Alien software is clandestine software that is installed on your computer through duplicitous methods.

4. What is a SCADA system?

Supervisory control and data acquisition (SCADA) systems are large-scale, distributed, measurement and control systems. SCADA systems are used to monitor or to control chemical, physical, or transport processes such as oil refineries, water and sewage treatment plants, electrical generators, and nuclear power plants.

Section 7.4 – Before you go on…

1. Describe several reasons why it is difficult to protect information resources.

The following are listed in Table 7.3 • Hundreds of potential threats exist.

• Computing resources may be situated in many locations.

• Many individuals control information assets.

• Computer networks can be located outside the organization and are therefore difficult to protect.

• Rapid technological changes make some controls obsolete as soon as they are installed.

• Many computer crimes are undetected for a long period of time, so it is difficult to learn from experience.

• People tend to violate security procedures because the procedures are inconvenient.

• The amount of computer knowledge necessary to commit computer crimes is usually minimal. As a matter of fact, one can learn hacking, for free, on the Internet.

• The cost of preventing hazards can be very high. Therefore, most organizations simply cannot afford to protect against all possible hazards.

• It is difficult to conduct a cost-benefit justification for controls before an attack occurs because it is difficult to assess the value of a hypothetical attack 2. Compare and contrast risk management and risk analysis.

Risk management seeks to reduce risk to acceptable levels. Risk analysis is the process by which an organization (1) assesses the value of each asset being protected, (2) estimates the probability that each asset will be compromised, and (3) compares the probable costs of the asset’s being compromised with the costs of protecting that asset.

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Section 7.5 – Before you go on…

1. What is the single most important information security control for organizations?

The single most effective control is user education and training, leading to increased awareness of the vital importance of information security on the part of every organizational employee.

2. Differentiate between authentication and authorization. Which one of these always comes first?

Authentication determines the identity of the person requiring access. After the person is authenticated (identified) then authorization is applied.

Authorization determines which actions, rights, or privileges the person has, based on verified identity. So, authentication comes first.

3. Compare and contrast whitelisting and blacklisting.

Whitelisting is a process in which a company identifies the software that it will allow to run. It does not try to recognize malware. Whitelisting permits acceptable software to run and either prevents anything else from running or lets new software run in a quarantined environment until the company can verify its validity. Whereas whitelisting allows nothing to run unless it is on the whitelist, blacklisting allows everything to run unless it is on the blacklist.

A blacklist, then, includes certain types of software that are not allowed to run in the company environment. For example, a company might blacklist peer-topeer file sharing on its systems.

4. What is the purpose of a disaster recovery plan?

The purpose of the disaster recovery plan, also known as the business continuity plan, is to provide guidance to people who keep the business operating after a disaster occurs.

5. What is information system auditing?

Independent and unbiased observers are called in to answer questions related to the security of a company during an information system audit. In an IS environment, an audit is an examination of information systems, their inputs, outputs, and processing.

“IT’s About Business” Questions 7.1– 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.

Page 5 CheckFree may have been at fault in this scenario. Network Solutions could not protect the users if someone logged in with a CheckFree account, which Network Solutions would have seen as a valid account. CheckFree failed to protect its ID/password information. (Employees at CheckFree were somehow tricked into giving out sensitive information.) CheckFree needs to increase security surrounding its Web site in order to protect its customers. Network Solutions did nothing wrong.

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

Network Solutions can add more security to its login accounts. Rather than simply an ID and password that is used for making changes to accounts, it could require its customers to provide some additional security information before making such changes. CheckFree needs to educate its employees about the problems that can be generated when users give out sensitive information to unauthorized users. Phishing attackers often try obtain user IDs and passwords, so anyone who receives such a request should check with the IS department before giving out such information. Also, anyone who inadvertently gives out this type of information should notify the IS department immediately.

7.2– 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?

Legislation alone will not be enough to protect against cyber attacks.

Educating employees about the dangers of outside influences attacking their networks is critical. Although legislation may provide some guidelines, it is up to the utilities to strengthen their internal security systems. Because their original networks and systems were not designed to be accessed from outside their own network, retooling their security plan is critical.

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

By not connecting their control system to their business system, utility companies can reduce the impact of cyber attacks on their operations.

Generally, the business IS systems contain data that are less sensitive regarding the running of the plant, so infection by a virus or malware would not shut down a utility plant.

From a different perspective, connecting the business system to the control system enables engineers and other employees who need the control information to access both systems from off-site. This capability, however, can create problems —as illustrated in the business case — by making the network vulnerable to outside intruders. Stricter security measures should minimize this risk.

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7.3– Cigna’s Approach to Least Privilege 1. Why is it so important for organizations to provide least privilege to employees?

Employees should have access only to the information they need to do their job. Making additional information available exposes the company to possible fraud by any employee who can access that information. For instance, an employee in a production environment does not need access to HR records that contain payroll or personal information about other employees. Enabling this access could lead to any number of problems from stalking to harassment against other employees.

2. What are possible disadvantages of least privilege?

Least privilege can create obstacles for employees by restricting how much information they have access to. For instance, if a customer service representative who has to deal with clients does not have access to all of the necessary information, then, when a client calls to request information or make a claim, the employee may need to contact a supervisor, keeping the client on the phone for an extended period of time. Also, when employees change positions within the organization, the software needs to be updated immediately so that they have access to the appropriate information to do their new job. Students may come up with other possible disadvantages.

Discussion Questions 1. Why are computer systems so vulnerable?

Today’s computer systems are vulnerable for the following reasons: • Today’s interconnected, interdependent, wirelessly networked business environment; • Smaller, faster, cheaper computers and storage devices; • Decreasing skills necessary to be a computer hacker; • International organized crime taking over cybercrime; • Increased employee use of unmanaged devices; • Lack of management support.

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

In today’s business environment, organizations rely on their computers more than ever. If the data or computer systems are compromised, there can be serious repercussions to the business’s survival. Because many employees now use laptops or smart phones to access data, any type of attack on a network or on one of those wireless devices could be devastating to an organization’s information systems.

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.clo.com), October 15, 2008.

Page 7 In fact, security is both a technical and a business issue. Security managers need to be proactive rather than reactive and anticipate the types of threats that will occur in the future. Also, many organizations do not enforce their own security policies, leaving their computer systems and networks vulnerable to attack. Employees often unintentionally open a system to attack, and then the organization must deal with it. Better business policies should be used along with the most recent technological advances in security.

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

When you buy insurance for your home, you are paying the insurance company to guarantee that if someone breaks into your house, or the house burns down, you will be compensated for your loss (depending on the way the insurance policy is written). In contrast, in an organization, the purpose of information security is to prevent the security breach from occurring in the first place. In order to protect its information systems, the organization might need to store backups of data at an off-site location so that they can be retrieved in case of a loss. Students may also have other answers.

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

An organization needs to know who is accessing its system, when they are doing it, and what they are accessing. Because customers can now access a company’s database via its Web site, it is extremely important that the data they can access are not of a sensitive nature and that anyone who accesses any internal database has the authority to do so.

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

The Internet has no borders. Hackers from the Caribbean can break into computers in Russia with no more than a PC and an Internet connection.

Companies can no longer rely simply on the physical security of their computer rooms to prevent unauthorized persons from accessing their data.

The ease of access and the widespread use of computers worldwide have made cross-border hacking widespread. Students may come up with many solutions, such as preventing access from certain domain names, implementing strict spam rules, and others.

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

Sarbanes-Oxley requires businesses to provide information that supports their financial statements It is extremely important that organizations implement effective security procedures so they can comply with this act without making their information vulnerable to hackers.

8. 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

Page 8 higher level of authentication were implemented? Would it be worth it, or would it decrease productivity?

Depending on the security installed at your institution, answers will vary.

Students can give their opinions concerning the state of security at your institution, and they can report any instances where your security systems did not work.

9. Why are federal government authorities so worried about SCADA attacks SCADA systems consist of multiple sensors, a master computer, and a communications infrastructure. The sensors connect to physical equipment.

The sensors are connected in a network, and each sensor typically has an Internet Protocol (IP) address. If an attacker can gain access to the network, he or she can disrupt the power grid over a large area or disrupt the operations of a large chemical plant.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 1. Why are computer systems so vulnerable?

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

Already answered 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.clo.com), October 15, 2008.

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

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

Already answered 6. Why is cross-border cybercrime expanding rapidly? Discuss possible solutions.

Page 9 Already answered 7. Discuss why the Sarbanes-Oxley Act is having an impact on information security.

Already answered 8. 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?

Already answered 9. Why are federal government authorities so worried about SCADA attacks?

Already answered 1. 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 its obligations?

If a company creates a security policy to follow, then their security measures need to meet the expectations defined in the policy. Students will have differing opinions on how this policy may be met. 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?

The ultimate way to determine that security is NOT efficient is if there is a security leak within the organization. Students should come up with a plan to determine if security within an organization is sufficient.

2. 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. a. Calculate the expected loss in dollars. b. .07 x .05 x $4,000,000 = $14,000.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.

Page 10 Students will have various reasons, but they should compare the expected loss to the low percentage of there being damage and the cost of the yearly premium for the insurance policy. See above numbers.

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

Students should write a report explaining what information this Web site provides and how the scams work.

4. Visit www.dhs.gov/dhspublic (Department of Homeland Security), and write a report on their agenda and accomplishments to date.

The outcome from this assignment will be a report about the listed Web site.

5. 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.

The list of products will include biometric devices that are used to safeguard systems, including fingerprint and retina IDs. Students will be able to find many items on the site.

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

Software piracy is not a crime in some countries, but a matter of normal business practices. Organizations need to protect themselves as much as possible when operating in another country. Students should come up with some solutions to this problem.

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?

The teams can either be assigned a consumer complaint, or they can choose one that is listed by the instructor. Their report should include how their complaint compares with the others listed and where the complaints are most prevalent around the world.

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.

Page 11 Each team will write a report on this matter. They may come up with different reasons why the breach occurred and different strategies to prevent future breaches.

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.

The instructor may assign a specific tool to each team. The students need to be able to download it to a computer and execute the program so they can see how it works. Their reports will list the positives and negatives they found in the software.

CLOSING CASE 1– Cybercriminals use Social Networks for Targeted Attacks The Business Problem Each infected personal computer in a corporate network represents a potential point of access to valuable intellectual property, such as customer information, patents, and strategic documents. The attackers who breached Google and 30 other technology, media, defense, and financial companies from mid- to late 2009 were after these kinds of information. Dubbed Operation Aurora by cyber security company McAfee (www.mcafee.com), the attacks were likely initiated by fake friendly messages sent to specific employees at the targeted companies. How do such attacks work? Take a look at the following example.

Bob works for a large U.S. financial company. Somehow, attackers gained access to Bob’s Facebook account, logged into it, grabbed his contact list of 50 to 60 friends, and began manually reviewing messages and postings on his profile page. The attackers noted discussions about a recent company picnic, and sent individual messages to Bob’s friends who worked at his company.

Alice, one of Bob’s co-workers, received a Facebook message from Bob, asking her to take a look at pictures from a company picnic. She had, in fact, attended the picnic with Bob. When she clicked on the accompanying Web link, she expected to see Bob’s pictures. But the message had come from the attackers and the link carried malicious software (malware).

Upon clicking on the link, Alice unknowingly downloaded a keystroke logger, which is a program designed to save everything she typed at her keyboard and, once per hour, send a text file of all her keystrokes to a free Gmail account controlled by the attackers. (The keystroke logger was available free on the Internet.) The attackers reviewed Alice’s hourly keystroke reports, and noted when she logged into a virtual private network account to access her company’s network. With her username and password, the attackers logged on to the financial firm’s network and gained access to the company’s servers and all the sensitive information they contain. The attackers also took control of

Page 12 Alice’s computer without her knowing it. As such, her computer became a zombie computer, under the control of the attackers.

Successful breaches, such as the example of the financial institution above, illustrate a shift in the way cybercriminals attack their targets. They are aggressively taking advantage of an unanticipated hole in corporate defenses: the use of social networks in corporate settings. They are using the personal information provided by individuals communicating on social networks. These networks provide a rich repository of information that cybercriminals can use to more precisely target individual corporate employees through phishing attacks. (A phishing attack is an attack that uses deception to fraudulently acquire sensitive information by masquerading as an authentic-looking email.) In fact, the attacks are so precisely targeted that they have a new name, spear fishing. (Spear fishing attacks are phishing attacks that target specific individuals.)

In addition to copying or stealing sensitive personal and corporate information, attackers combine many zombie computers into botnets, which can contain millions of computers.

The attackers then use these botnets to execute all forms of cybercrime.

In just four weeks in early 2010, cyberthieves known as the Kneber gang, stole 3,644 usernames and passwords for Facebook accounts from individuals in over 2,000 companies. These stolen credentials flow into hacking Web sites where a batch of 1,000 Facebook username and password pairs, guaranteed valid, sell for $75 to $200, depending on the number of friends tied to the accounts. From each account, thieves can gather up e-mail addresses, contact lists, birth dates, hometowns, mothers’ maiden names, photos, and recent gossip – all useful for targeting specific victims and turning their computers into zombies.

In another example of attacks on social networking sites, the Koobface worm targets users of social networking Web sites, including Facebook (its name is an anagram of Facebook), Twitter, MySpace, hi5, Bebo, Friendster, and others. A study by the Information Warfare Monitor (www.infowar-monitor.net) revealed that the operators of the Koobface worm generated over $2 million in revenue from June 2009 to June 2010.

Kaspersky Labs (http://usa.kaspersky.com), a security firm, estimates that there are 500,000 Koobface-controlled personal computers active on the Internet on any given day.

The Solution Facebook, the dominant social network and therefore the biggest target, is partnering with Microsoft and security firm McAfee to help filter malicious programs. A Facebook spokesperson said that this process should keep compromised accounts to a minimum.

The spokesperson went on to say that Facebook is “constantly working to improve complex systems that quickly detect and block suspicious activity, delete malicious links, and help people restore access to their accounts.”

The Result Unfortunately, vulnerabilities in social networking Web sites continue to be exploited.

Many owners of infected zombie computers do not know that their computers are compromised. The best solution that will yield the best results is for all users of social

Page 13 networks to be extremely careful of what information they post on their pages. Further, all computer users must not click on any link in an e-mail, even if that e-mail comes from a supposedly trusted source.

However, there is some good news. Social networking users in the United States, more than any other country, limit the personal information they post, and set privacy settings to restrict who can view their information. This finding comes from the 2010 Unisys Security Index, a bi-annual study conducted by market research company Lieberman Research Group (www.liebermanresearch.com). _________________________________________________________ Questions 1. Describe the difference between phishing attacks and spear fishing attacks.

Which attack is the most dangerous? Be specific as you support your answer A phishing attack is one in which a hacker attempts to get an Internet user to give out personal information. The attack is usually in the form of an e-mail, with a link to a site that is controlled by the attacker. The hackers use wellknown names (such as Bank of America or PayPal) in their e-mail to make the user think that this is a legitimate e-mail. A spearfishing attack works the same way as a phishing attack, except that the hacker targets a specific individual, the information usually coming from someone else’s account that has been hacked.

A spearfishing attack is the most dangerous, because the individual who is contacted thinks that the request for information has come from someone they know, rather than from a large entity such as a bank. The unsuspecting user is also duped into thinking that the link they are going to click is from some event that actually happened. This makes detecting the fraud very difficult.

In the example, the victim did not even know that her computer had been attacked and made part of the hackers network.

2. What are specific actions that you can take to decrease your vulnerability to such attacks?

Users should not click on any link sent to them from an unsolicited source, even if it is from someone that they know. In addition, those who use social networks need to be extremely careful about what information they post on their sites. In addition to not posting personal information such as address and phone numbers, users should be very careful about the names of friends and associates that they post on their site. Those who do not take care when using the Internet are the ones who are targeted by hackers, although anyone can be a victim.

CLOSING CASE 2– Who Is Minding The Store?

The Problem

Page 14 On Wednesday, April 21, 2010, computers in companies, hospitals, and schools around the world became trapped in a cycle of repeatedly rebooting themselves after an antivirus program from security vendor McAfee (www.mcafee.com) identified a normal Windows file as a virus. Computers running Windows XP Service Pack 3 in combination with McAfee VirusScan 8.7 were affected. The repercussions were widespread.

• About a third of the hospitals in Rhode Island had to postpone elective surgeries and stop treating emergency-room patients who were not experiencing traumas.

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In Kentucky, state police officers were instructed to shut down the computers in their patrol cars as technicians tried to fix the problem.

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The National Science Foundation in Arlington, Virginia, lost computer access.

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At Illinois State University in Normal, Illinois, dozens of computers in the College of Business became inoperable.

McAfee’s policy is to update its corporate customers on a daily basis. The April 21, 2010 update was intended to detect and destroy a minor threat, the “W32/wecorl.a” virus. However, the update incorrectly identified the critical “svchost.exe” file in Windows XP Service Pack 3 as malicious software and then quarantined it. In some cases, the update actually deleted the file. Without “svchost.exe” a Windows personal computer will not boot (start up) correctly.

When users applied the McAfee update and then rebooted their computers, the computers crashed and rebooted repeatedly. Most of these computers lost all network capability as well. Adding to these problems, some computers became unable to recognize their own USB drives. This problem turned out to be a major one, because recovery required users to reinstall svchost.exe, a process that could be done more easily by walking a flash drive from one crippled computer to the next.

The Solution Because virtually all the affected personal computers were unable to connect to a network, corporate IT personnel had to manually fix each machine. Of course, this process became much more difficult if the affected computers could not recognize their own USB drives.

Later on Wednesday, McAfee placed a document on its Web site that specified the necessary recovery steps. The following day the company made available a semiautomated tool that had to be run on affected computers after entering Windows’ Safe Mode.

The Results McAfee took two days (until April 23, 2010) to post a list of frequently asked questions (FAQ) concerning the update disaster on its Web site. Late on April 23, McAfee’s home page contained a link to a blog post by McAfee’s Barry McPherson that attempted to minimize the issue. (Interestingly, McPherson was McAfee’s executive vice president of support and customer service, not its CEO.) McPherson pledged that McAfee would improve its quality assurance processes to see that this problem did not reoccur.

Page 15 Most large McAfee customers had their computers up and running in two days or less. However, a number of small businesses that did not have IT departments were still trying to fix their computers several days later.

Interestingly, perhaps modern organizations are somewhat to blame for this problem. Today, organizations are pushing for more rapid updates to their antivirus software to minimize their exposure time to new malware threats. Antivirus vendors have responded to these pressures by speeding up the delivery of their software updates in an attempt to match the pace of new malware development by hackers. These rapid updates can cause security vendors to make mistakes in their quality control procedures, which apparently is what happened to McAfee.

Questions 1. Discuss McAfee’s handling of the update disaster. Should McAfee have done anything differently? If so, what? Support your answer.

It appears that McAfee might not have adequately tested the update prior to it being distributed. The news release also did not come from the highest person in the organization.

McAfee should evaluate its quality control process and make changes to ensure patches do not get release before stringent internal review and testing.

For public relation reasons, establish a policy, if one is not already in place, to limit who is authorized to make news releases dealing with major issues to only the company CEO. 2. What should organizations do to prevent such problems in the future?

Where possible, organization IT departments should develop a process to internally test all software updates, including virus updates, in a controlled environment prior their being pushed out to the computers on their network.

Develop, as part of the disaster recovery plan, procedures that could be used to recover systems that they believe have been compromised.

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CHAPTER 8: Web 2.0 and Social Networks Chapter Overview 8.1. Web 2.0 Underlying Technologies 8.2. Web 2.0 Applications 8.3. Categories of Web 2.0 Sites

Teaching Tips and Strategies Most students should already be familiar with social networking Web sites. Before beginning the discussion on this chapter, ask how many students have at least one social networking account and how many have more than one. You can then ask how active they are in terms of their social networking presence. For example, how often do they check the Web sites to see other people’s news feeds or to update their status? Visit some of the popular social networking sites such as Facebook, MySpace, LinkedIn, and Google+. Ask students if they know any other social networking sites. What are specific purposes or unique features of each of the social networking sites? For information on social networking sites, visit http://en.wikipedia.org/wiki/List_of_social_networking_websites.

Share with students how Web 2.0 technologies enable social networking sites and other exciting Internet-related applications. Ask them how many have heard about wikis, podcasts, blogs, and RSS, and how many have first-hand experience using any of them.

These are just a few examples of Web 2.0 applications. This chapter will cover more topics related to Web 2.0 and how they are used by individuals as well as businesses.

Explain and provide examples of Web 1.0 vs. Web 2.0. The first generation of the Internet, i.e., Web 1.0, focuses on creating Web sites and the commercialization of the Web. The second generation of the Internet, i.e., Web 2.0, allows users to interact with Web sites, and it provides tools for information sharing and collaboration. Point out to students that the advancements in wireless platform and mobile computing (see Chapter 10) have played significant roles in the innovative utilization of Web 2.0.

To conclude, ask students to predict the next generation of the Internet. What types of application they would like to see? Have they heard of any technological developments that could enable such applications?

OPENING CASE 1- Making Money with YouTube Videos Questions 1. Access the article in Forbes, “YouTube: Five Tips for Building Your Own Video Career.” Provide examples of how McLaughlin and Neal have followed each tip.

The five tips and analysis are as follows:

Page 2 • • • •

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Recognize your talents and be yourself: McLaughlin and Neal used their strengths as comedians to create funny videos on YouTube.

Structure your content and keep it consistent: By creating a designated RhettandLink channel on YouTube, McLaughlin and Neal keep their videos well organized.

Hone your camera and editing skills: McLaughlin and Neal have access to professional videographers from their previous work with television shows.

Grow your viewer base: The RhettandLink channel allows McLaughlin and Neal to utilize subscriptions as well as other tools (Facebook, Twitter, Web sites, second YouTube channel, etc.) to keep in touch with current viewers and attract new ones.

Work hard at building and maintaining your brand. McLaughlin and Neal are active on YouTube, constantly creating and posting videos and updating the site content.

2. What are the difficulties involved in building your own brand on YouTube?

Give specific examples of these difficulties.

With the soaring number of videos posted on YouTube, it is very difficult to gain attention and initially attract viewers. For videos that attract attention, it is also not very easy to keep the viewers coming back. Many content creators on YouTube work very hard to update their content and build their own brand on the site.

Review Questions Section 8.1 – Before you go on…

1. Differentiate between Web 1.0 and Web 2.0.

Web 1.0 is the term used to describe the first generation of the Web where organizations created Web sites and users passively received information from those sites with minimal interaction with the sites. Web 2.0 is the second generation of the Web where Web sites enrich the user experience by encouraging user participation, social interaction, and collaboration using such technologies as wikis, Web services, and mashups.

2. Explain how AJAX, tagging, and RSS have made the Web more interactive and informative.

AJAX enables portions of Web pages to reload with fresh data instead of requiring the entire Web page to reload. This process speeds up response time and increases user satisfaction.

Tagging allows users to classify information in multiple, overlapping associations rather than in rigid categories.

RSS allows users to receive the information they want (customized information), when they want it, without having to surf thousands of Web sites. When changes

Page 3 to the content are made, RSS feed subscribers receive a notification of the changes and an idea of what the new content contains.

Section 8.2 - Before you go on…

1. Differentiate between blogs and wikis.

A weblog (blog for short) is a personal Web site in which the site creator expresses his or her feelings or opinions via a series of chronological entries.

A wiki, in contrast, is not a personal Web site. Rather, it is a Web site where anyone can post new material and make changes to already posted material.

2. What is netcasting?

Netcasting is the distribution of digital media, primarily audio files (podcasting) and video files (videocasting), via syndication feeds for playback on digital media players and personal computers.

3. Discuss the business benefits of crowdsourcing The business benefits of crowdsourcing include finding large numbers of workers to complete projects quickly, attracting niche expertise, saving money, and making better use of in-house resources.

Section 8.3 - Before you go on 1. What are social networks, and how are organizations using them?

Social networking refers to the practice of communicating and collaborating with other people on the Web. Social networking Web sites allow users to upload their content to the Web in the form of text, voice, images, and videos.

In addition, it provides an easy, interactive tool for information sharing.

Organizations benefit from social networks in many ways. For example, they learn about products from the customers’ perspectives, they receive timely updates on the activities of people or topics with which an individual is associated (i.e., feed), they maintain contacts for future business opportunities, and they rehire former employees and recruit retired staff to serve as contractors.

2. What are aggregators, and what is their greatest value to Web 2.0 users?

Aggregators are Web sites that provide collections of content from the Web. Their greatest value to Web 2.0 users is collecting updates from various sources such as blogs, news sites, and forums and then compiling, formatting, categorizing, and ranking that information based on predefined criteria.

3. Describe mashups, and discuss their business value.

A mashup is a Web site that takes different content from a number of other Web sites and mixes them together to create a new kind of content. Many businesses utilize mashups to combine existing information (such as maps) with their own data (houses for sales, available apartments, weather, news,

Page 4 etc.) to add value to the results when presenting the information to customers or Web site users.

“IT’s About Business” Questions 8.1– The Blog del Narco 1. What are the advantages of the Blog del Narco?

The Blog del Narco provides local residents as well as other agencies in Northern Mexico with information that is not available in newspapers or other media due to the control of the media and information by drug cartels.

Information from the blogs has helped residents avoid dangerous areas and learn where shooting victims were treated. The blog has also helped law enforcement officials solve cases.

2. What are the disadvantages of the Blog del Narco?

The Web site is maintained by an anonymous computer science student. Thus, information posted on the blog is usually unedited and unverified and might be inaccurate.

8.2– Share Your Life in Pictures 1. Explain how and why a startup can survive if it becomes “wildly popular” before it evolves into a real, profit-making business.

Startup companies with ideas that become popular are viable investment opportunities.

2. What are some potential disadvantages to photo-sharing Web sites such as Instagram and Color?

For some Web sites with no password protection or limitations on who can view posted pictures, privacy is the main concern. For example, users of Color app have no control over who can view the pictures and, therefore, it is very difficult to control the usage of the pictures posted on the Web sites.

8.3– Online Games Are Big Business 1. From Zynga’s perspective, discuss the advantages and disadvantages of the company’s close relationship with Facebook.

Zynga benefits from the large number of Facebook users. The more people who use Facebook, the larger pool of potential customers for Zynga.

However, Zynga is dependent on Facebook because the game platform limits Zynga’s ability to reach customers who don’t have a Facebook account.

2. What kinds of actions could Zynga take to minimize its dependence on Facebook? Be specific, and provide examples.

Zynga could allow users to play games without creating a Facebook account.

For example, users could create a Zynga account that could be linked to their Facebook account (although users could choose not to link the account).

Page 5 Users could then play games on Zynga’s Web sites that are similar to those available on Facebook.

8.4– Location, Location, Location 1. What are some possible disadvantages of being a member of Foursquare?

Would you join Foursquare? Why or why not?

In essence, Foursquare broadcasts users’ specific locations and the times when they “check in” at an establishment. This could create a privacy issue for the users. Students’ answers and their rationale as to whether they would join Foursquare will vary.

2. Analyze the differences between social networking and social location networking, using specific examples.

Social networking can be set up around any topic that interests the users. In contrast, social location networking, as the name implies, centers around “location(s)” users have or experience in common. In other words, social location networking can be viewed as a subset of social networking. For example, a social networking site could focus on family, business, hobby, or friends. In contrast, people would use social location networking to share experiences about places they have visited.

Discussion Questions 1. How would you describe Web 2.0 to someone who has not taken a course in information systems?

The first generation of the Internet — Web 1.0 — focused on creating Web sites and making content available on the Internet. Web 2.0 is the second generation. It enables users to interact, share, and collaborate on the Internet.

Think about Web 1.0 as a scripted performance where audiences watch the show unveil on stage. Web 2.0 can be compared to an improvisation act as audiences participate and provide input to the show content.

2. If you were the CEO of a company, would you pay attention to blogs about your company? Why or why not? If yes, would you consider some blogs to be more important or more reliable than others? If so, which ones? How would you find blogs relating to your company?

Student can answer yes or no as long as they provide support for their answer.

Most likely, the answer will be yes, a company’s CEO should pay attention to information posted on blogs, especially when many reputable blogs mention the same issues. These blogs could indicate problems relating to the company’s products or services. Companies can find this feedback by searching for blogs that review products or services in the industry in which the company operates.

Page 6 3. Do you have a page on a social networking Web site? If yes, why? If no, what is keeping you from creating one? Is there any content that you definitely would not post on such a page?

Students will answer either yes or no and provide sound arguments to support their answers.

4. How can an organization best employ Web 2.0 technologies and applications to benefit their business processes?

The first step is to analyze the organization’s objectives and primary business processes. Then, consider which processes can be improved using Web 2.0 technologies. For example, if the company values customer relationships, technologies such as blogs and netcastings can provide additional communication channels with the customers in a less-formal setting than traditional customer services such as phone and e-mail.

5. What factors might cause an individual, an employee, or a company to be cautious in the use of social networks?

The main factor is the unpredictable outcomes from social networks. If used properly, social networks are a great communication and advertising tool.

From the opposite perspective, however, a negative incident might cause more harm to the company than anticipated.

6. What risks does a company expose itself to if it leverages feeds? How might the company mitigate these risks?

RSS feeds could pose security issues to both the company and the feed subscribers. Because feeds can deliver any type of content including Java Scripts, unwanted HTML, documents, and other program files, someone with unauthorized access to the company feeds can use them to distribute Trojan horses or computer worms to the subscribers.

7. What sorts of restrictions or guidelines should firms place on the use of social networks by employees? Are these Web 2.0 sites a threat to security? Can they tarnish a firm’s reputation? If so, how? Can they enhance a firm’s reputation? If so, how?

Many organizations have policies prohibiting employees from discussing customers and business practices beyond the workplace. These rules could also be applied to social networks. Web 2.0 provides tools and opportunities for employees to reveal sensitive information easily, whether intentionally or not, that could pose threats to security. These threats could also damage the firm’s reputation. For example, after a long day at work, an employee at a restaurant could update her Facebook status by complaining about a customer who left a small tip. If other people read this complaint, it could damage the restaurant’s reputation of friendly service. This type of damage is very difficult to reverse because the company normally does not know who read the comment. In response, many organizations set up a social network page

Page 7 as a way to directly communicate with customers. They use social networks as an outlet to clarify, apologize, or compensate customers.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 1. Enter www.programmableweb.com, and study the various services that the Web site offers. Learn how to create mashups, and then propose a mashup of your own. Present your mashup to the class.

Students will research the service options, learn how to create mashups, and present their work to the class.

2. Go to Amazon’s Mechanical Turk Web site (www.mturk.com). View the available HITs. Are there any HITs that you would be interested in to make some extra money? Why or why not?

Students will click “Find HITs now” on the link to search the list of available HITs. On the result page, they should click “view a HIT in this group” of their choice, read about what to do, then decide if they would be interested in working on any of those HITs. 3. Access Mojofiti (www.mojofiti.com). What is interesting about this social networking site?

Students will visit the Web site, click on the Social Networking tool, and research the content.

4. Access ChatRoulette (www.chatroulette.com). What is interesting about this social networking site?

Students will visit the Web site and research the content. Note that the Web site might require an update to the Flash Player.

5. Using a search engine, look up the following: a. Most popular or most visited blogs. Pick two, and follow some of the posts. Why do you think these blogs are popular?

Students will choose two blogs and read posted information before explaining why these blogs are popular. b. Best blogs (try www.bloggerschoiceawards.com/). Pick two, and consider why they might be the “best blogs.”

Students will choose two blogs from any category and read posted information before explaining why these blogs are considered the best ones.

6. Research how to be a successful blogger. What does it take to be a successful blogger? What time commitment might be needed? How frequently do successful bloggers post?

Page 8 Students will search various websites about the topic. Some starting points include http://kassandraproject.wordpress.com/rules-to-be-a-good-blogger/, http://www.affiliateblogonline.com/2008/08/10/how-to-become-a-successfulblogger/, and http://www.becomingminimalist.com/2010/04/23/how-to-be-asuccessful-blogger-and-keep-your-day-job/ 7. Design a mashup for your university. Include the purpose of the mashup, sources of data, and intended audience.

Students will come up with different ideas on how to use mashup for the university. One example is combining student statistics such as hometown or high school with a map application to show the composition of students who attend the university.

Team Assignments 1. Each team will visit a major social networking site. Discover features that distinguish each site. Present the pros, cons, and distinguishing features of each site to the class.

Students will visit a social networking site of their choice, learn about the site’s features, and present their findings to the class.

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

Students will choose a topic to aggregate, brainstorm to create a plan to set up the Web site, and present the aggregators to the class.

3. Enter www.podcasting-tools.com. Explain how to record a podcast. Each team will create a podcast on some idea in the course and make it available on your class Web site.

Student will visit the Web site and learn how to record a podcast. Next, they should create a podcast on a course-related topic of their choice and post it on the course Web site.

4. Each team will independently take on the following problem: You are an external consulting company with experience in corporate Web 2.0 implementation. Create a PowerPoint presentation that sells Web 2.0 to the following company while addressing the following concerns: •

The company is a credit card and payment-processing firm that has 100 employees. Many of the employees are not very literate on the Internet, and most have not heard of Web 2.0. It is believed that they will be resistance by employees to any proposed changes.

Students will discuss the situation as a group, investigate alternative solutions, and prepare a PowerPoint presentation.

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The company CIO would like to implement Web 2.0 technologies and applications to enhance employee life and perhaps venture into new ways of marketing the company’s services.

Students will discuss the situation as a group, investigate alternative solutions, and prepare a PowerPoint presentation.

CLOSING CASE 1– From Social Networks to Social Commerce The Business Problem Every year companies spend about $100 billion annually on local advertising in the United States alone. Much of that money is wasted, because local commerce is highly segmented and inefficient. A small company cannot acquire customers or advertise with the efficiency of a large chain that has multiple locations in the same town. The problem, therefore, is how to make local advertising more efficient and effective for small businesses.

The Solution The solution may lie in the emerging area of social commerce, as illustrated by Groupon (www.groupon.com). Groupon offers its subscribers – who numbered more than 70 million in March 2011 and are growing at a rate of 3 million per month – discounts on goods and services, but only if a critical mass of people agrees to buy the deals that are emailed to them each day. The discount could be up to 90 percent off on a car wash, a restaurant meal, a cooking class, dental work, or just about any product or service available in the 500 cities and 35 countries where Groupon operates. Groupon’s social commerce model pays off in three ways: (1) The subscriber gets a better price, (2) the merchant is guaranteed additional business and potential new customers, and (3) Groupon receives a share of the revenues generated by the deals.

The first phase of Groupon’s business model connected local merchants with local customers, using blasts of discounts that were not precisely targeted. When Groupon launched its operation, the business limited itself to promoting one deal per day because it did not have any merchant relationships. As Groupon became more popular, however, demand became so great that merchants were waiting months for their deal to be featured on the site. To solve this problem, Groupon created Groupon Stores and the Deal Feed.

Groupon Stores lets businesses create and launch their own deals whenever they want to and as frequently as they want to, without waiting to be featured as the deal of the day.

Participating merchants create Groupon stores, and Groupon then promotes their deals via e-mail, Twitter, and Facebook. There is no upfront fee, and businesses receive 70 percent of each promoted Groupon sale. When people visit a merchant’s Groupon Store, they have the option to “follow” it, just as they would on Twitter. This process is called the Deal Feed. Merchants can therefore inform their followers about new deals or special offers. Each day, Groupon selects the best deals from Groupon Stores and matches them with customers using Groupon’s proprietary personalization technology.

Page 10 Groupon labels the next phase of its business model hyperlocal. This phase involves knowing where subscribers live and what their interests are, becoming familiar with their commercial experiences, and sharing this knowledge with their friends. Put simply, Groupon knows not just what you like but also what deals might trigger your curiosity.

The company can thus inform you directly of these deals via your cell phone. It can also integrate and popularize deals offered to various individuals through social networking sites such as Twitter and Facebook.

Groupon calls the third phase of its business model Groupon Now. This service features two choices: “I’m hungry” and “I’m bored.” When a Groupon subscriber clicks the “I’m hungry” button, Groupon displays a list of deals from nearby restaurants. Similarly, when he or she clicks “I’m bored,” Groupon displays a list of local activities occurring nearby.

One objective of Groupon Now is to help eliminate perishable inventory – food products, labor hours, and anything else that is wasted if it not used immediately. Groupon claims that Groupon Now will enable small businesses to become more like airlines, matching supply against demand to maximize revenues. For example, a spa could send out a deal on a massage because a customer canceled, or a gym could run several days of coupons to fill the class of a new yoga instructor.

The Result Groupon’s business model has been wildly successful. The company has about 6,000 employees and sends out more than 900 deals each day in 550 markets. The company, which launched in 2008, gained 1 million subscribers within a year and went from zero to $500 million in sales within 18 months. Groupon is on track to generate some $3 billion in revenue in 2011, a dramatic increase from the $750 million it earned in 2010.

Groupon’s success has created intense competition. Today, more than 500 companies around the world offer similar services. For example, when Google tried to purchase Groupon in December 2010 for $6 billion, Groupon turned the offer down. Google promptly became a competitor and developed plans for its own social commerce site, called Google Offers. Groupon’s biggest rival, LivingSocial (www.livingsocial.com), received an infusion of $175 million from Amazon in 2010, because Amazon wanted a foothold in social commerce. This investment enabled LivingSocial to develop a technology platform from which to expand its base of 10 million subscribers.

In addition to competition, Groupon has other problems. As some small businesses have learned the hard way, running a discounted deal can attract so many customers that the deal can actually cost them money. A recent study surveyed 150 small to midsized businesses that had used Groupon. 63 percent of the respondents replied that their Groupon deal was profitable, whereas 32 percent found it unprofitable. Further, 40 percent of the respondents asserted that they would not use Groupon again, in large part because small businesses did not know what to expect from each Groupon deal. These businesses could be overwhelmed with customers or not have any customers show up at all.

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_________________________________________________________ Questions 1. Do you think social commerce is less irritating than viral marketing? Is it just a new wave of electronic marketing or is this a new, better way to reach customers?

Students could answer this question either way as long as they provide adequate support for their answer.

2. What are the advantages and disadvantages of social commerce?

Advantages for customers: new and repeated customers can purchase products or services at a discounted price.

Advantages for businesses: low cost of advertising to a wider group of audience; the potential to attract new customers from the deals.

Disadvantages for customers: deals usually expire a few months after purchase; e-mails advertising deals are often annoying.

Disadvantages for businesses: customer demand generated from social commerce can be unpredictable; less profit per transaction compared to normal sales.

CLOSING CASE 2– Marketing with Facebook The Business Problem Almost 100 years ago, John Wanamaker coined the advertiser’s dilemma: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Until the advent of the Web, it was difficult to argue that these percentages, or even an advertiser’s ability to track these percentages, had improved much. However, the Web has advanced to the point that most large sites can serve ads based on a user’s browsing history. For example, Google (www.google.com) has developed its brand of targeted advertising so effectively that the company reported some $28 billion in revenues in 2010.

Marketers have long hoped to turn the Web into the perfect advertising medium. Pop-ups on AOL, banners on Yahoo!, and search ads on Google were steps along that path.

Facebook, however, is pioneering targeted advertising.

The Solution Facebook (www.Facebook.com) has developed a powerful kind of targeted advertising that is more personal, or more “social,” than any previous type. For example, if you recently became engaged and you updated your Facebook status to reflect that fact, you might start seeing ads from local jewelers. Those jewelers have likely used Facebook’s automated ad system to target recently engaged couples living in the area.

Consider David Belden, founder of Residential Solar 101 (www.residentialsolar101.com), a San Francisco-based reseller of solar panels. Belden knows exactly who his customer is: male, around 55 years old, and with an

Page 12 environmental conscience that is often demonstrated in the ownership of a hybrid car.

Such details are exactly what Facebook can provide for Belden.

However, ads on Facebook’s Web site (say for Belden’s Residential Solar 101) are located on the far right of the page and are clicked on by less than one-tenth of 1 percent of the site’s users. In contrast, Google ads, which are triggered by searches for specific topics, can draw clicks from up to 10 percent of all searchers. However, they are also far more expensive than Facebook ads.

Facebook’s extremely low click-through rates limit the effectiveness of the site’s targeted ads, which would matter much more if Facebook were only selling clicks. However, Facebook ads can evolve into conversations among friends, colleagues, and family members, and advertisers want to be involved in these conversations.

The entire premise for Facebook’s model of advertising is that advertisements are more valuable when they are reinforced by your friends’ behaviors. If enough of your friends like or comment on an ad, that ad can move into your main news feed, along with the names of your friends and all the conversations about the ad. The advertiser pays nothing for this movement.

Facebook’s promise to advertisers is not to get consumers to buy their products – or even to get them to visit the advertiser’s Web site. Instead, Facebook wants to subtly place the advertiser’s brand in the user’s consciousness and provoke a purchase at a later time.

More immediately, Facebook wants you to “like” the brand itself. When you do this, it serves as a type of opt-in, allowing the advertiser to insert future messages into your feed.

The Results Nielsen (www.nielsen.com), the marketing research firm, notes that if users discover that their friends “like” an ad or have commented on it positively or negatively, they are up to 30 percent more likely to recall the ad’s message. Consider Nike’s (www.nike.com) three-minute commercial at the FIFA World Cup in the summer of 2010. Hundreds of millions of people saw the commercial on television. However, before the commercial even appeared on television, Nike launched it on Facebook.

The commercial started as a video on Facebook and then was passed from friend to friend, often with comments and recommendations. Facebook users played and commented on the commercial more than 9 million times. This activity helped Nike double its number of Facebook fans from 1.6 million to 3.1 million over a single weekend. Nike officials said that placing the ad on Facebook cost “a few million dollars.”

However, passing around the ad did not cost Nike anything. David Grasso, Nike’s chief marketing officer, noted that Facebook was the equivalent for Nike to what TV was for marketers in the 1960s. Facebook is now an integral part of Nike’s marketing strategy.

Ford, 7-Eleven, and McDonald’s have unveiled products on their Facebook pages, in some cases using their fan groups to help design those items in advance. Starbucks offers coupons and free pastries to its 14 million fans. Other brands use Facebook to pursue what they describe as their products’ “service mission.” For example, Special K’s page

Page 13 provides nutritional tips, and Nature Valley’s page discusses national parks and nature photography. Coca-Cola, which has more than 12 million Facebook fans, also relies and focuses on Facebook.

And the bottom line for Facebook? The company reported revenue of $1.86 billion in 2010 and was valued at $82.9 billion in January, 2011.

Even though Facebook’s bottom line looks good, the company’s success is creating competition. Google is adding a feature to its Web searches that enables users to recommend useful search results to friends. This process could lead Google to rank Web sites based on what users and their friends find useful rather than using only Google’s PageRank algorithm. Google’s social search effort is called “+1” or “plus one.” “Plus one” comes after Google botched an attempt to create a viable social-networking service, called Google Buzz. Google and Facebook increasingly appear to be on a collision course for online advertising dollars. _________________________________________________________ Questions 1. Describe the advantages enjoyed by advertisers who place ads on Facebook.

Advertisers can direct their ads to more-targeted audiences using information posted on Facebook. Once the ads create interest and are passed along, advertisers do not have to do anything on these social advertising Web sites.

Further, subtly placing the advertiser’s brand into the users’ consciousness may generate greater sales than more-direct methods.

2. Discuss disadvantages that users may encounter when advertisers target them on Facebook.

Similar to the controversies created by Google’s Gmail and their targeted ads based on e-mail content, Facebook users may feel uneasy knowing that Facebook scans their postings and allows advertisers to place ads based on their information.

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CHAPTER 9:

E-Business and E-Commerce

Chapter Overview 9.1 Overview of E-Business and E-Commerce 9.2 Business-to-Consumer (B2C) Electronic Commerce 9.3 Business-to-Business (B2B) Electronic Commerce 9.4 Electronic Payments 9.5 Ethical and Legal Issues in E-Business

Teaching Tips and Strategies Electronic commerce is a very important topic for business students because most businesses engage in some form of EC. Whether it is a simple Web site that lists information about a company and their products or a retailing site where a company accepts orders and then ships the products directly to consumers, businesses are involved in EC. A business that does not have a Web presence is not keeping up with the current business environment.

One way to get students engaged in this topic is to discuss their experiences in online shopping. Have they ever used Amazon.com to make a purchase? If so, was it a good or a bad experience? You could also have them discuss their favorite Web site for making purchases. There may also be some students who have never made a purchase online. Discussing this topic in class will help them understand the logistics of online shopping and how they can use the Internet as a smart consumer. In addition, it would be helpful to have the students describe their favorite consumer Web site in terms of the EC models explained in this chapter. The students can dissect how the site works based on the model that it uses.

There are often daily news stories about EC. Pick a current story, and have the class discuss it. If the story involves a problem such as fraud or theft, then use it to illustrate why everyone must be careful when conducting business online, whether with an individual or a corporation.

Corporations must deal with businesses and individuals from around the world with their electronic commerce sites. Assign a class project where the students create a fictitious corporation that they are going to use to market a product. Instruct the students to decide how they will use EC to their strategic advantage and to identify problems they might incur when dealing with a worldwide customer base. This exercise will give them a better understanding of how businesses operate in the modern economy.

Page 2 OPENING CASE – Vending Goes Online 1. Provide two examples of how the technology added to the vending machines gives Treat America a competitive advantage.

The technology allows Treat America to monitor inventory for the customers who use the machines without having to drive to the location to check on the machine.

This makes Treat America a more attractive company for customers. The change in technology has also improved the security of the machines and products, allowing real-time monitoring of the machines in case of a break-in.

2. Is this competitive advantage sustainable for any length of time? Why or why not?

Support your answer.

This competitive advantage many not last for a long time. Once other vending companies learn of the use of this technology, they will be quick to install it on their own machines. That will reduce the strategic advantage that Treat America has had from installing the technology. However, customers who changed to or stayed with Treat America will most likely remain with them, rather than switch to a competitor. Treat America will also need to stay on top of the newest trends in technology so they can upgrade their machines as necessary. Otherwise they could lose their competitive advantage.

Review Questions Section 9.1 – Before you go on…

1. Define e-commerce, and distinguish it from e-business.

E-commerce is defined as the process whereby individuals and organizations buy, sell, transfer, or exchange products, services, or information via computer networks. E-business is a much broader term because it includes not only buying and selling of goods and services, but also servicing customers, collaborating with business partners, and enabling the organization to conduct electronic transactions.

2. Differentiate among B2C, B2B, C2C, and B2E electronic commerce.

B2C-Business to consumer transactions: Organizations are the sellers, and individuals are the buyers.

B2B-Business-to-business transactions: Both the buyers and sellers are businesses.

C2C-Consumer-to-consumer transactions: Individuals are both the buyers and the sellers.

B2E-Business-to-employee transactions: An organization provides information and services to its employees.

3. Define e-government.

E-government refers to the use of the Internet to disseminate information and public services to citizens, business partners, and suppliers. E-government

Page 3 increases efficiency because the public can search for information online rather than having to speak to a government representative.

4. Discuss forward and reverse auctions.

In a forward auction, a seller lists items for sale on an auction Web site, and buyers bid on the items for a designated period of time, at which point the highest bidder wins the item.

In a reverse auction, an individual or organization posts a request for quotation (RFQ) for an item or service on a Web site. Suppliers read the RFQ and then submit their bid. In this case, the lowest bidder wins the contract.

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

E-commerce has enabled businesses to expand by making entirely new marketplaces available through the Internet. Costs for businesses have been reduced because customers increasingly can order online, thereby reducing the number of people working in call centers, for instance, and possibly reducing the number of errors from humans transcribing orders from paper orders into computer systems. Consumers living in rural areas or developing countries can now have access to products and services that were unavailable prior to the introduction of e-commerce.

There are some downsides to e-commerce as well. There are no international security standards for e-commerce, so there is always the threat that hackers or other attackers will gain access to corporate Web sites. The digital divide also comes into play because not all countries have the bandwidth available for all their citizens to access the Internet, and not all people have access to a computer.

There are also the psychological barriers that discourage some people from ordering products online. (A common question is “What happens if I don’t like it, it doesn’t fit, or it is the wrong color”?) In addition, many shoppers are reluctant to give out credit card information over the Internet. PayPal has been used to alleviate some of the latter concerns, but there are still holdouts who do not make purchases over the Internet.

Section 9.2 - Before you go on…

1. Describe electronic storefronts and malls.

Electronic storefronts enable consumers to shop online for products that were formerly sold either from a bricks-and-mortar store, a catalog, or via television shopping. The storefronts are a way for a business to present its products online for the shoppers to browse at their leisure. An electronic storefront represents a single store/company.

An electronic mall is a collection of different retailers/shops grouped under a single URL. Customers can browse through products at any one of the shops included in the mall without going to a different Web site.

2. Discuss various types of online services; for example, cyberbanking, securities trading, job searches, and travel services.

Page 4 Cyberbanking (or electronic banking) allows bank customers to do most, if not all, of their banking from home or anywhere that they have Internet access. Most banks allow their customers to access their accounts, pay bills, apply for loans, and move money between accounts through the online bank.

Securities trading has exploded for the small investor through the use of online trading. Individuals can trade stocks, bonds, and other financial instruments. Such transactions are less expensive than using a broker.

Job searches can also be done electronically. Many recruiting firms have Web sites that allow job seekers to upload an electronic resume and search for jobs.

Companies that have jobs available advertise their jobs and can search for employees using these sites.

The travel industry has made extensive use of the Internet to provide customers with information about planning their own trips. For many people, it can be a less expensive way to travel, because there are sites that give discounts for people who book transportation and hotel rooms at the same time. The online sites also allow consumers to compare prices among the airlines and hotels to find the best deal.

3. Discuss online advertising, its methods, and its benefits.

Online advertising has revolutionized advertising by making it more dynamic, personalized, and interactive. Ads on the Internet can be updated at any time, making the cost of the advertising and changes to it much less than traditional advertising. Plus, online advertising can reach millions of users for a fraction of the cost of mass mailings or television or radio advertising.

Online advertising uses banners, pop-ups and e-mail. These methods are very effective for targeted audiences. A banner is good for short text or a graphical message. In pop-up ads, a consumer clicks on a certain page, and a small box ‘pops-up’ in front of the main browser page with the advertising message.

Browsers can be set to eliminate pop-up messages, so an advertiser may not always get the message across when using pop-ups.

E-mail is targeted advertising to specific mailing lists. Marketers now purchase email lists just as they purchase snail-mail lists. Many businesses now indicate that they will not sell your e-mail address when they ask for it when you register for their products.

4. Identify the major issues relating to e-tailing.

Channel conflict is an issue for some companies involved in online retailing.

When a company has a bricks-and-mortar store and then tries to also sell online, they can come into conflict with their distributors, because the more they sell online, the less they will sell in the store, and the fewer products the distributor will be able to sell them for store displays. To avoid channel conflict, some stores limit their Web sites to providing information. In such cases, customers must make the actual purchases directly from a store.

The second issue in e-tailing is order fulfillment, which means that when consumers buy directly from a company, the company must have a way to package and ship that product to the consumer. The company must also supply some way for the consumer to get information about a product online in case they

Page 5 have a problem, and the company needs to send assembly and operating instructions with products. This is an entirely new concept for some businesses, so they need to be ready to deal with this aspect of online retailing.

5. What are spamming, permission marketing, and viral marketing?

Spamming refers to the distribution of electronic ads without the permission of the receiver. This is a misuse of e-mail advertising.

Permission marketing is a strategy in which a company asks consumer if they wish to receive e-mails and advertising. In these cases the order form includes a box to check if the consumer does not want advertising from the company.

Viral marketing is online “word-of-mouth” marketing. The underlying concept is that consumers who like the marketing message will forward it to their friends and family, who will in turn forward it to all their friends and family members.

The method helps to spread the advertising with little effort on the part of the marketer.

Section 9.3 - Before you go on 1. Briefly differentiate between the sell-site marketplace and the buy-side marketplace.

The sell-site e-marketplace is an online market where organizations sell their products and services to other businesses. This is similar to the B2C model, except that the buyer is an organization.

In the buy-side marketplace, an organization tries to buy products or services from another organization electronically. A major method for doing this is the reverse auction.

2. Briefly differentiate among vertical exchanges, horizontal exchanges, and functional exchanges.

Vertical exchanges are exchange mechanisms for buyers and sellers within a specific industry. Examples are steel, plastics, and chemicals, all of which have specific exchanges.

A horizontal exchange is a mechanism for buyers and sellers from across many industries to connect and exchange goods and services.

Functional exchanges are used to provide services on an “as needed” basis for such things as temporary help and extra office space.

Section 9.4 – Before you go on 1. List the various electronic payment mechanisms. Which of these mechanisms are most often used for B2B payments?

Electronic checks are used primarily for business-to-business transactions. A special account needs to be set up with a bank. When an electronic check is needed, it is e-mailed to the seller, who then deposits it in a bank account.

With electronic credit cards, consumers purchase items online using their credit card number.

Purchasing cards are the equivalent of electronic credit cards, but they are used in business-to-business transactions.

Page 6 Electronic cash is similar to in-person transactions using cash, but the purchaser uses stored-value money cards, smart cards, and person-to-person payments.

Electronic checks are most often used for B2B payments.

2. What are micropayments?

A micropayment is a very small payment, a few dollars or less.

Section 9.5 – Before you go on 1. List and explain some ethical issues in EC. The first ethical issue in EC is that of privacy. Because personal information can be easily stored and transferred, there is a threat to privacy when using electronic commerce. Consumers can protect themselves by purchasing products only from Web sites that use https:// (secure) selling sites. Businesses can also ensure privacy by encrypting their transactions. Consumers must also be aware of businesses using their information to track their buying habits and other activities on the Internet using cookies. Good antivirus packages can help alleviate this problem.

Another issue related to EC is the loss of jobs in corporations. Because fewer people call in orders, it is possible that some employees could lose their jobs..

2. Discuss the major legal issues of EC. A major legal issue in EC is fraud. Because the buyers and sellers cannot see one another, it is much easier to defraud an unsuspecting customer. Some examples of fraud are: • • • •

Online banks that disappeared taking customers’ money Stock promoters who falsely spread positive rumors about stocks to increase their value Auction fraud, where either the sellers or the buyers don’t get what they thought they were getting from the other person Scams disseminated via e-mail.

Domain names can also become a legal problem in EC. Companies or persons that have famous names or names close to a famous name can come into conflict with the big-name corporation over the domain name listing.

Cybersquatting is another legal issue in EC. People often buy a domain name that is close to a famous person or company so that they can sell it to that entity for a much higher price in the future. They may also use that domain name to obtain money or goods from an unsuspecting person, because the domain closely resembles a famous name.

Taxes on the Internet are a big problem. Currently, online purchases are not subject to sales tax, unless the seller has a storefront in the state to which the product is being sent. Many states are trying to eliminate this tax-free system, however, because they are losing millions of dollars in sales tax revenue due

Page 7 to EC. Other business taxes and fees are also currently not being collected for EC. There is a move to change this system as well.

Copyright infringement is a big problem in all aspects of EC. Software purchased by an individual is copyrighted and cannot be distributed. The same rule applies to anything that is copyrighted on a Web site. However, these laws are frequently violated, in part because they are hard to enforce.

3. Describe buyer protection and seller protection in EC. NOTE TO EDITOR: There is nothing in this section on buyer and seller protection.

Buyer protection can include things such as giving your credit card number only to sites that use a secure URL (begins with https://) and encryption. Some consumers use a separate credit card and e-mail address for buying online. If the site is hacked, they know the damages are limited. For sellers, encryption is necessary, and validating the buyer’s credit card using the security code is very important.

“IT’s About Business” Questions 9.1– Minecraft 1. Provide two specific examples of how electronic commerce enabled Persson’s business to be so successful.

Because the business was marketed on a Web site, the author did not have to spend any money on marketing. In addition, Persson did not have to rely on an outside distributor to sell his products. Consequently, the author earned up to $350,000 per day selling the game online.

2. Provide two specific examples of potential disadvantages that Persson might encounter by using electronic commerce.

Because the game is played using a Web browser, users cannot download it to a mobile device and run it directly from that device. Instead, they must be connected to a server. In addition, using any form of EC always involves the potential for fraud, and this would be a possibility when marketing this game.

9.2– Luxury Goods Turn to E-Commere 1. Provide two specific examples of luxury shoppers’ requirements that a Web site could not provide.

1. Luxury shoppers required an in-store salesperson to identify the latest fashion trends.

2. The Web site cannot offer the same experience as attending a sample sale in New York City in person.

2. What are the features provided by online luxury retailers that overcame the problems you mentioned in Question #1?

One solution was to use Net-a-Porter, an interactive shopping magazine, that provides information on fashion trends online. Also, flash sales (limited-

Page 8 duration online sales, marketed through e-mail) can simulate the experience of the sample sale.

9.3 – Hong Kong’s Jockey Club in a Race 1. What competitive advantages does the Hong Kong Jockey Club already have in their competition with online betting Web sites?

The Hong Kong Jockey Club is well established and has a governmentgranted monopoly on horse racing and lotteries. In addition, 35% of their bets are now placed through its Web sites or mobile devices. The Club has a good reputation and is trusted by betters.

2. Use specific examples to describe other measures that the Hong Kong Jockey Club might take to compete with online betting Web sites.

Advertising the fact that it is a regulated betting site to offset the threat from the unregulated sites would be one way to compete. Another way would be to link up with other race courses to pool bets and offer better odds.

Discussion Questions 1. Discuss the major limitations of e-commerce. Which of these limitations are likely to disappear? Why? E-commerce does have some limitations. International standards on security are one of the major limitations of e-commerce. Another limitation is that Web sites frequently don’t have the amount of information that customers need. That is why most corporations that use e-commerce also include a telephone number so the customer can talk to a customer service representative if needed. Sometimes a Web site does not work correctly when a customer tries to place an order. This is also a reason to have contact information available for customer service. EC cannot give the consumer the same experience as seeing a product in person and watching it operate. This is why many consumers use the Internet to find products they want to buy and then visit a store to see the products in person. With 3-D technology, this limitation could be reduced. Some EC sites also offer an online chat feature that allows customers to get help without using the telephone.

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

Every business is different. Using different business models is a way to accommodate all the various types of businesses. Some models have been developed by consumers to get better prices for products (such as e-coops).

3. Distinguish between business-to-business forward auctions and buyers’ bids for RFQs. In the forward auction, the business offers a product for other businesses to bid on, and the highest bidder wins. In buyer’s bids for RFQs, the buyer

Page 9 offers other businesses the opportunity to sell to the buyer. In this case, the lowest-price bid wins.

4. Discuss the benefits to sellers and buyers of a B2B exchange.

B2B exchanges allow buyers and sellers to connect. It is often the initial point of contact for these business partners. After they connect at the exchange, they often move to a private exchange to transact business. The exchanges allow buyers to find materials or services they need, while sellers find buyers for their products and services.

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

G2C electronic commerce allows government to be more efficient and effective. This is especially true of the delivery of public services. The government can electronically send Social Security retirement and disability payments directly to bank accounts, rather than mailing out checks.

Direct mailing helps prevent fraud and stolen checks. In addition, consumers and businesses can use G2C e-commerce sites to check on the availability of government services and programs.

6. Discuss the various ways to pay online in B2C. Which one(s) would you prefer and why?

With electronic credit cards, consumers purchase items online using their credit card number. This form of payment is very secure when the transactions are encrypted.

Electronic cash is similar to in-person transactions using cash, but the purchaser uses stored-value money cards, smart cards, and person-to-person payments.

7. Why is order fulfillment considered difficult?

Order fulfillment is considered difficult because a business must find the product to be shipped, pack the product, arrange for the package to be delivered in a timely manner to the customer, collect payment, and then handle any returns. To be successful, a business must manage this process must be handled effectively and efficiently. EC can provide a huge number of customers for a business, but the business must be able to handle the resulting orders.

8. Discuss the reasons for EC failures.

EC failures can occur for many reasons. One major reason is the lack of order fulfillment. If a business takes online orders, it must be able to meet the customers’ demands for the timely delivery of their purchases. This issue came to the forefront in the late 1990s around Christmas time when many dotcom businesses failed due to shipping problems. Businesses must also ensure that the transactions they accept are secure and that hackers cannot access their databases to steal customer information. Such a breach of security can doom EC.

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9. Should Mr. Coffee sell coffee makers online? Hint: Take a look at the discussion of channel conflict in this chapter.

If Mr. Coffee sells its coffee makers online, then the distributors that deliver the product to retail outlets may have problems with the decision. Selling more of the product online will reduce sales at bricks-and-mortar stores, so fewer deliveries from the distributors will be needed.

10. In some cases, individuals engage in cybersquatting so that they can sell the domain names to companies expensively. In other cases, companies engage in cybersquatting by registering domain names that are very similar to their competitors’ domain names in order to generate traffic from people who misspell Web addresses. Discuss each practice in terms of its ethical nature and legality. Is there a difference between the two practices? Support your answer.

Neither one of these activities is illegal, but they both are unethical. Using the good name of another company to sell your product has been done over the years before EC became popular. Some companies will do anything to try and get customers, but this does not mean that what they are doing is illegal.

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

Some Web sites the students might visit are www.carmax.com, www.autotrader.com, www.cars.com, www.truecar.com, plus any major manufacturer, such as GM, Chrysler, and Toyota, etc. The Federal Government also has a site (http://www.ftc.gov/bcp/consumer.shtm) that provides information about purchasing cars. Students’ answers will vary widely based on the type of car they configure and the type of insurance they are looking to buy.

2. Compare the various electronic payment methods. Specifically, collect information from the vendors cited in the chapter, and find additional vendors using google.com. Pay attention to security level, speed, cost, and convenience.

The vendors cited in the chapter include: e-checks (www.authorize.net, www.eccho.org, www.troygroup.com), PayPal (www.paypal.com), WebCertificate(www.webcertificate.com). Some additional sites include Bank of America (www.bankofamerica.com/merchant), Chase (www.chase.com), and other banks offer these electronic methods of payment.

Page 11 Students’ reports should include details about how these systems work and the costs involved.

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 do these sites use to educate buyers about gemstones?

The sites have information about the quality and types of gemstones, including the form of a tutorial (video or text) that explains the four key items in choosing a gemstone: cut, color, clarity, carat weight. Consumers can also often request a buying guide. b. How do these sites attract buyers?

Some sites have contests to win a diamond ring, as well as testimonials from customers. They use color and ring design to attract customers, and they provide education for the consumer. c. How do these sites increase customers’ trust in online purchasing?

The Web sites have links to various gemologist organizations, listing themselves as members of these organizations that watch over the gemstone industry. The sites also offer 30-day money back guarantees.

Some sites also include how long they have been in business to give customers more confidence in their experience in the business. Some sites, like Tiffany’s will depend on the name recognition they have and the customers’ knowledge of that name. d. What customer service features do these sites provide?

The customer service features vary by company, but some of them include:free FedEx® shipping, free gift packaging, 30-day returns, jewelry appraisals, financing & insurance, monthly payments, international orders, ring sizer, coupons, product care, and information on recalls.

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 the electronic payments association. Its role is to provide uniform operating rules for the Automated Clearing House (ACH) payments. Financial institutions exchange payments using the ACH e-payment system. There are currently 3 pilot projects under way at NACHA. Deposited Check Truncation allows banks to deposit small consumer checks more efficiently and cheaper.

Secure Vault Payments is a new way for consumers to pay for online purchases using their financial institution’s online banking system without giving out personal bank information to the seller. Electronic Billing Information Delivery Service will make electronic bills more accessible for consumers.

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5. Access www.espn.com. Identify at least five different ways the site generates revenue.

- Banner advertisements (Jim Beam) - Sells ESPN products through a ‘Shop’ button - They also sell gear from major sports leagues, so they most likely get paid to do that.

- Provide accounts for users so they can target the users to sell more products.

- Other advertising on additional pages (Progressive pop-up).

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 Web site offers a variety of online tests, for fun or for personality testing.

The site uses several models including affiliate marketing and membership.

The banner ads are click ads where the site gets paid whenever a consumer clicks on that ad. In addition, the site is designed to lure customers in to take some of the tests, and then decide to use those tests in their corporation. The corporation will then pay to use the tests on a wide scale, getting reports from the site about employees.

7. Access www.ediets.com. Prepare a list of all the services the company provides. Identify its revenue model.

The company provides a weight-loss plan, and it sells food to go along with the plan. It also offers free online membership; weight-loss tools; unlimited counseling and support; community discussion boards; and newsletters, articles, and information. Its revenue model is membership (you need to join to get the information).

8. Access www.theknot.com. Identify the site’s revenue sources.

The www.theknot.com site is an electronic marketplace for all things related to weddings. Many different vendors are listed along with all the trappings that go along with planning a wedding.

9. Access www.mint.com. Identify the site’s revenue model. What are the risks of giving this Web site your credit and debit card numbers, as well as you bank account number?

This Web site is a financial management site, and they promise to keep all of your information in a single place so that it is easy to manage. The site was purchased by Intuit, so it is now part of a much larger organization. Its revenue model is affiliate marketing, because it allows other companies to place their logos on the site. Whenever you submit information about debit and credit cards to a Web site, there is always the danger that if the numbers are stored on the company’s server and the server is hacked, then the numbers

Page 13 might be misused. For this reason you should always determine the safety of the Web site before giving them personal and financial information.

10. Research the case of www.nissan.com. Is Uzi Nissan cybersquatting? Why or why not? Support your answer. How is Nissan (the car company) reacting to www.nissan.com Web site?

Uzi Nissan does not appear to be cybersquatting, but he refuses to bow to the demands of the much larger Nissan Motors Corp. He has used his family name (Nissan) in his Web site name since it was associated with his computer store. At the time, Nissan Motors was actually known as Datsun, so there didn’t seem to be a conflict. In 2001, Nissan Motors sued over the rights to use that name in a URL. The case is currently pending.

Web Activities 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.

NOTE to EDITOR: This game requires a registration fee.

2. 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 site is a digital marketplace. The private trading room lists items along with their supplier and manufacturer. A buyer can contact the supplier directly for information about the products. This site can help customers by providing them with prices from multiple sources, thereby enabling them to comparison shop.

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

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

This site allows students to find restaurants in their college town and to order deliveries. It is successful because it lists restaurants that cater to college students, such as burger and pizza restaurants. Students will have varying answers about whether they can start a competing site in their area.

4. 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?

NOTE TO EDITOR: I’m not sure what ‘Calculators’ the author is talking about on this site. There were no calculators listed in the “My Cart” area. The advantage to this process is that you can configure the computer you like and see how much it will cost. A customer can then change the configuration and see the change in the price. A disadvantage is that customers must still call

Page 14 someone if they have questions. In a storefront environment, salespeople are available to answer questions immediately.

5. Enter www.checkfree.com and www.lmlpayment.com fine their services.

Prepare a report.

CheckFree is a company that provides financial products for the e-commerce market, such as ACH, billing, payments, and online bill payments. LML Payment Systems provides services for payment processing for both ecommerce and traditional businesses. They provide credit card processing, online debit, electronic funds transfer, ACH processing, and authentication services.

6. 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 east 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?

The students’ responses will vary, based on the type of itinerary they choose.

Which site is easier to use will be a matter of personal preference. Students should compare the amount of information they get from each site to determine which site is more useful.

7. 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?

This is an interesting personality and musical taste test that the students will enjoy. They will have various answers, and they may find that their test did not give them the expected result.

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

Students should create a table to compare the five companies that they choose in their industry vertical. This will make it easier to see how the companies have been able to compete in their particular industry.

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-sized

Page 15 enterprises (SMEs). Also, investigate what Visa and MasterCard are offering.

Finally, check Citicorp and some German and Japanese banks.

TradeCard provides the following services (taken from their Web site): “TradeCard provides hosted technology, online services, and a global network of trade experts to connect buyers, suppliers, and their service providers. This unique offering ensures members have the data and tools needed to automate and optimize transactions and control their extended supply chain.” Students can use the case studies on the Web site to get more information about the services provided. Visa, MasterCard, and Citicorp should all have similar offerings. Student reports or presentations should highlight the differences among these organizations.

CLOSING CASE 1– The Flash Crash Questions 1. Do you think information technology has made it easier to do business? Or, has IT only raised the bar on what is required to be able to conduct business in the 21st century? Support your answer with specific examples.

Information technology is a double-edged sword. On the one hand, it has enhanced the ability of business to compete in a global market place and has opened global markets to smaller businesses. On the other hand, businesses are left behind if they don’t invest in the technology. The bar has been raised because those companies that don’t maintain the most current information technology will fall behind their competitors.

2. With the rise of electronic commerce, what do you think will happen to those without computer skills, Internet access, computers, smartphones, and so on.

Will they be able to survive and advance by hard work?

Computer skills and Internet access are critical to getting ahead in the modern business world. People who don’t have a smart phone will still be able to work, but their competitors (for instance, in sales) may be able to close deals faster because their salespersons can communicate with customers in a more timely manner. Technology of all kinds is now critical, and it can determine if a business moves ahead, remains stagnant, or fails.

CLOSING CASE 2– eBay Finds a Way into China Questions 1. Research the reasons (besides the one listed in the case) why eBay was unsuccessful when it purchased EachNet. eBay was not successful with Each Net for a few reasons. First of all, EachNet charged fees for listings and transactions. Even though there were free alternatives, the company was successful because it was reliable and familiar when eBay bought it. After the purchase, eBay decided to move its online platform to the United States, allowing overseas buyers to see the

Page 16 sellers and their goods in China. This made both eBay and EachNet global companies. However, the migration was not successful, and the site experienced sluggish performance and unstable connections. eBay and EachNet were both interested in global expansion, whereas EachNet’s major competitor was focused on the specific needs of its market in China. This also led to the downfall of EachNet. 2. eBay has gained a competitive advantage by providing a service for Chinese exporters. Is this a sustainable competitive advantage? Why or why not?

Support your answer.

It is sustainable as long as Taobao is primarily concentrating on domestic business. eBay is competitive because they bring a global perspective to some Chinese businesses that is not available with Taobao. In addition, eBay has started a service that allows international buyers to track their purchases in China and to provide free shipping to buyers.

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CHAPTER 10: Wireless, Mobile Computing, and Mobile Commerce Chapter Overview 10.1.

Wireless Technologies

10.2.

Wireless Computer Networks and Internet Access

10.3.

Mobile Computing and Mobile Commerce

10.4.

Pervasive Computing

10.5.

Wireless Security

Learning Objectives 1. Describe the four main types of wireless transmission media, and identify at least one advantage and one disadvantage of each type.

2. Discuss the basic purposes of short-range, medium-range, and long-range networks, and explain how businesses can use at least one technology employed by each type of network.

3. Discuss the five major m-commerce applications, and provide a specific example of how each application can benefit a business.

4. Define pervasive computing, describe two technologies that underlie this technology, and provide at least one example of how a business can utilize each one.

5. Identify the four major threats to wireless networks, and explain, with examples, how each one can damage a business.

Teaching Tips and Strategies This is an eye-opening chapter for many students. Most students will not need to ask, “What’s in it for me?” Although most students likely have a personal computer and some type of Internet connection, they probably will not be as familiar with mobile computing applications other than cell phones. Highlight the difference between wireless and mobile. Wireless means exactly what it says: without wires. In contrast, mobile refers to something that changes its location over time. Wireless networks can be either mobile (e.g. Internet over cell phones) or fixed (e.g. Wi-Fi).

I suggest starting the class by having students brainstorm to identify information and services that already are available and other apps they would like to have available through mobile computing. Focus especially on location-based commerce to really pique their interest. Then, have students consider the implications for the businesses that would have to provide the information and services. In other words, how will businesses have

Page 2 to transform themselves to satisfy consumer demands for mobile computing applications?

This topic segues logically into a discussion of the benefits and drawbacks of mobile computing.

Next, discuss privacy issues associated with mobile computing, especially RFID and Auto-ID. Most students feel that the government and employers have no right to monitor their movements and location. This leads to a great discussion. I sometimes break the class into different groups and assign them different perspectives. One point of view is the employer’s. 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 is 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, try to remain impartial, at least at first. Your adopting an impartial position helps students complete their thoughts on the benefits and drawbacks of mobile computing and related privacy concerns.

OPENING CASE 1- Tacos, Trucks, and Tweets?

Questions 1. Provide specific examples of the advantages that mobile communications provided to Mark.

Utilizing mobile computing, Mark was able to create a unique communication channel between his business and his customers. The use of the relatively new technology, combined with the thrill of a game-like strategy (e.g., customers have to find out where the taco truck will be), contributed to the success of the business.

2. Which technology, Twitter or mobile communications, enables the other? Support your answer.

Mobile communication enables Twitter. Although Twitter can be used on a traditional computer platform, the true value of Twitter is the ability to send and receive tweets spontaneously. Mobile communication allows Twitter users to have access to the information on the go and respond to it in real time.

Review Questions Section 10.1 – Before you go on…

1. Describe the most common types of 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 people to determine the location of a GPS device or the location of a specific address.

Page 3 Smartphones – 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, whereas radio signals travel through the air and can pass through walls.

Section 10.2 - Before you go on…

1. What is Bluetooth? What is a WLAN? Bluetooth –An industry standard used to create small wireless radio-based personal networks for up to 8 devices within 10 meters using low-power, radiobased communication.

Wireless local area networks (WLAN) – Local area networks without the cables. used to transmit and receive data via radio waves.

2. Describe Wi-Fi, cellular service, and WiMAX. Wireless Fidelity – known as Wi-Fi, is a medium-range WLAN. The IEEE standards for Wi-Fi consist of 802.11a, 802.11b, 802.11g, and 802.11n. Major benefits are low cost and the ability to provide simple Internet access through wireless access points.

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

WiMax – Stands for Worldwide Interoperability for Microwave Access. WiMax 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 up to 75 Mbps.

Section 10.3 - Before you go on 1. What are the major drivers of mobile computing?

• Widespread availability of mobile devices • No need for a PC • The “cell phone culture” • Declining prices • Improved bandwidth 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 because they can also be accessed through a

Page 4 standard or a cell phone. A certain phone number connects you to a Web site, where you can request information verbally. The system finds the information, translates it into a computer-generated voice reply, and tells you what you want to know. An example is 511, the travel information line developed by Tellme.com.

3. Describe wireless financial services The services provide a convenient way for customers to transact business regardless of the time or their location. 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.

• Mobile delivery and dispatch services are used to assign jobs, along with detailed information about the job, to mobile employees.

• There are applications that help owners of rental vehicles, commercial transport, and heavy equipment fleets. These apps can be used to determine the location of the vehicles and control messages that are sent to and from the vehicles.

• Insurance companies use wireless digital cameras to take pictures at accident scenes and transmit them to processing centers.

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

Section 10.4 – Before you go on…

1. Define pervasive computing, RFID, and wireless sensor networks.

Pervasive computing is invisible “everywhere computing” that is embedded in the objects around us, including the floor, lights, cars, the washing machine, cell phones, and our clothes.

RFID is the technology that enables manufacturers to attach tags with antennae and computer chips to goods and then track their movement using radio signals. This technology was developed to replace barcodes.

Wireless sensor networks are networks of interconnected, battery-powered, wireless sensors called motes that are placed into the physical environment.

The motes collect data from many points over an extended space. Each mote contains processing, storage, and radio-frequency sensors and antennae. This technology enables users to gather more accurate information.

2. Provide two specific business uses of RFID technology.

• Retail companies use RFID to track inventory and shipments.

• Tolls roads use RFID to collect fees without the need for toll booth personnel.

Section 10.5 – Before you go on…

Page 5 1. Describe the four major threats to the security of wireless networks.

Rogue access points are unauthorized access points to a wireless network.

War driving is the act of locating WLANs while driving (or walking) around a city or elsewhere.

Eavesdropping refers to efforts by unauthorized users to access data that are traveling over wireless networks.

Radio-frequency (RF) jamming refers to a person or a device intentionally or unintentionally interfering with wireless network transmissions.

2. Which of these threats is the most dangerous for a business? Which is the most dangerous for an individual? Support your answers.

The most dangerous threats for a business are war driving and RF jamming.

For individuals, rogue access points are the most serious threat, particularly at public hotspots. Eavesdropping is threatening for both business and individual networks.

“IT’s About Business” Questions 10.1– WiMAX Helps the People of Northern Thailand 1. Provide specific examples of other advantages that WiMAX can deliver to the villagers.

Other advantages of WiMAX include better governmental services in remote areas and access to healthcare professionals via remote diagnosis.

2. Provide specific examples of the advantages of WiMAX compared to wireline communications.

Compared to wireline, WiMAX provides wider coverage at a lower cost.

WiMAX coverage can reach a 31-mile radius. In order to cover the same area, physical wireline must be must be laid out to each establishment.

10.2– Location-Based Services at Shopping Malls 1. Are the advantages of the mall apps discussed in this case enough to entice you to go to a mall? Why or why not? Support your answer.

Students’ answers will vary. Regardless of whether they respond yes or no, however, students should provide concrete reasons why they think the mall apps described in the case are enough (or not enough) to persuade them to shop at the mall.

2. Identify two specific benefits that you would add to mall apps to make them functional enough to attract shoppers to the mall.

Student answers will vary. Some ideas are to provide apps-only discount coupons to use in stores or the food center, and to enhance the scavenger hunt-

Page 6 style game with daily special rewards to the first ten customers who spot certain things in the mall during their shopping trip.

10.3– Your Car Becomes a Smartphone 1. Explain why OnStar, Sync, and Blue Link are telemetry applications.

Telemetry gathers data wirelessly from remote sensors to provide information.

OnStar, Sync, and Blue Line gather vehicle-related data using remote sensors located on the vehicles or connected mobile devices to provide information about the trip, vehicle status, and engine diagnosis.

2. Provide specific examples of the disadvantages of OnStar, Sync, and Blue Link.

A relatively high annual subscription/service fee is probably one of the biggest disadvantages of the system. Others include higher starting price tags for vehicles equipped with these features and the potential loss of privacy (the vehicle can be tracked anywhere at any time).

10.4– Protecting an Open Wireless Network at Brigham Young University -- Hawaii 1. What are the advantages of the Avenda system to the users?

The Avenda system provides better data security to the users. They can use the university network and feel secure that no unauthorized user is accessing their computers and valuable information.

2. Are there privacy issues associated with the Avenda system for users? If so, provide specific examples.

Yes, there are privacy issues associated with the Avenda system, because the IT team can determine what users are doing on the network. However, students are required to sign the university honor code of conduct, and their activities on the network can be monitored to ensure they don’t violate the rules, causing harm to the users and the university.

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

In the traditional computing environment, users must have physical access to a computer in order to utilize its applications. The need to be linked by wires to computing resources limited the usefulness of this technology to people who must be mobile while on the job. M-commerce is a natural extension of ebusiness, but it is conducted in a wireless environment. M-commerce serves the needs of an increasingly mobile work force and consumer population.

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

Wireless devices are becoming cheaper, and individuals can take those devices to locations where they can connect to the Internet, often for free.

Page 7 Consequently, users who do not have access to a computer at home can use these devices to connect to the Internet and gain the benefits that otherwise would not be available to them.

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 in real time with specialists in other places to provide specialized consultations. Consumers would benefit due to better access to specialized expertise without the inconvenience or expense of traveling to a different location for the consultation.

• Access to information. For example, mobile portals provide consumers with access to a personalized set of content and services regardless of location. This enables the consumer to always have specific information 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, thus eliminating the need to go to a bank or an ATM machine.

4. Discuss the ways in which Wi-Fi is being used to support mobile computing and m-commerce. 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 access points called hotspots. Mobile computing and mcommerce applications can be delivered easily and at adequate communication speeds in this environment. Wi-Fi is reducing the need for wide-area wireless networks 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 other people can obtain information about your exact location and movements and use that information in harmful ways.

6. Discuss the benefits of telemetry in healthcare for the elderly.

The alerting devices that people can wear around their neck are valuable for seniors who need emergency assistance after a fall or when they are experiencing some other medical problem.

7. Discuss how wireless devices can help people with disabilities.

Page 8 Sensors that help people with disabilities communicate with their computer and other household devices significantly enhance these individuals’ ability to interface with their environment and perform 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.

Answers will vary. Students will discuss their selected option in terms of speed, distance, and cost.

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? Although the students’ 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 a product for diagnostic and repair purposes would be useful because the consumer could arrange for the product to be repaired before it fails.

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

1. Investigate commercial applications of voice portals. Visit several vendors (e.g., www.tellme.com, www.bevocal.com, and so on). What capabilities and applications do these vendors offer?

Students will research voice portals and report their findings.

2. Using a search engine, try to determine whether there are any commercial Wi-Fi hotspots in your area. (Hint: Access http://v4.jiwire.com/searchhotspot-locations.htm.) Also check www.wifinder.com.

After students have located Wi-Fi hot spots in their area, ask them if they have connected to the Internet at those locations.

3. 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 that are 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 describing these wearable devices.

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

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

Page 9 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.

Various categories of products are listed in the Web site. Students will investigate and prepare a report on two of these products. Students should also examine any drawbacks to integrating Bluetooth into 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 Pitney-Bowes Business Insight (www.pbinsight.com). Click on MapInfo Professional, then click on the Resources tab, then on the Demos tab. Look for the location-based services demos. Try all the demos. Summarize your findings.

Students will view the location-based services demos and summarize their findings.

10. 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 Web site describes CORE as “an established framework” that “provides a universal structure for mobile multimedia applications.” MediaFusion is “a white-label client-server software application that enables you to rapidly develop and launch on-device portals for rich media services.”

11. 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

Page 10 12. Access www.itu.int/osg/spu/publications/internetofthings/InternetofThings_summary. pdf. Read about the Internet of Things. What is it? What types of technologies are necessary to support it? Why is it important?

Internet of Things refers to the concept of embedding communications technology in common devices like refrigerators and ovens in order to extend the reach of Internet to many remote areas that do not have an existing Internet access infrastructure The technologies required for creating this type of network include, but are not limited to, RFID, sensor networks, nanotechnology, distributed computing networks, and telecommunication technology.

Team Assignments 1. Each team should examine a major vendor of mobile devices (Nokia, Kyocera, Motorola, Palm, BlackBerry, Apple, 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. The answers should focus on the features supported by the models, the necessary bandwidth to support the features, and the costs and the quality of network service that each functions requires.

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 healthcare. Each team will present a report to the class based on their findings. (Start at www.mobiforum.org.)

There are a lot of options, particularly in the financial industry, that students can choose. 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.

CLOSING CASE 1– The Battle for the Mobile Wallet The Business Problem Customers today are in more of a hurry today than ever before. To satisfy them and keep their business, retailers are looking for strategies to speed up the checkout process and improve the overall customer experience. One strategy is to rely on customers’ smart

Page 11 phones as a replacement for all of their credit and debit cards. Instead of swiping a plastic card at the checkout counter, consumers merely wave their phones a few inches above a payment terminal. This process uses a contact-free technology called near-field communications (NFC).

The technology described in the preceding paragraph, known as the mobile wallet, is already being installed in millions of phones both in the United States and overseas.

However, wide adoption of this technology in the United States is being hindered by a major battle among large corporations.

In one camp are the established credit card companies such as MasterCard, Visa, and American Express, along with the banks that actually issue the cards to customers. These businesses want to maintain their traditional position at the center of any payment system and to continue to collect their fees from merchants. However, they are facing intense competition from technology companies such as Google and PayPal whose goal is to become major players in the new payment system. In addition, Apple and the mobile carriers such as Verizon, AT&T, and T-Mobile want to collect fees through their control of the phones themselves. Adding to the competitive mix are individual companies such as Starbucks that are developing proprietary mobile wallet technologies.

In the middle, and perhaps playing a deciding role, are the retailers. They have to install terminals that accept mobile payments. Consumer advocates, meanwhile, are concerned that a mobile system will bring higher fees, which, of course, would be passed along to customers.

The stakes in this competition are enormous because the small fees that are generated every time consumers swipe their cards add up to tens of billions of dollars annually in the United States alone. Before these companies make any money, they need to sort out what role each one will play and who will collect the lucrative transaction fees from retailers.

The Solution Mobile phone carriers. In 2010, three of the big four providers — AT&T, T-Mobile, and Verizon, but not Sprint — along with Discover (www.discovercard.com) and Barclays Bank (www.barclays.co.uk) formed a joint venture, called Isis. Their intention was to create a new payment network that encompassed credit card companies and card-issuing banks. Isis creates a digital wallet into which customers of card-issuing banks can easily move their accounts. Consumers would interface with Isis through a mobile app, which would give them access to multiple credit and debit accounts. Retailers would participate by offering targeted offers to loyalty members through Isis, while product companies and brands could also offer discounts to customers who opt in.

Credit card issuers. In 2010, Visa, MasterCard, and American Express spent nearly $3 billion to buy Internet-based payment processors. For example, in August 2010, MasterCard bought payment company DataCash Group (www.datacash.com) for $526 million. All three card issuers have mobile applications: MasterCard has MasterCard

Page 12 PayPass, Visa has Visa Mobile, and American Express has Amex Mobile. In addition, credit card companies have been experimenting with wave-and-pay systems that use NFC-enabled credit or debit cards (e.g., the Visa Wave).

The credit card companies claim that their mobile applications enable consumers to make online payments quickly, without having to enter a card number and billing address over and over. For example, a smart phone game could allow players to buy add-ons, such as new weapons or extra ammunition, by clicking a Visa logo. A caterer might be able to email a bill with a button that allows a client to pay with one click. Payers would authorize the transaction simply by entering a name and password.

Technology companies. Google has its own payment system, called Google Checkout (http://checkout.google.com). The company claims that it will be willing to partner with payment processors to handle purchases made with its smart phones. Interestingly, if future models of the iPhone incorporate NFC, the device may route payments through Apple’s iTunes store, which already has 200 million accounts tied to credit cards. Both Google Checkout and Apple’s iTunes could be turned into mobile wallets. Both systems, however, would need access to the smart phone chips and to the merchants’ terminals.

Apple could manufacture its own smart phone chips, but Google could not because it makes only Android smart phone software, not the phones themselves.

PayPal has developed PayPal X (https://www.x.com/index.jspa), software used by entrepreneurs to develop apps for PayPal. For example, if you are at the ballpark and you want to skip the long lines at the concession stand, just download the iConcessionStand (www.iconcessionstand.com) smart phone app. The app lets sports fans order hot dogs and cold beer from their mobile phones and pay by transferring money from PayPal (www.paypal.com) to a nearby food vendor. An alert pops up when the order is ready.

PayPal, a unit of eBay, earns about 3 percent on each transaction. The iConcessionStand app is 1 of more than 1,000 developed by entrepreneurs using PayPal X. In addition, new technology startups, such as Zong (www.zong.com) and Obopay (www.obopay.com), are developing applications to make online and mobile payments easier.

Individual companies. In January 2011, Starbucks (www.starbucks.com) announced that customers could use a bar-code app on their phones to buy coffee in almost 7,000 of its stores. This is the first major pay-by-phone initiative in the United States. Customers can download the free Starbucks Card app and hold their phones in front of a scanner at Starbucks cash registers. The money is subtracted from customers’ Starbucks accounts, which they can load with credit cards, or, on iPhones, with PayPal funds. Customers can also use the Starbucks app to check their balances, find nearby stores, and earn stars to qualify for free drinks.

The Result The battle for the transaction fees from your mobile wallet is ongoing, and the results will be several years in arriving. However, the potential for large revenue streams is real, because mobile wallets have clear advantages. For example: Which are you more likely

Page 13 to have with you at any given moment – your phone or your wallet? Also, keep in mind that if you lose your phone, it can be located on a map and remotely deactivated. Plus, your phone can be password protected. Your wallet cannot do these things. _________________________________________________________ Questions 1. Given that you can lose a cell phone as easily as a wallet, which do you feel is a more secure way of carrying your personal data? Support your answer.

Students can select either option, but they must explain why the feel that way.

2. If mobile computing is the next wave of technology, would you ever feel comfortable with handing a waiter or waitress your cell phone to make a payment at a restaurant the way you currently hand over your credit/debit card? Why or why not?

Students’ answers will vary. Some businesses have already started accepting payments and discount coupons through codes stored on mobile phones.

Whichever option students choose, they have to provide support for their answer.

CLOSING CASE 2– A Mobile Application for Home Depot The Business Problem Home Depot (www.homedepot.com), the world’s largest retailer of home improvement and construction products and services, has been lagging in information technology. In fact, IT was an afterthought at Home Depot for years because the company’s primary emphasis was opening new stores. Today, Home Depot has more than 2,000 retail outlets.

Until 2010, employees stocked shelves as they had for 15 years, using computers powered by motorboat batteries and rolled around stores on bulky carts. In early 2011, Home Depot still did not offer customers the option to order online and pick up merchandise in stores, as Lowe’s (www.lowes.com), Home Depot’s biggest competitor, already did. Further, when Home Depot employees processed special orders for customers, they had to rely on outdated information systems. This arrangement hurt both sales and service.

In 2007, Frank Blake became Home Depot’s new CEO. Blake shifted the company’s focus to increasing profits from existing stores. Inventory turns – a measure of how well a retailer turns goods into sales – began to increase. However, Home Depot did not have the information systems to enable this change in corporate strategy. Therefore, the company had to modernize its information systems to improve in-store technology.

Another component of Home Depot’s new strategy was to attract younger customers who are accustomed to shopping online, often with devices they carry in their pockets or handbags. That is, the company wanted to increase online transactions. (In 2010, online transactions amounted to roughly 1.5 percent of Home Depot’s total sales.)

Unfortunately, the company’s Web site was unattractive, difficult to navigate, and did not

Page 14 provide for a seamless shopping experience. Therefore, the company had to improve its site to capture the attention of the numerous customers who browse online before they go to the store.

The Solution During fiscal year 2010, which ended on January 30, 2011, Home Depot spent $350 million on information technology, which amounted to one-third of the company’s total capital expenditures. One of the new IT applications involved mobility. The company spent $60 million to buy 40,000 handheld devices, called “First Phones,” to replace the old in-store computers. First Phones enable Home Depot associates to manage inventory and help customers find products. These devices not only act as a phone, but they replace walkie-talkies. In addition, with its credit card reader, the device becomes a mobile cash register. Further, associates can check inventory in their store and in other stores from any location on the floor.

Home Depot also launched a blogging site on its Web site where employees answer customer questions on all home improvement and home construction matters. Further, as part of a broader upgrade of its checkout systems, the company’s U.S. stores installed contact-less scanners for reading credit card information on customers’ smart phones.

The Results It is too soon to predict the results of these new policies. Interestingly, Home Depot’s IT initiatives could be complicated by the preference of most older contractors and do-ityourself homeowners to buy in person at a store. Home Depot recognizes that the company has to serve customers the way they want to be served. However, the company feels that over the long run, customers are going to become much more comfortable using their smart phones on a real-time basis outside or inside the store. _________________________________________________________ Questions 1. Provide two specific reasons why Home Depot felt it necessary to deploy wireless handheld devices.

First, the current system was outdated. The wireless handheld device, called the “First Phone,” was a logical choice given the current technology. Second, the device helped improve customer service functions because employees can use it to help customers find their products.

2. Identify two potential disadvantages of deploying wireless handhelds at Home Depot.

First, the wireless handheld devices might get lost or stolen. Second, many associates will need to be retrained to become familiar with the new system.

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CHAPTER 11: Information Systems within the Organization Chapter Overview 11.1.

Transaction Processing Systems

11.2.

Functional Area Information Systems

11.3.

Enterprise Resource Planning Systems

11.4.

Reports

Teaching Tips and Strategies The focus of this chapter is organizational information systems. You might start this chapter by discussing why ISs can become quite complicated from both a technical and a managerial perspective. Significant performance and uptime requirements impose technical challenges, while coordination and usability for a large, diverse group of users pose managerial challenges.

Now, with the advent of e-commerce, online e-tailers are in the costly business of sending one or two items to millions of households. To illustrate how this changes the supply chain, you can use 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 what will be involved in delivering those Barbies. The students will usually answer that someone will have to pick the dolls in the warehouse, create an address label for each customer, and then box and ship the order.

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

• By integrating their systems so that all departments can communicate with one another (including outside vendors).

• By being able to track relevant data in real-time from business processes dispersed across the organization. This will help management to make crucial decisions regarding resources.

OPENING CASE 1- USA Cycling Questions 1. Why did USA Cycling need an inventory system?

Page 2 Because each cycling team needed adequate supplies such as tires, seats, chains, parts, and other items as they traveled. If any item stock was low, they had to reorder. The large number of participating members, teams, and inventory items, as well as the need to compile data from various locations, required USA Cycling to find a better way to manage its inventory.

2. What advantages did the SmartTurn system provide for USA Cycling?

The SmartTurn system helps USA Cycling to better manage inventory by allowing customers (i.e., cycling teams) from different locations around the world to update their inventory. The home office can see the level of each supply and reorder appropriate items when needed. The software-as-a-service platform also helps USA Cycling save money on software purchase costs and other related maintenance costs because the software company owns the program and delivers it over a network.

Review Questions Section 11.1 – Before you go on…

1. Define TPS. TPS stands for transaction processing system (TPS). It is a type of information system used in organizations to capture, store, and monitor data generated from all business transactions.

2. List the key functions of a TPS. The key functions of a TPS include • Capturing data from various business transactions • Storing captured data in a database • Providing input data to other business systems Section 11.2 - 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. These systems were designed to increase internal effectiveness and efficiency. They typically developed independently of one another, resulting in “information silos.”

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 involve analyzing operational data to help forecast and project business activities as well as the budgeting to support these activities. These data identify the amount of money that is needed to finance the firm’s operations. They also specify how that money can be raised from the financial markets and at what

Page 3 cost. These calculations involve many transactions and data points.

Information systems are essential to achieve a level of automation in these activities.

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, the chapter discusses only four: in-house logistics and materials management, planning production and operation, computerintegrated manufacturing (CIM), and product life cycle management (PLM).

The POM function is also responsible for managing the organization’s supply chain. Because supply chain management is vital to the success of modern organizations, Chapter 13 is devoted to this topic.

4. What are the most important HRIS applications?

The most important HRIS functions are 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.

Section 11.3 - Before you go on 1. Define ERP, and describe its functionalities.

Enterprise resource planning (ERP) was created to control all major business processes with a 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 Webenabled 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 11.3 illustrates the organization and functions of an ERP II system 3. Differentiate between core ERP modules and extended ERP modules.

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 ebusiness). As the name suggests, the core models must be included in all ERP

Page 4 systems. In contrast, the extended modules are optional. Table 11.2 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.

Section 11.4 – Before you go on…

1. Compare and contrast the three major types of reports.

All reports are generated to provide managers with information that they can use to support their decisions. Routine reports are produced at scheduled intervals. Ad-hoc or on-demand reports are created based on what users need, when they need it. Finally, exception reports include only information that falls outside certain threshold standards.

2. Compare and contrast the three types of on-demand reports.

The three types of on-demand reports are drill-down, key-indicator, and comparative reports. All three types are created to provide information that users need, when they are needed. Drill-down reports provide the most detail with features that users can “drill-down,” i.e., accessing detailed data from summary figures. Key-indicator reports summarize the performance of critical activities. Finally, comparative reports provide comparison information, i.e., sales, cost, etc., among different organization units, within the same unit over time (e.g., historical trend), or between the firm and the industry standard.

“IT’s About Business” Questions 11.1– SAP at Airgas 1. What actions did Airgas take to help ensure the successful implementation of SAP? To ensure the project’s success, Airgas included multiple project stakeholders, such as consultants from Deloitte and Airgas executives, in the project team.

The team worked closely with 300 subject matter experts from functional areas. The additional $20 million investment also helped speed up the project implementation.

2. What benefits does Airgas expect to receive from its deployment of SAP? The new SAP system is expected to help Airgas better manage prices, improve sales, and reduce operating costs. As a result, the company anticipated that its operating income would increase between $75 and $125 million.

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Discussion Questions 1. Consider Closing Case 1ase. What are the advantages that Fieldf/x provides for the owners of professional baseball teams? What are the advantages that Fieldf/x provides for professional baseball players? Are there disadvantages for the players? Support your answers.

Fieldf/x is a motion-capture, or optical tracking system, that is designed to rid sports of the biases of the human eye and quantify the formerly unquantifiable art of being in the right place at the right time. Sportvision claimed that Fieldf/x is accurate to within one foot.

The system collects player movement data and produces valuable information such as a fielder’s reaction time, his path to the ball, the baserunner’s speed, and the arc of a fly ball. The system generates more than 2.5 million records per game, or 2 terabytes of data. When Fiedlf/x is installed at all major league baseball parks, it will create a digital catalog of virtually every movement of every fielder at every Major League Baseball game.

Fieldf/x will generate new baseball metrics, such as degree-of-difficulty fielding ratings. Fieldf/x will also make coaching more precise. For example, coaches will be able to better position their fielders, depending on the hitter and the pitch being thrown (e.g., fast ball versus slow curve ball). Finally, the system will enhance the process by which clubs evaluate — and pay — their players. .

2. Why is it logical to organize IT applications by functional areas?

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

3. 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 that will handle the order. In addition, data are passed to other systems such as CRM, DSS, knowledge management, and e-commerce, as needed.

4. Describe the relationship between TPS and FAIS. An 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. The role of the TPS is to generate the data from the business operations.

5. Discuss how IT facilitates the budgeting process.

Page 6 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 it 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.

6. 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 that can be used to make investment decisions.

7. 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.

8. 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. One important form of financial control is auditing. 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. Like all activities within the accounting and finance functional area, auditing is performed with the assistance of IT. 9. 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

Page 7 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, employees’ records, and benefits administration. This is known as ERM – employee resource management.

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

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

Problem-Solving Activities Each student will have different ideas of what to include in the following: 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. These lists should include building profiles, searching for jobs, responding to job ads, evaluate the job market, etc.

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

SAS is a statistical data analysis package that allows for advanced 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?

Although 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.

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Web Activities Students will follow the directions for these activities and submit a thoughtful report on each one.

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.

Students will select the suggested software packages or other similar programs, research and compare their functionalities, and then write a report to summarize their findings.

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.

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

3. Examine the cap abilities 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.

Students will go to the suggested Web sites of the software packages, research and compare their functionalities, and then write a report to summarize their findings.

4. Examine the accounting software products at simplyaccounting.com (www.simplyaccounting.com/products/). Compare products to locate the software you would recommend for small businesses, and explain why you have selected it. ?

Students will develop a report on their findings 5. Enter www.halogensoftware.com and www.successfactors.com. Examine their software products, and compare them.

Students will research information on the Web sites and locate comparable software products. They will then write a report about each product and compare their features.

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.

Students will go to the suggested Web site and click under the Support menu.

Note that students might have to register before requesting a personal demo.

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Team Assignments 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.

Students will follow the directions for the group project. Note that students might have to search the Internet to locate information systems used in their functional area in order to better describe the interfaces to other related 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.

To help students prepare for the presentation, set up a scenario involving a company looking to adopt HRM software. Suggest that each project team is working for a consulting/software company. Stage the presentation as if they were presenting their software to the company’s executives as a part of the bidding process for the project.

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).

To help students prepare for the presentation, set up a scenario where the city has funding to promote local business development. Each project team is working for a local company. Stage the presentation as if they were presenting the selected technology (i.e., topic) to the city’s Board of Commerce as a part of the city grant/funding application process.

CLOSING CASE 1– Is Baseball a Science?

The Problem The last remaining non-scientific frontier in baseball is fielding. John Dewan, the owner of Baseball Info Solutions (BIS, www.baseballinfosolutions.com), knows this better than anyone. Dewan has spent many years building the current standard in fielding metrics.

He estimates that game analysts are collectively about 90 percent along the way to creating a complete picture of hitters, and almost 85 percent with pitchers.

When it comes to fielders, however, Dewan contends that analysts began with a severe handicap. For more than 100 years, scorekeepers have described a player’s work in the

Page 10 field based only on what he does after he gets to the ball. If a shortstop gathers in a grounder and throws it to first in time to make the out, he is credited with an assist. If he bobbles the grounder and cannot make the throw in time, he gets an error. The standard fielding average simply reflects the percentage of plays that a fielder executes successfully; that is, without making an error. According to Dewan, this basic accounting captures only about 5 percent of what fielding is all about.

Dewan looked for a better way to assess fielding, or defense, in baseball. He divided the field into 3,000 zones and then counted how often fielders were able to make outs on balls hit into each zone. He then measured each fielder against the average of all fielders at that position. If a center fielder, for instance, made a catch on a ball that 70 percent of major leaguers would also catch, he was credited with .3 toward what Dewan called his Ultimate Zone Rating. Dewan then converted the zone rating into the number of runs saved by a fielder’s play.

At BIS, compiling all these numbers is a laborious task. The company employs roughly 20 video scouts. They watch videos of every game at least three times, and they tag every batted ball with a direction (from 135 to 225 degrees), distance (0 to about 400 feet, depending on the size of the ballpark), pace (hard, medium, or soft), and type (grounder, fly ball, line drive, or “fliner”). The results provide information that major league teams pay to see.

The BIS data, however, are limited. For example, they do not indicate where a fielder was standing when the ball was hit. In addition, the data are susceptible to human error, with a margin of 15 to 20 feet on some plays. Dewan himself estimated that BIS and its video scouts could measure only 60 percent of a fielder’s ability.

The Solution Enter Sportvision (www.sportvision.com), a leader in sports broadcasting technology.

Sportvision created Fieldf/x, a motion-capture, or optical tracking system, that promises to rid sports of the biases of the human eye and quantify the formerly unquantifiable art of being in the right place at the right time. Sportvision claims that Fieldf/x is accurate to within one foot.

Fieldf/x uses four cameras placed high above the field to track players and the ball, and log their movements. The system collects movement data and produces valuable information such as a fielder’s reaction time, his path to the ball, the baserunner’s speed, and the arc of a fly ball. The system generates more than 2.5 million records per game, or 2 terabytes of data. When Fiedlf/x is installed at all major league baseball parks, it will create a digital catalog of virtually every movement of every fielder at every Major League Baseball game.

The Result In mid-2011, Fieldf/x was in place at San Francisco’s AT&T Park, and it was being installed in four more parks during that year. The current goal is to install the system in every major league park by 2012. Tom Tippett, the director of baseball information

Page 11 services for the Boston Red Sox, is responsible for gathering and analyzing data to put together a winning team in Boston. He asserts that Fieldf/x will essentially make all other fielding statistics irrelevant.

In summer 2010, Sportvision invited six baseball analysts to see what they could find in Fieldf/x data from 13 games. Even with that small amount of data, the analysts were able to distinguish between plays made because a fielder was already standing in the right place and plays made because a player was exceptionally quick in getting to the ball.

Ultimately, Fieldf/x will generate new baseball metrics, such as degree-of-difficulty fielding ratings. Fieldf/x will also make coaching more precise. For example, coaches will be able to better position their fielders, depending on the hitter and the pitch being thrown (e.g., fast ball versus slow curve ball). Finally, the system will enhance the process by which clubs evaluate — and pay — their players. _________________________________________________________ Questions 1. Describe the advantages and disadvantages of FIELDf/x for a team owner.

Now, describe the advantages and disadvantages of FIELDf/x for a player.

The major advantage of Fieldf/x for a team owner is that the system provides in-depth information that assists in managing and recruiting players.

However, Fieldf/x comes with a price tag that team owners are expected to pay. Otherwise their team will be at a disadvantage because they do not have the system installed. For players, Fieldf/x provides postgame information that they may use to improve their performance. However, the system does not provide a “complete” picture of the fielder. Players still need to rely on their judgment and skills while they are on the field.

2. In sports, paper-based systems have ruled for years. Coaches used to mail VHS tapes of their team to their opponent so they could scout each other’s teams. Given the availability of computer-based information systems, how many ways can this process be improved?

With the current technology, the process can be improved in many different ways. For example, each team can access live feeds of the opponents’ games as they happen in real time. They can also access postgame information via the Internet from anywhere, at any time. Many aspects of performance data are captured in real time and are available as soon as the game is over.

CLOSING CASE 2– Difficulties in Managing Enterprise Resource Planning Systems Companies initially installed ERP systems to make sense of their complicated operations.

In doing so, they were able to operate better and faster than their competition, at least until the competition caught up. In many of these companies, the ERP systems are still essential. However, they no longer provide a competitive advantage. Further, they are not helping to bring in new revenue, and managing them is absorbing an increasing share of

Page 12 the company’s IT budget. However, companies are not getting rid of ERP systems, because they still need them to manage their supply chain, financial, and employee data.

Nevertheless, ERP systems are causing problems for many organizations.

The First Problem: Lack of Flexibility Kennametal (www.kennametal.com), a $2 billion manufacturer of construction tools, has spent $10 million on SAP maintenance contracts during since 1998. Throughout this entire period, however, the company has been unable take advantage of any upgrades in the SAP software. The reason is that, over the years, Kennametal made more than 6,000 customizations to its SAP system. Consequently, the company could not implement any new technology that SAP built in to its software. The firm’s SAP implementation was simply too customized. The time and effort needed to install and test the upgrades outweighed any benefits. In late 2009, Kennametal inquired about the costs of hiring consultants to assist with an SAP re-implementation. The company was shocked by the estimates, which ranged from $15 million to $54 million. Kennametal’s CIO charged that not only SAP, but all the major ERP packages are “old and inflexible, and the vendors cannot build flexibility into their packages.”

A Potential Solution Even if Kennametal could afford to pay up to $54 million for consultants to help the company upgrade to the latest version of its SAP software, the CIO does not want to spend this amount of money. Instead, he plans to turn Kennametal’s old ERP strategy upside down by installing as generic a version of SAP as possible. He and Kennametal’s CEO are willing to change the company’s internal business processes to match the way SAP works, rather than modifying the SAP software to match Kennametal’s business processes.

Kennametal will also perform the implementation itself. The company hired IBM to consult about requirements definitions and to identify business processes that must be reworked to conform to SAP’s procedures. In fact, Kennametal planned to implement at least 90 percent of the SAP software unmodified.

Haworth (www.haworth.com), a $1.7 billion office furniture manufacturer, is another company that decided to make no customer changes to the core SAP code. The company uses tools from iRise (www.irise.com) to visually plant its SAP rollouts in its major offices on four continents. The iRise tools will simulate how the finished SAP system will look to employees, to get them accustomed to changes before the actual rollout. The company also uses a sales compensation application from Vertex (www.vertex.com) because SAP does not support the complicated, multi-tiered compensation model that Haworth uses to pay its salespeople.

The Results Implementing the core code of an ERP system without any significant modifications minimized both the costs of the system and the time devoted to the system for Kennametal and Haworth. However, there is a tradeoff. Both companies had to spend

Page 13 time and money reworking their business processes to meet the procedures established by their ERP systems.

The Second Problem: High Maintenance Fees Dana Holding (www.dana.com) is an $8.1 billion auto parts supplier. Dana’s CIO discovered that 90 percent of the fees the company paid to maintain its ERP system were pure profit for the ERP vendor. When the auto market hit tough times, Dana wanted its ERP vendor to work with the company to reduce maintenance fees, but the vendor objected. To persuade Dana that its maintenance fees were justifiable, the vendor analyzed Dana’s use of its support. The analysis concluded that Dana made 21,000 requests to the vendor over a nine-month period. Dana countered that 98 percent of the requests did not involve human interaction, but were automated look-ups on the vendor’s knowledge base.

The Solution Dana stopped making maintenance payments to its ERP vendor. The risks to any company that decides to stop paying maintenance fees include being hit with penalties assessed by the vendor for breaking a contract and being left without technical support in an emergency. Dana’s lawyers studied the contracts with the vendor and felt comfortable that the firm would not be violating any terms by terminating the payments. Then, Dana’s IT team explored ways to obtain support for their ERP system through other avenues.

They found many alternatives, including online user forums, books, and consultants.

The Results One result of the move away from provider support is that Dana’s IT group has to be more knowledgeable about the company’s ERP system so they can fix whatever goes wrong. However, Dana’s CIO notes that there have been no technology disasters with its ERP system, because the system is mature and reliable. In addition, eliminating maintenance saves money, because Dana is no longer paying for a service of questionable value. _________________________________________________________ Questions 1. Describe what it means for an ERP system to be inflexible.

An ERP system is considered inflexible in the sense that if the company initially has the system “custom made” to fit their business processes, any subsequent upgrades or changes are nearly impossible without a substantial investment in additional resources.

2. Describe the pros and cons of tailoring your organization’s business processes to align with the procedures in an ERP system.

Benefits for tailoring business processes to an ERP system’s procedures include better alignment between how the data are captured and processed.

However, modifying business processes means changing the ways things are typically done around the organization. This could result in additional resources spent on retraining for employees, which leads to confusion and frustration. Also, the modified process might not be the “best” way to get

Page 14 things done. The processes were changed only to be more compatible with the ERP system.

Page 1

CHAPTER 12: Extending the Organization to Customers Chapter Overview 12.1.

Defining Customer Relationship Management

12.2.

Operational Customer Relationship Management Systems

12.3.

Analytical Customer Relationship Management Systems

12.4.

Other Types of Customer Relationship Management Systems

Teaching Tips and Strategies This chapter covers a topic that is very familiar to most students as consumers or customers, even though they may not know the formal terms and system names. The teaching strategy that works best is to relate this CRM terminology 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 CRM, and we then turn our attention to the two major aspects of CRM — operational CRM and analytical CRM. We conclude by examining additional types of CRM, including mobile CRM, on-demand CRM, and open-source CRM. Most students will not be familiar with these types of systems.

Therefore, you should focus on the types of data needed for supporting effective customer service. Students will be familiar with many Internet transactions that they have used to order books and other items. As operations become more streamlined and firms move away from personalized customer service performed by humans, computers and CRM are filling the void.

Customers are supremely important to all organizations. For this reason, CRM is critical to the success of modern businesses. Regardless of the particular job students will perform, they will have either a direct or an indirect impact on their firm’s customers.

Therefore, it is important that all students possess a working knowledge of CRM. OPENING CASE - VIP Auto Appearance Center Questions 1. Why did the Macks purchase a software package instead of hiring another person?

Although the information was not directly discussed in the case text, the costbenefit analysis would show that the CRM software can perform similar

Page 2 customer-relation jobs to those performed by a person. The Macks decided to purchase the software instead of hiring another person because the overall software investment cost was less than the cost of hiring and training another employee.

2. Describe the advantages that the Macks gained from their new software package.

The new software allowed the Macks to integrate their systems in order to provide a better customer experience for their clients. It also provided them with easier access to their clients’ information. As a result, the Macks can spend more time interacting with their clients. Scheduling, billing, and e-mail are all more efficient as well.

Review Questions Section 12.1 – Before you go on…

1. What is the definition of customer relationship management?

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. CRM helps enterprises to perform this task.

3. Define and provide examples of customer touch points.

Anywhere a customer comes in contact with the organization is a touch point.

Customer touch points include telephone calls, email, chat sessions, promotions, and the company Web site.

Section 12.2 - Before you go on…

1. Differentiate between customer-facing applications and customer-touching applications.

The two major components of operational CRM are customer-facing applications and customer-touching applications. Customer-facing CRM applications are the areas where customers directly interact with the enterprise. These areas include customer service and support, sales force automation, marketing, and campaign management.

Page 3 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.

2. Other than the examples in the book, provide an example of cross selling, up selling, and bundling.

Cross selling – A magazine company offers their customer subscriptions to a different magazine based on their subscription history.

Up selling – An Internet service provider offers a faster Internet service to their current customers at a premium price.

Bundling – An insurance company offer discounts on home insurance for their existing customers who purchase car insurance.

Section 12.3 - Before you go on 1. What is the relationship between operational CRM systems and analytical CRM systems?

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. In contrast, 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 systems?

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. A CRM analyzes customer data for a variety of purposes, including: • 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.

Section 12.4 – Before you go on…

1. Define on-demand CRM. On-demand CRM, also called utility computing or software-as-a-service, is a CRM system that is hosted by an external vendor in the vendor’s data center.

This arrangement reduces the system’s purchase and maintenance costs.

2. Define mobile CRM. Mobile CRM system is an interactive CRM system that enables an organization to conduct communications related to sales, marketing, and

Page 4 customer service activities through portable devices such as smartphones for the purpose of building and maintaining relationships with its customers.

3. Define open-source CRM. Open-source CRM refers to CRM systems whose source code is available at no cost to developers and users. These systems are very easy to customize.

However, the software quality is not always guaranteed, and many opensource CRM systems are platform dependent.

“IT’s About Business” Questions 12.1– An Instantaneous CRM Effort 1. Provide two examples of specific actions a company could take to utilize social media in its CRM efforts.

A company selling scrapbooking tools and supplies uses social media to announce their upcoming workshops and showcase some customer projects.

A local ice cream store advertises daily specials and posts discount coupon code(s) on its Facebook page.

2. Should all organizations include a social media component in their CRM strategy? Why or why not? Support your answer.

All organizations should include social media component in their CRM strategy because it offers a low-cost, but effective way to reach out and connect with their customers. However, the degree to which the company utilizes social media will vary depending on their products and services. For example, a company selling commercial farming equipment may not utilize social media as much as restaurants and retail stores in big cities.

12.2– Mobile CRM on a Smart Phone 1. What are the disadvantages of the Kickback mobile CRM application?

The application is available only to customers who own a smartphone. The effectiveness of the system depends on the cell phone signal, which is not always reliable inside a building.

2. Identify two additional advantages of the Kickback mobile CRM application.

The Kickback mobile CRM may reduce errors associated with food and drink orders because customers can enter their menu options directly into the system. The system could also help lower operating costs in the long run because fewer servers are needed to take orders.

Discussion Questions 1. How do customer relationship management systems help organizations achieve customer intimacy?

Customer relationship management (CRM) returns to personal marketing. That is, rather than market to a mass of people or companies,

Page 5 businesses market to each customer individually. By employing this approach, 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 in the form of a variety of CRM systems and applications.

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

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 huge amounts of data. Without adequate safeguards, this strategy may not have worked. Failure to secure the data can lead to security problems.

4. Distinguish between operational CRM systems and analytical CRM systems.

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. In contrast, analytical CRM systems analyze customer behavior and perceptions in order to provide actionable business intelligence.

5. Differentiate between customer-facing CRM applications and customertouching CRM applications.

The two major components of operational CRM are customer-facing applications and customer-touching applications. Customer-facing CRM applications are the areas where customers directly interact with the enterprise. These areas include customer service and support, sales force automation, marketing, and campaign management.

Customer-touching applications (also called electronic CRM applications) include those technologies with which customers interact and typically help themselves. These applications include search and comparison capabilities, technical and other information and services, customized products and services, personalized Web pages, FAQs, e-mail and automated response, and loyalty programs.

6. Explain why Web-based customer interaction centers are critical for successful CRM systems.

Organizations have implemented customer interaction centers (CIC) thru multiple communication channels such as the Web, telephone, fax, and faceto-face interactions to support the communication preferences of customers.

The CIC manages several different types of customer interaction. Web-based

Page 6 CIC are low cost and provide the greatest automation for these customer interactions. Thus, 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 customerfacing 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 markedly improve the customer experience. Hence, these intangible benefits are difficult for executives to quantify and justify.

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.

For a small company, the most likely answer would be to use on-demand CRM because its demands on infrastructure are smaller than other CRM systems. An on-demand CRM system is hosted by an external vendor in the vendor’s data center. For a small company this is a cheaper and leaner solution.

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

Students will go to each of the suggested Web sites, find the customer service activities offered, and write a report to summarize their findings.

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

Students will go to their university Web sites, research the customer relationship management activities, and write a report to summarize their findings.

Page 7 3. Access www.sugarcrm.com and take the interactive tour. Prepare a report on SugarCRM’s functionality to the class.

Students will go to the company Web site and view the product demo or take the interactive tour. They will then write a report about the program functionality and present it to the class.

Team Assignments 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).

Students will follow directions for the group project. Note that students will have to search the Internet to locate information about the functionalities of the system they chose to investigate. Some Web sites might require them to register and provide contact information.

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).

Students will follow directions for the group project. Note that students will have to search the Internet to locate information about the functionalities of the system they chose to investigate. Some Web sites might require them to register and provide contact information.

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, Sage) 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.

Page 8 To help students prepare for the presentation, set up a scenario in which a company is looking for ways to improve its CRM functions. Suggest that each project team represent different CRM activities in the company such as sales, customer support, warranty services, and call center. Stage the presentation as if they were presenting their system proposals to the company’s executives.

CLOSING CASE 1– The Next Step in Customer Relationship Management Welcome, [Your First Name Here], to the era of personalization. Amazon.com recommends books you might like. Netflix tailors your movie menu. Google customizes your news. In exchange for this friendly assistance, targeted ads follow you wherever you navigate online. This process is called taste profiling.

Many, many people have accepted this bargain. It turns out, however, that taste profiling is only the beginning. A technique called persuasion profiling is rapidly evolving. This technique goes well beyond suggesting content that you might enjoy. It actually figures out how you think.

Today, most recommendation and targeting systems focus on products. For example, ecommerce Web sites analyze our consumption patterns and use that information to determine that, for instance, viewers of Iron Man also watch The Dark Knight. However, new research suggests that there is another factor that retailers and advertisers can use.

Specifically, these professionals can personalize not only the products they advertise to potential customers but also the strategies the employ to advertise them.

The research indicates that different people respond to different approaches, or pitches.

For example, in a bookstore, different pitches might look like this: • Appeal to Authority: “Another famous author says that you will like this book.”

• Social Proof: “All your friends on Facebook are buying this book.”

• High Need for Cognition: Smart, subtle points that require some thinking to realize, such as: “The Hunger Games is the Inferno of children’s literature.”

• Hit over the Head: A simple message such as: “The Hunger Games is a fun, fast read!”

Researchers are able to track which pitch is the most persuasive for each person. By eliminating persuasion styles that did not work on a particular individual, a retailer can increase the effectiveness of recommendations by 30 to 40 percent. Most significantly, people respond to the same pitch across multiple domains. In other words, if marketers figure out how to sell books to particular customers, then they can use the same techniques to sell them clothes.

As you probably have figured out by now, your persuasion profile will be worth quite a bit of money to many companies. Once a company like Amazon has determined your profile by suggesting products in a variety of ways over time and analyzing your

Page 9 responses, there is nothing to prevent that company from selling this information to other companies. That is, if you respond a few times to a “50 percent off in the next ten minutes!” deal, you could find yourself surfing a Web filled with blaring red headlines and countdown clocks.

Persuasion profiling can provide many benefits. Consider DirectLife (www.directlife.phillips.com), a wearable coaching device manufactured by Phillips that uses human coaches to determine which arguments motivate a particular individual to eat a healthier diet and exercise more regularly. However, DirectLife also highlights one of the core challenges of persuasion profiling: It works best when it is invisible to the user.

Whereas DirectLife is intended to improve your health, most companies that buy and sell your persuasion profile most likely will not have your well-being at heart. If persuasion profiling makes it possible for a coaching device to shout “You can do it” to people who need positive reinforcement, in theory the technique could also enable politicians to make personalized appeals based on each voter’s particular fears. For example, if your persuasion profile indicates that you are vulnerable to social pressure, then a candidate could target you with ads on your Facebook page claiming that your friends are all voting for him or her.

Persuasion profiling offers quick, easily transferable, targeted access to your personal psychological weak spots. How can you protect yourself from this technique? The best way is to be aware that retailers are practicing persuasion profiling, keep an eye out for it, and view all marketing arguments with the skepticism they deserve.

Persuasion profiling can cause another problem. Micro-profiling, or micropersonalization, can encase individuals in a silent, subtle bubble, thereby isolating them from discoveries and insights that fall outside their usual tastes and interests. This filter bubble is invisible. People are unaware of how their Internet and the Web sites they visit differ from what other people see. In fact, several years ago, when people searched a particular topic, everyone would get the same result. Today, different people who Google the same topic can get different results. These different results are based on the enormous amount of data (through search, Gmail, Maps, and other services) that Google maintains on its users. _________________________________________________________ Questions 1. Describe taste profiling and persuasion profiling.

Taste profiling is a marketing technique used to suggest content or products that might interest individual consumers based on past behaviors. Persuasion profiling, in contrast, is a marketing technique used to discover which sales pitch is the most persuasive for each person, regardless of the specific products.

2. Discuss the benefits of persuasion profiling.

Persuasion profiling helps companies devote their budget to the most effective advertising strategies. It also helps consumers stay with motivation programs

Page 10 targeting behavioral changes such as weight loss and tobacco and alcohol use reduction.

3. Describe the dangers of persuasion profiling.

Persuasion profiling offers quick, easily transferable, targeted access to consumers’ personal psychological weak spots. Therefore, it can be used to influence individuals in negative ways (such as those used in political campaigns). Another possible danger is micro-profiling, or micropersonalization, which can encase individuals in a silent, subtle bubble, thereby isolating them from discoveries and insights that fall outside their usual tastes and interests.

CLOSING CASE 2– Refining the Call Center Call centers are expensive. An average call center seat (representative) costs about $50,000 per year to maintain. The biggest companies, such as AT&T, with 100,000 seats, spend billions of dollars to placate irritated customers. ELoyalty (www.eloyalty.com) provides complex software that not only can define a specific complaint, but can also analyze a caller’s personality.

ELoyalty has analyzed 600 million conversations, and its 1,000 servers store 600 terabytes of customer data. (By way of comparison, the entire print collection of the Library of Congress would require 10 terabytes of storage.) Based on this analysis, the software categorizes people into one of six personality types, and it looks for telltale phrases that provide clues as to what the customer’s specific complaint might be. It then routes callers to the service representative who is most qualified to handle that combination of problem and personality.

The six personality types identified by ELoyalty software are: • Emotions-driven (30 percent of the population): These customers forge relationships with agents before getting into the problem.

• Thoughts-driven (25 percent of the population): These customers want facts and analysis and do not waste time on pleasantries.

• Reactions-driven (20 percent of the population): These customers either love something or hate it. “This product is so cool,” they might say.

• Opinions-driven (10 percent of the population): These customers’ language is full of imperatives, and their minds are made up.

• Reflections-driven (10 percent of the population): These customers are introverts who live in their own worlds, prefer silence to banter, and often skip personal pronouns in their speech.

• Actions-driven (5 percent of the population): These customers want movement and progress. Think Donald Trump.

ELoyalty’s software looks for key words, such as “cancel” and “disappointed,” indicating that a customer might want to close an account. If a customer has called in the past, call

Page 11 center systems flag her personality for representatives and assess the chances that she is calling to cancel her account. The systems also offer hints as to how to deal with her. The software even integrates with company accounts that indicate how valuable the caller might be. For example, customers who carry large balances on their credit cards and pay on time receive higher priority than infrequent users.

Research revealed that when callers were paired with a representative with a similar personality, their calls averaged just over 5 minutes, and the parties reached a satisfactory resolution 92 percent of the time. In contrast, when customers spoke with a representative with a different type of personality from themselves, calls averaged nearly 10 minutes, and the parties reached resolution only 47 percent of the time.

Pairing callers with like-minded representatives offers four benefits to companies: (1) It saves them a great deal of money, (2) it enables company representatives to resolve issues for more customers, (3) it increases customer satisfaction, and (4) it reduces customer churn (turnover). According to ELoyalty’s clients, the software has reduced their call center expenses by up to 20 percent by making the calls shorter and more productive. _________________________________________________________ Questions 1. Review the six categories of customers. Which kind of customer are you? Do you think it would be advantageous to you if you could speak with a customer service representative who had a similar personality? Why or why not?

Students’ answers to the first part of the question will vary. Ask them why they placed themselves in the category they chose. Speaking with a customer service representative who had a similar personality eliminates unintentional personality conflicts and, as a result, helps solve the issues faster.

2. Should companies inform customers about the use of ELoyalty software in their call centers? Why or why not? Support your answer.

Students’ answers will vary. This question could also be used to practice ethical analyses (see Chapter 6).

Page 1

CHAPTER 13: Extending the Organization along the Supply Chain Chapter Overview 13.1.

Supply Chains

13.2.

Supply Chain Management

13.3.

Information Technology Support for Supply Chain Management

Teaching Tips and Strategies Consider beginning this chapter by discussing why companies such as eToys and Toys “R” Us had trouble delivering goods on time for Christmas. Most students believe it was just mismanagement on the part of the e-tailer. Explain that before e-commerce companies existed, only catalog companies focused on sending a couple of items to many different residences.

Another strategy is to use Proctor & Gamble as an example of a consumer products company that sells 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 e-commerce, online e-tailers are in the costly business of sending one or two items to millions of different households. To illustrate how this changes the supply chain, use the following example. Pretend 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 what will be involved in delivering those Barbies. The students will usually answer that someone will have to pick the Barbies in the warehouse, create an address label for each customer, and then box and ship the order.

Next, explain that the actual process is 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, the package is weighed, and postage is affixed.

• Finally, eToys must coordinate with UPS or FedEx to pick up the package.

The above scenario assumes that eToys has 1,000 Barbies in stock. What if we only had 500? Now we have a backorder problem. Ask students “If 1,000 Barbies were available to you right now with invoices/labels, how long would it take to box those Barbies up and mail them?” The answers again will 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

Page 2 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 why companies like Barnes and Noble have created relationships with Amazon.com to handle their online store and the delivery process.

Using this example (or one like it) helps students to understand 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 one another 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 problem for decades. An example is a car dealer I knew 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 model, but not the right color. Consequently, he lost 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 10 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 than ever before to successfully manage their supply chain. How do companies better manage their supply chains?

• By integrating their systems so that all of the departments can communicate with one another (including outside vendors).

• By being able to track inventory and sales in real time. This will help management to make crucial decisions regarding resources.

OPENING CASE Questions 1. Describe the problems that led to Swagelok’s decision to implement a new ERP system.

As Swagelok grew over time, separate information systems developed at each of the 25 facilities. Swagelok was unable to integrate these systems to provide an overall picture of the company’s supply chain operations. This deficiency led to inappropriate decisions and high inventory level; thus, the need to implement a new ERP system.

2. Why is it so important for Swagelok to include its supply chain partners when the company is improving its internal business processes?

Page 3 Swagelok’s operations partly rely on their suppliers’ efficiency and flexibility.

By including its business partners in the process, Swagelok was able to help its partners become more efficient. After Swagelok implemented the improvements, the information flow among the companies/facilities was more seamlessly integrated, and managers were able to make decisions that better benefitted both their local facilities and the overall organization.

Review Questions Section 13.1 – Before you go on…

1. What is a supply chain?

A 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 management is the planning, organizing, and coordinating of all of 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 by 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 13.2 - 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

Page 4 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 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. One of the most notable examples of information sharing occurs between large manufacturers and retailers. For example, Walmart provides Procter & Gamble with access to daily sales information from every store for every item P&G makes for Walmart. This access enables P&G to manage the inventory replenishment for Walmart’s stores. By monitoring inventory levels, P&G knows when inventories fall below the threshold for each product at any Walmart store. These data trigger an immediate shipment.

Section 13.3 - Before you go on 1. Define EDI, and list its major benefits and limitations.

Electronic data interchange (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.

• It increases productivity.

• It enhances customer service.

• It minimizes paper usage and storage.

Major limitations are: • It requires a significant initial investment.

Page 5 • • • • •

Ongoing costs are high due to the use of private VANs. The traditional system is inflexible.

It often requires a long startup period.

Business processes may have to be restructured to fit EDI requirements.

Multiple standards exist.

2. Define an extranet, and explain its infrastructure.

An extranets is a technology that links business partners to one another over the Internet by providing access to certain areas of one another’s corporate intranets Extranets 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. 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.

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“IT’s About Business” Questions 13.1– Cisco Moves from Push Model to Pull Model 1. Describe the disadvantages of the push system at Cisco.

Under the push supply chain system, products were made and inventory was built up in response to forecasted demand. This technique did not work well when the market conditions deviated from the company anticipations, such as when demand dropped quickly and severely after the dot com crash. Because the production was already completed, Cisco was unable to adjust their inventory level in response to the changing demand.

2. Describe the advantages of the pull system at Cisco.

The pull system allows Cisco to better manage its production and inventory in response to market demand; thus, lower inventory level and warehouse costs.

3. Explain why the pull system enabled Cisco to manage through an economic downturn, but seemed to be unable to enable Cisco through an economic recovery.

The pull supply chain system helped Cisco reduce its inventory level.

However, during the economic recovery, market demand for networking equipment suddenly increased. The company once again failed to recognize the changing trend and therefore did not adjust the production and inventory level accordingly.

13.2– Parts Management at Southwest Airlines 1. What is the relationship between Southwest’s new parts inventory system and customer satisfaction?

The new parts inventory system enables Southwest Airline to keep the right spare parts at the right time. Therefore, their scheduled maintenance of the fleet can be completed on time, and the planes can be in service with minimal or no delay, resulting in higher customer satisfaction.

2. Describe two benefits that Southwest received from implementing its new system. What business processes were impacted by each of the two benefits you described?

With the new system, Southwest was able to lower its annual maintenance costs and create an accurate forecast of parts that must be procured to support maintenance. The business processes impacted by the first benefit include maintenance and accounting/finance. The business processes impacted by the second benefit include maintenance, accounting/finance, and procurement.

Discussion Questions 1. Explain how a supply chain approach may be part of a company’s overall strategy.

Page 7 The supply chain drives the company’s business operations. Therefore, it has to be closely aligned with the company’s overall strategy. The mechanics of the supply chain need to reflect the business strategy.

2. 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. Exchanging information can improve coordination among the firms linked in the supply chain. This integration can solve many potential problems in the supply chain. For example, information sharing between Walmart and P&G is done automatically. It is part of a vendormanaged 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.

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

Because Rolls-Royce produces a limited number of cars and customizes each one, the company should use a pull model for its supply chain.

4. 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 quickly. 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.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 1. Enter Teradata Student Network and find the podcasts that deal with supply chains (by Jill Dyche). Identify the benefits cited in the podcasts.

One of the podcast transcripts is available at http://www.teradata.com/library/pdf/DychePodcast0606.pdf 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.

Students will visit the suggested Web sites and research information on the topics. Students then should write a report about their findings.

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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.

Students will visit the suggested Web sites and research information on the recent topics on supply chain management.

4. Surf the Web to find a procurement (sourcing) portal, and 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.

Students will search the Internet for information. They will then write a report to summarize their findings. Remind them to include appropriate citations in their reports.

Team Assignments 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.

To help students prepare for the presentation, set up a scenario involving a company that is looking to adopt supply chain management software. Each project team is working for a different consulting/software company. Stage the presentation as if they were presenting their software to the company’s executives as a part of the bidding process for the project.

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.

In order to locate organizations using IOSs, students may start at the vendor’s Web site. Look for articles on success stories and case studies related to the system. Additional implementation information may be found in academic and practitioner journals.

CLOSING CASE 1– Information Technology Helps Cannondale Manage Its Complex Supply Chain The Problem Cannondale (www.cannondale.com) is a pioneer in the engineering and manufacturing of high-end bicycles, apparel, footwear, and accessories for independent dealers and distributors in more than 66 countries. Cannondale designs, develops, and produces

Page 9 bicycles at its factory in Bedford, Pennsylvania, and it operates subsidiaries in Holland, Switzerland, Japan, and Australia. As a leading custom bicycle manufacturer with an extensive and impressive customer list – including Olympic athletes, professional racing teams, and Tour de France competitors – Cannondale realizes that meeting customer demands and expectations is critical to its success.

Cannondale produces more than 100 different bicycle models annually, 60 percent of which are newly introduced lines. Working in a cyclical business that is impacted by market and weather conditions, coupled with the international nature of its business, Cannondale is faced with highly complex and volatile consumer demand. In addition to constantly shifting demand and a rapidly changing product portfolio, Cannondale has a global supply chain that must integrate global manufacturing, assembly, and sales and distribution sites.

Cannondale manufactures both make-to-order and make-to-stock models. Consequently, the company needs to manage a range of product batch sizes, sometimes including oneof-a-kind orders. A typical bicycle requires a 150-day lead time with a 4-week manufacturing window, and some bicycles have more than 250 parts in their bills of materials (BOMs). (A bill of materials specifies the raw materials, assemblies, components, and parts needed to manufacture a final product, along with the quantities of each one.) Cannondale has to manage more than 1 million BOMs and more than 200,000 individual parts. Adding to Cannondale’s manufacturing complexity, some of these parts are supplied by specialty vendors who require long lead times and have only limited production capacity. This complexity significantly challenged Cannondale’s capacity to quickly deliver complex and custom products to meet its customers’ high expectations.

In order to manage parts availability and varying customer demands, Cannondale’s manufacturing operations need to be highly flexible. Therefore, the company needed a global system that allowed managers to access all plant inventory levels and supply schedules to better manage shifts in product and customer demand.

Cannondale had been using a legacy material requirements planning system (MRP II) that generated weekly reports. Because Cannondale’s manufacturing environment is so dynamic, however, by Tuesday afternoon Monday’s reports were so outdated that they were useless. The supply chain team had to substitute parts in order to meet demand, causing an ever-increasing parts flow problem. Cannondale’s primary objective was to find an IT solution that would improve the accuracy of the company’s parts flow, support the company’s need for flexibility, and operate within the confines of its existing business systems — all at an affordable cost.

The Solution Cannondale selected the Kinaxis RapidResponse (www.kinaxis.com) system for its integrated demand and supply planning and monitoring. RapidResponse provides users with necessary information in minutes, as opposed to eight hours with the previous system. RapidResponse generates accurate and detailed supply chain information with an

Page 10 easy-to-use spreadsheet user interface, employing data supplied from the company’s existing MRP II systems.

RapidResponse has transformed Cannondale’s entire supply chain. Buyers, planners, master schedulers, sourcers (people who procure products), product managers, customer service personnel, and financial managers use the system for sales reporting, forecasting, monitoring daily inventory availability, and providing production schedule information to the MRP II and order-processing systems. Supply chain participants located around the world can now instantly simulate, share, and score what-if scenarios to evaluate and select the actions they need to take to respond to changing supply and demand conditions.

Company managers now receive up-to-date visibility of global operations. In addition, the management team uses RapidResponse daily to examine the company’s manufacturing backlog. Having access to current information enables the team to compare old forecasts with new ones.

The Result Today, Cannondale responds to customer orders quickly, and it has significantly reduced its inventory, with its associated costs. In addition, the company has benefitted from higher inventory turns, reductions in safety stock, improvement in cycle times, reduced lead times, and more accurate promise dates. As a result, customer satisfaction has improved. All of these benefits have provided Cannondale with a competitive advantage in a highly competitive industry. _________________________________________________________ Questions 1. Describe Cannondale’s complex manufacturing environment, and identify some of the problems this environment created.

Cannondale operates in a large-scale, global market and utilizes both pull and push supply chains. The company manufactures high-end cycling products and must meet customer’s high expectations. These factors contribute to the complexity of the manufacturing environments because its supply chain must manage large-volume generic parts, small-quantity specialty parts, a tight manufacturing timeframe, and diverse global market conditions.

2. Describe the RapidResponse system’s impact on Cannondale’s global supply chain management.

The new RapidResponse system allows Cannondale to produce reports in real time. Users can use accurate, updated information from the report to better plan the production as well as the procurement of materials.

CLOSING CASE 2– Supply Chain Management Helps Imperial Sugar after Disaster The Problem

Page 11 In February 2008, an accident at the Imperial Sugar (www.imperialsugar.com) plant in Port Wentworth, Georgia, resulted in an explosion that injured several people. In the days following the explosion, the company’s efforts focused on helping the affected employees and their families. But the $522 million sugar refiner – the third largest in the United States – had obligations to its customers as well. The disaster destroyed approximately 60 percent of the plant’s production capacity overnight. It was not clear when, or if, the plant would operate again.

The plant tried to fulfill as many customer orders as possible, but, unfortunately, it did not have any safety stockpiles. The company imported some sugar through its joint venture with Mexican refiner Ingenios Santos, but the amount was not enough to meet its customers’ demands.

The Solution In 1998, Imperial Sugar had implemented an inclusive PeopleSoft enterprise resource planning system, to manage its business processes. After completing several upgrades, the company realized that the demand-management module could not handle the complexities of the business. When large beverage and food manufacturers sign an annual contract, Imperial Sugar has to predict how that demand will actually manifest itself based on seasonal and consumer cycles. The executives at Imperial Sugar acknowledged that supply chain management was at “the heart of their business” and that it gave Imperial Sugar a competitive advantage.

In 2006, the company had added a system from Demand Foresight (www.demandforesight.com) that essentially calculated how demand ebbs and flows over time. This software package enabled Imperial Sugar to determine the impact of a wide range of factors on the demand for sugar, to react quickly to changes in demand, and to track the company’s overall performance.

After the refinery catastrophe, Imperial Sugar needed to know how many customers it could serve with its available inventory. The software provided that information by product line, and its functionality allowed everyone from production to sales to see, in real time, what could be delivered. The software took the company’s demand, its inventory and capacity, and the number of new orders coming in, and integrated all of that information.

The Results The Georgia plant remained offline for 20 months and the company disappointed many customers. Nevertheless, it credits supply-chain systems, particularly demandmanagement software, with helping to make the best use of its available resources. The firm noted that, although it could not fulfill every order, the software enabled it to fulfill many more orders than it would have been able to otherwise. _________________________________________________________ Questions 1. Why is demand management such an essential component of supply chain management?

Page 12 The demand management system is an essential component of a supply management system because it serves as a starting point for all other supply chain functions. Accurate and timely demand forecasts trigger the manufacturing plan, which, in turn, facilitates material procurements and smooth order fulfillments.

2. Go to www.imperialsugar.com, and learn about the company. Use your knowledge to describe other measures the company could have taken in its production/operations to recover from the disaster.

Click the About Us menu to access information about the company.

Examples of other measures that the company could have taken in its production and operations to recover from the disaster are establishing and updating action plans for disaster management (see http://www.nyu.edu/intercep/lapietra/Hale&Moberg_ImprovingSupplyChain DisasterPreparedness.pdf for related article) and conducting a series of practice responses according to the emergency plan.

Page 1

CHAPTER 14: Acquiring Information Systems and Applications Chapter Overview 14.1.

Planning for and Justifying IT Applications

14.2.

Strategies for Acquiring IT Applications

14.3.

The Traditional Systems Development Life Cycle

14.4.

Alternative Methods and Tools for Systems Development

14.5.

Vendor and Software Selection

Teaching Tips and Strategies The primary goal of this chapter is to explain how to develop a new information system. I would suggest investing time in 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 become 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 the development committees sometimes 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 after the system has been fully implemented Organize the students into groups, and have them come up with some ideas of how to get around the hidden agendas. It is important that the expectation be that the new information system must benefit everyone equally.

Student understanding of the systems development life cycle (SDLC) will help bring order to the complex process of creating a new system. Students who already are employed can relate to SDLC activities if they have participated as an end-user or have used a computer in a business setting. Students who don’t have work 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 understand how to effectively participate in these SDLC processes to ensure that their needs are represented in the development cycle.

Page 2 Spend some time explaining that many companies have struggled with bringing order to the process of system development. In some cases these companies let their users develop their own applications. Transitioning from these islands of information and “private databases” to a well-designed, enterprisewide information strategy is a complex, time-consuming process. This is especially true in cases where the IS vendor failed to determine the applications that users should and should not develop and the tools they should use.

Companies usually embark on a systematic development of information systems when they find out they are losing competitive advantage because they have an inefficient business process or no IS at all. In such cases, top management frequently initiates an impetus for change and throws their unwavering support behind the effort. Consequently, the project gets off to a great start. Unfortunately, this same sense of urgency causes project managers to take inappropriate shortcuts. It is imperative for top management to inform their employees that the project plan is the blueprint for successful development.

A successful approach to systems development is to rely on modular methodology and to exercise sound technical judgment. The key to successful project completion, however, is human relations and communications techniques. Therefore, it is prudent to mix the study of information systems development with sociological topics!

OPENING CASE 1- Anniston Orthopedics and Greenway Medical Technologies Questions 1. Would acquiring a new information system for a small organization be a longer or shorter process than acquiring one for a large organization? upport your answer.

All other things being equal (e.g., similar system complexity, functionality, budget, etc.), acquiring a new information system for a small organization takes less time than doing so for a larger organization. Although both organizations typically go through the same steps when acquiring a new information system, smaller organizations involve fewer stakeholders. As a result, each step takes less time.

2. What is the purpose of the contract between the two parties?

When acquiring a new information system, both parties (purchasing organization and service provider) normally sign a contract outlining the project scope and other aspects of the project. A typical contract for a system development project includes — but is not limited to — the final system functionalities, stakeholders and their responsibilities with proper contact information, reporting/communication channel for the project progress, system costs, service charges, training and consulting fees, payment terms and procedures, contract and system effective dates, conflict of interest, change orders procedures, implementation procedures and timeline, stakeholder penalty for violating the contract terms, project termination, insurance, and warranty.

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In this case, the contract will specify the responsibilities of both Anniston and Greenway. If the two parties cannot agree on terms, then Anniston must resume its search for a new IS vendor.

Review Questions Section 14.1 – 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, because they are real and are valuable to the organization. Therefore, they must be approximated.

Overestimating the value of intangible benefits will cause organizations to initiate projects that do not produce the expected benefits. Conversely, underestimating their value can 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 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 14.2 - Before you go on…

1. Describe the four fundamental business decisions that organizations must make when acquiring information systems.

1. How much computer code does the company want to write?

A company can choose to use a totally pre-written application (to write no computer code); to customize a pre-written application (to write some computer code); or to custom-write an entire application (write all new computer code).

Page 4 2. How will the company pay for the application?

For pre-written and customized pre-written applications, the payment options are to buy or to lease. For complete custom applications, the company may use internal funding.

3. Where will the application run?

The company may choose to run the application on the company’s own platform or on someone else’s platform (e.g., Software-as-a-Service vendor or an application service provider).

4. Where will the application originate?

Pre-written applications can be open source or proprietary software (i.e., from a software vendor). These applications may be further customized in-house or outsourced. Completely customized applications can be either written in-house or outsourced.

2. Discuss each of the seven development methods in this section with regard to the four business decisions that organizations must make.

Development Methods

Amount Of Code Written None

Funding/ Operating Payment Platform Owner Buy or Company’s Lease platform

Customize a pre-written application

Some

Buy or Lease

Lease the applications

None

Lease

Application service providers and softwareas-a-service vendors Use open-source software Outsourcing

None

Lease

Some

Custom development

Most

Internal funding Internal funding Internal funding

Purchase a pre-written application

None

Program Source Code Opensource or Proprietary Company’s Openplatform source or Proprietary Company’s or OpenVendor’s source or platform Proprietary Vendor’s Openplatform source or Proprietary Company’s Openplatform source Company’s Outsource platform Company’s In-house or platform outsource

Section 14.3 - Before you go on 1. Describe the feasibility study.

The feasibility study involves defining the business problem or a new opportunity, investigating options available for the best solution, making a recommendation, and estimating the probability of success.

Page 5 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 that details the system inputs, outputs, and interfaces as well as the hardware, software, databases, telecommunications, personnel, and procedures needed to provide a solution for the requirements developed in the analysis stage. Systems design also provides a blueprint for integrating these various components.

3. Describe structured programming.

Structured programming techniques are used to establish a uniform approach to programming that successive iterations of staff can understand.

• 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 being made inaccessible.

Pilot – introducing the new system in one part of the organization, determining that it is stable, and then rolling it out to other areas.

Phased – introducing select components of the new system in stages. When the organization determines that these components are stable, it rolls out other components.

Section 14.4 – 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 that helps users visualize what the new system will look like.

Joint application development (JAD) involves a meeting attended by all of the end users and the IS project team to develop requirements and reach a consensus. It can save a lot of time, but it is intense, and it will work well only if all departments are represented.

CASE tools are specialized tools that 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 is a systems development method that can combine JAD, prototyping, and ICASE tools to rapidly produce a high-quality system. In the first RAD stage, developers use JAD sessions to collect system requirements. This strategy ensures that users are intensively involved early on. The development process in RAD is iterative, similar to prototyping. That

Page 6 is, requirements, designs, and the system itself are developed and then undergo a series, or sequence, of improvements. RAD uses ICASE tools to quickly structure requirements and develop prototypes. As the prototypes are developed and refined, users review them in additional JAD sessions. RAD produces the functional components of a final system, rather than 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, end-user development can work well. If not, the IS department is usually called on to rewrite and rework.

Object-oriented development is based on a different view of computer systems. OO systems are based on the aspects of the real world that must be modeled to perform a task. Consequently, these systems can be used to perform related tasks that involve the same real-world entities.

Section 14.5 – Before you go on…

1. List the major steps of selection of a vendor and a software package.

1. Identify potential vendors 2. Determine the evaluation criteria 3. Evaluate vendors and packages 4. Select a vendor and package 5. Negotiate a contract 6. Establish a service-level agreement 2. Describe a request for proposal (RFP).

A request for proposal (RFP) is a document that a company sends to potential vendors inviting them to submit a proposal that describes their software package and explains how it would meet the company’s needs.

3. Explain why SLAs play an important role in systems development.

Service-level agreements are formal contracts that specify the division of work and responsibilities 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 the 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 14.1– A Disastrous Development Project 1. Debate the lawsuit from the point of view of Deloitte and SAP.

Page 7 Deloitte filed a counterclaim over the county’s failure to pay more than $550,000 in fees and interest. In its counterclaim, Deloitte maintained that it had fulfilled all of its obligations under the contract, as evidenced by the fact that all of Deloitte’s work was approved by the county officials who were responsible for the project.

2.

Debate the lawsuit from the point of view of Marin County.

Marin County claimed that Deloitte used the county’s SAP project as a training ground to provide young consultants with public sector SAP experience, at the county’s expense. Further, the complaint charged that Deloitte (1) intentionally failed to disclose its lack of SAP and public sector skills; (2) withheld information about critical project risks; (3) falsely represented to the county that the SAP system was ready to “go live” as originally planned; (4) conducted inadequate testing; and (5) concealed the fact that it had failed to perform necessary testing, thereby insuring that system defects would remain hidden prior to the “go-live” date. The county further maintained that, despite the consulting fees it had paid to Deloitte, the system continued to experience crippling problems.

14.2– The State of Virginia’s Outsourcing Contract Proves Costly 1. What are some reasons why Virginia’s IT problems can be considered the result of poor state oversight of Northrop Grumman? What are some reasons, if any, why the state might not be overseeing Northrop effectively?

The IT problems at the State of Virginia could stem from the state’s — or, in this case, the VITA taskforce’s — poor agreement (i.e., contract) and inadequate oversight of the contractor. The project contract did not cover such items as backup or a disaster recovery plan. There is no penalty for Northrop Grumman if the project milestone is delayed or fails. Furthermore, the project scope is so large that a relatively small, 16-member VITA committee simply cannot oversee the entire $2.4 billion, 10-year project development for the state.

2. What are some reasons why Virginia’s IT problems can be considered the result of poor execution by Northrop Grumman? What are some reasons, if any, why Northrop might be executing this project poorly?

Northrop missed several deadlines, and the new system experienced many problems, some of which caused state agencies to become dysfunctional. The problems were so severe that the state charged Northrop with breach of contract.

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.

Page 8 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, a system’s timely and careful development is a very high priority. Systems acquisition and development is a team effort that should involve the entire organization.

3. Why is it important for everyone in business organizations to have a basic understanding of the systems development process?

End users possess the business knowledge the IS staff needs to develop all of the components of the system’s design. For this reason, user input is critical to the acquisition and/or design of a successful IS. 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 as well as 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. Information system staff responsible for the cost-benefit analysis should collaborate with users of the system to place a value on the benefit, even if their analysis is less than scientific. Very often, it is the quantifying of the intangible benefit that will make the biggest impact on the decision to move ahead with a new system.

7. 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 the end users do not know the most efficient way to design a system.

Therefore, when working with a small amount of data, it may seem like

Page 9 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 through 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.

Problem-Solving Activities Each student will have different ideas of what to include in the following: 1. Access www.ecommerce-guide.com. Find the product review area. Read reviews of three software payment solutions. Assess them as possible components.

Students will visit the Web sites and look for reviews on three software payment solutions of their choice. Note that some product information was submitted by the company representatives and may not provide the “true” review of the product.

2. Use an Internet search engine to obtain information on CASE and ICASE tools. Select several vendors and compare and contrast their offerings.

A list of CASE tool vender may be found on this Web site http://www.unl.csi.cuny.edu/faqs/software-enginering/vendor.html. Students may choose a few vendors and compare and contrast their features.

3. Access www.ning.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.

Ning is an educational network site that helps people integrate social media into education. Students will visit www.ning.com and learn how to use it to build an application. There are resources available in many different formats (e.g., printed information, blog, interactive demo, etc.) to help users get started. Note that dabbledb.com no longer provides support for its users.

Web Activities 1. Enter www.ibm.com/software. Find its WebSphere product. Read recent customers’ success stories. What makes this software so popular?

Students will visit the suggested Web site and research information on the topics.

2. Enter the Web sites of the GartnerGroup (www.gartnergroup.com), the Yankee Group (www.yankeegroup.com), and CIO (www.cio.com). Search for

Page 10 recent material about ASPs and outsourcing, and prepare a report on your findings.

Students will visit the suggested Web sites and research information on the topics. Students then should write a report about their 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 StoreFront demonstration to see how this is done.

Students may need to register with the Web site in order to view the demo. b. What features does StoreFront provide?

Features of the StoreFront e-commerce software include various software tools for store building, product management, order processing, marketing and promotions, shopper features, and store management. c. Does StoreFront support smaller or larger stores?

The software provides services for smaller stores with additional add-on modules for larger stores. d. What other products does StoreFront offer for creating online stores?

What types of stores do these products support?

In addition to software solutions, StoreFront offers services that help customers build e-commerce stores including design, custom development, marketing, setup and implementation, training, hosting, payment processing, and support. Click the View Client Gallery link to see examples of client applications.

Team Assignments 1. Assessing the functionality of an application is a part of the planning process (Step 1). Select three to five Web sites catering 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.

Students will follow the directions for the group project. Note that students will have to search the Internet to locate information, and some Web sites might require them to register and provide contact information.

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.

Page 11 Students will follow directions for the group project, write a report to summarize their findings, and present the reports to 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.

Students will follow the directions for the group project. The project outcome may include a written report (e.g., a project proposal), a class presentation, or both. To help students prepare for the presentation, set up a scenario where the city has some funding to help a local startup business. Each project team is working for a local company. Stage the presentation as though the groups are presenting the selected company’s information system to the city’s Board of Commerce as a part of the city grant/funding application process.

CLOSING CASE 1– GE Healthcare Switches from Waterfall to Agile The Business Problem GE Healthcare (www.gehealthcare.com) is a $17 billion business unit of General Electric (www.ge.com) that manufactures an array of products designed to make clinicians more productive. These technologies, which range from high-definition CT scanners to diagnostic pharmaceutical devices, are developed by the company’s Imaging Solutions unit. Imaging Solutions employs 375 engineers who support 18 high-tech products.

Unfortunately, this unit was experiencing several difficulties.

First, Imaging Solutions struggled with the predictability of its systems development project execution. The cycle time on projects was too long, taking from 12 to 24 months, often with significant delays. These long cycle times frequently caused the business to add features beyond the initial user requirements, reflecting a concern that customers could not wait for a new system in order to have these features. That situation, in turn, often increases a project’s scope, causing further delays and increasing the project cycle time even more. Longer cycle times increase the risk that the user requirements gathered at the beginning of the project will be out of date by the time the product reaches the market.

In addition, Imaging Solutions’ system development process followed the systems development life cycle (SDLC) approach (discussed in detail in this chapter). That is, it began with investigation, systems analysis, and systems design. When the unit had completed these steps, it conducted a formal design review. After the team obtained the various approvals for the design, they began programming the new system.

Programming typically took several months, after which the development team released the system into a test environment, where they collected user feedback. This point was usually the first time that users saw the new system. After the team had accumulated and incorporated user input, they continued the testing effort prior to implementing the new system.

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The problem with the SDLC was that system could not incorporate user-requested modifications until very late in the project cycle. As a result, any significant errors could require the team to change the design completely; in effect, to start over. This approach wasted a great deal of time and effort, and it further delayed the project.

A third problem confronting Imaging Solutions’ development projects was the many communication barriers that existed among the various business functions, especially marketing and engineering. These barriers were becoming more problematic over time.

The Solution To address these problems, Imaging Solutions replaced the SDLC with an agile-based scrum initiative. Scrum (discussed in detail later in this chapter) focuses on maximizing the development team’s ability to deliver iterations quickly and to respond effectively to additional user requirements as they emerge. In contrast to the SDLC, agile development involves adding functionality in a series of phases and then testing the product after each phase is completed. Imaging Solutions hoped that adopting agile development would break down the barriers between the functional areas so that everyone would work together to release the right system on time. The unit particularly liked the idea of developing each product in a series of increments. They could then demonstrate each increment’s functionality to users at the end of each increment and receive immediate feedback. This approach was much more economical and efficient than receiving feedback when the system was close to completion.

Imaging Solutions launched its move to agile development with a single development team. The unit staffed a strong cross-functional team and defined a pilot project with a manageable scope with a four-month deadline. However, the project was substantial enough that the team could learn scrum skills while delivering a valuable product. The team also established clear success criteria so that they could evaluate whether they had achieved their goals.

The Result The pilot project was delivered successfully with the correct features and functionality.

The release ran over by one month, so Imaging Solutions is still working on the predictability of delivery.

The pilot project identified important lessons for Imaging Solutions. First, the unit operates in a highly regulated environment, so there are many additional quality and regulatory steps that must be completed before the development team can accept a user story. A user story is a scenario, written in the business terms of the users, that captures what they want to achieve with a particular project.

Imaging Solutions also discovered that they could adopt agile development, but with certain limitations. Specifically, the rigors of operating in a regulated industry required the unit to deploy a hybrid development process that involved more initial planning, and testing, than would be found in other agile organizations.

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Following the pilot project, Imaging Solutions formed 10 scrum teams of 7 to 9 people each. Every two weeks, the teams conduct their increment reviews together on Wednesday morning and hold planning meetings for the next increment on Wednesday afternoon. This process ensures that the teams share their knowledge and also provides visibility into what is going on outside any one team’s activities.

Imaging Solutions also discovered that they needed to identify cross-team dependencies early in each increment. Otherwise, teams could get in one another’s way. They employed Rally’s Agile ALM system (www.rallydev.com) to provide insight into crossteam dependencies and generate real-time status updates on the progress of each increment.

Since Imaging Solutions implemented the new system, the various development teams have begun to share user stories and tasks. Further, teams that complete their own tasks early now assist other teams.

To obtain maximum benefits from the agile system, Imaging Solutions had to transform its culture somewhat by modifying the role of managers and individual contributors on scrum teams. For example, managers have to avoid a command-and-control style where they are ordering work and instead concentrate on assembling empowered teams.

Imaging Solutions is seeing positive results. Obtaining user feedback early and often enables the unit to prioritize features correctly. In one example, the system helped a team identify a clinical workflow that they previously were not aware of. _________________________________________________________ Questions 1. The healthcare industry will be in upheaval for a few years to come. Due to the federal government’s push for Electronic Health Records, many physicians’ practices, both small and large, are acquiring new information systems. What risks can you think of associated with such private information? Do you feel better with your records in a paper file on a shelf or in a computer?

There are several risks associated with electronic health records. For example, systems with inadequate security measures may result in unauthorized access to patient information. Also, failure to update patient records in real-time may result in accurate information and misdiagnosis.

Possible technical issues include system downtime, errors, and limited employee proficiency with the system. Further, because patients may electronically access information about their condition without proper explanation from healthcare professionals, they might not understand how critical their issues are, which may frighten them. (Adapted from http://www.nchica.org/GetInvolved/CACHI/EHRbenefits-risks.htm)

Page 14 2. Search for the phrase “scope creep,” and see what you come up with. How would this phenomenon cause a problem in the acquiring and implementation of information systems?

In the context of IS project development, scope creep refers to uncontrollable changes or growth in project’s scope due to inadequately defined project requirements, unfamiliarity with the new system, limited system documentation, long project development time, poor project control, and failure to manage user expectations. Scope creep causes problems in acquiring and implementing information system because users might feel the system failed to address their concerns and didn’t meet the requirements (which might be caused by extensive system development time and/or users’ needs actually changing). As a result, users tend to reject the project outcome.

At this stage, the development team has to expend more resources fixing the problem and addressing the user concerns, thus further delaying the project.

CLOSING CASE 2– A Tale of Two Software Upgrades The Business Problem Two airlines — WestJet (www.westjet.com) and JetBlue (www.jetblue.com) — had been using a reservation system designed for start-up airlines with reasonably simple reservation requirements. As the two carriers expanded, they needed greater processing power to deal with increasing numbers of customers. They also wanted additional functions, such as the ability to link their prices and seat inventories to other airlines with whom they wished to cooperate.

The Solution WestJet and JetBlue independently selected a system offered by Sabre Holdings (www.sabre.com), a provider of airline reservation systems (SabreSonic; www.sabreairlinesolutions.com). Sabre provides technology to 300 airlines, and it owns Travelocity (www.travelocity.com) and other online travel agencies. JetBlue reported that the new system cost about $40 million, including $25 million in capital spending and $15 million in one-time operating expenses. WestJet did not disclose how much its system cost.

In addition to selling seats and collecting passenger payments, the Sabre system controls much of the passenger experience: shopping on the airline’s Web site; interacting with reservation agents; using airport kiosks; selecting seats; checking bags; boarding at the gate; and rebooking and obtaining refunds for cancellations. To perform these functions, the Sabre system has to integrate with the airline’s other information systems.

The Results WestJet, with 88 planes, switched to Sabre after it had shifted to a lighter winter schedule and canceled some flights. One imposing challenge was the overnight transition of 840,000 files – transactions of customers who already had purchased tickets – from WestJet’s old reservations system to the Sabre system. The process did not go well

Page 15 because the migration required WestJet agents to go through complex steps to process the data.

Despite months of planning, when WestJet made its conversion, its Web site crashed repeatedly, and its call center was overwhelmed. Making matters worse, WestJet did not reduce the number of passengers on the flights operating after the transition to the new system, nor did it inform customers of its upgrade plans until the day of the switch.

WestJet’s customer loyalty scores dropped as a result of long waits and booking difficulties. The airline sent apology letters, offered flight credits to some customers, and bolstered its call center with temporary staffers located in India. Two months after the conversion, the airline installed a “virtual hold” in its call centers so callers would be promised a response within a certain time. A virtual hold offers callers the option for a call back rather than waiting on hold.

The bottom line for WestJet? After several months, the airline was able to fulfill its plans to cooperate with U.S. and international airlines on some of its routes.

In contrast, JetBlue, with 151 aircraft, decided to make its switch on a Friday night, because Saturday traffic tends to be low. The airline trimmed its schedule that weekend and sold abnormally low numbers of seats on the remaining flights. JetBlue also developed a backup Web site that it used twice for a few hours during the transition.

JetBlue also contracted for 500 outside reservations agents. After the transition, in which 900,000 passenger records were moved to Sabre, JetBlue routed basic calls to the temporary workers, freeing up its own call staff to manage more complex tasks. The extra agents stayed in place for two months.

JetBlue still experienced some problems. Call wait times increased, and not all of its airport kiosks and ticket printers became operational right away. Despite these problems, however, JetBlue contends that migrating to Sabre was an important factor in the airline’s decision to cooperate on some routes in and out of Boston and New York with American Airlines. _________________________________________________________ Questions 1. Explain why WestJet and JetBlue decided to upgrade their reservation systems.

Both airlines decided to upgrade their information systems in order to stay competitive. Sabre dominated the airline ticket reservation system and became the industry standard. Without the new system, WestJet and JetBlue reservation systems would be incompatible with those used by other airlines, which would prevent the two companies from collaborating with partner airlines in the United States.

Page 16 2. Compare and contrast the software upgrade processes of WestJet and JetBlue.

Both companies decided to migrate to the new system over a short time period, and neither company experienced an entirely smooth transition. The conversion at WestJet was inadequately planned (e.g., did not reduce the number of seats sold, last-minute communication with customers about the change) and included minimal backup strategies (e.g., no backup Web site and call centers). JetBlue, in contrast, took preventive measures when planning the conversion (e.g., limit the number of flights and seats, set up a backup Web site, and hire additional reservation agents).

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Plug IT In 1:

Business Processes and Business Process Management

Plug-In Overview PI1.1

Business Processes

PI1.2

Business process reengineering and business process management

Teaching Tips and Strategies An organization’s business processes determine whether the business is successful or unsuccessful. When an organization determines that its processes need to be changed or is advised to reevaluate its processes, it can turn to business process reengineering as a way to reinvent itself.

The students can get a good idea about how an organization can use its business processes by examining the way their university works. Several of the questions in this chapter lead them to look at those processes, but it would be helpful if you explain how the university resembles a business in many respects. An example is the human resources department, which operates the same way HR in any other business operates, except that they have faculty contracts to deal with, as opposed to simply hiring employees. This would be an enlightening discussion topic for the class lecture.

An effective strategy for introducing business process reengineering is to have the class research this topic online and find examples of corporations that have implemented a successful BPR. A classroom discussion of how this happened and the impacts it had on the organization will help the students understand the value of BPR to the organization.

Review Questions Section PI1.1 – Before you go on…

1. What is a business process?

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

2. Describe several business processes carried out at your university.

University business processes include accounting services, human resources (hiring faculty and staff, managing payroll), marketing the university to the wider community, enrolling and registering students, managing student transcripts, managing the physical facilities of the university, managing the university grounds, implementing and servicing the computer labs, and maintaining the university Web site. The students may have other answers.

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3. Define a cross-functional business process, and provide several examples of such processes.

A cross-functional business process is one that cuts across several departments in a business. No single functional area is responsible for that process. In a business environment, procurement and fulfillment are cross-functional business processes.

In a university, student enrollment can be considered cross functional because both admissions and registration are involved.

4. Describe the three roles that information systems play in enabling business processes.

Information systems perform the following functions for business processes: - Execute the process - Capture and store process data - Monitor process performance.

Section PI1.2 - Before you go on…

1. What is business process reengineering?

Business process reengineering is a strategy for improving the efficiency and effectiveness of an organization’s business processes. The key to BPR is for enterprises to examine their business processes from a “clean sheet” perspective and then determine how they can best reconstruct those processes to improve their business functions.

2. What is business process management?

Business process management is a management technique that includes methods and tools to support the design, analysis, implementation, management, and optimization of business processes.

Discussion Questions 1. Consider the student registration business process at your university: a. Describe the steps necessary for you to register for your classes each semester.

Student answers will vary for this question. The steps might go something like this: - Determine the classes that fit into the plan of study - Discuss this with advisor - Register for the classes - Pick another class is one of the original choices is full - Receive receipt - Pay for classes b. Describe how information technology is used in each step of the process (or is not used).

Student answers will vary. Here is one scenario:

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-

Plan of study could be online, and the student may be able to check the plan of study that way.

Advisors may be available for online consultation.

Class registration may be available online. If not, the advisor will surely use a computerized system to conduct the registration.

The class list may be online.

The receipt will be printed from a computer system.

The payment system may be online.

2. Why is it so difficult for an organization to actually implement business process reengineering?

Some organizations find that business process reengineering is too radical, too difficult, and too comprehensive to accomplish. It has a great impact on employees, on existing investments in information systems, and on organizational culture. An organization must agree to look at its business processes from start to finish and determine how they can be reconstructed.

This is a daunting task for most organizations.

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Plug IT In 2:

Hardware and Software

Plug-In Overview PI2.1

Introduction to Hardware

PI1.2

Introduction to Software

Teaching Tips and Strategies Teaching students about hardware and software is very important if they are to understand how a computer works and to solve some of their own computer problems in the future. Students often don’t understand that hardware is nothing more than electrical circuits that do the processing and it cannot do anything without the software.

Hardware is usually something the students don’t really think about except when they buy a computer. Trying to decide whether to buy high-speed or extra cache memory is often out of their expertise, unless they are buying a computer for gaming. If you have students in class who have purchased high-end computers, they will be a good resource to explain the type of hardware they bought and why. When students go out into the business environment, it is important that they know the basics of hardware in case they need to be involved in purchasing hardware for their organization.

Operating systems and the various versions are sometimes confusing. Spend some time differentiating between the various versions of Microsoft operating systems: Windows XP, Windows Vista, Windows 7, and Windows 8 (not released as of September 2011). Then, expand the discussion to operating systems from other companies such as Apple. Compare open-source software such as Linux and Unix to the Windows-based operating systems.

Extend the conversation to the systems that are used at your university. Then talk about the application systems that your university uses. Productivity software such as Microsoft Office or Google Docs can be used as examples. The discussion of the software should also include specialized application software for different business functions such as accounting and marketing. If you have different majors in your class, they may be using some of this software in other classes. Have them describe the software and what they use it for. Universities often teach students to use software that they will utilize when they get a job in the business world.

Review Questions Section PI2.1 – Before you go on…

1. Decisions about hardware focus on what three factors?

Decisions about hardware focus on three interrelated factors: appropriateness for the task, speed, and cost.

2. What are the overall trends in hardware?

Page 2 Over time, hardware becomes smaller, faster, cheaper, and more powerful.

3. Define hardware, and list the major hardware components.

Hardware is the physical equipment used for the input, processing, output, and storage activities of a computer system. The major hardware components are: • Central processing unit (CPU) • Primary storage • Secondary storage • Input technologies (mouse, keyboard, other input devices) • Output technologies (display, printer, other output devices) • Communication technologies (network connections) 4. Describe the computer hierarchy from the largest to the smallest computers.

From largest to smallest, the computer hierarchy is: Supercomputers (fastest computers available at any given time) • Mainframe computers (computers used by thousands of users at a single time) • Midrange computers (small, inexpensive, compact computers) • Microcomputers (smallest and least-expensive general-purpose computers; includes laptops, netbooks, and tablets).

5. Distinguish between human data-input devices and source-data automation.

Human data-input devices require some human effort to input the data. Examples are keyboard, mouse, trackball, and touch screen. Source-data automation devices do require very little or no human intervention. An example is a barcode reader.

6. Briefly describe how a microprocessor functions.

The microprocessor accepts input data and instructions. This information is stored in a register until it is needed. The data and instructions travel in the chip via electrical pathways called buses, and they are dispatched to where they are needed by the control unit. The ALU receives the data and instructions and does the necessary calculations or logical comparisons. Finally, the results and the original data are placed in registers and then transferred to a storage device or an output device.

7. Distinguish between primary storage and secondary storage.

Primary storage stores small amounts of data and information that will be used immediately by the CPU. Secondary storage stores larger amounts of data and information to be used later.

Section PI2.2 - Before you go on…

1. What does this statement mean: “Hardware is useless without software”?

The computer hardware cannot do anything without software to make it happen.

Without the software, the hardware is just a set of metal and electronics that can only sit on the desk.

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2. What are the differences between systems software and application software?

Systems software serves as an intermediary between the computer hardware and the application programs. This is the software that controls the input/output and other maintenance functions within the computer. File management is an example of system software. Application software provides functions that are specifically needed by a user. Word processing software is an example of application software.

3. What is open-source software, and what are its advantages? Can you think of any disadvantages?

Open-source software is available free of charge to both developers and users. It is developed by ‘communities’ of programmers who write and maintain the code.

Open-source software is high quality, reliable, and inexpensive. It is also flexible, meaning that it can be modified to fit an individual user’s needs. Disadvantages include the fact that any problems must be handled by the community of users who created it (rather than by a company such as Microsoft). In addition, an organization may need to employ in-house experts on the software to provide maintenance. Finally, the software might not be compatible with the organization’s existing systems.

4. Describe the functions of the operating system.

The operating system controls the overall operation of the computer. It monitors the computer’s status and scheduling operations, and it manages input and output.

One of its primary roles is to act as an interface between the user and the computer.

Discussion Questions 1. If you were the CIO of a firm, what factors would you consider when selecting secondary storage media for your company’s records (files)?

Because secondary storage is likely to exist for a long time, the storage media need to be very stable and have a long life. As new technologies become available, an organization should consider converting its secondary storage to these media, which may have a longer life. Consider the difference between storing data on floppy disks versus newer optical media. Not only are the floppies more susceptible to magnetic interference, but the media itself may not last as long as the more modern optical disks. Investigating the life of a type of media will help ensure that the files are not lost over time.

2. Given that Moore’s Law has proved itself over the past two decades, speculate on what chip capabilities will be in 10 years. What might your desktop PC be able to do?

Page 4 Moore’s Law states that the number of transistors that can be placed on a circuit doubles almost every two years and that computing power will increase accordingly. It can also be applied to the exponential growth in speed and storage capacity of computers. Based on this law, in 10 years chips will be much faster, lighter, and use much less electricity than the ones that we now use. A desktop PC will be able to manage massive computing projects and will dramatically outperform the fastest gaming system available today.

Many desktop computers are now more powerful than the mainframes of 10 years ago, and in the future, this trend will continue.

3. If you were the CIO of a firm, how would you explain the workings, benefits, and limitations of using thin clients as opposed to fat clients?

Thin clients are very useful in an environment where the users do not need to install specialized software to do their job. A thin-client environment is one in which the computers do not house the software (for instance, word processing and spreadsheets). Instead, that software is stored on servers and downloaded when it is requested by a user. Thin clients are much less expensive to purchase. They are easier to maintain because the software is stored in a centralized location, and upgrades can be performed much faster. The major limitation is the fact that if the network goes down, then the thin-client computers cannot be used because they rely on the network to access software.

4. Where might you find embedded computers at home, at school, and/or at work?

Embedded computers are special computing devices that are designed to do a specific job. You can find embedded computers in your DVD player, an MP3 player, gaming systems, a microwave oven, your car, washing machines, televisions, dishwashers, and refrigerators. Students may come up with many more applications.

5. You are the CIO of your company, and you have to develop an application of strategic importance to your firm. What are the advantages and disadvantages of using open-source software?

Open-source software would likely be less expensive to install and use, and there is a community of users available to help if problems occur. In addition, it is often less susceptible to computer hackers, because it is specialized and therefore is relatively secure. It can also be modified to meet the company’s requirements. In this sense it is more flexible than an “off-the-shelf” package.

On the negative side, the company may need to hire specialized programmers to maintain the system. In addition, if there is a major problem, then the company would have to rely on the assistance of volunteers from the Internet.

6. 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?

Page 5 Why? Should you even have to learn a programming language? Why or why not?

C, C++, Java, and PHP are some of the very popular programming languages.

Some of these languages are used in creating games and investment software, so students may be interested in them for that reason. Internet programming languages like Java, JavaScript, and Active Server Pages (ASP) are also popular.

Problem-Solving Activities 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.

Intel - 20 new processors, new chipsets and new wireless chips including new Intel® Core™ i7, i5 and i3 processors, Intel® 6 Series Chipsets, and Intel® Centrino® WiFi and WiMAX adapters will power more than 500 new PC systems (from their Web site).

Motorola - dual-core 1GHz processor AMD – Accelerated Processing Unit Students can create a table that compares the speed, capacity, and cost of these products as well as other new products from these manufacturers.

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.

Students should illustrate how each part of this instruction cycle works.

3. A great deal of software is available free over the Internet. Go to http://www.pcmag.com/article2/0,2817,2338803,00.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.

Students can choose from a long list of software in the 2009 article, including: Audio/Music, Blogging, Browsers, Calendars, Conferencing, File Viewers/Converters, Fun/Home, Graphics, Office, Operating Systems, RSS Readers, and Video.

4. 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?

IBM offers software for many different applications, from Lotus products for office productivity to WebSphere for electronic commerce. Students will find a wealth of information here, and they should be able to determine that IBM has become a major supplier of software.

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5. Compare the following proprietary software packages with their open-source software counterparts. Prepare your comparison for the class.

Proprietary Open-Source Microsoft Office Google Docs, OpenOffice Adobe Photoshop Picnik.com, Google Picasa Students should consider the following: ease of installation, cost, collaboration among users, ease of use, training available, and help for technical issues. Students may also come up with additional features on which to compare the products.

6. 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?

Microsoft Surface is a touch-screen computer interface device built into a coffee table. From their Web site: “Surface computing uses a blend of wireless protocols, special machine-readable tags and shape recognition to seamlessly merge the real and the virtual world — an idea the Milan team refers to as ’blended reality.’ The table can be built with a variety of wireless transceivers, including Bluetooth, Wi-Fi and (eventually) radio frequency identification (RFID) and is designed to sync instantly with any device that touches its surface.”

Oblong Industry g-speak special operating environment – “The g-speak SOE (spatial operating environment) is Oblong's radically new platform. The SOE made its public debut in the film Minority Report, whose bellwether interface one of Oblong's founders designed. But its full history extends backward to three decades of research at the MIT Media Lab. The g-speak SOE implements the biggest advance in human-machine interface in twenty-five years. It also introduces a new model for multi-process cooperation, a realworld geometry engine for gestural input and multi-display output, and an athletic new network layer for data translation, encapsulation, and transport.”

The g-speak interface is designed to be used on a wall, rather than a table.

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Plug IT In 3: Emerging Types of Enterprise Computing Chapter Overview PI3.1 Introduction PI3.2 Server Farms PI3.3 Virtualization PI3.4 Grid Computing PI3.5 Utility Computing PI3.6 Cloud Computing PI3.7 Emerging Software Trends

Teaching Tips and Strategies This Plug IT In focuses on many technologies that are widely utilized in organizations.

Students might already have heard some of these terms — for example, cloud computing and virtualization — to the extent that the technology may apply to them. However, they might not know that those technologies were first available for organizations.

You may want to start by asking how many students have heard each of the terms and encouraging them to explain to the class what they think the technology is all about. For example, students might be familiar with cloud computing because they can store their music files on the “cloud” and then access those files with any device. They may also share those files with their friends and family (to a certain extent, of course). You can explain that those are the fundamental concepts of cloud computing and then discuss how to extend the concepts to organizations.

Students, however, may not have heard of many of these trends. Grid computing and server farms, for example, are normally associated with larger organizations. If your institution has a local IT department, you might want to ask them for permission to plan a field trip to the campus server room, because many students have never seen a server room before.

Finally, when you explain the concepts of Web services and service-oriented architecture, an online map is a good example that students can relate to. For example, try searching for real estate for sale in your area using the Web site http://www.realtor.com/ and then clicking to map the search results. Point out to students that the site utilizes Web services — map features in this case — provided by Bing from Microsoft.

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Review Questions Section PI3.1 – Before you go on…

1. Define cloud computing.

Cloud computing allows users to access a shared pool of computing resources, including computers, storage, applications, and services, over a network, typically the Internet. The cloud is composed of the computer hardware and software and the network connections among those computers. The computers in the cloud are typically located in data centers, or server farms, which can be located anywhere in the world and accessed from anywhere in the world.

2. Discuss the advantages and disadvantage of cloud computing.

The advantages of cloud computing include much lower infrastructure costs and convenience. The disadvantages consist of privacy, security, and reliability concerns.

Section PI3.2 – Before you go on…

1. Describe the function of Web services.

Web services allow different systems to share data and services with one another through a set of shared standards, or protocols, without requiring human beings to translate the conversations. Web services can be used in a variety of platform environments (e.g., over the Internet, intranet, and extranet) to perform a wide variety of tasks (e.g., automating business processes, integrating components of an enterprise-wide system, streamlining online buying and selling, etc.).

2. Describe the function of service-oriented architectures.

A service-oriented architecture (SOA) is an IT architecture that utilizes Web services in order to construct business applications.

Discussion Questions 1. What is the value of server farms and virtualization to any large organization?

Server farms use a large number of severs to provide the system redundancy and fault tolerance, meaning that if one computer fails, the application is automatically “rolled over” to another computer. Server farms require massive amounts of electrical power, air conditioning, backup generators, security, and money. In order to cut down cost, many companies utilize virtualization. Virtualization refers to a system in which servers no longer have to be dedicated to a particular task. Server virtualization allows companies to create virtual machines on fewer physical servers, thereby reducing costs for equipment, energy, personnel, and maintenance.

Page 3 2. If you were the chief information officer (CIO) of a firm, how would you explain the workings, benefits, and limitations of cloud computing?

Cloud computing refers to the technology that provides the company with access to applications, computing power, and infrastructure through a computer network such as the Internet. Cloud computing helps companies dramatically lower infrastructure costs, and it increases convenience and potential upgrade costs (e.g., personnel, time, software packages). The disadvantages, however, consist of privacy, security, and reliability concerns.

3. What is the value of cloud computing to a small organization?

Cloud computing allows small organizations to have access to computing resources at a lower cost. Because computer services are provided through a network, those organizations can perform their tasks without having to invest in basic infrastructure such as hardware, software, and typical maintenance.

4. What is the value of cloud computing to an entrepreneur who is starting a business?

Cloud computing enables a start-up business to have access to computing resources without having to commit to the capital investments for the IT infrastructure. For a business just starting up where uncertainty could play a major role in its survival, cloud computing enables the entrepreneur to treat those IT resources much like a variable cost.

Problem-Solving Activities 1. Investigate the status of cloud computing by researching the offerings of these leading vendors. 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 e.g., www.microsoft.com/azure/default.mspx) • Google (see e.g., www.technologyreview.com/biztech/19785/?a=f) Students will visit the suggested Web sites and research the latest developments on cloud computing as well as the inhibitors to adopting the technology.

Page 1

Plug IT In 4:

Intelligent Systems

Plug-In Overview PI4.1

Introduction to Intelligent Systems

PI4.2

Expert Systems

PI4.3

Neural Networks

PI4.4

Fuzzy Logic

PI4.5

Genetic Algorithms

PI4.6

Intelligent Agents

Teaching Tips and Strategies Artificial intelligence and the other advanced topics in this section are important because businesses have implemented them in order to achieve strategic advantage.

Computers have gone well past the point of simply being used for office productivity and gaming. Students already may have used a spreadsheet application to do ‘What If’ analysis in another course. Using that as an example is a good way to introduce these advanced topics.

Some universities conduct research in neural networks and fuzzy logic, so inviting an expert from those research centers would help the students understand this research and its applications for business. Students also use intelligent agents in their everyday lives and don’t know it. Demonstrating how this software works by using a log in or an account from an online retailer can illustrate its usefulness.

Review Questions Section PI4.1 – Before you go on…

1. What is artificial intelligence?

Artificial intelligence (AI) is a field that is concerned with studying the thought processes of humans and re-creating the effects of those processes in machines, such as computers and robots.

2. Differentiate between artificial and human intelligence.

Table 4.1 summarizes and compares the capabilities of human and artificial intelligence.

Section PI4.2 - Before you go on…

1. What is an expert system?

Page 2 An expert system is a computer system that attempts to mimic a human expert by applying what it has learned in a specific field.

2. Describe the benefits and limitations of using expert systems.

An expert system is decision-making software that can provide answers based on the data that have been previously collected. It can either support or replace an expert. A major benefit is that expert systems can collect an unlimited amount of information on which to base their conclusions. In addition, they are very reliable, and they can (1) increase output, quality, and productivity; (2) capture and dispense information in fields where expertise is scarce; (3) operate in hazardous environments; and (4) decrease decision-making time and downtime. Limitations include the following: (1) Transferring the information from the human experts into the ES can be difficult, (2) some reasoning processes may be either too complex or too vague to automate, and (3) using expert systems can involve legal liabilities, especially in the medical field.

Section PI4.3 – Before you go on…

1. What are neural networks?

A neural network is a system of programs and data structures that simulates the underlying concepts of the biological brain.

2. Describe how neural networks function.

The neural network has 3 layers of interconnect nodes. As the network is trained, the strengths of the connections among the layers change. The network establishes patterns based on previously input data, and it makes decisions based on those data and newly input data.

Section PI4.4 – Before you go on…

1. What is fuzzy logic?

Fuzzy logic is a branch of mathematics that deals with uncertainties by simulating the process of human reasoning.

2. Give some examples where fuzzy logic is used.

Fuzzy logic has been used in financial analysis and in the manufacture of antilock brakes.

Section PI4.5 – Before you go on…

1. What is a genetic algorithm?

A genetic algorithm is a method for solving a problem that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem.

2. Give examples of the use of genetic algorithms.

Boeing uses genetic algorithms to help design its aircraft parts. Retailers use genetic algorithms to manage inventories. A producer of industrial gases uses

Page 3 genetic algorithms to find optimal production schedules and distribution points in its supply chain.

Section PI4.6 – Before you go on…

1. Define intelligent agents, information agents, monitoring-and-surveillance agents, and user agents.

An intelligent agent is a software program that assists you in performing repetitive, computer-related tasks.

An information agent is a type of intelligent agent that searches for information of some kind and then displays it to the user.

Monitoring-and-surveillance agents (predictive agents) are intelligent agents that constantly observe and report on some item of interest.

User agents are intelligent agents that take action on your behalf.

2. Explain the uses of each type of intelligent agent.

The paper clip (Clippy) in Microsoft Word was an intelligent agent. It would suggest how to do things such as forming a business letter when it detected that was the type of document you were creating. A buyer agent is an information agent on a Web site that helps customers find products and services that they need. Predictive agents are used by companies such as Allstate to monitor its large networks and report on any problems. User agents can be used to do things like check e-mail, sort it, and alert you to high-priority messages.

Discussion Questions 1. Explain how your university could employ an expert system in its admission process. Could it apply a neural network to this process? What might be the outcome if a student was denied admission to the university and his parents discovered that an expert system had been involved in the admissions process?

A university could employ an expert system in its admission process because the expert system could maintain a list of items and requirements that a person must meet to be admitted. The computer program would review the electronic version of the admission application and determine if the applicant had met all of the criteria. A neural network would work in a similar manner. If an applicant had anything out of the ordinary, such as having attended a high school that was not on the computer program’s approved list or having test scores outside the acceptable range, then he or she would be denied admission. In such cases, however, there may be other information that should have been considered. The applicant’s parents should be upset if the expert system had rejected the application without considering this information.

2. One difference between a conventional business intelligence system and an expert system is that the former can explain a how question, whereas the latter

Page 4 can explain a how and a why question. Discuss the implications of this statement. If you were the CIO of a firm, how would you explain the workings, benefits, and limitations of using thin clients as opposed to fat clients?

The business intelligence system can give the organization a better outcome because the “why” something is true could make a difference when a decision is made, rather than simply basing it on how something can be done. There may be a business environment that will not allow a certain decision to be carried out, even if the expert system says that it is possible to implement it.

The business intelligence system adds additional information into the decision-making process.

NOTE TO EDITOR: The second part of this question is from the previous Plug IT In (2).

Problem-Solving Activities 1. You have decided to purchase a new video camcorder. To purchase it as inexpensively as possible and still get the features you want, you use a shopping bot. Visit several of the shopping bot Web sites that perform price comparisons for you. Begin with MySimon (www.mysimon.com), BizRate.com (www.bizrate.com), and Google Product Search. Compare these shopping bots in terms of their ease of use, number of product offerings, speed in obtaining information, thoroughness of information offered about products and sellers, and price selection. Which site or sites would you use, and why?

Which camcorder would you select and buy? How helpful were these sites in making your decision?

MySimon was easy to use to find the video camcorders. It gives you a list of the items, asks for your zip code, and lists the price.

BizRate does everything that MySimon does, plus it is easier to compare the prices. All you have to do is click on Compare Prices and it shows a list of the items, the supplier, and the price.

The Google Product Search shows the products in a typical list that is generated when you search for anything on Google. It also uses the cookies on your computer to remember your zip code. In addition, it lists stores in your area where you can purchase an item.

Students will have various answers to which camcorder they would choose and which site was most useful.

2. Access the Web site MyMajors (www.mymajors.com). This site contains a rule-based expert system to help students find majors. The expert system has more than 300 rules and 15,000 possible conclusions. The site ranks majors according to the likelihood that a student will succeed in them, and it provides 6 possible majors from among 60 alternative majors that a student might consider.

Take the quiz, and see if you are in the “right major” as defined by the expert system. You must register to take the quiz.

Page 5 This quiz takes about 10 to 15 minutes, depending on how long the students take to analyze how they think about the things they do. The students will have varying results as to whether they have selected the right major. They have to be honest in their answers.

3. Access Exsys (www.exsys.com), and click on “Sample Systems”. Next click on “Sample Systems to Run”. Try the Demo on the best breed of dog for you, and see if you agree with the results.

This is a very good expert system software demo, because it can give the students a feel for how an expert system can be used to make everyday decisions. The students will have varying opinions about how it worked for them. In a discussion about the results, you might ask how the students could improve the system, if at all.

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Plug IT In 5: Project Management Chapter Overview PI5.1 Project Management for Information Systems Projects PI5.2 The Project Management Process PI5.3 The Project Management Body of Knowledge

Teaching Tips and Strategies Project management is an important skill not only for MIS majors but for anyone who works or will work with projects. Ask students about their experiences with group work, regardless of whether it is school related. Discuss the benefits of teamwork as well as potential problems that could threaten the success of a group project.

If you plan to assign team projects for this class, strongly recommend that your students read this Plug IT In before starting the project. Explain the connections between the system development project and the five phases of project management activities.

Finally, introduce students to the Project Management Institute, a not-for-profit membership association for the project management profession. Visit the Web site www.pmi.org, and search for the most recent publications, certifications, and other resources that might interest and benefit students.

Review Questions Section PI5.1 – Before you go on…

1. What is a project?

A project is a short-term effort to create a specific business-related outcome such as a product or a service.

2. What is the triple constraint of any project?

All projects are constrained by the same three factors, known as the triple constraints of project management: • Time – the window of opportunity in which a project must be completed to provide a benefit to the organization • Cost – the actual amount of resources, including cash and labor, that an organization can commit to completing a project • Scope – the processes to ensure that the project includes all the work required – and only the work required – to complete the project successfully.

The triple constraints are interrelated, and they involve trade-offs. For example, scope can often be increased by using additional time and incurring increased

Page 2 costs. Similarly, costs and/or time can often be saved by reducing scope. For a given scope, time can sometimes be saved by increasing cost.

Section PI5.2 – Before you go on…

1. What are the five phases of the project management process?

• Project Initiation - Define the problem that the project is intended to solve and the goals that it is to achieve, identify and secure the resources necessary for the project, analyze the costs and benefits of the project, and identify potential risks.

• Project Planning – Identify the project objective and associated activities in detail in order to avoid scope creep.

• Project Execution – Perform the work defined in the project management plan in order to accomplish the project’s requirements.

• Project Monitoring and Control – Determine whether the progress is progressing as planned.

• Project Completion – The project is formally accepted by the organization.

Finalize all activities, fulfill and settle all contracts, archive files, and document all lessons learned from the project.

2. What are the major causes of project failure?

Major causes of project failure include: • Lack of sufficient planning at the start of a project; • Difficulties with technology compatibility (that is, new technology may not work with existing technology); • Lack of commitment by management providing the necessary resources; • Poorly defined project scope; • Lack of sufficient time to complete the project.

Section PI5.3 – Before you go on…

1. What is the Project Management Body of Knowledge, and why is it important to organizations?

The Project Management Body of Knowledge (PMBOK) is a collection of processes and knowledge areas generally accepted as best practice within the project management discipline. It is important for organizations to follow the recommended guidelines because PMBOK is an internationally recognized standard providing the fundamentals of project management, regardless of the type of project (e.g., construction, software, engineering, automotive, etc.).

2. Which of the PMBOK do you think is most important? Can a project succeed without any of them?

Student answers will vary. Students may choose any of the following knowledge areas as the most important one. Regardless of what they choose, students should be able to explain why they think it is the most important.

• Project Integration Management • Project Scope Management • Project Time Management

Page 3 • Project Cost Management • Project Quality Management • Project Human Resource Management • Project Communications Management • Project Risk Management • Project Procurement Management A project cannot succeed without any of the above PMBOK. However, each area may be emphasized differently across different projects.

Discussion Questions 1. You manage the department that will use a system being developed on a large project. After carefully reviewing the requirements definition document, you are positive that there are missing, ambiguous, inaccurate, and unclear requirements. The project manager is pressuring you for your sign-off since he has already received sign-off from all of your co-workers. If you fail to sign off on the requirements, you are going to put the entire project at risk because the time frame is not negotiable. What should you do? Why? Support your answer.

Students’ answers should be not to sign off on the project because requirements that were missing, ambiguous, inaccurate, and unclear may result in scope creep and potentially delay the project and increase the overall cost.

2. You have been hired as a consultant to build an employee payroll system for a startup restaurant. Before you even have a chance to interview them, the two owners decided to independently come up with a list of their business requirements. When you combine their two lists, you have the list below. (1) Highlight potential issues with the list. (2) Add requirements that you think should be there but are not. (3) What do you tell the owners when you derive your new list?

• All employees must have a unique employee ID. • The system must track employee hours worked based on employees’ last names.

• Employees must be scheduled to work a minimum of eight hours per day.

• Employee payroll is calculated by multiplying the employees’ hours worked by $7.25.

• Managers must be scheduled to work morning shifts.

• Employees cannot be scheduled to work more than eight hours per day.

• Servers cannot be scheduled to work morning, afternoon, or evening shifts.

• The system must allow managers to change and delete employees from the system.

Potential issues with the list include (1) the number of hours that each employee can work per day (at least eight hours vs. no more than eight hours

Page 4 per day); (2) the method of tracking employees (using employee ID is recommended because it is possible for two or more employees to share the same last name. However, the report could be generated based on last name); (3) the time that servers can be scheduled to work; (4) deleting employee records from the database might not be a good idea. Instead, a manager could update the employee status to “inactive.”

Additional requirements that the restaurant owners might consider include, but are not limited to, the list of reports that the owners would like to see, the security issues planned for the system, the procedures to keep track of employee work hours (i.e., clock-in, clock-out procedures), and the budget and development timeline for the system.

You might want to approach both owners at the same time by setting up a meeting to resolve the issues. Instead of presenting the owners with your new list, explain to them why their original list could cause problems as the system moves forward. Ask them to think of a new way to achieve the same goal, and use your list as recommendations for those conflicting issues.

Problem-Solving Activities 1. Apply and discuss each of the five project management processes of the PMBOK to the following massive project. Finally, use a search engine to find out where the project stands now. Would this be considered a runaway project? Why or why not?

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Project Initiation – The problem in this case stems from the facts that (1) the NHS information system was paper based, and (2) many computerized systems were acquired from multiple software vendors, creating silos of information that were not shared, or even sharable. The main objective of the project, therefore, is to create a single, comprehensive, lifelong historical electronic healthcare record for every individual regardless of where, when, and by whom he or she was treated. The system would also provide healthcare professionals with access to a national data repository and support the NHS in collecting and analyzing information and monitoring health trends to make the best use of clinical and other resources.

Project Planning – The National Program for Information Technology (NPIT) was formed in 2002 to oversee the system development. The project started with a study of the U.K. healthcare system that resulted in the division of work into five regions, each of which was serviced by a Local Service Provider (LSP). The NHS offered 10-year service contracts to the LSPs for the five regions, each of which was worth about $2 billion.

Project Execution – Each LSP performed its work.

Page 5 • •

Project Monitoring and Control – According to the case, this project did not proceed as originally planned, causing delays and compatibility issues. The project costs rose significantly over budget.

Project Completion – According to the case, the project had not yet been completed. However, in 2008 the contract with Fujitsu was terminated.

This project may be considered a runaway project because the NPIT has invested more resources than it originally planned to (e.g., increasing the budget from $12 to $24 billion).

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Plug IT In 6: Protecting Your Information Assets Chapter Overview PI6.1 Introduction PI6.2 Behavioral Actions to Protect Your Information Assets PI6.3 Computer-Based Actions to Protect Your Information Assets

Teaching Tips and Strategies Inform students that this Plug IT In contains information that directly affects them in the most fundamental way. Spark students’ interest by visiting Web sites such as the Internet Crime Complaint Center (http://www.ic3.gov) and searching for annual reports related to the latest information and statistics relating to Internet crime.

You may also ask students to share their experiences with identity theft, credit card fraud, and malware problems. Point out some of the techniques discussed in this chapter that students can use to protect themselves and their information assets.

Review Questions Section PI6.1 – Before you go on…

1. Why is it so important for you to protect yourself?

As businesses improve their information security, consumers become the next target of computer crime. Protecting yourself is becoming critical because organized crime is increasingly turning its attention to home users. Every time we use our computers or access the Internet, we risk exposing both professional and personal information to people looking to steal or exploit that information.

2. What are the two types of action that you can take to protect yourself?

The two types of actions are: • Behavioral actions - actions that do not specifically involve a computer • Computer-based actions – actions relate to safe computing.

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?

It is very important for you to protect your information assets because every time you use your computer or access the Internet, you risk exposing both professional and personal information to people looking to steal or exploit that information. You cannot always assume an organization’s MIS or IT

Page 2 department will protect your information for you because their primary focus is to protect the company’s information assets, not yours.

2. Discuss the differences between behavioral actions that you should take and computer-based actions that you should take.

Behavioral actions refer to basic actions you can take to protect personal information in your everyday life. For example, do not provide personal information such as Social Security numbers and credit card numbers to strangers in any format; be cautious when using debit and credit cards, especially for online shopping; use private mailboxes for collecting sensitive information; cross-cut old mail and documents; and sign up for informationprotection services.

Computer-based actions use computers to help protect personal information, especially information that can easily be compromised through the Internet.

These actions include: • Monitoring the Internet browsing history and activities on shared computers; • Never posting personal information in chat rooms or on social networking sites; • Running tests and scans to determine if your computer is infected with malware such as viruses, worms, and spyware, and removing it promptly if found; • Never downloading any files or software over the Internet that you have not requested or that are from Web sites that you do not know; • Installing firewalls, anti-malware products, and security suites on your computer; • Installing software patches as soon as they become available; • Using a browser and an operating system that are less prone to security attacks; and • Protecting your portable devices and information.

Problem-Solving Activities 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.

Students will follow the instructions outlined in this chapter to check for malware, test their firewalls, and scan their computers for spyware.

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

Page 3 Students will follow the instructions outlined in this chapter to check for a Trojan horse on their computers.