Introduction to Information Systems Supporting and Transforming Business

Introduction to Information Systems Supporting and Transforming Business Sixth Edition

R. Kelly Rainer Jr. Brad Prince

 

 

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ISBN 978-1-119-10800-9 (Binder-Ready Version)

Rainer, R. Kelly, Jr., 1949– Introduction to Information Systems : Supporting and Transforming Business / R. Kelly Rainer Jr., Brad Prince. — Sixth edition. 1 online resource. Includes index. Description based on print version record and CIP data provided by publisher; resource not viewed. ISBN 978-1-119-10799-6 (pdf) – ISBN 978-1-119-10800-9 (looseleaf) 1. Information technology. 2. Computer networks. 3. Management information systems. I. Prince, Brad, 1978- II. Title. T58.5 658.4’038011 —dc23 2015025301

The inside back cover will contain printing identifi cation and country of origin if omitted from this page. In addition, if the ISBN on the back cover differs from the ISBN on this page, the one on the back cover is correct.

Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

 

 

vPREFACE

v

What Do Information Systems Have to Do with Business? This edition of Rainer and Prince’s Introduction to Information Systems will answer this ques- tion for you. In every chapter, you will see how real global businesses use technology and information systems to increase their profi tability, gain market share, improve their customer service, and manage their daily operations. In other words, you will learn how information systems provide the foundation for modern business enterprises.

Our goal is to teach all business majors, especially undergraduates, how to use IT to master their current or future jobs and to help ensure the success of their organization. Our focus is not on merely learning the concepts of information technology but rather on applying those concepts to perform business processes more effi ciently and effectively. We concentrate on placing information systems in the context of business, so that you will more readily grasp the concepts presented in the text.

Preface

What’s In ITFor rMe?

The theme of this book, What’s in IT for Me?, is a question asked by most students who take this course. Our book will show you that IT is the backbone of any business, whether you’re majoring in Accounting, Finance, Marketing, Human Resources, Operations Management, or MIS.

New to This Edition The sixth edition contains many exciting additions and changes. These elements make the text more interesting and readable for students of all majors, while still providing the most current information possible in the rapidly changing fi eld of information systems.

Overall • A new section on Relational Database Operations in Chapter 5 (Data and Knowledge

Management). • Expanded coverage on Big Data in Chapter 5 (Data and Knowledge Management). • A new section on The Internet of Things in Chapter 8 (Wireless, Mobile Computing, and

Mobile Commerce). • All new or updated chapter-opening and closing cases. • All new or updated IT’s About Business boxes in every chapter.

MKTACCT FIN POMHRM MIS

 

 

vi PREFACE

Key Features We have been guided by the following goals that we believe will enhance the teaching and learning experience.

“What’s in IT for Me?” theme • We show why IT is important by calling attention in each chapter to how that chapter’s

IT topic relates to students in each major.

° A feature of this edition is chapter-opening “teasers” that list specifi c tasks for each major that the chapter will help prepare students to do.

° Throughout each chapter, icons guide the reader to relevant issues for their specifi c functional area—Accounting (ACC), Finance (FIN), Marketing (MKT), Operations Management (POM), Management Information Systems (MIS), and Human Resources Management (HRM).

° Every chapter concludes with a summary of how the concepts relate to each functional area (“What’s in IT for Me?”).

Active Learning We recognize the need to actively involve students in problem solving, creative thinking, and capitalizing on opportunities. Therefore, we have included in every chapter a variety of hands-on exercises, activities, and mini-cases, including exercises that require students to use software application tools. Through these activities and an interactive Web site, we enable students to apply the concepts they learn.

Diversifi ed and Unique Examples from Different Industries Extensive use of vivid examples from large corporations, small businesses, and government and not-for-profi t organizations helps to enliven concepts by demonstrating the capabilities of IT, its cost and justifi cation, and innovative ways in which real corporations are using IT in their operations. Each chapter constantly highlights the integral connection between IT and busi- ness. This is especially evident in the “IT’s About Business” boxes.

Misuse of IS Like other textbooks, this text presents many examples of IS success. But we also provide numerous examples of IS failures, in the context of lessons that can be learned from such fail- ures. Misuse of IS can be very expensive, as we illustrate.

Innovation and Creativity In today’s rapidly changing environment, creativity and innovation are essential for a business to operate effectively and profi tably. Throughout the text we demonstrate how IT facilitates these concepts.

Global Focus Because an understanding of global competition, partnerships, and trading is essential to success in business, we provide a broad selection of international cases and examples. We discuss how IT facilitates export and import, the management of multinational companies, and electronic trading around the globe.

Focus on Ethics With corporate scandals appearing daily in the news, ethics and ethical questions have come to the forefront of business people’s minds. In addition to a chapter that concentrates on ethics

 

 

viiPREFACE

and privacy (Chapter 3), we have included examples and cases that focus on business ethics throughout the chapters.

Pedagogical Structure Other pedagogical features provide a structured learning system that reinforces the concepts through features such as chapter-opening organizers, section reviews, frequent applications, and hands-on exercises and activities. Chapter-opening organizers include the following pedagogical features:

• The Learning Objectives provide an overview of the key concepts students should come away with after reading the chapter.

• Web Resources highlight ancillary materials available on the book companion site and within WileyPLUS for both instructors and students.

• The Chapter Outline lists the major chapter headings. • An opening case identifi es a business problem faced by an actual company, describes the

IT solution applied to the business problem, presents the results of the IT solution, and summarizes what students can learn from the case.

• New “What’s in IT for Me?” “teasers” give students a quick hint about skills in their majors for which this chapter will help prepare them.

Study aids are provided throughout each chapter. These include the following:

• IT’s About Business cases provide real-world applications, with questions that relate to concepts covered in the text. Icons relate these sections to the specifi c functional areas.

• Highlighted Examples interspersed throughout the text illustrate the use (and misuse) of IT by real-world organizations, thus making the conceptual discussion more concrete.

• Tables list key points or summarize different concepts. • End-of-section reviews (Before You Go On . . .) prompt students to pause and test their under-

standing of basic concepts before moving on to the next section.

End-of-chapter study aids provide extensive opportunity for the reader to review and actually “do something” with the concepts they have just studied:

• What’s in IT for Me? is a unique chapter summary section that demonstrates the relevance of topics for different functional areas (accounting, fi nance, marketing, production/operations management, and human resources management).

• The Chapter Summary, keyed to learning objectives listed at the beginning of the chapter, enables students to review the major concepts covered in the chapter.

• The end-of-chapter Glossary facilitates studying by listing and defi ning all of the key terms introduced in the chapter.

• Discussion Questions and Problem-Solving Activities provide practice through active learn- ing. These exercises are hands-on opportunities to use the concepts discussed in the chapter.

• A Case presents a brief case study organized around a business problem and explains how IT helped to solve it. Questions at the end of the case relate it to concepts discussed in the chapter.

Online Resources www.wiley.com/college/rainer This text also facilitates the teaching of an introductory IS course by providing extensive sup- port materials for instructors and students. Go to www.wiley.com/college/rainer to access the Student and Instructor Web Sites.

 

 

viii PREFACE

Instructor’s Manual The Instructor’s Manual, created by Bob Gehling of Auburn University at Montgomery, includes a chapter overview, teaching tips and strategies, answers to all end-of-chapter ques- tions, supplemental mini-cases with essay questions and answers, and experiential exercises that relate to particular topics.

Test Bank The Test Bank, written by Jennifer Gerow of Virginia Military Institute, is a comprehensive resource for test questions. It contains multiple-choice, true/false, short answer, and essay ques- tions for each chapter. The multiple-choice and true/false questions are labeled according to diffi culty: easy, medium, or hard.

The test bank is available for use in Respondus’ easy-to-use software. Respondus is a powerful tool for creating and managing exams that can be printed to paper or published directly to Black- board, WebCT, Desire2Learn, eCollege, ANGEL, and other eLearning systems. For more infor- mation on Respondus and the Respondus Test Bank Network, please visit www.respondus.com.

PowerPoint Presentations The PowerPoint Presentations consist of a series of slides for each chapter of the text that are designed around the text content, incorporating key points from the text and all text illustra- tions as appropriate.

Wiley Information Systems Hub http://wileyiscommunity.ning.com/

This is a new online, interactive community designed to support the teaching of the Intro IS course. The Hub will allow IS faculty to explore a centralized and constantly updated set of current articles for use in class, connect with IS colleagues for help and advice about upcom- ing course topics, and share course materials with other IS faculty. The Community Manager is David Firth of the University of Montana

Weekly Updates Weekly updates, harvested from around the web by David Firth of the University of Mon- tana, provide you with the latest IT news and issues. These are posted every Monday morning throughout the year at http://wileyinformationsystemsupdates.com/ and include links to articles and videos as well as discussion questions to assign or use in class.

Image Library All textbook fi gures are available for download from the Web site. These fi gures can easily be added to PowerPoint presentations.

Offi ceGrader Offi ceGraderTM is an Access-based VBA macro that enables automatic grading of Offi ce assign- ments. The macros compare Offi ce fi les and grade them against a master fi le. Offi ceGraderTM is available for Word, Access, Excel, and PowerPoint for Offi ce 2010 and Offi ce 2013. For more information, contact your Wiley sales representative or visit www.wiley.com/college/microsoft and click on “Offi ceGrader.”

WileyPlus Learning Space What is WileyPLUS Learning Space? It’s a place where students can learn, collaborate, and grow. Through a personalized experience, students create their own study guide while they interact with course content and work on learning activities.

 

 

ixPREFACE

WileyPLUS Learning Space combines adaptive learning functionality with a dynamic new e-textbook for your course—giving you tools to quickly organize learning activities, manage student collaboration, and customize your course so that you have full control over content as well as the amount of interactivity between students.

You can:

• Assign activities and add your own materials • Guide students through what’s important in the e-textbook by easily assigning specifi c

content • Set up and monitor collab orative learning groups • Assess student engagement • Benefi t from a sophisticated set of reporting and diagnostic tools that give greater insight

into class activity Learn more at www.wileypluslearningspace.com. If you have questions, please contact your Wiley representative.

Wiley Flex Wiley provides a wide variety of printed and electronic formats that provide many choices to your students at a range of price points. Contact your Wiley sales representative for more details on any of the below.

Wiley E-Textbook E-Textbooks are complete digital versions of the text that help students study more effi ciently as they:

• Access content online and offl ine on your desktop, laptop and mobile device • Search across the entire book content • Take notes and highlight • Copy and paste or print key sections

Wiley E-Text: Powered by VitalSource (available for all titles) Ask your sales representative about other available formats.

Wiley Custom This group’s services allow you to:

• Adapt existing Wiley content and combine texts • Incorporate and publish your own materials • Collaborate with our team to ensure your satisfaction

Wiley Custom Select Wiley Custom Select allows you to build your own course materials using selected chapters of any Wiley text and your own material if desired. For more information, contact your Wiley sales representative or visit http://customselect.wiley.com/.

Acknowledgments Creating, developing, and producing a text for an introduction to information technology course is a formidable undertaking. Along the way, we were fortunate to receive continuous evaluation, criticism, and direction from many colleagues who regularly teach this course. We would like to acknowledge the contributions made by the following individuals.

 

 

x PREFACE

We would like thank the Wiley team: Lisé Johnson, Executive Editor; Jennifer Manias, Sponsoring Editor; Allison Morris, Product Design Manager; Chris DeJohn, Executive Marketing Manager; and Amanda Dallas, Market Solutions Assistant. We also thank the production team, including Dorothy Sinclair, Senior Content Manager; Jane Lee, Senior Production Editor; and Gaurav Uppal of Thomson Digital. And thanks to Harry Nolan, Design Director; Wendy Lai, Senior Designer; and Billy Ray, Senior Photo Editor. We also would like to thank Robert Weiss for his skillful and thorough editing of the manuscript.

We also acknowledge and appreciate Bob Gehling and Jennifer Gerow for their work on the supplements, and David Firth for his work on the Weekly Updates and the new Faculty Hub. Many thanks also to Alina M. Chircu and Marco Marabelli of Bentley University for developing material that enhances our coverage of business processes and ERP. Finally, we thank all the faculty listed below who have generously shared their varied opinions by review- ing the manuscript and/or completing our user surveys.

Kelly Rainer Brad Prince

Ahlam Alhweiti, Southern New Hampshire University Barbara Gordon, Seminole State College of Florida Milele Hallingquest, Iowa State University Sandy Keeter, Southern New Hampshire University Nicole Lytle-Kosola, California State University, San Bernardino Joe Parker, Southern New Hampshire University Melissa Ray, University of Phoenix Donna Rex, York University Kevin Scheibe, Iowa State University Kevin Wilhelmsen, University of Phoenix Gaya P. Agrawal, Rutgers University Ihssan Alkadi, South Louisiana Community College Mary Baldwin-Grimes, Gateway Technical College Mary Barnard, IUPUI Nicholas Barnes, Nichols College Lisa Reeves Bertin, Penn State University Shenango Campus Mark Best, The University of Kansas Neelima Bhatnagar, University of Pittsburgh at Johnstown Dan Brandon, Christian Brothers University Fredrick Bsharah, Cape Cod Community College Jessie Brown, Macquarie City Campus Patrick Browning, The University of Southern Mississippi Trini Callava, University of Miami Pam Carter, North Carolina A&T State University Antoinette Cevenini, Macquarie City Campus Lewis Chasalow, The University of Findlay H. Michael Chung, California State University Long Beach Ken Corley, Appalachian State University Jose Cruz, University of Puerto Rico – Mayaguez Barry Cumbie, University of Southern Mississippi Subhasish Dasgupta, George Washington University

Lauren Eder, Rider University Greg Foudray, Salem State University Bob Gehling, Auburn University Montgomery Cody Gray, Portland Community College Eileen Griffi n, Canisius College Heather Griffo, Portland Community College Joseph Harder, Indiana State University Jeff Harper, Indiana State University Jim Howatt, Luther College Chang-tseh Hsieh, University of Southern Mississippi Scott Hunsinger, Appalachian State University Micki Hyde, Indiana University of Pennsylvania Jinman Kim, University of Sydney Richard Klein, Florida International University Dana Ladd, University of Findlay Faith Lamprey, Rhode Island College Christine Lazaro, Gateway Technical College Mark Lewis, Alfred University Susan Li, Adelphi University Thomas Long, DePaul University James Scott Magruder, The University of Southern Mississippi Kalana Malimage, Mississippi State University Efrem Mallach, Rhode Island College Steven Mandelbaum, George Washington University Nichelle Manuel, IADT Stanley Marcinczyk, Central Connecticut State University Robert Marmelstein, East Stroudsburg University Tom Mattson, University of Hawaii Lee McClain, Western Washington University Rodger Morrison, Troy University Mahdi Nasereddin, Penn State University

Reviewers

 

 

xiPREFACE

Bill Neumann, University of Arizona Cynthia Nitsch, University of San Diego Anthony Offor, Sanford-Brown College Jim Ott, Fontbonne University Neal Parker, Appalachian State University Sheila Pearson, Southern Arkansas University Jennifer Percival, University of Ontario Institute of Technology Olga Petkova, Central Connecticut State University Sean Piotrowski, Rider University Robert Plant, University of Miami Carol Pollard, Appalachian State University Simon Poon, University of Sydney Drew Procaccino, Rider University Carl Rebman, University of San Diego Howard D Rees, Rider University Lisa Rich, Athens State University Jim Ryan, Troy University Anselm Sequeira, University of Southern Mississippi

Linda Spauldig, Gateway Technical College Suneel Sharma, GDGWI-Lancaster University Troy Strader, Drake University Sharon Tabor, Boise State University Zaiyong Tang, Salem State University Christopher Taylor, Appalachian State University Gary Templeton, Mississippi State University Cheryl Ucakar, Gateway Technical College Michael Waclawiczek, Salem State University Shouhong Wang, University of Massachusetts Dartmouth John Wee, University of Mississippi Brian West, University of Louisiana at Lafayette Paul Wheatcraft, Portland Community College Melody White, University of North Texas Dezhi Wu, Southern Utah University Carol Wysocki, Columbia Basin College Li Richard Ye, Carlifornia State University, Northridge Saad Yousuf, Gateway Technical College

 

 

 

xiiiBRIEF CONTENTS

xiii

Brief Contents [Chapter 1] Introduction to

Information Systems 1

[Chapter 2] Organizational Strategy, Competitive Advantage, and Information Systems 31

[Chapter 3] Ethics and Privacy 66

[Chapter 4] Information Security 85

[Chapter 5] Data and Knowledge Management 121

[Chapter 6] Telecommunications and Networking 161

[Chapter 7] E-Business and E-Commerce 197

[Chapter 8] Wireless, Mobile Computing, and Mobile Commerce 229

[Chapter 9] Social Computing 262

[Chapter 10] Information Systems Within the Organization 293

[Chapter 11] Customer Relationship Management and Supply Chain Management 320

[Chapter 12] Business Intelligence 355

[Chapter 13] Acquiring Information Systems and Applications 380

[Technology Guide 1] Hardware 409

[Technology Guide 2] Software 424

[Technology Guide 3] Cloud Computing 433

[Technology Guide 4] Intelligent Systems 456

[Index] 471

 

 

xiv CONTENTS

xiv

[Chapter 1] Introduction to Information Systems 1

1.1: Why Should I Study Information Systems? 3 1.2: Overview of Computer-Based Information Systems 9 1.3: How Does IT Impact Organizations? 18 1.4: Importance of Information Systems to Society 22

[Chapter 2] Organizational Strategy, Competitive Advantage, and Information Systems 31

2.1: Business Processes 34 2.2: Business Process Reengineering, Business Process

Improvement, and Business Process Management 40 2.3: Business Pressures, Organizational Responses, and

Information Technology Support 44 2.4: Competitive Advantage and Strategic Information

Systems 52

[Chapter 3] Ethics and Privacy 66 3.1: Ethical Issues 70 3.2: Privacy 74

[Chapter 4] Information Security 85 4.1: Introduction to Information Security 88 4.2: Unintentional Threats to Information Systems 90 4.3: Deliberate Threats to Information Systems 94 4.4: What Organizations Are Doing to Protect Information

Resources 99 4.5: Information Security Controls 102

[Chapter 5] Data and Knowledge Management 121

5.1: Managing Data 124 5.2: The Database Approach 126 5.3: Big Data 131 5.4: Data Warehouses and Data Marts 137

5.5: Knowledge Management 145 5.6: Appendix: Fundamentals of Relational Database Operations 147

[Chapter 6] Telecommunications and Networking 161

6.1: What Is a Computer Network? 164 6.2: Network Fundamentals 167 6.3: The Internet and the World Wide Web 171 6.4: Network Applications: Discovery 178 6.5: Network Applications: Communication 180 6.6: Network Applications: Collaboration 184 6.7: Network Applications: Educational 187

[Chapter 7] E-Business and E-Commerce 197

7.1: Overview of E-Business and E-Commerce 201 7.2: Business-to-Consumer (B2C) Electronic Commerce 209 7.3: Business-to-Business (B2B) Electronic Commerce 217 7.4: Ethical and Legal Issues in E-Business 219

[Chapter 8] Wireless, Mobile Computing, and Mobile Commerce 229

8.1: Wireless Technologies 233 8.2: Wireless Computer Networks and Internet Access 239 8.3: Mobile Computing and Mobile Commerce 245 8.4: The Internet of Things 251 8.5: Wireless Security 255

[Chapter 9] Social Computing 262 9.1: Web 2.0 266 9.2: Fundamentals of Social Computing in Business 274 9.3: Social Computing in Business: Shopping 276 9.4: Social Computing in Business: Marketing 280 9.5: Social Computing in Business:

Customer Relationship Management 284

Contents

 

 

xvCONTENTS

9.6: Social Computing in Business: Human Resource Management 285

[Chapter 10] Information Systems within the Organization 293

10.1: Transaction Processing Systems 296 10.2: Functional Area Information Systems 297 10.3: Enterprise Resource Planning (ERP) Systems 305 10.4: ERP Support for Business Processes 311

[Chapter 11] Customer Relationship Management and Supply Chain Management 320

11.1: Defi ning Customer Relationship Management 322 11.2: Operational Customer Relationship Management

Systems 328 11.3: Analytical Customer Relationship Management

Systems 331 11.4: Other Types of Customer Relationship

Management 332 11.5: Supply Chains 337 11.6: Supply Chain Management 339 11.7: Information Technology Support for Supply Chain

Management 343

[Chapter 12] Business Intelligence 355 12.1: Managers and Decision Making 358 12.2: What is Business Intelligence? 363 12.3: Business Intelligence Applications

for Data Analysis 367 12.4: Business Intelligence Applications

for Presenting Results 370

[Chapter 13] Acquiring Information Systems and Applications 380

13.1: Planning for and Justifying IT Applications 384 13.2: Strategies for Acquiring IT Applications 387 13.3: The Traditional Systems Development Life Cycle 393 13.4: Alternative Methods and Tools for Systems

Development 399

[Technology Guide 1] Hardware 409 TG 1.1: Introduction to Hardware 410 TG 1.2: Strategic Hardware Issues 410

TG 1.3: Computer Hierarchy 411 TG 1.4: Input and Output Technologies 413 TG 1.5: The Central Processing Unit 416

[Technology Guide 2] Software 424 TG 2.1: Software Issues 425 TG 2.2: Systems Software 427 TG 2.3: Application Software 428

[Technology Guide 3] Cloud Computing 433

TG 3.1: Introduction to Cloud Computing 434 TG 3.2: What Is Cloud Computing? 436 TG 3.3: Different Types of Clouds 439 TG 3.4: Cloud Computing Services 442 TG 3.5: The Benefi ts of Cloud Computing 445 TG 3.6: Concerns and Risks with Cloud

Computing 447 TG 3.7: Web Services and Service-Oriented

Architecture 450

[Technology Guide 4] Intelligent Systems 456

TG 4.1: Introduction to Intelligent Systems 457 TG 4.2: Expert Systems 459 TG 4.3: Neural Networks 463 TG 4.4: Fuzzy Logic 464 TG 4.5: Genetic Algorithms 465 TG 4.6: Intelligent Agents 465

[Index] 471

 

 

 

Chapter

What’s In Me?ITFor T h i s C h a p t e r W i l l H e l p P r e p a r e Y o u T o …

MKTACCT FIN POM HRM MIS

ACCOUNTING

Monitor social media for

compliance

FINANCE

Collaborate with external fi nancial

experts

MARKETING

Receive real-time feedback from

customers

PRODUCTION OPERATIONS

MANAGEMENT

Partners/ customers

collaborate on product

development

HUMAN RESOURCES

MANAGEMENT

Enhance recruiting efforts

MIS

Develop internal company social

networks

Introduction to Information Systems

1

[ LEARNING OBJECTIVES ] [ CHAPTER OUTLINE ] [ WEB RESOURCES ]

1. Identify the reasons why being an informed user of information systems is important in today’s world.

2. Describe the various types of computer-based information systems in an organization.

3. Discuss ways in which information technology can affect managers and nonmanagerial workers.

4. Identify positive and negative societal effects of the increased use of information technology.

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

• Student PowerPoints for note taking

• E-book • Author video lecture for each

chapter section

• Practice quizzes • Flash Cards for vocabulary review • Additional “IT’s About Business”

cases

• Video interviews with managers • Lab Manuals for Microsoft

Offi ce 2010 and 2013

 

 

2 CHAPTER 1 Introduction to Information Systems

Fundraising is a diffi cult and time-consuming process that diverts entrepreneurs from building their companies. For decades, entrepreneurs who sought to obtain funding from Silicon Valley’s small, wealthy group of angel investors found the process similar to breaking into an exclusive club. (An angel investor is an individual who provides capital for a startup, usually in exchange for convertible debt or ownership equity.) They had to work with their personal networks to set up meetings with fi nanciers and then negotiate pri- vately, with little awareness of fair market value or better opportunities elsewhere.

To assist these individuals, AngelList (https://angel.co), founded in 2010 in San Francisco, has created an online forum where founders of early-stage companies—called startups—post their ideas and meet investors who fund these often risky ventures. AngelList’s mission is to make startup investing transparent and effi cient.

How does AngelList work? Basically, startups access the site and create profi les that list infor- mation such as their previous fi nancial backers (if any) and the amount of capital they have already raised. They then utilize those profi les to make their “pitch” to hundreds of certifi ed investors—fi nancial fi rms as well as wealthy individuals and companies. To avoid fraud, Angel- List vets its investors by requiring them to provide a track record of their prior investments. At the same time, the company thoroughly researches any startups that it lists on its Web site.

AngelList restricts its services to startups that are trying to obtain funding for the fi rst time. For example, the company handles the regulatory paperwork to help startups complete the relevant forms. One feature on the company’s Web site, called “Syndicates,” lets investors pool their money under the direction of a single, wealthy investor known as a “lead.” Then, when- ever the lead decides to back a startup, so do the other investors, or “backers.” Leads set their own terms. For example, one lead investor collects up to a 20 percent “carry” fee from his back- ers, plus a portion of any positive return they receive if the startup is acquired or goes public. AngelList takes a 5 percent cut on any such paydays. In 2014, some $87 million worth of deals were transacted via AngelList’s syndicates.

Startups such as the private taxi service Uber (www.uber.com) and babysitting-jobs Web site Urbansitter (www.urbansitter.com) have used AngelList to make contact with new investors and quickly fi nalize their funding deals. In another example, Sprig (www.eatsprig.com), a San Francisco-based dinner delivery service, raised most of the money it needed for a new kitchen in a single day on AngelList.

At the end of 2013, AngelList added startup job listings to its Web site. In addition, it was lobbying the U.S. government to further relax fundraising restrictions contained in the JOBS Act, the 2012 Federal law that lowered regulatory requirements for startups. The company’s goal is for the public—rather than simply accredited investors—to use the site to provide fund- ing for promising startups.

And the bottom line? By early 2015, AngelList featured tens of thousands of businesses, and it had provided entrepreneurs with thousands of introductions to potential investors. Also in early 2015, AngelList expanded its investor syndicates to the United Kingdom.

Sources: Compiled from K. Collins, “AngelList Syndicates to Bring Investment to UK Startups,” Wired, February 13, 2015; D. Primack, “A Disrupter Shakes Up Angel Investing,” Fortune, December 1, 2014; B. Stone, “The Social Network for Startups,” Bloomberg BusinessWeek, January 20–26, 2014; F. Lardinois, “OnTheGo Raises $700K Seed Round from Foundry Group’s AngelList Syndicate and Others to Improve Smart Glasses,” TechCrunch, January 6, 2014; L. Rao, “Kima Ventures Will Allow Startups to Raise $150K Within 15 Days via AngelList,” TechCrunch, December 4, 2013; N. Hughes, “Will AngelList Help or Hurt Startup Fundraising,” GeekWire, October 12, 2013; A. Davidson, “Follow the Money: AngelList Has Blown Open Early- Stage Investments,” Wired, May 17, 2013; P. Sloan, “AngelList Attacks Another Startup Pain Point: Legal Fees,” CNET News, September 5, 2012; L. Rao, “AngelList Launches Docs to Help Startups Sign and Close Seed Rounds Online with Low Legal Fees,” TechCrunch, September 5, 2012; www.angellist.com, accessed January 20, 2015.

Questions

1. What are the advantages that AngelList offers to entrepreneurs? 2. What are potential disadvantages that entrepreneurs might encounter by using AngelList?

(Hint: What if you listed your company profi le on AngelList and no investor provided funding?)

[ AngelList Helps

Entrepre- neurs Build Companies]

MKT

 

 

3SECTION 1.1 Why Should I Study Information Systems?

Introduction Before we proceed, we need to defi ne information technology (IT) and information systems (IS). Information technology refers to any computer-based tool that people use to work with information and to support the information and information-processing needs of an organiza- tion. An information system collects, processes, stores, analyzes, and disseminates information for a specifi c purpose.

IT has far-reaching effects on individuals, organizations, and our planet. Although this text is largely devoted to the many ways in which IT has transformed modern organizations, you will also learn about the signifi cant impacts of IT on individuals and societies, the global economy, and our physical environment. In addition, IT is making our world smaller, enabling more and more people to communicate, collaborate, and compete, thereby leveling the digital playing fi eld.

When you graduate, you will either start your own business or work for an organization, whether it is public sector, private sector, for-profi t, or not-for-profi t. Your organization will have to survive and compete in an environment that has been radically transformed by infor- mation technology. This environment is global, massively interconnected, intensely competi- tive, 24/7/365, real-time, rapidly changing, and information-intensive. To compete success- fully, your organization must use IT effectively.

As you read this chapter and this text, keep in mind that the information technologies you will learn about are important to businesses of all sizes. No matter what area of business you major in, what industry you work for, or the size of your company, you will benefi t from learn- ing about IT. Who knows? Maybe you will use the tools you learn about in this class to make your great idea a reality by becoming an entrepreneur and starting your own business! In fact, as you see in the chapter opening case, you can use information technology (in the form of AngelList.com) to help you raise the necessary funds to successfully grow your business.

The modern environment is intensely competitive not only for your organization, but for you as well. You must compete with human talent from around the world. Therefore, you will also have to make effective use of IT.

Accordingly, this chapter begins with a discussion of why you should become knowledgeable about IT. It also distinguishes among data, information, and knowledge, and it differentiates computer-based information systems (CBIS) from application programs. Finally, it considers the impacts of information systems on organizations and on society in general.

Why Should I Study Information Systems? You are part of the most connected generation in history: You have grown up online; you are, quite literally, never out of touch; you use more information technologies (in the form of digi- tal devices), for more tasks, and are bombarded with more information than any generation in history. The MIT Technology Review refers to you as Homo conexus. Information technologies are so deeply embedded in your lives that your daily routines would be almost unrecognizable to a college student just 20 years ago.

Essentially, you practice continuous computing, surrounded by a movable information net- work. This network is created by constant cooperation between the digital devices you carry (e.g., laptops, tablets, and smartphones), the wired and wireless networks that you access as you move about, and Web-based tools for fi nding information and communicating and collaborat- ing with other people. Your network enables you to pull information about virtually anything from anywhere, at any time, and to push your own ideas back to the Web, from wherever you are, via a mobile device. Think of everything you do online, often with your smartphone: register for classes; take classes (and not just at your university); access class syllabi, informa- tion, PowerPoints, and lectures; research class papers and presentations; conduct banking; pay your bills; research, shop, and buy products from companies or other people; sell your “stuff”; search for, and apply for, jobs; make your travel reservations (hotel, airline, rental car); cre- ate your own blog and post your own podcasts and videocasts to it; design your own page on

1.1

 

 

4 CHAPTER 1 Introduction to Information Systems

Facebook; make and upload videos to YouTube; take, edit, and print your own digital photo- graphs; “burn” your own custom-music CDs and DVDs; use RSS feeds to create your personal electronic newspaper; text and tweet your friends and family throughout your day; send Snaps; and many other activities. (Note: If any of these terms are unfamiliar to you, don’t worry. You will learn about everything mentioned here in detail later in this text.)

The Informed User—You! So, the question is: Why you should learn about information systems and information technol- ogies? After all, you can comfortably use a computer (or other electronic devices) to perform many activities, you have been surfi ng the Web for years, and you feel confi dent that you can manage any IT application that your organization’s MIS department installs.

The answer lies in your becoming an informed user; that is, a person knowledgeable about information systems and information technology. There are several reasons why you should be an informed user.

In general, informed users tend to get more value from whatever technologies they use. You will enjoy many benefi ts from being an informed user of IT.

• First, you will benefi t more from your organization’s IT applications because you will understand what is “behind” those applications (see Figure 1.1). That is, what you see on your computer screen is brought to you by your MIS department, which is operating “behind” your screen.

• Second, you will be in a position to enhance the quality of your organization’s IT applica- tions with your input.

• Third, even as a new graduate, you will quickly be in a position to recommend—and per- haps help select—the IT applications that your organization will use.

• Fourth, being an informed user will keep you abreast of both new information technolo- gies and rapid developments in existing technologies. Remaining “on top of things” will help you to anticipate the impacts that “new and improved” technologies will have on your organization and to make recommendations on the adoption and use of these technologies.

USERS

@ Slaomir Fajer/iStockphoto

MIS FIGURE 1.1 MIS provides what users see on their computer screens.

MIS

 

 

5SECTION 1.1 Why Should I Study Information Systems?

• Fifth, you will understand how using IT can improve your organization’s performance and teamwork as well as your own productivity.

• Finally, if you have ideas of becoming an entrepreneur, then being an informed user will help you use IT when you start your own business.

Going further, managing the IS function within an organization is no longer the exclu- sive responsibility of the IS department. Rather, users now play key roles in every step of this process. The overall objective in this text is to provide you with the necessary information to contribute immediately to managing the IS function in your organization. In short, the goal is to help you become a very informed user!

IT Offers Career Opportunities Because information technology is vital to the operation of modern businesses, it offers many employment opportunities. The demand for traditional IT staff—programmers, business ana- lysts, systems analysts, and designers—is substantial. In addition, many well-paid jobs exist in areas such as the Internet and electronic commerce (e-commerce), mobile commerce (m-commerce), network security, telecommunications, and multimedia design.

The information systems fi eld includes the people in various organizations who design and build information systems, the people who use those systems, and the people responsible for managing those systems. At the top of the list is the chief information offi cer (CIO).

The CIO is the executive who is in charge of the IS function. In most modern organizations, the CIO works with the chief executive offi cer (CEO), the chief fi nancial offi cer (CFO), and other senior executives. Therefore, he or she actively participates in the organization’s strategic planning process. In today’s digital environment, the IS function has become increasingly stra- tegic within organizations. As a result, although most CIOs still rise from the IS department, a growing number are coming up through the ranks in the business units (e.g., marketing and fi nance). So, regardless of your major, you could become the CIO of your organization one day. This is another reason to be an informed user of information systems!

Table 1.1 provides a list of IT jobs, along with a description of each one. For further details about careers in IT, see www.computerworld.com/careertopics/careers and www.monster.com.

Career opportunities in IS are strong and are projected to remain strong over the next 10 years. In fact, Forbes listed its “12 top jobs” for 2014, the U.S. News & World Report and Money listed their “100 top jobs” for 2014, and Money listed its “top jobs” for 2014. Let’s take a look at these rankings. (Note that the rankings differ because the magazines used different criteria in their research.) As you can see, jobs suited for MIS majors rank extremely high in all three lists. The magazines with their job rankings are as follows:

Forbes (out of 12) #1 Software developer #6 Web developer #8 Database administrators #12 Information security analysts

U.S. News & World Report (out of 100) #3 Software Developer #7 Computer System Analyst #8 Information Security Analyst #11 Web developer #21 IT manager

Money #1 Software architect #8 Database administrator #11 Clinical applications specialist (IT in healthcare) #14 User experience designer #17 IT program manager

MIS

 

 

6 CHAPTER 1 Introduction to Information Systems

Going further, the U.S. News & World Report picked technology as the #1 career choice for 2014. Not only do IS careers offer strong job growth, but also the pay is excellent. The Bureau of Labor Statistics, an agency within the Department of Labor that is responsible for tracking and analyzing trends relating to the labor market, notes that the median salary in 2014 for “computer and information systems managers” was approximately $121,000, and predicted that the profession would grow by an average of 15 percent per year through 2022.

Managing Information Resources Managing information systems in modern organizations is a diffi cult, complex task. Several factors contribute to this complexity. First, information systems have enormous strategic value to organizations. Firms rely on them so heavily that, in some cases, when these systems are

Position Job Description

Chief Information Offi cer

Highest-ranking IS manager; is responsible for all strategic planning in the organization

IS Director Manages all systems throughout the organization and the day-to-day operations of the entire IS organization

Information Center Manager

Manages IS services such as help desks, hot lines, training, and consulting

Applications Development Manager

Coordinates and manages new systems development projects

Project Manager Manages a particular new systems development project

Systems Manager Manages a particular existing system

Operations Manager Supervises the day-to-day operations of the data and/or computer center

Programming Manager Coordinates all applications programming efforts

Systems Analyst Interfaces between users and programmers; determines information requirements and technical specifi cations for new applications

Business Analyst Focuses on designing solutions for business problems; interfaces closely with users to demonstrate how IT can be used innovatively

Systems Programmer Creates the computer code for developing new systems software or maintaining existing systems software

Applications Programmer

Creates the computer code for developing new applications or maintaining existing applications

Emerging Technologies Manager

Forecasts technology trends; evaluates and experiments with new technologies

Network Manager Coordinates and manages the organization’s voice and data networks

Database Administrator Manages the organization’s databases and oversees the use of database-management software

Auditing or Computer Security Manager

Oversees the ethical and legal use of information systems

Webmaster Manages the organization’s World Wide Web site

Web Designer Creates World Wide Web sites and pages

Table

1.1 Information Technology Jobs

 

 

7SECTION 1.1 Why Should I Study Information Systems?

not working (even for a short time), the fi rm cannot function. (This situation is called “being hostage to information systems.”) Second, information systems are very expensive to acquire, operate, and maintain.

A third factor contributing to the diffi culty in managing information systems is the evolu- tion of the management information systems (MIS) function within the organization. When businesses fi rst began to use computers in the early 1950s, the MIS department “owned” the only computing resource in the organization, the mainframe. At that time, end users did not interact directly with the mainframe.

In contrast, in the modern organization, computers are located in all departments, and almost all employees use computers in their work. This situation, known as end user comput- ing, has led to a partnership between the MIS department and the end users. The MIS depart- ment now acts as more of a consultant to end users, viewing them as customers. In fact, the main function of the MIS department is to use IT to solve end users’ business problems.

As a result of these developments, the responsibility for managing information resources is now divided between the MIS department and the end users. This arrangement raises several important questions: Which resources are managed by whom? What is the role of the MIS department, its structure, and its place within the organization? What is the appropriate rela- tionship between the MIS department and the end users? Regardless of who is doing what, it is essential that the MIS department and the end users work in close cooperation.

There is no standard way to divide responsibility for developing and maintaining informa- tion resources between the MIS department and the end users. Instead, that division depends on several factors: the size and nature of the organization, the amount and type of IT resources, the organization’s attitudes toward computing, the attitudes of top management toward com- puting, the maturity level of the technology, the amount and nature of outsourced IT work, and even the countries in which the company operates. Generally speaking, the MIS depart- ment is responsible for corporate-level and shared resources, and the end users are responsible for departmental resources. Table 1.2 identifi es both the traditional functions and various new, consultative functions of the MIS department.

So, where do the end users come in? Take a close look at Table 1.2. Under the traditional MIS functions, you will see two functions for which you provide vital input: managing systems development and infrastructure planning. Under the consultative MIS functions, in contrast, you exercise the primary responsibility for each function, while the MIS department acts as your advisor. IT’s About Business 1.1 illustrates how the University System of Georgia (USG) manages its IT resources across its 31 member higher education institutions.

Traditional Functions of the MIS Department • Managing systems development and systems project management

º As an end user, you will have critical input into the systems development process. You will learn about systems development in Chapter 13.

• Managing computer operations, including the computer center • Staffi ng, training, and developing IS skills • Providing technical services • Infrastructure planning, development, and control

º As an end user, you will provide critical input about the IS infrastructure needs of your department.

New (Consultative) Functions of the MIS Department • Initiating and designing specifi c strategic information systems

º As an end user, your information needs will often mandate the development of new strategic information systems.

• You will decide which strategic systems you need (because you know your business needs better than the MIS department does), and you will provide input into developing these systems.

Table

1.2 The Changing Role of the Information Systems Department

MIS

 

 

8 CHAPTER 1 Introduction to Information Systems

• Incorporating the Internet and electronic commerce into the business

º As an end user, you will be primarily responsible for effectively using the Internet and electronic commerce in your business. You will work with the MIS department to accomplish this task.

• Managing system integration, including the Internet, intranets, and extranets

º As an end user, your business needs will determine how you want to use the Internet, your corporate intranets, and extranets to accomplish your goals. You will be primarily responsible for advising the MIS department on the most effective use of the Internet, your corporate intranets, and extranets.

• Educating the non-MIS managers about IT

º Your department will be primarily responsible for advising the MIS department on how best to educate and train your employees about IT.

• Educating the MIS staff about the business

º Communication between the MIS department and the business units is a two-way street. You will be responsible for educating the MIS staff on your business, its needs, and its goals.

• Partnering with business unit executives

º Essentially, you will be in a partnership with the MIS department. You will be responsible for seeing that this partnership is one “between equals” and ensuring its success.

• Managing outsourcing

º Outsourcing is driven by business needs. Therefore, the outsourcing decision resides largely with the business units (i.e., with you). The MIS department, working closely with you, will advise you on technical issues such as communications bandwidth and security.

• Proactively using business and technical knowledge to seed innovative ideas about IT

º Your business needs will often drive innovative ideas about how to effectively use information systems to accomplish your goals. The best way to bring these innovative uses of IS to life is to partner closely with your MIS department. Such close partnerships have amazing synergies!

• Creating business alliances with business partners

º The needs of your business unit will drive these alliances, typically along your supply chain. Again, your MIS department will act as your advisor on various issues, including hardware and software compatibility, implementing extranets, communications, and security.

IT’s [about business]

There are two major drivers for change in U.S. higher education: low- ering costs and improving performance. Lowering costs is neces- sary because the expenses associated with higher education have been rapidly increasing for many years, leading to concerns that higher education is out of reach for low- and increasingly middle- income families. Improving performance is necessary because there is pressure on universities to graduate more students while at the same time maintaining a high-quality educational experience. In essence, colleges and universities are under increasing pressure to accomplish more with less.

To achieve these seemingly contradictory goals, the University System of Georgia (www.usg.edu) has employed several cutting- edge information technologies. USG is the organizational body that includes 31 public institutions of higher learning in the state of Georgia. The system, which is governed by the Georgia Board of Regents, establishes goals and dictates general policy to its member institutions.

These policies require universities to deliver learning using new technologies—for example, delivering lectures via video— to stay current. In addition, university IT organizations must

1.1 Information Technology Supports Students in Georgia

Table

1.2 (continued)

MIS

 

 

9SECTION 1.2 Overview of Computer-Based Information Systems

Overview of Computer-Based Information Systems Organizations refer to their management information systems functional area by several names, including the MIS Department, the Information Systems (IS) Department, the Infor- mation Technology Department, and the Information Services Department. Regardless of the name, however, this functional area deals with the planning for—and the development,

1.2

devise innovative strategies to reduce costs and increase effi – ciencies both within and among universities. This requirement has become vital as state funding shrinks and students struggle under the escalating costs of higher education. To satisfy this requirement, university IT departments have to be fl exible and entrepreneurial.

The individual who bears the major responsibility for imple- menting these policies is Board of Regents Vice Chancellor and CIO Curtis Carver. Signifi cantly, Carver has to collaborate with 31 independent-minded university CIOs. This position requires him to sell services. USG institutions can pursue technology contracts on their own. So, Carver looks for scenarios where three to fi ve universities are planning to purchase the same product and there- fore can consolidate their buying or centralize the service. This approach not only reduces costs but also helps alleviate staff shortages in some areas, such as database administration and analytics. The central IT organization’s vision statement asserts, “If our customers can choose anyone to provide them IT services, they would choose us.” Let’s take a look at a specifi c example of how Carver utilized his strategy to resolve a problem.

The problem involves situations where a class is overbooked at one member university while the same class at other schools has empty seats. To manage such situations, the universities offered a number of such classes across institutions via videoconferenc- ing. However, the registration process posed a serious problem for students.

In addition to constituting a major inconvenience, overbooked classes and waiting lists can cause students to take longer to graduate, adding to their loan debt and delaying their entry into the workforce. Although a few vendors sell software to facilitate cross-institution registration, Carver considered those products too complex and costly. As an alternative, USG system develop- ers wrote custom computer code to handle cross-registration. This software integrated student information systems to create a total headcount of registrants in each course across all USG

universities. The system provides an interface for each student that exactly resembles the user interface at his or her home insti- tution. Therefore, if a student at Coastal Georgia University reg- isters for a course at the University of Georgia, the system looks exactly like the Coastal Georgia system, with no need to register or pay fees to another university. Thousands of students now sign up for courses through this cross-registration system, known as the Intra-Georgia Registration Sharing System, or Ingress (not to be confused with the open-source Ingres database).

After the developers had created Ingress, Carver had to con- vince member universities that this system was really the way to go. University CIOs often have the option to use or not to use a shared service. As of this writing, 22 of the 31 USG universities use or are implementing Ingress. Carver takes the same approach with shared data center services, which the central group offers via a private cloud. The USG has also centralized the operation of its Desire2Learn learning management system, used by 300,000 students statewide. Finally, Carver is exploring whether the USG can sell Ingress to other institutions. We discuss cloud computing in Technology Guide 3.

Sources: Compiled from C. Murphy, “Chiefs of the Year,” InformationWeek, December 16, 2013; K. Flinders, “Universities Investing in Back-Offi ce IT Systems,” Computer Weekly, March 2, 2012; “University IT Departments Can Drive Effi ciencies and Modernisation,” The Guardian, June, 2011; “Information Technology in Higher Education: Survey of Chief Informa- tion Offi cers,” The Chronicle of Higher Education, 2010; www.usg.edu, accessed January 25, 2015.

Questions 1. Describe how the University System of Georgia manages its

information resources vis-à-vis the individual universities in the system.

2. What are the advantages of central management of information systems in the University System of Georgia?

3. What are the disadvantages of central management of informa- tion systems in the University System of Georgia?

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

Explain the benefi ts of being an informed user of information systems.

Discuss the various career opportunities offered in the IT fi eld.

 

 

10 CHAPTER 1 Introduction to Information Systems

management, and use of—information technology tools to help people perform all the tasks related to information processing and management. Recall that information technology relates to any computer-based tool that people use to work with information and to support the infor- mation and information-processing needs of an organization.

As previously stated, an information system collects, processes, stores, analyzes, and dissemi- nates information for a specifi c purpose. The purpose of information systems has been defi ned as getting the right information to the right people, at the right time, in the right amount, and in the right format. Because information systems are intended to supply useful information, we need to differentiate between information and two closely related terms: data and knowledge (see Figure 1.2).

Data items refer to an elementary description of things, events, activities, and transactions that are recorded, classifi ed, and stored but are not organized to convey any specifi c meaning. Data items can be numbers, letters, fi gures, sounds, and images. Examples of data items are collections of numbers (e.g., 3.11, 2.96, 3.95, 1.99, 2.08) and characters (e.g., B, A, C, A, B, D, F, C).

Information refers to data that have been organized so that they have meaning and value to the recipient. For example, a grade point average (GPA) by itself is data, but a student’s name coupled with his or her GPA is information. The recipient interprets the meaning and draws conclusions and implications from the information. Consider the examples of data provided in the preceding paragraph. Within the context of a university, the numbers could be grade point averages, and the letters could be grades in an Introduction to MIS class.

Knowledge consists of data and/or information that have been organized and processed to convey understanding, experience, accumulated learning, and expertise as they apply to a cur- rent business problem. For example, suppose that a company recruiting at your school has

FIGURE 1.2 Data, information, and knowledge.

©Chad Reischl/iStockphoto

Exactostock/SuperStock

Information

Data

Knowledge

 

 

11SECTION 1.2 Overview of Computer-Based Information Systems

found over time that students with grade point averages over 3.0 have experienced the greatest success in its management program. Based on this accumulated knowledge, that company may decide to interview only those students with GPAs over 3.0. This example presents an example of knowledge because the company utilizes information—GPAs—to address a business prob- lem—hiring successful employees. As you can see from this example, organizational knowledge, which refl ects the experience and expertise of many people, has great value to all employees.

Consider this example:

Data Information Knowledge

[No context] [University context]

3.16 2.92 1.39 3.95

3.16 + John Jones = GPA 2.92 + Sue Smith = GPA 1.39 + Kyle Owens = GPA 3.95 + Tom Elias = GPA

* Job prospects * Graduate school prospects * Scholarship prospects

[No context] [Professional baseball pitcher context]

3.16 2.92 1.39 3.95

3.16 + Ken Rice = ERA 2.92 + Ed Dyas = ERA 1.39 + Hugh Carr = ERA 3.95 + Nick Ford = ERA

* Keep pitcher, trade pitcher, or send pitcher to minor leagues

* Salary/contract negotiations

GPA = grade point average (higher is better). ERA = earned run average (lower is better); ERA is the number of runs per nine innings that a pitcher surrenders.

You see that the same data items, with no context, can mean entirely different things in different contexts.

Now that you have a clearer understanding of data, information, and knowledge, let’s shift our focus to computer-based information systems. As you have seen, these systems process data into information and knowledge that you can use.

A computer-based information system is an information system that uses computer tech- nology to perform some or all of its intended tasks. Although not all information systems are computerized, today most are. For this reason, the term “information system” is typically used synonymously with “computer-based information system.” The basic components of computer- based information systems are listed below. The fi rst four are called information technology components. Figure 1.3 illustrates how these four components interact to form a CBIS.

• Hardware consists of devices such as the processor, monitor, keyboard, and printer. Together, these devices accept, process, and display data and information.

• Software is a program or collection of programs that enable the hardware to process data. • A database is a collection of related fi les or tables containing data. • A network is a connecting system (wireline or wireless) that permits different computers to

share resources. • Procedures are the instructions for combining the above components to process informa-

tion and generate the desired output. • People are those individuals who use the hardware and software, interface with it, or utilize

its output.

Figure 1.4 illustrates how these components are integrated to form the wide variety of infor- mation systems found within an organization. Starting at the bottom of the fi gure, you see that the IT components of hardware, software, networks (wireline and wireless), and databases form the information technology platform. IT personnel use these components to develop information systems, oversee security and risk, and manage data. These activities cumulatively

 

 

12 CHAPTER 1 Introduction to Information Systems

are called information technology services. The IT components plus IT services comprise the organization’s information technology infrastructure. At the top of the pyramid are the vari- ous organizational information systems.

Computer-based information systems have many capabilities. Table 1.3 summarizes the most important ones.

FIGURE 1.3 Computer-based information systems consist of hardware, software, databases, networks, procedures, and people.

Database

NetworkSoftware

Computer-based information system

Procedures

Procedures Procedures

Procedures

©Oleksiy Mark/iStockphoto

©Dzianis Kazlouski/iStockphoto ©Alex Slobodkin/iStockphoto

©Alex Slobodkin/iStockphoto

©Blend_Images / iStockphoto

Hardware

FIGURE 1.4 Information technology inside your organization.

IT Personnel

IT Components

P ro

d u

ct io

n /O

p er

at io

n s

M an

ag em

en t

IS

H u

m an

R es

o u

rc es

IS

M ar

ke ti

n g

IS

F in

an ce

IS

A cc

o u

n ti

n g

IS

IT In

fr as

tr u

ct u

re

IT Services Transaction Processing Systems

Enterprise Resource Planning Systems

IT Platform

Business Intelligence Systems Dashboards

 

 

13SECTION 1.2 Overview of Computer-Based Information Systems

Information systems perform these various tasks via a wide spectrum of applications. An application (or app) is a computer program designed to support a specifi c task or business process. (A synonymous term is application program.) Each functional area or department within a business organization uses dozens of application programs. For instance, the human resources department sometimes uses one application for screening job applicants and another for monitoring employee turnover. The collection of application programs in a single depart- ment is usually referred to as a departmental information system (also known as a functional area information system (FAIS)). For example, the collection of application programs in the human resources area is called the human resources information system (HRIS). There are collections of application programs—that is, departmental information systems—in the other functional areas as well, such as accounting, fi nance, marketing, and production/operations.

Types of Computer-Based Information Systems Modern organizations employ many different types of information systems. Figure 1.4 illus- trates the different types of information systems that function within a single organization, and Figure 1.5 shows the different types of information systems that function among multiple organizations. You will study transaction processing systems (TPSs), management information systems, and enterprise resource planning (ERP) systems in Chapter 10. You will learn about customer relationship management (CRM) systems and supply chain management (SCM) systems in Chapter 11.

• Perform high-speed, high-volume numerical computations.

• Provide fast, accurate communication and collaboration within and among organizations.

• Store huge amounts of information in an easy-to-access, yet small space.

• Allow quick and inexpensive access to vast amounts of information worldwide.

• Interpret vast amounts of data quickly and effi ciently.

• Automate both semiautomatic business processes and manual tasks.

Table

1.3 Major Capabilities of Information Systems

Business-to-business electronic commerce

(B2B)

Business-to-business electronic commerce

(B2B)

SUPPLIERS

S up

pl y

ch ai

n m

an ag

em en

t

C ustom

er relationship

m anagem

ent

Your Organization

Business-to-consumer electronic commerce

(B2C)

CUSTOMERS

Individuals

Information

Online orders

Payments

Online orders

Payments

Digital products

Digital products

Payments

Online orders

Physical products

Physical products

M at

er ial

s

Internet

Business

FIGURE 1.5 Information systems that function among multiple organizations.

 

 

14 CHAPTER 1 Introduction to Information Systems

In the next section, you will learn about the numerous and diverse types of information systems employed by modern organizations. You will also read about the types of support these systems provide.

Breadth of Support of Information Systems. Certain information systems support parts of organizations, others support entire organizations, and still others support groups of organizations. This section addresses all of these systems.

Recall that each department or functional area within an organization has its own collection of application programs, or information systems. These functional area information systems are supporting pillars for the information systems located at the top of Figure 1.4, namely, business intelligence (BI) systems and dashboards. As the name suggests, each FAIS supports a particular functional area within the organization. Examples are accounting IS, fi nance IS, production/operations management (POM) IS, marketing IS, and human resources IS.

Consider these examples of IT systems in the various functional areas of an organization. In fi nance and accounting, managers use IT systems to forecast revenues and business activity, to determine the best sources and uses of funds, and to perform audits to ensure that the organiza- tion is fundamentally sound and that all fi nancial reports and documents are accurate.

In sales and marketing, managers use information technology to perform the following functions:

• Product analysis: developing new goods and services • Site analysis: determining the best location for production and distribution facilities • Promotion analysis: identifying the best advertising channels • Price analysis: setting product prices to obtain the highest total revenues

Marketing managers also use IT to manage their relationships with their customers. In manufacturing, managers use IT to process customer orders, develop production schedules, control inventory levels, and monitor product quality. They also use IT to design and manu- facture products. These processes are called computer-assisted design (CAD) and computer- assisted manufacturing (CAM).

Managers in human resources use IT to manage the recruiting process, analyze and screen job applicants, and hire new employees. They also employ IT to help employees manage their careers, to administer performance tests to employees, and to monitor employee productivity. Finally, they rely on IT to manage compensation and benefi ts packages.

Two information systems that support the entire organization, enterprise resource planning systems and transaction processing systems, are designed to correct a lack of communication among the functional area ISs. For this reason, Figure 1.4 shows ERP systems spanning the FAISs. ERP systems were an important innovation because the various functional area ISs were often developed as standalone systems and did not communicate effectively (if at all) with one another. ERP systems resolve this problem by tightly integrating the functional area ISs via a common database. In doing so, they enhance communications among the functional areas of an organization. For this reason, experts credit ERP systems with greatly increasing organiza- tional productivity.

A transaction processing system supports the monitoring, collection, storage, and process- ing of data from the organization’s basic business transactions, each of which generates data. When you are checking out at Walmart, for example, a transaction occurs each time the cashier swipes an item across the bar code reader. Signifi cantly, within an organization, different func- tions or departments can defi ne a transaction differently. In accounting, for example, a transac- tion is anything that changes a fi rm’s chart of accounts. The information system defi nition of a transaction is broader: A transaction is anything that changes the fi rm’s database. The chart of accounts is only part of the fi rm’s database. Consider a scenario in which a student transfers from one section of an Introduction to MIS course to another section. This move would be a transaction to the university’s information system, but not to the university’s accounting depart- ment (the tuition would not change).

The TPS collects data continuously, typically in real time—that is, as soon as the data are generated—and it provides the input data for the corporate databases. TPSs are considered

ACCT

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15SECTION 1.2 Overview of Computer-Based Information Systems

critical to the success of any enterprise because they support core operations. Signifi cantly, nearly all ERP systems are also TPSs, but not all TPSs are ERP systems. In fact, modern ERP systems incorporate many functions that previously were handled by the organization’s functional area information systems. You will study both TPSs and ERP systems in detail in Chapter 10.

ERP systems and TPSs function primarily within a single organization. Information sys- tems that connect two or more organizations are referred to as interorganizational informa- tion systems (IOSs). IOSs support many interorganizational operations, of which supply chain management is the best known. An organization’s supply chain is the fl ow of materials, infor- mation, money, and services from suppliers of raw materials through factories and warehouses to the end customers.

Note that the supply chain in Figure 1.5 shows physical fl ows, information fl ows, and fi nan- cial fl ows. Digitizable products are those that can be represented in electronic form, such as music and software. Information fl ows, fi nancial fl ows, and digitizable products go through the Internet, whereas physical products are shipped. For example, when you order a computer from www.dell.com, your information goes to Dell via the Internet. When your transaction is completed (i.e., your credit card is approved and your order is processed), Dell ships your com- puter to you. (We will discuss supply chains in more detail in Chapter 11.)

Electronic commerce systems are another type of interorganizational information system. These systems enable organizations to conduct transactions, called business-to-business (B2B) electronic commerce, and customers to conduct transactions with businesses, called business- to-consumer (B2C) electronic commerce. E-commerce systems typically are Internet based. Figure 1.5 illustrates B2B and B2C electronic commerce. Electronic commerce systems are so important that we discuss them in detail in Chapter 7, with additional examples interspersed throughout the text. IT’s About Business 1.2 shows how information systems have enabled Warby Parker to grow rapidly via e-commerce.

IT’s [about business]

Warby Parker (Warby; www.warbyparker.com) is an online eye- wear retailer founded in 2010. The idea for the company was conceived when the fi rm’s founders (MBA students at the time) wondered why glasses—uncomplicated, easily breakable, and mass produced—cost so much ($500 or more, for example). The students were convinced they knew why. The optical industry is an oligopoly, meaning that a small number of companies monopolize the business and are making large margins.

Consider, for example, Luxottica (www.luxottica.com), based in Milan, Italy. Luxottica runs the eyewear business for most major fashion houses, including Armani, Chanel, Prada, and Ralph Lau- ren. Luxottica also markets its own frames as well: Oakley, Oliver- Peoples, Persol, and Ray-Ban are all Luxottica brands. Further, LensCrafters, Pearle Vision, and Sunglass Hut are Luxottica sub- sidiaries. Luxottica also owns EyeMed, a leading vision insurance company.

Warby’s founders realized that Luxottica had created “the illu- sion of choice,” while in fact they monopolized the eyewear indus- try. Warby uses the same materials and the same Chinese facto- ries as Luxottica. It then sells its glasses at a lower price because it does not have to pay licensing fees, which can amount to as much as 15 percent of the $100 wholesale cost of a pair of glasses.

Warby also does not have to deal with retailers, whose markups can double prices.

Warby’s business model allows customers to test the com- pany’s retro-style glasses via a mail order, try-it-at-home program. The glasses cost only $95, and customers may test up to fi ve frames at a time. The price includes prescription lenses, ship- ping, and a donation to its not-for-profi t organization, VisionSpring (www.visionspring.org).

VisionSpring has a market-based approach to philanthropy. Rather than simply give away free eyeglasses, the organization supplies frames to entrepreneurs to sell to their neighbors.

On its Web site, Warby even offers a way to upload photos and “try on” frames virtually. Such large-scale individualized shopping experiences have attracted a devoted following among young, trendy professionals and have made the fi rm a commercial success.

In addition to enjoying great commercial success, Warby also has a social mission. For every pair of glasses it sells, it provides subsidies to help someone in need buy a pair—although not one— of Warby’s creations.

By July 2014, Warby had distributed their millionth pair of glasses for that year, up from 500,000 during all of 2013. Analysts estimate that the company’s annual revenue in 2014 exceeded

1.2 Warby Parker POM MKT

 

 

16 CHAPTER 1 Introduction to Information Systems

Support for Organizational Employees. So far, you have concentrated on information systems that support specifi c functional areas and operations. Now you will learn about infor- mation systems that typically support particular employees within the organization.

Clerical workers, who support managers at all levels of the organization, include bookkeep- ers, secretaries, electronic fi le clerks, and insurance claim processors. Lower level managers handle the day-to-day operations of the organization, making routine decisions such as assign- ing tasks to employees and placing purchase orders. Middle managers make tactical decisions, which deal with activities such as short-term planning, organizing, and control.

Knowledge workers are professional employees such as fi nancial and marketing analysts, engineers, lawyers, and accountants. All knowledge workers are experts in a particular subject area. They create information and knowledge, which they integrate into the business. Knowl- edge workers, in turn, act as advisors to middle managers and executives. Finally, executives make decisions that deal with situations that can signifi cantly change the manner in which business is done. Examples of executive decisions are introducing a new product line, acquir- ing other businesses, and relocating operations to a foreign country.

Offi ce automation systems (OASs) typically support the clerical staff, lower and middle managers, and knowledge workers. These employees use OASs to develop documents (word processing and desktop publishing software), schedule resources (electronic calendars), and communicate (e-mail, voice mail, videoconferencing, and groupware).

Functional area information systems summarize data and prepare reports, primarily for middle managers, but sometimes for lower level managers as well. Because these reports typi- cally concern a specifi c functional area, report generators (RPGs) are an important type of functional area IS.

Business intelligence systems provide computer-based support for complex, nonroutine decisions, primarily for middle managers and knowledge workers. (They also support lower level managers, but to a lesser extent.) These systems are typically used with a data ware- house, and they enable users to perform their own data analysis. You learn about BI systems in Chapter 12.

Expert systems (ES) attempt to duplicate the work of human experts by applying rea- soning capabilities, knowledge, and expertise within a specifi c domain. They have become valuable in many application areas, primarily but not exclusively areas involving decision making. For example, navigation systems use rules to select routes, but we do not typi- cally think of these systems as expert systems. Signifi cantly, expert systems can operate as

$100 million. By early 2015, Warby had opened 10 retail stores around the United States. Warby plans to open additional stores and to increase their product offerings—for example, thinner lenses for customers with extreme prescriptions and even clip- on sunglasses. Signifi cantly, Warby does not plan to offer contact lenses in the near future because lens prescriptions tend to be brand specifi c, and that market is dominated by 1-800-Contacts (www.1800contacts.com).

Warby does face intense competition from companies such as EyeFly (www.eyefl y.com), Made Eyewear (www.madeeye- wear.com), and Jimmy Fairly (www.jimmyfairly.com/fr). In addi- tion, Luxottica has not been standing still. In January 2015, the company acquired Glasses.com, which mimics many of Warby’s features and offers some additional ones, including a three-dimen- sional virtual try-on app that is similar to Warby’s virtual try-on app. Around the same time, it has made its brand, Pearle Vision, “look and feel” much like Warby.

Sources: Compiled from “For Building the First Great Made-on-the-Internet Brand,” FastCompany, March, 2015; M. Fox, “Who Says Glasses Can’t Be Edgy? Warby Parker Out-Innovates Tech Giants,” CNBC, February 15, 2015; “Warby Parker Named Most Innovative Company,” CBS News, February 9, 2015; J. Avins, “Warby Parker Proves Customers Don’t Have to Care About Your Social Mission,” qz.com, December 29, 2014; M. Fitzgerald, “Warby Parker: Buy One, Give One Pair of Trendy Eyeglasses,” Impact Alpha, November 30, 2014; C. Peterson-Withom, “Warby Parker CEO Is Building a Brand That Gives Back,” Forbes, September 8, 2014; J. Chokkattu, “Warby Parker Hits One Million Glasses Sold, Distributed,” TechCrunch, June 25, 2014; www.warbyparker.com, accessed February 20, 2015.

Questions 1. Provide two examples of how Warby Parker uses information

technology to support its business model. 2. How might Warby Parker further use information technology to

counter major competitors who want to emulate Warby’s busi- ness model? Support your answer.

 

 

17SECTION 1.2 Overview of Computer-Based Information Systems

standalone systems or be embedded in other applications. We examine ESs in greater detail in Technology Guide 4.

Dashboards (also called digital dashboards) are a special form of IS that support all manag- ers of the organization. They provide rapid access to timely information and direct access to structured information in the form of reports. Dashboards that are tailored to the information needs of executives are called executive dashboards. Chapter 12 provides a thorough discussion of dashboards.

Table 1.4 provides an overview of the different types of information systems used by organizations.

Type of System Function Example

Functional area IS Supports the activities within specifi c functional area

System for processing payroll

Transaction processing system

Processes transaction data from terminal

Walmart checkout point- of-sale business events

Enterprise resource planning

Integrates all functional areas of the organization

Oracle, SAP system

Offi ce automation system Supports daily work activities of individuals and groups

Microsoft ® Offi ce

Management information system

Produces reports summarized from transaction data, usually in one functional area

Report on total sales for each customer

Decision support system Provides access to data and analysis tools

“What–if” analysis of changes in budget

Expert system Mimics human expert in a particular area and makes decisions

Credit card approval analysis

Executive dashboard Presents structured, summarized information about aspects of business important to executives

Status of sales by product

Supply chain management system

Manages fl ows of products, services, and information among organizations

Walmart Retail Link system connecting suppliers to Walmart

Electronic commerce system

Enables transactions among organizations and between organizations and customers

www.dell.com

Table

1.4 Types of Organizational Information Systems

What is a computer-based information system?

Describe the components of computer-based information systems.

What is an application program?

Explain how information systems provide support for knowledge workers.

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

 

 

18 CHAPTER 1 Introduction to Information Systems

How Does IT Impact Organizations? Throughout this text you will encounter numerous examples of how IT affects various types of organizations. This section provides an overview of the impact of IT on modern organizations. As you read this section, you will learn how IT will affect you as well.

IT Impacts Entire Industries As of early 2015, the technology required to transform industries through software had been developed and integrated and could be delivered globally. In addition, software tools and Inter- net-based services enabled companies in many industries to launch new software- powered startups without investing in new infrastructure or training new employees. For example, in 2000, operating a basic Internet application cost businesses approximately $150,000 per month. In early 2015, operating that same application in Amazon’s cloud cost less than $1,000 per month.

In essence, software is impacting every industry, and every organization must prepare for these impacts. Let’s examine a few examples of software disruption across several industries. Many of these examples focus on two scenarios: (1) industries where software disrupted the previous market-leading companies and (2) industries where a new company (or companies) used software to achieve a competitive advantage.

• The book industry: Which is the largest book publisher and bookseller in the United States today? Would it surprise you to learn that the answer is Amazon, a software company? Ama- zon’s core capability is its software engine, which can sell virtually anything online without building or maintaining any retail stores. Now, even the books themselves have become software products, known as electronic (or digital) books, or eBooks. (In early 2015, elec- tronic books were gaining in popularity, but approximately 80 percent of book sales were still for print books.)

Consider the Borders bookstore chain. In 2001, Borders agreed to hand over its online business to Amazon because Borders was convinced that online book sales were nonstrate- gic and unimportant. Ten years later, Borders fi led for bankruptcy.

• The music industry: Today’s dominant music companies are also software companies: Apple’s iTunes (www.apple.com/itunes), Spotify (www.spotify.com), and Pandora (www.pan- dora.com). Traditional record labels now exist largely to provide these software companies with content. Meanwhile, the Recording Industry Association of America (RIAA) continues to fi ght battles over copyright infringement and the illegal download and sharing of digital music fi les.

• The video industry: Blockbuster—which rented and sold videos and ancillary products through its chain of stores—was the industry leader until it was disrupted by a software company Netfl ix (www.netfl ix.com). In early 2015, Netfl ix had the largest subscriber base of any video service with millions of subscribers. Meanwhile, Blockbuster declared bank- ruptcy in February 2011 and was acquired by satellite television provider Dish Networks a month later.

• The software industry: Incumbent software companies such as Oracle and Microsoft are increasingly threatened by software-as-a-service (SaaS) products (e.g., Salesforce.com) and Android, an open-source operating system developed by the Open Handset Alliance (www .openhandsetalliance.com). (We discuss operating systems in Technology Guide 2 and SaaS in Technology Guide 3.)

• The videogame industry: Today, the fastest-growing entertainment companies are vid- eogame makers—again, software. Examples are Zynga (www.zynga.com), the creator of FarmVille; Rovio (www.rovio.com), the maker of Angry Birds; and Minecraft (www . minecraft.net).

• The photography industry: This industry was disrupted by software years ago. Today it is virtually impossible to buy a mobile phone that does not include a software-powered

1.3

MIS

 

 

19SECTION 1.3 How Does IT Impact Organizations?

camera. In addition, people can upload photos automatically to the Internet for perma- nent archiving and global sharing. Leading photography companies include Shutterfl y (www.shutterfl y.com), Snapfi sh (www.snapfi sh.com), Flickr (www.fl ickr.com), and Instagram (www.instagram.com). Meanwhile, the longtime market leader, Kodak—whose name was almost synonymous with cameras—declared bankruptcy in January 2012.

• The marketing industry: Today’s largest direct marketing companies include Facebook (www.facebook.com), Google (www.google.com), and Foursquare (www.foursquare.com). All of these companies are using software to disrupt the retail marketing industry.

• The recruiting industry: LinkedIn (www.linkedin.com) is a fast-growing company that is dis- rupting the traditional job recruiting industry. For the fi rst time, employees and job search- ers can maintain their resumes on a publicly accessible Web site that interested parties can search in real time.

• The fi nancial services industry: Software has transformed the fi nancial services industry. Practically every fi nancial transaction (e.g., buying and selling stocks) is now performed by software. Also, many of the leading innovators in fi nancial services are software companies. For example, Square (https://squareup.com) allows anyone to accept credit card payments with a mobile phone.

• The motion picture industry: The process of making feature-length computer-generated fi lms has become incredibly IT intensive. Studios require state-of-the-art information tech- nologies, including massive numbers of servers (described in Technology Guide 1), sophis- ticated software (described in Technology Guide 2), and an enormous amount of storage (described in Technology Guide 1).

Consider DreamWorks Animation (www.dreamworksanimation.com), a motion picture studio that creates animated feature fi lms, television programs, and online virtual worlds. For a single motion picture, the studio manages more than 500,000 fi les and 300 terabytes (a terabyte is 1 trillion bytes) of data, and it uses about 80 million central processing unit (CPU) (described in Technology Guide 1) hours. As DreamWorks executives state, “In real- ity, our product is data that looks like a movie. We are a digital manufacturing company.”

Software is also disrupting industries that operate primarily in the physical world. Consider these examples:

• The automobile industry: In modern cars, software is responsible for running the engines, controlling safety features, entertaining passengers, guiding drivers to their destinations, and connecting the car to mobile, satellite, and GPS networks. Other software functions in modern cars include Wi-Fi receivers, which turn your car into a mobile hot spot; software, which helps maximize fuel effi ciency; and ultrasonic sensors, which enable some models to parallel-park automatically.

The next step is to network all vehicles together, a necessary step toward the next major breakthrough: self-driving or driverless cars. The creation of software-powered driverless cars is already being undertaken at Google as well as at several major car companies, and interestingly, Apple.

• The agriculture industry: Agriculture is increasingly powered by software, including satellite analysis of soils linked to per-acre seed selection software algorithms. In addition, precision agriculture makes use of automated, driverless tractors controlled by global positioning sys- tems and software. (Precision agriculture is based on observing, measuring, and responding to inter- and intrafi eld variability.)

• National defense: Even national defense is increasingly software based. The modern com- bat soldier is embedded in a web of software that provides intelligence, communications, logistics, and weapons guidance. Software-powered drone aircraft launch airstrikes without placing human pilots at risk. Intelligence agencies perform large-scale data mining with software to uncover and track potential terrorist plots.

• The fashion industry: Women have long “borrowed” special-occasion dresses from depart- ment stores, buying them and then returning them after wearing them for one evening.

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20 CHAPTER 1 Introduction to Information Systems

Now, Rent the Runway (www.renttherunway.com) has redefi ned the fashion business, mak- ing expensive clothing available to more women than ever before. The fi rm is also disrupt- ing traditional physical retailers. After all, why buy a dress when you can rent one for a very low price? Some department stores feel so threatened by Rent the Runway that they have reportedly told vendors that they will remove fl oor merchandise if it ever shows up on that company’s Web site.

Rent the Runway employs 200 people, including one of the nation’s largest dry cleaning operations. Their Web site has more than 3 million members, and it features 35,000 dresses and 7,000 accessories created by 170 designers.

• Education: College graduates owe approximately $1 trillion in student debt, a crippling burden for many recent graduates. UniversityNow (www.unow.com) was founded to make college more accessible to working adults by offering online, self-paced degrees. Two key characteristics distinguish UniversityNow from an increasing number of rivals: (1) very low fees (as little as $2,600, which includes tuition and books for as many courses as students can complete in one year) and (2) fully accredited degrees, from an associate’s degree to an MBA.

• The legal profession: Today, electronic discovery (e-discovery) software applications can analyze documents in a fraction of the time that human lawyers would take, at a fraction of the cost. For example, Blackstone Discovery (www.blackstonediscovery.com) helped one company analyze 1.5 million documents for less than $100,000. That company estimated that the process would have cost $1.5 million had it been performed by lawyers.

IT Reduces the Number of Middle Managers IT makes managers more productive, and it increases the number of employees who can report to a single manager. Thus, IT ultimately decreases the number of managers and experts. It is rea- sonable to assume, therefore, that in coming years organizations will have fewer managerial lev- els and fewer staff and line managers. If this trend materializes, promotional opportunities will decrease, making promotions much more competitive. Bottom line: Pay attention in school!

IT Changes the Manager’s Job One of the most important tasks of managers is making decisions. A major consequence of IT has been to change the manner in which managers make their decisions. In this way, IT ultimately has changed managers’ jobs.

IT often provides managers with near-real-time information, meaning that managers have less time to make decisions, making their jobs even more stressful. Fortunately, IT also provides many tools—for example, business analytics applications such as dashboards, search engines, and intranets—to help managers handle the volumes of information they must deal with on an ongoing basis.

So far in this section, we have been focusing on managers in general. Now, let’s focus on you. Due to advances in IT, you will increasingly supervise employees and teams who are geo- graphically dispersed. Employees can work from anywhere at any time, and teams can consist of employees who are literally dispersed throughout the world. Information technologies such as telepresence systems (discussed in Chapter 6) can help you manage these employees even though you do not often see them face-to-face. For these employees, electronic or “remote” supervision will become the norm. Remote supervision places greater emphasis on completed work and less emphasis on personal contacts and offi ce politics. You will have to reassure your employees that they are valued members of the organization, thereby diminishing any feelings they might have of being isolated and “out of the loop.”

Will IT Eliminate Jobs? One major concern of every employee, part-time or full-time, is job security. Relentless cost-cutting measures in modern organizations often lead to large-scale layoffs. Put simply,

 

 

21SECTION 1.3 How Does IT Impact Organizations?

organizations are responding to today’s highly competitive environment by doing more with less. Regardless of your position, then, you consistently will have to add value to your organiza- tion and to make certain that your superiors are aware of this value.

Many companies have responded to diffi cult economic times, increased global competition, demands for customization, and increased consumer sophistication by increasing their investments in IT. In fact, as computers continue to advance in terms of intelligence and capabilities, the competitive advantage of replacing people with machines is increasing rapidly. This process frequently leads to layoffs. At the same time, however, IT creates entirely new categories of jobs, such as electronic medical record-keeping and nanotechnology.

IT Impacts Employees at Work Many people have experienced a loss of identity because of computerization. They feel like “just another number” because computers reduce or eliminate the human element present in noncomputerized systems.

The Internet threatens to exert an even more isolating infl uence than have computers and television. Encouraging people to work and shop from their living rooms could produce some unfortunate psychological effects, such as depression and loneliness.

IT Impacts Employees’ Health and Safety. Although computers and information sys- tems are generally regarded as agents of “progress,” they can adversely affect individuals’ health and safety. To illustrate this point, we consider two issues associated with IT: job stress and long-term use of the keyboard.

An increase in an employee’s workload and/or responsibilities can trigger job stress. Although computerization has benefi ted organizations by increasing productivity, it also has created an ever-expanding workload for some employees. Some workers feel overwhelmed and have become increasingly anxious about their job performance. These feelings of stress and anxiety can actually diminish rather than improve workers’ productivity while jeopardizing their physical and mental health. Management can help alleviate these problems by providing training, redistributing the workload among workers, and hiring more workers.

On a more specifi c level, the long-term use of keyboards can lead to repetitive strain injuries such as backaches and muscle tension in the wrists and fi ngers. Carpal tunnel syndrome is a particularly painful form of repetitive strain injury that affects the wrists and hands.

Designers are aware of the potential problems associated with the prolonged use of comput- ers. To address these problems, they continually attempt to design a better computing environ- ment. The science of designing machines and work settings that minimize injury and illness is called ergonomics. The goal of ergonomics is to create an environment that is safe, well lit, and comfortable. Examples of ergonomically designed products are antiglare screens that alleviate problems of fatigued or damaged eyesight and chairs that contour the human body to decrease backaches. Figure 1.6 displays some sample ergonomic products.

IT Provides Opportunities for People with Disabilities. Computers can create new employment opportunities for people with disabilities by integrating speech-recognition and vision-recognition capabilities. For example, individuals who cannot type can use a voice- operated keyboard, and individuals who cannot travel can work at home.

Going further, adaptive equipment for computers enables people with disabilities to per- form tasks they normally would not be able to do. For example, the Web and graphical user interfaces (GUIs) (e.g., Windows) can be diffi cult for people with impaired vision to use. To address this problem, manufacturers have added audible screen tips and voice interfaces, which essentially restore the functionality of computers to the way it was before GUIs became standard.

Other devices help improve the quality of life in more mundane, but useful, ways for peo- ple with disabilities. Examples are a two-way writing telephone, a robotic page turner, a hair brusher, and a hospital-bedside video trip to the zoo or the museum. Several organizations specialize in IT designed for people with disabilities.

HRM

 

 

22 CHAPTER 1 Introduction to Information Systems

Importance of Information Systems to Society This section explains in greater detail why IT is important to society as a whole. Other exam- ples of the impact of IT on society appear throughout the text.

IT Affects Our Quality of Life IT has signifi cant implications for our quality of life. The workplace can be expanded from the traditional 9-to-5 job at a central location to 24 hours a day at any location. IT can provide employees with fl exibility that can signifi cantly improve the quality of leisure time, even if it doesn’t increase the total amount of leisure time.

From the opposite perspective, however, IT also can place employees on “constant call,” which means they are never truly away from the offi ce, even when they are on vacation. In fact, surveys reveal that the majority of respondents take their laptops and smartphones on their vacations, and 100 percent took their cell phones. Going further, the majority of respondents did some work while vacationing, and almost all of them checked their e-mail regularly.

1.4

FIGURE 1.6 Ergonomic products protect computer users. (a) Wrist support. (b) Back support. (c) Eye- protection fi lter (optically coated glass). (d) Adjustable foot rest.

Media Bakery Media Bakery

Media Bakery Media Bakery

(a)

(c)

(b)

(d)

Why should employees in all functional areas become knowledgeable about IT?

Describe how IT might change the manager’s job.

Discuss several ways in which IT impacts employees at work.

 

 

23SECTION 1.4 Importance of Information Systems to Society

The Robot Revolution Is Here Now Once restricted largely to science fi ction movies, robots that can perform practical tasks are becoming more common. In fact, “cyberpooches,” “nursebots,” and other mechanical beings may be our companions before we know it. Around the world, quasi-autonomous devices have become increasingly common on factory fl oors, in hospital corridors, and in farm fi elds. For home use, iRobot (www.irobot.com) produces the Roomba to vacuum our fl oors, the Scooba to wash our fl oors, the Dirt Dog to sweep our garages, the Verro to clean our pools, and the Looj to clean our gutters.

Robots are increasingly being utilized in a variety of areas. For example, take a look at the commercial use of drones in the chapter closing case. Further, IT’s About Business 1.3 illus- trates the use of social, collaborative robots in the workplace.

IT’s [about business]

Manufacturing constitutes a $2 trillion sector of the U.S. economy. In the past, the United States retained higher-value-added manu- facturing jobs while allowing lower-value-added jobs to go else- where. However, the world will eventually run out of places where low-cost labor is available. Therefore, the question is: “What will it take to break out of the cycle of making inexpensive goods by hand with unskilled, inexpensive labor?” Perhaps robots are the answer.

Today’s industrial robots perform well on very narrowly defi ned, repetitive tasks. However, they are not adaptable, fl exible, or easy to use, and they are very expensive. In addition, most industrial robots are not safe for people to be around. Moreover, it typically takes 18 months to integrate an industrial robot into a factory operation.

As of early 2015, about 70 percent of all industrial robots in the United States were being utilized in automobile factories. The cost to integrate one of today’s industrial robots into a fac- tory operation is often three to fi ve times the cost of the robot itself. Such integration requires the services of computer pro- grammers and machine specialists. In addition, companies must place safety cages around the robots so that they do not strike people while they are operating. Further, most industrial robots have no sensors or means to detect what is happening in their environment.

There are roughly 300,000 small manufacturing companies in the United States that have fewer than 500 employees. Almost none of these fi rms utilizes industrial robots, for the reasons we just discussed. In addition, almost all of these fi rms have rela- tively small production runs, meaning that they are constantly changing the design and manufacturing procedures for their products. Some of these companies, called “job shops,” pro- duce a wide variety of goods for other companies. They spe- cialize in manufacturing a type of product that can be highly customized to an individual client’s needs. In a typical factory that uses an industrial robot, a production run is rarely less than four months long. For a job shop, a production run can be as short as one hour. Clearly, then, small manufacturing fi rms need a different kind of robot.

Rethink Robotics (www.rethinkrobotics.com) is putting these technological developments to work with Baxter, a new kind of industrial robot that sells for $25,000. Baxter is very different from existing industrial robots. It does not need an expensive or elabo- rate safety cage, and factory operators do not need to segregate it from human workers. In fact, humans actually share a workspace with Baxter, making it an excellent example of a social, collabora- tive robot.

Baxter also works right out of the box. It can be integrated into a factory’s workfl ow in about one hour. Baxter also requires no special programming.

Interacting with Baxter is more like working with a person than operating a traditional industrial robot. If Baxter picks up some- thing it shouldn’t on the assembly line, for instance, workers can take its arm and move the robot to put the object down.

Baxter also contains a variety of sensors, including depth sensors as well as cameras in its wrists, so it “sees” with its hands. It is constantly building and adjusting a mathematical model of the world in front of it, enabling it to recognize different objects.

Another benefi t of Baxter is that other factory workers can train it. In fact, a factory worker who has never seen a robot before can learn to train Baxter to perform simple tasks in fi ve minutes. For example, a worker can show Baxter a part of the task she is asking the robot to perform, and Baxter can infer the rest of the task. Also, if a human is interacting with Baxter or doing part of the task, the robot can fi gure out how to perform the rest of the task.

In November 2014, Rethink Robotics announced its new Robot Positioning System for Baxter. This system enables Baxter to adapt to changing, real-world environments, such as tables and benches being moved. As a result, manufacturers can now deploy Baxter in fl exible manufacturing environments, such as short pro- duction runs.

The new system highlights a huge advantage for companies that acquire Baxter. Because so much of Baxter’s capabilities are contained in its software, when the robot is upgraded it tends to increase in value.

1.3 Social, Collaborative Robots POM

 

 

24 CHAPTER 1 Introduction to Information Systems

It will probably be a long time before we see robots making decisions by themselves, han- dling unfamiliar situations, and interacting with people. Nevertheless, robots are extremely helpful in various environments, particularly those that are repetitive, harsh, or dangerous to humans.

Improvements in Healthcare IT has brought about major improvements in healthcare delivery. Medical personnel use IT to make better and faster diagnoses and to monitor critically ill patients more accurately. IT has also streamlined the process of researching and developing new drugs. Expert systems now help doctors diagnose diseases, and machine vision is enhancing the work of radiologists. Sur- geons use virtual reality to plan complex surgeries. They also employ surgical robots to perform long-distance surgery. Finally, doctors discuss complex medical cases via videoconferencing. New computer simulations recreate the sense of touch, allowing doctors-in-training to perform virtual procedures without risking harm to an actual patient.

Information technology can be applied to improve the effi ciency and effectiveness of healthcare. In IT’s About Business 1.4 you will see how Apricot Forest is using information technology to improve healthcare in China.

Rethink Robotics asserts that Baxter empowers factory workers by providing them with user-friendly machines they can manage themselves. In fact, Rethink claims it is on a mission to rescue U.S. manufacturing through technological innovation. That is, Baxter can help U.S. manufacturers lower costs suffi ciently to compete with manufacturers overseas who employ low-cost labor.

However, Baxter does raise the question of the future of low- skilled labor in the United States: How fast will Baxter replace these workers, and what will they do after they are replaced?

Sources: Compiled from J. Green, “Collaborative Robotics, Job Security, and ROI,” Rethink Robotics Press Release, February 12, 2015; J. Barnes, “Rethink Robotics Turns Robots into Better Co-Workers,” InformationWeek, November 28, 2014; “Rethink Robotics Introduces Industry-First Robot Positioning System,” Rethink Robotics Press Release, November 3, 2014; J. Guinto, “Machine Man,” Boston Magazine, November 2014; T. Green, “Building the Factory of the Future at RoboBusiness,” Robotics Business Review, October 17, 2014; J. Morton, “Baxter the Robot Rolls On In,” The New Zealand Herald, January 21, 2014; B. Trebilcock, “Is There a Robot in Your Distribution Future?” Modern Materials Handling, December 1, 2013; S. Castellanos, “Rethink Robotics to Distribute Baxter in Japan,” Boston Business Journal, November 6, 2013; M. Naitove, “’Collaborative’ Robot Works Safely, Comfortably Alongside Human Workers,” Plastics

Technology, November 2013; J. Markoff, “Making Robots More Like Us,” The New York Times, October 28, 2013; K. Alspach, “New Brain for Baxter: Rethink Robotics Releases Baxter 2.0 Software,” Boston Business Journal, September 23, 2013; B. Jackson, “Baxter the Friendly Robot,” Yale Daily News Magazine, September 8, 2013; R. Brooks, “Robots at Work: Toward a Smarter Factory,” The Futurist, May–June, 2013; G. Anderson, “Help Wanted: Robots to Fill Service Jobs,” Retail Wire, April 10, 2013; J. Young, “The New Industrial Revolution,” The Chronicle of Higher Education, March 25, 2013; L. Kratochwill, “Rethink’s Baxter Robot Got a Job Packaging Toys and Sending Them to China,” Fast Company, February 26, 2013; A. Regalado, “Small Factories Give Baxter the Robot a Cautious Once-Over,” MIT Technology Review, January 16, 2013; www.rethinkrobotics.com, accessed April 4, 2015.

Questions 1. Rethink Robotics claims that Baxter will not necessarily replace

workers, rather it will enable workers to transition into higher paying jobs (e.g., programming Baxter robots and supervising Baxter robots). Will Baxter replace workers in small manufac- turing companies? Why or why not? Support your answer.

2. Discuss the possible reactions of labor unions to Baxter. 3. Identify and discuss additional potential applications for Baxter.

IT’s [about business]

Most physicians in China work for state-operated hospitals, where entry-level physicians earn about $500 per month. This amount is roughly equivalent to what taxi drivers make. In addi- tion, China’s physicians have a potentially overwhelming case- load, typically treating 50–60 patients per day. This situation is causing problems.

One of these problems is violence perpetrated by patients against health providers. Chinese hospitals experienced an aver- age of 27 assaults in 2012, as angry patients beat, stabbed, and even killed the physicians who failed to meet their expectations. These problems have created a need for software tools that improve the effi ciency and effectiveness of patient care.

1.4 Apricot Forest Helps China’s Physicians

 

 

25SECTION 1.4 Importance of Information Systems to Society

Among the thousands of other healthcare applications, administrative systems are critically important. These systems perform functions ranging from detecting insurance fraud to creat- ing nursing schedules, to fi nancial and marketing management.

The Internet contains vast amounts of useful medical information (see, for example, www.webmd.com). In an interesting study, researchers at the Princess Alexandra Hospital in Brisbane, Australia, identifi ed 26 diffi cult diagnostic cases published in the New England Journal of Medicine. They selected three to fi ve search terms from each case and then con- ducted a Google search. Next, they recorded the three diagnoses that Google ranked most prominently and that appeared to fi t the symptoms and signs. Finally, they compared these results with the correct diagnoses as published in the journal. The researchers discovered that their Google searches had found the correct diagnosis in 15 of the 26 cases, a success rate of 57 percent. Despite these results, the research team cautions against self-diagnosis. They main- tain that people should use diagnostic information gained from Google and medical Web sites such as WebMD (www.webmd.com) only to ask questions of their physicians.

Essentially, these tools must provide China’s physicians with more data—about patients, their records, and their illnesses—as well as easier access to those data. Further, the tools must allow physicians and their patients to communicate seamlessly.

Apricot Forest (http://www.xingshulin.com) is a Beijing-based startup company that offers three applications that address the problems in China’s medical system. The primary app is MedClip, an all-in-one patient service system. Physicians can photograph, store, and organize patient records; dictate notes directly into a patient’s chart; send patients reminders and educational materials via China’s popular Weixin (aka WeChat) messaging system; and consult with other physicians on diffi cult cases. The second app, e-Pocket, contains reference materials, such as drug formular- ies and specialized calculators. The third app, Medical Journals, helps physicians stay current on the latest research literature.

Apricot Forest’s clients are China’s physicians who, as we discussed, earn little money. The company compensates for this problem by making money in other areas. Pharmaceutical com- panies place ads inside the apps to reach doctors. The company takes a cut of the sales of books and other publications made accessible through e-Pocket and Medical Journals. Further, Apri- cot Forest plans to charge patients for follow-up phone calls with their physicians via MedClip. Both physicians and patients agree to this arrangement because patients cannot currently connect easily with their doctors, and the app lets doctors keep their phone numbers private and control the amount of contact with patients. Apricot Forest also plans to aggregate the data that physicians

upload to MedClip, analyze them, and sell the reports to compa- nies that research, design, and market medical products. Finally, the Apricot Forest apps can also become a mobile offi ce for physi- cians, enabling them to treat patients in the patients’ homes.

And the results? By early 2015, roughly 25 percent of China’s 2.5 million physicians were using at least one of Apricot Forest’s apps.

Sources: Compiled from “The Healthcare System and Medical Device Mar- ket in China,” PR Newswire, February 17, 2015; J. Makinen, “The World’s 50 Most Innovative Companies,” FastCompany, March 2015; L. Qi and L. Burkitt, “Falling through the Cracks of China’s Health-Care System,” The Wall Street Journal, January 4, 2015; S. Shankar, “Hospital Attack in North- ern China’s Beidaihe Town Kills 7 People, Including 6 Nurses,” International Business Times, November 20, 2014; C. Beam, “Under the Knife,” The New Yorker, August 25, 2014; E. Rauhala, “Why China’s Doctors Are Getting Beaten Up,” Time, March 7, 2014; P. Bischoff, “Apricot Forest Wants to Streamline Your Hospital Visits,” TechinAsia, June 7, 2013; www.xingshulin. com, accessed February 25, 2015.

Questions 1. Explain how Apricot Forest’s apps will help improve the rela-

tionship between physicians and patients in China. 2. Explain how Apricot Forest’s apps will help improve overall

healthcare in China. 3. Discuss potential disadvantages of Apricot Forest’s apps to

patients. 4. Discuss potential disadvantages of Apricot Forest’s apps to

physicians.

What are some of the quality-of-life improvements made possible by IT? Has IT any nega- tive effects on our quality of life? If so, explain and provide examples.

Describe the robotic revolution and consider its implications for humans.

Explain how IT has improved healthcare practices.

 

 

26 CHAPTER 1 Introduction to Information Systems

[ Summary ] 1. Identify the reasons why being an informed user of information sys-

tems is important in today’s world. The benefi ts of being an informed user of IT include the following:

• You will benefi t more from your organization’s IT applications because you will under- stand what is “behind” those applications.

• You will be able to provide input into your organization’s IT applications, thus improv- ing the quality of those applications.

• You will quickly be in a position to recommend or participate in the selection of IT applications that your organization will use.

• You will be able to keep up with rapid developments in existing information technolo- gies, as well as with the introduction of new technologies.

• You will understand the potential impacts that “new and improved” technologies will have on your organization and therefore will be qualifi ed to make recommendations concerning their adoption and use.

• You will play a key role in managing the information systems in your organization. • You will be in a position to use IT if you decide to start your own business.

2. Describe the various types of computer-based information systems in an organization. • Transaction processing systems support the monitoring, collection, storage, and processing

of data from the organization’s basic business transactions, each of which generates data. • Functional area information systems support a particular functional area within the

organization. • Interorganizational information systems support many interorganizational operations,

of which supply chain management is the best known. • Enterprise resource planning systems correct a lack of communication among the

FAISs by tightly integrating the functional area ISs via a common database. • Electronic commerce systems enable organizations to conduct transactions with other

organizations (called business-to-business electronic commerce) and with customers (called business-to-consumer electronic commerce).

• Offi ce automation systems typically support the clerical staff, lower and middle manag- ers, and knowledge workers by enabling them to develop documents (word processing and desktop publishing software), schedule resources (electronic calendars), and com- municate (e-mail, voice mail, videoconferencing, and groupware).

What’s In ITFor Me?

In Section 1.2, we discussed how IT supports each of the functional areas of the orga- nization. Here we examine the MIS function.

For the MIS Major The MIS function directly supports all other functional areas in an organization. That is, the MIS function is responsible for providing the information that each functional area needs in order to make decisions. The overall objective of MIS per- sonnel is to help users improve performance and solve business problems using IT. To accomplish this objective, MIS personnel must understand both the informa- tion requirements and the technology associated with each functional area. Given their position, however, they must think “business needs” fi rst and “technology” second.

MIS