Chapter 1

Information Systems in Global Business Today

1-1 How are information systems transforming business and why are they so essential for
running and managing a business today?

Describe how information systems have changed the way businesses operate and their
products and services.
Wireless communications, including computers and mobile hand-held computing devices, are
keeping managers, employees, customers, suppliers, and business partners connected in every
way possible. Email, online conferencing, the web, and the Internet, are providing new and
diverse lines of communication for all businesses, large and small. Through increased
communication channels and decreased costs of communication, customers are demanding more
of businesses in terms of services and products, at lower costs. E-commerce is changing the way
businesses must attract and respond to customers.
Identify three major new information system trends.
Three information system trends that are influencing the way businesses interact with employees,
customers, suppliers, and business partners include IT innovations, new business models, e-
commerce expansion, management changes, and changes in firms and organizations.
Describe the characteristics of a digital firm.
● Significant business relationships with customers, suppliers, and employees are
digitally enabled and mediated.
● Core business processes are accomplished through digital networks spanning the
entire organization or linking multiple organizations.
● Key corporate assets—intellectual property, core competencies, and financial and
human assets—are managed through digital means.
● They sense and respond to their environments far more rapidly than traditional firms.
● They offer extraordinary opportunities for more flexible global organization and
management, practicing time-shifting and space-shifting.
Describe the challenges and opportunities of globalization in a “flattened” world.
Customers no longer need to rely on local businesses for products and services. They can shop
24/7 for virtually anything and have it delivered to their door or desktop. Companies can operate
24/7 from any geographic location around the world. Jobs can just as easily move across the state
or across the ocean. Employees must continually develop high-level skills through education and
on-the-job experience that cannot be outsourced. Business must avoid markets for goods and
serves that can be produced offshore much cheaper. The emergence of the Internet into a full-
blown international communications system has drastically reduced the costs of operating and
transacting business on a global scale.

List and describe six reasons why information systems are so important for business today.
Six reasons why information systems are so important for business today include:
(1) Operational excellence.
(2) New products, services, and business models.
(3) Customer and supplier intimacy.
(4) Improved decision making.
 (5) Competitive advantage.
(6) Survival.
Information systems are the foundation for conducting business today. In many industries,
survival and even existence without extensive use of IT is inconceivable, and IT plays a critical
role in increasing productivity. Although information technology has become more of a
commodity, when coupled with complementary changes in organization and management, it can
provide the foundation for new products, services, and ways of conducting business that provide
firms with a strategic advantage.

1-2 What is an information system? How does it work? What are its management,
organization and technology components? Why are complementary assets essential for
ensuring that information systems provide genuine value for organizations?

Define an information system and describe the activities it performs.

An information system is a set of interrelated components that work together to collect,

process, store, and disseminate information to support decision making, coordination,
control, analysis, and visualization in an organization. In addition to supporting decision
making, information systems may also help managers and workers analyze problems,
visualize complex subjects, and create new products.
List and describe the organizational, management, and technology dimensions of
information systems.

● Organization: The organization dimension of information systems involves issues

such as the organization’s hierarchy, functional specialties, business processes,
culture, and political interest groups.
● Management: The management dimension of information systems involves setting
organizational strategies, allocating human and financial resources, creating new
products and services and re-creating the organization if necessary.
● Technology: The technology dimension consists of computer hardware, software,
data management technology, and networking/telecommunications technology.

Distinguish between data and information and between information systems literacy
and computer literacy.

● Data are streams of raw facts representing events occurring in organizations or the
physical environment before they have been organized and arranged into a form that
people can understand and use.
● Information is data that have been shaped into a form that is meaningful and useful to
human beings.
● Information systems literacy is a broad-based understanding of information systems.
It includes a behavioral as well as a technical approach to studying information
systems.
● In contrast, computer literacy focuses primarily on knowledge of information
technology. It is limited to understanding how computer hardware and software
works. (Learning Objective 1-2: What is an information system? How does it work?
 What are its management, organization and technology components? Why are
complementary assets essential for ensuring that information systems provide genuine
value for organizations? AACSB: Analytical thinking.)

Explain how the Internet and the World Wide Web are related to the other technology
components of information systems.

The Internet and World Wide Web have had a tremendous impact on the role that
information systems play in organizations. These two tools are responsible for the increased
connectivity and collaboration within and outside the organization. The Internet, World Wide
Web, and other technologies have led to the redesign and reshaping of organizations. They
have helped transform the organization’s structure, scope of operations, reporting and control
mechanisms, work practices, work flows, and products and services.

Define complementary assets and describe their relationship to information technology.

Complementary assets are those assets required to derive value from a primary investment.
Firms must rely on supportive values, structures, and behavior patterns to obtain a greater
value from their IT investments. Value must be added through complementary assets such as
new business processes, management behavior, organizational culture, and training.
Describe the complementary social, managerial, and organizational assets required to
optimize returns from information technology investments.

Table 1-2 lists the complementary social, managerial, and organization assets required to
optimize returns from information technology investments. Here are a few of them:

Organizational assets:
● Supportive culture that values efficiency and effectiveness
● Appropriate business model
● Efficient business processes
● Decentralized authority
Managerial assets:
● Strong senior management support for technology investment and change
● Incentives for management innovation
● Teamwork and collaborative work environments
Social assets:
● The Internet and telecommunications infrastructure
● IT-enriched educational programs raising labor force computer literacy
● Standards (both government and private sector)

1-3 What academic disciplines are used to study information systems and how does each
contribute to an understanding of information systems?

List and describe each discipline that contributes to a technical approach to

information systems.
 A technical approach to information systems emphasizes mathematically-based models to
study information systems and the physical technology and formal capabilities of information
systems. Students should know the differences between computer science (theories of
computability, computation methods, and data storage and access methods), management
science (development of models for decision making and managerial practice), and
operations research (mathematical techniques for optimizing organizational parameters such
as transportation, inventory control, and transaction costs).

List and describe each discipline that contributes to a behavioral approach to

information systems.
A behavioral approach to information systems focuses on questions such as strategic business
integration, behavioral problems of systems utilization, system design and implementation,
social and organizational impacts of information systems, political impacts of information
systems, and individual responses to information systems. Solutions to problems created by
information technology are primarily changes in attitudes, management, organizational
policy, and behavior. =

Describe the sociotechnical perspective on information systems.

A sociotechnical perspective combines the technical approach and behavioral approach to
achieve optimal organizational performance. Technology must be changed and designed to
fit organizational and individual needs and not the other way around. Organizations and
individuals must also change through training, learning, and allowing technology to operate
and prosper.

Interactive Session: Management: Can You Run the Company with Your iPhone?
Case Study Questions

1. What kinds of applications are described here? What business functions do they
support? How do they improve operational efficiency and decision making?

Email, messaging, social networking, and salesforce management are described in this case
study. The applications support business functions including collaboration, location-based
services, and communications with colleagues. These applications improve operational
efficiency and decision making by allowing people to communicate from wherever they are.
They are no longer tethered to one place or one machine. They can receive information and data
instantaneously which allows them to make better, faster decisions.

2. Identify the problems that businesses in this case study solved by using mobile digital
devices.

Network Rail uses a group of custom apps for its 22,000 iPhone and iPad devices to streamline
maintenance operations, quickly capture incident data, and immediately share critical
information.
One of Network Rail’s app helps employees report hazards as they are found so problems can be
addressed quickly. Workers can take pictures of dangerous situations immediately with their
phones which speeds up the time it takes to fix problems in the rail lines. Another app allows
field managers to electronically scan ID cards to verify that workers are qualified to perform
specific tasks.

British Airways agents use phones to scan boarding passes, review customer books, look up
alternate flight options, and rebook and reticket passengers within four minutes. That creates a
lot of customer satisfaction.

The company also uses mobile apps to shorten and streamline the aircraft turnaround process
which generates huge business benefits. Turnaround managers are able to monitor the aircraft
loading process and share data with pilots and back-office staff in real time. The apps helped
British Airways achieve an industry-leading benchmark for aircraft turnaround.

3. What kinds of businesses are most likely to benefit from equipping their employees with
mobile digital devices such as iPhones and iPads?

Any business with a need to communicate with customers, suppliers, and business colleagues
can benefit from equipping employees with mobile digital devices.

Student answers will vary as they relate their own experiences and knowledge of using mobile
digital devices. Try to encourage student creativity and imagination with this question. Here are a
couple examples:

Insurance companies: claims adjusters or agents writing new policies or updating old ones, can
take pictures of property as-is or that’s been damaged, update data on the condition of a property,
and document property damage for claims processing.

Real estate agents: can take pictures of homes for sale and send to prospective buyers, send
information to other agents or prospective buyers and sellers, answer questions and complete
documents related to buying and selling property.

Winemakers: can receive up-to-date weather forecasts, track crop information via GPS
coordinates, store and access data on crop varieties for later analysis, track employee
productivity during harvest time, take pictures of crops to include in a database, and
communicate with suppliers and customers.

4. One company deploying iPhones has said, “The iPhone is not a game changer, it’s an
industry changer. It changes the way that you can interact with your customers and
with your suppliers.” Discuss the implications of this statement.

First and foremost, those that effectively and efficiently deploy mobile digital device technology
gain a huge competitive advantage over those who do not use the technology to stay in constant
touch with customers and suppliers. Sales and Marketing can take a hit by not having access to
information that can close business deals faster and more efficiently. Costs can increase without
the ability to contact suppliers and track product shipments, especially for those companies who
use just-in-time supply chains.

Case Study: Did Information Systems Cause Deutsche Bank to Stumble?

1-12 Identify the problem described in this case study. What people, organization, and
technology factors contributed to this problem?

People: The Commodity Futures Trading Commission (CFTC) charged that Deutsche Bank
submitted incomplete and untimely credit default swap data, failed to properly supervise
employees responsible for swap data reporting, and lacked an adequate business continuity and
disaster recovery plan.

Organization: The CFTC complaint also alleged that Deutsche Bank’s system outage and
subsequent reporting problems occurred in part because Deutsche Bank failed to have an
adequate business continuity and disaster recovery plan and other appropriate supervisory
systems in place. The bank is now struggling with seismic changes in the banking industry,
including recent regulatory change.

Technology: The CFTC complained that on April 16, 2016, Deutsche Bank’s swap data
reporting system experienced a system outage that prevented Deutsche Bank from reporting any
swap data for multiple asset classes for approximately five days. Deutsche Bank’s subsequent
efforts to end the system outage repeatedly exacerbated existing reporting problems and led to
the discovery and creation of new reporting problems.

Swap data reported before and after the system outage revealed persistent problems with the
integrity of certain data fields, including numerous invalid legal entity identifiers. U.S. regulators
have identified Deutsche Bank’s antiquated technology as one reason why the bank was not
always able to provide the correct information to the agency.. Poor information systems may
have even contributed to the 2008 financial crisis. Banks often had trouble untangling the
complex financial products they purchased and sold to determine their underlying value.

1-13 What was the role of information technology at Deutsche Bank? How was IT related
to the bank’s operational efficiency, decision-making capability and business strategy?

It turns out that Deutsche Bank, like other leading global financial companies, had undergone
decades of mergers and expansion. When these banks merged or acquired other financial
companies, they often did not make the requisite (and often far-reaching) changes to integrate
their information systems with those of their acquisitions. The effort and costs required for this
integration, including a need for coordination across many management teams, were too great.
So, the banks left many old systems in place to handle the workload for each of their businesses.
This created what experts call “spaghetti balls” of overlapping and often incompatible
technology platforms and software programs. These antiquated legacy systems were designed to
handle large numbers of transactions and sums of money, but they were not well suited to
managing large bank operations. They often did not allow information to be shared easily among
departments or provide senior management with a coherent overview of bank operations.
1-14 Was Deutsche Bank using technology effectively to pursue its business strategy?
Explain your answer.

No, Deutsche Bank was not using technology to pursue its business strategy.

Individual teams and traders each had their own incompatible platforms. The bank employed a
deliberate strategy of pitting teams against each other to spur them on, but this further
encouraged the use of different systems because competing traders and teams were reluctant to
share their data. Yet the bank ultimately had to reconcile the data from these disparate systems,
often by hand, before trades could be processed and recorded.

1-15 What solution for Deutsche Bank was proposed? How effective do you think it will be?
Explain your answer.

The solutions that Deutsche Bank is pursuing can be effective in resolving the many problems
associated with its technology and organizational structure.

In July 2015, John Cryan became Deutsche Bank’s CEO. He has been trying to reduce costs and
improve efficiency, laying off thousands of employees. He is focusing on overhauling Deutsche
Bank’s fragmented, antiquated information systems, which are a major impediment to
controlling costs and finding new sources of profit and growth. Cryan noted that the bank’s cost
base was swollen by poor and ineffective business processes, inadequate technology, and too
many tasks being handled manually. He has called for standardizing the bank’s systems and
procedures, eliminating legacy software, standardizing and enhancing data, and improving
reporting.

In February 2015, Deutsche Bank announced a 10-year, multibillion-dollar deal with Hewlett-
Packard (HP) to standardize and simplify its IT infrastructure, reduce costs, and create a more
modern and agile technology platform for launching new products and services. Deutsche Bank
is migrating to a cloud computing infrastructure where it would run its information systems in
HP’s remote computer centers. HP will provide computing services, hosting, and storage.
Deutsche Bank will still be in charge of application development and information security
technologies, which it considers proprietary and crucial for competitive differentiation.

Deutsche Bank is withdrawing from high-risk client relationships, improving its control
framework, and automating manual reconciliations. To modernize its IT infrastructure, the bank
will reduce the number of its individual operating systems that control the way a computer works
from 45 to four, replace scores of outdated computers, and replace antiquated software
applications.

Thousands of applications and functions will be shifted from Deutsche Bank’s mainframes to HP
cloud computing services. Automating manual processes will promote efficiency and better
control. These improvements are expected to reduce “run the bank” costs by 800 million euros.
Eliminating 6,000 contractors will create a total savings of 1 billion euros. Deutsche Bank has
also opened four technology centers to work with financial technology startups. In March 2017,
the bank opened a new center in New York to work with financial technology startups to
improve its technology.
 Chapter 2
Global E-Business and Collaboration

2-1 What are business processes? How are they related to information systems?

Define business processes and describe the role they play in organizations.
A business process is a logically related set of activities that define how specific business
tasks are performed. Business processes are the ways in which organizations coordinate and
organize work activities, information, and knowledge to produce their valuable products or
services.

How well a business performs depends on how well its business processes are designed and
coordinated. Well-designed business processes can be a source of competitive strength for a
company if it can use the processes to innovate or perform better than its rivals. Conversely,
poorly designed or executed business processes can be a liability if they are based on
outdated ways of working and impede responsiveness or efficiency.

Describe the relationship between information systems and business processes.

Information systems automate manual business processes and make an organization more
efficient. Data and information are available to a wider range of decision-makers more
quickly when information systems are used to change the flow of information. Tasks can be
performed simultaneously rather than sequentially, speeding up the completion of business
processes. Information systems can also drive new business models that perhaps wouldn’t be
possible without the technology.

2-2 How do systems serve the different management groups in a business and how do
systems that link the enterprise improve organizational performance?

Describe the characteristics of transaction processing systems (TPS) and the roles they
play in a business.

Transaction processing systems (TPS) are computerized systems that perform and record
daily routine transactions necessary in conducting business; they serve the organization’s
operational level. The principal purpose of systems at this level is to answer routine questions
and to track the flow of transactions through the organization.
● At the operational level, tasks, resources, and goals are predefined and highly
structured.
● Managers need TPS to monitor the status of internal operations and the firm’s
relationship with its external environment.
● TPS are major producers of information for other types of systems.
● Transaction processing systems are often so central to a business that TPS failure for
a few hours can lead to a firm’s demise and perhaps that of other firms linked to it.

Describe the characteristics of management information systems (MIS) and explain

how MIS differ from TPS and from DSS.
Middle management needs systems to help with monitoring, controlling, decision-making,
and administrative activities.
● MIS provide middle managers with reports on the organization’s current
performance. This information is used to monitor and control the business and predict
future performance.
● MIS summarize and report the company’s basic operations using data supplied by
TPSs. The basic transaction data from TPS are compressed and usually presented in
reports that are produced on a regular schedule.
● MIS serve managers primarily interested in weekly, monthly, and yearly results,
although some MIS enable managers to drill down to see daily or hourly data if
required.
● MIS generally provide answers to routine questions that have been specified in
advance and have a predefined procedure for answering them.
● MIS systems generally are not flexible and have little analytical capability.
● Most MIS use simple routines, such as summaries and comparisons, as opposed to
sophisticated mathematical models or statistical techniques.

MIS differs from TPS in that MIS deals with summarized and compressed data from the
TPS.

Although MIS have an internal orientation, DSS will often use data from external sources, as
well as data from TPS and MIS. DSS supports “what-if” analyses rather than providing the
long-term structured analysis inherent in MIS systems. MIS are generally not flexible and
provide little analytical capabilities. In contrast, DSS are designed for analytical purposes and
are flexible.

Describe the characteristics of decision-support systems (DSS) and how they benefit
businesses.

Decision-support systems (DSS) support nonroutine decision-making for middle managers.

● DSS provide sophisticated analytical models and data analysis tools to support
semistructured and unstructured decision-making activities.
● DSS use data from TPS, MIS, and external sources, in condensed form, allowing
decision makers to perform “what-if” analysis.
● DSS focus on problems that are unique and rapidly changing; procedures for arriving
at a solution may not be fully predefined.
● DSS are designed so that users can work with them directly; these systems include
interactive, user-friendly software.

Describe the characteristics of executive support systems (ESS) and explain how these
systems differ from DSS.

Executive support systems (ESS) help senior managers address strategic issues and long-term
trends, both in the firm and in the external environment.
 ● ESS address nonroutine decisions requiring judgment, evaluation, and insight because
there is no agreed-on procedure for arriving at a solution.
● ESS provide a generalized computing and communications capacity that can be
applied to a changing array of problems.
● ESS are designed to incorporate data about external events, such as new tax laws or
competitors, but they also draw summarized information from internal MIS and DSS.
● ESS are designed for ease-of-use and rely heavily on graphical presentations of data.

Explain how enterprise applications improve organizational performance.

An organization operates in an ever-increasing competitive and global environment. The

successful organization focuses on the efficient execution of its processes, customer service,
and speed to market. Enterprise applications provide an organization with a consolidated
view of its operations across different functions, levels, and business units. Enterprise
applications allow an organization to efficiently exchange information among its functional
areas, business units, suppliers, and customers.

Define enterprise systems, supply chain management systems, customer relationship

management systems, and knowledge management systems and describe their business
benefits.

Enterprise systems integrate the key business processes of an organization into a single
central data repository. This makes it possible for information that was previously
fragmented in different systems to be shared across the firm and for different parts of the
business to work more closely together.

Business benefits include:

● Information flows seamlessly throughout an organization, improving coordination,
efficiency, and decision making.
● Gives companies the flexibility to respond rapidly to customer requests while
producing and stocking only that inventory necessary to fulfill existing orders.
● Increases customer satisfaction by improving product shipments, minimizing costs,
and improving a firm’s performance.
● Improves decision making by improving the quality of information for all levels of
management. That leads to better analyses of overall business performance, more
accurate sales and production forecasts, and higher profitability.

In short, supply chain management (SCM) systems help businesses better manage
relationships with their suppliers. The objective of SCM is to get the right number of
products from the companies’ source to their point of consumption in the least amount of
time and with the lowest cost. SCM provide information to help suppliers, purchasing firms,
distributors, and logistics companies share information about orders, production, inventory
levels, and delivery of products and services so that they can source, produce, and deliver
goods and services efficiently. SCM helps organizations achieve great efficiencies by
automating parts of these processes or by helping organizations rethink and streamline these
processes. SCM is important to a business because through its efficiency it can coordinate,
schedule, and control the delivery of products and services to customers.

Business benefits include:

● Decide when and what to produce, store, and move
● Rapidly communicate orders
● Track the status of orders
● Check inventory availability and monitor inventory levels
● Reduce inventory, transportation, and warehousing costs
● Track shipments
● Plan production based on actual customer demand
● Rapidly communicate changes in product design

Customer relationship management (CRM) systems enable a business to better manage its
relationships with existing and potential customers. With the growth of the web, potential
customers can easily comparison shop for retail and wholesale goods and even raw materials,
so treating customers better has become very important.

Business benefits include:

● CRM systems provide information to coordinate all the business processes that deal
with customers in sales, marketing, and service to optimize revenue, customer
satisfaction, and customer retention. This information helps firms identify, attract, and
retain the most profitable customers; provide better service to existing customers; and
increase sales.
● CRM systems consolidate customer data from multiple sources and provide analytical
tools for answering questions such as: What is the value of a particular customer to
the firm over his/her lifetime?
● CRM tools integrate a business’s customer-related processes and consolidate
customer information from multiple communication channels, giving the customer a
consolidated view of the company.
● Detailed and accurate knowledge of customers and their preferences helps firms
increase the effectiveness of their marketing campaigns and provide higher-quality
customer service and support.

Knowledge management systems (KMS) enable organizations to better manage processes

for capturing and applying knowledge and expertise. These systems collect all relevant
knowledge and experience in the firm, and make it available wherever and whenever it is
needed to improve business processes and management decisions. They also link the firm to
external sources of knowledge.

Business benefits include:

● KMS support processes for acquiring, storing, distributing, and applying knowledge,
as well as processes for creating new knowledge and integrating it into the
organization.
● KMS include enterprise-wide systems for managing and distributing documents,
graphics, and other digital knowledge objects; systems for creating corporate
 knowledge directories of employees with special areas of expertise; office systems for
distributing knowledge and information; and knowledge work systems to facilitate
knowledge creation.
● KMS use intelligent techniques that codify knowledge and experience for use by
other members of the organization and tools for knowledge discovery that recognize
patterns and important relationships in large pools of data.

Explain how intranets and extranets help firms integrate information and business
processes.

Because intranets and extranets share the same technology and software platforms as the
Internet, they are easy and inexpensive ways for companies to increase integration and
expedite the flow of information within the company (intranets alone) and with customers
and suppliers (extranets). They provide ways to distribute information and store corporate
policies, programs, and data. Both types of nets can be customized by users and provide a
single point of access to information from several different systems. Businesses can connect
the nets to transaction processing systems easily and quickly. Interfaces between the nets and
TPS, MIS, DSS, and ESS systems provide input and output for users.

2-3 Why are systems for collaboration and social business so important and what
technologies do they use?

Define collaboration and social business and explain why they have become so
important in business today.

Collaboration is working with others to achieve shared and explicit goals. It focuses on task
or mission accomplishment and usually takes place in a business, or other organizations, and
between businesses. Collaboration can be short-lived or longer term, depending on the nature
of the task and the relationship among participants. It can be one-to-one or many-to-many.

Social business is part of an organization’s business structure for getting things done in a
new collaborative way. It uses social networking platforms to connect employees, customers,
and suppliers. The goal of social business is to deepen interactions with groups inside and
outside a company to expedite and enhance information-sharing, innovation, and decision-
making.

Collaboration and social business are important because of the:

● Changing nature of work. More jobs are becoming “interaction” jobs. These kinds of
jobs require face-to-face interaction with other employees, managers, vendors, and
customers. They require systems that allow the interaction workers to communicate,
collaborate and share ideas.
● Growth of professional work. Professional jobs in the service sector require close
coordination and collaboration.
 ● Changing organization of the firm. Work is no longer organized in a hierarchical
fashion as much as it is now organized into groups and teams who are expected to
develop their own methods for accomplishing tasks.
● Changing scope of the firm. Work is more geographically separated than before.
● Emphasis on innovation. Innovation stems more from groups and teams than it does
from a single individual.
● Changing culture of work and business. Diverse teams produce better outputs, faster,
than individuals working on their own.

List and describe the business benefits of collaboration and social business.

The general belief is that the more a business firm is collaborative in nature, the more
successful it will be and that collaboration within and among firms is more essential than in
the past. The overall economic benefits of collaboration and social business are significant.

The business benefits of collaboration and social business are listed in Table 2-3:
● Productivity: people working together accomplish tasks faster, with fewer errors,
than those working alone.
● Quality: people can communicate errors and correct them faster when working
together versus working alone.
● Innovation: people working in groups can generate more innovative ideas than if
they were working alone.
● Customer service: people working in teams can solve customer complaints and
issues faster and more effectively versus working in isolation.
● Financial performance: collaborative firms have superior sales, sales growth, and
financial performance.

Describe a supportive organizational culture and business processes for collaboration.

Historically, organizations were built on hierarchies which did not allow much decision
making, planning, and organizing at lower levels of management or by employees.
Communications were generally vertical through management levels rather than horizontal
between groups of employees.

A collaborative culture relies on teams of employees to implement and achieve results for
goals set by senior managers. Policies, products, designs, processes, and systems are much
more dependent on teams at all levels of the organization to devise, to create, and to build.
Rather than employees being rewarded for individual results, they are rewarded based on
their performance in a team. The function of middle managers in a collaborative business
culture is to build the teams, coordinate their work, and monitor their performance. In a
collaborative culture, senior management establishes collaboration and teamwork as vital to
the organization, and it actually implements collaboration for the senior ranks of the business
as well.

List and describe the various types of collaboration and social business tools.
 Some of the more common enterprise-wide information systems that businesses can use to
support interaction jobs include:
● Internet-based collaboration environments like IBM Notes and WebEx provide
online storage space for documents, team communications (separated from
email), calendars, and audio-visual tools members can use to meet face-to-face.
● Email and Instant Messaging (IM) are reliable methods for communicating
whenever and wherever around the globe.
● Cell phones and wireless handhelds give professionals and other employees an
easy way to talk with one another, with customers and vendors, and with
managers. These devices have grown exponentially in sheer numbers and in
applications available.
● Social networking is no longer just “social.” Businesses are realizing the value of
providing easy ways for interaction workers to share ideas and collaborate with
each other.
● Wikis are ideal tools for storing and sharing company knowledge and insights.
They are often easier to use and cheaper than more proprietary knowledge
management systems. They also provide a more dynamic and current repository
of knowledge than other systems.
● Virtual worlds house online meetings, training sessions, and “lounges” where
real-world people meet, interact, and exchange ideas.
● Google tools, cyberlockers, and cloud collaboration allow users to quickly create
online group-editable web sites that include calendars, text, spreadsheets, and
videos for private, group, or public viewing and editing.
● Microsoft SharePoint software makes it possible for employees to share their
Office documents and collaborate on projects using Office documents as the
foundation

Interactive Session: Technology: Videoconferencing: Something for Everyone

Case Study Questions

1. Compare the capabilities of Cisco’s IX5000 telepresence and the Logitech SmartDock
systems. How do they promote collaboration and innovation?

The current generation of telepresence platforms provide much more than video collaboration,
with the ability to coordinate multiple rich data streams that integrate digital information from
mobile, desktop, and video, create a collaborative environment,
and move the information to where managers and professionals are making decisions.
Cisco’s IX5000 immersive telepresence system offers leading-edge telepresence and is much
more affordable and easier to use than in the past even though it can cost between $299,000 and
$339,000. It is sleekly sculpted, with three 4K ultra-high-definition cameras clustered discreetly
above three 70-inch LCD screens. The cameras provide crisp, high-definition video. Theater-
quality sound emanates from 18 custom speakers and one powerful subwoofer, creating a high-
quality lifelike collaboration experience for 8 to 18 people. Video and other content can move
across any of the screens.
The system creates a more natural setting than previous systems because the camera and graphic
processors are able to capture the whole room in fine detail so you can stand up and move around
or go to the whiteboard. Using the 4K cameras, the IX5000 creates an image four times larger
than what’s actually needed to fill the system’s three screens. The images can be cropped down
to show participants seated behind their tables, but when someone stands up, the crop is removed
to show both standing and sitting participants.
On the lower-cost end, Logitech’s SmartDock provides an audio and video videoconferencing
and collaboration system to hold meetings, interview job candidates, and handle other tasks.
SmartDock is a user-friendly touch-screen control console to launch and manage audio and video
calls in any meeting space, large or small. It has an embedded Microsoft Surface Pro tablet
running a special version of Skype for Business,
called Skype Room System, and works with Office for Business productivity tools and qualified
devices, including Logitech ConferenceCams. With Logitech SmartDock, people can start
meetings with a single touch, then instantly project to the display in the
room and share with remote participants via their Skype for Business clients on a smartphone or
laptop.
Participants can share content in a meeting and view and edit documents in real time. An
embedded motion sensor activates the system when anyone is in the room. Prices range from
$1,999 to $3,999, depending on the size of the meeting room and the need for webcams.

2. Why would a company like Produban want to invest in a high-end telepresence system
such as Cisco’s IX5000? How is videoconferencing technology and telepresence related
to Produban’s business model and business strategy?

With more than 5,500 employees working in nine different countries, Produban services more
than 120 companies in areas such as data center design and operation, IT infrastructure design
and operation as a service, IT platform design and operation as a service, technology risk
management and business continuity, and management of end user computing mobility and self-
service management. The company is dedicated to technology innovation and continuous
improvement.
By using Cisco’s IX5000 system, Produban brings people from all over the world together to
make better decisions faster and more efficiently. With 50 percent less power usage, 50 percent
less data transmission capacity, and half the installation time of earlier systems (only eight
hours), the IX5000 reduces TCO by 30 percent over three years.
Because Produban’s business model and strategy is to maximize technology innovation and
continuous improvement for other companies, using the latest telepresence technology for its
own inner workings fits.

3. Why would King County, Washington want to implement the Logitech SmartDock
system? What business benefits did it obtain from using this technology?

In the past, King County had used a variety of systems and technologies for videoconferencing
and collaboration. They were time consuming for the county’s IT staff to administer and had
limited capabilities and features. Teams couldn’t connect remotely and establish multipoint
connections with smartphones and tablets.
King County’s IT staff might spend 20 minutes or more setting up a videoconferencing system,
which often relied on legacy technology from multiple vendors along with computer monitors
and outdated VGA-quality TV sets. King County received multiple requests to use these systems
daily in its 30 on-site conference rooms and needed to standardize the technology and make it
more supportive of collaboration. The King County IT staff was able to handle installation and
implementation of the Logitech SmartDock system on its own. Employees are using the
videoconferencing and collaboration systems without IT involvement. Being able to share
presentations and co-edit documents in Word, Excel, and other formats has made working much
more collaborative.

Case Study: Should Companies Embrace Social Business?

2-13 Identify the management, organization, and technology factors affecting adoption of
internal corporate social networks.

Management: Employees that are used to collaborating and doing business in more traditional
ways need an incentive to use social software. Most companies are not providing that incentive:
only a small number of social software users believe the technology to be necessary to their jobs.
A successful social business strategy requires leadership and behavioral changes. Just sponsoring
a social project is not enough—managers need to demonstrate their commitment to a more open,
transparent work style.

Organization: Companies that have tried to deploy internal social networks have found that
employees are used to doing business in a certain way and overcoming the organizational inertia
and culture can prove difficult. Enterprise social networking systems were not at the core of how
most of the surveyed companies collaborate. The social media platform that will work best
depends on its specific business purpose. Firms should first identify how social initiatives will
actually improve work practices for employees and managers. Most importantly, social business
requires a change in thinking and in most cases, employees can’t be forced to use social business
apps.

Technology: Ease of use and increased job efficiency are more important than peer pressure in
driving adoption of social networking technologies. Content on the networks needs to be
relevant, up-to-date, and easy to access; users need to be able to connect to people who have the
information they need, and that would otherwise be out of reach or difficult to reach.

2-14 Compare the experiences implementing internal social networks of the organizations
described in this case. Why were some successful? What role did management play in this
process?

NASA’s Goddard Space Flight Center abandoned its enterprise social network called Spacebook
because no one knew how the tools would help people do their jobs better and more efficiently.
It didn’t focus enough on people. It didn’t take into consideration the organization’s culture and
politics.
Covestro succeeded with its social networking journey because it made the tools more
accessible, demonstrated the value of the tools in pilot projects, employed a reverse mentoring
program for senior executives, and trained employee experts to spread know-how of the new
social tools and approaches within the company. It also demonstrated the tools’ usefulness to
employees. Because of its correct approach, 50 percent of Covestro’s employees are now
routinely active in the company’s enterprise social network.

ModCloth started piloting Yammer with a small test group and used a People Team to promote
the tool. Yammer caught on quickly with employees and was soon being used by over 250
employees across four offices in the United States. Every new ModCloth employee is introduced
to Yammer on his or her first day of work. Yammer helps new hires learn their coworkers’
names and feel they are part of the company. Yammer has proved very useful for connecting
people and ideas, saving ModCloth considerable time and money. Yammer has helped save
teams from duplicating work that has already been done.

The Esquel Group is based in Hong Kong; its core business is making cotton tops for fashion
brands such as Lacoste, Ralph Lauren, and Nike. It was attracted to internal social networking as
a way to unite its different lines of business in various locations. Esquel chose Microsoft
Yammer as its enterprise social networking tool. Esquel employees communicate in a variety of
languages, so it especially appreciated Yammer’s translation capabilities. Management sees
many benefits in being able to “listen” to its workforce. When people post complaints on the
network, management is able to find innovative solutions and new ideas. For example, workers
in Esquel’s garment operation posted a complaint on Yammer about having to wait in a long line
to recharge their cards for purchasing meals in the company cafeteria. Four months later, the
company had a solution—a kiosk that instantly transferred funds from payroll to the meal card.

Ideas posted on Yammer were used to improve Esquel’s quality control process. Instead of using
measuring tape to ensure that sleeves and collars matched specifications, an employee in the
quality control department used Yammer to float the idea of an electric
ruler. The concept was refined through more Yammer discussion. Instead of taking
measurements and writing numbers down, staff can capture measurements faster and more
accurately electronically.

2-15 Should all companies implement internal enterprise social networks? Why or why
not?
Yes, companies should implement internal enterprise social networks, if for no other reason than
they are cheaper and easier than other systems to operate and reduce expenses in other areas. The
systems also improve productivity, in some cases dramatically. Companies should provide
incentives if they must to encourage adoption of the new collaboration methods. Executives
should be the first to use them which will speed their adoption. Executives must also tie these
networks to financial results. Management must also encourage the necessary organizational
cultural changes to help make the social networking tools a success.
 Chapter 3
Information Systems, Organizations, and Strategy

3-1 Which features of organizations do managers need to know about to build and use
information systems successfully?

Define an organization and compare the technical definition of organizations with the
behavioral definition.

Students can make use of Figures 3-2 and Figure 3-3 in answering this question.

The technical definition defines an organization as a stable, formal social structure that takes
resources from the environment and processes them to produce outputs. This definition of an
organization focuses on three elements: capital, labor, and production and products for
consumption. The technical definition also implies that organizations are more stable than an
informal group, are formal legal entities, and are social structures.

The behavioral definition states that an organization is a collection of rights, privileges,

obligations, and responsibilities that are delicately balanced over a period of time through
conflict and conflict resolution. This definition highlights the people within the organization,
their ways of working, and their relationships.

The technical definition shows us how a firm combines capital, labor, and information
technology. The behavioral definition examines how information technology impacts the
inner workings of the organization.

Identify and describe the features of organizations that help explain differences in
organizations’ use of information systems.

Common features for organizations include:

● Routines and business processes: Standard operating procedures have been developed
that allow the organization to become productive and efficient thereby reducing costs
over time.
● Organizational politics: Divergent viewpoints about how resources, rewards, and
punishments should be distributed bring about political resistance to organization
change.
● Organizational culture: Assumptions that define the organizational goals and products
create a powerful restraint on change, especially technological change.
● Organizational environments: Reciprocal relationships exist between an organization
and environments; information systems provide organizations a way to identify
external changes that might require an organizational response.
● Organizational structure: Information systems reflect the type of organizational
structure—entrepreneurial, machine bureaucracy, divisionalized bureaucracy,
professional bureaucracy, or adhocracy.

3-2 What is the impact of information systems on organizations?

Describe the major economic theories that help explain how information systems affect
organizations.

The two economic theories discussed in the book are transaction cost theory and agency
theory. The transaction cost theory is based on the notion that a firm incurs transaction costs
when it buys goods in the marketplace rather than making products for itself. Traditionally,
firms sought to reduce transaction costs by getting bigger, hiring more employees, through
vertical and horizontal integration, and with small-company takeovers.

Information technology helps firms lower the cost of market participation (transaction costs)
and helps firms shrink in size while producing the same or greater amount of output.

The agency theory views the firm as a nexus of contracts among interested individuals. The
owner employs agents (employees) to perform work on his or her behalf and delegates some
decision-making authority to the agents. Agents need constant supervision and management,
which introduces management costs. As firms grow, management costs rise. Information
technology reduces agency costs by providing information more easily so that managers can
supervise a larger number of people with fewer resources.

Describe the major behavioral theories that help explain how information systems
affect organizations.

Behavioral theories, from sociology, psychology, and political science, are useful for
describing the behavior of individual firms. Behavioral researchers theorize that information
technology could change the decision-making hierarchy by lowering the costs of information
acquisition and distribution. IT could eliminate middle managers and their clerical support by
sending information from operating units directly to senior management and by enabling
information to be sent directly to lower-level operating units. It even enables some
organizations to act as virtual organizations because they are no longer limited by geographic
locations.

One behavioral approach views information systems as the outcome of political competition
between organizational subgroups. IT becomes very involved with this competition because
it controls who has access to what information, and information systems can control who
does what, when, where, and how.

Explain why there is considerable organizational resistance to the introduction of

information systems.

There is considerable organizational resistance to new information systems because they

change many important organizational dimensions, such as culture, structure, politics, and
work. Leavitt puts forth a model that says that changes in technology are absorbed, deflected,
and defeated by organizational task arrangements, structures, and people. In this model the
only way to bring about change is to change the technology, tasks, structure, and people
simultaneously. In a second model, the authors speak of the need to unfreeze organizations
 before introducing an innovation, quickly implementing the new system, and then refreezing
or institutionalizing the change. (Learning Objective 3-2: What is the impact of information
systems on organizations? AACSB: Analytical thinking.)

Describe the impact of the Internet and disruptive technologies on organizations.

The Internet increases the accessibility, storage, and distribution of information and
knowledge for organizations; nearly any information can be available anywhere at any time.
The Internet increases the scope, depth, and range of information and knowledge storage. It
lowers the cost and raises the quality of information and knowledge distribution. That is, it
lowers transaction costs and information acquisition costs. By using the Internet,
organizations may reduce several levels of management, enabling closer and quicker
communication between upper levels of management and the lower levels. The Internet also
lowers agency costs.

Disruptive technologies caused by technological changes can have different effects on

different companies depending on how they handle the changes. Some companies create the
disruptions and succeed very well. Other companies learn about the disruption and
successfully adopt it. Other companies are obliterated by the changes because they are very
efficient at doing what no longer needs to be done. Some disruptions mostly benefit the firm.
Other disruptions mostly benefit consumers.

3-3 How do Porter’s competitive forces model, the value chain model, synergies, core
competencies, and network economics help companies develop competitive strategies using
information systems?

Define Porter’s competitive forces model and explain how it works.

This model provides a general view of the firm, its competitors, and the firm’s environment.
Porter’s model is all about the firm’s general business environment. In this model, five
competitive forces shape the fate of the firm:
● Traditional competitors
● New market entrants
● Substitute products and services
● Customers
● Suppliers (Learning Objective 3-3: How do Porter’s competitive forces model, the
value chain model, synergies, core competencies, and network economics help
companies develop competitive strategies using information systems? AACSB:
Application of knowledge.)

Describe what the competitive forces model explains about competitive advantage.

Some firms do better than others because they either have access to special resources that
others do not, or they are able to use commonly available resource more efficiently. It could
be because of superior knowledge and information assets. Regardless, they excel in revenue
growth, profitability, or productivity growth, ultimately increasing their stock market
valuations compared to their competitors.

List and describe four competitive strategies enabled by information systems that firms
can pursue.

The four generic strategies, each of which often is enabled by using information technology
and systems include:
● Low-cost leadership: Lowest operational costs and the lowest prices.
● Product differentiation: Enable new products and services, or greatly change the
customer convenience in using existing products and services.
● Focus on market niche: Enable a specific market focus and serve this narrow target
market better than competitors.
● Strengthen customer and suppliers: Tighten linkages with suppliers and develop
intimacy with customers.

Describe how information systems can support each of these competitive strategies and
give examples.

● Low-cost leadership: Use information systems to improve inventory management,

supply management, and create efficient customer response systems. Example:
Walmart.
● Product differentiation: Use information systems to create products and services that
are customized and personalized to fit the precise specifications of individual
customers. Examples: Google, eBay, Apple, Lands’ End.
● Focus on market niche: Use information systems to produce and analyze data for
finely tuned sales and marketing techniques. Analyze customer buying patterns,
tastes, and preferences closely in order to efficiently pitch advertising and marketing
campaigns to smaller target markets. Examples: Hilton Hotels, Harrah’s.
● Strengthen customer and supplier intimacies: Use information systems to facilitate
direct access from suppliers to information within the company. Increase switching
costs and loyalty to the company. Examples: IBM, Amazon.com.

Explain why aligning IT with business objectives is essential for strategic use of systems.

The basic principle of IT strategy for a business is to ensure the technology serves the
business and not the other way around. The more successfully a firm can align its IT with its
business goals, the more profitable it will be. Business people must take an active role in
shaping IT to the enterprise. They cannot ignore IT issues. They cannot tolerate failure in the
IT area as just a nuisance to work around. They must understand what IT can do, how it
works, and measure its impact on revenues and profits.

Define and describe the value chain model.

The value chain model highlights specific activities in the business where competitive
strategies can best be applied and where information systems will most likely have a strategic
impact. The model identifies specific, critical leverage points where a firm can use
information technology most effectively to enhance its competitive position. The value chain
model views the firm as a series of basic activities that add a margin of value to a firm’s
products or services. The activities are categorized as either primary or support activities.
Primary activities are most directly related to production and distribution of the firm’s
products and services, which create value for the customer. Support activities make the
delivery of primary activities possible and consist of organization infrastructure. A firm’s
value chain can be linked to the value chains of its suppliers, distributors, and customers.

Explain how the value chain model can be used to identify opportunities for
information systems.

Information systems can be used at each stage of the value chain to improve operational
efficiency, lower costs, improve profit margins, and forge a closer relationship with
customers and suppliers. Organizations can use information systems to help examine how
value-adding activities are performed at each stage of the value chain. Information systems
can improve the relationship with customers (customer relationship management systems)
and with suppliers (supply chain management systems) who may be outside the value chain
but belong to an extended value chain. Information systems can help businesses track
benchmarks in the organization and identify best practices of their particular industries. After
analyzing various stages in the value.

Define the value web and show how it is related to the value chain.

A value web is a collection of independent firms that use information technology to

coordinate their value chains to collectively produce a product or service. It is more customer
driven and operates in a less linear fashion than the traditional value chain. The value web is
a networked system that can synchronize the business processes of customers, suppliers, and
trading partners among different companies in an industry or in related industries.

Explain how the value web helps businesses identify opportunities for strategic
information systems.

Information systems enable value webs that are flexible and adaptive to changes in supply
and demand. Relationships can be bundled or unbundled in response to changing market
conditions. Firms can accelerate their time to market and to customers by optimizing their
value web relationships to make quick decisions on who can deliver the required products or
services at the right price and location. Information systems make it possible for companies
to establish and operate value webs.

Describe how the Internet has changed competitive forces and competitive advantage.

The Internet has nearly destroyed some industries and severely threatened others. The
Internet has also created entirely new markets and formed the basis of thousands of new
businesses. The Internet has enabled new products and services, new business models, and
new industries to rapidly develop.
Because of the Internet, competitive rivalry has become much more intense. Internet
technology is based on universal standards that any company can use, making it easy for
rivals to compete on price alone and for new competitors to enter the market. Because
information is available to everyone, the Internet raises the bargaining power of customers,
who can quickly find the lowest-cost provider on the web.

Explain how information systems promote synergies and core competencies.

A large corporation is typically a collection of businesses that are organized as a collection of

strategic business units. Information systems can improve the overall performance of these
business units by promoting synergies and core competencies.

Describe how promoting synergies and core competencies enhances competitive

advantages.

The concept of synergy is that when the output of some units can be used as inputs to other
units, or two organizations can pool markets and expertise, these relationships lower costs
and generate profits. In applying synergy to situations, information systems are used to tie
together the operations of disparate business units so that they can act as a whole.

A core competency is an activity for which a firm is a world-class leader. In general, a core
competency relies on knowledge that is gained over many years of experience and a first-
class research organization or simply key people who stay abreast of new external
knowledge. Any information system that encourages the sharing of knowledge across
business units enhances competency.

Explain how businesses benefit by using network economics and ecosystems.

In a network, the marginal costs of adding another participant are almost zero, whereas the
marginal gain is much larger. The larger the number of participants in a network, the greater
the value to all participants because each user can interact with more people.

The availability of Internet and networking technology has inspired strategies that take
advantage of the abilities of the firm to create networks or network with each other. In a
network economy, information systems facilitate business models based on large networks of
users or subscribers that take advantage of network economies. Internet sites can be used by
firms to build communities of users that can result in building customer loyalty and
enjoyment and build unique ties to customers, suppliers, and business partners.

Define and describe a virtual company and the benefits of pursuing a virtual company
strategy.
A virtual company uses networks to link people, assets, and ideas, enabling it to ally with
other companies to create and distribute products and services without being limited by
traditional organizational boundaries or physical locations. One company can use the
capabilities of another company without being physically tied to that company. The virtual
 company model is useful when a company finds it cheaper to acquire products, services, or
capabilities from an external vendor or when it needs to move quickly to exploit new market
opportunities and lacks the time and resources to respond on its own

Interactive Session: Organizations: Digital Technology Helps Crayola Brighten Its Brand

Case Study Questions

1. Analyze Crayola’s problem. What management, organization, and technology factors

contributed to the problem?

Management: With the advent of computers and web-based learning, children are leaving
behind handheld art supplies at an increasingly younger age. As children reach the age of four or
five, when they become old enough to play with a computer, they become less interested in toys
and crayons in favor of electronics.

Organization: The traditional box of Crayola crayons is under assault, not by competitors, but
by changing times.

Technology: Digital products are starting to supplant physical ones in the world of children’s
play.

2. What competitive strategies is Crayola pursuing? How does digital technology support
this strategy?

The organization restructured around consumer insights and needs rather than specific product
lines. Crayola’s purpose has always been to nourish originality and to help parents and teachers
raise creative and inspired children. The firm’s broader mission is to help children learn and play
in colorful ways.

Crayola reframed its business model, introduced a new innovation process for product
development, and created new products and revenue streams. The company transformed itself
from a manufacturer of crayons and art tools into a trusted source of tools and experiences for
creative play.

3. What people issues did Crayola have to address in designing its new technology-based
products?

The company found that parents were looking for toys that were less messy than traditional
markers or finger paints. The company’s new digital toys are “100 percent mess-proof” and
technology has helped Crayola make its other products less messy as well.

The company understands how digital technology can play a part at different ages. The My First
Crayola line is targeted specifically at one-year-olds while Crayola Catwalk Creations is
designed for tween girls who like expressing themselves through fashion.
Crayola’s core “mom” audience is turning to the web for gift and usage ideas, comparing prices,
and reading reviews before making purchases. The company’s web site has been thoughtfully
designed for children, parents, and educators. The website also can be used for ordering Crayola
products online.

4. How has digital technology changed Crayola’s business model and the way it runs its
business?

Crayola changed the way it markets its products and has been investing more and more in digital
marketing. The company uses online advertising, promotions, social media pushes, and other
digital activation programs that allow Crayola to connect with parents and educators invested in
raising children’s creativity level.

Because of its new array of products and services, Crayola has experienced better growth.

Interactive Session: Technology: Smart Products – Coming Your Way

Case Study Questions

1. Describe the role of information technology in the products described in this case. How
is it adding value to these products? How is it transforming these products?

It’s not just about selling products with these companies. Now it’s about creating relationships
with customers that keep them connected and keep them coming back to the company for more.

Under Armour is trying to enhance its performance clothing with digital technology. The
company now sells connected running shoes. The shoes come in several models and feature a
built-in wireless Bluetooth sensor that tracks cadence, distance, pace, stride length, and steps,
even if the runner does not bring a smartphone along. The data are stored on the shoe until they
can sync wirelessly to Under Armour’s Map My Run app for iPhone, iPad, and Android devices.
Users can also connect to the app on third-party devices such as AppleWatch, Garmin, or Fitbit,
to incorporate metrics such as heart rate that can’t be tracked by the shoes. The shoe’s analytics
will let users know when it’s time to purchase new shoes and sensor batteries have to be charged.

A smart meter is a digital meter that communicates between a residence or business and Con
Edison through a secure wireless communication network. The smart meter records and
transmits each customer’s energy consumption regularly throughout the day. The smart meter
transmits data to a system of access points on utility poles, which send the usage information to
Con Edison.

2. How are these smart products changing operations and decision making for these
organizations? How are they changing the behavior of their users?
Under Armour has recently added a digital coaching feature for the connected running shoes and
Map My Run app. Runners will be able to monitor their gait and stride length mile after mile,
and see how that impacts their pace and cadence. By analyzing these data, along with data about
the runner’s gender, age, weight, and height, Map My Run will be able to provide a runner with
tips on how to improve his or her pace and splits, by taking shorter or longer strides while
running, for instance.

Under Armour can generate revenue from in-app ads, including ads from other companies, and
purchases from app users referred to its products. The platform delivers unprecedented depth of
information and insight about fitness- and health-oriented consumers, creating numerous
opportunities for Under Armour and other brands to engage with potential and existing
customers.

Under Armour is hoping that daily use of its smartphone apps will build stronger ties to
customers that will lead to stronger sales of its own apparel, footwear, and other athletic gear.
The company is clearly benefiting from bringing the power of software to its physical products.

The smart meter will let the company know when a customer loses service, resulting in faster
repairs, and will also provide real-time billing information to customers based on energy usage,
enabling them to pinpoint areas for energy savings. They will also permit more definitive voltage
regulation, enhancing electric distribution-system efficiency, reducing costs, and providing
savings that ultimately get reflected in lower customer bills. Data from the new meters will let
Con Ed set prices based on customers’ time and
level of use. Rates might jump during summer hours when hot weather makes people turn on
their air conditioners or drop overnight when power use is lowest.

Con Ed customers can use an online My Account dashboard with tools to track their daily energy
consumption down to 15-minute increments. They can analyze their usage by comparing hour to
hour, weekday versus weekend, or day versus evening use to see where they can save, and they
can receive high bill alerts if they are using more energy than usual. Con Ed also offers a mobile
app for iPhone and Android smartphone users so that they can track their detailed energy usage
while they are on the go.

3. Are there any ethical issues raised by these smart products, such as their impact on
consumer privacy? Explain your answer.
Privacy is the number one issue with these companies and their customers. The companies have
a great responsibility to protect the customer data collected by their products. The data falling
into the wrong hands could be disastrous for both the companies and the customers.

Case Study: Grocery Wars

3-13 Analyze Walmart and Amazon.com using the competitive forces and value chain
models.

Walmart: It is a traditional competitor with strong supplier intimacy. It continually works to

develop and strengthen its customer intimacy by offering low prices on a wide variety of
products that may or may not be offered elsewhere. It relies on its low-cost leadership to bring
customers back. Its continuous supply replenishment chain with its efficient customer response
system is based on using information technology to strengthen its value chain concentrated in its
primary activities including inbound logistics, operations, sales and marketing, and service.

Amazon: It is a new market entrant that uses substitute products and services to draw in new
customers and keep old ones coming back. Using a lot of third-party suppliers, Amazon often
plays the role of middle-man by simply taking orders and having the supplier ship the goods to
the customer. That strategy requires strong relationships with suppliers. It does use product
differentiation in its strategy to individually tailor products and services under mass
customization. It focuses on market niches for many of its products especially with books and
music preferences recorded and stored for individual customers. By offering its Amazon Prime
shipping service, it has increased switching costs for customers who may order from another site.
Its value chain also relies on efficient information systems that improve inbound and outbound
logistics, sales and marketing, and service.

3-14 Compare the role of grocery sales in Amazon and Walmart’s business strategies.

Walmart has built its empire through 4,000-plus brick-and-mortar stores. It has not been that
involved in online shopping but now it’s being forced to increase its Internet presence based on
Amazon’s success. Walmart is the largest seller of groceries in the United States. Grocery
accounts for 56 percent of Walmart’s total sales, and grocery shopping is a major driver of store
traffic and customer loyalty.

The company is intent on maintaining its position as the leading U.S. grocer. Walmart
has invested and tested in click-and-collect programs, stand-alone grocery pick-up sites, and
scanning and paying for items with smartphones. Grocery is where Walmart really shines. If
Walmart loses the grocery battle to Amazon, it has no chance of ever overtaking Amazon as the
world’s largest e-commerce player.

Online grocery sales were a key part of Walmart’s e-commerce sales growth in 2017, and
management expects online grocery expansion to be the main driver of Walmart’s sales growth
going forward. But if Walmart wants to meet their goal of 40 percent growth in online sales in
2018, it will have to do even more. Management rolled out same-day grocery delivery to 100
markets by the end of 2018, covering 40 percent of U.S. households. Deliveries are handled by
Uber Technologies and other providers, with a $9.95 service fee for a minimum $30 purchase.
Walmart’s online order and pickup service was available at 2,000 stores by the end of 2018.
Management is hoping growth will continue to increase year over year with rollout of new stores
into the online order and pickup program.

Amazon originally could concentrate all its corporate resources on its web business because it
didn’t have to support traditional brick-and-mortar stores. With the addition of Whole Foods
traditional stores, that has changed. However, Amazon is combining the offline and online in
very innovative ways.
In February 2018, Amazon and Whole Foods launched a test to deliver groceries and other goods
directly from Whole Foods in four cities across the United States. Whole Foods was basically
used as an Amazon depot. Customers could order fresh produce, seafood, meat, flowers, baked
goods, and dairy products for delivery, with items arriving at their doorstep within two hours.
The company plans to roll out the service through Prime Now to more cities.

Later in February 2018, Amazon extended its 5 percent cash-back benefit to Prime members
shopping at Whole Foods with the Amazon Prime Rewards Visa Card. Selected Whole Foods
stores have begun selling Amazon technology products, including the Amazon Echo voice-
controlled speaker system, Echo Dots, Fire TV, Kindle e-readers, and Fire tablets.

Whole Foods announced that Amazon Prime would replace Whole Foods’ loyalty program. And
Whole Foods goods are now available on Amazon.com, AmazonFresh (Amazon’s grocery
delivery service), Prime Pantry, and Prime Now. Some Whole Foods stores have added Amazon
Lockers, allowing customers to have their Amazon.com orders delivered to a secure location
inside certain Whole Foods stores until it’s time to pick them up. Customers can also use lockers
to return Amazon items. Amazon and Whole Foods are integrating their point-of-sale systems to
enable more of Amazon’s brands to be available at Whole Foods, and vice versa.

3-15 What role does information technology play in these strategies?

Walmart is crafting a strategy that gives consumers the best of both worlds—what is called an
omnichannel approach to retailing. Walmart’s management believes the company’s advantage is
that it is not a pure-play e-commerce retailer and that customers want some real interaction with
physical stores as well as digital. Walmart will sell vigorously through the web and also in its
physical stores, retaining its hallmark everyday low prices and wide product assortment in both
channels and using its large network of stores as distribution points. Walmart will closely
integrate online shopping and fulfillment with its physical stores so that customers can shop
however they want, whether it’s ordering on their mobile phones for home delivery, through in-
store pickup, or by wandering down the aisles of a Walmart superstore. Walmart is aiming to be
the world’s biggest omnichannel retailer.

Walmart’s web site monitors prices at other retailers and lowers its online prices if necessary. It
is also increasing the number of third-party retailers to compete with Amazon’s vast field of
suppliers. That helps increase the number of items available to customers without Walmart
having to create new shipping logistics chains.

It looks like Amazon is trying to innovate in physical retail store sales as well as online. Amazon
has opened retail bookstores in Seattle, Chicago, San Diego, and other U.S. locations featuring
Amazon electronic devices as well as books. It is thinking about moving into the grocery
business as well as retail stores for furniture and appliances. These are retail experiences that
lend themselves less easily to online purchasing because customers like to see and feel these
types of goods in person.

Amazon set up a physical grocery store in downtown Seattle called Amazon Go that is designed
around an app that is able to place the items customers buy in a digital shopping cart so they can
leave the store without waiting in a checkout line. The system automatically charges the credit
card linked to the customer’s Amazon account and even knows when that person puts something
back.

Amazon is also increasing the number of order fulfillment centers, especially near urban areas
that allows it to offer same-day delivery of purchases. It has a supply chain optimized for online
commerce that Walmart just can’t match.

3-16 Which company is more likely to dominate grocery retailing? Explain your answer.

Student answers will vary. The winner of this epic struggle will be the company that leverages its
advantage better. While Walmart is struggling to improve its online presence, its real focus
remains its brick-and-mortar stores. While Amazon appears to be ahead of Walmart in the e-
commerce battle, it still doesn’t have as many physical stores to serve its customers.

Amazon is working on expanding its selection of goods to be as exhaustive as Walmart’s.

Amazon has allowed third-party sellers to sell goods through its web site for several years, and it
has dramatically expanded product selection through acquisitions such as its 2009 purchase of
online shoe shopping site Zappos.com to give Amazon an edge in footwear and the Whole Foods
acquisition.

There are other forces at work affecting Amazon–Whole Foods, Walmart, and the grocery
industry’s competitive landscape. Money spent on dining out has surpassed grocery sales.
Instead of shopping weekly at the supermarket for groceries to prepare meals at home,
consumers are increasingly snacking and using prepared foods. Companies in the $1.5 billion
meal kit industry (such as Blue Apron) have moved into the market, though grocery chains are
creating their own prepackaged food kits as well.

Grocers are also adapting to surging consumer demand for fresher items, personalized options,
and use of technology to improve the food-buying experience. Deloitte researchers found an
overwhelming majority of shoppers are deploying digital devices to research the groceries they
intend to buy. Deloitte also found that shoppers spend more when using digital tools
 Chapter 4
Ethical and Social Issues in Information Systems

4-1. What ethical, social, and political issues are raised by information systems?

Explain how ethical, social, and political issues are connected and give some examples.

Figure 4-1 can be used to answer this question. Information technology has raised new
possibilities for behavior for which laws and rules of acceptable conduct have not yet been
developed. The introduction of new information technology has a ripple effect, raising new
ethical, social, and political issues that must be dealt with on the individual, social, and
political levels. Ethical, social, and political issues are closely related. Ethical issues confront
individuals who must choose a course of action, often in a situation in which two or more
ethical principles are in conflict (a dilemma). Social issues spring from ethical issues as
societies develop expectations in individuals about the correct course of action. Political
issues spring from social conflict and are mainly concerned with using laws that prescribe
behavior to create situations in which individuals behave correctly.

In giving examples, students can identify issues surrounding the five moral dimensions of the
information age. These include: information rights and obligations, property rights and
obligations, accountability and control, system quality, and quality of life.

List and describe the key technological trends that heighten ethical concerns.

Table 4-2 summarizes the five key technological trends responsible for heightening ethical
concerns. These trends include:
● Computing power doubles every 18 months
● Data storage costs rapidly declining
● Data analysis advances
● Networking advances and the Internet
● Mobile device growth impact

Increasing computer power, storage, and networking capabilities including the Internet can
expand the reach of individual and organizational actions and magnify their impacts. The
ease and anonymity with which information can be communicated, copied, and manipulated
in online environments are challenging traditional rules of right and wrong behavior.

Differentiate between responsibility, accountability, and liability.

Responsibility is a key element of ethical actions. Responsibility means that you accept the
potential costs, duties, and obligations for the decisions you make.
Accountability is a feature of systems and social institutions. It means that mechanisms are in
place to determine who took responsible action.
Liability is a feature of political systems in which a body of laws is in place that permits
individuals to recover the damages done to them by other actors, systems, or organizations.
4-2. What specific principles for conduct can be used to guide ethical decisions?

List and describe the five steps in an ethical analysis.

The five steps in ethical analysis are:

● Identify and describe clearly the facts.
● Define the conflict or dilemma and identify the higher-order values involved.
● Identify the stakeholders.
● Identify the options that you can reasonably take.
● Identify the potential consequences of your options.

Identify and describe six ethical principles.

Six ethical principles are available to judge conduct. These principles are derived
independently from several cultural, religious, and intellectual traditions and include:
● Golden Rule—Do unto others as you would have them do unto you.
● Immanuel Kant’s Categorical Imperative—If an action is not right for everyone to
take, it is not right for anyone.
● Descartes’ rule of change—If an action cannot be taken repeatedly, it is not right to
take at all.
● Utilitarian Principle—Take the action that achieves the higher or greater value
● Risk Aversion Principle—Take the action that produces the least harm or the least
potential cost.
● “No free lunch” rule—Assume that virtually all tangible and intangible objects are
owned by someone else unless there is a specific declaration otherwise.

These principles should be used in conjunction with an ethical analysis to guide decision
making. The ethical analysis involves identifying the facts, values, stakeholders, options,
and consequences of actions. Once completed, you can consider which ethical principle to
apply to a situation to arrive at a judgment.

4-3. Why do contemporary information systems technology and the Internet pose
challenges to the protection of individual privacy and intellectual property?

Define privacy and Fair Information Practices.

Privacy is the claim of individuals to be left alone, free from surveillance or interference
from other individuals or organizations, including the state. Claims of privacy are also
involved at the workplace.
Fair information practices is a set of principles governing the collection and use of
information about individuals. FIP principles are based on the notion of a mutuality of
interest between the record holder and the individual.

Explain how the Internet challenges the protection of individual privacy and
intellectual property.
Contemporary information systems technology, including Internet technologies, challenges
traditional regimens for protecting individual privacy and intellectual property. Data storage
and data analysis technology enables companies to easily gather personal data about
individuals from many different sources and analyze these data to create detailed electronic
profiles about individuals and their behaviors. Data flowing over the Internet can be
monitored at many points. The activities of web site visitors can be closely tracked using
cookies, web beacons, and other web monitoring tools. Not all web sites have strong privacy
protection policies, and they do not always allow for informed consent regarding the use of
personal information.

Explain how informed consent, legislation, industry self-regulation, and technology

tools help protect the individual privacy of Internet users.

The online industry prefers self-regulation rather than having state and federal governments
passing legislation that tightens privacy protection.

In February 2009, the FTC began the process of extending its fair information practices
doctrine to behavioral targeting. The FTC held hearings to discuss its program for voluntary
industry principles for regulating behavioral targeting. The online advertising trade group
Network Advertising Initiative published its own self-regulatory principles that largely
agreed with the FTC. Nevertheless, the government, privacy groups, and the online ad
industry are still at loggerheads over two issues. Privacy advocates want both an opt-in
policy at all sites and a national Do Not Track list. The industry opposes these moves and
continues to insist on an opt-out capability being the only way to avoid tracking (Federal
Trade Commission, 2009). Nevertheless, there is an emerging consensus among all parties
that greater transparency and user control (especially making opt-out of tracking the default
option) is required to deal with behavioral tracking.

Privacy protections have also been added to recent laws deregulating financial services and
safeguarding the maintenance and transmission of health information about individuals. The
Gramm-Leach-Bliley Act of 1999, which repeals earlier restrictions on affiliations among
banks, securities firms, and insurance companies, includes some privacy protection for
consumers of financial services. All financial institutions are required to disclose their
policies and practices for protecting the privacy of nonpublic personal information and to
allow customers to opt out of information-sharing arrangements with nonaffiliated third
parties.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), which took effect
on April 14, 2003, includes privacy protection for medical records. The law gives patients
access to their personal medical records maintained by healthcare providers, hospitals, and
health insurers and the right to authorize how protected information about themselves can be
used or disclosed. Doctors, hospitals, and other healthcare providers must limit the disclosure
of personal information about patients to the minimum amount necessary to achieve a given
purpose.
 List and define three different regimes that protect intellectual property rights?

Intellectual property is subject to a variety of protections under three different legal

traditions:
● Trade secrets
● Copyright
● Patent law

Traditional copyright laws are insufficient to protect against software piracy because
digital material can be copied so easily. Internet technology also makes intellectual
property even more difficult to protect because digital material can be copied easily and
transmitted to many different locations simultaneously over the Net. Web pages can be
constructed easily using pieces of content from other web sites without permission

Interactive Session: Organizations: Will Automation Kill Jobs?

Case Study Questions

1. How does automating jobs pose an ethical dilemma? Who are the stakeholders?
Identify the options that can be taken and the potential consequences of each.

Far more U.S. jobs have been lost to robots and automation than to trade with China, Mexico, or
any other country. No one knows exactly how many U.S. jobs will be lost or how soon, but
researchers estimate that from 9 to 47 percent of jobs could eventually be affected and perhaps 5
percent of jobs eliminated entirely. The changes shouldn’t lead to mass unemployment because
automation could increase global productivity by 0.8 percent to 1.4 percent annually over the
next 50 years and create many new jobs.

The positive and negative impacts of technology are not delivered in an equal way. All the new
jobs created by automation are not necessarily better jobs. Manufacturing jobs have been the
hardest hit by robots and automation. Disappearing factory jobs have been largely replaced by
new jobs in the service sector.

The new jobs created by technology are not necessarily in the places losing jobs, such as the Rust
Belt. Those forced out of a job by robots generally do not have the skills or mobility to assume
the new jobs created by automation. The problem is not mass unemployment; it’s transitioning
people from one job to another.

At this point in time, it’s highly unlikely that robots will replace all human workers in
manufacturing. They still lack the flexibility, delicacy, and insight provided by humans. For all
their recent advances, robots still can’t duplicate a human being’s fine motor skills in
manipulating materials and small parts. Robots still have trouble dealing with soft or floppy
material, such as cloth or bundles of electrical wire. Although robots are good at reliably and
repeatedly performing defined tasks, they’re not good at adapting.
2. If you were the owner of a factory deciding on whether to acquire robots to perform
certain tasks, what people, organization, and technology factors would you consider?

People: As robots become more widespread, manufacturing tasks performed by humans will
become higher level and more complex. Workers will be expected to supervise and perhaps even
program robots, and there will be fewer low-level manufacturing jobs. Workers will need more
sophisticated skills to succeed in tomorrow’s manufacturing plants.

Organization: Using primarily human workers, a manufacturing plant can shift a production line
in a weekend. It would take weeks to reprogram robots and shift assembly patterns, and during
that downtime, production would be at a standstill.

Technology: Among all the other drawbacks listed in previous questions, robots can’t deal with
the amount of variation in options required to run all manufacturing plants.

Case Study: Facebook Privacy: Your Life for Sale

4-13 Perform an ethical analysis of Facebook. What is the ethical dilemma presented by
this case?

The stakeholders involved in an ethical analysis of Facebook include Facebook (obviously),

advertisers, device makers, data collecting agencies, Electronic Privacy Information Center
(EPIC), governments and individual users.

Facebook collects an incredible amount of personal data on its users. It is using its ability to
track online activity of its members to develop a frighteningly accurate picture of their lives.
It gathers personal information about users, both with and without their consent, which can
be used against them in other ways. It also collects data of friends of users without their
knowledge or consent. All the data on users and users’ friends is available for sale.

Facebook’s goal is to get its users to share as much data as possible, because the more
Facebook knows, the more accurately it can serve relevant advertisements and thus, charge
higher fees to advertisers.

Facebook’s critics are concerned that the repository of personal data of the size that
Facebook has amassed requires protections and privacy controls that extend far beyond those
that Facebook currently offers.

4-14 What is the relationship of privacy to Facebook’s business model?

The less privacy Facebook offers to its users, the more valuable and useful its business model
becomes. By providing more privacy to its users, the less data it collects, stores, and provides
to advertisers. That makes its business model less valuable because advertisements cannot be
as fully developed for individual users.
 Facebook CEO Mark Zuckerberg says that people want the world to be more open and
connected. He also wants the world to be more open and connected because his company
stands to make more money in that world.

While Facebook has shut down several of its more egregious privacy-invading features, and
enhanced its consent process, the company’s data use policies
make it very clear that, as a condition of using the service, users grant the company wide
latitude in using their personal information in advertising. The default option for users is
“opt-in”; most users do not know how to control use of their information; and
they cannot “opt out” of all sharing if they want to use Facebook. This is called the “control
paradox” by researchers: even when users are given controls over the use of their personal
information, they typically choose not to use those controls. Although users can limit some
uses of their information, an advanced degree in Facebook data features is required.

Facebook also had data-sharing partnerships with at least 60 device makers all of whom
could capitalize on the data and make more money for their companies. Data sharing
restrictions placed on software developers from collecting information about customers’
friends did not extend to device makers.

4-15 Describe the weaknesses of Facebook’s privacy policies and features. What
management, organization, and technology factors have contributed to those weaknesses?

Management: Ninety-three percent of people polled believe that Internet companies should
be forced to ask for permission before using their personal information much like European
countries require. Seventy-two percent want the ability to opt out of online tracking.
Executives and managers must develop policies and procedures that address those concerns
at the same time they are developing a competitive strategy to effectively use personal
information to increase the company’s value to advertisers. Privacy advocate groups like the
Electronic Privacy Information Center want Facebook to restore its more robust privacy
settings from 2009. If it does that, some of its value to advertisers will diminish.

Organization: Facebook’s value and growth potential are determined by how effectively it
can leverage the personal data that is aggregated about its users to attract advertisers. It also
stands to gain from managing and avoiding the privacy concerns raised by its users and
government regulators.

Technology: Facebook does not have a good history when it comes to privacy violations and
missteps that raise doubts about whether it should be responsible for the personal data of
hundreds of millions of people. It has settled lawsuits with the Federal Trade Commission in
which they were barred from misrepresenting the privacy or security of its users’ personal
information. It was charged with deceiving its users by telling them they could keep their
information on Facebook private, then repeatedly allowing it to be shared and made public. It
has also come under fire for collecting information about users who are not even logged into
Facebook or do not have accounts with the company. It keeps track of activity on other sites
that have “Like” buttons or “recommendations” widgets, and records the time of your visit
 and your IP address when you visit a site with those features, regardless of whether or not
you click on them.

4-16 Will Facebook be able to have a successful business model without invading privacy?
Explain your answer. Are there any measures Facebook could take to make this possible?

Opinions will vary on this question. Certainly, Facebook’s ability to leverage as much as
possible from advertisers may be diminished if it cannot collect every nugget of information
about its users to sell to advertisers. However, it could make up some of the lost revenue by
charging users a premium fee for the company to not collect as much information and restore
a higher level of privacy to those who are willing to pay for it.

For the first time since its founding, Facebook is facing a serious existential crisis, and
potentially a threat to its business model. Facebook’s current crisis follows from a history of
privacy abuses in its short 14-year life. However, there are some signs that Facebook might
become more responsible with its data collection processes, whether by its own volition or
because it is forced to do so. As a publicly traded company, Facebook now invites more
scrutiny from investors and regulators.

The company can also allow users to view all the data it collects on them and allow them to
delete information they deem necessary. They can also allow users to opt-out of the tracking
systems much like European users already can.
Facebook should continue to explore additional revenue streams outside of what it already
has in advertising.
Critics have asked Facebook why it doesn’t offer an ad-free service—like music streaming
sites—for a monthly fee. Others want to know why Facebook does not allow users just to opt
out of tracking. But these kinds of changes would be very difficult for Facebook because its
business model depends entirely on the largely unfettered use of its users’ personal private
information, just as it declares in its data use policy. That policy states very openly that if you
use Facebook you agree to their terms of service, which enable it to share your information
with third parties.
 Chapter 5
IT Infrastructure and Emerging Technologies

5-1 What is IT infrastructure and what are the stages and drivers of IT infrastructure
evolution?

Define IT infrastructure from both a technology and a services perspective.

● Technical perspective is defined as the shared technology resources that provide the
platform for the firm’s specific information system applications. It consists of a set of
physical devices and software applications that are required to operate the entire
enterprise.
● Service perspective is defined as providing the foundation for serving customers,
working with vendors, and managing internal firm business processes. In this sense, IT
infrastructure focuses on the services provided by all the hardware and software. IT
infrastructure is a set of firm-wide services budgeted by management and comprising
both human and technical capabilities.

List each of the eras in IT infrastructure evolution and describe its distinguishing
characteristics.

Five stages of IT infrastructure evolution include:

● General-purpose mainframe and minicomputer era (1959 to present): Consists of a
mainframe performing centralized processing that could be networked to thousands of
terminals and eventually some decentralized and departmental computing using
networked minicomputers.
● Personal computer era (1981 to present): Dominated by the widespread use of standalone
desktop computers with office productivity tools.
● Client/server era (1983 to present): Consists of desktop or laptop clients networked to
more powerful server computers that handle most of the data management and
processing.
● Enterprise computing era (1992 to present): Defined by large numbers of PCs linked
together into local area networks and the growing use of standards and software to link
disparate networks and devices into an enterprise-wide network so that information can
flow freely across the organization.
Cloud and mobile computing era (2000 to present): A model of computing where firms
and individuals obtain computing power and software applications over the Internet,
rather than purchasing their own hardware and software.

Define and describe the following: Web server, application server, multitiered
client/server architecture.

● Web server: Software that manages requests for web pages on the computer where they
are stored and that delivers the page to the user’s computer.
 ● Application server: Software that handles all application operations between browser-
based computers and a company’s back-end business applications or databases.
Multitiered client/server architecture: Client/server network in which the work of the
entire network is balanced over several different levels of servers.

Describe Moore’s Law and the Law of Mass Digital Storage

● Moore’s Law: The number of components on a chip with the smallest manufacturing
costs per component (generally transistors) had doubled each year. Moore later reduced
the rate of growth to a doubling every two years.
● Law of Mass Digital Storage: The amount of digital information is roughly doubling
every year. The cost of storing digital information is falling at an exponential rate of 100
percent a year.

Both of these concepts explain developments that have taken place in computer
processing, memory chips, storage devices, telecommunications and networking
hardware and software, and software design that have exponentially increased computing
power while exponentially reducing costs.

Describe how network economics, declining communications costs, and technology

standards affect IT infrastructure.

Network economics: Metcalfe’s Law helps explain the mushrooming use of computers by
showing that a network’s value to participants grows exponentially as the network takes on
more members. As the number of members in a network grows linearly, the value of the
entire system grows exponentially and theoretically continues to grow forever as members
increase.

Declining communication costs: Rapid decline in communication costs and the exponential
growth in the size of the Internet is a driving force that affects the IT infrastructure. As
communication costs fall toward a very small number and approach zero, utilization of
communication and computing facilities explodes.

Technology standards: Growing agreement in the technology industry to use computing

and communication standards that define specifications that establish the compatibility of
products and the ability to communicate in a network. Technology standards unleash
powerful economies of scale and result in price declines as manufacturers focus on the
products built to a single standard. Without economies of scale, computing of any sort would
be far more expensive than is currently the case.

5-2 What are the components of IT infrastructure?

List and describe the components of IT infrastructure that firms need to manage.
IT infrastructure includes hardware, software, and services:
 ● Computing platforms: Includes mainframes, midrange computers, desktop and laptop
computers, and mobile handheld devices—anything that connect employees, customers,
and suppliers into a coherent digital environment.
● Telecommunications services: Data, voice, and video connectivity between employees,
customers, and suppliers.
● Data management: Store, manage and analyze data.
● Application software: Includes enterprise resource planning, customer relationship
management, supply chain management, and knowledge management systems.
● Physical facilities management: Develop and manage the physical installations for
computing, telecommunications, and data management.
● IT management: Planning and developing the infrastructure, coordinate IT services
among business units, managing accounting for IT expenditures, and provide project
management.
● IT standards: Policies that determine which information technology will be used, when,
and how.
● IT education: Employee training in system use and management training for IT
investments.
● IT research and development: Research future IT projects and investments that can help
the firm differentiate itself from competitors.

Case Study: Is BYOD Good for Business?

5-14 What are the advantages and disadvantages of allowing employees to use their
personal smartphones for work?

Advantages: Employees using their own smartphones would allow companies to enjoy all of
the same benefits of a mobile workforce without spending company funds on the devices.
Mobility experts can help a company leverage mobility more effectively. Employees can be
more productive and happier with a BYOD policy in place.

Disadvantages: IT departments need to overcome several logistical hurdles before allowing

employees to use their own smartphones, including security, inventory management, support,
integrating mobile devices into pre-existing IT functions and systems, and measuring return
on investment. When employees are not able to access critical data or encounter other
problems with their mobile devices, they will need assistance from the information systems
department. Some devices are much more prone to hackers thereby threatening the security
of corporate networks.

5-15 What management, organization, and technology factors should be addressed when
deciding whether to allow employees to use their personal smartphones for work?

Management: When employees make changes to their personal phone, such as switching
cellular carriers, changing their phone number, or buying a new mobile device, companies
will need to quickly and flexibly ensure that their employees are still able to remain
productive.
 Organization: A significant portion of corporate IT resources is dedicated to managing and
maintaining a large number of devices within an organization. In the past, companies tried to
limit business smartphone use to a single platform, making it easier to keep track of each
mobile device and to roll out software upgrades or fixes. Firms need an efficient inventory
management system that keeps track of which devices employees are using, where the device
is located, whether it is being used, and what software it is equipped with. For unprepared
companies, keeping track of who gets access to what data could be a nightmare.

Technology: The mobile digital landscape is very complicated, with a variety of devices and
operating systems on the market that do not have well-developed tools for administration and
security. BYOD requires a significant portion of corporate IT resources dedicated to
managing and maintaining a large number of devices within the organization. Providing
adequate technical support for every employee could be difficult. Mobility introduces a new
layer of variety and complexity to tech support that companies need to be prepared to handle.

5-16 Evaluate how the companies described in this case study dealt with the challenges of
BYOD.

Intel and SAP successfully implemented BYOD. Intel managed a potential lack of trust
between workers and management when management has access to personal data on
employee devices by establishing clear-cut guidelines informing employees about exactly
what information can and can’t be seen. Intel allows employees to choose amon
g different levels of mobile access to corporate systems, with each tier accompanied by
different levels of security. SAP created a security system for decommissioning a mobile
device within a minute whenever a smartphone or tablet is lost or stolen.

Blackstone placed limitations on the types of devices employees can use limiting the
devices to Apple products that are the easiest to support and require little maintenance
compared to other mobile tools.

At Venafi, a cybersecurity company, employees have the option of bringing their own
smartphones, tablets, and notebooks to work with them or using company-issued devices.
The company has a well-developed BYOD policy. Venafi’s IT department does not support
employees’ hardware devices because it would be too difficult to handle all the different
mobile devices and software available to consumers. That means employees are
responsible for troubleshooting and repairs of their personal equipment. However, Venafi
does ensure that each device each device is securely connected to the corporate network.

5-16 Allowing employees to use their own smartphones for work will save the company
money. Do you agree? Why or why not?

Allowing employees to use their own smartphones won’t necessarily save money when you
consider the TCO and the extra efforts required on the part of the IT staff, especially if the
smartphone becomes a point of entry for malware. There are significant concerns with
securing company information accessed with mobile devices.
By using virtualization, employees can access their entire desktop on their smartphones and
mobile handhelds and thus are able to use the same programs on the road that they use in the
office. Placing virtualization software on employees’ personal tablets is less expensive than
outfitting them with company-purchased laptops.
One of the biggest worries that managers have about mobility is the difficulty of measuring
their return on investment.