Management

Information Systems
MBA Programme
MANCOSA
 The Role of Information Systems in Business Today

• In the emerging, fully digital firm

– Significant business relationships are digitally
enabled and mediated
– Core business processes are accomplished
through digital networks
– Key corporate assets are managed digitally

• Digital firms offer greater flexibility in

organization and management
 The Role of Information Systems in Business Today

• Growing interdependence between ability to use information

technology and ability to implement corporate strategies and
achieve corporate goals

• Business firms invest heavily in information systems to

achieve six strategic business objectives:

– Operational excellence
– New products, services, and business models
– Customer and supplier intimacy
– Improved decision making
– Competitive advantage
– Survival
 The Role of Information Systems in Business Today

The Interdependence Between Organizations and

Information Technology
 Perspectives on Information Systems

Functions of an Information System

Perspectives on Information Systems

Levels in a Firm
 Perspectives on Information Systems

• Management dimension of
information system
– Managers set organizational strategy for
responding to business challenges
– In addition, managers must act creatively:
• Creation of new products and services
• Occasionally re-creating the organization
 Business Processes and Information Systems

• Examples of functional business processes

– Manufacturing and production
• Assembling the product
– Sales and marketing
• Identifying customers
– Finance and accounting
• Creating financial statements
– Human resources
• Hiring employees
 Business Processes and Information Systems

• Information technology enhances

business processes in two main ways:

• Increasing efficiency of existing processes

• Automating steps that were manual

• Enabling entirely new processes that are

capable of transforming the businesses
• Change flow of information
• Replace sequential steps with parallel steps
• Eliminate delays in decision making
 Types of Business Information Systems

• Systems from a constituency

perspective
– Transaction processing systems:
supporting operational level employees
– Management information systems and
decision-support systems: supporting
managers
– Executive support systems: supporting
executives
 Types of Business Information Systems

• Transaction processing systems

– Perform and record daily routine
transactions necessary to conduct
business
• E.g. sales order entry, payroll, shipping
– Allow managers to monitor status of
operations and relations with external
environment
 Types of Business Information Systems

• Management information systems

– Serve middle management
– Provide reports on firm’s current
performance, based on data from TPS
– Provide answers to routine questions with
predefined procedure for answering them
– Typically have little analytic capability
 Types of Business Information Systems

How Management Information Systems Obtain their

Data from the Organization’s TPS
 Types of Business Information Systems

• Decision support systems

– Serve middle management
– Support nonroutine decision making
• E.g. What is impact on production schedule if
December sales doubled?
– Often use external information as well from
TPS and MIS
 Types of Business Information Systems

• Executive support systems

– Support senior management
– Address nonroutine decisions requiring
judgment, evaluation, and insight
– E.g. ESS that provides minute-to-minute
view of firm’s financial performance as
measured by working capital, accounts
receivable, accounts payable, cash flow,
and inventory.
 Types of Business Information Systems

Interrelationships Among Systems

 Decision Making and Information Systems

• Types of decisions:
• Unstructured: Decision maker must provide judgment,
evaluation, and insight to solve problem
• Structured: Repetitive and routine; involve definite procedure
for handling so they do not have to be treated each time as new
• Semistructured: Only part of problem has clear-cut answer
provided by accepted procedure
 Decision Making and Information Systems

Information Requirements of Key Decision-Making

Groups in a Firm
 Decision Making and Information Systems

Stages in Decision Making

 Systems for Decision Support

• Four kinds of systems for decision support

• Management information systems (MIS)

• Decision support systems (DSS)

• Executive support systems (ESS)

• Group decision support systems (GDSS)

 Systems for Decision Support

• Management information systems (MIS)

• Help managers monitor and control business by providing
information on firm’s performance and address structured
problems
• Typically produce fixed, regularly scheduled reports based on
data from TPS
• E.g. exception reports: Highlighting exceptional conditions, such
as sales quotas below anticipated level
• E.g. California Pizza Kitchen MIS
• For each restaurant, compares amount of ingredients used per
ordered menu item
 Systems for Decision Support

• Decision-support systems (DSS)

• Support unstructured and semistructured decisions
• Model-driven DSS
• Earliest DSS were heavily model-driven
• Data-driven DSS
• Some contemporary DSS are data-driven
• Use OLAP and data mining to analyze large pools of data
 Systems for Decision Support

• Components of DSS
• Database used for query and analysis
• Current or historical data from number of
applications or groups
• May be small database or large data warehouse
• User interface
• Often has Web interface

• Software system with models, data mining, and other

analytical tools
 Systems for Decision Support

• Model:
• Abstract representation that illustrates components or
relationships of phenomenon; may be physical,
mathematical, or verbal model
• Statistical models
• Optimization models
• Forecasting models
• Sensitivity analysis models
 Systems for Decision Support

A Pivot Table that Determines Regional Distribution of Customers

 Executive Support Systems (ESS)

• Executive support systems (ESS)

• Integrate data from different functional systems for firmwide
view
• Incorporate external data, e.g. stock market news, competitor
information, industry trends, legislative action
• Include tools for modeling and analysis
• Facilities for detecting signals of problems, threats, or strategic
opportunities
• Able to drill down from summary information to lower levels of
detail
 Group Decision-Support Systems (GDSS)

• What Is a GDSS?
• Interactive, computer-based system used to facilitate
solution of unstructured problems by set of decision
makers working together as group
• Designed to improve quality and effectiveness of
decision-making meetings
• Make meetings more productive by providing tools to
facilitate:
• Planning, generating, organizing, and evaluating ideas
• Establishing priorities
• Documenting meeting proceedings for others in firm
 Group Decision-Support Systems (GDSS)

• Components of GDSS
• Hardware
• Facility: Appropriate facility, furniture, layout
• Electronic hardware: Audiovisual, computer, networking equipment
• Software
• Electronic questionnaires, electronic brainstorming tools, idea
organizers
• Tools for voting or setting priorities, stakeholder identification and
analysis tools, policy formation tools,
• Group dictionaries
• People
• Participants and trained facilitator, support staff
 Group Decision-Support Systems (GDSS)

• Overview of GDSS meeting

• Each attendee has workstation, networked to facilitator’s
workstation and meeting’s file server
• Whiteboards on either side of projection screen
• Seating arrangements typically semicircular, tiered
• Facilitator controls use of tools during meeting
• All input saved to server, kept confidential
• After meeting, full record (raw material and final output)
assembled and distributed
Group Decision-Support Systems (GDSS)

Group System Tools

 Using Information Systems to Achieve Competitive Advantage

• Why do some firms become leaders within

their industry?
• Michael Porter’s competitive forces model
• Provides general view of firm, its competitors, and
environment
• Five competitive forces shape fate of firm
 Using Information Systems to Achieve Competitive Advantage

Porter’s Competitive Forces Model

 Using Information Systems to Achieve Competitive Advantage

• Traditional competitors
• All firms share market space with competitors who
are continuously devising new products, services,
efficiencies, switching costs
• New market entrants
• Some industries have high barriers to entry, e.g.
computer chip business
• New companies have new equipment, younger
workers, but little brand recognition
 Using Information Systems to Achieve Competitive Advantage

• Substitute products and services

• Substitutes customers might use if your prices
become too high, e.g. iTunes substitutes for CDs
• Customers
• Can customers easily switch to competitor’s
products? Can they force businesses to compete on
price alone in transparent marketplace?
• Suppliers
• Market power of suppliers when firm cannot raise
prices as fast as suppliers
 Using Information Systems to Achieve Competitive Advantage

• Four generic strategies for dealing with

competitive forces, enabled by using IT
• Low-cost leadership
• Product differentiation
• Focus on market niche
• Strengthen customer and supplier intimacy
 Using Information Systems to Achieve Competitive Advantage

• Low-cost leadership
• produce products and services at a lower price than
competitors while enhancing quality and level of
service.
• Product differentiation
• Enable new products or services, greatly change
customer convenience and experience
 Using Information Systems to Achieve Competitive Advantage

• Focus on market niche

• Use information systems to enable a focused
strategy on a single market niche; specialize.
• Strengthen customer and supplier intimacy’
• Use information systems to develop strong ties and
loyalty with customers and suppliers
 Understanding Ethical and Social Issues Related to Systems

• Five moral dimensions of information age

• Major issues raised by information systems
include:
• Information rights and obligations
• Property rights and obligations
• Accountability and control
• System quality
• Quality of life
 The Moral Dimensions of Information Systems

• Health risks:
• Repetitive stress injury (RSI)
• Largest source is computer keyboards
• Carpal Tunnel Syndrome (CTS)
• Computer vision syndrome (CVS)
• Technostress
• Role of radiation, screen emissions, low-level
electromagnetic fields
Organizing Data in a Traditional File Environment

The Data Hierarchy

 Organizing Data in a Traditional File Environment

• Problems with the traditional file processing (files

maintained separately by different departments)
• Data redundancy and inconsistency
• Data redundancy: Presence of duplicate data in multiple files
• Data inconsistency: Same attribute has different values
• Program-data dependence:
• When changes in program requires changes to data accessed by
program
• Lack of flexibility
• Poor security
• Lack of data sharing and availability
 The Database Approach to Data Management

• Database:
• Collection of data organized to serve many applications by
centralizing data and controlling redundant data
• Database management system:
• Interfaces between application programs and physical data files
• Separates logical and physical views of data
• Solves problems of traditional file environment
• Controls redundancy
• Eliminated inconsistency
• Uncouples programs and data
• Enables central management and security
 The Database Approach to Data Management

Human Resources Database with Multiple Views

 The Database Approach to Data Management

• Relational DBMS
• Represent data as two-dimensional tables called relations or files
• Each table contains data on entity and attributes
• Table: Grid of columns and rows
• Rows (tuples): Records for different entities
• Fields (columns): Represents attribute for entity
• Key field: Field used to uniquely identify each record
• Primary key: Field in table used for key fields
• Foreign key: Primary key used in second table as look-up field to
identify records from original table
The Database Approach to Data Management

Relational Database Tables

 The Database Approach to Data Management

Relational Database Tables (cont.)

Using Databases to Improve Business Performance and Decision Making

Components of a Data Warehouse

 Using Databases to Improve Business Performance and Decision Making

• Business Intelligence:
• Tools for consolidating, analyzing, and providing access
to vast amounts of data to help users make better
business decisions
 Managing Data Resources

• Managing data resources:

• Establishing an information policy
• Information policy: Specifies firm’s rules, procedures, roles for
sharing, standardizing data
• Data administration: Responsible for specific policies and
procedures; data governance
• Database administration: Database design and management
group responsible for defining, organizing, implementing,
maintaining database
 Communications Networks

• Signals: digital vs. analog

• Analog: Represented by continuous waveform
• Digital: Discrete, binary waveform
• Data as strings of two states: one bit, zero bits / on-off
electrical pulses
• Modem needed to translate between analog and digital
• Types of networks (geographic scope)
• Local area network (LAN)
• Campus area network (CAN)
• Metropolitan area network (MAN)
• Wide area network (WAN)
 Communications Networks

Functions of the Modem

 Communications Networks

Network Topologies
 Communications Networks

• Physical transmission media

• Twisted wire
• Pairs of twisted copper wire
• Older type of transmission medium
• Most common LAN cabling: Cat5 cable
• Coaxial cable
• Single, thickly insulated copper wire
• Used for longer runs
 Communications Networks

• Physical transmission media

• Fiber optics and optical networks
• Strands of clear glass fiber
• Used for Internet backbone
• Optical networks can boost capacity by using multiplexing -
using different wave lengths to carry separate streams of data
over same strand
 Communications Networks

• Wireless transmission media

• Microwave systems
• High-frequency radio signals that follow straight line and require
transmission stations or satellites to act as relay
• Cellular telephones
• Radio towers placed in adjacent geographic areas (cells)
 Communications Networks

• Transmission speed
• Bits per second (bps): Used to measure total amount
of data that can be transmitted
• Hertz (cycles per second): Frequency of medium,
affects transmission capacity
• Bandwidth: Difference between highest and lowest
frequencies that can be accommodated on channel
 The Internet

• What is the Internet?

• World’s most extensive public communication system, rivaling
global telephone system
• World’s largest implementation of:
• Client/server network
• Internetworking
• Internet service provider:
• Commercial organization with permanent connection to Internet
• Sells temporary connections to retail subscribers
 The Internet

• Internet addressing
• IP address
• Assigned to each computer on Internet
• 32-bit number: four strings of numbers ranging from 0 to 255
separated by periods
• E.g. 207.46.250.119
• Messages decomposed into packets, each carrying
destination IP address
 The Internet

• Domain Name System

• Converts IP addresses to domain names
• DNS servers maintain database of domain names mapped to IP
addresses
• Domains: E.g. www.google.com
• Root domain (“.”)
• Top-level domain (.gov, .com, .edu, etc.)
• Second-level domain (e.g. “google”)
• Third-level domains/hosts (“www”)
 The Internet

• World Wide Web: Most popular Internet service

• Web pages: Formatted using Hypertext Markup Language
(HTML) with embedded links that connect documents to one
another and that also link pages to other objects, such as sound,
video, or animation files
• Hypertext Transfer Protocol (HTTP): Communications
standard used to transfer pages on Web
• Uniform resource locator (URL): Full address of web page,
including protocol, domain name, directory path, and file name
• E.g.: http://www.megacorp.com/content/features/082602.html
 The Internet

• Web servers: Software for locating and

managing stored Web pages, typically run on
dedicated computers
• Web site: Collection of Web pages linked to
home page
• Webmaster: Person in charge of organization’s
Web site
• Search engines: Allow finding information on
Web of 50 billion+ pages nearly instantly
 The Internet

• Intranets: Private networks using Internet standards

• Protected from public visits by firewalls
• Extranets: Limited area of intranet designed for access by
authorized vendors and customers
• Technologies and tools for communication and e-
business
• E-mail
• Chat, instant messaging
• Electronic discussions
• Groupware
• Electronic conferencing
 The Internet

• Internet telephony:
• Telephone voice transmission over Internet or private networks
• Voice over IP (VoIP): Uses Internet Protocol (IP) to deliver voice
information using packet switching, avoiding tolls charged by local
and long-distance telephone networks
• Can reduce communication and network management costs by 20
to 30 percent
• Flexible technology: Phones can be added or moved to different
offices without rewiring or reconfiguring network
 Systems Vulnerability and Abuse

• Security
• Policies, procedures, and technical measures used to prevent
unauthorized access, alteration, theft, or physical damage to
information systems

• Controls
• Methods, policies, and organizational procedures that ensure:
• Safety of organization’s assets
• Accuracy and reliability of accounting records
• Operational adherence to management standards
 Systems Vulnerability and Abuse

• Why systems are vulnerable

• Electronic data vulnerable to more types of threats
than manual data
• Networks
• Potential for unauthorized access, abuse, or fraud is not
limited to single location but can occur at any access point
in network
• Vulnerabilities exist at each layer and between layers
• E.g. user error, viruses, hackers, radiation, hardware or
software failure, theft
 Systems Vulnerability and Abuse

• Malicious software (malware)

• Computer virus
• Rogue software program that attaches to other
programs or data files
• Payload may be relatively benign or highly destructive
• Worm:
• Independent program that copies itself over network

• Viruses and worms spread via:

• Downloaded software files
• E-mail attachments
• Infected e-mail messages or instant messages
• Infected disks or machines
 Systems Vulnerability and Abuse

• Trojan horse
• Software program that appears to be benign but then does
something other than expected
• Does not replicate but often is way for viruses or malicious code
to enter computer system
• Spyware
• Small programs installed surreptitiously on computers to monitor
user Web surfing activity and serve advertising
• Key loggers
• Record and transmit every keystroke on computer
• Steal serial numbers, passwords
 Systems Vulnerability and Abuse

• Hacker
• Individual who intends to gain unauthorized access to
computer system
• Cybervandalism
• Intentional disruption, defacement, or destruction of Web
site or corporate information system
• Sniffer:
• Eavesdropping program that monitors information
traveling over network
 Systems Vulnerability and Abuse

• Denial-of-service (DoS) attack:

• Flooding network or Web server with thousands of false
requests so as to crash or slow network
 Systems Vulnerability and Abuse

• Computer crime
• Computer as target of crime
• Accessing computer without authority
• Breaching confidentiality of protected computerized data
• Computer as instrument of crime
• Theft of trade secrets and unauthorized copying of software or
copyrighted intellectual property
• Using e-mail for threats or harassment
• Most economically damaging computer crimes
• DoS attacks and viruses
• Theft of service and disruption of computer systems
 Systems Vulnerability and Abuse

• Identity theft
• Using key pieces of personal information (social security
numbers, driver’s license numbers, or credit card numbers) to
impersonate someone else
• Phishing
• Setting up fake Web sites or sending e-mail messages that look
like those of legitimate businesses to ask users for confidential
personal data
 Systems Vulnerability and Abuse

• Internal threats: Employees

• Company insiders pose serious security problems
• Access to inside information– like security codes and passwords
• May leave little trace
• User lack of knowledge: Single greatest cause of network
security breaches
• Compromised passwords
• Social engineering
• Errors introduced into software by:
• Faulty data entry, misuse of system
• Mistakes in programming, system design
 Technologies and Tools for Security

• Security policy
• Statements ranking information risks, identifying acceptable
security goals, and identifying mechanisms for achieving
these goals
• Chief Security Officer (CSO)
• Heads security group in larger firms
• Responsible for enforcing security policy
• Security group
• Educates and trains users
• Keeps management aware of security threats and
breakdowns
• Maintains tools chosen to implement security
 Technologies and Tools for Security

• Disaster recovery planning

• Restoring computing and communication services after
earthquake, flood, etc.
• Can be outsourced to disaster recovery firms
• Business continuity planning
• Restoring business operations after disaster
• Identifies critical business processes and determines how to
handle them if systems go down
• Business impact analysis
• Use to identify most critical systems and impact system outage
has on business
 Technologies and Tools for Security

• Access control
• Policies and procedures used to prevent improper access to
systems by unauthorized insiders and outsiders
• Users must be authorized and authenticated
• Authentication:
• Typically established by password systems
• New authentication technologies:
• Tokens
• Smart cards
• Biometric authentication
 Technologies and Tools for Security

• Firewalls:
• Hardware and software controlling flow of incoming
and outgoing network traffic
• Prevents unauthorized access
• Screening technologies
 Technologies and Tools for Security

• Intrusion detection systems:

• Full-time, real-time monitoring tools

• Placed at most vulnerable points of corporate networks

to detect and deter intruders

• Scanning software looks for patterns such as bad

passwords, removal of important files, and notifies
administrators
 Technologies and Tools for Security

• Antivirus software, antispyware software

• Antivirus software:
• Checks computer systems and drives for presence of
computer viruses
• To remain effective, antivirus software must be
continually updated
• Antispyware software tools:
• Many leading antivirus software vendors include
protection against spyware
 Electronic Commerce

• Three major e-commerce categories

• Business-to-consumer (B2C)
• E.g. Barnesandnoble.com
• Business-to-business (B2B)
• E.g. ChemConnect.com
• Consumer-to-consumer (C2C)
• E.g. eBay.com

• M-commerce
• Use of handheld wireless devices for purchasing goods
and services from any location
 The Growth of International Information Systems

• Strategy when building international

systems
• Understand global environment
• Business drivers pushing your industry toward global
competition
• Inhibitors creating management challenges
• Develop corporate strategy for competition
• How firm should respond to global competition
 The Growth of International Information Systems

• Strategy when building international

systems (cont.)
• Develop organization structure and division of
labor
• Where will production, marketing, sales, etc. be located
• Consider management issues
• Design of business procedures, reengineering
• Consider technology platform
 The Growth of International Information Systems

International Information Systems Architecture

 The Growth of International Information Systems

• Challenges and obstacles to global business

systems
• General, cultural challenges
• Cultural particularism
• Regionalism, nationalism, language differences
• Social expectations:
• Brand-name expectations, work hours
• Political laws
• Transborder data flow
• Transborder data and privacy laws, commercial regulations
 The Growth of International Information Systems

• Specific challenges
• Standards
• Different EDI, e-mail, telecommunication standards
• Reliability
• Phone networks not uniformly reliable
• Speed
• Different data transfer speeds, many slower than U.S.
• Personnel
• Shortages of skilled consultants
 Managing Global Systems

• Principle management problems posed by

developing international systems
• Agreeing on common user requirements
• Introducing changes in business processes
• Coordinating application development
• Coordinating software releases
• Encouraging local users to support global systems
 Managing Global Systems

1. Define core business processes

2. Identify core systems to coordinate centrally
3. Choose an approach
• Grand design approaches tend to fail
• Evolve transnational applications incrementally from
existing applications
4. Make benefits clear
• Global flexibility
• Gains in efficiency
• Global markets
• Optimizing corporate funds over much larger capital base
 Managing Global Systems

• The management solution

• Agreeing on common user requirements
• Introducing changes in business processes
• Coordinating applications development
• Coordinating software releases
• Encouraging local users to support global systems
 Technology Issues and Opportunities for Global Value Chains

• Technology challenges of global systems

• Computing platforms and systems integration
• How new core systems will fit in with existing suite of applications
developed around globe by different divisions
• Standardization: Data standards, interfaces, software, etc.

• Connectivity
• Internet does not guarantee any level of service
• Many firms use private networks and VPNs
• Low penetration of PCs, outdated infrastructures
 Technology Issues and Opportunities for Global Value Chains

• Technology challenges of global systems (cont.)

• Software
• Integrating new systems with old
• Human interface design issues, languages,
• Standardizing business processes
• Software applications that enhance productivity of international
work teams
• Solutions include
• EDI, SCM systems
• Groupware, e-mail, videoconferencing
• Internet-based tools