Beruflich Dokumente
Kultur Dokumente
and e-BUSINESS
Part 1
Warsaw
COURSE OBJECTIVES
3
COURSE BRIEF CONTENTS (only part with WCH)
4
REFERENCES (textbooks):
Main:
1. Turban E., at al…: Information Technology for Management.
Transforming Organizations in the Digital Economy, John Wiley
and Sons Inc. 6-th ed., 2008,
2. Laudon K. C., Laudon J. P.: Management Information Systems,
Pearson Education Inc., Prentice Hall, NY, 9-th ed. 2010.
Additionally:
1. Chmielarz W.: Selected Problems of IT Development, Wydawnictwo
Naukowe WZ UW, Warsaw, 2005,
2. Bocij P., Chaffey D., Greasley A., Hickie S.: Business Information
Systems, 2-nd ed., Prentice Hall, Harlow, 2003,
3. Turban E., Lee J., King D., McKay J., Viehland D., Cheung C., Lay L.:
Electronic Commerce. A Managerial Perspective, Pearson Education, 4-
th ed., 2008
4. Wallace T., M.; Kremzar M., H.: ERP: Making It Happen, The
Implementers’ Guide to Success with Enterprise Resource Planning;
John Wiley & Sons, Inc., New York, 2001
5
...From Aphorismus Book...
...Wisdom is nontransferable. The sage’ knowledge which he try to
transfere, sounds always like nonsense...
(... Mądrości nie można przekazać. Wiedza, którą próbuje przekazywać
mędrzec, brzmi zawsze jak głupota...),
6
Subject:
8
Some definitions (glossary)…
• Data items – a student first name, name, grade in a class, the
number of hours an employe worked in a certain week, etc.
• Information – a student’s grade point average (GPA), the
application transforminf data in information might be a Web-
based inventory management system, a univerity online
registration, or e-commerce (internet-based buying and selling)
system
• Knowledge – GPA of a student applying to Erasmus Students
Exchange can be compared with GPA of the other students
applying to this sholarship and be over average of all students
from faculty (average is only criteria of selection)
• Wisdom – see above case – inspite of level of GPA you know from
your experience or partner’s knowledge that in Italy or Spain in
most cases courses are in Italian or Spanish, so you first of all send
there students speak these languages…
9
Some definitions (glossary)…
• System – group of elements integrated with common purpose of
achieving an objective (...) by transforming input resources to
output resources…
• Information system – group of programs integrated in three areas:
programme, logical and technical…, a physical process, that
supports an organization in collecting, processing, storing nad
analyzing data, and disseminating information to achieve
organizational goals.
• Information Technology – the technology component of an
information system (a narrow definition), or the collection of the
computing systems in an organization (the broad definition)
• Information infrastructure – the physical arrangement of: harware,
software, databases, networks, and information management personnel
• …Decision making – a process of choosing among alternative courses
of action for the purpose of attainings a goal or goals…
What should be done? When? How? Where? By whom?
• Model (in decision making) – a simplified representation or
abstraction of reality; can be used to performs virtual experiments
and analysis
10
Some definitions (glossary)…
• Information system:
– Set of interrelated components
– Collect, process, store, and distribute information
– Support decision making, coordination, and control
12
Some definitions (glossary)…
13
Functions of an Information System
An information system contains information about an organization and its surrounding environment.
Three basic activities—input, processing, and output—produce the information organizations need.
Feedback is output returned to appropriate people or activities in the organization to evaluate and
refine the input. Environmental actors, such as customers, suppliers, competitors, stockholders, and
regulatory agencies, interact with the organization and its information systems. 14
Information Systems Are More Than Computers
16
Management dimension of information systems
17
Technology dimension of information systems
18
THE INTEGRATION AND CONVERGENCE THEORY OF
INFORMATION SYSTEMS DEVELOPMENT
19
• Integration – in the ideological sense – consists in combining functional
elements using by means of relations, so as to constitute specific
structural components of the whole. Integration is here understood as
a process of consolidation and merging of particular different-class
characters and forms of interrelated elements in order to create a
functional entity, resulting in the usefulness and efficiency which are
greater than each of the parts acting separately
C
o
n
v
e
r
g
e
n TSP/APD
c
e
Integration Year
1
C
o
n
v
e
r
g
MIS
e
n TSP/APD
c
e
Integration Year
Economic environment MIS
Internet
Interior of organization
User
User interface
Database
Management System
Database
Ba
Applications:
- accounting
Available for
and finance, decision
- inventory maker:
control, •knowledge,
- production •intuition,
management, •education,
- Human
relations.
•data.
1
C
o
n
v
e
r DSS
g
MIS
e
n TSP/APD
c
e
Integration Year
Economic environment DSS
Internet
Interior of organization
User
User interface
Database Model
Ba Base
Applications: Available for
- accounting and decision maker:
finance,
• knowledge,
- inventory
control, • Intuition,
- production • education,
management, • data,
- Human • models, Base of
Procedures
relations. methods.
1
C
o
n
v EIS/ESS
e
r DSS
g
MIS
e
n TSP/APD
c
e
Integration Year
Economic environment EIS/ESS
Internet
Interior of organization
User
User interface
C
o
ES
n
v EIS/ESS
e
r DSS
g
MIS
e
n TSP/APD
c
e
Integration Year
Economic environment ES
Internet
Interior of organization
User
User interface
C BIS
o
ES
n
v EIS/ESS
e
r DSS
g
MIS
e
n TSP/APD
c
e
Integration Year
Economic environment BIS
Internet
Interior of organization
User
Mechanizms of data
Mechanizms Business
wholesale management User interface
Analytics
Applications:
- accounting and finance,
- inventory control, Knowledge Base
- production System Model
Database Base
management, Management
- Human relations.
Knowledge
Ba
Base
Base of
Procedures
Interior of organization
User
Mechanizms of data
Mechanizms Business
wholesale management User interface
Analytics
Applications:
- accounting and finance,
- inventory control, Knowledge Base
- production System Model
Database Base
management, Management
- Human relations.
Knowledge
Ba
Base
Base of
Procedures
Types of decision
• Data from the business environment: Businesses must deal with both
structured and unstructured data from many different sources, including
mobile devices and the Internet. The data need to be integrated and
organized so that they can be analyzed and used by human decision
makers
• Delivery platform - MIS, DSS, ESS. The results from business intelligence and
analytics are delivered to managers and employees in a variety of ways,
depending on what they need to know to perform their jobs. MIS, DSS, and ESS,
deliver information and knowledge to different people and levels in the firm—
operational employees, middle managers, and senior executives. In the past, these
systems could not share data and operated as independent systems. Today, one
suite of hardware and software tools in the form of a business intelligence and
analytics package is able to integrate all this information and bring it to managers’
desktop or mobile platforms.
• User interface: Business people are no longer tied to their desks and desktops.
They often learn quicker from a visual representation of data than from a dry
report with columns and rows of information. Today’s business analytics software
suites emphasize visual techniques such as dashboards and scorecards. They also
are able to deliver reports on Blackberrys, iPhones, and other mobile handhelds as
well as on the firm’s Web portal. BA software is adding capabilities to post
information on Twitter, Facebook, or internal social media to support decision
making in an online group setting rather than in a face-to-face meeting.
Business Intelligence and Analytics for Decision Support
Business Intelligence Users
1
C BIS
o
ES
n
v EIS/ESS
e
r DSS 2
g
MIS
e
n TSP/APD
c
e
IC
Integration Year
Inventory
balance
IC
1
C BIS
o
ES
n
v EIS/ESS
e
r DSS 2
g
MIS
e
n TSP/APD
c
e
MRP
IC
Integration Year
Production
balance
Inventory
balance
IC MRP
1
K BIS
C
ES
o
n EIS/ESS
v
e DSS 2
r
MIS
g
e TSP/APD
n
c MRP II
e
MRP
IC
Integration Year
Production Financial
Balance Balance
Inventory
Balance
IC MRP MRP II
1
C BIS
o
ES
n
v EIS/ESS
e
r DSS 2
g
MIS
e
n TSP/APD
c ERP
e MRP II
MRP
IC
Integration Year
Production Financial Service Balans
Balans Balans
Inventory
Balance
IC MRP MRP II ERP
Functional integration - more and more utility functions
Convergence - in each, next step newer technology and better
adjust to needs of user
Diffusion patterns between tracks 1
C BIS
o
ES
n
v EIS/ESS
e
r DSS CRM 2
g
MIS
e
n ERP II
TSP/APD
c ERP
e MRP II SCM
MRP
IC
Integration Year
Production Financial Service Balans
Balance Balance
Inventory
Balance
IC MRP MRP II ERP
Logistic Balans,
specializations and
mutations ERP
II
1
C BIS
o
ES
n
v EIS/ESS
e
r DSS CRM 2
g
MIS
e
n ERP II
TSP/APD
c ERP
e MRP II SCM
MRP
IC
Integration Year
C B
Production Financial Service Balans o a
Balance Balance m l
m a
u n
n s
i
c
a
t
Inventory i
Balance o
IC MRP MRP II ERP n
Logistic Balans,
specializations and
mutations ERP eERP
II
1
C BIS
o
ES
n
v EIS/ESS
e
r DSS CRM 2
g
MIS
e
n ERP II
TSP/APD
c ERP
e MRP II SCM 3
MRP
IC
Integration Year
Corporate solutions
based on EDI
standards, huge
organizations
Corporate networking
C BIS
o
ES
n
v EIS/ESS
e
r DSS CRM 2
g
MIS
e
n ERP II
TSP/APD
c ERP
e MRP II SCM 3
MRP
IC
Commercial nets
Private, corporate nets
Integration Year
Commercial solutions
for large and
medium-sized
companies
Organizational nets
Commerce nets
Corporate solutions
based on EDI
standards, huge
organizations
Corporate networking
C BIS
o
ES
n
v EIS/ESS
e
r DSS CRM 2
g
MIS
e
n ERP II
TSP/APD
c ERP
e MRP II SCM 3
MRP
IC Internet
Commercial nets
Private, corporate nets
Integration Year
Commercial solutions Comprehensive and
for large and global solution for all
medium-sized (organizations,
companies customers, society)
Organizational nets Social nets
Commerce nets
Corporate solutions
based on EDI
standards, huge
organizations
Corporate networking
Internet
Private, corporate nets
1
C BIS
o
ES
n
v EIS/ESS
e
r DSS CRM 2
g
MIS
e
n ERP II
TSP/APD
c ERP
e MRP II SCM 3
MRP
IC Internet
Commercial nets
Private, corporate nets
Integration Year
C
o
r 1
p
C BIS
o
o r
ES
n a
v EIS/ESS t
e e
r DSS CRM 2
g P
MIS
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n ERP II
TSP/APD a
c ERP t
e MRP II f
SCM 3
MRP
o
r
IC Internet m
Commercial nets
Private, corporate nets
Integration Year
Conclusions
Witold Chmielarz
Questions - vitec@post.pl
64
MANAGEMENT INFORMATION SYSTEMS
Part 2
66
Knowledge in MIS
67
LEARNING OBJECTIVES
• Describe the major types of knowledge work systems and assess how they
provide value for firms
68
A brief content:
• Basic definitions
• Intro to Knowledge Management (KM)
• Approaches to KM
• Problems with KM implementation
69
…Management Information System – refers to a
collection of computerized and net technologies
whose objective is to support managerial work and
especially decision making…
70
Some basis definitions…
71
Some basic definitions…
• Decision making – a process of choosing among
alternative courses of action for the purpose of
attainings a goal or goals:
What should be done?
When?
How?
Where?
By whom?
72
Intro to Knowledge Management (KM)
73
Knowledge Management (KM)
74
Knowledge acquisition
• Documenting tacit and explicit knowledge:
– Storing documents, reports, presentations, best
practices
– Unstructured documents (e.g., e-mails)
– Developing online expert networks
• Creating knowledge
• Tracking data from TPS and external sources
75
Knowledge storage
• Databases
• Document management systems
• Role of management:
– Support development of planned knowledge storage
systems
– Encourage development of corporate-wide schemas
for indexing documents
– Reward employees for taking time to update and store
documents properly
(Laudon, Laudon, Chapt 11)
76
Knowledge dissemination
• Portals
• Push e-mail reports
• Search engines
• Collaboration tools
• A deluge (dissemination, too) of information?
– Training programs, informal networks, and shared
management experience help managers focus
attention on important information
(Laudon, Laudon, Chapt 11)
77
Knowledge application
• To provide return on investment, organizational
knowledge must become systematic part of management
decision making and become situated in decision-support
systems
– New business practices
– New products and services
– New markets
78
The Knowledge Management Value Chain
80
Relations – data – information – knowledge - wisdom
81
Wisdom – Knowledge triangle
82
Charactristics of knowledge
83
Transforming information into knowledge
84
Introduce the concept of organizational learning
(selflearning), which describes the process of gathering,
creating, and applying knowledge
• Organizational learning
• Process in which organizations learn
• Gain experience through collection of data, measurement,
trial and error, and feedback
• Adjust behavior to reflect experience:
• Create new business processes
• Change patterns of management decision making
85
Some additional definitions
87
Important dimensions of knowledge
Knowledge is situational
• Conditional: Knowing when to apply procedure
• Contextual: Knowing circumstances to use certain tool
89
Approaches to KM
Best practices – the activities and methods that the most effective
organizations use to operate and manage various functions. They
include:
1. A good idea that is not yet proven, but makes intuitive sense,
2. A good practice, an implemented technique, metodology,
procedure, or process that has improved business results,
3. A local best practice, a best approach for all or a large part of the
organization based on analysing hard data. The scope within
organization of the best practice is identified; can be used only in
a single department or geographical region, or across the
organization.
• Hybrid approaches – in reality involve both process and practice
approaches.
90
Three major types of knowledge management systems:
• Enterprise-wide knowledge management systems
• General-purpose firm-wide efforts to collect, store, distribute, and
apply digital content and knowledge
• Knowledge work systems (KWS)
• Specialized systems built for engineers, scientists, other knowledge
workers charged with discovering and creating new knowledge
• Intelligent techniques
• Diverse group of techniques such as data mining used for various
goals: discovering knowledge, distilling knowledge, discovering
optimal solutions
91
Major Types of Knowledge Management Systems
There are three major categories of knowledge management systems, and each can be broken down further
into more specialized types of knowledge management systems.
92
Three major types of knowledge in enterprise
• Structured documents
• Reports, presentations
• Formal rules
• Semistructured documents
• E-mails, videos
• Unstructured, tacit knowledge
94
An Enterprise Content Management System
An enterprise content management system has capabilities for classifying, organizing, and
managing structured and semistructured knowledge and making it available throughout the
enterprise
95
Knowledge network systems
• Provide online directory of corporate experts in well-defined
knowledge domains
• Use communication technologies to make it easy for employees to find
appropriate expert in a company
• May systematize solutions developed by experts and store them in
knowledge database
• Best-practices
• Frequently asked questions (FAQ) repository
96
An Enterprise Knowledge Network System
97
Major knowledge management system vendors include
powerful portal and collaboration technologies:
• Portal technologies: Access to external information
• News feeds, research
• Access to internal knowledge resources
• Collaboration tools
• E-mail
• Discussion groups
• Blogs
• Wikis
• Social bookmarking
98
Learning management systems
• Provide tools for management, delivery, tracking, and assessment of
various types of employee learning and training
• Support multiple modes of learning - CD-ROM, Web-based classes,
online forums, live instruction, etc.
• Automates selection and administration of courses
• Assembles and delivers learning content
• Measures learning effectiveness
99
Knowledge work systems
• Systems for knowledge workers to help create new knowledge and
ensure that knowledge is properly integrated into business
Knowledge workers
• Researchers, designers, architects, scientists, and engineers who create
knowledge and information for the organization
• Three key roles:
• Keeping organization current in knowledge
• Serving as internal consultants regarding their areas of expertise
• Acting as change agents, evaluating, initiating, and promoting change
projects
100
Requirements of knowledge work systems
• Substantial computing power for graphics, complex calculations
• Powerful graphics, and analytical tools
• Communications and document management capabilities
• Access to external databases
• User-friendly interfaces
• Optimized for tasks to be performed (design engineering, financial
analysis)
101
Requirements of Knowledge Work Systems
Knowledge work systems require strong links to external knowledge bases in addition to specialized hardware
and software.
102
Examples of knowledge work systems
• CAD (computer-aided design): Automates creation and revision of
engineering or architectural designs, using computers and sophisticated
graphics software
• Virtual reality systems: Software and special hardware to simulate
real-life environments
• E.g. 3-D medical modeling for surgeons
• VRML: Specifications for interactive, 3D modeling over Internet
• Investment workstations: Streamline investment process and
consolidate internal, external data for brokers, traders, portfolio
managers
103
• Intelligent techniques: Used to capture individual and
collective knowledge and to extend knowledge base
• To capture tacit knowledge: Expert systems, case-based reasoning,
fuzzy logic
• Knowledge discovery: Neural networks and data mining
• Generating solutions to complex problems: Genetic algorithms
• Automating tasks: Intelligent agents
• Artificial intelligence (AI) technology: computer-based systems
that emulate human behavior
104
Management Information Systems
characteristics and features
105
Transactional Systems Processing (TSP)
Definition:
• …Transaction Processing Systems (TSP) - perform the frequent
routine external and internal transactions that serve the operational
level of organisation…
106
Transactional Systems Processing (TSP)
107
Transactional Systems Processing (TSP)
108
Transactional Systems Processing (TSP)
111
Transactional Systems Processing (TSP) - contemporary
definition and interpretation as a part of ERP
• Definition: a Transactional Processing system (TPS) supports the
monitoring, collection, storage, processing, and dissemination of
the organization’s basic business transactions.
• It also provides the input data for other information systems.
Sometimes several TPSs exist in one company.
• TPSs are considered critical to the success of the organization
since they support core operations, such as purchasing of
materials, billing customers, preparing a payroll and shipping
goods to customers.
A TPS for payroll processing captures employee payment transaction data (such as a
time card). System outputs include online and hard-copy reports for management and
employee paychecks. 113
How Management Information Systems Obtain Their Data
from the Organization’s TPS
117
Management Information Systems
118
Management Information Systems
120
Integrated Information Management Systems
121
Beginning…
122
And integrated system now – ERP - functional diagram (SAP Sources)
Only by „intelligence” usage of this system you can obtain proper results for your company?
123
Management Information Systems - summarizing
124
Decision Support Systems
125
Decision Support Systems
• The basic definition of the decision support systems describes it as
…information systems based upon computer and communication
infrastructure supporting the activities of people involved in the decision-
making process…
• The support is understood as the help provided to the decision-maker in
arriving at a decision, not taking a decision instead of him or replacing him
in the decision-making process.
• The main difference in relation to the management information systems is in
the fact that thanks to DSS-class systems the decision-maker has at its
disposal tools for developing a decision, apart from intuition, knowledge,
skills and information.
• The tools usually take the form of programmes (software packages)
consisting of mathematical, statistical and econometric models (or their
combinations), focusing on the issues related to corporate management. It
means that apart from the deterministic conditions in which the decisions
were taken on the basis of verified data (or their combination) from the
database.
• The managers can use the systems to make decisions in probabilistic
situations with incomplete, random, sometimes partly erroneous or
conflicting data. 126
Decision Support Systems - new components
Model base – containing routine, standard and specialised models used for
decision-making in an enterprise. From a mathematical point of view, there may
appear models based on linear or non-linear dependencies, simulation,
optimization models and the ones based on game theory or resulting from good
management practices. From an organizational point of view models are often
divided into in-built (imposed on a user) and constructed by the user from the
complete components (subsystems and procedures (rules)), limited only by
nomenclature of the tool supporting this process,
Database and model parameters – the database, which can contain data which is
necessary to run and use a model, derived from historical and current data recorded
in the database (model data: parameters and coefficients), external data downloaded
and entered “manually” from economic environment (sometimes together with a
converter into the format of data used in the model), normalization standards, etc.).
128
Decision Support Systems - all components
129
Data Management Subsystem (Database+ Management System)
1.DSS database (the same as in MIS structure)
2.Database management system (see MIS)
3.Query facility
Query facility – provides the basis for access to data. It accepts request for
data, determines how these request can be filled, formulates the detailed
request, returns the results to user
130
Management system of model database All of them
1. Model base are elements of:
2. ModelBase management system
3. Model language BI or
4. Model directory KM systems
5. Model execution, integration and command
Model base – contains routine, standard and special statistical, financial, managerial
and other models that provide the analysis capabilities in the DSS. The ability to
invoke, run, change, combine and inspect models. The models in the Model base can
be divided into four main blocks: strategic, tactical, operational and basic (model
buiding blocks and subroutines)
Model base management – contains all tools for model management: modeling
commands – creation, maintenance-update, database interface, modeling language
Model language - special set of commands which can make possible to conctruct the
model ( next step natural language?)
• such architecture allowed for the first time to develop, not the data to
make a decision, but, (in a model-based decision-making process) the
suggestions of a decision which would be best from the point of view of
an assumed criterion or a collection of possible decisions user options.
132
Features of DSS
133
Features of DSS
• DSS attempts to improve the effectiveness of decision making -
accuracy, timeliness, quality), then its efficiency - cost, including the
charges for computer time
• The decision maker has control over all steps the decisin-making
process in solving the problem
• DSS leads to learning, which leads to new demands and the refinement
of the system, which leads to additional learning (continuos process)
135
MIS and DSS
MIS
• The main impact on structured tasks, where standard operating
procedures, decision rules and information flows can be predefined
• Tha main payoff – improving efficiency by reducing costs, turaround
time, and so on.
• The relevance for managers’ decisions making – indirect – for example by
providing reports and access to data
DSS
• The main impact on decisions in which there is sufficient structure for
computer and analytic aids to be of value but where managers’ judgement
is essential
• The payoff – extending the rangeand capability of computerized
managers’decision processes to help them improve their effectiveness,
• The relevance for managers is the creation of a SUPPORTIVE TOOL,
under their own control, that does not attempt to automatic the decision
process, predefine objectives, or impose solutions
136
Information Systems for Senior Management
EIS and ESS
Definition:
Information Systems for Managers - provide senior managers with
a system to assist them in taking strategic and tactical decisions.
137
Information Systems for Senior Managers
Two categories:
• Executive Information Systems (EIS) – is a computer-based system
that serves the information needs of top executives. Rapid access to
timely information and direct access to management reports. Very
user-friendly, supported by graphics, and provides exceptions
reporting and drill-down capabilities (break down data for details:
daily report corporate rates can be drilled down to find the daily
sales in a region, or by product, or by salesperson.
There were somewere between a Final User and the other part of a
DSS –additional tools for better decision making process –
intelligent access to model base!
(Compare with: Laudon, Laudon, Chapt. 12)
138
Executive Support Systems
139
Executive Information Systems
• In fact, the new elements introduced by EIS systems were only the
expansion of the user interface or database management system in
order to offer more possibilities to organize and select data
(preferably without the knowledge of the database structure) and
graphic visualization of the obtained results.
• Graphic visualization e.g. in the form of a structural or dynamic
chart meant that a decision-maker at a first glance was able to
evaluate the structure of the analysed phenomenon at a particular
stage of its development.
• Additionally, efforts were made – perhaps for the first time in the
history of the IT system development – to ensure the inflow of
external data in order to allow comparisons with the situation of
other companies in a given sector in the country or abroad.
140
Executive Support Systems
141
Characteristics
Quality of information:
• Flexible
• Produces correct information, timely informaton, relevant
information, complete information, validated information.
User interface:
• Includes sophisticated graphic user interface
• Allows secure and confidental access to information
• Includes a user friendly interface
• It’s a short response time
• It’s accessible from many places
• Minimizes keyboard use
• Provides quick retrieval of desired information
• It’s tailored to management styles of individual executives
• Contains self-help menu
142
Technical Capability
143
Benefits
144
Model of an Executive Support System
This system pools data from diverse internal and external sources and makes
them available to executives in easy-to-use form.
145
Expert Systems
Definition:
Expert systems – is a computer system that applies
reasoning methodologies or knowledge in a specific domain
to render advice or recommendations – much like a human
expert
Two generations:
• Supported by mechanisms of DSS (from early 80.)
• Supported by knowledge base and knowledge management
(from the end of 80. – beginning of Business Information
Systems)
146
• Definition: W.A. Freyenfeld described the expert system as ...a system
which contains specialised knowledge of a particular area of human
activity organized in a way which made it possible to enter into a
dialogue (with a user) concerning this field, on the basis of which the
system can offer advice or suggestions, and explain the reasoning,
which is at the core of the problem...
147
• We may observe that the second generation of expert
systems, which had its foundation in the ideas of the so–
called systems of artificial intelligence, has creatively
developed a logical architecture construction of the previous
systems.
• Additionally, the designers distinguished (artificially,
externally in relation to the corporate structures)
econometric, statistical, forecasting models etc. and they
distincted models based on the latest, at the time,
management achievements (Business Process Reengineering
- BPR) – models of best practices of corporate management,
analyses and optimization in a colloquial sense, functions
and processes taking place in an enterprise, in the existing or
modified organization structure of an enterprise.
• There appeared new structural elements
148
Some usable definitions…
149
Modern Expert Systems – structure and components
Components:
• Knowledge acquisition subsystem
• Knowledge Base
• Inference Engine
• User Interface
• Explanation justifier
• Knowledge Refining (Improving) Subsystem
150
Modern Expert systems – structure and components
151
Moodern Expert Systems – structure and components
152
Modern Expert Systems – structure and components
153
Architecture of integrated „Ideal” Expert (almost BIS) System
User
High level query language Access through the use of natural language, pictures etc.
Model base +
Data base + Data model base
base management management
system system
Hardware
Structure of the highest level of integration level
154
Expert systems
155
Rules in an Expert System (or BI)
157
Inference Engines in Expert Systems
An inference engine works by searching through the rules and “firing” those rules that are
triggered by facts gathered and entered by the user. A collection of rules is similar to a series
of nested IF statements in a traditional software system; however the magnitude of the
statements and degree of nesting are much greater in an expert system
158
Successful expert systems
• Countrywide Funding Corporation in Pasadena, California, uses expert
system to improve decisions about granting loans
• Con-Way Transportation built expert system to automate and optimize
planning of overnight shipment routes for nationwide freight-trucking
business
• Most expert systems deal with problems of classification
• Have relatively few alternative outcomes
• Possible outcomes are known in advance
• Many expert systems require large, lengthy, and expensive development
and maintenance efforts
• Hiring or training more experts may be less expensive
160
Expert Systems Areas (2)
161
Benefits of Expert Systems
162
Managerial Advanteges of ES
163
Artificial Intelligence Systems
„. AIS are like YETI, nobody, never has seen it, but everybody has
heard about them ...”
164
Artificial Intelligence Systems
165
AIS – some benefits
166
Information Technology in KM
167
Information Technology in KM
168
Knowledge Discovery in Databases (KDD)
169
Business Intelligence Systems (BIS)
171
Case-based reasoning (CBR) in BI
• Descriptions of past experiences of human specialists, represented as
cases, stored in knowledge base
• System searches for stored cases with problem characteristics
similar to new one, finds closest fit, and applies solutions of old case
to new case
• Successful and unsuccessful applications are grouped with case
• Stores organizational intelligence: Knowledge base is continuously
expanded and refined by users
• CBR found in
• Medical diagnostic systems
• Customer support
172
How Case-Based Reasoning Works
173
Data Warehousing (see: Data Base in MIS)
174
Development of Database Mechanisms
175
Business Analytics (se:e Models Base in DSS)
176
Development of Model Base Mechanism
177
Business Performance Management (interpretation and advices)
178
The role of knowledge today in the U.S. economy
179
The Benefits of BIS
(Eckerson)
(Thompson)
180
U.S. Enterprise Knowledge Management software revenues, 2005-2012
The growth of sales of knowledge management software in the U.S. along with
sales predictions through 2012
182
Purpose of presentation:
The main purpose of presentation is analysis and identification of the
possibilities of overcoming barriers to the implementation of
integrated systems with the use of specialised software supporting the
implementation process (I-CASE class)
Brief contents:
• identification of the basic implementation problems
• discussion the possible steps to overcoming these barriers with the
use of I-CASE tools and knowledge contained in reference models
• introduction the first concept of a knowledge management system
supporting implementation process
183
Delays in the process of implementation
65%
21%
Base d on mode rn te chnol ogy 14% Discont inued
0%
48% Delayed
24%
Ve ry compl e x, i nnovati ve 28% T imely
0%
Early
20%
18%
C ompl e x 61%
1%
7%
12%
Me di um, compl i cate d 75%
6%
2%
Smal l , standard proje ct 6%
81%
11%
0%
Ve ry smal l , standard proje ct 2%
83%
15%
• Empirical research shows that there is a simple relationship between the complexity and
innovativeness of a project and the feasibility of its implementation.
• The more innovative and complex a project is, the more likely it is that its
implementation will be delayed or even discontinued. In the case of integrated systems,
this rule applies now to as many as 70% - 80% of the projects.
184
Average scale of effectiveness of management information
system implementation 1996-2008
Year Success coefficient Partial failure* Total failure Failures together
Source: J. Johnson, CHAOS Rising, Standish Group, Materiały konferencyjne II-giej Krajowej
Konferencji Jakości Systemów Informatycznych, Computerworld, czerwiec 2005, s. 11; Standish Group,
The Standish Group Report 2007, West Yarmouth, Massachusetts, 2008 (intro version).
*higher budget, or longer time, or more narrow scope of implementation
185
The procedure in order to overcome barriers and threats to the
system implementation: :
• Identify the areas where such barriers appear, and the reasons why
they appear
• Define the methods of removing these barriers
• Identify the barriers which can be eliminated or at least significantly
reduced using the methods of knowledge management contained in
the intelligent tools
• Identify the tools and methods used to assist the designer and
implementator in this respect
• Create a concept of automation of the process of preventing barriers
to integrated systems implementation
186
Organisational barriers
Role of I-CASE tools in solving them
(on the base of my own research of implementation of IFS in 12 locations and branches in Poland)
187
Organisational barriers
Role of I-CASE tools in solving them
11. Problems with reaching understanding between the consultants and end-users
Problems with understanding – end-users and other employees of the client
involved in the implementation, including the management (items 1 and 2),
obtain knowledge about the CASE tool used. Subsequently, a ready-made
(predefined) solution is presented and discussed. In this way, the existing and
modified business models containing all basic processes functioning at a given
company become a platform of understanding
12. A lack of understanding of the implementation needs
Presentation of processes subject to changes with the use of CASE helps the
employees understand the objectives and needs of the implementation
13. Hostile attitude of employees
If the implementation process becomes faster and more efficient, the results
are achieved earlier, which has an encouraging effect and increases faith in
success.
190
Financial and technological barriers
Role of I-CASE tools in solving them
191
Some conclussions
192
Transformation data into knowledge process
193
Architecture of system- concept
User
• Interactive questioning mechanizm.
User language
Questioner • Data collection. Problems described
by attributes and functions
• Data categorisation (which are new
Identyfier one)
DataBase
• Comparing with Database collection
(adding new)
Selector • Problem and proper solving method
connection
• Automatic solving problem or switch
to proper I-CASE tool (when we
Evaluator I-CASE have no ready solution)
• Modyfying system or making new
part of it
Solutions • Solutions Base – methods collection
Stop Solver Base
194
Summary of the case
195
Thank you very much for your attention!
Witold Chmielarz
Questions - vitec@post.pl
196
MANAGEMENT INFORMATION SYSTEMS
Part 3
Integration Year
TRENDS IN MANAGEMENT INFORMATION SYSTEMS
DEVELOPMENT AND NEW CLASSIFICATION
Computerized Tools of MIS
201
The Integration in the Development of MIS
202
The Benefits Resulting from Linking – MIS & ES
203
Integration: MIS & ES
User Reports
Interface Data Base
Applications
Data Base and Data Screens
Base Management
System Conckusions Data Base
Mechanism Transactions
Expert System
Fig.1. Combinaton Architecture Expert System and Management Information System (Intelligent
Data Base)
204
Integration ES & DSS
Cooperation gives the following effects:
• possibility of logical explanation of undertaken decisions and results
collected,
• faster accomplishment of operations, when the acquired results of the DSS
are input data for ES,
• proper identification of the reverse situation,
• an increase in possibility of choice for the user – using a system of two
types of compound databases as regards the required needs of the logical
decision process,
• generation of variant solutions (DSS) and linking to them alternative
functions, which should be undertaken for their retrieval.
205
Integration ES & DSS
User
User Interface
Expert System
Data Model
Base Base
User Interface
Expert System
Fig. 4. Expert System Expanding Decision Making Process in Decision Support System
The system has links not only with management systems but - directly - with date and
model bases, too. It means that the user has in fact three independent possibilities: to
work with database, with the model base and with the ES.
ES has no background, so the model and database in this situation acts as an
additional support for its characteristics.
207
Integration ES & DSS
User
User Interface
Expert System
Intelligent
Model Base
Data Base Management
Conclusion
Management System
Mechanism
System
Supervisory
Programme
209
Integration EIS & DSS
Environment User
External Reccomendations
Information for User
Querries
Executive
Information User Interface
Responses
System
Reccomedations
Fig. 6. Connections Architecture between Executive Information System and Decision Support
System
210
Integration ES & EIS
211
Integration ES & EIS
Environment User
Recommendations
External for User
Informations
Information
Executive
User Interface
Information Odpowiedzi (ES Class)
System
Interpretations
Rekomendac
je
Fig. 7. Connection Architecture between Executive Information System and Expert System
212
Integration EIS & MIS
213
Integration EIS & MIS
User
Executive
User Interface
Information
System
Data Base
Management Data
System Base
214
Integration Between Systems of the Same Type
215
Integration Within Unified Enterprise Systems
216
Integrated Management Information Systems
Benefits:
• More productive than forming a whole system (faster in construction and
correction),
• Eliminates completely manual handling of information,
• Owning a larger functionality than the simple sum of the applications functions
(synergy).
Scenarios:
• Integration of already existing applications,
• Building a new applications integrated with existing ones,
Typical problems:
• Cooperation needs a common language,
• Organizational problems: there are various levels/platforms:
- hardware,
- operation system
- networks
• Organizations have various structures and development strategies and therefore
functional applications,
• During application connection a complicated structure arises as regards the
application2application connection 217
Integrated Enterprise Systems
218
Integrated Enterprise Systems Development
• 1957 in the USA - American Production & lnventory Control Society (APICS)
was established - for maintaining standards of computers application in
production’ organizations management
• In late 50. APICS made assesments for the first standard MRP (Material
Requirements Planning). This standard let us compute accurate quantity of row
materials (resources) adequately for flexible demand on commodities
(assortment of products, articles) in time.
The main goal of MRP:
• Inventory reduction (in warehouses and interoperational inventories),
• Accurate defining supply time of row materials and semi-finished articles supply
• Precise ddetermining of production costs,
• Better usage of technical (production) infrastructure,
• Faster reaction under environmental changes,
• Control of individual stages of production.
• 1964 – Inventory Control System – the first information system with integrated
functions of purchase, storage and distribution of commodities; in next years
firstly created mainly for inwentory management in warehouses and for serial
industrial production, particulary in electro-machinery branch,
219
Integrated Enterprise Systems Development
• Standard MRP II was extended (in relation with the previous one)
about elements connected with sale (retail and wholesale) and
functions supported strategic production management
221
Integrated Systems Development
ERP areas:
• Customer service – database about clients, orders processing,
orders service, EDI – transfer of e-documents, internet access,
• Production – wholesale servis, production costs calculating,
purchasing materials rows, establishing time-table of production,
forecasting of capabilities, calculating of critical level of
inventories, process production control etc.,
• Finance – accounting, accounting documents flow control,
preparing reports according to customer needs, etc.,
• Logistic chain itegration - connection with next subsystems CRM
(Customer Relationship Management), SCM (Supply Chain
Management), VRM (Vendor Relationship Manegement)
222
System evolution direction – total complexity
Internet area
ERP II
ERP
MRP II
MRP
Inventory
Control
223
Enterprise Integrated Systems
Enterprise systems
feature a set of
integrated software
modules and a central
database that enables
data to be shared by
many different business
processes and functional
areas throughout the
enterprise
Integrated Enterprise Systems Development
ERP areas:
• Customer service – database about clients, orders processing,
orders service, EDI – transfer of e-documents, internet access,
• Production – wholesale servis, production costs calculating,
purchasing materials rows, establishing time-table of production,
forecasting of capabilities, calculating of critical level of
inventories, process production control etc. ustalanie.,
• Finance – accounting, accounting documents flow control,
preparing reports according to customer needs,etc.
• Logistic chain itegration - connection with next subsystems CRM
(Customer Relationship Management), SCM (Supply Chain
Management), VRM (Vendor Relationship Manegement)
227
Evolution of ERP Systems
228
Structure of ERP Systems
229
Modules overview of ERP Systems
230
ERP Diagram
231
Market share 2010 according to Gartner Dataquest
232
ERP Advantages and Disadvantages
Benefits:
• ERP automate business processes and enable process changes, what brings
a lot benefits in operational activities such like: cost reduction, cycle time
reduction, productivity improvement, quality improvement, customer
service improvement,
• with a centralized database and build in data analysis capabilities, the
system is helping in managerial activities for example: better resource
management, improves decision making and planning, improves
performance,
• ERP systems with their large-scale business involvement and internal and
external integration capabilities can assist in achieving strategic benefits
such as: support business growth, build business innovations, build cost
leadership, generate product differentiation (including customization),
build external linkages (customers and suppliers), enabling e-commerce,
• ERP systems has integrated a standard application architecture, which
provides an infrastructure that can build business flexibility for current
and future changes, IT cost reduction, increased IT infrastructure
capability,
• the integrated information processing capabilities of ERP can support
organizational changes, facilitate business learning, build common vision,
change employee behavior, increase employee moral and satisfaction.
233
ERP Advantages and Disadvantages
• Personnel turnover; companies can employ new managers lacking education
in the company's ERP system, proposing changes in business practices that
are out of synchronization with the best utilization of the company's selected
ERP.
• Customization of the ERP software is limited. Some customization may
involve changing of the ERP software structure which is usually not
allowed.
• Re-engineering of business processes to fit the "industry standard"
prescribed by the ERP system may lead to a loss of competitive advantage.
• ERP systems can be very expensive especially for multinational companies.
• ERP vendors can charge sums of money for annual license renewal that is
unrelated to the size of the company using the ERP or its profitability.
• Technical support personnel often give replies to callers that are
inappropriate for the caller's corporate structure. Computer security
concerns arise, for example when telling a non-programmer how to change
a database on the fly, at a company that requires an audit trail of changes so
as to meet some regulatory standards.
• ERPs are often seen as too rigid and too difficult to adapt to the specific
workflow and business process of some companies—this is cited as one of
the main causes of their failure.
234
ERP Advantages and Disadvantages
• Systems can be difficult to use.
• Systems are too restrictive and do not allow much flexibility in
implementation and usage.
• The system can suffer from the "weakest link" problem—an inefficiency
in one department or at one of the partners may affect other participants.
• Many of the integrated links need high accuracy in other applications to
work effectively. A company can achieve minimum standards, then over
time "dirty data" will reduce the reliability of some applications.
• Once a system is established, switching costs are very high for any one of
the partners (reducing flexibility and strategic control at the corporate
level).
• The blurring of company boundaries can cause problems in
accountability, lines of responsibility, and employee morale.
• Resistance in sharing sensitive internal information between departments
can reduce the effectiveness of the software.
• There are frequent compatibility problems with the various legacy
systems of the partners.
• The system may be over-engineered relative to the actual needs of the
customer.
235
ERP Life Cycle
236
Trends of ERP development
ERP initiatives are most common:
• Upgrade. In 2008, a meaningful percentage of companies were going through major and
minor upgrades of their ERP environment.
• Rationalize and standardize. Many diversified companies that have grown by acquisition
now face a significant challenge in that they have multiple ERP vendors and installations
running. To improve process consistency and reduce internal support costs, many
companies have embarked on a long-term strategy to standardize on a single-
instance/single-vendor ERP strategy.
• Multitier (multileyer). The multitier ERP strategy seems to run counter to the notion of
ERP standardization but is a viable strategy for companies with a number of smaller
subsidiaries.
• Integrate. Improving integration among applications is the leading application strategy
priority among enterprise companies, representing a critical priority among 33% of
companies. Integration of applications is moving from a traditional batch, flat-file mode to
virtually real-time, message-based integration using SOA technologies.
• Expand. ERP systems have been historically hard to use and are typically deployed to a
limited set of core users who enter and retrieve data from the systems on a daily basis.
Alternative user interfaces - including Web-based self-service, Adobe forms, Microsoft
Office, and other technologies - are more readily available now to roll out certain ERP
capabilities to a broader set of less frequent users across the enterprise. Newer role-based
user experience designs as well as vastly improved BI capabilities are becoming more
evident, making these systems more accessible and approachable.
• Replace. Replacement becomes a necessity at some point, due to the technology
obsolescence of older legacy systems and high levels of customization that compromise the
upgrade path. ERP systems, however, typically have a useful life of 15 to 20 years or more
when proactively maintained.
237
Supply Chain Management Systems
This figure illustrates the major entities in Nike’s supply chain and the flow of information
upstream and downstream to coordinate the activities involved in buying, making, and moving a
product. Shown here is a simplified supply chain, with the upstream portion focusing only on the
suppliers for sneakers and sneaker soles.
Supply Chain Management Systems
• Intranets integrate
information from
isolated business
processes within the
firm to help manage its
internal supply chain.
• Access to these private
intranets can also be
extended to authorized
suppliers, distributors,
logistics services, and,
sometimes, to retail
customers to improve
coordination of external
supply chain processes.
Supply Chain Management Systems
The future Internet-driven supply chain operates like a digital logistics nervous system. It provides
multidirectional communication among firms, networks of firms, and e-marketplaces so that
entire networks of supply chain partners can immediately adjust inventories, orders, and
capacities.
Customer Relationship Management Systems
Customer relationship management software provides a single point for users to manage
and evaluate marketing campaigns across multiple channels, including e-mail, direct mail,
telephone, the Web, and wireless messages.
CRM Software Capabilities
• Operational CRM:
• Customer-facing applications such as sales force automation, call
center and customer service support, and marketing automation
• Analytical CRM:
• Analyze customer data output from operational CRM applications
• Based on data warehouses populated by operational CRM systems
and customer touch points
• Customer lifetime value (CLTV)
Analytical CRM Data Warehouse
Analytical CRM uses a customer data warehouse and tools to analyze customer data collected
from the firm’s customer touch points and from other sources.
Customer Relationship Management Systems
Witold Chmielarz
Questions - vitec@post.pl
257
ERP example –
IFS Applications
Basic modules
– Master Production Scheduling (MPS)
– Item Master Data (Technical Data)
– Bill of Materials (BOM) (Technical Data)
– Production Resources Data (Manufacturing Technical Data)
– Inventories & Orders (Inventory Control)
– Purchasing Management
– Material Requirements Planning (MRP)
– Shop Floor Control (SFC)
– Capacity planning or Capacity Requirements Planning (CRP)
– Standard Costing (Cost Control)
– Cost Reporting / Management (Cost Control)
– Distribution Resource Planning (DRP)
Additional functionalities
• Business Planning
• Lot Traceability
• Contract Management
• Tool Management
• Engineering Change Control
• Configuration Management
• Shop Floor Data Collection
• Sales Analysis and Forecasting
• Finite Capacity Scheduling (FCS)
Related systems
• General Ledger
• Accounts Payable (Purchase Ledger)
• Accounts Receivable (Sales Ledger)
• Sales Order Management
• Distribution Requirements Planning (DRP)
• [Automated] Warehouse Management
• Project Management
• Technical Records
• Estimating
• Computer-aided design/Computer-aided manufacturing
(CAD/CAM)
IFS App Component Chart
Example – IFS App for automotive industry
Example – IFS App for aviation
Example – IFS App for Defence
Example – IFS App for telecommunications
Thank you very much for your attention!
Witold Chmielarz
Questions - vitec@post.pl
270
MANAGEMENT INFORMATION SYSTEMS
Part 4
(Zwass, 1998)
(UK government),
272
• E – Enterprise - the most fundamental element of the E-Commerce
is E- Enterprise
273
• E - Transactions can be best defined as the ability of consumers to
purchase products and services in the e-marketplace using
Internet technologies and infrastructure.
The Internet is rapidly becoming the medium through which a large share of
communications and commerce takes place.
Online transitions are the new means of conducting business, which are taking
over the traditional ones.
Despite the recent dot.com bubble burst, online transactions have become one
of the main ways to do business, to buy goods and services.
274
e-Commerce from Perspectives:
275
Electronic Commerce and the Internet (Laudons…)
• E-commerce
• Use of the Internet and Web to transact business
• Digitally enabled transactions
• History of e-commerce
• Began in 1991 and grew exponentially; still growing at an annual
rate of 16 percent
• Rapid growth led to market bubble 1999
• While many companies failed, many survived with soaring revenues
2002
• E-commerce today the fastest growing form of retail trade in U.S.,
Europe, Asia
The Growth of E-Commerce
The typical distribution channel has several intermediary layers, each of which adds to
the final cost of a product, such as a sweater.
Removing layers lowers the final cost to the consumer.
Key concepts in e-commerce
Digital goods
• Goods that can be delivered over a digital network -
e.g., music tracks, video, software, newspapers, books
• Cost of producing first unit almost entire cost of
product: marginal cost of producing 2nd unit is about
zero
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly
variable
• Industries with digital goods are undergoing
revolutionary changes (publishers, record labels, etc.)
Internet business models
• Pure-play models - internet is primary mode of operation
• Clicks-and-mortar models (a type of business model that
includes both online and offline operations, which typically
include a website and a physical store. A click-and-mortar
company can offer customers the benefits of fast, online
transactions or traditional, face to face
service=clicks&brick - see: Clicks&Bricks - offline and
online operations, but Bricks&Mortar – only offline
operations)
Social Networks
• Online meeting place
• Social shopping sites
• Can provide ways for corporate clients to target
customers through banner ads and pop-up ads
Online marketplace:
• Provides a digital environment where buyers and
sellers can meet, search for products, display products,
and establish prices for those products
284
• Content provider
• Providing digital content, such as digital news, music,
photos, or video, over the Web
• Online syndicators: Aggregate content from multiple
sources, package for distribution, and resell to third-party
Web sites
• Service provider
• Provides Web 2.0 applications such as photo sharing and
interactive maps, and services such as data storage
• Portal
• “Supersite” that provides comprehensive entry point for
huge array of resources and services on the Internet
• Virtual storefront:
• Sells physical products directly to consumers or to
individual businesses
• Information broker:
• Provides product, pricing, and availability information
to individuals and businesses
• Transaction broker:
• Saves users money and time by processing online
sales transactions and generating a fee for each
transaction
Types of Electronic Commerce
• Business-to-consumer (B2C)
• Business-to-business (B2B)
• Consumer-to-consumer (C2C)
• Mobile commerce (m-commerce)
Types of e-Transactions:
Cunningham, M. S. (2001). How to Build a Profitable E-Commerce Strategy. Cambridge: Perseus Pub.
288
Types of e-transactions:
289
What else? (types of e-transactions):
290
What else? (types of e-transactions):
291
IOS and e-Market Features
• Customer relationship is determined in • Two types of relationships may exist:
advance with anticipation it will be an Customer/seller linkage is established in
ongoing relationship based on multiple time of transactions and may be for one
transactions transaction only (just purchase),
• IOS may be built around private or Customer/seller purchase agreement is
publicly accesible networks establish for a defined period (a
subscribtion transaction)
• Advance arrangements result in • Electronic markets are built around
agreements on the nature and format of publicly accesible networks
business documents that will be • Sellers determine, in conjunction with the
exchanged and payments market maker which business
• Advance arrangements are made so transactions they will provide
both parties know which communication • Customers and sellers independently
networks will be integral to the system determine which communication
• Joint guildelines and expectations of networks they will use in participating in
each party are formulated so each knows the electronic market. The network used
may vary from transaction to transaction,
how the systemis to be used and when
transactions will be submited and • No joint guideliness are drawn in advance
received by each business partner
THE BASE OF B2B 292 THE BASE OF B2C and the others
• Interactive marketing and personalization
• Web sites are bountiful source of details about customer
behavior, preferences, buying patterns used to tailor
promotions, products, services, and pricing
• Clickstream tracking tools: Collect data on customer
activities at Web sites
• Used to create personalized Web pages
• Collaborative filtering: Compares customer data to
other customers to make product recommendations
• Blogs
• Personal web pages that contain series of chronological
entries by author and links to related Web pages
• Has increasing influence in politics, news
• Corporate blogs: New channels for reaching customers,
introducing new products and services
• Blog analysis by marketers
• Customer self-service
• Web sites and e-mail to answer customer questions or to
provide customers with product information
• Reduces need for human customer-support expert
B2B e-commerce: New efficiencies and relationships
(Janc, Kotlinski)
305
e-Banking
• Electronic banking (cyberbanking) – includes various banking activities
conducted from home, business, or on the road, instead of at physical
bank location.
• It started with the use of propriety software and private networks but was
not particularly popular until the emergence of the Internet
306
Some of the advanteges of e-banking:
• Get current account balances at any time – you can easily check the status of
your checking, savings, and money market accounts
• Obtain charge and credit card statements – you can even set up your account
to pay off cards automatically every month
• Pay bills – electronic payments from your accounts are normally credited the
same day or the next. The cost of paying bills electronically may well be less
than the postage involved in sending out a large number of payments each
month
• Download account transactions – it’s easy to import them directly with the
money transfer system
• Transfer money between accounts
• Balance your accounts
• Send e-mail to your bank
• A new meaning for „banker’s hours” – in any time, any place
• Handle your finances when traveling
• Additional services – for example free phone banking
307
Internet-banking: part of e-Banking services realized only by Internet
e-Banking
Internet Virtual
Banking Banking
308
e-Banking =
home-banking +
office banking +
selfbanking +
interbanking (clearing systems) +
POS (point of sales) +
finance transfere nets +
e-Payments
309
Electronic banking based on communication channels of
distribution can be divided as follows:
310
Online banking (Internet banking)
• Its success is gained from Internet development all over the world.
311
Dedicated computer banking (PC banking)
• Stationary and cell phones can be used for telephone banking, but
also it can be replaced by internet telephony
313
Portable banking
315
The types of models of electronic banking are next
important criterion of identification:
316
• Multi-channel model (Bricks & Clicks) it is model of the offering all
channels of distribution. Most important feature is that this model
supports all kinds of distribution channels.
• Model of the virtual bank (Clicks only) relies on basing activity of the
bank exclusively on electronic banking. Therefore the most
important feature favouring the virtual banking is resignation from
bank departments. In this model, Internet and cash machines are
main channels of distribution.
317
TERM DESCRIPTION
e-banking Bank activity, supporting remote services to customers by electronic channels of communication.
Virtual banking,
web-only banking, Model of virtual banking; Main channel of communication is Internet. Bank doesn’t offer
Internet-only banking, departments as channels of communication.
pure play banking
Mobile banking
m-banking
Portable banking using non-voice technologies
Wireless banking
WAP banking
PC-banking
Home banking Client-Bank communication with usage of dedicated software installed on client’s Personal
Office banking Computer
Electronic corporate banking
Self banking Terminal banking – customer can execute all operations on terminal in public place
318
TV-banking Access to bank accounts via digital TV
ELECTRONIC BANKING
MAIN PURPOSE
PROMINENT ASPECT
ROLE OF ASPECT
ENVIRONMENTAL AIM
• Archaic phase, where the communication is based one by one on the mail,
telegraph, telephone - from the second-half of the XIX century to the second-
half of the XX century,
• Preliminary phase of communication computer-support - 1956-1964,
• Early phase of the electronic data processing systems based on batch
processing - 1965-1969,
• Phase of the intense development of Management Information Systems -
1970-1977,
• Productive phase of systems as: Decision Support Systems, Expert Systems,
Executive Information Systems, video-data - 1978-1985,
• Phase of technological changes - 1986-90,
• Phase of application integration on the basis of computer techniques and the
telecommunications on the basis of the modem communication - 1990-1995,
• Phase of remote systems - electronic banking - from 1992,
• Phase of global systems - online and virtual banking - from 1996; to now
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• Archaic phase came down for using telegraphic techniques to equalize among-
regional and market price differences and enhancing coordinating possibilities
between structures of the bank. The most important innovations of this period are:
• telegraph – 1846,
• the transatlantic cable – 1866,
• permanent connection of Great Britain with India and Australia - 1870-1871,
• telegraphic connections within settlements among banks since 1918,
• telephone communication for inter-bank settlements,
• transatlantic New York – London telephone technology – 1927.
Main merit of investigated innovations was significant acceleration of transmitting
announcements, reducing the time from days, weeks or months till minutes.
Although they generated essential bases for implementing other innovations in this field,
those services were relatively very expensive and acted in limited channels of traffic
capacities (transatlantic cable till 1956 could support maximum 20 simultaneous
conversations).
Long-term progress in this field was possible only thanks to the permanent
development of computer technologies, which till the middle of fifties were used only in
science and military.
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• Preliminary phase of the bank computer system development was already based
on computer techniques. Actually it was based on the automation of manual
activities than on the automation of bank operations but it was constrained with
the lack of software and computer equipment.
• As an example is ERMA system (Electronic Recording Machine-Accounting),
applied in 1956 in the Bank of America.
• The system was used to the automatic recording, summing up, sorting,
verification and entering cheques on the base of data led by readers, services of
all transactions, client accounts, and making balance printouts.
• Applying the system extorted the change in organization of the customer service
- every customer received the new number of the account.
• In 1960 a first effort was taken to computerize credit card services, two years
later bank implemented the payroll and payments of bills.
• It was just individual applications, adapted exactly for the type of the computer
preinstalled software. In 1964 was started the first cash machine.
• The success of these applications turned attention to need of the standardization
both the equipment and programs.
• It enabled portability of the bank software to different banks, what of course
reduced individual costs of creation and extended the market to banks not as
rich as the Bank of America.
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• The early phase of electronic processing was already based on known
standards of programming languages like: Algol, Basic, Cobol, Fortran
and Unix operating systems. It enabled the service of routine, mass
operations about the defined structure. Gathered data could be processed
once, than it required the data change given for processing in the
program. It included within its range scope of the statistic calculation,
standard personnel pay prints, handlings of calculations and handlings of
accounts. With time the software was broadened with applications
managing harvests of data and enabling their automatic parameterization
programs. This phase was characterized by the following features:
• supported by big, expensive, slow computers (e.g. IBM 360/65) about the
failure frequency up to the 60% of the working time, functioning centrally
at isolated computer centers. it’s increasing computational possibilities
enabled banks to process the great volumes of transactions based on
paper documents,
• cheaper software programming became standard but was still long-term
and troublesome,
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• the scope of systems concerned mainly the chosen automation procedures
of bank departments, embracing processing in the batch mode of front
office and back office as like as handling the fragments of customers
accounts. it involved faster, more accurate and more correct service of
entering, lowering costs of the back office services,
• continuation of cash-machine system development (since 1967 in Great
Britain, France, Switzerland, Sweden; end of the period the first
implementations in Japan),
• at the end of this period (1968) arising the first systems of interbank
settlements (Bankers’ Clearing System), using the technology of the
electronic date interchange, determining basics for one of the most
important tools in home banking,
• a telephone service was disseminated.
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• Phase of intense development of banking management information systems (MIS)
started from 70’s.
• The increasing complexity of bank problems and the huge functionality extorted
the change in bank data technology.
• Sequential computer sessions are being replaced by more effective in terms of the
access and using database technologies from hierarchical and network, to
relational databases with the software managing them as Base Date Management
Systems - DBMS.
• Universally a way of the communication with the computer is also changing - in
place of tapes and paper cards loaded in into additional devices connected to the
central unit, appearing the computer monitors, being direct devices (user to
customer contact) of the operator with the computer system.
• It is making the peculiar communications revolution - introduction to all
operations going towards to independent the customer relation with the bank.
• The telephone communication is constantly being developed in bank functioning
and electronic data transfer systems - in 1973 in Belgium started an organization
which starts the international interbank communication system Swift - Society
for Worldwide Interbank Financial Telecommunication. It is today the one of the
most popular systems of the international interbank communication system.
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This phase had the following attributes:
• creating - for the first time - applications which are automating work in the
entire department, based on financial-accounting systems standards; the
complete automation of calculations, individual systems, the duplication of
chosen data in the area of the unit,
• assuring basic, standardized, technical equipment of the computer centre;
basic architecture that contained central unit of the big computer and
external memory device as: magnetic tape device, fixed discs, readers of tapes
and perforated cards replaced next with monitors, printers,
• completion of centralized batch systems with the first regular systems,
• limited capacity and performance of devices.
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• At the end of 70's, as a result of information system development that
supports managing, types of bank organizational structures are changing
and next changes are coming in the way of driving strategy.
• Systems equipped with the base of models Decision Support Systems
allows to calculate variants of development and pointing best solution.
• Expert Systems allow analyzing the situation and giving the further
strategy.
• Executive Information Systems gives the most essential information from
databases and systems about management information and introduce it in
the legible form to senior staff.
• New kinds of systems are applicable on the level of department (credit
activity), head office (analysis of the risk) and specific activities of the
central banks.
• Its further development within Management Information Systems will
result in the next developmental phase.
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The productive phase of computer bank systems, apart from the
modernization of previous phase effects, shows such features as:
• data processing is being treated as the production providing: bank
accounts, bills, savings, carrying on the full synthetic and analytical
bookkeeping, leading all back-end operations, leading to permanently
implement analytical, prognostic and supporting decisions systems of
bank modules,
• applications still orientated to products,
• very difficult maintenance of all systems,
• beginning of spreading the cash-machines with decreasing of bank posts,
• data is being registered by the final user - bank clerk and the customer
• preliminary works started, concerning planning the strategy of bank
activity development.
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• This period offered abilities to using information videotext systems, which a few
years later made the undoubted creative model for many services offered by systems
by online banking. The videotext can communicate by two-way connection from and
to the user. It is sending pages to the user in the digital form, which mainly is being
shown on the TV screen or on user terminal.
• Only one videotext service, before Internet, closed with the full success. It was
French Minitel, inaugurated in 1982 by PTT (Poste, Telephone et
Telecommunications).
• Success has been achieved by offering free of charge system terminals to future
users.
• The system offered similar services like a few years later Internet: direct (free of
charge) telephone services, retail orders (e-commerce in the future), purchase of
train and plane tickets, information services, access to databases and sending
announcements.
• It was used at first the most to sending private announcements and seeing through
erotic pages.
• Payments were being realized with the credit card (e-commerce, tourist services),
other payments for using the system were paid by a telephone bill depending on
pages seen through.
• For many years Minitel competed with the Internet. In the end of 90’s France
Telecom estimated the system for 9 millions of terminals and 250 millions of
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monthly connections.
• The phase of technological changes emerged the strong bases of traditional
systems. It influenced to all aspects of the internal functionality of the bank
and more and more strongly to its contacts with customers.
• Applications was modeled on windows user-friendly environment, hitting also
to banks and in next years making unwritten standard of the communication
with user which was more and more conscious of own abilities and
possibilities of computer systems in this business.
• Amongst telecommunications solutions cash machines are being unwound
constantly - e.g. between 1984-1989 ATM number (Automatic Teller
Machine) in Great Britain grew by the 100% to over 12 thousands.
• Numbers of bank departments were systematically decreasing. In the next year
in there were more cash machines than bank departments in Great Britain.
• Together with the development of cash machines, credit and payment cards are
becoming increasingly common.
• Cards are increasing their range as a matter of fact at that time to be global. At
the same time possibilities of payments realization are increasing by large
number of terminals.
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• Phase of application integration is characterized by a change in general
philosophy and systematic of forming banking computer systems.
• The first matter of integrated systems ideology was applying the ERP services,
adapted to the cooperation with the online environment.
• It was period of rise electronic systems, interbank settlements, credit cards
service systems and finally other forms of remote access to bank services.
• The ideology of integrated systems was based on cooperating, based on the
shared database, using shared data in the entire system based on financial
assessments and shared platform.
• It started an invaluable phenomenon of the consolidations and bank merges
within bank infrastructure (shared standards).
• The special role played the ERP customer relations systems - Customer
Relationship Management - CRM. “Customer relationship management is a
corporate level strategy, focusing on creating and maintaining relationships
with customers. Several commercial CRM software packages are available
which vary in their approach to CRM. However, CRM is not a technology
itself, but rather a holistic approach to an organization’s philosophy, placing
the emphasis firmly on the customer”.
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e-Banking phase
• Phase of remote systems and phase of global systems - concept of banking computer
system related with electronic banking. Development of modern banking technology
can be divided in three stages.
• First stage until 1995 concerns electronic computer systems only with just a little
similarity to electronic banking – based on paper, telegraph and telephone
communication. Most of customer services were handled in departments. Banks
didn’t conquer with technology, it were costs, brand knowledge and level of bank
staff working in bank departments.
• Second stage is the start and instant growth of electronic banking – mainly forced by
Internet development. Banks started to invest in modern technologies, providing
latest services for customer. Computers started to exclude people from customer
service. Banks started Information Technology combat by the most modern
technologies and customer facilitates.
• Tird stage as Virtual Banking – virtual banking technology will be main drive of
banking services allowing customers to modify bank offer in each way. Customer
will be Chief Executive Officer of his bank account with design, offer, service, etc.
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ELECTRONIC SYSTEMS ELECTRONIC BANKING VIRTUAL BANKING
Archaic phase
Preliminary phase
Phase of remote systems
Productive phase
Phase of global systems
Phase of technological changes
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• Phase of remote systems.
• Customer, realizing the contact with the bank through could work offline,
and then connecting with a modem could send information to the bank
system.
• Main merit of such banking was that user didn’t have to visit bank office
in the case of the most frequent operations.
• It saved time and money for the user. Additionally user got the ability of
data integration coming from the bank with the own financial accounting
system to manage own finances more precisely.
• It also fastened access to account information with high transaction
security.
• On the other side low quality of transmission (generating errors),
especially where the stationary network was underdeveloped, high costs of
services, need to install the different software in case of contacts with lots
of banks caused that customers easily switched to the Internet based
contact.
• Parallel to telebanking for first time is developing an idea of electronic
money known as data stored on computer’s hard disk.
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• Phase of global systems was based on using websites to carry banking
transactions. Unlike the previous conception - in the Internet banking,
customer possesses both the own hardware and software. It is based on
Windows system and online viewer.
• Essential software allowing managing website is on bank server.
Lot of authors,,, presents four main stages of implementation and
development of Internet banking:
• information,
• interactive,
• functional,
• strategic.
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• Information stage – marketing and promotion is dated for 1995-1997
• Its attributes are: one website, address information, economical information
(bank condition, service fees), organizational information (structure,
departments), way of contact with bank (phone, fax, call centre, e-mail, on-line
forms, SMS, WAP), places of bank contact and its structure (departments,
info-kiosks, cash-machines), information about bank and finance area with
info about areas indicators (exchange rates, stock information) and examples
of service application and comparison services to customers.
• Information stage gives temporary advantage on market (until other banks will
join the market), customer visibility, information for present customers, low
costs of marketing (using existing paper documentation) and influence on
policy of small and mid- companies.
• Each structure has also its disadvantages. For information stage these cons are:
one way of communication (bank to customer only), information services only
and web portal limitations (portals with basic services). All these factors don’t
give proper customer’s feedback for bank.
• Via this services bank can only manage information through bank websites,
Internet bank portals with information about market and first financial portals.
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Interactive stage – two way communications is dated for 1998-1999
• Banks started to offer multimedia websites, tools supporting customer (search
engines, rates calculators, electronic documents), online services (on-line basic
account operations, on-line document forms, financial analysis for customers,
advertisements) and start up of Internet funds services. There were also
recruitment advertisements.
• New way of communication created lot of virtues as: image pick-up, new way of
gaining new customers and keeping present customers, new functionality of web
services, e-documentation mentioned above and financial aspect - decreasing
staff in bank departments. On the other side such approach gave marketing
information only as waiting for customers (pick-up service – banks couldn’t be
informed still about customer feedback), low security system.
• Despite couple inconveniences of this stage, customers were getting used to
communicate with bank through Internet tools. Banks were creating security
standards of Internet transactions and the main value - growth with customers.
• In this approach banks was growing own customers which were looking at these
changes - likely or not, but changes were started and growing generation of
potential customers saw modern technologies entering bank sector. It caused next
step since 2000 – full range of provided transactions and services.
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Functional stage – full range of provided transactions and services dated for 2000-2002
• Functional stage provided secured websites with ability to run all financial services,
online money transfers and service on direct debits, deposit accounts, bank loans,
support of cellular network (WAP) and beginning of real virtual banking.
• The most advancing issues were: the reduction of service costs, keeping present and
approach for new customers by high competitive rates and credits, service of e-trading,
constant reduction of bank staff.
• Banks was able to see changes in more customer oriented way.
• The most difficult area to manage was barrier of basic computer knowledge and Internet
access, low quality of mobile bank communication.
• With technical area most common disadvantages were problems with base systems
integrity and very high costs of implementing.
• Although new set of services has been forced into banking.
• Vide bank services offer via Internet, high complexity of banking systems, high security
standards and what was most interesting for customers - new forms of payments as
electronic transfer.
• Functional stage made banks more customer-oriented, allowed to leave bank queues.
Customers could create new definition like time-saving.
• Seeing all changes banks started to set it strategy on Internet services.
• That’s why since 2003 we are aware of Internet as tool which forms bank strategy.
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Strategic stage – Internet as tool which form bank strategy started 2003
• Modern attitude made multimedia bank portals integrated with bank core
systems. Systems have ability to analyze supplies and demands, banks could
offer electronic forms of payments with advanced sale of new services. It was
100% of virtual banking. There was also possibility to spread banking services
through communicators – mobility banking.
• With this approach banks related lot of advantages: scope of services was
related to “traditional” bank services, possibility to individualize each
customer, potentially - ability to gain high revenue, full integration of bank
systems, bank is perceived as modern and progressive and visible growth of
bank Internet users.
• Like as functional stage there was a barrier of high computer and Internet
knowledge. On-line services caused problems with CRM systems which
provide customer profiling and possible of “leaking” customer data became
real.
• Those bank services can be used for bank competition - high advanced stage of
system is unavailable for other banks in short term, digital communication
development – ability to implement new services (video conference, Internet
telephony), spreading portable terminals and highest security of electronic
bank systems became as standard.
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E-Cash and e-Payments
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E-Cash and e-Payments
• E-cash is most often downloaded from its respective system through special
terminals:
o specially equipped ATM machines,
o computers, or
o cell-phones) onto smart cards.
Such cards are called stored-value smart cards.
• E-cash can also be downloaded to personal computer hard disks via a modem.
The “money” remains stored until the user spends it. In the case of smart
cards, the “money” is spent by transacting it with another individual, in
vending machines, turnstiles, toll collecting devices, or retailers’ terminals.
• In the case of computer e-cash, the “money” is spent over the Internet. Each e-
cash transaction reduces the amount of stored “money” (value).
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Smart cards / stored value cards
• A smart card consists of a specifically designed integrated circuit chip
embedded in a plastic card.
• The chip contains either a set of contacts that physically connects with an
electronic reader or an aerial for contact less operation.
• Because they contain one or more electronic chips or integrated circuits that
can store and protect information, smart cards are also called chip cards or
integrated circuit cards.
• If, in addition to integrated circuits, a smart card contains a microprocessor
chip, it can calculate addition and subtraction of value.
• The capabilities of their embedded chips are what make smart cards “smart.”
• Many so-called smart cards are, in fact, only memory cards because their chips
do not contain a microprocessor.
• Memory cards can store data and value, but they cannot perform complex
calculations.
• If they are used to store value, as, for example, is the case with telephone
cards, they can deduct value only from the total available as the card is used.
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Some examples of smart cards
• In the late 1990s, three stored-value e-cash systems suited to the smart card form - Visa
Cash, Mondex, and Proton –were prominent in international markets.
• Visa International, the world’s largest credit card company, introduced Visa Cash, its
version of smart card e-cash, in 1995. The card
is intended to be used for small purchases such as a cup of coffee, a newspaper, a pay
phone call, cinema tickets, or public transportation. Visa Cash cards store units of
prepayment and come in two main types-disposable and reload-able.
• In July 1996, 17 major world financial institutions founded Mondex International; among
the founders were its original developer, National Westminster Bank, Midland Bank,
Hong Kong & Shanghai Banking Corp., Wells Fargo, AT&T, and 10 major banks in
Australia and New Zealand. The following November, MasterCard International acquired
a majority stake
in Mondex and since then has licensed the program worldwide on a regional basis
• Proton, a third major smart card e-cash scheme, is a rechargeable electronic purse
developed by Banksys, a Belgian Electronic Funds Transfer network operator, and is
marketed by Belgian banks. Proton is similar to Visa Cash in that its value is denominated
in units
of prepayment; it is likewise intended to be used for low-value purchases from shops or
from vending machines.
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Computer E-cash
• Computer e-cash, as noted above, entails the issuance of electronic units
or electronic value that can be used for payment in place of currency.
• Often also called e-money, computer e-cash made its appearance,
primarily in the United States, in about 1995, and is used in virtual
transactions over the Internet.
• Computer e-cash exists solely in cyberspace; in contrast with currency or
smart cards, it does not exist in tangible form.
• When using computer e-cash, the customer buys value from an authorized
provider, as he would with a smart card.
• Computer e-cash value, however, is then stored either in the customer’s
home computer or in a safe online repository.
• When the funds are spent, the e-cash value is credited to a retailer’s e-
cash account that must later be transferred to the retailer’s regular bank
account.
• Computer e-cash is marketed as an alternative to credit cards for normal
Internet transactions.
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Computer e-Cash examples
• Cyber Cash, which was founded in 1994 in the United States, began offering
Cyber Coin services in September 1996.
• Cyber Cash, Inc. touts Cyber Coin as the Internet equivalent of pocket change
because payments can be made in increments as small as $.25.
• The upper limit of value is set at $10. Cyber Coin features units of repayment,
as is the case with Visa Cash, and operates via software installed in a personal
computer.
• The payment service uses the existing banking network system and does not
require the opening of a new account at a specific bank.
• Because payment by Cyber Coin involves the transfer of funds between
established bank accounts, such payments can generally be traced without
great difficulty.
In 1997, in addition to offering Cyber Coin and its credit card service, Cyber
Cash, Inc. initiated an electronic check system called Pay Now Service.
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Computer e-Cash examples
• Digi-Cash, Inc. was founded in 1989 in the Netherlands.
• In 1994 Digi-Cash announced e-Cash, a software-based payments system that allows
users to send electronic payments from any personal computer to any other personal
computer or work station using any computer network, including the Internet.
• To use e-Cash, a customer opens a special bank account with a bank that issues it.
• E-Cash differs from Cyber Coin in that e-Cash is electronic value itself and not units
of prepayment.
• E-Cash is similar to Mondex in that it can be circulated outside existing banking
networks.
• In contrast with Mondex, however, once e-Cash is issued, the amount of expended
value cannot be divided into smaller denominations, a feature that discourages
continuous transfer.
• In order to prevent multiple use of electronic value, each value amount of e-Cash is
given
an encoded serial number (blind signature).
• When an amount of electronic value is brought to a bank, the serial number is checked.
• Only when the number has not been previously used can the value be accepted by the
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bank.
Internet banking – benefits for banks
• The main benefits to banks are cost savings, reaching new segments of the population,
efficiency, enhancement of the bank’s reputation and better customer service and satisfaction.
• The more transactions can be converted online, the more money will be saved.
• The cost of an electronic transaction is dramatically less when done online compare to at branch.
• That online banking strengthens the relationship between the service provider and the customer,
because it brings banking services directly to a customer’s home or office, or in the mobile phone.
• This creates customer loyalty. Online services are a must for banks that have to compete with a
growing number of services from other financial institutions, investment concerns and insurance
companies.
• Internet banking customers:
o are more satisfied with their bank,
o have higher switching barriers,
o provide more positive word of-mouth,
o have higher repurchase intentions,
o have a lower price sensitivity,
o have a lower propensity to exit and higher propensity to complain.
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Benefits for customers
• Internet banking offers also new value to customers. It makes available to customers a
full range of services including some services not offered at branches.
• The greatest benefit of Internet banking is that it is cheap or even free to customers.
• However, price seemed to be one factor militating against Internet banking
• Two important factors in the price debate are on the one hand geographical differences
and on the other hand disparities between the costs of e.g. Internet connections and
telephone call pricing.
• Electronic banking in general is not tied to time or place.
• It has also been argued that electronic banks are more likely to change in response to
customers’ demands.
• Internet banking has the advantage that the customer avoids traveling to and from a
bank branch.
• In this way, internet banking saves time and money, provides convenience and
accessibility, and has a positive impact on customer satisfaction.
• Customers can manage their banking affairs when they want, and they can enjoy more
privacy while interacting with their bank.
• It has been claimed that Internet banking offers the customer more benefits at lower
costs 348
Bank’s cost transactions via different channels of distribution
349
Electronic Commerce Payment Systems
Source: Furnell, S.M. & Karweni, T. 1999. Security implications of electronic commerce: A survey of consumers and business. Internet Research: 354
The Internet - a real sales channel?
355
The Internet a pre-sales channel?
356
The Benefits of EC (to Organizations)
357
The Benefits of EC (to Consumers)
• Enables customers to shop or do other transactions 24 hours a day, all yer
around, from almost any location,
• Provides customers with more choices, they can select from many vendors
and from mare products,
• Enables people in Third World countries and rural areas to enjoy product
and services that othervise are not available for them,
• The software development tools are still evolving and changing rapidly,
• It’s difficult to integrate the Internet and EC software with some existing
applications and databases,
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The Limits of EC – Non-Technical
• Costs and justifications – in house it may be very high, and mistake due to lack of
experience may result in delays (34, 8%),
• Lack of trust and user resistance – customers do not trust an unknown faceless
seller, paperless transactions and electronic money (4,4%).
Other limiting factors:
• Many legal issues are as yet unresolved, and government regulations and
standards are not refined enough for many circumstances,
• EC, as a discipline, is still evolving and changing rapidly. Many people are looking
for more stable area before they enter into it,
• There are not enough support services (clearance centers for EC transactions, tax
centers etc.),
• In most applicationss there are not yet enough sellers and buyers for profitable EC
operations,
• EC could result in a breakdown of human relations,
• Access to the Internet is still expensive and/or inconvenient for many potential
customers.
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The Limits of New Technologies
363
The Limits of New Technologies
364
Impact of the internet on competitive forces and
industry structure
Competitive force Impact of the internet
Substitute products or services Enables new substitutes to emerge with new approaches to
meeting needs and performing functions
Customers’ bargaining power Availability of global price and product information shifts
bargaining power to customers
Suppliers’ bargaining power Procurement over the Internet tends to raise bargaining power
over suppliers; suppliers can also benefit from reduced
barriers to entry and from the elimination of distributors and
other intermediaries standing between them and their users
Threat of new entrants The Internet reduces barriers to entry, such as the need for a
sales force, access to channels, and physical assets; it
provides a technology for driving business processes that
makes other things easier to do
Positioning and rivalry among Widens the geographic market, increasing the number of
existing competitors competitors, and reducing differences among competitors;
makes it more difficult to sustain operational advantages;
puts pressure to compete on price
Internet Users in the World by Region, 2012
www.internetworldstats.com/stats.htm
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Internet Penetration Rates (users per capita citizens) by
Region, 2012
367
Students using internet for posting messages to social media sites
or instant messaging (%)
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http://epp.eurostat.ec.europa.eu/tgm/graph.do?tab=graph&plugin=1&pcode=tin00084&language=e
n&toolbox=data
e- Business and e-Services
Part 5
Telecommunications, the Internet and Wireless Technology
• Client/Server Computing
• Packet Switching
• TCP/IP and Connectivity
Communications networks
• Local area network (LAN)
• Metropolitan area network (MAN)
• Wide area network (WAN)
Physical transmission media
• Twisted wire
• Coaxial cable
• Fiber optics and optical networks
• Wireless transmission media (microwave,
cellular, Wi-Fi)
THE GLOBAL INTERNET
• The Internet has become the world’s most
extensive, public communication system
that now rivals the global telephone system
in reach and range.
• It’s also the world’s largest
implementation of client/server
computing and internetworking, linking
millions of individual networks all over the
world.
Internet – how does it work?
• An Internet service provider (ISP) is a commercial
organization with a permanent connection to the Internet
that sells temporary connections to retail subscribers
• Internet Protocol (IP) address
• Domain Name System (DNS) converts domain names to
IP addresses
• Internet policies are established by a number of
professional organizations and government bodies,
including the Internet Architecture Board (IAB), which
helps define the overall structure of the Internet; the
Internet Corporation for Assigned Names and
Numbers (ICANN), which assigns IP addresses; and the
World Wide Web Consortium (W3C), which sets
Hypertext Markup Language and other programming
standards for the Web
Major internet services
CAPABILITY FUNCTIONS SUPPORTED
E-mail Person-to-person messaging; document sharing
• 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 its accounting
records; and operational adherence to management standards
System Vulnerability and Abuse
The architecture of a Web-based application typically includes a Web client, a server, and
corporate information systems linked to databases. Each of these components presents security
challenges and vulnerabilities. Floods, fires, power failures, and other electrical problems can
cause disruptions at any point in the network.
• Internet vulnerabilities
• Network open to anyone
• E-mail attachments
This chart is a sample page from a list of control weaknesses that an auditor might find in a loan system
in a local commercial bank. This form helps auditors record and evaluate control weaknesses and
shows the results of discussing those weaknesses with management, as well as any corrective actions
taken by management.
Technologies and Tools for Security
The firewall is placed between the firm’s private network and the public Internet or another
distrusted network to protect against unauthorized traffic.
• Antivirus and antispyware software:
• Checks computers for presence of malware and can often eliminate
it as well
• Require continual updating
• Unified threat management (UTM)
• Comprehensive security management products
• Tools include
• Firewalls
• Intrusion detection
• VPNs
• Web content filtering
• Antispam software
Technologies and Tools for Security
• Encryption:
• Transforming text or data into cipher text that cannot be
read by unintended recipients
• Two methods for encrypting network traffic
• Secure Sockets Layer (SSL) and successor Transport Layer
Security (TLS)
• Secure Hypertext Transfer Protocol (S-HTTP)
• Two methods of encryption
• Symmetric key encryption
• Public key encryption
Public Key Encryption
• Digital certificate:
• Data file used to establish the identity of users and electronic assets
for protection of online transactions
• Uses a trusted third party, certification authority (CA), to validate a
user’s identity
• CA verifies user’s identity, stores information in CA server, which
generates encrypted digital certificate containing owner ID
information and copy of owner’s public key
• Public key infrastructure (PKI)
• Use of public key cryptography working with certificate authority
• Widely used in e-commerce
Digital Certificates
Digital certificates help establish the identity of people or electronic assets. They protect online
transactions by providing secure, encrypted, online communication.
Technologies and Tools for Security
• Number of transactions
• Online response time
• Payroll checks printed per hour
• Known bugs per hundred lines of code
• Testing: Early and regular testing
• Walkthrough: Review of specification or design document
by small group of qualified people
• Debugging: Process by which errors are eliminated
Thank you very much for your attention!
Witold Chmielarz
Questions - vitec@post.pl
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