Chapter 1--Managing the Digital Firm
What is the role of information systems in today's competitive business environment? Information systems have become essential for helping organizations deal with changes in global economies and the business enterprise. Information systems provide firms with communication and analytic tools for conducting trade and managing businesses on a global scale. Information systems are the foundation of new knowledge-based products and services in knowledge economies and help firms manage their knowledge assets. Information systems make it possible for businesses to adopt flatter, more decentralized structures and more flexible arrangements of employees and management. Organizations are trying to become more competitive and efficient by transforming themselves into digital firms where nearly all core business processes and relationships with customers, suppliers, and employees are digitally enabled.
What exactly is an information system? What do managers need to know about information systems? The purpose of an information system is to collect, store, and disseminate information from an organization's environment and internal operations to support organizational functions and decision making, communication, coordination, control, analysis, and visualization. Information systems transform raw data into useful information through three basic activities: input, processing, and output. From a business perspective, an information system represents an organizational and management solution based on information technology to a challenge posed by the environment.
Information systems literacy requires an understanding of the organizational and management dimensions of information systems as well as the technical dimensions addressed by computer literacy. Information systems literacy draws on both technical and behavioral approaches to studying information systems. Both perspectives can be combined into a sociotechnical approach to systems.
How are information systems transforming organizations and management? The kinds of systems built today are very important for the organization's overall performance, especially in today's highly globalized and information-based economy. Information systems are driving both daily operations and organizational strategy. Powerful computers, software, and networks, including the Internet, have helped organizations become more flexible, eliminate layers of management, separate work from location, coordinate with suppliers and customers, and restructure work flows, giving new powers to both line workers and management. Information technology provides managers with tools for more precise planning, forecasting, and monitoring of the business. To maximize the advantages of information technology, there is a much greater need to plan the organization's information architecture and information technology (IT) infrastructure.
How has the Internet and Internet technology transformed business? The Internet provides the primary technology infrastructure for electronic commerce, electronic business, and the emerging digital firm. The Internet and other networks have made it possible for businesses to replace manual and paper-based processes with electronic flows of information. In electronic commerce, businesses can exchange electronic purchase and sale transactions with each other and with individual customers. Electronic business uses the Internet and digital technology to expedite the exchange of information that can facilitate communication and coordination both inside the organization and between the organization and its business partners. Digital firms use Internet technology intensively for electronic commerce and electronic business to manage their internal processes and relationships with customers, suppliers, and other external entities.
What are the major management challenges to building and using information systems? There are five key management challenges in building and using information systems: (1) designing systems that are competitive and efficient; (2) understanding the system requirements of a global business environment; (3) creating an information architecture that supports the organization's goals; (4) determining the business value of information systems; and (5) designing systems that people can control, understand, and use in a socially and ethically responsible manner.
Chapter 2--Information Systems in the Enterprise
What are the key system applications in a business? What role do they play? There are six major types of information systems in contemporary organizations. Operational-level systems are transaction processing systems (TPS), such as payroll or order processing, that track the flow of the daily routine transactions that are necessary to conduct business. Knowledge-level systems support clerical, managerial, and professional workers. They consist of office systems for increasing data workers' productivity and knowledge work systems for enhancing knowledge workers' productivity. Management-level systems (MIS and DSS) provide the management control level with information for monitoring, controlling, and decision-making. Most MIS reports condense information from TPS and are not highly analytical. Decision-support systems (DSS) support management decisions when these decisions are unique, rapidly changing, and not specified easily in advance. They have more advanced analytical models and data analysis capabilities than MIS and often draw on information from external as well as internal sources. Executive support systems (ESS) support the strategic level by providing a generalized computing and communications environment to assist senior management's decision making. They have limited analytical capabilities but can draw on sophisticated graphics software and many sources of internal and external information.
The various types of systems in the organization exchange data with one another. TPS are a major source of data for other systems, especially MIS and DSS. ESS primarily receive data from lower-level systems. The different systems in an organization have traditionally been loosely integrated.
How do information systems support the major business functions: sales and marketing, manufacturing and production, finance and accounting, and human resources? At each level of the organization there are information systems supporting the major functional areas of the business. Sales and marketing systems help the firm identify customers for the firm's products or services, develop products and services to meet customers' needs, promote the products and services, sell the products and services, and provide ongoing customer support. Manufacturing and production systems deal with the planning, development, and production of products and services, and controlling the flow of production. Finance and accounting systems keep track of the firm's financial assets and fund flows. Human resources systems maintain employee records; track employee skills, job performance, and training; and support planning for employee compensation and career development.
Why should managers pay attention to business processes? What are the benefits of using information systems to support business processes, including those for customer relationship management and supply chain management? Business processes refer to the manner in which work is organized, coordinated, and focused to produce a valuable product or service. Business processes are concrete work flows of material, information, and knowledge. They also represent unique ways in which organizations coordinate work, information, and knowledge and the ways in which management chooses to coordinate work. Managers need to pay attention to business processes because they determine how well the organization can execute, and thus are a potential source of strategic success or failure. Although each of the major business functions has its own set of business processes, many other business processes are cross-functional, such as fulfilling an order. Information systems can help organizations achieve great efficiencies by automating parts of these processes or by helping organizations rethink and streamline these processes, especially those for customer relationship management and supply chain management. Customer relationship management uses information systems to coordinate all of the business processes surrounding the firm's interactions with its customers. Supply chain management is the close linkage of activities involved in buying, making, and moving products. Information systems make supply chain management more efficient by helping companies coordinate, schedule, and control procurement, production, inventory management, and delivery of products and services to customers.
What are the business benefits of using collaborative commerce, private industrial networks and enterprise systems?Collaborative commerce relies on digital technologies to enable multiple organizations to collaboratively design, develop, build, move, and manage products through their lifecycles. A firm engaged in collaborative commerce with its suppliers and customers can achieve new efficiencies by reducing product design cycles, minimizing excess inventory, forecasting demand, and keeping partners and customers informed. Private industrial networks are Web-enabled networks that support collaborative commerce activities by providing an infrastructure for transorganizational business processes and information flows.
Enterprise systems integrate the key business processes of a firm into a single software system so that information can flow throughout the organization, improving coordination, efficiency, and decision making. Enterprise systems promise efficiencies from better coordination of both internal and external business processes. Enterprise systems can help create a more uniform organization in which everyone uses similar processes and information, and measures their work in terms of organization-wide performance standards. The coordination of sales, production, finance, and logistics processes provided by enterprise systems helps organizations respond more rapidly to customer demands.
Enterprise systems are very difficult to implement successfully. They require extensive organizational change, use complicated technologies, and require large up-front costs for long-term benefits that are difficult to quantify. Once implemented, enterprise systems are very difficult to change. Management vision and foresight are required to take a firmwide and industry-wide view of problems and to find solutions that realize strategic value from the investment.
What types of information systems are used by companies that operate internationally? There are four basic global forms of business organization: domestic exporter, multinational, franchiser, and transnational. Each works best with a different systems configuration. Transnational firms must develop networked system configurations and permit considerable decentralization of development and operations. Franchisers tend to duplicate systems across many countries and use centralized financial controls. Multinationals typically rely on decentralized independence among foreign units with some movement toward development of networks. Domestic exporters typically are centralized in domestic headquarters with some decentralized operations permitted.
Chapter 3--Information Systems, Organizations, Management, and Strategy
What do managers need to know about organizations in order to build and use information systems successfully?
Managers need to understand certain essential features of organizations in order to build and use information systems successfully. All modern organizations are hierarchical, specialized, and impartial. They use explicit standard operating procedures to maximize efficiency. All organizations have their own cultures and politics arising from differences in interest groups. Organizations differ in goals, groups served, social roles, leadership styles, incentives, surrounding environments, and types of tasks performed. These differences create varying types of organizational structures and they also help explain differences in organizations' use of information systems.
What impact do information systems have on organizations?
Information systems and the organizations in which they are used interact with and influence each other. The introduction of a new information system will affect organizational structure, goals, work design, values, competition between interest groups, decision making, and day-to-day behavior. At the same time, information systems must be designed to serve the needs of important organizational groups and will be shaped by the organization's structure, tasks, goals, culture, politics, and management. Information technology can reduce transaction and agency costs, and such changes have been accentuated in organizations using the Internet. The information systems department is the formal organizational unit that is responsible for the organization's information systems function. Organizational characteristics and managerial decisions determine the role this group will actually play.
How do information systems support the activities of managers in organizations?
There are several different models of what managers actually do in organizations that show how information systems can be used for managerial support. Early classical models of managerial activities stressed the functions of planning, organizing, coordinating, deciding, and controlling. Contemporary research looking at the actual behavior of managers has found that managers' real activities are highly fragmented, variegated, and brief in duration, with managers moving rapidly and intensely from one issue to another. Managers spend considerable time pursuing personal agendas and goals, and contemporary managers shy away from making grand, sweeping policy decisions.
The nature and level of decision making are important factors in building information systems for managers. Decisions can be structured, semistructured, or unstructured, with structured decisions clustering at the operational level of the organization and unstructured decisions at the strategic planning level. Decision making can also take place at the individual or group level. Individual models of decision making assume that human beings can rationally choose alternatives and consequences based on the priority of their objectives and goals. Organizational models of decision making illustrate that real decision making in organizations takes place in arenas where many psychological, political, and bureaucratic forces are at work.
Information systems have been most helpful to managers by providing support for their roles in disseminating information, providing liaison between organizational levels, and allocating resources. However, some managerial roles cannot be supported by information systems, and information systems are less successful at supporting unstructured decisions.
How can businesses use information systems for competitive advantage
Businesses can use strategic information systems to gain an edge over competitors. Such systems change organizations' goals, business processes, products, services, or environmental relationships, driving them into new forms of behavior.
Information systems can be used to support strategy at the business, firm, and industry level. At the business level of strategy, information systems can be used to help firms become the low-cost producers, differentiate products and services, or serve new markets. Information systems can also be used to "lock in" customers and suppliers using efficient customer response and supply chain management applications. Value chain analysis is useful at the business level to highlight specific activities in the business where information systems are most likely to have a strategic impact.
At the firm level, information systems can be used to achieve new efficiencies or to enhance services by tying together the operations of disparate business units so that they can function as a whole or promote the sharing of knowledge across business units. At the industry level, systems can promote competitive advantage by facilitating cooperation with other firms in the industry, creating consortiums or communities for sharing information, exchanging transactions, or coordinating activities. The competitive forces model, information partnerships and network economics are useful concepts for identifying strategic opportunities for systems at the industry level.
Why is it so difficult to build successful information systems, including systems that promote competitive advantage?
Information systems are closely intertwined with an organization's structure, culture, and business processes. New systems disrupt established patterns of work and power relationships, so there is often considerable resistance to them when they are introduced.
Implementing strategic systems often requires extensive organizational change and a transition from one sociotechnical level to another. Such changes are called strategic transitions and are often difficult and painful to achieve. Moreover, not all strategic systems are profitable, and they can be expensive to build. Many strategic information systems are easily copied by other firms, so that strategic advantage is not always sustainable.
Chapter 4--The Digital firm: Electronic Commerce and Electronic Business
How has Internet technology changed value propositions and business models? The Internet is rapidly becoming the infrastructure of choice for electronic commerce and electronic business because it provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizations, no matter what computer system or information technology platform they are using. Internet technology provides a much lower cost and easier to use alternative for coordination activities than proprietary networks. Companies can use Internet technology to radically reduce their transaction costs.
The Internet radically reduces the cost of creating, sending, and storing information while making that information more widely available. Information is not limited to traditional physical methods of delivery. Customers can find out about products on their own on the Web and buy directly from product suppliers instead of using intermediaries such as retail stores. This unbundling of information from traditional value chain channels is having a disruptive effect on old business models, and it is creating new business models as well. Some of the traditional channels for exchanging product information have become unnecessary or uneconomical, and business models based on the coupling of information with products and services may no longer be necessary.
The Internet shrinks information asymmetry and has transformed the relationship between information richness and reach. Using the Internet and Web multimedia capabilities, companies can quickly and inexpensively provide detailed product information and detailed information specific to each customer to very large numbers of people simultaneously. The Internet can help companies create and capture profit in new ways by adding extra value to existing products and services or by providing the foundation for new products and services. Many different business models for electronic commerce on the Internet have emerged, including virtual storefronts, information brokers, transaction brokers, online marketplaces, content providers, on-line service providers, virtual communities, and portals.
What is electronic commerce? How has electronic commerce changed consumer retailing and business-to-business transactions? Electronic commerce is the process of buying and selling goods electronically with computerized business transactions using the Internet or other digital network technology. It includes marketing, customer support, delivery, and payment. The three major type of electronic commerce are business-to-consumer (B2C), business-to-business (B2B), and consumer-to-consumer (C2C). Another way of classifying electronic commerce transactions is in terms of the participants' physical connection to the Web. Conventional e-commerce transactions, which take place over wired networks, can be distinguished from mobile commerce or m-commerce, the purchase of goods and services using handheld wireless devices.
The Internet provides a universally available set of technologies for electronic commerce that can be used to create new channels for marketing, sales, and customer support, and to eliminate intermediaries in buy and sell transactions. Interactive capabilities on the Web can be used to build closer relationships with customers in marketing and customer support. Firms can use various Web personalization technologies to deliver Web pages with content geared to the specific interests of each user, including technologies to deliver personalized information and ads through m-commerce channels. Companies can also reduce costs and improve customer service by using Web sites to provide helpful information as well as e-mail and even telephone access to customer service representatives.
B2B e-commerce generates efficiencies by enabling companies to electronically locate suppliers, solicit bids, place orders, and track shipments in transit. Businesses can use their own Web sites to sell to other businesses or use net marketplaces or private industrial networks. Net marketplaces provide a single digital marketplace based on Internet technology for many buyers and sellers. Net marketplaces can be differentiated by whether they sell direct or indirect goods, support spot or long-term purchasing, or serve vertical or horizontal markets. Private industrial networks link a firm with its suppliers and other strategic business partners to develop highly efficient supply chains and to respond quickly to customer demands.
What are the principal payment systems for electronic commerce? The principal electronic payment systems for electronic commerce are credit card systems, digital wallets, accumulated balance digital payment systems, stored value systems, digital cash, peer-to-peer payment systems, electronic checks, and electronic billing presentment and payment systems. Accumulated balance systems, stored value systems (including smart cards), and digital cash are useful for small micropayments.
How can Internet technology support electronic business and supply chain management? Private, internal corporate networks called intranets can be created using Internet connectivity standards. Extranets are private intranets that are extended to selected organizations or individuals outside the firm. Intranets and extranets are forming the underpinnings of electronic business by providing a low-cost technology that can run on almost any computing platform. Organizations can use intranets to create collaboration environments for coordinating work and information sharing, and they can use intranets to make information flow between different functional areas of the firm. Intranets also provide a low-cost alternative for improving coordination among organizations' internal supply chain processes. Extranets can be used to coordinate supply chain processes shared with external organizations.
What are the major managerial and organizational challenges posed by electronic commerce and electronic business? Many new business models based on the Internet have not yet found proven ways to generate profits or reduce costs. Digitally enabling a firm for electronic commerce and electronic business requires far-reaching organizational change, including redesign of business processes; recasting relationships with customers, suppliers, and other business partners; and new roles for employees. Channel conflicts may erupt as the firm turns to the Internet as an alternative outlet for sales. Security, privacy and legal issues pose additional electronic commerce challenges.
Chapter 5--Ethical and Social Issues in the Digital Firm
What ethical, social, and political issues are raised by information systems? Information technology has raised new possibilities for behavior for which laws and rules of acceptable conduct have not yet been developed. The main ethical, social, and political issues raised by information systems center around information rights and obligations, property rights, accountability and control, system quality, and quality of life. Ethical, social, and political issues are closely related. Ethical issues confront individuals who must choose a course of action, often in a situation in which two or more ethical principles are in conflict (a dilemma). Social issues spring from ethical issues as societies develop expectations in individuals about the correct course of action. Political issues spring from social conflict and have to do largely with laws that prescribe behavior and seek to use the law to create situations in which individuals behave correctly.
Are there specific principles for conduct that can be used to guide decisions about ethical dilemmas? Six ethical principles are available to judge conduct. These principles are derived independently from several cultural, religious, and intellectual traditions and include the Golden Rule, Immanuel Kant's Categorical Imperative, Descartes' rule of change, the Utilitarian Principle, the Risk Aversion Principle, and the ethical "no free lunch" rule. These principles should be used in conjunction with an ethical analysis to guide decision making. The ethical analysis involves identifying the facts, values, stakeholders, options, and consequences of actions. Once completed, one can consider what ethical principle to apply to a situation to arrive at a judgment.
Why does contemporary information systems technology pose challenges to the protection of individual privacy and intellectual property? Contemporary information systems technology, including the Internet technology, challenges traditional regimens for protecting individual privacy and intellectual property. Database and data analysis technology allows companies to easily gather personal data about individuals from many different sources and analyze these data to create detailed electronic profiles about individuals and their behavior. Data flowing over the Internet can be monitored at many points. The activities of Web site visitors can be closely tracked using "cookies" and other Web monitoring tools. Not all Web sites have strong privacy protection policies, and they do not always allow for informed consent regarding the use of personal information. The on-line industry prefers self-regulation to the U.S. government tightening privacy protection legislation.
Traditional copyright laws are insufficient to protect software piracy because digital material can be so easily copied. Internet technology also makes intellectual property even more difficult to protect because digital material can be copied and transmitted to many different locations simultaneously over the Net. Web pages can be easily constructed by using pieces of content from other Web sites without permission.
How have information systems affected everyday life? Although computer systems have been sources of efficiency and wealth, they have some negative impacts. Errors in large computer systems are impossible to totally eradicate. Computer errors can cause serious harm to individuals and organizations, and existing laws and social practices are often unable to establish liability and accountability for these problems. Less serious errors are often attributable to poor data quality, which can cause disruptions and losses for businesses. Jobs can be lost when workers are replaced by computers or tasks become unnecessary in reengineered business processes. The ability to own and use a computer may be exacerbating socioeconomic disparities among different racial groups and social classes. Widespread use of computers increases opportunities for computer crime and computer abuse. Computers can also create health problems such as repetitive stress injury, computer vision syndrome, and technostress.
How can organizations develop corporate polices for ethical conduct? For each of the five moral dimensions of information systems, corporations should develop an ethics policy statement to assist individuals and to encourage the correct decisions. The policy areas are as follows. Individual information rights: Spell out corporate privacy and due process policies. Property rights: Clarify how the corporation will treat property rights of software owners. Accountability and control: Clarify who is responsible and accountable for corporate information. System quality: Identify methodologies and quality standards to be achieved. Quality of life: Identify corporate policies on family, computer crime, decision making, vulnerability, job loss, and health risks.
Chapter 6--Managing Hardware and Software Assets
What computer processing and storage capability does our organization need to handle its information and business transactions?
Managers should understand the alternative computer hardware technologies available for processing and storing information so that they can select the right technologies for their business. Modern computer systems have six major components: a central processing unit (CPU), primary storage, input devices, output devices, secondary storage, and communications devices. All of these components need to work together to process information for the organization. The CPU is the part of the computer where the manipulation of symbols, numbers, and letters occurs. The CPU has two components: an arithmetic-logic unit and a control unit.
The CPU is closely tied to primary memory, or primary storage, which stores data and program instructions temporarily before and after processing. Several different kinds of semiconductor memory chips are used with primary storage: RAM (random access memory) is used for short-term storage of data and program instructions; and ROM (read-only memory) permanently stores important program instructions.
Computer processing power depends in part on the speed of their microprocessors, which integrate the computer's logic and control on a single chip. Microprocessors capabilities can be gauged by their word length, data bus width, and cycle speed. Most conventional computers process one instruction at time, but computers with parallel processing can process multiple instructions simultaneously.
The principal secondary storage technologies are magnetic disk, optical disk, and magnetic tape Disk permits direct access to specific records and is much faster than tape. Disk technology is used in on-line processing. Optical disks can store vast amounts of data compactly. CD-ROM disk systems can only be read from, but rewritable optical disk systems are becoming available. Magnetic tape stores records in sequence and only can be used in batch processing.
The principal input devices are keyboards, computer mice, touch screens, magnetic ink and optical character recognition, pen-based instruments, digital scanners, sensors, and voice input. The principal output devices are video display terminals, printers, plotters, voice output devices, and microfilm and microfiche. In batch processing, transactions are accumulated and stored in a group until the time when it is efficient or necessary to process them. In on-line processing, the user enters transactions into a device that is directly connected to the computer system. The transactions are usually processed immediately. Multimedia integrates two or more types of media, such as text, graphics, sound, voice, full-motion video, still video, and/or animation into a computer-based application.
What arrangement of computers and computer processing would best benefit our organization?
Managers should understand the capabilities of various categories of computers and arrangements of computer processing. The type of computer and arrangement of processing power that should be used by the business depends on the nature of the organization and its problems.
Computers are categorized as mainframes, midrange computers, PCs, workstations, or supercomputers. Mainframes are the largest computers; midrange computers can be minicomputers used in factory, university, or research lab systems or servers providing software and other resources to computers on a network. PCs are desktop or laptop machines; workstations are desktop machines with powerful mathematical and graphic capabilities; and supercomputers are sophisticated, powerful computers that can perform massive and complex computations rapidly. Because of continuing advances in microprocessor technology, the distinctions between these types of computers are constantly changing.
Computers can be networked together to distribute processing among different machines. In the client/server model of computing, computer processing is split between "clients" and "servers" connected via a network. The exact division of tasks between client and server depends on the application. Network computers are pared-down desktop machines with minimal or no local storage and processing capacity. They obtain most or all of their software and data from a central network server. Whereas network computers help organizations maintain central control over computing, peer-to-peer computing puts processing power back on users' desktops, linking individual PCs, workstations, or other computers through the Internet or private networks to share data, disk space, and processing power for a variety of tasks.
What kinds of software and software tools do we need to run our business? What criteria should we use to select our software technology?
Managers should understand the capabilities of various types of software so they can select software technologies that provide the greatest benefit for their firms. There are two major types of software: system software and application software. System software coordinates the various parts of the computer system and mediates between application software and computer hardware. Application software is used by application programmers and some end users to develop specific business applications.
The system software that manages and controls the activities of the computer is called the operating system. The operating system acts as the chief manager of the information system, allocating, assigning, and scheduling system resources and monitoring the use of the computer. Multiprogramming, multitasking, virtual storage, time sharing, and multiprocessing are operating system capabilities that enable system resources to be used more efficiently so that the computer can attack many problems at the same time. Other system software includes computer-language translation programs that convert programming languages into machine language and utility programs that perform common processing tasks.
PC operating systems have developed sophisticated capabilities such as multitasking and support for multiple users on networks. Leading PC operating systems include Windows XP, Windows 98 and Windows Me; Windows 2000, Windows CE, UNIX, Linux, OS/2, Mac OS, and DOS. PC operating systems and many kinds of application software now use graphical user interfaces.
The general trend in software is toward user-friendly, high-level languages that both increase professional programmer productivity and make it possible for end users to work directly with information systems. Conventional programming languages include assembly language, FORTRAN, COBOL, BASIC and Pascal, and C, and each is designed to solve specific types of problems. Fourth-generation languages are less procedural than conventional programming languages and enable end users to perform many software tasks that previously required technical specialists. They include popular PC software tools such as word processing, spreadsheet, data management, presentation graphics, and e-mail software along with Web browsers and groupware. Enterprise software, middleware, and enterprise application integration software are all software tools for promoting enterprise-wide integration of business processes and information system applications.
Software selection should be based on criteria such as efficiency, compatibility with the organization's technology platform, vendor support, and whether the software tool is appropriate for the problems and tasks of the organization.
Of what new software technologies should we be aware? How would they benefit our organization?
Object-oriented programming tools and new programming languages such as Java, hypertext markup language (HTML), and eXtensible Markup Language (XML) can help firms create software more rapidly and efficiently and produce applications based on the Internet or data in Web sites. Object-oriented programming combines data and procedures into one object, which can act as an independent software building block. Each object can be used in many different systems without changing program code.
Java is an object-oriented programming language designed to operate on the Internet. It can deliver precisely the software functionality needed for a particular task as a small applet that is downloaded from a network. Java can run on any computer and operating system. HTML is a page description language for creating Web pages. XML is a language for creating structured documents in which data are tagged for meanings. The tagged data in XML documents and Web pages can be manipulated and used by other computer systems. XML can thus be used to exchange data between Web sites to different legacy systems within a firm and between the systems of different partners in a supply chain.
How should we acquire and manage the firm's hardware and software assets?
Both hardware and software are major organizational assets that must be carefully managed. Electronic commerce and electronic business have put new strategic emphasis on technologies that can store vast quantities of transaction data and make them immediately available on-line. Managers and information systems specialists need to pay special attention to hardware capacity planning and scalability to ensure that the firm has enough computing power for its current and future needs.
They also need to balance the costs and benefits of owning and maintaining their own hardware and software renting these assets from external service providers. On-line storage service providers (SSPs) rent out storage space to subscribers over the Web, selling computer storage as a pay-per-use utility. Application service providers (ASPs) rent out software applications and computer services from remote computer centers to subscribers over the Internet or private networks.
Calculating the total cost of ownership (TCO) of the organization's technology assets can help provide managers with the information they need to manage these assets and decide whether to rent or own these assets. The total cost of owning technology resources includes not only the original cost of computer hardware and software but also costs for hardware and software upgrades, maintenance, technical support, and training.
Chapter 8--Telecommunications and Networks
What technologies are used in telecommunications systems? A telecommunications system consists of devices that create a network for communication from one location to another by electronic means. The essential components of a telecommunications system are computers, terminals, other input/output devices, communications channels, communications processors (such as modems, multiplexers, controllers, and front-end processors), and telecommunications software. Different components of a telecommunications network can communicate with each other with a common set of rules termed protocols. Data are transmitted throughout a telecommunications network using either analog signals or digital signals. A modem is a device that translates analog signals to digital signals and vice versa.
What telecommunications transmission media should our organization use? The capacity of a telecommunications channel is determined by the range of frequencies it can accommodate. The higher the range of frequencies, called bandwidth, the higher the capacity (measured in bits per second). The principal transmission media are twisted copper telephone wire, coaxial copper cable, fiber-optic cable, and wireless transmission using microwave, satellite, low-frequency radio waves, or infrared waves. The choice of transmission medium depends on the distance and volume of communication required by the organization and its financial resources. Fiber-optic and coaxial cable are used for high-volume transmission but are expensive to install. Twisted wire can only transmit low volumes of data, but it is less expensive than other media, allowing companies to use the existing wiring for telephone systems for digital communication. Microwave and satellite are used for wireless communication over long distances.
How should our organization design its networks? Network design should be based on the organization's information requirements and the distance required for transmission. The three common network topologies are the star network, the bus network, and the ring network. In a star network, all communications must pass through a central computer, and star networks are primarily used when some centralized processing is required. The bus network links a number of devices to a single channel and broadcasts all of the signals to the entire network, with special software to identify which components receive each message. In a ring network, each computer in the network can communicate directly with any other computer but the channel is a closed loop. Data are passed along the ring from one computer to another. Network design should also consider geographic scope. Local area networks (LANs) and private branch exchanges (PBXs) are used to link offices and buildings in close proximity. LANs require special wiring, but PBXs are limited to existing telephone lines and low transmission speeds. Wide area networks (WANs) span a broad geographical distance, ranging from several miles to continents, and are private networks that are independently managed.
What alternative network services are available to our organization? A number of services are available to organizations for network management and Internet access. Value-added networks (VANs) sell wide area networking services to companies that do not want to build or maintain their own private networks. VANs (and the Internet) achieve economies and higher speeds in long-distance transmission by using packet switching, which breaks messages into small packets that are sent independently along different paths in a network and then reassembled at their destination.
Integrated Services Digital Network (ISDN) is an international standard for dial-up network access that integrates voice, data, image, and video services in a single link. Basic Rate ISDN can transmit data at a rate of 128 kilobits per second on an existing local telephone line.
Firms have the option of using frame relay, asynchronous transfer mode (ATM), digital subscriber line, cable modem, and T1 lines for high transmission capacity. Frame relay is a shared network service that is faster and less expensive than packet switching because it does not perform error correction routines. ATM can seamlessly and dynamically switch voice, data, images, and video between computers from different vendors and can tie LANs and wide area networks together. ATM can transmit up to 2.5 GBPS.
Digital subscriber line (DSL) technologies, cable modems, and T1 lines are often used for high-capacity Internet connections. Like ISDN, DSL technologies also operate over existing copper telephone lines to carry voice, data, and video, but they have higher transmission capacities than ISDN. Asymmetric digital subscriber line (ADSL) supports a transmission rate of 1.5 to 9 megabits per second when receiving data and up to 640 kilobits per second when sending data. Symmetric digital subscriber line (SDSL) supports the same transmission rate for sending and receiving data of up to 3 megabits per second. Cable modems are modems designed to operate over cable TV lines. They can provide high-speed access to the Web or corporate intranets of up to 4 megabits per second. A T1 line is a dedicated telephone connection comprising 24 channels that can support a data transmission rate of 1.544 megabits per second. Each of these 64-kilobit-per-second channels can be configured to carry voice or data traffic.
What telecommunications applications can be used for electronic commerce and electronic business? The principal telecommunications applications for electronic commerce and electronic business are electronic mail, voice mail, fax, digital information services, distance learning and e-learning, teleconferencing, dataconferencing, videoconferencing, electronic data interchange (EDI), and groupware. EDI is the computer-to-computer exchange between two organizations of standard transaction documents such as invoices, bills of lading, and purchase orders.
Chapter 9--The Internet and the New Information Technology Infrastructure
What is the new information technology (IT) infrastructure for business? Why is connectivity so important in this infrastructure? The new information technology (IT) infrastructure uses a mixture of computer hardware supplied by different vendors, including mainframes, PCs, and servers, which are networked to each other. More processing power is available on the desktop through client/server computing and mobile personal information devices that provide remote access to the desktop from outside the organization. The new IT infrastructure also incorporates public infrastructures, such as the telephone system, the Internet, and public network services and electronic devices.
Connectivity is a measure of how well computers and computer-based devices can communicate with one another and "share" information in a meaningful way without human intervention. It is essential in enterprise networking in the new IT infrastructure, where different hardware, software, and network components must work together to transfer information seamlessly from one part of the organization to another. TCP/IP and OSI are important reference models for achieving connectivity in networks. Each divides the communications process into layers. UNIX is an operating system standard that can be used to create open systems, as can the Linux operating system. Connectivity also can be achieved by using Internet technology, XML, and Java.
How does the Internet work? What are its major capabilities? The Internet is a worldwide network of networks that uses the client/server model of computing and the TCP/IP network reference model. Using the Net, any computer (or computing appliance) can communicate with any other computer connected to the Net throughout the world. The Internet has no central management. The Internet is used for communications, including e-mail, public forums on thousands of topics, and live, interactive conversations. It also is used for information retrieval from hundreds of libraries and thousands of library, corporate, government, and nonprofit databases. It has developed into an effective way for individuals and organizations to offer information and products through a Web of graphical user interfaces and easy-to-use links worldwide. Major Internet capabilities include e-mail, Usenet, LISTSERV, chatting, Telnet, FTP, and the World Wide Web.
How can organizations benefit from the Internet? Many organizations use the Net to reduce communications costs when they coordinate organizational activities and communicate with employees. Researchers and knowledge workers are finding the Internet a quick, low-cost way to gather and disperse knowledge. The global connectivity and low cost of the Internet helps organizations lower transaction and agency costs, allowing them to link directly to suppliers, customers, and business partners and to coordinate activities on a global scale with limited resources. The Web provides interactive multimedia capabilities that can be used to create new products and services and closer relationships with customers. Communication can be customized to specific audiences.
What are the principal technologies for supporting electronic commerce and electronic business? Businesses need a series of software tools for maintaining a Web site. Web server software locates and manages Web pages stored on Web server computers. Electronic commerce server software provides capabilities for setting up electronic storefronts and arranging for payments and shipping. Customer tracking and personalization tools collect, store, and analyze data on Web site visitors. Content management tools facilitate the collection, assembly, and management of Web site content. Web site performance monitoring tools monitor the speed of Web site transactions and identify Web site performance problems. Businesses can use an external vendor's Web hosting service as an alternative to maintaining their own Web sites.
What management problems are raised by the new information technology (IT) infrastructure? How can businesses solve these problems? Problems posed by the new IT infrastructure include loss of management control over systems; the need to carefully manage organizational change; connectivity and application integration challenges; the difficulty of ensuring network scalability, reliability, and security; and controlling the hidden costs of enterprise computing.
Solutions include planning for and managing the business and organizational changes associated with enterprise-wide computing; increasing end-user training; asserting data administration disciplines; and considering connectivity, application integration, bandwidth, and cost controls when planning the IT infrastructure.