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Lecture 01
Information Technology in the Digital Economy
Digital Economy – “New” Economy
 E-Business: The use of electronic technologies to transact business.
 Collaboration: People and Organizations interact, communicate, collaborate and search for
information
 Information Exchange: Storing, processing and transmission of information.

Digital Business

Telecommunications Networks

Field Sale Internet

Consumer In office

The Old Economy – Taking Photo’s

1. Buy film in a store
2. Load your camera
3. Take pictures
4. Take roll of film to store for processing
5. Pickup the film when ready
6. Select specific photos for enlargement
7. Mail to family and friends

The New Economy – Taking Photo’s

 1st Generation Digital Photography
 Old economy except 6 and 7 were replaced by using a scanner and emailing
 2nd Generation Digital Photography
 Use a Digital Camera, no film, no processing.
 3rd Generation Digital Photography
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 Your Digital Camera is now your mobile phone, in your binoculars or a palmtop computer.

Business Models
 A business model is a method of doing business by which a company can generate revenue
to sustain itself. The model spells out how the company adds value to create a product or
service. (Value Chain)
Changing
 Nokia makes and sells cell phones
 A TV station provides free broadcasting. Its survival depends on a complex model
involving advertisers and content providers.
 Internet portals, such as Yahoo, also use a complex business model.

Digital Age Business Models

 Name-Your-Own Price
 Reverse Auctions
 Affiliate Marketing
 E-Marketplaces and Exchanges
 Electronic aggregation (buying groups)

Drivers Forcing Changes in Business Models

Business Pressures
 Environmental, organizational, and technological factors are creating a highly competitive
business environment these factors or forces can change quickly, sometimes in an
unpredictable manner.
Business Critical Response Activities
 Therefore, companies need to react frequently and quickly to both the threats and the
opportunities resulting from this new business environment. A response can be a reaction
to a pressure already in existence, an initiative intended to defend an organization against
future pressures, or an activity that exploits an opportunity created by changing conditions.

The Drivers of change

 Business Pressures on an Organization that force change.

 Business Pressures on an Organization.

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Organizational Response to
these Drivers
 Strategic Systems
 Continuous Improvement –
Operational Efficiency
 Restructuring business processes
 Manufacturer to order
 Customer Focus Strategy
 Employ E-business tools
 Business Alliances

Technology is required to effectively

implement these critical responses.

Information System
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 An information system (IS) collects, processes, stores, analyzes, and disseminates

information for a specific purpose. Like any other system, an information system includes
inputs (data, instructions) and outputs (reports, calculations). It processes the inputs by
using technology such as PCs and produces outputs that are sent to users or to other
systems via electronic networks and a feedback mechanism that controls the operation.

Input Process Output Feedback Control

Information System Is a System

Computer Based Information System

 Hardware
 Software
 Data
 Network
 Procedures
 People
More than hardware and software

Applications and Operations

 Retail operations
 Wholesale
 Manufacturing


Human Resources
Marketing Application
 Content management
Information Systems
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 Functional Perspective Purchasing

Marketing  Which vendors
 Identify customers  Quantity to purchase
 Determine what they want  Coop, rebate tracking
 Planning products  Handle delivery discrepancies
 Advertising and promoting products  Generate the purchase order
 Determine prices for products  Functional Perspective
 Functional Perspective Finance
Sales  Financial Assets
 Contact customers  Investment management
 Sell the product  Banking
 Take the order  Long term budgets
 Follow-up on the sale  Functional Perspective
 5 year sales forecast Accounting
 Functional Perspective  Accounts Receivable
Manufacturing  Disbursements
 Control Equipment and machinery  Payroll
 Design new products  Depreciation
 When and quantity of products to  Earned Coop and Rebates
produce  Functional Perspective
 New production facilities Human Resources
 Generate the work order  Employee wages, salaries & benefits
 Long term labor requirements
 Tracking vacation, sick,
 Track employee skills
 Interview and review employees
 Functional Perspective

Trends in Technology
 Cost-performance ratio of chips keeps improving. Moore’s Law, his prediction was that
the processing power of silicon chips would double every 18 months.
 According to McGarvey & tenornetworks.com, states that the performance of optical
communication networks is growing by a factor of 10 every three years
 Several new devices and methods to increase storage capacity price performance
 Object technology enables the development of self-contained units of software that can
be shared
 Networked and distributed computing is emerging rapidly Metcalfe’s Law.
 Internet
 Mobile Computing and M-Commerce
 Wireless networks
 Pervasive Computing
 Smart Devices
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The Networked Enterprise

 The Network Computer
 Optical Networks
 Storage Area Networks
 Intranets & Extranets
 The Internet

Why Study Information Systems?

 You will be more effective in your chosen career if you understand how successful
information systems are built, used, and managed.
 You also will be more effective if you know how to recognize and avoid unsuccessful
systems and failures.
 Developing “Computer” Literacy will only enhance your “Information” Literacy

The Outline
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MANAGERIAL ISSUES
 Recognizing opportunities for using IT and Web-based systems.
 Who will build, operate, and maintain the information systems. This is a critical issue
because management wants to minimize the cost of IT while maximizing its benefits.
Some alternatives are to outsource portions, or even all, of the IT activities, and to
divide the remaining work between the IS department and the end users.
 How much IT? This is a critical issue related to IT planning. IT does not come free, but
not having it may be much costlier.
 How important is IT? In some cases, IT is the only approach that can help organizations.
As time passes, the comparative advantage of IT increases.
 Is the situation going to change? Yes, the pressures will be stronger as time passes.
Therefore, the IT role will be even more important.
 Globalization. Global competition will have an impact on many companies. However,
globalization opens many opportunities, ranging from selling and buying products and
services online in foreign markets, to conducting joint ventures or investing in them. IT
supports communications, collaboration, and discovery of information regarding all the
above.
 Ethics and social issues. The implementation of IT involves many ethical and social
issues that are constantly changing due to new developments in technologies and
environments. These topics should be examined any time an IT project is undertaken.
 Transforming the organization to the digital economy. The transformation can be done
on several fronts. Management should study the opportunities, consider alternatives
and prioritize them.
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Lecture 02
Information Technologies: Concepts and Management
Purposes of Information Systems

Information System – Elements

An information system (IS) collects, processes, stores, analyzes, and disseminates information
for a specific purpose “Application”.
 Hardware
 Software
 Data
 Network
 Procedures
 People

Information System – Primary Purpose

Collects data, processes it into information then converts
information into knowledge for a specific purpose.
 Data
 Elementary description of things, events, activities, and
transactions that are recorded, classified, and stored, but Application
not organized to convey any specific meeting
 Information
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 Data that has been organized so that they have meaning and value to the recipient

 Knowledge
 Information that has been organized and processed to convey understanding, experience
and expertise as they apply to a current problem or activity

Information System – Classification by Organizational Structure

An information system (IS) can span
departments, business units and
corporations.
 Departmental IS
 Enterprise-Wide IS
 Inter-Organizational IS

Information systems are usually

Connected by means of
Electronic networks

Information System -
Classification by Function (Department)
An information system (IS) support each department in a corporation.
 Operations
 Accounting
 Finance
 Marketing
 Human resources

Transaction Processing Systems (TPS): Automates Point-of-Sale (POS)

Routine and repetitive tasks that is critical
To the operation of the organization
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Information System - Classification by Function (Department)

An information system (IS) support each department in a corporation.

Information System - Classification by Support Function

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5-year sales trend

Profit Planning
Executive Support System Senior Mgr5-year budget forecasting
Product development

Sales Management
Management Information System Inventory Control
Decision Support System Annual budget
Intelligent Support Systems Middle Managers Production Scheduling
Cost Analysis
Pricing Analysis
Simulation
Knowledge Management System Pgm coding
System support
Office Automation System Data Workers
Word Processing
Desktop Publishing

Order Processing
Fulfillment
Transaction Processing System Operational Managers Material Movement
A/R, A/P, GL
Payroll
POS
Supporting Environment
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Transaction Processing System (TPS)

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 TPS automates routine and repetitive tasks that are critical to the operation of the
organization, such as preparing a payroll, billing customers, Point-of-Sale and Warehouse
operations.
 Data collected from this operation supports the MIS and DSS systems employed by Middle
Management
 Computerizes the primary and most of the secondary activities on the Value Chain.
 Primary purpose to perform transactions and collect data.

Management Information Systems (MIS)

 These systems access, organize, summarize, and displayed information for supporting
routine decision making in the functional areas. Geared toward middle managers, MIS are
characterized mainly by their ability to produce periodic reports such as a daily list of
employees and the hours they work, or a monthly report of expenses as compared to a
budget
 Typical uses would be in Replenishment, Pricing Analysis (Markdowns) and Sales
Management
 Decisions supported are more structured.
 Primary purpose to process data into information

Decision Support Systems (DSS)

 These systems support complex non-routine decisions.
 Primary purpose to process data into information
 DSS systems are typically employed by tactical level management whose decisions and
what-if analysis are less structured.
 This information system not only presents the results but also expands the information with
alternatives.
 Some DSS methodologies
 Mathematical Modeling
 Simulation
 Queries
 What-If (OLAP-Cubes)
 Data mining

Intelligent Support Systems (ISS)

 Essentially, artificial intelligence (AI) these systems perform intelligent problem solving.
 One application of AI is expert systems. Expert systems (ESs) provide the stored knowledge
of experts to non experts, so the latter can solve difficult or time-consuming problems.
These advisory systems differ from TPS, which centered on data, and from MIS and DSS,
which concentrated on processing information. With DSS, users make their decisions
according to the information generated from the systems. With ES, the system makes
recommended decisions for the users based on the built-in expertise and knowledge.

Executive Support Systems (ESS)

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 ESS systems or Enterprise Information Systems (EIS) originally were implemented to support
senior management. These systems have been expanded to support other managers within
the enterprise.
 At the senior management level they support Strategic activities which deal with situations
that significantly may change the manner in which business is done.

Office Automation Systems (OAS)

 Electronic communication is only one aspect of what is now known as an office automation
system (OAS). Other aspects include word processing systems, document management
systems and desktop publishing systems.
 OAS systems are predominantly used by clerical workers who support managers at all levels.
Among clerical workers, those who use, manipulate, or disseminate information are
referred to as data workers.

Knowledge Management Systems (KMS)

 An additional level of staff support now exists between top and middle management. These
are professional people, such as financial and marketing analysts that act as advisors and
assistants to both top and middle management. They are responsible for finding or
developing new knowledge (External Content) for the organization and integrating it with
existing knowledge (Internal Content).
 KMS that support these knowledge workers range from Internet search engines and expert
systems, to Web-based computer-aided design and sophisticated data management
systems

People in organizations
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Expand our Scope to Include External Environments

A supply chain is a concept describing the flow of materials, information, money, and services
from raw material suppliers through factories and warehouses to the end customers.
Components of the Supply Chain
 Upstream supply chain
 includes the organization’s first-tier suppliers and their suppliers
 Internal supply chain
 includes all the processes used by an organization in transforming the inputs of the
suppliers to outputs
 Downstream supply chain
 includes all the processes involved in delivering the products to final customers
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Inter-Organizational Systems (IOS)

 IOS are systems that connect two or more organizations. These systems are common
among business partners and play a major role in e-commerce, as well as in supply chain
management support.
 The first type of IT system that was developed in the 1980s to improve communications
with business partners was electronic data interchange (EDI), which involved computer-to-
computer direct communication of standard business documents (such as purchase orders
and order confirmations) between business partners. These systems became the basis for
electronic markets, that later developed to electronic commerce.
 Web-based systems (many using XML) deliver business applications via the Internet. Using
browsers and the Internet, people in different organizations communicate, collaborate,
access vast amounts of information, and run most of the organization’s tasks and processes.
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Information
Fun Systems
ctio
n
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Two or more organizations

Information Infrastructure
 Hardware
 Software
 Networks & communication facilities
 Databases
 IS personnel

Information Architecture – Classified by Hardware

A common way to classify information architecture is by computing paradigms, which are the
core of the architecture.
 Mainframe Environment
 PC Environment
 PC-LAN Environment
 Distributed Computing Environment
 Client/server Environment
 Enterprise-wide Computing Environment
 Legacy systems
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The Web Based IT Architectures

Web-based systems refer to those applications or services that are resident on a server that is
accessible using a Web browser. The only client-side software needed to access and execute
these applications is a Web browser environment.
 The Internet  Electronic Storefronts
 Intranets  Electronic Markets
 Extranets  Electronic Exchanges
 Corporate Portals  M-Commerce
 E-commerce Systems  Enterprise Web

The Internet
 Sometimes called simply “the Net,” the Internet is a worldwide system of computer
networks—a network of networks hence Internet, in which users at any one computer can
get information from any other computer
 The Internet uses a portion of the total resources of the currently existing public
telecommunication networks. Technically, what distinguishes the Internet is its use of a set
of protocols called TCP/IP (Transmission Control Protocol/Internet Protocol).

Intranets
 An intranet is the use of Web technologies to create a private network, usually within one
enterprise.
 It is typically a complete LAN, or several intra-connected LANs
 Intranets are used for:
 work-group activities
 the distributed sharing of projects within the enterprise
 Controlled access to company financial documents
 use of knowledge management, research materials, online training, and other
information that requires distribution within the enterprise.

Extranets
 Connect several intranets via the Internet, by adding a security mechanism and some
additional functionalities
 They form a larger virtual network that allows remote users (such as business partners or
mobile employees) to securely connect over the Internet to the enterprise’s main intranet.
 Extranets are also employed by two or more enterprises (suppliers & buyers) to share
information in a controlled fashion, and therefore they play a major role in the
development of business-to-business electronic commerce and Supply Chain systems.
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Corporate Portals
 Web sites that provide the gateway to corporate information from a single point of
access. They aggregate information and content from many files and present it to the
user.
 Corporate portals also are used to personalize information for individual customers and
for employees.
 Intranets and Extranets are usually combined with and accessed via a corporate portal

E-commerce Systems
 Web-based systems that enable business transactions to be conducted seamlessly twenty-
four hours a day, seven days a week
 Some classifications of E-commerce systems are:
 B2C (Business to Consumer)
 B2B (Business to Business)
 B2E (Business to Employee)
 The major components of Web-based EC are:
 Electronic storefronts
 Electronic markets
 Mobile commerce

Electronic Storefronts
 These are Web-equivalents of a physical store. Through the electronic storefront, an e-
business can display and/or sell its products.
 The storefront may include electronic catalogs that contain descriptions, graphics, and
possibly product reviews.
 They have following common features and functions:
 an E-catalog
 a shopping cart
 a checkout mechanism
 a payment processing feature
 a back office order fulfillment system

Electronic Markets
 Is a web-based network of interactions and relationships over which information, products,
services, and payments are exchanged. It is equivalent to a physical marketplace except is
Web-based.
 The principal participants in marketplaces are: transaction handlers, buyers, brokers, and
sellers.
 The means of interconnection vary among parties and can change from event to event,
even between the same parties. Electronic markets can reside in one company, where there
is either one seller and many buyers, or one buyer and many sellers. These are referred to
as private marketplaces.
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Electronic Exchanges
 A special form of electronic markets electronic exchanges, are Web-based public
marketplaces where many buyers and many sellers interact dynamically.
 Originally set as trading places for commodities, electronic exchanges have emerged for all
kinds of products and services

M-Commerce – Mobile Computing

 M-commerce or Mobile commerce is commerce (buying and selling of goods and services)
in a wireless environment, such as through wireless devices like cellular telephones and
PDAs.
 M-commerce enables users to access the Internet without needing to find a place to “plug”
in their device.
 As this wireless environment expands, a pervasive computing environment will develop,
employed by mobile employees and others, will change the way business is transacted.

Enterprise Web
 Is an open environment for managing and delivering Web applications. It combines services
from different vendors in a technology layer that spans rival platforms and business
systems, creating a foundation for building applications at a lower cost.
 Applications, including business integration, collaboration, content management, identity
management, and search, which work together via integrating technologies.
 The result is an environment that spans the entire enterprise.

Emerging Computing Environments

 Utility Computing is computing that is as available, reliable, and secure as electricity, water
services, and telephony. The vision behind utility computing is to have computing resources
flow like electricity on demand from virtual utilities around the globe—always on and highly
available, secure, efficiently metered, priced on a pay-as-you-use basis, dynamically scaled,
self-healing, and easy to manage.
 Subscription Computing is a form of utility computing that puts the pieces of a computing
platform together as services, rather than as a collection of separately purchased
components.
 Grid Computing employs networked systems to harness the unused processing cycles of all
computers in that given network thus creating powerful computing capabilities. Grid
computing is already in limited use, for example the well-known grid-computing project
SETI (Search for Extraterrestrial Intelligence) @Home project. In this project, PC users
worldwide donate unused processor cycles to help the search for signs of extraterrestrial
life by analyzing signals coming from outer space.
 Pervasive Computing, a future in which computation becomes part of the environment.
Computation will be embedded in things, not in computers.
 Web services are self-contained, self-describing business and consumer modular
applications, delivered via the Internet, that users can select and combine through almost
any device, ranging from PC to mobile phones.
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Managing Information Systems

 Information Systems (IS) have enormous strategic value so when they are not working even
for a short time, an organization cannot function. Furthermore, the Life Cycle Costs
(acquisition, operation, security, and maintenance) of these systems is considerable.
Therefore, it is essential to manage them properly. The planning, organizing, implementing,
operating, and controlling of the infrastructures and the organization’s portfolio of
applications must be done with great skill.
 The responsibility for the management of information resources is divided between two
organizational entities:
 The information systems department (ISD), which is a corporate entity
 the end users, who are scattered throughout the organization.

MANAGERIAL ISSUES
 The transition to e-business. Converting an organization to a networked-computing-based
e-business may be a complicated process. The e-business requires a client/ server
architecture, an intranet, an Internet connection, and e-commerce policy and strategy, all in
the face of many unknowns and risks. However, in many organizations this potentially
painful conversion may be the only way to succeed or even to survive. When to do it, how
to do it, what the role of the enabling information technologies will be, and what the
impacts will be of such a conversion are major issues for organizations to consider.
 From legacy systems to client/server to intranets, corporate portals, and Web-based
systems. A related major issue is whether and when and how to move from the legacy
systems to a Web-based client/server enterprise-wide architecture. While the general trend
is toward Web-based client/server, there have been several unsuccessful transformations,
and many unresolved issues regarding the implementation of these systems. The
introduction of intranets seems to be much easier than that of other client/server
applications. Yet, moving to any new architecture requires new infrastructure and a
decision about what to do with the legacy systems, which may have a considerable impact
on people, quality of work, and budget. A major aspect is the introduction of wireless
infrastructure.
 How to deal with the outsourcing and utility computing trends.
As opportunities for outsourcing (e.g., ASPs) are becoming cheaper, available, and viable,
the concept becomes more attractive. In the not-so-distant future, we will see outsourcing
in the form of utility computing. How much to outsource is a major managerial issue.
 How much infrastructure? Justifying information system applications is not an easy job due
to the intangible benefits and the rapid changes in technologies that often make systems
obsolete. Justifying infrastructure is even more difficult since many users and applications
share the infrastructure that will be used for several years in the future. This makes it
almost impossible to quantify the benefits. Basic architecture is a necessity, but there are
some options.
 The roles of the ISD and end users. The role of the ISD can be extremely important, yet top
management frequently mistreats it. By constraining the ISD to technical duties, top
management may jeopardize an organization’s entire future. However, it is not
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economically feasible for the ISD to develop and manage all IT applications in an
organization. End users play an important role in IT development and management. The
end users know best what their information needs are and to what degree they are fulfilled.
Properly managed end-user computing is essential for the betterment of all organizations.
 Ethical issues. Systems developed by the ISD and maintained by end users may introduce
some ethical issues. The ISD’s major objective should be to build efficient and effective
systems. But, such systems may invade the privacy of the users or create advantages for
certain individuals at the expense of others.
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Chapter 3
Strategic Information Systems for Competitive Advantage
Strategic Information System
Any information system--EIS, OIS, TPS, KMS--that changes the goals, processes, products, or
environmental relationships to help an organization gain a competitive advantage or reduce a
competitive disadvantage.
 Competitive Advantage
 An advantage over competitors in some measure such as cost, quality, or speed
 A difference in the Value Chain Data
 Improving Core Competency
 Employee productivity
 Operational efficiency
The goals, processes, products, or environmental relationships that help an organization gain a
competitive advantage or reduce a competitive disadvantage.
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Strategic Management
Strategic management is the way an organization maps or crafts the strategy of its future
operations.
 SWOT Analysis
 Product Life Cycle
 Quality Preference
 …

Strategy Evaluation & Development

Mental Map

Needs
Analysis Strengths
A Weaknesses

High
G1 G2 G3 G4 G5 G6

D Low
Preference
Low
High C Opportunities Threats

B
Demand
Management

Competitive $
E Advantage SCOPE
Position,
Product
Capabilities, Cost-
Differentiation,
Quality Curve, target
Substitutions
Sustainability Company market

ARC,
Coordination,
Incentives,
Value Chain Explorer-Exploiter
Creation/Capture,
PIE, Supplier,
Strategy
Buyer
Scope, Goals,
Competitive
Advantage,
Logic

Competitors
Competitive
Competition
Niche Life Cycle, Market
Oligopoly Structure, Behavior,
Dominant Barriers to Entry
Monopoly

F
Introductory Growth Maturity Decline
Stage Stage Stage Stage

Total
Market
Sales
January 2002
S M T W T F S
Time
Early Early Late 1 2 3 4 5
Innovators Laggards 6 7 8 9 10 11 12
Adopters Majority Majority Implement 13 14 15 16 17 18 19

Time
20 21 22 23 24 25 26
27 28 29 30 31

&
H
"The

G
Market growth rate

Chasm"
? Stars
Action
Technology Adoption Process

Exit Cash
Strategy Cows Strategy Statement Performance
Relative market share
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Information Technology – Supports Strategic Management

 Innovative applications: Create innovative applications that provide direct strategic
advantage to organizations.
 Competitive weapons: Information systems themselves are recognized as a competitive
weapon
 Changes in processes: IT supports changes in business processes that translate to strategic
advantage
 Links with business partners: IT links a company with its business partners effectively and
efficiently.
 Cost reductions: IT enables companies to reduce costs.
 Relationships with suppliers and customers: IT can be used to lock in suppliers and
customers, or to build in switching costs.
 New products: A firm can leverage its investment in IT to create new products that are in
demand in the marketplace.
 Competitive intelligence: IT provides competitive (business) intelligence by collecting and
analyzing information about products, markets, competitors, and environmental changes.

Competitive Intelligence
One of the most important aspects in developing a competitive advantage is to acquire
information on the activities and actions of competitors.
 Such information-gathering drives business performance
 by increasing market knowledge
 improving knowledge management
 raising the quality of strategic planning
However once the data has been gathered it must be processed into information and
subsequently business intelligence. A porter 5 Forces is a well-known framework that aids in
this analysis.

Porter’s Competitive Forces Model

The model recognizes five major forces that could endanger a company’s position in a given
industry.
 The threat of entry of new competitors
 The bargaining power of suppliers
 The bargaining power of customers (buyers)
 The threat of substitute products or services
 The rivalry among existing firms in the industry
External Competitive Forces
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Porter’s Competitive Forces Model

We develop a Competitor Analysis

First Competitive Force
What drives them?
What are they doing and can do?
What are their strengths & weaknesses?
Is Competition intense?
We Analyze the Entry Barriers
Second Competitive Force
If nothing slows entry of competitors competition will become intense.
Incumbent Reaction?
What Actions are required to build market share?
Production Process?
We Analyze the Substitute Products
Third Competitive Force
Products or services from another industry enter the market
Customers becoming acclimated to using substitutes
Is the substitute market growing?
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We Analyze the Supply Chain

Fourth & Fifth Competitive Forces
The Suppliers
The Buyers
Who controls the transaction?
Each element adds value – question who captures it?

Porter’s Competitive Forces Model

Competitive
Forces
Generic Strategies – Developing a Sustained Competitive Advantage
Analyzing the forces that influence a company’s competitive position will assist management in
crafting a strategy aimed at establishing a sustained competitive advantage. To establish such a
position, a company needs to develop a strategy of performing activities differently than a
competitor.
 Cost leadership strategy: Produce products and/or services at the lowest cost in the
industry.
 Differentiation strategy: Offer different products, services, or product features.
 Niche strategy: Select a narrow-scope segment (niche market) and be the best in quality,
speed, or cost in that market.
 Growth strategy: Increase market share, acquire more customers, or sell more products.
 Alliance strategy: Work with business partners in partnerships, alliances, joint ventures, or
virtual companies.
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 Innovation strategy: Introduce new products and services, put new features in existing
products and services, or develop new ways to produce them.
 Operational effectiveness strategy: Improve the manner in which internal business
processes are executed so that a firm performs similar activities better than rivals.
 Customer-orientation strategy: Concentrate on making customers happy
 Time strategy: Treat time as a resource, then manage it and use it to the firm’s advantage.
 Entry-barriers strategy: Create barriers to entry.
 Lock in customers or suppliers strategy: Encourage customers or suppliers to stay with you
rather than going to competitors.
 Increase switching costs strategy: Discourage customers or suppliers from going to
competitors for economic reasons.
Our goal is to perform activities differently than a competitor. Those activities can be linked
in a Value Chain Model.

The Value Chain

According to the value chain model (Porter, 1985), the activities conducted in any organization
can be divided into two parts: primary activities and support activities.
 Primary activities are those activities in which materials are purchased, processed into
products, and delivered to customers. Each adds value to the product or service hence the
value chain.
 Inbound logistics (inputs)
 Operations (manufacturing and testing)
 Outbound logistics (storage and distribution)
 Marketing and sales
 Service
 Unlike the primary activities, which directly add value to the product or service, the support
activities are operations that support the creation of value (primary activities)
 The firm’s infrastructure (accounting, finance, management)
 Human resources management
 Technology development (R&D)
 Procurement
The initial purpose of the value chain model was to analyze the internal operations of a
corporation, in order to increase its efficiency, effectiveness, and competitiveness. We can
extend that company analysis, by systematically evaluating a company’s key processes and core
competencies to eliminate any activities that do not add value to the product.
 P a g e | 30

Secondary
Activities

Val
ue
Primary
Activities

Secondary
Activities

Val
ue

Primary
Activities
 P a g e | 31

Phone Fa x Tra ns a c tio na l

Int erne t S ys te ms

Item Retrieval
Brand & Model EDI/ XML
UPC

Internal
Model No. POS
Order Entry
MFG No. Service Cash
SKU EDI
Construction
Internet
Check
Charge(Bank, T&E, House, Finance)
Alternate Units Transm
issions Tra n s a c tion P os tin g Ca s h P o s tin g
Automatic
Accessories Invoice/Credit Memo

Cash Receipts
Generic Items Order Entry Screen
Item Key 1
Text 199.95
Windows POS Deposits
Instructions item2
189.99
2
Retrieval
Order Entry Deposits
Service Deposits
Trade-in's Construction Deposits
Internet Deposits
Catalog Items End of Month
Statements

Ticket
Pricing Exception
Packages Tables YES Customer Stmt
Ticket Customer Accepts NO
Pre-Built (actual) To Delivery
Customer Stmt
Customer Stmt
Pre-Built (phantom) Accounting

Selling Tools Out of Stock Accounts Receivable

Features Substitution
Messages Hot Items

E-
Hot Items Special Order
Best Sellers Alternate Locations
Notes Open Order
Drop Ship Customer History Backorder

Billing
Installation WO's Standard Orders

E-
Blanket Orders

(Whole s a le Division)

Catalog, Phone, Internet Sales

Payments
Receiving Operation
Customers
Delivery Ticket Marked Pick
Me r c h a n d is e Invo ic e
Ticket

Received Uncosted File

Picking Ticket
Order Fulfillment
Pick Ticket Exp e ns e In vo ic e
MIT^%T$$
Three-way
Match

Accounts Payable File

From POS
Delivery Ticket sent to
Delivery Department
Delivery Process Scheduling

Disbursement File

Accounts Payable

The Value System

A firm’s value chain is part of a larger stream of activities, which Porter calls a value system. A
value system includes the suppliers that provide the inputs necessary to the firm and their value
chains. This also is the basis for the supply chain management concept. Many of these alliances
and business partnerships are based on Internet connectivity are called interorganizational
information systems (IOSs)
 These Internet-based EDI systems offer strategic benefits
 Faster business cycle (PO to Receiving)
 Automation of business procedures (Automated Replenishment)
 Reduced operational costs
 Greater advantage in a fierce competitive environment

Global Competition
Many companies are operating in a global environment. Doing business in this environment is
becoming more challenging as the political environment improves and as telecommunications
 P a g e | 32

and the Internet open the door to a large number of buyers, sellers, and competitors
worldwide. This increased competition is forcing companies to look for better ways to compete
globally.
 Global dimensions along which management can globalize
 Product
 Markets & Placement
 Promotion
 Where value is added to the product
 Competitive strategy
 Use of non-home-country personnel - labor
Multidomestic Strategy: Zero standardization along the global dimensions. Global Strategy:
Complete standardization along the seven global dimensions.

Sustaining a Strategic Information System (SIS)

Strategic information systems are designed to establish a profitable and sustainable position
against the competitive forces in an industry. Due to advances in systems development it has
become increasingly difficult to sustain an advantage for an extended period. Experience also
indicates that information systems, by themselves, can rarely provide a sustainable competitive
advantage. Therefore, the major problem that companies now face is how to sustain their
competitive advantage.
 One popular approach is to use inward systems that are not visible to competitors. These
proprietary systems allow the company to perform the activities on their value chain
differently than their competitors.

MANAGERIAL ISSUES
 Risk in implementing strategic information systems. The investment involved in
implementing an SIS is high. Frequently these systems represent a major step forward and
utilize new technology. Considering the contending business forces, the probability of
success, and the cost of investment, a company considering a new strategic information
system should undertake a formal risk analysis.
 Planning. Planning for an SIS is a major concern of organizations (Earl, 1993). Exploiting IT
for competitive advantage can be viewed as one of four major activities of SIS planning. The
other three are aligning investment in IS with business goals, directing efficient and effective
management of IS resources and developing technology policies and architecture.
 Sustaining competitive advantage. As companies become larger and more sophisticated,
they develop sufficient resources to quickly duplicate the successful systems of their
competitors. Sustaining strategic systems is becoming more difficult and is related to the
issue of being a risk-taking leader versus a follower in developing innovative systems.
 Ethical issues. Gaining competitive advantage through the use of IT may involve actions that
are unethical, illegal, or both. Companies use IT to monitor the activities of other companies
that may invade the privacy of individuals working there. In using business intelligence (e.g.,
spying on competitors), companies may engage in tactics such as pressuring competitors’
 P a g e | 33

employees to reveal information or using software that is the intellectual property of other
companies without the knowledge of these other companies.

Chapter 4
Network Computing: Discovery, Communication,
and Collaboration
Chapter Objectives
 Understand the concepts of the Internet and the Web, their importance, and their
capabilities.
 Understand the role of intranets, extranets, and corporate portals for organizations.
 Identify the various ways in which communication is executed over the Internet.
 Demonstrate how people collaborate over the Internet, intranets, and extranets using
various supporting tools, including voice technology and teleconferencing.
 Describe groupware capabilities.
 Describe and analyze the role of e-learning and distance learning.
 Analyze telecommuting (teleworking) as a techno-social phenomenon.
 Consider ethical and integration issues related to the use of network computing.

Network Computing
The vast web of electronic networks, referred to as the information superhighway or Internet
links the computing resources of businesses, government, and educational institutions using a
common computer communication protocol, TCP/IP. The World Wide Web---the Web--is the
most widely used application on the Internet. Domain
Name Ser ver
URL = protocol://hostComputeror IP/path
Client Web Ser ver

Discovery
The HTTP protocol (HyperText

Intrane
Transfer Protocol) specifies the rules

Collaborati
for communication between a Web
browser (client) and a Web server.

on
Request is made for a
page through a Web ts
Communication
Browser (IE. NS)
Extrane
Ser ver Application ts
Technology Coldfusion Technology Ser ver
- CFM Apache Server
Java Server Pages -
JSP
Active Server Pages - Personal Server
ASP
Internet Information
Server- IIS

DB
iPlanet
 P a g e | 34

Internet Application Categories

 Discovery: Discovery involves browsing and information retrieval.
 Communication: The Internet provides fast and inexpensive communication channels that
range from messages posted on online bulletin boards to complex information exchanges
among many organizations.
 Collaboration: Due to improved communication, electronic collaboration between
individuals and/or groups ranging from screen sharing and teleconferencing to group
support systems.
 The Net is also used for:
 Education
 Entertainment: People can access the content of newspapers, magazines, and books.
Correspond with friends and family, play games, listen to music, view movies and other
cultural events.
 Work: They can download documents, do research.

The Network Computing Infrastructure

In addition to the Internet and the Web there are two other major infrastructures of network
computing: the intranet and the extranet
 Intranet: a network designed to serve the internal informational needs of a company, using
Internet concepts and tools.
 Browsing and Search capabilities.
 Support communication and collaboration.
 Extranet: An extranet is an infrastructure that allows secure communications (connects the
intranets of different organizations) among business partners over the Internet.
 Enables business-to-business (B2B) transactions
 Provides an interface to exchange of business forms
Discovery - Internet Application Categories
Through the discovery capability users can access information located in databases all over the
world. It facilitates education, government services, entertainment, and commerce. Discovery is
done by browsing and searching static or dynamic data sources on the Web.
 Internet Software Agents
 Internet-Based Web Mining
 Other Discovery Aids
 Toolbars
 Material in Foreign Languages
 Information and Corporate Portals A network is designed
Discovery - Internet Software Agents
company, using
Software agents are computer programs that carry out a set of routine computer tasks on
behalf of the user and in so doing employ some sort of knowledge of the user’s goals
 Search engines, directories, software and intelligent agents
 Web-Browsing-Assisting Agents
 Frequently Asked Questions (FAQ) Agents
 P a g e | 35

 Search Engines and Intelligent Indexing Agents

Discovery - Internet-Based Web Mining
Data mining refers to sophisticated analysis techniques for sifting through large amounts of
information to discover new patterns and relationships.
 Predictive Tools
 Classification (Predefined Groups)
 Regression
 Time series
 Descriptive Tools
 Clustering (No Predefined Groups)
 Summarization
 Association
 Sequencing

Discovery - Other Discovery Aids

Hundreds of other search engines and discovery aids are available
 Webopedia.com
 What Is? (whatis.com)
 eBizSearch (gunther.smeal.psu.edu)
 Elibrary (ask.library.com)
 Howstuffworks.com.
 Findarticles.com

Discovery - Toolbars
To get the most out of search engines, you may use add-on toolbars and special software.

 Google Toolbar (toolbar.google.com)

 Copernic Agent Basic (copernic.com)
 KartOO (kartoo.com)
 Yahoo Companion (companion.yahoo.com)
 Grokker (groxis.com)

Discovery - Information in Foreign Languages

There is a huge amount of information on the Internet in languages that you may not know.
Automatic translation of Web pages is an application offered by many vendors. However, not all
automatic translations are equally good, so evaluation of these products is needed.
 WorldPoint Passport (worldpoint.com)
 Babel Fish Translation (world.altavista.com)
 AutoTranslate (offered in Netscape browser)
 trados.com
 P a g e | 36

 translationzone.com
Discovery - Information & Corporate Portals
A portal is a Web-based personalized gateway to information and knowledge in network
computing. It attempts to address information overload by providing one screen from which we
do all our work on the Web. Thus eliminating retrieval time spent on integrating disparate IT
systems.
 Commercial (public) portals offer content for diverse communities and are the most
popular portals on the Internet. Examples are:
 yahoo.com
 lycos.com
 msn.com
 Publishing portals are intended for communities with specific interests. Examples are:
 techweb.com
 zdnet.com
 Personal portals target specific filtered information for individuals.
 Affinity portals support communities such as hobby groups or a political party
 Mobile portals are portals accessible from mobile devices.
 Voice portals are Web portals with audio interfaces, which enables them to be accessed by
a standard or cell phone.
 AOLbyPhone
 tellme.com
 i3mobile.com
 Corporate portals provide single-point access to specific enterprise information and
applications available on the Internet, intranets, and extranets to employees, business
partners, and customers. They are also known as enterprise portals or enterprise
information portals.
 Supplier’s portals: Using corporate portals, suppliers can manage their own inventories
online.
 Customer’s portals: Customers can use a customer-facing portal for viewing products and
services and placing orders, which they can later self-track.
 Employee’s portals: Such portals are used for training, dissemination of news and
information, and workplace discussion groups.
 Supervisors’ portals: These portals, sometimes called workforce portals, enable managers
and supervisors to control the entire workforce management process– from budgeting to
scheduling workforce.
Communication - Internet Application Categories
People exchange and share information by sending and receiving messages, documents, forms
and files. This information-processing supports the organization and the transaction of
business. Communications can involve one or several IT-supported media, such as text, voice,
graphics, radio, pictures, and animation. Using different media increases the effectiveness of a
message, expedites learning, and enhances problem solving.
 Electronic Mail
 Web-Based Call Centers
 P a g e | 37

 Electronic Chat Rooms

 Voice Communication
 Weblogging (Blogging)

Collaboration - Internet Application Categories

Collaboration refers to the mutual efforts of two or more individuals or groups to perform
activities in order to accomplish certain tasks. These tasks range from designing products and
documents, to teaching, to executing complementary subtasks, to working with customers,
suppliers, and other business partners. In an effort to improve productivity and competitiveness
collaboration can be supported electronically.
 Virtual collaboration (e-collaboration): the use of digital technologies that enable
organizations or individuals to collaborative
Corporate
 Collaborative commerce (c-commerce): collaboration portals
among business partners
 Supply chains
 Dealer/Partner Networks
 Product Networks

Collaboration – Tools (Workflows)

 Workflow Technologies: the movement of information through the sequence of steps that
make up an organization’s work procedures or business processes.
 Workflow management is the automation of workflows from start to finish, including all
exception conditions.
 Workflow systems are business process automation tools (software programs) that
automate almost any information-processing task.
 Workflow applications:
 Collaborative workflow: addresses project-oriented and collaborative types of
processes.
 Production workflow: addresses mission-critical, transaction-oriented, high volume
processes.
 Administrative workflow: is cross between collaborative and production workflows.

Collaboration – Tools (Groupware)

Software products that support groups of people who share a common task or goal and who
collaborate on its accomplishment.
Groupware implies the use of networks to connect people, even if the people are in the same
room.
 Electronic Meeting Systems attempt to improve face-to-face meetings with their electronic
counter-part.
 Electronic Teleconferencing (Teleconferencing) is the use of electronic communication that
allows two or more people at different locations to have a simultaneous conference.
 Video Teleconferencing (videoconference), participants in one location can see
participants at other locations. Data (data conferencing) can also be sent along with
voice and video making it possible to work on documents together.
 P a g e | 38

 Web Conferencing is Videoconferencing solely conducted on the Internet

Real-time collaboration (RTC) Tools: help companies bridge time and space to make decisions
and to collaborate on projects. RTC tools support synchronous communication of graphical and
text-based information.
 Interactive Whiteboards work like the “physical world” whiteboards with markers and
erasers, except instead of one person standing in front of a meeting room drawing on the
whiteboard, all participants can join in.
 Screen Sharing software, allows group members to work on the same document, which is
shown on the PC screen of each participant.
 Instant video, is a kind of real time chat room that allows you to see the person you are
communicating with.

Collaboration – Tools (continued)

Collaborative Networks

E-Learning – Web-based Application

Distance learning (DL) refers to situations where teachers and students do not meet face-to-
face. It can be done in different ways. E-learning is only one form of distance learning. It
provides a new set of tools that add value to traditional learning modes. It does not replace the
classroom setting, but enhances it, taking advantage of new content and delivery technologies.
 P a g e | 39

 Blackboard Inc. (blackboard.com) offers a complete suite of enterprise software products

and services that power a total “e-education infrastructure” for schools, colleges,
universities, and other education providers.
 WebCT (webct.com) provides a similar set of tools, but with a different vision and strategy.
It uses advanced pedagogical tools to help institutions of higher education make distance-
learning courses possible.
Telecommuting – Web-based Application
Telecommuting, or teleworking, refers to an arrangement whereby employees can work at
home, at the customer’s premises, in special work places, or while traveling, usually using a
computer linked to their place of employment.
 There are numerous non-compensatory benefits and advantages for employees, employers,
and society. The most important being improved productivity.
 Some disadvantages for the employees are increased feelings of isolation, loss of fringe
benefits, no workplace visibility, and lack of socialization.
 Disadvantages to employers are difficulties in supervising work, potential data security
problems, training costs, and the high cost of equipping and maintaining telecommuters’
homes.

MANAGERIAL ISSUES
 Security of communication. Communication via networks raises the issue of the integrity,
confidentiality, and security of the data being transferred. The protection of data in
networks across the globe is not simple.
 Installing digital dashboards. Many companies are installing “digital dashboards,” which are
a sort of one-way portal that are continuously updated with online displays. The dashboard
is available to employees in visible places around the company and is also accessible from
PCs, PDAs, etc. Large companies, such General Electric, believe that the cost of the
dashboards can be justified by better discovery and communication they promote within
the company.
 Control of employee time and activities. To control the time that employees might waste
“surfing the Net” during working hours, some companies limit the information that
employees have access to or use special monitoring software. Providing guidelines for
employee use of the Internet is a simple but fairly effective approach.
 How many portals? A major issue for some companies is how many portals to have. Should
there be separate portals for customers, suppliers, employees, for example? Regardless of
the answer, it is a good idea to integrate the separate portals. If you build a separate portal,
make sure it can be easily connected to the others.
 Organizational impacts. Technology-supported communication may have major
organizational impacts. For example, intranets and groupware force people to cooperate
and share information. Therefore, their use can lead to significant changes in both
organizational culture and the execution of business process reengineering. Further impacts
may be felt in corporate structure and the redistribution of organizational power.
 Telecommuting. Telecommuting is a compelling venture, but management needs to be
careful. Not all jobs are suitable for telecommuting, and allowing only some employees to
 P a g e | 40

telecommute may create jealousy. Likewise, not all employees are suitable telecommuters;
some need the energy and social contact found in an office setting.
 Cost-benefit justification. The technologies described in this chapter do not come free, and
many of the benefits are intangible. However, the price of many networking technologies is
decreasing.
 Controlling access to and managing the content of the material on an intranet. This is
becoming a major problem due to the ease of placing material on an intranet and the huge
volume of information. Flohr (1997) suggests tools and procedures to manage the situation.