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Strategic Use of Information Technology in the Digital Economy

Information Technology For Management 5th Edition Turban, Leidner, McLean, Wetherbe
Lecture Slides by A. Lekacos, Stony Brook University

John Wiley & Sons, Inc.

Learning Objectives

Describe the characteristics of the digital economy and ebusiness. Recognize the relationships between business pressures, organizational responses, and information systems. Identify the major pressures in the business environment and describe the major organizational responses to them. Define computer-based information systems and information technology. Describe the role of information technology in supporting the functional areas, public services and specific industries List the new technology development in the areas of generic and networked computing and Web-based systems. Understand the importance of learning about information technology.
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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.
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Digital Business
Telecommunications
Thin Client
PC

Networks
E- Com m er ce Ser ver

Appliance

O n-line Single-station Store

STARS
Bu si n ess t o Bu si n ess Of f i ce Su i t e Ser ver Vi d eo Con f er en ci n g SCO Unix Ser ver Un i x
Tarentella

Linux SSL

Li n u x

Sybase ASE Database

Appliance Server Store 3

O n-line Multi-station Store

Net Appliance Store 1

Cold Fusion Apache Server Linux Credit Card Approval

Wi n d ow s 2 0 0 0

Beacon Hill's Stars Apache Server

I P Ad d r ess 2

I P Ad d r ess 3

Field Sales

O n-line Salesperson

I P Ad d r ess 1 POS You r Dom a i n / URL

Commercial

I nt er net

E-commerce

Internet
STARS Accounting Phone Orders Mail Orders Order Fulfillment Purchasing

Hu b

PC

In-house operations

PC

PC

Consumer

O n-line Customers Consumer & Business

Thin Client Thin Client

In-office
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The Old Economy

1. 2. 3. 4. 5. 6. 7.

Taking Photos

Buy film in a store Load your camera Take pictures Take roll of film to store for processing Pickup the film when ready Select specific photos for enlargement Mail to family and friends

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The New Economy

Taking Photos

1st Generation Digital Photography

Old economy except 6 and 7 were replaced by using a scanner and emailing Use a Digital Camera, no film, no processing. Your Digital Camera is now your mobile phone, in your binoculars or a palmtop computer.

2nd Generation Digital Photography

3rd Generation Digital Photography

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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)
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.
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Digital Age Business Models

Name-Your-Own Price

Reverse Auctions
Affiliate Marketing E-Marketplaces and Exchanges Electronic aggregation (buying groups)

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Drivers Forcing Changes In Business Models

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 Business Pressures

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.
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The Drivers of change

Business Pressures on an Organization that force change. Technology

Market

Society

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The Drivers of change

Continued

Business Pressures on an Organization.

Society

Market

Technology
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Organizational Response to these Drivers

Strategic Management & Systems Continuous Improvement Operational Efficiency Restructuring business processes Manufacturer to order, Mass-Customization Customer Focus Strategy Electronic business Business Alliances
Technology is required to effectively implement these critical responses.

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Information System
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.

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Information System Is A System

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Computer Based Information System

Hardware Software Data Network Procedures People than hardware More
and software

Hardware Software

Application Data People

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Applications and Operations

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

Marketing
Identify customers Determine what they want Planning products Advertising and promoting products Determine prices for products

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Information Systems
Functional Perspective

Sales
Contact customers Sell the product Take the order Follow-up on the sale 5 year sales forecast

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Information Systems
Functional Perspective

Manufacturing
Control Equipment and machinery Design new products When and quantity of products to produce New production facilities Generate the work order

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Information Systems
Functional Perspective

Purchasing
Which vendors Quantity to purchase Coop, rebate tracking Handle delivery discrepancies Generate the purchase order

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Information Systems
Functional Perspective

Finance
Financial Assets Investment management Banking Long term budgets

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Information Systems
Functional Perspective

Accounting
Accounts Receivable Disbursements Payroll Depreciation Earned Coop and Rebates

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Information Systems
Functional Perspective

Human Resources
Employee wages, salaries & benefits Long term labor requirements Tracking vacation, sick, Track employee skills Interview and review employees

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Trends in Technology
Cost-performance ratio of chips keeps improving. Moores 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 selfcontained units of software that can be shared
Networked and distributed computing is emerging rapidly Metcalfes Law. Chapter 1 24

Trends in Technology

(continued)

Internet Mobile Computing and M-Commerce Wireless networks Pervasive Computing Smart Devices

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Trends in Technology
The Network Computer Optical Networks Storage Area Networks Intranets & Extranets The Internet

(continued)

The Networked Enterprise

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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. According to the US Bureau of Labor Statistics, Top seven fastest growing occupations fall within IT or computer related field Developing Computer Literacy will only enhance your Information Literacy
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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.

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MANAGERIAL ISSUES

Continued

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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