Information Systems,

Organisations, and
Strategy
Chapter 3
Usman Naeem

Introduction
What is an Organisation?
What is the relationship between an
Organisation and Information
System?
How Information Systems cause an
impact on an Organisation?

Case Study

532,000 Storefronts
$77 Billion in revenue (2005)
Paypal and Skype
Earlier strategy of geographical
expansion
Primarily focusing upon continuous
improvement of business model.
Stub-hub, shopping.com, craiglist

Organisation
Technical Definition:
An organisation is a stable, formal structure
that takes resources from the environment
and processes to produce outputs

An organisation is more stable as

compared to an informal group
Organisation is a formal legal entity with
internal rules and regulations
Organisations are social structures

Organisation
Behavioral Definition:
A collection of:

Rights, Privileges, Obligations and

Responsibilities
Delicately Balanced
Conflict Resolution

Two way communication between

Organizations and Technology

Organisational Environment
Organisations and environments
have a reciprocal relationship.
Organisations can influence their
environments.
Organisations are influenced by their
environments.

Organisations are open to, and

dependent on, the social and
physical environment.

Organisational Culture
Unquestioned assumptions like
What products / services
How to produce
Where and for whom?

Structural Characteristics of an
Organisation

Clear division of Labor

Hierarchy
Explicit rules and regulations
Impartial Judgments
Technical Qualifications
Maximum efficiency

Organisational Structure
Entrepreneurial structure: Small start-up business
Machine bureaucracy: Midsize manufacturing firm
Divisionalised bureaucracy: very large firms
Professional bureaucracy: Law firms, school
systems, hospitals
Adhocracy: Consulting firms

Organisational Politics
Divergent viewpoints lead to political
struggle, competition, and conflict.
Obstruct organizational change

Other Organisational
Features
Goals
Functions and constituencies
Leadership styles
Tasks

Impact of IS on
Organisations
Economic Impact

Organisational and Behavioural

Impact

Economic Impact
MICROECONOMIC MODEL:
IT changes both the relative costs of
capital and the costs of information.
Information technology is a factor of
production, like capital & labor
Information technology helps firms
contract in size because it can
reduce transaction costs (the cost of
participating in markets)
Outsourcing

 TRANSACTION COST THEORY:

Firms seek to economize on cost of
participating in market (transaction
costs)
IT lowers market transaction costs for
firm, making it worthwhile for firms to
transact with other firms rather than
grow the number of employees

 AGENCY THEORY:
Firm is nexus of contracts among selfinterested parties requiring supervision
Firms experience agency costs (the cost
of managing and supervising).
IT can reduce agency costs, making it
possible for firms to grow without adding
to the costs of supervising, and without
adding employees.

Organisational and Behavioural

Impact
Flattened Organisation:
Decision making pushed to lower levels
Fewer managers needed (IT enables faster
decision making and increases span of control)

Postindustrial organizations
Organizations flatten because in postindustrial
societies, authority increasingly relies on
knowledge and competence rather than formal
positions

 Organisational Resistance to Change:

Information systems become bound up in
organizational politics because they
influence access to a key resource.
Information systems potentially change
an organizations structure, culture,
politics, and work.
Most common reason for failure of large
projects is due to organizational and
political resistance to change.

Organizational Resistance and the Mutually

Adjusting Relationship between Technology
and the Organization

Internet and Organisations

The Internet increases the accessibility,
storage, distribution of information and
knowledge for business firms.
The Internet lowers the transaction and
agency costs of firms.
Businesses are rapidly rebuilding their key
business processes based on Internet
technology. Example: online order entry,
customer service, and fulfillment of orders.

Implications for Design and

Understanding of IS
Information Systems must be built with a
clear understanding of the organisation
Environment
Structure: Hierarchy, Specialization, Routines
and processes
Culture and Politics
Type of Organisation and its Leadership
Principle interest Groups
Tasks, decisions, and business processes the
system will assist