Course:

Information Systems Management

Course Instructor: Ahmer Umer

 These Slides are prepared from following
Books:

1) Information Systems Management In

Practice 6E - McNurlin & Sprague
2) Introduction to Information System 13E
- James A. O’BRIEN & George M.
Marakas

Acknowledgement
1) PowerPoints prepared by Michael Matthew
Visiting Lecturer, GACC, Macquarie University – Sydney Australia
2) Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
Lecture 3 & 4
 Learning Objectives
• Identify several basic competitive strategies
and explain how they can use information
technologies to confront the competitive
forces faced by a business.

• Identify several strategic uses of Internet

technologies and give examples of how they
give competitive advantages to a business.
 Learning Objectives
• Give examples of how business process
reengineering frequently involves the strategic use
of Internet technologies.

• Identify the business value of using Internet

technologies to become an agile competitor or to
form a virtual company

• Explain how knowledge management systems can

help a business gain strategic advantages.
 Why Study Strategic IT?
• Technology is no longer an afterthought in
forming business strategy, but the actual
cause and driver.

• IT can change the way businesses

compete.
 Strategic View of Information
Systems
• Information systems are vital competitive networks.

• Information systems are a means of organizational

renewal.

• IS are a necessary investment in technologies that

help a company adopt strategies and business
processes that enable it to reengineer or reinvent
itself in order to survive and succeed in today’s
dynamic business environment.
 Strategic Information Systems
Definition:
• Any kind of information system that uses
information technology to help an
organization gain a competitive
advantage, reduce a competitive
disadvantage, or meet other strategic
enterprise objectives.
Competitive Forces and
Strategies
 Competitive Forces

Definition:
• Shape the structure of competition in its
industry.
 Porter’s Competitive Forces
Model
To survive and succeed, a business must develop
and implement strategies to effectively counter the:

• Rivalry of competitors within its industry

• Threat of new entrants into an industry and its
markets
• Threat posed by substitute products which might
capture market share
• Bargaining power of customers
• Bargaining power of suppliers
 Competitive Strategies
• Cost Leadership
• Differentiation
• Innovation
• Growth
• Alliance
 Cost Leadership Strategy
• Becoming a low-cost producer of products
and services

• Finding ways to help suppliers and

customers reduce their costs

• Increase costs of competitors

 Differentiation Strategy
• Developing ways to differentiate a firm’s
products and services from its
competitors’

• Reduce the differentiation advantages of

competitors
 Innovation Strategy
• Development of unique products and services

• Entry into unique markets or market niches

• Making radical changes to the business

processes for producing or distributing products
and services that are so different from the way a
business has been conducted that they alter the
fundamental structure of an industry
 Growth Strategy
• Significantly expanding a company’s capacity to
produce goods and services

• Expanding into global markets

• Diversifying into new products and services

• Integrating into related products and services

 Alliance Strategy
• Establishing new business linkages and
alliances with customers, suppliers,
competitors, consultants, and other
companies
Competitive Strategy Examples
 Other Competitive Strategies
• Locking in customers or suppliers by building
valuable new relationships with them.

• Building switching costs so a firm’s customers or

suppliers are reluctant to pay the costs in time,
money, effort, and inconvenience that it would
take to switch to a company’s competitors.
 Other Competitive Strategies
• Raising barriers to entry that would
discourage or delay other companies from
entering a market.

• Leveraging investment in information

technology by developing new products and
services that would not be possible without a
strong IT capability.
 Advantage vs. Necessity
• Competitive Advantage – developing products,
services, processes, or capabilities that give a
company a superior business position relative to
its competitors and other competitive forces

• Competitive Necessity – products, services,

processes, or capabilities that are necessary
simply to compete and do business in an industry
 Customer-Focused Business
A business that:

• can anticipate customers’ future needs.

• responds to customer concerns.

• provides top-quality customer service.

IS in a Customer-Focused
Business
 Value Chain
Definition:
• View of a firm as a series, chain, or
network of basic activities that add value
to its products and services, and thus add
a margin of value both to the firm and its
customers.
Value Chain
Value Chain
 Business Process
Reengineering
Definition:
• Fundamental rethinking and radical
redesign of business processes to achieve
dramatic improvements in cost, quality,
speed, and service.
BPR vs. Business Improvement
Cross-Functional Processes
 Agility
Definition:
• The ability of a company to prosper in
rapidly changing, continually fragmenting
global markets for high-quality, high
performance, customer-configured
products and services.
 Agile Company
Definition:
• A company that can make a profit in
markets with broad product ranges and
short model lifetimes, and can produce
orders individually and in arbitrary lot
sizes.
 Mass Customization
Definition:
• Providing individualized products while
maintaining high volumes of production
Agile Competitor
 Virtual Company
Definition:
• An organization that uses information
technology to link people, organizations,
assets, and ideas.
 Interenterprise Information
Systems
Definition:
• Information systems implemented on an
extranet among a company and its
suppliers, customers, subcontractors, and
competitors with whom it has formed
alliances.
Virtual Company
 Virtual Company Strategies
• Share infrastructure and risk with alliance
partners.

• Link complementary core competencies.

• Reduce concept-to-cash time through

sharing.
 Virtual Company Strategies
• Increase facilities and market coverage.

• Gain access to new markets and share

market or customer loyalty.

• Migrate from selling products to selling

solutions.
 Knowledge-Creating
Companies
Definition:
• Consistently creating new business
knowledge, disseminating it widely
throughout the company, and quickly
building the new knowledge into their
products and services.
 Types of Knowledge
• Explicit Knowledge – data, documents,
things written down or stored on
computers

• Tacit Knowledge – the “how-tos” of

knowledge, which reside in workers
 Knowledge Management
Definition:
• Techniques, technologies, systems, and
rewards for getting employees to share what
they know and to make better use of
accumulated workplace and enterprise
knowledge.

Knowledge Management Systems – manage

organizational learning and business know-
how
Telecommunications
And Networks
 Learning Objectives
1. Identify several major developments and
trends in the industries, technologies and
business applications of
telecommunications and Internet
technologies.

2. Provide examples of the business value of

Internet, intranet, and extranet
applications.
 Learning Objectives
3. Identify the basic components, functions,
and types of telecommunications
networks used in business.

4. Explain the functions of major types of

telecommunications network hardware,
software, media, and services.
 Why Study Networking?
• When computers are networked, two
industries – computing and communications
– converge, and the result is vastly more
than the sum of the parts.

• Suddenly, computing applications become

available for business-to-business
coordination and commerce, and for small
as well as large organizations.
 Telecommunications
Definition:
• The exchange of information in any form
(voice, data, text, images, audio, video)
over networks
Trends in Telecommunications
 Open Systems
Definition:
• Information systems that use common
standards for hardware, software,
applications, and networking
 Connectivity
Definition:
• The ability of networked computers and
other devices to easily access and
communicate with each other and share
information
 Interoperability
Definition:
• The ability of an open system to enable
the many different applications of end
users to be accomplished using the
different varieties of computer systems,
software packages, and databases
provided by a variety of interconnected
networks
 Digital Network Technologies
Definition:
• Digital transmission technologies that transmit
information in the form of discrete pulses

Benefits:
• Higher transmission speeds
• Movement of larger amounts of information
• Greater economy
• Lower error rates
 Business Value of
Telecommunications
 Internet
Definition:
• A network made up of millions of smaller
private networks each with the ability to
operate independent of, or in harmony
with, all the other millions of networks
connected to the Internet
Internet Applications
Business Use of the Internet
Business Value of the Internet
 Intranet
Definition:
A network inside an organization that uses
Internet technologies to provide an
Internet-like environment within the
enterprise for information sharing,
communications, collaboration, and the
support of business processes
 Business Value of Intranets
• Communications and Collaboration – includes email,
voicemail, paging, faxes, and groupware

• Web Publishing – easy, attractive and low-cost way of

publishing and accessing multimedia business
information

• Business Operations and Management – platform for

developing and deploying critical business applications
to support business operations and managerial decision
making across the inter-networked enterprise
Business Value of Intranets
 Extranet
Definition:
• Network links that use Internet
technologies to interconnect the intranet of
a business with the intranets of its
customers, suppliers, or other business
partners
Business Value of Extranets
Intranets & Extranets
 Telecommunications Network
Components
• Terminals – any input/output device that uses telecommunications
networks to transmit or receive data

• Telecommunications Processors – devices that perform control

and support functions

• Telecommunications Channels – media over which data are

transmitted and received

• Computers – all sizes and types

• Telecommunications Control Software – programs that control

telecommunications activities
Telecommunications Network
Components
 Types of Telecommunications
Networks
• Wide Area Network (WAN) – network that covers a
large geographic area

• Local Area Network (LAN) – network connecting

information processing devices within a limited
physical area

• Virtual Private Network (VPN) – secure network that

uses the Internet as its main backbone network, but
relies on network firewalls, encryption, and other
security features of its Internet and intranet
connections and those of participating organizations
LAN & VPN
 Types of Telecommunications
Networks
• Client/Server – PCs and workstations, called clients are
interconnected by local area networks and share
application processing with network servers

• Network Computing – Thin clients provide a browser-

based user interface for processing small application
programs

• Peer-to-Peer – file-sharing software connects each PC

to a central server or to another online user’s PC
 Telecommunications Media
• Twisted-Pair Wire – copper wire twisted into
pairs

• Coaxial Cable – sturdy copper or aluminum

wire wrapped with spacers to insulate and
protect it

• Fiber Optics – one or more hair-thin filaments

of glass fiber wrapped in a protective jacket
Telecommunications Media
 Wireless Technologies
• Terrestrial Microwave – earthbound
microwave systems that transmit high-speed
radio signals in a line-of-sight path between
relay stations spaced approximately 30
miles apart

• Communications Satellites - high-earth orbit

communications satellites placed in
stationary geosynchronous orbits
 Wireless Technologies
• Cellular and PCS Systems – a geographic area divided
into cells with one low-power transmitter device per cell
used to relay calls from one cell to another

• Wireless LANs –high- or low-frequency radio technology

installed in an office or building

• Wireless Web – wireless, Web-enabled information

appliances accessing the Internet, intranets and
extranets
Wireless Application Protocol
(WAP)
 Telecommunications
Processors
• Modems – convert digital signals from a
computer into analog frequencies that can
be transmitted over ordinary telephone lines

• Multiplexers – allows a single

communications channel to carry
simultaneous data transmissions from many
terminals
Telecommunications
Technologies
 Internetwork Processors
• Switch – makes connections between
telecommunications circuits in a network

• Router – intelligent communications processor that

interconnects networks based on different protocols

• Hub – a port switching communications processor

• Gateway – connects networks using different

communications architectures
Communications Processors
 Network Management
• Traffic Management – manage network
resources and traffic to avoid congestion and
optimize telecommunications service levels
to users

• Security – provide authentication, encryption,

firewall, auditing and enforcement
 Network Management
• Network Monitoring – troubleshoot and watch over
the network, informing network administrators of
potential problems before they occur

• Capacity Planning – survey network resources

and traffic patterns and users’ needs to determine
how best to accommodate the needs of the
network as it grows and changes
 Network Topologies
• Star – ties end user computers to a central
computer

• Ring – ties local computer processors together

in a ring on a relatively equal basis

• Bus – local processors share the same

communications channel
Network Topologies
 Network Architectures &
Protocols
• Protocol – standard set of rules and procedures
for the control of communications in a network

• Network Architecture – the use of standard

protocols, standard communications hardware
and software interfaces and the design of a
standard multilevel interface between end users
and computer systems with the goal of promoting
an open, simple, flexible, and efficient
telecommunications environment
 OSI & TCP/IP Models
• Open Systems Interconnection (OSI) - model is
a seven-layer model that serves as a standard
model for network architectures

• Transmission Control Protocol / Internet Protocol

(TCP/IP) – is a five layer telecommunications
protocol used by the Internet
OSI & TCP/IP Models
 Bandwidth
Definition:
• Classification of communications speed
and capacity of telecommunications
networks

Transmission Rates:
• Narrow-band – low-speed
• Broadband – high-speed
Transmission Speeds
 Switching Alternatives
• Circuit Switching – a switch opens a circuit
to establish a link between a sender and
receiver; it remains open until the
communication session is completed

• Message Switching – a message is

transmitted a block at a time from one
switching device to another
 Switching Alternatives
• Packet Switching – messages are divided
into fixed or variable length packets, and
packets are sent across networks

• Cell Switching – breaks voice, video and

other data into fixed cells of 53 bytes and
routes them to their next destination in the
network
 Case #3: Wi-Fi Networks

Benefits:
• Superfast
• Lower cost
 Case #3: Wi-Fi Networks

Challenges:
• Hit-or-miss hotspots
• Lost productivity due to disruptions
• Must create billing systems
• Must establish technical standards
• Must develop tighter security measures
 Case #4: Voice Over IP
Services:
• Combine email with voicemail
• Audio-conferencing
• Collaboration technologies
• Video
 Case #4: Voice Over IP
Benefits:
• Install one line to carry voice and data
• Reduced staff training
• Improved productivity
 Summary
• Organizations are becoming networked
enterprises that use the Internet, intranets, and
other telecommunications networks to support
business operations and collaboration within the
enterprise, and with their customers, suppliers,
and other business partners.

• Telecommunications technology is moving

toward open, inter-networked digital networks for
voice, data, video and multimedia.
 Summary
• Open systems with unrestricted connectivity using
Internet technologies are the primary
telecommunications technology drivers in e-
business systems.

• Companies are deriving strategic business value

from the Internet, which enables them to
disseminate information globally, communicate and
trade interactively with customized information and
services for individual customers, and foster
collaboration of people and integration of business
processes within the enterprise and with business
partners.
 Summary
• Businesses are installing and extending intranets
throughout their organizations to:
– Improve communications and collaboration among
individuals and teams within the enterprise
– Publish and share valuable business information
easily, inexpensively, and effectively via enterprise
information portals
– Develop and deploy critical applications to support
business operations and decision making
 Summary
• The primary role of extranets is to link the intranet
resources of a company to the intranets of its
customers, suppliers, and other business partners.

• The major generic components of any

telecommunications network are:
– Terminals
– Telecommunications processors
– Communications channels
– Computers
– Telecommunications software
What is EAI?

96
 Extend your business processes
throughout your enterprise
and beyond...

CRM
Trading
Partners Data
Warehouse
ERP

Legacy
Enterprise Application Supply
Integration Chain

97
 The road to EAI
1980’s: Legacy systems
 Departmental focus
 Highly fragmented, after-the-fact view of the
business
1990’s: ERP
 Enterprise focus
 Partially integrated, after-the-fact view of the
business
 Replaces much of existing IT investment
2000+: Enterprise Application Integration (EAI)
 Extended enterprise focus
 Fully integrated, up-to-the-second visibility
& control of the business
 Complete preservation of existing IT
investment
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 Integrate packaged, custom, & legacy
 What is Enterprise
Application Integration?
• Enterprise Application Integration (EAI) products are an emerging class
of software applications and tools enabling companies to define and
manage business processes spanning multiple internal and external
software applications and data sources. These products are comprised
of process management, application interface, transformation, and
messaging services necessary to facilitate end-to-end application
integration both internally and externally to the enterprise.

• Benefits of Enterprise Application Integration include:

– Extended enterprise focus
– Fully integrated, up-to-the-second visibility and control of the business
– Complete preservation of existing IT investment
– Integrate packaged, custom and legacy applications
– Enable integration of heterogeneous infrastructures, hardware and networks

99
 Business Drivers for EAI

– Mergers and acquisitions

– Supply chain / value chain integration
– Customer service chain
– Customer relationship management
– Business to business eCommerce
– Internet self-service applications
– Business intelligence applications

100
 Demands for
Integration
Large and complex organizations desire to:

– Integrate companies resulting from merger and acquisition activity

– Integrate an environment composed of disparate, best of breed applications
including a large number of legacy or custom apps that have evolved in
silos over time
– Improve and better manage customer-facing processes

New entrants and emerging organizations desire to:

– Minimize the time to market with new products and services, enabled by a
flexible, integrated architecture
– Grow the enterprise aggressively and quickly, and want to avoid the future
development of legacy system silos

101
 Product Industry Scenario
Traditional Approach
“Studies show that the
average large company
has upward of 50
different applications
running. And it costs
companies an estimated
$16 billion a year trying
to keep them all working
smoothly together, along
with applications used
by their suppliers and
clients.” --The Wall
Street Journal

102
 Enterprise Application
Integration Value
Early adopters of EAI technologies are experiencing unparalleled agility in the
management of integrated business processes across multiple disparate systems both
within and between enterprises. Specific benefits achieved through EAI include:
– Increased quality of decisions/reduce time to “think” and react
– Increased ability and speed to adapt to
change
– Increased speed to market with new
products and services
– Enhanced customer service and self
service
– Expanded capabilities to deliver new
products and services CRM
Marketing
Data Marts Data
Warehouse
Data Marts Data MartsManagement
– Increased utilization of critical assets Sales
Traditional Partner
Vendor
– Decreased operating costs Customer
Relations
Legacy
Forwarding/
Customer
Service EAI Transportation
TraditionalManagement Work Centers
Partner
Customer
Order
ERP Management
SCA
Inventory Plant
Purchasing Warehouses
Management Returns Maintenance
Shipping
Production Finance - Finance -
Planning Accounts Billing Accounts
Receivable Payable
103
 Product Industry Scenario
Traditional Approach
SCA Traditional Partner
CRM
Inventory
Purchasing Vendor
Management
Marketing
Traditional
Partner ERP
Production
Order Planning
Customer Sales
Management

Customer
Warehouses Plant
Relations
Maintenance

Customer Shipping ERP

Service
Management Finance -
Work Centers
Legacy Accounts
Payable
Forwarding/
Returns Legacy
Transportation

Data Data Marts

Warehouse
Finance -
Accounts Billing
Receivable Management Data Marts

Data104
Marts
 EAI
New Approach
CRM Data
Data Marts Warehouse
Marketing
Data Marts Data Marts Management
Traditional Partner

Sales Vendor

Customer
Relations Legacy

Forwarding/

Traditional
Customer
Service
Management
EAI Transportation

Partner Work Centers

Customer

ERP Order
SCA
Management
Inventory Plant
Purchasing Warehouses
Management Maintenance
Returns
Shipping
Production
Planning Finance - Finance -
Accounts Billing
Receivable
Accounts105
Payable
 EAI Scenario
Existing System Enhancement
Build a Near-Zero-Latency Enterprise

ERP CRM Vendor

Customer SCA DW

106
 EAI Scenario
Existing System Enhancement
Build a Near-Zero-Latency Enterprise

ERP CRM Vendor

EAI

Customer SCA DW

107
 EAI Scenario
Merger
Company A Company B

ERP CRM ERP CRM

DW EAI DW

SCA Legacy SCA Legacy

108
 EAI Scenario
Merger
Company A Company B

ERP CRM ERP CRM

DW EAI DW

SCA Legacy SCA Legacy

109
 How does EAI help Delivery?
• Lower T.C.O.
– Less Development
Effort
– Lower Support
Costs

• Faster Build
Effort (Days)

Build

Design Run

Build
Run
Traditional
Approach
Lifecycle (Time)
EAI 110
•
•
What potential does EAI hold?
No EAI
100 Unique Applications
Average 3 Existing Interfaces Per App Yearly Cost:
• 15 New App Interfaces Needed Yearly (15 * 50% * 200) + (15 * 50% * 200 * 67%)
• 50% probability of reuse 2500 days (or roughly 13 people)
• Degree of reuse is 33% $2,000,000 - $3,000,000 per year
• Cost of a new interface from scratch (no Size and complexity of technology base?
reuse) is 200 days Impact on maintenance and nimbleness?

VS.
■ Assume a standard approach across the EAI
enterprise
■ 100 Unique Applications
■ Average 3 Existing Interfaces Per App Yearly Cost:
■ 15 New App Interfaces Needed Yearly (15 * 50% * 100) + (15 * 50% * 100 * 20%)
■ 50% probability of reuse 900 days (or roughly 5 people)
■ Degree of reuse is 80% (vs. 33%) $500,000 - $1,000,000 per year
■ Cost of a new interface (no reuse) is 100
days (vs. 200 days)

Half the cost, Half the size, and less complexity means more
111
than twice as nimble and much easier to maintain
 EAI Technical
Components
An EAI Solution is comprised of the following services:

Business Process Business process-level integration and

Management management

Pre-built adapters to packaged

Application Connectivity applications and custom
adapter development kits

Message and data

Translation & Formatting transformation and formatting

Communications middleware
Communications Middleware
and message routing

112
 Business Process
Management
• Centralized visibility and control of
multi-step business process
EAI Solution traversing multiple applications
• Real-time analysis capabilities
• Workflow-like coordination of multi-
step processes
• Transactional control
• Process state information
maintained to support rollback
processes
Data
Warehouse
• Graphical tools and metadata to
ERP Custom define processes and rules

113
 Application Connectivity

• Pre-built application
adapters to ERP and
EAI Solution packaged systems
• Custom adapter
development kits
• Connection managed to
and from source
BAPI COM SQL
Call Event Call
application
• Connectors to common
technologies such as orbs,
Data support for CORBA, EJB,
Warehouse
etc.
ERP Custom

114
 Transformation & Formatting
• Message protocol transformation
• Syntactic translation of one data set
Order into another.
#BA4583 Order Example: translation of date formats
#0K00765
• Semantic translation of data based
on underlying data definitions or
EAI Solution meaning.
Example: conversion from the
English system to the metric system
Corporate Order # -> SAP Order # ->
SAP Order # DW Order #

ERP Data
Warehouse
Order Order
#BA4583 #0K00765

115
*From MessageQ.com
 Communications Middleware
• Directs the flow of messages among
applications

• Supports both synchronous and

New Msg asynchronous communications

EAI Solution • Routes messages to applications based

on message subject and/or content

Message Broker • Provides services via message brokers,

orbs or message queues

• May support publish/subscribe

messaging
Synch. Msg Synch. Msg Asynch. Msg

Data
Warehouse

ERP Custom

116