CHAPTER 8 INTERORGANIZATIONAL AND GLOBAL INFORMATION SYSTEMS

Learning Objectives Describe the role, benefits and structure of interorganizational systems Distinguish between interorganizational and global information systems Describe EDI and compare a traditional EDI with an Internet-base EDI Define extranets and explain their infrastructure, types and benefits Describe planning and other issues related to interorganizational and global systems

Chapter Overview Electronic Data Inerchange and Electronic Funds Transfer EDI and IOS EFT and IOS Interorganizational Information Systems Response to Business Pressures Types of Interorganizational systems Global Information Systems Who Needs Global Systems? Benefits of Global IS Issues in Electronic Global Trading Global E-Commerce Implementing IOS Security Ethical and Social Issues Planning Extranets Components and Structure Types Benefits

Case: The Harper Group Collaborates With Honda in International Trade The Problem highly competitive environment where hundreds of freight moving companies in the United States and abroad operate large amounts of information flow among several trading partners and support services HOW TO EFFECTIVELY MANAGE THE INFORMATION? HOW TO DO IT AT COMPETITIVE PRICES?

Case (continued…) The Solution The Results Use information technology that links the computers of involved organizations, resulting in a paperless flow of routine information The Results allows cheaper, faster, and more reliable information to flow among all business partners supports Harper’s global business maintains the company’s position as the second largest trading facilitator in the United States operates the company with thin profit margins adopted an intranet for improving the internal operations in 1997

Case (continued…) What have we learned from this case?? Global information system - EDI enables efficient flow of large amounts of transactional information among several business partners around the globe keeps current customers attracts new customers

Interorganizational Information Systems (IOS) Objective efficient processing of transactions, such as transmitting orders, bills, and payments Major Characteristics determine customer-supplier relationship in advance built around privately or publicly accessible networks employ value-added networks (VANs) when use telecommunications companies for communication use the Internet with either an electronic data interchange (EDI), with extranets, or with EDI/Internet

IOS (continued …) IOS Response to Business Pressures reduce the costs of routine business transactions improve the quality of the information flow by reducing or eliminating errors compress cycle time in the fulfilment of business transactions, regardless of geographical distance eliminate paper processing and its associated inefficiencies and costs make the transfer and processing of information easy for users

IOS (continued …) Types of Interorganizational Systems Global systems - information systems connecting two or more companies in two or more countries Electronic data interchange (EDI) - the electronic movement of standard business documents between business partners Electronic funds transfer (EFT) - the transfer of money using telecommunication networks Extranets - link the intranets of business partners Shared databases - databases that can be shared by trading partners, often used to reduce time in communicating information between parties as well as arranging cooperative activities Integrated messaging - delivery of electronic mail and fax documents through a single transmission system that can combine electronic mail and electronic business documents

Global Information System connect companies located in two or more countries Who Uses Global Systems? Multinational Companies companies that operate in several countries International Companies companies that do business with other companies in different countries Virtual Global Corporations joint ventures whose partners are form different countries

Benefits of Global Information System Effective communication at a reasonable cost Effective collaboration with groupware software, Group DSS, extranets, and teleconferencing devices Organizations access each other’s databases and frequently work on the same projects while their members are in different locations

Issues in Electronic Global Information System Cultural Differences many different aspects ranging from legal and ethical issues to what information is considered offensive localization - use different names, colors, sizes, and packaging for overseas products and services Economic and Legal Differences differ considerably in their economical and legal environments Transfer of Data Across International Borders cross-border data transfer - several countries impose strict laws to control the flow of corporate data across their borders; to protect the privacy of their citizens

Global Electronic Commerce Access to larger markets, the possibility of saving on taxes, and the flexibility to employ workers and manufacture products anywhere using a world telecommuting workforce Benefits the Internet and the extranets resulted in an inexpensive and flexible infrastructure can do business anytime and from anywhere can do it rapidly at a reasonable cost

Global Electronic Commerce (continued …) Barriers Legal barriers jurisdiction issues, export/import regulations and compliance; contacts Intellectual property (enforcement of ), privacy, and content issues Cryptography (encryption), security, authentication procedures, and notarized documents Cross-border transactions, as described earlier Consumer protection (e.g. liability for wrong transactions) Market access barriers building a telecommunications infrastructure capable of accommodating all users and all types of data is a necessity

Global Electronic Commerce (continued …) Barriers Financial barriers including taxation, customs and electronic payment systems, different currencies Others need to match buyers and sellers across international borders and establish trust between them existence of cultural diversity lack of sufficient international agreements deciding on the collection of sales and other taxes compliance with diversified export/import regulations and fees need for language translation (the Web page, transactions)

Electronic Data Interchange (EDI) Elements of EDI Data formatting standards to shorten the length of the messages, reducing long distance telephone charges and eliminating data entry errors EDI translators conversion of data into standard format Private line (VANs) versus the Internet VANs-based EDI - expensive, high security and capacity, incompatible hardware and software of the telecommunication companies Internet-based EDI - less security and capacity as compare to VAN-based EDI, but cheaper; requires coordination and integration with the company’s back-end processing systems

Order-delivery Cycle With and Without EDI Start Specifier Purchasing Accounting Mailroom Shipping Receiving Buyer P.O. delivery Order confirmation Bill delivery Sales Seller With EDI Receiving Buyer Seller Start Specifier PO Standardized PO Form Invoice Flash report Shipping EDI transmissions Computer Generates Standardized P.O. Form Instant data to : Sales Manufacturing Engineering Automatic billing Automatic order confirmation Approval Prices Availability

How the Benefit is Achieved? Benefits of EDI Benefits How the Benefit is Achieved? Speed, volume EDI enables companies to send and receive large amounts of routine transaction information quickly around the globe in a paperless environment Sales and other information is delivered to manufacturers, shippers, and warehouse almost in real time Once EDI documents are received ,they are automatically forwarded to the appropriate department for processing Accuracy There are very few errors in the transformed data as a result of computer-to-computer data transfer. Information is also consistent

Benefits of EDI (continued …) How to Benefit is Achieved? Collaboration Companies can access partners databases to retrieve and store standard transactions Commitment EDI fosters true (and strategic) partnership relationships, since it involves a commitment to a long-term investment and the refinement of the system over time Profit The time for collecting payments can be shortened by several weeks, benefiting the recipients of payments Cost saving EDI creates a complete paperless transfer processing environment, saving money and increasing efficiency EDI enables a just-in-time environment, which means lower (or no) inventories for manufacturers

EDI Applications Manufacturing - to communicate with suppliers, customers, and other business partners Retailing - to streamline deliveries of goods from the suppliers to the stores and reduce inventories Global trade - to shorten the elapse time by 70% or more and to reduce administrative expenses by 30% Service Industry - used EDI and its companion, electronic funds transfer, for a long time Large trading networks - provide efficient and effective trading environments (e.g. TradeNet)

Electronic Funds Transfer (EFT) transfer of money to and from financial institutions using telecommunication networks used as an IOS, a global system, and a communication system among organizations and to individuals fast - reduces delays associated with sending hard-copy documents and it eliminates returned checks security issues - how can a business ensure that a hacker is not bilking corporate accounts by electronically transferring funds to his account, or that competitive snoops are not gaining a complete picture of corporate financial assets?

TradeNet (Singapore) Trader (1) Trader fills up Inward declaration form on the terminal. (2) TDB retrieves and approves Inward declaration (It is an import permit). TDB (3) TradeNet automatically forwards approved Inward declaration to Customers Tradenet (4) Customers retrieves and approves Inward declaration (It is a customs permit). (5) Trader prints a form for Customs clearance (trader may inquire status of declaration at any time). (6) Port Authority retrieves data required for delivery of cargo. Port Authority Trader Customers

customers, suppliers, contractors, distributors, government Extranet A network that links business partners to one another over the Internet by providing access to certain areas of each other’s corporate intranets Components Servers TCP/IP protocols E-mail Web browsers as the Internet Structure Extranet Company A Intranet corporate data, e-mail, orders, customer data, inventory, documents Company B Other users customers, suppliers, contractors, distributors, government Corporate employees travelling or at home Internet

Types of Extranet A company and its dealers, customers, or suppliers centered around one company An industry’s extranet (Trading Network) teamed up and created by the major players in an industry (e.g. the automotive industry) Joint ventures and other business partnerships used as a vehicle for communications and collaboration among several companies partnering in a joint venture

Benefits of Extranets (continues …) Fewer help-desk employees are needed Improved quality Lower communications and travel costs Lower administrative and other overhead costs Faster processes and information flow Reductions in paperwork and delivery of accurate information in a timely manner Improved order entry and customer service Better communication

Implementing Interorganizational Information System Security protection mechanisms : firewalls and VPNs Ethical and Societal Issues takes a great risk for its trade secrets, the privacy of the employees and the controlling of some processes Planning complex IT planning when involving several organizations several IT planning teams should be created and supported by e-mail, extranets,and groupware

What’s in IT for Me? For Accounting For Finance procedures in multinational corporations and issues in taxation include data collection and transfer and auditing For Finance EDI and EFT have been the pioneering systems for over 20 years; now global financial services and trading For Human Resource Management recruitment, HR development and training in a local and multinational corporations can be improved by using IT

What’s in IT for Me?(continued …) For Marketing marketing and sales in global markets can be enhanced by appropriate information systems For Production/Operations Management the logistics systems can be greatly improved by using IOSs For Non-Business everyone will encounter interorganizational systems in almost any organization, public or private