MIS 301 Information Systems in Organizations Dave Salisbury ( ) (web site)

Oh, the places we’ll go! What we’re going to be about this term Basic assumptions & where we’ve come from Why we invest in Information Systems & Information Technology (IS&T) Technology trends and how business is changing Why study information systems & what are they The “big picture” Some implications of advancing information technology innovation How IS&T influences organizational strategy Conclusions

History of IT&S Early Days Automation Accounting focus Later Support business Functional focus Today Empower business Strategic & process focus

Views on the role and importance of Information Systems Our information resources dept makes a major contribution to profitability. We expect our VP of IT to provide ideas for improving company performance just the same way as we rely on sales, manufacturing and engineering executives for their contributions IT is our top strategic concern, not because it outweighs everything else, but because we are unsure what to do with it. Although we understand other parts of our business strategy, IT issues keep eluding us. We make good technical decisions and our systems work well but we can't seem to grasp the bigger picture. Don’t even ask about our e-business efforts. Our IT manager does a fine job. He handles all those technical details no one else understands quickly and without complaining. We can always count on Charlie We have shaped up data processing very nicely since the early 1990's. We have developed many new systems to support our operations. As computing costs come down, we expect that more systems will be justified and implemented

IS&T Investment Profit Operational Systems Revenue Strategic Systems Costs + – + – Why We Invest in IS&T Management Support & Decision Systems

Trends in Technology Cost-performance ratio of chips keeps improving (Moore’s Law) Improving performance of optical communication networks Increasing storage capacity price performance Object technology and self- contained units of sharable software Emergence of networked and distributed computing Internet Mobile Computing and M- Commerce Wireless networks Pervasive Computing Smart Devices RFID GPS

An Example of Digital Economy – New Implementations 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.

Digitization creates new opportunities Digitization turns information into zeros & ones Digital information (be it text, audio, or video) is more easily transmitted with no loss of quality Resulting is mixing of traditionally separated businesses This is most pronounced in information intense businesses – once you have information you can digitize it and move it around with no quality loss to anywhere

Taking photos the “old” way 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

Taking photos the “new” way 1st Generation Digital Photography Old economy except 6 and 7 were replaced by using a scanner and ing 2nd Generation Digital Photography Use a Digital Camera, no film, no processing 3rd Generation Digital Photography 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. 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 Highly competitive business environment Instable, unpredictable Business Critical Response Activities Companies need to react frequently and rapidly Rapidly emerging threats and the opportunities Defend from extant & potential future pressures Exploit opportunities created by change

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

Technology versus Systems Technology Computers Telephones Tools Systems Intelligent application of technology along with people and procedures to do something useful

IS Applications and Operations Retail operations Wholesale Manufacturing Human Resources Marketing Content management …

IS in Sales & Marketing Identify customers Determine what they want Planning products Advertising and promoting products Determine prices for products Contact customers Maintain Customer Relationships Sell the product Take the order Follow-up on the sale Develop sales forecasts

IS in Manufacturing Computer-based control equipment and machinery (e.g. robotics) Design new products Calculate amount & quantity of products to produce Assess & design new production facilities Generate work orders

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

IS in Finance Financial Assets Investment management Banking Long term budgets

IS in Accounting Accounts Receivable Disbursements Payroll Depreciation Earned Coop and Rebates General ledger

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

What is a System? Manufacturing Process Input of Raw Materials Output of Finished Products Environment Other Systems Control by Management Control Signals Control Signals Feedback Signals Feedback Signals System Boundary

What is an Information System? Input of Data Resources (Forms) Data Processing (Updates, Queries) Output of Information (Reports) System to Support a Business Process Data Storage Feedback/Control

IS Components/Resources Input of Data Resources (Forms) Data Processing (Updates, Queries) Output of Information (Reports) System to Support a Business Process Data Storage People Data Hardware Software Network Other Systems

Systems Interact w/ Other Systems

Manufacturing and Production Engineering & Research Accounting, Finance, and Management Suppliers and Other Business Partners Procurement, Distribution, and Logistics Advertising Sales Customer Service Consumer and Business Customers Company Boundary Intranets The Internet Extranets The Inter-Networked Business

The IS&T Big Picture Creating, supporting and enhancing organizational socio-technical systems Leveraging the informational component of a product, service, business process or business relationship Enable redesign of business processes Business modeling Data Processes Process & deliver information to decision-makers

Even More of the IS&T Big Picture Processes, data & technology should be secured against misuse Individual lives are represented in the information stored and processed by these systems Increasingly inter-networked world, potential exploits in one individual or organization’s systems can translate into damage for other systems To apply IT, one must understand it Communications infrastructure and technology standards Evaluate current and emergent technologies

Some implications of IS&T Information Asymmetry The extent to which one party in an exchange knows something the other doesn’t – this is being reduced Richness Information content within a given time Degree of customization Dialog between provider & receiver Reach Number of people receiving information

Some more implications of IS&T Big firms can work like small firms Hotel information systems High-performance farming Small firms can work like big firms Internet/Virtual Businesses Limited need for Physical Facilities

Even more implications of IS&T Strategic Advantage If you’re first, a novel technology creates an advantage Strategic Necessity Eventually, technology-based gains are lost because they are easily replicable

Strategic Information Systems 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

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.

Porter’s Competitive Forces Model Bargaining Power Threat

Sample Competitive Strategies Cost Leadership Differentiation Niche Growth Innovation Alliance Operational effectiveness Customer-orientation Time Entry-barriers Lock in customers or suppliers Increase switching costs

Information Technology Supports Strategic Management 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 Assessment Current Competitors What drives them? Actions & capabilities Strengths & weaknesses Competitive intensity Barriers to Entry What are they? Current basis for competition? How to build share? Substitutes What are they? Are they increasing? Are they really substitutes? Buyers & Suppliers Who has power in the transaction? Who captures value added for each part of the value chain?

The Value Chain Activities for acquisition, transformation & delivery of products & services (primary) Inbound logistics (inputs) Operations (manufacturing and testing) Outbound logistics (storage and distribution) Marketing and sales Service Activities that support the creation of value but do not themselves add value (support) Infrastructure (e.g. accounting, finance, management) Human resources Technology development (R&D) Procurement

The Value Chain

Critical Building Blocks Information Intensity The extent to which a product, service, process or relationship is comprised of information Understanding Technology Infrastructure Standards Essential Business Modeling Data Modeling Process Modeling Using Technology to reengineer business processes Support for Decision-Making Security of Systems and Data

Finally… The rules of business haven’t changed Profitability Measures of firm strength Customer service Logistics How we implement them has – dramatically Web-based businesses Re-engineering based on IT