Chapter 9 Organizational Use of Information Systems The McGraw-Hill Companies, Inc All rights reserved. Irwin/McGraw-Hill

2 Chapter Objectives To understand how businesses are organized and what general functions they need to perform. To understand how information systems can be used to support organizational functions and activities, regardless of how the organization is structured. To understand potential vulnerabilities arising from the use of information systems, including ethical vulnerabilities.

3 Organizations and Organizational Structure Organizational structure provides stability, regularity, and predictability. Organizational structure is not static. Organizational structure deals with reporting relationships, working relationships, and communication channels among departments.

4 Traditional View of Organization The traditional view of an organization is that of hierarchy. –An individual or small group reside at the top. –The number increases with each successive group. –See Figure 9.1

5 Business Functions One way to divide the organization is based on business functions. –Accounting –Finance –Marketing and Sales –Production and Operations Management –Customer Support –Human Resource Management –Information Services

6 Business Functions Accounting –Score keeping function. –Records details of company transactions. –Allows organization to keep track of revenue. –Allows organization to keep track of Inventory. –Software to support Accounting Function Peachtree and Great Plains (Microsoft)

7 Business Functions Finance –Responsible for acquiring and managing the financial capital (money) for the organization. –Determines source of capital Issue common stock Issue bonds Re-invest profits –Typically works close with accounting.

8 Business Functions Marketing and Sales –Involves all activities involved with identifying potential customers and customer preferences. –Customer Relationship Management Data Mining tools are used to track customer preferences. –Order processing systems record customer orders. –Sales tracking systems monitor sales activities.

9 Business Functions Production and Operations Management –Concerned with the acquisition of raw materials and the conversion of those materials into finished products. –Numerous information systems are needed to keep track of inventories. –Bar code tags are used to track inventory. –Radio frequency identification is also used to track inventory.

10 Business Functions Customer Support –Involves answering all customer questions prior to purchase. –Involves handling all returns and customer complaints. –Customer Relationship Management

11 Business Functions Human Resource Management –Responsible for hiring, developing, administering compensation and training plans, and terminating employees. –Systems to submit claims electronically. –Web-based systems to accept resumes.

12 Business Functions Information Services –Responsible for providing the computing and communications support for the rest of the organization. –Acquires computers, networks, and telecommunications systems. –Designs and maintains databases. –Develops or acquires software programs and applications.

13 Business Processes Business functions are dependant on the sharing of data and information. The Business cycle –Starts when marketing delivers a message to a potential customer. –Customer places an order. –Marketing transmits sales information to production. –Production ships the goods to the customer and information to accounting. –Accounting sends the customer a bill.

14 Process View of Organization An alternative to the functional organizational structure is the process view of an organization. –A process is a clearly defined and structured series of inputs and outputs. –Every process has an output. –A process is a composition of activities for satisfying a customer need.

15 Process View of Organization A process view of organizations implies an emphasis on how work is done. –Looks at what the organization does. –A process view of organizations cut across functional areas. –A process view differs significantly from the hierarchy view in terms of authority, and responsibility. –The process view coordinates the expertise of the functional areas to meet the common goal of satisfying the customer.

16 I/S to Support Organizational Processes Different information systems are required to support the different functions. –Lower-levels may use transaction processing systems. –Mid-level managers may use decision support systems. –Executives may use executive information systems.

17 I/S to Support Organizational Processes The term interorganizational system (IOS) is used to describe a networked system used by two or more organizations. –EDI (Electronic Data Interchange) –XML (Extensible Markup Language) –ERP (Enterprise Resource Planning) system

18 The Virtual Organization When members of an organizational team cut across functional areas using electronic mail and other similar methods of communication to achieve the same goal this is known as a virtual team. –They exists only in cyber space. –Members rarely meet face to face. –Members may be different locations. The virtual organization can be viewed as an extension of the virtual team.

19 Cautions on the Use of IT Information technology may not be able to sustain a competitive advantage. –Regulatory Issues SABRE and Apollo –Bad Timing FedEx’s Zapmail –Waking Sleeping Giant Wal-mart –Cultural Issues Short Messaging Service (Popular in Japan)

20 Ethical Vulnerabilities Ethical vulnerabilities refers to the risks a company has in collecting, using, and storing confidential and personal data. –Competitors may attempt to copy your system. –Companies buy and sell customer and potential customer data. –Companies “profile” customers. –The right to know versus the right to privacy. –Efforts to increase efficiency may dehumanize the workplace.

21 Policies on Ethics and Use of IT Laws relating to social and ethical issues are ambiguous and open to interpretation. New technologies impact existing laws on an on-going basis. Responsibilities of management. –Information access –Information Stewardship (See Table 9.10)

22 Analyzing Ethical Dilemmas Stakeholder analysisIdentify all parties with a stake in the issue. Goal-based analysisSelect option that promises greatest good for greatest number. Rights-based analysisIdentify data that might violate rights. Duty-based analysisIdentify basic ethical duties, honesty, fairness ect.