Management Information Systems
Chapter 2
COMPONENTS OF A BUSINESS * A business is a formal organization whose aim is to produce products or provide services for a profit – that is, to sell products at a price greater than the costs of production. * ORGANIZING A BUSINESS: BASIC BUSINESS FUNCTIONS * The decision of what to produce is called a strategic choice because it determines your likely customers, the kind of employees you will need, the production methods and facilities needed, the marketing themes, and many other choices. * The five basic entities in a business with which it must deal are: suppliers, customers, employees, invoices/payments, and, of course, products and services. * BUSINESS PROCESSES * The actual steps and tasks that describe how work is organized in a business are called business processes. * A logically related set of activities that define how specific business tasks are performed. * Also refer to the unique ways in which work, information, and knowledge are coordinated in a specific organization. Manufacturing & Production | * Assembling the product * Checking for quality * Producing bills of materials | Sales & Marketing | * Identifying customers * Making customers aware of the product * Selling the product | Finance & Accounting | * Paying creditors * Creating financial statements * Managing cash accounts | Human Resources | * Hiring employees * Evaluating employees’ job performance * Enrolling employees in benefits plans | * Interorganizational includes interactions with delivery firms and customers who are outside the boundaries of the organization. * Cross-functional includes interactions between one or more departments of an organization * HOW INFORMATION TECHNOLOGY ENHANCES BUSINESS PROCESSES * Information systems automate many steps in business processes that were formerly performed manually, such as checking a client’s credit, or generating an invoice and shipping order. * MANAGING A BUSINESS AND FIRM HIERARCHIES * The hierarchy of management is composed of senior management, which makes long-range strategic decisions about products and services as well as ensures financial performance of the firm; middle management, which carries out the programs and plans of senior management; and operational management, which is responsible for monitoring the daily activities of the business. * Knowledge workers, such as engineers, scientists, or architects, design products or services and create new knowledge for the firm, whereas data workers, such as secretaries or clerks, assist with administrative work at all levels of the firm. * Production or service workers actually produce the product and deliver the service. * THE BUSINESS ENVIRONMENT * Business firms depend heavily on their environments to supply capital, labor, customers, new technology, services, and products, stable markets and legal systems, and general education resources. * A firm must respond to political shifts, respond to changes in the overall economy (such as changes in labor rates and price inflation), keep track of new technologies, and respond to changes in the global business environment (such as foreign exchange rates). * In its immediate environment, firms need to track and share information with suppliers, customers, stockholders, regulators, and logistic partners (such as shipping firms). * THE ROLE OF INFORMATION SYSTEMS IN BUSINESS * Firms invest in information systems for the following business objectives: * To achieve operational excellence (productivity, efficiency, agility) * To develop new products and services * To attain customer intimacy and service (continuous marketing, sales, and service; customization and personalization) * To improve decision making (accuracy and speed) * To achieve competitive advantage * To ensure survival * TYPES OF BUSINESS INFORMATION SYSTEMS * A typical business organization will have systems supporting processes for each of the major business functions – sales and marketing, manufacturing and production, finance and accounting, and human resources. * A typical firm will also have different systems supporting the decision-making needs of each of the main management groups. * SYSTEMS FOR MANAGEMENT DECISION MAKING & BUSINESS INTELLIGENCE * TRANSACTION PROCESSING SYSTEMS * Transaction processing systems (TPS) are computerized systems that perform and record the daily routine transactions necessary to conduct business, such as sales order entry, hotel reservations, payroll, employee record keeping, and shipping. * Managers need TPS to monitor the status of internal operations and the firm’s relations with the external environment. * Transaction processing systems are often so central to a business that TPS failure for a few hours can lead to a firms demise and perhaps that of other firms linked to it. * SYSTEMS FOR BUSINESS INTELLIGENCE * Business intelligence is a contemporary term for data and software tools for organizing, analyzing, and providing access to data to help managers and other enterprise users make more informed decisions. * The term management information systems (MIS) also designates a specific category of information systems serving middle management. * MIS summarize and report on the company’s basic operations using data supplied by transaction processing systems. * These systems generally are not flexible and have little analytical capability. * Most MIS use simple routines, such as summaries and comparisons, as opposed to sophisticated mathematical models or statistical techniques. * Decision-support systems (DSS) focus on problems that are unique and rapidly changing, for which the procedure for arriving at a solution may not be fully predefined in advance. * Although DSS use internal information from TPS and MIS, they often bring in information from external sources, such as current stock prices or product prices of competitors. * The system can answer question such as the following: Given a customer delivery schedule and an offered freight rate, which vessel should be assigned at what rate to maximize profits? * Executive support systems (ESS) help senior management address non-routine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution. * ESS present graphs and data from many sources through an interface that is easy for senior managers to use. * ESS are designed to incorporate data about external events, such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS. * The information is presented on a digital dashboard, which displays on a single screen graphs and charts of key performance indicators for managing a company. * Contemporary business intelligence and analytics technology has enabled a whole new style of management called, variously, “information driven management” or “management by facts.” * Here, information is captured at the factory floor (or sales floor) level, immediately entered into enterprise systems, and then sent to corporate headquarters executive dashboards for analysis within a matter of hours or seconds. * SYSTEMS FOR LINKING THE ENTERPRISE * ENTERPRISE APPLICATIONS * Systems that span functional areas, focus on executing business processes across the business firm, and include all levels of management. * There are four major enterprise applications: enterprise systems, supply chain management systems, customer relationship management systems, and knowledge management systems. * Enterprise Systems * Firms use enterprise systems, also known as enterprise resource planning (ERP) systems, to integrate business processes in manufacturing and production, finance and accounting, sales and marketing, and human resources into a single software system. * Supply Chain Management Systems * Firms use supply chain management (SCM) systems to help manage relationships with their suppliers. * These systems help suppliers, purchasing firms, distributors, and logistics companies share information about orders, production, inventory levels, and delivery of products and services so that they can source, produce, and deliver goods and services efficiently. * Supply chain management systems are one type of interorganizational system because they automate the flow of information across organizational boundaries. * Customer Relationship Management Systems * Firms use customer relationship management (CRM) systems to help manage their relationships with their customers. * CRM systems provide information to coordinate all of the business processes that deal with customers in sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention. * Knowledge Management Systems * Knowledge management systems (KMS) enable organizations to better manage processes for capturing and applying knowledge and expertise. * These systems collect all relevant knowledge and experience in the firm, and make it available wherever and whenever it is needed to improve business processes and management decisions. * INTRANETS AND EXTRANETS * Intranets are simply internal company Web sites that are accessible only by employees. * The term “intranet” refers to an internal network, in contrast to the Internet, which is a public network linking organizations and other external networks. * Extranets are company Web sites that are accessible to authorized vendors and suppliers, and often used to coordinate the movement of supplies to the firm’s production apparatus. * E-BUSINESS, E-COMMERCE, AND E-GOVERNMENT * Electronic business, or e-business, refers to the use of digital technology and the Internet to execute the major business processes in the enterprise. * E-business includes activities for the internal management of the firm and for coordination with suppliers and other business partners. * It also includes electronic commerce, or e-commerce. * E-commerce is the part of e-business that deals with the buying and selling of goods and services over the internet. * It also encompasses activities supporting those market transactions, such as advertising, marketing, customer support, security, delivery, and payment. * E-government refers to the application of the Internet and networking technologies to digitally enable government and public sector agencies’ relationships with citizens, businesses, and other arms of government. * SYSTEMS FOR COLLABORATION AND TEAMWORK * WHAT IS COLLABORATION? * Collaboration is working with others to achieve shared and explicit goals. * Teams are part of the organization’s business structure for getting things done. * Collaboration and teamwork are more important today than ever for a variety of reasons. * Changing nature of work. * The nature of work has changed from factory manufacturing and pre-computer office work where each stage in the production process occurred independently of one another, and was coordinated by supervisors. * Today, our jobs require much closer coordination and interaction among the parties involved in producing the service or product. * A recent report from the consulting firm McKinsey and Company argued that 41% of the U.S. labor force is now composed of jobs where interaction (talking, e-mailing, presenting, and persuading) is the primary value-adding activity. * Growth of professional work. * “Interaction” jobs tend to be professional jobs in the service sector that require close coordination, and collaboration. * Changing organization of the firm. * For most of the industrial age, managers organized work in a hierarchical fashion. Orders came down the hierarchy, and responses moved back up the hierarchy. * Today, work is organized into groups and teams, who are expected to develop their own methods for accomplishing the task. * Changing scope of the firm. * The work of the firm has changed from single location to multiple locations – offices or factories throughout a region, nation, or even around the globe. * Emphasis on innovation. * We tend to think of innovations in business and science as coming from great individuals, but more commonly these individuals are working with a team of brilliant colleagues, and all have been preceded by a long line of earlier innovators and innovations. * Innovation, in other words, is a group and social process, and most innovations derive from collaboration among individuals in a lab, a business, or government agencies. * Changing culture of work and business. * Most research on collaboration supports the notion that diverse teams produce better and faster outputs than individuals working on their own. * BUSINESS BENEFITS OF COLLABORATION AND TEAMWORK BENEFIT | RATIONALE | Productivity | People working together can complete a complex task faster than the dame number of people working in isolation from one another. There will be fewer errors. | Quality | People working collaboratively can communicate errors, and corrective actions faster than if they work in isolation. There will be a reduction in buffers and time delay among production units. | Innovation | People working collaboratively in groups can come up with more innovative ideas for products, services, and administration than the same number working in isolation from one another. There are advantages in group diversity and “the wisdom of crowds.” | Customer Service | People working together in teams can solve customer complaints and issues faster and more efficiently than if they were working in isolation from one another. | Financial Performance(profitability, and sales growth) | As a result of all of the above, collaborative firms have sales, superior sales, sales growth, and financial performance. |

* BUILDING A COLLABORATIVE CULTURE * Senior managers are responsible for achieving results, but rely on teams of employees to achieve and implement the results. * Policies, products, designs, processes, and systems are much more dependent on teams at all levels of the organization to devise, to create, and to build. * The function of middle managers is to build the teams, coordinate their work, and monitor their performance. * In a collaborative culture, senior management establishes collaboration and teamwork as vital to the organization, and it actually implements collaboration for the senior ranks of the business as well. * TOOLS AND TECHNOLOGIES FOR COLLABORATION AND TEAMWORK Fifteen Categories of Collaborative Software Tools | E-mail and instant messaging | White boarding | Collaborative writing | Web presenting | Collaborative reviewing/editing | Work scheduling | Event scheduling | Document sharing (including wikis) | File Sharing | Mind mapping | Screen sharing | Large-audience Webinars | Audio conferencing | Co-browsing | Video conferencing | | * * E-MAIL AND INSTANT MESSAGING (IM) * E-mail and instant messaging have been embraced by corporations as a major communication and collaboration tool supporting interaction jobs. * SOCIAL NETWORKING * Internal social networking tools are quickly becoming a corporate tool for sharing ideas and collaborating among interaction-based jobs in the firm. * WIKIS * Wikis are a type of Web site that makes it easy for users to contribute and edit text content and graphics without any knowledge of Web page development or programming techniques. * Wikis are ideal tools for storing and sharing company knowledge and insights. * VITRUAL WORLDS * Virtual worlds, such as Second Life, are online 3-D environments populated by “residents” who have built up graphical representations of themselves known as avatars. * Real-world people represented by avatars meet, interact, and exchange ideas at these virtual locations using voice or text chat. * Siemens Corporate Research used OpenSim to create a secure private environment where employees represented as avatars work with virtual models of products. * INTERNET-BASED COLLABORATION ENVIRONMENTS * Numerous collaboration tools are available, but the most widely used are Internet-based audio conferencing and video conferencing systems, online software services such as Google Apps/Google Sites, and corporate collaboration systems such as Lotus Notes and Microsoft SharePoint. * Virtual Meeting Systems. * In an effort to reduce travel expenses, many companies, both large and small, are adopting videoconferencing and Web conferencing technologies. * A videoconference allows individuals at two or more locations to communicate simultaneously through two-way video and audio transmissions. * High-end videoconferencing systems feature telepresence technology, an integrated audio and visual environment which allows a person to give the appearance of being present at a location other than his or her true physical location. * Google Apps/Google Sites * Google Sites users can design and populate Web sites in minutes and can, without any advanced technical skills, post a variety of files including calendars, text, spreadsheets, and videos for private, group, or public viewing and editing. Google Apps/Google Sites Capability | Description | Google Calendar | Private and shared calendars; multiple calendars | Google Gmail | Google’s free online e-mail service, with mobile access capabilities. | Google Talk | Instant messaging, text, voice, and video chat | Google Docs | Online word processing, electronic presentation software, spreadsheets; online editing, sharing, publishing | Google Sites | Team collaboration sites for sharing of documents, schedules, calendars, searching documents; creation of group wikis | * Microsoft SharePoint * Microsoft SharePoint is the most widely adopted collaboration system for small and medium-sized firms that use Microsoft server and networking products. * SharePoint is a browser-based collaboration and document management platform, combined with a powerful search engine that is installed on corporate computers. * SharePoint has a Web-based interface and close integration with everyday tools such as Microsoft Office desktop software products. * SharePoint can be used to host Web sites that organize and store information in one central location to enable teams to coordinate work activities, collaborate on and publish documents, maintain task lists, implement workflows, and share information via wikis and blogs. SharePoint’s Major Capabilities | Provides a single workspace for teams to coordinate schedules, organize documents, and participate in discussions, within the organization or over an extranet. | Facilitates creation and management of documents with the ability to control versions, view past revisions, and enforce document-specific security and maintain document libraries. | Provides announcements, alerts, and discussion boards to inform users when actions are required or changes are made to existing documentation or information. | Supports personalized content and both personal and public views of documents and applications. | Provides templates for blogs and wikis to help teams share information and brainstorm. | Provides tools to manage document libraries, lists, calendars, tasks, and discussion boards offline, and to synchronize changes when reconnected to the network. | Provides enterprise search tools for locating people, expertise, and content. | * Lotus Notes * For very large firms the most widely used collaboration tool is IBM’s Lotus Notes. * Lotus Notes was an early example of groupware, a collaborative software system with capabilities for sharing calendars, collective writing and editing, shared database access, and electronic meetings, with each participant to see and display information from others and other activities. * Notes software installed on the user’s client computer allows the machine to be used as a platform for e-mail, instant messaging (working with Lotus Sametime), Web browsing, and calendar/resource reservation work, as well as for interacting with collaborative applications. * Notes also provides blogs, wikis, RSS aggregators, CRM, and help desk systems. OTHER POPULAR ONLINE COLLABORATION TOOLS | Tool | Description | Socialtext | An enterprise server-based collaboration environment that provides social networking, Twitter-like micro-blogging, and wiki workspaces; includes integrated weblogs, distributed spreadsheets, and a personal home page for every user. | Zoho Notebook Project | Allows collection of and collaborating on text, line drawings, images, Web pages, RSS feeds; includes project management (task management, work flow, reports, time tracking, forums, and file sharing) | Basecamp | Enables sharing of to-do lists, files, message boards, project milestone tracking | Onehub | Provides customizable work spaces for online collaboration; enable project and file sharing | Workzone | Enable collaboration with file sharing; includes project management, customization, and security | * CHECKLIST FOR MANAGERS: EVALUATING AND SELECTING COLLABORATION SOFTWARE TOOLS * The time/space matrix focuses on two dimensions of the collaboration problem: time and space. * * Here’s a “to-do” list to help invest in the correct collaboration software for your firm at a price you can afford, and within your risk tolerance. * 1. What are the collaboration challenges facing the firm in terms of time and space? Locate your firm in the time/space matrix. Your firm can occupy more than one cell in the matrix. Different collaboration tools will be needed for each situation. * 2. Within each cell of the matrix where your firm faces challenges, exactly what kinds of solutions are available? Make a list of vendor products. * 3. Analyze each of the products in terms of their cost and benefits to your firm. Be sure to include the costs of training in your cost estimates, and the costs of involving the information systems department, if needed. * 4. Identify the risks to security and vulnerability involved with each of the products. Is your firm willing to put proprietary information into the hands of external service providers over the Internet? Is your firm willing to risk its important operations to systems controlled by other firms? What are the financial risks facing your vendors? Will they be here in 3 -5 years? What would be the cost of making a switch to another vendor in the event the vendor firm fails? * 5. Seek the help of potential users to identify implementation and training issues. Some of these tools are easier to use than others. * 6. Make your selection of candidate tools, and invite the vendors to make presentations. * THE INFORMATION SYSTEMS FUNCTION IN BUSINESS * The information systems department is the formal organizational unit responsible for information technology services. * THE INFORMATION SYSTEMS DEPARTMENT * The information systems department consists of specialists, such as programmers, systems analysts, project leaders, and information systems managers. * Programmers are highly trained technical specialists who write the software instructions for computers. * System analysts constitute the principle liaisons between the information systems groups and the rest of the organization. * Information systems managers are leaders of teams of programmers and analysts, project managers, physical facility managers, telecommunications managers, or database specialists. They are also managers of computer operations and data entry staff. * The chief information officer (CIO) is a senior manager who oversees the use of information technology in the firm. * The chief security officer (CSO) is in charge of information systems security for the firm and is responsible for enforcing the firm’s information security policy. * The chief privacy officer (CPO) is responsible for ensuring that the company complies with existing data privacy laws. * The chief knowledge officer (CKO) is responsible for the firm’s knowledge management program. * End users are representatives of departments outside of the information systems group for whom applications are developed. * INFORMATION SYSTEMS SERVICES * Services provided by the information systems department include the following: * Computing platforms provide computing services that connect employees, customers, and suppliers into a coherent digital environment, including large mainframes, desktop and laptop computers, and mobile handheld devices. * Telecommunications services provide data, voice, and video connectivity to employees, customers, and suppliers. * Data management services store and manage corporate data, and provide capabilities for analyzing the data. * Application software services provide development and support services for the firm’s business systems, including enterprise-wide capabilities, such as enterprise resource planning, customer relationship management, supply chain management, and knowledge management systems, that are shared by all business units. * Physical facilities management services develop and manage the physical installations required for computing, telecommunications, and data management services. * IT management services plan and develop the infrastructure, coordinate with the business units for IT services, manage accounting for the IT expenditure, and provide project management services. * IT standards services provide the firm and its business units with policies that determine not only which information technology will be used, but when, and how. * IT educational services provides training in system use to employees and offer managers training in how to plan for and manage IT investments. * IT research and development services provide the firm with research on potential future information systems projects and investments that could help the firm differentiate itself in the marketplace.