UNIT-1

Chapter 1: Information Technology Support and Application

1.1 Objectives,

1.2 Introduction to Information Technology

1.3 Business Values of IT

1.1 Objectives

1. To understand Information Technology and its practices in managing the business

2. To understand the role of computers in modern business.
3. Conceptualize the process of Technology acquisition in an Industry.
4. To understand the current scenario of IT in business
5. To understand the various elements of IT infrastructure
6. To understand the relevance of sizing infrastructure for business needsand appreciate the
current IT trends and their business impacts
7. To understand the need for IT audits and IT governance

1.2 Introduction to Information Technology

● Information technology refers to all compositions of technology applied to processing,

storing, and broadcasting information in electronic form. The physical equipment such as
computers, communications equipment and networks, fax machines, and even electronic
pocket organizers are used for this purpose. Information systems perform organized
 procedures that process and communicate information. We define information as a
tangible or intangible entity that serves to reduce doubt about some state or event.

● Data can come from the internal operations of the firm and from external entities; for
example suppliers or customers. Data also collected from external databases and services,
for example, organizations purchase a great deal of marketing and competitive
information.

● In IT, Management is the process through which all resources related to information
technology are managed according to an organization's priorities and their basic needs.
This includes actual resources like networking, hardware, computers and people, as well
as intangible resources like software and data. The main aim of IT management is to
generate importance through the use of technology. To achieve this, business strategies
and technology must be lined up.

● IT includes many of the key functions of management, such as staffing, organizing,

budgeting and control, but also unique functions to IT, such as software development,
change management & network planning.
 Fig. 1 Management Function

● IT is used by firms or corporations to support and complement their business operations.

The advantages brought about by having a separate IT department are too great for most
organizations to pass up.

● Information technology extends much beyond the computational capabilities of

computers. Today computers are used extensively for communications, data storage and
computation purposes. Many computers system are connected together to form networks

● The Challenge of Change:The feature of information technology is the changes that IT

brings. Business and economic conditions change all the time; a revolution is a
conclusion, a short and dramatic series of changes in the natural evolution of economies.
In the early days of technology, change was gradual and often not particularly
consequential. The advent of personal computers accelerated the step of change, and
change became exponential and revolutionary.

 The expansion of the Internet has been called the most complete development in the
history of human communications. It is all-over and is changing politics, economics, and
social relations. The borderless nature of the Internet produces particular needs for global
institutions and has opened the door for inventive approaches

 Information technology (IT) provides a significant advantage in a corporation’s ability to

take a part in the growing Internet marketplace. Corporations have acquire technology to
increase productivity, reduce costs, drive revenues, offer new ability to customers and
suppliers, and improve competitive place to respond to real-time requirements.
 The business environment today requires real-time responsiveness to change, whether it
is to meet new demands by customers, changes in the supply chain, or unexpected
competitive proceed.

 In order to be able to respond quickly, enterprises must provide their employees with
immediate access to accurate and updated information. This greater vulnerability on
information translates into greater dependence on the effectiveness of IT infrastructure as
a whole.

 Infrastructure is a concept that depends on factors. In a city planner, infrastructure is a

transportation and communications systems, water and power lines, and public
institutions including schools, post offices, etc. The term has various meanings in
different branches, but is perhaps most widely understood to refer to roads, airports, and
utilities. These various elements may collectively be termed as civil infrastructure,
municipal infrastructure, or simply public works, although they may be developed and
operated as private-sector or government enterprises.

 IT refers as informal and formal channels of communication, software development tools,

and political/social networks. The responsibility of CEO an organization, infrastructure
might be facilities, security, logistics, power, waste disposal, and large chunks of
information technology. A flexible and robust IT infrastructure also plays an important
role by empower employee productivity and globalization. IT infrastructure allowed
pervasive and secure business communications anywhere and anytime, and managing
operational complexity and providing greater utilization of resource assets.

 Over past years, information and computer-based systems have larger and more complex,
the importance of and dependence on IT systems have grown substantially. Information
technology has all the indication of an infrastructural technology. Infrastructural
technologies offer far more value when used in isolation. The value of infrastructure
 sharing has come out as a business model to increase the bottom line. Information
technology is, first of all, a transport system. It carries digital information like as railroads
carry goods and power grids carry electricity.

 In IT, companies have worked hard to reduce the cost of IT infrastructure data center,
networks, databases, and software tools that support businesses. These attempt to
consolidate; standardize; and streamline assets, technologies, and processes have
delivered major savings.

 Functional Roles and Responsibilities

1. The CTO’s primary responsibility is to contribute to the strategic direction of

the company by identifying the role that specific technologies will play in its
future growth. A CTO is expected to provide a technical strategy that seamlessly
segues into the corporate business strategy.
2. The chief financial officer (CFO) is a senior person responsible for devising the
capital structure best suited to an enterprise’s business needs,
3. Thechief information officer (CIO) is the senior person responsible for making
sure that
 The enterprise’s IT infrastructure best supports its business needs.
 Helps define and translate business goals and strategiesinto a system’s
performance requirements and oversees a portfolio of IT development
projects to deliver systems that meet these requirements.
 TheCIO leads the application of IT to internal processes and services.

4. According to the IT Governance Institute (ITGI), there are four critical questions
for value delivery. These are as follows.
a. Are we doing the right things?
b. Are we getting the benefits?
 c. Are we getting them done well?
d. Are we doing them the right way?

5. A comprehensive understanding of risk measures will assist the CIO to take the
right decisions.

 There are four key business requirements have been analyze for the success of an
organization.

1. Availability Systems must be up and running. Recovery from failure should

be rapid, based on the firm’s business requirements.
2. Access Systems should be sufficiently secure to prevent loss and destruction
of data but flexible enough to enable employees to do their job.
3. Accuracy Information must be timely, complete, and correct when presented
to both internal and external users.
4. Agility Ability to change IT systems to meet new business requirements with
requisite speed and reasonable cost.

1.3 Business Values of IT

Information technology can have a significant impact on the quality of services (QaS)
and solutions and the performance of a company. Efficiently and effectively managed IT
investments that meet business and mission needs can create new value in revenue generation,
build important competitive advantages and barriers to entry, improve productivity and
performance, and decrease costs. Similarly, imperfectly aligned and uncontrollable IT
investments can sink a company. Concurrent to cutbacks in IT expending and a short-term focus,
management within companies is demanding an increase in IT productivity, expanding its role
from internally focused to customer facing and making IT more relevant to business strategy.

Rumpled between information technology and the strategic intent, impotence to establish
a common IT architecture, and a highly redundant and nonfactual as-is architecture will result in
high operations and maintenance costs. Business and IT relationships are more critical because
web services and services-oriented development of applications (SODA) will continue to build
as IT continues to become increasingly more integral to business processes.

The Value business is the output of the collection of processes through which businesses
today try to maximize the age-old equation of profit equals revenue minus expenses. Most
businesses today rely on information technology to realize some of their business value.

The remarkable growth of IT has enormous potential for improving the performance of
organizations. The large investment made in IT puts increasing pressure on the management to
justify the expenses by specifying the business value of IT. In today’s fast growing competitive
business environment, companies increasingly demand that IT investments demonstrate business
value through measurable results.

In companies, the link between business technology investment and business

performance remains evasive.

There is a general global consent that developments in information technology in recent

years have contributed to the broadcasting of what has been described as the information
economy characterized by significant productivity benefits at the big level. However, there is a
critical need to understand the complex relationships between IT investments and business value
at more micro levels, as underscored by policy makers, practitioners, and researchers.

Implementing an innovative approach to find the business value of information

technology is a huge task, but the payoff for the IT organization and the enterprise as a whole is
worth the effort.

Information technology directs innovation and innovation is the path to business success.
Innovation in business has the same effect that steam had on the industrial revolution.

In fact, it’s difficult to imagine any business that has not benefited from the digital
revolution. Today, in agriculture we use computers. Farmers use computers for recording
production, financial planning, research on technical issues, and procurement.

The value of IT in a business production process has long been a debatable issue.
Explanation of the so-called “productivity paradox” has been one of the central topics in this
field. Much work has been focused on firm-level analyses. It disallows the relationship between
IT value and productivity based on grouping of countries, when the individual analytical method
is applied and technical efficiency is used as the performance touchstone.

Technology offers the opportunity to see things from a new perspective, and to resemble
what we were already doing from a new perspective.

Technology also allows greater efficiency for conducting business. Technology

authorizes us to automate numerous processes, which thereby increases our productivity. This is
possible because it allows us to use fewer resources, thereby enabling us to improve on quality at
a low cost and to improve the speed with which we can deliver to customers. Technology also
makes it easy to store more information while maintaining the integrity of that information.

Fig. 2 Source of business value

Business value refers to the contribution of IT to corporate performance. Business value can be
measured along dimensions such as corporate efficiency and effectiveness, competitiveness,
product and service innovation, and customer and supplier relationships.

It is expected that different organizations operating in different environments, adopting different

portfolios of IT systems, and achieving varying levels of successful diffusion of such systems
will attain different dimensions of business value, and to different extents. In effect, individual
firms or firms in different industries do not gain equally from IT.

To identify the range of business value impacts of IT, the extent to which they appear to be
realized, and the patterns of association between IT business value and corporate characteristics.
The business value can be measure through following 10 dimensions:

 Organizational effectiveness
a. Improve the process and content of decision making
b. Improve internal communication within your corporation
c. Provide better coordination among functional areas in your corporation
d. Improve strategic planning
e. Facilitate the implementation of new processes that constitute a better way of doing
business
 Organizational efficiency
a. Increase your corporation's profit margins.
b. Increase your corporation's market shares.
c. Reduce your corporation's labor and related expenses.
d. Reduce your corporation's selling and general administrative expenses.

 Economies of production
a. Reduce the cost of designing new products/ services.
b. Improve levels of production or throughput.
c. Reduce the production cost of tailoring products/services to market segments.
d. Improve the productivity of production labor through automation.
e. Improve the utilization of machinery.

 New business innovation

a. Make new areas of business technologically feasible for your corporation.
b. Make new areas of business economically feasible for your corporation, as a result of
improved economies of scale.

 Customer relations
 a. Allow your corporation to provide administrative support (such as billing, collection,
inventory, management, etc.) to customers.
b. Provide on-line access of your corporation's products/services database to customers.
c. Position customers to rely increasingly on your corporations' electronic support
systems (e.g., order entry terminals, order tracking)

 Supplier relations
a. Help your corporation gain leverage over its suppliers.
b. Reduce your suppliers' transaction costs by making it easier for them to handle
orders.
c. Reduce uncertainty and variance in lead times for suppliers.
d. Enhance the ability of your corporation to monitor the quality of products and
services received from suppliers.
 Product and service enhancement
a. Provide your corporation with unique opportunities for product and service
innovation.
b. Reduce the cycle time for development of new products/services.
c. Reduce variance and uncertainty in product/ service quality.
d. Reduce variance and uncertainty in product/ service delivery time.
e. Become part of existing products/ services to enhance their value.

 Inter-organizational coordination
a. Help to enlarge your geographic market area.
b. Help your corporation coordinate closely with its customers and suppliers.

 Marketing support
a. Play an important role in identifying market trends.
b. Assist your corporation in serving new market segments.
c. Enhance sales forecast accuracy.
d. Track market response to discounts.
 e. Track market response to promotional or introductory pricing.
f. Facilitate targeted response to competitors' pricing strategies.

 Competitive dynamics
a. Delay competitor entry into new products/ services because of the investments now
required in complex software and hardware in your industry.
b. Support your corporation in making a first strike against your competitors.
c. Help your corporation to provide substitute products/services for your competitor's
products/services,
d. Make it easier to capture distribution channels and thereby increase the cost and
difficult for competitors to enter a new or existing market segment.
UNIT-1

Chapter 2: Information Technology Support and Application

1.4 Role of Computer in Modern Business

1.5 Current Trends

1.6 Business in Digital Economy

1.7 Summary

1.8 Reference for further reading

1.9 Unit End Exercises

1.4 Role of Computer in Modern Business

● Computers are used to process, store, and exchange information in digital form.
● Computers have today become the backbone of business processes.
● The act of computing is built over computing software which runs on top of bare metal
computing hardware.
● A variety of computing and processing software are available for various kinds of
applications.
● Different computer applications generate different kinds of data.
 ● It is easy to imagine that the requirements for a network linking a bank’s automatic teller
machines (ATMs) to its computers are different from those of a network of computers
that control air traffic or a car manufacturer’s assembly line.
● In today’s modern world, for almost every activity whether it is personal, or business-
related, in some or the other way, we relay / commit to the computer system.
● Due to the growing dependency on computers, every small and big firms and other
business companies have started offering computer-based service.
● The advancement of communications, electronic service networks, and multimedia have
opened a new door for corporations by providing an effective way of business
processing, payment transfer, and service delivery.

1.4.1 Advantages of Computers in Business

1. Independency

As computer systems help in making the business automated, the businesses are
becoming more and more independent. No more, there is the need to put man-power for
every work, as with the help of computers most of the work can be automated. Starting
from ticket booking to luxury car manufacturing, everything is automated.

2. Cost Cutting

A number of businesses are based online in recent seasons; therefore, there is no

need to open a business branch in every city, rather having one centralized inventory can
make the business easier.

3. Marketing

With the use of computer systems with Internet facilities, it is very simple to
make a business global in a given period of time. Websites, email, social media
websites, online advertisements, etc. are the important tools of online marketing.

4. Huge Transaction Capacity

 A number of tasks are being done by computer including ticket booking to money
transactions; this increases the transaction capacity.

5. Huge Storage Capacity

Businesses need to store and maintain large data and other records; manually, it is
very difficult to maintain, but the use of computers not only increases the storage
capacity, but also ease the processing and retrieval of data anytime.

6. Improvement of Productivity & Efficiency

As most of the tasks in almost every industry have become automated, it has now
become much easier to manufacture a huge bulk of products in very less time. Through
computer technology, services also became faster and easier.

7. High Accuracy

There is hardly any scope of errors in an automated system; however, if any error
occurs, it is largely a human error.

8. Ease of Data Sharing

Data sharing has now become very simple just the way it is simple to link one
computer system to another.

9. Competition

The applicability of computer technology has increased competition; now, the

customers can avail support 24x7.

10. Enhanced the Security System

Computers also help keep the data of businesses secure. However, this security
can face threats too. For instance, if someone hacks the system or there is a virus attack,
it can have the potential to damage all the data that is secured.

1.4.2 Importance of Computers in Business Administration

 ● The role of computers in modern business is to help you work efficiently, smarter, not
harder.
● The main struggle today is more about finding the right software for your problem.
Consider talking to or following productivity evangelists and information technology
experts to see if you’re passing over potential solutions through smartphones, tablets and
computers that could be a game changer in how you solve and speed up business
challenges.

1.4.3 Types of Computers and Apps

a. Smartphone

Smartphones are essentially a computer now, and they may not be as steady and
unflappable In fact, some think smartphones could even replace computers for some
businesses.

b. Tablet & Desktop Computers

Then there are tablets and all-in-one desktop computers where a thicker monitor
holds the entire computer system.

c. Laptops

There are laptops and even desktops and laptops that offer touchscreen input now,
and what you pay often prescribes how long your tech will be relevant.

1.4.4 Problem in the computer

Problem in the computer world now, it's that disuse is a constant threat.
Technology moves so fast and changes so quickly that many products are rendered
obsolete inside of two to three years. Staying up to date with hardware and apps can
make all the difference in program firmness, up time and the opportunities offered
through technology.

Computers help in business is with programs that help expedite:

● Project management
 ● Accounting/payables
● Scheduling
● Production and productivity management
● Design and engineering
● Navigation
● Expense tracking and budgeting
● Inventory management and shipping tracking
● Industry oversight and alerts
● Communication
● Database and information management
● Client care
● Tracking related industry news via alerts

1.4.5 Communication and Collaboration

Third-party apps on computers and other devices have radically transformed

business activity, and offices are beginning to be more virtual than actual. With programs
like Google meet, teams now collaborate around the world in real time. Video
conferencing/ interfacing through meeting apps like Zoom allows multiple parties to meet
in one virtual space with full video and audio. Even apps like Google Docs, Sheets are
collaborative in real time.

1.4.6 Record Keeping and Problem Solving

Information management is a key example of the importance of computers in

business management. At a thumb, a manager can see what sales are doing and what
problems are arising.

Computers can be programmed to have specific operations for each business or

client through highly adaptable software creations.

Even a hardware shop can have software to record transactions for their
customers, making orders and client care easier than ever before. Businesses can track
individual employee performance online, monitor divisional sales and accomplishments
and much more.

Infrastructure Management

Management has been defined as assembling the resources to achieve a mutually

agreed upon objective. This reflects the two typical management structures command and
control, or collaboration.

Elements of IT Infrastructure

The combination of computers and communications has had a profound influence

on the way computer systems are organized. Many firms have invested in a substantial
number of computers. For example, a company may have individual computers to
monitor production, keep track of inventories, and do the payroll. Beforehand, each of
these computers may have worked in isolation from the others, but at some point,
management may have decided to connect them in order to be able to extract and
correlate information about the entire firm.

The IT infrastructure is characterized by the 7S model (Figure 2). The 7S model

identifies the essential IT components to ensure a good IT service.

Fig. 2 7S Model
 The 7S model includes servers, systems, storage, security, supervision, services, and
staff. All the seven components work together to achieve the overall business benefit.

1.5 Current Trends

1.5.1 Data Centre

The modern business runs on data. Data centers have thousands of servers that
power applications, provide information, and automate a range of processes. The data
center is a physical place that has computers, computer networks, critical computing
systems, data storage, including backup power supplies, air conditioning, and security
applications.

For example, Wikipedia defines a data center as a facility used to house computer
systems and associated components such as telecommunications and storage systems. It
generally includes redundant or backup power supplies, redundant data communications
connections, environmental controls (for example, air conditioning, fire suppression), and
security devices.

1.5.2 Green Computing

Energy is a major concern especially in developing countries like India where

there is a power crisis. Data center operational costs have also been heavily impacted by
the rising costs of energy. Data centers today consume a substantial percentage of
generated power for any country. Especially the cost of energy needed to power and cool
the data center facilities, computer rooms, and data centers.

Today, the IT industry finds that for every kilowatt of power it uses to drive a
server, another kilowatt is needed to cool it. Businesses are looking to minimize energy
waste and reduce the carbon footprint of computing Resources. Green IT efficiently
utilizes computing resources reducing carbon footprint based on reduction of energy
requirements and decrease in total energy usage.

1.5.3 Grid Computing

Grid computing enables the creation of an IT infrastructure that can be shared by

multiple business procedures. The basic idea of grid computing is to create a grid
computing infrastructure to harness the power of remote high end computers, databases,
and other computing resources owned by various people across the globe through the
Net. Grids are internally distributed and heterogeneous but must be viewed by the user as
a virtual environment with uniform access to resources. Grid computing enlarges the web
services concept by providing task and resource management functions.

1.5.4 Virtualization

Virtualization is the process of running a virtual instance of a computer system in

a layer abstracted from the actual hardware. Virtualized computers are provided with the
same basic architecture as that of a generic physical computer. Virtualization helps in
better utilization of server hardware, reduces floor-space requirements, lowers power and
cooling costs, and improves productivity of personnel.

An information technology organization is the ability to save costs on hardware

and increase the efficiency of server deployments, provisioning, and management.
Virtualization also enables physical hardware independence, which gives IT the
flexibility and freedom of not being locked into a single vendor’s hardware solution.
Virtualization allows an engineer to control a guest operating system’s use of CPU,
memory, storage, and other resources, so that each guest receives only the resources that
it needs.

1.5.5 Server Consolidation

 Server Consolidation allows companies to improve overall business processing
through the following three primary IT objectives.

1. A higher and more consistent level of service

2. Greater efficiency and control over operations

3. The flexibility to respond to constantly changing business requirements

Fig. 3 Server Consolidation

To manage and utilize systems Server consolidation (Fig. 3) is becoming an

increasingly popular technique. Server consolidation is an approach to efficient usage of
computer server resources in order to reduce the total number of servers. Server
consolidation can increase the efficient use of server resources; it may also result in
complex configurations of data, applications, and servers that can be confusing for the
average user to resist.

One of them is to arrange workloads to make maximum use of physical server

capacity, reduce power consumption, reduce administrative and operational expenses,
and create an environment which can satisfy that each and every workload can meet
service-level objectives.
1.5.6 Storage Consolidation

Customers focused on day-to-day business and have created large storage islands
of committed storage. As these storage have expanded to more significant capacity levels,
total storage utilization across the business and the inability to share data between
applications have become forbidden to further growth. The multiplication of data
throughout every facet of industry, combined with an increasing demand for secure
access from a variety of devices, make data storage a critical component of every
business strategy and organization.

Consolidating the storage systems, platforms, and applications can help the
organization ease manageability and improve capacity utilization factors. Storage
consolidation, also called storage convergence, is a method of centralizing data storage
among multiple servers.

1.5.7 IT Practices in Banks

Core banking solutions (CBS) implementation is the first step towards

transformation and automation of all of a bank’s business processes. Core banking
solutions have become a part of basic wholesomeness for a bank’s operation. Today, if a
bank does not have a CBS in place, the ecosystem solutions, such as anywhere banking,
Internet banking, etc. become a huge challenge for functioning.

CBS provides a bank with a solid, flexible, and scalable foundation on which
other systems can be easily built and coordinated into a robust scalable banking solution.

As per RBI guidelines, the CBS in RRBs should be geared towards better
management control and monitoring, wider range of services offered and enhanced level
of customer satisfaction.
 The electronic clearing service (ECS) and electronic funds transfer (EFT) are also
being enhanced in terms of security by means of implementation of public key
infrastructure (PKI) and digital signatures using the facilities offered by the certifying
authority as per the guidelines of the RBI.

1.6 Business in Digital Economy

Digital economy is one of the collective words for all economic transactions that
occur on the internet. It is also called the Web Economy or the Internet Economy. With
the emergence of technology and the process of globalization, the digital and traditional
economies are merging into one.

Digital economy is focused on digital technologies, which is based on digital and

computing technologies. It essentially covers all business, economic, social, cultural
activities that are supported by the web and other digital communication technologies.

There are three main components of this economy, namely,

● e-business
● e-business infrastructure
● E-commerce
Digital Economy is integrated into every aspect of the user’s life – healthcare, education,
banking, entertainment etc.

The business in the digital economy has given rise to a number of new business
models. The types of business models discussed include several varieties of e-commerce,
app stores, online advertising, cloud computing, participative networked platforms, high
speed trading, and online payment services.
1.6.1 Electronic commerce

E-commerce is defined as the sale or purchase of goods or services, conducted

over computer networks by methods specifically designed for the purpose of receiving or
placing orders. The goods or services are ordered by online mode, but the payment and
the ultimate delivery of the goods or service do not have to be conducted online mode.
An e-commerce transaction can be between firms for example enterprises, households,
individuals, governments, and other public or private organizations.

Types of e-commerce cover a broad array of businesses

Fig. 4 Types of E-Commerce

● Business-to-business models
E-commerce consists of transactions in which a business sells products or
services to another business, B2B model.

It can also include the providing of goods or services to support other

businesses, including, among others:
 ● logistics services such as transportation, warehousing, and distribution;
● Application serviceprovider’s deployment, hosting, and management of
application software.
● outsourcing such as web-hosting, security, and customer care solutions
● An auction solution provides operation and maintenance of real-time
auctions via the Internet.
● Content management services, for the facilitation of website content
management and delivery.
● Web-based commerce enablers that provide automated online purchasing
capabilities.

● Business-to-consumer models
B2C business model sells goods or services to individuals outside the
extent of their profession. B2C models come into several categories, including,
online vendors with no physical stores or offline presence, existing consumer-
facing businesses with online sales, and manufacturers that use online business to
allow customers to order and custom-make directly.

● Consumer-to-consumer models
In C2C e-commerce plays the role of mediator, helping individual
consumers to sell or rent their assets (for example such as residential property,
cars, motorcycles, etc.) by presenting their information on the website and
facilitating transactions. These businesses may or may not charge the consumer
for these types of services, conditional on their revenue model. This type of e-
commerce comes in various forms, including, but not limited to:

● online bidding on the items being sold;

● allowing sharing of files between users; and
● allowingnegotiation between buyers and sellers.
1.6.2 Payment services

Payment services such as online transactions traditionally required providing

some amount of financial information, such as bank account information, to a vendor.
Online payment service providers help address this examine by providing a secure way to
enable payments online without requiring the parties to the transaction to share financial
information with each other

E-wallets or cyber-walletscan be spent online as an alternative to the use of a

credit card. These are often used for micropayments because the use of a credit card for
frequent small payments is not economical.

Mobile payment solutions, which encompass all types of technologies that enable
payment using a mobile phone or smartphone, including, among others, mobile card
processing using card readers connected to smartphones, in-app payments for virtual
products.

1.6.3 App stores

To increase in the number of use of online services and the development of

application stores. The app store provides the component of an operating system. These
application stores are accessible through the consumer’s device, through which the
consumer can browse, view information and reviews, purchase and automatically
download and install the application on his/her device.

1.6.4 Online advertising

Online advertising uses the Internet as a medium to publish marketing

information to customers. Internet advertising offers a number of benefits over
 conventional advertising. For example, many Internet advertisers have developed
sophisticated methods for dividing consumers in order to allow more accurate targeting
of ads. The publishers can monitor performance of digital advertising, tracking how users
interact with their brands and learning what is of interest to current and prospective
customers. It takes a number of forms, the most prominent of which are display ads, in
which an advertiser pays to display ads linked to particular content or user behavior, and
search engine ads, in which an advertiser pays to appear among Internet search result

1.6.5 Cloud computing

Cloud computing is the providing of standardized, configurable, on-demand,

online computer services, which can include computing, storage, software, and data
management, using shared physical and virtual resources (including networks, servers,
and applications). The users can typically access the service using various types of
equipment wherever they are located, provided they have a suitable Internet connection.

The examples of cloud computing service models are:

a. Infrastructure-as-a-service
b. Platform-as-a-service
c. Software-as-a-service
 Fig. 5 Cloud computing service models

1.6.6 High frequency trading

High frequency trading uses experienced technology, including complex

computer algorithms, to trade securities at high speed. Huge numbers of orders which are
typically decently small in size are sent into the markets at high speed, with round-trip
execution times measured in microseconds. The variables for the trades are set with
algorithms run on powerful computers that analyses large volumes of market data and
utilize small price movements or opportunities for market computer assisted trading that
may occur for only milliseconds.
1.6.7 Key features of the digital economy

● Mobility, with respect to the

(i) Intangibles on which the digital economy relies heavily,

(ii) Users, and

(iii) Business functions as a consequence of the decreased need for local personnel to
perform certain functions as well as the flexibility in many cases to choose the location of
servers and other resources.

● Reliance on data, including in particular the use of so-called “big data”.

● Network effects, understood with reference to user participation, integration and
synergies.
● Use of multi-sided business models in which the two sides of the market may be in
different jurisdictions.
● Tendency toward monopoly or oligopoly in certain business models relying heavily on
network effects.
● Volatility due to low barriers to entry and rapidly evolving technology.

1.7 Summary

● In this chapter we learn the business value of IT, role of computer in modern business.
● In this chapter we discussed the basic IT components, networks, and the types of
resources networks can share.
 ● The topics discussed include data center, grid computing, cloud computing,
virtualization, server consolidation, and storage consolidation.
● An overview of current trends in the field of IT has been discussed to enable the reader to
get a feel of it.
● The chapter outlined the basic need for IT infrastructure and the various components that
go with it. An overview of current trends in the field of IT has been discussed to enable
the reader to get a feel of it.
● The topics discussed include data center, grid computing, cloud computing,
virtualization, server consolidation, and storage consolidation.

1.8 Reference books for further reading

1. Information Technology for Management by B. MuthuKumaran

2. Information Technology For Management ed Authors Henry C Lucas,McGraw Hill
Publications.
3. Information Technology for Management: Transforming Business in the Digital
Economy, Fourth Edition by Efraim Turban, Ephraim McLean, and James
4. www.oecd-ilibrary.org

1.9 Unit End Exercises

1. Discuss the business value of information technology?

2. Discuss current trends in modern business?
3. What are three main components of this digital economy?
4. What is the 7s model in IT infrastructure?
5. What is the importance of Computers in Business Administration?
6. What are the different management functions available in IT?
7. Discuss the business values of IT?
 Unit 2: Chapter 3

Information System and Business Applications

Unit Structure
1.0 Objectives:................................................................................................................................. 32
1.1 Introduction to Information System ........................................................................................... 33
1.2 Digital Impact on Business ......................................................................................................... 33
1.3 Basic Terminology in Information Systems ................................................................................. 35
1.4 Information Systems .................................................................................................................. 38
1.4.1 Hardware ............................................................................................................................ 39
1.4.2 Software ............................................................................................................................. 39
1.4.3 Communication Network .................................................................................................... 39
1.4.4 Database............................................................................................................................. 40
1.4.5 People ................................................................................................................................ 41
1.5 Classification of Information Systems......................................................................................... 42
1.5.1.Transaction Processing System ........................................................................................... 42
1.5.2Process Control Systems ...................................................................................................... 42
1.5.3 Enterprise Collaboration System ......................................................................................... 43
1.5.4 Management Information System ....................................................................................... 43
1.5.5 Decision Support System ..................................................................................................... 43
1.5.6 Executive Information System ............................................................................................. 44
1.6 IS Infrastructure and Architecture .............................................................................................. 45
1.6.1 IS Architecture .................................................................................................................... 45
1.6.2 IS Infrastructure ................................................................................................................. 47
1.7 Summary ................................................................................................................................... 48
1.8 Review Your Learnings: .............................................................................................................. 48
1.9 Sample Questions: ..................................................................................................................... 49
1.10 References for further reading ................................................................................................. 49

1.0 Objectives:
1. Define what an information system is by identifying its major components
 2. Describe the basic history of information systems
3. Distinguish data from information and explain the characteristics used to evaluate
importance of data
4. Identify the basic types of business information systems and discuss who uses them, how
they are used, and what kind of benefits they deliver
5. Define the types of roles, functions and careers available in information systems

1.1 Introduction to Information System

Nowadays, over 60 years after computer revolution, and more than 20 years of internet
age there is tremendous demand in utilization of mobiles, laptops, PDAs, Smart Devices
etc. And all these devices have instant access to internet, and it can store lot of data and
transfer huge amount of data/ information using various services like Internet/ SMS/
Messages/ Emails/ Bluetooth or by any other medium.

Here we have used terms data and information interchangeably? But what is difference
between these terms?
Data is known as raw facts. These raw facts are in unorganized manner. To convert these
unorganized facts into organized one, we need to do some processing where data is
cleaned, arranged in organized fashion. This cleaned, organized data is called as
information. This information can be used for answering various questions, we can
retrieve the information in various formats as per requirement. Thus, it has a very high
importance.

1.2 Digital Impact on Business

In this era of cloud data, most of the businesses are having online applications rather than
old style company software. For example, in 2000, if a company need to create a software
for company’s various process/service management, it must create a software where there
is requirement of actual hardware, whole set up for development of the software and
availability of technical person for development or continuous usage of the software. In
those days if this software development costs approximately Rs. 30,000/-. But the online
application having same or more enhanced facilities can be developed nowadays in
approximately Rs. 5,000/-. And since its online cloud-based application, its server is in
running mode 24 x 7.
Since, nowadays these application development and maintenance is easy and in cost-
effective way, most of the businesses are coming to online services.
But not all businesses are aware about various software disruptions. The software
disruptions can be of 2 types:
1. For industries where software interrupted the previous market-leading companies
2. A new company used new software to create and gain competency
Below are the examples:
1. Retailers selling grocery, clothing, novelty items: Online business by
companies like Amazon, Flipkart etc disrupted the business of local retailers.
Company like Amazon have only software engine but can sell all items virtually.
2. Publisher and Book Industries: Previously, publishers used to have tie-ups with
famous authors and book sellers used to have commission in business behind
selling of hard copy of books. But nowadays, since books can be purchased from
Amazon, Flipkart, Crossword websites, retailer shops are in loss. Not only this but
Amazon has created its software for e-book editions in Kindle format, so that
people can buy e-book on kindle. So, all the business part behind actual paper
book has reduced a lot.
3. Music Industry: Previously, SaReGaMa, Tips, HMV were the Indian companies
which used to sell cassettes, records etc for selling music albums. But, now,
iTunes, SaReGaMa are the software based companies which sells music contents
and maintains copyright infringement in illegal downloads. People can listen to
original high-quality songs by using subscribed membership.
4. Video Industry: The old companies like BR Productions, Dharma Productions,
RK Productions, etc had the copyright on video content and used to have
commission for selling movie tickets in theatres, but now we can see software-
based companies like Netflix, Amazon etc handle all these showcasing, marketing
of movies produced by other video production companies.
5. Photography Industry: This industry is harshly disrupted because of many
available high-featured photos, video editing software. People can use
applications like snapchat, flicker, beautyplus, etc.
6. Marketing Industry: The marketing is done by Google, Facebook, Groupon,
Foursquare like companies online, so offline marketers has to change their
marketing strategies to sustain.
7. Education: Students can learn online by enrolling to high-standard universities
online using Edx, Coursera like platforms. These platforms just provide services
to other universities for Learning Management Systems and provide services to
students for easy learning of the curses from their places. Students can learn
various short-term courses on Udemy, YouTube etc. So, teachers and supporting
staff in schools, colleges are losing their jobs.
8. Automobile Industry: Software like GPS systems, Wifi, Sensors based
application like driverless cars are enables in automobiles. Example: Zoomcar
enables automobile owner to track their vehicle by just connecting his vehicle
through mobile. With just one software of Zoomcar, almost entire business runs
and it caused to loose car hiring services by local people.
So, you can see, almost in all fields there is drastic change because of software and its
applications. An increasing number of major businesses and industries are being run on software
and delivered as online services—from motion pictures to agriculture to national defence.
Regardless of the industry, companies face constant competitive risks from both recognized
competitors and innovative technology companies that are developing disruptive software. These
threats will force companies to become more alert and to respond to competitive threats more
rapidly, competently, and realistically.

1.3 Basic Terminology in Information Systems

Before we proceed to understand IT and IS terms let us understand the difference between
terminologies like Data, Information, Process and Knowledge??

Data: Raw facts

Information: Collection of facts organized in such a way that they have additional value beyond
the value of the facts themselves.

Process: Set of logically related tasks performed to achieve a defined outcome

Knowledge: Awareness and understanding of a set of information

 Table 1.1: Data type representations

Data Type Represented By

Alpha Numeric Numbers, Letters and other character
Image Graphic images and pictures
Video Moving Images or pictures
Audio Sound, Noise or tones

The transformation
process (Applying
knowldege by
Data Information
selecting, organizing
and manipulating
data)

Figure: The process of transforming Data into Information

Characteristics of Valuable information:

If information is not accurate or complete –

1. People can make poor decisions, costing thousands, or even millions, of dollars
2. Information can be of little value to the organization

If information is not relevant, not delivered to decision makers in a timely fashion, or too
complex to understand.

Information Technology (IT) refers to any computer-based tool that people use to work with
information and to support the information and information-processing needs of an organization.

An Information System (IS) collects, processes, stores, analyzes, and disseminates information
for a specific purpose.

This chapter will let you know many ways in whichIT has transformed modern organizations,
you will also learn about the significant impacts ofIT on individuals and societies, the global
economy, and our physical environment. In addition, IT is making our world smaller, enabling
more and more people to communicate, collaborate, and compete, thereby levelling the digital
playing field.

When you graduate, you either will start your own business or you will work for an organization,
whether it is public sector, private sector, for-profit, or not-for-profit. Your organizationwill have
to survive and compete in an environment that has been radically transformedbyinformation
technology. This environment is global, massively interconnected, intensely competitive,
24/7/365, real-time, rapidly changing, and information intensive. To compete successfully, your
organization must use IT effectively.

You need to keep in mind that the information technologies you will learn about are important to
businesses of all sizes. No matter what area of business you major in, what industry you work
for, or the size of your company, you will benefit from learning about IT.

Who knows? Maybe you will use the tools you learn about in this class to make
your great idea a reality! The modern environment is intensely competitive not only for your
organization, but for you as well. You must compete with human talent from around the world.
Therefore, you will also have to make effective use of IT.

This chapter will make you understand why you should become knowledgeable about IT. It also
distinguishes among data, information, and knowledge, and it differentiates computer-based
information systems from application programs. Finally, it considers the impacts of information
systems on organizations and on society in general. As you see in IT’s About small business
owners do not need to beexperts in information technology to be successful. Rather, the
company’s business model is its core competency. However, the firm is effectively using IT to
support its business model and, thus, to create a successful business.

Table: 1.2 Various Job Roles in Information Technology

PositionJob Description
Chief Information Highest-ranking IS manager; is responsible for all strategic
Officerplanning in the organization
IS DirectorManages all systems throughout the organization and the day-to-
day operations of the entire IS organization
Information Centre Manages IS services such as help desks, hot lines, training, and
Manager consulting
Applications Coordinates and manages new systems development projects
Development Manager
Project Manager Manages a particular new systems development project
Systems Manager Manages a particular existing system
Operations Manager Supervises the day-to-day operations of the data and/or
computer centre
Programming Manager Coordinates all applications programming efforts
Systems Analyst Interfaces between users and programmers; determines
information requirements and technical specifications for new
applications
Business Analyst Focuses on designing solutions for business problems; interfaces
closely with users to demonstrate how IT can be used
innovatively
 Systems Programmer Creates the computer code for developing new systems software
or maintaining existing systems software
Applications Creates the computer code for developing new applications or
Programmer maintaining existing applications
Emerging Technologies Forecasts technology trends; evaluates and experiments with
Manager new technologies
Network Manager Coordinates and manages the organization’s voice and data
networks
Database Administrator Manages the organization’s databases and oversees the use of
database management software
Auditing or Computer Oversees the ethical and legal use of information systems
Security Manager
Webmaster Manages the organization’s World Wide Web site
Web Designer Creates World Wide Web sites and pages

1.4 Information Systems

Information System is a system which collects, processes, stores, analyses, and disseminates
information for a specific purpose. A Computer Based Information System is an information
system that uses computertechnology to perform some or all of its expected tasks. Although not
all information systems arecomputerized, but nowadays almost all are computerised. And
because of this the term “Information System” is typically used synonymously with “Computer-
Based Information System”.

An Information system is broadly divided in three parts viz., People, Process, Technology.
Following diagram show their inter-relationship.

Figure: Components of Information Systems

Computer Based Information Systems is organized combination of following components:

1. Hardware
2. Software
3. Communication Networks
4. Data
5. People

1.4.1Hardware
Hardware is required in all systems. There can be basic or advanced hardware requirement based
on the applications. It consists of devices such as the processor, monitor, keyboard, and printer.
Together, these devices accept, process, and display data and information. Following are some of
the hardware examples:

a. Dell PowerEdge 2600 File Server

b. Apple iMac
c. Sony LCD Flat Panel Monitor
d. iPod
e. IDAutomation USB Barcode Scanner
f. RFID Chip

1.4.2 Software
Software is a program or collection of programs that enable the hardware to process data as per
requirement. Following are the examples of software:

a. Windows XP
b. Graphics Card Driver Software
c. PowerPoint
d. mySAP Customer Relationship Management
e. Peachtree Accounting
f. iTunes Software

1.4.3 Communication Network

Communication Networks is a connecting system either wired or wireless, that permits different
computers to share the resources. Examples of communication networks are given below:

a. Ethernet
 b. Netgear Wireless Router
c. Cable Modem
d. Cell Phone
e. WiFi, WiMax card
f. Bluetooth device

1.4.4 Database
Database is a collection of related files or tables containing data. There are many database
resource management technologies which are listed below:

a. IBM DB2 8.2

b. Microsoft SQL Server 2000
c. Oracle Database 10g
d. MySQL
e. Data Mining Software
f. Firebase
g. MongoDB

Figure: Computer-Based Information System

1.4.5 People
Everyone forgets the importance of people in an information system. However they are the most
important one and because of them the whole system can work. Examples of various work
profiles are given below:

a. End User
b. Data Entry Person
c. Manager
d. Programmer
e. DB Administrator
f. Cashier
g. Secretary
h. Professor
There are three main roles of Information Systems, viz., Support Strategies for Competitive
Advantage, Support Business Decision Making, Support Business Processes and Operations.
These are shown in figure below:

Figure: Hierarchy of Business Processes

Information Systems are being used in more areas, especial at the strategic level. At the same
time, Information Systems are expanding participation of End Users. Biggest advantages of IS is
Information can flow up the pyramid faster and more effectively.
1.5 Classification of Information Systems
Information System is broadly classified in two parts namely Operations Support System and
Management Support Systems.

Operations Support System maintains all data flows through various processes in an
organization. It is required in any business for maintaining daily basis operations. This is further
classified in three parts, viz., Transaction Processing Systems, Process Control Systems and
Enterprise Collaboration Systems.

1.5.1.Transaction Processing System

Transaction Support Systems supports various operations in an organization / business. It is
required for updating operational databases. For example, in Banks, when we use Automated
Teller Machine (ATM) for withdrawing or depositing money in account, every single operation
is considered as a transaction. On daily basis there are lakhs of transactions happening in each
bank. For maintaining account balance after each transaction of each customer we need a process
for updating account balance correctly after each transaction. This process comes under category
of Transaction Processing Systems. There are some few more similar examples listed below in
short.

a. Cash Register System – Point of Sale Transactions

b. Accounting System – Checking Account Transactions
c. Pay-per-view or OnDemand is a TPS
d. GooglePay / PayTm transactions
e. Daily Logistics

1.5.2Process Control Systems

Process Control Systems supports various operations. It Monitors and Controls Industrial /
Manufacturing Processes. For example, if there is a company which provide cleaned
vegetables to customers, then in its processing units there will be need to work on various
processes like cleaning vegetables as per requirement for different kind of vegetables, do the
packaging of the vegetables such that it won’t perish till it delivered to customer and ensure
that the vegetable when gets delivered to customer its fresh. To ensure this immediately
delivery vehicles and delivery persons should be available. So to manage all minor and
major processes there is Process Control Systems which will integrate all sub-processes in
an unit and manage its proper working.
Few other examples can be considered from other industries like mentioned below:
a. Petroleum Refining
b. Power Generation
c. Automobile Manufacturing
1.5.3 Enterprise Collaboration System
Enterprise Collaboration System also supports operations. How?? The answer is since every
industry needs Teamwork, Communication, and Collaboration. There are many departments
in big organizations as all works can’t be handled by a single person. So, as the organization
size grows, it needs to maintain proper communication among all employees to manage all
processes and make business effective and successful. For example, for official
communication between employees, they need E-mail services, for unofficial
communication need chat services, for arranging meetings needs calendars / schedular, for
meetings with people from different locations need Video conferencing applications,
sometimes people need to share some files, so they need file sharing applications, need some
data storages etc. .
Example:
a. Chat
b. Video Conferencing
c. Calendaring
d. Journaling
e. Workflow
f. File Sharing (Kazaa, Morpheus, Limework, Napster)
g. Organizational pack of various services (GSuit)

1.5.4 Management Information System

Management Information System is enables the management people to do various kinds of
analysis and reporting to provide it to higher management people. These management
people need to represent the overall data using various charts, graphs or various summary
tools. Below are the some examples of such tools:
a. SCT Banner – Managing College Information (Siena uses it)
b. Spreadsheet (Excel) – One of the first and most basic
c. Oracle's Corporate Performance Management

1.5.5 Decision Support System

Decision Support Systems enables higher management people to find solution to a business
problem using analysis and decision support mechanism of the entire data of the
organization. This system can predict the various problem solutions based on given
conditions like Qhat-if Analysis, Decision Modeling, Scenario Building, Highly interactive,
 ad hoc, etc. Most decision support systems are developed for specific company
requirements, very few products are there which support wide variety of business. Below are
some examples applications:
a. Enterprise Decision Manager 2.0 Fair Isaac Corporation
b. AIMMS 3.6

1.5.6 Executive Information System

Executive Information System is used by top level management people of an organization
like Chief Executive Officer (CEO), Chief Information Officer (CIO), Chief Finance Officer
(CFO), etc. They are the people whose decision can change entire business process and can
have highest impact on businesses. So, their role is very critical in taking decisions based on
overall information of an organization and hence, they should get the correct, precise
information whenever required. Executive Information System provides critical info from
other systems like MIS and DSS. It can have portal concept where they can get links of all
information at one place. Executive Information System’s integrate external information
such as economic developments and news about related markets and competitors. This helps
in strategic decision making, although not necessarily tactical. (Here, Tactical means doing
things the right way right and Strategic means doing the right things). You can see how
Information System is broadly connected to all components in diagram below:

Figure: Relation with External Environment and Information System

 Figure: Classification of Information Systems

1.6 IS Infrastructure and Architecture

1.6.1 IS Architecture
In first chapter, we have seen the importance of Information Systems to people with different
roles in an organization. We had seen some related application examples in previous chapter.
Now, in this chapter we need to look upon the infrastructure and architecture of these system.
No, what do you mean by infrastructure and architecture? Infrastructure is the basic systems and
services that are necessary for an organization to run any business. And architecture is internal
the fundamental structure of various software components which enables transmitting of data
from one module to another.
 Figure: Information Flow to Information System Components

Above figure shows the information flow through-out the information systems. Figure shows
major modules from information system like Process Control System (PCS), Transaction
Processing Systems (TPS), Management Information Systems (MIS), Decision Support Systems
(DSS). This information flow shows that basic staff workers deal with TPS, PCS and MIS based
on their role. Various managers deal with DSS and MIS. And Executive officers deal with
External Information, DSS, MIS and analytical information provided by various managers.

The above diagram is divided in 2 parts viz., Information Exchange / Communication and
System Information Flow. Information Exchange / Communication represents information
shared between various basic processes transactions. For example, for any supermarket, there
can be various processes like purchase in wholesale, selling in retail at different store, shipping
of the items, maintaining daily transactions at each point of sale, merging overall transactions
done by all point of sale on daily basis, selling items as per pre-decided offer prices maintaining
stock in store, paying daily wages to worker, etc. So, information flowing through all these
processes come under category of Information Exchange / Communications.

On the other hand, when we say about System Information, it deals with the information
provided to various managers, information coming from external units regarding competitive
business in market, decisions provide by Decision Support System, and Management
Information System so that as and when required, higher management can have access to any
information for verification, etc.

These partitions of the Information Flow can also be called as Operations and Management
based on the information flowing to a process criterion. Please refer to below diagram for the
same.
 Figure: Information Flow

1.6.2 IS Infrastructure
Infrastructure of Information systems contains many different hardware / software applications
which are needed to run an information system of a business and it should be able to cover all
business process requirements.

Information system’s infrastructure contains following elements which are shown in below
figure:

1. Internet Platform
2. Computer Hardware
3. Operating System
4. Enterprise Resource Planning Systems
5. Telecommunication and Networking System
6. Consultants and System Integrators
7. Database Management and Storage Systems

For any business to run, it needs various software and hardware. For example, we need computer
/ mobile / ipad / PDA etc in basic hardware. Along with this, we need licenced user-friendly
Operating Systems to work with hardware.
We need internet to access internal and external data required for business processes. For this,
we also need telecommunication hardware and software which is used for networking for basic
requirements as well as to business communications. There is requirement of Enterprise resource
planning (ERP) systems to manage all business transaction data. And to store these vast data we
need database management and storage systems. And,finaly to integrate all these different
modules we need consultants and System Integrators.

Figure: Depiction of IS Infrastructure

1.7 Summary
In this chapter we have studied about Information System and some basic terminologies associated with
it. We have seen the various people roles in a business and their data requirement for running a
business successfully. We have seen the infrastructure and architecture of Information System.

1.8Review Your Learnings:

1. Are you able to define what is Information Systems?
2. Are you able to recognize various components in Information Systems?
 3. Are you able to understand the roles of people in a business application?
4. Are you able to explain the infrastructure of Information System?
5. Are you able to figure out the flow of information in various components of IS as well as
need of that data to person’s role in business?

1.9 Sample Questions:

1. What are the five components that make up an information system?
2. What are three examples of information system hardware?
3. Microsoft Windows is an example of which component of information systems?
4. What is application software?
5. What roles do people play in information systems?
6. What are three examples of information system hardware?
7. What roles do people play in information systems?
8. If every company is now a technology company, then what does this mean for every
studentattending a business college? Provide specific examples to support your answer.
9. Suppose that you had to explain to a member of your family or one of your closest
friends the concept of an information system. How would you define it? Write a one-
paragraph description in your own words that you feel would best describe an
information system to your friends or family.
10. Of the five primary components of an information system (hardware, software, data,
people, process), which do you think is the most important to the success of a business
organization? Write a one-paragraph answer to this question that includes an example
from your personal experience to support your answer.
11. We all interact with various information systems every day: at the grocery store, at work,
at school, even in our cars (at least some of us). Make a list of the different information
systems you interact with every day. See if you can identify the technologies, people, and
processes involved in making these systems work.

1.10 References for further reading

 https://www.britannica.com/topic/information-system
 https://www.journals.elsevier.com/information-systems
 https://www.coursera.org/courses?query=information%20systems
 https://www.edx.org/learn/information-systems
 Unit 2: Chapter 4

Role of IS in Business

Unit Structure
2.0 Objectives.................................................................................................................................. 52
2.1 Role of IS in Business ................................................................................................................. 52
2.1.1 Functional Areas in Business ............................................................................................... 53
2.1.1.1 Manufacturing and Production ..................................................................................... 53
2.1.1.2 Sales and Marketing ..................................................................................................... 54
2.1.1.3 Finance and Accounting ............................................................................................... 54
2.1.1.4 Human Resource Management .................................................................................... 54
2.2 Perspective on IS ....................................................................................................................... 55
2.3 Software & Hardware Platforms to Improve Business Performance ........................................... 58
2.3.1 Software in IS ...................................................................................................................... 61
2.3.1.1 Customer Relationship Management ........................................................................... 61
2.3.1.2 Supply Chain Management........................................................................................... 61
2.3.1.3 Customized Software ................................................................................................... 62
2.3.1.4 Commercial and Open-Source Software ....................................................................... 62
2.3.1.5 Cloud Computing.......................................................................................................... 63
2.3.1.6 Enterprise Resource Planning ....................................................................................... 64
2.3.1.7 Utility Software ........................................................................................................ 65
2.3.2 Hardware in IS .................................................................................................................... 66
2.3.2.1 Motherboard ............................................................................................................... 66
2.3.2.2 Random-Access Memory .............................................................................................. 67
2.3.2.3 Hard Disk...................................................................................................................... 67
2.3.2.4 Solid-State Drives ......................................................................................................... 67
2.3.2.5 Removable Media ........................................................................................................ 68
2.3.2.6 Network Connection .................................................................................................... 68
2.3.2.7 Input and Output ......................................................................................................... 69
2.3.2.8 Bluetooth ..................................................................................................................... 69
2.3.2.9 Input Devices ............................................................................................................... 69
2.3.2.10 Output Devices ........................................................................................................... 70
 2.3.2.11 Portable Computers ................................................................................................... 70
2.3.2.12 Smartphones .............................................................................................................. 70
2.3.2.13 Tablet Computers ....................................................................................................... 70
2.3.2.14 The Rise of Mobile Computing .................................................................................... 71
2.3.2.15 Integrated Computing ................................................................................................ 71
2.3.2.16 Servers ....................................................................................................................... 71
2.4 Summary ............................................................................................................................. 72
2.5 Review Your Learnings ............................................................................................................... 72
2.6 Questions .................................................................................................................................. 72
2.7 Further Reading ......................................................................................................................... 72

2.0 Objectives
6. Understand role of IS in business
7. Describe the role ERP software plays in an organization
8. Analyse and identify best software and hardware required for IS in business
9. Describe cloud computing and its advantages and disadvantages for use in an
organization
10. Explain the term open-source and its characteristics
11. Identify major steps in system development process and state the goal of each step.
12. Identify the value-added processes in the supply chain and describe the role of
information systems within them
13. Identify some of the strategies employed to lower costs or improve service
14. Define the term competitive advantage and discuss how organizations are using
information systems to gain such an advantage

2.1 Role of IS in Business

Every business has its own information system depending upon the size of the organization, and
it plays a vital role in running a business successfully. Business is divided into broad functional
areas like Manufacturing and Production, Sales and Marketing, Finance & Accounting and
Human Resource Management. Following diagram shows the basic functional areas of any
business. Because of dividing business in small areas, one can focus on the required outcome for
that functional unit and take necessary steps as per requirement. This is to maximize the profit of
the business either by manufacturing, or by improving selling / advertising process or by giving
discounts or selling combination of items for more sales or profit of the organization can be
increase by hiring best candidates for the required roles and utilize the man-power at required
works. So, all these units play a vital role for business improvement.

2.1.1 Functional Areas in Business

Functional Areas
of Business

Manufacturing Sales and Finance and Human Resource

and Production Marketing Accounting Management

Figure: Classification of Functional Areas in Business

2.1.1.1 Manufacturing and Production

Producing organization’s goods and services is the main function of this function. There are
three stages of manufacturing:
a. Inbound Logistics
b. Production
c. Outbound Logistics

a. Inbound Logistics: This is important to any business as any manufacturing

process needs raw material and transportation of raw material from their source to
manufacturing unit. There ca be multiple sources for raw materials and hence a
business needs its own inbound logistics.
b. Production: Production doesn’t merely mean manufacturing, but sometimes its
purpose is to create a branded product out of available products in market by
merchandising etc. It can be related to a product or service provide by a company.
c. Outbound Logistics: Once the products or services are ready to dispatch, it is
transferred with the help of Outbound Logistics. Where the final product / service
is transported from own company to other or to end user.
2.1.1.2 Sales and Marketing

Once the products or services are ready, they need marketing in market so increase the sell.
For marketing, businesses create their offers at launching the products or later depending
upon the market situation. The products / services can be sold from their own retail stores or
online as per business. Or sometime by creating tie-ups with other organizations, the
products are launched. Example: When we buy a new laptop, stre give s other accessories
like wired/wireless mouse, keyboard, speaker, headphone, hard-disk, laptop bag, etc, in
small amounts compared to their original prices. This is a marketing strategy for all these
items.

2.1.1.3 Finance and Accounting

This function is responsible for managing the firm's financial assets and maintaining the
firm's financial records. The finance process involves managing the firm's financial assets,
whereas the accounting process is involved primarily in financial record keeping.
For any business to work, there is need of Finance and Accounting department to fulfill the
requirements of a company. Let us understand what are these requirements? In Finance, it is
related with managing funds for the company, may be from banks, stakeholders, other
external agencies etc. And these funds received may be taken as loan with some interest
rate, so a company needs to repay it as soon as possible to reduce payment of interest as well
as whenever required company need to take loan as required capital to run a business.
People working in finance need to manage all these funds correctly to have maximum profit
of the company. And they need the various statistical information of the company to take
important high-level decisions.
On the contrary, to maintain these statistics of finance data, people in Accounting need to
maintain all transaction details, track each and every inbound and outbound processes, and
maintain transparency to these processes. After gathering these data, it needs to be verified.

2.1.1.4 Human Resource Management

Every business needemployee in different roles as per business process requirements. There
are people with low grade in education and as well as people with highest educational
qualifications. Apart from educational qualities of the employee, there are certain roles
where the work experience matters most in executing a process. So, a business needs people
with different qualities and working skills. These people are hired based on the requirement
of the business departments and processes. Once they are hired or employed by the
 employer, they need to be paid. This payment can be done either on hour basis / day basis /
monthly basis / contract basis.

As you have seen the people with different roles in business in previous chapter, these
people need to be managed for smoothly conduction of all business processes. Now, what do
we mean by managing people? Its regarding managing their employment details, their
salary, hiring new employees, terminating employees if required etc. These all details are
managed by information system of a business.

2.2 Perspective on IS
Information System plays major part in all micro level to macro level business processes. Starting
from data collection to processing and to decision making and increasing profitability of business
everywhere there is important role of Information System. Please refer to following diagram for
reference.

Figure: Business Processes in Information System

From a business perspective, information systems are part of a series of value-adding activities
or processes for obtaining, transforming, and supplying information to the managers who can use
to improve decisions regarding the business processes.
The business outlook calls attention to the organizational and managerial type of information
systems. An information system symbolizes an organizational and management solution based
on information technology to a challenge by the environment.

Some firms achieve better results from their information systems than others. Various studies
have shown that information technology investments give a considerable variation in the returns
of the business firms. Reasons for lower return on investment include failure to adopt the right
business model that suits the new technology or seeking to preserve an old business model that is
doomed by new technology.

Information technology investments cannot make organizations and managers more effective
unless they are accompanied by corresponding assets: assets required to gain value from a
primary investment. For instance, to realize value from automobiles requires complementary
investments in highways, roads, repair facilities, and a legal regulatory structure to set standards
and control drivers.

Complementary investments include:

1. Organizational Assets: These include a supportive business culture that values efficiency
and effectiveness, an appropriate business model, efficient business processes,
decentralization of authority, highly distributed decision rights, and a strong information
system (IS) development team.
2. Managerial Assets: These include strong senior management support for change,
incentive systems that monitor and reward individual innovation, an emphasis on
teamwork and collaboration, training programs, and a management culture that values
flexibility and knowledge.
3. Social Assets: These are not made by the firm but by the society at large, other firms,
governments, and other key market actors, such as the Internet, educational systems,
network and computing standards, regulations and laws, and the presence of technology
and service firms.
Research indicates that firms that support their technology investments with investments in
complementary assets, such as new business processes or training, receive superior returns.
These investments in organization and management are also known as organizational and
management capital.

Following table shows a list of information systems which you can find in many businesses:

Organization Purpose Description

American Apparel Point-of-Sale (POS) POS data (the data recorded when
System merchandise is sold) is integrated
with an inventory database, so
 more merchandise can be ordered.

Orange County Employee Hiring System Web based system that posts job
Department of opportunities and lets people
Education apply online. Hiring systems
often filter resumes using the
digital keywords from the online
application. Hiring systems also
manage the application through
the hiring process.

Sales Dashboard Sales Dashboard The digital dashboard gives a

quick view of revenue earned this
year compared to last, number of
new leads generated, top 5
products, sales per rep and
regional sales.

Sports Analytics Any professional team Consultants and specialists to look

at various data to make a team
more successful and recruit
players that add to the team’s
success.

Coursera.com Online education. “Take Video lectures and online

the world’s best courses, assignments are offered for free.
online, for free.” It costs a nominal fee for a
certificate of completion.

Boeing Corporation SAP System Integrated enterprise-wide

information system that handles
procurement, manufacturing,
marketing, sales, employee
benefits, accounting,
finance…and just about every
business function you can think
of.

Obamacare National healthcare system Individual exchanges for each

for the United States state in which people are required
to register to insurance.
Waze.com Geographic information App that provides mapping, traffic
system. reporting and routing to avoid
traffic.

WireShark Network Analyzer Software that helps users to

examine network traffic to
identify problems.

AS-Software.com Sonograms (ex. Seeing a Specialized software for

fetus inside the mother’s ultrasound reporting and image
womb) management, reporting and
consultation.

2.3 Software &Hardware Platforms to Improve Business

Performance
For any kind of business, there is need of information system. As per the size of the organization,
these requirements may vary. There are innumerable options available in IT market for
information systems. One can go for separate software applications for different departments or
business processes like al-a-carte menu in a restaurant. Or one can go for complete package for
entire business environment. Depending on the features required, this software application can be
purchased by an employer. For purchasing any licensed software or hardware, the price of the
software or hardware increases or reduced as per the number of employees as almost all
employees need some access to this information system. So, an organization need to buy the
applications as per the organization size.

Apart from this, not only based on organizational size, but its cost also depends on number of
features available in the information system. If as per requirement of the business the complete
solution package is not available in market, then one can go for customized software or
hardware.
 Information
System Software &
Hardware
Solutions

Al-a-carte
Complete Single Customized
(Separate for each
Solution Modules
module)

Figure: Types of Solutions to Hardware/Software Requirement

For making any business profitable, we need to do the groundwork first on purchasing software
and hardware for firm. We need to do the market survey for various available solutions, compare
the solutions with their available features and find the best solutions according to organization’s
budget.

Figure: Technology Requirements for an Organization

The technical approach highlightsstatistically based, standardising models to study information

systems, as well as the physical technology and formal capabilities of these systems. The
behavioural approach, a growing part of the information systems field, does not ignore
technology, but tends to focus on non-technical solutions concentrating instead on changes in
attitudes, management and organizational policy, and behaviour.

MIS combines the work of computer science, management science, and operations research with
a practical orientation toward developing system solutions to real-world problems and managing
information technology resources. It is also concerned with social issues encircling the
development, use, and impact of information systems, which are typically discussed in the fields
of sociology, economics, and psychology

In the sociotechnical view of systems, optimal organizational performance is achieved by jointly

optimizing both the social and technical systems used in production. Adopting a sociotechnical
systems perspective helps to avoid a purely technological approach to information systems.

Technology must be changed and constructed, sometimes we need to de-optimize it to fit

administrative and private needs. Organizations and individuals must also be changed through
training, learning, and planned organizational change to allow technology to operate and prosper.

The brief history of business computing with it’s hardware and software availability is
mentioned in table below for your reference.

Table: The Eras of Business Computing [1]

Era Hardware Operating System Applications
Mainframe Terminals connected Time-sharing Custom-written
(1970s) to mainframe (TSO) on MVS MRP software
computer.
PC IBM PC or MS-DOS WordPerfect,
(mid-1980s) compatible. Lotus 1-2-3
Sometimes connected
to mainframe
computer via
expansion card.
Client-Server IBM PC “clone” on a Windows for Microsoft
(late 80s to Novell Network. Workgroups Word, Microsoft
early 90s) Excel
World IBM PC “clone” Windows XP Microsoft
Wide Web connected to company Office, Internet
(mid-90s to intranet. Explorer
early 2000s)
Web 2.0 (mid- Laptop connected to Windows 7 Microsoft
2000s to company Wi-Fi. Office, Firefox
present)
Post-PC Apple iPad iOS Mobile-friendly
(today and websites, mobile
beyond) apps

2.3.1 Software in IS
Software can be broadly divided into two types: operating systems and application software.
Operating systems control the hardware and establish the interface between the hardware and the
user. Application software is the class of programs that do something useful for the user.

2.3.1.1Customer Relationship Management

A customer relationship management (CRM) system is a software application designed to
manage an organization’s customers. In today’s environment, it is important to develop
relationships with your customers, and the use of a well-designed CRM can allow a business to
personalize its relationship with each of its customers. Some ERP software systems include
CRM modules. An example of a well-known CRM package is Salesforce [2].

2.3.1.2Supply Chain Management

Many organizations must deal with the complex task of managing their supply chains. At its
simplest, a supply chain is the linkage between an organization’s suppliers, its manufacturing
facilities, and the distributors of its products. Each link in the chain has a multiplying effect on
the complexity of the process: [2] if there are two suppliers, one manufacturing facility, and two
distributors, for example, then there are 2 x 1 x 2 = 4 links to handle. However, if you add two
more suppliers, another manufacturing facility, and two more distributors, then you have 4 x 2 x
4 = 32 links to manage.
 Figure: Components in Supply Chain Management

A supply chain management (SCM) system manages the interconnection between these links, as
well as the inventory of the products in their various stages of development. A full definition of a
supply chain management system is provided by the Association for Operations Management:
“The design, planning, execution, control, and monitoring of supply chain activities with the
objective of creating net value, building a competitive infrastructure, leveraging worldwide
logistics, synchronizing supply with demand, and measuring performance globally”. Most ERP
systems include a supply chain management module.

2.3.1.3 Customized Software

How is software developed? Software is the set of instructions that tells the hardware what to do,
and these instructions can be written by an expert. A programming language consists of a set of
commands and syntax that can be organized logically to execute specific functions.Examples of
well-known programming languages today include Java, PHP, and various types of C (Visual C,
C++, C#). Languages such as HTML and Javascript are used to develop web pages.

Software development can be done using vendors by outsourcing the requirement or by

developing it by own employee if he/she is capable of doing it.

2.3.1.4 Commercial and Open-Source Software

Software began to come up as a businesswhen a software programming takes much oh hard
efforts to develop. This led to a new business model of restrictive software licensing, which
required payment for software and called as commercialized softwareand also called as closed
source where the source code is not made available to others.

Open-source software is software is the software which source code is available and open to
anyone who wants to modify it fir betterment of the application.
Many businesses are distrustful of open-source software because the code is available for anyone
to work on. This increases the threat of an attack. There are many arguments on both sides of the
aisle for the benefits of the two models. Some benefits of the open-source model are:

1. The software is freely available

2. The software source-code is available; it can be checked and analysed before installation
3. The community of programmers who work on open-source projects leads to quick bug-
fixing and feature additions.
Some benefits of the closed-source model are:

1. By providing financial incentive for software development, some of the brightest minds
have chosen software development as a career.
2. Technical support from the company that developed the software.

Today there are thousands of open-source software applications available for download. For
example, as we discussed previously in this chapter, you can get the productivity suite from
Open Office. One good place to search for open-source software is sourceforge.net, where
thousands of software applications are available for free download.

2.3.1.5 Cloud Computing

The cloud means space where applications, services, and data are stored on the Internet. These
service providers rely on big server and massive storage devices that are connected via Internet
protocols. Cloud computing is the use of these services by individuals and organizations publicly
or privately.

In this era, you are already using cloud computing in many forms. For example, using Gmail,
Google Drive where you store the data. Salesforce.com is a good example of cloud computing,
their entire suite of CRM applications areoffered via the cloud. Cloud computing is not limited to
web applications: it can also be used for services such as phone or video streaming.

Nowadays, almost all applications are online and using cloud platforms like Amazon Web
Services (AWS), IBM Cloud or Microsoft Azure etc for deployment of the applications.

Advantages of Cloud Computing

1. No software to install or upgrades to maintain.

2. Available from any computer that has access to the Internet.
3. Can scale to many users easily.
4. New applications can be up and running very quickly.
5. Services can be leased for a limited time on an as-needed basis.
6. Your information is not lost if your hard disk crashes or your laptop is stolen.
7. You are not limited by the available memory or disk space on your computer.
Disadvantages of Cloud Computing

1. Your information is stored on someone else’s computer – how safe is it?

2. You must have Internet access to use it. If you do not have access, you’re out of luck.
3. You are relying on a third-party to provide these services.
4. Cloud computing has the ability to really impact how organizations manage technology.
For example, why is an IT department needed to purchase, configure, and manage
personal computers and software when all that is really needed is an Internet connection?

2.3.1.6 Enterprise Resource Planning

The enterprise resource planning (ERP) system was developed to bring together an entire
organization in one software application. Simply put, an ERP system is a software application
utilizing a central database that is implemented throughout the entire organization. Let’s take a
closer look at this definition:

“A software application”: An ERP is a software application that is used by many of an

organization’s employees.

“utilizing a central database”: All users of the ERP edit and save their information from the data
source. What this means practically is that there is only one customer database, there is only one
calculation for revenue, etc.

“that is implemented throughout the entire organization”: ERP systems include functionality that
covers all of the essential components of a business. Further, an organization can purchase
modules for its ERP system that match specific needs, such as manufacturing or planning.

ERP systems were originally marketed to large corporations. However, as more and more large
companies began installing them, ERP vendors began targeting mid-sized and even smaller
businesses. Some of the more well-known ERP systems include those from SAP, Oracle, and
Microsoft.
 Figure: Components in Enterprise Resource Planning Application

For effectively implementing an ERP system in an organization, the organization must be ready
to make a full dedication. All parts of the organization are affected as old systems are replaced
by the ERP system. Generally, implementing an ERP system can take two to three years and
several million dollars. In most cases, the cost of the software is not the most expensive part of
the implementation: it is the cost of the consultants!

What is need of installing an ERP system? An ERP system can bring an organization a good
return on their investment, can enfore rules and regulations on basic business processes across
the enterprise and using the software to enforce best practices, most organizations see an overall
improvement after implementing an ERP.

Figure: Top ERP Systems

2.3.1.7 Utility Software

These are the software which are used in routine for basic data manipulation or presentations or
storage, etc. Microsoft Office is well versed office productivity software which have many more
features like spreadsheets, presentation, word document, notes, SharePoint, emailing and so on.
Although this is commercialized software, one can get the same application I open source
software too, but with limited functionality.

Figure: Comparison of office application suites

2.3.2 Hardware in IS
Computer hardware contains digital devices. This includes the following:

1. Desktop Computers
2. Laptop Computers
3. Mobile Phones
4. Tablet Computers
5. e-Readers
6. Storage Devices
7. Input Devices
8. Networking elements like Routers, Switches, Cables, etc.

2.3.2.1 Motherboard
The motherboard is the important circuit board on the computer. The CPU, memory, and storage
components, among other things, all connect into the motherboard. Motherboards come in
different shapes and sizes, depending upon how compact or expandable the computer is designed
to be. Most modern motherboards have many integrated components, such as video and sound
processing, which used to require separate components.
The motherboard provides much of the bus of the computer (the term bus refers to the electrical
connection between different computer components). The bus is an important determiner of the
computer’s speed: the combination of how fast the bus can transfer data and the number of data
bits that can be moved at one time determine the speed. [1]

2.3.2.2 Random-Access Memory

When a computer starts up, it begins to load information from the hard disk into its working
memory. This working memory, called random-access memory (RAM), can transfer data much
faster than the hard disk. Any program that you are running on the computer is loaded into RAM
for processing. For a computer to work effectively, some minimal amount of RAM must be
installed. In most cases, adding more RAM will allow the computer to run faster. Another
characteristic of RAM is that it is “volatile.” This means that it can store data as long as it is
receiving power; when the computer is turned off, any data stored in RAM is lostoutput devices
such as printers and speakers.

2.3.2.3Hard Disk

While the RAM is used as working memory, the computer also needs a place to store data for the
longer term. Most of today’s personal computers use a hard disk for long-term data storage. A
hard disk is where data is stored when the computer is turned off and where it is retrieved from
when the computer is turned on. Why is it called a hard disk? A hard disk consists of a stack of
disks inside a hard metal case. A floppy disk (discussed below) was a removable disk that, in
some cases at least, was flexible, or “floppy.”

2.3.2.4Solid-State Drives

A relatively new component becoming more common in some personal computers is the solid-
state drive (SSD). The SSD performs the same function as a hard disk: long-term storage. Instead
of spinning disks, the SSD uses flash memory, which is much faster.

Solid-state drives are currently quite a bit more expensive than hard disks. However, the use of
flash memory instead of disks makes them much lighter and faster than hard disks. SSDs are
primarily utilized in portable computers, making them lighter and more efficient. Some
computers combine the two storage technologies, using the SSD for the most accessed data (such
as the operating system) while using the hard disk for data that is accessed less frequently. As
with any technology, Moore’s Law is driving up capacity and speed and lowering prices of solid-
state drives, which will allow them to proliferate in the years to come [3].

2.3.2.5Removable Media

Besides fixed storage components, removable storage media are also used in most personal
computers. Removable media allows you to take your data with you. And just as with all other
digital technologies, these media have gotten smaller and more powerful as the years have gone
by. Early computers used floppy disks, which could be inserted into a disk drive in the computer.
Data was stored on a magnetic disk inside an enclosure. These disks ranged from 8″ in the
earliest days down to 3 1/2″ [3].

Around the turn of the century, a new portable storage technology was being developed: the USB
flash drive (more about the USB port later in the chapter). This device attaches to the universal
serial bus (USB) connector, which became standard on all personal computers beginning in the
late 1990s. As with all other storage media, flash drive storage capacity has skyrocketed over the
years, from initial capacities of eight megabytes to current capacities of 64 gigabytes and still
growing.

2.3.2.6Network Connection

When personal computers were first developed, they were stand-alone units, which meant that
data was brought into the computer or removed from the computer via removable media, such as
the floppy disk. Beginning in the mid-1980s, however, organizations began to see the value in
connecting computers together via a digital network. Because of this, personal computers needed
the ability to connect to these networks. Initially, this was done by adding an expansion card to
the computer that enabled the network connection, but by the mid-1990s, a network port was
standard on most personal computers. As wireless technologies began to dominate in the early
2000s, many personal computers also began including wireless networking capabilities [3].
2.3.2.7Input and Output

In order for a personal computer to be useful, it must have channels for receiving input from the
user and channels for delivering output to the user. These input and output devices connect to the
computer via various connection ports, which generally are part of the motherboard and are
accessible outside the computer case. In early personal computers, specific ports were designed
for each type of output device. The configuration of these ports has evolved over the years,
becoming more and more standardized over time. Today, almost all devices plug into a computer
through the use of a USB port. This port type, first introduced in 1996, has increased in its
capabilities, both in its data transfer rate and power supplied[3].

2.3.2.8Bluetooth
Besides USB, some input and output devices connect to the computer via a wireless-technology
standard called Bluetooth. Bluetooth was first invented in the 1990s and exchanges data over
short distances using radio waves. Bluetooth generally has a range of 100 to 150 feet. For
devices to communicate via Bluetooth, both the personal computer and the connecting device
must have a Bluetooth communication chip installed.

2.3.2.9Input Devices
All personal computers need components that allow the user to input data. Early computers used
simply a keyboard to allow the user to enter data or select an item from a menu to run a program.
With the advent of the graphical user interface, the mouse became a standard component of a
computer. These two components are still the primary input devices to a personal computer,
though variations of each have been introduced with varying levels of success over the years. For
example, many new devices now use a touch screen as the primary way of entering data.

Besides the keyboard and mouse, additional input devices are becoming more common. Scanners
allow users to input documents into a computer, either as images or as text. Microphones can be
used to record audio or give voice commands. Webcams and other types of video cameras can be
used to record video or participate in a video chat session.
2.3.2.10Output Devices
Output devices are essential as well. The most obvious output device is a display, visually
representing the state of the computer. In some cases, a personal computer can support multiple
displays or be connected to larger-format displays such as a projector or large-screen television.
Besides displays, other output devices include speakers for audio output and printers for printed
output.

2.3.2.11Portable Computers
As more organizations and individuals are moving much of their computing to the Internet,
laptops are being developed that use “the cloud” for all of their data and application storage.
These laptops are also extremely light because of compresses components and are preferred in
this emerging technology era.

2.3.2.12Smartphones
The first modern-day mobile phone was invented in 1973. Resembling a brick and weighing in at
two pounds, it was priced out of reach for most consumers at nearly four thousand dollars. Since
then, mobile phones have become smaller and less expensive; today mobile phones are a modern
convenience available to all levels of society. As mobile phones evolved, they became more like
small computers. These smartphones have many of the same characteristics as a personal
computer, such as an operating system and memory. The first smartphone was the IBM Simon,
introduced in 1994.

In January of 2007, Apple introduced the iPhone. Its ease of use and intuitive interface made it
an immediate success and solidified the future of smartphones. Running on an operating system
called iOS, the iPhone was really a small computer with a touch-screen interface. In 2008, the
first Android phone was released, with similar functionality.

2.3.2.13Tablet Computers
A tablet computer is one that uses a touch screen as its primary input and is small enough and
light enough to be carried around easily. They generally have no keyboard and are self-contained
inside a rectangular case. The first tablet computers appeared in the early 2000s and used an
attached pen as a writing device for input. These tablets ranged in size from small personal
digital assistants (PDAs), which were handheld, to full-sized, 14-inch devices. Most early tablets
used a version of an existing computer operating system, such as Windows or Linux.

These early tablet devices were, for the most part, commercial failures. In January, 2010, Apple
introduced the iPad, which ushered in a new era of tablet computing. Instead of a pen, the iPad
used the finger as the primary input device. Instead of using the operating system of their
desktop and laptop computers, Apple chose to use iOS, the operating system of the iPhone.
Because the iPad had a user interface that was the same as the iPhone, consumers felt
comfortable and sales took off. The iPad has set the standard for tablet computing. After the
success of the iPad, computer manufacturers began to develop new tablets that utilized operating
systems that were designed for mobile devices, such as Android.

2.3.2.14The Rise of Mobile Computing

Mobile computing is having a huge impact on the business world today. The use of smartphones
and tablet computers is rising at double-digit rates each year. The Gartner Group, in a report
issued in April, 2013, estimates that over 1.7 million mobile phones will ship in the US in 2013
as compared to just over 340,000 personal computers. Over half of these mobile phones are
smartphones.Almost 200,000 tablet computers are predicted to ship in 2013. According to the
report, PC shipments will continue to decline as phone and tablet shipments continue to increase.

2.3.2.15Integrated Computing
Along with advances in computers themselves, computing technology is being integrated into
many everyday products. From automobiles to refrigerators to airplanes, computing technology
is enhancing what these devices can do and is adding capabilities that would have been
considered science fiction just a few years ago. Here are two of the latest ways that computing
technologies are being integrated into everyday products:

 The Smart House

 The Self-Driving Car

2.3.2.16 Servers
Servers are high end configuration computers.a server is a piece of computer hardware or
software (computer program) that provides functionality for other programs or devices,
called "clients". This architecture is called the client–server model. Servers can provide
various functionalities, often called "services", such as sharing data or resources among
multiple clients, or performing computation for a client. A single server can serve multiple
clients, and a single client can use multiple servers. A client process may run on the same
device or may connect over a network to a server on a different device. Typical servers are
database servers, file servers, mail servers, print servers, web servers, game servers, and
application servers [4].

By using the latest technology both in terms of software and hardware, a business can grow
and achieve maximum profitability either by making low-cost transactions, low maintenance
cost for data handling or doing more marketing / selling etc. One need to understand the
capability of hardware and software and chose a best platform suitable for an organization.
2.4Summary
In this chapter, we have learned the role of information system in every process of the
organization. Software and hardware requirements for incorporation of IS for organization.
We have discussed the ways for selection of hardware and software for an organization.We
have discussed the various software tools and hardware used in Information Systems. Based
on the features of software and hardware one can find the best suitable tool for any
information system.

2.5 Review Your Learnings

 Can you explain role of Information Systems in business processes?
 Can you identify the best software and hardware requirement for any Information
System?
 Can you explain the importance of productivity, ERP, CRM, like applications?

2.6 Questions
1. Explain the role of Information System in business.
2. Explain the various classification of business functions. Give examples of software
applications used for these business functions.
3. Explain various software requirement in IS and give examples of IS software solutions.
4. Explain need for hardware in IS and express yourself for improvising the efficiency of
the IS by choosing software and hardware.
5. Express in your language about the term information systems hardware means.
6. What are the advantages of solid-state drives over hard disks?
7. How IS adds value to a business?

2.7 Further Reading

 https://www.britannica.com/topic/information-system
 https://www.softwaresuggest.com/blog/enterprise-resource-planning-erp-ebook/
 https://www.freetechbooks.com/information-systems-f46.html
 https://www.phindia.com/Books/ShoweBooks/ODE/Management-Information-Systems
 https://courses.lumenlearning.com/santaana-informationsystems
 http://www.opentextbooks.org.hk/ditatopic/26197

References:
1. openlibrary-repo.ecampusontario.ca
2. bus206.pressbooks.com
3. courses.lumenlearning.com
4. https://en.wikipedia.org
 Unit - 2

Chapter-5

Contents
3.0 Objectives ................................................................................................................................. 73
3.1 Introduction ............................................................................................................................... 73
3.2 Management Opportunities Challenges & Solutions ................................................................... 74
3.2.1 The Challenges and Problems of Information Systems ........................................................ 74
3.2.2 Issues in Managing IT .......................................................................................................... 78
3.2.3 Solutions to Various Business Problems .............................................................................. 79
3.3 Business Applications ................................................................................................................ 80
3.4 Role of IT in E-Commerce and M-Commerce ............................................................................ 84
3.5 Summary ................................................................................................................................... 90
3.6 Review Your Learning ............................................................................................................... 90
3.7 Questions ............................................................................................................................. 90
3.8 Further Reading ......................................................................................................................... 91
3.9 References ................................................................................................................................. 91

3.0 Objectives
1. To identify major factors for executing a business successfully
2. To create technical solution to a business problem
3. To demonstrate how IS and IT support E-Commerce and M-Commerce
4. To analyse various business applications of MIS
5. To analyse the business process and find the probable supporting IT solution
6. To evaluate and find technical alternatives on business challenges

3.1 Introduction
When we say information, its likely to be a piece of relevant information, but many a times while
doing a business we might get the information which is not needed, and the information which
we need is not available…so, this will create a problem in taking decisions at higher level as well
as working on low order processes in an organization. There are many more differ job roles and
different process as per departments in an organization. This is shown in figure below. There are
many different types of problems faced by the organization and many more challenges are there
in day-to-day business. We will see their classification in below sections.
 Figure: Relationship Between Organizational Problem and Levels

3.2 Management Opportunities Challenges & Solutions

We are using the Information Systems to provide consolidated view of all business data at one
place and to monitor the activities. Based on this. the strategic business decisions are taken. But
for maintenance of this information there are certain challenges a business can face. We will
study this here.

3.2.1 The Challenges and Problems of Information Systems

If all the existing difficulties are divided into human-centred, organizational and environmental
factors,the major drawbacksand the reasons of failure andusing Management Information System
(MIS) in community organizations are as following:

1. Human-centred factors:
1. The lack of understanding of the needs of the users by designers (the lack of
correct definition of the needsand their analysis).
2. The lack of information of the managers and users as they don’t know exactly
what they want and whattheir information needs are.
3. The lack of participation of the managers and users in system design.
4. The lack of understanding of the managers of software and information systems.
5. The lack of accuracy in the data collected.
2. Environmental factors:
1. The lack of procedures and methodology and stages of creating the system.
2. The lack of suitable consultants for designing the system and software.
 3. The lack of evaluation of environmental aspects in management information
systems.
4. The lack of serious consideration and adequate investment in this regard.
3. Organizational factors:
a. The lack of good conditions for participation and collaboration of the managers,
users and system directors.
b. The lack of existing systems and methods analysis before the system design.
c. The lack of evaluation of the existing power.
d. Bad condition of educating the specialized forces.
e. Unsuitable implementation of the system.
f. Inadequate education of the users.
g. Inadequate and incomplete documentation.

Figure: The Relationship between Organization & Information Systems

There are many factors which directly affect on relationship between Organization and
Information Technology of a business. These can be seen in above diagram.

Apart from this, there are other challenges as well for achieving business objectives. These are
listed below:

1. Integration and The Whole Firm View

In the earlier days, information systems were developed to serve the interestspecific business
functions like marketing, finance, or operationsor to provide a specific group of decision-making
application for middle managers. The problem aroused with this mechanism is it resulted in the
building of thousands of systems which cannot share information with one another and to make
it worse, it makes difficult for managers to get the information they need to operate and work in
the whole firm. Building systems that both serve specific interests in the organization, but also
can be integrated to provide organization wide information is a challenge.
 2. Management and Employee Training
With so many systems in a large business firm, and with fairly high employee turnover typical of
the last few years, training people how to use the existing systems, and learn new systems, turns
out to be a major challenge. Obviously, without training or when training is limited, employees
and managers cannot use information systems to maximum advantage, and the result can be a
low return on investment in systems.

3. Accounting for The Cost of Systems and Managing Demand for Systems
As the cost of information falls because of the power of information technology, demands for
information and technology services proliferate throughout the firm. Unfortunately, if employees
and managers believe information services are free, their demands will be infinite. One of the
challenges facing business managers is understanding which systems are truly necessary, truly
productive with high returns on investment, and which are merely conveniences that cost a great
deal but deliver little.

A number of solutions exist to the challenges, some of them are explained here.

1. Inventorying The Firm’s Information Systems For A 360-Degree View Of Information

You should develop a list of firmwide information requirements to get a 360-degree view of the
most important information needs for your company as a whole. Once you have this list
developed, examine how your existing systems—most built to service specific groups and levels
in the firm—provide this information to corporate-wide systems. You’ll need to inventory your
firm’s existing information systems and those under construction. (Many organizations have no
idea of all the systems in their firm, or what information they contain.) Identify each system and
understand which group or level in the firm benefits from the system.

2. Employee and Management Education

Systems are usually not obvious or self-taught for most people. You will need to ensure that you
understand how much training is required to support new systems, and budget accordingly. Once
you have an inventory of just the major systems in a firm that are used every day by thousands of
employees, try to identify how they learn how to use the system, how effective their training is,
and how well they use the systems. Do they exploit all the potential value built into the systems?

3. Accounting for The Costs and Benefits of Information Systems

To manage the demand for information services, you’ll need an accounting system for
information services. It is worthwhile to examine the methods used in your industry and by
industry competitors to account for their information systems budgets. Your system should use
some method for charging the budgets of various divisions, departments, and groups that directly
benefit from a system. And there are other services that should not be charged to any group
because they are a part of the firm’s general information technology (IT) infrastructure
(described in Chapter 6) and serve everyone. For instance, you would not want to charge various
groups for Internet or intranet services because they are services provided to everyone in the
firm, but you would want to charge the manufacturing division for a production control system
because it benefits that division exclusively. Equally important, management should establish
priorities on which systems most deserve funding and corporate attention.

Apart from above mentioned points, there are other solutions as well.

Many organizations obtain remarkable business value from enterprise applications because of
their power to enhance process coordination and management decision making.

But,

1. enterprise systems, supply chain management, and customer relationship management

systems are very expensive to purchase and implement. Costs run even higher for
organizations with global operations, which must manage organizational and technology
changes in many different languages, time zones, currencies, and regulatory
environments.
2. Enterprise applications require not only deep-seated technological changes but also
fundamental changes in the way the business works, including changes to business
processes, employee responsibilities, and functions.
3. Enterprise applications also introduce "switching costs." Once an enterprise application is
purchased and implemented, it becomes very costly to switch vendors.
4. Enterprise applications require defining and implementing standardized definitions of
data throughout the organization.

Solutions for gaining more value from enterprise applications include:

1. Enterprise solutions (enterprise suites or e-business suites): Flexible enterprise

software that enables close linking between CRM, SCM, and enterprise systems, as well
as to customer and supplier systems.
2. Service platforms: A service platform integrates multiple module applications from
multiple business functions, business units, or business partners to deliver a seamless
experience for the customer, employee, manager, or business partner. Enterprise-wide
service platforms provide a greater degree of cross-functional integration than the
traditional enterprise applications. To accomplish this, software tools (such as Web
services and XML) use existing applications as building blocks for new cross-enterprise
processes. Portal software can integrate information from enterprise applications and
disparate in-house legacy systems, presenting it to users through a Web interface so that
the information appears to be coming from a single source.
 As shown in above figure, you can see the processing of customer order in an enterprise.
When customer gives order or comes to a store for purchasing, system will check the
availability of the product or service and if and only if its available then only billing will
be processed. Now once this process is completed, this should be reflected in all other
modules of the information systems. So, there is an integration layer which will update
the data in Customer Relationship Management (CRM), Supply Chain Management
(SCM), Enterprise Resource Planning (ERP) and Other related system modules. This
integration is done by service platforms.

3.2.2 Issues in Managing IT

Here we summarize some of the key management issues discussed in this chapter:
• The personal involvement of management in making decisions about technology
is crucial, especially given the huge investments most companies have made and
continue to make in information technology.
• You can use information technology to transform the organization. IT design
variables let you develop entirely new structures like the T-Form organization.
• Information technology should be an integral part of a firm's corporate strategy.
Managers and other users are the most likely source of strategic applications of
 the technology.
• Senior management needs a vision of how technology can be used in the firm.
• A corporate plan should include planning for IT.
• Management has the responsibility for des.igning and managing an IT architecture. It
has to provide the basic infrastructure needed to take advantage of
technology.
• There are a number of different structures for managing IT. Today the federal
structure is probably the most popular in a large organization.
• Management is also responsible for developing new applications of technology.
It needs to focus development resources where they are most needed.
• Systems development is one of the most creative activities in modern organizations.
Managing development projects has been a continuing challenge for companies.
• Reengineering focuses attention on business processes instead of functions. It
also contrasts radical redesign with incremental improvements in processes.
• Management must decide on the source of IT services; for example, there is the
option of outsourcing to another firm.
• Managers determine what level of support to provide users working with technology,
and how much time users should spend developing applications themselves.
• Managers are in the business of change. Nowhere is change more evident than
in implementing new technology and using IT to redesign organizations.
• Information technology, while easy to use in some respects, is constantly growing
more complex. There is a continuing need for IT professionals in the organization.

3.2.3 Solutions to Various Business Problems

Use IT Design Variables to Structure the Organization
One of the most exciting attributes of modern technology is your ability to use itin designing
innovative and highly effective organizations. You can use this technology to design
components of an organization or to structure an entirely newtype of organization.
• IT design variables, in conjunction with conventional organization design variables,
provide you with tremendous flexibility in designing an organization.
• The most likely outcome from using these variables will be a flat
organizationalstructure with decentralized decision making. The firm will use electronic
communications and linking, as well as electronic customer-supplier relationships toform
alliances with other firms, and in general it will resemble the T-Form organization
Determine and Communicate Corporate Strategy
If you and others in the organization are to help the firm achieve its strategy, youmust
know what it is!Develop a plan for how to use information technology. The plan should
include:
1. A list of opportunities for your business unit.
 2. A vision of how your unit should function and the role of IT in that vision.
3. A survey of current business processes that are good candidates for major
improvement through process reengineering.
4. A catalog of areas for applying IT, including priorities.
Develop a long-range plan for the technological infrastructure.
1. Plan for hardware-software architecture for your unit given the constraints of
the corporation, that is, what technology already exists.
Plan for the evolution of a network that forms the backbone of your technology
a. Invest in infrastructure.
b. Investigate the use ofstandards to facilitate connection and
interorganizational,systems.
Develop ongoing management strategies for IT
1. Support users in your unit and encourage them to work with the technology.
2. Develop mechanisms for allocating resources to IT.
3. Encourage innovation and reward it.
Manage systems development
1. See that design teams are formed for new projects.
2. Participate in the design process.
Be sure you understand what IT applications will do.
1. Review and monitor development projects.
2. Be a user of technology.
3. Use IT to improve your own productivity.
4. Use technology to set an example for others

3.3 Business Applications

Management Information System (MIS) plays a vital role in overall development of an
organizations. Because of MIS, the management people can get clear idea about information
represented in various graphical formats. But still, many a times, a change is needed in the
information system or a process. We can find a solution to such problem using Information
Systems approach. We first need to find the probable solutions for the problems and analyse it.
Understand the problem’s exact location or process and then evaluate it. Find a best solution. If
best solution is nit available in readymade modules, then need to go for tailor-made modules i.e.
customize the MIS as per need. And implement it after evaluating.
 Figure: Information System Approach to Problem Solving

In business applications, MIS plays an important role. There are many vendors who provide
solutions as a full-fledged MIS system for an organization. Ex. Microsoft Dynamics, LS Retail,
ERP, CRM.

Below are some examples screenshots of solutions.

Application of MIS

The application of MIS in an organization requires involvement of many key team players,
including systems analysts, information technology specialists, computer programmers,
management, executives, quality-control personnel, help-desk specialists, information security
and more. Proper application of MIS should result in the following advantages:

Increased Profits: MIS application can result in new product development, changed marketing,
changed packaging, improved customer service, a growing product line, better communication
with different levels of customers, competitive pricing and higher customer retention rates.

Increased Quality: MIS application contributes to increased quality through reducing waste,
helping in the selection of quality materials and implementing warranties/guarantees that match
material quality.

Decreased Costs: MIS application helps management become more strategic about material
sourcing, staffing, scheduling, increasing efficiency, improving processes, managing inventory
appropriately and manufacturing goods at the right time.

Role of Management Information Systems in Organizations

The role of management information systems in organization decision-making processes is key
to helping businesses reduce waste and increase profits. MIS reports can be used by individual
managers and groups of managers and can be shown to employees to highlight where they are
performing well and where they need to grow.

When management has an accurate report, they do not have to guess about who is doing well or
what needs to be improved or wonder where their blind spots are. The data help them see a
clearer, less-biased picture than they could come up with on their own.

Implementing Management Information Systems

Once management information systems are in place, implementing them into management
workflow is vital to their effectiveness. Management needs to be aware of how to access the
data, run regular reports and find help when they need it. Visual presentations and opportunities
for hands-on exploration of the systems help managers to get used to accessing data before they
need to.

Help-desk personnel could choose to host a class or webinar that walks management through
every step needed to navigate through your company's MIS. Due to the importance of MIS data
in decision making, it is imperative that management has a thorough understanding of how and
when to best use the system.

Importance of Decision Making

Managers regularly make decisions that impact the daily lives of their employees, so having
accurate data is important. Changes introduced by management have the power to alter
someone's life by:

1. Increasing or decreasing stress levels.

2. Increasing or decreasing workload.
3. Increasing or decreasing ease of job performance.
4. Increasing or decreasing job task understanding.
5. Giving or taking away livelihood.
The large impact of managerial decisions on the everyday lives of people as well as on the
company's bottom line means that decisions cannot be made lightly or without adequate
information.

Decision-Making Processes

Many companies train their managers to make decisions using a structured decision-making
process. While these processes vary slightly from organization to organization, a basic seven-
step process is common:
 1. Identify the problem.
2. Gather data related to the problem.
3. Identify possible solutions to the problem.
4. Consider pros and cons of each solution.
5. Choose the solution that minimizes risks while increasing benefits.
6. Execute your plan, adjusting as needed.
7. Review the effectiveness of your plan to help inform future decisions.
Importance of MIS in Decision Making

The importance of MIS in decision making can be seen throughout the typical corporate
decision-making process. MIS reports typically alert management about problems by
highlighting poor performance, lower than expected sales, problems in efficiency and so forth.

These same reports allow managers to gather data related to the problem by looking at trends
over a certain period of time and seeing where improvements can be made. This information
empowers managers to brainstorm a wide variety of possible solutions to the given problem so
that they can consider the pros and cons of each one. This makes it possible for management to
choose and execute a plan to solve the problem.

Future MIS reports should show improvement in the problem areas so that managers can
accurately evaluate the success of their given plan and make adjustments going forward.

Proactive Versus Reactive Decision Making

The importance of MIS in decision making lies in its ability to help managers become proactive
versus reactive decision makers. Without proper data, crises can build in the background and
then explode, causing managers to go into survival mode and make reactive decisions that Band-
Aid the problem rather than prevent it in the first place.

The role of management information systems in organization leadership is to give a heads up

about growth areas before major crises emerge so that they can make proactive decisions. This
results in crisis prevention so that the company can focus on growth.

Goal Setting and MIS

Because MIS provides a plethora of information that helps with proactive decision making, it is
also helpful for goal setting and review. When your management team sets goals for the week,
month, quarter or year, those can be programmed into your management information system.
Then, it is easy to track actual performance against your goals and then either increase or
decrease your goals in the future to make them more probable and make profit margins more
accurate [4].
3.4 Role of IT in E-Commerce and M-Commerce
As you are aware now that every firm needs IT support from low-level processes to high-level
processes. In any organization, IT plays a vital role in automating many processes as well as to
reduce paperwork and human-errors. Apart from this, at management level, IT has different
aspects to learn. When we implement IT support, it increases the chances of business
development a lot but at the same time, an organization needs hardware, software, IT expert
employees to maintain this IT support. So, there is always a trade-off between the gain by IT
Systems and then cost incurred to have IT support systems in organizations. Few perceptions
about IT are mentioned in below figure.

Figure: Perceptions of IT in a Business

As the technology has developed from few decades, there is drastic change in working strategies
in big organizations. In 1950s, if there would have change in business process then it would be
limited to some technical changes. In 1960s, majorly changes reflected in managerial control and
in around 1990 the major changes in information systems are in organizational core activities.
But if you see the case studies after 2005, there is change in the system as organizations used to
have different vendors for different operations. But nowadays, in this cloud computing era, a
business doesn’t need more vendors, rather than they can have a single Management Information
System and which will be working on cloud platform. This enables all employees and customers
for easy access to the system and is more cost effective than purchasing the actual hardware
setups for IT Systems.

Now, we have studied the importance of IT in an organization, now let’s study its role in e-
commerce and m-commerce. What do you mean by e-commerce and m-commerce?
 1. E-commerce:
The process of buying and selling products or services over the Internet by using electronic mode
is called as E-commerce. It refers to Electronic commerce. Generally, e-commerce activities are
performed with the help of desktop computers and laptops, so users have to look for a place to do
their transactions. It is broad term which refers doing shopping and making payments online with
help of electronic devices like Laptop and computers.

Examples of E-commerce includes Amazon, Flipkart, Quikr, Olx websites.

2. M-commerce:

The process of buying and selling products or services over the internet by using wireless
handheld devices is called as M-commerce. It refers to Mobile Commerce. M-commerce implies
the use of Mobile devices for shopping activities and making business transactions anywhere
they go they can do this with just internet connectivity. It is subcategory of ecommerce which
does the same this via mobile devices.

Examples of M-commerce includes mobile banking like paytm, in-app purchasing Amazon
mobile app.

Table: Difference between e-commerce and m-commerce

S.NO. E-COMMERCE M-COMMERCE

01. Electronic Commerce in short it is Mobile Commerce in short it is called as

called as e-commerce. m-commerce.

02. In general, e-commerce activities are M-commerce activities are performed

performed with the help of desktop with the help of mobile devices like
computers and laptops. smartphones, tablets, PDA’s (Personal
Digital Assistant) etc.

03. E-commerce is an older concept. M-commerce is a newer concept.

04. It is broad term which refers doing It is subcategory of ecommerce which

shopping and making payments does the same this via mobile devices.
online with help of electronic devices
like Laptop and computers.

05. In e-commerce the use of internet is But in case of m-commerce some

mandatory activities can be performed without
internet also.
 06. E-commerce devices are not easy to M-commerce devices are easy to carry
carry and portability point of view it and portability point of view it is good.
is not so good.

07. E-commerce developed in 1970’s. M-commerce developed in 1990’s.

08. Its reachability is comparatively low Its reachability is more than that of e-
than the m-commerce as it is not so commerce only due to the use of mobile
good in portability. devices.

09. In e-commerce location tracking In m-commerce location tracking

capabilities are limited due to the capabilities is so good as mobile apps
non-portability of devices. track and identify user locations with the
help of GPS technology, Wi-Fi, and so
on.

10. E-commerce fails in push In m-commerce push notification can be

notification. achieved.

11. Examples of E-commerce includes Examples of M-commerce includes

Amazon, Flipkart, Quikr, Olx mobile banking like paytm, in-app
websites. purchasing Amazon mobile app.

E-commerce is divided into two types, viz.: business-to-consumer (B2C) e-commerce refers to
transactions that occur between a business and the finalconsumer of the product e-commerce
business to business(business-to-business-B2B) refers to inter-businesstransactions where no
party becomes the final consumer,involves relatively few people, and the parties involved
arehighly trained in using information systems and getting toknow business processes.Trade
Through Electronic NetworksSome people define electronic commerce (e-commerce)narrowly,
namely trade, which only covers businesstransactions that relate to customers and suppliers.
Thisdefinition means that only transactions that only crosscompany boundaries can be classified
as e-commerce. If atransaction remains within the company boundary, thesepeople will call it an
electronic business transaction. Limitinginternal versus external transactions will not offer much
help,because most people consider electronic business andelectronic commerce to be the same
thing.Key Success Factors in E-CommerceIn many cases, an e-commerce company can survive
not onlyon the strength of the product, but with a reliable managementteam, timely delivery,
good service, good businessorganization structure, network infrastructure and security,website
design good, several factors include:

1. Providing competitive prices

2. Providing responsive, fast and friendly purchasing services
3. Provide the complete and clear information about product andservice
 4. Provide many bonuses such as coupons, special offers, anddiscounts
5. Give special attention such as the proposed purchase
6. Providing a sense of community for discussion, input fromcustomers, and others
7. Facilitate trading activities

Benefits of trading via electronic networks:

Companies do e-commerce to achieve overall organizationalimprovement. This improvement is

expected to be the result ofthe 3 main benefits that will contribute to the company'sfinancial
stability and enable it to compete better in thebusiness world that applies computer technology,
namely:

1. Better customer service

2. Better relations with suppliers and the financial community
3. Returns on investment in shareholders and owners increases
4. In terms of grouping benefits, can be seen from:
5. Benefits for the company
6. Expansion of network of business partners.

In traditional trade,it is very difficult for a company to find the geographicallocation of its
business partners in other countries or othercontinents. Efficient. It is considered very efficient,
becauseevery company does not need equipment to run this business,and only needs internet.
And reduce all levels of operationalcosts, so that it doesn't seem expensive. Because it is
runthrough online channels. Market expansion. The reach will beincreasingly very broad,
because it is not limited by thegeographical location wherever the company is located.Shortening
Distance. Companies can get closer to consumers.By just clicking on the links on the sites.
consumers can go tocompanies wherever they are.

Benefits for consumers

1. Effective. Consumers can obtain information about products orservices needed and
transact in a fast and inexpensive way.
2. Physically safe. Consumers do not need to go to the storewhere the company sells its
goods, and this allows consumersto trade safely because in certain areas it may be
verydangerous to drive and carry very large amounts of cash.
3. Flexible. Consumers can make transactions from variouslocations, both from home,
office, internet cafe or other places.

Benefits for the end-user:

1. Reducing Pollution and Environmental Pollution.

2. Open New Job Opportunities.
3. Profitable Academic World.
4. Improving the Quality of Human Resources
 5. Customer service improvements before, during, and aftersales
6. Improving relations with suppliers and the financial community.
7. Strategy Business-to-Consumer (B2C) for E-Commerce

The increasing number of products and services available fordigital shipping and the increasing
number of customers areable to overcome their reluctance to make purchases usingthe web. The
faster speed of communication from homecomputers has also made the delivery of digital
products morepractical.

1. Digital Products

Certain products and services can be sent to consumersdirectly through the internet. Examples of
digital products suchas songs, movies, software. Products and services can bedirectly consumed
after downloading.

2. Physical Products

Certain products and services that cannot be directlyconsumed via the internet but must be sent
to consumers.Sales and payment orders can be received through theinternet, after which they are
sent to the buyer.

3. Previous Mode of selling Vs. Mixed Mode

Virtual sales are sales made by a company that does notoperate a physical selling place. With
virtual sales, there is noshop where customers can enter and buy products. Hybridsales occur
when a company has a place to sell physically anda website where customers can buy products.
These two retailsales strategies need to inform customers of product costs andfeatures, manage
customer payments, and produce productshipments. Virtual sales are most often used when
companiescannot build a place to sell physically or find a place to selleconomically feasible
physical sales. Mixed sales aresometimes referred to as brick-and-click operations.
Mostcompanies have a place to sell because usually this is neededfor their business plans. The
most popular example at this timeis the sale of products through social networks such
asFacebook or other sites such as www.kaskus.us, where thesales they do are usually virtual
sales or mixed sales.

4. Electronic Governance

The government can also benefit from e-commerce. Electronicgovernment or e-government is

the use of informationtechnology by the government to provide information andservices to its
citizens, business affairs, and other mattersrelating to government. E-government can be applied
to thelegislature, judiciary, or public administration, to improveefficiency internal, deliver public
services, or democraticgovernance processes. The main delivery model isgovernment-to-citizen
or government-to-customer (G2C),government-to-business (G2B) and government-to-
government (G2G). The most expected advantage of e-government is increasing efficiency,
comfort, and betteraccessibility of public services. The challenge for e-commerceis more than
just the type of goods offered. Many customersare more comfortable using cellular phones than
usingcomputer keyboards.

Mobile Trade

Mobile commerce is the use of cellular telephones andpersonal digital assistants (PDA) to
conduct wireless ecommerce. Along with the development of cellular telephonetechnology from
analog generation to the digital generation,the term third generation telecommunications
(thirdgeneration-3G) have loosely used for wireless technologycapable of transferring data.

Era of Wireless Networking:

With many innovative shopping methods presented by merchants, nowadays developing

countries are increasing their facilities for providing the items an user wants in a very easy, quick
and safe manner. Information Technology (IT) has played an important role in human life today.
The development of information technology has followed with the progress of human
development. The development of information technology is very rapidly triggered by the
information needs quickly, precisely and up to date. Information technology has become a major
facility for the activities of various sectors of life which contribute greatly to fundamental
changes in the structure of operations and management of the organization. Those who
understand ECommerce can see good opportunities in the world of online business. Because
there are many advantages or advantages in online business. These businesspeople do not need to
find a place to do business, do business online only with computers and internet connections, no
need to pay employees, and many more benefits. With the existence of electronic commerce (e-
commerce) services, customers can access and place orders from various places. With the
advanced technology era, customers who want to access ecommerce don't have to be somewhere.
Theadvantage of business strategy in winning the competition thatcan be obtained is that global
communication in the businessbecomes truly alive, faster, cheaper, and easier;
interactivecommunication as a means to show the company's attentionto its customers; provide
information and services inaccordance with the needs of each consumer; enhancecooperation
between teams; The EC makes it possible to opennew markets, products or services; can
integrate outsideactivities and business processes within the company on-line.

Expected benefits from E-commerce

Organizations implement e-commerce to achieve overallorganizational improvement. These

improvements areexpected to be the result of three main benefits:

• Improved customer service before, during, and after sales

• Improved relations with suppliers and the financialcommunity

• Increased economic returns on shareholders andinvestment owners

E-commerce constraints

For implementing e-commerce there are some issues like

• High costs

• Concern about security issues (access to personal data /information)

• Software that is not yet established or not yet available

Thus, if an organization is fully updated with latest IT support systems and Information System,
then it work as a boon for the organization in its development .

3.5 Summary
In this chapter we have studied the business opportunities and challenges associated with it from
various factor. We have seen the probable solution steps in overcoming these challenges. We
have seen the applications of IS/IT in organization and various business systems. IT is very
important in any business but at the same time it incurs some cost for implementations. So, there
is trade-off between IT and business opportunities. We have seen the e-commerce & m-
commerce and effective role of IT in this.

3.6 Review Your Learning

1. Did you understand the business challenges and the source for these business
challenges?
2. Can you analyse the probable solutions for business issues with IT?
3. Are you able to explain the importance of IT in Information Systems and running a
business?
4. Are you able to differentiate between e-commerce and m-commerce?
5. Are you able to write the important aspects in integrating a system?
6. Are you able to recognize probable challenges and solutions in a business according to
given case study?
7. Can you write the applications of IS/IT in various business opportunitiues?

3.7 Questions
1. What do you think a CEO wants from information technology?
2. What is the role of the chief information officer?
3. Why do you think organizations have established the CIO position? What kind of
individual should fill it?
4. Describe how at least one organization gained a competitive advantage with information
systems.
5. How should corporate and IT planning be coordinated?
6. What is meant by the statement that a key challenge for management is the integration of
information technology and the business?
 7. Give an example of how information systems can constrain the opportunities available to
management.
8. What are the motivations for outsourcing or vendor management?
9. What are the options for structuring information processing in an organization?
10. How do managers react in a organization that views IT as a liability compared with a
company where it is seen as an asset?
11. If you became the CEO of an organization, how would you evaluate its information
technology effort?
12. Why should a manager insist on seeing different alternatives when a new system is being
designed?
13. Describe how a manager provides leadership with respect to information technology in
the organization.
14. Discuss the problems with the different political models of IT in the organization.
15. How should an organization decide on proposed investments in IT?
16. What kind of changes does information technology either create or facilitate within and
between organizations? What other changes are associated with IT?
17. What is e-commerce and m-commerce?
18. What is role of IT in e-commerce and m-commerce?
19. What are the different factors creating business challenges?
20. Write difference between e-commerce and m-commerce.

3.8 Further Reading

1. https://core.ac.uk/download/pdf/301346416.pdf
2. https://en.wikiversity.org/wiki/Information_Systems/Applications
3.

3.9 References
1. http://infokara.com/, ISSN NO: 1021-9056, 691, INFOKARA RESEARCH, Volume 8
Issue 10 2019
2. http://basselelgammal.blogspot.com/2013/05/management-opportunities-challenges-
and.html
3. https://www.ijstr.org/final-print/jan2019/The-Role-Of-Information-Technology-In-E-
commerce.pdf
4. https://bizfluent.com/facts-6938756-application-mis-business.html
 Unit 3 (Chapter 6)

ACQUISITION OF INFORMATION TECHNOLOGY

6.0 Objectives

6.1 Introduction

6.2 Need to acquire technology

6.2.1 Developing new technologies

6.2.2 Increasing strategic options

6.2.3 Gaining Efficeincy improvements

6.0 OBJECTIVES

After reading this unit, student will be able to

 Describe the signifiance of acquisiton of technology in information management.

 Classify the motivations of acquiring technology.

 Illustrate the concept of developing new technologies

 Eplain the need of increasing strategic options for a IT frm

 Outline the concept of gaining efficeincy improvements for a IT firm

6.1 INTRODUCTION

 Technology acquisitions involve bringing in new technologies from external sources

rather than using the firm’s using its own research and development activities.
 Bringing in new technologies can provide the company with the opportunity to
develop new products and to come up with new market.

 Technology can be acquired in many different ways depending upon the firm’s
necessity of using that technology.

 Technology aquisition is a technology transfer, with transaction cost associated with

external sources such as licensing, subcontracting, research and development
activities,industry-university collaboration and hiring of employees for a whole
comapany.

 The process of technology is shown in figure below. Technology acquisition require:

a)Identification of attractive technologies or partners with technological
capabilities.b)Assessment of these opportunities, selection of the most promising
ones and consideration of the terms of acquisition.c)Negotiation of the terms of
aquisition between acquirers and sellers.d)Transfer of the technology to the
acquirer, if these negotiations have been successful.

6.1.1 Explanation of each step

Step 1: Acquisition context:- This step leads to the definition of a detailed framework for
the acquisition, including the aquisition motives, the different types of partners that could
be involved, the desired technology readiness level and an overview of the most likely
technology acqusition scenarios.

Step 2: Acquisition evaluation:- This step involves assessing the match between
technological capabilities and market oppotunities, as well as the capability of the firm to
absorp and make great use of the technologies that other firms are developing and also
this step gives a checklist of questions to evaluate the partner-technology-absorptive
capacity combination.

Step 3: Acquisition options:- This step provides assistance to evaluate the different
options associated with such issues as future technological development, exploitation
routes,protection strategies, the type of contract governing the relationship and the
transaction ‘currency’.It also provides open ended questions and case study examples
to support evaluation of pros and cons of each strategic option.

Figure 1: The technology acquisition process

6.2 Need to acquire technology

1. As organization’s motive for wanting to acquire a technology will affect the kind of
technology they are looking for.

2. The partners from whom they decide to acquire it and the process they follow to
make the acquisition.

3. The motivation to acquire technology can be broadly classified in to

3.1 Developing new technological capabilities

3.2 Increasing strategic options

3.3 Gaining efficiency improvements

3.4 Responding to the competitive environment

4. Academics have used two main models to understand technology acquisition. The
first, a linear model, suggest that only developing country firms acquire increasingly
complex capabilities (allowing them to use and maintain technology) in order to develop
innovative technologies for themselves.

5. The second model is the non linear model, in which employees of the company
update their skills upon introduction of new technology acquisition in the firm.

6. Firms can use a number of strategies to acquire technology successfully like as

follows

6.1 Firms uses training and learning programmes to acquire design, engineering and
project management technolgies.

6.2 Successful firms used post graduate training programs for engineers and managers
to acquire problem solving skills.

6.3 To acquire more knowledge on technology, some domestic firms establishes

research and development centres for employees.

7. Eg A study of 26 telecommunication firms in Ghana, South Africa, Tanzania and

Uganda has shown that a number of firm-level actions can be taken to improve
technological acquisition for developing countries. For example, importing firms can:

 improve their selection of training instructors and 'experts' by being more active
in the screening process;
 stay in regular contact with their suppliers;
 make sure suppliers and clients share the same objectives;
 involve clients in a wide range of acquisition activities;
 improve access to social networks within supplier firms;
 use joint learning mechanisms like equipment trials and test sites;
 ask suppliers to disclose more information before contracting them;
 make use of scan and search mechanisms like trade fairs and exhibitions;
  negotiate bilateral and multilateral funding terms that do not reduce technological
choice;
 encourage participation of technological specialists in regional organisations and
industry forums;
 actively seek out information from shareholders and strategic investors;
 establish strong and effective management systems, particularly for
organisational development;
 support technological experimentation;
 engage senior leadership in technological acquisition strategies; andpromote
higher-order learning.

6.2.1 Developing new technological capabilities

1. One of the fundamental motivation for the acquisition of external technologies is the
need to develop new technological capabiliites and to fill gaps in the Research and
Development knowledge base.

2. The objective of these acquisition is sometimes to fill holes in an existing product line,
while in other cases it is to create and establish a brand new product.

3. This need may arise as specialist technical expertise and capabilities are often
difficult to obtain and firms may not have the ability to develop these valuable
knowledge based resources internally.

4. This may be the case, for eg when the technological knowledge of a firm is close to
exhaustion and most of the possible technological combination have already been tried.

5. The development of technological capabilities should not be thought of as the ability

to undertake leading edge innovation, whereas innovative capabilities are an important
part of technological capabilities.

6. Technological capabilities comprise a much broader range of effort that every

enterprise must itself undertake in order to develop knowledge to be utilized in
production.
7. Technology capabilities is more than the sum of the education and training of a frim’s
employees.

8. For most firms in developing countries, a large proportion of technology is imported,

usually as a ‘bundle’ that includes equipment, software and codified knowledge in the
form of equipment handbooks, training course materials, maintenance procedures and
protocols. This process is commonly referred to as technology ‘transfer’.

9.Developing country firms actively search for technological solutions and install, test
and commission technologies, work with international suppliers as partners.This type of
active engagement produces better returns on investment in technology and fosters
improved familiarity and confidence. So the process is better described as technology
'acquisition'.

10. The ability to acquire technology varies across firms in developing countries. For eg
a single foreign company may sell the same technology to different domestic firms, but
the service will be different for each firm.

11. The capability is both embodied that is held in people and non-embodied as a
property of components as shown in figure below.

Figure 2: The elements of technological capability

12. The tasks and the associated technological capabilities can b classifed in two broad
category 1)Investment capability 2)Production capabilitis as shown in table given below
Table 1 Illustrative matrix of Technological capabilities

Investment Production
Level of Pre investment Project Process Product Industrial
Complexity execution engineering engineering engineering
Simple Pre-feasibility Civil Debugging, Assimilation of Work flow,
Routine and feasibility construction, balancing, product design, scheduling,
(experience studies, site ancillary quality control, minor adaptation time motion
based) selection, services, preventive to market needs studies,
(experience erection, commissioning maintenance, inventory
based ) scheduling of assimilation of control
investment process
technology
Adaptive Search for Equipment Equipment Product quality Monitoring
Duplicative technology procurement, stretching, improvement, productivity,
(search source, detailed process licensing and improve
based) negotiation of engineering, adaptation and assimilating new coordination
contracts, training and cost saving, imported product
bargaining recruitment of licensing new technology
suitable terms, skilled technology
information personnel
systems
Innovative, Basic process In-house process In-house product
Risky design, innovation, basic innovation, basic
(Research equipment research research
Based) design and
supply

6.2 Increasing Strategic options

1. Acquistions can enable a firm to improve its strategic flexibility.

2. Increasing its internal technological capabilities, can give the company more strategic
options, allowing it to select the best available technology.

3. For eg

3.1 Acquisitions can encourage innovation, countering inertia and rigidity and increasing
R and D productivity.
3.2 Relying on incremental improvements to existing technologies may limit a firm’s
poetential.

3.3 Experimenting with novel and emerging technologies can provide opportunities for
more radical innovation.

4. Eg Acquisitions can open new markets by allowing the knowledge of new customers,
channels, inputs, processes and markets to be exploited.

5. Acquisitions may help to deal with uncertainty and risk. Companies operating in high-
tech industries are often dependent on uncertain future outcomes or developments. In
such cases, managers are more likely to avoid risky internal investments in R and D
with long term pay back periods, investing way of keeping their options open until the
risks and uncertainty diminish.

6. The firm’s have a different strategic options for regulating and managing the
acquisition. Like as follows

6.1 Future technology development

6.2 Contracts and relationships

6.3 Ownership of intellectual property (IP)

6.4 Technology exploitation

6.5 Rights to use a technology

6.6 Exchange ‘currency’

6.7 IP protection

7. Future technology development- There are three main approaches to this a)The
technology can be developed internally by the acquiring company b) It can be done
externally by the technology provider c)It can be carried out collaboratively between the
two. The choice of development path will depend on a number of things including the
type of technology involved, the resources available, the degree of control the acquiring
firm needs to maintain over the technology and the strategy driving the acquisition.

Figure 3: Internal development

Figure 4 External Development

 Figure 5 Collaborative Development

8. Contracts and relationships: Another dimension of acquisiton to consider conserns

the relationship between the parties invloved. The formal relationship between the
parties will be governed by some kind of contract designed to protect the parties during
the transactions and acts as a guarantee that the relationship will be profitable for both
sides. The contract may range from R and D services at one end of the scale, to a joint
venture or even take over by one company of another. The framework depicted below is
used by many firms to create a contractual relationship with another firm on based on
these parameters given in framework.
 Figure 6 Framework of a relation between technology development and
contractual/relationship options

9. Ownership of Intellectual property- An important point of debate for any technology

acquisition is the ownership and control of the intellectual property (IP) relating to the
knowledge generated or transferred. Ownership can take one of three different forms:
a)The IP can belong to one party only b)The IP can be shared between the parties who
collaborated to develop it. c)The IP can be owned by everyone and is donated to the
public.
 Figure 7 Four different approaches to IP ownership

10. Technology exploitation:- Decisions concerning the ownership of IP are

intrinsically linked with decisons over how to exploit it a)A firm may want to exploit a
technological IP by embedding it in products and services.b)A firm may want toexploit
the technology with a number of business models and sell it in its disembodied form(I.e
licensing it).

11. Rights to use a technology:- The IP can be exploited along multiple dimensions,
ensuring that each party can take full advantage of the rights of the IP in their particular
area. The major dimensions are geography, time frame and field of use, but the IP can
also be divided alon the technology axis. For eg when two companies are woring on
same project, so one company is located in India and another in USA, so if both
companies wants to file a patent for same product, they has a right to do so as area of
both the companies diffier due to their locations.
 Figure 8 Division of technology rights

12. Acquisition currency: The acquirer can offer the seller a number of different kinds
of benefits in exchange for the technology. The terms of an exchange are spcified in the
contract under th legal terms of consideration. It is helpful to be clear about what is
exchanged in return for a technology as the implicit benefits of collaboration can often
be overlooked.

Figure 9 The three main kinds of ‘currency’ that are used in exchange of technology
13. IP protection:- Transferring technology knowledge from one organisation to
another (whether in the form of know-how, know-what or know-who) is well known to be
problematic as far as IP is concerned.

Figure 10: The preferred protection mechanism for different types of knowledge

6.3 Gaining effeciency improvements

1 The need to innovate more rapidly is another motivation for technology acquisition as
it can reduce the time to market.

2. The internal development of new capabilities may take too long time or too costly.

3. Technology acquisition can create these more quicky so that firm can be more
responsive to market demands.

4. There are often cost advantages to acquiring technologies externally.

5. Firms substitute fixed investment costs with variable acquisition costs and such costs
can be recovered via profits from new businesses that follow a partnership based
strategy.
 Figure 10 checklist for identifying firms motives for acquiring technology

The above figure can be greatly explained with the help of case study

Firm A, in collaboration with a consultancy firm, developed a new production

process technology which allowed the making of products with a unique shape
feature.

The company decided to opt for an embedded exploitation strategy for this new IP,
using the technology for its products which, as a result, could be highly customised
and uniquely shaped. This was considered a potential unique selling proposition for
the firm which would be the only world supplier offering such a range of products.
Furthermore, the new processing technology left an unmistakable fingerprint on the
products which could be used to uncover potential emulators and patent infringers.
The company obtained three process patents covering this production process and
proceeded to commercialise its new range of products with its customers.

It was a struggle to create the market for this particular product, with customers still
sceptical of the advantages of adopting the new product lines. Several years after
the patents were granted, the legal department realised that a competitor was
launching similarly shaped products and that there was almost certainly an
infringement of their IP.

To investigate the issue, neutral assessors were sent to the competitor’s production
plant to evaluate the patent infringement. They estimated that only one of the three
patents had been infringed and that there was only a 50 per cent chance of winning
a case in court. Furthermore, due to the small scale of the market, the potential
damages which could be recovered if Firm A was successful were smaller than the
expected costs of the trial itself. Firm A decided not to pursue the case.

In their retrospective analysis of this situation, Firm A realised that they had been
focusing too much on the ‘embedded’ exploitation route and that the protection in
place was not adequate for this approach. The patent was a good means of
protecting the technology and of identifying potential infringements, but this
protection route would only have worked if they could claim damages for infringed
rights.

Firm A realised that an alternative approach would have been to adopt the
technology in their products and to also license it to competitors. This would have
had the advantage of growing the market as the customers could use multiple
suppliers. It would also have meant that some of their competitors would have
depended on their technology.

Weight(0-10) Description

Develop Technological 6 out of 10 as Is acquisition

capabilities company is able sought to
to achieve only
Motivators  Help in
two points from
developing a
description I.e
unique
1st and 3rd point
shape
 features of
product

 Fill hole in
an existing
product line

 Created and
established
a new
product to
the firm

Increase Strategic 9 out of 10 as  Is company

option company of firm obtaining a
is able to new IP using
achieve the the
strategy decided technology
for launching of for its
new product products to
be highly
customised

Gain efficiency 7 out of 10 as  Is firm

improvements company is not reduce the
able to achieve production
the goal of time .
creating interest
 Is firm
among
reduce the
customers.
cost also

 Is firm
 created a
interest
among the
customers to
buy this
product

Respond to the 10 yes firm is  Is firm is

competitive environment realized by making an
making an strategy to
strategy for respond to
increasing the the
sales than their competitors
competitors

Questions

Q1. Explain the need of acquisition of technology

Q2. What are the ways for acquiring of technology

Q3. Explain the concept of developing technological capabilities w.r.t to need to acquire
of technology.

Q4. Illustrate what is importance of increasing strategic option for any firm with the help
of case study.

Q5. Write down the steps of technology acquisition

 Unit 3 (Chapter 7)

ACQUISITION OF INFORMATION TECHNOLOGY

7.0 Objectives

7.1 Introduction

7.2 Sources for acquiring technology

7.3 Responding to the competitive environment

7.0 OBJECTIVES

After reading this unit, student will be able to

 Describe the importance of sources for acquiring of technology.

 Classify the different types of socurces for acquiring technology.

 Explain the concept of responding to the competitive environment.

 Choose a technology perfect for a firm to handle the market and to their
competitors.

7.1 Introduction

 New technology can be acquired in the firm through many channels or sources, one
of the channel is through collaboration.

 So collaboration brings advantages in relation to pure internal development or

purchase from external developers.

 Sometimes collaboration with new industry partner for the technology acquisition
can be risky due to the prior limited experience of working with the new one.
 If a firm chooses a collaboration method for technology acquisition then, the firm
and its partner should agree on how costs and benefits of the outcomes will be
shared, cultural differences might reduce the quality of coordination and
communication and the acquisition project may not be considered successful if the
outcomes are not deployed.

 Therefore, managing technology acquisition by collaboration is an complex task if

the goals for acquiring technology between the firms is not clear.

 Another channels or sources of acquiring technology includes private companies,

universities and government agencies.

 It may be acquired from a single organization or more than one can be involved in
the form of consortium.

 It is very important to understand the characteristics of your potential partners as

these will determine their expectations and behavior during collaboration.

7.2 Sources for acquiring technology

1. Universities

1. Universities are more seeking interested in the commercialisation of research but are
generally inexperienced in commercialising IP.

2. Regulations regarding ownership of academic research outputs vary from country to

country.

3. The Bayh Dole Act has drastically modified the relationship between firms and US
academia for instance.

4. An element of tension exists between academics who want to publish the work with
the industry who want to filing a patent for that same work.

5. Another issue is that high turnover of people in academia might lead to information
leaks.
6. Universities fall in to two categories.

6.1 Universities with a track record of new technologies which have already been
brought to the market, along with good technology transfer office are considering by
firm’s an easiest way of acquiring new technology. For eg open innovation manager or
any electronics company

6.2 Sometimes universities are difficult to work with a firm, if universities want to own IP
and want to become a inventors of new technology, but that is not fit a firm as firm’s are
bearing the costs of scaling up a new technology in the market. For eg Acquisitions
manager, large company

2. Start-up companies

1. Start-ups can be an important source of ideas for larger companies.

2. However, they are typically lacking in resources and business knowledge and are
often subject to the influence of their investors(eg venture capitalists).

3. They may be more flexible but also more volatile than established firms.

4. They may own only one technology and the fear of losing control over it might lead to
over protective attitudes.

5. Partnerships between start-ups and established firms can be mutually beneficial.

6. Research shows that making such partnerships work may be mutually beneficial.

7. Research shows that making such partnerships work may be problematic, but there
are ways to increase the chances of success.

3. Consortia

1. Consortia are becoming common.

2. A firm gets together with other types of organisations(mix of universities, industry and
governement bodies) typically to tackle complex technological issues which would be
difficult to deal with an isolation.

3. Consortia are more common in industries with long technology life cycles such as
pharmaceuticals.

4. This industry require access to a wider set of competences beyond the traditional
areas of chemistry and pharmacology-such as molecular biological, nano technology
and computational science to guarantee future innovation.

5. Types of consortia

5.1 Pre-competitive research consortia: these are an important mechanism to share risk
and investment with others.

5.2 Policy maker consortia: these could be a bad investment as the government dream
for a particular project and fund it. But these consortia do not work well due to lack of
motivation between the collaborators.

5.3 Supply chain consortia: they resemble joint Research and Development projects in
which many companies are paying for one firm to do the work, this work well if there is
strong bond of collaboration is there. Eg senior manager, large energy firm

Figure 1 Possible partnership options for technology acquisitions

7.2.1 Technology maturity

1. If the firm want to acquire the technology in its own space then require certain level of
maturity between the development of product till the product is not reached to a market.

2. The maturity level and the amount of work needed to bring it up to the level your firm
requires are highly significant factors for considering in the context of any acquisition.

3. There are many ways of measuring maturity of a technology. This will be shown
below

3.1 First measuring maturity model of technology development process is (STAM)

1. Sceince(s):- Development of understanding of scientic underpinning technology

platform.

2. Science/Technology transition(S->T):- Demonstrating the feasibility of a scientific

underpining technology to support a new market-directed technology platform which is
more feasible in supporting sceince and technology to be integrated together to develop
a application specific system.

3. Technology:(T):-Updated technology improves the raliability and performance of the

product which is likely to be delivered in the market which is full of competitive
environment.

4. Application(A):- Application which is constructed with latest technology is be a part of

market with more number of potential users to buy it.

5. Application/Market transition(A->M):- Translating price-performance demonstrators in

to a market with mass growth potential.

6. Market(M):- Marketing, commercial and business deelopment leading to sustainable

growth.

7. Framework for STAM is shown below.

8. A Firm asks useful question before acquiring any technology from a source/channel
8.1 What type of organizations could be considered as a source for the technology?

8.2 What are their key characteristics?

8.3 What are their motivations in selling/giving the technology to us?

8.4 What alternative partnering options coul we consider?

8.5 What degree of maturity characterises the technology currently?

8.6 What degree of maturity will the technology have at the end of the acquisition?

Figure 2: Framework for technology sources and technology maturity levels

Above figure explains framework of technology souces, along with maturity levels . So if
any firm is using above framework to meaure the maturity level of technology sources ,
will get an proper feedback about new technology which is aquired newly in the firm.
 For eg Casestudy depicted here shows how a aerospace company is done
collaboration with goverenment’s scientific organization.

A firm in the aerospace sector is considering a collaboration with a Government

scientific organisation. The key characteristic of this organisation is that it is ‘not-for-
profit’ and hence its objectives for the collaboration are very different to the firm’s. For
example, it aims to reinvest the payment it receives from the company in further
research and in this way meet the expectations of

the Government, a key stakeholder. Being clear about the expectations of its
prospective partner helped the aerospace company to anticipate future problems. The
framework above supported a discussion concerning the possible forms such a
partnership could take in relation to the acquisition

of very early stage technology. The discussion showed that there was an alternative to
a one-to- one relationship between the aerospace firm and the not-for-profit
organisation. This involved a consortium of industrial and academic partners. Forming a
consortium could require those involved

to contribute to its cost. Alternatively, external funding could be found, for example
through European grants. A grant might impose constraints on the partnership
composition. For example, the consortium might need to include different kinds of
members.

Now we will solve above case study using the STAM framework depicted above

Current Potential sources for the technology

and
One to One(S->Very Low,T->Low, A->Medium, M->High) One to
Expected Many
technolo
University Governement Individual Consultant Large Small Consortium
gy
maturity comp Comp
levels
X X X X X X

X X X X X X

X X X X X X

X X X X X X  (M)

Conclusion- So a firm is using consortium with government organization

X- Indicates that firm is not using any of the matuirty levels of technology from one to
one sources

 - Indicates firm is using consortium as a source of acquiring technology with another

firm and also considered a maturity level of technology for collaboration.

7.3 Responding to the competitive environments

1. Firms are more likely to consider technology acquisitions as environments become

more hostile, when there is rapid technological change and fast-moving competition in
their market area.

2. Acquiring technologies helps the firm to feel less vulnerable and more competitive.

3. In such an environment it is likely there will be a greater use of partnerships,

collaborations and outsourcing as a substitute for in-house activities.

4. To remain competitve, large technology companies must clearly define their growth
aspirations, establish a feasible business growth strategy, and align the operating model
and appropriate capabilities to deliver on the strategy efficiently and effectively.
5. Deploying an integrated strategy-through-execution approach will help companies
guide the strategic planning processes and accelerate deployment of the growth
strategy.

Figure 6: Strategy through execution approach

6. By using approaches shown in above diagram, the company can improve their
growth in an timely manner and company will b better able to

6.1 Create a seamless connection between strategic growth aspirations and operational
implications:- Execution teams should define the end state of their growth aspirations
and think positively for different approaches of strategies. For eg For example, strategy
implications on operations may include a shift in sales channels, geographic footprint,
strategic partners, information systems, or changes in cultural norms to foster the
desired results of the strategy.
6.2 Establish a systematic approach for aligning effective operating models to growth
strategy plans:-By design, business models and their supporting operating models shift
over time.

6.3 Right-size assets and capabilities to improve alignment and focus on strategic
plans:-For example, a Silicon Valley company going through separation optimized two
separate cost structures and deployed a team to optimize operations in parallel with
deploying a growth strategy investment. Doing these activities in parallel allowed this
company to realize its strategic agenda much quicker than if it did these activities in
series.

6.4 Increase transparency on goals and expectations for all stakeholders:- To increase
the speed of strategy deployment, changes spurred by innovation cannot be deployed
in series. Many elements must work together to improve response time, and employees,
suppliers and distribution partners all have key roles to play.

7. Case study depicted here will resemble how an firm research for a market to stand in
an competitive market- A chemical company

An experineced R&D mananger of a chemical firm suggested possible technology

acquisition scenarios in terms of

A) The readiness level of the technology:- At what point in the innovation process will
the technology be acquired? This might be at the research stage, during the
development stage, or close to commercialisation.

B) The market in which the technology will be employed:- Will the technology be applied
in an existing market or one which is new to the firm?
Market in Technology readiness level
which the
Research Development Commercialisation
technology
will be Current Not very This is most Not common
employed Market common- as common
company’s situation.
own internal Here a
team is company go
strong to for licensing,
achieve joint venture
progress or merger
and
acquisition
with other
companies

New Market For example Unlikely Unlikely scenario

collaboration scenario
with a
university.
Technology
could be co-
developed
under an
umbrella
agreement
or might
involve
partial equity
investment
 which allows
the company
to be once
removed
from the risk.

Miscellaneous

Case study on Technology acquisition - sourcing technology from Industry partners.

Kaza Oil, a subsidiary of a large chemical company, was engaged in an R&D

programme aimed at developing new solutions that may increase the safety

and integrity of gas pipelines. At that time, the latest progress on fibre optic seemed to
enable this technology for a new range of applications in industry.

Kaza Oil asked Erwin Optoelectronics, a firm specialised in fibre optic sensing
technologies, to carry out a state of the art and technical feasibility study to

use fibre optics to monitoring the integrity of gas pipelines. The results of the study
pointed out that additional research work was needed to determine the

technical and economic feasibility of the technology.

Kaza and Erwin pushed the formation of a consortium to develop new technical
knowledge on this technology. After some months, the consortium

provided such positive results that both firms became interested in developing
technology concepts.

The concepts they developed worked so well that both companies signed a joint
development agreement to develop products based on this technology for gas pipelines
integrity surveillance. Erwin was in charge
of laboratory tests and product development while

Kaza provided the infrastructure to execute field trials

and the operative specifications of the products.

Both companies jointly own all the intellectual property rights emerged from the
partnership; however, Erwin is in charge of the commercialisation

of the resulting products and services. Kaza, on the other hand, has a substantial
discount on the public prices of the family of products and services based on this
technology.

Solution to above case study

The case studies suggest that there are three conditions to achieve effective acquisition
of technology by collaboration.

1. Effective partnership management: A stable partnership is required to keep the

participating firms committed to the project.

2. Effective execution of the co-development project- The quality and performance of

the outcomes greatly depend on the availability of appropriate technical resources and
coordination between the technical terms.

3. Effective transference of the collaboration outcome to the recipient system:- If the

outcome of the project is not transferred to the value chain of the acquiring firm, the
chances to obtain a return on the investment are severely reduced.

4. The framework also indicates three key tasks that need to be effectively managed in
order to achieve success.

4.1 Project management is one key task in technology acquistion by collaboration.

Firms may increase their ability to manage partnerships by implementing systematic
procedures to manage collaborative business relationships.This standard includes eight
processes that reflect the overall lifecycle of a collaborative relationship:
awareness,knowledge,internal assesment, partner selection, working together, value
creation, staying together and exit strategy.

4.2 A second key task is managing the co-development project. International

organizations such as the product development management association(PDMA) and
the project management institute(PMI) have produced a number of guidelines to
systematically manage the development of new projects.

4.3 Third key task is transfering the technology to the recipient system.These three
tasks seem to be critical to success in technology acquisition projects. Effective
partnership management becomes particularly important when an industry partner is
involved.
Figure 7: Key activities and influential factors in technology acquisiion by collaboration.

Questions

Q1. Explain the three ways of sources of acquirng technology?

Q2. Why universities are not conidered is better way of acquiring technology?

Q3. Describe in brief about consortia?

Q4. Illustrate the concept of Responding to the competitive environments?

Q5. Consider the STAM model for Chemical company if company wants to collaborate
with government organization?

Q6. Why start-up companies as a source of acquiring technology is suitable for small
companies?
 Unit 4 - IMPACT OF INFORMATION TECHNOLOGY ON ORGANIZATION AND
STRATEGIC ISSUES OF INFORMATION TECHNOLOGY

Chapter 8

IMPACT OF TECHNOLOGY ON ORGANIZATION.

8.0 Objectives

8.1 Introduction

8.2 Modern Organization

8.2.1Organisational Structure and Design

8.2.2 What is Organizational Flexibility?

8.2.3 Impact on Flexibility and Information Technology runs the Airline

8.2.4 Co-opting the Travel Agent

8.2.5 Technology Transform the Securities Industry

8.2.6 Natural Growth Generates an Impact

8.2.7 Conclusions

8.3 New Types of Organization

8.3.1 Examples of Design Using IT variables

8.3.2 Adding People to the Design

8.4 Building a T-Form Organization

8.0 OBJECTIVES

After reading this unit, student will be able to

 Describe the structure of modern organization used by IT firms nowadays.

 Classify the ways of Information technology on the organization

 Explain the need of creating new types of organizations.

 Model the T-Form of the organization

 Illustrate the concept of adoption of T-Form in the organization

8.1 INTRODUCTION

1. Technology impacted the business also as organization change their way of doing
business they had done in the past before technology came in to existence.

2. Technology has created flexible environment for the whole organization, as

technonology has greatest potential to design an entire new organization from
traditional one.

3. This effort of Information technology is turns out to be an most significant contribution

till yet.

4. An organization can be defined as - is a rational coordination of activities of a groups

pf people for the purpose of achieving some goal.

5. The activities of the group of people are coordinated that is there is a joint effort
between the group of peoples.

6. The formal organizational chart structure shows that there is a well defined
relationship between the managers and workers which shows the rational coordination
among them.

7. In Organization when a group of people interact with each other, so this interaction is
nothing but creation of social organization which lacks goals to achieve and does not
possess any structure.

8. In formal organization is the pattern of relations and coordination among members of

the formal organization that is not specified on a formal chart.

9. To design information system, realistic standard rules and procedures has to be

followed, to get the system workable.
10. As prescribed rules are not followed by all the peoples of organization, as we are
adhered closely to formal organization must consider both patterns (that is Formal and
Informal) organization to get the system workable.

11. Advantages of Impact of IT on Organization

1. Reduces office space.

2. Decreases the number of employees.

3. Improves job satisfaction.

4. Increase the productivity & Marketing.

5. To help decrease the work.

6. Provide the security to Organization.

7. To manage the Data and Time schedule

8.1 Modern Organization

A. It means a boundary-less organization which is networking together and collaborating

more than ever before.

B. Modern Organization follows the structure which is boundary-less ,learning and

Matrix like attributes.

8.2.1 Organization Structure and design

I. Uncertainty

1. One of the major factors influencing organizations is uncertainty.

2. An organization and its managers has come across many different types of
uncertainties.

3. For eg Technical uncertainties always exist whenever a new product can be

manufactured and work properly or not.
4. Market Uncertainties exist when a firm having a less knowledge about how a product
will be received potential demand of the product response from competitors and so on.

5. Sometimes uncertainty creates in internal management level itself as individuals may

not adequately perform their tasks). Thus the organization and its managers face many
different types and degrees of uncertainty.

6. For eg A chip manufacturing company like Intel is not facing any uncertainty as they
have a decentralizing decision at management level which handled uncertainty at a
great level.

2. Specialization

1. Another major consideration in organizational design is specialisation.

2. Every task to perform in an organisation requires a specialist to perform that
particular task.
3. For example - to run a complicated machine tool there is an requirement of
skilled engineer, whereas to clean a building there is requirement of sweepers.
4. So, standpoint is that information services department is highly specialized and
requires a level of technological proficiency on the part of its staff.

3. Co-ordination

1. If an organization requires an specialization, so the task of management is to do

coordination between diverse set of specialities to achieve the goals of
organization.
2. For example - the marketing department may want to produce a particular item in
each style and colour for every warehouse as this reduces the uncertainties and
produces a good customer service, but also at the same time, manufacturing
 department may not produce same item which leads to conflict between two
departments.
3. So there the role of management is to resolve the conflict between the specialist
by coordinating among them.
4. So here information technology helps managers to create coordination among
groups in the organization.

4.Interdependence

1. The last factor that is to be considered in organisational structure is

interdependence.
2. This means in one organization how the different departments or subunits within
the organization are dependent on each other.
3. Three types of manual dependence is as follows :-

I Pooled interdependence –

i)This occurs when two organizations depend on each other as they are all
components of a larger organization.

ii)One unit does not depend directly on another

iii)For example – the small companies that are part of a larger company exhibit
pooled interdependence.

II Sequential interdependence –

i)This means when the output of one unit becomes the input of another firm.

ii)For example – a student depends on the professor to explain concepts in class

so that she can do her assignment and the professor depends on students to
prepare for class.
 8.2.2 Organisational flexibility

I Introduction

i)Flexibility is the ability to adapt when confronted with the new circumstances.

ii)Flexibility provides the organisation with the ability to adapt to change and
respond quickly to market forces and uncertainty in its environment

iii)Technology changes the pace of work i.e in general technology speeds up the pace
of work and increases the capacity of the organization to process information.

iv)For example – technology has made it faster to search a library book catalogue, to
communicate with someone at a remote location and to perform a number of tasks.

v)Technology also alter time and space boundaries for work, for example – using
electronicmail and computer conferencing- colleagues working on a project do not have
to be in the same physical location.

vi)Thus, these impacts of technology helps in increasing flexibility in an organizational

structure.

vii) Thus organization can increase its ability to respond to customers, competitors and
the environment in general.

8.2.3 Impact of technology on organizations flexibility

To describe the above point, here we start with an example which will clearly
explain this point.

Use of Information technology runs the airline industry –

i) In the early days of airline travel, if we wanted to make a reservation

everything was done manually and there was no actual record associating
your name you’re your flight.
ii) The problem with this approach when the number of available seats began
to jumble up, a reservation office had to call a central location to be sure it
could sell a seat or not.
iii) So one never knew for sure if he or she had a reservation because a name
was never associated with a reservation record.
iv) In the late 1950’s, American airlines realised that its manual reservation
process could not keep up with the expected growth in travel.
v) At that time, batch mode is used, where all data were collected at once, key
punched and used to update computer files at a later point in time.
vi) But such an approach would not work for an airline reservation system
because people throughout the country need to be able to update and
inquire against files instantly.
vii) IBM had at this time completed a defence system called sage, which allowed
operators to interact with real time data from radar.
viii) So, IBM and American airlines established a joint product to develop an
automated airline reservation system that would be on-line.
ix) IBM would develop the control programme that managed the online
processing, while American airlines would write the applications programme
that provided logic for making airline reservations.
x) Thus this computerised airline reservation systems maintain a large
database that contains the name of passengers associated with their flights.
xi) What was the initial impact of the airline systems in terms of time and space,
you could make a reservation anytime of the day or night from virtually any
place in the world.
xii) Second impact was that the airlines with reservation systems could provide
better services to their customers as they had historical data on reservation
and boarding.
xiii) Third impact is that one would have great difficulty in starting up an airline
reservation system without a proper reservation system; for ex – Donald
Byor chairman of people express, pointed out the lack of decent reservation
system, as one of the factors that lead to the shutdown of his airline.
 xiv) In recent years, the airlines developed yield management systems where
these programs look at the future flights and dynamically adjust the number
of special fare seats depending on the number of reservations so far.

8.2.4 Co – opting the travel agent

i) For several years the airline industry waited for an agreement on a common
reservation.
ii) So, finally United kingdom and Americans began placing terminals
connected to their system in travel agencies.
iii) This move proved to be tremendous benefit for both the agent and the airline
iv) First order impact –
a) was a dramatic increase in the productivity of the travel agent.
b) once the travel agent made a reservation he or she could have the ticket
printed automatically, so effect of this is each employee of the agency would
write more tickets in a day.
c) Another impact is the change in organizational structure and boundaries for
reservation.
d) As enhancement to the system allows agents to issue boarding passes with
tickets.
e) Information technology takes care of the first part of boarding the plane well
before the day of the flight
f) Today many airline systems offer etickets which cost less than $1 whereas
printed ticket costs for $8.
g) Each airline system tried various approaches to using a CRS to increase its own
bookings.
h) A second order impact of the System is a revenue-generating feature. For eg
when an agent using American books a ticket on Northwest, northwest must pay
American a booking fees of about $2.50 to $3.00 per leg.
i) So in short, the airline CRS provide flexibility for the airlines, travel agents and
travelers.
 j) Technology has affected the booking of flight and managing of passengers from
reservation to flight completion.
k) So service is speeded up and is more convenient. Eg Security Industry

8.6 Natural Growth generates an impact

1. By 1999,all the major exchanges were looking at replacing or supplementing

their trading floors with electronic exchanges.
2. Today several exchange offer after hours trading for 24 hours
3. After hour trading will take place only through computers and communication
networks
4. Within a few years, it should be possible to trade securities from virtually any
place in the world, any time of the day or night.
5. For eg Etrade.

8.2.7 Conclusions

Above examples show how information technology affects organizations flexibility in two
major industries

8.3 Creating New types of organization

1. Technology makes it possible to create new forms of organizations
through the use of different design variables.
2. A variable is something that takes on different values.
3. For eg Interest payment(p), interest rate etc are the variable .
4. For organizations, we have design variables like the span of control, a
number that can take on different values that one can use to build
organizations.
5. It contains two types of variables: conventional and one from information
technology.
6. Information technology is defined to include computers
communication,video confering,AI, Virtual reality etc.
7. The problem with conventional organization design literature is its failure
to recognize the new design variables enabled by information technology.
8. In organization nowadays email or groupware is used for communication
instead of conventional solutions such as liason agents.
9. New kinds of It design variables are aas follows
9.1 Virtual components
a. Virtual Components:- 1) The organization can use IT to create components
that do not exist in conventional form. 2) Foreg Some Manufacturers want
parts for production for their inventory, so here supplier is linked through
electronic data interchange with the manufacturers. So benefit for this
manufacturers will get virtual raw material inventory for production.
b. Electronic Linking:- 1)Through Electronic mail, electronic or video
conferencing and fax, it is possible to form links within and across all
organizational boundaries.2)Electronic linking also facilitates monitoring and
coordination, especially from remote locations.
c. Technological Leveling:- 1)It can substitute for layers of management and
for a number of management tasks.2)In some organizations, layers of
management exist to look at edit and approve message received from lower
level employee and forward to higher level bosses.3)Technology makes it
possible to increase the span of control and possibly eliminate layers in the
organizaton, leveling it in the process.
d.Work Process:-
1.Production Automation:- a) The use of technology to automate
manufacturing process is well documented in magazines and newspapers.
B)It is also used extensively for automating information processing and
assembly line tasks in the financial industry.
2. Electronic Workflows:- a)As organization eliminate paper & perform most of
their processing using electronic forms and images workflow languages will
also be used to route documents electronically to individuals and workgroups
that need access to them.b)Electronic workflows also contribute to the
monitoring and coordination of work.
 3. Communications:-1) Electronic Communication- Electronic mail,electronic
bulletin board and fax all offer alternatives to formal channels of
communication. 2) Technological Matrixing:- a) Through the use of
email,video and electronic conferencing and fax, an matrix organization can
be created.b)For eg using email or groupware, organization marketing, sales
& production for a trade show, participants would report electronically to
supervisors and team leader for the show- thus creates a matrix organization.
4.International Relations:-a) Electronic customer / supplier relationships:-
a)Companies and industries are rapidly adopting electronic data
interchange(EDI), internet and internet technologies to speed the ordering
process and improve accuracy. b)For eg firms acting as virtual components.
Conclusion
1) Firms have used information systems to provide control after the
organization has been designed.
2) For eg Mrs Fields cookies uses a variety of traditional and IT variables in
creating an organizations.
8.3.1 Examples of Design Using IT Variables
1) The variables shown in table as conventional and traditional used to create the
T-form(technology form) organization.
2) In addition to the T-form, it is possible to characterize four new organization
structures that make use of the IT design variables.
3) The table given below shows each organization and how the IT design
variables contribute to its development.
4) Conventional organization have historically grouped workers together to
establish communications and coordination.
5) In contrast to physical presence, IT design variables allow for virtual
organization structures.
6) With electronic communications a physical organization is not needed for
many kind of tasks.
7) For eg Many catalog operations use individuals working from their homes
using a phone connected to an 800 number.
8) The virtual organization creates new management and corrdination
challenges.
9) Foreg Microsoft offers Net meeting on its network which makes it possible to
coordinate work on Pcs in different locations.
10) Foreg CU-Seeme is a program developed at coronell. It is free and lets users
on the Internet set up small video conferences using inexpensive cameras.
11) At First, only technology companies like IBM and AT&T eliminated employee
offices.
12) AT&T found that eliminating commute time with home office allowed the
sales force to spend 15-20 percent more time with customers.
13) A second kind of IT-enabled organization is labeled “negotiated agreement”.
14) A Flower company in california, Calyx and Corolla is based on two negotiated
agreements.
15) The first agreement is with federal express to deliver flowers overnight to any
destination in the Us at a favourable rate.
16) The agreement is with flower growers instead of selling exclusively to
wholesalers, the growers agree to put together a number of standard
arrangements.
17) The final part of the organization is an 800 number staffed by clerks who take
orders.
18) The orders are sent via phone or fax to growers who prepare and address
arrangements for pickup and delivery by federal express.
 Figure 1 A virtual negotiated-agreement organization
19) Calyx and Corolla is a negotiated organization in that its existence and
probability depend on the agreements it has with others and the service supplied
to its customers by others.

Figure 2 The clayx and Corolla website

20) The management challenge for the negotiated organization is to maintain
service and quality.
 21) For eg the floral firm might place random orders with its growers to have
flowers sent to its own management to test delivery time and product quality.
22) An electronic manufacturers has set up just-in-time electronic data
interchange(EDI) link with a parts supplier, changing one component of the
organization, the supplier can now be viewed as part of the manufacturers raw
material inventory.
23) There are many examples of the use of IT design variables to make changes
in parts of traditional organizations.
24) A management challenge in the traditional organization is to transform the
organization enough so it can take advantage of the cost savings and
competitive opportunities made possible by technology.
25) IT organization design variables help restructure traditional organizations by
making them more flexible.
Table 1 IT variables used in Indusstry

8.3.2 Adding People to the Design

 1. For the most part, politics and emotions in organizations are not of concern in
IT-enabled organizations.
2. Politics and the beliefs of senior managers are likely to determine the
directions of the firm, its likely to determine the direction of the firm, its strategy
and how resources are allocated.
3. The design remians neutral as it focus is on creating an efficient and
competitive organization.
4. While politics and emotion are not unique to IT-enabled firms, people and
tasks are an important component of any organization.
5. Table shown below adds people and tasks to the structure and technology to
provide a more complete picture of organization design.

8.4 Building a T-form organization

8.4.1 People in the T-form
a. The pure T-form organization operates with the assumptions about people
found in the virtual and negotiated agreement organizations, where managers
base supervision on trust in employees and their self-control.
b. People and tasks are an extremely important component of the T-form
organization.
c. The T-form organization is a generic model for a technologically enabled
organization.
d. The Same IT design variables can be used in a variety of ways to create very
different types of organizations, all of which have some of the characteristics of
the T-form.
e. Figure given below presents simple structural models of five different
organizations
 Figure 3 IT -enabled organization Forms
f. T-Form organization Example:- 1) Frito-Lay is a major producer of snack food
like fritos corn chips. The company invested heavily in hand-held computers for
its drivers and a satellite communications network to transmit transactions data to
headquarters. b) Mrs Fields cookies developed elaborate in-store systems to
guide its store managers in all aspects of the business. c)Verifone is a company
that manufacturing devices to verify credit card payments and is active in offering
electronic commerce solutions of the Internet.
8.4.2 Company structure and IT Design Variables
Table 2 depicts how every compnies uses these types of variables to create a different
structure .
8.4.5 Adopting the T-Form: An example
Table 3 ilustrastes how IT variables can be applied to the design of an organization.
Questions
Q1. What kind of technology is least flexible? Most flexible?
Q2. The information services department is often considered to provide a support
function.
Can a support department really be powerful? Are there different kinds of power in an
organization?
Q3. What kinds of management problems result from a lack of organizational flexibility?
Q4. Are there any organizations that are completely dependent on information
technology
for their operations?
Q5. What kinds of employees are most likely to be replaced by information technology?
How does your answer depend on the type of system and the decision levels affected?
Q6. How would you measure the extent of unemployment created by the
implementation of
IT? What factors tend to mitigate the problem of increased unemployment if it actually
occurs?
Q7. What signs might indicate the need to restructure or redesign an organization?
Q8. Is information technology creating more centralization in organizations? How do you
define centralization? Why should technology have any effect at all on the degree of
centralization?
Q9. How would you recognize a company that is using IT successfully? What signs
would you expect to find?
 Unit 4 (Chapter 9)
STRATEGIC ISSUES OF INFORMATION TECHNOLOGY
9.0 Objectives
9.1 Introduction
9.2 Information Technology and Corporate Strategy
9.2.1 Some examples of technology and strategy
9.2.2 The value chain
9.2.3 Some Generic Strategies
9.2.4 A framework for the strategic use of IT
9.2.5 Capitializing on Information Technology
9.3 Creating and Sustaining a competitive Edge
9.3.1 Using Rsources to Advantage
9.3.2Protecting an IT Innovation
9.3.3 An example of Technology for Competitive Advantage

9.0 OBJECTIVES
After reading this unit, the student will be able to
 Infer the examples of Technology and Strategy
 Outline the concept of value chain.
 Explain the framework for the strategic use of the IT.
 Rephrase the concept of protecting an IT innovation
 Summarize the knowledge of Integrating Technology with the Business
Environment.
9.1 INTRODUCTION
1. As technology becomes integrated with strategy, the nature of business
changes.
2. So, technology and strategy are responsible for major changes in the structure
and operations of the organizations.
3. Eg Baxtex laboratories, a firm dedicated to providing hospital supplies and to
helping hospitals m,anage their costs through information technology.
 4. A recent poll of more than 200 executives showed that they feel information
technology is key to a competitive edge.
5. This unit discusses how technology can be used to gain a strategic,
competitive advantage.
6. This unit also discusses IT and strategy that manager should use to manage
technology so that it can contribute to corporate strategy.
7. What is competitve strategy?
a. A firm has a competitve advantage when it is able to perform some function
“better” than its competitors.
b. ‘Better’ may mean that it has a superior product, the most efficient
manufacturing process, unique knowledge or some other capability that is
competitors lack.
c. For eg Intel considers its knowledge of how to build and operate a
semiconductor manufacturing plant a competitve advantage.
d. After obtaining a competitve advantage, the firm faces the challenge of
sustaining it as competitors fight back.
9.2 Information Technology and Corporate Strategy
1. A key task of top management is formulating corporate strategy.
2. What opportunities for new directions are available ? what are competitors
doing?
3. The Corporation can dramatically change its strategy by deciding among
competing alternatives for new ventures.
4. IT and strategy became interwined, with each influencing the other.
5. A well managed firm will strive for this kind of integration.
9.2.1 Eg of Technology and strategy
1. Merrill lynch is the largest stock brokerage firm in the united states and plans to
become one of the major financial institution in the world.
2. The firm developed a new financial product called the cash management
account.
 3. Now, the small investor, instead of being limited to bank or savings and loan
passbook accounts can take advantage of higher interest rates previously available
only to those with a large amount to invest.
4. The firm decided an account that automatically invested idle cash in merrill
lynch’s own ready assets fund would appeal to its customers.
5. Has it been successful? At first the account was slow to win acceptance, but
today merrill Lynch than a million CMA customers.
6. Other brokerage firms have hired merill lynch employees to develop similar products.
7. Merill Lynch gained a significant competitive advantage with its cash management
account system.
8. Could this system have developed without confidence in information technology.
Infact, this product could never be offered unless a firm hold computer technology and
could manage it.
9. Eg on a Smaller scale, information processing technology made it possible for a new
market research firm to offer a service it could not obtain from its competitors.
10. The firm purchased grocery store point-of-sale scanning equipment and at first,
gave it free to 15 supermarkets in two town selected on the basis of their demographic
makeup.
11.There are 2000 households in each of the two test markets using the scanning
equipment and purchases are recorded on the firm’s computer in chicago.
12.Since each product is marked with the universal product code, researchers can pin
paint a family’s purchases by price, brand and size and then correlate the purchase
information with promotions such as coupons, free samples, price adjustments,
advertising and store displays.
13. For eg Through cooperation with a cable TV network, the firm can target different
TV commercials to selected households and analyze the resulting purchases.
14. The imaginative use of the technology has allowed the firm to gain a competitive
lead over much larger, more well-established market research firms.

Conclusion
The above given examples illustrate how the integration of information-processing
technology with strategy formulation expanded the opportunities for each firm.

9.2.2 Value Chain

1. Michael porter at Harvard has popularized the concept of the “Value chain”,
the activities in an organization that add value to its products or services.
2. The figure given below shows the primary activities in the value chain include
in-bound logistics,operations outbound logistics, marketing and sales and
services.
3. Each of these activities adds value directly to the firm’s output.
4. Supporting these primary activities are the firm’s infrastructure human
resource management, technology development and procurement.
5. What is the potential impact of information technology on the value chain? IT
can create dramatic changes here.
6. For eg Calyx and corolla a negotiated companies uses growers who provide
inbound logistics and Fed Ex is responsible for outbound logistics.
 Figure 1: The Value chain

9.2.3 Some Generic strategies

1. Porter elaborates on his value chain analysis and suggests that firm follow one
of three generic strategies.
2. Low-cost producer -a) Here the firm tries to have the lowest cost in the
industry so that it can compete on price.
3. Differentiation- 1)The firm tries to separate its product image from that the
customer want its product.2)Luxury automobile manufacturers like BMW are very
adapt at differentiating their products from other cars.
4. Market niche strategy-1)A number of firms try to find a market niche and
exploit it. 2) Eg Hermes has stayed in its niche of producing high-quality,
expensive products like women’s scarves for a limited clients.3) In today’s
 competitive economy, firm’s focusing on more specific strategies that are as
follows
1. Customer Driven- a) Here the firm focuses on its customers . b) How can we
design products that meet our customers needs ? what technology exists so we can
better serve our customers c)for eg The mail order sales of personal computers.
2. Reducing Cycle Times- a) A firm has a variety of cycle time, a typical one is the
length of time it takes to design a new product or service.b)Detroit automobile
manufacturers and Boeing are focusing on reducing cycle times.c)In addition to
saving time, parallel development results in better coordination among team
members working on the design of a new car or plane.
3. Global Competition- a)As the unification of western europe continues and asian
economies become more open, some firms have decided to follow a strategy
competing in the global market place rather than only in local markets.b)Information
technology is a great facilitator for global operations

5.Right-Sizing- a) In the U.S, the first part of the 1980’s was an economic boom
leading to a number but the early’s 1990’s were marked by economic downturns and
slow growth. b)To compete in a different economy firms have attempted to determine
their right size.c)Blue chip companies such as IBM have reduced their levels of
employment by tens of thousands of workers.
6. Quality -a) Japanese manufacturers gained a large market share in a number of
industries partially through a financial devotion to quality.b)Quality is an obvious
component in the manufacturing sector, but the services firm can also be concerned
about the quality of its output.

9.2.4 A framework for the strategic use of IT

1. Figure given below shows a framework for IT strategy that arrays a firm’s existing
applications against those that are currently under development.
2. Companies that are “located” in the fourth cell of diagram (I.e in strategic cell) are
critically dependent on the smooth functioning of information systems.. The banks
 are part of strategic cell as the bank would be a wash in a sea of paper and could not
possibly keep up with the volume without computers.
3. For instance, banks are offering new services connecting home computers to bank
computers .
3.1 Turn Around cell :- a) In turnaround company, there is a need for planning too.
b)Apple gate and her colleagues found a firm in this cell with adequate operating
system in production but limited new applications critical for keeping up with growth.
b)Without new technology the firm could not maintain control over its rapidly expanding
operations.
3.2 Factory cell-a)In factory setting, there is not much to do but run existing applications.
b)They maintain that strategic goal setting and linkage of information systems to
corporate plans.
3.3 Support cell-a)In a support environment, information processing is probably not
critical to the firm, so strategic integration will not be essential for success.b)If the
support cell position is characteristic of the industry, the firm that first finds a strategic
edge through information technology to move far ahead of the competition.
4. The framework is a useful one for diagnosing the state of an organization. One can
look at the nature of the business, its plans for the future and its existing and planned
applications.Technology can contribute to a firm’s strategy in a number of ways a)
reduce costs to help efficient firm compete and technology can tie the firm more
closely to suppliers and customers.
 Figure 2 Information system strategic framework
9.2.5 Capitializing on Information technology
1. How does firm take advantage of information. Four steps to be followed by top
management as follows
A. Look for ways to incorporate technology in a product or service - 1)Technology
can help open a new market or increase an existing market share. 2)Does
information processing provide an opportunity for a new approach to business?
.3)Does the technology make it possible to differentiate a product or service from
that of the competition .
B. Seek ways use technology to connect with other firms
1 there is great interest in interorganizational systems that link two organizations
together .
2the firm may be able to connect electronically to its customers so that it is easy for
them to place orders.
3 a firm can encourage its supplies to provide links for placing orders .
4 these links include the internet which is becoming the connection mechanism of
choice among firms.
C look for ways to use technology to make dramatic changes in the way you structure
the organization
Use information technology organization design variables so management can structure
an organization that is highly competitive that uses its technology enabled structure to
become a formidable competitor .
For eg providing extraordinary customer service can also provide an advantage .
Integrate technology with planning
To integrate technology with planning , managers have to understand a.to operation of
their business and b. the capabilities of technology .
Finally, management has to make information technology a part of its planning process.

9.3 Creating and sustaining a competitive edge

Introduction
There are different schools of strategy that describes how a firm gains and then
sustains a competitive advantage .
Theories by tece (1986) and barney(1991) apply particularly well to the case of using
information technology for achieving a competitive advantage
9.3.1 using resource to advantage
1. A firm has a number of resources available to it including its employees and their
knowledge , capital , products and services and physical resources that might include a
significant investment in a production facility.
2. Resources according to Barney(1991), must be valuable, rare imperfectly
immitable and nonsubstitutable to provide an advantage.
3. Otherwise a competitor can develop exactly the same resource without much
cost and duplicate your firm’s strategy.
4. A resource must be valuable enough that a competitor will think twice before
trying to acquire or create a copy.
 5. A resource has to be nonsubstitutable so that a competitor cannot find an easy
substitute in the form of a different, more accessible resource that is easy to
acquire.
6. Intel is an example of a company with resources that give it a competitive
advantage.
A. First it has the knowledge of how to build and run a chip fabrication plant as a
major competition advantage.
B. Intel is also large enough to have the financial resources to build such
expensive plants.
C. This combination of resources is valuable, rare, imperfectly , immitable and
nonsubstitutable.

9.3.2Protecting an IT innovation
1. Many innovations in IT are virtually impossible to protect from copying.
2. It is difficult to copyright or obtain a patent on application of technology.
3. For eg when fedex established a website to let customers enquire, about the
status if their shipments, united parcel followed with a similar web service within
a month.
4. A strong regime means one can protect an innovation, while weak
appropriability means that others can easily duplicate your innovation.
5. Most IT initiatives seem to have weak appropriability regimes.
6. There are however, some conditions that favor the innovator. For eg if you
have certain complementary assets(resources).
7. When IBM brought out its first personal computer in 1981, it had a strong
complementary organization with contacts in major corporations around the
world.
8. A good example of a cospecialized asset is the relationship between
microsoft’s Internet explorer and windows 98.
9. The explorer depends on windows since it must run on a computer controlled
by this operating system, as the explorer interface becomes a part of a windows,
the operating system develops a dependence on this browser.
 10. There may be ways to use the technology, itself to strengthen your regime of
appropriability.
11. Merrill Lynch has many imitators infact the “Sweep account” is very common
in the investment business.
12. However, no one has been able to overtake Merrill Lynch’s lead, it has by far
the largest number of cash management accounts of any other brokerage firm.
13. United and American airlines have more than 70 percent of the domestic
market for reservation systems in travel agencies.
14. These firms, had the resources to make large investments in technology and
for developing skilled staff members who could implement reservation systems.
15. Apollo and Sabre today are travel supermarkets that would be extremely
difficult and expensive to imitate.
16. By continuously investing in technology and managing it well, these two
airlines and vendors of potential reservation systems.
17. A Successful strategic applications such as the classic American hospital
supply/ Baxter health care order entry system demonstrate continuous
innovation.
18. A final approach to sustaining an advantage is to create high switching costs.
19. By making it very expensive or inconvenient to switch a customer’s business
to a competitor, one can assured that customers will continue to do business with
your company.
20. When planning and developing a strategy think about the kinds of resources
you to provide an advantage and the difficulties of protecting an IT innovation.
9.3.3 Eg Technology for competitive advantage
1. Clemons and Row (1991) describe how a small travel agency expanded to a
nationwide business through the use of IT.
2. Rosenbluth travel, headquartered in philadelphia grew from $40 million in
sales in 1980 to $1.3 billion in 1990.
3. It is now one of the five largest travel management companies in the united
states and has more than 400 offices.
 4. The firm has used technology to help manage the complexity of modern travel
and to obtain economies of scale.
5. Rosenbluth created a technology base that is extremely difficult for a new
entrant or even a competitor to match.
6. The travel agent, however could be expected to help the client without a bias
toward a particular airline. By 1985 travel agencies were distributing more than
80 percent of airtickets.
7. One of Rosenbluth’s major business focuses has been the corporate travel
market.
8. The following list of critical technology moves by Rosenbluth illustrates how
the firm has used IT for expanding its business.
8.1 1981- The firm experimental with processing data from airline computerized
reservation system (CRS) to provide information for corporate accounts.
8.2 1983- Rosenbluth introduced a product called readout that listed flights by fare
instead of by time of departure.
8.3 1986- Rosenbluth created vision system which is flexible as it keeps client’s
records of transactions done at the time of ticketing regardless of the location of the
agency or the CRS in use.
A. The vision system was more flexible and produced reports about two months
earlier than agencies using only the airline CRS.
B. Rosenbluth used VISION to negotiate special fares with the airlines on heavily
traveled routes the system identified.
C. Rosenbluth tried to create a cooperative relationship with clients.
D. They promised with clients to reduce overall travel costs through lower fares and
used VISION reports to document the savings.
E. 1988-Rosenbluth used a new feature in united’s Appollo reservation system to
support intelligent workstations.
F. Precision, the new rosenbluth system, made client and individual the database of
flights listed by increasing fares were made available to the booking agent.
G. During 1990-91 rosenbluth begin installing user vision in its offices. This system
lets the user make flexible queries about corporate travel.
 H. These initiatives were part of a tremendous growth period as Rosenbluth’s sales
increased from $400 million in 1987 to $1.3 billion in 1990.
I. The firm has been extremely successful as firm uses technology and strategy to
compete with competitors.

Figure 3 Rosenbluth web site

Questions
Q1. Locate an article in the popular business press about the strategy of a corporation.
De-scribe the interrelationship between technology and the strategy of the firm.
Comparetwo firms and note the differences.
Q2. Why did most firms first develop systems to improve operational efficiency?
Q3. How can a firm sustain a competitive advantage?
Q4. What is the first mover advantage? Give an example of a firm that has achieved
such an advantage.
Q5. How can users evaluate the quality of service from an information services
department?
Q6. What are the characteristics of a resource that helps a firm obtain a competitive
advantage?
Q7. What structural features of the organization influence the structure of the
information services department in the firm?
Q8. What are regimes of appropriability? How do they apply to IT innovations?
Q9. Why do you think firms might have trouble simultaneously following more than one
or two of the generic strategies described in this chapter?
Q10. How does strategic planning differ between a firm that offers services and one that
manufactures a product? Is there a difference in the impact of technology on strategy in
the two types of firms?
Q11. How can management assess the probable information-processing technology
available over the next five years?
Q12. What criteria are the most important for an organization in choosing among
competing
alternatives for a particular application?
Q13. Why should the decision of what applications to undertake not be left to the
manager of
the information services department?
Q14. What do you think the role of top management should be in the design of a
specific information system?
 Unit 4 (Chapter 10)
INTEGRATING TECHNOLOGY WITH THE BUSINESS ENVIRONMENT
10.0 Objectives
10.1 Introduction
10.2 Integrating Technology with Business Environment
10.3Managing Information Technology
10.3.1A vision of the organization and Technology
10.3.2Technology for structuring the organization
10.3.3Integrating Technology and Decision Making
10.3.4A corporate plan for strategy Alliances and Partnerships
10.3.5 New IT initiatives
10.3.6 IT Infrastructure
10.3.8 Ongoing Management of IT
10.0 OBJECTIVES
After reading this unit, the student will able to,
 List the different ways of Managing Information Technology.
 Compare and contrast between the different ways of managing infomation
technology.
 Illustrate the concept of Integrating Technology with Business Environment
 Infer the new It initiatives.
10.1 INTRODUCTION
1. One of the most significant management challenges during the coming decade
will be to integrate business and technology.
2. Instead managers must consider how technology affects their decisions and
how their decisions affect the technology.
3. Figure given below describes how a manager can integrate technology with
decision making.
4. First, the manager has to search for new technology to help create new
business opportunities.
5. These opportunities combined with the technology itself, lead to new
development projects.
6. The development projects are influenced by technological constraints.
7. The firm cannot undertake a new marketing program in which customers
inquire about their orders from the internet if the firm lacks the skills to set up a
home page on the world wide web and integrate the page with its existing order
entry system.
8. The box at the bottom of the figure represents decision making, planning and
execution of decisions.
9. Technological constraints and opportunities influence these decision making,
planning and execution of decisions.
10. Management’s decision influence how it manages the existing business and
technology.
11. A decision to undertake a major factory automation project will result in a
different type of production process to manage.
12. Successful managers must be able to integrate their knowledge of
information technology and their business knowledge in making decisions.
13. The manager should be aware of the opportunities provided by the
technology and the constraints that already exist for the firm in developing new
technologies.
14. The manager should also recognize that as decisions are made, the
alternative chosen will have an impact on technology and its development within
the firm.
15. Eg Autozip sells acessories for cars through a chain of stores on the west
coast.Customers like the convenience of calling a toll-free number and having
the parts they order delivered via UPS or an overnight carrier such as federal
express.
16. The president of Autozip realizes that the firm needs to have a presence on
the Internet.
17. He is trying to decide whether to accept a orders on the web and if so how.
18. The president has to make a decision
18.1 Autozip accept orders on the web
 18.2 If so,how ? should it go to a firm that hosts web market places, buy
software and set up its own site or develop its own software.

10.2 Integrating Technology with the Business Environment

1. One of the most significant management challenges during these coming years will
be to integrate business and technology.
2. Instead managers must consider how technology affects their decisions and how
their decisions affect the technology
3. Figure depict below describes how a manager can integrate technology with decision
making.
3.1 First, the manager has to search for new technology to help create new business
opportunities.
3.2 These opportunities, combined with the technology itself, lead to new development
projects.
4. The firm cannot undertake a new marketing program in which customers inquire
about their orders from the internet if the firm lacks the skills to set up a home page on
the WWW and integrate the page with integrate the page with its existing order entry
system.
5. The box at the bottom of figure portray decision making, planning, and execution of
decisions.
6. Technological constraints and opportunities influence these decision-making
activities.
7. A firm cannot provide customers with inquiry capabilities until it allocates resources to
develop a web site.
8. A decision to undertake a major factory automation project will result in a different
type of production process to manage.
9. Successful managers must be able to integrate their knowledge of information
technology and their business knowledge in making decisions.
10.The manager should aware of both the opportunities and constraints provided by the
technologies already exist in firm in order to develop a new technologies.
 Figure 1 The management challenge of Integrating information Technology

10.3 Managing Information Technology

1. Figure given below shows a framework for managing information technology.
2. The arrows in the figure show the relationship between the actions in the boxes for
managing and controlling technology.
3. The first step is to develop a vision for the organization and information technology.
4. The senior manager looks at how technology can contribute to the structure of the
organization using the IT design variables.
5. Strategy, structure and the integration of IT in to the firm help generate a plan for
technology.
6. This plan includes a structure for the IT subunits in the organization along with a
hardware/ software network architecture for the firm.
7. The plan describes what new applications and what resources are needed to operate
existing technology.
8. It also describes the sources of services, for eg from within the firm or from an
outside source.
9. Finally, the plan contains information on how management will control the technology
effort.

Figure 2 A framework for managing information technology

10.3.1 A Vision of the Organization and Technology
1. Vision are rare and difficult to create, leaders are frequently criticized for lack of
vision.
2. For an organization, the vision thing is important especially given the ability of
technology to change the structure of the firm, the nature of business and the basis for
competition.
3. A fundamental responsibility for management is to develop a vision for the business
and for the role of information technology in achieving that vision.
4. The vision should describe the mission of the organization and identify the product
and services it produces.
5. It should identify the markets in which the firm will compete and its strategy for
competition.
6. Information technology is likely to play an important part in shaping the structure of
the organization and in supporting its value chain activities.

10.3.2 Technology for structuring the Organization

1. A firm’s structure is highly interrelated with its strategy, these two aspects of the
organization must be considered together.
2. Foreg A firm might decide to compete on the basis of extremely efficient operations,
to become the low-cost , low-overhead producer in its industry.
3. The firm might use production automation to reduce costs and improve quality.
4. It could use electronic customer-supplier relationships to process electronic orders
from customers on a just-in-time basic and to order in a similar manner from its
suppliers.
5. To minimize overhead, it could employ electronic communications and linking with its
sales force, providing them with electronic devices suach as notebook computers with
fax modems, wireless communication and cellular phones in place of a physical office.
6. The adoption of a generic strategy such as becoming the low-cost producer,
management wants to develop technology that will give firm a competitive edge.
7. By reviewing what competitors are doing, staying abreast of the technology and
looking for analogies in other industries, one can develop new ideas for strategic
advantage.
8. It is likely these strategies will include the development of Interorganizational systems
and alliances with other firms.
9. For a Manufacturing firm, IT strategy might involve technology embedded in a
product, such as the computer chips found in automobiles to control the engine and
exhaust, antilock brakes, traction control and similar functions.
10. A services firm might look for way technology can add value to existing services,
make it easier to do business with the company, reduce cycle time, lower costs etc.

10.3.3 Integrating Technology and Decision Making

1. A significant responsibility of management is to integrate technology with all business
decisions.
2. Integration means that the manager is aware of how new technology can create
opportunities.
3. The technology can literally change the way a firm does business.
4. A decision to enter a new line of business has a direct effect on existing information
processing systems.
5. For eg The creation of frequent airline flyer program means, the company gives
maximum credit to those who are frequently travel by plan.
6. The airline finally was able to modify its reservation system, to keep track of the miles
when the traveler made the flight.

10.3.4 A corporate plan for strategy

1. A corporate strategic plan comes from the firm’s vision for its future activities.
2. This plan includes the vision, it is a road map for bringing about the vision.
3. Given the contents of the corporate strategic plan, it is possible for managers in the
IT plan to support the cooporation.
4. Many organizations agree that a plan to support the corporation.
5. A frequent reason given is that the three to five year information systems, planning
horizon is not compatible with the planning horizon of the organization.
6. Then also it is possible and desirable to develop an information technology which is
too pervasive and important for planning of organization.
7. Eg Citibank is a pioneer in electronic banking it was one of the first to introduce
electronic banking in 1985. The mainframes computers keep every kind of account in a
different system, for eg a system for checking accounts, for mortgages, for personal
loans etc.Citigroup merged with travelers to form citigroup, after the merger the
combined company serves 100 million customers.
8. The company has a bold goal of having a billion customers worldwide by 2010.
9. Management realized that current electronic banking would be necessary to reach
this kind of customer base.
10. A new technology officer made the decision to convert completely to the internet for
providing banking services globally.

10.3.5 Alliances and Partnerships

1. Companies today form a variety of partnership and alliances if the information
technology is an example.
2. Infact, firms sometime form alliances in one area with a company they compete with
in some other aspect of business.
3. Intel and microsoft have a long history of cooperation, but intel is also working to
produce chips that run competing operating systems.
4. Eg Honda place a new badge on an Isuzu rodeo and sells it as a Honda sport -utility
vehicle.
5. If another organizations has a product or service that enchances your offerings or
your operations, it can be very appealing to work with them.
6. Information technology facilitates these kinds of cooperative arrangements by
providing electronic linking and information technology.

10.3.6 New IT Initiatives

1. Few Organizations ever stop developing new information technology initiatives.
2. As technology advances, it seems to simulate new ideas on how to use IT to improve
some aspect of the organization.
3. The corporate strategic plan should identify broad areas in which technology can
contribute to the firm.
4. An IT plan adds further details and identifies specific applications of the technology
can contribute to the firm.
5. A system that will be feasible can usually be undertaken to improve the organization.
6. Now here the question is if system is both feasible and desirable ?
7. A corporate steering committee should choose applications as a part of developing a
plan for information processing.
8. The task then is to choose what type of system, if any will be developed.
9. Management must consider the existing portfolio of applications and provide
guidance on the amount of investment possible and the balance of portfolio.
10. Systems development is an area that requires a great deal of management
attention.
11. Managers must demonstrate that they are behind the development of a new system
and see that there is adequate user input in the design process.
12. Top management must participate in these meeitngs, and make clear that it
supports the changes likely to come from the systems.

10.3.7 The IT Infrastructure

1. The combination of the firm’s various common technologies constitutes information
infrastructure
2. For eg the organization provide networks to which various computers are connected.
3. It would not make sense for individual users to each develop their own network or
choose a different provideer of network services.
4. Some experts define the infrastructure as limited to common facilities the firm
provides like a network, this view of infrastructure is similar to that of society at large in
which governments provide infrastruture such as roads and airports.
5. Others take a broader view of infrastructure and define it as the firm’s existing stock
of technology that is available to users.
6. Infrastructure is extremely important because it facilitates the development of new IT
initiatives.
7. for eg If an organization wish to develop an interactive application available to all
employees, the time and effort required will vary dramatically depending on whether the
firm has intranet in place.

Figure 3 Management problem related to the IT infrastructure

10.3.8 Ongoing management of IT
1. Vision and strategy are long term in nature the firm still faces the day-to-day task of
managing information technology.
2. This work consist of two different kinds of tasks.a)developing new applications and
b)operating the existing stock of applications.
3. for eg consider a morgan stanley, a leading investment bank and a major force in
retail brokerage through its merger with dean writter in 1997.
4. The investment banks technology is a 24 hour per day and seven days a week
operation.
5. There are 15000 computers used to process 100,000 trades a day.
6. The firm has an estimated 100 million lines of software code and an intranet with
10,000 users.
7. Each night, its batch-processing cycle executes 34000 jobs.
8. Morgan stanley is a services firm and much of its business is information processing.
9. Its “factory” is the IT division, which managers must be sure operates relaibly and
within deadlines so that the firm is able to “make its products” every day.

Questions
Q1 Some senior executives feel that they do not receive a return on their investments
in technology. What factors might account for this feeling? Do you think they are right?
Q2. It has been said that problems with information technology start at the top of the
organization. What does this mean? Do you agree or disagree? Why?
Why do priorities have to be set for new uses of IT?
Q3. What are specialized and cospecialized assets? How do they apply to sustaining an
advantage with technology?
Q4. What strategies did American and United airlines follow to enhance and sustain the
advantage provided by their reservations systems?
Q5.. What actions can management take if information technology activities seem to be
out of control?
Q6.What is the role of external expertise in the development of a strategy for
information technology?
22. What should a vision for a firm include?
 Unit – 5

Chapter 11

IT for managing International Business and Governance

International business and IT technologies

International business strategies

___________________________________________________________________
Objective
___________________________________________________________________
Information technology is an important tool in making business transformation and in
designing the international organization. Even a one-person company can have
worldwide sales through the Internet. Globalization has been one of the major trends in
business in the last decade. The European Economic Community (EEC) has eliminated
almost all barriers to trade and has adopted a common currency, the Euro.
Globalization can greatly complicate the task of managing IT in a firm.

___________________________________________________________________
THE IMPACT OF GLOBALIZATION ON BUSINESS
___________________________________________________________________

There are a number of impacts of globalization (Ives and Jarvenpaa, 1992):

• Rationalized manufacturing :
Firms manufacture in locations with a comparative advantage for the type of
manufacturing involved.

• Worldwide purchasing:
Firms can purchase worldwide for their operations, giving them a great deal of leverage
over suppliers.

• Integrated customer service:

A multinational firm is likely to have multinational customers and can provide all
locations with the same level of customer service.

• Global economies of scale:

Size, if managed properly, provides for economies in purchasing, manufacturing, and
distribution.
• Global products:
Consumer firms have worked especially hard to market global brands such as Kellogg's
cereals and beverages like Coke and Pepsi.

• Worldwide roll-out of products and services:

The firm can test products and services in one market and then roll them out around the
world.

• Subsidizing markets:
The profits from one country can be used to subsidize operations in another.

• Managing risk across currencies:

With floating exchange rates, doing business in many countries can help reduce risks.

• The growing irrelevance of national borders:

Technology has far outpaced political progress in integrating different cultures. As
electronic commerce plays an increasingly important role, the ability of national
governments to control transactions will become more difficult.

One conclusion from the above list is that global business creates greater uncertainty
and complexity. To handle these challenges, the firm will need faster communications
and information processing. It will have to rely more on IT to manage the organization.
___________________________________________________________________
INTERNATIONAL BUSINESS AND IT TECHNOLOGIES
___________________________________________________________________
Important ways in which technology is facilitating International Business are as follows:
Technology is beneficial to international business. It may be stated that lowering of
trade barriers has made globalization of markets and production a theoretical
possibility, technology has made it a practical reality.
Technology is facilitating international business in at least six ways, which are as
follows:

1) Telecommunications:

Telecommunication plays a vital role in the technological environment facing

international business. Now people are using mobile phones, tablets and other
telecommunications services, giving a way to international growth. As a result, growth in
the wireless technology business worldwide has been rapid. This growth is welcome as
business, domestic or global, cannot prosper without an efficient telephone system.

2) Transportation:

Technology In addition to developments in computers and telecommunications, several

major innovations occurred in transportation. In economic terms, the most important
are probably the development of a commercial transport system which simplifies
transshipment from one mode of transport to another. While the advent of commercial
jet has reduced the travel time of businessmen, containerization has lowered the costs
of shipping goods over long distances.

3) Globalization of Production:

Technological breakthroughs have facilitated globalization of production. A worldwide

communications network has become essential for any MNC. These MNCs do have
multiple plants in multiple countries all over the globe. A satellite based communications
system allows it to coordinate on a global scale; its production planning, cost
accounting, financial planning, marketing, customer service and human resource, 21 in
some ways conventional Ricardian theories appear to be irrelevant as shown in given
figure.

4) Globalization of Markets:

Along with the globalization of production, technological innovations have facilitated the
inter-nationalization of markets. As stated earlier, containerization has made it more
economical to transport goods over long distances, thereby creating global markets.
Low-cost global communications networks such as the World Wide Web are helping to
create electronic global marketplaces. In addition, low-cost jet travel has resulted in the
mass movement of people around the world. This has reduced the cultural distance
between the countries and is bringing about convergence of consumer tastes and
preferences. At the same time, global communications networks and global media are
creating a worldwide culture. Worldwide culture is creating a world market for consumer
goods. As a signs of a global market we can see it is now easy to find a McDonald’s
restaurant in Tokyo as it is in New York, and in Mumbai.

5) E-Commerce:

The Internet and the access gained to the World Wide Web have revolutionized
international marketing practices. Firms ranging from a few employees to large
multinationals have realized the potential of marketing globally online and so have
developed the facility to buy and sell their products and services online to the world.
Because of the low entry costs of the Internet it has permitted firms with low capital
resources to become global marketers, in some cases overnight. For all companies, the
implications of being able to market goods and services online have been far reaching.
The Internet has led to an explosion of information to consumers, giving them the
potential to source products from the cheapest supplier in the world. This has led to the
increasing standardization of prices across borders or, atleast, to the narrowing of price
differentials as consumers become more aware of prices in different countries and buy
a whole range of products via the net.
In B2C marketing this has been most dramatically seen in the purchase of such things
as flights, holidays, CDs and books. The Internet, by connecting end- users and
producers directly, has reduced the importance of traditional intermediaries in
international marketing (i.e., agents and distributors) as more companies have built the
online capability to deal directly with their customers, particularly in B2B marketing.

6) Technology Transfer:

Technology transfer is a process that permits the flow of technology from a source to a
receiver. The source in this case is the owner or holder of the knowledge, while the
recipient is the beneficiary of such knowledge. The source could be an individual, a
company, or a country.

___________________________________________________________________
INTERNATIONAL BUSINESS STRATEGIES
___________________________________________________________________

There are four major types of international business strategies as shown in below
Figure (Bartlett and Ghoshal, 1989).

1. Multinational
2. Global
3. International
4. Transnational

Let us see each one in detail,

Multinational

➔ The multinational strategy focuses on local responsiveness.

➔ Subsidiaries operate autonomously or in a loose federation.
➔ The advantage of this type of approach is that the firm can quickly respond to
different local needs and opportunities.
➔ This strategy reduces the need for communications because local subsidiaries
can make many decisions.
➔ There are heavy reporting requirements though because the results from the
subsidiaries have to be monitored at a headquarters location.

Global

➔ A global strategy stresses efficiency because there is strong central control from
headquarters.
➔ Economies come from standard product designs and global manufacturing.
➔ An extensive communications and control system is necessary to centrally
manage the global firm.

International

➔ The international strategy is much like the multinational as there are autonomous
local subsidiaries.
➔ However, these subsidiaries are very dependent on headquarters for new
processes and products.
➔ Example is a pharmaceutical company.
The research labs in the headquarters company develop products for
introduction around the world. Local subsidiaries stress product approval by local
governments and local marketing.

Transnational

➔ The transnational firm attempts to do everything! It seeks global efficiency while

retaining local responsiveness.
➔ The firm integrates global activities through cooperation among headquarters
and foreign subsidiaries.
➔ This difficult strategy tries to achieve local flexibility at the same time that it
obtains the advantage of global integration, efficiency, and innovation.
➔ We predict that the various types of firms will tend to strive toward the
transnational model over time.
Answer the following:
___________________________________________________________________

1. What has motivated the current interest in global business?

2. Why might a country want to regulate the data collected within its borders?
3. One study reported that managers found concerns about regulations on transborder
data flows to be unwarranted. Why do you suppose this issue has not surfaced?
4.What is the impact of globalization on business?
5.Explain correlation in international business and IT technologies.
 UNIT – 5

Chapter 12

Key issues in international environment

Managing IT Internationally

___________________________________________________________________
OBJECTIVE
___________________________________________________________________
We will discuss different key issues in the international environment like the need of
information, sharing of information globally , and implementation of IT internationally.
We will also discuss on What the manager can do to solve the problems raised above.
Some of these impediments to IT require political action or deregulation, for example,
the policies of foreign PTT utilities. In other instances, management has to take action
to solve problems, and managers have to be involved in efforts to develop systems that
will be used in multiple countries. It is management that has to sell its vision for the
firm's global technological infrastructure and resolve conflicts over IT requirements.
___________________________________________________________________
KEY ISSUES IN AN INTERNATIONAL ENVIRONMENT
___________________________________________________________________

Information Needs

● An international corporation needs information to coordinate and control its

diverse businesses.
● Systems that summarize sales data and process accounting information are
necessary, but they only reflect what has happened in the past.
● These systems represent traditional uses of IT for reporting and control.
● Coordination is a major problem for the global firm. IT provides a number of
approaches to improving communications and coordination, for example, e-mail
and fax.
● The system let workers in different locations create a shared, electronic
environment.
● Intranets encourage the sharing of information and provide for coordination as
well.
● The Intranet provides the mechanism for coordinating the diverse design groups
of a car manufacturer company.
● The manager can use IT in a variety of ways to design the structure of the global
organization.
 ● We can see that technology plays a crucial part in the design and operation of
international firms.

Implementing International IT

The ultimate objective for the global firm is to process data anyplace in the world and
share information on any type of platform used for processing.

The following section outlines some of the typical problems faced by a manager of a
global organization.

1) The first problem is managing local development when the foreign unit does not
coordinate with headquarters. The foreign subsidiary may be duplicating
development efforts under way in other parts of the world. It also may not have a
talented staff and may end up with poorly conceived and designed systems. The
question of headquarters-subsidiary coordination and management is a central
one in pursuing an international corporate strategy.

2) The local company knows the needs in its location. A distant headquarters unit
cannot set specifications for foreign countries. This contention leads to the
second development issue: Different countries have different laws and
regulations, so it may be impossible to share programs among foreign locations
without making special modifications for unique requirements in each country.

3) The third development problem is that when designing applications, there are
real and perceived unique features in each country. Designers, especially those
representing headquarters, must recognize what features are required for a
system to work in a country and what features are there as an exercise in local
independence. The cultural differences predisposed managers in each country to
a choice of communications vehicles.

4) Managers must also be aware that more and more firms want to build a
worldwide communications network to take advantage of communications and
coordination tools to move data freely around the world.
Certain countries regulate the kind of telecommunications equipment that can be
used on their network. In a number of foreign countries, PTT (postal,
telegraph,and telephone) monopolies regulate communications and may restrict
the ability to transmit data.
 Some underdeveloped countries may not have adequate communications
capabilities to support private networks. Countries also may prohibit importing
certain kinds of computer equipment in order to protect domestic competitors.
Different kinds of communications networks and standards can greatly increase
the difficulty and cost of building worldwide communications capabilities. One of
the most attractive features of the Internet is that it has open standards and a
presence in almost all countries.

5) It is pervasive in Asia and the West and has much less penetration of Africa and
the Middle East (except Israel).

A number of government requirements may impede the development of global

information systems (Steinbart and Nath, 1992):

1. A requirement to purchase specific equipment in the foreign country that may

not be compatible with the equipment used by other parts of the global firm.

2. A requirement to do certain kinds of processing in the host country before data

can be sent electronically to another country.

3. Restrictions on the use of satellites and special requirements for building

private networks.

4. Limited access to flat-rate leased lines or a requirement that all transmission

be made on variable cost lines.

5. Restrictions on Internet access and efforts to censor Websites.

6) A sixth major issue arising from international IS efforts is transborder data

flows. Moving data across a boundary may be curtailed by government
regulation, ostensibly to protect its citizens and their privacy. Another impact of
regulation is to reduce the economic power of foreign companies or limit the
imposition of foreign culture on the host country. Many of the transborder
regulations seem to be motivated by a desire to protect local industry. Countries
may have a legitimate concern about the privacy rights of their citizens. This
reason is probably cited most often for instituting data controls. To implement
control, a country can establish regulations through its telecommunications
ministry, levy tariffs, and/or require formal approval of plans to process data in
the country.
Examples of barriers to data flows include:
• Restrictive regulations that require processing of data originating in a country in that
country only, making it difficult to transmit and share data.
• Exorbitant pricing of communications services by government-owned post,telephone,
and telegraph ministries. However, a wave of "privatization" is sweeping countries and
many PTTs are becoming private or quasi private companies.
• Attacks on computers by various hackers throughout the world have pointed out how
difficult it is to secure networked computers.

As with any international venture, language and cultural differences can also present a
challenge to developing IT on a global scale. Time differences can make
communication difficult for different parts of the world, though fax and e-mail have
eased this problem considerably. Some firms stress joint development teams with
representatives from different countries to avoid problems stemming from developing a
system in any one country or language. Foreign subsidiaries may be more willing to
adopt an international system developed by a cross-cultural team.

___________________________________________________________________
MANAGING INFORMATION TECHNOLOGY INTERNATIONALLY
___________________________________________________________________
Roche (1992) presents a number of strategies for managing information technology in a
global environment.

Following Are The Strategies For Managing Global IT :

• Concentrate on interorganizational linkages

• Establish global systems development skills
• Build an infrastructure
• Take advantage of liberalized telecommunications
• Strive for uniform data
• Develop guidelines for shared versus local systems

Let’s discuss each in detail,

Concentrate on Interorganizational Linkages

➔ The strategy of creating linkages with suppliers and customers can be extremely
effective internationally.
➔ It can also be very difficult to set up these linkages because of differing
telecommunications capabilities in different countries.
 ➔ In some regions phone systems do not work well and transmitting data over them
is probably not viable.
➔ Other countries, like France, have an extremely well-developed infrastructure for
business communication, which is discussed later in this section.
➔ The Internet is one solution for quickly establishing these linkages.

Establish Global Systems Development Skills

➔ There are problems managing IT development projects when all participants are
from the same country and work in the same location.
➔ Coordinating multinational project teams presents an even greater challenge.
➔ Language and distance make them difficult to coordinate.
➔ A New York bank has a development team with members in New York,
Lexington, Massachusetts, and Ireland coordinated through groupware.
➔ In some foreign countries, hiring staff with the appropriate skills to work on
technology can be difficult.
➔ Interviews with IT managers for multinationals in seven countries found dramatic
differences in their accomplishments and their capabilities.
➔ Lack of personal skills can be a major impediment to developing international
systems; not all countries have educational programs to prepare individuals for
systems analysis or programming jobs.

Build an Infrastructure

➔ Justifying expenditures on infrastructure can also be extremely difficult.

➔ Infrastructure is the part of technology that does not have an immediate benefit.
➔ The easiest example is a worldwide communications network.
➔ One money-center bank carefully costed out an international, private network
and found that it had a negative net present value: The economic criteria
suggested not to undertake the development of the network.
➔ However, the bank went ahead and found that the new IT provided a number of
benefits that were hard to quantify.
➔ Basically,with this network the bank could "plug in" any application to the network
and
offer it anyplace in the world it did business.

Take Advantage of Liberalized Electronic Communications

➔ The trend toward deregulation in the U.S. is also sweeping foreign countries.
 ➔ France has split France Telecom from the PTT and established it as a quasi-
public organization.
➔ In the past two decades, France Telecom has replaced an outmoded phone
system and added a mass market communications network called the Minitel
system.
➔ It is also a leader in providing packet-switched data communications through
Transpac.
➔ Changes such as these facilitate the development of the international
communications networks, which is essential to managing in a global
environment.

Strive for Uniform Data

➔ One of the major problems in sharing data is identifying it.

➔ A story is told that a large computer vendor once looked at its logistics systems
and found that "ship date" meant six or seven different things depending on the
system involved.
➔ In one system it might be the promised ship date, and in another the date the
item left the loading dock.
➔ To obtain economies of scale from sharing data and systems, the firm must have
a common vocabulary of terms and definitions.

Develop Guidelines for Shared versus Local Systems

➔ We can add another important strategy to Roche's list: You need to develop
guidelines for when a system should be shared and when a local, autonomous
system is more appropriate. The obvious advantages of shared systems are
economies of scale and the ability to share data.
➔ The problem with shared systems is that they tend to become very large and
complex. Also, individual locations and users have special needs that must be
incorporated into the system.
➔ As the number of exceptions increases, the system becomes more cumbersome
and
difficult to program.
➔ The advantage of a local system is that it can often be developed quickly in
response to a local condition.
➔ If it later becomes necessary to coordinate this system with other applications,
special interfaces will have to be created.
➔ If each location ends up needing a similar system and cannot share this one, the
firm has paid from many systems when possibly one would have sufficed.
 ➔ There are no firm guidelines for making this kind of decision.
➔ Firms have had success and failure with both approaches.
➔ Systems development in an international environment (or even a domestic one
where there are many locations) leads to this problem.
➔ Management has to recognize that the problem exists and compare the
alternative of local versus global, shared systems.

___________________________________________________________________
Answer the following:
___________________________________________________________________

1. What are the risks of a global IT strategy? What are its benefits?
2. What impediments do you see to worldwide networks for coordinating the
activities of global firms? What is the role of the Internet in this process?
3. How can an international firm see that local staff members have enough
expertise to develop and apply IT?
4. What are the problems of establishing common data elements in a global
organization?
5. Why does a firm need common data elements and structures?
6. How can IT help coordinate a global firm? Where can it help save money while
making the firm more responsive?
7. Roche (1992) advocated a number of interorganizational linkages in conducting
international business. What problems do you see in connecting a global firm to
its many customers in different countries?
8. What kind of business activities do you think are most amenable to common
systems in different countries?
9. What are the advantages of making product design information available around
the world? How might you use this capability to organize product development?
10. If company management or custom dictates a fairly independent and
autonomous IT effort in subsidiaries, what approaches can management take to
coordinate these activities?
11. What Internet access policies would you recommend to the government of a
developing country?
 UNIT – 5

Chapter 13

___________________________________________________________________
OBJECTIVE
___________________________________________________________________

Governance is the action of governing an organisation by using and regulating

influence to direct and control the actions and affairs of management and others. It is
the exclusive responsibility of the 'governing body', the person, or group accountable for
the performance and conformance of the organisation.

IT Governance (Information Technology Governance) is a process used to monitor and

control key information technology capability decisions. It attempts to ensure the
delivery of value to key stakeholders in an organization.
___________________________________________________________________
IT Governance
___________________________________________________________________
Information technology is prevalent in nearly every industry and organization across the
globe. It’s a diverse and challenging discipline with a lot of moving parts and critical
scenarios. Besides all, information technology is constantly evolving. IT governance
ensures that IT departments are prepared for what’s next, without losing focus on what
matters.

At its base level, IT governance is one or multiple processes that enable the IT staff to
better manage risk and operate at its most efficient to the benefit of the organization on
the whole. IT governance is a process that works coordly with corporate governance.
Corporate governance is its own collection of processes that are designed to keep the
entire corporation effective and efficient.
IT governance is all about managing performance for efficiency. IT governance is a
compound of a lot of things. Having evolved from many other methods, IT governance
has taken pieces of its methodology from:

“The Principles of Scientific Management” — a method of corporate organization

focused on scientific output during the industrial era.
“Total Quality Management” — a method focused on creating a work environment
where employees strive to constantly improve.
“Quality Management System” — a method that acts as a collection of organizational
processes focused on increasing customer satisfaction.
The Desired Outcomes of IT governance:

The main three desired outcomes from implementing IT governance in any given
organization is typically to:
1. Ensure business value is generated by information and technology
2. Oversee the performance of IT managers
3. Assess risks associated with the IT department and mitigate as needed

Key Terms in IT Governance :

Following are some of the complicated IT terms defined.

● IT Management:
➔ It is not similar to IT governance.
➔ IT management is about how IT resources are leveraged from a planning,
organizing and directing perspective.
➔ This is different from IT governance in that IT governance is all about
uncovering what an organization can really achieve when it uses its IT
resources effectively.

● IT Compliance:
➔ Compliance in the IT world can mean creating an adequate defense
process which manages both the management of the compliance process
as well as the integrity of the compliance system.
➔ Therefore, IT compliance revolves around taking control of protecting
personal or private information, including how it’s kept, stored or shared.

● IT Controls:
These are specific tasks performed by IT staff to ensure that business objectives
are kept top-of-mind.

● Governance, Risk and Compliance (GRC):

➔ Invented by the Open Compliance and Ethics Group (OCEG)
➔ this term refers to -
◆ a certain grouping of capabilities that combine governance,
◆ risk management
◆ performance to achieve reliable business objectives and address
uncertainty.
 ● Good Governance:
➔ This is a method of measuring how public organizations efficacy for
maximum public good, mostly from a political perspective.
➔ The concept of good governance is also a key component of managing
risk and ensuring compliance from an IT perspective.

● Certified in the Governance of Enterprise Information Technology (CGEIT):

➔ This is a certification that is vendor-neutral, designed for IT staff in large
businesses and organizations that are responsible for IT governance.

● Information Systems Audit and Control Association (ISACA):

➔ ISACA is an independent, nonprofit that is “engaged in the development,
adoption and use of globally accepted, industry-leading knowledge and
practices for information systems.”

IT Governance Framework:

An IT governance framework is a roadmap that defines the methods used by an

organization to implement, manage and report on IT governance within said
organization.
The most common IT governance frameworks are:

● COBIT:
This is by far the most popular framework out there.
It gives staff a reference of 37 IT processes, with each process defined with
process inputs and outputs, objectives, methods to measure performance and
more.

● AS8015-2005:
A technical standard developed in Australia and published in 2005, this
framework is a 12-page framework that includes six principles for effective IT
governance.

● ISO/IEC 38500:2015:
This framework aims to assist those at the top of the organization to better grasp
their legal and ethical obligations when it comes to their company’s use of IT.

● ITIL:
 Stands for Information Technology Infrastructure Library, this framework includes
five management best practices from strategy to design that aims to ensure that
IT supports core business operations.

● COSO:
From the Committee of Sponsoring Organizations of the Treadway Commission,
this framework focuses on more general and less IT-focused processes, with an
emphasis on enterprise risk management and fraud deterrence.

● CMMI:
Also known as the Capability Maturity Model Integration framework, this process
uses a scale of 1 to 5 to better understand how the organization is performing
and maturing over time.

● FAIR:
Also known as the Factor Analysis of Information Risk, this framework has an
emphasis on cyber security and risk assessment, with an ultimate goal of making
better informed decisions.

There are many more IT governance frameworks that offer both a full and partial view of
IT governance processes that can be useful when it comes to the application of a solid
and effective IT governance process.

Benefits of IT Governance:

IT managers and system administrators know technology like the back of their hand.
They work with it day in, and day out and keep up with the latest trends at all times. So,
to the administrator, it might seem like adding in an IT governance process is an extra
step added to their busy days.
However, there are many benefits to IT governance, including:
● Showing that you have taken the extra step to implement an IT governance plan
gives stakeholders,partners and customers added assurance that you mean
business.
● Controlling your risks doesn’t come automatically. It has to be studied in a
working environment where a standard, replicable process has been
implemented. IT governance helps track risks in a controlled experiment
environment.
● Ensure your company is meeting rules and regulations around compliance, so
you can reduce risk and eliminate liability.
 ● Better align your IT department with the company’s overall business objectives,
so they can prioritize their projects better.
● Better measure performance for your IT department and optimize their
processes, so they don’t have to waste time on clunky processes that had
previously been in place.

Implementation and Planning for IT Governance :

● Understand what role IT governance is going to play in your organization,

whether it be led by the CIOs or at the department-level.
● Start with any one of the templates that give you actual steps to take to
implement successfully, like the COBIT, which gives inputs, objectives, methods
to measure performance, and more.

● IT staff needs to be actively participated after implementation of IT governance.

The more they can keep your department aligned with the overall business goals,
the less you have to validate your value to the company.

___________________________________________________________________
Internet Governance
___________________________________________________________________

A working group established after a UN-initiated World Summit on the Information

Society (WSIS) proposed the following definition of Internet governance as part of its
June 2005 report:
Internet governance is the development and application by Governments, the
private sector and civil society, in their respective roles, of shared principles,
norms, rules, decision-making procedures, and programmes that shape the
evolution and use of the Internet.

Law professor Yochai Benkler developed a conceptualization of Internet governance by

the idea of three "layers" of governance:
1. Physical infrastructure layer (through which information travels)
2. Code or logical layer (controls the infrastructure)
3. Content layer (contains the information signaled through the network)

● Internet governance refers to the rules, policies, standards and practices that
coordinate and shape global cyberspace.
 ● The Internet is a vast network of independently-managed networks, woven
together by globally standardized data communication protocols primarily like
Internet Protocol, TCP, UDP, DNS and BGP.
● The common adoption and use of these protocols unified the world of information
and communications like never before.
● Millions of digital devices and massive amounts of data, software applications,
and electronic services became compatible and interoperable.
● The Internet created a new environment, a complex and dynamic “cyberspace.”
● While Internet connectivity generated innovative new services, capabilities and
unprecedented forms of sharing and cooperation, it also created new forms of
crime, abuse, surveillance and social conflict.
● Internet governance is the process whereby cyberspace participants resolve
conflicts over these problems and develop a workable order.
● It is the development and application of shared principles, norms, rules, decision-
making procedures, and programs that shape the evolution and use of the
Internet.
● Internet governance should not be confused with e-governance, which refers to
governments' use of technology to carry out their governing duties.
● If Internet Governance is done properly, the internet can remain a great motor for
the future of humankind and its social and economic development. We need to
give people access to their own personal data that's held by the companies, as
well as the data produced by the government, paid by us, in the form of taxes.
● The importance of IT governance is that it achieves desired outcomes and
behavior. The relationship between IT governance and effective value creation
of IT investments has long been recognized and is cited as the reason for
achieving excellence in the management of IT.
● The Internet Governance Forum (IGF) is a multi-stakeholder community that
discusses a broad range of Internet issues, and seeks to identify possible
shared solutions to current challenges.
● The governing body of the Internet is actually the Internet Corporation for
Assigned Names and Numbers (ICANN), a Los Angeles based independent
body. On March 14, the National Telecommunications and Information
Administration (NTIA), an arm of the Commerce Department, announced that it
would sever its contract with ICANN.

___________________________________________________________________
E-governance
___________________________________________________________________

Electronic governance or e-governance is the application of IT.

It is used for back-office processes and interactions within the entire government
framework.
Through e-governance, government services are made available to citizens in a
convenient, efficient, and transparent manner.E-governance is providing governmental
services that are accessible through the internet. It refers to any government process or
function that is out online in digital form.Similarly, E-governance is the involvement of
digital democracy, online service delivery.An ordinary citizen gets the government
facility through the internet.

E-Governance is of 4 types depending on the specific types of services.

1. Government-to-Citizen(G2C)

The Government-to-citizen refers to the government services that are accessed by the
familiar people. And Most of the government services fall under G2C. The primary goal
of Government-to-citizen is to provide facilities to the citizens. It helps the ordinary
people to reduce the time and cost to conduct a transaction. A citizen can have access
to the services anytime from anywhere.

Example:
1. Many services like license renewals, and paying tax are essential in G2C.
2. Likewise, spending the administrative fee online is also possible due to G2C.
3. The facility of Government-to-Citizen enables the ordinary citizen to overcome
time limitations.
4. It also focuses on geographic land barriers.

2. Government-to-business (G2B)

The Government to business is the exchange of services between Government and

Business organizations. It is efficient for both government and business organizations.
G2B provides access to relevant forms needed to comply. The G2B also consists of
many services exchanged between business sectors and government.
Similarly, the Government to business provides Timely business information. And A
business organization can have easy and convenient online access to government
agencies. G2B plays a crucial role in business development. It enhances the efficiency
and quality of communication and transparency of government projects.

3. Government-to-Government (G2G)
The Government-to-Government refers to the interaction between different government
department, organizations, and agencies. This increases the efficiency of government
processes. In G2G, government agencies can share the same database using online
communication. The government departments can work together. This service can
increase international diplomacy and relations.
In conclusion, G2G services can be at the local level or the international level. It can
communicate with the global government and local government as well. Likewise, it
provides safe and secure inter-relationship between domestic or foreign governments.
G2G constructs a universal database for all member states to enhance service.

4. Government-to-Employee (G2E)

The Government-to-Employee is the internal part of G2G sector. Furthermore, G2E

aims to bring employees together and improvise knowledge sharing.
Similarly, G2E provides online facilities to the employees. Likewise, applying for leave,
reviewing salary payment record. And checking the balance of holiday. The G2E sector
provides human resource training and development. So, G2E is also the relationship
between employees, government institutions, and their management.

The goals of e-government:

e-Government is a means to accomplish these broader social goals, goals that move
beyond mere efficiency of government processes to that of overall reform and
development.

a. Creating a better business environment.

By cutting out redundancies in procedures and emphasizing immediate and efficient
delivery of services, e-government creates the conditions that attract investors/
investment.
This goal is highly dependent on the country, its industry strengths and its global
competitive advantage.

b. Customers online, not in line.

This refers to the effective delivery of public goods and services to citizens
accompanied by quick response government with minimal direct intervention by a public
official.

c. Strengthening good governance and broadening public participation.

Promoting transparency and accountability in government through the proliferation of
ICT in management and operations also opens opportunities for citizens to be more
actively involved in the policy- and decision-making processes of government.
As a major tool in building a tradition of transparency and good governance, e-
government can advance the fight against corruption.
e-government facilitates the swift delivery of complete information.

d. Improving the productivity and efficiency of government agencies.

Re-engineering processes and procedures to cut red tape, facilitate delivery of services,
increase productivity of the bureaucracy, and increase savings are benefits inherent in
E-government.

e. Improving the quality of life for disadvantaged communities.

ICT makes it possible for governments to reach marginalized groups/communities and
improve their quality of life. This means empowering them through their participation in
the political process, as well as delivering much-needed public goods and services.

The goal of e-government is to enhance the interaction between three main actors in
society—government, citizens and business—in order to stimulate political, social and
economic progress in the country.
In India, the National e-Governance Plan (NeGP) is an initiative to make all government
services available to the citizens of India via electronic media.This is an enabler of
Digital India initiative, and UMANG (Unified Mobile Application for New-age
Governance) in turn is an enabler of NeGP.

___________________________________________________________________
Internal IT processes
___________________________________________________________________

IT processes are the number one source of issues more so than technology. To
manage your IT organization, you need to ensure that procedures, tools, roles, and
reporting are well planned, deployed, and managed for the following elements of the IT
Process domain: IT process architecture and IT value management.

___________________________________________________________________
Answer the following :
___________________________________________________________________
1. What is E-Governance? Explain 4 types depending on the specific types of
services.
2. Explain IT governance in detail.
3. Which are the key terms of IT governance?
4. Which are the goals of E-governance?
 Unit – 6
Chapter 14
Information Technology Issues For Management

Management in a Technological Environment

The Changing world of Information
Action Plan

___________________________________________________________________
OBJECTIVE
___________________________________________________________________

 We will discuss on How to focus on the change,

 The key to using IT to transform themselves and their industries is management.
 Management must lead the IT effort that will keep the firm competitive in the
future.
 Management must view information technology as a resource to be used in
managing the organization.
___________________________________________________________________
MANAGEMENT IN A TECHNOLOGICAL ENVIRONMENT

Managers will face a highly technological environment.

The costs of processing logic and communications networks are so low, and the
potential of this technology so high, that the proliferation of technologies will continue to
accelerate.
We need to focus on the following aspects to know more about how management of IT
is required in any organization.

What Do CEOs Think?

According to surveys, CEOs want their IS departments to produce fast and flexible
systems that serve the customers effectively and increase markets.
To do cost cutting, the majority of CEOs outsource 50% of their IT services.
Although they are not satisfied by the outcomes of this practice of outsourcing, which is
a serious problem given the huge amounts of capital invested in technology.

A Political Model of Information Technology

Following Table describes a political model of information technology in the organization

(Davenport et aI., 1992).
Information Politics

Technocratic Reliance on technology; model the firm's IT structure and rely

utopianism on
new technologies

Anarchy No overall information management policy

Feudalism Management of IT by individual business units; limited reporting

to
the corporation

Monarchy Strong control by senior management; information may not be

shared
with lower levels of the firm

Federalism Management through consensus and negotiation about key IT

decisions and structures

● Firms characterized by technocratic utopianism are fascinated with the

technology.
● The firm will develop databases, desktop workstations, and networks, and
purchase large amounts of software.
● But this organization often lacks a vision of how all of this technology will be used
to achieve its objectives and results in anarchy when technology is not
managed.
● In the initial days of PCs many firms let users purchase whatever equipment they
want. As a result, these firms found it very difficult and expensive to connect their
diverse computers to a network.

● In the feudal model,executives control technology within their divisions and

departments. These executives determine what information to collect and choose
the technology fiefdoms.
● They also make the decision on what information to forward to higher levels of
management. This model is most often found when the finn stresses divisional
autonomy.

● In a monarchy, the CIO becomes the CIC, the chief information czar.
 ● Instead of playing the consultant role, the CIO establishes and enforces
standards that will be followed throughout the corporation.
● The monarchy often emerges when the finn finds that it has suffered too long
from the feudal model.
● A possible halfway point between feudalism and a monarchy is a constitutional
monarchy, in which a document sets out the powers reserved to senior
management and those that fall to the divisions.

● In today's environment, the federal model may be the most appropriate.

● The finn tries to reach a consensus on which IT decisions belong at each level
and how information should be shared.
● The emphasis is on which policies make the most sense for the corporation as a
whole, not just for a specific department or division.
● Senior management recognizes that local divisions need some autonomy; local
managers recognize that information belongs to the company and may often be
of great strategic value.

If there are many opportunities to share systems across divisions, corporate

management will encourage a strong role for a central IS group.In the case of very
dissimilar divisions where there is little opportunity for sharing, we would expect to see
the local unit have a lot of responsibility for IT decision making. A central IT group will
provide some coordination, but most decisions will be left to local managers. This
decentralization will be more pronounced if local managers are very knowledgeable
about information technology.

The Chief Information Officer

● The increased importance of IT to the firm has led to the creation of a chief
information officer (CIO) position.
● However, the chief information officer is also an influential member of senior
management and is usually a vice president or senior vice president in the firm.
● CIO is responsible for traditional information processing, voice and data
communications and office technology.
● The job demands someone who can assume a role in planning, influencing other
senior managers, and organizing information activities in the organization.
● CIO must provide leadership and control over processing.
● It is important that planning, systems development, and operations are all
undertaken successfully.
● Earl and Feeny (1994) describe ways in which CIOs should try to add value to
their organizations. They found two types of CEOs, those who see IT as a
strategic resource and those who see it as a cost.
● Following Table presents various issues in managing IT as seen by CEOs in
these different positions.

PERCEPTIONS OF IT

Issue IT, a Cost/Liability IT, an Asset

Are we getting value ROl on IT is difficult to ROI is difficult to

for money measure; the measure; the
invested in IT? organization as a whole organization
is unhappy with IT. believes IT makes an
important
contribution.

How important is IT? Stories of strategic IT Stories of strategic IT

use are dismissed as use are instructive.
irrelevant to this
business.

How do we plan IT plans are made by IT thinking is subsumed

for IT? specialists or within business
missionary zealots. thinking.

Is the IS function There is general The performance of IS

doing a good job? cynicism about the is no longer an
track agenda item.
record of IS.

What is the IT Many IT applications IS efforts are focused

strategy? are under development. on a few key
initiatives.

What is the CEO's The CEO sees a limited The CEO sees IT as
vision for the role role for IT within the having a role in the
of IT? business. transformation of the
business.
 What do we expect The CIO is positioned The CIO is valued as a
of the CIO? as a specialist contributor to
functional manager. business thinking and
business
operations.

● Earl and Feeny argue that the CIa must find a way to add value to the
corporation from its use of IT so the CEO will view IT as an asset.
● It appears the most successful approach to obtaining benefits from IT is not to
identify separate IT and business strategies; rather, business strategy subsumes
IT strategy.
● The job of the cra is to build relationships with other functional managers so IT
requirements become a part of business strategy.
● This approach means the CIa has to be involved in planning and strategy
meetings across the company.
● To provide confidence in technology, the CIa must build a track record of
delivering IT as promised, on time and within budget.
● Rather than scattering the development effort, a well-run company focuses its IT
efforts on opportunities and areas where the firm is weak.
● The task of the CIa here is to determine not how to use IT, but rather where it
should be used to most benefit the organization.
● The CIa has to be a promoter, marketing the potential of IT to transform the
organization.

Following summarizes the characteristics Earl and Feeny found among CIas for firms
that considered IT to be an asset rather than a liability :

ADDED VALUE OF THE CIO

1. Obsessive and continuous focus on business imperatives.
2. Interpretation of external IT success stories as potential models for the firm.
3. Establishment and maintenance of IS executive relationships.
4. Establishment and communication of IS performance record.
5. Concentration of the IS development effort.
6. Achievement of a shared and challenging vision of the role of IT.

CIa can add value by finding new business opportunities for the company and using
technology to conduct business in new ways.
The company manages IT in a federal structure so he takes responsibility for
infrastructure like a worldwide network.
IT managers in each division develop systems for their divisions and worry about the
day-to-day operation of their systems.

The Corporate IS Department

Many organizations have a corporate information services department and separate IS

departments at different physical locations.
Responsibilities of a department:
1) It is staffed with operations, maintenance, and development personnel.
2) The operations group is responsible for the ongoing operation of the
infrastructure, including computers and communications networks.
3) Maintenance staff members make changes to existing applications to enhance
them, and they repair errors that appear in programs.

Most organizations are content to have a central group provide and maintain
infrastructure, the underlying network of computers and communications networks, for
the firm.
The role of a central group in developing applications of technology varies among
organizations as discussed earlier in the chapter.
A firm can decentralize and leave applications development to users, it may centralize
this activity, or it may adopt a combination approach in which the central group consults
with users who undertake their own development projects.

A Vision and Plan for IT

● One task of a CIO is to be sure there is a vision in the firm for what IT can
accomplish and a plan to provide a guideline for management decisions about
technology.
● A vision is a general statement of what the organization is trying to become, it
also describes, possibly in scenario form, the environment seen by a user.
● A vision might include a statement about the kind of technology architecture the
firm hopes to provide, say, a client-server environment and a global network for
communications.
● The vision needs to be sufficiently compelling that it creates enthusiasm for the
plan to achieve it.
● Corporate and IT strategic planning should be part of one planning effort. The IT
plan expands the IT component of the strategic business plan and describes how
to execute the agreed-upon strategy.
● This plan must combine the vision of IT with strategy to produce a document that
guides IT decision making.
 ● The vision and strategy provide the goals for an IT plan that will describe how to
achieve them.
● A key role of the plan is to identify the most important new applications of
technology and prioritize them.
● It is important to focus efforts on applications that contribute to achieving the
vision and strategy of the company.
● The plan would describe each of these projects in some detail including cost,
time, and staff requirements for completion.
● If management decides it wants to undertake more applications than there is staff
available, some of the development will have to be outsourced.
● Having a plan makes managing IT requests easier for the CIa and for
management in general.
● A well-prepared plan can create enthusiasm for IT, focus the technology effort on
business imperatives as suggested above, and help manage and evaluate
technology.
● The plan is a fundamental management tool for seeing that IT makes the
maximum contribution to the organization.
● A plan developed by a CIa alone will probably not be acceptable to other
managers.
● The CIa should act as a resource, consultant, and tutor for the planning
committee. The idea is for technology not to be a separate plan, but to be
integrated, and to some extent subsumed, in a corporate plan.

CONTENTS OF AN INFORMATION SYSTEMS PLAN

• Executive summary
• Goals-general and specific
• Assumptions
• Scenario-information processing environment
• Applications areas-status, cost, schedule, priorities
• Operations
• Maintenance and enhancements
• Organizational structure-pattern of computing
• Effect of plan on the organization-financial impact
• Implementation-risks, obstacles

Outsourcing as a Strategy
Outsourcing involves turning over responsibility for some part of a firm's technology
effort to an external company. In addition to obtaining services like systems integration
for developing a specific application,a firm can outsource all or part of its IT effort.

Loh and Venkatraman (1992) have identified some of the factors that lead a firm
to outsource:

• A firm that feels it is spending more on technology than it should may adopt
outsourcing if it feels this option provides a lower cost alternative than internal
management.
Outsourcing may be seen as a way to reduce IT related costs in general.

• A firm with a high-debt structure may not wish to invest in technology. It may view
outsourcing as a way to lease technology instead of buying it.

• An organization may feel its IT function is not performing adequately. Outsourcing can
be a way to arrange for a more professional and better performing IT operation in the
company.

Turner and Kambil (1993) have added to this list:

• An organization has decided to return to its core competencies. Managing IT is not

one of these, so it outsources this task to another firm.

• The organization is interested in technology transfer from the expert outsourcing firm.
It will learn from the outsourcer.

• A firm may outsource "commodity" processing to free its staff to develop new
applications of technology.

Accomplish above objectives of outsourcing:

The outsourcing firm must have a high level of expertise in technology. This firm should
also be able to create economies of scale.
For example, the telecommunications outsourcer can probably provide network services
for a number of clients with a smaller staff than the sum of the networking staffs of its
clients.
The outsourcing firm may have a high-cost structure because of its need to employ
highly skilled personnel. The need to have a contract with the outsourcing firm can lead
to conflict and misunderstandings.
The biggest deterrent to outsourcing is the question of control.
Lacity and Hirschheim (1993) studied a number of firms that outsourced. Their criticism
of outsourcing provides a cautionary note.
Their study identified two myths of outsourcing.

Myth 1: Outsourcing vendors are strategic partners.

The outsourcing vendor cannot be a partner because the outsorcerer's profit motive is
not shared by the customer. The outsourcer makes more money if it is able to charge
the customer higher fees. If the outsourcer can reduce service levels and collect the
same fees, that also contributes to its profit margins.

Myth 2: Outsourcing vendors are inherently more efficient than an internal IS

department.

The outsorcerer's argument here is that economies of scale help it to be more efficient.
It is possible that the outsourcer can do some tasks more efficiently because it has done
them before or because it can afford to share highly paid specialists among a number of
clients.
An outsourcing agreement will probably extend for a number of years in order to justify
the transition effort involved. Since an agreement may be for five or ten years, the
contract must be highly flexible. Business conditions and technology are expected to
change during the life of the agreement.

How Much to Invest in IT

Most firms have a product or service to offer, and the technology helps them accomplish
the mission of the organization. Overall in the United States, the Department of
Commerce estimates that 45 percent of capital investment is for information technology.
The question looks at IT as a cost and as an investment.
Each investment has a different probability of producing the benefits anticipated from
the IT innovation.
Estimating Value

The probability of successfully obtaining a return must be weighted by the probability

that an IT investment will have a return and the probability of conversion success. If we
assume that the probability of a return on an IT initiative based on the investment type is
independent of the probability of converting the investment into a successful application,
we get the following IT Investment Equation:

P(SuccesslReturn) = P(Return on Investment Type) x P(Conversion Success)

where P means "probability of."

This equation calculates the SR index, the probability of a successful return.

The IT Investment Equation says that the probability of obtaining a return on an

investment in information technology equals the probability that the type of investment
you are making has a return times the probability that you will be successful in
converting the investment into a working IT application.

Making the Investment Decision

There are two capital budgeting techniques that have been used or proposed for
making IT investment decisions.
 1. The first is the well known net present value approach or NPV, which figures out
the net present value of income and expenses using the firm's cost of capital,
and compares the two to see if the result is positive or negative. A project with a
positive NPV returns a value in excess of the firm's cost of capital.

2. A second approach is to use an options pricing model that looks at an investment

in IT as providing an option for making a future investment. This approach is new
and somewhat controversial; it presents an interesting framework for thinking
about IT investments.

A Summary of Issues in Managing IT

• The personal involvement of management in making decisions about technology is

crucial, especially given the huge investments most companies have made and
continue to make in information technology.

• You can use information technology to transform the organization. IT design variables
let you develop entirely new structures like the T-Form organization.

• Information technology should be an integral part of a firm's corporate strategy.

Managers and other users are the most likely source of strategic applications of the
technology.

• Senior management needs a vision of how technology can be used in the firm.

• A corporate plan should include planning for IT.

• Management has the responsibility for designing and managing an IT architecture. It

has to provide the basic infrastructure needed to take advantage of technology.

• There are a number of different structures for managing IT. Today the federal structure
is probably the most popular in a large organization.

• Management is also responsible for developing new applications of technology. It

needs to focus development resources where they are most needed.
• Systems development is one of the most creative activities in modern organizations.
Managing development projects has been a continuing challenge for companies.

• Reengineering focuses attention on business processes instead of functions. It also

contrasts radical redesign with incremental improvements in processes.
• Management must decide on the source of IT services; for example, there is the option
of outsourcing to another firm.

• Managers determine what level of support to provide users working with technology,
and how much time users should spend developing applications themselves.

• Managers are in the business of change. Nowhere is change more evident than in
implementing new technology and using IT to redesign organizations.

• Information technology, while easy to use in some respects, is constantly growing

more complex. There is a continuing need for IT professionals in the organization.

___________________________________________________________________
THE CHANGING WORLD OF INFORMATION
___________________________________________________________________

● The percentage of IT expenditures controlled by the professional IS group has

steadily dropped.
● The responsibility for IT management is shifting to users and line managers.
● The challenge for senior management in this changing world is to exert the
proper amount of influence on and oversight of an increasingly complex
technological environment.
● The hardware and software infrastructure is expanding rapidly as networks of
servers and workstations grow .
● Senior management will continue to struggle with the balance between what
appears to be critical for the organization and should be controlled centrally, and
what is best left to local management.
● The trends that are likely to continue are the declining cost of hardware, the
explosive growth of networking, the Internet,interorganizational communications,
the development of more sophisticated software packages, and the desire of
users to do more computing under their own control.

___________________________________________________________________
ACTION PLAN
___________________________________________________________________

The following are helpful guidelines:

 1. Use IT Design Variables to Structure the Organization

One of the most exciting attributes of modern technology is your ability to use it in
designing innovative and highly effective organizations. You can use this technology to
design components of an organization or to structure an entirely new type of
organization.

• IT design variables, in conjunction with conventional organization design variables,

provide you with tremendous flexibility in designing an organization.

• The most likely outcome from using these variables will be a flat organizational
structure with decentralized decision making. The firm will use electronic
communications and linking, as well as electronic customer-supplier relationships to
form alliances with other firms.

2. Determine and Communicate Corporate Strategy

Develop a plan for how to use information technology. The plan should include:

➔ A list of opportunities for your business unit.

➔ A vision of how your unit should function and the role of IT in that vision.
➔ A survey of current business processes that are good candidates for major
improvement through process reengineering.
➔ A catalog of areas for applying IT, including priorities.

Develop a long-range plan for the technological infrastructure.

➔ Plan for hardware-software architecture for your unit given the constraints of the
corporation, that is, what technology already exists.
➔ Plan for the evolution of a network that forms the backbone of your technology.
➔ Invest in infrastructure.
➔ Investigate the use of standards to facilitate connection and interorganizational
systems.

Develop ongoing management strategies for IT.

➔ Support users in your unit and encourage them to work with the technology.
➔ Develop mechanisms for allocating resources to IT.
➔ Encourage innovation and reward it.
Manage systems development.
➔ See that design teams are formed for new projects.
➔ Participate in the design process.
➔ Be sure you understand what IT applications will do.
➔ Review and monitor development projects.

Be a user of technology.

➔ Use IT to improve your own productivity.

➔ Use technology to set an example for others.

___________________________________________________________________
Answer the following:
___________________________________________________________________

1. What do you think a CEO wants from information technology?

2. What is the role of the chief information officer?
3. Why do you think organizations have established the CIO position? What kind of
individual should fill it?
4. What is meant by the statement that a key challenge for management is the
integration of information technology and the business?
5. Give an example of how information systems can constrain the opportunities
available to management.
6. What are the motivations for outsourcing?
7. What are the "myths" of outsourcing? Do you agree with them?
8. What are the options for structuring information processing in an organization?
9. How should you manage an outsourcing relationship?
10. If you became the CEO of a finn, how would you evaluate its information technology
effort?
11. What kind of changes does information technology either create or facilitate within
and between organizations? What other changes are associated with IT?
 Unit – 7
Chapter 15

Societal Implications And The Future With Technology

___________________________________________________________________
Objectives
___________________________________________________________________
 We will discuss Social Responsibilities and societal implication with respect to
technology which affects various aspects of society.
 To know more about a professional code of conduct for computer professionals
developed by the Association for Computing Machinery, a society of individuals
who teach and work in the field.
 Discuss Kallman and Grillo (1993) suggest several informal guidelines for ethical
behavior
 Learn the future with IT
___________________________________________________________________
Introduction
___________________________________________________________________
The result of any action or event on society or part of society is known as social
implications.It can also be described as a law or a protocol or a set of rules or policy
which need to follow for taking certain actions.
Development in technology and its impact on society go hand in hand. Poor
implementation will give adverse results on society like pollution which caused a serious
threat to the whole environment. The objective of technology is to make the current
working environment easier to manage and achieve to complete the task effortlessly
and effectively.
The government in developing countries focused on the change and started adopting
the Internet to their business in a restricted way to avoid openness associated with
democratic, postindustrial societies.Information technology has an impact beyond any
one organization. A user of systems may be affected directly as a member of an
organization or indirectly as a citizen.
In this chapter, we discuss some of the social responsibilities associated with
information systems. We also look at the future of the technology to understand better
how to prepare for it today.
___________________________________________________________________
Social Responsibilities
___________________________________________________________________
● Social responsibility is an ethical framework for any organization or citizen.
● It implements for the benefit of society.
● A vital role is played by the government for implementation of social responsibility
to endorse ethical, social and environment friendly actions or events by an entity,
be it an organization or individuals.

The issues according to the following categories:

• Technology : Issues that relate to the nature of the technology itself
• Applications: Problems that arise from applying technology
• Impact: Issues regarding the impact of technology on individuals, the organization,
and society
___________________________________________________________________
Technology
___________________________________________________________________

Complexity and Integrity

➔ As we discuss the interaction between IT and societal complexity,we come to

know that IT will make things more complicated and at the same time it will help
us cope with the growing complexity inherent in a postindustrial, information-
based economy.
➔ The client-server architectures and networking create greater complexity and
dependence on machines.
➔ It takes considerable effort to learn a graphical user interface like Windows 98
and to operate five or six application packages.
 ➔ Using a networking environment is more complex than using a standalone
computer.
➔ Sometimes software does not run right, there is downtime on the network,
➔ Users encounter problems accessing data or programs on the server, and there
can be printing difficulties.
➔ The complex environment can cause longer time to diagnose the problem and fix
it compared with the days of simpler technology.
➔ These problems can affect the organization to the extent to which they have
become dependent on technology.
➔ Organizations use technology to process most transactions, to operate
infrastructure systems used in transportation and communications.
➔ The Internet is a huge, decentralized and distributed network used by such
technology dependent organizations.
➔ At such organizations, if the Internet goes down, they cannot book an order,
enter a purchase order, or process salaries.

Reliability and Failure

➔ Information technology is extremely complex.Systems in the future are expected

to feature more redundancy and lower failure rates. Though there is always the
possibility of a system failing.
➔ The results of such a system failure range from inconvenience to disaster..
➔ There is serious public concern about seeing that systems are designed and
installed with adequate considerations of reliability and backup.
➔ For example, critical on-board systems in airliners have long featured
redundancy, that is, several separate and independent hydraulic systems.
➔ Some systems have extensive hardware redundancy, but very few systems have
software that is independently developed and executed on separate machines to
provide reliability and backup.
➔ This approach is costly,but in future it may become necessary.
➔ It required a well-developed procedure for analyzing the risks of various types of
system failures.
➔ Without this assessment capability, it is difficult to determine the steps necessary
to achieve acceptable levels of reliability for any given system.

Piracy

➔ Piracy is highly organized with factories and distribution channels.

➔ It is a violation of what is often referred to as intellectual property rights.
 ➔ The AsialPacific region is considered by most companies to be the largest center
of piracy.
➔ The U.S. is a strong engine for growth and jobs,though this industry is threatened
by piracy, primarily of software.
➔ Estimates of piracy in the People's Republic of China run as high as 98 percent.
➔ The score for Russia and Latin America is estimated to be 90 percent.
➔ An attorney for Microsoft estimated that the company is losing half its revenue
worldwide to piracy.
➔ Piracy is a serious threat to the economy.
➔ The violation of intellectual property rights is not confined to individuals selling
pirated copies of software. But whenever you borrow a program a friend
purchased with a licensing agreement and install it on your computer, you are
probably violating the licensing agreement.
➔ Software companies offer a variety of licensing arrangements.
➔ Education industry or universities are licensed to use software in a computing
lab at a very low fee in order to introduce students to the programs.
➔ For the software vendor, the misappropriation of its intellectual property rights is
a major problem.
___________________________________________________________________
Applications of IT
___________________________________________________________________

Electronic Securities Markets

On October 19 and 20, 1987, the stock market “meltdown". As per investigations
of this market collapse, the blame is put on investment and trading strategies
that are possible only because of computers. One strategy, called portfolio
insurance, involves the sale of futures to offset a falling stock market. In addition,
the insurer sells stock while the market is falling,thus contributing to a decline in
the price of stock.

➔ These strategies require computers to perform calculations and alert the trader or
to actually send trades to brokers.
➔ Computerized trading systems at the New York Stock Exchange help the
arbitrageur, who must simultaneously trade stocks and futures before a price
change eliminates an arbitrage opportunity.
➔ The end result of investigations into the crash was a series of "circuit breakers":
➔ When different averages move by a certain amount, trading is halted for some
period of time to allow the market to adjust.
 ➔ There are concerns that technology contributed to a lack of stability in the
market, and this may discourage individual investors from investing.
➔ However, even with these concerns, stock exchanges are moving to develop
electronic markets and sometimes closing the comparable physical exchange.
➔ There are thousands of individuals exchanging financial instruments in on-line
markets through the Internet.
➔ Electronic brokers have experienced tremendous growth, accounting for 35
percent of retail stock trades.
➔ The speed and low cost of these trades have encouraged "day trading"-where
investors buy and sell the same stock in a short period of time.
➔ Electronic Computer Networks(ECN), offer a place to exchange shares of stock
off the traditional stock exchanges.

Monitoring

➔ Computer systems offer the opportunity to monitor worker performance closely.

➔ For example ,
◆ An insurance company can determine how long it takes a representative
to serve a customer on the telephone.
◆ An airline can tell how long a reservations agent takes on each call and
how many calls the worker handles in each shift.
◆ On the production line, errors are traced back to the individual making
them.
◆ Control systems also track individual worker productivity.
➔ Many individuals respond negatively to such monitoring. For example, one
employee sued her employer for monitoring her e-mail messages.
➔ It is possible employees will refuse to work with systems that closely monitor their
work performance.
➔ One solution, adopted by an automobile manufacturer, was to form workers into
teams; the firm publicizes the performance of the entire team rather than that of
individual workers.
➔ Team members discuss the team's performance and try to figure out how to do
better.
➔ This approach to monitoring lets management keep track of production without
the severe negative effect on individuals who resent having their performance
measured by a computer system.

Harassment
 ➔ Systems are designed to automatically send second, third, and even further
overdue notices when a customer has a legitimate complaint about a bill.
➔ Computers connected to automatic dialing machines harass consumers via the
phone.
➔ Systems appear unresponsive to an individual's problems because of the need to
process large volumes of information quickly.
➔ Some systems may be flexible but require manual procedures to update records
and keep them accurate.
➔ If a clerk makes an error or omission, the computer will continue sending letters
to the customer.
➔ In other situations, employees learn to rely on systems and do not provide
customer service when a system is unavailable.

Defense

➔ Since so much of the economy of developed countries depends on technology,

these nations are vulnerable to electronic warfare.
➔ A recent issue of Time had a cover story on "Cyberwar" in which the magazine
interviewed officers at the Army Intelligence and Security Command who plan
electronic offenses against enemies and defenses for the U.S.
➔ As an example,
◆ a country might try to insert a computer virus in an enemy's telephone
switching stations to cause a nationwide failure of communications.
◆ If you insert logic "bombs" in enemy communications networks, you can
set them off to disrupt rail and air transportation as well.
◆ Other scenarios describe various kinds of electronic mischief to disable an
IT-intensive economy without firing a shot.

___________________________________________________________________
The Impact of IT

Educating for Technology

Challenges to educate society for the following roles:

• Knowledge workers.
Employees need to be able to use computers as a part of their work. The knowledge
worker needs to understand something about computers, networks, and different kinds
of software. He or she should be familiar with using the Internet for commerce and to
search for information. The user needs to understand how to use this technology to
improve his or her performance.

• IS professionals.
These individuals will work with the technology.It includes programmers, systems
analysts, managers, and other staff members.Systems professionals must have an in-
depth understanding of the technology and its applications. Some of these employees
will develop hardware and software packages, and others will apply combinations of
hardware, packages, and custom programs to the problems faced by organizations.

• Interface personnel.
Between the IS professional and the user is an interface staff. These individuals have
functional knowledge of how computers and software work but do not have a command
of all the technical details. They need to be knowledgeable with the kinds of problems
faced by organizations and understand business and management.

• Factory and office workers using computer equipment.

Earlier the plant could operate with largely unskilled and uneducated employees.
Nowadays a machine operator uses a touch screen on a computer-driven testing device
to enter testing parameters.

The Technology Gap

➔ There is a serious concern over whether computer and communications

technology will accentuate the gulf that exists between the "haves" and the "have
nots," among both individuals and nations.
➔ More than half of U.S. homes do not have a personal computer.
➔ There are countries in the Middle East and Africa that have no Web servers.

Employment
➔ Labor leaders are extremely concerned about the possibility of wide-scale
unemployment because of information technology.
➔ It does appear that the continued introduction of automation will reduce
employment in manufacturing. However, increased technology will certainly
require a more highly skilled, better-educated workforce.
➔ The implementation of information systems also has implications for the pace of
technological evolution, employment security, and the importance of retraining
workers when jobs change.
➔ There is no longer a need for a layer of middle management as a conduit for
information between the next-lower and next higher level in the organization.
 ➔ The T-Form organization uses IT design variables to create a flat structure with
minimum overhead; requiring fewer employees than a traditional organization.
➔ The remaining employees will use IT as an integral part of their jobs.

Privacy
➔ The important issue of concern relating technology to society is the issue of an
individual's right to privacy.
➔ The European Union has a law that prohibits the purchase and sale of personal
data,which means that a firm cannot sell data to another company for marketing
purposes. But there is a fear of having adverse effects on electronic commerce.

➔ For example, Sweden enacted a comprehensive program to regulate the

development of data banks.
Direct-mail marketing organizations use auto registration information to target
mailings.
The Web introduces another privacy concern: companies collecting information
about people who visit their Web site without the visitor's knowledge.

Security
➔ Closely related to problems of privacy is the issue of system security.
➔ There are many possible threats to the security and integrity of computer
systems.
➔ Researchers in the field are working on methods of encrypting data so they
cannot be intercepted and decoded by an unauthorized user.
➔ This is an important concern for highly sensitive data such as online databases
and the need for a secure payments system for electronic commerce.
➔ There are a number of approaches to safeguarding credit card numbers sent to
merchants over the Internet, generally involving some type of encryption.
➔ Alternatives to a credit card like "digital cash" and electronic script are available.

Growth of International Business

➔ One of the major changes in the global economy in the past decade is the growth
of international business.
➔ The United States,Canada, and Mexico are reducing and eliminating most tariffs.
➔ Europe has created one market and currency to facilitate trade.
➔ Major corporations view themselves as worldwide global firms that happen to
have a headquarters in a particular country.
➔ The implications of internationalization for information technology is the solution
for one major problem for the multinational organizations restrictions on the flow
of data across borders.
 ➔ A related problem is the need for standardization, which may be antithetical to a
management climate that stresses local control and initiative.
➔ We need standards for information technology because most headquarters
operations collect financial data from various subsidiaries.
➔ If there are no standards for reporting, the task at headquarters will be much
more difficult.
➔ Standards also make it easy to share applications among a firm's locations.
➔ The Internet, Intranets, and the proprietary networks of global companies cover
the world, as do networks for banking and securities trading.
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Some Suggested Solutions

Education
➔ Technology will change the nature of education. Few are suggesting that
multimedia will revolutionize education.
➔ For this, education infrastructure will need to redesign and develop new curricula
in which the capabilities of technology are exploited to provide new ways of
learning.
➔ Some companies are using computers to help illiterate workers function on the
job.
➔ In one warehouse, forklift drivers who cannot read get instructions from the
"talking computers" they wear on their belts.

Building an International Infrastructure

➔ The Internet is increasingly important for education and business, yet there is
little access to the Net in less developed countries and the Middle East, except
for Israel.
➔ There are very few Web hosts in Africa outside of South Africa. The U.S. has
begun to train Peace Corps volunteers in the use of the Internet .
➔ Peace Corps volunteers will be encouraged to use the Internet to modernize
remote areas.
➔ Teachers and managers have to learn how to incorporate the Internet into their
activities.
➔ Through a concerted, multinational effort, the Internet could become a powerful
tool to help underdeveloped countries improve education and commerce.

Technical Safeguards
➔ Some problems involving misuse of information systems are technical in nature.
➔ We should attempt to make systems as secure as possible to avoid penetration
by hackers.
 ➔ Thorough testing is needed to prevent programs from inadvertently disclosing
sensitive data.
➔ There should be technical checks on procedures to prevent accidental entry by
unauthorized individuals.
➔ Protecting a system from malicious programs such as viruses is also not easy.
➔ Protection may take the form of monitoring to keep track of users or introducing
special encoding algorithms to maintain security.

Controls
➔ Several individuals are required to authorize changes in programming and
databases, and checking input carefully helps maintain data integrity.
➔ Controls requiring all data to be processed help solve such problems as data not
updated to reflect payments.
➔ Controls are important to the extent they ensure accurate processing and screen
out requests in which access is aimed at fraud or mischief.
➔ Legislation is another solution to some of these social issues, particularly
privacy and abuse of power, is legislation.
➔ In 1973, Sweden enacted a law regulating how and where personal data are
maintained about individuals.
➔ The act established a data inspection board that grants permission to keep a
data bank of personal information.
➔ Sensitive data, such as records of criminal convictions, can be maintained only
by an agency charged by statute with the job of keeping these records.
➔ Responsibility for maintaining the correct data lies with the organization
maintaining the data bank, not with the individual whose records are in the bank.

some of the following topics are usually proposed in privacy legislation:

• Notifying the subject about the existence of a record

• Responding to inquiries on the contents of data and the use of records
• Investigating complaints
• Obtaining consent for each use of the data
• Checking authorization for requests
• Keeping a log of all accesses
• Providing subjects' statements when disputed data are released
• Sending corrections and/or subjects' statements to past recipients of information
• Ensuring accurate compilation of records
• Providing additional data to give a fair picture
• Providing a secure system
System Design
➔ To a large extent, many social implications are determined during the system
design process. By asking appropriate questions during the design process, we
can assess some of the potential problems regarding the impact of the system on
society.
➔ The design team should encourage independent attempts to penetrate the
system along these lines to verify the completeness and viability of the design.
➔ A well designed system is the best guarantee against harassment, abuse,
privacy violations, and alienation.
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ETHICS AND INFORMATION TECHNOLOGY
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Ethical considerations include concerns that:

● Data in the organization should be used for its intended purpose and the
intended purpose should be legitimate.
● Monitoring of workers should be undertaken with their consent, and the data
should be used to help rather than punish the workers involved.
● Systems and services made available to individuals external to the firm should
behave as specified and cause no harm to others.
● Systems within the firm should not be guilty of harassment.
● Appropriate privacy should be maintained; for example, e-mail files should not be
read by individuals not involved in the exchange of messages.
● Appropriate software copyrights should be observed and there should be respect
for intellectual property.
● Systems should be secure and well controlled.
Ethical decisions arise frequently when dealing with information technology.

The facts of an ethical situation can be summarized by four factors.

1. The first factor is to clearly identify the moral agent.
This is who , whose actions will bring about the technology-in-duced change.
2. The next factor is the set of alternative courses-of-action available to the agent.
These are the real world acts that will have an effect on the human system under
consideration. Acts have consequences.
3. The third factor description of the results that are expected to occur if each act is
taken.
4. Finally, it is essential to identify the stakeholders who will be affected by the
consequences of the acts stakeholders have an interest in what the agent does.

Kallman and Grillo (1993) suggest several informal guidelines for ethical
behavior:

• The family test: Would you be comfortable telling your closest family members about
your decision or action?

• The investigative reporter test: How would your actions look if reported in a
newspaper or on a television news program?
• The feeling test: How does the decision feel to you? If you are uneasy about a
decision or action but cannot understand why, your intuition is telling you it is not the
right thing to do.

• The empathy test: How does this decision look if you put yourself in someone else's
position? How would it look to another party affected by your actions?
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THE FUTURE WITH INFORMATION TECHNOLOGY
______________________________________________________________________
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Over the period of decades ,information technology has made huge changes in
organizations and society. As the internet comes into the picture we observed dramatic
change.The most recent and fastest growing innovation is the Internet and the World
Wide Web. New models for business generally involve the Web and include ideas like
electronic commerce, streamlined supply chains, electronic markets and even web-
enabled appliances. The Internet provides, for the first time, a worldwide network
infrastructure. Over 100 million people around the world can access applications and
information placed on the Web.
This same technology allows knowledge workers to access vast amounts of corporate
information online using an Intranet. Using web browsers all kinds of information
access is possible through a single program. The combination of computers, databases,
and telecommunications, especially the Internet, provide the manager with an incredible
number of options for improving the way an organization functions. Your challenge will
be to choose appropriate technology, implement it successfully and continually manage
change.

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Answer the following:
__________________________________________________________________

1. Why is the use of a system the responsibility of the systems design team and the
organization?

2. Does technology make it easier to violate an individual's privacy?

3. What would be your response to a proposal for a national data bank of information on
citizens for purposes of social science research?

4. What are the ethical responsibilities of an IS professional?

5. What solutions are there to protect a country's information infrastructure from attack?

6. What steps are necessary to bring the benefits of information technology to the
nation's
schools?

7. Why does an innovation like the Internet offer both an opportunity and a threat to de-
veloping countries?

8. What can be done to reduce the possibility of a computer-based fraud that would
cause
the failure of a business?

9. How could IT be used to solve some of the pressing problems of society, such as
reduc-
ing the amount of energy consumed?

10. How is a highly technological society like the U.S. vulnerable to "electronic
aggression"?

11. What are a manager's responsibilities for information technology?