Alter – Information Systems 4th ed. © 2002 Prentice Hall 1 Moving Towards E-Business As Usual.

1 Alter – Information Systems 4th ed.

© 2002 Prentice Hall

Moving Towards E-Business As Usual

Alter – Information Systems 4th ed. © 2002 Prentice Hall2

Opening Case - Dell Computer

Business insight:What is the point of this case?

What are the two management concepts are applied in this case?

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Opening Case - Dell Computer

Business insight: Sell directly to customers

Decide how much to produce based on demand estimates & contracts produce on demand

What makes this approach possible? Outsourcing

Negative holding costs! Mass customization

Powerful order fulfillment system

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Opening Case - Dell Computer

Dell: http://www.dell.com

Debate:What is more important to Dell, the fact that it sells computers over the Web, or the fact that its manufacturing process permits it to build and deliver customized computers efficiently?

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Work Systems, Information Systems, and E-Business

E-business = the practice of performing & coordinating business processes through the extensive use of information technology (IT) IT = computer and communication

technologies E-business does NOT equal the Internet,

though the growth of the Internet acted as a very powerful catalyst

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Work System = a system in which people and/or machines perform a business process using resources (e.g., information, technology) to create products/services for internal or external customers

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Information System = a work system that processes information, thereby supporting other work systems Capture Transmit Store Retrieve Manipulate Display

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Four Main Themes:

Businesses operate through systems Business professionals are part of all

phases of building & maintaining information systems

Technological advances drive business innovation

The success of IT-based systems is NOT guaranteed

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1. Businesses Operate Through Systems

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Systems & Subsystems

System = a set of interacting components that operate together to accomplish a purpose

Subsystem = a system component Has all the features of a system, but it is part

of a larger system

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Viewing a Firm as a System

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System Terminology:

Purpose The reason for the system’s existence The reference for measuring the system’s success

Boundary Separates the system from its environment

Environment Everything pertinent to the system that is outside the

boundary

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Inputs Objects & information that enter the system

from the environment Outputs

Objects & information that enter the environment from the system

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Alter’s Work System Framework

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The Work System Framework The concept of a work system can be used to visualize

almost any system that operates in an organization. The Work System Framework helps you think about

business processes and the information systems that support them. It focuses on the work being done.

Work is the application of human and physical resources such as people, equipment, time, effort, and money to generate outputs used by internal or external customers.

It ideas from several prominent management theories including Total Quality Management, business process reengineering, and systems theory.

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Examples of Information Systems Supporting Business Processes Bar-code scanners and computers identify items

sold and calculate the bill (Performing customer checkout).

Airline reservation system keeps track of flights and accepts reservations for customers (making airline reservations).

System that identifies people by scanning and analyzing voice prints (preventing unauthorized access to restricted areas).

Word processing system for typing and revising book chapters (Writing a book).

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Elements of the Work System Framework: The internal or external customers of the business

process The products and/or services generated by the

business process. The steps in the business process. The participants in the business process. The information the business process uses or

creates. The technology (if any) the business process uses. (Context and Infrastructure discussed later.)

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The Work System Framework

The Work System framework implies that although people sometimes speak of computers as systems, the system business professionals should focus on is the system performing the work.

The system performing the work is much broader than the technology. It includes the business processes, the participants, any information used, and any technology used.

The links are two-way, implying that the elements should be in balance. Also, changes in one place may result in changes in other elements.

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Consder Some Work Systems

Ordering a Pizza Use of an Automated Teller Machine Hiring a New employee

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Business Processes & the Value Chain

Business process A related group of steps (subprocesses)

and/or activities that use resources (including information) to create value for internal or external customers

Subprocess = a well-defined part of a process Activity = less well-defined process component Often an important role of IT is to transform an

activity into a better-defined subprocess

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A process must add value for its customers

Always analyze whether a process or subprocess adds value or not An obvious but surprisingly often overlooked

point

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Business Processes & Functional Areas

Traditional organizational structure is centered around functional areas May reinforce an inward-looking orientation

Functional silos

Current trend: reorganize around customer-oriented processes

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Business processes and functional areas of business

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Three Types of Processes

Processes that cross functional areas

Processes related to a specific functional area

Activities & subprocesses occurring in every functional area

Possible problems when functional areas are overemphasized

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Question:What are some typical functional areas in a college of university?

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Some Functional Areas in a Typical College or University

Admissions Records and Registration Financial Aid Bursar Human Resources Accounts Payable Budget, Finance, and

Accounting Parking Services

Academic Department University Advancement Student Services Residence Life Public Safety Physical Plant Student Career

Development Health Services

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The Value Chain

The set of processes used by a firm to create value for its customers. Includes: Primary processes – directly create the

value as perceived by the customers Support processes – indirectly create value

by supporting the primary processes

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Primary processes for a hypothetical restaurant

Question: Give some examples of restaurants that follow this value chain.

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The Supply Chain & the Customer Experience

Note: Opportunities to increase value for the customer may exist Outside the company.

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Supply chain – the transactions, coordination, and movement of goods between the firm and its suppliers

Each layer provides an opportunity to increase value to the customer and/or improve efficiency Basic approach:

Standardized electronic links Long-term agreements

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The Trend Toward E-Business

Much more than a cool Web site! E-commerce – the part of e-business that

the customer experiences directly B2B (business-to-business) vs. B2C

(business-to-consumer)

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2. Phases in Building & Maintaining Systems

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Figure 1.7 – Business Professionals Play an Important Role in All 4 Phases

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1. Initiation

Defining the need for a new work system or for the change of an existing one

May occur as result of a known problem, or as part of a planning process

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2. Development

Acquiring & configuring hardware, software, and other resources Decide how the different parts of the system

will operate Acquire the resources Create the documentation Testing

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3. Implementation

Making the new process operational Planning User training Conversion to the new system Follow-up

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4. Operation & Maintenance

Supporting the ongoing operation of the system + efforts to enhance it and correct possible problems

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Table 1.4

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3. IT As a Driving Force for Innovation

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Main Trends

Greater miniaturization, speed, and portability

Greater connectivity + continuing convergence of computing and communications

Greater use of digitized information & multimedia

Better software and user interfaces Growth of Telecommuting

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IT Based Innovations in Every Business Function

Product Design Procurement Systems Manufacturing Systems Sales and Marketing Delivery Systems Customer Service Systems Finance Systems

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Computer-Aided Design

Enable designers to visualize how a product will look.

The need to produce physical mock-ups has been significantly reduced.

Originally applied in engineering and architecture, it is now being applied in other areas such as surgery, clothes design, and hairdressing.

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CAD inunexpected places

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Supply Chain Management EDI (Electronic Data Interchange) is changing the

entire model of supply chain management in businesses.

The cost of processing simple transactions can be reduced by more than an order of magnitude (e.g. purchase orders from $55 ea. To $2.50 ea.).

SCM and EDI are essential ingredients to the transformation of relationships between suppliers and customers.

Among the most notable initial applications was Baxter Healthcare where hospital supplies were ordered directly with computer terminals in hospital stock rooms.

The Basic Supply Chain Management Process

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Customers link to suppliers using EDI

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Manufacturing

Computer-integrated manufacturing (CIM) integrates the use of technology across the manufacturing process, not just the design phases.

The information content of a product is the value that is added through use of information systems rather than not using them.

Mass production techniques allows for mass customization.

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Mass Customization:Building a customized bicycle

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Sales and Marketing IT has drastically changed the approach to

marketing. Amazon.com capitalizes on electronic commerce. Point of Sales (POS) systems provide new ways

to affect marketing - e.g. linking information about the customer with the sale. Loyalty Cards at Supermarkets Ask for your Home Zip code Discreet observation and collection. BJ’s Wholesale Club product recall.

All to better improve the addressability in marketing.

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Delivery and Logistics Systems

Delivery (logistics) Systems transport materials where they are needed.

The need for accurate and accessible information on where a product is located. U.S. Army experience in Gulf War Federal Express

New products are being developed: Instead of delivering physical goods such as paper and forms, consider what can be delivered over the network.

Consider impact of Global Positioning Systems.

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Customer Service

The need for information on a customer’s current status.

Work is still needed to integrate some voice-response systems with customer databases (e.g. Bank Help Centers).

Have the right information available when you need it. Optical Scan relevant documents

Be able to initiate transactions and process them immediately. E.g. Car Rental Returns

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Finance Systems

Consider how technology is being used to replace currency as a form of barter.

Direct Deposit Payroll. Smart cards. Electronic stock trading. Web-Based Real Estate Marketing (2% vs. 6%). Eliminate the “middleman” and commissions.

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Question?

How have any of these innovations affected you?

Can you identify any IT-based innovations that have affected business functions?

Why does the technology provide such innovation?

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Data Processing Progress

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Dramatic Progress in Processing Data

Data Processing functions: capture, transmit, store, retrieve, manipulate, display

Greater Miniaturization, Speed, and Portability Greater Connectivity and Convergence of

Computing and Communications Greater Use of Digitization and Multimedia Better Software Techniques and Interfaces with

People

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Six Data Processing Functions Performed by IT

FUNCTION: CAPTURE

Definition: Obtain a representation of information in a form permitting it to be transmitted or stored

Example: Keyboard, bar code scanner, document scanner, optical character recognition, sound recorder, video camera, voice recognition software

FUNCTION: TRANSMIT

Definition: Move information from one place to another

Example: Broadcast radio, broadcast television via regional transmitters, cable TV, satellite broadcasts, telephone networks, data transmission networks for moving business data, fiber optic cable, fax machine, electronic mail, voice mail, internet

FUNCTION: STORE

Definition: Move information to a specific place for later retrieval

Example: Paper, computer tape, floppy disk, hard disk, optical disk, CD-ROM, flash memory

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Six Data Processing Functions Performed by IT

FUNCTION: RETRIEVE

Definition: Find the specific information that is currently needed

Example: Paper, computer tape, floppy disk, hard disk, optical disk,

CD-ROM, flash memory

FUNCTION: MANIPULATE

Definition: Create new information from existing information through summarizing, sorting, rearranging, reformatting, or other types of calculations

Example: Computer (plus software)

FUNCTION: DISPLAY

Definition: Show information to a person

Example: Laser printer, computer screen

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Miniaturization:Comparison of a vacuum tube and an integrated circuit

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Progress in Memory Chip Capacity Since 1973

1973197619791982198519881991199419972000

1 kilobit4 kilobit

16 kilobit64 kilobit

256 kilobit1 megabit4 megabit

16 megabit64 megabit

256 megabit

1,0244,096

16,38465,536

262,1441,048,5764,194,304

16,777,21667,108,864

268,435,456

Approximate dateof widespreadcommercial availability Type of chip

Capacity in number of bits

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Using a portable computer to give parking tickets

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Important Concept:Convergence of computing and communications.

Convergence: GPS

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A leading edge flat panel monitor and a computer terminal from the 1980s

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The positive and negative impacts of technical change

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4. Obstacles When Applying IT in the Real World

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Unrealistic Expectations & Techno-hype

Technology is almost never a solution by itself Often vendors claim to “sell solutions”

Be skeptical about the Internet hype

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Difficulty Building & Modifying IT Systems

Factors most often associated with success: User involvement Executive support Clear statement of requirements Proper planning Realistic expectations

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Difficulty Integrating IT Systems

One of the most difficult issues – examples: Medicare’s insurance claims (aborted) system

A unified system would have had to integrate 72 72 existing systems, built & operated by different insurance companies

Y2K problem Integrated supply chains

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Organizational Inertia

Often a change that has a positive impact in some areas, may also have a negative impact in other areas

Natural tendency of both organizations & individuals to resist change

Overcoming inertia may require a consistent effort across all phases of the system life cycle

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Genuine Difficulty Anticipating What Will Happen

No one really knows how a particular innovation will develop in time

Eye-opening examples in table 1.7

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Reality Check!

What are some examples of “techno-hype” you have encountered?

Have you experienced any of these “obstacles” when applying IT?