Chapter Ten: Acquiring Information Systems and Applications

Section 10.1 - Before You Go On

1. What are some problems associated with assessing the costs of IT?

Major challenges that companies face in association with the assessment of IT costs include:

• Fixed Costs: those costs that remain regardless of any change in the activity level; for IT fixed costs include infrastructure cost, cost of IT services, and IT management cost.
• Continuing costs: cost of a system does not end when the system is installed; costs for maintaining, debugging, and improving the system can accumulate over many years; in some cases the company does not even anticipate them when it makes the investment.

2. What difficulties accompany the intangible benefits from IT?

Intangible benefits, such as improved customer or partner relations or improved decision making, are hard quantify. The fact the organisations use IT for several different purposes further complicates benefit analysis. In addition, to obtain a return from an IT investment, the company must implement the technology successfully. In reality, many systems are not implemented on time, within budget, or with all the features originally envisioned for them. Finally, the proposed system may be 'cutting edge'; in these cases there may be no previous evidence of what sort of financial payback the company may expect.

3. Define NPV and ROI, and business case approaches.

Net present value (NPV): calculations for cost-benefit analyses; using this method, analysts convert future values of benefits to their present-value equivalent by 'discounting' them as the organisation's cost of funds; they then can compare the present value of the future benefits to the cost required to achieve those benefits and determine whether the benefits exceed the costs; used when the costs and benefits are well defined and tangible enough to be converted into monetary values.

Return on investment (ROI): measures the management's effectiveness in generating profits with its available assets; measure is a percentage and the higher the percentage return, the better; calculated by dividing net income attributable to a project by the average assets invested in the project (in the case of IT, the company would divide the income generated by an IT investment by the costs of that investment); the greater the value of the ROI, the more likely the company is to approve the investment

Business case approach: written document that managers use to justify funding one or more specific applications or projects; these cases describe what and how you do it and how a new system could better the company; it is a bridge between the initial plan and its execution; purpose is to get approval, funding and provide foundation for tactical decision making and technology risk management; used when company wants to embark on new IT projects; helps clarify how the company can best use its resources to accomplish its IT strategy; concentrates on justifying the investment, focuses on risk management, and on how an IT project corresponds with the company's mission

Section 10.5 - Before You Go On

1. What type of companies provide outsourcing service?

Many software companies, from IBM to Oracle, offer a range of outsourcing services for developing, operating, and maintaining IT applications. IT outsourcers, such as EDS, offer a variety of services and the large CPA companies and management consultants offer some outsourcing services.

2. Define ASPs and list their advantages to companies using them.

Application service provider (ASP): agent or a vendor who assembles the software needed by enterprises and packages the software with services such as development, operations, and maintenance. The customer then accesses these applications via the Internet or VANs through a standard web browser interface.

Advantages of ASPs:

• save costs
• reduce software maintenance and upgrades
• reduce user training
• make the company more competitive by reducing time-to-market and enhance the company's ability to adapt to changing market conditions

3. List some disadvantages of ASPs.

Disadvantages of ASPs:

• ASPs might not offer adequate security protection
• software might not be a perfect fit for the desired application
• company must make certain that the speed of the Internet connection between the customer and the ASP is adequate to handle the requirements of the application

Section 10.6 - Before You Go On

1. List the major steps of selection of a vendor and a software package.

Step 1: Identify potential vendors

Companies can identify potential software application vendors through various sources:

• software catalogs
• lists provided by hardware vendors
• technical and trade journals
• consultants and industry analysts experienced in the application area
• peers in other companies
• web searches

Step 2: Determine the evaluation criteria

Areas in which a customer should developed detailed criteria are:

• characteristics of the vendor
• functional requirements of the system
• technical requirements that the software must satisfy
• amount and quality of documentation provided
• vendor support of the package

Step 3: Evaluate vendors and packages

Often, the company gives the vendors and packages an overall score by:

1. assigning an importance weight to each of the criteria
2. ranking the vendors on each of the weighted criteria
3. multiplying the ranks by the associated weights

Step 4: Choose the vendor and the package

Once a vendor and package have been chosen, the company can begin negotiations with these vendors to determine how their packages might be modified to remove any discrepancies with the company's IT needs.

Step 5: Negotiate a contract

The contract specifies price of the software and the type and amount of the support that the vendor agrees to provide

Step 6: Establish a service level of agreement

2. Describe a request for proposal (RFP).

RFP is a document that is sent to potential vendors inviting them to submit a proposal that describes their software package and explains how it would meet the company's needs; it provides the vendors with information about the objective and requirements of the system; it describes the environment in which the system will be used, the general criteria that the company will use to evaluate the proposals, and the conditions for submitting proposals; RFP may also request a list of current users of the package whom the company may contact; it can require the vendors to demonstrate the package at the company's facilities using specified inputs and data files

3. Describe SLAs.

Service level agreements (SLAs) are formal agreements that specify how work is to be divided between the company and its vendors; these divisions are based on a set of agreed-upon milestones, quality checks, and what-if situations; SLAs describe how quality checks will be made and what is to be done in the case of disputes; goals are accomplished by :

1. defining the responsibilities of both partners
2. providing framework for designing support systems
3. allowing the company to retain as much control as possible over its own systems

Chapter Nine: Managerial Support Systems

Section 9.1 - Before You Go On

1. Describe the decision-making process proposed by Simon.

Decision making is a systematic process. Simon (1977) described the process as composed of four major stages: intelligence, design, choice and implementation.

1. Intelligence: managers examine a situation, an identify and define a problem
2. Design: decision makers construct a model that simplifies the problem; they do this by making assumptions that simplify reality and by expressing the relationships among all the relevant variables; models are then validated in a test data
3. Choice: decision makers set criteria for evaluating all potential solutions that are proposed; involves selecting a solution which is tested 'on paper'; decision makers choose the solution that is most feasible
4. Implementation: if successful the proposed solution would have solved the problem, if not then the failure leads to a return to the previous phases

2. Why do managers need IT support?

Managers need IT support as it is difficult to make good decisions without valid and relevant information. Information is vital for each phase and activity in the decision-making process. Decision making is become increasingly difficult for several reasons including:

• The number of alternatives to be considered constantly increases. (global market, internet)
• Decisions must be made under time pressure.
• Decisions are more complex (requires modeling)
• Decision makers can be in different locations and so is the information.

3. Describe the decision matrix

The three primary classes of problem structure (structured, unstructured, semi-structured) and the three broad categories of the nature of decisions (operational control, management control and strategic planning) can be combined together in a decision support matrix that consists of nine cells, as shown in the diagram below.

Lower-level managers usually perform the structured and operational-control oriented tasks in cells 1, 2, and 4. (Blue color above).

Middle managers and staff usually perform the tasks in cells 3, 5, and 7. (Orange color above).

Senior executives usually perform the tasks in cells 6, 8, and 9. (Yellow color above.)

Section 9.2 - Before You Go On

1. Describe the capabilities of data mining.

Data mining derives its name from searching for valuable business information in a large database, data warehouse, or data mart. It addresses why it is happening and provides predictions of what will happen in the future. Data mining can perform two operations:

1. Predicting Trends and Behaviours

• automates the process of finding predictive information in large databases with questions that traditionally require extensive hands on analysis, are able to be answered directly and quickly from the data
• example targeted marketing: data mining can use data from past promotional mailings to identify people who are most likely to respond favourably to future mailings

2. Identifying previously unknown patterns

• can identify previously hidden patterns in a single step
• example fraudulent credit card transactions: pattern emerges of the typical ways you are using your credit card (e.g. places); if card is stolen and used fraudulently this usage is often different from your usual pattern of use; data mining tools can distinguish the difference in the two patterns of use and bring this issue to the card holders attention

Section 9.3 - Before You Go On

1. What are some of the capabilities of digital dashboards?

Digital dashboards evolved from executive information systems and provide rapid access to timely informations and direct access to management reports. It is very user friendly and is supported by graphics.

Capabilities of digital dashboards:

• Drill-down reports: ability to go to details, at several levels; can be done by a series of menus or by direct queries (using intelligent agents and natural language processing)
• Critical success factors (CSFs): the factor most critical for the success of the business; can be organisational, industrial, departmental, etc.
• Key performance indicators (KPIs): the specific measures of CSFs
• Status access: the latest data available on KPI or some other metrics; ideally in real time
• Trend analysis: short-,medium-, and long-term trend of KPIs or metrics, which are projected using forecasting methods
• Ad-hoc analysis: analyses made any time, upon demands and with any desired factors and relationships
• Exception reports: reports that highlight deviations larger than certain thresholds; reports may include only deviations

Chapter Eight: Organisational Information Systems

Section 8.1 - Before You Go On

1. What is a Transactional Processing and the role of TP systems. State the key objective of TP/TPSs.

Transactional processing systems are information systems that support routine, core business actions. These systems monitor, collect, store, and process data generated from all business transactions; the data is then stored into the organisations database. In the modern business environment, TPSs are also inputs to the functional information systems, decision support systems, customer relationship management, knowledge management and e-commerce.

Section 8.2 - Before You Go On

1. What is a functional area information system? List its major characteristics.

Functional area information systems (FAISs) provide information mainly to the lower and middle level management in the functional areas. This helps organise and control operations with information presented in a number of reports.

2. How does an FAIS support management by exception? How does it support on-demand reports?

Exception reports are those reports that include information that falls outside certain threshold standards. To implement management by exception using a functional area information system, management first creates performance standards. The company then sets up the FAIS to monitor performance, through the incoming data about business transactions such as expenditures. The company then compares actual performance to its standards and identifies predefined exceptions. Managers are alerted to the exceptions via exception reports.

On-demand (ad-hoc) reports are non-routine; they can be drill-down reports, key-indicator reports or comparative reports. Drill-down reports show a greater level of detail, whereas key-indicator reports summarise the performance of critical activities and comparative reports compare. The FAIS sends information to the corporate data warehouse and this data can be used for decision support and in the case of on-demand reports, FAIS is essential as it shows all the information needed for a unstructured management problem.

Section 8.3 - Before You Go On

1. Define ERP and describe its functionalities.

Enterprise resource planning (ERP) systems integrate the planning, management, and use of all the organisation’s resources. The major objective of ERP systems is to tightly integrate the organisation’s functional areas. ERP software includes a set of interdependent software modules, linked to a common database, that provide supports for internal business processes.

Enterprise resource planning (ERP) was created to control all major business processes with single software architecture in real time. ERP integrates all department and functional information flows across a company onto a single computer system that can serve all of the enterprise’s needs.

Business processes that are supported by ERP modules include financial and accounting processes (e.g. general ledger, accounts payable, financial reporting); sales and marketing processes (e.g. order processing, quotations, sales planning); manufacturing and production processes (e.g. procurement, transportation, plant and equipment maintenance); human resources processes (e.g. personnel administration; payroll, workforce planning).

2. List some drawbacks of ERP software.

ERP softwares do have some drawbacks, to begin with that can be extremely complex, expensive, and time consuming to implement. In addition, companies may need to change existing business processes to fit the predetermined business processes of the software. For companies with well-established procedures, this requirement can be a huge problem. Finally, companies must purchase the entire software package even if they require only a few of the modules. For these reasons, ERP software is not attractive to everyone.

Section 8.5 - Before You Go On…

1. Define a supply chain and supply chain management (SCM).

A supply chain refers to the flow of materials, information, capital, and services form raw material suppliers, through factories and warehouses, to the end customers. A supply chain also includes the organisations and processes that create and deliver products, information, and services to the end customers. The function for the supply chain management is to plan, organise, and optimise the supply and its distributors and customers.

2. List the major components of supply chains.

The supply chain consists of three parts: (1) Upstream supply chain, where sourcing or procurement from external suppliers occurs; (2) Internal supply chain, where packaging, assembly or manufacturing takes place; and (3) Downstream supply chains, where distribution or dispersal takes place, frequently be external distributors.

3. What is the bullwhip effect?

The bullwhip effect refers to erratic shifts in orders up and down the supply chain. Basically, customer demand variables can become magnified when they are viewed through the eyes of managers at each link in the supply chain.

Section 8.6 - Before You Go On

1. Define EDI and list its major benefits and limitations

Electronic data interchange (EDI) is a communication standard that enables the electronic transfer of routine documents, such as purchasing orders, between business partners. It formats these documents according to agreed-upon standards, and it reduces costs, delays, and errors inherent in a manual document delivery system.

EDI provides many benefits compared with manual delivery systems. To begin with, it minimises data entry errors because each entry is checked by the computer. In addition, the length of the message can be shorter, and the messages are secured. EDI also reduces cycle time, increases productivity, enhances customer service, and minimises paper usage and storage. Another issue is that some companies find the EDI traditional system inflexible, as they often require long startup periods. Business process may have to be restructured to fit EDI requirements and multiple standards exist.

Comparing Purchase Order Fulfillment Without EDI

Comparing Purchase Order Fulfillment With EDI

Chapter Four: Data and Knowledge Management

Question One: What are some of the difficulties in managing data?

Managing data in an organisation can be difficult for many reasons:

• Amount of data increases exponentially over time
• Much historical data must be kept for a long time
• New data is added rapidly
• New sources of data are constantly being developed and this data is generally unstructured (they cannot be truly represented in a computer record)
• Security, quality and integrity of data is critical but can be easily jeopardised
• Data has different legal requirements in different countries

Question Two: What are the various sources for data?

There are four major sources for data, these are:

• Internal sources (e.g. corporate databases)
• Personal sources (e.g. personal thoughts, opinions and experiences)
• External sources (e.g. commercial databases, government reports, and corporate websites)
• Web sources, through the form of clickstream data (data that visitors and customers produce when they visit a website and click on hyperlinks)

Question Three: What is a primary key and a secondary key?

A primary key is the identifier field or attribute that uniquely identifies a record and a secondary key is an identifier field or attribute that has some identifying information, but typically does not identify the file with complete accuracy

Question Four: What is an entity and a relationship?

An entity is a person, place, thing, or event about which information is maintained in a record. A relationship can be classified into three types: one to one (a single-entity instance of one type is related to a single entity instance of another); one to many (a single entity instance of one type can be related to many entities of another); many to many (many entities can be related to many other entities)

Question Five: What are the advantages and disadvantages of relational databases?

A relational database is based on the concept of two-dimensional tables. Advantages of this type of database include the database being deigned with a number of related tables that can be joined when they contain common columns; uniqueness of the primary key tells the database management system which records are joined with others in related tables; greater flexibility. Disadvantages include the overall design being complex and therefore have a slow search and access times.

Question Six: What is knowledge management?

Knowledge management is a process that helps organisations identify, select, organise, disseminate, transfer, and apply information and expertise that are a part of organisation’s memory and that typically reside within the organisation in an unstructured manner. For an organisation to be successful, knowledge, as a form of capital, must exist in a format that can be exchanged among persons. In addition, it must be able to grow

Question Seven: What is the difference between tacit knowledge and explicit knowledge?

Explicit knowledge deals with more objective, rational, and technical types of knowledge. In an organisation, explicit knowledge consists of the policies, procedural guides, reports, products, strategies, goals, core competencies of the enterprise and the IT infrastructure. It is the knowledge that has been documented in a form that can be distributed to others or transformed into a process or strategy.

In contrast, tacit knowledge is the cumulative store of subjective or experimental learning. In an organisation, tacit knowledge can consist of organisation’s experiences, insights, know-how, trade secrets, skill sets, understanding, and learning. It also includes the organisational culture, which reflects the past and present experiences of the organisation’s people and process, as well as prevailing values.

Chapter Seven: Mobile Computing and Mobile Commerce

Question One: Identify common wireless devices and their application to business

Common wireless devices include the following:

• Pagers
• Email handhelds
• Personal Digital Assistants (PDAs)
• Mobile phones
• Smart phones

Wireless technologies are fundamentally changing the ways organisations operate and do business. These devices allow quick and easy access to interact with different businesses. They make productive use of time that is otherwise wasted, makes users work locations flexible and enables users to allocate working time around their personal and professional obligations.

Question Two: Describe the various types and general characteristics of wireless transmission media/technologies - microwave, satellite, infrared and radio waves.

Microwave- is used for high volume, long distance, line of sight communication (the transmitter and the receiver must be in view from each other-this means that they are not able to be more than 30 miles apart).

Satellite- uses communication satellites. There also needs to be a line of sight but there earth larges surface area means there are little limitations in satellite transmissions. There are three types of satellites: geostationary (GEO), medium earth orbit (MEO) and low earth orbit (LEO) around the earth, global positioning system (GPS) and Internet over satellite (IOS).

Radio waves- uses radio-wave frequencies to send data directly between transmitter and receiver. This has a high bandwidth, the signals are sent and passed through normal office walls, it is inexpensive and is easy to install.

Infrared light- red light that is not commonly visible to human eyes. It has a low to medium bandwidth, and is only used for short distances. There must also be an unobstructed line of sight. Examples include remote control units for televisions, VCRs, DVDs and CD players.

Below is a diagram of some of the types of satellites used:

Question Three: What is bluetooth/how is it used?

Bluetooth is an industry specification used to create small personal networks. A personal area network is a computer network used for communication close to one person. Bluetooth can link up to eight devices within a 10 meter area using low power, radio based communication, transmitting up to 2.1 megabits per second. Common applications for bluetooth are wireless handsets for mobile phones, laptops and portable music players. The advantages of bluetooth includes its low power consumption and its use of omnidirectional radio waves.

Question Four: What are WLAN's, Wi-Fi, WWAN's, 3G?

WLANs are wireless local area networks that uses wireless transmission for communication. Wireless Fidelity (Wi-Fi) is a set of standards for wireless local networks based on the IEEE 802.11 standard. It is basically a wired LAN but without the cables. Wireless wide area network (WWAN) connects users to the Internet over geographically dispersed territory. They use portions of the wireless spectrum that are regulated by the government. In contrast, bluetooth and Wi-Fi operate over an unlicensed spectrum and are therefore prone to interference and security problems. Third Generation (3G) uses digital signals and can transmit voice and data. It supports video, web browsing and instant messaging.

Question Five: What are the drivers of mobile computing and mobile commerce?

Mobile computing is real- time, wireless connection between a mobile device and other computing environments, such as Internet or an intranet. Mobile commerce is electronic commerce transactions that are conducted in a wireless environment especially via the Internet.

The drivers of mobile computing and mobile commerce are the following:

• Widespread availability of mobile devices
• No need for a PC
• The mobile phone culture
• Declining prices
• Bandwidth improvement

Question Six: Explain the nature of RFID

Radio frequency identification (RFID) is the term used for technologies that use radio waves to automatically identify the location of individual items equipped with tags that contain embedded microchips. They are heavily used in Inventory tracking, they will eventually replace barcodes. Examples of RFID include:

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• Passports – that instantly transmit data to a national security database about the time, date, place of people entering & leaving the country.
• Transportation – think eTag, passive reader that sends toll charges to your account
• Travel – in Mumbai 3.5 million people use the train stations, RFID’s have automated the ticketing process
• Social Retailing – RFID, consumer tries on a garment, the RFID tells the LCD in the change room to show the garment being worn by a celebrity

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