e- Business and e-Services
Part 1
DEFINITIONS AND WAYS OF INFORMATION SYSTEM
DEVELOPMENT – PLACE&ROLE of e-BUSINESS
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
Poland in the world
POLAND
Warsaw
COURSE BRIEF CONTENTS
Sessions
Coverage
1
DEFINITIONS AND WAYS OF
INFORMATION SYSTEM
DEVELOPMENT
2.
e-COMMERCE AND e-BANKING
3.
4.
TELECOMMUNICATIONS, THE
INTERNET AND WIRELESS
TECHNOLOGY
SECURITY ISSUES IN E-BUSINESS
SYSTEMS
References
Turban E., at al…, Laudon K. C.,
Laudon J. P, Chmielarz W.
Laudon K. C., Laudon J. P, Chmielarz
W.
Turban E., at al…, Laudon K. C.,
Laudon J. P
Turban E., at al…, Laudon K. C.,
Laudon J. P
3
REFERENCES (textbooks):
Main:
1.
Turban E., at al…: Information Technology for Management.
Transforming Organizations in the Digital Economy, John Wiley
and Sons Inc. 6-th ed., 2008,
2.
Laudon K. C., Laudon J. P.: Management Information Systems,
Pearson Education Inc., Prentice Hall, NY, 9-th ed. 2010.
Additionally:
1.
Chmielarz W.: Selected Problems of IT Development, Wydawnictwo
Naukowe WZ UW, Warsaw, 2005,
2.
Bocij P., Chaffey D., Greasley A., Hickie S.: Business Information
Systems, 2-nd ed., Prentice Hall, Harlow, 2003,
3.
Turban E., Lee J., King D., McKay J., Viehland D., Cheung C., Lay L.:
Electronic Commerce. A Managerial Perspective, Pearson Education, 4th ed., 2008
4.
Wallace T., M.; Kremzar M., H.: ERP: Making It Happen, The
Implementers’ Guide to Success with Enterprise Resource Planning;
John Wiley & Sons, Inc., New York, 2001
4
...From Aphorismus Book...
...Wisdom is nontransferable. The sage’ knowledge which he try to
transfere, sounds always like nonsense...
(... Mądrości nie można przekazać. Wiedza, którą próbuje przekazywać
mędrzec, brzmi zawsze jak głupota...),
...Study period is the time when you are instructing by somebody
you don’t want to know, about something you don’t want to
know...
(... Okres nauki to czas gdy jesteś pouczany przez kogoś kogo nie chcesz
znać, o czymś czego nie chcesz wiedzieć ... )
…Knowledge is powerless unless it prepares you to do the right thing
at the right time…
(…Wiedza nic nie daje, jeżeli nie przygotowuje cię do podjęcia właściwej
decyzji we właściwym czasie…)
5
…Management Information System – refers to (means) a
collection of computerized and net technologies whose
objective is to support managerial work and especially
decision making…
…System designed to provide past, present, and future
information appropriate for planning, organizing, and
controlling the operations of functional areas in an
organization…
(Turban E., at all: IT for Management ... 2008)
Some definitions (glossary)…
• Data items – refer to an elementary description of facts and figures
relatively important for users, data item – an elementary description of
things, events, activities, and transactions, that are recorded, classified,
and stored but not organized to convey any specific meaning: can be
numeric, alphanumeric, figures, sounds or images
• A database – consists of stored data items organized for retrieval
• Information – is processed, meaningful data… data that have been
organized, so they have meaning and value to the recipient
• Data items typically are processed into information by means of an
application, represents a more specific use and a higher added value than
simple retreieval and summarizing from a database
• Knowledge – data and/or information that have been organized and
processed to convey (distribute) understanding, experience, accumulated
learning, and expertise (what to do with information)
• Wisdom – the ability to make sensible (rational) decisions and give good
advice because of the experience, intuition and knowledge that you have
(how to use knowledge, how to do it in rational way)
7
Some definitions (glossary)…
• Data items – a student first name, name, grade in a class, the
number of hours an employe worked in a certain week, etc.
• Information – a student’s grade point average (GPA), the
application transforminf data in information might be a Webbased inventory management system, a univerity online
registration, or e-commerce (internet-based buying and selling)
system
• Knowledge – GPA of a student applying to Erasmus Students
Exchange can be compared with GPA of the other students
applying to this sholarship and be over average of all students
from faculty (average is only criteria of selection)
• Wisdom – see above case – inspite of level of GPA you know from
your experience or partner’s knowledge that in Italy or Spain in
most cases courses are in Italian or Spanish, so you first of all send
there students speak these languages…
8
Some definitions (glossary)…
•
•
•
•
•
•
System – group of elements integrated with common purpose of
achieving an objective (...) by transforming input resources to
output resources…
Information system – group of programs integrated in three areas:
programme, logical and technical…, a physical process, that
supports an organization in collecting, processing, storing nad
analyzing data, and disseminating information to achieve
organizational goals.
Information Technology – the technology component of an
information system (a narrow definition), or the collection of the
computing systems in an organization (the broad definition)
Information infrastructure – the physical arrangement of: harware,
software, databases, networks, and information management personnel
…Decision making – a process of choosing among alternative courses
of action for the purpose of attainings a goal or goals…
What should be done? When? How? Where? By whom?
Model (in decision making) – a simplified representation or
abstraction of reality; can be used to performs virtual experiments
and analysis
9
Some definitions (glossary)…
•
•
•
•
•
•
•
A computer-based information system is an information system that uses
computer and net technology to perform some or all of its intnded tasks.
The basic components of the system are hardware, software, database(s),
telecommunication networks, procedures and people.
Hardware is a set of devices that accept data and information, process
them, and display or raport them.
Software is a set of programs that enable the hardware to process data.
A database is a collection of related files, tables, relations, and so on that
stores data and the associations among them.
A network is a connecting system (wireline or wireless) that permits
different computers to share resources.
Procedures are the set of instructions about how to combine the above
components in order to process information and generate the desire
output.
People (users or final users, maybe curtomers) are those individuals
who work with the information system, interface with it, or use its
outputs
10
Some definitions (glossary)…
• Information system:
– Set of interrelated components
– Collect, process, store, and distribute information
– Support decision making, coordination, and control
• Information vs. data
– Data are streams of raw facts
– Information is data shaped into meaningful form
11
Some definitions (glossary)…
• Information system: three activities produce information
organizations need
•
•
– Input: Captures raw data from organization or external
environment
– Processing: Converts raw data into meaningful form
– Output: Transfers processed information to people or activities
that use it
Feedback:
Output returned to appropriate members of organization to help
evaluate or correct input stage
Computer/Computer program vs. information system
Computers and software are technical foundation and tools
12
Functions of an Information System
An information system contains information about an organization and its surrounding environment.
Three basic activities—input, processing, and output—produce the information organizations need.
Feedback is output returned to appropriate people or activities in the organization to evaluate and
refine the input. Environmental actors, such as customers, suppliers, competitors, stockholders, and
regulatory agencies, interact with the organization and its information systems.
13
Information Systems Are More Than Computers
Using information systems effectively requires an understanding of the organization,
management, and information technology shaping the systems. An information system
creates value for the firm as an organizational and management solution to challenges
posed by the environment.
14
Organizational dimension of information systems
Hierarchy of authority, responsibility:
•
•
•
•
•
•
Senior management
Middle management
Operational management
Knowledge workers
Data workers
Production or service workers
Separation of business functions:
•
•
•
•
Sales and marketing
Human resources
Finance and accounting
Manufacturing and production
Unique business processes
Unique business culture
Organizational politics
15
Management dimension of information systems
–
–
Managers set organizational strategy for responding to
business challenges,
In addition, managers must act creatively:
• Creation of new products and services
• Occasionally recreating the organization
16
Technology dimension of information systems
– Computer hardware and software
– Data management technology
– Networking and telecommunications technology
(Networks, the Internet, intranets and extranets, World Wide
Web)
– IT infrastructure: provides platform that system is built on
17
THE INTEGRATION AND CONVERGENCE THEORY OF
INFORMATION SYSTEMS DEVELOPMENT
The main objective of this part of course is to present the idea
of the development of MIS consisting in the integration and
convergence approach by the analysis of three main paths of
development:
• increasing complexity of logical systems architecture,
• functional integration of Information Systems, tailored to the
current needs of the organization and the user within the
organization,
• expansion of spatial network infrastructure.
18
• Integration – in the ideological sense – consists in combining functional
elements using by means of relations, so as to constitute specific
structural components of the whole. Integration is here understood as
a process of consolidation and merging of particular different-class
characters and forms of interrelated elements in order to create a
functional entity, resulting in the usefulness and efficiency which are
greater than each of the parts acting separately
• Convergence in the development process – consists in the formation of
similar features with regard to construction, function and appearance
of various groups of systems functioning under the same
environmental conditions, regardless of adopted specific innovative
solutions.
1
C
o
n
v
e
r
g
e
n
c
e
TSP/APD
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
C
o
n
v
e
r
g
e
n
c
e
MIS
TSP/APD
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
C
o
n
v
e
r
g
e
n
c
e
DSS
MIS
TSP/APD
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
C
o
n
v
e
r
g
e
n
c
e
EIS/ESS
DSS
MIS
TSP/APD
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
MIS
TSP/APD
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
MIS
TSP/APD
Internal integration - just combine different types of systems
Convergence - increasingly sophisticated systems to ever higher level
of development
1950
1960
1970
1980
Integration
1990
2000
2010
Year
Economic environment
MIS
Internet
Interior of organization
User
User interface
Database
Management System
Database
Ba
Applications:
- accounting
and finance,
- inventory
control,
- production
management,
- Human
relations.
Available for
decision
maker:
•knowledge,
•intuition,
•education,
•data.
Economic environment
DSS
Internet
Interior of organization
User
User interface
Database System
Management
Model Base System
Management
Database
Model
Base
Ba
Applications:
- accounting and
finance,
- inventory
control,
- production
management,
- Human
relations.
Available for
decision maker:
• knowledge,
• Intuition,
• education,
• data,
• models,
methods.
Base of
Procedures
Economic environment
EIS/ESS
Internet
Interior of organization
User
User interface
Model Base System
Management
Database System
Management
Database
Ba
Applications:
- accounting and
finance,
- inventory
control,
- production
management,
- Human
relations.
Available for
decision maker:
• knowledge,
• Intuition,
• education,
• data,
• models,
methods.
• prezentation,
vizualization,
extension.
Model Base
Base of
procedures
Economic environment
ES
Internet
Interior of organization
User
User interface
Model BaseSystem
Management
Database System
Management
Database
Ba
Applications:
- accounting and
finance,
- inventory
Available
for decision
control,
maker:
- production
management,
• intuition,
- Human
• education,
• data,relations.
• models, methods,
• prezentation,
vizualization, extension,
• knowledge.
Knowlede Base
System
Management
Knowledge
Base
Ba
Model
Base
Base of
Procedures
Economic environment
BIS
Internet
Interior of organization
User
Mechanizms of data
wholesale management
User interface
Model Base System
Management
Database System
Management
Applications:
- accounting and finance,
- inventory control,
- production
Database
management,
- Human relations.
Mechanizms Business
Analytics
Knowledge Base
System
Management
Model
Base
Marts – branch wholesale
Knowledge
Base
Ba
Decison maker has at his disposal more then he needs!!!
Base of
Procedures
Economic environment
BIS
Internet
Interior of organization
User
Mechanizms of data
wholesale management
User interface
Model Base System
Management
Database System
Management
Applications:
- accounting and finance,
- inventory control,
- production
Database
management,
- Human relations.
Mechanizms Business
Analytics
Knowledge Base
System
Management
Model
Base
Marts – branch wholesale
Knowledge
Base
Ba
Base of
Procedures
Types of decision
• Structured decisions are repetitive and routine (strictly determined),
and they involve a definite procedure for handling them so that they do
not have to be treated each time as if they were new.
• Unstructured decisions are those in which the decision maker must
provide judgment, evaluation, and insight to solve the problem
(probablistic, undetermined). Each of these decisions is novel,
important, and non routine, and there is no well-understood or agreedon procedure for making them.
• Many decisions have elements of both types of decisions and are
semistructured, where only part of the problem has a clear-cut answer
provided by an accepted procedure. In general, structured decisions are
more prevalent at lower organizational levels, whereas unstructured
problems are more common at higher levels of the firm.
INFORMATION REQUIREMENTS OF KEY DECISIONMAKING GROUPS IN A FIRM
STAGES IN DECISION MAKING
• Intelligence consists of discovering, identifying, and
understanding the problems occurring in the organization why a problem exists, where, and what effects it is having
on the firm
• Design involves identifying and exploring various
solutions to the problem
• Choice consists of choosing among solution alternatives
• Implementation involves making the chosen alternative
work and continuing to monitor how well the solution is
working
Six elements in business intelligence environment
• Data from the business environment: Businesses must deal with both
structured and unstructured data from many different sources, including
mobile devices and the Internet. The data need to be integrated and
organized so that they can be analyzed and used by human decision
makers
• Business intelligence infrastructure: The underlying foundation of
business intelligence is a powerful database system that captures all the
relevant data to operate the business. The data may be stored in
transactional databases or combined and integrated into an enterprisedata warehouse or series of interrelated data marts
• Business analytics toolset: A set of software tools are used to analyze
data and produce reports, respond to questions posed by managers, and
track the progress of the business using key indicators of performance
Six elements in business intelligence environment
• Managerial users and methods: Business intelligence hardware and
software are only as intelligent as the human beings who use them.
o Managers impose order on the analysis of data using a variety of
managerial methods that define strategic business goals and specify how
progress will be measured.
o These include business performance management and balanced scorecard
approaches focusing on key performance indicators and industry strategic
analyses focusing on changes in the general business environment, with
special attention to competitors.
o Without strong senior management over-sight, business analytics can
produce a great deal of information, reports, and online screens that focus
on the wrong matters and divert attention from the real issues.
o You need to remember that, so far, only humans can ask intelligent
questions.
Six elements in business intelligence environment
•
•
Delivery platform - MIS, DSS, ESS. The results from business intelligence and
analytics are delivered to managers and employees in a variety of ways,
depending on what they need to know to perform their jobs. MIS, DSS, and ESS,
deliver information and knowledge to different people and levels in the firm—
operational employees, middle managers, and senior executives. In the past, these
systems could not share data and operated as independent systems. Today, one
suite of hardware and software tools in the form of a business intelligence and
analytics package is able to integrate all this information and bring it to managers’
desktop or mobile platforms.
User interface: Business people are no longer tied to their desks and desktops.
They often learn quicker from a visual representation of data than from a dry
report with columns and rows of information. Today’s business analytics software
suites emphasize visual techniques such as dashboards and scorecards. They also
are able to deliver reports on Blackberrys, iPhones, and other mobile handhelds as
well as on the firm’s Web portal. BA software is adding capabilities to post
information on Twitter, Facebook, or internal social media to support decision
making in an online group setting rather than in a face-to-face meeting.
Business Intelligence and Analytics for Decision Support
Business Intelligence Users
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
2
DSS
MIS
TSP/APD
IC
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
2
DSS
MIS
TSP/APD
MRP
IC
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
BIS
K
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
2
DSS
MIS
TSP/APD
MRP II
MRP
IC
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
2
DSS
MIS
TSP/APD
ERP
MRP II
MRP
IC
1950
1960
1970
1980
Integration
1990
2000
2010
Year
Functional integration - more and more utility functions
Convergence - in each, next step newer technology and better
adjust to needs of user
Diffusion patterns between tracks
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
2
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
MRP
IC
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
2
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
MRP
IC
1950
1960
1970
1980
Integration
1990
2000
2010
Year
Inventory
balance
IC
Production
balance
Inventory
balance
IC
MRP
Production
Balance
Financial
Balance
Inventory
Balance
IC
MRP
MRP II
Production
Balans
Service Balans
Financial
Balans
Inventory
Balance
IC
MRP
MRP II
ERP
Production
Balance
Service Balans
Financial
Balance
Inventory
Balance
IC
MRP
Logistic Balans,
specializations and
mutations
MRP II
ERP
ERP
II
Production
Balance
Service Balans
Financial
Balance
Inventory
Balance
IC
MRP
Logistic Balans,
specializations and
mutations
MRP II
ERP
ERP
II
C
o
m
m
u
n
i
c
a
t
i
o
n
B
a
l
a
n
s
eERP
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
2
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
3
MRP
IC
Private, corporate nets
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
2
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
3
MRP
IC
Commercial nets
Private, corporate nets
1950
1960
1970
1980
Integration
1990
2000
2010
Year
Integration - the traditional systems and other networks
Convergence - the expansion of the subsequent users, connected with
increasing availability and ease of use
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
2
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
3
MRP
IC
Internet
Commercial nets
Private, corporate nets
1950
1960
1970
1980
Integration
1990
2000
2010
Year
1
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
2
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
3
MRP
IC
Internet
Commercial nets
Private, corporate nets
1950
1960
1970
1980
Integration
1990
2000
2010
Year
Corporate solutions
based on EDI
standards, huge
organizations
Corporate networking
Private, corporate nets
Commercial solutions
for large and
medium-sized
companies
Organizational nets
Commerce nets
Corporate solutions
based on EDI
standards, huge
organizations
Corporate networking
Private, corporate nets
Commercial solutions
for large and
medium-sized
companies
Organizational nets
Comprehensive and
global solution for all
(organizations,
customers, society)
Social nets
Commerce nets
Corporate solutions
based on EDI
standards, huge
organizations
Corporate networking
Private, corporate nets
Internet
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
MRP
IC
Internet
C
o
r
p
o
r
a
t
e
1
2
P
l
a
t
f
o
r
m
3
Commercial nets
Private, corporate nets
1950
1960
1970
1980
Integration
1990
2000
2010
Year
Conclusions
•
•
•
•
The solution which under the conditions of the development of internet
systems started to be applied in lieu of internal integration was external
integration through external corporate portals.
A corporate portal is …a platform which integrates systems and information
technology, data, information and knowledge in an organization and its
environment in order to provide users with a personalised and convenient access
to data, information and knowledge, in accordance with the needs, at any time
and in any place, in a secure manner and through a unified web interface ….
The main objective of a corporate portal are improvements with regard to
access to data, information and knowledge and their sources according to user
requirements; regardless of time and location of the web interface, and in a
secure manner.
The main feature of corporate platforms is the integration of data from
internal resources with external data, their conversion into common and
jointly processed formats; integration of heterogeneous applications;
integration of communication between particular users and providing them
with personalized information and knowledge.
•
•
•
•
•
The emergence of corporate portals is connected with the development of
internet network technologies, and the portals operate mainly in an intranet
corporate environment. Through this environment – web interface - they are
distributed to users, as required information and knowledge.
The impression is that a corporate platform is both an integration instrument
and at the same time a convergence tool - on the level, cooperation of both
complementary and parallel systems is possible.
The author believed that this tendency was a process of intensifying of a
previously examined complexity of the logical architecture structure in
particular types of the systems, and therefore it does not require further
analysis.
Also, the author did not illustrate the development of particular internet tools
in such a great detail as in the article, assuming that they are still developing
very intensively.
Nevertheless, there is a clearly visible - possible thanks to a corporate platform
- tendency to connect everything with everything (multi-dimensional
integration) in terms of transmissivity of the idea of interaction between
various information systems on all presented development paths.
Thank you very much for your attention!
Witold Chmielarz
Questions - [email protected]
63
MANAGEMENT INFORMATION SYSTEMS
Part 2
Evaluation of the selected websites
Prof. Witold Chmielarz, PhD ,
Oskar Szumski, PhD
Faculty of Management University of Warsaw
AN AUTOMATIC TOOL FOR WEBPAGE EVALUATION Case 1
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
Brief content:
1.
2.
3.
4.
Introduction –setting of the problem
Model’s elements specification
Relation between elements – concept of structureof the model
Some conclusions
66
Purposes:
The basic aim: analysis of possibilities of applying
expert systems’ mechanisms in the evaluation of
websites from point of view of modelling
requirements
•
•
•
•
In order to realize this objective - creation a model concept of a
system that would automatically choose the website which would be
the best from the point of view of a specific user.
This way the system would help to find a solution of problem:
which of the functioning websites demonstrates the greatest
usefulness with regard to the applied set of criteria?
The existing procedures and the methods which are available at
present cannot provide us with a univocal and universal answer to
the issue presented in the beginning of this article.
The proposed model of the system may help to find the desired
solution.
Modelling requirements – factors of the system
specification
•
•
•
•
user category – detailed objectives of each kind of users – the status
which, to a large extent, determines our further selection procedure.
A website designer, owner – website administrator and client tend to
have entirely different aims,
sector, service branch – a set of evaluation and selection criteria may
be completely different depending on the status of each of the
specified users,
scope and accuracy of the study – an opinion of a single expert or a
selected group of experts from each sector/branch, opinions of
selected group of users or interviews with a randomly selected group
of users/potential users,
a set of basic criteria groups and specific criteria within each group.
The number of criteria and their attributes may vary in subsequent
studies depending on the objectives specified by a user from a
particular sector, and also, as it turned out, they may depend on the
economic situation of a country where the research is being
conducted,
68
Modelling requirements – factors of the
system specification
•
•
•
•
•
a specific method of addressing the problem. It may be a single,
simple methodology or a combination of methodologies. These
methodologies may be e.g. of a linear, relational, scoring, value or
mixed character.
method’s environmental conditionings – taking into consideration
a preference scale (expert’s opinion or automated calculations) and
evaluation (ratios) of the risk connected with realizing the method,
the quality of data – especially important during a screening
process; information should be substantiated and preliminarily
prepared for analyses, before it is further processed,
IT infrastructure – supporting the processing of data which are
needed for our decision-making process – software and
calculation procedures of particular methodologies,
the way of interpreting findings – in a tabular or graphic form.
69
User category
•
•
•
•
•
The examined problem is being solved for the user, which decides what
actually should be considered in the research.
An IT system designer has a different approach to the issue of website’s
usefulness or functionality than an average end user who the system is
targeted at.
An end user pays greater attention to those evaluation criteria which are
related to the ease of navigation, website’s functionality which is close to the
real one (usefulness) and, finally, economic aspects which are connected with
the content within the technical framework (price relations of goods/services
as compared to the real market).
In the case of a system’s designer, these are mainly technical aspects (proper
functioning), visualization (esthetics) and those connected with the website’
security (protection measures).
Both points of view are important for the owner of a website; however, we
may observe a tendency to attaching slightly greater weight to the client’s
point of view – as, ultimately, it is the end user and not the creator of the tool
(role of open models?)
70
Sector, service, branch
•
•
•
•
•
The research showed that one universal, standard set of criteria which would
be suitable for all occasions does not exist.
The differences between sectors (e.g. banking and trade in manufactured
goods) are much greater than between branches (computers and cosmetics,
cosmetics and clothes/footwear, etc.).
From the point of view of a system’s designer, it would be recommended to
undertake a constructive confrontation of the scores obtained in the study of
the established solutions with a properly performed analysis of the user’s
information needs.
The evaluation of websites is treated then as an element of typical research
carried out prior to the project, where, additionally, the author needs to take
into consideration the specific requirements of the mandator of the task.
We should also pay attention to the economic situation in which the study is
being performed. Electronic economy is based, to a large extent, on clients’
trust. At a time of crisis we may observe considerable diversity.
71
Scope and accuracy of the study
• There are cases where a mandator is interested only in a general and quickly
formed (preliminary) opinion concerning the quality of websites in a given
branch. In such a case the entrepreneur consults one expert, formulating his
or her own evaluation criteria to be used by the evaluator and preferences
concerning their structure. After becoming acquainted with such an opinion
- the mandator delegates the task of making further detailed assumptions to
a corporate website designer whose task is to construct and launch a website.
It is very simple, but subjective.
• One of the methods used to limit the subjectivity is consulting a whole team
of experts who represent a homogeneous group (the same qualifications) or a
group which is diversified with regard to their status or skills. We may arrive
at a better approximation of the objectified scores by means of averaging (or
taking into consideration a median of their responses).
• In the case of more complicated methods there occur problems with training
an expert to provide responses (evaluations) to the addressed questions
(problems have already appeared when AHP method has been applied).
• Other problems may emerge during conducting research on a large scale.
Firstly, in the case when respondents are chosen at random, the number of
responses markedly decreases
• Secondly, the survey should be as simple as possible
72
Set of criteria
•
•
•
•
The description of criteria should be analyzed with regard to its meaning
– the language of an analyst, designer and programmer may be entirely
different from the language of an end user (or generally, the language of
business).
Therefore, the languages should be made as similar as possible, through
coordination, simplification and unification.
Such practices are not commonly used; instead, established sets of factors
with specific terminology are prepared e.g.: organizational, functional,
technological, legal, economic, cultural, or the one referring to the level of
security.
In each of the groups particular subcriteria undergo marked
differentiation depending on the sector/branch they relate to or the
objective of the study (role of open models?).
73
A specific method of addressing the problem
•
•
•
A commonly applied ranking method, which is easy to use and simple due to
its interpretation of scores, has been applied and tested several times - the
specific simplicity, linearity of the evaluation, its susceptibility to structural
diversity (the more subcriteria of a given group, the greater its weight in the
final score) and the aforementioned subjectivity.
The author initially concentrated on the modifications of the ranking method.
- proceeded to use a survey on a larger scale and calculate average scores, and
went on to undertake preliminary processing of the data., then applied: group
standardization – each group was assigned a maximum value equal to one
and a simulation of preference scale variants.
Simultaneously, the author has started tests concerning a possible application
of a relational method. The author has chosen T.Saaty’s AHP/ANP method as
the most popular and the simplest one with regard to its ideology.
74
A specific method of addressing the problem
•
•
•
•
•
The experts objected to the necessity of filling in a great number of tables:
first, relations among particular criteria, then particular websites with regard
to the established criterion.
Next, together with the increase of the number of criteria and subcriteria,
experts faced great difficulty evaluating relations among them: a simple
maneuver of changing the order of criteria in the table resulted in marked
differences in the obtained scores .
Moreover, in order to make calculations, it was necessary to apply a special
software package or engage in laborious calculations performed in
spreadsheets.
The method itself cannot be quickly acquired by an average user, and its
results have not been treated seriously.
Then the author has constructed a special conversion method transforming
the results of partial experts’ evaluations into relations among criteria, and
subsequently, relations of websites in the realization of particular criteria
75
Relation between elements – concept of the model
•
•
•
•
As it has become apparent in the above specification, creating an IT
system that would support a decision-making process in the examined
case is not an easy task due to the quantity of data, increasing
exponentially, which (together with their mutual relations) should be
processed by the system.
Simultaneously, the specification which has been constructed in the
second part allows for analyzing the problem and presenting it in the
form of an orderly, model research procedure.
Also, we should remember that in a given case we use a limited, specified
amount of gathered information; also, a number of methods which may
be potentially used to process the data increases.
Basic elements of the model are: Analyzer,
Simulator,
Solver,
Interpreter, Veryfier.
76
Concept of the model -Analyzer
•
•
•
•
•
•
•
•
The basic task of an Analyzer mainly consists in allowing the end user to
communicate with the system.
It is a complex task because it should be made up of a few subsequent steps.
In the first step, a user should have a chance to ask a question, which on the
one hand, would express his intentions, and on the other, it could serve as a
basis for initiating further actions.
In order to address the first problem we should deal with the issue of
correctness of the categories and the correspondence of the categories known
to the user and those which function in the system.
It happens that the treatment of the same variables from the point of view of a
user and a system designer may be entirely different.
Next, we should construct a mechanism which helps to specify the scope of the
research either by means of subsequent questions or by selecting available
options from the menu.
In the third stage, we should ensure internal consistency and integrity of the
question which is being asked, from the point of view of limitations which
result from the previous selection.
The Analyzer will aid with making a choice of a category of a user, branch
where he or she wants to operate, and the scope of the actions which are to be
undertaken.
77
Concept of the model - Analyzer
Analyzer should be supplied with database information concerning:
• a status of a user (a functional user, analyst, designer, website administrator,
etc.). A status of a user will be related to defining or selecting criteria groups
(from a list) specifying characteristic features which are important from the
point of view of particular categories of users,
• division into sectors and branches within the sectors (e.g. financial services
(banking, stock exchange, insurance, customs); trade (computers, clothes,
cosmetics, sportswear, etc.); service (tourism, recruitment, property trading
etc.)). Each sector/branch will have a maximum set of criteria for detailed
evaluation attached to it. This set will be available to specific categories of users
to view (only) or to select (from a list); or a user will be able to add his or her
own categories,
• a list of experts from particular sectors (to select) and a possibility to generate
(enter, import from a given format) one’s own list of users evaluating websites,
• sets of criteria groups and specific criteria in a hierarchic, narrowing
subdivision with regard to the user’s status, sector, branch and range.
78
Concept of the model - Simulator
•
•
•
A Simulator module will be used to gather basic data for performing
calculations. Its role consists in generating tables which would enable an
expert (experts, website users) to evaluate the phenomenon (evaluation of
specific criteria), and subsequently, the expert would be able to sum up the
evaluations and calculate additional indicators which are required for further
analyses. Additionally, it should have the following mechanisms:
selection of a specific method used to solve a research problem, together with
an attached software package which enables its application (it is important in
the case of complex methods, especially relational, value conversions – basis of
solution methods),
mechanisms of supplying some methods with additional parameters such as
preference coefficients, risk coefficients, coefficients of usefulness, etc. which
would automatically suggest options or give a chance to add one’s own
solution,
mechanism of processing data in the case of selecting general solutions with
access to the required statistical packages, or developed, selected (or to be
chosen by the user), necessary statistical methods.
79
Concept of the model – Solver, Interpreter, Veryfier
•
•
•
A Solver module should be used as an additional, supplementary calculation
back-end of the designed system. According to previous comments, it should
contain a package of evaluation methods for websites (possibly to be
complemented) as well as methods used for preliminary preparation of data
to be processed.
Basically, an Interpreter module may be destined to realize two objectives.
Firstly, it may be helpful in interpretation of scores and their presentation in
a desirable graphic form (the issue of selection of data to be presented and
their form: table and a type of a table, graph and a type of a graph, etc.). Its
second objective is comparison of results obtained by means of various
methods of websites’ evaluation (collecting scores obtained from various
methods, adjustment to comparability and help in presenting scores).
A Verifier should become an additional module. Its primary tasks are:
verifying the correctness of methods used to solve specified problems of a
user and coordination of the system’s operations.
80
Logical framework structure of expert system supporting evaluation of websites
Analyzer:
• query language,
• selection
mechanism (status,
sector/branch
Interpreter:
• presenting and
explaining findings,
• mechanism of
comparing results.
Systems’ knowledge
base - on the basis of
results of calculations
– to use and compare
with subsequent scores
User
Simulator
•generating preliminary tables,
•presenting tables to the experts,
•selection of the method to be applied,
•supplying data with parameters,
•data treatment.
System’s database
•system category dictionary,
•list of user statuses,
•sector/service branch dictionary,
•list of kinds of experts,
•list of experts,
•list of criteria groups and criteria,
•list of solution methods and references
to solver.
Verifier:
• correctness of the
applied methods,
• coordination of
results
Solver: numerical
and statistical
methods of solving
the system‘s
calculation problems
Methods’ basis:
•websites’ evaluation,
•preliminary
preparation of data.
81
Some conclusions
•
•
•
•
•
The presented concept is still being developed. It is a continuation of
work concerning evaluation methods of websites’ quality and
usefulness.
On the basis of the concept, after its specification, we can create a
logical project of the system that can be systematically developed in
order to expand the base of sector/branch criteria and to apply
procedures and methods for the evaluation of the examined
phenomenon which have not been tested so far.
Probably the best for the concept would be supporting the tool on the
idea of open models creating by end user or designer of the system.
Importance idea of open modelling for end user – possibility of
creation at least set of evaluation criteria or making some decisions
for methods and procedures of solving problem ,
Importance for designer – possibility of experiments with different
forms of models
for many kind of users, possibility of
approximations used as models for user requirements etc.
82
Thank you for your attention!
Questions:
[email protected]
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
83
COMPARATIVE ANALYSIS OF SELECTED
HOTEL WEBSITES IN POLAND Case 2
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
Faculty of Informatics Vistula University
Brief content:
1.
2.
3.
4.
5.
Introduction
Specific character of hotel services
Assumptions of research
Analysis results
Conclusions
85
Purposes:
The main objective of this presentation is to identify
the most important criteria for assessing websites of
hotels and to specify a website which is optimal from
the point of view of individual customer
•
In order to realize this objective – creation a set of criteria
described hotels websites, assessment them, comparing and
drawing some conclusions
•
This way it would help to find a solution of problem: which
of the functioning websites in this sector demonstrates the
greatest usefulness with regard to the applied set of criteria?
•
The proposed procedure may help to find the desired
solution
Introduction
At the begining of 2011 authors performed a comprehensive
analysis of internet services in the best hotels in Warsaw
(Poland)
• It was a part of the larger project on automation of websites
assessment (research grant: NN115 568738 ).
• In the process of system creation there are identyfied modelling
requirements – factors of the system specification,
• Next – reletions between the main components and model
formulation.
• The last step, after programming the model will be fulfilling it
with data, parameters and knowledge.
The presented survey was used to collect materials for the
proposed model.
87
Specific character of a tourism services
• The most important functions realized in websites in the hotel
industry are:
•
•
providing the necessary information to satisfy customer needs,
offering the possibility to make a reservation or purchase of a selected hotel
product.
• The most important hotel services include: accommodation, catering,
information, booking services, storage of luggage and tourist
equipment, transport, laundry, shopping services, beauty and
hairdressing salons, entertainment, parking, health, financial,
telecommunication, postal services, car rental, organization of tours,
travel service, conferences, banquets, weddings and meetings, etc.
• Very few hotel websites cover all the functionalities: even global
reservation systems (GRS) have not reached perfection in this regard
• It is also essential that hotel services, as one of the most important
factors of tourism services are still developing dynamically
88
Introduction - specific character of a tourism services
•
•
•
•
•
•
•
In 2010 about 58.3m foreigners came to Poland, which is 8% more than in 2009,
including 12.5m tourists (5% more than in the previous year). I
1809 hotels operated in Poland and 0.5% of them are owned by the State. They
offer more than 158,000 beds.
Last year the number of people who used the tourist accommodation and the
collective accommodation services offered on-line amounted to approximately
19.2m.
The number of overnight stays as a result of using online service is close to
55.3m
In 2010, 4.1m foreign tourists used the services of collective accommodation
establishments, which is an increase of 6.3% in comparison to 2009 and 1.4%
more than in 2008.
So, we may conclude that online reservations and searching tourist services via
the Internet is one of the most important elements of promotion of the tourism
industry
A few years ago about 29% of the Internet users looked for tourist information
through entering specific names of e.g. places or cities. In 2010 the number
doubled (to 71%) and it is still growing.
89
Assumptions of the study
•
•
•





•
It was taken into account twelve hotels of the best category which appear
as first among the search results of popular search engines and take
leading positions in relevant rankings: Sheraton Warsaw, Hilton Warsaw,
Intercontinental Warsaw, Westin Warsaw, Radisson Warsaw, Le
Meridien Bristol Warsaw, Hyatt Warsaw, Rialto Warsaw, Platinum
Residence Warsaw, Mamaison Le Regina Warsaw, Marriott Warsaw and
Victoria Warsaw
The authors applied a scoring method to evaluate the hotels.
The following scoring scale has been used:
0.00 – no feature, the highest costs;
0.25 – satisfactory criterion fulfilment;
0.50 – partial criterion fulfilment, medium costs;
0.75 – sufficient fulfilment of criterion;
1.00 – complete criterion fulfilment, the lowest costs.
In the next step he used a scoring method with preference points where
weights (with the total of 1) have been assigned to particular criteria
90
Assumptions of the study
• Within the expert group of five people who took part in the evaluation
there were three people who travel frequently both on business and as
tourists, a tourist newspaper editor and an owner of the national
tourist agency (typical hotel customers).
The criteria used in the study were:
• visualisation: colour scheme, the size and type of font, icons, text
organization, graphics, pictures, videos,
• functionality: navigation, links, clients’ ratings, search engine, site
interactivity, personalization (My profile), booking, special offers,
• access: the availability in other portals, map, available languages,
website’s user- friendliness, additional information.
91
%% max
score
Total
Marriott
Victoria
Mamaison
Le Regina
Platinum
Residence
Rialto
Hyatt
Le Meridien
Bristol
Radisson
Westin
Intercontine
ntal
Hilton
Sheraton
Criteria/hotels
Colour scheme
Font size and type
Icons
Arrangement and
placement of text
Graphics
Navigation (userfriendliness and
efficiency)
The use of links
Photographs of the facility
0.70
0.75
0.05
0.55
0.75
0.60
0.45
0.45
0.10
0.75
0.80
0.05
0.35
0.40
0.06
0.60
0.85
0.00
0.85
0.85
0.00
0.80
0.60
0.00
0.75
0.75
0.05
0.55
0.80
0.10
0.75
0.45
0.70
0.75
0.80
0.00
7.85
8.25
1.71
65%
69%
14%
0.75
0.70
0.55
0.65
0.45
0.75
0.65
0.75
0.65
0.60
0.65
0.50
7.65
64%
0.80
0.40
0.45
0.85
0.55
0.95
0.85
0.65
0.60
0.50
0.65
0.80
8.05
67%
0.75
0.56
0.60
0.80
0.70
0.85
0.70
0.80
0.70
0.70
0.65
0.40
8.21
68%
0.65
0.75
0.30
0.50
0.35
0.50
0.60
0.85
0.65
0.65
0.75
0.95
0.80
0.90
0.55
0.50
0.45
0.50
0.45
0.65
0.60
0.75
0.65
0.70
6.80
8.20
57%
68%
Videos or virtual reality
0.15
0.50
0.10
0.35
0.50
0.60
1.00
0.40
0.00
0.60
0.00
0.00
4.20
35%
User ratings
Search engine
0.00
0.80
0.00
0.39
0.00
0.00
0.00
0.80
0.40
0.55
0.20
0.75
0.00
0.15
0.00
0.15
0.15
0.20
0.60
0.15
0.50
0.10
0.15
0.20
2.00
4.24
17%
35%
The degree of interactivity
0.20
0.10
0.15
0.20
0.15
0.25
0.20
0.25
0.00
0.50
0.45
0.05
2.50
21%
0.15
0.20
0.20
0.10
0.60
0.15
0.20
0.15
0.10
0.05
1.80
0.30
4.00
33%
0.70
0.45
0.65
0.70
0.45
0.90
0.20
0.35
0.30
0.35
0.30
0.75
6.10
51%
0.70
0.85
0.45
0.60
0.60
0.65
0.50
0.60
0.55
0.65
0.60
0.55
7.30
61%
0.75
0.45
0.30
0.65
0.50
1.00
0.70
0.40
0.40
0.65
0.30
0.50
6.60
55%
0.75
0.55
1.35
0.65
0.65
0.70
0.70
0.60
0.80
0.70
0.70
0.60
8.75
73%
0.65
0.45
0.60
0.75
0.60
0.85
0.75
0.75
0.70
0.80
0.85
0.70
8.45
70%
0.80
0.35
0.45
0.75
0.50
0.90
0.85
0.80
0.65
0.75
0.70
0.85
8.35
70%
0.65
0.45
0.40
0.70
0.80
0.55
0.80
0.80
0.40
0.85
0.40
0.80
7.60
63%
Total
11.50
9.10
8.10
11.60
10.11
13.20
11.65
9.90
8.70
11.00
11.90
10.05
%% max. score
58%
46%
41%
58%
51%
66%
58%
50%
44%
55%
60%
50%
92
Personalization (My
profile)
The availability in other
portals
Map
User-friendliness (ease of
use and support)
Available languages
Additional information
(about accommodation,
tourism, etc.)
Special offers
Booking (accommodation
and associated services)
Analysis of the results
• Le Meridien Bristol, which fulfils 66% of the maximum possible fulfilment of
all criteria, takes the first place in this calculation. It is not a very impressive
result (less than two thirds): potential clients are not satisfied with the
functionality of the websites – in the best category i.e. five-star hotels, where
the clients’ expectations are much higher.
• The subsequent positions are taken by Victoria Hotel (59.50%) and Hyatt
(58.25%) which is slightly ahead of Westin.
• Out of twelve of the analysed five-star hotels, eight meet customer
requirements in more than 50%.
• The spread between the best and the worst hotels in the rating is also
worrying – it amounts to 25.50 percentage points.
• Intercontinental (40.50%), Platinum Residence (43.50%) and Hilton
(45.50%) were the worst in this classification.
• The poor result was primarily due to the lack of possibility for clients to
express their opinions, lack of video presentation or taking advantage of
virtual reality techniques, no search engine or no possibility of customization
of contacts.
93
Analysis of the results
•
•
•
The websites of Hyatt Hotel and Le Meridien Bristol obtained high scores
in the greatest number of categories; Intercontinental received very few
high scores.
The largest number of unsatisfactory scores appeared in the case of
Intercontinental, the smallest in the evaluations of: Le Meridien Bristol,
Radisson and Mamaison Le Regina.
As can be seen from the compilation, the number of the best scores did not
always determine the position in the ranking – Hyatt hotel was only
ranked third.
94
Ranking of the quality of websites of selected five-star
hotels according to a simple scoring method
Le Meridien Bristol
66,00%
Victoria
59,50%
Hyatt
58,25%
Westin
58,00%
Sheraton
57,50%
Mamaison Le Regina
55,00%
Radisson
50,55%
Marriott
50,25%
Rialto
49,50%
Hilton
45,50%
Platinum Residence
43,50%
Intercontinental
0,00%
40,50%
10,00%
20,00%
30,00%
40,00%
50,00%
60,00%
70,00%
95
Assessment of the criteria impact
• The selection of criteria for research undoubtedly influenced the results.
• In general, the best rated factors were the elements of visualisation of an
offer such as colour scheme, photographs presenting the facility, special
offers and additional information concerning the accommodation.
• Nevertheless, it must be admitted that they just slightly exceeded the 50% of
the maximum available evaluation scores.
• The lowest scores were given for personalization (a possibility occurring only
in 9.1% of cases) and visitors’ opinions and the use of icons in
communication with clients (just over 11%).
• The difference between the best and the worst scores is 44 percentage points.
Interestingly, the functions, which are worst implemented in hotel websites
are much more common in external sites, where clients may obtain
additional information about a hotel (hotele.pl, hotels Warsaw.pl,
rezerwuje.com, etc.).
96
Ranking of criteria fulfilment by selected hotels according
to a scoring method
Colour scheme
Photographs of the facility
Special offers
Additional information (about the facility,…
Graphics
Navigation (ease and effectiveness)
Font size and type
Arrangement and placement of text
Available languages
Map
Booking (accommodation and associated services)
Links
User-friendliness (ease of use and support)
Availability in other portals
Videos or virtual reality
Search engine
Interactivity
Icons
User ratings
Personalization (My profile)
53,75%
53,75%
53,33%
53,33%
53,33%
53,00%
52,50%
50,42%
48,33%
45,83%
45,42%
41,67%
40,00%
34,17%
29,58%
22,00%
13,33%
11,75%
11,67%
9,17%
97
0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00%
Scoring method with preferences - assumptions
The authors applied three out of many possible variants of
assigning preferences to particular criteria groups:
• predominance of visual criteria (0.5), functional (0.3),
access criteria (0.2);
• predominance of functional criteria (0.5), visual (0.3),
access criteria (0.2);
• predominance of access criteria (0.5), visual (0.3),
functional (0.2).
98
Marriott
Victoria
Mamaison Le Regina
Platinum Residence
Rialto
Hyatt
Le Meridien Bristol
Radisson
Westin
Intercontinental
Hilton
Hotels/types of
preferences
Sheraton
Scoring method with preferences - results
Preferences visualization
2.99 2.66 1.60 3.27 2.82 3.68 3.54 2.87 2.13
3.14 3.01
2.67
Preferences -functionality
2.95 2.56 1.53 3.16 2.97 3.56 3.18 2.69 1.95
3.20 2.93
2.57
Preferences –
access/availability
3.01 2.73 1.72 3.24 2.73 3.60 3.38 2.88 2.23
3.12 2.81
2.74
99
Scoring method with preferences – results
• Imposing the preference scale did not result in major changes in the first
and last position: here the experts’ evaluations show a high degree of
conformity.
• However, in other ranking positions we observe certain differences.
Taking into account the average experts’ ratings, the Hyatt hotel website
takes the second position with regard to its visualization (previously –
third place), and the website of Mamaison La Regina hotel receives high
scores because of its functionality.
• The Victoria Hotel website falls to the 5th, 5th and 7th positions
respectively.
• Westin website obtained high scores with regard to its visualization and
availability; and the hotel in both cases is moved (in relation to the
variant without preferences) to the third position in the ranking.
• We observe no significant changes of the last four positions in the rating
100
Scoring method with preferences – results
3,60
3,56
3,68
Le Meridien Bristol
3,38
3,18
3,54
Hya tt
3,24
3,16
3,27
Westin
3,12
3,20
3,14
Ma ma ison Le Regina
Victoria
2,81
2,74
3,01
Shera ton
3,01
2,95
2,99
Preferences - visualization
2,73
2,97
2,82
Ra disson
Ma rriott
2,74
2,57
2,67
Hilton
2,73
2,56
2,66
2,23
1,95
2,13
Pla tinum Residence
1,72
1,53
1,60
Intercontinenta l
0,00
Preferences - functionality
2,88
2,69
2,87
Ria lto
Preferences - access
0,50
1,00
1,50
2,00
2,50
3,00
3,50
4,00
101
Conclusions
The obtained results lead to the following considerations:
• Why the websites of the best, five-star hotels in Warsaw received
such low scores (on average only 53% as the value expressing
customer acceptance)?
• It appears that it is due to the fact that, despite their visual elegance
(as evidenced by the evaluation scores: more than 50% fulfilment of
this group of criteria), the functionality of the websites differs from
the currently accepted standards.
• Only five out of twelve hotel websites offer more than five language
versions: these are Sheraton, Westin, Le Meridien, Hyatt and
Mamaison La Regina.
• There are no mechanisms for personalization, expressing opinions,
there are no clear and transparent search criteria of relevant content
in the website, there are no redirects – in the case of the lack of
possibility to make a reservation at the hotel to other hotels, often
even within the same group
102
Conclusions
• And the authors have taken into consideration the best hotels,
assuming that their websites should be the most sophisticated
representations of the entire hotel industry.
• We may observe that some features which are included in the set
of evaluation criteria can be found in hotel chain portals and hotel
industry portals – so, there is a likelihood that hotel website
designers feel that they do not need to repeat the same functions in
their websites.
• Nevertheless, the designers and implementers of websites serving
the hotels should consider a possibility to introduce changes in the
direction of the latest trends in building the network software,
especially under the present circumstances, i.e. next year the
UEFA European Football Championship is to take place in
Warsaw.
103
Thank you for your attention!
Questions:
[email protected]
[email protected]
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
Vistula University
Oskar Sziumski, PhD
Faculty of Management University of Warsaw
104
MANAGEMENT INFORMATION SYSTEMS
Part 3
e-COMMERCE AND e-BANKING
Prof. Witold Chmielarz, PhD ,
Faculty of Management University of Warsaw
LEARNING OBJECTIVES
• Identify the unique features of e-commerce, digital markets, and
digital goods.
• Describe how Internet technology has changed business models.
• Identify the various types of e-commerce and explain how e-commerce
has changed consumer retailing and business-to-business transactions.
• Evaluate the role of m-commerce in business, and describe the most
important m-commerce applications.
• Identify the principal payment systems for electronic commerce.
Information Society – Ultimate Goal of Development
• …An information society is a society in which the creation,
distribution, diffusion, use, integration and manipulation
of information is a significant economic, political, and
cultural activity…
• …The knowledge economy is its economic counterpart
whereby wealth is created through the economic
exploitation of understanding…
E-Commerce is only small part of it…
e-Commerce Definitions
• …Electronic Commerce (E-Commerce) is an artificial socioeconomic structure, functioning based on widely used virtual nets,
dynamic complexity and specific infrastructure.
From this definition, it can be derived, that this structure cannot
be directly transferred to the physical world, but some elements as
payments and commodities originate from this world. In some
areas of science,
E-Commerce is defined as virtual commerce, although the prior is
considerably wider as it includes processes such as telephone
transactions…
(B. Kubiak, Korowicki A. 1999)
• ...An emerging concept that describes the process of buying and
selling or exchanging of products, services, and information via
computer networks including the Internet ...
(Turban, at all 2000),
108
MANAGEMENT INFORMATION SYSTEMS
Subpart of 3
INTEGRATED ENTERPRISE SYSTEMS- basement for
e-BUSINESS
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
LEARNING OBJECTIVES
• Evaluate how enterprise systems help businesses achieve
operational excellence.
• Describe how supply chain management systems
coordinate planning, production, and logistics with
suppliers.
• Explain how customers relationship management systems
help firms achieve customer intimacy.
• Identify the challenges posed by enterprise applications.
• Describe how enterprise applications are used in
platforms for new cross-functional services.
BIS
C
o
n
v
e
r
g
e
n
c
e
ES
EIS/ESS
DSS
CRM
MIS
ERP II
TSP/APD
ERP
MRP II
SCM
MRP
IC
Internet
C
o
r
p
o
r
a
t
e
1
2
P
l
a
t
f
o
r
m
3
Commercial nets
Private, corporate nets
1950
1960
1970
1980
Integration
1990
2000
2010
Year
TRENDS IN MANAGEMENT INFORMATION SYSTEMS
DEVELOPMENT AND NEW CLASSIFICATION
Computerized Tools of MIS
•
•
•
•
•
Transaction Processing Systems (TPS) 1965
Management Information Systems (MIS) 1970
Decision Support Systems (DSS) 1975
Expert Systems (ES) 1980
Executive Information Systems &Executive Support
Systems – 1980+
• Artificial Neural Networks 1985 (?) (ES II generation,
Knowledge Based IS, Business Intelligence Systems)
• Integrated Enterprise Information Systems 1990
• Transformed into Digital Economy Systems 2000+
113
The Integration in the Development of MIS
The relationship between the basic IS can be presented as:
· perceiving them through a perspective of separate IS,
· alternating meaningful and alter,
· tendency to evolution and adaptation as regards reality,
· interaction and coordination between systems as regards specific
applications.
We can observe the important role of the integrated systems which
support office work and production, and also – now only sometimes a complete lack of network systems here. Nonetheless, the already
drawn conclusion that the main direction of development of most
systems is their complex integration in direction of management
support system.
114
The Benefits Resulting from Linking – MIS & ES
In this case Expert Systems supply:
supervision and review of the process of registration, retrieval and
execution of information processes,
simplification of a correct base management for operators,
optimization of questions and search paths as well as the amount of
transfer data,
intelligent-interfaces-like operation in commercial deposition
structured databases.
In such a kind of the architecture management information system
(MIS) - provides information for ES as well as simplifies core data
manipulation.
115
Integration: MIS & ES
User
Interface
Data Base and Data
Reports
Data Base
Applications
Screens
Base Management
Data
Models
System
Conckusions
Mechanism
Data
Gathering
Expert
System
Rules Base
Data Base
Transactions
Expert System
Fig.1. Combinaton Architecture Expert System and Management Information System (Intelligent
Data Base)
116
Integration ES & DSS
Cooperation gives the following effects:
• possibility of logical explanation of undertaken decisions and results
collected,
• faster accomplishment of operations, when the acquired results of the DSS
are input data for ES,
• proper identification of the reverse situation,
• an increase in possibility of choice for the user – using a system of two
types of compound databases as regards the required needs of the logical
decision process,
• generation of variant solutions (DSS) and linking to them alternative
functions, which should be undertaken for their retrieval.
There are three possibilities:
• Expert System as independent component of the Decision Support System
• Expert System expanding the decision making process in the Decision
Support System
• Expert System unified with the Decision Support System
117
Integration ES & DSS
User
User Interface
Data Base
Management
System
Model Base
Management
System
Expert System
Data
Base
Model
Base
Fig.3. Expert System as Independent Component of Decision Support System
Here ES is quite a separate element of the combined system
and the final user can use it only under particular
circumstances – only even it is quite impossible to solve a
particular problem operating118 on the database or model
base.
Integration ES & DSS
User
User Interface
Data Base
Management
System
Model Base
Management
System
Expert System
Data Base
Model
Base
Fig. 4. Expert System Expanding Decision Making Process in Decision Support System
The system has links not only with management systems but - directly - with date and
model bases, too. It means that the user has in fact three independent possibilities: to
work with database, with the model base and with the ES.
ES has no background, so the model and database in this situation acts as an
additional support for its characteristics.
119
Integration ES & DSS
User
User Interface
Expert System
Intelligent
Data Base
Management
System
Conclusion
Mechanism
Model Base
Management
System
Supervisory
Programme
System Management systemem
Data
Base
Knowledge
Base
Model
Base
Fig. 5. Expert System Unified with Decision Support System
Total unification of ES and DSS into an intelligent expert
or knowledge system.
120
Integration EIS & DSS
The basic method of integrating systems, which inform management
and DSS is using them with the recent information generated by EIS
as input information.
In more complicated cases we expect to see a loop of the reverse
compound through a special intelligent interface which will allow for
the creation of questions to DSS, and in the opposite direction it will
send interpretations and recommendations obtained from DSS.
In short we can split this process into two parts:
• After introductory treatment in EIS data will be used as input data to
DSS,
• EIS is used for further interpretations of solutions achieved with the
help of DSS.
121
Integration EIS & DSS
User
Environment
External
Information
Reccomendations
for User
Querries
Executive
Information
System
User Interface
Responses
Reccomedations
Data
Base
Data Base
Management
System
Model Base
Management
System
Model
Base
Fig. 6. Connections Architecture between Executive Information System and Decision Support
System
122
Integration ES & EIS
• It seems that these two systems are seldom (only sometimes)
linked in practice
• EIS can return with questions to the ES in the hope of solving
particular, specialist problems which they have and changes of
obtaining appropriate solutions.
• EIS can also refer to the knowledge base or procedures base of
ES in situations when their user of interface is equipped with
communication mechanism, which allows them such a function.
• Now and again ES acts as a regular provider of reports (with a
substantial grade) generated on the basis of data sent from EIS.
123
Integration ES & EIS
User
Environment
External
Informations
Recommendations
for User
Information
Executive
Information
System
User Interface
(ES Class)
Odpowiedzi
Interpretations
Rekomendac
je
Data
Base
Data Base
Management
System
Knowledge
Base
Management
System
Knowledge
Base
Fig. 7. Connection Architecture between Executive Information System and Expert System
124
Integration EIS & MIS
It is the oldest and most natural system of linking two IS. It
makes full use of all the database mechanism and at the same
time only extracts information, which is needed by the
management in a given moment. In this way, there arises an
extra method independent of the user interface on a management
level.
Its basic characteristics:
• possible ongoing observation of events in the company and its
surroundings (EIS - as an intelligent interface to the database
system),
• reverse - memory of the interpretation of the EIS results in the
database.
125
Integration EIS & MIS
User
Executive
Information
System
User Interface
Data Base
Management
System
Data
Base
Fig. 8. Executive Information System Architecture Connected with Management Information
System
126
Integration Between Systems of the Same Type
This kind of linking applies mainly to:
• ES - information exchange between systems from various
categories or branches or
• DSS - strengthening of the functions of humble (small, weak)
systems through specialized transformation systems
127
Integration Within Unified Enterprise Systems
•
•
•
•
Therefore the basic characteristics of such systems are:
functional complexity – i.e. the inclusion of its whole range of functions and
processes going on in the organization (that does not disturb the selling of one
part of the system in practice)
structural compound – from one side a complex functional stimulation (the size
of the system would be enough!), from the other a joining of various types of
system as a whole one, finally making use of various technological integration.
considerable ease of use – all new technical gadgets are quickly added to existing
systems or new versions are created which differ by, for example a more
attractive user interface. A common imposed idea about solving office problems
with Windows put big pressure on systems creators, in the direction of building
“Windows-style” interfaces - i.e. such that ensured ease of use for users who are
accustomed to it.
common usage – all companies who want to survive on the ever narrowing more
competitive market look for salvage in cost minimization. Such salvage is
provided by the management and production support computer system. If it is
used in the correct way, the substantial effects cause an increase of technological
interest, and with this comes an increase in common usage of such systems.
128
Integrated Management Information Systems
Benefits:
• More productive than forming a whole system (faster in construction and
correction),
• Eliminates completely manual handling of information,
• Owning a larger functionality than the simple sum of the applications functions
(synergy).
Scenarios:
• Integration of already existing applications,
• Building a new applications integrated with existing ones,
Typical problems:
• Cooperation needs a common language,
• Organizational problems: there are various levels/platforms:
hardware,
operation system
networks
• Organizations have various structures and development strategies and therefore
functional applications,
• During application connection a complicated structure arises as regards the
application2application connection 129
Integrated Enterprise Systems
•
•
•
•
•
Following conditions must be satisfied:
common information handling for the whole organization, without
a dispensable surplus, which denotes, that the information about
every thing is collected only once, ideally from the source, and sent
to every processes which is ready to use it,
unique collection system, transforming and information sending,
unique media collection and information handling,
common tools and system development procedures,
unique user dialogue procedures.
130
Integrated Enterprise Systems Development
•
•
•
•
•
•
•
•
•
1957 in the USA - American Production & lnventory Control Society (APICS)
was established - for maintaining standards of computers application in
production’ organizations management
In late 50. APICS made assesments for the first standard MRP (Material
Requirements Planning). This standard let us compute accurate quantity of row
materials (resources) adequately for flexible demand on commodities
(assortment of products, articles) in time.
The main goal of MRP:
Inventory reduction (in warehouses and interoperational inventories),
Accurate defining supply time of row materials and semi-finished articles supply
Precise ddetermining of production costs,
Better usage of technical (production) infrastructure,
Faster reaction under environmental changes,
Control of individual stages of production.
1964 – Inventory Control System – the first information system with integrated
functions of purchase, storage and distribution of commodities; in next years
firstly created mainly for inwentory management in warehouses and for serial
industrial production, particulary in electro-machinery branch,
131
Integrated Enterprise Systems Development
• 1989 APICS create new standard MRP II (Manufacturing
Resource Planning commonly used in all great integrated
information systems
• Standard MRP II was extended (in relation with the previous one)
about elements connected with sale (retail and wholesale) and
functions supported strategic production management
• In 90. – all functions and processes were included in standard
MRP II
• Now it takes into account all spheres of management of the firm
connected with preparation of production, production planning
and management and sale or distribution production goods
• Besides of row materials - in MRP
II there were human relations,
132
financial flows, auxiliary materials etc.
Integrated Enterprise Systems Development
• Mid-90 standard ERP (Enterprise Resource Planning – not
approved) - Main purpose – complete integration of all levels of
management of the company
• ERP included all proceses of production and distribution, which
integrating various areas of firm activity, implementing critical –
for success - information flows and let direct react for market
changes
• Information updating - in real time and information for decision
making process is accesable in that momment
• Additionally – procedures for simulationg variuos operations with
possible analysis of their results (financial included).
133
Integrated Systems Development
ERP areas:
• Customer service – database about clients, orders processing,
orders service, EDI – transfer of e-documents, internet access,
• Production – wholesale servis, production costs calculating,
purchasing materials rows, establishing time-table of production,
forecasting of capabilities, calculating of critical level of
inventories, process production control etc.,
• Finance – accounting, accounting documents flow
control,
preparing reports according to customer needs, etc.,
• Logistic chain itegration - connection with next subsystems CRM
(Customer Relationship Management), SCM (Supply Chain
Management), VRM (Vendor Relationship Manegement)
134
System evolution direction – total complexity
Internet area
ERP II
ERP
MRP II
MRP
Inventory
Control
1960
1970
1980
135
1990
2000
Enterprise Integrated Systems
• Built around thousands of predefined business processes that reflect best
practices
• Finance/accounting: General ledger, accounts payable, etc.
• Human resources: Personnel administration, payroll, etc.
• Manufacturing/production: Purchasing, shipping, etc.
• Sales/marketing: Order processing, billing, sales planning, etc.
• To implement, firms:
• Select functions of system they wish to use
• Map business processes to software processes
• Use software’s configuration tables for customizing
Business Value of Integrated Enterprise Systems
• Increase operational efficiency
• Provide firmwide information to support decision making
• Enable rapid responses to customer requests for
information or products
• Include analytical tools to evaluate overall organizational
performance
How Enterprise Integrated Systems Work
Enterprise
systems
feature
a
set
of
integrated
software
modules and a central
database that enables
data to be shared by
many different business
processes and functional
areas throughout the
enterprise
Integrated Enterprise Systems Development
ERP areas:
• Customer service – database about clients, orders processing,
orders service, EDI – transfer of e-documents, internet access,
• Production – wholesale servis, production costs calculating,
purchasing materials rows, establishing time-table of production,
forecasting of capabilities, calculating of critical level of
inventories, process production control etc. ustalanie.,
• Finance – accounting, accounting documents flow
control,
preparing reports according to customer needs,etc.
• Logistic chain itegration - connection with next subsystems CRM
(Customer Relationship Management), SCM (Supply Chain
Management), VRM (Vendor Relationship Manegement)
139
Evolution of ERP Systems
140
Structure of ERP Systems
141
Modules overview of ERP Systems
142
ERP Diagram
143
Market share 2012 according to Gartner Dataquest
No.
Vendor
Revenue
(million $)
1.
SAP
4726
28.7
2.
Oracle Applications
1674
10.2
3.
The Sage Group
1221
7.4
4.
Microsoft Dynamics
616
3.7
5.
SSA Global Technologies
464
2.8
6.
Lawson Software
391
2.4
7.
Epicor
384
2.33
144
Market share
(%)
ERP Advantages and Disadvantages
•
•
•
•
•
Benefits:
ERP automate business processes and enable process changes, what brings
a lot benefits in operational activities such like: cost reduction, cycle time
reduction, productivity improvement, quality improvement, customer
service improvement,
with a centralized database and build in data analysis capabilities, the
system is helping in managerial activities for example: better resource
management, improves decision making and planning, improves
performance,
ERP systems with their large-scale business involvement and internal and
external integration capabilities can assist in achieving strategic benefits
such as: support business growth, build business innovations, build cost
leadership, generate product differentiation (including customization),
build external linkages (customers and suppliers), enabling e-commerce,
ERP systems has integrated a standard application architecture, which
provides an infrastructure that can build business flexibility for current
and future changes, IT cost reduction, increased IT infrastructure
capability,
the integrated information processing capabilities of ERP can support
organizational changes, facilitate business learning, build common vision,
change employee behavior, increase employee moral and satisfaction.
145
ERP Advantages and Disadvantages
• Personnel turnover; companies can employ new managers
lacking education in the company's ERP system, proposing
changes in business practices that are out of synchronization
with the best utilization of the company's selected ERP.
• Customization of the ERP software is limited. Some
customization may involve changing of the ERP software
structure which is usually not allowed.
• Re-engineering of business processes to fit the "industry
standard" prescribed by the ERP system may lead to a loss of
competitive advantage.
• ERP systems can be very expensive especially for
multinational companies.
• ERP vendors can charge sums of money for annual license
renewal that is unrelated to the size of the company using the
ERP or its profitability.
146
ERP Advantages and Disadvantages
• Technical support personnel often give replies to callers that
are inappropriate for the caller's corporate structure.
Computer security concerns arise, for example when telling
a non-programmer how to change a database on the fly, at a
company that requires an audit trail of changes so as to meet
some regulatory standards.
• ERPs are often seen as too rigid and too difficult to adapt to
the specific workflow and business process of some
companies—this is cited as one of the main causes of their
failure.
• Systems can be difficult to use.
• Systems are too restrictive and do not allow much flexibility
in implementation and usage.
• The system can suffer from the "weakest link" problem—an
inefficiency in one department or at one of the partners may
affect other participants
147
ERP Advantages and Disadvantages
• Many of the integrated links need high accuracy in other
applications to work effectively. A company can achieve
minimum standards, then over time "dirty data" will reduce the
reliability of some applications.
• Once a system is established, switching costs are very high for
any one of the partners (reducing flexibility and strategic
control at the corporate level).
• The blurring of company boundaries can cause problems in
accountability, lines of responsibility, and employee morale.
• Resistance in sharing sensitive internal information between
departments can reduce the effectiveness of the software.
• There are frequent compatibility problems with the various
legacy systems of the partners.
• The system may be over-engineered relative to the actual needs
of the customer.
148
Trends of ERP development
ERP initiatives are most common:
• Upgrade. In 2008, a meaningful percentage of companies
were going through major and minor upgrades of their ERP
environment.
• Rationalize and standardize. Many diversified companies
that have grown by acquisition now face a significant
challenge in that they have multiple ERP vendors and
installations running. To improve process consistency and
reduce internal support costs, many companies have
embarked on a long-term strategy to standardize on a singleinstance/single-vendor ERP strategy.
• Multitier (multileyer). The multitier ERP strategy seems to
run counter to the notion of ERP standardization but is a
viable strategy for companies with a number of smaller
subsidiaries.
149
Trends of ERP development
• Integrate. Improving integration among applications is the leading
application strategy priority among enterprise companies, representing
a critical priority among 33% of companies. Integration of applications
is moving from a traditional batch, flat-file mode to virtually real-time,
message-based integration using SOA technologies.
• Expand. ERP systems have been historically hard to use and are
typically deployed to a limited set of core users who enter and retrieve
data from the systems on a daily basis. Alternative user interfaces including Web-based self-service, Adobe forms, Microsoft Office, and
other technologies - are more readily available now to roll out certain
ERP capabilities to a broader set of less frequent users across the
enterprise. Newer role-based user experience designs as well as vastly
improved BI capabilities are becoming more evident, making these
systems more accessible and approachable.
• Replace. Replacement becomes a necessity at some point, due to the
technology obsolescence of older legacy systems and high levels of
customization that compromise the upgrade path. ERP systems,
however, typically have a useful life of 15 to 20 years or more when
proactively maintained.
150
Supply Chain Management Systems
The supply chain
• Network of organizations and processes for:
• Procuring raw materials
• Transforming them into products
• Distributing the products
• Upstream supply chain:
• Firm’s suppliers, suppliers’ suppliers, processes for
managing relationships with them
• Downstream supply chain:
• Organizations and processes responsible for delivering
products to customers
Supply Chain Management Systems
Nike’s Supply Chain
This figure illustrates the major entities in Nike’s supply chain and the flow of information
upstream and downstream to coordinate the activities involved in buying, making, and moving a
product. Shown here is a simplified supply chain, with the upstream portion focusing only on the
suppliers for sneakers and sneaker soles.
Supply Chain Management Systems
• Information and supply chain management
• Inefficiencies cut into a company’s operating costs
• Can waste up to 25% of operating expenses
• Just-in-time strategy:
• Components arrive as they are needed
• Finished goods shipped after leaving assembly line
• Safety stock
• Buffer for lack of flexibility in supply chain
• Bullwhip effect
• Information about product demand gets distorted as it
passes from one entity to next across supply chain
Supply Chain Management Systems
• Supply chain management systems
• Supply chain planning systems
• Model existing supply chain
• Demand planning
• Optimize sourcing, manufacturing plans
• Establish inventory levels
• Identifying transportation modes
• Supply chain execution systems
• Manage flow of products through distribution centers
and warehouses
Supply Chain Management Systems
• Global supply chains and the Internet
• Before Internet, supply chain coordination hampered by difficulties
of using disparate internal supply chain systems
• Enterprise systems supply some integration of internal supply chain
processes but not designed to deal with external supply chain
processes
• Intranets and Extranets
• Intranets: To improve coordination among internal
supply chain processes
• Extranets: To coordinate supply chain processes
shared with their business partners
Intranets and Extranets for Supply Chain Management
• Intranets
integrate
information
from
isolated
business
processes within the
firm to help manage its
internal supply chain.
• Access to these private
intranets can also be
extended to authorized
suppliers, distributors,
logistics services, and,
sometimes, to retail
customers to improve
coordination of external
supply chain processes.
Supply Chain Management Systems
• Global supply chain issues
• Global supply chains typically span greater geographic distances and
time differences
• More complex pricing issues (local taxes, transportation, etc.)
• Foreign government regulations
• Internet helps companies manage many aspects of global
supply chains
• Sourcing, transportation, communications, international finance
Business Value of Supply Chain Management Systems
• Match supply to demand
• Reduce inventory levels
• Improve delivery service
• Speed product time to market
• Use assets more effectively
• Reduced supply chain costs
• Increased sales
The Future Internet-Drive Supply Chain
The future Internet-driven supply chain operates like a digital logistics nervous system. It provides
multidirectional communication among firms, networks of firms, and e-marketplaces so that
entire networks of supply chain partners can immediately adjust inventories, orders, and
capacities.
Customer Relationship Management Systems
• What is customer relationship management?
• Knowing the customer
• In large businesses, too many customers and too
many ways customers interact with firm
• Customer relationship management (CRM) systems
• Capture and integrate customer data from all over the
organization
• Consolidate and analyze customer data
• Distribute customer information to various systems
and customer touch points across enterprise
• Provide single enterprise view of customers
Customer Relationship Management (CRM)
CRM systems examine customers from a multifaceted perspective.
These systems use a set of integrated applications to address all aspects of the customer
relationship, including customer service, sales, and marketing.
Customer Relationship Management Systems
•
CRM software packages
•
More comprehensive packages have modules for:
• Partner relationship management (PRM)
• Employee relationship management (ERM)
•
Most packages have modules for
•
Sales force automation (SFA): Sales prospect and contact
information, and sales quote generation capabilities; etc.
•
Customer service: Assigning and managing customer service
requests; Web-based self-service capabilities; etc.
•
Marketing: Capturing prospect and customer data, scheduling and
tracking direct-marketing mailings or e-mail; etc.
How CRM Systems Support Marketing
Customer relationship management software provides a single point for users to manage
and evaluate marketing campaigns across multiple channels, including e-mail, direct mail,
telephone, the Web, and wireless messages.
CRM Software Capabilities
The major CRM software
products support business
processes in sales, service,
and marketing, integrating
customer information from
many different sources.
Included are support for
both the operational and
analytical aspects of CRM.
Customer Relationship Management Systems
• Operational CRM:
• Customer-facing applications such as sales force automation, call
center and customer service support, and marketing automation
• Analytical CRM:
• Analyze customer data output from operational CRM applications
• Based on data warehouses populated by operational CRM systems
and customer touch points
• Customer lifetime value (CLTV)
Analytical CRM Data Warehouse
Analytical CRM uses a customer data warehouse and tools to analyze customer data collected
from the firm’s customer touch points and from other sources.
Customer Relationship Management Systems
• Business value of customer relationship management
• Increased customer satisfaction
• Reduced direct-marketing costs
• More effective marketing
• Lower costs for customer acquisition/retention
• Increased sales revenue
• Reduced churn rate
• Churn rate:
• Number of customers who stop using or
purchasing products or services from a company.
• Indicator of growth or decline of firm’s customer
base
Enterprise Applications: New Opportunities and Challenges
• Enterprise application challenges
• Highly expensive to purchase and implement enterprise applications
– total cost may be 4 to 5 times the price of software
• Requires fundamental changes
• Technology changes
• Business processes changes
• Organizational changes
• Incurs switching costs, dependence on software vendors
• Requires data standardization, management, cleansing
Enterprise Applications: New Opportunities and Challenges
• Next generation enterprise applications
• Enterprise solutions / suites:
• Replacing stand-alone enterprise, CRM, SCM systems
• Make these applications more flexible, Web-enabled, integrated
with other systems
• Open-source and on-demand applications
• SaaS, Salesforce.com
• Service platform: Integrates multiple applications to deliver a
seamless experience for all parties
• Order-to-cash process
• Portals:
• Increasingly, new services delivered through portals
Thank you very much for your attention!
Witold Chmielarz
Questions - [email protected]
170
ERP example –
IFS Applications
Basic modules
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–
–
–
–
–
–
–
–
–
–
–
Master Production Scheduling (MPS)
Item Master Data (Technical Data)
Bill of Materials (BOM) (Technical Data)
Production Resources Data (Manufacturing Technical Data)
Inventories & Orders (Inventory Control)
Purchasing Management
Material Requirements Planning (MRP)
Shop Floor Control (SFC)
Capacity planning or Capacity Requirements Planning (CRP)
Standard Costing (Cost Control)
Cost Reporting / Management (Cost Control)
Distribution Resource Planning (DRP)
Additional functionalities
•
•
•
•
•
•
•
•
•
Business Planning
Lot Traceability
Contract Management
Tool Management
Engineering Change Control
Configuration Management
Shop Floor Data Collection
Sales Analysis and Forecasting
Finite Capacity Scheduling (FCS)
Related systems
•
•
•
•
•
•
•
•
•
•
General Ledger
Accounts Payable (Purchase Ledger)
Accounts Receivable (Sales Ledger)
Sales Order Management
Distribution Requirements Planning (DRP)
[Automated] Warehouse Management
Project Management
Technical Records
Estimating
Computer-aided design/Computer-aided manufacturing
(CAD/CAM)
IFS App Component Chart
Example – IFS App for automotive industry
Example – IFS App for aviation
Example – IFS App for Defence
Example – IFS App for telecommunications
MANAGEMENT INFORMATION SYSTEMS
Part 2
CHARACTERISTICS AND FEATURES OF MIS –
ELEMENTS OF E-BUSINESS SOCIETY
Prof. Witold Chmielarz, PhD ,
Oskar Szumski, PhD
183
Faculty of Management University of Warsaw
Characteristics and Features of MIS
Towards Knowledge Based Systems –
elements of e-business society
184
Knowledge in MIS
185
LEARNING OBJECTIVES
•
Assess the role of knowledge management and knowledge management
programs in business
•
Describe the types of systems used for enterprise-wide knowledge
management and demonstrate how they provide value for organizations
•
Describe the major types of knowledge work systems and assess how they
provide value for firms
•
Evaluate the business benefits of using intelligent techniques for
knowledge management
•
Analyzing of the concept of knowledge management application
186
A brief content:
•
•
•
•
Basic definitions
Intro to Knowledge Management (KM)
Approaches to KM
Problems with KM implementation
187
…Management Information System – refers to a
collection of computerized and net technologies
whose objective is to support managerial work and
especially decision making…
(Turban E., at al: IT for Management ... 2008)
188
Some basis definitions…
• System – group of elements integrated with common
purpose of achieving an objective (...) by transforming
input resources to output resources…
• Information system – group of programs integrated in
three areas: programme, logical and technical…
• An application program – a set of computer instructions
written in a programming language, the purpose of
which is to provide functionality to a user…
189
Some basic definitions…
•
Decision making – a process of choosing among
alternative courses of action for the purpose of
attainings a goal or goals:
What should be done?
When?
How?
Where?
By whom?
190
Intro to Knowledge Management (KM)
…A process that helps organizations identify, select, organize,
disseminate, and transfer important information and expertise
that are part of the organization’s memory and that typically
reside within the organization in an unstructured manner…
•
•
•
Creating of knowledge enables effective and efficient problem solving,
dynamic learning, strategic planning and decision making
Focus on identyfing knowledge, explicating it in formal manner and
exploiting by reuse,
For success of organization must be exchangable among persons, and able
to grow…
E.Turban et al.: Information Technology for Management;
191
Knowledge Management (KM)
• Knowledge management: Set of business processes developed
in an organization to create, store, transfer, and apply
knowledge
• Knowledge management value chain: each stage adds value to
raw data and information as they are transformed into usable
knowledge:
– Knowledge acquisition
– Knowledge storage
– Knowledge dissemination
– Knowledge application
(Laudon, Laudon, Chapt 11)
192
Knowledge acquisition
• Documenting tacit and explicit knowledge:
– Storing documents, reports, presentations, best
practices
– Unstructured documents (e.g., e-mails)
– Developing online expert networks
• Creating knowledge
• Tracking data from TPS and external sources
(Laudon, Laudon, Chapt 11)
193
Knowledge storage
• Databases
• Document management systems
• Role of management:
– Support development of planned knowledge storage
systems
– Encourage development of corporate-wide schemas
for indexing documents
– Reward employees for taking time to update and store
documents properly
(Laudon, Laudon, Chapt 11)
194
Knowledge dissemination
•
•
•
•
•
Portals
Push e-mail reports
Search engines
Collaboration tools
A deluge (dissemination, too) of information?
– Training programs, informal networks, and shared
management experience help managers focus
attention on important information
(Laudon, Laudon, Chapt 11)
195
Knowledge application
• To provide return on investment, organizational
knowledge must become systematic part of management
decision making and become situated in decision-support
systems
– New business practices
– New products and services
– New markets
(Laudon, Laudon, Chapt 11)
196
The Knowledge Management Value Chain
Knowledge management today involves both information systems activities and
a host of enabling management and organizational activities.
197
New organizational roles and responsibilities
• Chief knowledge officer executives
• Dedicated staff / knowledge managers
• Communities of practice (COPs)
• Informal social networks of professionals and employees
within and outside firm who have similar work-related
activities and interests
• Activities include education, online newsletters, sharing
experiences and techniques
• Facilitate reuse of knowledge, discussion
• Reduce learning curves of new employees
• Establish paths of carrier
198
Relations – data – information – knowledge - wisdom
• Data – are a collection of facts, measurements, and statistics
• Information – is organized or processed data that are timely and
accurate (ready for use),
• Knowledge – is information that is contextual (connected with
particular conditions), relevant (closely connected with situation)
and actionable (supported by cases), shows how to use information
and data under current, given, defined situation in effective,
acceptable formal (visible knowledge) way,
• Wisdom – abbility to make sensible decisions and good advice
because of the experience and knowledge, how to use knowledge
and information in reasonable (optimal) way (hidden knowledge,
too)
199
Wisdom – Knowledge triangle
Wisdom – collection of reasonable knowledge
Knowledge – collection of usable information
Information – collection of processed data
Data – collection of facts
200
Charactristics of knowledge
• Extraordinary and increasing results – knowledge is not subject to
diminishing results. When it is used, it is not consumed. Its
consumers can add to it, thus increasing its value.
• Fragmentation, leakage and need to refresh – knowledge is
dynamic, it is information in action. Thus an organization must
continually refresh its knowledgebase to maintain it as a source of
competitive advantage,
• Uncertain value – it’s difficult to estimate the impact of an
investment in knowledge. There too many intengible aspects
• Uncertain value of sharing – it’s difficult to estimate the value of
sharing knowledge, or even who will benefit most,
• Rooted in time – the utility and validity of knowledge may change
with time.
201
Transforming information into knowledge
• To transform information into knowledge, firm must expend
additional resources to discover patterns, rules, and contexts
where knowledge works
• Wisdom: Collective and individual experience of applying
knowledge to solve problems - involves where, when, and how
to apply knowledge
• Knowing how to do things effectively and efficiently in ways
other organizations cannot duplicate is primary source of profit
and competitive advantage that cannot be purchased easily by
competitors
(Laudon, Laudon, Chapt. 11)
202
Introduce the concept of organizational learning
(selflearning), which describes the process of gathering,
creating, and applying knowledge
• Organizational learning
• Process in which organizations learn
• Gain experience through collection of data, measurement,
trial and error, and feedback
• Adjust behavior to reflect experience:
• Create new business processes
• Change patterns of management decision making
203
Some additional definitions
• Intellectual capital (or intellectusl assets) – the valuable knowledge
of employees, evolves with time and experience, which puts
connections among new situations and events in context.
• Tacit knowledge – usually in the domain of subjective, cognitive
and experimental learning (personal and difficult to formalize).
The cumulative store of an experiences, expertise, know-how,
trade secrets, skill sets, usually localized in the brain of individual
• Explicit knowledge – deals with more objective, rational, and
technical knowledge (date, procedures, software, documents).
Codyfied knowledge (documented) in the form can be distributed
to others or transformed into process without interpersonal
interaction (can leave person – leaky knowledge)
Organizations now recognize the need too integrate explicit and
tacit knowledge in formal information systems
(taken from: Laudon, Laudon, Chapt. 11)
204
Important dimensions of knowledge
– Knowledge is a firm asset
• Intangible
• Creation of knowledge from data, information, requires organizational
resources
• As it is shared, experiences network effects
– Knowledge has different forms
•
•
•
•
May be explicit (documented) or tacit (residing in minds)
Know-how, craft, skill
How to follow procedure
Knowing why things happen (causality)
(taken from: Laudon, Laudon, Chapt. 11)
205
Important dimensions of knowledge
• Knowledge has a location
• Cognitive event
• Both social and individual
• “Sticky” (hard to move), situated (enmeshed in firm’s
culture), contextual (works only in certain situations)
Knowledge is situational
• Conditional: Knowing when to apply procedure
• Contextual: Knowing circumstances to use certain tool
(see: Laudon, Laudon & Dass, Chapt. 11)
206
Approaches to KM
• Process approach – attempts to codify organizational knowledge
through formalized controls, processes and technologies,
frequently involves the use of information technologies to enhance
the quality and speed of knowledge creation and distribution in the
organizations
• Practice approach – assumes that a great deal of organizational
knowledge is tacit in nature and that formal controls, processes
and technologies are not suitable for transmitting this type of
understanding. The focus of this approach is to build the social
environments or communities necessary to the sharing of tacit
knowledge.
(see: Laudon, Laudon, Chapt. 11)
207
Approaches to KM
1.
2.
3.
•
Best practices – the activities and methods that the most effective
organizations use to operate and manage various functions. They
include:
A good idea that is not yet proven, but makes intuitive sense,
A good practice, an implemented technique, metodology,
procedure, or process that has improved business results,
A local best practice, a best approach for all or a large part of the
organization based on analysing hard data. The scope within
organization of the best practice is identified; can be used only in
a single department or geographical region, or across the
organization.
Hybrid approaches – in reality involve both process and practice
approaches.
(see: Laudon, Laudon, Chapt. 11)
208
Three major types of knowledge management systems:
• Enterprise-wide knowledge management systems
• General-purpose firm-wide efforts to collect, store, distribute, and
apply digital content and knowledge
• Knowledge work systems (KWS)
• Specialized systems built for engineers, scientists, other knowledge
workers charged with discovering and creating new knowledge
• Intelligent techniques
• Diverse group of techniques such as data mining used for various
goals: discovering knowledge, distilling knowledge, discovering
optimal solutions
209
Major Types of Knowledge Management Systems
There are three major categories of knowledge management systems, and each can be broken down further
into more specialized types of knowledge management systems.
210
Three major types of knowledge in enterprise
• Structured documents
• Reports, presentations
• Formal rules
• Semistructured documents
• E-mails, videos
• Unstructured, tacit knowledge
80% of an organization’s business content is
semistructured or unstructured
211
Enterprise-wide content management systems
• Help capture, store, retrieve, distribute, preserve
• Documents, reports, best practices
• Semistructured knowledge (e-mails)
• Bring in external sources
• News feeds, research
• Tools for communication and collaboration
212
An Enterprise Content Management System
An enterprise content management system has capabilities for classifying, organizing, and
managing structured and semistructured knowledge and making it available throughout the
enterprise
213
Knowledge network systems
• Provide online directory of corporate experts in well-defined
knowledge domains
• Use communication technologies to make it easy for employees to find
appropriate expert in a company
• May systematize solutions developed by experts and store them in
knowledge database
• Best-practices
• Frequently asked questions (FAQ) repository
214
An Enterprise Knowledge Network System
A knowledge network maintains
a database of firm experts, as
well as accepted solutions to
known problems, and then
facilitates the communication
between employees looking for
knowledge and experts who have
that knowledge.
Solutions
created
in
this
communication are then added
to a database of solutions in the
form of FAQs, best practices, or
other documents.
215
Major knowledge management system vendors include
powerful portal and collaboration technologies:
• Portal technologies: Access to external information
• News feeds, research
• Access to internal knowledge resources
• Collaboration tools
• E-mail
• Discussion groups
• Blogs
• Wikis
• Social bookmarking
216
Learning management systems
• Provide tools for management, delivery, tracking, and assessment of
various types of employee learning and training
• Support multiple modes of learning - CD-ROM, Web-based classes,
online forums, live instruction, etc.
• Automates selection and administration of courses
• Assembles and delivers learning content
• Measures learning effectiveness
217
Knowledge work systems
• Systems for knowledge workers to help create new knowledge and
ensure that knowledge is properly integrated into business
Knowledge workers
• Researchers, designers, architects, scientists, and engineers who create
knowledge and information for the organization
• Three key roles:
• Keeping organization current in knowledge
• Serving as internal consultants regarding their areas of expertise
• Acting as change agents, evaluating, initiating, and promoting change
projects
218
Requirements of knowledge work systems
• Substantial computing power for graphics, complex calculations
• Powerful graphics, and analytical tools
• Communications and document management capabilities
• Access to external databases
• User-friendly interfaces
• Optimized for tasks to be performed (design engineering, financial
analysis)
219
Requirements of Knowledge Work Systems
Knowledge work systems require strong links to external knowledge bases in addition to specialized hardware
and software.
220
Examples of knowledge work systems
• CAD (computer-aided design): Automates creation and revision of
engineering or architectural designs, using computers and sophisticated
graphics software
• Virtual reality systems: Software and special hardware to simulate
real-life environments
• E.g. 3-D medical modeling for surgeons
• VRML: Specifications for interactive, 3D modeling over Internet
• Investment workstations: Streamline investment process and
consolidate internal, external data for brokers, traders, portfolio
managers
221
• Intelligent techniques: Used to capture individual and
collective knowledge and to extend knowledge base
• To capture tacit knowledge: Expert systems, case-based reasoning,
fuzzy logic
• Knowledge discovery: Neural networks and data mining
• Generating solutions to complex problems: Genetic algorithms
• Automating tasks: Intelligent agents
• Artificial intelligence (AI) technology: computer-based systems
that emulate human behavior
222
Management Information Systems
characteristics and features
223
Transactional Systems Processing (TSP)
Definition:
• …Transaction Processing Systems (TSP) - perform the frequent
routine external and internal transactions that serve the operational
level of organisation…
• …An information system that processes an organization’s basic
business transactions such as purchasing, billing and payroll…
• Previously based on batch processing – where processes inputs at
fixed intervals as a file and operates on it all at once; interactive
processing operates on a transaction as soon as it occurs
224
Transactional Systems Processing (TSP)
• Data processing – manipulation or transformation numbers and
letters for the purpose of increasing their usefulness :
• data gathering,
• data manipulation:
 classifying,
 sorting,
 selecting etc).
• TSP, D(data) PS or A(analytic)IS – the first single
simple systems made mainly for gathering and
processing data not for decision making, operating
separately in the frames of the firm; in the beginning
often without common database
225
Transactional Systems Processing (TSP)
• System tended to grow independently, and not according to some
grand plan.
• Each functional area tended to develop systems in an isolation
from other functional areas.
• Accounting, finance, manufacturing, human resources, and
marketing all developed their own systems and data files.
• Each application, of course, required its own files and its own
computer program to operate.
• For example, the human resources functional area might have a
personnel master file, a payroll file, a medical insurance file, a
pension file and so forth until tens, perhaps hundreds, of files and
programs existed.
• In the company as a whole, this process led to multiple master file
created, maintained, and operated by separate divisions or
departments.
226
Transactional Systems Processing (TSP)
• These were undoubtedly the first attempts of creating a tool which
indirectly could be used to support business management.
• The basic advantage of such a tool was the speed of performing
simple, standard large-scale operations.
• The basic problem which occurred then was the low level of
technological development, which caused the fact that processing,
before it could take place, entailed a number of complicated steps
and procedures connected with the imperfection of the existing
hardware and software.
• Additionally, this process was accompanied by considerable costs.
The lack of reliability and failure rate reached in total 80% of the
total working time of such a machine.
• Designing and processing of the program which operated on the
data which were entered in the computer’s memory data was very
complex.
227
Transactional Systems Processing (TSP)
• The limitations were numerous:
 the problem connected with entering the programme and the data to be
processed by the computer,
 processing of the data and saving the results,
 distribution of the results among the engaged individuals etc. (processing
speed, memory capacity, problems with design and construction of software,
etc.).
• Each of the constructed systems was separate, which sometimes
resulted in entering the same data within an organization in a multiple
way and frequently in different formats.
• Other difficulties were: using unreliable input media with the longterm processing and separating the user from processing the data on a
computer which he could only prepare.
• The systems were effective in the case of mass numerical calculations
whose findings were interpreted „manually”. Their usefulness in
supporting management was reduced to speeding up numerical
calculations.
228
Transactional Systems Processing (TSP) - summarizing
Transaction processing systems
– Perform and record daily routine transactions necessary
to conduct business (examples: sales order entry, payroll,
shipping)
– Allow managers to monitor status of operations and
relations with external environment
– Serve operational levels
– Serve predefined, structured goals and decision making
229
Transactional Systems Processing (TSP) - contemporary
definition and interpretation as a part of ERP
• Definition: a Transactional Processing system (TPS) supports the
monitoring, collection, storage, processing, and dissemination of
the organization’s basic business transactions.
• It also provides the input data for other information systems.
Sometimes several TPSs exist in one company.
• TPSs are considered critical to the success of the organization
since they support core operations, such as purchasing of
materials, billing customers, preparing a payroll and shipping
goods to customers.
Examples: in retail stores, data flows from POS (point-of-sale)
terminals to a database where they are aggregated.
When a sale is completed, an information transaction reduces the
level of inventory on hand, and the collected revenue from the sale
increases the company’s cash position.
Now this is very similar now to a part of MIS category
230
A Payroll TPS
A TPS for payroll processing captures employee payment transaction data (such as a
time card). System outputs include online and hard-copy reports for management and
employee paychecks.
231
How Management Information Systems Obtain Their Data
from the Organization’s TPS
In the system illustrated by this diagram, three TPS supply summarized
transaction data to the MIS reporting system at the end of the time period.
Managers gain access to the organizational data through the MIS, which provides
them with the appropriate reports.
232
Management Information Systems
• Management Information Systems from the very beginning of their
existence were designed for record keeping of past and current routine
information for planning, organizing and controlling operations in
functional areas of a business’s activities.
• Management Information Systems are defined by R. M. Stair as “... an
organized collection of people, processing procedures, databases, and
applications used to provide standardized information for managers and
decision makers ...”
• According to E.Turban "... Management Information System is a formal,
computer system, created in order to ensure a selection and integration of
distributed information from various sources to provide timely data needed
for decision making in management. They are the most effective in
routine, structured systems, where there are predictable types of decisions
...”
• These systems have had – so far – the greatest influence on the
formation of management information systems.
233
Management Information Systems
The basic logical architecture structure of MIS consisted of:
• end-user with interface - the collection of programmes, usually of an operation
system, responsible for communication with a user, which imposes certain standards
of perception and use of other software,
• databases with the database management system – collection of data stored
according to certain organizational principles, interrelated, linked by certain defined
dependencies, stored in a strictly defined way in the structures corresponding to a
certain assumed data model.
• the software which helps to define, construct, manipulate and share database for
applications and users is called a database management system.
• an additional element of the software may be a query language facilitating the
communication with a database in terms of accepting queries, its formalization and
making its result available to the decision-maker,
• applications – subsystems, application software consisting of a collection of
instructions, whose task is to provide a user with a defined functionality (financial
and accounting subsystem, warehouse subsystem, production control subsystem,
etc.).
234
The main elements of MIS – some definitions
•
A database (DB) – is a collectionof files serving as a data resource for
computer based information systems (MIS),
•
A batabase management system (DBMS) is a software program (or group of
programs) that managesand provides access to a database
•
Data warehouse – is a repository of historical data (millions of records),
subject oriented and organized, integrated from various sources, that can
easily be accessed and manipulated for decision support for example by: data
mining – process of searching for unknown information or relationships in
large databases using tools as neural computing or case-based reasoning (so,
sometimes only mechanizms of data mining are treated as kind of intelligence
– see products of SAS Institute, nothing more)
•
An application program – a set of computer instructions written in a
programming language, the purpose of which is to provide functionality to a
user…
235
Management Information Systems
• This simple construction of logical architecture has found its
application in tens of thousands of systems operating on the
market, and it became the basis for building more complex
systems, both in terms of adding new elements and handling a
number of new features
• The user who is making a decision – a manager – aided by means
of systems of such kind has:
 professional knowledge,
 qualifications and skills,
 intuition of an economist
 access to gathered, structured, specific data obtained from the
documents which were used in the course of conducting
business activity.
236
Management Information Systems
The way to access, handle and distribute the resulting information is
still relatively simple, but in order to use it we need IT knowledge:
• information used in the decision-making process is obtained in the
form of reports (processed documents),
• the way of presentation and deep analyses leading to their selection
and initial processing depends on the programming language and
the database management system,
• in order to obtain the information with a specific cross-section and
with a specified range you need at least basic knowledge about the
structure of a database,
• there is a relative redundancy of the basic information obtained
from a database in relation to the data required in order to make a
managerial decision based on the information,
• there are no direct mechanisms of processing the information
obtained from the database into the patterns which could be used as
the basis for taking a decision.
237
Next step of MIS development - Integrated Systems – where may be
knowledge inside them…
•
•
•
•
Basic characteristics :
functional complexity – i.e. the inclusion of its whole range of functions
and processes going on in the organization (that does not disturb the
selling of one part of the system in practice)
structural compound – from one side a complex functional stimulation
(the size of the system would be enough!), from the other a joining of
various types of system as a whole one.
considerable ease of use – all new technical gadgets are quickly added to
existing systems or new versions are created which differ by, for example
a more attractive user interface (“Windows-style” interfaces)
common usage – all companies want to survive - minimize costs. If
management information system is used in the correct way, the
substantial effects cause an increase of technological interest, and with
this comes an increase in common usage of such systems (it is the kind of
the highest intelligence)
238
Integrated Information Management Systems
•
•
•
•
•
Following conditions must be satisfied:
common information handling for the whole organization - the
information is collected only once, and sent to every processes to
use it,
unique collection system, transforming and information sending,
unique media collection and information handling,
common tools and system development procedures,
unique user dialogue procedures.
239
Beginning…
In 1964 – Inventory Control System – the first information system
with integrated functions of:
• purchase,
• storage,
• distribution of commodities;
in next years firstly created mainly for inwentory management in
warehouses and for serial industrial production, particulary in
electro-machinery branch
240
And integrated system now – ERP - functional diagram (SAP Sources)
Only by „intelligence” usage of this system you can obtain proper results for your company?
241
Management Information Systems - summarizing
– Serve middle management
– Provide reports on firm’s current performance, based on data
from TPS
– Provide answers to routine questions with predefined
procedure for answering them
– Typically have little analytic capability
242
Decision Support Systems
•
…Decision Support Systems couple the intellectual resources of
individuals with the capabilities of the computer to improve the
quality of decisions…
•
…It is a computer based support system for management decision
makers who deal with semistructural problems…
•
…It is a comptuer based information system that combines models
and data in an attempt to solve semistructured problems with
extensive user involvment…
Turban E. and R. Spraque
243
Decision Support Systems
•
•
•
•
•
The basic definition of the decision support systems describes it as
…information systems based upon computer and communication
infrastructure supporting the activities of people involved in the decisionmaking process…
The support is understood as the help provided to the decision-maker in
arriving at a decision, not taking a decision instead of him or replacing him
in the decision-making process.
The main difference in relation to the management information systems is in
the fact that thanks to DSS-class systems the decision-maker has at its
disposal tools for developing a decision, apart from intuition, knowledge,
skills and information.
The tools usually take the form of programmes (software packages)
consisting of mathematical, statistical and econometric models (or their
combinations), focusing on the issues related to corporate management. It
means that apart from the deterministic conditions in which the decisions
were taken on the basis of verified data (or their combination) from the
database.
The managers can use the systems to make decisions in probabilistic
situations with incomplete, random, sometimes partly erroneous or
conflicting data.
244
Decision Support Systems - new components
Model base – containing routine, standard and specialised models used for
decision-making in an enterprise. From a mathematical point of view, there may
appear models based on linear or non-linear dependencies, simulation,
optimization models and the ones based on game theory or resulting from good
management practices. From an organizational point of view models are often
divided into in-built (imposed on a user) and constructed by the user from the
complete components (subsystems and procedures (rules)), limited only by
nomenclature of the tool supporting this process,
Management system of model database – the software containing all tools
which are necessary to handle and manipulate ready models, maintain the model
base and their modified versions, create new models from elements and construct
them according to system principles, integrate the models into one entity or
combine new models with already existing ones, mechanisms coordinating the
demand for processed models with the database systems, parameters and external
data, to coordinate and integrate with the devices further expanding the
possibilities of using the model base. Communication with the model base is
performed by means of an interactive language of the model base ((specifying
enquiries and requests of the end user), and the models are maintained in
appropriate directories.
245
Decision Support Systems - new components
Procedure base (solver) – programme or software package used to solve
particularly complex mathematical problems arising from the constructed models
(linear, non-linear, multi-criteria programming, fuzzy systems, etc.). Addressing a
problem is either permanently assigned to a tested, standard model being used or –
after possible consultations (usually an option) with a user, adapted to a brand new
model which is created by means of mechanisms of model base management,
Database and model parameters – the database, which can contain data which is
necessary to run and use a model, derived from historical and current data recorded
in the database (model data: parameters and coefficients), external data downloaded
and entered “manually” from economic environment (sometimes together with a
converter into the format of data used in the model), normalization standards, etc.).
246
Decision Support Systems - all components
1. Data Management – includes the database, which contains relevant
data for the situation and is managed by software called database
management system (DBMS)
2. Management system of model database – includes financial,
statistical, management science or other models that provide the
system’s analytical capabilities and an appropriate software
management
3. Communication Subsystem - the user can communicate with and
command the DSS through this subsystem. It provides the user
interface
4. Procedure management of procedure base. This optional
subsystem can support any of the other subsystem, mainly Model
Management
(See: Laudon, Laudon, Chapt. 12)
247
Data Management Subsystem (Database+ Management System)
1.DSS database (the same as in MIS structure)
2.Database management system (see MIS)
3.Query facility
The Database – collection of interrelated data organized in such a way that
it corresponds to the needs and structure of an organization and can be
used by more than one person for more than one application.
Database Management System – is a software program to establish, update
and use a model base; to screen each request for information and determine
that the person making the request is indeed an autorised user.
Administrator can obtain reports about that activity of users. An effective
DBMS can provide support for many managerial activities, general
navigation among records, support for a diverse set of data relationships,
and report generation are typical examples.
Query facility – provides the basis for access to data. It accepts request for
data, determines how these request can be filled, formulates the detailed
request, returns the results to user
248
Management system of model database
1.
2.
3.
4.
5.
Model base
ModelBase management system
Model language
Model directory
Model execution, integration and command
All of them
are elements of:
BI or
KM systems
Model base – contains routine, standard and special statistical, financial, managerial
and other models that provide the analysis capabilities in the DSS. The ability to
invoke, run, change, combine and inspect models. The models in the Model base can
be divided into four main blocks: strategic, tactical, operational and basic (model
buiding blocks and subroutines)
Model base management – contains all tools for model management: modeling
commands – creation, maintenance-update, database interface, modeling language
Model language - special set of commands which can make possible to conctruct the
model ( next step natural language?)
Model directory – catalog of all models in the system, whenever used
Model execution, integration and command – rules of data management, dialog
249
management and knowledge management
(Compare with: Laudon, Laudon & Dass, Chapt. 12)
Decision Support Systems
•
such architecture allowed for the first time to develop, not the data to
make a decision, but, (in a model-based decision-making process) the
suggestions of a decision which would be best from the point of view of
an assumed criterion or a collection of possible decisions user options.
•
under the circumstances, we should focus not on the technological
solutions which were developed at the beginning of the period, but
rather on the creation of an alternative for a decision-maker – a
decision developed on the basis of the available (or selected) data
versus a decision, which was suggested by the computer on the basis of
the applied model problem solution.
•
emerging opportunities of examining the effects of making various
decisions, as well as the projection (forecasting) the future, or in a
spatial layout are also important in this case.
250
Features of DSS
• Support for decisions makers mainly in semistructured and
unstructured situations
• Support is provided for various managerial levels
• Support is provided to individuals and groups, for several independent
or sequential decisions, to all phases of the decision making process
• Supports a variety of decision-makers processes and styles
• DSS is adaptive over time
• DSS should be easy to use (userfrendliness, flexibility, strong graphic
capabilities)
251
Features of DSS
• DSS attempts to improve the effectiveness of decision making accuracy, timeliness, quality), then its efficiency - cost, including the
charges for computer time
• The decision maker has control over all steps the decisin-making
process in solving the problem
• DSS leads to learning, which leads to new demands and the refinement
of the system, which leads to additional learning (continuos process)
• DSS is relatively easy to construct (with user assistance)
• DSS usually utilizes models (standards, custom-made)
• Advanced DSS are equiped with the knowledge component – enables
the efficient and effective solution of very difficult problems
252
The Major Benefits of DSS
1.Abbility to support the solution of complex problem
2.Fast response to unexpected situations that result in changed conditions. A DSS
enables a thorough, quantitative analysis in a very short time. Even frequent
changes in a scenario can be evaluated objectively in a timely manner
3.Ability to try several different strategies under different configurations
4.New insights and learning. The user can be exposed to new insights through the
composition of the model and an extensive sensitivity „what-if” analysis. Training
inexperiencedmanagers and other employees as well
5.Facilitated communication. Data collection and model construction experiments
are being executed with active users’ participation
6.Improved management control and performance. DSS can increase management
control over expenditures and improve performance of the organization
7.Cost savings. Routine applications of a DSS may result in cost reduction or
reducing the cost of wrong decisions
8.Objective decisions – more consistent and objective than decisions made intuitively
9.Improving managerial effectiveness, allowing managers to perform a task in less
time and less effort
253
MIS and DSS
MIS
• The main impact on structured tasks, where standard operating
procedures, decision rules and information flows can be predefined
• Tha main payoff – improving efficiency by reducing costs, turaround
time, and so on.
• The relevance for managers’ decisions making – indirect – for example by
providing reports and access to data
DSS
• The main impact on decisions in which there is sufficient structure for
computer and analytic aids to be of value but where managers’ judgement
is essential
• The payoff – extending the rangeand capability of computerized
managers’decision processes to help them improve their effectiveness,
• The relevance for managers is the creation of a SUPPORTIVE TOOL,
under their own control, that does not attempt to automatic the decision
process, predefine objectives, or impose solutions
254
Information Systems for Senior Management
EIS and ESS
Definition:
Information Systems for Managers - provide senior managers with
a system to assist them in taking strategic and tactical decisions.
Their purposeis to analyse, compare and highlight trends to help
govern the strategic direction of a company
There are commonly integrated with operational systems, giving
managers the facility to „drill down” to find out further
information on a problem
255
Information Systems for Senior Managers
Two categories:
• Executive Information Systems (EIS) – is a computer-based system
that serves the information needs of top executives. Rapid access to
timely information and direct access to management reports. Very
user-friendly, supported by graphics, and provides exceptions
reporting and drill-down capabilities (break down data for details:
daily report corporate rates can be drilled down to find the daily
sales in a region, or by product, or by salesperson.
• Executive Support System (ESS) – is a comprehensive support
system that goes beyond EIS to include communications, office
automation, analysis support and intelligence issues resolving.
There were somewere between a Final User and the other part of a
DSS –additional tools for better decision making process –
intelligent access to model base!
(Compare with: Laudon, Laudon, Chapt. 12)
256
Executive Support Systems
– Support senior management
– Address nonroutine decisions requiring judgment, evaluation,
and insight
– Incorporate data about external events (e.g. new tax laws or
competitors) as well as summarized information from internal
MIS and DSS
– Example: ESS that provides minute-to-minute view of firm’s
financial performance as measured by working capital,
accounts receivable, accounts payable, cash flow, and
inventory
257
Executive Information Systems
• In fact, the new elements introduced by EIS systems were only the
expansion of the user interface or database management system in
order to offer more possibilities to organize and select data
(preferably without the knowledge of the database structure) and
graphic visualization of the obtained results.
• Graphic visualization e.g. in the form of a structural or dynamic
chart meant that a decision-maker at a first glance was able to
evaluate the structure of the analysed phenomenon at a particular
stage of its development.
• Additionally, efforts were made – perhaps for the first time in the
history of the IT system development – to ensure the inflow of
external data in order to allow comparisons with the situation of
other companies in a given sector in the country or abroad.
258
Executive Support Systems
• ESS systems, which are a kind of a mirror reflection of EIS
systems (some researchers considered them to be the next stage of
the development of MIS) allowed for an easier manipulation of the
results obtained by means of model processing, which was
sometimes reduced to a possible transfer of the results of the
processing into a spreadsheet.
• Sometimes, however, the designers created their own software
based mainly in the user’s interface.
259
Characteristics
Quality of information:
• Flexible
• Produces correct information, timely informaton, relevant
information, complete information, validated information.
User interface:
• Includes sophisticated graphic user interface
• Allows secure and confidental access to information
• Includes a user friendly interface
• It’s a short response time
• It’s accessible from many places
• Minimizes keyboard use
• Provides quick retrieval of desired information
• It’s tailored to management styles of individual executives
• Contains self-help menu
260
Technical Capability
•
•
•
•
•
•
•
•
•
•
•
•
Access to aggregate information
Extensive use of external data
Written interpretation
Highlights problem indicators
Ad hoc analysis
Information presented in hierarchical form
Incorporates graphics and text in the same display
Shows trends, ratios and deviations
Provides access to historical and the most current data
Organized around critical success factors
Provides often forecasting capability
Produces information at variuos levels of details
261
Benefits
•
•
•
•
•
•
•
•
•
•
•
Facilitates accesss to information
Allows the user be more productive
Increases the quality of decision making
Provides a competetive adventage
Saves time for the user
Increases communication quality and capacity
Provides better control in the organization
Allows the anticipation of problems/opportunities
Allows planning
Allows finding the cause of a problem
Meets the needs od executives
262
Model of an Executive Support System
This system pools data from diverse internal and external sources and makes
them available to executives in easy-to-use form.
263
Expert Systems
Definition:
Expert systems – is a computer system that applies
reasoning methodologies or knowledge in a specific domain
to render advice or recommendations – much like a human
expert
Two generations:
• Supported by mechanisms of DSS (from early 80.)
• Supported by knowledge base and knowledge management
(from the end of 80. – beginning of Business Information
Systems)
264
•
Definition: W.A. Freyenfeld described the expert system as ...a system
which contains specialised knowledge of a particular area of human
activity organized in a way which made it possible to enter into a
dialogue (with a user) concerning this field, on the basis of which the
system can offer advice or suggestions, and explain the reasoning,
which is at the core of the problem...
•
The first ES systems (designed already in the seventies) did not
contain anything new with regard to their architecture – they were
based on the construction of the conditional jump (if you… –…then)
or unconditional jump (go to …) which exists in many programming
languages.
Nevertheless, the first, not very sophisticated, systems which helped
to find solutions of health problems (e.g. MYCIN) were formed
almost entirely based on this principle.
They were related to a specific industry or a problem, and, due to the
so-formed functionality, its application was very limited.
•
•
265
•
•
•
We may observe that the second generation of expert
systems, which had its foundation in the ideas of the so–
called systems of artificial intelligence, has creatively
developed a logical architecture construction of the previous
systems.
Additionally, the designers distinguished (artificially,
externally in relation to the corporate structures)
econometric, statistical, forecasting models etc. and they
distincted models based on the latest, at the time,
management achievements (Business Process Reengineering
- BPR) – models of best practices of corporate management,
analyses and optimization in a colloquial sense, functions
and processes taking place in an enterprise, in the existing or
modified organization structure of an enterprise.
There appeared new structural elements
266
Some usable definitions…
• Knowledge base – a collection of facts, rules, and procedures,
related to a specific problem, organized in one (the same)
place
• Knowledge discovery in databases – the process of extracting
knowledge from volumes of data in databases (e.g. in data
warehouse; includes data-mining
• Knowledge Management System – a system that organizes,
enhances and expedites intra- and inter-firm knowledge
management; centered around a corporate base or depository
267
Modern Expert Systems – structure and components
Components:
• Knowledge acquisition subsystem
• Knowledge Base
• Inference Engine
• User Interface
• Explanation justifier
• Knowledge Refining (Improving) Subsystem
Compare with: Laudon, Laudon & Dass, Chapt. 11, 12)
268
Modern Expert systems – structure and components
•
Knowledge acquisition subsystem – accumulation, transfer and
transformation (conversion) of problem solving expertise from
some knowledge source to a computer program for constructing
or expanding the knowledge base. Sources: human experts,
textbooks, databases, special research reports and pictures.
•
Knowledge Base – contains knowledge necessary for
understanding, formulate and solving problem. Consists of:

facts - such as the problem situation and theory of the problem area
and
special rules that direct the use of knowledge to solve specific problems
in a particular domain,
procedures – for using combined facts (or related) in frameworks of
rules


269
Moodern Expert Systems – structure and components
Inference Engine – brain of the ES, control structure or
maybe the ruler interpreter; a computer program that
provides a methodology for reasoning about information in
the knowledge base and for formulating conclusions.
It has three major elements:
•
•
•
an interpreter – (rule interpreter) – which executes chosen items, by
applying the corresponding knowledge rules base,
a scheduler – which maintains control over the agenda. It estimates the
effects of applying inference rules in light of item priorities or other criteria,
a consistency enforcer – which attempts to maintain a consistent
representation of the emerging solution.
270
Modern Expert Systems – structure and components
User Interface – expert system contain a language processor for
friendly, problem-oriented communication between the user and
the computer. Could be carried out in natural language or
supplemented by menus or graphics
Explanation Subsystem (Justifier) – can trace responsibility for
conclusions:
•
•
•
•
Why was a certain question asked by the expert system?
How was a certain conclusion reached?
Why was a certain alternative rejected?
What is a plan to reach the solution?
Knowledge Refining (Improving) System - can analyse their
performance, learn from it and improve it for future consultations
271
Architecture of integrated „Ideal” Expert (almost BIS) System
User
High level query language
Access through the use of natural language, pictures etc.
Knowledge base
system
management
Intelligent
interface system
Management of problem
solving and conclusion
forming system
Knowledge
base
Access to
software level
Rule base
Intelligent
interface
system +
network
service system
Application
software level
Model base +
model base
management
system
Data base + Data
base management
system
Mechanism of intelligent access
Mechanism object
data base
Logic of communication
language
Relational
mechanism of
component
management
Operating system
and tools
software level
Adaptation and learning
mechanism
Structure of the highest level of integration
Hardware
level
272
Expert systems
• Capture tacit knowledge in very specific and limited
domain of human expertise
• Capture knowledge of skilled employees as set of rules in
software system that can be used by others in organization
• Typically perform limited tasks that may take a few
minutes or hours, e.g.:
• Diagnosing malfunctioning machine
• Determining whether to grant credit for loan
273
Rules in an Expert System (or BI)
An expert system contains a number of rules to be followed. The rules are
interconnected; the number of outcomes is known in advance and is limited; there are
multiple paths to the same outcome; and the system can consider multiple rules at a
single time. The rules illustrated are for simple credit-granting expert systems.
274
How expert systems work
• Knowledge base: Set of hundreds or thousands of rules
• Inference engine: Strategy used to search knowledge base
• Forward chaining: Inference engine begins with information entered
by user and searches knowledge base to arrive at conclusion
• Backward chaining: Begins with hypothesis and asks user questions
until hypothesis is confirmed or disproved
275
Inference Engines in Expert Systems
An inference engine works by searching through the rules and “firing” those rules that are
triggered by facts gathered and entered by the user. A collection of rules is similar to a series
of nested IF statements in a traditional software system; however the magnitude of the
statements and degree of nesting are much greater in an expert system
276
Successful expert systems
•
Countrywide Funding Corporation in Pasadena, California, uses expert
system to improve decisions about granting loans
• Con-Way Transportation built expert system to automate and optimize
planning of overnight shipment routes for nationwide freight-trucking
business
• Most expert systems deal with problems of classification
• Have relatively few alternative outcomes
• Possible outcomes are known in advance
• Many expert systems require large, lengthy, and expensive development
and maintenance efforts
• Hiring or training more experts may be less expensive
Could an expert system be used to diagnose a medical condition?
What might be the drawbacks to using an expert system for medical diagnosis?
Is it possible that a functioning expert system can be programmed to make some
bad decisions very rapidly?
277
Expert Systems Areas (1)
• Interpretetion systems – infer about situation from observation:
speech understanding, image analysis, signal interpretation and
many types of intelligence analysis
• Prediction systems – include weather forecasting, demographic
predictions, economic forecasting, traffic predictions, crop
estimates, military, marketing or financial forecasting
• Diagnosytic systems – include medical, electronic, mechanical and
software diagnosis
• Design systems – develop configurations of objects that satisfy the
constraints of the design problem: circuit layout, building design,
plant layout
• Planning systems – deal with short- and long-term planning in
areas: project management, routing, communication, product
development, military applications and financial planning.
• Monitoring systems – compare the observations of system
behaviour with standards
278
Expert Systems Areas (2)
• Debugging systems - for create specifications or recommendations
for correcting a diagnosed problem
• Control systems – adaptively govern the overall behaviour of a
system: repeatedly interpret the current situation, predict the
future, diagnose the causes of anticipated problems, formulate a
remedial plan and monitor its execution to ensure success.
279
Benefits of Expert Systems
•
•
•
•
•
•
•
•
•
•
•
Increasd output and productivity,
Increased quality
Strong flexibility
Easier equipment operations ability to solve complex problem
Elimination of the need for expensive equipment
Operations in hazardous environments
Increased capabilities of the other computerized systems
Integration of several experts’ opinions
Ability to work with incomplete or uncertain information
Provision of training
Enhancement (improvement) of problem solving
280
Managerial Advanteges of ES
• From the point of view of a decision-maker, expert systems
provide him or her with a new tool for decision-making:
 apart from the structured data from a database, model solutions based
on the model base
 there appears a third possibility: suggested solutions built on best
practices of management.
• In each of these three cases the managers also use their expertise,
skills and intuition in making business decisions.
• This way, he or she has better chances to make a decision-making
process easier, and the final decision will provide the organization
with the greatest possible benefits and it will protect the enterprise
from losses.
281
Artificial Intelligence Systems
„. AIS are like YETI, nobody, never has seen them, but everybody has
heard about them ...”
…Artificial Intelligence Systems – would be called intelligent; is the
study of how to make computers do things at which, at the
momment, people are better; subfield of computer science
concerned with symbolic reasoning and problem solving…
Three objectives of AIS:
• Make machines smarter (primary goal),
• Understand what intelligence is (that’s Nobel laureate purpose),
• Make machines more useful (the company purpose).
282
Artificial Intelligence Systems
…Artificial Intelligence - capability of a device, such as a computer,
to perform functions or tasks that would be regarded as intelligent, if
they were observed in humans…
•
•
•
•
•
•
•
•
Meanings of intelligent behaviour for IS:
learn or understand from experience
make sense out of ambigous or contradictory messages
respond quickly and successfully to a new situation
use reason in solving problems
deal with perplexing (uneasy) situations
understand and infer in ordinary, rational ways
acquire and apply knowledge,
recognize the relative importance of diffrerent elements in a
situation
(Turban at al. Compare with: Laudon, Laudon, Chapt. 12)
283
AIS – some benefits
• Pattern recognition for character, speech and visual recognition
• Systems that learn are more natural interfaces to the real world
than systems that must be programmed
• Hihg fault tolerance
• Generalization – in work with noisy, incomplet or previously
unsen input – generates reasonable response
• Adaptivity – learns in new environment.
In our XXI century AIS were divided into:
• BIS – Business Information Systems,
• APS – Automation of Production Systems (robots included)
284
Information Technology in KM
Expert Systems based on Knowledge Management Systems
(early stage of BIS) are developed using three sets of
technologies: communication, total integration and database
managemnt systems (not only storage and retrieval but
data-mining et. ceatera)
Artificial Intelligence Systems – methods and tools are
embeded in a number of KM systems. AI can assist
identifiying expertise, eliciting knowledge, interfacing
through natural languages intelligent search through
intelligent systems
(see: Laudon, Laudon, Chapt. 11)
285
Information Technology in KM
AI methods used in KM systems may to do the
following:
•
•
•
•
•
•
Assist in and enhance searching knowledge
Help establish knowledge profiles
Help determine the relative importance of knowledge
Identify patterns of data
Forecast future results using existing knowledge
Provide advice directly from knowledge by using ES
(see: Laudon, Laudon, Chapt. 11)
286
Knowledge Discovery in Databases (KDD)
• KDD is a process used to search for an extract useful
information from volumes of documents and data.
• It includes tasks known as knowledge extraction, data
archeology, data exploration, data pattern processing, and
so on.
• All of these activities are conducted automatically and allow
quick discovery, even by nonprogrammers.
• Data often are deeply buried within very large databases,
data warehouses, text documents, or knowledge repositories,
all of which may contain data, information, and knowledge
gathered by many years
• Data mining – the process of searching for previously
unknown information or relationships in large databases.
287
Business Intelligence Systems (BIS)
BI is …an analytical information system built on the basis of data
warehouse together with data collection mechanisms, using different
analytical tools, in particular tools for multidimensional analysis and
data mining…
The definition indicates the directions of changes, which occurred since
the emergence of DSS or ES systems.
BIS is an umbrella term that combines architectures, tools,
databases, applications, and methodologies for example:
• data warehouse (with its „source” data),
• business analytics (a collection of tools for manipulationg,
mining, and analyzing the external data in data warehouse),
• business performance management (for monitoring and
analysis of performance),
• user (intelligent) interface
288
Components of Business Intelligence Systems
Data warehouse
environment
Data
Sources
Business Analytics
Environment
Technical staff
Build the data warehouse
Organizing
Data
Summarizing
warehouse
Standarizing
Future component
Intelligent Systems
Performance and
strategy
Business Users
Accesss
Manipulation
Results
Managers Executives
Business Performance
Management (BPM)
Strategies
User interface
Browser, portal

289
Case-based reasoning (CBR) in BI
• Descriptions of past experiences of human specialists, represented as
cases, stored in knowledge base
• System searches for stored cases with problem characteristics
similar to new one, finds closest fit, and applies solutions of old case
to new case
• Successful and unsuccessful applications are grouped with case
• Stores organizational intelligence: Knowledge base is continuously
expanded and refined by users
• CBR found in
• Medical diagnostic systems
• Customer support
290
How Case-Based Reasoning Works
Case-based reasoning represents
knowledge as a database of past
cases and their solutions.
The system uses a six-step process
to generate solutions to new
problems encountered by the user.
291
Data Warehousing (see: Data Base in MIS)
• Data flow from operational systems (CRM, ERP etc.) to a data
warehouse (DW) – which is a special database, or repository of
data, that has been prepared to support decision-making
applications, ranging from simple reporting and quering to
complex optimization
• The DW is constructed with methodologies, mainly metadata or
data marts (branch databases) which are databases for
departments (e.g marketing) or specific functions
• Originally included only a historical data that were organized and
summarized for end-users (for easily view or manipulate data)
• Today some data warehouses include current date (by net) for real
time decision support (collected in so called Data Marts (branch
DB or Micro DB)
292
Development of Database Mechanisms
• A clear extension of a database, connected with the multitude and
variety of the data processed in the systems, towards creating a data
warehouse.
• Basically, data warehouse is an expanded corporate database with the
mechanisms of data extraction from heterogeneous (including external)
data sources and the solutions for their processing into a common
database, which would be suitable for analysts and users making
business decisions, supported by the domain or industry database (mart)
and mechanisms of cooperation with analytical tools.
• The main tasks of the database, apart from the standard reporting and
defining reports and ad-hoc queries from the user, are: statistical
analyses, interactive analytical processing, data mining as well as – to a
limited extent - business modelling.
• So – as the above shows – there occurred a qualitative change at the level
of the main source of information in the system.
293
Business Analytics (se:e Models Base in DSS)
• There are many software tools for users to create on-demand
reports and queries and analyze data. (common name OLAP
online analytical processing)
• Users could analyse different dimensions of data and trends.
Business users easily identify performance trends by using trend
analysis and graphic tools There are three groups categories of
tools:
 Reporting and queries – we have to do with all types of queries, discovery
of information,multidimensional vew,drilldown to details and so on
 Advanced Analytics – include many statistical, finacial, mathematical and
other models used in analyzing data and information
 Data, Text and Web Mining – data mining is a process of searching for
unknown or nonobvious relationship or information in large databases
using intelligent tools (neural computing or advanced statistical methods)
on quantitative data, text, or web data.
294
Development of Model Base Mechanism
• When we compare the present system with the previous ones we
observe another qualitative change with regard to the support model
compared to the previous classes of systems.
• The so-called Business Analytics are all kinds of tools and analytical
applications used for the broadly defined corporate performance
management.
• Among the tools and applications used for performance management,
we may distinguish:
 universal analytical tools,
 the tools used for the analysis of spatial data stored in the spatial information
systems database
 analytic applications designed for specific areas of business management:
financial management and strategy management, customer relationship
management, human resources management, supply chain management
295
Business Performance Management (interpretation and advices)
The final component of the BI process is based on the balanced
scorecard methodology, which is a framework for defining,
implementing and managing and enterprise’s business strategy by
linking objectives with factual measures
User interface: Dashboard and Other Information
Broadcasting Tools
Dashboards (like in car) organize and present information in the
way that is easy to read. They present graphs, charts, and tables that
show actual performance vs. desired level of metrices at the first
glance (digital cockpits, corporate portals, visualizations tools).
296
The role of knowledge today in the U.S. economy
• Sales of enterprise content management software for knowledge
management expected to grow 15 percent annually through 2012
• Information Economy
• 55% U.S. labor force: knowledge and information workers
• 60% U.S. GDP from knowledge and information sectors
• Substantial part of a firm’s stock market value is related to
intangible assets: knowledge, brands, reputations, and unique
business processes
• Knowledge-based projects can produce extraordinary rate of
interest
297
The Benefits of BIS
•
•
•
•
•
•
•
Time savings (60%)
Single version of the truth (59%)
Improve strategies and plans (57%)
Improved tactical decisions (56%)
More efficient process (55%)
Cost savings ((37%)
Improved customers and partners relationships (36%)
(Eckerson)
•
•
•
•
Faster, more accurate reporting (81%)
Improved decision making (78%)
Improved customer service (36%)
Increased revenue (49%)
(Thompson)
298
U.S. Enterprise Knowledge Management software revenues, 2005-2012
The growth of sales of knowledge management software in the U.S. along with
sales predictions through 2012
Enterprise knowledge management software includes sales of content management and
portal licenses, which have been growing at a rate of 15% annually, making it among the
fastest-growing software applications
(taken from Laudon&Laudon, Chapter 299
11)
Thank you very much for your attention!
Witold Chmielarz
Questions - [email protected]
300
e-Commerce and e-Banking
e-Commerce definitions
• …Electronic Commerce (E-Commerce) is an artificial
socio-economic structure, functioning based on widely
used virtual nets, dynamic complexity and specific
infrastructure. From this definition, it can be derived,
that this structure cannot be directly transferred to the
physical world, but some elements as payments and
commodities originate from this world. In some areas
of science, E-Commerce is defined as virtual commerce,
although the prior is considerably wider as it includes
processes such as telephone transactions… (B. Kubiak,
Korowicki A. 1999)
302
e-Commerce definitions
• ... To include only business transactions that deal with
customers and suppliers, and it is often described in
terms of the Internet, implying that there are no other
communications alternatives ... (McLeod,...2001)
• ... E-commerce – exchange the information across
electronic networks, at any stage in the supply chain,
whether within an organization, between businesses
(B2B), between businesses and consumers (B2C), or
between the public and private sector, whether paid or
unpaid... (UK government),
303
e-Commerce definitions
• ...An emerging concept that describes the process of buying and
selling or exchanging of products, services, and information via
computer networks including the Internet ... (Turban, at all 2000),
• ... The sharing of business information, maintainin business
relationships, and conducting business transactions by means of
telecommunications networks (Zwass, 1998),
• …E-business:
• Use of digital technology and Internet to execute major
business processes in the enterprise,
• Includes e-commerce (electronic commerce):
• Buying and selling of goods over Internet… (Laudon, 2010)
W. Chmielarz: Faculty of Management University of Warsaw
304
The Growth of E-Commerce
W. Chmielarz: Faculty of Management University of Warsaw
305
• Key concepts in e-commerce
• Digital markets reduce
• Information asymmetry
• Search costs
• Transaction costs
• Menu costs
• Digital markets enable
• Price discrimination
• Dynamic pricing
• Disintermediation
W. Chmielarz: Faculty of Management University of Warsaw
306
• Key concepts in e-commerce (cont.)
• Digital goods
• Goods that can be delivered over a digital network
• E.g., Music tracks, video, software, newspapers, books
• Cost of producing first unit almost entire cost of product:
marginal cost of producing 2nd unit is about zero
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly variable
• Industries with digital goods are undergoing revolutionary
changes (publishers, record labels, etc.)
W. Chmielarz: Faculty of Management University of Warsaw
307
• Internet business models
• Pure-play models
• Clicks-and-mortar models
• Social Network
•
Online meeting place
•
Social shopping sites
•
Can provide ways for corporate clients to target customers through
banner ads and pop-up ads
• Online marketplace:
• Provides a digital environment where buyers and sellers can meet,
search for products, display products, and establish prices for
those products
W. Chmielarz: Faculty of Management University of Warsaw
308
• Content provider
• Providing digital content, such as digital news, music, photos, or
video, over the Web
• Online syndicators: Aggregate content from multiple sources,
package for distribution, and resell to third-party Web sites
• Service provider
• Provides Web 2.0 applications such as photo sharing and
interactive maps, and services such as data storage
• Portal
• “Supersite” that provides comprehensive entry point for huge
array of resources and services on the Internet
W. Chmielarz: Faculty of Management University of Warsaw
309
• Blogs
• Personal web pages that contain series of chronological entries by
author and links to related Web pages
• Has increasing influence in politics, news
• Corporate blogs: New channels for reaching customers,
introducing new products and services
• Blog analysis by marketers
• Customer self-service
• Web sites and e-mail to answer customer questions or to provide
customers with product information
• Reduces need for human customer-support expert
W. Chmielarz: Faculty of Management University of Warsaw
310
• E – Enterprise - the most fundamental element of the ECommerce is E- Enterprise.
Most frequently it is be described as an institutional unit
possessing ability to exchange goods – capital,
information, products and services, in an electronic manner
In practice, it can be the source (producer), interacting part
of trade chain, as well as the organizer (online auctions for
example) of transactions taking place in the Internet.
• E – Marketplace is an online marketplace where buyers
and sellers meet to exchange products, services, or
information.
Internet electronic markets can be supplemented by intraorganizational (intranets) or inter-organizational
(extranets) information systems.
311
• Intranets:
• Internal networks built with same tools and standards as
Internet,
• Used for internal distribution of information to
employees,
• Typically utilize private portal providing single point of
access to several systems,
• May connect to company’s transaction systems.
W. Chmielarz: Faculty of Management University of Warsaw
312
• Extranets:
• Intranets extended to authorized users outside the
company,
• Expedite flow of information between firm and its
suppliers and customers
• Can be used to allow different firms to collaborate on
product design, marketing, and production.
W. Chmielarz: Faculty of Management University of Warsaw
313
• The Internet is rapidly becoming the medium through
which a large share of communications and commerce
takes place.
• Online transitions are the new means of conducting
business, which are taking over the traditional ones.
• Despite the recent dot.com bubble burst, online
transactions have become one of the main ways to do
business, to buy goods and services.
• They are an important mean of communication for
governmental institutions.
314
E-COMMERCE FROM PERSPECTIVES:
• Communication perspective – EC is delivery of information,
product/services, or payments over telephone lines, computer
networks, or any other electronic mesns,
• Business process perspective – EC is the application of technology
toward the automation of business transactional and work flow,
• Service perspective – EC – is a tool that addresses the desire of
firms, consumers, and management to cut service costs while
improving the quality of goods and increasing the speed of service
delivery,
• An online perspective – the buying and selling of products and
information online.
(Kalakota and Winston, 1997)
315
Types of e-transactions:
Business-to-Customer (B2C) – includes retail
transactions of products, services or information from
business to individual shoppers. The typical example is a
shopper at Amazon.com or Merlin.com.pl
Business-to-business (B2B) – trade contacts based not
only on search for new customers and target markets, but
also the search for:
– partners to invest jointly,
– building optimized supply chain,
– trade information,
– building cooperational nets, and
– acquiring know-how.
316
Types of e-transactions:
• Customer-to-customer (C2C) – in this type of
transaction, customers sell directly to other customers. A
great example of customer-to-customer is an online
auction, like Ebay.com or Allegro.pl, that faciliate trade
among individual customers.
• Mobile Commerce (M-Commerce) – transactions and
activities conducted entirely or partially in a wireless
environment.
317
Types of e-transactions:
• E-learning – training or education is provided online.
• E-Goverment – happens when governmental entity buys or
provides information, service or product to individual
citizens (G2C) or to businesses (G2B).The application of
Internet and networking technologies to digitally enable
government and public sector agencies’ relationships with
citizens, businesses, and other arms of government
318
Eight unique features of e-commerce technology
1.
Ubiquity
• Internet/Web technology available everywhere: work, home, etc.,
and anytime
2.
Global reach
• The technology reaches across national boundaries, around Earth
3.
Universal standards
• One set of technology standards: Internet standards
4.
Richness
• Supports video, audio, and text messages
W. Chmielarz: Faculty of Management University of Warsaw
319
Eight unique features of e-commerce technology
5.
Interactivity
• The technology works through interaction with the user
6.
Information density
• Vast increases in information density—the total amount and
quality of information available to all market participants
7.
Personalization/Customization:
• Technology permits modification of messages, goods
8.
Social technology
• The technology promotes user content generation and social
networking
W. Chmielarz: Faculty of Management University of Warsaw
320
IOS and Internet Systems
•
•
•
•
•
Customer relationship is determined in
advance with anticipation it will be an
ongoing relationship based on multiple
transactions
IOS may be built around private or
publicly accesible networks
Advance arrangements result in
agreements on the nature and format of
business documents that will be
exchanged and payments
Advance arrangements are made so
both parties know which communication
networks will be integral to the system
Joint guildelines and expectations of
each party are formulated so each knows
how the systemis to be used and when
transactions will be submited and
received by each business partner
THE BASE OF B2B
• Two types of relationships may exist:
 Customer/seller linkage is established in
time of transactions and may be for one
transaction only (just purchase),
 Customer/seller purchase agreement is
establish for a defined period (a
subscribtion transaction)
• Electronic markets are built around
publicly accesible networks
• Sellers determine, in conjunction with the
market maker which business
transactions they will provide
• Customers and sellers independently
determine which communication
networks they will use in participating in
the electronic market. The network used
may vary from transaction to transaction,
• No joint guideliness are drawn in advance
THE BASE OF B2C and the others
321
B2B e-commerce: New efficiencies and relationship
Electronic data interchange (EDI)
Computer-to-computer exchange of standard transactions such as
invoices, purchase orders
Major industries have EDI standards that define structure and information
fields of electronic documents for that industry
More companies increasingly moving away from private networks to
Internet for linking to other firms
E.g., Procurement: Businesses can now use Internet to locate most lowcost supplier, search online catalogs of supplier products, negotiate with
suppliers, place orders, etc.
W. Chmielarz: Faculty of Management University of Warsaw
322
Electronic Data Interchange (EDI)
W. Chmielarz: Faculty of Management University of Warsaw
323
THE BENEFITS OF EC (for organizations)
•
•
•
•
•
•
Expands the marketplace to national and international markets. With
minimal capital outlay, a company can easily and quickly locate more
customars, the best suppliers and business partners worldwide,
Decreases the costs of creating, processing, distributing, storing and
retriving paper-based information (administrative costs to 85%, electronic
payments are 95% cheaper and so on),
Allows reduced inventories and overhead by facilitationg current („pull”)
type supply management. In the system process starts from customer orders
and uses just-in-time manufacturing
This processing enables expensive customization of the products and
services which provides competitive advantage to its implementers.
Diminishing telecommunication cost (internet much cheaper than commerce
nets
Improved image, improved customer service, newfound business partners,
simplified processes, increased productivity, eliminating paper, expending
access to information, reduced transportation costs, increased flexibility.
324
THE BENEFITS OF EC (for customers)
• Enables customers to shop or do other transactions 24 hours a
day, all yer around, from almost any location,
• Provides customers with more choices, they can select from many
vendors and from mare products,
• Frequently provides customers with less expensive products and
services by allowing them to shop in many places and conduct
quick comparison,
• In some cases, especially with digitized products, EC allows quick
delivery,
• Makes it possible to participate in virtual auctions,
• Allows customers to interact with other customers in electronic
communities and exchange ideas as well as compare experiensces,
• Facilitates competition, which results in substantial discounts
325
THE BENEFITS OF EC (for society)
• Enables more individuals to work at home and to do less traveling
for shopping, resulting in less traffic on the roads and lower air
pollution,
• Allows some merchandise to be sold at lower prices, so less affluent
people can buy more and increase their standard of living,
• Enables people in Third World countries and rural areas to enjoy
product and services that othervise are not available for them,
This includes opportunities to learn professions and earn college
degrees.
• EC facilitates delivery of public services – health care, education,
distribution of government social services (cost reduction,
improved quality)
326
The Benefits of Disintermediation to the Consumer
W. Chmielarz: Faculty of Management University of Warsaw
327
THE LIMITS OF EC - TECHNICAL
• There is a lack of system security, reliability, and some
communications protocols,
• The software development tools are still evolving and changing
rapidly,
• It’s difficult to integrate the Internet and EC software with some
existing applications and databases,
• Vendors may need special Web servers and other insfastructures,
in additions to the network servers,
• Some EC software might not fit with some hardware or may be
incompatible with some operating systems or other components
328
THE LIMITS OF EC – NON-TECHNICAL
•
•
•
•
•
•
•
•
•
Costs and justifications – in house it may be very high, and mistake due to lack of
experience may result in delays (34, 8%),
Security and privacy – specially important in B2C area, especially security issues
which are perceived to be more serious then they really are (17, 2%),
Lack of trust and user resistance – customers do not trust an unknown faceless
seller, paperless transactions and electronic money (4,4%).
Other limiting factors:
Many legal issues are as yet unresolved, and government regulations and
standards are not refined enough for many circumstances,
EC, as a discipline, is still evolving and changing rapidly. Many people are looking
for more stable area before they enter into it,
There are not enough support services (clearance centers for EC transactions, tax
centers etc.),
In most applicationss there are not yet enough sellers and buyers for profitable EC
operations,
EC could result in a breakdown of human relations,
Access to the Internet is still expensive and/or inconvenient for many potential
customers.
329
The limits of New Technologies
• A certain feeling of intrusion and defiance.
• New channels of communication appeared thanks to
new technologies, which has resulted in a new
relationship with customers.
• From the customer’s point of view:
– Lack of familiarity with new technologies
– The web has sometimes become the only way of accessing and
giving information. What about the people who are not
connected?
• Changing consumption habits and modes takes time.
• Some reluctances may be explainable, other ones
illogical
330
The limits of New Technologies
Sociological limits - fears:
• Fear of viruses or infringement on privacy
• Fear of receiving executable files which would disrupt the
computer’s functions
• Fear of worms, likely to paralyse your computer
• Fear of Trojan horses likely to bypass your computer’s
security systems and allow it to be penetratedFear of
tracking: collecting information on a webuser with or
without his/her being aware of it
• Fear of spyware
• Multiplication of online questionnaireHacking of personal
data
331
E-Marketing
…Describes company effords to inform, communicate,
promote, and sell its productsand services over the
Internet…
(P. Kotler Marketing Management 11 ed. page 40)
332
E-COMMERCE INFRASTRUCTURE IN POLAND
some numbers and figures
• Approximately 98% of Polish companies have MIS,
97% - access to Internet and over 85% have their own
websites.
• Now in Poland we have more then 16 000 companies
sell goods on the Internet (dotcoms) and the value of
business-to-consumer Internet sales is about 11,3 mld zł
(eCard)
333
Share of e-commerce in market (2011-2012)
Prognoza na rok 2012
Rok 2011
Wielka Brytania
12%
Niemcy
9%
Szwajcaria
8,70%
Dania
8,10%
Francja
7,30%
Szwecja
6,90%
5,70%
5,10%
Benelux (Nl, B, Lux)
4,10%
3,50%
Hiszpania
3,80%
3,10%
Polska
Włochy
1,60%
1,30%
8%
9,90%
9,10%
8%
Norwegia
10%
9,10%
8,70%
13,20%
Internet companies in Poland 1996-2013
18000
15600
16000
14000
13200
11500
12000
10100
10000
8000
7100
6000
4700
Wg danych GUS – 3500
4000
Wg danych InternetStandard.pl – 5600
2000
30
100
204
530
800
850
800
750
660
660
1120
700 1000
1500
0
1996 1997 1998 1999 2000 2001 2001 2002 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
r.
r.
r.
r.
r.
r. i IV r.II IV
r.
r.
r.
r.
r.
r.
r.
r.
r.
r.
r.
kw. kw. kw. kw.
Internet customers in selected countries in Europe 2008
90%
81%
80%
71%
70%
64%
59%
60%
54%
50%
45%
40%
33%
30%
25%
19%
20%
10%
10%
6%
7%
Rumunia
Turcja
0%
Bułgaria
Hiszpania
Włochy
Polska
Holandia
Francja
Niemcy
Szwecja
Wielka
Brytania
Islandia
336
Expendings for IT in euro per capita in selected countries
2455
Szwecja
2422
Dania
Wielka Brytania
2000
Holandia
1998
1880
Finlandia
1752
Belgia/Luksemburg
1740
Austria
Niemcy
1597
Irlandia
1595
1563
Francja
Średnio UE
1376
Włochy
1196
1044
Hiszpania
896
Portugalia
758
Grecja
Słowenia
740
Węgry
639
575
Estonia
563
Czechy
Łotwa
432
Słowacja
422
403
Litwa
374
Polska
0
500
1000
1500
2000
2500
337
3000
Internet Users in the World by Region, 2012
338
www.internetworldstats.com/stats.htm
Internet Penetration Rates (users per capita citizens) by
Region, 2012
339
Perfumes,
cosmetics
Tickets
Toys
Automotive
Pharmacy
Books (eBooks),
music
Electronics
Multibranch
Oclothes and
shoes
The most popular shops - visits of
internauts in mln 2013 (Poland)
Value of eBooks market in Poland in mln
US$
Top 10 Internet Users in EU
Germany
55,2
United Kingdom
43,2
France
40,1
Italy
28,2
Spain
27,0
Poland
20,0
Netherlands
13,8
Romania
7,4
Sw eden
7,3
Belgium
7,0
0,0
10,0
20,0
30,0
40,0
50,0
60,0
milion of users
Source: Internet World Stats, www.internetworldstats.com
342
Internet penetration rate in EU 2010
85,40%
Netherlands
Denmark
84,20%
Finland
82,90%
Sweden
80,50%
United Kingdom
79,80%
70,60%
Spain
61,10%
AVERAGE
Poland
52,00%
Romania
0,00%
33,40%
10,00%
20,00%
30,00% 40,00%
50,00% 60,00%
percentage of penetration
70,00%
80,00%
90,00%
Source: Internet World Stats, www.internetworldstats.com
343
Dynamic of e-commerce progress
250,00%
200,00%
150,00%
shops on-line
100,00%
auctions on-line
shops & auctions
50,00%
0,00%
2002
2003
2004
2005
2006
2007
2008
source: Report: Polski Rynek e-commerce, SMB, 2009
344
e-Banking
e-Banking - form of bank services to facilitate access to customers’s
account with computer or the other electronic devices and connections
(Council of e-Banking)
-
Complex of information systems for maintenance:
home and office banking
tele-banking
credit cards
automatic teller machines ATM
virtual transactions.
(Janc, Kotlinski)
Electronic net and information bank systems usage for client’s
convenience in tradictional and modern payment systems.
The ultimate purpose is creation bank-accounting system without the
paper
(Chmielarz)
345
e-Banking
• Electronic banking (cyberbanking) – includes various banking
activities conducted from home, business, or on the road, instead
of at physical bank location.
• E-banking – has capabilities ranging from paying bills to securing
a loan electronically
• It started with the use of propriety software and private networks
but was not particularly popular until the emergence of the
Internet
• Allows customers to access their accounts and execute orders
through a simple-to-use Web site
• It is inexpensive alternative to branch banking and a chance to
enlist remote customers
(Turban)
346
Some of the advanteges:
•
•
•
•
•
•
•
•
•
•
Get current account balances at any time – you can easily check the status
of your checking, savings, and money market accounts
Obtain charge and credit card statements – you can even set up your
account to pay off cards automatically every month
Pay bills – electronic payments from your accounts are normally credited
the same day or the next. The cost of paying bills electronically may well
be less than the postage involved in sending out a large number of
payments each month
Download account transactions – it’s easy to import them directly with
the money transfer system
Transfer money between accounts
Balance your accounts
Send e-mail to your bank
A new meaning for „banker’s hours” – in any time, any place
Handle your finances when traveling
Additional services – for example free phone banking
347
Internet-banking: part of e-Banking services realized only by Internet
Virtual banking: part od e-banking realized ONLY and
EXCLUSIVELY by net (maybe Internet, too)
e-Banking
Internet
Banking
Virtual
Banking
348
e-Banking =
home-banking+
office-banking+
selfbanking+
interbanking+
POS (point of sales)+
finance transfere nets+
e-Payments
349
Customers of e-Banking in Europe in mln
250
80%
202.1
70%
200
178.1
157.1
150
50%
139.1
124.1
100
79.5
89.4
97.1
103.1
60%
40%
112.1
30%
67.4
54.1
50
20%
41.2
10%
0
0%
Penetration of e-Business amongst all Internet users
e-Banking development in Europe 2001-2013
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
r.
r.
r.
r.
r.
r.
r.
r.
r.
r.
r.
r.
r.
Users
Penetration
350
Źródło: Jupiter Research, 2008
Bank’s cost transactions via different
channels of distribution
Channel
Cost of one transaction US$
Traditional bank branch
1,07
Phone banking
0,54
ATM
0,27
Electronic banking
0,015
Internet banking
0,01
(Booz, Allen & Hamilton (banking sector - USA))
351
Summary: types of Information Systems - examples
Type of System
Function
Example
Functional area IS
Support the activities within specific
functional area
System for processing payroll
Enterprise resource
planning system
Integrate all functional areas in
organization
Oracle, SAP, BaaN, IFS
Management Information
Systems
Produce reports summarized from
transactional data, usually in one
functional area
Report on total sales for each
customer
Decision Support System
Provide access to data and analytic
model tools
What if analysis of changes in
budget
Expert system
Mimic human expert in a particular
area and make a decision
Credit card approval analysis
Executive information
systems
Present structured, summarized
information about aspects of business
important to executives
Status of production by product
Electronic commerce
system
Enable transactions among
organizations and between
organizations and customers
www.dell.com
Supply chain management
system
Manage flows of products, services
and information among organizations
Wal-Mart Retail Link system
connecting suppliers with WalMart
352
TERM
e-banking
i-banking, Web-banking, Netbanking, WWW-banking
Virtual banking,
web-only banking,
Internet-only banking,
pure play banking
DESCRIPTION
Bank activity, supporting remote services to customers by electronic channels of communication.
Synonyms of Internet banking
Model of virtual banking; Main channel of communication is Internet. Bank doesn’t offer
departments as channels of communication.
Bricks & Mortar,
Bricks & Clicks
Clicks only
Three modes of using Internet in banking
On-line banking
All operations are real time executed.
Mobile banking
m-banking
Wireless banking
WAP banking
Portable banking using non-voice technologies
PC-banking
Home banking
Office banking
Electronic corporate banking
Remote banking
Self banking
Client-Bank communication with usage of dedicated software installed on client’s Personal
Computer
Same as electronic banking
Terminal banking – customer can execute all operations on terminal in public place
353
TV-banking
Access to bank accounts via digital TV
ELECTRONIC BANKING
SET OF TECHNICAL
CENTRES
UNIQUE BANK SERVICE
BANK ACTIVITY ACTED IN
SPECIFIC FORM
MAIN PURPOSE
Isolation from distribution
channels
Isolation from bank services
Isolation from whole bank
activity
PROMINENT ASPECT
Technical way of functioning of
Customer–bank relations and way
Functionality of electronic
electronic banking
of services perception
banking on market
ROLE OF ASPECT
Technical workable
Customer-bank relation under
Efficient utilization of electronic
banking law
channels of distribution
ENVIRONMENTAL AIM
IT, technicians, electronic
Bank staff, marketing experts,
banking users
lawyers
Bank institutions, theoretics
354
Phases of information systems in banks development –
some stages
• Archaic phase, where the communication is based one by one on the mail,
telegraph, telephone - from the second-half of the XIX century to the secondhalf of the XX century,
• Preliminary phase of communication computer-support - 1956-1964,
• Early phase of the electronic data processing systems based on batch
processing - 1965-1969,
• Phase of the intense development of Management Information Systems 1970-1977,
• Productive phase of systems as: Decision Support Systems, Expert Systems,
Executive Information Systems, video-data - 1978-1985,
• Phase of technological changes - 1986-90,
• Phase of application integration on the basis of computer techniques and the
telecommunications on the basis of the modem communication - 1990-1995,
• Phase of remote systems - electronic banking - from 1992,
• Phase of global systems - online and virtual banking - from 1996; to now
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Archaic phase came down for using telegraphic techniques to equalize amongregional and market price differences and enhancing coordinating possibilities
between structures of the bank. The most important innovations of this period are:
• telegraph – 1846,
• the transatlantic cable – 1866,
• permanent connection of Great Britain with India and Australia - 1870-1871,
• telegraphic connections within settlements among banks since 1918,
• telephone communication for inter-bank settlements,
• transatlantic New York – London telephone technology – 1927.
 Main merit of investigated innovations was significant acceleration of transmitting
announcements, reducing the time from days, weeks or months till minutes.
 Although they generated essential bases for implementing other innovations in this field,
those services were relatively very expensive and acted in limited channels of traffic
capacities (transatlantic cable till 1956 could support maximum 20 simultaneous
conversations).
 Long-term progress in this field was possible only thanks to the permanent
development of computer technologies, which till the middle of fifties were used only in
science and military.
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Preliminary phase of the bank computer system development was already based
on computer techniques. Actually it was based on the automation of manual
activities than on the automation of bank operations but it was constrained with
the lack of software and computer equipment.
As an example is ERMA system (Electronic Recording Machine-Accounting),
applied in 1956 in the Bank of America.
The system was used to the automatic recording, summing up, sorting,
verification and entering cheques on the base of data led by readers, services of
all transactions, client accounts, and making balance printouts.
Applying the system extorted the change in organization of the customer service
- every customer received the new number of the account.
In 1960 a first effort was taken to computerize credit card services, two years
later bank implemented the payroll and payments of bills.
It was just individual applications, adapted exactly for the type of the computer
preinstalled software. In 1964 was started the first cash machine.
The success of these applications turned attention to need of the standardization
both the equipment and programs.
It enabled portability of the bank software to different banks, what of course
reduced individual costs of creation and extended the market to banks not as
rich as the Bank of America.
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The early phase of electronic processing was already based on known
standards of programming languages like: Algol, Basic, Cobol, Fortran
and Unix operating systems. It enabled the service of routine, mass
operations about the defined structure. Gathered data could be processed
once, than it required the data change given for processing in the
program. It included within its range scope of the statistic calculation,
standard personnel pay prints, handlings of calculations and handlings of
accounts. With time the software was broadened with applications
managing harvests of data and enabling their automatic parameterization
programs. This phase was characterized by the following features:
supported by big, expensive, slow computers (e.g. IBM 360/65) about the
failure frequency up to the 60% of the working time, functioning centrally
at isolated computer centers. it’s increasing computational possibilities
enabled banks to process the great volumes of transactions based on
paper documents,
cheaper software programming became standard but was still long-term
and troublesome,
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the scope of systems concerned mainly the chosen automation procedures
of bank departments, embracing processing in the batch mode of front
office and back office as like as handling the fragments of customers
accounts. it involved faster, more accurate and more correct service of
entering, lowering costs of the back office services,
continuation of cash-machine system development (since 1967 in Great
Britain, France, Switzerland, Sweden; end of the period the first
implementations in Japan),
at the end of this period (1968) arising the first systems of interbank
settlements (Bankers’ Clearing System), using the technology of the
electronic date interchange, determining basics for one of the most
important tools in home banking,
a telephone service was disseminated.
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Phase of intense development of banking management information systems (MIS)
started from 70’s.
The increasing complexity of bank problems and the huge functionality extorted
the change in bank data technology.
Sequential computer sessions are being replaced by more effective in terms of the
access and using database technologies from hierarchical and network, to
relational databases with the software managing them as Base Date Management
Systems - DBMS.
Universally a way of the communication with the computer is also changing - in
place of tapes and paper cards loaded in into additional devices connected to the
central unit, appearing the computer monitors, being direct devices (user to
customer contact) of the operator with the computer system.
It is making the peculiar communications revolution - introduction to all
operations going towards to independent the customer relation with the bank.
The telephone communication is constantly being developed in bank functioning
and electronic data transfer systems - in 1973 in Belgium started an organization
which starts the international interbank communication system Swift - Society
for Worldwide Interbank Financial Telecommunication. It is today the one of the
most popular systems of the international interbank communication system.
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This phase had the following attributes:
• creating - for the first time - applications which are automating work in the
entire department, based on financial-accounting systems standards; the
complete automation of calculations, individual systems, the duplication of
chosen data in the area of the unit,
• assuring basic, standardized, technical equipment of the computer centre;
basic architecture that contained central unit of the big computer and
external memory device as: magnetic tape device, fixed discs, readers of tapes
and perforated cards replaced next with monitors, printers,
• completion of centralized batch systems with the first regular systems,
• limited capacity and performance of devices.
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At the end of 70's, as a result of information system development that
supports managing, types of bank organizational structures are changing
and next changes are coming in the way of driving strategy.
Systems equipped with the base of models Decision Support Systems
allows to calculate variants of development and pointing best solution.
Expert Systems allow analyzing the situation and giving the further
strategy.
Executive Information Systems gives the most essential information from
databases and systems about management information and introduce it in
the legible form to senior staff.
New kinds of systems are applicable on the level of department (credit
activity), head office (analysis of the risk) and specific activities of the
central banks.
Its further development within Management Information Systems will
result in the next developmental phase.
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The productive phase of computer bank systems, apart from the
modernization of previous phase effects, shows such features as:
• data processing is being treated as the production providing: bank
accounts, bills, savings, carrying on the full synthetic and analytical
bookkeeping, leading all back-end operations, leading to permanently
implement analytical, prognostic and supporting decisions systems of
bank modules,
• applications still orientated to products,
• very difficult maintenance of all systems,
• beginning of spreading the cash-machines with decreasing of bank posts,
• data is being registered by the final user - bank clerk and the customer
• preliminary works started, concerning planning the strategy of bank
activity development.
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This period offered abilities to using information videotext systems, which a few
years later made the undoubted creative model for many services offered by systems
by online banking. The videotext can communicate by two-way connection from and
to the user. It is sending pages to the user in the digital form, which mainly is being
shown on the TV screen or on user terminal.
Only one videotext service, before Internet, closed with the full success. It was
French Minitel, inaugurated in 1982 by PTT (Poste, Telephone et
Telecommunications).
Success has been achieved by offering free of charge system terminals to future
users.
The system offered similar services like a few years later Internet: direct (free of
charge) telephone services, retail orders (e-commerce in the future), purchase of
train and plane tickets, information services, access to databases and sending
announcements.
It was used at first the most to sending private announcements and seeing through
erotic pages.
Payments were being realized with the credit card (e-commerce, tourist services),
other payments for using the system were paid by a telephone bill depending on
pages seen through.
For many years Minitel competed with the Internet. In the end of 90’s France
Telecom estimated the system for 9 millions of terminals and 250 millions of
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monthly connections.
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The phase of technological changes emerged the strong bases of traditional
systems. It influenced to all aspects of the internal functionality of the bank
and more and more strongly to its contacts with customers.
Applications was modeled on windows user-friendly environment, hitting also
to banks and in next years making unwritten standard of the communication
with user which was more and more conscious of own abilities and
possibilities of computer systems in this business.
Amongst telecommunications solutions cash machines are being unwound
constantly - e.g. between 1984-1989 ATM number (Automatic Teller
Machine) in Great Britain grew by the 100% to over 12 thousands.
Numbers of bank departments were systematically decreasing. In the next year
in there were more cash machines than bank departments in Great Britain.
Together with the development of cash machines, credit and payment cards are
becoming increasingly common.
Cards are increasing their range as a matter of fact at that time to be global. At
the same time possibilities of payments realization are increasing by large
number of terminals.
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Phase of application integration is characterized by a change in general
philosophy and systematic of forming banking computer systems.
The first matter of integrated systems ideology was applying the ERP services,
adapted to the cooperation with the online environment.
It was period of rise electronic systems, interbank settlements, credit cards
service systems and finally other forms of remote access to bank services.
The ideology of integrated systems was based on cooperating, based on the
shared database, using shared data in the entire system based on financial
assessments and shared platform.
It started an invaluable phenomenon of the consolidations and bank merges
within bank infrastructure (shared standards).
The special role played the ERP customer relations systems - Customer
Relationship Management - CRM. “Customer relationship management is a
corporate level strategy, focusing on creating and maintaining relationships
with customers. Several commercial CRM software packages are available
which vary in their approach to CRM. However, CRM is not a technology
itself, but rather a holistic approach to an organization’s philosophy, placing
the emphasis firmly on the customer”.
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e-Banking phase
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Phase of remote systems and phase of global systems - concept of banking computer
system related with electronic banking. Development of modern banking technology
can be divided in three stages.
First stage until 1995 concerns electronic computer systems only with just a little
similarity to electronic banking – based on paper, telegraph and telephone
communication. Most of customer services were handled in departments. Banks
didn’t conquer with technology, it were costs, brand knowledge and level of bank
staff working in bank departments.
Second stage is the start and instant growth of electronic banking – mainly forced by
Internet development. Banks started to invest in modern technologies, providing
latest services for customer. Computers started to exclude people from customer
service. Banks started Information Technology combat by the most modern
technologies and customer facilitates.
Tird stage as Virtual Banking – virtual banking technology will be main drive of
banking services allowing customers to modify bank offer in each way. Customer
will be Chief Executive Officer of his bank account with design, offer, service, etc.
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ELECTRONIC SYSTEMS
ELECTRONIC BANKING
VIRTUAL BANKING
Archaic phase
Preliminary phase
Phase of remote systems
Electronic data processing systems
phase
Phase of virtual
systems
Intense development of MIS phase
Productive phase
Phase of global systems
Phase of technological changes
Phase of application integration
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Phase of remote systems.
Customer, realizing the contact with the bank through could work offline,
and then connecting with a modem could send information to the bank
system.
Main merit of such banking was that user didn’t have to visit bank office
in the case of the most frequent operations.
It saved time and money for the user. Additionally user got the ability of
data integration coming from the bank with the own financial accounting
system to manage own finances more precisely.
It also fastened access to account information with high transaction
security.
On the other side low quality of transmission (generating errors),
especially where the stationary network was underdeveloped, high costs of
services, need to install the different software in case of contacts with lots
of banks caused that customers easily switched to the Internet based
contact.
Parallel to telebanking for first time is developing an idea of electronic
money known as data stored on computer’s hard disk.
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Phase of global systems was based on using websites to carry banking
transactions. Unlike the previous conception - in the Internet banking,
customer possesses both the own hardware and software. It is based on
Windows system and online viewer.
• Essential software allowing managing website is on bank server.
Lot of authors,,, presents four main stages of implementation and
development of Internet banking:
• information,
• interactive,
• functional,
• strategic.
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Information stage – marketing and promotion is dated for 1995-1997
Its attributes are: one website, address information, economical information
(bank condition, service fees), organizational information (structure,
departments), way of contact with bank (phone, fax, call centre, e-mail, on-line
forms, SMS, WAP), places of bank contact and its structure (departments,
info-kiosks, cash-machines), information about bank and finance area with
info about areas indicators (exchange rates, stock information) and examples
of service application and comparison services to customers.
Information stage gives temporary advantage on market (until other banks will
join the market), customer visibility, information for present customers, low
costs of marketing (using existing paper documentation) and influence on
policy of small and mid- companies.
Each structure has also its disadvantages. For information stage these cons are:
one way of communication (bank to customer only), information services only
and web portal limitations (portals with basic services). All these factors don’t
give proper customer’s feedback for bank.
Via this services bank can only manage information through bank websites,
Internet bank portals with information about market and first financial portals.
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Interactive stage – two way communications is dated for 1998-1999
• Banks started to offer multimedia websites, tools supporting customer (search
engines, rates calculators, electronic documents), online services (on-line basic
account operations, on-line document forms, financial analysis for customers,
advertisements) and start up of Internet funds services. There were also
recruitment advertisements.
• New way of communication created lot of virtues as: image pick-up, new way of
gaining new customers and keeping present customers, new functionality of web
services, e-documentation mentioned above and financial aspect - decreasing
staff in bank departments. On the other side such approach gave marketing
information only as waiting for customers (pick-up service – banks couldn’t be
informed still about customer feedback), low security system.
• Despite couple inconveniences of this stage, customers were getting used to
communicate with bank through Internet tools. Banks were creating security
standards of Internet transactions and the main value - growth with customers.
• In this approach banks was growing own customers which were looking at these
changes - likely or not, but changes were started and growing generation of
potential customers saw modern technologies entering bank sector. It caused next
step since 2000 – full range of provided transactions and services.
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Functional stage – full range of provided transactions and services dated for 2000-2002
• Functional stage provided secured websites with ability to run all financial services,
online money transfers and service on direct debits, deposit accounts, bank loans,
support of cellular network (WAP) and beginning of real virtual banking.
• The most advancing issues were: the reduction of service costs, keeping present and
approach for new customers by high competitive rates and credits, service of e-trading,
constant reduction of bank staff.
• Banks was able to see changes in more customer oriented way.
• The most difficult area to manage was barrier of basic computer knowledge and Internet
access, low quality of mobile bank communication.
• With technical area most common disadvantages were problems with base systems
integrity and very high costs of implementing.
• Although new set of services has been forced into banking.
• Vide bank services offer via Internet, high complexity of banking systems, high security
standards and what was most interesting for customers - new forms of payments as
electronic transfer.
• Functional stage made banks more customer-oriented, allowed to leave bank queues.
Customers could create new definition like time-saving.
• Seeing all changes banks started to set it strategy on Internet services.
• That’s why since 2003 we are aware of Internet as tool which forms bank strategy.
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Strategic stage – Internet as tool which form bank strategy started 2003
• Modern attitude made multimedia bank portals integrated with bank core
systems. Systems have ability to analyze supplies and demands, banks could
offer electronic forms of payments with advanced sale of new services. It was
100% of virtual banking. There was also possibility to spread banking services
through communicators – mobility banking.
• With this approach banks related lot of advantages: scope of services was
related to “traditional” bank services, possibility to individualize each
customer, potentially - ability to gain high revenue, full integration of bank
systems, bank is perceived as modern and progressive and visible growth of
bank Internet users.
• Like as functional stage there was a barrier of high computer and Internet
knowledge. On-line services caused problems with CRM systems which
provide customer profiling and possible of “leaking” customer data became
real.
• Those bank services can be used for bank competition - high advanced stage of
system is unavailable for other banks in short term, digital communication
development – ability to implement new services (video conference, Internet
telephony), spreading portable terminals and highest security of electronic
bank systems became as standard.
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E-Cash and e-Payments
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The terms electronic cash, e-cash, or e-money refer to electronic payment
schemes that enable consumers to store and redeem financial value.
They operate via stored electronic units of value.
Paid for in advance by conventional money and representing equivalent units
in real currency, these funds can be transferred between vendors and
individuals using compatible electronic systems, in some cases without resort
to banks or other financial intermediaries.
E-cash (or-money) comes in two basic forms: smart card e-cash and computer
e-cash.
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E-Cash and e-Payments
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E-cash is most often downloaded from its respective system through special
terminals:
o specially equipped ATM machines,
o computers, or
o cell-phones) onto smart cards.
Such cards are called stored-value smart cards.
• E-cash can also be downloaded to personal computer hard disks via a modem.
The “money” remains stored until the user spends it. In the case of smart
cards, the “money” is spent by transacting it with another individual, in
vending machines, turnstiles, toll collecting devices, or retailers’ terminals.
•
In the case of computer e-cash, the “money” is spent over the Internet. Each ecash transaction reduces the amount of stored “money” (value).
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Smart cards / stored value cards
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A smart card consists of a specifically designed integrated circuit chip
embedded in a plastic card.
The chip contains either a set of contacts that physically connects with an
electronic reader or an aerial for contact less operation.
Because they contain one or more electronic chips or integrated circuits that
can store and protect information, smart cards are also called chip cards or
integrated circuit cards.
If, in addition to integrated circuits, a smart card contains a microprocessor
chip, it can calculate addition and subtraction of value.
The capabilities of their embedded chips are what make smart cards “smart.”
Many so-called smart cards are, in fact, only memory cards because their chips
do not contain a microprocessor.
Memory cards can store data and value, but they cannot perform complex
calculations.
If they are used to store value, as, for example, is the case with telephone
cards, they can deduct value only from the total available as the card is used.
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Some examples of smart cards
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In the late 1990s, three stored-value e-cash systems suited to the smart card form - Visa
Cash, Mondex, and Proton –were prominent in international markets.
Visa International, the world’s largest credit card company, introduced Visa Cash, its
version of smart card e-cash, in 1995. The card
is intended to be used for small purchases such as a cup of coffee, a newspaper, a pay
phone call, cinema tickets, or public transportation. Visa Cash cards store units of
prepayment and come in two main types-disposable and reload-able.
In July 1996, 17 major world financial institutions founded Mondex International; among
the founders were its original developer, National Westminster Bank, Midland Bank,
Hong Kong & Shanghai Banking Corp., Wells Fargo, AT&T, and 10 major banks in
Australia and New Zealand. The following November, MasterCard International acquired
a majority stake
in Mondex and since then has licensed the program worldwide on a regional basis
Proton, a third major smart card e-cash scheme, is a rechargeable electronic purse
developed by Banksys, a Belgian Electronic Funds Transfer network operator, and is
marketed by Belgian banks. Proton is similar to Visa Cash in that its value is denominated
in units
of prepayment; it is likewise intended to be used for low-value purchases from shops or
from vending machines.
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Computer E-cash
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Computer e-cash, as noted above, entails the issuance of electronic units
or electronic value that can be used for payment in place of currency.
Often also called e-money, computer e-cash made its appearance,
primarily in the United States, in about 1995, and is used in virtual
transactions over the Internet.
Computer e-cash exists solely in cyberspace; in contrast with currency or
smart cards, it does not exist in tangible form.
When using computer e-cash, the customer buys value from an authorized
provider, as he would with a smart card.
Computer e-cash value, however, is then stored either in the customer’s
home computer or in a safe online repository.
When the funds are spent, the e-cash value is credited to a retailer’s ecash account that must later be transferred to the retailer’s regular bank
account.
Computer e-cash is marketed as an alternative to credit cards for normal
Internet transactions.
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Computer e-Cash examples
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Cyber Cash, which was founded in 1994 in the United States, began offering
Cyber Coin services in September 1996.
Cyber Cash, Inc. touts Cyber Coin as the Internet equivalent of pocket change
because payments can be made in increments as small as $.25.
The upper limit of value is set at $10. Cyber Coin features units of repayment,
as is the case with Visa Cash, and operates via software installed in a personal
computer.
The payment service uses the existing banking network system and does not
require the opening of a new account at a specific bank.
Because payment by Cyber Coin involves the transfer of funds between
established bank accounts, such payments can generally be traced without
great difficulty.
In 1997, in addition to offering Cyber Coin and its credit card service, Cyber
Cash, Inc. initiated an electronic check system called Pay Now Service.
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Computer e-Cash examples
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Digi-Cash, Inc. was founded in 1989 in the Netherlands.
In 1994 Digi-Cash announced e-Cash, a software-based payments system that allows
users to send electronic payments from any personal computer to any other personal
computer or work station using any computer network, including the Internet.
To use e-Cash, a customer opens a special bank account with a bank that issues it.
E-Cash differs from Cyber Coin in that e-Cash is electronic value itself and not units
of prepayment.
E-Cash is similar to Mondex in that it can be circulated outside existing banking
networks.
In contrast with Mondex, however, once e-Cash is issued, the amount of expended
value cannot be divided into smaller denominations, a feature that discourages
continuous transfer.
In order to prevent multiple use of electronic value, each value amount of e-Cash is
given
an encoded serial number (blind signature).
When an amount of electronic value is brought to a bank, the serial number is checked.
Only when the number has not been previously used can the value be accepted by
the
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bank.
Internet banking – benefits for banks
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The main benefits to banks are cost savings, reaching new segments of the population,
efficiency, enhancement of the bank’s reputation and better customer service and satisfaction.
The more transactions can be converted online, the more money will be saved.
The cost of an electronic transaction is dramatically less when done online compare to at branch.
That online banking strengthens the relationship between the service provider and the customer,
because it brings banking services directly to a customer’s home or office, or in the mobile phone.
This creates customer loyalty. Online services are a must for banks that have to compete with a
growing number of services from other financial institutions, investment concerns and insurance
companies.
Internet banking customers:
are more satisfied with their bank,
have higher switching barriers,
provide more positive word of-mouth,
have higher repurchase intentions,
have a lower price sensitivity,
have a lower propensity to exit and higher propensity to complain.
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Benefits for customers
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Internet banking offers also new value to customers. It makes available to customers a
full range of services including some services not offered at branches.
The greatest benefit of Internet banking is that it is cheap or even free to customers.
However, price seemed to be one factor militating against Internet banking
Two important factors in the price debate are on the one hand geographical differences
and on the other hand disparities between the costs of e.g. Internet connections and
telephone call pricing.
Electronic banking in general is not tied to time or place.
It has also been argued that electronic banks are more likely to change in response to
customers’ demands.
Internet banking has the advantage that the customer avoids traveling to and from a
bank branch.
In this way, internet banking saves time and money, provides convenience and
accessibility, and has a positive impact on customer satisfaction.
Customers can manage their banking affairs when they want, and they can enjoy more
privacy while interacting with their bank.
It has been claimed that Internet banking offers the customer more benefits at lower
costs
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Electronic Commerce Payment Systems
Types of electronic payment systems:
• Digital wallet
• Stores credit card and owner identification information and enters
the shopper’s name, credit card number, and shipping information
automatically when invoked to complete a purchase
• Accumulated balance digital payment systems
• Used for micropayments ($10 or less)
• Accumulating debit balance that is paid periodically on
credit card or telephone bills
Electronic Commerce Payment Systems
• Stored value payment systems
• Enable online payments based on value stored in online digital
account
• May be merchant platforms or peer-to-peer (PayPal)
• Digital checking
• Extend functionality of existing checking accounts to be used for
online payments
• Electronic billing presentment and payment systems
• Paying monthly bills through electronic fund transfers or credit cards
Electronic Commerce Payment Systems
Digital payments systems for m-commerce:
• Three types of mobile payment systems in use in Japan
• Stored value system charged by credit cards or bank
accounts
• Mobile debit cards
• Mobile credit cards
Examples of Electronic Payment Systems for e-Commerce,
once more
Electronic banking security requirements
Requirement
Typical considerations
Security at the user side
Physical access control to the machine
User authentication and authorization
Security during transport of data
Confidentiality
Data integrity
Security at the merchant side
Secure storage of user information
User’s privacy protection
Authentication of parties involved
Source: Furnell, S.M. & Karweni, T. 1999. Security implications of electronic commerce: A survey of consumers and business. Internet Research:
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Impact of the internet on competitive forces and
industry structure
Competitive force
Impact of the internet
Substitute products or services
Enables new substitutes to emerge with new approaches to
meeting needs and performing functions
Customers’ bargaining power
Availability of global price and product information shifts
bargaining power to customers
Suppliers’ bargaining power
Procurement over the Internet tends to raise bargaining power
over suppliers; suppliers can also benefit from reduced
barriers to entry and from the elimination of distributors and
other intermediaries standing between them and their users
Threat of new entrants
The Internet reduces barriers to entry, such as the need for a
sales force, access to channels, and physical assets; it
provides a technology for driving business processes that
makes other things easier to do
Positioning and rivalry among
existing competitors
Widens the geographic market, increasing the number of
competitors, and reducing differences among competitors;
makes it more difficult to sustain operational advantages;
puts pressure to compete on price
e- Business and e-Services
Part 3
Telecommunications, the Internet and Wireless Technology
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
LEARNING OBJECTIVES
• What are the principal components of telecommunications
networks and key networking technologies?
• What are the main telecommunications transmission media
and types of networks?
• How do the Internet and Internet technology work and how
do they support communication and e-business?
• What are the principal technologies and standards for
wireless networking, communication, and Internet access?
• Why are radio frequency identification (RFID) and
wireless sensor networks valuable for business?
Corporate network infrastructure
Key digital networking technologies
• Client/Server Computing
• Packet Switching
• TCP/IP and Connectivity
Communications networks
• Local area network (LAN)
• Metropolitan area network (MAN)
• Wide area network (WAN)
Physical transmission media
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Twisted wire
Coaxial cable
Fiber optics and optical networks
Wireless transmission media (microwave,
cellular, Wi-Fi)
THE GLOBAL INTERNET
• The Internet has become the world’s most
extensive, public communication system
that now rivals the global telephone system
in reach and range.
• It’s also the world’s largest
implementation of client/server
computing and internetworking, linking
millions of individual networks all over the
world.
Internet – how does it work?
• An Internet service provider (ISP) is a commercial
organization with a permanent connection to the Internet
that sells temporary connections to retail subscribers
• Internet Protocol (IP) address
• Domain Name System (DNS) converts domain names to
IP addresses
• Internet policies are established by a number of
professional organizations and government bodies,
including the Internet Architecture Board (IAB), which
helps define the overall structure of the Internet; the
Internet Corporation for Assigned Names and
Numbers (ICANN), which assigns IP addresses; and the
World Wide Web Consortium (W3C), which sets
Hypertext Markup Language and other programming
standards for the Web
Major internet services
CAPABILITY
FUNCTIONS SUPPORTED
E-mail
Person-to-person messaging; document sharing
Chatting and instant messaging
Interactive conversations
Newsgroups
Discussion groups on electronic bulletin boards
Telnet
Logging on to one computer system and doing work
on another
File Transfer Protocol (FTP)
Transferring files from computer to computer
World Wide Web
Retrieving, formatting, and displaying information
(including text,audio, graphics, and video) using
hypertext links
Internet communication tools
• Voice over IP (VoIP)
• A virtual private network (VPN) is a secure,
encrypted, private network that has been
configured within a public network to take
advantage of the economies of scale and
management facilities of large networks,
such as the Internet
The Web - components
•
•
•
•
•
Hypertext Markup Language (HTML)
Web Servers
Search Engines
Web 2.0
Web 3.0 - The Future Web?
Wireless computer networks and internet
access
• Bluetooth
• Wi-Fi and Wireless Internet Access
• WiMax (Worldwide Interoperability for
Microwave Access)
Bluetooth personal area networks
(PAN)
An 802.11 wireless LAN
Radio-frequency identification
(RFID)
• RFID is an automatic identification method,
relying on storing and remotely retrieving data
using devices called RFID tags or transponders.
The technology requires some extent of
cooperation of an RFID reader and an RFID tag.
• An RFID tag is an object that can be applied to or
incorporated into a product, animal, or person for
the purpose of identification and tracking using
radio waves. Some tags can be read from several
meters away and beyond the line of sight of the
reader.
RFID tag
• Most RFID tags contain at least two parts.
One is an integrated circuit for storing and
processing information, modulating and
demodulating a radio-frequency (RF)
signal, and other specialized functions. The
second is an antenna for receiving and
transmitting the signal.
• Size of tags: from 0,05 mm × 0,05 mm
• Working distance: from 0,1m to 10m
Types of RFID tags
• RFID tags come in three general varieties:
– passive (tags require no internal power source,
they are only active when a reader is nearby to
power them by wireless illumination),
– active (tags require a power source, usually a
small battery),
– beacon (tags transmit autonomously with a
certain blink pattern and do not respond to
interrogation)
Communication
• To communicate, tags respond to queries generating
signals that must not create interference with the readers,
as arriving signals can be very weak and must be
differentiated. Besides backscattering, load modulation
techniques can be used to manipulate the reader's field.
Typically, backscatter is used in the far field, whereas
load modulation applies in the nearfield, within a few
wavelengths from the reader.
RFID technology in practice
RFID reader sends a radio
signal
signal transfer
API (Application
Programming Interface)
Database layer
Tag sends data to the
RFID transmitter
Application Layer
(eg. ERP)
RFID: tag-reader-computer
RFID Reference Model
• Created in 2007 by CE RFID
(Coordinating European Efforts for
Promoting the European RFID Value
Chain)
• It covers to areas:
– Mainly Object Tagging
– Tagging with Reference or Potential Reference
to Individuals
RFID Reference Model
RFID - Mainly object tagging
RFID - Tagging with reference to
individuals
Wireless sensor networks (WSNs)
• WSN - Interconnected wireless devices that are
embedded into the physical environment to
provide measurements of many points over large
spaces.
• These devices have built-in processing, storage,
and radio frequency sensors and antennas. They
are linked into an interconnected network that
routes the data they capture to a computer for
analysis.
e- Business and e-Services
Part 4
Security Issues in e-Business Systems
Prof. Witold Chmielarz, PhD
Faculty of Management University of Warsaw
LEARNING OBJECTIVES
• Explain why information systems are vulnerable to
destruction, error, and abuse.
• Assess the business value of security and control.
• Identify the components of an organizational framework
for security and control.
• Evaluate the most important tools and technologies for
safeguarding information resources.
System Vulnerability and Abuse
• Security:
• Policies, procedures and technical measures used to prevent
unauthorized access, alteration, theft, or physical damage to
information systems
• Controls:
• Methods, policies, and organizational procedures that ensure safety
of organization’s assets; accuracy and reliability of its accounting
records; and operational adherence to management standards
System Vulnerability and Abuse
• Why systems are vulnerable
• Hardware problems
• Breakdowns, configuration errors, damage from improper use or
crime
• Software problems
• Programming errors, installation errors, unauthorized changes)
• Disasters
• Power failures, flood, fires, etc.
• Use of networks and computers outside of firm’s
control
• E.g., with domestic or offshore outsourcing vendors
Contemporary Security Challenges and Vulnerabilities
The architecture of a Web-based application typically includes a Web client, a server, and
corporate information systems linked to databases. Each of these components presents security
challenges and vulnerabilities. Floods, fires, power failures, and other electrical problems can
cause disruptions at any point in the network.
• Internet vulnerabilities
• Network open to anyone
• Size of Internet means abuses can have wide impact
• Use of fixed Internet addresses with permanent connections to
Internet eases identification by hackers
• E-mail attachments
• E-mail used for transmitting trade secrets
• IM messages lack security, can be easily intercepted
• Wireless security challenges
• Radio frequency bands easy to scan
• SSIDs (service set identifiers)
• Identify access points
• Broadcast multiple times
• War driving
• Eavesdroppers drive by buildings and try to intercept
network traffic
• When hacker gains access to SSID, has access to
network’s resources
• WEP (Wired Equivalent Privacy)
• Security standard for 802.11
• Basic specification uses shared password for both users
and access point
• Users often fail to use security features
Wi-Fi Security Challenges
Many Wi-Fi networks can
be penetrated easily by
intruders
using
sniffer
programs to obtain an
address to access the
resources of a network
without authorization.
• Malicious software (malware)
• Viruses: Rogue software program that attaches itself to
other software programs or data files in order to be
executed
• Worms: Independent computer programs that copy
themselves from one computer to other computers over a
network
• Trojan horses: Software program that appears to be benign
but then does something other than expected
• Spyware: Small programs install themselves
surreptitiously on computers to monitor user Web surfing
activity and serve up advertising
• Key loggers: Record every keystroke on computer to
steal serial numbers, passwords, launch Internet
attacks
• Hackers and computer crime
• Hackers vs. crackers
• Activities include
• System intrusion
• Theft of goods and information
• System damage
• Cybervandalism
• Intentional disruption, defacement, destruction of
Web site or corporate information system
• Spoofing
• Misrepresenting oneself by using fake e-mail addresses or
masquerading as someone else
• Redirecting Web link to address different from intended one, with
site masquerading as intended destination
• Sniffer: Eavesdropping program that monitors information traveling
over network
• Denial-of-service attacks (DoS): Flooding server with thousands
of false requests to crash the network
• Distributed denial-of-service attacks (DDoS): Use of
numerous computers to launch a DoS
• Botnets: Networks of “zombie” PCs infiltrated by bot malware
• Computer crime
• Defined as “any violations of criminal law that involve a knowledge
of computer technology for their perpetration, investigation, or
prosecution”
• Computer may be target of crime, e.g.:
• Breaching confidentiality of protected computerized data
• Accessing a computer system without authority
• Computer may be instrument of crime, e.g.:
• Theft of trade secrets
• Using e-mail for threats or harassment
• Identity theft: Theft of personal Information (social security id,
driver’s license or credit card numbers) to impersonate someone else
• Phishing: Setting up fake Web sites or sending e-mail messages that
look like legitimate businesses to ask users for confidential personal data.
• Evil twins: Wireless networks that pretend to offer trustworthy Wi-Fi
connections to the Internet
• Pharming: Redirects users to a bogus Web page, even when
individual types correct Web page address into his or her browser
• Click fraud
• Individual or computer program clicks online ad without
any intention of learning more or making a purchase
• Global threats - Cyberterrorism and cyberwarfare
• Concern that Internet vulnerabilities and other networks
make digital networks easy targets for digital attacks by
terrorists, foreign intelligence services, or other groups
• Internal threats – Employees
• Security threats often originate inside an organization
• Inside knowledge
• Sloppy security procedures
• User lack of knowledge
• Social engineering:
• Tricking employees into revealing their passwords by
pretending to be legitimate members of the company in
need of information
• Software vulnerability
• Commercial software contains flaws that create
security vulnerabilities
• Hidden bugs (program code defects)
• Zero defects cannot be achieved because complete testing is
not possible with large programs
• Flaws can open networks to intruders
• Patches
• Vendors release small pieces of software to repair flaws
• However, amount of software in use can mean exploits created
faster than patches be released and implemented
• Lack of security, control can lead to
• Loss of revenue
• Failed computer systems can lead to significant or total loss
of business function
• Lowered market value:
• Information assets can have tremendous value
• A security breach may cut into firm’s market value almost
immediately
• Legal liability
• Lowered employee productivity
• Higher operational costs
• Legal and regulatory requirements for electronic records
management
• Firms face new legal obligations for the retention and
storage of electronic records as well as for privacy
protection
• HIPAA: Medical security and privacy rules and procedures
• Gramm-Leach-Bliley Act: Requires financial institutions to ensure
the security and confidentiality of customer data
• Sarbanes-Oxley Act: Imposes responsibility on companies and their
management to safeguard the accuracy and integrity of financial
information that is used internally and released externally
• Electronic evidence
• Evidence for white collar crimes often found in digital
form
• Data stored on computer devices, e-mail, instant messages, ecommerce transactions
• Proper control of data can save time, money when
responding to legal discovery request
• Computer forensics:
• Scientific collection, examination, authentication, preservation, and
analysis of data from computer storage media for use as evidence in
court of law
• Includes recovery of ambient and hidden data
• Information systems controls
• General controls
• Govern design, security, and use of computer programs and data
throughout organization’s IT infrastructure
• Combination of hardware, software, and manual procedures to
create overall control environment
• Types of general controls
•
Software controls
•
Hardware controls
•
Computer operations controls
•
Data security controls
•
Implementation controls
•
Administrative controls
• Application controls
• Specific controls unique to each computerized application, such as
payroll or order processing
• Include both automated and manual procedures
• Ensure that only authorized data are completely and accurately
processed by that application
• Types of application controls:
• Input controls
• Processing controls
• Output controls
• Risk assessment
• Determines level of risk to firm if specific activity or process is not
properly controlled
•
•
•
•
Types of threat
Probability of occurrence during year
Potential losses, value of threat
Expected annual loss
EXPOSURE
Power failure
Embezzlement
User error
PROBABILITY
LOSS RANGE (AVERAGE)
EXPECTED
ANNUAL LOSS
30%
$5K - $200K ($102,500)
$30,750
5%
$1K - $50K ($25,500)
$1,275
98%
$200 - $40K ($20,100)
$19,698
• Security policy
• Ranks information risks, identifies acceptable security goals, and
identifies mechanisms for achieving these goals
• Drives other policies
• Acceptable use policy (AUP): Defines acceptable uses of firm’s
information resources and computing equipment
• Authorization policies: Determine differing levels of user
access to information assets
• Authorization management systems
• Allow each user access only to those portions of system that person
is permitted to enter, based on information established by set of
access rules, profile
Security Profiles for a Personnel System
These two examples
represent two security
profiles or data security
patterns that might be
found in a personnel
system. Depending on
the security profile, a
user would have certain
restrictions on access
to various systems,
locations, or data in an
organization.
• Disaster recovery planning: Devises plans for restoration
of disrupted services
• Business continuity planning: Focuses on restoring
business operations after disaster
• Both types of plans needed to identify firm’s most critical
systems and business processes
• Business impact analysis to determine impact of an outage
• Management must determine
• Maximum time systems can be down
• Which systems must be restored first
• MIS audit
• Examines firm’s overall security environment as well as controls
governing individual information systems
• Reviews technologies, procedures, documentation, training, and
personnel
• May even simulate disaster to test response of technology, IS staff,
other employees
• Lists and ranks all control weaknesses and estimates probability of
their occurrence
• Assesses financial and organizational impact of each threat
Sample Auditor’s List of Control Weaknesses
This chart is a sample page from a list of control weaknesses that an auditor might find in a loan system
in a local commercial bank. This form helps auditors record and evaluate control weaknesses and
shows the results of discussing those weaknesses with management, as well as any corrective actions
taken by management.
Technologies and Tools for Security
• Access control: Policies and procedures to prevent
improper access to systems by unauthorized insiders and
outsiders
• Authorization
• Authentication
• Password systems
• Tokens
• Smart cards
• Biometric authentication
Technologies and Tools for Security
• Firewall: Hardware and/or software to prevent unauthorized
access to private networks
• Screening technologies
• Packet filtering
• Stateful inspection
• Network address translation (NAT)
• Application proxy filtering
• Intrusion detection systems: Monitor vulnerable points on
networks to detect and deter intruders
• Examines events as they are happening to discover attacks in
progress
• Scans network to find patterns indicative of attacks
A Corporate Firewall
The firewall is placed between the firm’s private network and the public Internet or another
distrusted network to protect against unauthorized traffic.
• Antivirus and antispyware software:
• Checks computers for presence of malware and can often eliminate
it as well
• Require continual updating
• Unified threat management (UTM)
• Comprehensive security management products
• Tools include
•
•
•
•
•
Firewalls
Intrusion detection
VPNs
Web content filtering
Antispam software
Technologies and Tools for Security
• Securing wireless networks
• WEP security can be improved:
• Activating it
• Assigning unique name to network’s SSID
• Using it with VPN technology
• Wi-Fi Alliance finalized WAP2 specification,
replacing WEP with stronger standards
• Continually changing keys
• Encrypted authentication system with central server
Technologies and Tools for Security
• Encryption:
• Transforming text or data into cipher text that cannot be
read by unintended recipients
• Two methods for encrypting network traffic
• Secure Sockets Layer (SSL) and successor Transport Layer
Security (TLS)
• Secure Hypertext Transfer Protocol (S-HTTP)
• Two methods of encryption
• Symmetric key encryption
• Public key encryption
Public Key Encryption
A public key encryption system can be viewed as a series of public and
private keys that lock data when they are transmitted and unlock the data
when they are received.
The sender locates the recipient’s public key in a directory and uses it to
encrypt a message.
The message is sent in encrypted form over the Internet or a private network.
When the encrypted message arrives, the recipient uses his or her private
key to decrypt the data and read the message.
Technologies and Tools for Security
• Digital certificate:
• Data file used to establish the identity of users and electronic assets
for protection of online transactions
• Uses a trusted third party, certification authority (CA), to validate a
user’s identity
• CA verifies user’s identity, stores information in CA server, which
generates encrypted digital certificate containing owner ID
information and copy of owner’s public key
• Public key infrastructure (PKI)
• Use of public key cryptography working with certificate authority
• Widely used in e-commerce
Digital Certificates
Digital certificates help establish the identity of people or electronic assets. They protect online
transactions by providing secure, encrypted, online communication.
Technologies and Tools for Security
• Ensuring system availability
• Online transaction processing requires 100%
availability, no downtime
• Fault-tolerant computer systems
• For continuous availability
• Contain redundant hardware, software, and power supply
components to provide continuous, uninterrupted service
• High-availability computing
• Helps recover quickly from crash
• Minimizes, does not eliminate downtime
• Recovery-oriented computing
• Designing systems that recover quickly with capabilities to help
operators pinpoint and correct of faults in multi-component
systems
• Controlling network traffic
• Deep packet inspection (DPI)
• Security outsourcing
• Managed security service providers (MSSPs)
Technologies and Tools for Security
• Ensuring software quality
• Software Metrics: Objective assessments of system in form of
quantified measurements
• Number of transactions
• Online response time
• Payroll checks printed per hour
• Known bugs per hundred lines of code
• Testing: Early and regular testing
• Walkthrough: Review of specification or design document
by small group of qualified people
• Debugging: Process by which errors are eliminated
Thank you very much for your attention!
Witold Chmielarz
Questions - [email protected]
455
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