1
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
CHAPTER 8
INTERORGANIZATIONAL
AND GLOBAL
INFORMATION SYSTEMS
Oleh : Kundang K Juman
2
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Learning Objectives
Describe the role, benefits and structure of
interorganizational systems
Distinguish between interorganizational and
global information systems
Describe EDI and compare a traditional EDI
with an Internet-base EDI
Define extranets and explain their infrastructure,
types and benefits
Describe planning and other issues related to
interorganizational and global systems
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
3
Chapter Overview
Interorganizational
Information
Systems
• Response to
Business
Pressures
• Types of
Interorganizational
systems
Electronic Data
Inerchange and
Electronic Funds
Transfer
• EDI and IOS
• EFT and IOS
Global
Information
Systems
• Who Needs Global
Systems?
• Benefits of Global IS
• Issues in Electronic
Global Trading
• Global E-Commerce
Implementing
Extranets
IOS
• Components
• Security
and Structure
• Ethical and Social
• Types
Issues
• Benefits
• Planning
4
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Case: The Harper Group Collaborates
With Honda in International Trade
 The Problem
 highly competitive environment where
hundreds of freight moving companies
in the United States and abroad operate
 large amounts of information flow
among several trading partners and
support services
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
5
Case (continued…)
 The Solution
 Use information technology that links the
computers of involved organizations, resulting in a
paperless flow of routine information
The Results
 allows cheaper, faster, and more reliable
information to flow among all business partners
 supports Harper’s global business
 maintains the company’s position as the second
largest trading facilitator in the United States
 operates the company with thin profit margins
 adopted an intranet for improving the internal
operations in 1997
6
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Case (continued…)
What have we learned from this case??
 Global information system - EDI
» enables efficient flow of large amounts of
transactional information among several
business partners around the globe
» keeps current customers
» attracts new customers
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
7
Interorganizational Information
Systems (IOS)
 Objective
 efficient processing of transactions, such as transmitting
orders, bills, and payments
 Major Characteristics
 determine customer-supplier relationship in advance
 built around privately or publicly accessible networks
» employ value-added networks (VANs) when use
telecommunications companies for communication
 use the Internet with either an electronic data interchange
(EDI), with extranets, or with EDI/Internet
8
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
IOS (continued …)
 IOS Response to Business Pressures
 reduce the costs of routine business transactions
 improve the quality of the information flow by
reducing or eliminating errors
 compress cycle time in the fulfilment of business
transactions, regardless of geographical distance
 eliminate paper processing and its associated
inefficiencies and costs
 make the transfer and processing of information
easy for users
9
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
IOS (continued …)
Types of Interorganizational Systems
 Global systems - information systems connecting two or more
companies in two or more countries
 Electronic data interchange (EDI) - the electronic
movement of standard business documents between business partners
 Electronic funds transfer (EFT) - the transfer of money
using telecommunication networks
 Extranets - link the intranets of business partners
 Shared databases - databases that can be shared by trading
partners, often used to reduce time in communicating information
between parties as well as arranging cooperative activities
 Integrated messaging - delivery of electronic mail and fax
documents through a single transmission system that can combine
electronic mail and electronic business documents
10
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Global Information System
 Global Information System
 connect companies located in two or more countries
 Who Uses Global Systems?
 Multinational Companies
» companies that operate in several countries
 International Companies
» companies that do business with other companies in
different countries
 Virtual Global Corporations
» joint ventures whose partners are form different countries
11
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Benefits of
Global Information System
Effective communication at a reasonable cost
Effective collaboration with groupware
software, Group DSS, extranets, and
teleconferencing devices
Organizations access each other’s databases
and frequently work on the same projects
while their members are in different locations
12
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Issues in Electronic
Global Information System
Cultural Differences
 many different aspects ranging from legal and ethical
issues to what information is considered offensive
 localization - use different names, colors, sizes, and
packaging for overseas products and services
Economic and Legal Differences
 differ considerably in their economical and legal
environments
Transfer of Data Across International Borders
 cross-border data transfer - several countries impose
strict laws to control the flow of corporate data across
their borders; to protect the privacy of their citizens
13
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Global Electronic Commerce
Access to larger markets, the possibility of
saving on taxes, and the flexibility to employ
workers and manufacture products anywhere
using a world telecommuting workforce
Benefits
 the Internet and the extranets resulted in an
inexpensive and flexible infrastructure
 can do business anytime and from anywhere
 can do it rapidly at a reasonable cost
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
14
Global Electronic Commerce
(continued …)
Barriers
 Legal barriers
» jurisdiction issues, export/import regulations and
compliance; contacts
» Intellectual property (enforcement of ), privacy, and
content issues
» Cryptography (encryption), security, authentication
procedures, and notarized documents
» Cross-border transactions, as described earlier
» Consumer protection (e.g. liability for wrong transactions)
 Market access barriers
» building a telecommunications infrastructure capable of
accommodating all users and all types of data is a necessity
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
15
Global Electronic Commerce
(continued …)
 Barriers
 Financial barriers
» including taxation, customs and electronic payment
systems, different currencies
 Others
» need to match buyers and sellers across international
borders and establish trust between them
» existence of cultural diversity
» lack of sufficient international agreements
» deciding on the collection of sales and other taxes
» compliance with diversified export/import regulations and
fees
» need for language translation (the Web page, transactions)
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
16
Electronic Data Interchange (EDI)
 Elements of EDI
 Data formatting standards
» to shorten the length of the messages, reducing long distance
telephone charges and eliminating data entry errors
 EDI translators
» conversion of data into standard format
Private line (VANs) versus the Internet
 VANs-based EDI - expensive, high security and capacity,
incompatible hardware and software of the telecommunication
companies
 Internet-based EDI - less security and capacity as compare to
VAN-based EDI, but cheaper; requires coordination and
integration with the company’s back-end processing systems
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
17
Order-delivery Cycle
With and Without EDI
Without EDI
Start
Accounting
Specifier
Mailroom
Purchasing
P.O. delivery
Mailroom
Sales
Order confirmation
Bill delivery
Shipping
Receiving
Accounting
Shipping
Receiving
Seller
Buyer
With EDI
Standardized PO
PO Form
Start
Specifier
EDI transmissions
Automatic order
confirmation
• Approval
• Prices
• Availability
Automatic billing
Computer Generates
Standardized P.O. Form
PO
Instant data to :
•Sales
•Manufacturing
•Engineering
Receiving
Buyer
Shipping
Seller
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
18
Benefits of EDI
Benefits
How the Benefit is Achieved?
Speed, volume
 EDI enables companies to send and receive
large amounts of routine transaction
information quickly around the globe in a
paperless environment
 Sales and other information is delivered to
manufacturers, shippers, and warehouse
almost in real time
 Once EDI documents are received ,they are
automatically forwarded to the appropriate
department for processing
Accuracy
 There are very few errors in the transformed
data as a result of computer-to-computer data
transfer. Information is also consistent
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
19
Benefits of EDI (continued …)
Benefits
How to Benefit is Achieved?
Collaboration
 Companies can access partners databases to
retrieve and store standard transactions
 EDI fosters true (and strategic) partnership
relationships, since it involves a commitment to
a long-term investment and the refinement of
the system over time
 The time for collecting payments can be
shortened by several weeks, benefiting the
recipients of payments
 EDI creates a complete paperless transfer
processing environment, saving money and
increasing efficiency
 EDI enables a just-in-time environment, which
means lower (or no) inventories for
manufacturers
Commitment
Profit
Cost saving
20
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
EDI Applications
Manufacturing - to communicate with suppliers,
customers, and other business partners
Retailing - to streamline deliveries of goods from the
suppliers to the stores and reduce inventories
Global trade - to shorten the elapse time by 70% or
more and to reduce administrative expenses by 30%
Service Industry - used EDI and its companion,
electronic funds transfer, for a long time
Large trading networks - provide efficient and
effective trading environments (e.g. TradeNet)
21
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Electronic Funds Transfer (EFT)
 transfer of money to and from financial institutions
using telecommunication networks
 used as an IOS, a global system, and a communication
system among organizations and to individuals
 fast - reduces delays associated with sending hard-copy
documents and it eliminates returned checks
 security issues - how can a business ensure that a
hacker is not bilking corporate accounts by
electronically transferring funds to his account, or that
competitive snoops are not gaining a complete picture
of corporate financial assets?
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
22
TradeNet (Singapore)
(5) Trader prints a form for
Customs clearance (trader
may inquire status of
declaration at any time).
(6) Port Authority
retrieves data Port Authority
Tradenet required for
delivery of cargo.
Trader
(1) Trader fills up
Inward declaration
form on the terminal.
TDB
(2) TDB retrieves and
approves Inward
declaration (It is an
import permit).
(3) TradeNet
automatically
forwards
approved
Inward
declaration to
Customers
Customers
(4) Customers retrieves
and approves Inward
declaration (It is a
customs permit).
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
23
Extranet
A network that links business partners to one
another over the Internet by providing access to
certain areas of each other’s corporate intranets
Components Structure
 Servers
 TCP/IP
protocols
 E-mail
 Web browsers
as the Internet
Company A
Intranet
Extranet
Internet
corporate data, e-mail,
orders, customer data,
inventory, documents
Internet
Corporate
employees
travelling or at home
Company B
Intranet
Internet
Internet
Other users
customers, suppliers,
contractors, distributors,
government
24
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Types of Extranet
A company and its dealers, customers, or
suppliers
 centered around one company
An industry’s extranet (Trading Network)
 teamed up and created by the major players in an
industry (e.g. the automotive industry)
Joint ventures and other business partnerships
 used as a vehicle for communications and
collaboration among several companies partnering
in a joint venture
25
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
Benefits of Extranets (continues …)
Fewer help-desk employees are needed
Improved quality
Lower communications and travel costs
Lower administrative and other overhead costs
Faster processes and information flow
Reductions in paperwork and delivery of
accurate information in a timely manner
Improved order entry and customer service
Better communication
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
26
Implementing Interorganizational
Information System
Security
 protection mechanisms : firewalls and VPNs
Ethical and Societal Issues
 takes a great risk for its trade secrets, the privacy of
the employees and the controlling of some processes
Planning
 complex IT planning when involving several
organizations
 several IT planning teams should be created and
supported by e-mail, extranets,and groupware
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
27
What’s in IT for Me?
For Accounting
 procedures in multinational corporations and issues in
taxation include data collection and transfer and auditing
For Finance
 EDI and EFT have been the pioneering systems for over
20 years; now global financial services and trading
For Human Resource Management
 recruitment, HR development and training in a local and
multinational corporations can be improved by using IT
28
Introduction to Information Technology
Turban, Rainer and Potter
Chapter 8 Interorganizational and Global Information Systems
What’s in IT for Me?(continued …)
For Marketing
 marketing and sales in global markets can be
enhanced by appropriate information systems
For Production/Operations Management
 the logistics systems can be greatly improved by
using IOSs
For Non-Business
 everyone will encounter interorganizational systems
in almost any organization, public or private