CHAPTER ONE
INFORMATION SYSTEMS IN BUSINESS
The Role of IT in Business
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Technology is everywhere
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Watch CNBC and you will see the
importance of technology in business
Look at productivity articles in the Wall
Street Journal
Listen to Ben Bernanke speak
A basic understanding of technology
is a requirement of any business
person
UPS – An Example
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Synchronizing the World of
commerce
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About 14.0 million packages per day in
2012 generating $51.5 billion in
revenue for the year
101,000 vehicles
5620 Aircraft (14 hubs)
UPS Technology
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UPS.com processes 18 million
package transactions daily
All package tracking is visible from
one Web site
SCM Technology contributed over 9
Billion in revenue in 2012
Current technology investment is
about 1.6 billion
Common IT Goals (1)
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Reduce costs
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Improve customer satisfaction
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Online transactions and statements
Online content management
Self-service applications and CRM
Develop customer loyalty
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Rewards and loyalty programs
Interactive marketing
Common IT Goals (2)
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Create a competitive advantage
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Possess competitive intelligence
Streamline and improve the supply
chain
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Amazon’s recommendations
UPS shipment tracking
Electronic data interchange
Just-in-time production
Growth in new and existing markets
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Clicks and bricks
Information Technology Defined

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The field concerned with managing
information is called information
technology
Management information systems
are a business function just as
marketing is a business function
Information Technology (Terms)
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Data are raw facts
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A transaction, bank deposit, etc.
Information is produced from raw
data
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To be useful, information must be put
in the hands of the person that needs it
Information must appear in a useful
form
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Timely, relevant, ACTIONABLE
Information Technology (Terms)
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Business intelligence refers to using
technology to make better (fact
based) decisions
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Involves the use of complex analytical
tools
More later in the business intelligence
chapter
Information Technology (Terms)
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Knowledge refers to the experience
and expertise of individuals and
organization
Common Organizational Units
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Accounting
Finance
HR
Sales and marketing
Operations management
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Supply chain management
Management information systems
Management Information Systems
and the Organization
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Information must be shared and
processed across functional units as
business processes
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Sales quotation (vendor) (Marketing)
Purchase order (customer)
Shipping documents (vendor) (SCM)
Invoice (vendor) (Accounting)
Payment (customer)
IT Roles (History)
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Historically, IT was viewed as a
necessary evil
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IT did not make a profit or contribute
to an organization’s bottom line
IT was just a cost center
IT was not a strategic part of the
organization
In some cases IT has evolved into a
profit center
IT Roles
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Strategic-level IT positions are
becoming commonplace
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Chief
Chief
Chief
Chief
Chief
Information Officer
Technology Officer
Knowledge Officer
Data Officer
Security Officer
Organizational Cultures and IT
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Information Discovery
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Seek radical new ways to do business
Information Inquiring
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Understand trends and align business
with them
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Information Sharing
These cultures are not mutually
exclusive
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Dysfunctional organizations?
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The IT Dilemma
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IT must understand user and
business needs
Many failed IT projects are caused
by human and organizational
factors rather than technical factors
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Hershey (ERP)
United’s baggage system at DIA
Success Metrics for IT Executives
Benchmarking
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Use quantitative metrics to assess
efficiency of hardware and software
Efficiency benchmarks
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Transaction processing benchmarks
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www.tpc.org
Raw performance benchmarks
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www.spec.org
Competitive Forces Models
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These model apply not only to IT
but business in general
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Michael Porter’s Five Forces Model
Value chain analysis
Generic strategies
Porter’s Five Forces Model
(Illustration)
Porter’s Five Forces Model (1)
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Buyer power
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Reduce buyer power through loyalty
programs
Frequent flyer
 Gaming rewards
 Increase switching costs
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Supplier power
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The inverse of buyer power
Enhance through B to B exchanges
Reverse auctions – Clients competitively
bid down cost of goods or services
Five Forces Model (2)
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Substitution threat
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High when there are many buyer
choices
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Lower when switching costs are high
Threat of new entrants
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Amazon vs. Barnes and Noble
High when it’s easy to enter a market
UPS / FedEx have a low threat
Competition rivalry
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Groceries and other commoditized
items
Porter’s Three Business Strategies
Porter’s Three Business Strategies
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Cost leadership
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Broad differentiation
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Lower costs through information
technology
Hyundai
Audi
Focused strategy in narrow markets
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Porsche
Value Chain Analysis
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Value chain views an organization
as a group of processes
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Each process adds value to a product
or service
Wal-Mart's supply chain adds value to the
organization by reducing cost
 IT systems support this activity
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Divide activities into support
activities and primary activities
Value Chain (Primary Activities)
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Activities vary based on what the
organization produces
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Supply chain optimization
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Warehousing / delivery
Manufacturing
Materials requirements planning
 Process control
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Marketing
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CRM systems
Customer service
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CRM systems
Value Chain (Support Activities)
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Activities related to the business
itself
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Managing human resources
Infrastructure
Technology development (It’s a
primary activity for Google, Twitter,
Facebook)