BCom ITM 2 Business Information Systems Jan 2014

BACHELOR OF COMMERCE IN INFORMATION AND
TECHNOLOGY MANAGEMENT
(YEAR 2)
Business Information Systems

Study Guide
Copyright 2014
MANAGEMENT COLLEGE OF SOUTHERN AFRICA
All rights reserved; no part of this book may be reproduced in any form or by any means, including
photocopying machines, without the written permission of the publisher
REF: BIS2014
Introduction
This course in Business Information Systems is intended to provide a comprehensive guide to choosing
the appropriate information system for an organization.
It covers, in detail, the software and hardware technologies which form Information Systems, the
activities involved in acquiring and building new Information Systems and the elements of strategy
required to manage Information Systems effectively.
The prescribed textbook is:
Bocij P., Greasley A. and Hickie S. (2008). Business Information Systems. 4 th Edition. Essex. England:
Prentice Hall.
How to Use This Module
This module should be studied using the study guide and the prescribed text book. You should read
about the topic that you intend to study in the appropriate section of this Study Guide before you start
reading in detail in the prescribed textbook. Ensure that you make your own notes/summaries as you
work through both the textbook and this Study Guide.
At the commencement of each section of this Study Guide you will find a list of learning outcomes.
These learning outcomes outline the key areas of competence which you should develop as a result of
working through the section with its supporting chapters in the prescribed textbook.
Avoid reading all the material at once. Take a study session at a time.
MANCOSA BCom ITM Year 2

Icons
In the study guide a set of icons have been designed to communicate certain study process messages
for you to participate.
Important information
Further/additional Reading
Answers/solutions. This is used after a self-evaluation exercise,

where you receive information about possible answers to the
activity you just completed.
As you work through the study guide, you will come also come across:
Learning outcomes: list describing what readers should learn through reading the chapters
Think point: a think point asks you to stop and think about an issue. Sometimes you are asked
to apply a concept to your own experience or to think of an example
Activity: An activity asks you to carry specific tasks
Discussions questions: require longer essay-style answers discussing themes from the
chapters
Self assessment questions: short questions which will test your understanding of the chapters
Examination questions: typical short answer questions which would be encountered in an exam
and can also be used for revision.

Module Outcomes
On completion of the Business Information System module, students should:
have a thorough understanding of the value, use and management of information, information
systems and information technology in order to revitalise business processes, improve
managerial decision-making and gain a competitive advantage; and
be able to apply the various principles and techniques in an integrative way to deal with the
core dynamics of information management.
The module outcomes imply that any student that has completed this module should:
understand the fundamental behaviour and technical concepts of information systems

management;
comprehend how information systems solutions to business problems are developed by the
use of fundamental problem-solving and development technologies;
reflect on the major concepts, developments, and managerial issues in computer technology:
hardware, software, telecommunications and database management ;
be familiar with the major applications of information systems in operations, management, and
for a competitive advantage of an enterprise; and
grasp the major management, global and ethical challenges regarding information systems and
technology.
TABLE OF CONTENTS
CHAPTER
PART
1
INTRODUCING INFORMATION SYSTEMS INTO
PAGE
4
BUSINESS
2
COMPUTER HARDWARE AND SOFTWARE
24
TELECOMMUNICATIONS AND NETWORKS
42
OPERATIONAL EXCELLENCE AND CUSTOMER
64
INTIMACY: ENTERPRISE SYSTEMS

5
INFORMATION SYSTEMS IN PERSPECTIVE
81
BUSINESS INFORMATION SYSTEMS DEVELOPMENT
94
BUSINESS INFORMATION SYSTEMS PROJECT
106
MANAGEMENT
8
INFORMATION SYSTEMS STRATEGY
119
INFORMATION SYSTEMS MANAGEMENT
131
10
MANAGING INFORMATION SECURITY AND ETHICAL
143
CHALLENGES
REFERENCES
157
GLOSSARY
159
PART 1
INTRODUCING
INFORMATION SYSTEMS
INTO BUSINESS

At the end of this study unit, the learner should be able to:
understand the basic concepts related information systems, including the characteristics of a
system and components;
explain the vital role information systems play in business operations and managerial decisionmaking;
discuss the types of decisions taken at different levels of management;

explain how knowledge management relates to information systems;
explain the different types of system; and
comment on the resources that support Business Information Systems

1.1.
INTRODUCTION
When beginning the study of the use of information systems (IS) in business, it is important to
understand a number of concepts drawn from a variety of different fields. In order to create, improve
and manage business information systems (BIS) one must combine an understanding of information,
systems concepts, business organisations and information technology (IT).
The purpose of this study unit is to introduce the field of information management. The user will gain a
basic understanding of the importance of information systems by analysing how information systems
relate to the student as a managerial end user. This study unit will also familiarise the user with the
important role of information technology in your organisation. This study unit presents an overview of
the basic areas of information systems knowledge needed by business professionals, including the
conceptual system components and major types of information systems.
Study Chapters 1 and 2 in Bocij et al. (2008) that deal with an introduction to the
foundation of information systems in business.
1.2
WHY STUDY BUSINESS INFORMATION SYSTEMS?
Information systems form an integral part of modern organisations and businesses. Computer-based IS
are now used to support all aspects of an organisations normal functions and activities. New
technology creates new opportunities for forward-thinking companies. Higher levels of automation, high
speed communications and improved access to information can all provide significant benefits to a
modern business organisation. However, the benefits of new and emerging technologies can only be
realised once they have harnessed and directed towards an organisation s goals.

1.3
WHY INFORMATION SYSTEMS ARE IMPORTANT?
Information systems play a fundamental and ever-expanding role in all organisations. Therefore, an
understanding of the effective and responsible use and management of information systems is
important for all managers and other business knowledge workers in todays global information society.
A knowledge worker is a person whose primary work activities include creating, using and distributing
information. A high portion of workers employed by organisations can be classified as knowledge
workers.
Information systems have become a vital component of successful organisations. It constitutes an
essential field of study in business administration and management. Information systems are
considered a major functional area in business operations and it can play an important role in the
success of an organisation. It integrates accounting, finance, marketing, production and human
resource management in the organisation. It can provide the information an organisation needs for
efficient operations, effective managerial decision-making and a competitive advantage.
First, a clear understanding of the difference between efficiency and effectiveness is important. This
difference is a basic principle in management and it is also applicable to the field of information
systems. Efficiency can be defined as doing things right. It is a measure of the consumption of input
resources in producing given system outputs. It focuses on productivity. An efficient data processing
system can update thousands of employee records per minute. Historically, data processing systems
have supported efficiency by automating routine paperwork processing tasks.
Effectiveness can be defined as doing the right things. This means doing things that need to be done
in order to achieve important business results. An effective information system is therefore a system
that achieves its objectives. A database housed on a notebook may enable a sales manager to identify
high potential sales prospects and to direct his staffs attention to take advantage of those prospects.
1.4.
BASIC CONCEPTS
1.4.1
Data and Information
Much of a managers work involves using information to make decisions and ensuring that information
flows through the organisation as efficiently as possible.

1.4.1.1 Data
Data are raw facts or observations, typically about physical phenomena or business transactions. More
specifically, data refers to objective measurements of the attributes (characteristics) of entities, such as
todays date, people, places, things, and events.
1.4.1.2 Information
Information is processed data, which has been placed in a meaningful and useful context for an end
user. Data is subjected to a value-added process where its form is aggregated, manipulated, and
organised, its content analysed and evaluated and placed in a proper context for a human user.
Information, therefore, is data that has been made relevant for a specific person to make decisions. Any
report given to a foreman or area manager, remains data until it has been assimilated by them to make
decisions.
1.4.2
Data Process
A process used to convert data into information. Examples include summarising, classifying and
sorting.
1.4.3
Value of Information
It is often possible to measure the value of information directly. The tangible value of information is
often measured in terms of financial value, an example can be the use of inventory information to
improve stock control procedures.
The intangible value of information is difficult or impossible to quantify, an example can be attempting to
measure the extent to which information can improve decision behaviour.
1.4.4. Sources of Information
Information can be gathered through both formal and informal communication. Formal communications
can include reports and accounting statements. Informal communications can include conversations
and notes.
1.4.4.1 Formal communication
Formal communication involves presenting information in a structured consistent manner.

1.4.4.2 Informal communication.
This describes less well-structured information that is transmitted by informal means such as casual
conversations between members of staff.
1.4.4.3 Attributes of Information Quality
A group of characteristics by which the quality of information can be assessed, normally grouped into
categories of time, content and form.
Table 1.1: Summary of attributes of information quality
TIME
CONTENT
FORM
ADDITIONAL
CHARACTERISTICS
Timeliness
Accuracy
Clarity
Confidence in source
Currency
Relevance
Detail
Reliability
Frequency
completeness
Order
Appropriateness
Time period
Conciseness
Presentation
Received by correct person
Scope
Media
Sent by correct channels
(Bocij et al, 2008: 12)

1.4.5
Knowledge
Knowledge can be thought of as the combined result of a persons experiences and the information
they possess.
Knowledge management (KM) describes a range of activities intended to make sure an organisation
uses its information resources as effectively as possible. Applications of KM include data mining,
document image processing and business intelligence. Competitive intelligence is an area of
knowledge management concerned with helping organisations to respond effectively to competition by
gathering and analysing information about competitors.
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1.5.
MANAGERIAL DECISION MAKING
In order for an organisation to function effectively all activities must be planned and monitored by
managers according to well-informed decisions. The functions of management include forecasting,
planning, organising and coordination and control. One of the key management functions that
information systems seek to support is managerial decision making. The way in which managers make
decisions and the factors that influence those decisions are often described as decision behaviour.
Decisions can be classified as structured or unstructured or semi-structured.
Structured decisions: situations where the rules and constraints governing are known, e.g., How
would we process a sales order?
Unstructured decisions: complex situations where the rules governing the decision are complicated
or unknown, e.g., what should our distribution channels be?
Semi-structured: Many decisions fall somewhere in between the two extremes, e.g., which foreign
market should we target?
1.5.1
LEVELS OF MANAGERIAL DECISION MAKING
Strategic Level: managers are largely concerned with long term organisational planning.
Tactical Level: Managers are largely concerned with medium term planning.
Operational Level: Managers are largely concerned with short term planning and the day- to day control of an organisations activities.
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Table 1.2: Decision characteristics and management level
Management level Type of decision
STRATEGIC
Unstructured
Timescale
Impact
of Frequency
organisation
decisions
Long
Large
Infrequent
medium
Medium
short
small
of
LEVEL
TACTICAL LEVEL
OPERATIONAL
structured
Frequent
LEVEL
(Bocij et al, 2008: 20)
1.6
The real world of information systems
ACTIVITY
Case 1.1: Letters to the dead and other tales of data dereliction that of (Bocij et al., p14).
This case dramatizes just one of the countless examples of the information that are duplicated or out of
date.
Read attentively through the Case 1.1: Letters to the dead and other tales of data dereliction that
of (Bocij et al., p14). Answer the case study questions on p. 15 and read through the paragraph
Competitive intelligence on page 29. Also answer Discussion Question 4 on p. 30. Do you think that
your organisation could also benefit from such a strategy? After you have analysed the case
study and answered the questions, consider the suggested answers given at the end of the
study unit.
Additional Reading
Turn to pp. 29-30 of Bocij et al. The summary provides an outline of the major areas of information
systems knowledge needed by a managerial end user. This includes foundation concepts of information
systems, information system technology, and the application, development and management of
information systems.
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1.7
THE SYSTEMS APPROACH
Systems theory provides a means of analysing and improving business processes within and between
systems.
1.7.1. What is a system?
A system can be defined as a collection of interrelated components that work together towards a
collective goal. The function of a system is to receive inputs and transform these into outputs.
1.7.2
What is Input?
Input is the raw materials for a process that will produce a particular output
1.7.3
What is process?
Inputs are turned into outputs by a transformation process.

1.7.4
What is output?
A product that is created by a system.

Figure 1.1 illustrates the organisation of the input process-output model.
(Source: Bocij et al, 2008:36)

When these components are added to the basic model of the system, it can be illustrated in Figure 1.2
as follows
Figure 1.2: A generic model of a system

1.7.5
What is feedback?
Feedback provides information on the performance of a system which can be used to adjust its
behaviour.
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1.7.6
What is control mechanism?
If alterations are needed to the system, adjustments are made by a control mechanism.
In business there are familiar phrases such as I am not part of the system, The system is down,
He has a good system, or Do not interfere with the system. Phrases like these suggest that
almost everything can be a system. However, the term system is often misunderstood because the
value and applicability of the systems theory to daily life is underestimated. More specifically, in the field
of information systems, the value of the systems theory to solve information management problems is
underestimated.
Additional reading
Turn to p 37 of Bocij et al., read the paragraph Systems Components and make sure you can explain
all the different system components. Included are the definition of a system, input, processing, output,
feedback, control, environment, boundary, subsystems and the interrelations between the components.
Take note of Figure 2.1 (p.36) and Figure 2.2 (p.37) for graphical displays of the various system
concepts.
Other system concepts that are important to your body of knowledge include the following:
Closed System: A system that does not interact with other systems or its environment, is a
closed system. An example of a closed system is a battery that runs down after a while. This
phenomenon of decay is called entropy.
Open System: A system that interacts with other systems in its environment is called an open
system (connected to its environment by exchanges of inputs and outputs).
Adaptive System: A system that has the ability to change itself or its environment in order to
survive is called an adaptive system.
Cybernetic System: A system that includes feedback and control components. These systems
are self-monitoring and self-regulating.
Consider an example that will explain most of the system concepts. A medium sized furniture
manufacturing business is used as an example.
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The organisation is supposed to have a common purpose or goal, for example to make a profit.
Furthermore, it consists of various functional departments, such as the Human Resource, Production
(manufacturing), Sales, Marketing, and Financial, Research and Development and Information
Technology departments. It is important that all the subsystems of this organisation (functional
departments), work together to ensure that the organisation attains the common goal. The different
subsystems (departments) are interrelated to each other and form a bigger system, in this case the
manufacturing business. The business uses inputs (raw materials, labour, capital) and transforms or
processes these (manufacturing process) into outputs (chairs, tables). The system, and subsystems, is
influenced by the internal environment (business policies, productivity, organisational culture, strikes)
and the external environment (government policies and the economic, socio-economical, political and
technological environment). There is also a feedback and control process built into the manufacturing
process.
It is vital that all the departments work together to attain the common goal of the organisation. Each
department (sub-system) may act in the best possible way as a sales system, but the sum of their
actions may not be optimal for the organisation. This is the problem of sub-optimisation. An aggressive
market strategy could lead to more sales, but if product quality (production) is not of the necessary
standard, the organisation will over the long-term fail to be optimal and sales could drop. Therefore, the
various subsystems must be aligned to achieve the goals of the system. If the subsystems complement
each other, their effectiveness considered collectively as a system may be greater than the sum of the
effectiveness of each subsystem considered separately. This phenomenon is called synergism. The
effect of synergism must be understood and fostered because it can give an organisation a competitive
edge.
Although the systems theory is concerned with a holistic approach, it does not neglect the components
of the subsystems. It recognises the activities of the components while also considering the activity of
the whole system that contains it. That is important, because the system is only as strong as the
individual entities being put together. The weakest link in the chain determines the strength.
ACTIVITY
Take a system that you are familiar with, and describe its various components.
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1.8
WHAT IS A BUSINESS INFORMATION SYSTEM (BIS)?
A business information system is a group of interrelated components that work collectively to carry out
input, processing, output, storage and control actions in order to convert data into information products
that can be used to support forecasting, planning, control, coordination, decision making and
operational activities in an organisation (Bocij et al, 2008).
1.9
RESOURCES THAT SUPPORT BUSINESS INFORMATION SYSTEMS
People resources: People resources include the users of an information system and those who
develop, maintain and operate the system.
Hardware resources: The term hardware resources refers to all types of machines, not just computer
hardware.
Software resources: In the same way, the term software resources do not only refer to computer
programs and the media on which they are stored. The term can also be used to describe the
procedures used by people.
Communications resources: Resources are also required to enable different systems to transfer data.
Data resources: Data resources describe all of the data that an organisation has access to, regardless
of its form.
Further reading
Read paragraph on Business Information System Resources (Bocij et al., p.43) which provides
information on information systems resources and products, which include people, hardware, software,
data and network resources.
1.10
COMPONENTS OF AN INFORMATION SYSTEM.
The components of an Information System are as follows:

Input device: Hardware used to enter data, information or instructions into a computer-based
information system.
Central processing unit (CPU): The processor found in a computer system that controls all of
the computers main functions and enables users to execute programs or process data.
Memory: A temporary means of storing data awaiting processing, instructions used to process
data or control the computer system, and data or information that has been processed.
Storage devices: A permanent means of storing data and programs until they are required.
Output devices: Translate the results of processing output into a human readable form.
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Figure 1.3
Further reading
For further reading on Components of an information system: Turn to pp.66-68 of Bocij et al.
ACTIVITY
Is there a difference between data and information? If so, what is the difference? Give examples in your
organisation to motivate your answer.
Suggested answer
Take note of the paragraph Data Resources on p. 43.
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The terms data and information are often used interchangeably. Data is raw facts or observations,
typically about physical phenomena or business transactions. More specifically, data refers to objective
measurements of the attributes (characteristics) of entities, such as people, places, things, and
events. Information is processed data, which has been placed in a meaningful and useful context for
an end user. Data is subjected to a value-added process where its form is aggregated, manipulated,
and organised, its content analysed and evaluated and placed in a proper context for a human user.
Information, therefore, is data that has been made relevant for a specific person to make decisions. Any
report given to a foreman or area manager, remains data until it has been assimilated by them to make
decisions. Note, therefore, that one person's information may be another person's data.
The value of information can be directly linked to how it helps decision-makers achieve the
organisations goals and objectives. For example, the value of information can be measured by the time
required to make a decision or by the increased profits of an organisation. Consider a market forecast
that predicts a high demand for a new product. If market forecast information is used to develop the
new product and the organisation makes an additional profit of one million Rand, the value of the
information to the organisation is one million Rand. However, it is in most cases difficult to quantify the
value of information to the organisation in monetary terms. There are also intangible gains, such as a
growth in market share, lower risk, better safety and a competitive advantage.
MANAGEMENT RESPONSIBILITY
Managers must answer the following questions regarding the gathering, processing and
dissemination of data/information in an organisation:
Do the team members know what happens to the data he or she gathered?
Does anyone use the data in the decision making or problem solving process?
Is there any feedback regarding the value and possible use of the data?
Do the team members think that the gathering of data is worth the input?
Does the organisation get the right information at the right time?
Does the organisation utilise the quality and usable information?
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1.11
Applications of Business Information systems
The information or data processing activities that occur in an information system include the input of
data resources, processing of data into information, output of information products, storage of data
resources and the control of system performance.
1.12
Recognising Business information systems
Managers should be able to recognise the fundamental components of information systems

encountered in the real world. This means that managers should be able to identify the people,
hardware, software and data resources they use, the types of information products they produce and
the way they perform input, processing, output, storage and control activities.
To fully understand a business information system, one needs to analyse it by identifying the resources
the information system uses, the information processing activities it performs, and the information
products it produces. This will enable managers to identify ways to improve the components and thus
the performance of the information system. Information systems form part of the total system in an
organisation with a common goal, for instance to maximise shareholder wealth. Therefore, a basic
understanding of the systems theory and its application to business information systems is vital to any
organisation.
ACTIVITY
Consider the discussion Questions on p. 60 of Bocij et al. and answer questions 4 and 5.
1.13
CONCLUSION
This study unit has given an overview of the basic concepts of information system. It has also shown
that much of a managers work involves making decision about the best way to achieve the
organisations objectives. Further, the quality of a managers decisions depends upon the quality of the
information he or she has access to. Since information influences almost every activity within an
organisation, it is an important asset and must be treated accordingly.
Information systems have proved to be important subsystems in any organisation because it contributes to the common goal of the organisation. An information system uses the resources of people,
hardware, and software to perform input, processing, output, storage, and control activities that convert
data resources into information products.
19
Suggested answers
Case Study 1.1: Letters to the dead and other tales of data dereliction
1. The case study identifies a number of problems with the way companies store and
manages information. Using your own words, identify and describe these problems.
In general, the problems described in the case study point to deficiencies in the data/information
management processes and systems used by companies. This is not necessarily a technology
issue; it is more to do with the management of information resources and the use of appropriate
policies and procedures. Some examples that support this argument are as follows:
Lazy sales staff entering data incorrectly. Staff should be monitored correctly and procedures
should be in place to check the accuracy of data as it is entered.
Advances in technology mean greater quantities of information are available but managers do
not organise it properly information overload?
There is a tendency to collect large quantities of data without regard for whether or not it is
needed/useful. Mention of information management professionals suggests that these experts
should be involved in (a) deciding what information to collect, (b) making sure it is accurate and
(c) storing it in an organised manner.
Duplication of information caused by allowing individual departments to keep their own copies
of records, rather than keeping records centrally.
Companies do not know what information they have and how it is being used! Information
resources cannot be managed correctly if no one knows what they are.
Inaccurate assumptions are being made about the meaning of information (e.g. sales spike),
suggesting that it is not being processed/analysed correctly.
Company systems are unsuitable for handling companies data processing needs (e.g. unable
to hold separate addresses for joint account holders). Effective management should/would
have identified and corrected such a problem before it became an issue.
Data/information management processes and systems are unable to deal with new
requirements (e.g. delivering information more quickly and handling unstructured data).
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2. According to the case study, Bill Gates has claimed that almost a third of information
workers time is spent searching for data. Why do you think this is?
This question is intended to introduce the notion of information overload in the context of management.
Following are some of the reasons why people spend a great deal of time searching for information:
Too much irrelevant information exists; the required information is buried.
Time is spent finding out if the information needed actually exists.
Information is presented in a way that is difficult to understand, so it takes longer to search for
and identify the required information.
Information is badly organised, making it harder to search quickly.
Information is spread out across a number of locations (e.g. across departments).
Information is stored in different formats or presented in different ways.
3. What are some of the consequences of relying on inaccurate information? Refer to the case
study in your answer.
Answer:
Some examples drawn from the case study:
Negative publicity, loss of customer satisfaction: The families of deceased people would have been
distressed by receiving Dear Mr. Deceased letters. Distress also caused by pension leaver letters.
Lost business, cost of cleaning data: Listing customers as astronauts would cause insurance company
to lose potential sales. Database records need to be corrected.
Impaired productivity, loss of customer satisfaction. The case study points out that relying on inaccurate
information damages efficiency; at worst it can destroy relationships and hamper efforts in crucial
areas such as fighting fraud.
Public safety, damage to company image, damages: The safety of some people might be jeopardized
(letter containing the new address of a wife sent to her violent husband); the company would have
suffered negative publicity and was forced to pay cost of rehousing the wife.
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Discussion question 4.
4. Knowledge management is nothing new, it is merely a repackaging of existing information
management techniques. Discuss.
A suggested structure for this answer is:
Definition of knowledge management (KM).
Explanation of concept of tacit and explicit knowledge.
Summary of what is new about KM, i.e. focus on making use of information (applying
intelligence that is part of managers experience and skill set). Use examples of applications
(e.g. Hansen et al., 1999 article in chapter references). It is a structured rather than ad hoc
approach to capturing and disseminating knowledge.
Assess whether or not it is repackaging using examples of applications and practice. For
example, information on best practice has always been shared, with or without the KM label.
To conclude, discuss whether or not KM has caused a change in practice or change in

perspective. A combination of the two, but mainly in perspective.
Discussion questions on page 60

4. Discuss the following statement with reference to how an organisation should react to the
Internet. Is the Internet a typhoon force, a ten times force, or is it a bit of wind? Or is it a force
that fundamentally alters our business? (Andy Grove, Chairman of Intel).
Suggested approach:
This statement is useful in that it indicates that the impact of the Internet will vary according to the type
of business that an organisation is in. Students should look at a range of industries from those where
the impact is high, e.g. media and information services to those where the impact is low, e.g. retailer.
Examples can be taken from those that have reacted, e.g. easyJet or General Electric in comparison to
those that havent. The analogy may also be apt, since the Internet phenomenon may be transitory.
This can also be considered.
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5. Enterprise resource planning software is likely to replace packages used in a single area of
the organisation, such as accounting, logistics, production and marketing. Discuss.
Answer:
ERP is likely to be restricted to larger organisations due to the cost of customisation of the software for
the client. Mass-produced and, thus, cheaper, off-the-shelf packages are likely to be the most suitable
option for the small organisation. Enterprise resource planning (ERP) software is a single system that
gives applications for all the major business functions discussed in this chapter such as production,
distribution, marketing and sales, finance and human resources management.
It is normally purchased as an off-the-shelf package, with modules for each major business process or
business function that are tailored by a consultant. A single package typically replaces many different
previous packages.
The benefits of this approach include:
reduced cost of buying from a single supplier;
better transfer of information within the organisation since all the modules of the system are
compatible;
simplified support and maintenance through a single supplier;
use of best-of-breed solutions employed by other companies.
The main disadvantage of the use of ERP systems seems to be the high costs charged by suppliers
due to the demand for this type of system. This high demand has also given rise to skills shortages.
The other disadvantage of ERP systems is shared with all off-the-shelf systems, namely, that the
business often has to change its processes or way of working in order to fit the way the software works.
This may not present a problem if a company is looking to reengineer its processes since, then, the
ERP software can provide a framework.
Owing to the high cost of ERP solutions, only large companies can afford the cost of the software and
the consultants, which will often be measured in millions of pounds. Smaller companies can take
advantage of the features of integrated accounting packages that now provide modules beyond those
of the basic accounting package.
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In summary, there is overwhelming evidence that ERP will replace functional applications in large
organisations. In smaller organisations, the role of ERP applications is likely to be assumed by
integrated accounting packages with similar functions.
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PART 2
COMPUTER HARDWARE AND SOFTWARE
25

demonstrate knowledge of the trends and developments in microcomputer, midrange, and
mainframe computer systems;
understand the basic computer hardware concepts, as well as the major types of technologies used
in peripheral services for computer input, output, and storage;
identify the major types and uses of computer peripherals;
identify several major types of system and application software;
explain the benefits and features of network computer systems
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2.1
INTRODUCTION
The study unit deals with a managerial overview of computer hardware by reviewing the basic types of
computer systems and the major types of computer peripheral devices used for input, output, and
storage. An overview will also be given on computer software by analysing the functions, benefits and
the limitations of major types of systems and application software packages.
Study Chapter 3 and 4 in Bocij et al. (2008) that deal with the managerial overview of
computer hardware and software.
2.2
WHAT IS MEANT BY PERIPHERALS?
Peripherals is the generic name for all input/output equipment and secondary storage devices that
depend on direct connections or Telecommunications links to the central processing unit (CPU) of a
computer system. Thus, all peripherals are on-line devices, that is, separate from, but can be
electronically connected to and controlled by a CPU. This is the opposite of off-line devices, which are
separate from and not under the control of the CPU.
2.3
WHAT ARE INPUT AND OUTPUT DEVICES?
2.3.1
Input devices: Hardware used to enter data, information or instructions into a computer-based
information system.
Output devices: translate the results of processing output into a human readable form.
These devices include:
2.3.2
pointing devices such as electronic mice, trackballs, pointing sticks and touch-sensitive screens;
pen-based computing such as light pens or digitisers;
video and multimedia input and video output;
printed output by means of printers and plotters to produce permanent (hard copy) output;
voice recognition and voice response; and
optical scanning and magnetic data entry.
27

2.4
STORAGE TRENDS AND TRADE-OFFS
A Storage device is a permanent means of storing data and programmes until they are required.
Storage devices of computers can be divided into:
1. Primary storage devices: The primary storage of most modern computers consists of the
following:
Volatile memory: Anything held in memory is lost once the power to the computer system is
switched off.
Non-volatile memory: Non-volatile memory retains its contents until altered or erased.
Random access memory (RAM): RAM is used as volatile, working storage by a computer,
holding instructions and data that are waiting to be processed.
Read-only memory (ROM): The contents of ROM are fixed and cannot be altered. ROM is nonvolatile.
EPROM (erasable programmable read-only memory): This is a form of ROM memory that
retains its contents until changed using a special device known as a burner.
Cache memory: Used to improve performance by anticipating the data and instructions needed
by the processor. The required data is retrieved and held in the cache, ready to be transferred
directly to the processor when required.
2. Secondary storage devices

Secondary storage devices include the following:
Floppy disk: Consists of a plastic disk, coated with a magnetic covering and enclosed within a
rigid plastic case.
Hard disk: A magnetic medium that stores data upon a number of rigid platters that are rotated
at very high speeds.
Personal video recorder (PVR): A PVR is a sophisticated video recorder that uses a hard disk
drive to store programs. The use of a hard disk drive allows a PVR to offer a range of
sophisticated features, such as the ability to pause live broadcasts.
Flash drive: A flash drive is a portable storage device that connects to a computer via a
standard USB port. Flash drives have no moving parts, so are reliable and robust.
28
Additional Reading:
For further reading on Primary and Secondary storage devices, turn to pp. 95-100 of Bocij et al.
ACTIVITY
Analyse the Case 3.2 Did IT work? How Wall Street is eradicating down time (Bocij et al., p. 106).
Analyse the case and answer the questions.
After answering the questions, refer to the suggested answers at the end of the study unit.
2.5
COMPONENTS OF A COMPUTER SYSTEM
2.5.1
What is a Computer System?
A computer system is a number of interrelated components including hardware and software that work
together with the aim of converting data into information. The components of a computer system
include hardware and software.
2.5.2
Computer Hardware
What is Computer Hardware?

Computer hardware includes the physical components of a computer system: input devices, memory,
central processing unit, output devices and storage devices.
Input devices. Hardware used to enter data, information or instructions into a computer-based
information system.
Central Processing Unit (CPU): The processor found in a computer system that controls all the
computers main functions and enables users to execute programs or process data.
Memory: a temporary means of storing data awaiting processing, instructions used to process
data or control the computer systems and data or information that has been processed.
Output devices: translate the results of processing output into a human readable form.
Storage devices: a permanent means of storing data and programs until they are required.
29
Figure 2.1
Further reading
Read on Components of a computer system: Turn to pp.66-68 of Bocij et al.
2.6
TYPES OF COMPUTER SYSTEMS
There are several major categories of computer systems with a variety of characteristics and
capabilities. Thus, computer systems are typically classified as:
Mainframe computers: powerful computers used for large-scale data processing
Minicomputers computers: computers that offer an intermediate stage between the power and
mainframe systems and the relatively low cost of microcomputer systems.
Microcomputers: computers that are considered less powerful than minicomputers and mainframes,
but are more flexible and relatively inexpensive to purchase.
These categories are attempts to describe the relative computing power provided by different
computing platforms or types of computer. Therefore, they are not precise classifications.
30

Some experts predict the merging or disappearance of several computer categories. They feel that
many midrange and mainframe systems have been made obsolete by the power and versatility of
client/server networks of microcomputers and servers. Most recently, some industry experts have
predicted that the emergence of network computers and information appliances for applications on the
Internet and corporate intranets will replace many personal computers, especially in large organisations
and in the home computer market.
ACTIVITY
To understand better the paragraph above on obsolete computer systems, attempt Discussion
Question 3 p. 116 of Bocij et al.
Computer systems are most commonly categorised according to size, processing speed and storage
capacity.
Further reading
Turn to the paragraph Major categories of computers (Bocij et al., p. 68), which gives a short
overview of the various types of computers, (Figure 3.3 on p. 68).
Figure 2.2: Different forms of computer system.
(Source: Bocij et al, 2008: 68)

31

2.7
NETWORKED COMPUTER SYSTEMS
Network computer systems are very important in organisations.

The benefits of network computer systems are:
Networked computer systems allow end users to communicate electronically and share the use
of hardware, software, and data resources.
Networks of small computers have become a major alternative to the use of larger computer
systems, as many organisations downsize their computing platforms. For example, a local area
network (LAN) of microcomputers can replace the use of groups of end user terminals
connected to a minicomputer or mainframe.
The features of networked computer applications include:
Networked microcomputer systems are used in place of minicomputers and mainframes;
Are easy to install, use, and maintain; and provide a more efficient, flexible, lower-cost
alternative to large computer systems for many applications; and
Can share computer power, software, and databases required in time-sharing and resourcesharing applications.
Networked computers also support work group computing (communicate electronically and
share data on joint projects); and
Are used in transaction processing applications.
Additional Reading
Network computer systems form a vital part of todays information systems. Increasingly, computers are
being networked or interconnected by Telecommunications links with other computer systems. Further
reading: Turn to p. 74 of Bocij et al. and read through the paragraph Network Computers.
32

ACTIVITY
The mini case study on p. 75 of Bocij et al., relates how Panalpina uses network computers to
reduce costs, please study the paragraph and make notes. Then analyse Case 3.1 When
Systems converge but people dont and answer the questions on p.81 as well as Essay Question 1
on p. 116. Take note of the use of computer systems.
ACTIVITY
Work through the following exercises on network computing. Refer to Discussion Question 1 on p 115
of Bocij et al.
Do you think that client/server networks make minicomputers and mainframe computers obsolete?
Explain.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Managers may argue that it is unnecessary to be an expert on information system technology.
Computer hardware and software are vital resources to support business operations, managerial
decision making and strategic advantage. Therefore, you need to understand the basic terminology and
concepts which are part of the basic literacy of business people and managers in an information era.
The responsibility as a manager would be to manage the end users and the effective utilisation of
computer technology in the work environment.
33
Additional reading
It is recommended that you refer on a regular basis to the Glossary page for short descriptions of most
of the relevant terms as follows. You can also discuss the terms with a computer expert at work or with
fellow students.
Refer to the glossary page for the following terms:
Application generator
Artificial intelligence
Batch processing
Business ethics
Business Process Reengineering
Chip theft
Client/Server model
Competitive Advantage
Computer criminals
Cost of ownership
Critical Success Factors
Cross licensing agreement
Database
Data warehouse
Decision Support Systems
Electronic Data Interchange
Electronic Commerce
Executive Information Systems
Expert Systems
Extranet
Groupware
Information
Intelligent Agent
34
2.8
Local Area Network
Management Information System
Neural Networks
Online Analytical Processing
Prototyping
Systems analysis
APPLICATION SOFTWARE: END USER APPLICATIONS
Software can be defined as a series of detailed instructions that control the operation of a
computer system. software exists as programmes that are developed by computer
programmers.
Systems software: this form of software manages and controls the operation of the computer
system as it performs tasks on behalf of the user.
Application software directs the processing required for a particular use, or application, that
you as an end user want to accomplish. Application software can be divided into two
categories, general purpose programs and application-specific programmes. The various types
of application software for end users are discussed in this study unit. General purpose programmes are those that perform common information processing jobs for end users. Examples
are word processing programmes, spreadsheets programmes, database management
programmes, integrated packages, and graphics programmes. Application-specific programmes
are programmes that support specific applications of end users. Major categories of
application-specific programmes include business application programmes, scientific
application programmes, and other application programmes.
The major software trends important to managerial end users are:
there is a trend away from custom-designed one-of-a-kind programs developed by the professional
programmers or end users of an organisation, and
there is, however, a trend towards the use of off-the-shelf software packages acquired by end
users from software vendors.
35
There is also a trend towards the use of user-friendly fourth-generation programming languages.
That makes it easier for end users to develop their own applications
You have to take note of these trends in order to use the available technology to the benefit of the
organisation.
Additional Reading
For further reading on software: Turn to p. 122-123 of Bocij et al. (Chapter 4).
2.9
GENERAL-PURPOSE SOFTWARE
General-purpose applications are programmes that can be used to carry a wide range of common
tasks, for e.g a word processor. It is often referred as productivity software as it helps to improve the
efficiency of an individual.
General-purpose software commonly used by end users include:
2.10
Software Suites and Integrated Packages ;
Web-Browsers;
Electronic Mail;
Word Processing and Desktop Publishing Packages;
Electronic Spreadsheets;
Database Management Packages;
Presentation Graphics and Multimedia Packages;
Personal Information Managers;
Groupware and
Other business Software.

APPLICATION-SPECIFIC SOFTWARE
Application-specific software comprises programs intended to serve a specific purpose such as

software in the accounting and marketing function.
36
Further reading
Turn to Bocij et al. p. 125 and read through the paragraph Application Software. The concepts
General-Purpose Application Programmes and Application-Specific Software Packages are
introduced.
ACTIVITY
Which application software (also known as software packages) are you familiar with? Do you use it to
support your work tasks? Explain.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Do you think that these software packages are helpful tools?
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Suggested answers
Case Study 3.1: When systems converge but people dont
1. In brief, what is VoIP? If necessary, use the Internet to carry out any research you need.
VoIP stands for Voice over Internet Protocol. It is a service that is used for transmitting
telephone calls over a network, such as the Internet. In order to use VoIP, both users must be
connected to the network and both must have an appropriate handset (or a microphone and
speakers) and a computer running a suitable software. The very latest systems do not need a
computer; they can be connected directly to a router and use wireless handsets.
37

2. What are the benefits of VoIP to a business organisation? Refer to the case study in
your answer.
The case study lists a number of significant business benefits as follows:
Replacing two networks with one reduces the amount of hardware needed to be bought
and maintained. In turn, this reduces other costs such as training.
IP-based phone networks are easier to manage, resulting in time and cost savings.
Call costs are reduced.
The system can be the basis for new applications e.g. unified messaging.
3. Can you think of any disadvantages associated with this technology?

Some major disadvantages:
The company becomes reliant on its network system; any failure also means the loss of
telephone communications.
Staff needs to be trained to handle new technologies.
Adopting this approach can result in conflict between departments (IT and telecoms).
Case Study 3.2 Did IT work? How Wall Street is eradicating downtime
1. Suggest at least three ways virtual computing can help an organisation to reduce costs.
Some ways in which virtualisation can reduce costs:
Virtual machines can be created to emulate legacy systems, removing the need to maintain
outdated equipment. Since a virtual machine often runs more quickly than the legacy
system being emulated, it can remove the need to migrate to a new, faster system.
Developers can programme and test applications on several operating systems using only
a single PC.
Snapshots make it quick and easy to deploy new machines and install updates.
Virtual machines can make use of spare capacity, reducing the need to buy additional
hardware.
38
New software can be tested on a virtual machine before being installed on the companys
network. This reduces the possibility of crashing the network and makes it easier to
determine the source/cause of any problems.
2. The case study suggests that when you focus on recovery: the hardware and software you
buy becomes less important. How true is this?
This is only true to the extent that virtual machines can be created using almost any kind of
hardware/software platform. However, the following points should be considered:
Even if emphasis is placed on recovery, hardware and software must still be reliable. Poor quality
hardware or buggy software, for example, may cause repeated crashes.
The text makes it clear that virtual machines run more efficiently when multi-core processors are
used. Hardware that is slow or inefficient may make virtual machines unusable. After all, the case
study states, If a system is on, but running slowly, it is, in effect, down.
The views of Steve Randich are based on a faulty assumption: robustness no longer needs to be
engineered, at great expense, into the application or its operating system. Robustness describes
the ability of a system to carry on working in spite of errors, partial failures or abnormal conditions.
In terms of software, this usually means that an application should be able to cope with erroneous
data and other, unexpected problems.
An unstable operating system that crashes frequently will not become more reliable because it runs
on a virtual machine it will remain unreliable and will continue to crash frequently. In this way, it is
clear that the software you buy is important.
3. In your own words, explain how virtual machines can be moved around, backed up, or
diverted to adjacent or remote systems.
Two features of virtualisation technology allow these actions:
Virtual machines allow the use of snapshots disk files containing an exact image of the virtual
machines memory and the contents of its hard disk at a specific point in time. These files can be
used as backups and are easily copied to other machines.
Software such as VMWares Distribution Resource Scheduler (DRS) constantly monitors available
computing resources and can automatically set up new VMs using spare resources if it detects a
need, such as a sudden increase in web traffic.
39

Discussion questions
1. Will network computers and clients make personal computers obsolete? Using relevant
examples, make a case for one side of this argument.
Some of the arguments that might be discussed are given below:
Network computers are the point at which computer technology and television converge. As
interactive television becomes more popular, consumers will begin to see network computers in the
same way as video recorders and satellite receivers.
Compared to a typical personal computer, network computers have limited functionality.
Since there is sometimes only a small difference in cost, consumers are likely to opt for a more
flexible and more powerful personal computer. This argument also applies to thin clients.
To date, network computers have failed to make an impression on the consumer electronics
market. They are still considered expensive luxuries and have yet to deliver a killer app.
Network computers are able to deliver some services more effectively and at lower costs than other
methods. Video telephony, for example, is awkward and expensive to provide via a personal
computer. Such applications will ensure the success of network computers. This argument also
applies to thin clients.
As technology progresses, it becomes possible to build dedicated devices that offer levels of power
and sophistication similar to that of a personal computer. Since these devices are often multifunctional and are relatively cheap to buy, they are likely to replace the need for a personal
computer for many people. A good example is the mobile telephone; recent models provide the
ability to transmit pictures, access the Internet, manage appointments and so on. Although the
primary purpose of the telephone is communication, it can also serve other purposes, such as
allowing users to play games or access information services.
40

3. Despite still being functional, an obsolete computer system is of little value to a business
organisation. Organisations should continually upgrade or replace systems in order to keep
abreast of changes in technology. Make a case in favour of or against this argument.
Although this is a relatively complex area, students might consider some of the following points:
All organisations undertake a cycle of improvement and replacement for their computer systems. In
a college or university, for example, all of the institutions hardware and software might be replaced
or renewed during a five-year cycle. In view of this, it could be said that already organisations
continually upgrade or replace systems in order to keep abreast of changes in technology.
Changing an existing system or adopting a new one carries a number of risks; for example, a large
financial outlay may be required to purchase the new system. Such risks are unacceptable when
the potential gains to be made are unclear or uncertain.
Although the hardware and software used by an organisation may be obsolete, it would be difficult
to prove that obsolescence automatically renders a given system worthless. A fully functional
system, no matter how old, will have an intrinsic value to an organisation. Consider the following:
what expense would be involved in carrying out a given set of tasks without the system? If the
system performs such tasks more quickly, more accurately or less expensively, then it has a clear,
quantifiable value.
Although a new system may carry out tasks more quickly or more accurately than an existing
system, it may still not be viable in financial terms. The costs associated with implementation may
be so high that they outweigh any benefits gained by adopting the system.
New hardware and software often allow an organisation to maximise the use of its data resources.
The ability to use data-mining software, for example, might allow the organisation to realise cost
savings or identify new products and new markets.
41

In general, as technology moves forward, the expense involved in purchasing new hardware and
software tends to decline. A system that might have cost many thousands of pounds five years ago
may be available for just a few hundred pounds today. In many cases, it may be possible to adopt a
new system for less than the cost of upgrading an existing one.
42
PART 3
TELECOMMUNICATIONS AND NETWORKS
43

explain the importance of telecommunications in your organisation;
explain the business benefits and disadvantages of networks;
identify the trends in telecommunication;
explain the types of telecommunications network
specify the advantages and disadvantages of the client/server computing
explain how internet is enhancing value to business organisations
describe the models of e-commerce and
discuss the key features of e-commerce.
44

3.1
INTRODUCTION
For the modern organisations to operate effectively, the links connecting its people and their computers
are vital. The network links provide the channels for information to flow continuously between people
working in different departments of an organisation, or in different organisations. This allows people to
collaborate much more efficiently than before the advent of networks when information flow was
irregular and unreliable. These links allow hardware such as printers and faxes to be shared more costeffectively.
This chapter focuses on the use of computer networks from the global network of the internet through to
small-scale networks. The benefits of networks are discussed. The basic trends and functions of
telecommunications networks are also explained.
3.2
WHAT ARE COMPUTER NETWORKS?
A computer network can be defined as: a communications system that links two or more computers
and peripheral devices and enables transfer of data between the components (Bocij et al, 2008: 184).
Computer networks are themselves constructed on different scales. Small-scale networks within a
workgroup or single office are known as local-area networks (LANs). Larger-scale networks which are
national or international are known as wide-area networks (WANs). The internet is the best known
example of wide-area network.
Further Reading
Turn to p. 184 of Bocij et al and read through the paragraph on Introduction to computer Networks.
3.2.1
What are the business benefits of networks?
Networks are vital to a business. They are important for the cost savings and improved communications
that arise from an internal network. Beyond this, they are truly vital, because they help a business reach
out and connect with its customers, suppliers and collaborators. Through doing this a company can
order new raw materials more rapidly and cheaply from its suppliers and can keep in touch with the
needs of its customers.
45

The following figure indicates the links that may exist between different partners.

3.2.2
Benefits of networks
The benefits that networks provide are as follows

Reduce cost compared to traditional communications
Reduce time for information transfer
Enable sharing and dissemination of company information
Enable sharing of hardware resources such as printers, back up, processing power.
Promote new ways of working
Operate geographically separate business as one.
Restructure relationships with partners.
(Bocij et al 2008:186)
46
HINT! Further Reading

For further reading on benefits that networks provide: Turn to p. 186 of Bocij. et al. ALSO
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Bocij et Turn
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network-enabled technology such as video conferencing and email deliver. Please study it.
3.2.3
What are the disadvantages of network technology?
To balance against the many benefits, there are, of course, disadvantages with introducing networks.
The main disadvantages are:
Overreliance on networks for mission-critical applications
Cost of initial set-up and maintenance
Disruptions during initial set up and maintenance
Reduced security due to more external access points to the networks on wide-area networks
and the internet.
Additional Reading
For further reading on disadvantages of network technology: Turn to p. 188 of Bocij et al.
3.3
What is meant by Telecommunications?
The method by which data and information are transmitted between different locations (Bocij et al,
2008:185)
47

3.3.1
The Importance of Telecommunication Networks And Networking In An Organisation
Telecommunications networks and the use of these networks for communication (networking) is
important in todays organisation for the following reasons:
Networking permits the sharing of scarce, critical resources such as software, printers, fax
machines and other peripherals.
Networking allows users to share data. Users from different areas within the organisation,
as well as those in different organisations, can all access common databases and this
permits the more efficient use of data.
Networking is the key in making distributed data processing and client/server systems
feasible. It interconnects the computer systems of an organisation so their computing
power can be shared by end users throughout the whole organisation.
Networks exchange the communication within the organisation and between organisations.
Networking, therefore, can be used for applications such as information distribution and to
build strategic information systems.
There is a trend towards electronic trade. Computer networks form the basis for electronic
trade.
It enhances collaboration and communication among individuals both inside and outside an
organisation.
Manager as end user and organisations need to electronically exchange data and information with
other end users, customers, suppliers, financial institutions and other organisations. Only through the
use of Telecommunications can managers work their activities, manage organisational resources, and
compete successfully in todays fast changing global economy.
Many organisations today could not survive without interconnected networks of computers to serve the
information processing and communications needs of their end users.
3.3.2
A telecommunications network model
The conceptual model below shows a telecommunications network. It illustrates that a communications
network is any arrangement where a sender transmits a message to a receiver over a channel
consisting of some type of medium. A telecommunications network consists of five basic categories of
components, those are terminals, telecommunications processors, telecommunications channels,
computers, and telecommunications control software. Turn to the Glossary page for descriptions of
unfamiliar terms.
48

3.4
TYPES OF TELECOMMUNICATIONS NETWORK
There are many different types of telecommunications networks. From an end user point of view, there
are two basic types: wide area networks (WAN) and local area networks (LAN). It is important to note
that there is a growing trend toward the increased use of LANs and WANs as an alternative to the use
of terminals connected to minicomputers or smaller mainframes for end user computing in many
organisations.
3.4.1
Wide Area Network (WAN)
Wide area networks (WANs) are telecommunications networks that span a large geographical
distance.
These networks cover areas such as:
a large city or metropolitan area;
a whole country; or
many countries and continents.
WANs may consist of a variety of cable, satellite, and microwave technologies.
49

Figure 3.2: A wide-area network (WAN)
Local area network (LAN)
A local area network (LAN) is a telecommunications network that requires its own dedicated channels
and that encompass a limited distance, usually one building, or several buildings in close proximity, for
example a manufacturing plant.
Some of the characteristics of LANs include the following:
LANs use a variety of telecommunications media, such as ordinary telephone wiring, coaxial
cable, or wireless radio systems to interconnect microcomputer workstations and computer
peripherals.
LOCAL AREA NETWORK (LAN)
(Source: Bocij et al 2008: 217)

3.4.2 Local Area Network (LAN)
A LAN consists of a single network segment or several connected segments that are limited in extent,
hence local.
LANs use a powerful microcomputer with a large disk capacity as a file server or network
server that contains a network operating system program (e.g. Novell) that controls
telecommunications and the use of network resources.
LANs may be connected to WANs by communications processors forming a common

interface called a gateway.
LANs allow end users in a work group to communicate electronically; share hardware,
software, and data resources; and pool their efforts when working on group projects.
50

Figure 3.3: a small workgroup network connecting a single server to three PCs and a laser printer.

3.5
CLIENT SERVER COMPUTING
Client Server computing is a grown trend in most organisations. Computing power has rapidly become
distributed and interconnected throughout many organisations through networks of all types of
computers.
3.5.1
Characteristics of a client/server network are:
End user microcomputer workstations are the clients;
Clients are interconnected by local area networks and share application processing with LAN
servers, which also manage the networks; and
LANs may be interconnected to other LANs and wide area networks of client workstations and
servers.
3.5.2
Benefits of client server computing include:
clients (end users) can perform some or most of the processing of their business applications;
LAN servers can share application processing, manage work group collaboration, and control
common hardware, software, and databases;
data can be completely processed locally, where most inputs and outputs must be handled;
51
provides access to the workstations and servers in other networks;
computing processing is more tailored to the needs of the end users;
increases information processing efficiency and effectiveness as users are more responsible
for their own application systems;
allows large central-site computers to handle the jobs they do best, such as high-volume
transaction processing, communications network security and control, and maintenance and
control of large corporate databases; and
clients at local sites can access the corporate superservers to receive corporate wide
management information or transmit summary transaction data reflecting local site activities.
ACTIVITY
To understand better the concept of client/server computing, attempt discussion question on p. 226 of
Bocij et al
3.6
NETWORK COMPUTING
The growing reliance on the computer hardware, software, and data resources of the Internet, Intranets,
extranets, and other networks has emphasized that for many users the network is the computer. This
network computing, or network-centric, concept views networks as the central computing resource of
any computing environment. It appears to be the architecture that will take computing into the next
century.
3.6.1 Features of network computing include:
Network computers provide a browser-based user interface for processing small application
programs called applets.
Network computers are microcomputers without floppy or hard disk drives that are designed as lowcost networked computing devices.
Servers provide the operating system, applets, databases, and database management software
needed by the end users in the network.
3.6.2 Peer-to-Peer networks

The emergence of peer-to-peer (P2P) networking technologies and applications is being hailed as a
development that will revolutionize E-business and E-commerce and the Internet itself. It is a simple
type of LAN which provides sharing of files and peripherals between PCs.
52

3.6.3 Inter-Enterprise Networks
Many applications of telecommunications can be classified as inter-enterprise networks. Businesses
are using telecommunications to:
Link a companys wide area and local area networks to the networks of customers and suppliers
both domestically and internationally.
Build new strategic business relationships and alliances with their stakeholders in an attempt to
increase and lock in their business, while locking out competitors.
Reduce transaction-processing costs.
Increase the quality of service.
Connect to information service providers, and other external organisations to provide better
information for management decision-making.
Distributed Processing is where information-processing activities in an organisation are accomplished

by a network of computers interconnected by telecommunications links instead of relying on one large
centralised computer facility or on the decentralised operation of several independent computers.
ACTIVITY AND THINK POINT
Why do you think organisations use telecommunications?
What are the benefits?
Suggested answer
Businesses are using telecommunications to:
cut costs;
improve the collaboration of work groups;
develop on-line operational processes;
share resources;
lock in customers and suppliers;
develop new products and services;
breaking down of time, geographic and structural barriers;
53
link a companys wide area and local area networks to the networks of customers and suppliers
both domestically and internationally;
build new strategic business relationships and alliances with their stakeholders in an attempt to
increase and lock in their business, while locking out competitors;
increase the quality of service; and
the connection to information service providers, and other external organisations provides better
information for management decision-making.
ACTIVITY
Case study 5.1(Finders Keepers) on p. 199 has to do with RFID technology. To understand better the
concept of telecommunication attempt the case. Also turn to p. 198 of Bocij et al. and do Discussion
Questions 2 and 3.
The suggested answers are given at the end of the study unit.
3.7
TRENDS IN TELECOMMUNICATIONS
There is definitely a change in the business use of telecommunications. The trend toward more
vendors, services, advanced technologies, and open systems dramatically increase the number of
feasible applications. Telecommunications, therefore, is playing a more important role in support of the
operations, management, and strategic objectives of both large and small companies. The difference
between analogue and digital network technologies, the various communication media, the trend
towards open systems and the application trends should be noted.
The trend is towards the pervasive use of telecommunications networks in support of business
operations, managerial decision-making, and strategic advantage in domestic and global markets.
3.7.1 Key Concepts in telecommunications

Analogue: analogue data are continuous in that an infinite number of values between two given points
can be represented
Digital: Digital data can only represent a finite number of discrete values.
ACTIVITY
Describe the current trends that have been observed in the telecommunication sector with
regards to business organisations.
54
Bocij et al., pp. 194-199 gives an idea about the various trends occurring in the field of
telecommunications.
Telecommunications is so important in organisations that any manager has to be aware of the
telecommunications trends in the industry, otherwise, the organisation could fall in the trap of poor
decisions or investments in this minefield. This could lead to a situation where the organisation is
unable to compete with rival organisations. A basic knowledge of the technology trends is also
important to enable the managers to make the right decisions in obtaining and managing
telecommunications technology in your organisation.
3.8
THE INTERNET
The simplest way in which the internet can be described is as a global network system made up of
smaller systems.
The history and origin of the internet as a business tool is surprising since it has taken a relatively long
time to become an essential part of business. The internet was conceived by the Defense Advanced
Research Projects Agency (DARPA), an American intelligence organisation in 1969.
The internet began to achieve its current form in 1987, growing from systems developed by DARPA
and the National Science Foundation (NSF). The internet is only the latest of a series of developments
through which the human race has used technology to disseminate information.
3.8.1
The distinguishing features of the Internet can be summarised as follows:
The Internet does not have a central computer system or telecommunications centre. Instead
each message sent on the Internet has an address code so any computer in the network can
forward it to its destination.
The Internet does not have a headquarters or governing body.
55
The usage of the Internet is growing rapidly. This high level of traffic on the net makes it very
slow. That is a major problem.
The most popular Internet application is e-mail. Other applications include assessing files and
databases from libraries and organisations, and holding real-time conversations with other
Internet users.
3.9
The Internet supports bulletin board systems.
DIFFERENCE BETWEEN INTRANET AND EXTRANET

Intranet is a private network within a single company using internet standards to enable employees to
share information using e-mail and web publishing. Extranet is formed by extending the intranet beyond
a company to customers, suppliers and collaborators.
3.9.1 Important Key Concepts

Firewall: a specialised software application mounted on a server at the point where the company is
connected to the internet. Its purpose is to prevent unauthorised access into the company from
outsiders.
World Wide Web: the most common technique for publishing information on the internet. It is accessed
through web browsers which display web pages of embedded graphics and HTML/XML-encoded text.
Businesses use of the Internet is expanding rapidly for several reasons:
ease of world-wide communications with colleagues, consultants, customers and suppliers;
links workstations together to form virtual work groups to work on joint projects such as product
development, marketing campaigns, and scientific research;
allows for collaboration through Internets global e-mail and bulletin board systems (BBS);
access to a vast range of information provided by the networks on the Internet;
the Internet represents the wave of the future in business telecommunications and
special software programs are required to access the Internet. Examples include Gopher,
Mosaic, Netscape and Explorer.
56
Additional reading
For further reading on The Internet, refer to pp. 200-216 of Bocij et al.
ACTIVITY AND THINK POINT
Are you familiar with the Internet?
Do you think that the Internet can be to the benefit of managers? Explain.
Do you agree with the following statement: The only way to compete in the global society, is to
do business electronically. Therefore, organisations should use the Internet as a vehicle for
international trade. Explain.
3.10 E-COMMERCE
Electronic commerce (e-commerce) is defined as sharing business information, maintaining business
relationships, and conducting business transactions through the use of telecommunication networks.
What is referred to as traditional e-commerce has been conducted using EDI, enterprise-wide
messaging systems, fax communication, bar coding, and other private local area network and wide
area network systems. E-commerce is also about reorganizing internal business processes and
external business alliances and creating new consumer-oriented products and services globally. The
term e-business is sometimes used interchangeably with the term e-commerce to refer to this broader
concept.(Bocij et al 2008:48)
3.10.1 E-Commerce Models
There are several forms of e-commerce, or e-commerce models, based on who is involved in
the transaction:
Business-to-business (B2B). The business-to-business (B2B) model represents interorganizational information systems in which a company handles transactions within its own
value chain or with other businesses and organizations.
Business-to-consumer (B2C). The business-to-consumer (B2C) model represents

retailing transactions between a company and individual customers.
57
Consumer-to-consumer (C2C). The consumer-to-consumer (C2C) model represents

individuals who are selling and buying directly with each other via a Web site.
3.10.2 The key features of E-commerce

Most of us have become so used to the Internet that we take it for granted. Lets look at the factors that
make e-commerce so different from anything weve seen before.
Ubiquity: 24/7 365 days a year, anytime, anywhere. New market spaces change the balance of
power from being business-centric to customer-centric. Transactions costs for both businesses and
customers are reduced.
Global Reach: The Internet opens markets to new customers. If you live in New York City and yearn
for fresh Montana-grown beef, you can order it from a Web site and receive it the next day. You benefit
from new markets previously not available, and the Montana rancher benefits from new customers
previously too expensive to reach.
Universal standards: One of the primary reasons e-commerce has grown so quickly and has become
so wide-spread is due to the universal standards upon which the technology is built. Businesses dont
have to build proprietary hardware, software, or networks in order to reach customers thereby keeping
market entry costs to a minimum. Customers can use the universally accepted Internet tools to find
new products and services quickly and easily thereby keeping search costs to a minimum. It truly is a
win-win situation for both sides.
Richness:
The richness of information available to customers, coupled with information that
merchants are able to collect about them, is opening up new opportunities for both businesses and
consumers. Consumers can access more information than was previously available and businesses
collect more information than they were previously able to. Now, instead of trying to gather information
about businesses or consumers from multiple sources, both parties can use the Internet to cobble
together more information than ever. And do it much easier and faster than ever before.
Interactivity: E-commerce originally presented simple, static Web sites to customers with limited
possibilities of interactivity between the two. Now, most major retailers and even small shops, use a
variety of ways to communicate with customers and create new relationships around the globe.
58

Information Density: While many people complain about having too much information pouring from
the Internet, it provides information density like no other medium.
Consumers enjoy price
transparency allowing them to comparison shop quickly and easily. Cost transparency is another
benefit consumers enjoy that theyve never had available as readily as what they can find on the
Internet. On the other hand merchants gather much more information about customers and use it for
price discrimination.
Personalization/Customization: The neighbourhood merchant probably knows most customers by
name and remembers their personal preferences. That same comfortable relationship can now be
extended to the Internet through a variety of personalization and customization technologies.
Interactivity, richness, information density, and universal standards help make it possible.
Social Technology: User Content Generation and Social Networking: Social networks are no
longer limited to those people living in your immediate, physical neighbourhood or even the same town
or city. Your social network can now extend to all four corners of the world. More and more content is
being generated by users like video, audio, graphics, and pictures.
59
Suggested answers
1. Do you think that the introduction of client/server system has been worthwhile to
businesses?
This question is a straight analysis of the business benefits compared to the disadvantages of
client/server system. It is a specific instance of a general issue facing businesses with the introduction
of any new technology. Client/server system can be compared to a previous situation in a business
where the PCs are not networked or more likely, a mainframe is used with character-based dumb
terminals.
The key benefits of client/server system are as follows:
The cost-reduction available through downsizing to lower-cost hardware and software
Improved flexibility for the end users to deploy specialised applications and to write their own
applications using tools such as MS Excel or Access
Improved ease of use on the client side since traditional applications tend to be character based
rather than using a WIMP interface (Chapter 4)
The main disadvantages are as follows:
The cost-reduction argument is not clear. The experience of implementing client/server system is
that although the purchase price of hardware and software may be lower, the lifetime or total cost
of ownership (TCO) may be higher. Much analysis of TCO has been conducted by the Gartner
Group (www.gartner.com) and is briefly referred to in Chapter 16. The high TCO of client/server
systems arises from the cost of supporting them; since it is easy to modify the configuration, it is
also possible to stop applications working.
60

This problem is compounded by the range of networking drivers and software applications that are
available from different vendors. In a traditional mainframe environment, the software would
typically be sourced from a smaller number of vendors.
The stability or reliability of client/server system is questionable. There are many examples of
client/server
system
failures
mentioned
in
the
UK
trade
papers
such
as
www.computerweekly.co.uk and www.computingnet.co.uk. A recent example is that of the rollout of a UK-wide system for the National Westminster bank that is based on Windows NT. This
rollout has experienced technical difficulties resulting from software incompatibilities.
The control and administration of traditional mainframe systems tend to be easier since they are
more centralised, with less opportunity for the end user to configure the software. This is similar to
the TCO argument.
The security of client/server systems may be less robust than mainframe systems.
System designers are still learning about the best way to construct client/server systems. Early
implementations tended to be error prone and difficult to maintain since two-tier architecture had
been adopted in which the application logic and data access routines are mixed with the program
code for interacting with the user.
Many of the disadvantages of client/server systems result from the relatively new introduction of
client/server techniques in the late 1980s and 1990s. Mainframe technology has been in existence for
30 years and many of the mistakes currently being made with client/server systems have already been
learned by companies and rectified for mainframes. This is true for many new technologies. For
example, both UNIX and Windows NT operating systems can be used as a basis for developing
client/server, but UNIX has a reputation for being more secure and reliable since it has existed longer.
So it can be argued that some of the disadvantages of client/server systems are greater if the Windows
NT environment is used for the implementation.
Since there is no clear cost-reduction argument either way, the overall balance in this discussion is
governed by how important a business considers the improved usability and flexibility of client/server
systems are in comparison to the likelihood of poorer reliability and control.
61

Students should consider figures on the adoption of client/server systems. Since many businesses
have now adopted them it could be argued that the business benefits are clear, but there are still many
disadvantages inherent in deploying client/server systems.
2. There are many possible benefits of company-wide networks. Is it possible for them to be
achieved without changing working practices?
Discussion of this issue can be in two main parts a brief review of the benefits and disadvantages of
adopting networks. The benefits are mentioned in Essay question 1 below.
The principal disadvantages are the cost and potential disruption during implementation and the need
to change working practices. This discussion should focus on the disruption and the changed working
practices.
The arguments in favour of the need to change working practices are based on taking advantage of the
new technology. Gains to the business will not occur if existing bad practices are continued. Reasons
for the need for change in practices include the following:
New software systems will often be introduced as part of the installation of a network. This might
include tools such as e-mail or groupware, or enterprise resource planning (ERP) software
(Chapters 6 and 14). Such software will often require new working practices. For example, e-mail
will only work effectively for a business if there are guidelines stating it is used in preference to
paper or ensuring replies within a set period. This is particularly true for e-mails received from
customers a company could introduce a rule stating that each e-mail should be replied to within
two days. ERP software may require new business structures to be adopted as part of a business
process redesign exercise (Chapter 14).
A network can be used to help a company move towards a paperless office. This will only occur if
there is management commitment to this. If commitment does not occur, the advantages of the
network may be wasted.
62
A network can also help promote teamwork in an organisation using groupware (Chapter 6) and
intranets (Chapter 16). These help the staff to collaborate, communicate and work in new ways. For
example, the need for travel to meetings can be reduced through the use of videoconferencing and
discussion forums.
A change in purchasing policy is needed in buying shared devices such as printers, rather than
purchasing them by individual departments.
Arguments against changing working practices are weak, but could include the following:
The cost of training and disruption
The risk of the new working practices being resented by staff.
3. Discuss the merits and disadvantages of locating company e-business services inside a
company, in comparison with outsourcing to an ISP or ASP.
Select particular type(s) of e-business services to refer to in answering this question, e.g. site
hosting, e-mail management for questions and accounting packages.
Review the benefits of external location: maintenance costs, expertise, responsiveness to short
term problems, e.g. a new virus and longer-term technological trends.
Review the benefits of internal location: control and security.
Assess the benefits and risks overall.
Case Study 5.1: Finders keepers

1. Discuss the benefits and limitations of RFID technology.
Benefits:
Decreasing cost
Requires no line of sight between tag and reader.
63
Allows tracking and monitoring of virtually everything that moves.
Provides real-time information on movement of stock in supply chain permitting quick response.
Disadvantages:
Costly compared to bar codes.
Limited range between tag and reader.
64
PART 4
OPERATIONAL EXCELLENCE AND CUSTOMER
INTIMACY: ENTERPRISE SYSTEMS
65

Identify and describe the major components of an enterprise system.
Explain how enterprise systems help businesses achieve operational excellence
Explain enterprise resource planning, its advantages, disadvantages, business value, the
challenges and trends.
Discuss the role of supply chain management, its benefits and also the challenges.
Explain the trends in supply chain management.
Discuss the role of customer relationship management (CRM), the phases in CRM its benefits and
also the challenges.
Comment on the applications of CRM.
Discuss the role of Supplier Relationship Management (SRM) with regards to procurement
Outline the benefits and barriers of SRM
66

4.1
INTRODUCTION
The value of Business information systems (BIS) to an organisation is dependent on how the hardware,
software and network technologies described in the previous chapters are applied to support the
organisations objectives. This is achieved through deployment of specific business applications that
support different organisational processes and functions.
This chapter considers enterprise systems and their major components of enterprise resource
planning (ERP), supply chain management (SCM) customer relationship management (CRM) and
supplier relationship management (SRM).
4.2
WHAT IS MEANT BY ENTERPRISE SYSTEMS?
Enterprise systems aim to support the business processes of an organisation across any
functional boundaries that exist within that organisation.
4.3
BUSINESS VALUE OF ENTERPRISE SYSTEMS
Done correctly, enterprise systems can offer big rewards. Conversely, done incorrectly can cause firm
huge headaches, loss of business, employee turmoil, and wasted dollars.
The changes in the enterprise will be tremendous:
Management:
improved management decision making, with a comprehensive view of
performance across all functional areas.
More efficient operations and customer-driven business processes: all functional areas
can focus more on the customer and respond to product demand more efficiently.
A more uniform organization: a more disciplined approach to business throughout the entire
firm, regardless of physical location and/or organizational structure.
Bottom Line: Enterprise systems force a company to fully integrate all business processes. These
systems usually require massive changes in the structure and organization of a business and are
difficult to implement. However, the changes can make a tremendous improvement in a firm by using
the best practices of the industry and requiring all functional areas to focus more on the customer.
67

4.4
WHAT IS ENTERPRISE RESOURCE PLANNING (ERP)?
Enterprise resource planning (ERP) systems serve as a cross-functional enterprise backbone that
integrates and automates many internal business processes and information systems within the
manufacturing, logistics, distribution, accounting, finance, and human resource functions of a company.
Additional Reading
Remember ERP is a business operating system. Make sure that you understand this concept as it
forms a crucial part of E-business. Please note the definition on p.232 of Bocij et al.
4.4.1
Characteristics of ERP software include:
ERP software is a family of software modules that supports the business activities involved in vital
back-office processes.
ERP is viewed as a necessary ingredient for the efficiency, agility, and responsiveness to
customers and suppliers that an E-business enterprise needs to succeed in the dynamic world of Ecommerce.
4.4.2
Business value of ERP software:

ERP creates a framework for integrating and improving back-office systems which results in
major improvements in customer service, production, and distribution efficiency.
ERP provides vital cross-functional information quickly on business performance to managers

to significantly improve their ability to make better business decisions across the enterprise.
4.4.3
Advantages of ERP
Integration of all internal and external processes resulting in increased efficiency and quality of
customer service
Better sharing of information within the organisation due to integration of modules leading to
better decision making and a more agile organisation
68
Additional Reading
Read the mini case study Did it work? Huge benefits from tidying up on page 234 of Bocij et al.
Simplified support and maintenance through a single supplier rather than dealing with many
legacy systems
Use of best-of- breed ERP solution applied by other companies.
The main disadvantage of ERP systems are:
High costs charged by suppliers for what is a large complex system.
Implementation of the major organisational change required by these systems-a major

planning, training and development effort is needed to successfully introduce a system that will
radically change both the information systems and business processes of the organisation.
Additional Raeding
Read the mini case study Workforce complain of too little training on page 235 Bocij et al.
4.4.4
The Cost of ERP
Costs and risks involved in implementing ERP are considerable.
Hardware and software costs are a small part of the total costs. The cost of developing new
business processes (reengineering) and preparing employees for the new system (training and
change management) make up the bulk of implementing a new ERP system.
Converting data from previous legacy systems to the new cross-functional ERP system is another
major category of ERP implementation costs.
4.4.5
Causes of ERP Failures:
Business managers and IT professionals underestimate the complexity of the planning,

development, and training that are needed to prepare for a new ERP system that would radically
change their business processes and information systems.
69
Failure to involve affected employees in the planning and development phases and change
management programs
Trying to do too much too fast in the conversion process.
Insufficient training in the new work tasks required by the ERP sys4em.
Failure to do enough data conversion and testing.
Over reliance by company or IT management on claims of ERP software vendors.
4.4.6
Trends in ERP
Four major developments and trends that are evolving in ERP applications include:
ERP software packages are gradually being modified into more flexible products.
In relation to the growth of the Internet and corporate intranets and extranets prompted software
companies to use internet technologies to build Web interfaces and network capabilities into ERP
systems.
Development of inter-enterprise ERP system that provide Web-enabled links between key business
systems of a company and its customers, suppliers, distributors, and others.
ERP software companies have developed modular, Web-enabled software suites that integrate
ERO, customer relationship management, supply chain management, procurement, decision
support, enterprise portals, and other business applications and functions.
Additional Reading
For further reading on ERP: Turn to pp. 232-236 of Bocij et al.
ACTIVITY
Attempt Self-assessment Question 1 on p. 271 of Bocij et al.
4.5
SUPPLY CHAIN MANAGEMENT (SCM)
As mentioned earlier, another major component of enterprise systems is supply chain management
(SCM).
70

4.5.1
What is meant by Supply chain?
The supply chain consists of the series of activities that moves materials from suppliers, through the
organisation to customers. A representation of the structure of a supply chain is shown in the figure
below .
Figure 4.1: The structure of a supply chain

4.5.2
What is meant by Supply chain management?
Supply chain management and logistics are terms used to refer do the management of the flow of
materials through the entire supply chain. The following figure gives an overview of the terms used to
describe the management of the supply chain.
71

Figure 4.2: terms used to describe the management of the supply chain

Terms used in the supply chain management are:
Upstream suppliers: Suppliers that supply the organisation with goods or services.
Downstream customers: customers of the organisation such as wholesalers and retailers.
Inbound logistics: the activities of moving material in from supplier.
Outbound logistics: the activities of moving material to customers
Materials management: the movement of materials within the organisation.

Bullwhip effect
This effect occurs when there is a lack of synchronisation between supply chain members. Even a
slight change in consumer sales will ripple backwards in the form of magnified oscillations in demand
upstream described `bove
4.5.3
THE ROLE OF SCM
SCM supports the objectives of the top three management levels of an organisation (strategic, tactical,
and operational). The role of information technology in SCM is to support these objectives with interenterprise information systems that produce many of the outcomes a business needs to effectively
manage its supply chain.
72

Supply chain management is a cross-functional inter-enterprise system that uses information
technology to help support and manage the links between some of a companys key business
processes and those of its suppliers, customers, and business partners. The goal of SCM is to create a
fast, efficient, and low-cost network of business relationships, or supply chain, to get a companys
products from concept to market.
4.5.4
BENEFITS AND CHALLENGES OF SCM
Major business benefits that are possible with effective supply chain management systems include:
Faster, more accurate order processing, reductions in inventory levels, quicker time to market,
lower transaction and materials costs, and strategic relationships with suppliers.
Companies can achieve agility and responsiveness in meeting the demands of their customers and
the needs of their business partners.
Major business challenges include:
Lack of proper demand planning knowledge, tools, and guidelines is a major source of SCM failure.
Inaccurate or overoptimistic demand forecasts will cause major production, inventory, and other
business problems, no matter how efficient the rest of the supply chain management process is
constructed.
Inaccurate production, inventory, and other business data provided by a companys other
information systems are frequent causes of SCM problems.
Lack of adequate collaboration among marketing, production, and inventory management

departments within a company, and with suppliers, distributors, and others.
SCM software tools are considered to be immature, incomplete, and hard to implement by many
companies who are installing SCM systems.
4.5.5
TRENDS IN SCM
Three possible stages in a companys implementation of SCM systems.
First stage a company concentrates on making improvements to its internal supply chain
process and its external processes and relationships with suppliers and customers.
Second stage a company accomplishes substantial supply chain management applications by

using selected SCM software programs internally, as well as externally via intranet and extranet
links among suppliers, distributors, customers, and other trading partners.
73
Third stage company begins to develop and implement cutting-edge collaborative supply chain
management applications using advance SCM software, full-service extranets links, and private
and public e-commerce exchanges.
ACTIVITY
Attempt Self-assessment Question 3 on p. 271 of Bocij et al.
4.6
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
As mentioned earlier, another major component of Enterprise systems is customer relationship

management (CRM).
Customer-focused business is one of the top business strategies that can be supported by information
technology. Many companies are implementing customer relationship management (CRM) business
initiatives and information systems as part of a customer-focused or customer centric strategy to
improve their chances for success in todays competitive business environment.
4.6.1
What is meant by CRM?
CRM is described as a cross-functional E-business application that integrates and automates many
customer-serving processes in sales, direct marketing, accounting and order management, and
customer service and support.
CRM systems create an IT framework that integrates all the functional processes with the rest of a
companys business operations.
CRM systems consist of a family of software modules that perform the business activities involved
in such front office processes.
CRM software provides the tools that enable a business and its employees to provide fast,
convenient, dependable, and consistent service to its customers.
It is important to bear the following in mind:
It costs six times more to sell to a new customer than to sell to an existing one.
A typical dissatisfied customer will tell eight to ten people about his or her experience.
A company can boost its profits 85 percent by increasing its annual customer retention by only 5
percent.
The odds of selling a product to a new customer are 15 percent, whereas the odds of selling a
product to an existing customer are 50 percent
74
Seventy percent of complaining customers will do business with the company again if it quickly
takes care of a service snafu.
More than 90 percent of existing companies do not have the necessary sales and service integration to
support E-commerce.
4.6.2
CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SYSTEMS
Further reading
Study Paragraph on CRM Systems on page 241 Bocij et al.
CRM systems are built around a database and when this database is accessed by employees and
customers using a website the technology is often referred to as e-CRM. Common applications which
would be integrated in a CRM system include:
Customer data collection: This includes personal details such as age, sex and contact address and
also a record of purchase transactions undertaken
Customer data analysis: The captured data allow the categorisation and targeting of customers
according to criteria set by the firm. This information can be useful for marketing campaigns.
Salesforce automation: The entire sales cycle from lead generation to close of sale and after-sales
service can be facilitated using CRM.
CRM programmes typically include:
Sales. CRM software tracks customer contacts and other business and life cycle events of
customers for cross-selling and up-selling.
Direct Marketing and Fulfilment. CRM software can automate tasks such as qualifying leads,
managing responses, scheduling sales contacts, and providing information to prospects and
customers.
Customer Service and Support. CRM helps customer service managers quickly create, assign,
and manage service requests. Help desk software assists customer service reps in helping
customers whom are having problems with a product or service, by providing relevant service data
and suggestions for resolving problems.
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Examples of business benefits of customer relationship management include:
CRM allows a business to identify and target their best customers; those who are the most
profitable to the business, so they can be retained as lifelong customers for greater and more
profitable services.
CRM enables real-time customisation and personalisation of products and services based on
customer wants, needs, buying habits, and life cycles.
CRM can keep track of when a customer contacts the company, regardless of the contact point.
CRM enables a company to provide a consistent customer experience and superior service and
support across all the contact points a customer chooses.
The three phases of CRM

CRM can be viewed as an integrated system of Web-enabled software tools and databases
accomplishing a variety of customer-focused business processes that support the three phases of the
relationship between a business and its customers.
Acquire a business relies on CRM software tools and databases to help it acquire new
customers by doing a superior job of contract management, sales prospecting, selling, direct
marketing and fulfilment. The goal of these CRM functions is to help customers perceive the value
of a superior product offered by an outstanding company.
Enhance Web-enabled CRM account management and customer service and support tools help
keep customers happy by supporting superior service from a responsive networked team of sales
and service specialists and business partners. CRM sales force automation and direct marketing
and fulfilment tools help companys cross-sell and up-sell to their customers, thus increasing their
profitability to the business. The value perceived by customers is the convenience of one-stop
shopping at attractive prices.
Retain CRM analytical software and databases help a company proactively identify and reward
its most loyal and profitable customers to retain and expend their business via targeted
marketing and relationship marketing programs.
o The value perceived by customers is of a rewarding personalized business relationship
with their company.
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4.6.4
BENEFITS AND CHALLENGES OF CRM
CRM allows a business to identify and target their best customers; those who are the most
profitable to the business, so they can be retained as lifelong customers for greater and more
profitable services.
CRM enables real-time customization and personalization of products and services based on
customer wants, needs, buying habits, and life cycles.
CRM can keep track of when a customer contacts the company, regardless of the contact point.
CRM enables a company to provide a consistent customer experience and superior service and
support across all the contact points a customer chooses.
CRM Failures:
Major reason for the failure of CRM systems is the lack of understanding and preparation.
4.6.5
TRENDS IN CRM
Four types or categories of CRM that are being implemented by many companies today include:
Operational CRM most businesses start out with operational CRM systems such as sales force
automation and customer service centres.
Analytical CRM analytical CRM applications are implemented using several analytical marketing
tools, such as data mining, to extract vital data about customers and prospects for targeted
marketing campaigns.
Collaborative CRM CRM systems to involve business partners as well as customers in

collaborative customer service.
Portal-based CRM Internet, intranet, and extranet Web-based CRM portals as a common
gateway for various levels of access to all customer information, as well as operational, analytical,
and collaborative CRM tools for customers, employees, and business partners.
ACTIVITY
Attempt Discussion Question 1 on p. 271 of Bocij et al.
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4.7
SUPPLIER RELATIONSHIP MANAGEMENT (SRM)
4.7.1 What Is Meant By Supplier Relationship Management (SRM)?

Supplier Relationship Management (SRM) refers to all activities involved with obtaining items from a
supplier, which includes procurement, but also inbound logistics such as transportation and
warehousing.
Procurement is an important aspect of SRM as the cost of materials can represent a substantial amount
of the total cost of a product or service. Another issue that has increased the importance of
procurement is that the efficient use of automated systems requires a high quality and reliable source of
materials to be available. This is also the case with the adoption of production planning systems such
as JIT which require the delivery of materials of perfect quality, at the right time and the right quantity.
Figure 4.3: Steps in the procurement process.
DIAGRAM
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Additional Reading
Study Paragraph on SRM on page 243 and Figure 6.7 on page 243 of Bocij et al., relating to the steps
in the procurement process.
Refer to Mini case study Lloyds TSB Banks on SAP SRM on page 244 of Bocij et al., for a better
understanding of e-procurement
4.7.2
Advantages of SRM
SRM can achieve significant savings and other benefits which directly impact the customer
including faster purchase cycle times leading to a need for less material in inventory and less
staff time spent in searching and ordering products and reconciling deliveries with invoices.
SRM enables greater flexibility in ordering goods from different suppliers according to best
value.
SRM allows the integration of the many information systems that are used to cover different
parts of the SRM process.
4.7.3
Disadvantages of SRM
The major barrier to the use of SRM is in the difficulty of linking systems with suppliers whose
systems may be incompatible or non-existent.
Additional Reading
For further reading on SRM, study Paragraph on SRM on page 243 of Bocij et al.
79
ANSWERS TO SELF-ASSESSMENT QUESTIONS

1. What is the difference between an enterprise system and an enterprise resource planning
(ERP) system?
Enterprise systems and ERP can refer to the same concept. In this text the term enterprise system
refers to a collection of systems that aims to support business processes across functions within an
organisation. ERP is one of these systems that deals with internal production, distribution and financial
processes. Other enterprise systems include customer relationship Management (CRM), supply chain
management (SCM), supplier relationship management (SRM) and product lifecycle management
(PLM).
3. How can information systems support the manufacturing process?
Support for the manufacturing process includes:
Production planning and materials management* Information is provided in the progress of work
through the manufacturing system in relation to the due date for a customer order. Enables plans to
be developed for resources (e.g. labour, materials and equipment) needed for production and to
schedule order and quantity of components on a day-to-day basis. Materials management
approaches include Materials requirements planning (MRP), Just-in-time (JIT) and optimised
production technology (OPT).
Product/service design. A database of information required for aspects such as customer needs
and material costing for the design process, Computer-aided design (CAD) provides graphic design
assistance.
Facility design. Software allows the use of the statistical process control (SPC) technique for quality
control.
Computer integrated manufacture (CIM). Provides a range of facilities coordinated over a network
system using the manufacturing automation protocol (MAP).
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ANSWERS TO DISCUSSION QUESTIONS
1. Discuss the concept of customer relationship management (CRM).
CRM covers the whole process by which relationships with Customers are built and maintained. CRM
systems are designed to integrate the range of information systems that contain information regarding
the customer. These include applications such as customer details and preference databases, sales
order processing applications and sales force automation. The idea is to acquire customers, retain
customers and increase customer involvement with the organisation.
Common applications which would be integrated in a CRM system include the following:
Customer data collection: This can include personal details such as age, sex and contact address also
a record o& purchase transactions undertaken in terms of factors such as location, date, time, quantity
and price. This information can be used by call centre staff to improve and tailor their services to
individual customers.
Customer data analysis: The captured data allows for the categorisation and targeting of customers
according to criteria set by the firm. This information can be used to improve the effectiveness of
marketing campaign.
Salesforce automation: The entire sales cycle from lead generation to close of sale and after sales
service can be facilitated using CRM.
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PART 5
INFORMATION SYSTEMS IN PERSPECTIVE
82

explain the features of the different information systems;
discuss how Management Information System (MIS), Decision Support System (DSS), Group
Decision Support System (GDSS), Executive Information System(EIS) Geographic Information
System(GIS) and Expert System (ES), can support different parts of an organisation;
explain the decision types and their relation to different types of system.
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5.1
INTRODUCTION
Information systems fall into the categories of Management Information Systems (MIS), Decision
Support System (DSS), Executive Information System, or Expert System. Any specific system can
have a mix of their features. The design features to incorporate into an information system should be
chosen based on the communication and decision-making requirements of the managerial users.
This unit deals with the features and benefits that the different systems entail. Further the section gives
an overview of how different systems support the activities of a business organisation and also the
classifications of decisions by decision types and their relation to different types of system.
5.2
WHAT ARE MANAGEMENT INFORMATION SYSTEMS?
Management Information systems are defined as systems providing feedback on organisational

activities and supporting managerial decision making.
5.2.1
The features of management information systems (MIS) are:

MIS support structured and semi-structured decisions at the operational and management
control levels. They can also be useful for planning purposes of senior management;
5.3
MIS are generally reporting and control oriented;
MIS information products include pre-specified reports and displays;
MIS rely on existing corporate data and data flow;
MIS have little analytical capability;
MIS generally aid in decision-making using past and present data;
MIS are relatively inflexible;
MIS have an internal rather than an external orientation; and
Information requirements are known and stable.

DECISION TYPES
The identification of problems according to their degree of structure dates back to Garry and ScottMorton (1971) but it still provides a useful framework for defining decision types. Figure 5.1 indicates
that at the operational level, structured decisions predominate. Decision Support systems are mainly
used to support the tactical, semi-structured decisions that need to be made as part of the evaluation
and planning of the business. Executive information systems are targeted at strategic decision making,
which often involves unstructured decisions.
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(Source: Bocij et al 2008:259)
Additional Reading
Read through the paragraph Management Information Systems (MIS) and Decision Types on page
258 of Bocij et al.
5.4
WHAT IS DECISION SUPPORT SYSTEMS (DSS)?
DSS provide information and models in a form to facilitate tactical and strategic decision making.
5.4.1
The features of DSS are:
DSS offer users flexibility, adaptability and quick response;
DSS allow users to initiate and control input and output;
DSS operate with little or no assistance from professional programmers;
DSS provide support for decisions on the semi-structured and unstructured levels whose
solutions cannot be specified in advance; and
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DSS use sophisticated analysis and modelling tools.
Models are an important component of decision support systems. A model can be defined as a
simplified abstraction of reality that illustrates the fundamental components and relationships of a
system or other phenomena. Models can be physical, verbal, graphical or mathematical.
Further reading
For further reading on Decision Support Systems (DSS): turn to pp. 259-262 of Bocij et al.
The software resources needed by decision support systems should integrate the management and
use of the model bases, databases, and dialogue generation capabilities of a DSS. DSS software
resources should support the following capabilities:
Dialogue management: DSS software provides an attractive user interface that supports the
dialogue between an user and the DSS which are vital for the interactive analytical modelling
needed (commands, menus, icons etc.).
Model base management: DSS software supports the development, storage, retrieval,
revision, and control of the models in a DSS model base. It also help linking models together to
construct integrated models, and supports the analytical modelling needed to assist the
decision making process.
Database management: The creation, use, and maintenance of a DSS database are
accomplished by database management software. It helps define and modify the structure of
the data records and relationships in the database, the storage and retrieval of data, the
updating of the database, and the control of the integrity of the database.
Further reading
Turn to p.260 of Bocij et al. and refer to where DSS software is discussed in the paragraph of DSS
Components.
Refer to the suggested answers at the end of the study unit.
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5.5
GROUP DECISION SUPPORT SYSTEMS (GDSS)
Group decision support systems (GDSS) are designed to improve the productivity of decisionmaking meets by enhancing the dynamics of collaborative work. The GDSS also includes specific
communication-oriented software tools that support the development and sharing of ideas.
5.6
GEOGRAPHIC INFORMATION SYSTEMS (GIS)
A geographic information system (GIS) is a special type of decision support system designed to
work with maps and other spatial information. A GIS is used to support a wide variety of managerial
decisions that involve geographic information.
5.7
EXECUTIVE INFORMATION SYSTEMS (EIS)
The features of EIS are:
executive workstations in an EIS are typically networked to mainframe or microcomputer

systems or LAN servers for access to EIS software;
EIS packages work with telecommunications and database management software to provide
easy access to internal, external, and special databases with almost instantaneous response
times;
EIS provide information about the current status and projected trends regarding a companys
critical success factors, as determined by its top management;
an analytical modelling capability to evaluate alternatives for DSS is also available; and
information is presented in forms tailored to the preferences of the executive using the system.
Further reading
For further reading on Executive Information Systems (EIS): turn to Bocij et al., pp. 263-264.
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ACTIVITY
Do you use DSS or EIS in your work environment? Explain.
If you do not use support systems at this stage, contact the information systems department
and ask them what support tools are available that could help you in your decision making role.
5.8
Answer essay questions 2 (Bocij et al., p. 271).
ENTERPRISE PORTALS AND DECISION SUPPORT
Major changes and expansion are taking place in traditional MIS, DSS, and EIS tools for providing the
information and modelling that managers need to support their decision making. Some of these
changes include:
Decision support in business is changing, driven by rapid developments in end user computing and
networking; Internet, web browser, and related technologies, and the explosion of E-commerce
activity.
Growth of corporate intranets, extranets, as well as the Web, has accelerated the development and
use of executive class information delivery and decision support software tools by lower levels of
management and by individuals and teams of business professionals.
Dramatic expansion of E-commerce has opened the door to the use of such E-business DSS tools
by the suppliers, customers, and other business stakeholders of a company for customer
relationship management, supply chain management, and other E-business applications.
Enterprise information portals are being developed by companies as a way to provide webenabled information, knowledge, and decision support to executives, managers, employees,
suppliers, customers, and other business partners.
Enterprise information portals are described as a customized and personalized web-based
interface for corporate intranets, that give users easy access to a variety of internal and external
business applications, databases, and services.
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Enterprise information portal is the entry to corporate intranets that serve as the primary
knowledge management systems for many companies. They are often called enterprise
knowledge portals by some vendors. Knowledge management systems are defined as the use of
information technology to help gather, organize, and share business knowledge within an
organisation.
Enterprise information portals can play a major role in helping a company use its intranets as
knowledge management systems to share and disseminate knowledge in support of its business
decision-making.
5.9
EXPERT SYSTEMS
An expert system (ES) supports decision making by providing managers with access to
computerized expert knowledge. An ES is designed to replicate the decision-making process of a
human expert. Todays expert systems are based on years of artificial intelligence (AI) research
devoted to replicating elusive human cognitive abilities in machines.
A knowledge base is similar to the database component in an MIS or a DSS. In addition to facts, a
knowledge base contains a system of rules for determining and changing the relationship between
those facts.
Along with the knowledge base, an ES includes a user interface and an inference engine. The
inference engine combines the user input with the knowledge base, applies logical principles, and
produces the requested expert advice.
Expert systems are difficult to build. To simplify the process, many software companies sell expert
system shellsgeneric expert systems containing human interfaces and inference engines. These
shells do not include the difficult-to-create knowledge base. A knowledge engineera specialist who
interviews and observes experts and converts their words and actions into the knowledge base
usually constructs the knowledge base.
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THINK POINT
Some modern expert systems are organized as blackboard systems.
In a blackboard model, the task of expert decision-making is broken
down into three basic components. One is a knowledge base, often
composed of several mini-experts on related topics. The second part
is a control module that carries out the recognise-act feedback cycle that
drives the system. The final part is the blackboard itself, a working area
of memory that the system can use for storing intermediate results.
ACTIVITY
Answer essay questions 2 on 271 of Bocij et al.
5.10
ELECTRONIC DATA INTERCHANGE (EDI)
EDI is one of the most important developments in the world. Electronic trade is the revolution of the
future and a lot of overseas trade is done by means of telecommunications and the use of electronic
data interchange and electronic funds transfer. The main concern is that South Africa is lagging behind
the rest of the world in using this technology. It is, therefore, one of the major challenges of the modern
South African manager to use this technology to gain a competitive advantage. If not, your organisation
could suffer significantly.
Electronic data interchange (EDI) involves the electronic exchange of business transaction
documents over the Internet and other networks between supply chain trading partners (organisations
and their customers and suppliers). Data representing a variety of business transaction documents are
electronically exchanged between computers using standard document message formats.
5.10.1 Characteristics of EDI software include:
EDI software is used to convert a companys own document formats into standardized EDI formats
as specified by various industry and international protocols.
Formatted transaction data are transmitted over network links directly between computers, without
paper documents or human intervention.
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Besides direct network links between the computers of trading partners, third-party services are
widely used.
EDI eliminates the printing, mailing, checking, and handling by employees of numerous multiplecopy forms of business documents.

5.10.2 The benefits of EDI are numerous.
It allows the transmission of data without paper documents or human intervention. EDI can help
the organisation to:
eliminate the handing of numerous multiple-copy forms of business documents by employees;
reduce paper, postage, and labour costs;
speed up the flow of transactions;
reduce errors;
increase productivity;
provide a just-in-time (JIT) inventory policy;
reduce inventory levels; and
provide better customer service.

EDI may also provide strategic benefits by helping the organisation to lock in customers, making it
easier for customers or distributors to order from them rather than from competitors. Another possibility
with excellent strategic benefits, is when an organisation provides EDI and material requirements
planning (MRP) links to its customers and suppliers. With the EDI and MRP links, the organisation can
download information daily from its manufacturers and distributors, yet the other organisations can
process their own information locally. These links can lay the foundation of accurate forecast or a justin-time (JIT) system.
Further reading
For further reading on EDI: Turn to pages 218-219 of Bocij et al.
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ACTIVITY
Does your organisation make use of EDI?
What are the benefits and limitations that your organisation experiences?
Suggested answers
Answers to Essay Questions
2. Review the changing tools available for decision making at a strategic level within the
organisation. What does this mean for senior managers?
There is a move away from executive information systems (EIS) to the use of online analytical
processing (OLAP) to interrogate data warehouses. Question 2 in the Discussion questions section
discusses whether or not this represents a genuine change in facilities available to users. For senior
managers there is now a greater choice of tools available. The data warehouse provides the facility in a
single system to analyse data from across an organisation and drill down to identify the source of
problems. Such facilities were not always available in earlier generations of EIS.
3. Was the promise of expert systems in the 1980s delivered in the 1990s? Justify your answer.
Expert systems have not widely replaced human experts in many fields as had been envisaged. It has
been found difficult to match the flexibility of humans. Expert systems are most relevant to complex
problems in a well-defined subject area, such as assessing the credit risk of a loan applicant. The
justification is that ES are not used in the majority of businesses.
Which information systems tools can be used to support the marketing function?
Marketing information systems include:
Sales information systems. Employees involved in the sales area are required to identify potential
customers, negotiate the sale of goods and services with those customers and provide a follow-up
service. Systems are available to support each of these tasks. Prospect information systems provide
lists of potential customers by categories such as product range or geographic area.
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Distribution information systems. Speed of delivery is often an important aspect of service to the
customer. In order to ensure this, it is important that tracking systems that can locate products during
the distribution process are in place.
Sales order processing (SOP) systems. The sales order processing (SOP) system is usually based in
the financial area and provides a variety of data that can be used for marketing purposes such as
assessing the timing and value of orders from customers. These can be used for applications such as
sales forecasting, which is a major input into the sales planning process. Other data supplied by the
SOP system include inventory levels. If inventory levels are high, then this might trigger a discount
programme for a particular product line.
Sales and campaign management information systems. The sales management information system
provides information in support of decision making at the tactical level. It will hold information on such
aspects as sales performance by geographical area, by product group and by sales person. This
information can be used to determine sales effort in different areas and products and level of bonus
payments to an individual sales person. The data can also be used to investigate the strength of
relationship between such factors as customer types and product sales. This information can be used
as the basis for a marketing plan based around advertising and promotion scheme aimed at a particular
customer segment (e.g. targeting designer label drinks at people in the 1825 age range).
Product pricing information systems. The price of a product will be dependent on a variety of factors
such as the cost of producing the product or providing the service, the required profit margin and the
price of competitors goods. The price may also be affected by a marketing strategy to build market
share by lowering the price. The product pricing information system will collate information on costs and
predicted market demand at different price points and discounts in order to support the pricing decision.
More sophisticated software in the form of a pricing model enables the user to input various market and
product attributes, and provides a suggested price on the basis of relationships formalised in the model.
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Sales forecasting information systems. At a strategic level it is necessary to provide sales forecast data
in order to help form the long-range strategic plan. Sales forecast data is essential so that demands can
be met and resources employed in the correct areas. For instance, marketing needs to inform other
functions such as operations of a predicted demand so that they can organise their resources to meet
this demand. The information system is required because of the range of data that goes into the
forecast and the need to continually update the database in order that the forecast is as accurate as
possible.
Marketing research and analysis information systems. In order to ensure that there is a demand for the
goods and services of the organisation, it is necessary to undertake market research. For a new
product this may include information on demographic changes and customer feedback from
questionnaires and interviews that indicate customer preferences.
Competitive tracking. Knowledge of competitors prices, products, sales and promotions is an important
factor in the development of a marketing strategy. For example, the organisation would need to
consider its reaction to a competitors move to build market
share.
Telemarketing software. This software is designed to dial potential customers automatically based on
customer files maintained in a database. The software will also allow notes to be stored on customer
requests, generate follow-up letters and display information gathered on the customer for reference as
the call is taking place.
Geographical information systems (GIS). GIS are used to display information on maps. Performance of
distribution channels such as branches can be shown by colour coding them. Colour-coded areas on
the map can be used to show variation in the demand from customers for products or the
characteristics of people living in different areas such as average disposable income.
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PART 6
BUSINESS INFORMATION SYSTEM
DEVELOPMENT
95

explain the functions of each step in the System Development Life Cycle (SDLC)
Understand the role of prototyping process, rapid application development( RAD) and end user
system development
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6.1
INTRODUCTION
There are many examples which demonstrate the use of information systems in a variety of disciplines.
A manager at a hotel chain can use an information system to look up client preferences. An accountant
at a manufacturing company can use an information system to analyse the costs of a new plant. A
sales representative can use an information system to determine which goods to order. Information
systems have been designed and implemented for almost every career and industry.
This study unit gives the user an overview how the project can be planned, aligned with corporate
goals, rapidly developed. This chapter gives the user an overview of the system development process.
6.2
OVERVIEW OF SYSTEM DEVELOPMENT
Systems development includes every resource and every step that goes into producing an information
system that solves a problem or helps the organization take advantage of new opportunities.
The systems development process is also called a systems Development life Cycle (SDLC) because
the activities associated with it are ongoing. Several common systems development life cycles exist:
traditional, prototyping, rapid application development (RAD), end-user development and others. In
addition, companies can outsource the systems development process.
Systems development is a problem-solving process of investigating a situation; designing a system
solution to improve the situation; acquiring the human, financial, and technological resources to
implement the solution; and finally evaluating the success of the solution.
After a steering committee determines that a proposed project is desirable, a project team of end users
and systems analysts is formed to develop the system. An end user is a person who will use the
information system or the information it provides. A systems analyst is the IT professional who
develops the system.
Usually the systems analyst is part of the organization. However, the organization sometimes may
choose to contract, or outsource, the systems analyst from an outside consulting firm.
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Many small-scale projects can be developed without the direct involvement of a professional systems
analyst. This approach, called end-user development, is popular in organizations where end users
have access to and training in the use of spreadsheet and database management packages and fourthgeneration languages.
6.2.1 The Systems Development Life Cycle
An information system has a systems development life cycle (SDLC)a sequence of steps or
phases it passes through between the time the system is conceived and the time it is phased out. The
phases of the systems life cycle include: investigation, analysis, design, development, implementation,
maintenance, and retirement.
6.2.1.1
Investigation
System investigation involves defining the problemidentifying the information needs of the
organization, examining the current system, determining how well it meets the needs of the
organization, and studying the feasibility of changing or replacing the current system.
After completing the initial investigation of the problem, a systems analyst produces a feasibility study
to help management decide whether to continue with the system analysis. Types of feasibility are:
Technical.
Economic.
Operational.
Organizational.
6.2.1.2
Analysis
During the analysis phase, the systems analyst gathers documents, interviews users of the current
system (if one exists), observes the system in action, and generally gathers and analyses data to help
understand the current system and identify new requirements. The systems analyst identifies the
requirements related to each subsystem of the proposed system:
Input/output requirements.
Processing requirements.
Storage requirements.
Control requirements.
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6.2.1.3
Design
The investigation phase focuses on why, the analysis phase focuses on what, and the design
phase focuses on how. The systems analyst considers important how-to questions in three
categories:
User interface design.
Database design.
Process design.
In many cases, the design phase produces a prototype systema limited working system or
subsystem to give the users and management an idea of how the completed system will work. With
prototyping, the systems analyst can modify the prototype until it meets the needs and expectations of
the organization.
6.2.1.4
Development
After the design is completed, the actual system development can begin. A large part of the
development schedule is devoted to testing the system. Members of the system development team
perform early testing to locate and eliminate bugs. This initial testing is known as alpha testing. Later,
potential users who are willing to work with almost-finished software perform public beta testing and
report bugs to the developers.
6.2.1.4
Implementation
When the testing is completed and known bugs have been eradicated, the new system is ready to
replace the old one. In some cases, the new system is run in parallel with the old system until the
analyst is confident that the new system is stable and reliable.
The systems analyst can choose one of four approaches for converting to the new system:
Direct cutover.
Parallel systems approach.
Phase-in approach.
Pilot approach.
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6.2.1.5
Maintenance
The maintenance phase involves evaluating, repairing, and enhancing the system. For large custom
systems, maintenance involves a continual process of evaluating and adjusting the system to meet
organizational needs. In either case, maintenance usually lasts throughout the lifetime of the system.
6.2.1.6
Retirement
At some point in the life of a system, ongoing maintenance is not enough. Because of changes
in organizational needs, user expectations, available technology, and other factors, the system
no longer meets the needs of the users or the organization. At that point, its time to phase it
out in favour of a newer system and begin another round of the system life cycle.
6.3 SYSTEMS DEVELOPMENT TOOLS AND TECHNIQUES
6.3.1
Data Collection Techniques
Systems analysts use several data collection techniques, including:
Document review.
Interview.
Questionnaire.
Observation.
Sampling.
6.3.2
Modelling Tools
Modelling tools are graphic representations of a system. Some of the tools are:
A system flowchart is a graphical depiction of the physical system that exists or is

proposed.
A data flow diagram (DFD) is a simple graphical depiction of the movement of data
through a system.
A data dictionary, also called a repository, is a catalog or directory that describes all the
data flowing through a system.
A decision table shows, in a row-column format, the decision rules that apply and what
actions to take when certain conditions occur.
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6.3.3
Computer-Aided Systems Engineering (CASE)
Today, many of the systems development tools and techniques are included in commercially
available software packages referred to as computer-aided systems engineering (CASE).
Most CASE tools software packages include the following:
Charting and diagramming tools.
A centralized data dictionary.
A user-interface generator.
Code generators that automate much of the computer programming.
Further Reading
For further reading on SDLC, turn to p. 286 of Bocij et al.
Self Check Questions

1. Outline and describe the major steps in the systems
development life cycle.
2. Describe the data collection techniques used by systems
analysts.
3. Describe the systems modelling tools used by systems.
6.4
PROTOTYPING
Prototyping is a preliminary version of part of a framework of all of an information system which can be
reviewed by end users. Prototyping is an iterative process where users suggest modifications before
further prototypes and the final information system is built (Bocij et al, 306).
Prototyping is the rapid development and testing of working models, or prototypes, of new
applications in an interactive, iterative process involving both IS specialists and business professionals.
Prototyping makes the development process faster and easier for IS specialists and business
professionals.
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Prototyping makes the development process faster and easier, especially for projects where
end user requirements are hard to define.
Thus, prototyping is sometimes called rapid
application design (RAD).
Prototyping has also opened up the application development process to end-users because it
simplifies and accelerates systems design. These developments are changing the roles of end
users and information systems specialists in systems development.
6.4.1
The Prototyping Process
Prototyping can be used for both large and small applications.
Typically, large e-business systems still require using the traditional systems development
approach, but parts of such systems can frequently be prototyped.
A prototype of a business application needed by an end user is developed quickly using a variety
of application development software tools. The prototype system is then repeatedly refined until it
is acceptable.
Prototyping is an iterative, interactive process that combines steps of the traditional systems
development cycle, and allows the rapid development and testing of a working model.
Further Reading
Four further reading on Prototyping turn to p.309 of Bocij et al.
102

Managers are responsible for working with the information systems specialist or the systems developer
to prepare a thorough analysis of the proposed system, including a thorough description of what the
system is intended to do (systems requirements) and a cost/benefit analysis. The feasibility study is one
of the most important aspects for the development of successful information systems. Managers should
also have the vision to define new systems or applications that will be beneficial to the organisation.
6.5
RAPID APPLICATIONS DEVELOPMENT
A method of developing information systems which uses prototyping to achieve user involvement and
faster development compared to traditional methodologies.
6.6
END USER DEVELOPMENT
End user development represents a major trend in the use of information technology in organisations.
McGill et al. (2003) explain that user-developed applications (UDAs) are computer-based applications
for which non-information systems assume primary development responsibility. They support decision
making and organisational processes in the majority of organisations.
End user development has become much more popular in the last few years and involves the
development of applications by the business end user.
103
Additional Reading
For further reading on End User Development: Turn to pp. 620-630 of Bocij et al.
Pay special attention to the paragraph on Managing EUC as part of IS Strategy on p. 625 and Table
16.2 on p. 625 that emphasises that end users should focus on the fundamental activities and basic
components of an information system.
ACTIVITY
Attempt essay question 1 on p. 629 of Bocij et al.
Suggested answers
ANSWER TO DISCUSSION QUESTION
1. The rise of rapid applications development is mainly a response to the failure of traditional
systems development methodologies to deliver the right system at the right price and at the
right time. Discuss.
This question asks students to reflect on whether or not a traditional approach to systems development
(such as SSADM) is inevitably going to result in systems that take longer to develop (and are therefore
more expensive) than alternative methods. The question also points to the assertion that since
business requirements change much more rapidly today, development methods which are more longwinded may result in systems developers solving what has become yesterdays problem rather than
todays or tomorrows. Students need to analyse whether or not methodologies such as SSADM
inevitably result in longer development times or if they can be modified to compete with alternatives
such as Dynamic Systems Development Methodology (DSDM).
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It should also be remembered that RAD looks at the whole lifecycle of systems development, whereas
many methods concentrate on analysis and design activities. With RAD, the distinction between
analysis and design becomes blurred through the use of evolutionary prototyping. Not only is
prototyping used as a means of refining further what users actually want from an information system but
it is also used to identify the design requirements (input, output, processing etc.). Finally, prototypes are
developed and refined (using 4GLs and application generators) so that they are implementable as the
finished solution.
RAD is also characterised by the use of time boxes (typically 90 days) where system products are
delivered to end-users at the end of each time box.
ANSWER TO EXAMINATION QUESTION
1. Explain the terms bespoke development, off-the-shelf package and end-user computing.
Illustrate your answer with some of the reasons cited in favour of each of these methods of
application software acquisition.
The student should present an answer along the following lines.
Bespoke development occurs when either in-house IS/IT staff or a third party such as a software house
develops applications software for a business. The software is tailored to the organisations specific
requirements. Bespoke solutions are required where packaged software cannot be procured which
offers the necessary functionality and/or would require changes in working practices that are
unacceptable to the organisation.
An off-the-shelf package is a software product that has been written by a company with the intention of
selling it to many customers. Benefits include the ability to purchase sophisticated software solutions at
a much lower cost than bespoke development, the increased probability that the software will be free
from bugs when implemented and access to upgraded versions of the software in return for an annual
maintenance charge.
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End-user computing occurs when non-IT professionals develop software solutions themselves, often
using PC-based tools such as spreadsheet, database and report generator packages. These
applications are usually for personal and departmental use, although, in the case of small businesses,
the software may have organisation-wide use. The benefits include the ability to produce tailored
solutions without the expense of using IS/IT personnel, the freeing up of IS/IT professionals to
concentrate on developing corporate information systems and also the sense of ownership that comes
from having developed software oneself.
ANSWERS TO ESSAY QUESTION
1. End-user applications development poses a new set of management problems in companies
that adopt this approach. Identify the nature of these problems and suggest measures to
overcome them.
Management problems are mainly a consequence of end-users missing out part of the life cycle, viz:
feasibility study assessment of whether or not existing software is available may often be omitted;
analysis users may have their own opinions of the features that the software should fulfil, so they
do not consult with other potential users;
design users often progress straight on to programming since they do not have the design skills
or are more interested in programming a solution;
testing and documentation.
Solutions include these aspects of EUC strategy:
training;
suitability review;
standards for development;
guidance from end-user support personnel;
software and data audits;
ensuring corporate data security.
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PART 7
BUSINESS INFORMATION SYSTEMS PROJECT
MANAGEMENT
107

After you have worked through this study section you should be able to:
explain the three key objectives of project management
identify the typical stages in an information systems project;
explain the reasons for projects failure; and
understand approaches used by project managers to control projects.
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7.1
INTRODUCTION
Projects are unique, one time operations designed to accomplish a specific set of objectives in a
limited timeframe. Examples of projects include a building construction or preparing for the FIFA 2010
World Cup in South Africa. Management issues that involve typical questions facing managers related
to this topic are:
What are the success criteria for a BIS project?
What are the attributes of a successful project manager?
Which project management activities and techniques should be performed by the project
manager for a successful outcome?
In this unit the focus is on providing the technical knowledge that is necessary to manage information
systems projects. Large information systems projects like construction projects may consist of many
activities and must therefore be carefully planned and coordinated if a project is to meet its objectives.
The three key objectives of project management are shown in the following figure.
(Source:Bocij et al, 2008: 344)

ACTIVITY
Attempt case study 9.1 - Putting an all-inclusive price tag on successful IT on page 344 of Bocij et
al.
The job of project managers is difficult since they are under pressure to increase the quality of
information system within the constraints of fixed costs, budget and resources.
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7.2
WHY DO PROJECTS FAIL?
In general terms Lyytinen and Hirscheim (1987) researched the reasons for information systems
projects failing. They identified five broad areas which still hold true today:
Technical failure
Data failure
User failure
Organisational failure
Failure in the business environment
Additional Reading
For more information on the success and failure of IT project management, read case study 9.1 Putting
an all-inclusive price tag on successful IT on page 344 of Bocij et al.
7.3
PROJECT MANAGEMENT FUNDAMENTALS
Project deliverables are any measurable, tangible, verifiable outcome, result, or item that is produced to
complete a project or part of a project. Examples of project deliverables include design documents,
testing scripts, and requirements documents. Project milestones represent key dates when a certain
group of activities must be performed. For example, completing the planning phase might be a project
milestone. If a project milestone is missed, then chances are the project is experiencing problems. A
project manager is an individual who is an expert in project planning and management, defines and
develops the project plan, and tracks the plan to ensure all key project milestones are completed on
time. The art and science of project management must coordinate numerous activities as displayed in
the figure below. Project managers perform numerous activities, and three of these primary activities
are:
1. Choosing strategic projects.
2. Setting the project scope.
3. Managing resources and maintaining the project plan.
110
Further Reading
Read the paragraph titled Steps in project management on page 350 of Bocij et al. and take special
note of the work breakdown structure.
7.4
WORK BREAKDOWN STRUCTURE (WBS)
This is a breakdown of the project or a piece of work into its component parts (tasks).it shows the
hierarchical relationship between the project tasks. It is an important part of estimation. Figure 7.2
illustrates a WBS structure for an accounting firm.
Figure 7.2: Work Breakdown structure (WBS) for an accounting
firm
(Source : Bocij et al 2008: 351)
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Figure 7.3: Management roles in project management
(Source: CM Guide, 2009)

7.5
PROJECT MANAGEMENT PROCESS
The project management process includes the following main elements:

Estimate: The project manager is allowed to plan for the resources required for project execution
through establishing the number and size of tasks that need to be completed for the project.
Schedule/plan: This involves when project activities should be executed. The finished schedule is
termed the project plan.
Monitoring and control: When a project is under way, its objectives of cost, time and quality in
meeting targets must be up to the plan level. Control or corrective action will occur if the performance
measures deviate from the plan.
Documentation: Documentation is essential to disseminate information during project execution and
for reference during software maintenance
112
Additional Reading
For further reading on Steps in project management: Turn to page 350 of Bocij et al. and take special
note of the work breakdown structure.
7.6
CHOOSING STRATEGIC PROJECTS- AN EXAMPLE
Calpine Corp., a large energy producer, uses project management software to look at its IT investments
from a business perspective. The company classifies projects in one of three ways: (1) run the
business, (2) grow the business, and (3) transform the business. Calpine splits its $100 million in assets
accordingly: 60 percent for running the business, 20 percent for growing the business, and 20 percent
for transforming the business. Calpine evaluates each of its 30 to 35 active projects for perceived
business value against project costs. For the company to pursue a project it must pass a return on
investment (ROI) hurdle. A business project must minimally provide two times ROI, and a
transformation project must provide five times ROl.
One of the most difficult decisions organizations make is determining the projects in which to invest
time, energy, and resources. An organization must identify what it wants to do and how it is going to do
it. The what plan of this question focuses on issues such as justification for the project, definition of
the project, and expected results of the project. The how part of the question deals with issues such
as project approach, project schedule, and analysis of project risks. Determining which projects to focus
corporate efforts on is as necessary to projects as each project is to an organization. The three
common techniques an organization can use to select projects include:
1. Focus on organizational goals.
2. Categorize projects.
3. Perform a financial analysis
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7.6.1
Techniques for Choosing Strategic Projects
IMPORTANT NOTE!
1.
Focus on organizational goalsManagers are finding tremendous value in choosing projects that
align with the organizations goals. Projects that address organizational goals tend to have a higher
success rate since they are important to the entire organization.
2. Categorize projectsThere are various categories that an organization can group projects into to
determine a projects priority. One type of categorization includes problem, opportunity, and directives.
Problems are undesirable situations that prevent an organization from achieving its goals. Opportunities
are chances to improve the organization. Directives are new requirements imposed by management
government or some other external influence. It is often easier to obtain approval for projects that
address problems or directives because the organization must respond to these categories to avoid
financial losses.
3. Perform a financial analysis-A number of different financial analysis techniques can be performed
to help determine a projects priority. A few of those include net present value, return on investment and
payback analysis. These financial analysis techniques help determine the organizations financial
expectations for the project.
7.7
SELLING THE PROJECT SCOPE
Once an organization defines the projects it wants to pursue, it must set the project scope. Project
scope defines the work that must be completed to deliver a product with the specified features and
functions. The project scope statement is important because it specifies clear project boundaries. The
project scope typically includes the following:
Project producta description of the characteristics the product or service has undertaken.
Project objectivesquantifiable criteria that must be met for the project to be considered a
success.
114
Project deliverablesany measurable, tangible, verifiable outcome, result, or item that is

produced to complete a project or part of a project.
Project exclusionsproducts, services, or processes that are not specifically a part of the
project.
The project objectives are one of the most important areas to define because they are essentially the
major elements of the project. When an organization achieves the project objectives, it has
accomplished the major goals of the project and the project scope is satisfied. Project objectives must
include metrics so that the projects success can be measured. The metrics can include cost, schedule,
and quality metrics along with a number of other metrics. SMART criteriauseful reminders on how to
ensure that the project has created understandable and measurable objectives.
7.8
MANAGING RESOURCES AND MAINTAINING THE PROJECT PLAN
Managing people is one of the hardest and most critical efforts a project manager undertakes. How to
resolve conflicts within the team and how to balance the needs of the project with the
personal/professional needs of the team are a few of the challenges facing project managers. More and
more project managers are the main (and sometimes sole) interface with the client during the project.
As such, communication, negotiation, marketing, and salesmanship are just as important to the project
manager as financial and analytical acumen. There are many times when the people management side
of project management made the difference in pulling off a successful project.
A project plan is a formal, approved document that manages and controls project execution. A welldefined project plan is characterized by the following:
Easy to understand.
Easy to read.
Communicated to all key participants (key stakeholders).
Appropriate to the projects size, complexity, and criticality.
Prepared by the team, rather than by the individual project manager.
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The most important part of the plan is communication. The project manager must communicate the plan
to every member of the project team and to any key stakeholders and executives. The project plan
must also include any project assumptions and be detailed enough to guide the execution of the
project. A key to achieving project success is earning consensus and buy-in from all key stakeholders.
By including key stakeholders in project plan development, the project manager allows them to have
ownership of the plan. This often translates to greater commitment, which in turn results in enhanced
motivation and productivity.
The two primary diagrams most frequently used in project planning are PERT and Gantt charts. A
PERT (Program Evaluation and Review Technique) chart is a graphical network model that depicts a
projects tasks and the relationships between those tasks. A dependency is a logical relationship that
exists between the project tasks, or between a project task and a milestone.
PERT charts define dependency between project tasks before those tasks are scheduled (see Figure
below). The boxes in figure below represent project tasks, and the project manager can adjust the
contents of the boxes to display various project attributes such as schedule and actual start and finish
times. The arrows indicate that one task is dependent on the start or completion of another task. The
critical path is a path from the start to the finish that passes through all the tasks that are critical to
completing the project in the shortest amount of time. PERT charts frequently display a projects critical
path.
116

Figure 7.4: Pert chart
(Source: CM guide, 2009)

A Gantt chart is a simple bar chart that depicts project tasks against a calendar. In a Gantt chart, tasks
are listed vertically and the projects time frame is listed horizontally. A Gantt chart works well for
representing the project schedule. It also shows actual progress of tasks against the planned duration.
Figure 7.5 illustrates a Gantt Chart.
117

Figure 7.5: Gantt Chart
Further reading
For further reading on project evaluation: Turn to p 367 of Bocij et al.
ACTIVITY
Attempt essay question 3 on page 370 of Bocij et al. on Project evaluation and review technique
118
Suggested answers
ANSWER TO CASE STUDY
Case Study 9.1: Putting an all-inclusive price tag on successful IT
1. Discuss the difficulties in estimating the costs and benefits of an IT project.
There is a need to consider the context of the IT project and thus the change required for a successful
implementation and delivery. IT departments tend to focus on the technical costs of hardware, software
and training but underestimate the costs of change. In the case study these costs are stated as
ensuring compliance with the business strategy; aligning the people with the processes the business is
changing to and ensuring that behaviours are commensurate with the required new ways of working.
There is also the traditional problem in that hardware and software costs estimates are relatively easy
to calculate but more benefits tend to be more qualitative and difficult to express as a number.
ANSWER TO ESSAY QUESTION
3. What is the most effective method of estimating the duration of an information systems
development project?
The answer can be approached in two main different ways; a good answer will explore both.
1 Top-down vs. bottom-up. Is the estimate built by producing broad estimates for each module
and then refining them, or by considering the detailed tasks and then building up an overall
estimate from the sum of these? It should be apparent that the second option is more time
consuming, but more accurate.
Review of techniques such as constructive cost model (COCOMO) which give estimates based on the
number of lines of source code or function point analysis that considers the functions and numbers of
inputs and outputs provided by the software. Both of these techniques can produce good answers, but
only when a good data set of similar past projects is available. They are probably both inferior to, but
quicker than, a bottom-up estimate. Function point analysis tends to be more detailed and accurate
than COCOMO.
119
PART 8
INFORMATION SYSTEMS STRATEGY
120

demonstrate the fundamental concepts of strategic advantage through information technology;
explain the strategic applications of information systems that can gain competitive advantages for
an organisation; and
identify several basic competitive strategies and explain how they can be used to confront the
competitive forces faced by an organisation.
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8.1
INTRODUCTION
Organisations that make the most effective use of business information systems (BIS) are those that
make BIS strategy an integral part of their overall business strategy. This study unit will give you an
understanding of the roles of information systems and technologies in helping an organisation achieve
a strategic advantage over its competitors. It emphasises competitive strategy concepts and the
strategic roles information systems can play in gaining competitive advantages for an organisation.
Furthermore, this study unit provides examples of the strategic business use of information technology
and discusses the major managerial challenges posed by strategic information systems.
8.2
INTRODUCTION TO BIS STRATEGY
Ward and Peppard (2002) identify three different elements of IS strategy:
Business Information Strategy: this defines how information, knowledge and the applications
portfolio will be used to support business objectives.
IS functionality strategy: this defines the most appropriate processes and resources to
ensure that information provision supports business strategy
IT strategy: this defines the software and hardware standards and suppliers which make up
the e-business infrastructure.
Further reading
For further reading on BIS Strategy: Turn to pp.509-511 in Bocij et al.
ACTIVITY
Attempt Case study 13.1 - Agile development can make business quick and light on page 531 and
answer the questions.
Compare your answers with the suggested answers given at the end of the study unit.
122

8.3
COMPETITIVE STRATEGY CONCEPTS
An organisation can survive and succeed in the long run if it successfully develops strategies to
confront the five competitive forces that shape the structure of competition in its industry. From an
information systems perspective, the tool provides further pointers towards how IS can be used to
benefit the business. The following diagram illustrates Porters five forces model
Figure 8.1: Porters five forces Model
(Source: Laudon and Laudon 2010)

Traditional competitors
All firms share market space with competitors who are continuously devising new products, services,
efficiencies, switching costs
New market entrants
Some industries have high barriers to entry, e.g. computer chip business
New companies have new equipment, younger workers, but little brand recognition
Substitute products and services
Substitutes customers might use if your prices become too high, e.g. iTunes substitutes for CDs
Customers
Can customers easily switch to competitors products? Can they force businesses to compete on price
alone in transparent marketplace?
Suppliers
Market power of suppliers when firm cannot raise prices as fast as suppliers
123
Further reading
For further reading on Porters five forces model: Turn to pp 514-516 of Bocij et al.
8.3.1
Competitive Strategies
These competitive strategies include a cost leadership, differentiation, focus on market niche,
strengthen customer and supplier intimacy.
8.3.1.1 Low-cost leadership
produce products and services at a lower price than competitors while enhancing quality and level of
service
Examples: Wal-Mart, Dell
8.3.1.2 Product differentiation
Enable new products or services, greatly change customer convenience and experience
Examples: Google, Lands End, Apple iPhone
8.3.1.3 Focus on market niche
Use information systems to enable a focused strategy on a single market niche; specialize
Example: Hilton Hotels
8.3.1.4 Strengthen customer and supplier intimacy
Use information systems to develop strong ties and loyalty with customers and suppliers; increase
switching costs
Example: Chrysler, Amazon
Further reading
For further reading on competitive strategies: Turn pp. 516-517 of Bocij et al.
124

ACTIVITY
Answer Discussion Questions 1 and 2 of Bocij et al., p. 533
8.4
8.4.1
THE VALUE CHAIN AND STRATEGIC INFORMATION SYSTEMS

The Business Value Chain Model
Be better than the competition. Thats the mantra of most companies that are serious about winning
the game. Areas of the organization most affected by leveraging technology are in producing the
product, getting it to the stores, and making the customer happy. For instance, think of all the activities
that go into getting the Cybernuts candy bar made, from procuring raw materials to actual production.
Then consider how the candy bar gets from the factory to the store shelves. And what about all those
commercials you see? These are primary activities. Just as important are support activities:
human resources, accounting, and finance.
These functions support the primary functions of
production, shipping, and sales and marketing. The value chain model shown below will help an
organization focus on these activities and determine where to focus their efforts the most.
Figure 8.2: Michael Porters internal value chain model, showing the relationship between
primary and support activities to the value chain within a company
(Source: Bocij et al. 2008:521)
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Primary Activities
Primary value chain activities include:
Primary Activity Description
Inbound
All those activities concerned with receiving and storing externally sourced materials
logistics
Operations
The manufacture of products and services - the way in which resource inputs (e.g.
materials) are converted to outputs (e.g. products)
Outbound
All those activities associated with getting finished goods and services to buyers
logistics
Marketing and
Essentially an information activity - informing buyers and consumers about products
sales
and services (benefits, use, price etc.)
Service
All those activities associated with maintaining product performance after the
product has been sold
Support Activities
Support activities include:
Secondary
Description
Activity
Procurement
This concerns how resources are acquired for a business (e.g. sourcing and
negotiating with materials suppliers)
Human Resource Those activities concerned with recruiting, developing, motivating and rewarding the
Management
workforce of a business
Technology
Activities concerned with managing information processing and the development
Development
and protection of "knowledge" in a business
Infrastructure
Concerned with a wide range of support systems and functions such as finance,
planning, quality control and general senior management
By effectively using an information system in a strategic role at any, or preferably all, levels of the
organization, a digital firm can provide more value in their products than the competition. If they cannot
provide more value, then the strategic information system should help them provide the same value but
at a lower price.
126
Additional Reading
Read the paragraph on the Value Chain of Bocij et al., p. 521
ACTIVITY
Do Examination questions 1, 2 & 3 of Bocij et al. on p. 533.
The IS function can help managers develop competitive weapons (that use information technology) to
implement a variety of competitive strategies to meet the competitive challenges that confront any
organisation.
Successful strategic information systems are not easy to develop and implement. They may require
major changes in the way a business operates and in their relationships with customers, suppliers,
competitors, internal and external stakeholders, and others. Managers must determine how the
organisation can build information systems of strategic importance. Information systems, therefore, are
too important to be left entirely to a small technical group in the organisation. Managers, probably at
senior management level, must initiate the search for opportunities to develop strategic information
systems.
8.5
SUMMARY
The strategic role that information systems play in organisation to attain a competitive advantage is
crucial to survive in the challenging business environment. Information systems can be used to break
business barriers, reengineer business processes, improve business quality, to become an agile
competitor, and to create a virtual company. Organisations can also use the Internet to develop
strategic collaboration, operations, marketing and alliances to succeed in the fast-changing global
market.
127
Suggested answers
ANSWERS TO CASE STUDY
Case Study 13.1: Agile development can make business quick and light
What do the differences between the traditional waterfall model and agile development methods
suggest about their respective applicability to the strategic alignment of business and IS/IT
strategies?
Students are expected to focus on the following:
Agile software development can prevent organisations becoming locked into yesterdays ideas and
business strategies. It might be suggested that since projects based around the waterfall model
can take longer (sometimes much longer) before any software is actually implemented, the
business needs then may have moved on. However, agile methods that focus on the frequent
delivery of software products allow the system to evolve and meet changing business needs.
Since it is claimed that rigid specifications and inflexible development techniques can lock
organisations into yesterdays ideas and also inhibit commercial evolution, then the link between
software development methodologies and strategic alignment is clear: monolithic and rigid methods
can lead to a mismatch between what the business needs and the information systems that are
developed.
The link is summarised on the article thus: with agile development, the final product can be quite
different from that originally planned. But it tends to be more aligned with the business needs at the
time of completion rather than its needs at the start, which may now be outdated.
128

ANSWERS TO DISCUSSION QUESTIONS
1. The millennium bug has demonstrated that organisations, more often than not, take a shortterm view in their approach to information systems rather than a strategic one. Discuss.
Students should concentrate on applications software rather than other issues such as processor chips.
They can centre their discussion around the following points:
Some legacy systems in current use can date back to their original development at least two
decades ago; the writers of these systems never envisaged that the software would still be running
20 or more years later. This suggests that the software falls at least into the support or even the
key operational categories.
The legacy systems referred to above were built at a time when memory and disk space constraints
were severe and developers took every possible step to reduce storage space for data and
programs. It has been argued that running applications with full eight-digit dates would have been
prohibitively expensive, thus putting off systems development and fixing these systems is less than
the benefits that have accrued over the life of the system.
There is evidence that systems developed as recently as 6 or 7 years ago were not millennium
compliant. It is much harder to argue the storage and memory costs issue here. Recently
developed systems that use six-figure dates, therefore, do suggest that shorttermism exists.
The failure of many companies to get up to speed with their millennium compliance activities also
suggests that a degree of complacency exists (especially for those businesses with a turnover of
between 1 and 50 million). Also, it is suggested that some public sector organisations are leaving
things to the last minute. Both of these points suggests that, again, too many people are not taking
the problem sufficiently seriously and are concentrating on short-term objectives.
129

2. The barriers relating to the relationship between business and IS/IT strategies mean that
successful alignment is likely to be the exception rather than the rule. Discuss.
In this discussion, I would expect students to focus on the alignment model produced by Weill and
Broadbent along with their identification of expression barriers, specification barriers and
implementation barriers.
While the model and barriers are clear, what remains an issue is whether successful alignment is the
norm, or something relatively rare. As is often the case in this situation, the answer probably lies
somewhere in between. What could be useful as a discussion activity is to discuss each of the three
barriers identified by Weill and Broadbent and for the students to identify how they think each of the
barriers might be overcome.
ANSWER TO EXAMINATION QUESTION
1. Explain the concept of Porters value chain and how it can be used to identify a companys
information needs.
Value chain analysis allows the functional areas of an organisation to be analysed logically and
systematically. Each primary and secondary function can be analysed in terms of its critical success
factors, decisions that are needed and information required to support the decision-making processes.
It is also possible to look at how business processes are linked across functional areas and the
information systems that are needed to make this possible.
2. How can McFarlans strategic grid be used to define an information systems strategy for a
company?
This model looks at the relationship between an organisations current and possible future IS and their
contribution or potential contribution to the business.
Applications are classified as follows:
Support these applications are valuable to the organisation but not critical to its success.
130

Key operational the organisation currently depends on these applications for success.
High potential these applications may be important to the future success of the organisation.
Strategic applications that are critical to sustaining future business strategy.
The model is useful because it allows the current applications portfolio to be analysed according to
where the applications fit. It may also suggest where future development work should be concentrated.
Finally, candidates for outsourcing may be selected (e.g. applications in the support category).
3. Explain the difference between a business-impacting and business-aligning approach to a
companys IS strategy. Give examples of strategy tools that can help support each method.
Business-impacting techniques seek to analyse the business to see how IS/IT can be used to benefit
the business. These include the following:
Competitive forces analysis.
Competitive strategies (in response to the business external environment).
Value chain analysis.
It is also suggested that any techniques used as part of a business process re-engineering (BPR)
exercise apply as well. Business-aligning techniques seek to base the IS/IT strategy on the
organisations existing business strategy. These include the following:
Critical success factors analysis.
Business systems planning (including information engineering).
131
PART 9
INFORMATION SYSTEMS MANAGEMENT
132

When you have worked through this study section you should be able to:
evaluate the relationships between IS spending and business benefits;
evaluate location alternatives for an organisations IS function;
assess the arguments for and against outsourcing; and
explain the importance of offshore outsourcing
133

9.1
INTRODUCTION
In part 8, a number of tools and issues relating to the development of IS/IT strategies and their
integration with an overall business strategy were explored. This section explores a range of issues
relating to the management of information systems within an organisation including investment
appraisal, outsourcing and the organisation and implementation of the IS/IT management function
within an organisation. By combining effective IS/IT strategies with effective implementation and
management, it will then become more likely that an organisation will have IS/IT solutions that provide
significant business benefits rather than ones which act as a drain on the organisation.
9.2
DOES IT MATTER?
As the amount of money spent by organizations on information technology has increased, there has
been a great deal of argument about the value delivered by this IT. Despite the large-scale investments
in IT within organizations, it is still not clear the extent to which investment in information systems
benefits organizations.
In 1987, the MIT professor and Nobel economist Robert Solow (Wed better watch out, New York
Times, 12 July 1987), made the remark: We see the computer age everywhere except in the
productivity statistics.
This expressed in words what many in business and economists had suspected.
Although there was a lot of expenditure on IT, there was relatively little to show for it. Subsequent
studies in the late 1980s and 1990s summarized by Brynjolfsson (1993) and Strassman (1997) did
indeed suggest that, across companies, there is little or no correlation between a companys investment
in information technology and its business performance measured in terms of profitability or
shareholder value.
This concept is known as the IT productivity paradox. Strassmans early work, looking at the paradox
at the firm level, was based on a study of 468 major North American and European firms which showed
a random relationship between IS spending per employee and return on equity. More recently
Brynjolfsson and Hitt (1998) and studies summarized in Financial Times (2003) have suggested that
the productivity paradox is no longer valid.
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At the economy level, the Financial Times (2003) reported that in the US, the annual rate of increase in
output per hour in the late 1970s and early 1980s was 2.6 per cent.
From 1987 to 1995, it dropped to only 1.5 per cent, despite the increase in use of personal computer
technology in organizations. From 1995 to 2000, however, the annual rate increased to an average of
2.5 per cent. Output per hour then increased to 5.3 per cent in 2002 and in the third quarter of 2003
reached 9.4 per cent, the highest rate for 20 years. At the firm level, more recent work at the individual
company level, completed by Brynjolfsson, has demonstrated that productivity increases can be
achieved through IT investment.
His studies have also shown that, as one would expect, IT is only a small part of the investment in
business information management projects.
Additional Reading:
For further reading on IT Productivity Paradox, turn to pp. 538-539 of Bocij et al.
ACTIVITY
Do you agree that many organisations are reengineering their business processes at this stage? Make
sure you are familiar with this important concept.
9.3
INFORMATION SYSTEMS INVESTMENT APPRAISAL.
Lubbe and Remenyi (1999) in their analysis of the management of IS/IT evaluation identified seven
benefit objectives that provide a stimulus to organisational IS/IT investment. In descending order of
significance these are:
Productivity
New opportunities
Change
Competitive advantage
Increased turnover
Reduced risk
135

Coupled with these factors Lubbe and Remenyi (1999) also identified seven IS/IT investment drivers
that will help determine the organisations response to the IS/IT investment opportunity. In descending
order of importance, these are:
Organisational strategy
Management decisions
Interfacing of systems
Quality of service
Evaluation of IS/IT (tangible and intangible benefits)
Business modelling (improving business processes)
Budgets
Additional Reading
For further reading on IS Investment appraisal, turn to pp. 539-540 of Bocij et al.
9.4
DETERMINING INVESTMENT LEVELS
How much an organisation will spend on IS will depend both on the size of the organisation and on the
nature of its business operations. Spending as a proportion of turnover will also vary over time
depending on the maturity of an organisations systems and on the organisation itself.
Further Reading
For additional reading on Determining investment levels, turn to pp. 540-543 of Bocij et al.
ACTIVITY
Do self assessment questions 1 and 2 on page 566 of Bocij et al.
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9.5
LOCATING THE INFORMATION SYSTEMS MANAGEMENT FUNCTION
There are two basic approaches to locating the information system function in an organisation that
operates at more than one location. These are the centralisation of all IS services at one office (usually
the head office) and decentralisation. It is unusual for a company to choose one extreme or the other;
typically, the approach will vary for the different types of services. The approach chosen is significant,
since it will have a direct correspondence to the quality of service available to the end- user
departments and the cost of providing this service.
9.5.1
What needs to be managed?
It is useful to make a distinction between information systems and information technology. As has been
stated before, we can view IT as the infrastructure and an enabler, while information systems give a
business the applications that produce the information for decision-making purposes. IS cannot exist
without the IT to support them, but IT on its own does not of itself confer any business benefits.
For information technology the following must be managed:
Hardware platforms.
Network architectures.
PCs
Development tools.
Legacy systems.
Operations management.
Business systems development.
Migration and conversion strategy.
Database administration.
User support and training.
End-user application development.
Shared services.
IS/IT staffing.
137
Further Reading
For further reading on what needs to be managed, turn to pp.543 of Bocij et al
9.6
OUTSOURCING
Outsourcing is the process of hiring another organization to perform a service. Just about any business
activity in the value chain can be outsourced, from marketing and sales, to logistics, manicuring, or
customer service. Support functions, such as accounting and HR, can be outsourced as well. In this
section, we will focus on the outsourcing of IS and IT services but please realize that companies also
outsource most other business activities.
The outsourced vendor can be domestic or international. Some companies choose to outsource
overseas because labour is cheaper and to take advantage of time differences.
9.6.1
Reasons for outsourcing
According to the Outsourcing Institute, the top 10 reasons companies outsource are:
1. Accelerate re-engineering benefits
2. Access to world class capabilities
3. Cash infusion
4. Free resources for other purposes
5. Function difficult to manage out of control
6. Improve company focus
7. Make capital funds available
8. Reduce operating costs
9. Reduce risk
10. Resources not available internally
(Source: Bocij et al. 2008:550)
ACTIVITY
Attempt essay question 3 on p. 567 of Bocij et al.
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Organizations should consider outsourcing in order to achieve the following benefits:
Financial savings
Increased technical abilities
Market agility
9.6.2
Developing strategic outsourcing partnerships
Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a
third-party service provider. Business process outsourcing is increasingly becoming the strategic choice
of companies looking to achieve cost reductions while improving their service quality, increasing
shareholder value, and focusing on their core business capabilities. Many organizations are looking
beyond traditional IT outsourcing to business process outsourcing as the next logical step.
Implementing BPO can save costs for tasks that an organization requires but does not depend upon to
maintain its position in the marketplace. BPO is divided into two categories: (1) back-office outsourcing
that includes internal business functions such as billing or purchasing, and (2) front-office outsourcing,
which includes customer-related services such as marketing or technical support.
Business process outsourcing is not a new field. Paychex, based in Rochester, New York, for example,
has been outsourcing payroll processing for small businesses since 1971. However, the market is
heating up these days, as companies need for strategic cost cutting, desire to improve business
methods, and comfort with outsourcing arrangements grow.
The Gartner Group estimated that the worldwide market for business process outsourcing would grow
to $178 billion in 2005. Management consulting and technology services company Accenture is a BPO
player. Accentures first BPO deal came in the early 1990s, when it outsourced finance and accounting
functions for British Petroleum. Accenture now handles a variety of outsourcing tasks, such as airline
ticket processing and call centre staffing for AT&T.
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9.6.3
Offshore outsourcing
Offshore outsourcing is using organizations from developing countries to write code and develop
systems. Numerous countries have substantially well-trained IT professionals and clerical staff who
have lower salary expectations compared to their U.S. counterparts. Offshore outsourcing has become
a small but rapidly growing sector in the overall outsourcing market. Nearly half of all businesses use
offshore providers, and two-thirds plan to send work overseas in the near future, according to Forrester
Research. India receives most of the outsourcing functions from all over the world. However, as more
American companies seek to source globally, more countries are emerging to benefit from that
demandfrom Canada to Malaysiaeach with its own particular strengths and weaknesses.
Organizations have much to gain from offshore outsourcing.
Additional Reading
Study the paragraph making outsourcing work on p. 553 of Bocij et al.
ACTIVITY
Attempt Examination questions 1 & 2 on page 567 of Bocij et al
140
Suggested answers
ANSWERS TO SELF-ASSESSMENT QUESTIONS
1. What factors might account for the productivity paradox relating to IS/IT investments?
The main factors identified include:
Mis-measurement;
The lag occurring between initial investment and payback;
Mis-management of IS projects.
To these, can be added the notion that business benefits are often intangible in nature (e.g. improving
customer satisfaction) and that it is hard to put a money value on some factors. This would tend to
reinforce both the mis-measurement and lag arguments.
2. When information systems costs are being considered, what kinds of costs would be
considered development costs and what would be considered operations/maintenance costs?
Development costs would include the following:
package software and bespoke development costs;
relational database management system (RDBMS) acquisition;
initial hardware and infrastructure acquisition;
development tools.
Operations and maintenance costs include the following:
ongoing software licence costs;
legacy system maintenance;
telecommunications running costs;
help-desk support;
security management;
hardware technical support;
systems programming support.
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ANSWERS TO ESSAY QUESTIONS
3. What do you see as the main problems with outsourcing and how can they be
overcome?
Chapter 14 covers the basic points. Problems include the following:
loss of control of IS;
loss/degradation of internal IS services;
corporate security issues;
qualifications of outside personnel;
negative impact on employee morale;
cost reduction may not actually be achieved.
Overcoming the problems involve:
ensuring that an outsourcing contract will work properly;
having an outsourcing strategy that is consistent with the business and information management
strategy;
matching the level of outsourcing to what the business needs;
making sure methods of retaining control and leverage over suppliers exist;
taking account of the human factors involved, particularly where staff may be displaced or made
redundant;
using an independent specialist to assist in drawing up an outsourcing agreement;
allocating time and using measurement systems to manage the outsourcing contract.
ANSWERS TO EXAMINATION QUESTIONS
1. What are the two main alternatives for a companys location of its information
systems? Summarise the benefits and disadvantages in terms of cost and control.
The two main alternatives are the following:
Centralised
Decentralised or devolved.
Chapter 14 contains many of the relevant points.
For a centralised approach:
achieve and control consistent IS/IT strategy;
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coordinate IS/IT activities more easily;
implement simpler control systems;
allocate resources more efficiently;
achieve speedier strategic decision making.
Against a centralised approach:
competitive element for resources;
cumbersome overhead involved.
The decentralised approach also has advantages that counter possible criticisms of the centralised
approach:
rapid response to local problems;
improved motivation and commitment amongst staff to their IS.
The disadvantages are:
split responsibilities need to be defined carefully to avoid forgetting things;
ability of functional business areas can tend to adopt idiosyncratic approaches to IS
resulting in higher costs and less efficiency across the business;
complicated control procedures, which make decision making more difficult and time consuming.
2. What information systems management activities would occur with a total outsourcing
contract?
The activities would centre around the management of the outsourcing contract and the information
systems strategy within the business. It would be necessary to:
retain sufficient in-house management and technical expertise to
manage the OS vendor;
monitor contract performance;
keep strategic business and technical options under review;
have in place detailed measurement systems to allow a detailed contractual agreement to be drawn
up;
monitoring of the OS vendors performance.
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PART 10
MANAGING INFORMATION SECURITY AND
ETHICAL CHALLENGES
144

provide a explanation of the need for control in information systems;

explain the most common threats faced by information systems;
outline several types of information system controls, procedural controls, and facility controls that can
be used to ensure the quality and security of information systems;
identify several ethical principles that affect the use and management of information technology;
explain the privacy, social and legal issues related to information systems;
comment on the principles of the UK Data Protection Act 1984
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10.1
INTRODUCTION
This chapter discusses the threats to computer systems with regard to business and the defences and
control needed for, the performance and security of e-business systems. The moral, legal and ethical
responsibilities of those involved in designing, developing and managing computer-based information
systems are also explained.
10.2
THE NEED FOR CONTROLS
Controls upon information systems are based upon 2 underlying principles:
The need to ensure the accuracy of the data held by the organisation
The need to protect against loss or damage.
10.3
COMMON THREATS TO INFORMATION SYSTEMS
Accidents
Inaccurate data entry. As an example, consider a typical relational database management

system, where update queries are used to change records, tables and reports. If the contents
of the query are incorrect, errors might be produced within all of the data manipulated by the
query. Although extreme, significant problems might be caused by adding or removing even a
single character to a query.
Attempts to carry out tasks beyond the ability of the employee. In smaller computer-based
information systems, a common cause of accidental damage involves users attempting to
install new hardware items or software applications. In the case of software applications,
existing data may be lost when the program is installed or the program may fail to operate as
expected.
Failure to comply with procedures for the use of organisational information systems. Where
organisational procedures are unclear or fail to anticipate potential problems, users may often
ignore established methods, act on their own initiative or perform tasks incorrectly.
Failure to carry out backup procedures or verify data backups. In addition to carrying out
regular backups of important business data, it is also necessary to verify that any backup
copies made are accurate and free from errors.
Update query: Used to change records, tables and reports held in a database management
system.
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Natural disasters
All information systems are susceptible to damage caused by natural phenomena, such as
storms, lightning strikes, floods and earthquakes.
In Japan and the United States, for example, great care is taken to protect critical information
systems from the effects of earthquakes.
Although such hazards are of less concern for instance, in Europe, properly designed systems
will make allowances for unexpected natural disasters.
Sabotage
Deliberate deletion of data or applications
Logic bomb: Sometimes also known as a time bomb, a logic bomb is a destructive
computer program that activates at a certain time or in reaction to a specific event.
Back door: A section of program code that allows a user to circumvent security
procedures in order to gain full access to an information system.
Data theft: This can involve stealing sensitive information or making unauthorised
changes to computer records.
Accidental deletion
Unauthorised use
Hacker: Hackers are often described as individuals who seek to break into systems as a test of
their abilities. Few hackers attempt to cause damage to systems that they access and few are
interested in gaining any sort of financial profit.
Cracker: A person who gains access to an information system for malicious reasons is often
termed a cracker rather than a hacker. This is because some people draw a distinction
between ethical hackers and malicious hackers.
Computer viruses
Computer virus: This is a computer programme that is capable of self-replication, allowing it to spread
from one infected machine to another. Whilst some methods such as logic bombs are beginning to
decline, others like the release of the virus construction kits are becoming more common. For example
parasitic viruses insert copies of themselves into legitimate programs. Macro viruses are created using
high level programming languages.
147
Additional Reading
Read table 15.3 on p. 589 of Bocij et al which gives an overview of estimated losses due to computer
viruses from 1999 to 2004.
Two other kinds of programmes are related to computer viruses: worms and Trojans.
A worm is a small program that moves through a computer system randomly changing or overwriting
pieces of data as it moves.
A Trojan appears as a legitimate program in order to gain access to a computer system.
Spyware represents a new type of threat for business and home users. In general, spyware describes
a category of software designed to capture and record confidential information without a users consent.
Additional reading
For further reading on threats to systems: turn to pp. 572-580 of Bocij et al.
10.4
E-BUSINESS SECURITY
There are many significant threats to the security of E-business and E-commerce. Business managers
and professionals alike are responsible for the security, quality, and performance of the business
systems in their business units.
10.4.1 Internetworked Security Defence
Security of todays internetworked E-business enterprises is a major management challenge. Vital
network links and business flows need to be protected from external attack by cyber criminals or
subversion by the criminal or irresponsible acts of insiders. This requires a variety of security tools and
defensive measures and a coordinated security management program.
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10.4.2
Encryption
Encryption of data has become an important way to protect data and other computer network
resources especially on the Internet, intranets, and extranets. Encryption characteristics include:
Passwords, messages, files, and other data can be transmitted in scrambled form and unscrambled
by computer systems for authorized users only.
Encryption involves using special mathematical algorithms, or keys, to transform digital data into a
scrambled code before they are transmitted, and to decode the data when they are received.
The most widely used encryption method uses a pair of public and private keys unique to each
individual. For example: E-mail could be scrambled and encoded using a unique public key for the
recipient that is known to the sender. After the E-mail is transmitted, only the recipients secret
private key could unscramble the message.
Encryption programs are sold as separate products or built into other software used for the
encryption process.
There are several competing software encryption standards, but the top two are RSA and PGP.
10.4.3
Firewalls
Fire Wall computers and software is another important method for control and security on the Internet
and other networks. A network firewall can be a communications processor, typically a router, or a
dedicated server, along with firewall software. Firewall computers and software characteristics include:
A firewall serves as a gatekeeper computer system that protects a companys intranets and other
computer networks from intrusion by serving as a filter and safe transfer point for access to and
from the Internet and other networks.
A firewall computer screens all network traffic for proper passwords and other security codes, and
only allows authorized transmissions in and out of the network.
Firewalls have become an essential component of organisations connecting to the Internet,

because of its vulnerability and lack of security.
Firewalls can deter, but not completely prevent, unauthorized access (hacking) into computer
networks. In some cases, a firewall may allow access only from trusted locations on the Internet to
particular computers inside the firewall. Or it may allow only safe information to pass.
In some cases, it is impossible to distinguish safe use of a particular network service from unsafe
use and so all requests must be blocked. The firewall may then provide substitutes for some
network services that perform most of the same functions but are not as vulnerable to penetration.
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10.4.4 Denial of Service Defences
The Internet is extremely vulnerable to a variety of assaults by criminal hackers, especially denial of
service (DOS) attacks. Denial of service assaults via the Internet depend on three layers of networked
computer systems, and these are the basic steps E-business companies and other organisations can
take to protect their websites form denial of service and other hacking attacks.
The victims website
The victims Internet service provider (ISP)
The sites of zombie or slave computers that were commandeered by the cyber criminals.
10.4.5 E-Mail Monitoring

Internet and other online E-mail systems are one of the favourite avenues of attack by hackers for
spreading computer viruses or breaking into networked computers. E-mail is also the battleground for
attempts by companies to enforce policies against illegal, personal, or damaging messages by
employees, and the demands of some employees and others, who see such policies as violations of
privacy rights.
10.4.6 Virus Defences
Many companies are building defences against the spread of viruses by centralizing the distribution and
updating of anti-virus software, as a responsibility of there IS departments. Other companies are
outsourcing the virus protection responsibility to their Internet service providers or to
telecommunications or security management companies.
10.4.7 Other Security Measures
A variety of security measures are commonly used to protect E-business systems and networks. These
include both hardware and software tools like fault-tolerant computers and security monitors, and
security policies and procedures like passwords and backup files.
10.4.7.1 Security Codes
Typically, a multilevel password system is used for security management.
First, an end user logs on to the computer system by entering his or her unique identification code,
or user ID. The end user is then asked to enter a password in order to gain access into the system.
Next, to access an individual file, a unique file name must be entered.
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10.4.7.2 Backup Files
Backup files, which are duplicate files of data or programmes, are another important security measure.
Files can be protected by file retention measures that involve storing copies of files from previous
periods.
Several generations of files can be kept for control purposes.
10.4.7.3 Security Monitors
System security monitors are programmes that monitor the use of computer systems and networks
and protect them from unauthorized use, fraud, and destruction.
Security monitor programmes provide the security measures needed to allow only authorized users
to access the networks.
Security monitors also control the use of the hardware, software, and data resources of a computer
system.
Security monitors can be used to monitor the use of computer networks and collect statistics on any
attempts at improper use.
10.4.8 Biometric Controls

Biometric controls are security measures provided by computer devices, which measure physical
traits that make each individual unique. This includes:
Voice verification
Fingerprints
Hand geometry
Signature dynamics
Keystroke analysis
Retina scanning
Face recognition
Genetic pattern analysis
10.4.9 Computer Failure Controls

A variety of controls are needed to prevent computer failure or to minimize its effects. Computer
systems may fail due to:
Power failure
Electronic circuitry malfunctions
151
Telecommunications network problems
Hidden programming errors
Computer operator errors
Electronic vandalism
The information services department typically takes steps to prevent equipment failure and to minimize
its detrimental effects. For example:
Programmes of preventative maintenance of hardware and management of software updates are

commonplace
Using computers equipped with automatic and remote maintenance capabilities
Establishing standards for electrical supply, air conditioning, humidity control, and fire prevention
standards
Arrange for a backup computer system capability with disaster recovery organisations.
Scheduling and implementing major hardware or software changes to avoid problems.
Training and supervision of computer operators.
Using fault tolerant computer systems (fail-safe and fail-soft capabilities)
10.4.10 Fault Tolerant Systems

Many firms use fault tolerant computer systems that have redundant processors, peripherals, and
software that provide a fail-over capability to back up components in the event of system failure.
Fail-Safe - Fail-Safe refers to computer systems that continue to operate at the same level of
performance after a major failure.
Fail-Soft - Fail-soft refers to computer systems that continue to operate at a reduced but
acceptable level after a system failure.
10.4.11 Disaster Recovery

Hurricanes, earthquakes, fires, floods, criminal and terrorist acts, and human error can all severely
damage an organisation's computing resources. Many organisations like airlines and losing even a few
hours of computing power for example, cripples banks. That is why it is important for organisations to
develop disaster recovery procedures and formalize them in a disaster recovery plan. It specifies
which employees will participate in disaster recovery, and what their duties will be; what hardware,
software, and facilities will be used; and the priority of applications that will be processed.
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Arrangements with other companies for use of alternative facilities as a disaster recovery site and offsite storage of an organisation's databases are also part of an effective recovery effort.
10.5
E-BUSINESS SYSTEM CONTROLS AND AUDITS
The development of information system controls and the accomplishment of E-business systems audits
are two other types of security management.
10.5.1 Information Systems Controls
Information systems controls are methods and devices that attempt to ensure the accuracy, validity,
and propriety of information system activities. Information System (IS) controls must be developed to
ensure proper data entry, processing techniques, storage methods, and information output. IS controls
are designed to monitor and maintain the quality and security of the input, processing, output, and
storage activities of any information system.
10.5.2 Auditing E-Business Systems
E-business systems should be periodically examined, or audited, by a companys internal auditing

staff or external auditors from professional accounting firms. Such audits should review and
evaluate whether proper and adequate security measures and management policies have been
developed and implemented.
An important objective of E-business system audits is testing the integrity of an application audit trail.
An audit trail can be defined as the presence of documentation that allows a transaction to be traced
through all stages of its information processing. The audit trail of manual information systems was quite
visible and easy to trace, however, computer-based information systems have changed the form of the
audit trail.
ACTIVITY
What is your view on the importance of information system security and control?
Is it needed?
Why? Explain.
Cite examples from your work environment to motivate your answer.
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10.6
PROFESSIONALISM, ETHICS AND MORALITY
Developers, managers and users of computer-based information systems are expected to behave in a
professional manner at all times. They are expected to balance the needs of their employer and the
requirements of their profession with other demands such as responsibility to society. The term ethics,
morality and professionals are often used to describe the expectations of managers and employees.
10.6.1 What is Professionalism?
Professionalism can be described as acting to meet the standards set by a profession in terms of
individual conduct, competence and integrity.
10.6.2 What is Ethics?
Ethics describes beliefs concerning right or wrong that can be used by individuals to guide their
behaviour.
What is Morality?
Morality is concerned with an individuals personal beliefs of what is right and wrong.
10.6.3 Computer crime in E- Business
Computer crime is a growing threat to the security of computer-based information systems and thus
presents a major challenge to the ethical use of information technology.
Examples of computer crime are:
Hacking
Cyber Theft
Unauthorized Use at Work
Software Piracy
Piracy of Intellectual Property
Computer Viruses
154
Additional Reading
For further reading on computer crimes: turn to p.645-646 of Bocij et al.
10.7
PRIVACY ISSUES
The power of information technology to store and retrieve information can have a negative effect on the
right to privacy of every individual.
Two examples can be used to illustrate common concerns related to privacy:
The use of computer-based information systems enables an organisation to combine or

analyse data in ways not previously possible with manual systems. As an example, a bank
might build up profiles of its customers by analysing their spending, borrowing and saving
habits. This information could then be supplied to other organisations involved in marketing
relevant goods or services.
Communications technology allows organisations to share data, allowing them to develop a

comprehensive pool of information regarding individuals. An insurance company, for example,
might gather medical information before deciding whether or not to offer a policy to an
individual.
Additional Reading
For further reading on the Privacy Issues, turn to p. 641 of Bocij et al.
10.8
SOCIAL ISSUES
It is vital to note that computers can have many benefits to society. Applications such as the following
can be used to solve human and societal problems:
medical diagnosis;
computer-assisted instruction;
governmental program planning;
environmental quality control; and
law enforcement.
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Information society describes a modern population that is conversant with and reliant upon
information and communications technology. In this section some of the social issues are considered
that both concern individuals and organisations.
10.8.1 Employment
There is no doubt that technology has made a significant impact on the patterns of employment. The
tasks of employees have been taken by computer-based information systems. However it is also true
that technology has been responsible for the loss of many jobs also.
10.8.2 Digital Divide
One group will be made up of those who have access to technology and are able to obtain information
via the Internet. The other will be made up of those who are unable to gain access to technology and
information.
Additional Reading
For further reading on the Social Issues: Turn to pp. 639-642 as discussed of Bocij et al.
10.9
LEGAL ISSUES
Some of the UK legislation relevant to those included in managing or developing computer-based

systems are:
The copyright, Designs and Patents Act 1998 provides limited protection for an organisations
intellectual properties such as copyrights.
Computer Misuse Act 1990 attempts to prevent unauthorised access to computer-based systems. In
addition, such legislation also makes it an offence to cause damage to hardware, software or data.
The Human Right Act 1998 has implications for personal privacy including the privacy of employees.
Regulation of Investigatory Powers Act 2000 has caused concern for many business organisations
since under certain circumstances it allows confidential e-mail traffic and business data to be monitored
by security forces.
Data Protection Act 1998 defines the way in which companies may gather, store, process and
disclose personal data.
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The Data Protection Act 1998 of UK is based on a number of principles. These include:
Information shall be obtained and processed fairly and lawfully.
Information shall be held only for one or more specific and lawful purposes.
Companies should not hold information that is excessive or not relevant to the Act.
Information held on individuals should be accurate and up to date.
Information should not be held for longer than needed.
Individuals have the right to see the data and make corrections where necessary.
Companies must take measures to protect information from unauthorised access.
Additional Reading
For further reading on the legal Issues: Turn to pp. 646-650 of Bocij et al.
157

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GLOSSARY
A
802.11b (Wi-Fi): Standard for high-speed wireless LANs that can transmit up to 11 Mbps within a 100meter area, providing a low-cost flexible technology for connecting work groups and providing mobile
Internet access.
acceptance testing: Provides the final certification that the system is ready to be used in a production
setting.
accountability: The mechanisms for assessing responsibility for decisions made and actions taken.
accumulated balance digital payment systems: Systems enabling users to make micropayments
and purchases on the Web, accumulating a debit balance on their credit card or telephone bills.
activity-based costing: Model for identifying all the company activities that cause costs to occur while
producing a specific product or service so that managers can see which products or services are
profitable or losing money and make changes to maximize firm profitability.
administrative controls: Formalized standards, rules, procedures, and disciplines to ensure that the
organizations controls are properly executed and enforced.
agency theory: Economic theory that views the firm as a nexus of contracts among self-interested
individuals who must be supervised and managed.
AI shell: The programming environment of an expert system.
antivirus software: Software designed to detect, and often eliminate, computer viruses from an
information system.
application controls: Specific controls unique to each computerized application.
application server: Software that handles all application operations between browser-based
computers and a companys back-end business applications or databases.
application service provider (ASP): Company providing software that can be rented by other
companies over the Web or a private network.
application software: Programmes written for a specific application to perform functions specified by
end users.
application software package: A set of prewritten, precoded application software programs that are
commercially available for sale or lease.
analogue signal: A continuous waveform that passes through a communications medium; used for
voice communications.
arithmetic-logic unit (ALU): Component of the CPU that performs the computers principal logic and
arithmetic operations.
artificial intelligence (AI): The effort to develop computer-based systems that can behave like
humans, with the ability to learn languages, accomplish physical tasks, use a perceptual apparatus, and
emulate human expertise and decision making.
assembly language: A programming language developed in the 1950s that resembles machine
language but substitutes mnemonics for numeric codes.
asynchronous transfer mode (ATM): A networking technology that parcels information into 8-byte
cells, allowing data to be transmitted between computers from different vendors at any speed.
attribute: A piece of information describing a particular entity.
authentication: The ability of each party in a transaction to ascertain the identity of the other party.
automation: Using the computer to speed up the performance of existing tasks.
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B
backbone: Part of a network handling the major traffic and providing the primary path for traffic flowing
to or from other networks.
backward chaining: A strategy for searching the rule base in an expert system that acts like a problem
solver by beginning with a hypothesis and seeking out more information until the hypothesis is either
proved or disproved.
balanced scorecard: Model for analysing firm performance that supplements traditional financial
measures with measurements from additional business perspectives, such as customers, internal
business processes, and learning and growth.
bandwidth: The capacity of a communications channel as measured by the difference between the
highest and lowest frequencies that can be transmitted by that channel.
banner ad: A graphic display on a Web page used for advertising. The banner is linked to the
advertisers Web site so that a person clicking on it will be transported to the advertisers Web site.
batch processing: A method of collecting and processing data in which transactions are accumulated
and stored until a specified time when it is convenient or necessary to process them as a group.
baud: A change in signal from positive to negative or vice versa that is used as a measure of
transmission
speed.
behavioral models: Descriptions of management based on behavioural scientists' observations of
what managers actually do in their jobs.
benchmarking: Setting strict standards for products, services, or activities and measuring
organizational performance against those standards.
best practices: The most successful solutions or problem-solving methods that have been developed
by a specific organization or industry.
bit: A binary digit representing the smallest unit of data in a computer system. It can only have one of
two states, representing 0 or 1.
Blue tooth: Standard for wireless personal area networks that can transmit up to 720 Kbps within a 10meter area.
broadband: High-speed transmission technology. Also designates a single communications medium
that can transmit multiple channels of data simultaneously.
bugs: Program code defects or errors.
bullwhip effect: Large fluctuations in inventories along the supply chain resulting from small
unanticipated fluctuations in demand.
bureaucracy: Formal organization with a clear-cut division of labour, abstract rules and procedures,
and impartial decision making that uses technical qualifications and professionalism as a basis for
promoting employees.
bureaucratic models of decision making: Models of decision making where decisions are shaped by
the organization's standard operating procedures (SOPs).
bus network: Network topology linking a number of computers by a single circuit with all messages
broadcast to the entire network.
business driver: A force in the environment to which businesses must respond and that influences the
direction of business.
business functions: Specialized tasks performed in a business organization, including manufacturing
and production, sales and marketing, finance, accounting, and human resources.
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business intelligence: Applications and technologies that focus on gathering, storing, analysing, and
providing access to data from many different sources to help users make better business decisions.
business model: An abstraction of what an enterprise is and how the enterprise delivers a product or
service, showing how the enterprise creates wealth.
business process reengineering: The radical redesign of business processes, combining steps to cut
waste and eliminating repetitive, paper-intensive tasks in order to improve cost, quality, and service,
and to maximize the benefits of information technology.
business processes: The unique ways in which organizations coordinate and organize work activities,
information, and knowledge to produce a product or service.
business-to-business (B2B) electronic commerce: Electronic sales of goods and services among
businesses.
business-to-consumer (B2C) electronic commerce: Electronic retailing of products and services
directly to individual consumers.
byte: A string of bits, usually eight, used to store one number of character in a computer system.
C
C: A powerful programming language with tight control and efficiency of execution; is portable across
different microprocessors and is used primarily with PCs.
C++: Object-oriented version of the C programming language.
cable modem: Modem designed to operate over cable TV lines to provide high-speed access to the
Web or corporate intranets.
call centre: An organizational department responsible for handling customer service issues by
telephone and other channels.
capacity planning: The process of predicting when a computer hardware system becomes saturated
to ensure that adequate computing resources are available for work of different priorities and that the
firm has enough computing power for its current and future needs.
capital budgeting: The process of analysing and selecting various proposals for capital expenditures.
carpal tunnel syndrome (CTS): Type of RSI in which pressure on the median nerve through the
wrists bony carpal tunnel structure produces pain.
case-based reasoning (CBR): Artificial intelligence technology that represents knowledge as a
database of cases and solutions.
CD-ROM (compact disk read-only memory): Read-only optical disk storage used for imaging,
reference, and database applications with massive amounts of unchanging data and for multimedia.
CD-RW (CD-ReWritable): Optical disk storage that can be rewritten many times by users
cellular telephone (cell phone): A device that transmits voice or data, using radio waves to
communicate with radio antennas placed within adjacent geographic areas called cells.
central processing unit (CPU): Area of the computer system that manipulates symbols, numbers, and
letters, and controls the other parts of the computer system.
centralized processing: Processing that is accomplished by one large central computer.
change agent: In the context of implementation, the individual acting as the catalyst during the change
process to ensure successful organizational adaptation to a new system or innovation.
channel conflict: Competition between two or more different distribution chains used to sell the
products or services of the same company.
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channels: The links by which data or voice are transmitted between sending and receiving devices in a
network.
chatting: Live, interactive conversations over a public network.
chief information officer (CIO): Senior manager in charge of the information systems function in the
firm.
chief knowledge officer (CKO): Senior executive in charge of the organizations knowledge
management programme.
choice: Simon's third stage of decision making, when the individual selects among the various solution
alternatives.
classical model of management: Traditional description of management that focused on its formal
functions of planning, organizing, coordinating, deciding, and controlling.
clicks-and-mortar: Business model where the Web site is an extension of a traditional bricks-andmortar business.
click stream tracking: Tracking data about customer activities at Web sites and storing them in a log.
client: The user point-of-entry for the required function in client/server computing. Normally a desktop
computer, workstation, or laptop computer.
client/server computing: A model for computing that splits processing between clients and servers
on a network, assigning functions to the machine most able to perform the function.
clustering: Linking two computers together so that the second computer can act as a backup to the
primary computer or speed up processing.
coaxial cable: A transmission medium consisting of thickly insulated copper wire; can transmit large
volumes of data quickly.
COBOL (COmmon Business Oriented Language): Major programming language for business
applications because it can process large data files with alphanumeric characters.
cognitive style: Underlying personality dispositions toward the treatment of information, selection of
alternatives, and evaluation of consequences.
collaborative commerce: The use of digital technologies to enable multiple organizations to
collaboratively design, develop, build, and manage products through their lifecycles.
collaborative filtering: Tracking users movements on a Web site, comparing the information gleaned
about a users behavior against data about other customers with similar interests to predict what the
user would like to see next.
collaborative planning, forecasting, and replenishment (CPFR): Firms collaborating with their
suppliers and buyers to formulate demand forecasts, develop production plans, and coordinate
shipping, warehousing, and stocking activities
communications technology: Physical devices and software that link various computer hardware
components and transfer data from one physical location to another.
community of practice: Informal group of people that may live or work in many different locations but
who share a common professional interest. An important source of expertise for organizations.
competitive forces model: Model used to describe the interaction of external influences, specifically
threats and opportunities, that affect an organizations strategy and ability to compete.
compiler: Special system software that translates a high-level language into machine language for
execution by the computer.
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computer: Physical device that takes data as an input, transforms the data by executing stored
instructions, and outputs information to a number of devices.
computer abuse: The commission of acts involving a computer that may not be illegal but are
considered unethical.
computer-aided design (CAD): Information system that automates the creation and revision of
designs using sophisticated graphics software.
computer-aided software engineering (CASE): Automation of step-by-step methodologies for
software and systems development to reduce the amounts of repetitive work the developer needs to do.
computer-based information systems (CBIS): Information systems that rely on computer hardware
and software for processing and disseminating information.
computer crime: The commission of illegal acts through the use of a computer or against a computer
system.
computer hardware: Physical equipment used for input, processing, and output activities in an
information system.
computer matching: The processing control that matches input data to information held on master
files.
computer software: Detailed, pre-programmed instructions that control and coordinate the work of
computer hardware components in an information system.
computer virus: Rogue software programs that are difficult to detect which spread rapidly through
computer systems, destroying data or disrupting processing and memory systems.
computer vision syndrome (CVS): Eyestrain condition related to computer display screen use;
symptoms include headaches, blurred vision, and dry and irritated eyes.
concentrator: Telecommunications computer that collects and temporarily stores messages from
terminals for batch transmission to the host computer.
connectivity: A measure of how well computers and computer-based devices communicate and share
information with one another without human intervention.
consumer-to-consumer (C2C) electronic commerce: Consumers selling goods and services
electronically to other consumers.
control totals: A type of input control that requires counting transactions or quantity fields prior to
processing for comparison and reconciliation after processing.
control unit: Component of the CPU that controls and coordinates the other parts of the computer
system.
controller: A specialized computer that supervises communications traffic between the CPU and the
peripheral devices in a telecommunications system.
controls: All of the methods, policies, and procedures that ensure protection of the organizations
assets, accuracy and reliability of its records, and operational adherence to management standards.
converged network: Network with technology to enable voice and data to run over a single network
conversion: The process of changing from the old system to the new system.
cookie: Tiny file deposited on a computer hard drive when an individual visits certain Web sites. Used
to identify the visitor and track visits to the Web site.
cooptation: Bringing the opposition into the process of designing and implementing the solution
without giving up control over the direction and nature of the change.
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copyright: A statutory grant that protects creators of intellectual property against copying by others for
any purpose for a period of 28 years.
core competency: Activity at which a firm excels as a world-class leader.
core systems: Systems that support functions that are absolutely critical to the organization.
costbenefit ratio: A method for calculating the returns from a capital expenditure by dividing total
benefits by total costs.
counter implementation: A deliberate strategy to thwart the implementation of an information system
or an innovation in an organization.
critical success factors (CSFs): A small number of easily identifiable operational goals shaped by the
industry, the firm, the manager, and the broader environment that are believed to assure the success of
an organization. Used to determine the information requirements of an organization.
customer decision-support system (CDSS): System to support the decision-making process of an
existing or potential customer.
customer relationship management systems: Information systems for creating a coherent integrated
view of all of the relationships a firm maintains with its customers
customisation: The modification of a software package to meet an organizations unique requirements
without destroying the package softwares integrity.
D
data: Streams of raw facts representing events occurring in organizations or the physical environment
before they have been organized and arranged into a form that people can understand and use.
data administration: A special organizational function for managing the organizations data resources,
concerned with information policy, data planning, maintenance of data dictionaries, and data quality
standards
data cleansing: Correcting errors and inconsistencies in data to increase accuracy so that they can be
used in a standard company-wide format.
data definition language: The component of a database management system that defines each data
element as it appears in the database.
data dictionary: An automated or manual tool for storing and organizing information about the data
maintained in a database.
data-driven DSS: A system that supports decision making by allowing users to extract and analyse
useful information that was previously buried in large databases.
data-flow diagram: Primary tool for structured analysis that graphically illustrates a systems
component processes and the flow of data between them.
data management software: Software used for creating and manipulating lists, creating files and
databases to store data, and combining information for reports.
data manipulation language: A language associated with a database management system that end
users and programmers use to manipulate data in the database.
data mart: A small data warehouse containing only a portion of the organizations data for a specified
function or population of users.
data quality audit: A survey and/or sample of files to determine accuracy and completeness of data in
an information system.
data redundancy: The presence of duplicate data in multiple data files.
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data security controls: Controls to ensure that data files on either disk or tape are not subject to
unauthorized access, change, or destruction.
data visualization: Technology for helping users see patterns and relationships in large amounts of
data by presenting the data in graphical form.
data warehouse: A database, with reporting and query tools, that stores current and historical data
extracted from various operational systems and consolidated for management reporting and analysis.
data workers: People, such as secretaries or bookkeepers, who process and disseminate the
organizations information and paperwork.
database: A group of related files.
database (rigorous definition): A collection of data organized to service many applications at the
same time by storing and managing data so that they appear to be in one location.
database administration: Refers to the more technical and operational aspects of managing data,
including physical database design and maintenance.
database management system (DBMS): Special software to create and maintain a database and
enable individual business applications to extract the data they need without having to create separate
files or data definitions in their computer programs.
database server: A computer in a client/server environment that is responsible for running a DBMS to
process SQL statements and perform database management tasks.
data conferencing: Teleconferencing in which two or more users are able to edit and modify data files
simultaneously.
data mining: Analysis of large pools of data to find patterns and rules that can be used to guide
decision making and predict future behaviour.
debugging: The process of discovering and eliminating the errors and defectsthe bugsin program
code.
decisional roles: Mintzberg's classification for managerial roles where managers initiate activities,
handle disturbances, allocate resources, and negotiate conflicts.
decision-support systems (DSS): Information systems at the organization's management level that
combine data and sophisticated analytical models or data analysis tools to support semi structured and
unstructured decision making.
dedicated lines: Telephone lines that are continuously available for transmission by a lessee. Typically
conditioned to transmit data at high speeds for high-volume applications.
denial of service attack: Flooding a network server or Web server with false communications or
requests for services in order to crash the network.
dense wave division multiplexing (DWDM): Technology for boosting transmission capacity of optical
fibre by using many different wavelengths to carry separate streams of data over the same fibre strand
at the same time.
Descartes rule of change: A principle that states that if an action cannot be taken repeatedly, then it
is not right to be taken at any time.
design: Simon's second stage of decision making, when the individual conceives of possible
alternative solutions to a problem.
desktop publishing: Technology that produces professional-quality documents combining output from
word processors with design, graphics, and special layout features.
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development methodology: A collection of methods, one or more for every activity within every phase
of a development project.
digital cash: Currency represented in electronic form that moves outside the normal network of money.
digital certificate: An attachment to an electronic message to verify the identity of the sender and to
provide the receiver with the means to encode a reply.
digital checking: Systems that extend the functionality of existing checking accounts so they can be
used for online shopping payments.
digital credit card payment system: Secure services for credit card payments on the Internet that
protect information transmitted among users, merchant sites, and processing banks.
digital divide: Large disparities in access to computers and the Internet among different social groups
and different locations.
digital firm: Organization where nearly all significant business processes and relationships with
customers, suppliers, and employees are digitally enabled, and key corporate assets are managed
through digital means.
digital market: A marketplace that is created by computer and communication technologies that link
many buyers and sellers.
Digital Millennium Copyright Act (DMCA): Adjusts copyright laws to the Internet age by making it
illegal to make, distribute, or use devices that circumvent technology-based protections of copyrighted
materials
digital signal: A discrete waveform that transmits data coded into two discrete states as 1-bits and 0bits, which are represented as onoff electrical pulses; used for data communications.
digital signature: A digital code that can be attached to an electronically transmitted message to
uniquely identify its contents and the sender.
digital subscriber line (DSL): A group of technologies providing high-capacity transmission over
existing copper telephone lines.
digital wallet: Software that stores credit card and owner identification information and provides these
data automatically during electronic commerce purchase transactions.
direct cutover: A risky conversion approach whereby the new system completely replaces the old one
on an appointed day.
disaster recovery plan: Plan for running the business in the event of a computer outage. Includes
organizational procedures as well as backup processing, storage and database capabilities.
disinter mediation: The removal of organizations or business process layers responsible for certain
intermediary steps in a value chain.
distance learning: Education or training delivered over a distance to individuals in one or more
locations.
distributed database: A database that is stored in more than one physical location. Parts or copies of
the database are physically stored in one location, and other parts or copies are stored and maintained
in other locations.
distributed processing: The distribution of computer processing work among multiple computers
linked by a communications network.
document imaging systems: Systems that convert paper documents and images into digital form so
that they can be stored and accessed by the computer.
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documentation: Descriptions of how an information system works from either a technical or an enduser standpoint.
domain name: The unique name of a collection of computers connected to the Internet.
domain name system (DNS): A hierarchical system of servers maintaining databases enabling the
conversion of domain names to their IP addresses.
domestic exporter: A strategy characterized by heavy centralization of corporate activities in the home
country of origin.
downsizing: The process of transferring applications from large computers to smaller ones.
downtime: Period of time in which an information system is not operational.
drill down: The ability to move from summary data to lower and lower levels of detail.
DSS database: A collection of current or historical data from a number of applications or groups. Can
be a small PC database or a massive data warehouse.
DSS software system: Collection of software tools that are used for data analysis, such as OLAP
tools, data mining tools, or a collection of mathematical and analytical models.
due process: A process in which laws are well-known and understood and there is an ability to appeal
to higher authorities to ensure that laws are applied correctly.
DVD (digital video disk): High-capacity optical storage medium that can store full-length videos and
large amounts of data.
dynamic page generation: Technology for storing the contents of Web pages as objects in a database
rather where they can be accessed and assembled to create constantly changing Web pages.
dynamic pricing: Pricing of items based on real-time interactions between buyers and sellers that
determine what an item is worth at any particular moment.
E
edit checks: Routines performed to verify input data and correct errors prior to processing.
efficient customer response system: System that directly links consumer behaviour back to
distribution, production, and supply chains.
e-learning: Instruction delivered through purely digital technology such as CD-ROMs, the Internet or
private networks.
electronic billing presentment and payment systems: Systems used for paying routine monthly bills
that allow users to view their bills electronically and pay them through electronic funds transfers from
banks or credit card accounts.
electronic business (e-business): The use of Internet and digital technology to execute all the
business processes in the enterprise. Includes e-commerce as well as processes for the internal
management of the firm and for coordination with suppliers and other business partners.
electronic commerce (e-commerce): The process of buying and selling goods and services
electronically involving transactions using the Internet, networks, and other digital technologies.
electronic commerce server software: Software that provides functions essential for running ecommerce Web sites, such as setting up electronic catalogs and storefronts, and mechanisms for
processing customer purchases.
electronic data interchange (EDI): The direct computer-to-computer exchange between two
organizations of standard business transaction documents.
electronic mail (e-mail): The computer-to-computer exchange of messages.
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electronic payment system: The use of digital technologies, such as credit cards, smart cards and
Internet-based payment systems, to pay for products and services electronically.
encryption: The coding and scrambling of messages to prevent their being read or accessed without
authorization.
end-user development: The development of information systems by end users with little or no formal
assistance from technical specialists.
end-user interface: The part of an information system through which the end user interacts with the
system, such as on-line screens and commands.
end users: Representatives of departments outside the information systems group for whom
applications are developed.
enterprise analysis: An analysis of organization-wide information requirements that examines the
entire organization in terms of organizational units, functions, processes, and data elements; helps
identify the key entities and attributes in the organizations data.
enterprise application integration software: Software that ties together multiple applications to
support enterprise integration.
enterprise applications: Systems that can coordinate activities, decisions, and knowledge across
many different functions, levels, and business units in a firm. Include enterprise systems, supply chain
management systems, customer relationship management systems, and knowledge management
systems.
enterprise information portal: Application that enables companies to provide users with a single
gateway to internal and external sources of information.
enterprise networking: An arrangement of the organizations hardware, software, network, and data
resources to put more computing power on the desktop and create a company-wide network linking
many smaller networks.
enterprise software: Set of integrated modules for applications such as sales and distribution, financial
accounting, investment management, materials management, production planning, plant maintenance,
and human resources that allow data to be used by multiple functions and business processes.
enterprise systems: Integrated enterprise-wide information systems that coordinate key internal
processes of the firm, integrating data from manufacturing and distribution, finance, sales, and human
resources.
entity: A person, place, thing, or event about which information must be kept.
entity-relationship diagram: A methodology for documenting databases illustrating the relationship
between various entities in the database.
ergonomics: The interaction of people and machines in the work environment, including the design of
jobs, health issues, and the end-user interface of information systems.
ethics: Principles of right and wrong that can be used by individuals acting as free moral agents to
make choices to guide their behaviour.
exchange: Third-party Net marketplace that is primarily transaction oriented and that connects many
buyers and suppliers for spot purchasing.
executive support systems (ESS): Information systems at the organization's strategic level designed
to address unstructured decision making through advanced graphics and communications.
expert system: Knowledge-intensive computer program that captures the expertise of a human in
limited domains of knowledge.
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external integration tools: Project management technique that links the work of the implementation
team to that of users at all organizational levels.
extranet: Private intranet that is accessible to authorized outsiders.
F
facsimile (fax): A machine that digitises and transmits documents with both text and graphics over
telephone lines.
Fair Information Practices (FIP): A set of principles originally set forth in 1973 that governs the
collection and use of information about individuals and forms the basis of most U.S. and European
privacy laws.
fault-tolerant computer systems: Systems that contain extra hardware, software, and power supply
components that create an environment that provides continuous uninterrupted service.
feasibility study: As part of the systems analysis process, the way to determine whether the solution is
achievable, given the organizations resources and constraints.
feedback: Output that is returned to the appropriate members of the organization to help them evaluate
or correct input.
fibre-optic cable: A fast, light, and durable transmission medium consisting of thin st of clear glass
fibre bound into cables. Data are transmitted as light pulses.
field: A grouping of characters into a word, a group of words, or a complete number, such as a
persons name or age.
file: A group of records of the same type.
file transfer protocol (FTP): Tool for retrieving and transferring files from a remote computer.
finance and accounting information systems: Systems that keep track of the firms financial assets
and fund flows.
firewall: Hardware and software placed between an organizations internal network and an external
network to prevent outsiders from invading private networks.
floppy disk: Removable magnetic disk storage primarily used with PCs.
focused differentiation: Competitive strategy for developing new market niches for specialized
products or services where a business can compete in the target area better than its competitors.
formal control tools: Project management technique that helps monitor the progress toward
completion of a task and fulfilment of goals.
formal planning tools: Project management technique that structures and sequences tasks, budgeting
time, money, and technical resources required to complete the tasks.
formal system: System resting on accepted and fixed definitions of data and procedures, operating
with predefined rules.
FORTRAN (FORmula TRANslator): A programming language developed in 1956 for scientific and
mathematical
applications.
forward chaining: A strategy for searching the rule base in an expert system that begins with the
information entered by the user and searches the rule base to arrive at a conclusion.
fourth-generation language: A programming language that can be employed directly by end users or
less-skilled programmers to develop computer applications more rapidly than conventional
programming languages.
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frame relay: A shared network service technology that packages data into bundles for transmission but
does not use error-correction routines. Cheaper and faster than packet switching.
framing: Displaying the content of another Web site inside ones own Web site within a frame or a
window.
franchiser: A firm where a product is created, designed, financed, and initially produced in the home
country, but for product-specific reasons must rely heavily on foreign personnel for further production,
marketing, and human resources.
front-end processor: A special purpose computer dedicated to managing communications for the host
computer in a network.
fuzzy logic: Rule-based AI that tolerates imprecision by using non-specific terms called membership
functions to solve problems.
G
"garbage can" model: Model of decision making that states that organizations are not rational and
that decisions are solutions that become attached to problems for accidental reasons.
gateway: A communications processor that connects dissimilar networks by providing the translation
from one set of protocols to another.
general controls: Overall controls that establish a framework for controlling the design, security, and
use of computer programs throughout an organization.
genetic algorithms: Problem-solving methods that promote the evolution of solutions to specified
problems using the model of living organisms adapting to their environment.
geographic information system (GIS): System with software that can analyse and display data using
digitised maps to enhance planning and decision making.
global culture: The development of common expectations, shared artefacts, and social norms among
different cultures and peoples
graphical user interface (GUI): The part of an operating system users interact with that uses graphic
icons and the computer mouse to issue commands and make selections.
group decision-support system (GDSS): An interactive computer-based system to facilitate the
solution to unstructured problems by a set of decision-makers working together as a group.
groupware: Software that provides functions and services that support the collaborative activities of
work groups.
H
hacker: A person who gains unauthorized access to a computer network for profit, criminal mischief, or
personal pleasure.
hard disk: Magnetic disk resembling a thin steel platter with a metallic coating; used in large computer
systems and in most PCs.
hierarchical DBMS: Older logical database model that organizes data in a treelike structure. A record
is subdivided into segments that are connected to each other in one-to-many parentchild relationships.
high-availability computing: Tools and technologies, including backup hardware resources, to enable
a system to recover quickly from a crash.
hit: An entry into a Web servers log file generated by each request to the server for a file.
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home page: A World Wide Web text and graphical screen display that welcomes the user and explains
the organization that has established the page.
human resources information systems: Systems that maintain employee records; track employee
skills, job performance, and training; and support planning for employee compensation and career
development.
hybrid AI systems: Integration of multiple AI technologies into a single application to take advantage
of the best features of these technologies.
hypermedia database: An approach to data management that organizes data as a network of nodes
linked in any pattern the user specifies; the nodes can contain text, graphics, sound, full-motion video,
or executable programs.
hypertext mark-up language (HTML): Page description language for creating Web pages and other
hypermedia documents.
hypertext transport protocol: The communications standard used to transfer pages on the Web.
Defines how messages are formatted and transmitted.
I
I-mode: Standard developed by Japans NTT DoCoMo mobile phone network for enabling cell phones
to received Web-based content and services.
implementation: Simon's final stage of decision making, when the individual puts the decision into
effect and reports on the progress of the solution.
implementation: All organizational activities working toward the adoption, management, and
routinization of an innovation.
inference engine: The strategy used to search through the rule base in an expert system; can be
forward or backward chaining.
information: Data that have been shaped into a form that is meaningful and useful to human beings.
information appliance: Device that has been customized to perform a few specialized computing
tasks well with minimal user effort.
information architecture: The particular design that information technology takes in a specific
organization to achieve selected goals or functions.
information asymmetry: Situation where the relative bargaining power of two parties in a transaction
is determined by one party in the transaction possessing more information essential to the transaction
than the other party.
information centre: A special facility within an organization that provides training and support for enduser computing.
information partnership: Cooperative alliance formed between two or more corporations for the
purpose of sharing information to gain strategic advantage.
information policy: Formal rules governing the maintenance, distribution, and use of information in an
organization.
information rights: The rights that individuals and organizations have with respect to information that
pertains to themselves.
information requirements: A detailed statement of the information needs that a new system must
satisfy; identifies who needs what information, and when, where, and how the information is needed.
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informational roles: Mintzberg's classification for managerial roles where managers act as the nerve
centres of their organizations, receiving and disseminating critical information.
information systems department: The formal organizational unit that is responsible for the
information systems function in the organization.
information systems literacy: Broad-based understanding of information systems that includes
behavioural knowledge about organizations and individuals using information systems as well as
technical knowledge about computers.
information systems managers: Leaders of the various specialists in the information systems
department.
information systems plan: A road map indicating the direction of systems development: the rationale,
the current situation, the management strategy, the implementation plan, and the budget.
information systems plan: A road map indicating the direction of systems development: the rationale,
the current situation, the management strategy, the implementation plan, and the budget.
information technology (IT) infrastructure: Computer hardware, software, data, and storage
technology, and networks providing a portfolio of shared information technology resources for the
organization.
information work: Work that primarily consists of creating or processing information.
input: The capture or collection of raw data from within the organization or from its external
environment for processing in an information system.
input controls: The procedures to check data for accuracy and completeness when they enter the
system.
instant messaging: Chat service that allows participants to create their own private chat channels so
that a person can be alerted whenever someone on his or her private list is online to initiate a chat
session with that particular individual.
intangible benefits: Benefits that are not easily quantified; they include more efficient customer service
or enhanced decision making.
informed consent: Intangible property created by individuals or corporations that is subject to
protections under trade secret, copyright, and patent law.
integrated software package: A software package that provides two or more applications, such as
word processing and spreadsheets, providing for easy transfer of data between them.
intellectual property: Consent given with knowledge of all the facts needed to make a rational
decision.
intelligence: The four stages of decision making, when the individual collects information to identify
problems occurring in the organization.
intelligent agent: Software program that uses a built-in or learned knowledge base to carry out
specific, repetitive, and predictable tasks for an individual user, business process, or software
application.
Integrated Services Digital Network (ISDN): International standard for transmitting voice, video,
image, and data to support a wide range of service over the public telephone lines.
internal integration tools: Project management technique that ensures that the implementation team
operates as a cohesive unit.
internal rate of return (IRR): The rate of return or profit that an investment is expected to earn.
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international information systems architecture: The basic information systems required by
organizations to coordinate worldwide trade and other activities.
Internet: International network of networks that is a collection of hundreds of thousands of private and
public networks.
Internet2: Research network with new protocols and transmission speeds that provides an
infrastructure for supporting high-bandwidth Internet applications.
Internet protocol (IP) address: Four-part numeric address indicating a unique computer location on
the Internet.
Internet service provider (ISP): A commercial organization, with a permanent connection to the
Internet, that sells temporary connections to subscribers.
Internet telephony: Technologies that use the Internet Protocols packet-switched connections for
voice service.
Internetworking: The linking of separate networks, each of which retains its own identity, into an
interconnected network.
interorganizational systems: Information systems that automate the flow of information across
organizational boundaries and link a company to its customers, distributors, or suppliers.
interpersonal roles: Mintzberg's classification for managerial roles where managers act as
figureheads and leaders for the organization.
intranet: An internal network based on Internet and World Wide Web technology and standards.
intrusion detection system: Tools to monitor the most vulnerable points in a network to detect and
deter unauthorized intruders.
intuitive decision makers: Cognitive style that describes people who approach a problem with
multiple methods in an unstructured manner, using trial and error to find a solution.
investment workstation: Powerful desktop computer for financial specialists, which is optimised to
access and manipulate massive amounts of financial data.
iteration construct: The logic pattern in programming where certain actions are repeated while a
specified condition occurs or until a certain condition is met.
iterative: A process of repeating over and over again the steps to build a system.
J/K
Java: Programming language that can deliver only the software functionality needed for a particular
task, such as a small applet downloaded from a network; can run on any computer and operating
system.
joint application design (JAD): Process to accelerate the generation of information requirements by
having end users and information systems specialists work together in intensive interactive design
sessions.
key field: A field in a record that uniquely identifies instances of that record so that it can be retrieved,
updated, or sorted.
knowledge-and information-intense products: Products that require a great deal of learning and
knowledge to produce.
knowledge assets: Organizational knowledge regarding how to efficiently and effectively perform its
business processes and create new products and services that enables the business to generate its
profits.
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knowledge base: Model of human knowledge that is used by expert systems.
knowledge discovery: The process of identifying novel and valuable patterns in large volumes of data
through the selection, preparation, and evaluation of the contents of large databases.
knowledge engineer: A specialist who elicits information and expertise from other professionals and
translates it into a set of rules, or frames, for an expert system.
knowledge frames: A method of organizing expert system knowledge into chunks; the relationships
are based on shared characteristics determined by the user.
knowledge-level decision making: Evaluating new ideas for products, services, ways to communicate
new knowledge, and ways to distribute information throughout the organization.
knowledge-level systems: Information systems that support knowledge and data workers in an
organization.
knowledge management: The set of processes developed in an organization to create, gather, store,
maintain, and disseminate the firms knowledge.
knowledge management systems: Systems that support the creation, capture, storage, and
dissemination of firm expertise and knowledge.
knowledge map: Tool for identifying and locating the organizations knowledge resources.
knowledge repository: Collection of documented internal and external knowledge in a single location
for more efficient management and utilization by the organization.
knowledge work systems (KWS): Information systems that aid knowledge workers in the creation and
integration of new knowledge in the organization.
knowledge workers: People, such as engineers, scientists, or architects, who design products or
services or create knowledge for the organization.
L
legacy system: A system that has been in existence for a long time and that continues to be used to
avoid the high cost of replacing or redesigning it.
legitimacy: The extent to which ones authority is accepted on grounds of competence, vision, or other
qualities. Making judgments and taking actions on the basis of narrow or personal characteristics
liability: The existence of laws that permit individuals to recover the damages done to them by other
actors, systems, or organizations.
Linux: Reliable and compactly designed operating system that is an offshoot of UNIX and that can run
on many different hardware platforms and is available free or at very low cost. Used as alternative to
UNIX and Windows NT.
LISTSERV: Online discussion groups using e-mail broadcast from mailing list servers.
load balancing: Distribution of large numbers of requests for access among multiple servers so that no
single device is overwhelmed.
local area network (LAN): A telecommunications network that requires its own dedicated channels
and that encompasses a limited distance, usually one building or several buildings in close proximity.
logical view: A representation of data as they would appear to an application programmer or end user.
M
machine cycle: Series of operations required to process a single machine instruction.
machine language: A programming language consisting of the 1s and 0s of binary code.
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magnetic disk: A secondary storage medium in which data are stored by means of magnetized spots
on a hard or floppy disk.
magnetic tape: Inexpensive, older secondary-storage medium in which large volumes of information
are stored sequentially by means of magnetized and non-magnetized spots on tape.
mainframe: Largest category of computer, used for major business processing.
maintenance: Changes in hardware, software, documentation, or procedures to a production system to
correct errors, meet new requirements, or improve processing efficiency.
management control: Monitoring how efficiently or effectively resources are used and how well
operational units are performing.
management information systems (MIS): Information systems at the management level of an
organization that serve the functions of planning, controlling, and decision making by providing routine
summary and exception reports.
management-level systems: Information systems that support the monitoring, controlling, decisionmaking, and administrative activities of middle managers.
management service provider (MSP): Company that provides network, systems, storage, and
security management for subscribing clients.
managerial roles: Expectations of the activities that managers should perform in an organization.
man-month: The traditional unit of measurement used by systems designers to estimate the length of
time to complete a project. Refers to the amount of work a person can be expected to complete in a
month.
manufacturing and production information systems: Systems that deal with the planning,
development, and production of products and services, and with controlling the flow of production.
mass customisation: The capacity to offer individually tailored products or services on a large scale.
massively parallel computers: Computers that use hundreds or thousands of processing chips to
attack large computing problems simultaneously.
megahertz: A measure of cycle speed, or the pacing of events in a computer; one megahertz equals
one million cycles per second.
message integrity: The ability to ascertain that a transmitted message has not been copied or altered.
micro browser: Web browser software with a small file size that can work with low-memory
constraints, tiny screens of handheld wireless devices, and low bandwidth of wireless networks.
micro payment: Payment for a very small sum of money, often less than $10.
microprocessor: Very large scale integrated circuit technology that integrates the computers memory,
logic, and control on a single chip.
microwave: A high-volume, long-distance, point-to-point transmission in which high-frequency radio
signals are transmitted through the atmosphere from one terrestrial transmission station to another.
middle managers: People in the middle of the organizational hierarchy who are responsible for
carrying out the plans and goals of senior management.
middleware: Software that connects two disparate applications, allowing them to communicate with
each other and to exchange data.
midrange computer: Middle-size computer that is capable of supporting the computing needs of
smaller organizations or of managing networks of other computers.
minicomputer: Middle-range computer used in systems for universities, factories, or research
laboratories.
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mirroring: Duplicating all the processes and transactions of a server on a backup server to prevent any
interruption in service if the primary server fails.
MIS audit: Identifies all the controls that govern individual information systems and assesses their
effectiveness.
mobile commerce (m-commerce): The use of wireless devices, such as cell phones or handheld
digital information appliances, to conduct both business-to-consumer and business-to-business ecommerce transactions over the Internet.
mobile data networks: Wireless networks that enable two-way transmission of data files cheaply and
efficiently.
model: An abstract representation that illustrates the components or relationships of a phenomenon.
model-driven DSS: Primarily stand-alone system that uses some type of model to perform what-if
and other kinds of analyses.
modem: A device for translating digital signals into analogue signals and vice versa.
module: A logical unit of a program that performs one or several functions.
MP3 (MPEG3): Compression standard that can compress audio files for transfer over the Internet with
virtually no loss in quality.
multicasting: Transmission of data to a selected group of recipients.
multimedia: The integration of two or more types of media such as text, graphics, sound, voice, fullmotion video, or animation into a computer-based application.
multinational: A global strategy that concentrates financial management and control out of a central
home base while decentralizing production, sales, and marketing operations to units in other countries.
multiplexer: A device that enables a single communications channel to carry data transmissions from
multiple sources simultaneously.
N
net marketplace: A single digital marketplace based on Internet technology linking many buyers to
many sellers.
net present value: The amount of money an investment is worth, taking into account its cost, earnings,
and the time value of money.
network: The linking of two or more computers to share data or resources, such as a printer.
network-attached storage (NAS): Attaching high-speed RAID storage devices to a network and so
that the devices in the network can access these storage devices through a specialized server
dedicated to file service and storage.
network computer (NCs): Simplified desktop computer that does not store software programs or data
permanently. Users download whatever software or data they need from a central computer over the
Internet or an organizations own internal network.
network DBMS: Older logical database model that is useful for depicting many-to-many relationships.
network economics: Model of strategic systems at the industry level based on the concept of a
network where adding another participant entails zero marginal costs but can create much larger
marginal gain.
network operating system (NOS): Special software that routes and manages communications on the
network and coordinates network resources.
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neural network: Hardware or software that attempts to emulate the processing patterns of the
biological brain.
non-obvious relationship awareness (NORA): Technology that can find obscure hidden connections
between people or other entities by analysing information from many different sources to correlate
relationships.
normalization: The process of creating small stable data structures from complex groups of data when
designing a relational database.
O
object-oriented DBMS: An approach to data management that stores both data and the procedures
acting on the data as objects that can be automatically retrieved and shared; the objects can contain
multimedia.
object-oriented development: Approach to systems development that uses the object as the basic
unit of systems analysis and design. The system is modelled as a collection of objects and the
relationships between them.
object-oriented programming: An approach to software development that combines data and
procedures into a single object.
object-relational DBMS: A database management system that combines the capabilities of a relational
DBMS for storing traditional information and the capabilities of an object-oriented DBMS for storing
graphics and multimedia.
Office 2000 and Office XP: Integrated software suites with capabilities for supporting collaborative
work on the Web or incorporating information from the Web into documents.
office systems: Computer systems, such as word processing, voice mail, and imaging, that are
designed to increase the productivity of information workers in the office.
online analytical processing (OLAP): Capability for manipulating and analysing large volumes of data
from multiple perspectives.
online processing: A method of collecting and processing data in which transactions are entered
directly into the computer system and processed immediately.
online transaction processing: Transaction processing mode in which transactions entered online are
immediately processed by the computer.
open-source software: Software that provides free access to its program code, allowing users to
modify the program code to make improvements or fix errors.
open systems: Software systems that can operate on different hardware platforms because they are
built on public non-proprietary operating systems, user interfaces, application standards, and
networking protocols.
Open Systems Interconnect (OSI): International reference model for linking different types of
computers and networks.
operating system: The system software that manages and controls the activities of the computer.
operational control: Deciding how to carry out specific tasks specified by upper and middle
management, and establishing criteria for completion and resource allocation.
operational-level systems: Information systems that monitor the elementary activities and
transactions of the organization.
operational managers: People who monitor the day-to-day activities of the organization.
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optical network: High-speed networking technologies for transmitting data in the form of light pulses.
opt-in: Model of informed consent prohibiting an organization from collecting any personal information
unless the individual specifically takes action to approve information collection and use
opt-out: Model of informed consent permitting the collection of personal information until the consumer
specifically requests that the data not be collected.
organization (behavioural definition): A collection of rights, privileges, obligations, and
responsibilities that are delicately balanced over a period of time through conflict and conflict resolution
organization (technical definition): A stable, formal, social structure that takes resources from the
environment and processes them to produce outputs.
organizational culture: The set of fundamental assumptions about what products the organization
should produce, how and where it should produce them, and for whom they should be produced.
organizational impact analysis: Study of the way a proposed system will affect organizational
structure, attitudes, decision making, and operations.
organizational memory: The stored learning from an organizations history that can be used for
decision making and other purposes.
organizational models of decision making: Models of decision making that take into account the
structural and political characteristics of an organization.
organizational learning: Creation of new standard operating procedures and business processes that
reflect organizations experience.
output: The distribution of processed information to the people who will use it or to the activities for
which it will be used.
output controls: Measures that ensure that the results of computer processing are accurate, complete,
and properly distributed.
outsourcing: The practice of contracting computer centre operations, telecommunications networks, or
applications development to external vendors.
P
P3P: Industry standard designed to give users more control over personal information gathered on Web
sites they visit. Stands for Platform for Privacy Preferences.
packet switching: Technology that breaks blocks of text into small, fixed bundles of data and routes
them in the most economical way through any available communications channel.
paging system: A wireless transmission technology in which the pager beeps when the user receives
a message; used to transmit short alphanumeric messages.
paradigm shift: Radical reconceptualization of the nature of the business and the nature of the
organization.
parallel processing: Type of processing in which more than one instruction can be processed at a
time by breaking down a problem into smaller parts and processing them simultaneously with multiple
processors.
parallel strategy: A safe and conservative conversion approach where both the old system and its
potential replacement are run together for a time until everyone is assured that the new one functions
correctly.
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patent: A legal document that grants the owner an exclusive monopoly on the ideas behind an
invention for 20 years; designed to ensure that inventors of new machines or methods are rewarded for
their labour while making widespread use of their inventions.
payback method: A measure of the time required to pay back the initial investment on a project.
peer-to-peer: Network architecture that gives equal power to all computers on the network; used
primarily in small networks.
peer-to-peer computing: Form of distributed processing that links computers via the Internet or private
networks so that they can share processing tasks.
peer-to-peer payment system: Electronic payment system for people who want to send money to
vendors or individuals who are not set up to accept credit card payments.
personal communication services (PCS): A wireless cellular technology that uses lower power,
higher frequency radio waves than does cellular technology and so can be used with smaller size
telephones.
personal computer (PC): Small desktop or portable computer.
personal digital assistants (PDA): Small, pen-based, handheld computers with built-in wireless
telecommunications capable of entirely digital communications transmission.
phased approach: Introduces the new system in stages either by functions or by organizational units.
physical view: The representation of data as they would actually be organized on physical storage
media.
pilot study: A strategy to introduce the new system to a limited area of the organization until it is
proven to be fully functional; only then can the conversion to the new system across the entire
organization take place.
political models of decision making: Models of decision making where decisions result from
competition and bargaining among the organization's interest groups and key leaders.
pop-up ad: Ad that opens automatically and does not disappear until the user clicks on it.
portfolio analysis: An analysis of the portfolio of potential applications within a firm to determine the
risks and benefits, and to select among alternatives for information systems.
portal: Web site or other service that provides an initial point of entry to the Web or to internal company
data.
post implementation audit: Formal review process conducted after a system has been placed in
production to determine how well the system has met its original objectives.
present value: The value, in current dollars, of a payment or stream of payments to be received in the
future.
primary activities: Activities most directly related to the production and distribution of a firms products
or services.
primary storage: Part of the computer that temporarily stores program instructions and data being
used by the instructions.
privacy: The claim of individuals to be left alone, free from surveillance or interference from other
individuals, organizations, or the state.
private exchange: Another term for a private industrial network.
private industrial networks: Web-enabled networks linking systems of multiple firms in an industry for
the coordination of trans-organizational business processes.
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process specifications: Describe the logic of the processes occurring within the lowest levels of a
data flow diagram.
processing: The conversion, manipulation, and analysis of raw input into a form that is more
meaningful to humans.
processing controls: The routines for establishing that data are complete and accurate during
updating.
product differentiation: Competitive strategy for creating brand loyalty by developing new and unique
products and services that are not easily duplicated by competitors.
production: The stage after the new system is installed and the conversion is complete; during this
time the system is reviewed by users and technical specialists to determine how well it has met its
original goals.
production or service workers: People who actually produce the products or services of the
organization.
profiling: The use of computers to combine data from multiple sources and create electronic dossiers
of detailed information on individuals.
profitability index: Used to compare the profitability of alternative investments; it is calculated by
dividing the present value of the total cash inflow from an investment by the initial cost of the
investment.
program: A series of statements or instructions to the computer.
program-data dependence: The close relationship between data stored in files and the software
programs that update and maintain those files. Any change in data organization or format requires a
change in all the programs associated with those files.
programmers: Highly trained technical specialists who write computer software instructions.
programming: The process of translating the system specifications prepared during the design stage
into program code.
protocol: A set of rules and procedures that govern transmission between the components in a
network.
prototype: The preliminary working version of an information system for demonstration and evaluation
purposes.
prototyping: The process of building an experimental system quickly and inexpensively for
demonstration and evaluation so that users can better determine information requirements.
pure-play: Business models based purely on the Internet.
push technology: Method of obtaining relevant information on networks by having a computer
broadcast information directly to the user based on pre-specified interests.
Q/R
query language: Software tool that provides immediate online answers to requests for information that
are not predefined.
RAID (Redundant Array of Inexpensive Disks): Disk storage technology to boost disk performance
by packaging more than 100 smaller disk drives with a controller chip and specialized software in a
single large unit to deliver data over multiple paths simultaneously.
RAM (Random Access Memory): Primary storage of data or program instructions that can directly
access any randomly chosen location in the same amount of time.
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rapid application development (RAD): Process for developing systems in a very short time period by
using prototyping, fourth-generation tools, and close teamwork among users and systems specialists.
rational model: Model of human behaviour based on the belief that people, organizations, and nations
engage in basically consistent, value-maximizing calculations.
rationalization of procedures: The streamlining of standard operating procedures, eliminating obvious
bottlenecks, so that automation makes operating procedures more efficient.
reach: Measurement of how many people a business can connect with and how many products it can
offer those people.
real options pricing models: Models for evaluating information technology investments with uncertain
returns by using techniques for valuing financial options.
record: A group of related fields.
reduced instruction set computing (RISC): Technology used to enhance the speed of
microprocessors by embedding only the most frequently used instructions on a chip.
re-intermediation: The shifting of the intermediary role in a value chain to a new source.
relational DBMS: A type of logical database model that treats data as if they were stored in twodimensional tables. It can relate data stored in one table to data in another as long as the two tables
share a common data element.
repetitive stress injury (RSI): Occupational disease that occurs when muscle groups are forced
through repetitive actions with high-impact loads or thousands of repetitions with low-impact loads.
Request for Proposal (RFP): A detailed list of questions submitted to vendors of software or other
services to determine how well the vendors product can meet the organizations specific requirements.
resource allocation: The determination of how costs, time, and personnel are assigned to different
phases of a systems development project.
responsibility: Accepting the potential costs, duties, and obligations for the decisions one makes.
reverse logistics: The return of items from buyers to sellers in a supply chain.
richness: Measurement of the depth and detail of information that a business can supply to the
customer as well as information the business collects about the customer.
ring network: A network topology in which all computers are linked by a closed loop in a manner that
passes data in one direction from one computer to another.
risk assessment: Determining the potential frequency of the occurrence of a problem and the potential
damage if the problem were to occur. Used to determine the cost/benefit of a control.
Risk Aversion Principle: Principle that one should take the action that produces the least harm or
incurs the least cost.
ROM (read-only memory): Semiconductor memory chips that contain program instructions. These
chips can only be read from; they cannot be written to.
router: Device that forwards packets of data from one LAN or WAN to another.
rule base: The collection of knowledge in an AI system that is represented in the form of IFTHEN
rules.
rule-based expert system: An AI program that has a large number of interconnected and nested IF
THEN statements, or rules, that are the basis for the knowledge in the system.
run control totals: The procedures for controlling completeness of computer updating by generating
control totals that reconcile totals before and after processing.
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sales and marketing information systems: Systems that help the firm identify customers for the
firms products or services, develop products and services to meet customers needs, promote these
products and services, sell the products and services, and provide ongoing customer support.
satellite: The transmission of data using orbiting satellites that serve as relay stations for transmitting
microwave signals over very long distances.
scalability: The ability of a computer, product, or system to expand to serve a larger number of users
without breaking down.
scoring model: A quick method for deciding among alternative systems based on a system of ratings
for selected objectives.
search costs: The time and money spent locating a suitable product and determining the best price for
that product.
search engine: A tool for locating specific sites or information on the Internet.
secondary storage: Relatively long term, non-volatile storage of data outside the CPU and primary
storage.
security: Policies, procedures, and technical measures used to prevent unauthorized access,
alteration, theft, or physical damage to information systems.
selection construct: The logic pattern in programming where a stated condition determines which of
two alternative actions can be taken.
senior managers: People occupying the topmost hierarchy in an organization who are responsible for
making long-range decisions.
sensitivity analysis: Models that ask what-if questions repeatedly to determine the impact of
changes in one or more factors on the outcomes.
sequence construct: The sequential single steps or actions in the logic of a program that do not
depend on the existence of any condition.
server: Computer specifically optimised to provide software and other resources to other computers
over a network.
server farm: Large group of servers maintained by a commercial vendor and made available to
subscribers for electronic commerce and other activities requiring heavy use of servers.
shopping bot: Software with varying levels of built-in intelligence to help electronic commerce
shoppers locate and evaluate products or service they might wish to purchase.
six sigma: A specific measure of quality, representing 3.4 defects per million opportunities; used to
designate a set of methodologies and techniques for improving quality and reducing costs.
smart card: A credit-card-size plastic card that stores digital information and that can be used for
electronic payments in place of cash.
smart phone: Wireless phone with voice, text, and Internet capabilities.
SOAP (Simple Object Access Protocol): Set of rules that allows Web services applications to pass
data and instructions to one another.
Socio-technical design: Design to produce information systems that blend technical efficiency with
sensitivity to organizational and human needs.
software metrics: The objective assessments of the software used in a system in the form of
quantified measurements.
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software package: A prewritten, pre-coded, commercially available set of programs that eliminates the
need to write software programs for certain functions.
source code: Program instructions written in a high-level language programming language that must
be translated into machine language to be executed by the computer.
spamming: The practice of sending unsolicited e-mail and other electronic communication.
spreadsheet: Software displaying data in a grid of columns and rows, with the capability of easily
recalculating numerical data.
standard operating procedures (SOPs) : Precise rules, procedures, and practices developed by
organizations to cope with virtually all expected situations.
star network: A network topology in which all computers and other devices are connected to a central
host computer. All communications between network devices must pass through the host computer.
storage area network (SAN): A high-speed network dedicated to storage that connects different kinds
of storage devices, such as tape libraries and disk arrays.
storage service provider (SSP): Third-party provider that rents out storage space to subscribers over
the Web, allowing customers to store and access their data without having to purchase and maintain
their own storage technology.
storage technology: Physical media and software governing the storage and organization of data for
use in an information system.
stored value payment systems: Systems enabling consumers to make instant online payments to
merchants and other individuals based on value stored in a digital account.
strategic decision making: Determining the long-term objectives, resources, and policies of an
organization.
strategic information systems: Computer systems at any level of the organization that change goals,
operations, products, services, or environmental relationships to help the organization gain a
competitive advantage.
strategic-level systems: Information systems that support the long-range planning activities of senior
management.
strategic transitions: A movement from one level of socio-technical system to another. Often required
when adopting strategic systems that demand changes in the social and technical elements of an
organization.
streaming technology: Technology for transferring data so that they can be processed as a steady
and continuous stream.
structured: Refers to the fact that techniques are carefully drawn up, step by step, with each step
building on a previous one.
structured analysis: A method for defining system inputs, processes, and outputs and for partitioning
systems into subsystems or modules that show a logical graphic model of information flow.
structured chart: System documentation showing each level of design, the relationship among the
levels, and the overall place in the design structure; can document one program, one system, or part of
one program.
structured decisions: Decisions that are repetitive, routine, and have a definite procedure for handling
them.
structured design: Software design discipline encompassing a set of design rules and techniques for
designing systems from the top down in hierarchical fashion.
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structured programming: Discipline for organizing and coding programs that simplifies the control
paths so that the programs can be easily understood and modified; uses the basic control structures
and modules that have only one entry point and one exit point.
Structured Query Language (SQL): The standard data manipulation language for relational database
management systems.
supercomputer: Highly sophisticated and powerful computer that can perform very complex
computations extremely rapidly.
supply chain: Network of organizations and business processes for procuring materials, transforming
raw materials into intermediate and finished products, and distributing the finished products to
customers.
supply chain management: Close linkage and coordination of activities involved in buying, making
and moving a product.
supply chain management systems: Information systems that automate the relationship between a
firm and its suppliers in order to optimise the planning, sourcing, manufacturing and delivery of products
and services.
support activities: Activities that make the delivery of a firm's primary activities possible. Consist of the
organizations infrastructure, human resources, technology, and procurement.
switched lines: Telephone lines that a person can access from a terminal to transmit data to another
computer, the call being routed or switched through paths to the designated destination.
switching costs: The expense a customer or company incurs in lost time and resources when
changing from one supplier or system to a competing supplier or system.
system failure: An information system that either does not perform as expected, is not operational at a
specified time, or cannot be used in the way it was intended.
system software: Generalized programs that manage the computers resources, such as the central
processor, communications links, and peripheral devices.
system testing: Tests the functioning of the information system as a whole in order to determine if
discrete modules will function together as planned.
systems analysis: The analysis of a problem that the organization will try to solve with an information
system.
systems analysts: Specialists who translate business problems and requirements into information
requirements and systems, acting as liaisons between the information systems department and the rest
of the organization.
systems design: Details how a system will meet the information requirements as determined by the
systems analysis.
systems development: The activities that go into producing an information systems solution to an
organizational problem or opportunity.
systems lifecycle: A traditional methodology for developing an information system that partitions the
systems development process into formal stages that must be completed sequentially with a very
formal division of labour between end users and information systems specialists.
syndicator: Business aggregating content or applications from multiple sources, packaging them for
distribution, and reselling them to third-party Web sites.
systematic decision makers: Cognitive style that describes people who approach a problem by
structuring it in terms of some formal method.
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T
T1 line: A dedicated telephone connection comprising 24 channels that can support a data
transmission rate of 1.544 Mbps. Each channel can be configured to carry voice or data traffic.
tacit knowledge: Expertise and experience of organizational members that has not been formally
documented.
tangible benefits: Benefits that can be quantified and assigned a monetary value; they include lower
operational costs and increased cash flows.
team ware: Group collaboration software that is customized for teamwork.
techno stress: Stress induced by computer use; symptoms include aggravation, hostility toward
humans, impatience, and enervation.
telecommunications: The communication of information by electronic means, usually over some
distance.
telecommunications system: A collection of compatible hardware and software arranged to
communicate information from one location to another.
teleconferencing: The ability to confer with a group of people simultaneously using the telephone or
electronic-mail group communication software.
Telnet: Network tool that allows someone to log on to one computer system while doing work on
another.
test plan: Prepared by the development team in conjunction with the users; it includes all of the
preparations for the series of tests to be performed on the system.
testing: The exhaustive and thorough process that determines whether the system produces the
desired results under known conditions.
topology: The way in which the components of a network are connected.
total cost of ownership (TCO): Designates the total cost of owning technology resources, including
initial purchase costs, the cost of hardware and software upgrades, maintenance, technical support,
and training.
total quality management (TQM): A concept that makes quality control a responsibility to be shared
by all people in an organization.
trade secret: Any intellectual work or product used for a business purpose that can be classified as
belonging to that business, provided it is not based on information in the public domain.
traditional file environment: A way of collecting and maintaining data in an organization that leads to
each functional area or division creating and maintaining its own data files and programs.
transaction cost theory: Economic theory stating that firms grow larger because they can conduct
marketplace transactions internally more cheaply than they can with external firms in the marketplace.
transaction processing systems (TPS): Computerized systems that perform and record the daily
routine transactions necessary to conduct the business; they serve the organization's operational level.
trans-border data flow: The movement of information across international boundaries in any form.
Transmission Control Protocol/Internet Protocol (TCP/IP): U.S. Department of Defence reference
model for linking different types of computers and networks; used in the Internet.
Trans-national: Truly globally managed firms that have no national head months; value-added
activities are managed from a global perspective without reference to national borders, optimising
sources of supply and demand and taking advantage of any local competitive advantage.
186

tuple: A row or record in a relational database.
twisted wire: A transmission medium consisting of pairs of twisted copper wires; used to transmit
analogue phone conversations but can be used for data transmission.
U
unified messaging: System combining voice messages, e-mail, and fax so that they can all be
obtained from a single system.
uniform resource locator (URL): The address of a specific resource on the Internet.
unit testing: The process of testing each program separately in the system. Sometimes called program
testing.
UNIX: Operating system for all types of computers, which is machine independent and supports multiuser processing, multitasking, and networking. Used in high-end workstations and servers.
unstructured decisions: Non-routine decisions in which the decision maker must provide judgment,
evaluation, and insights into the problem definition; there is no agreed-on procedure for making such
decisions.
Usenet: Forums in which people share information and ideas on a defined topic through large
electronic bulletin boards where anyone can post messages on the topic for others to see and to which
others can respond.
userdesigner communications gap: The difference in backgrounds, interests, and priorities that
impede communication and problem solving among end users and information systems specialists.
user interface: The part of the information system through which the end user interacts with the
system; type of hardware and the series of on-screen commands and responses required for a user to
work with the system.
Utilitarian Principle: Principle that assumes one can put values in rank order and understand the
consequences of various courses of action.
utility computing: Model of computing in which companies pay only for the information technology
resources they actually used during a specified time period. Also called on-demand computing or
usage-based pricing.
V
value-added network (VAN): Private, multi-path, data-only, third-party-managed network that multiple
organizations use on a subscription basis.
value chain model: Model that highlights the primary or support activities that add a margin of value to
a firms products or services where information systems can best be applied to achieve a competitive
advantage.
value web: Customer-driven network of independent firms who use information technology to
coordinate their value chains to collectively produce a product or service for a market.
videoconferencing: Teleconferencing in which participants see each other over video screens.
virtual organization: Organization using networks to link people, assets, and ideas to create and
distribute products and services without being limited to traditional organizational boundaries or
physical locations.
virtual private network (VPN): A secure connection between two points across the Internet to transmit
corporate data. Provides a low-cost alternative to a private network.
187

visual programming: The construction of software programs by selecting and arranging programming
objects rather than by writing program code.
virtual reality systems: Interactive graphics software and hardware that create computer-generated
simulations that provide sensations that emulate real-world activities.
virtual reality modelling language (VRML): A set of specifications for interactive three-dimensional
modelling on the World Wide Web.
voice mail: A system for digitising a spoken message and transmitting it over a network.
voice over IP (VoIP): Facilities for managing the delivery of voice information using the Internet
Protocol (IP).
voice portal: Portal that can accept voice commands for accessing information from the Web.
W
walkthrough: A review of a specification or design document by a small group of people carefully
selected based on the skills needed for the particular objectives being tested.
Web browser: An easy-to-use software tool for accessing the World Wide Web and the Internet.
Web bugs: Tiny graphic files embedded in e-mail messages and Web pages that are designed to
monitor online Internet user behaviour.
Web server: Software that manages requests for Web pages on the computer where they are stored
and that delivers the page to the users computer.
Web personalization: The tailoring of Web content directly to a specific user.
Web services: Software components deliverable over the Internet that enable one application to
communicate with another with no translation required using a standard plug and play architecture.
Web site: All of the World Wide Web pages maintained by an organization or an individual.
wide area network (WAN): Telecommunications network that spans a large geographical distance.
May consist of a variety of cable, satellite, and microwave technologies.
Windows 98: Version of the Windows operating system that is closely integrated with the Internet and
that supports hardware technologies such as MMX, digital video disk, videoconferencing cameras,
scanners, TV tuner-adapter cards, and joysticks.
Windows 2000: Windows operating system for high-performance PCs and network servers. Supports
networking, multitasking, multiprocessing, and Internet services.
Windows Millennium Edition (Windows Me): Enhanced Windows operating system for consumer
users featuring tools for working with video, photos, music, and home networking.
Windows .NET server: Most recent Windows operating system for servers.
Windows XP: Powerful Windows operating system that provides reliability, robustness, and ease of
use for both corporate and home PC users.
word processing: Office system technology that facilitates the creation of documents through
computerized text editing, formatting, storing, and printing.
work flow management: The process of streamlining business procedures so that documents can be
moved easily and efficiently from one location to another.
World Wide Web: A system with universally accepted standards for storing, retrieving, formatting, and
displaying information in a networked environment.
Workstation: Desktop computer with powerful graphics and mathematical capabilities and the ability to
perform several complicated tasks at once.
188

WSDL (Web Services Description Language): Common framework for describing the tasks
performed by a Web service so that it can be used by other applications.
Webmaster: The person in charge of an organizations Web site.
Wireless Web: Web-based applications enabling users to access digital information from the Internet
using wireless mobile computing devices.
Wireless Application Protocol (WAP): System of protocols and technologies that lets cell phones and
other wireless devices with tiny displays, low-bandwidth connections, and minimal memory access
Web-based information and services.
WML (Wireless Mark-up Language): Mark-up language for wireless Web sites; based on XML and
optimised for tiny displays.
Web content management tools: Software to facilitate the collection, assembly, and management of
content on a Web site, intranet, or extranet.
Web hosting service: Company with large Web server computers to maintain the Web sites of feepaying subscribers.
Web site performance monitoring tools: Software tools for monitoring the time to download Web
pages, perform Web transactions, identify broken links between Web pages, and pinpoint other Web
site problems and bottlenecks.
X
XHTML (Extensible Hypertext Mark-up Language): Hybrid of HTML and XML that provides more
flexibility than HTML..
XML (extensible Mark-up Language): General-purpose language that describes the structure of a
document and supports links to multiple documents, allowing data to be manipulated by the computer.
Used for both Web and non-Web applications.
189

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BACHELOR OF COMMERCE IN INFORMATION AND

Business Information Systems

Business Information Systems

MANCOSA BCom ITM Year 2

Business Information Systems

Answers/solutions. This is used after a self-evaluation exercise,

Activity: An activity asks you to carry specific tasks

MANCOSA BCom ITM Year 2

Business Information Systems

understand the fundamental behaviour and technical concepts of information systems

MANCOSA BCom ITM Year 2

Business Information Systems

INTRODUCING INFORMATION SYSTEMS INTO

COMPUTER HARDWARE AND SOFTWARE

TELECOMMUNICATIONS AND NETWORKS

OPERATIONAL EXCELLENCE AND CUSTOMER

INTIMACY: ENTERPRISE SYSTEMS

INFORMATION SYSTEMS IN PERSPECTIVE

BUSINESS INFORMATION SYSTEMS DEVELOPMENT

BUSINESS INFORMATION SYSTEMS PROJECT

INFORMATION SYSTEMS STRATEGY

INFORMATION SYSTEMS MANAGEMENT

MANAGING INFORMATION SECURITY AND ETHICAL

MANCOSA BCom ITM Year 2

Business Information Systems

MANCOSA BCom ITM Year 2

Business Information Systems

discuss the types of decisions taken at different levels of management;

comment on the resources that support Business Information Systems

MANCOSA BCom ITM Year 2

Business Information Systems

WHY STUDY BUSINESS INFORMATION SYSTEMS?

MANCOSA BCom ITM Year 2

Business Information Systems

WHY INFORMATION SYSTEMS ARE IMPORTANT?

Data and Information

MANCOSA BCom ITM Year 2

Business Information Systems

MANCOSA BCom ITM Year 2

Business Information Systems

Received by correct person

Sent by correct channels

(Bocij et al, 2008: 12)

MANCOSA BCom ITM Year 2

Business Information Systems

MANAGERIAL DECISION MAKING

LEVELS OF MANAGERIAL DECISION MAKING

MANCOSA BCom ITM Year 2

Business Information Systems

The real world of information systems

MANCOSA BCom ITM Year 2

Business Information Systems

THE SYSTEMS APPROACH

Inputs are turned into outputs by a transformation process.

A product that is created by a system.

(Source: Bocij et al, 2008:36)

(Source: Bocij et al, 2008:37)

MANCOSA BCom ITM Year 2

Business Information Systems

What is control mechanism?