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f o u r t h e d i t i o n
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Pa i g e B a lt z a n
B usiness D
riven Inform ation System
s
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ISBN 978-0-07-337689-9 MHID 0-07-337689-2
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www.mhhe.com/baltzan
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Business Driven
Information Systems
M D
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#1216453 11/28/12 C Y
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StudentS get:
• Interactive, engaging content.
• Interactive Applications – chapter assignments that help you APPLY what you’ve learned in the course.
• Immediate feedback on how you’re doing. (No more wishing you could call your instructor at 1 a.m.)
• Quick access to lectures, practice materials, eBook, and more. (All the material you need to be successful is right at your fingertips.)
With McGraw-Hill's Connect™ Plus MIS,
Want to get better grades? (Who doesn’t?)
Ready to do online interactive assignments that help you apply what you’ve learned? (You need to know how to use this stuff in the real world…)
Need new ways to study before the big test? (A little peace of mind is a good thing…)
StudentS...
M D
D A
L IM
#1216453 11/28/12 C Y
A N
M A
G Y
E L
O B
L K
B A
C K
U P
StudentS get:
• Interactive, engaging content.
• Interactive Applications – chapter assignments that help you APPLY what you’ve learned in the course.
• Immediate feedback on how you’re doing. (No more wishing you could call your instructor at 1 a.m.)
• Quick access to lectures, practice materials, eBook, and more. (All the material you need to be successful is right at your fingertips.)
With McGraw-Hill's Connect™ Plus MIS,
Want to get better grades? (Who doesn’t?)
Ready to do online interactive assignments that help you apply what you’ve learned? (You need to know how to use this stuff in the real world…)
Need new ways to study before the big test? (A little peace of mind is a good thing…)
StudentS...
M D
D A
L IM
#1216453 11/28/12 C Y
A N
M A
G Y
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Less managing. More teaching. Greater learning.
Would you like your students to show up for class more prepared? (Let’s face it, class is much more fun if everyone is engaged and prepared…)
Want ready-made application-level interactive assignments, student progress reporting, and auto-assignment grading? (Less time grading means more time teaching…)
Want an instant view of student or class performance relative to learning objectives? (No more wondering if students understand…)
Need to collect data and generate reports required for administration or accreditation? (Say good-bye to manually tracking student learning outcomes…)
Want to record and post your lectures for students to view online?
INSTRUCTORS...
Less managing. More teaching. Greater learning.
INSTRUCTORS GET:
• Interactive Applications—book-specific interactive assignments that require students to APPLY what they’ve learned.
• Simple assignment management, allowing you to spend more time teaching.
• Auto-graded assignments, quizzes, and tests.
• Detailed visual reporting, where student and section results can be viewed and analyzed.
• Sophisticated online testing capability.
• A filtering and reporting function that allows you to easily assign and report on materials that are correlated to accreditation standards, learning outcomes, and Bloom’s taxonomy.
• An easy-to-use lecture capture tool.
With McGraw-Hill’s Connect™ Plus MIS,
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Want an online, searchable version of your textbook?
Wish your textbook could be available online while you’re doing your assignments?
Want to get more value from your textbook purchase?
Think learning MIS should be a bit more interesting?
Connect™ Plus MIS eBook
If you choose to use Connect™ Plus MIS, you have an affordable and
searchable online version of your book integrated with your other
online tools.
Connect™ Plus MIS eBook offers features like: • Topic search
• Direct links from assignments
• Adjustable text size
• Jump to page number
• Print by section
Check out the STUDENT RESOURCES section under the Connect™ Library tab.
Here you’ll find a wealth of resources designed to help you
achieve your goals in the course. You’ll find things like quizzes,
PowerPoints, and Internet activities to help you study. Every
student has different needs, so explore the STUDENT RESOURCES
to find the materials best suited to you.
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Business Driven Information Systems
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TM
Business Driven Information Systems
F O U R T H E D I T I O N
P a i g e B a l t z a n Daniels College of Business, University of Denver
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TM
BUSINESS DRIVEN INFORMATION SYSTEMS, FOURTH EDITION
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. Printed in the United States of America. Previous editions © 2012, 2009, and 2008. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the United States.
This book is printed on acid-free paper.
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ISBN 978-0-07-337689-9 MHID 0-07-337689-2
Senior Vice President, Products & Markets: Kurt L. Strand Vice President, General Manager, Products & Markets: Brent Gordon Vice President, Content Production & Technology Services: Kimberly Meriwether David Director: Scott Davidson Senior Brand Manager: Wyatt Morris Executive Director of Development: Ann Torbert Development Editor II: Alaina G. Tucker Digital Development Editor: Kevin White Marketing Manager: Tiffany Russell Project Manager: Kathryn D. Wright Senior Buyer: Michael R. McCormick Senior Designer: Matt Diamond Cover Designer: Lisa Buckley Cover Image: Getty Images Lead Content Licensing Specialist: Keri Johnson Photo Researcher: Colleen Miller Media Project Manager: Brent dela Cruz
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All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Baltzan, Paige. Business driven information systems/Paige Baltzan, Daniels College of Business, University of Denver.—FOURTH EDITION. pages cm Includes index. ISBN 978-0-07-337689-9 (alk. paper)—ISBN 0-07-337689-2 (alk. paper) 1. Information technology—Management. 2. Industrial management—Data processing. I. Title. HD30.2.B357 2014 658.4’038011—dc23 2012040826
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a web- site does not indicate an endorsement by the authors or McGraw-Hill, and McGraw-Hill does not guaran- tee the accuracy of the information presented at these sites.
www.mhhe.com
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D E D I C AT I O N
To Tony, Hannah, Sophie, and Gus: What do you always remember?
That I Love You! That I’m Proud of You!
Paige
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Brief Contentsviii
MODULE 1 Business Driven MIS
Chapter 1 Management Information Systems: Business Driven MIS
Chapter 2 Decisions and Processes: Value Driven Business
Chapter 3 Ebusiness: Electronic Business Value
Chapter 4 Ethics and Information Security: MIS Business Concerns
MODULE 2 Technical Foundations of MIS
Chapter 5 Infrastructures: Sustainable Technologies
Chapter 6 Data: Business Intelligence
Chapter 7 Networks: Mobile Business
MODULE 3 Enterprise MIS
Chapter 8 Enterprise Applications: Business Communications
Chapter 9 Systems Development and Project Management: Corporate
Responsibility
APPENDIX
Appendix A Hardware and Software Basics
Appendix B Networks and Telecommunications
Appendix C Designing Databases
The Technology Plug-Ins
Apply Your Knowledge
Glossary
Notes
Credits
Index
BRIEF CONTENTS
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ixContents
module 1 Business Driven MIS 1
CHAPTER 1 Management Information Systems: Business Driven MIS 2
Opening Case Study: The World Is Flat: Thomas Friedman 3
Section 1.1 Business Driven MIS 5 COMPETING IN THE INFORMATION AGE 5
Data 6 Information 7 Business Intelligence 8 Knowledge 10
THE CHALLENGE: DEPARTMENTAL COMPANIES 11 THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS 12
MIS Department Roles and Responsibilities 14 Section 1.2 Business Strategy 15 IDENTIFYING COMPETITIVE ADVANTAGES 15 THE FIVE FORCES MODEL—EVALUATING INDUSTRY ATTRACTIVENESS 18
Buyer Power 18 Supplier Power 19 Threat of Substitute Products or Services 19 Threat of New Entrants 20 Rivalry among Existing Competitors 20 Analyzing the Airline Industry 20
THE THREE GENERIC STRATEGIES—CHOOSING A BUSINESS FOCUS 22 VALUE CHAIN ANALYSIS—EXECUTING BUSINESS STRATEGIES 23 Learning Outcome Review 27 Opening Case Questions 29 Key Terms 29 Review Questions 29 Closing Case One: Apple—Merging Technology, Business, and Entertainment 30 Closing Case Two: Best of the Best of the Best—Under 25 32 Critical Business Thinking 34 Entrepreneurial Challenge 36 Apply Your Knowledge Business Projects 37 AYK Application Projects 41
C O N T E N T S
CHAPTER 2 Decisions and Processes: Value Driven Business 42
Opening Case Study: Action Finally—Actionly 43
Section 2.1 Decision Support Systems 45 MAKING BUSINESS DECISIONS 45
The Decision-Making Process 46 Decision-Making Essentials 46
METRICS: MEASURING SUCCESS 48 Efficiency and Effectiveness Metrics 50 The Interrelationship Between Efficiency and Effectiveness MIS Metrics 51
SUPPORT: ENHANCING DECISION MAKING WITH MIS 53 Operational Support Systems 54 Managerial Support Systems 55 Strategic Support Systems 56
THE FUTURE: ARTIFICIAL INTELLIGENCE 60 Expert Systems 61 Neural Networks 61 Genetic Algorithms 62 Intelligent Agents 62 Virtual Reality 63
Section 2.2 Business Processes 64 EVALUATING BUSINESS PROCESSES 64 MODELS: MEASURING PERFORMANCE 66 SUPPORT: ENHANCING BUSINESS PROCESSES WITH MIS 71
Improving Operational Business Processes—Automation 72 Improving Managerial Business Processes—Streamlining 73 Improving Strategic Business Processes—Reengineering 74
THE FUTURE: BUSINESS PROCESS MANAGEMENT 77 Learning Outcome Review 78 Opening Case Questions 80 Key Terms 80 Review Questions 81 Closing Case One: Political Micro-Targeting: What Decision Support Systems Did for Barack Obama 81 Closing Case Two: Second Life: Succeeding in Virtual Times 83 Critical Business Thinking 84 Entrepreneurial Challenge 86
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Contentsx
Apply Your Knowledge Business Projects 87 AYK Application Projects 89
CHAPTER 3 Ebusiness: Electronic Business Value 90
Opening Case Study: Pinterest— Billboards for the Internet 91
Section 3.1 WEB 1.0: Ebusiness 94 DISRUPTIVE TECHNOLOGIES AND WEB 1.0 94
Disruptive versus Sustaining Technology 94 The Internet and World Wide Web—The Ultimate Business Disruptors 95 Web 1.0: The Catalyst for Ebusiness 96
ADVANTAGES OF EBUSINESS 98 Expanding Global Reach 98 Opening New Markets 98 Reducing Costs 100 Improving Operations 100 Improving Effectiveness 100
THE FOUR EBUSINESS MODELS 101 Business-to-Business (B2B) 102 Business-to-Consumer (B2C) 102 Consumer-to-Business (C2B) 103 Consumer-to-Consumer (C2C) 103 Ebusiness Forms and Revenue-Generating Strategies 103
EBUSINESS TOOLS FOR CONNECTING AND COMMUNICATING 106
Email 106 Instant Messaging 106 Podcasting 107 Videoconferencing 107 Web Conferencing 108 Content Management Systems 108
THE CHALLENGES OF EBUSINESS 108 Identifying Limited Market Segments 109 Managing Consumer Trust 109 Ensuring Consumer Protection 109 Adhering to Taxation Rules 109
Section 3.2 WEB 2.0: Business 2.0 109 WEB 2.0: ADVANTAGES OF BUSINESS 2.0 109
Content Sharing Through Open Sourcing 111 User-Contributed Content 111 Collaboration Inside the Organization 111 Collaboration Outside the Organization 112
NETWORKING COMMUNITIES WITH BUSINESS 2.0 113 Social Tagging 114
BUSINESS 2.0 TOOLS FOR COLLABORATING 116 Blogs 116 Wikis 117 Mashups 117
THE CHALLENGES OF BUSINESS 2.0 118 Technology Dependence 118
Information Vandalism 119 Violations of Copyright and Plagiarism 119
WEB 3.0: DEFINING THE NEXT GENERATION OF ONLINE BUSINESS OPPORTUNITIES 119
Egovernment: The Government Moves Online 120 Mbusiness: Supporting Anywhere Business 121
Learning Outcome Review 121 Opening Case Questions 123 Key Terms 124 Review Questions 124 Closing Case One: Social Media and Ashton Kutcher 125 Closing Case Two: Amazon.com—Not Your Average Bookstore 126 Critical Business Thinking 128 Entrepreneurial Challenge 130 Apply Your Knowledge Business Projects 131 AYK Application Projects 135
CHAPTER 4 Ethics and Information Security: MIS Business Concerns 136
Opening Case Study: To Share—Or Not to Share 137
Section 4.1 Ethics 141 INFORMATION ETHICS 141
Information Does Not Have Ethics, People Do 144 DEVELOPING INFORMATION MANAGEMENT POLICIES 145
Ethical Computer Use Policy 145 Information Privacy Policy 146 Acceptable Use Policy 146 Email Privacy Policy 147 Social Media Policy 148 Workplace Monitoring Policy 149
Section 4.2 Information Security 151 PROTECTING INTELLECTUAL ASSETS 151
Security Threats Caused by Hackers and Viruses 153
THE FIRST LINE OF DEFENSE—PEOPLE 155 THE SECOND LINE OF DEFENSE—TECHNOLOGY 156
People: Authentication and Authorization 156 Data: Prevention and Resistance 159 Attack: Detection and Response 160
Learning Outcome Review 161 Opening Case Questions 162 Key Terms 163 Review Questions 163 Closing Case One: E-Espionage 164 Closing Case Two: Hacker Hunters 165 Critical Business Thinking 167 Entrepreneurial Challenge 168 Apply Your Knowledge Business Projects 169 AYK Application Projects 171
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xiContents
module 2 Technical Foundations of MIS 172
CHAPTER 5 Infrastructures: Sustainable Technologies 173
Opening Case Study: Pandora’s Music Box 174
Section 5.1 MIS Infrastructures 176 THE BUSINESS BENEFITS OF A SOLID MIS INFRASTRUCTURE 176 SUPPORTING OPERATIONS: INFORMATION MIS INFRASTRUCTURE 177
Backup and Recovery Plan 178 Disaster Recovery Plan 179 Business Continuity Plan 181
SUPPORTING CHANGE: AGILE MIS INFRASTRUCTURE 183 Accessibility 183 Availability 184 Maintainability 185 Portability 185 Reliability 185 Scalability 185 Usability 187
Section 5.2 Building Sustainable MIS Infrastructures 187 MIS AND THE ENVIRONMENT 187
Increased Electronic Waste 188 Increased Energy Consumption 189 Increased Carbon Emissions 189
SUPPORTING THE ENVIRONMENT: SUSTAINABLE MIS INFRASTRUCTURE 189
Grid Computing 189 Virtualized Computing 192 Cloud Computing 195
Learning Outcome Review 199 Opening Case Questions 200 Key Terms 201 Review Questions 201 Closing Case One: UPS Invests $1 Billion to Go Green 202 Closing Case Two: Turning Ewaste into Gold 203 Critical Business Thinking 203 Entrepreneurial Challenge 205 Apply Your Knowledge Business Projects 206 AYK Application Projects 209
CHAPTER 6 Data: Business Intelligence 210
Opening Case Study: Informing Information 211
Section 6.1 Data, Information, and Databases 214
THE BUSINESS BENEFITS OF HIGH-QUALITY INFORMATION 214 Information Type: Transactional and Analytical 214 Information Timeliness 216 Information Quality 216 Information Governance 219
STORING INFORMATION USING A RELATIONAL DATABASE MANAGEMENT SYSTEM 219
Storing Data Elements in Entities and Attributes 221 Creating Relationships Through Keys 221
USING A RELATIONAL DATABASE FOR BUSINESS ADVANTAGES 222
Increased Flexibility 222 Increased Scalability and Performance 223 Reduced Information Redundancy 223 Increased Information Integrity (Quality) 224 Increased Information Security 224
DRIVING WEBSITES WITH DATA 224 Section 6.2 Business Intelligence 227 THE BUSINESS BENEFITS OF DATA WAREHOUSING 227 PERFORMING BUSINESS ANALYSIS WITH DATA MARTS 228
Multidimensional Analysis 229 Information Cleansing or Scrubbing 230
UNCOVERING TRENDS AND PATTERNS WITH DATA MINING 231 Cluster Analysis 234 Association Detection 235 Statistical Analysis 236
SUPPORTING DECISIONS WITH BUSINESS INTELLIGENCE 236 The Problem: Data Rich, Information Poor 237 The Solution: Business Intelligence 237 Visual Business Intelligence 238
Learning Outcome Review 239 Opening Case Questions 240 Key Terms 241 Review Questions 241 Closing Case One: Data Visualization: Stories for the Information Age 242 Closing Case Two: Zillow 243 Critical Business Thinking 244 Entrepreneurial Challenge 246 Apply Your Knowledge Business Projects 246 AYK Application Projects 249
CHAPTER 7 Networks: Mobile Business 250
Opening Case Study: The Ironman 251
Section 7.1 Connectivity: The Business Value of a Neworked World 253 OVERVIEW OF A CONNECTED WORLD 253
Network Categories 254 Network Providers 254 Network Access Technologies 255 Network Protocols 258 Network Convergence 260
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Contentsxii
BUILDING A CONNECTED CORPORATION THROUGH INTEGRATIONS 300
Integration Tools 301 SUPPLY CHAIN MANAGEMENT 302 THE BENEFITS OF SCM 303
Improved Visibility 305 Increased Profitability 306
THE CHALLENGES OF SCM 307 THE FUTURE OF SCM 308 Section 8.2 Customer Relationship Management
and Enterprise Resource Planning 309 CUSTOMER RELATIONSHIP MANAGEMENT 309 THE BENEFITS OF CRM 311
Evolution of CRM 311 Operational and Analytical CRM 312 Marketing and Operational CRM 313 Sales and Operational CRM 314 Customer Service and Operational CRM 315 Analytical CRM 316 Measuring CRM Success 317
THE CHALLENGES OF CRM 317 THE FUTURE OF CRM 319 ENTERPRISE RESOURCE PLANNING 319 THE BENEFITS OF ERP 320
Core ERP Components 322 Extended ERP Components 324 Measuring ERP Success 325
THE CHALLENGES OF ERP 327 THE FUTURE OF ENTERPRISE SYSTEMS: INTEGRATING SCM, CRM, AND ERP 327 Learning Outcome Review 328 Opening Case Questions 330 Key Terms 330 Review Questions 330 Closing Case One: Can Customer Loyalty Be a Bad Thing? 331 Closing Case Two: Got Milk? It’s Good for You—Unless It’s Contaminated! 332 Critical Business Thinking 334 Entrepreneurial Challenge 336 Apply Your Knowledge Business Projects 337 AYK Application Projects 340
CHAPTER 9 Systems Development and Project Management: Corporate Responsibility 341
Opening Case Study: Getting Your Project On Track 342
Section 9.1 Developing Enterprise Applications 345 THE SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC) 345
Phase 1: Planning 345 Phase 2: Analysis 346 Phase 3: Design 348
BENEFITS OF A CONNECTED WORLD 263 Sharing Resources 263 Providing Opportunities 265 Reducing Travel 265
CHALLENGES OF A CONNECTED WORLD 266 Security 266 Social, Ethical, and Political Issues 266
Section 7.2 Mobility: The Business Value of a Wireless World 267
WIRELESS NETWORK CATEGORIES 267 Personal Area Networks 268 Wireless LANs 268 Wireless MANs 269 Wireless WAN—Cellular Communication System 270 Wireless WAN—Satellite Communication System 272
BUSINESS APPLICATIONS OF WIRELESS NETWORKS 274 Radio-Frequency Identification (RFID) 274 Global Positioning System (GPS) 275 Geographic Information Systems (GIS) 276
BENEFITS OF BUSINESS MOBILITY 278 Enhances Mobility 278 Provides Immediate Data Access 279 Increases Location and Monitoring Capability 279 Improves Work Flow 279 Provides Mobile Business Opportunities 280 Provides Alternative to Wiring 280
CHALLENGES OF BUSINESS MOBILITY 280 Protecting Against Theft 280 Protecting Wireless Connections 282 Preventing Viruses on a Mobile Device 283 Addressing Privacy Concerns with RFID and LBS 283
Learning Outcome Review 284 Opening Case Questions 286 Key Terms 286 Review Questions 287 Closing Case One: Wireless Bikes 287 Closing Case Two: Google Latitude . . . Without an Attitude? 288 Critical Business Thinking 289 Entrepreneurial Challenge 291 Apply Your Knowledge Business Projects 292 AYK Application Projects 295
module 3 Enterprise MIS 296
CHAPTER 8 Enterprise Applications: Business Communications 297
Opening Case Study: Zappos Is Passionate for Customers 298
Section 8.1 Supply Chain Management 300
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xiiiContents
Output Devices A.8 Communication Devices A.9
COMPUTER CATEGORIES A.9 SOFTWARE BASICS A.12
System Software A.12 Application Software A.13 Distributing Application Software A.14
Key Terms A.15 Apply Your Knowledge A.15
APPENDIX B Networks and Telecommunications B.1
INTRODUCTION B.1 NETWORK BASICS B.1 ARCHITECTURE B.3
Peer-to-Peer Networks B.3 Client/Server Networks B.4
TOPOLOGY B.5 PROTOCOLS B.6
Ethernet B.6 Transmission Control Protocol/Internet Protocol B.7
MEDIA B.8 Wire Media B.8 Wireless Media B.9
Key Terms B.10 Apply Your Knowledge B.10
APPENDIX C Designing Databases C.1
INTRODUCTION C.1 THE RELATIONAL DATABASE MODEL C.1
Entities and Attributes C.2 BUSINESS RULES C.3 DOCUMENTING ENTITY RELATIONSHIP DIAGRAMS C.4
Basic Entity Relationships C.4 Relationship Cardinality C.6
RELATIONAL DATA MODEL AND THE DATABASE C.7 From Entities to Tables C.7 Logically Relating Tables C.8
Key Terms C.9 Apply Your Knowledge C.9
The Technology Plug-Ins T.1 Apply Your Knowledge AYK.1 Glossary G.1 Notes N.1 Credits C.1 Index I.1
Phase 4: Development 348 Phase 5: Testing 349 Phase 6: Implementation 349 Phase 7: Maintenance 350
SOFTWARE DEVELOPMENT METHODOLOGY: THE WATERFALL 351 AGILE SOFTWARE DEVELOPMENT METHODOLOGIES 352
Rapid Application Development (RAD) Methodology 353 Extreme Programming Methodology 353 Rational Unified Process (RUP) Methodology 353 Scrum Methodology 354
Section 9.2 Project Management 354 USING PROJECT MANAGEMENT TO DELIVER SUCCESSFUL PROJECTS 355
Unclear or Missing Business Requirements 356 Skipped Phases 356 Changing Technology 356 The Cost of Finding Errors in the SDLC 356 Balance of the Triple Constraint 357
PRIMARY PROJECT PLANNING DIAGRAMS 359 OUTSOURCING PROJECTS 361
Outsourcing Benefits 364 Outsourcing Challenges 364
Learning Outcome Review 367 Opening Case Questions 368 Key Terms 368 Review Questions 369 Closing Case One: Disaster at Denver International Airport 370 Closing Case Two: Reducing Ambiguity in Business Requirements 370 Critical Business Thinking 372 Entrepreneurial Challenge 373 Apply Your Knowledge Business Projects 374 AYK Application Projects 378
appendices
APPENDIX A Hardware and Software Basics A.1
INTRODUCTION A.1 HARDWARE BASICS A.2
Central Processing Unit A.2 Primary Storage A.3 Secondary Storage A.5 Input Devices A.7
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Prefacexiv
Business Driven Information Systems discusses various business initiatives first and how technology supports those initiatives second. The premise for this unique approach is that business initiatives should drive technology choices. Every discussion first addresses the business needs and then addresses the technology that supports those needs. This text provides the foundation that will enable students to achieve excellence in business, whether they major in operations management, manufacturing, sales, mar- keting, finance, human resources, accounting, or virtually any other business discipline. Business Driven Information Systems is designed to give students the ability to under- stand how information technology can be a point of strength for an organization.
Common business goals associated with information technology projects include reducing costs, improving productivity, improving customer satisfaction and loyalty, creating competitive advantages, streamlining supply chains, global expansion, and so on. Achieving these results is not easy. Implementing a new accounting system or mar- keting plan is not likely to generate long-term growth or reduce costs across an entire organization. Businesses must undertake enterprisewide initiatives to achieve broad general business goals such as reducing costs. Information technology plays a critical role in deploying such initiatives by facilitating communication and increasing business intelligence. Any individual anticipating a successful career in business whether it is in accounting, finance, human resources, or operation management must understand the basics of information technology that can be found in this text.
We have found tremendous success teaching MIS courses by demonstrating the correlation between business and IT. Students who understand the tight correlation between business and IT understand the power of this course. Students learn 10 percent of what they read, 80 percent of what they personally experience, and 90 percent of what they teach others. The business driven approach takes the difficult and often intangible MIS concepts, brings them to the student’s level, and applies them using a hands-on approach to reinforce the concepts. Teaching MIS with a business driven focus helps:
■ Add credibility to IT.
■ Open student’s eyes to IT opportunities.
■ Attract majors.
■ Engage students.
FORMAT, FEATURES, AND HIGHLIGHTS
Business Driven Information Systems is state-of-the-art in its discussions, presents concepts in an easy-to-understand format, and allows students to be active participants in learn- ing. The dynamic nature of information technology requires all students, more specifically business students, to be aware of both current and emerging technologies. Students are facing complex subjects and need a clear, concise explanation to be able to understand and use the concepts throughout their careers. By engaging students with numerous case stud- ies, exercises, projects, and questions that enforce concepts, Business Driven Information Systems creates a unique learning experience for both faculty and students.
■ Audience. Business Driven Information Systems is designed for use in undergradu- ate or introductory MBA courses in Management Information Systems, which are required in many Business Administration or Management programs as part of the common body of knowledge for all business majors.
■ Logical Layout. Students and faculty will find the text well organized with the topics flowing logically from one chapter to the next. The definition of each term is provided before it is covered in the chapter and an extensive glossary is included at the back of the text. Each chapter offers a comprehensive opening case study, learning outcomes, closing case studies, key terms, and critical business thinking questions.
P R E FA C E
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xvPreface
■ Thorough Explanations. Complete coverage is provided for each topic that is intro- duced. Explanations are written so that students can understand the ideas presented and relate them to other concepts.
■ Solid Theoretical Base. The text relies on current theory and practice of informa- tion systems as they relate to the business environment. Current academic and pro- fessional journals cited throughout the text are found in the Notes at the end of the book—a road map for additional, pertinent readings that can be the basis for learning beyond the scope of the chapters or plug-ins.
■ Material to Encourage Discussion. All chapters contain a diverse selection of case studies and individual and group problem-solving activities as they relate to the use of information technology in business. Two comprehensive cases at the end of each chapter reinforce content. These cases encourage students to consider what concepts have been presented and then apply those concepts to a situation they might find in an organization. Different people in an organization can view the same facts from dif- ferent points of view and the cases will force students to consider some of those views.
■ Flexibility in Teaching and Learning. While most textbooks that are “text only” leave faculty on their own when it comes to choosing cases, Business Driven Information Systems goes much further. Several options are provided to faculty with case selec- tions from a variety of sources including CIO, Harvard Business Journal, Wired, Forbes, and Time, to name just a few. Therefore, faculty can use the text alone, the text and a complete selection of cases, or anything in between.
■ Integrative Themes. Several integrative themes recur throughout the text, which adds integration to the material. Among these themes are value-added techniques and methodologies, ethics and social responsibility, globalization, and gaining a competitive advantage. Such topics are essential to gaining a full understanding of the strategies that a business must recognize, formulate, and in turn implement. In addition to addressing these in the chapter material, many illustrations are provided for their relevance to business practice.
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Walkthroughxvi
Learning Outcomes
Learning Outcomes. These outcomes focus on what students should learn and be able to answer upon completion of the chapter.
WA L K T H R O U G H
section 3.1 Web 1.0: Ebusiness
L E A R N I N G O U T C O M E S
3.1 Compare disruptive and sustaining technologies, and explain how the Internet and WWW caused business disruption.
3.2 Describe ebusiness and its associated advantages.
3.3. Compare the four ebusiness models.
3.4. Describe the six ebusiness tools for connecting and communicating.
3.5 Identify the four challenges associated with ebusiness.
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Walkthrough xvii
1. Knowledge: Do you consider Pinterest a form of disruptive or sustaining technology?
2. Comprehension: Categorize Pinterest as an example of Web 1.0 (ebusiness) or Web 2.0 (Business 2.0).
3. Application: Describe the ebusiness model and revenue model for Pinterest.
4. Analysis: What is open source software and how could Pinterest take advantage of it?
O P E N I N G C A S E Q U E S T I O N S
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opening case study
Pinterest—Billboards for the Internet
Pinterest has been called the latest addiction for millions of people around the world.
Pinterest, a visual social media network, allows users to create “interest boards” where
they “pin” items of interests found on the web. Terms you need to understand to use
Pinterest include:
■ Pin: A link to an image from a computer or a website. Pins can include captions for other
users. Users upload, or “pin,” photos or videos to boards.
■ Board: Pins live on boards and users can maintain separate boards, which can be cat-
egorized by activity or interests, such as cooking, do-it-yourself activities, fitness, music,
movies, etc.
■ Repin: After pinning an item, it can be repinned by other Pinterest users, spreading the
content virally. Repinning allows users to share items they like with friends and family.
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Chapter Opening Case Study. To enhance student interest, each chapter begins with an opening case study that highlights an organization that has been time-tested and value-proven in the business world. This feature serves to fortify concepts with relevant examples of outstanding companies. Discussion of the case is threaded throughout the chapter.
Opening Case Questions. Located at the end of the chapter, poignant questions connect the chapter opening case with important chapter concepts.
Chapter Opening Case Study and Opening Case Questions
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Projects and Case Studies
Case Studies. This text is packed with 27 case studies illustrating how a variety of prominent organizations and businesses have successfully implemented many of this text’s concepts. All cases are timely and promote critical thinking. Company profiles are especially appealing and relevant to your students, helping to stir classroom discus- sion and interest.
Apply Your Knowledge. At the end of each chapter you will find several Apply Your Knowledge projects that challenge students to bring the skills they have learned from the chapter to real business problems. There are also 33 Apply Your Knowledge projects on the OLC that accompanies this text ( www.mhhe.com/baltzan ) that ask students to use IT tools such as Excel, Access, and Dreamweaver to solve business problems. These projects help to develop the applica- tion and problem-solving skills of your students through challenging and creative business-driven scenarios.
PROJECT I Making Business Decisions You are the vice president of human resources for a large consulting company. You are compiling a list of questions that you want each job interviewee to answer. The first question on your list is, “How can MIS enhance your ability to make decisions at our organization?” Prepare a one-page report to answer this question.
PROJECT I I DSS and EIS Dr. Rosen runs a large dental conglomerate—Teeth Doctors—that employs more than 700 dentists in six states. Dr. Rosen is interested in purchasing a competitor called Dentix that has 150 dentists in three additional states. Before deciding whether to purchase Dentix, Dr. Rosen must consider several issues:
■ The cost of purchasing Dentix.
■ The location of the Dentix offices.
■ The current number of customers per dentist, per office, and per state.
■ The merger between the two companies.
■ The professional reputation of Dentix.
■ Other competitors.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
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End-of-Chapter Elements
Key Terms. With page numbers referencing where they are discussed in the text.
Each chapter contains complete pedagogical support in the form of:
Critical Business Thinking. The best way to learn MIS is to apply it to scenarios and real-world business dilemmas. These projects require students to apply critical thinking skills and chapter concepts to analyze the problems and make recommended business decisions.
Entrepreneurial Challenge. This unique feature represents a running project that allows students to chal- lenge themselves by applying the MIS concepts to a real business. The flexibility of the case allows each student to choose the type of business he or she would like to operate throughout the case. Each chapter provides hands-on projects your students can work with their real-business scenarios.
Two Closing Case Studies. Reinforcing important concepts with prominent examples from businesses and organizations. Discussion questions follow each case study.
Business intelligence (BI), 8 Business process, 23 Business strategy, 15 Buyer power, 18 Chief information officer
(CIO), 15 Chief knowledge officer
(CKO), 15
Fact, 5 Feedback, 14 First-mover advantage, 17 Goods, 12 Information, 7 Information age, 5 Knowledge, 10 Knowledge worker, 10
Product differentiation, 20 Rivalry among existing
competitors, 20 Services, 12 Supplier power, 19 Supply chain, 19 Support value activities, 24 Switching costs, 18
K E Y T E R M S
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C L O S I N G C A S E O N E
Political Micro-Targeting: What Decision Support Systems Did for Barack Obama
On the day he took the oath of office in 2009, President Barack Obama spoke a word rarely heard in inaugural addresses— data— referencing indicators of economic and other crises. His use of the word is perhaps not so surprising. Capturing and analyzing data were crucial to Obama’s rise to
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1. Modeling a Business Process Do you hate waiting in line at the grocery store? Do you find it frustrating when you go to the video rental store and cannot find the movie you wanted? Do you get annoyed when the pizza delivery person brings you the wrong order? This is your chance to reengineer the process that drives you
C R I T I C A L B U S I N E S S T H I N K I N G
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E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. You realize that you need a digital dashboard to help you operate your business. Create a list of all of the components you would want to track in your digital dashboard that would help you run your business. Be sure to justify how each component would help you gain insight into the opera- tions of your business and flag potential issues that could ruin your business. (Be sure to identify
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About the Plug-Ins
Located on the OLC that accompanies this text ( www.mhhe.com/baltzan ), the overall goal of the plug-ins is to provide an alternative for faculty who find themselves in the situation of having to purchase an extra book to support Microsoft Office 2010 or 2013. The plug-ins presented here offer integration with the core chapters and provide critical knowledge using essential business applications, such as Microsoft Excel, Microsoft Access, DreamWeaver, and Microsoft Project. Each plug-in uses hands-on tutorials for compre- hension and mastery.
Each plug-in contains complete pedagogical support in the form of: Plug-In Summary. Revisits the plug-in highlights in summary format. Making Business Decisions. Small scenario-driven projects that help students focus individually on decision making as they relate to the topical elements in the chapters.
End-of-Plug-In Elements
Plug-In Description
T1. Personal Productivity Using IT This plug-in covers a number of things to do to keep a personal computer running effectively and efficiently. The 12 topics covered in this plug-in are:
■ Creating strong passwords. ■ Performing good fi le management. ■ Implementing effective backup and recovery strategies. ■ Using Zip fi les. ■ Writing professional emails. ■ Stopping spam. ■ Preventing phishing. ■ Detecting spyware. ■ Threads to instant messaging. ■ Increasing PC performance. ■ Using anti-virus software. ■ Installing a personal fi rewall.
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T2. Basic Skills Using Excel This plug-in introduces the basics of using Microsoft Excel, a spreadsheet program for data analysis, along with a few fancy features. The six topics covered in this plug-in are:
■ Workbooks and worksheets. ■ Working with cells and cell data. ■ Printing worksheets. ■ Formatting worksheets. ■ Formulas. ■ Working with charts and graphics.
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T4. Decision Making Using Excel This plug-in examines a few of the advanced business analysis tools used in Microsoft Excel that have the capability to identify patterns, trends, and rules, and create “what-if” models. The four topics covered in this plug-in are:
■ IF ■ Goal Seek ■ Solver ■ Scenario Manager
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Support and Supplemental Material All of the supplemental material supporting Business Driven Information Systems was developed by the author to ensure you receive accurate, high-quality, and in-depth content. Included is a complete set of materials that will assist students and faculty in accomplishing course objectives.
Online Learning Center ( www.mhhe.com/baltzan ) The McGraw-Hill website for Business Driven Information Systems includes support for students and faculty. All supplements will be available exclusively on the OLC. This will allow the authors to continually update and add to the instructor support materials. The following materials will be available on the OLC:
Video Exercises. Each of the videos that accompany the text is supported by detailed teaching notes on how to turn the videos into classroom exercises where your students can apply the knowledge they are learning after watching the videos.
Test Bank. This computerized package allows instructors to custom design, save, and generate tests. The test program permits instructors to edit, add, or delete questions from the test banks; analyze test results; and organize a database of tests and students’ results.
Instructor’s Manual (IM). The IM, written by the author, includes suggestions for designing the course and presenting the material. Each chapter is supported by answers to end-of-chapter questions and problems, and suggestions concerning the discussion topics and cases.
PowerPoint Presentations. A set of PowerPoint slides, created by the author, accompanies each chapter and fea- tures bulleted items that provide a lecture outline, plus key figures and tables from the text, and detailed teaching notes on each slide.
Image Library. Text figures and tables, as permission allows, are provided in a format by which they can be imported into PowerPoint for class lectures.
Project Files. The author has provided files for all projects that need further support, such as data files.
Cohesion Case. The Broadway Café is a running case instructors can use to reinforce core material such as customer relationship management, supply chain management, business intelligence, and decision making. The case has 15 sections that challenge students to develop and expand their grandfather’s coffee shop. Students receive hands-on experience in business and learn technology’s true value of enabling business. Please note that the Cohesion Case is not a McGraw-Hill product but a Baltzan direct product. The case can be found at www.cohesioncase.com .
Video Content. Twenty videos accompany this text and cover topics from entrepreneurship to disaster recovery. Video content icons are placed throughout the text highlighting where we recommend watching the videos. Video IMs are also available so you can turn the videos into engaging classroom activities.
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McGraw-Hill Connect MIS
TM
Less Managing. More Teaching. Greater Learning.
McGraw-Hill Connect MIS is an online assignment and assessment solution that connects students with the tools and resources they’ll need to achieve success.
McGraw-Hill Connect MIS helps prepare students for their future by enabling faster learning, more efficient studying, and higher retention of knowledge.
McGraw-Hill Connect MIS features
Connect MIS offers a number of powerful tools and features to make managing assignments easier, so faculty can spend more time teaching. With Connect MIS, students can engage with their coursework anytime and anywhere, making the learning process more accessible and efficient. Connect MIS offers you the features described next.
Simple Assignment Management
With Connect MIS, creating assignments is easier than ever, so you can spend more time teaching and less time managing. The assignment management function enables you to:
■ Create and deliver assignments easily with selectable end-of-chapter questions and test bank items.
■ Streamline lesson planning, student progress reporting, and assignment grading to make classroom manage- ment more efficient than ever.
■ Go paperless with the eBook and online submission and grading of student assignments.
Smart Grading
When it comes to studying, time is precious. Connect MIS helps students learn more efficiently by providing feedback and practice material when they need it, where they need it. When it comes to teaching, your time also is precious. The grading function enables you to: • Have assignments scored automatically, giving students immediate feedback on their work and side-by-side
comparisons with correct answers.
• Access and review each response; manually change grades or leave comments for students to review.
• Reinforce classroom concepts with practice tests and instant quizzes.
Instructor Library
The Connect MIS Instructor Library is your repository for additional resources to improve student engagement in and out of class. You can select and use any asset that enhances your lecture.
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Student Study Center
The Connect MIS Student Study Center is the place for students to access additional resources. The Student Study Center:
• Offers students quick access to lectures, practice materials, ebooks, and more.
• Provides instant practice material and study questions, easily accessible on the go.
• Gives students access to the Personalized Learning Plan described next.
Student Progress Tracking
Connect MIS keeps instructors informed about how each student, section, and class is performing, allowing for more productive use of lecture and office hours. The progress-tracking function enables you to:
• View scored work immediately and track individual or group performance with assignment and grade reports.
• Access an instant view of student or class performance relative to learning objectives.
• Collect data and generate reports required by many accreditation organizations, such as AACSB.
Lecture Capture
Increase the attention paid to lecture discussion by decreasing the attention paid to note taking. For an additional charge, Lecture Capture offers new ways for students to focus on the in-class discussion, knowing they can revisit important topics later. Lecture Capture enables you to:
• Record and distribute your lecture with a click of button.
• Record and index PowerPoint presentations and anything shown on your computer so it is easily searchable, frame by frame.
• Offer access to lectures anytime and anywhere by computer, iPod, or mobile device.
• Increase intent listening and class participation by easing students’ concerns about note taking. Lecture Capture will make it more likely you will see students’ faces, not the tops of their heads.
McGraw-Hill Connect Plus MIS
McGraw-Hill reinvents the textbook learning experience for the modern student with Connect Plus MIS. A seamless integration of an ebook and Connect MIS, Connect Plus MIS provides all of the Connect MIS features plus the following:
• An integrated ebook, allowing for anytime, anywhere access to the textbook.
• Dynamic links between the problems or questions you assign to your students and the location in the ebook where that problem or question is covered.
• A powerful search function to pinpoint and connect key concepts in a snap.
In short, Connect MIS offers you and your students powerful tools and features that optimize your time and energies, enabling you to focus on course content, teaching, and student learning. Connect MIS also
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offers a wealth of content resources for both instructors and students. This state-of-the-art, thoroughly tested system supports you in preparing students for the world that awaits.
For more information about Connect, go to www.mcgrawhillconnect.com , or contact your local McGraw-Hill sales representative.
Tegrity Campus: Lectures 24/7
Tegrity Campus is a service that makes class time available 24/7 by automatically capturing every lecture in a searchable format for students to review when they study and complete assignments. With a simple one-click start-and-stop process, you capture all computer screens and corresponding audio. Students can replay any part of any class with easy-to-use browser-based viewing on a PC or Mac.
Educators know that the more students can see, hear, and experience class resources, the better they learn. In fact, studies prove it. With Tegrity Campus, students quickly recall key moments by using Tegrity Campus’s unique search feature. This search helps students efficiently find what they need, when they need it, across an entire semester of class recordings. Help turn all your students’ study time into learning moments immediately supported by your lecture.
To learn more about Tegrity watch a two-minute Flash demo at http://tegritycampus.mhhe.com .
Assurance of Learning Ready Many educational institutions today are focused on the notion of assurance of learning, an important element of some accreditation standards. Business Driven Information Systems is designed specifically to support your assur- ance of learning initiatives with a simple, yet powerful solution.
Each test bank question for Business Driven Information Systems maps to a specific chapter learning outcome/ objective listed in the text. You can use our test bank software, EZ Test and EZ Test Online, or in Connect MIS to easily query for learning outcomes/objectives that directly relate to the learning objectives for your course. You can then use the reporting features of EZ Test to aggregate student results in similar fashion, making the collection and presentation of assurance of learning data simple and easy.
AACSB Statement The McGraw-Hill Companies is a proud corporate member of AACSB International. Understanding the importance and value of AACSB accreditation, Business Driven Information Systems 4e recognizes the curricula guidelines detailed in the AACSB standards for business accreditation by connecting selected questions in the test bank to the six general knowledge and skill guidelines in the AACSB standards.
The statements contained in Business Driven Information Systems 4e are provided only as a guide for the users of this textbook. The AACSB leaves content coverage and assessment within the purview of individual schools, the mission of the school, and the faculty. While Business Driven Information Systems 4e and the teaching package make no claim of any specific AACSB qualification or evaluation, within Business Driven Information Systems 4e we have labeled selected questions according to the six general knowledge and skills areas.
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McGraw-Hill Customer Care Contact Information At McGraw-Hill, we understand that getting the most from new technology can be challenging. That’s why our services don’t stop after you purchase our products. You can email our product specialists 24 hours a day to get product-training online. Or you can search our knowledge bank of Frequently Asked Questions on our support website. For Customer Support, call 800-331-5094 or visit www.mhhe.com/support where you can look for your question on our FAQ or you can email a question directly to customer support. One of our technical support analysts will be able to assist you in a timely fashion.
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Apply Your Knowledge
Business Driven Information Systems contains 33 projects that focus on student application of core concepts and tools. These projects can be found on the OLC at www.mhhe.com/baltzan .
Project Number Project Name Project Type Plug-In Focus Area Project Level Skill Set
Page Number
1 Financial Destiny
Excel T2 Personal Budget
Introductory Formulas AYK.4
2 Cash Flow Excel T2 Cash Flow Introductory Formulas AYK.4
3 Technology Budget
Excel T1, T2 Hardware and Software
Introductory Formulas AYK.4
4 Tracking Donations
Excel T2 Employee Relationships
Introductory Formulas AYK.4
5 Convert Currency
Excel T2 Global Commerce
Introductory Formulas AYK.5
6 Cost Comparison
Excel T2 Total Cost of Ownership
Introductory Formulas AYK.5
7 Time Management
Excel or Project T12 Project Management
Introductory Gantt Charts AYK.6
8 Maximize Profit
Excel T2, T4 Strategic Analysis
Intermediate Formulas or Solver
AYK.6
9 Security Analysis
Excel T3 Filtering Data Intermediate Conditional Formatting, Autofilter, Subtotal
AYK.7
10 Gathering Data
Excel T3 Data Analysis
Intermediate Conditional Formatting
AYK.8
11 Scanner System
Excel T2 Strategic Analysis
Intermediate Formulas AYK.8
12 Competitive Pricing
Excel T2 Profit Maximization
Intermediate Formulas AYK.9
13 Adequate Acquisitions
Excel T2 Break-Even Analysis
Intermediate Formulas AYK.9
14 Customer Relations
Excel T3 CRM Intermediate PivotTable AYK.9
15 Assessing the Value of Information
Excel T3 Data Analysis
Intermediate PivotTable AYK.10
16 Growth, Trends, and Forecasts
Excel T2, T3 Data Forecasting
Advanced Average, Trend, Growth
AYK.11
17 Shipping Costs Excel T4 SCM Advanced Solver AYK.12
18 Formatting Grades
Excel T3 Data Analysis
Advanced If, LookUp AYK.12
(Continued)
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Project Number Project Name Project Type Plug-In Focus Area Project Level Skill Set
Page Number
19 Moving Dilemma
Excel T2, T3 SCM Advanced Absolute vs. Relative Values
AYK.13
20 Operational Efficiencies
Excel T3 SCM Advanced PivotTable AYK.14
21 Too Much Information
Excel T3 CRM Advanced PivotTable AYK.14
22 Turnover Rates Excel T3 Data Mining Advanced PivotTable AYK.15
23 Vital Information
Excel T3 Data Mining Advanced PivotTable AYK.15
24 Breaking Even Excel T4 Business Analysis
Advanced Goal Seek AYK.16
25 Profit Scenario Excel T4 Sales Analysis
Advanced Scenario Manager
AYK.16
26 Electronic Résumés
HTML T9, T10, T11
Electronic Personal Marketing
Introductory Structural Tags
AYK.17
27 Gathering Feedback
Dreamweaver T9, T10, T11
Data Collection
Intermediate Organization of Information
AYK.17
28 Daily Invoice Access T5, T6, T7, T8
Business Analysis
Introductory Entities, Relationships, and Databases
AYK.17
29 Billing Data Access T5, T6, T7, T8
Business Intelligence
Introductory Entities, Relationships, and Databases
AYK.19
30 Inventory Data Access T5, T6, T7, T8
SCM Intermediate Entities, Relationships, and Databases
AYK.20
31 Call Center Access T5, T6, T7, T8
CRM Intermediate Entities, Relationships, and
Databases AYK.21
32 Sales Pipeline Access T5, T6, T7, T8
Business Intelligence
Advanced Entities, Relationships, and Databases
AYK.23
33 Online Classified Ads
Access T5, T6, T7, T8
Ecommerce Advanced Entities, Relationships, and Databases
AYK.23
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SimNet Online is McGraw-Hill’s leading solution for learning Microsoft Office skills and beyond! SimNet is our online training and assessment solution for Microsoft Office skills, computing concepts, Internet Explorer, and Windows content. With no downloads for installation and completely online (requires Adobe Flash Player), SimNet is accessible for today’s students through multiple browsers and is easy to use for all. Its consistent user interface and functional- ity will help save you time and help you be more successful in your course.
Moreover, SimNet offers you lifelong learning. Our codes never expire and the online program is designed with Self- Study and SimSearch features to help you immediately learn isolated Microsoft Office skills on demand. It’s more than a resource; it’s a tool you can use throughout your entire time at your higher education institution.
Finally, you will see powerful, measurable results with SimNet Online. See results immediately in the student grade- book and also generate custom training lessons after an exam to help you determine exactly which content areas you still need to study.
SimNet Online is your solution for mastering Microsoft Office skills!
SIMnet: Keep IT SIMple!
To learn more, visit www.simnetkeepitsimple.com
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McGraw-Hill Higher Education and Blackboard have teamed up. What does this mean for you?
1. Your life, simplified. Now you and your students can access McGraw-Hill’s Connect™ and Create™ right from within your Blackboard course—all with one single sign-on. Say good-bye to the days of logging in to multiple applications.
2. Deep integration of content and tools. Not only do you get single sign-on with Connect™ and Create™, you also get deep integration of McGraw-Hill content and content engines right in Blackboard. Whether you’re choos- ing a book for your course or building Connect™ assignments, all the tools you need are right where you want them—inside of Blackboard.
3. Seamless Gradebooks. Are you tired of keeping multiple gradebooks and manually synchronizing grades into Blackboard? We thought so. When a student completes an integrated Connect™ assignment, the grade for that assignment automatically (and instantly) feeds your Blackboard grade center.
4. A solution for everyone. Whether your institution is already using Blackboard or you just want to try Blackboard on your own, we have a solution for you. McGraw-Hill and Blackboard can now offer you easy access to industry leading technology and content, whether your campus hosts it, or we do. Be sure to ask your local McGraw-Hill representative for details.
Craft your teaching resources to match the way you teach! With McGraw-Hill Create, www.mcgrawhillcreate.com , you can easily rearrange chapters, combine material from other content sources, and quickly upload content you have written, like your course syllabus or teaching notes. Find the content you need in Create by searching through thousands of leading McGraw-Hill textbooks. Arrange your book to fit your teaching style. Create even allows you to personalize your book’s appear- ance by selecting the cover and adding your name, school, and course information. Order a Create book and you’ll receive a complimentary print review copy in 3–5 business days or a complimentary electronic review copy (eComp) via email in about one hour. Go to www.mcgrawhillcreate.com today and register. Experience how McGraw-Hill Create empowers you to teach your students your way.
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Acknowledgmentsxxx
Stephen Adams Lakeland Community College
Adeyemi A. Adekoya Virginia State University—Petersburg
Joni Adkins Northwest Missouri State University
Chad Anderson University of Nevada—Reno
Anne Arendt Utah Valley University
Laura Atkins James Madison University
William Ayen University of Colorado
David Bahn Metropolitan State University—St. Paul
Nick Ball Brigham Young University—Provo
Patrick Bateman Youngstown State University
Terry Begley Creighton University
Craig Beytien University of Colorado—Boulder
Sudip Bhattacharjee University of Connecticut
Meral Binbasioglu Hofstra University
Joseph Blankenship Fairmont State College
Beverly Bohn Park University
Brenda Bradford Missouri Baptist University
Casey Cegielski Auburn University—Auburn
Amita Chin Virginia Commonwealth University
Steve Clements Eastern Oregon University
Cynthia Corritore Creighton University
Dan Creed Normandale Community College
Don Danner San Francisco State University
Sasha Dekleva DePaul University
Robert Denker Baruch College
Hongwei Du California State University, East Bay
Kevin Duffy Wright State University—Dayton
Annette Easton San Diego State University
Barry Floyd California Polytechnic State University
Valerie Frear Daytona State College
Laura Frost Walsh College
Don Gaber University of Wisconsin—Eau Claire
Biswadip Ghosh Metropolitan State College of Denver
Richard Glass Bryant University
Lakshmi Goel University of North Florida
Mark Goudreau Johnson & Wales University
Katie Gray The University of Texas at Austin
Gary Hackbarth Northern Kentucky University
Shu Han Yeshiva University
Peter Haried University of Wisconsin—La Crosse
Rosie Hauck Illinois State University
Jun He University of Michigan—Dearborn
James Henson California State University—Fresno
Terri Holly Indian River State College
Scott Hunsinger Appalachian State University
Ted Hurewitz Rutgers University
Yan Jin Elizabeth City State University
Brian Jones Tennessee Technological University
ACKNOWLEDGMENTS
Working on the fourth edition of Business Driven Information Systems has been an involved undertaking, and there are many people whom we want to heartily thank for their hard work, enthusiasm, and dedication.
This text was produced with the help of a number of people at McGraw-Hill, including Brand Manager Wyatt Morris, Development Editor Alaina Tucker, and Kathryn Wright, our Project Manager.
Additionally, we would like to thank Scott Davidson (Director), Tiffany Russell (Marketing Manager), Matt Diamond (Designer), Kevin White (Digital Development Editor), and Keri Johnson (Content Licensing Specialist) for your support and dedica- tion to the success of this text.
Finally, we offer our sincerest gratitude and deepest appreciation to our valuable reviewers whose feedback was instrumental in successfully compiling this text. We could not have done this without you!
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xxxiAcknowledgments
Robert Judge San Diego State University
B. Kahn Suffolk University
Virginia Kleist West Virginia University
Meagan Knoll Grand Valley State University
Rick Kraas Kalamazoo Valley Community College
Chetan Kumar California State University—San Marcos
Guolin Lai University of Louisiana—Lafayette
Jose Lepervanche Florida State College—Jacksonville
Norman Lewis Wayne State University
Mary Lind North Carolina A&T State University
Steve Loy Eastern Kentucky University
Joan Lumpkin Wright State University—Dayton
Linda Lynam University of Central Missouri
Nicole Lytle-Kosola California State University—San Bernardino
Garth MacKenzie University of Maryland University College
Michael Martel Ohio University—Athens
Dana McCann Central Michigan University
David McCue University of Maryland
Lynn McKell Brigham Young University
Patricia McQuaid California Polytechnic State University
Fiona Nah University of Nebraska—Lincoln
Eric Nathan University of Houston Downtown
Bill Neumann University of Arizona
Richard Newmark University of Northern Colorado
Kathleen Noce Pennsylvania State University—Erie
Gisele Olney University of Nebraska—Omaha
Kevin Parker Idaho State University—Pocatello
Neeraj Parolia Towson University
Gang Peng Youngstown State University
Julie Pettus Missouri State University
Craig Piercy University of Georgia
Clint Pires Hamline University
Jennifer Pitts Columbus State University
Carol Pollard Appalachian State University
Lara Preiser-Houy California State Polytechnic University—Pomona
John Quigley East Tennessee State University
Muhammad Razi Western Michigan University
Lisa Rich Athens State University
Russell Robbins University of Pittsburgh
Fred Rodammer Michigan State University
Steve Ross Western Washington University
Mark Schmidt St. Cloud State University
Dana Schwieger Southeast Missouri State University
Darrell Searcy Palm Beach Community College
Jay Shah Texas State University
Vivek Shah Texas State University
Vijay Shah West Virginia University— Parkersburg
Jollean Sinclaire Arkansas State University
Changsoo Sohn St. Cloud State University
Toni Somers Wayne State University
Denise Sullivan Westchester Community College
Yi Sun California State University—San Marcos
Mike Tarn Western Michigan University
Mark Thouin The University of Texas at Dallas
Lise Urbaczewski University of Michigan—Dearborn
Hong Wang North Carolina A&T State University
Barbara Warner University of South Florida
Connie Washburn Georgia Perimeter College
Bruce White Quinnipiac University
Raymond Whitney University of Maryland University College
Rosemary Wild California Polytechnic State University
Marie Wright Western Connecticut State University
Yajiong Xue East Carolina University
Ali Yayla Binghamton University
Grace Zhang Midwestern State University
Lin Zhao Purdue University—Calumet
Jeanne Zucker East Tennessee State University
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About the Authorxxxii
A B O U T T H E A U T H O R
Pa ige Ba l tzan Paige Baltzan teaches in the Department of Business Information and Analytics at the
Daniels College of Business at the University of Denver. She holds a B.S.B.A. specializing
in Accounting/MIS from Bowling Green State University and an M.B.A. specializing in
MIS from the University of Denver. She is a coauthor of several books, including Business
Driven Technology, Essentials of Business Driven Information Systems, I-Series, and a con-
tributor to Management Information Systems for the Information Age.
Before joining the Daniels College faculty in 1999, Paige spent several years working
for a large telecommunications company and an international consulting firm, where
she participated in client engagements in the United States as well as South America
and Europe. Paige lives in Lakewood, Colorado, with her husband, Tony, and daughters
Hannah and Sophie.
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2
3
1
MODULE 1: Business Driven MIS
MODULE 3: Enterprise MIS
MODULE 2: Technical Foundations
of MIS
module 1 Business Driven MIS
M OST COMPANIES TODAY rely heavily on the use of management information sys-
tems (MIS) to run various aspects of their businesses. Whether they need to order and ship
goods, interact with customers, or conduct other business functions, management information
systems are often the underlying infrastructure performing the activities. Management informa-
tion systems allow companies to remain competitive in today’s fast-paced world and especially
when conducting business on the Internet. Organizations must adapt to technological advances
and innovations to keep pace with today’s rapidly changing environment. Their competitors cer-
tainly will!
No matter how exciting technology is, successful companies do not use it simply for its own
sake. Companies should have a solid business reason for implementing technology. Using a
technological solution just because it is available is not a good business strategy.
The purpose of Module 1 is to raise your awareness of the vast opportunities made possible
by the tight correlation between business and technology. Business strategies and processes
should always drive your technology choices. Although awareness of an emerging technology
can sometimes lead us in new strategic directions, the role of information systems, for the most
part, is to support existing business strategies and processes.
Module 1: Business Driven MIS
CHAPTER 1: Management Information Systems: Business Driven MIS
CHAPTER 2: Decisions and Processes: Value Driven Business
CHAPTER 3: Ebusiness: Electronic Business Value
CHAPTER 4: Ethics and Information Security: MIS Business Concerns
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What’s in IT for me? This chapter sets the stage for the textbook. It starts from ground zero by providing a clear description of what information
is and how it fits into business operations, strategies, and systems. It provides an overview of how companies operate in
competitive environments and why they must continually define and redefine their business strategies to create competi-
tive advantages. Doing so allows them to survive and thrive. Information systems are key business enablers for successful
operations in competitive environments.
You, as a business student, must understand the tight correlation between business and technology. You must first rec-
ognize information’s role in daily business activities, and then understand how information supports and helps implement
global business strategies and competitive advantages. After reading this chapter, you should have a solid understanding of
business driven information systems and their role in managerial decision making and problem solving.
1
■ I d e n t i f y i n g C o m p e t i t i v e A d v a n t a g e s
■ T h e F i v e F o rc e s M o d e l — E v a l u a t i n g I n d u s t r y A t t r a c t i v e n e s s
■ T h e T h re e G e n e r i c S t r a t e g i e s — C h o o s i n g a B u s i n e s s F o c u s
■ Va l u e C h a i n A n a l y s i s — E x e c u t i n g B u s i n e s s S t r a t e g i e s
SECTION 1.2 Business Strategy
■ C o m p e t i n g i n t h e I n f o r m a t i o n A g e
■ T h e C h a l l e n g e : D e p a r t m e n t a l C o m p a n i e s
■ T h e S o l u t i o n : M a n a g e m e n t I n f o r m a t i o n S y s t e m s
SECTION 1.1 Business Driven MIS
C H
A P
T E
R O
U T
L IN
E
C H A P T E R
Management Information Systems: Business Driven MIS
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3Business Driven MIS Module 1
opening case study
The World Is Flat: Thomas Friedman
Christopher Columbus proved in 1492 that the world is round. For centuries, sailors maneu-
vered the seas discovering new lands, new people, and new languages as nations began
trading goods around the globe. Then Thomas Friedman, a noted columnist for The New
York Times, published his book The World Is Flat.
Friedman argues that the world has become flat due to technological advances connecting
people in China, India, and the United States as if we were all next-door neighbors. Physicians
in India are reading X-rays for U.S. hospitals, and JetBlue Airways ticket agents take plane
reservations for the company from the comfort of their Utah homes. Technology has elimi-
nated some of the economic and cultural advantages developed countries enjoy, making the
world a level playing field for all participants. Friedman calls this Globalization 3.0.
Globalization 1.0 started when Christopher Columbus discovered the world is round and
the world shrank from large to medium. For the next several hundred years, countries domi-
nated by white men controlled business. Globalization 2.0 began around 1800, during the
Industrial Revolution, when the world went from medium to small. In this era international
companies dominated by white men controlled business. Globalization 3.0 began in early
2000, removing distance from the business equation, and the world has gone from small to
tiny. In this era, people of all colors from the four corners of the world will dominate busi-
ness. Farmers in remote villages in Nepal carry an iPhone to access the world’s knowledge
at, say, Wikipedia or the stock market closing prices at Bloomberg.
Outsourcing, or hiring someone from another country to complete work remotely, will
play an enormous role in this era. It has advantages and disadvantages. Outsourcing work
to countries where labor is cheap drives down production costs and allows companies to
offer lower prices to U.S. consumers. Having an accountant in China complete a U.S. tax
return is just as easy as driving to the H&R Block office on the corner, and probably far
cheaper. Calling an 800 number for service can connect consumers to an Indian, Canadian,
or Chinese worker on the other end of the line. Of course, outsourcing also eliminates some
U.S. manufacturing and labor jobs, causing pockets of unemployment. In fact, the United
States has outsourced several million service and manufacturing jobs to offshore, low-cost
producers.
Figure 1.1 shows Friedman’s list of forces that flattened the world. They converged
around the year 2000 and “created a flat world: a global, web-enabled platform for mul-
tiple forms of sharing knowledge and work, irrespective of time, distance, geography, and
increasingly, language.” Three powerful new economies began materializing at this time. In
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4 Chapter 1 Management Information Systems: Business Driven MIS
India, China, and the former Soviet Union, more than 3 billion new willing and able partici-
pants walked onto the business playing field. Business students will be competing for their
first jobs not only against other local students, but also against students from around the
country and around the globe.1
Friedman’s 10 Forces That Flattened the World
1. Fall of the Berlin Wall The events of November 9, 1989, tilted the worldwide balance of power toward democracies and free markets.
2. Netscape IPO The August 9, 1995, offering sparked massive investment in fiber- optic cables.
3. Work flow software The rise of applications from PayPal to VPNs enabled faster, closer coordination among far-flung employees.
4. Open sourcing Self-organizing communities, such as Linux, launched a collaborative revolution.
5. Outsourcing Migrating business functions to India saved money and a Third World economy.
6. Offshoring Contract manufacturing elevated China to economic prominence.
7. Supply chaining Robust networks of suppliers, retailers, and customers increased business efficiency.
8. In-sourcing Logistics giants took control of customer supply chains, helping mom-and-pop shops go global.
9. Informing Power searching allowed everyone to use the Internet as a “personal supply chain of knowledge.”
10. Wireless Wireless technologies pumped up collaboration, making it mobile and personal.
FIGURE 1.1
Thomas Friedman’s 10 Forces That Flattened the World
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5Business Driven MIS Module 1
section 1.1 Business Driven MIS
L E A R N I N G O U T C O M E S
1.1 Describe the information age and the differences among data, information, business intelligence, and knowledge.
1.2 Identify the different departments in a company and why they must work together to achieve success.
1.3 Explain systems thinking and how management information systems enable business communications.
COMPETING IN THE INFORMATION AGE
Did you know that . . .
■ The movie Avatar took more than four years to create and cost $450 million.
■ Lady Gaga’s real name is Stefani Joanne Angelina Germanotta.
■ Customers pay $2.6 million for a 30-second advertising time slot during the Super Bowl. 2
A fact is the confirmation or validation of an event or object. In the past, people pri- marily learned facts from books. Today, by simply pushing a button people can find out anything, from anywhere, at any time. We live in the information age , when infinite quantities of facts are widely available to anyone who can use a computer. The impact of information technology on the global business environment is equivalent to the printing press’s impact on publishing and electricity’s impact on productivity. College student startups were mostly unheard of before the information age. Now, it’s not at all unusual to read about a business student starting a multimillion-dollar company from his or her dorm room. Think of Mark Zuckerberg, who started Facebook from his dorm, or Michael Dell (Dell Computers) and Bill Gates (Microsoft), who both founded their legendary companies as college students.
You may think only students well versed in advanced technology can compete in the information age. This is simply not true. Many business leaders have created exceptional opportunities by coupling the power of the information age with traditional business methods. Here are just a few examples:
■ Amazon is not a technology company; its original business focus was to sell books, and it now sells nearly everything.
■ Netflix is not a technology company; its primary business focus is to rent videos.
■ Zappos is not a technology company; its primary business focus is to sell shoes, bags, clothing, and accessories.
Amazon’s founder, Jeff Bezos, at first saw an opportunity to change the way people purchase books. Using the power of the information age to tailor offerings to each customer and speed the payment process, he in effect opened millions of tiny virtual bookstores, each with a vastly larger selection and far cheaper product than traditional bookstores. The success of his original business model led him to expand Amazon to carry many other types of products. The founders of Netflix and Zappos have done the same thing for videos and shoes. All these entrepreneurs were business professionals, not technology experts. However, they understood enough about the information age to apply it to a particular business, creating innovative companies that now lead entire industries.
Students who understand business along with the power associated with the infor- mation age will create their own opportunities and perhaps even new industries, as co- founders Chris DeWolfe and Tom Anderson did with MySpace and Mark Zuckerberg did
LO. 1.1: Describe the information age and the differences among data, information, business intelligence, and knowledge.
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BUSINESS DRIVEN DISCUSSION
Bill Gates, founder of Microsoft, stated that 20 years ago most people would rather have been a B student in New York City than a genius in China because the opportunities available to students in developed countries were limitless. Today, many argue that the opposite is now true due to technological advances making it easier to succeed as a genius in China than a B student in New York. As a group, discuss if you agree or disagree with Bill Gates statement. 3
View from a Flat World
APPLY YOUR KNOWLEDGE
6 Chapter 1 Management Information Systems: Business Driven MIS
with Facebook. Our primary goal in this course is to arm you with the knowledge you need to compete in the information age. The core drivers of the information age are:
■ Data
■ Information
■ Business intelligence
■ Knowledge (see Figure 1.2 )
Data
Data are raw facts that describe the characteristics of an event or object. Before the information age, managers manually collected and analyzed data, a time-consuming and complicated task without which they would have little insight into how to run their
FIGURE 1.2
The Differences among Data, Information, Business Intelligence, and Knowledge
Data Information Business Intelligence
Knowledge
•
•
• Data converted into a meaningful and useful context
• Information collected from multiple sources that analyzes patterns, trends, and relationships for strategic decision making
• The skills, experience, and expertise, coupled with information and intelligence, that creates a person’s intellectual resources.
• Choosing not to fire a sales representative who is underperforming knowing that person is experiencing family problems • Listing products that are about to expire first on the menu or creating them as a daily special to move the product
• Raw facts that describe the characteristics of an event or object
• Order date • Amount sold • Customer number • Quantity ordered
• Best-selling product • Best customer • Worst-selling product • Worst customer
• Lowest sales per week compared with the economic interest rates • Best-selling product by month compared to sports season and city team wins and losses
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7Business Driven MIS Module 1
business. Lacking data, managers often found themselves making business decisions about how many products to make, how much material to order, or how many employ- ees to hire based on intuition or gut feelings. In the information age, successful manag- ers compile, analyze, and comprehend massive amounts of data daily, which helps them make more successful business decisions.
Figure 1.3 shows sales data for Tony’s Wholesale Company, a fictitious business that supplies snacks to stores. The data highlight characteristics such as order date, cus- tomer, sales representative, product, quantity, and profit. The second line in Figure 1.3 , for instance, shows that Roberta Cross sold 90 boxes of Ruffles to Walmart for $1,350, resulting in a profit of $450 (note that Profit 5 Sales 2 Costs). These data are useful for understanding individual sales; however, they do not provide us much insight into how Tony’s business is performing as a whole. Tony needs to answer questions that will help him manage his day-to-day operations such as:
■ Who are my best customers?
■ Who are my least-profitable customers?
■ What is my best-selling product?
■ What is my slowest-selling product?
■ Who is my strongest sales representative?
■ Who is my weakest sales representative?
What Tony needs, in other words, is not data but information.
Information
Information is data converted into a meaningful and useful context. Having the right information at the right moment in time can be worth a fortune. Having the wrong infor- mation at the right moment; or the right information at the wrong moment can be disas- trous. The truth about information is that its value is only as good as the people who use it. People using the same information can make different decisions depending on how they interpret or analyze the information. Thus information has value only insofar as the people using it do as well.
Tony can analyze his sales data and turn them into information to answer all the above questions and understand how his business is operating. Figures 1.4 and 1.5 , for instance, show us that Walmart is Roberta Cross’s best customer, and that Ruffles is Tony’s best product measured in terms of total sales. Armed with this information, Tony can identify and then address such issues as weak products and underperforming sales representatives.
A variable is a data characteristic that stands for a value that changes or varies over time. For example, in Tony’s data, price and quantity ordered can vary. Changing
FIGURE 1.3
Tony’s Snack Company DataOrder Date Customer
Sales Representative Product Qty
Unit Price
Total Sales
Unit Cost
Total Cost Profit
4-Jan Walmart PJ Helgoth Doritos 41 $24 $ 984 $18 $738 $246
4-Jan Walmart Roberta Cross Ruffles 90 $15 $1,350 $10 $900 $450
5-Jan Safeway Craig Schultz Ruffles 27 $15 $ 405 $10 $270 $135
6-Jan Walmart Roberta Cross Ruffles 67 $15 $1,005 $10 $670 $335
7-Jan 7-Eleven Craig Schultz Pringles 79 $12 $ 948 $ 6 $474 $474
7-Jan Walmart Roberta Cross Ruffles 52 $15 $ 780 $10 $520 $260
8-Jan Kroger Craig Schultz Ruffles 39 $15 $ 585 $10 $390 $195
9-Jan Walmart Craig Schultz Ruffles 66 $15 $ 990 $10 $660 $330
10-Jan Target Craig Schultz Ruffles 40 $15 $ 600 $10 $400 $200
11-Jan Walmart Craig Schultz Ruffles 71 $15 $1,065 $10 $710 $355
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8 Chapter 1 Management Information Systems: Business Driven MIS
FIGURE 1.4
Tony’s Data Sorted by Customer “Walmart” and Sales Representative “Roberta Cross”
Order Date Customer
Sales Representative Product Quantity
Unit Price
Total Sales Unit Cost
Total Cost Profit
26-Apr Walmart Roberta Cross Fritos 86 $ 19 $ 1,634 $ 17 $ 1,462 $ 172
29-Aug Walmart Roberta Cross Fritos 76 $ 19 $ 1,444 $ 17 $ 1,292 $ 152
7-Sep Walmart Roberta Cross Fritos 20 $ 19 $ 380 $ 17 $ 340 $ 40
22-Nov Walmart Roberta Cross Fritos 39 $ 19 $ 741 $ 17 $ 663 $ 78
30-Dec Walmart Roberta Cross Fritos 68 $ 19 $ 1,292 $ 17 $ 1,156 $ 136
7-Jul Walmart Roberta Cross Pringles 79 $ 18 $ 1,422 $ 8 $ 632 $ 790
6-Aug Walmart Roberta Cross Pringles 21 $ 12 $ 252 $ 6 $ 126 $ 126
2-Oct Walmart Roberta Cross Pringles 60 $ 18 $ 1,080 $ 8 $ 480 $ 600
15-Nov Walmart Roberta Cross Pringles 32 $ 12 $ 384 $ 6 $ 192 $ 192
21-Dec Walmart Roberta Cross Pringles 92 $ 12 $ 1,104 $ 6 $ 552 $ 552
28-Feb Walmart Roberta Cross Ruffles 67 $ 15 $ 1,005 $ 10 $ 670 $ 335
6-Mar Walmart Roberta Cross Ruffles 8 $ 15 $ 120 $ 10 $ 80 $ 40
16-Mar Walmart Roberta Cross Ruffles 68 $ 15 $ 1,020 $ 10 $ 680 $ 340
23-Apr Walmart Roberta Cross Ruffles 34 $ 15 $ 510 $ 10 $ 340 $ 170
4-Aug Walmart Roberta Cross Ruffles 40 $ 15 $ 600 $ 10 $ 400 $ 200
18-Aug Walmart Roberta Cross Ruffles 93 $ 15 $ 1,395 $ 10 $ 930 $ 465
5-Sep Walmart Roberta Cross Ruffles 41 $ 15 $ 615 $ 10 $ 410 $ 205
12-Sep Walmart Roberta Cross Ruffles 8 $ 15 $ 120 $ 10 $ 80 $ 40
28-Oct Walmart Roberta Cross Ruffles 50 $ 15 $ 750 $ 10 $ 500 $ 250
21-Nov Walmart Roberta Cross Ruffles 79 $ 15 $ 1,185 $ 10 $ 790 $ 395
29-Jan Walmart Roberta Cross Sun Chips 5 $ 22 $ 110 $ 18 $ 90 $ 20
12-Apr Walmart Roberta Cross Sun Chips 85 $ 22 $ 1,870 $ 18 $ 1,530 $ 340
16-Jun Walmart Roberta Cross Sun Chips 55 $ 22 $ 1,210 $ 18 $ 990 $ 220
1,206 $383 $20,243 $273 $14,385 $5,858
Sorting the data reveals the information that Roberta Cross’s total sales to Walmart were $20,243 resulting in a profit of $5,858. (Profit $5,858 5 Sales $20,243 2 Costs $14,385)
variables allows managers to create hypothetical scenarios to study future possibilities. Tony may find it valuable to anticipate how sales or cost increases affect profitability. To estimate how a 20 percent increase in prices might improve profits, Tony simply changes the price variable for all orders, which automatically calculates the amount of new prof- its. To estimate how a 10 percent increase in costs hurts profits, Tony changes the cost variable for all orders, which automatically calculates the amount of lost profits. Manip- ulating variables is an important tool for any business.
Business Intelligence
Business intelligence (BI) is information collected from multiple sources such as sup- pliers, customers, competitors, partners, and industries that analyzes patterns, trends, and relationships for strategic decision making. BI manipulates multiple variables and in some cases even hundreds of variables including such items as interest rates, weather conditions, and even gas prices. Tony could use BI to analyze internal data such as company sales, along with external data about the environment such as competitors, finances, weather, holidays, and even sporting events. Both internal and external vari- ables affect snack sales, and analyzing these variables will help Tony determine ordering levels and sales forecasts. For instance, BI can predict inventory requirements for Tony’s business for the week before the Super Bowl if, say, the home team is playing, average
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9Business Driven MIS Module 1
Tony’s Business Information Name Total Profit
Who is Tony’s best customer by total sales? Walmart $ 560,789
Who is Tony’s least-valuable customer by total sales? Walgreens $45,673
Who is Tony’s best customer by profit? 7-Eleven $ 324,550
Who is Tony’s least-valuable customer by profit? King Soopers $ 23,908
What is Tony’s best-selling product by total sales? Ruffles $ 232,500
What is Tony’s weakest-selling product by total sales? Pringles $ 54,890
What is Tony’s best-selling product by profit? Tostitos $ 13,050
What is Tony’s weakest-selling product by profit? Pringles $ 23,000
Who is Tony’s best sales representative by profit? R. Cross $1,230,980
Who is Tony’s weakest sales representative by profit? Craig Schultz $ 98,980
What is the best sales representative’s best-selling product by total profit? Ruffles $ 98,780
Who is the best sales representative’s best customer by total profit? Walmart $ 345,900
What is the best sales representative’s weakest-selling product by total profit? Sun Chips $ 45,600
Who is the best sales representative’s weakest customer by total profit? Krogers $ 56,050
FIGURE 1.5
Information Gained after Analyzing Tony’s Data
BUSINESS DRIVEN MIS
How can global warming be real when there is so much snow and cold weather? That’s what some people wondered after a couple of massive snowstorms bur- ied Washington, D.C. Politicians across the capital made jokes and built igloos as they disputed the existence of climate change. Some concluded the planet simply could not be warming with all the snow on the ground.
These comments frustrated Joseph Romm, a physicist and climate expert with the Center for American Progress. He spent weeks turning data into infor- mation and graphs to educate anyone who would listen as to why this reason- ing was incorrect. Climate change is all about analyzing data, turning it into information to detect trends. You cannot observe climate change by looking out the window; you have to review decades of weather data with advanced tools to really understand the trends.
Increasingly we see politicians, economists, and newscasters taking tough issues and boiling them down to simplistic arguments over what the data mean, each interpreting the data and spinning the data to support their views and agendas. You need to understand the data and turn them into useful infor- mation or else you will not understand when someone is telling the truth and when you are being lied to.
Brainstorm two or three types of data economists use to measure the economy. How do they turn the data into information? What issues do they encounter when attempting to measure the economy? As a manager, what do you need to understand when reading or listening to economic and business reports? 4
Manipulating the Data to Find Your Version of the Truth
APPLY YOUR KNOWLEDGE
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10 Chapter 1 Management Information Systems: Business Driven MIS
temperature is above 80 degrees, and the stock market is performing well. This is BI at its finest, incorporating all types of internal and external variables to anticipate business performance.
Top managers use BI to define the future of the business, analyzing markets, indus- tries, and economies to determine the strategic direction the company must follow to remain profitable. Tony will set the strategic direction for his firm, which might include introducing new flavors of potato chips or sport drinks as new product lines or schools and hospitals as new market segments.
Knowledge
Knowledge includes the skills, experience, and expertise, coupled with information and intelligence, that creates a person’s intellectual resources. Knowledge workers are indi- viduals valued for their ability to interpret and analyze information. Today’s workers are commonly referred to as knowledge workers and they use BI along with personal experi- ence to make decisions based on both information and intuition, a valuable resource for any company.
Imagine that Tony analyzes his data and finds his weakest sales representative for this period is Craig Schultz. If Tony considered only this information, he might con- clude that firing Craig was a good business decision. However, because Tony has knowledge about how the company operates, he knows Craig has been out on medi- cal leave for several weeks; hence, his sales numbers are low. Without this additional knowledge, Tony might have executed a bad business decision, delivered a negative message to the other employees, and sent his best sales representatives out to look for other jobs.
The key point in this scenario is that it is simply impossible to collect all the infor- mation about every situation, and yet without that, it can be easy to misunderstand the problem. Using data, information, business intelligence, and knowledge to make deci- sions and solve problems is the key to finding success in business. These core drivers of the information age are the building blocks of business systems.
BUSINESS DRIVEN ETHICS AND SECURITY
We live in the information age where the collection, storage, and use of data are hot topics. One example of inappropriate data handling occurred at a college where the monitoring of restrooms occurred every 15 seconds to observe the use of toilets, mirrors, and sinks. Students, faculty, and staff began complaining that the data collection was an invasion of their privacy and a violation of their rights.
Another example of inappropriate data handling occurred when a profes- sor of accounting at a college lost a flash drive containing information for more than 1,800 students, including Social Security numbers, grades, and names. Social Security numbers were included because the data went back to before 1993 when the college used Social Security numbers to identify students.
What types of student data does your college collect? What could happen if your professor lost a thumb drive with all of your personal information? What types of issues could you encounter if someone stole your personal data? What can your college do to ensure this type of data storage violation does not occur? 5
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