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Attachment 1

Chapter 1 – study questions 1-5, Exercise 3 from  (Information Systems for Business and Beyond)

Part 1: What Is an Information System?

Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.




Chapter 1: What Is an Information System? David T. Bourgeois

Learning Objectives

Upon successful completion of this chapter, you will be able to:

· define what an information system is by identifying its major components;

· describe the basic history of information systems; and

· describe the basic argument behind the article “Does IT Matter?” by Nicholas Carr.


If you are reading this, you are most likely taking a course in information systems, but do you even know what the course is going to cover? When you tell your friends or your family that you are taking a course in information systems, can you explain what it is about? For the past several years, I have taught an Introduction to Information Systems course. The first day of class I ask my students to tell me what they think an information system is. I generally get answers such as “computers,” “databases,” or “Excel.” These are good answers, but definitely incomplete ones. The study of information systems goes far beyond understanding some technologies. Let’s begin our study by defining information systems.

Defining Information Systems

Almost all programs in business require students to take a course in something called information systems. But what exactly does that term mean? Let’s take a look at some of the more popular definitions, first from Wikipedia and then from a couple of textbooks:

· “Information systems (IS) is the study of complementary networks of hardware and software that people and organizations use to collect, filter, process, create, and distribute data.”1

· “Information systems are combinations of hardware, software, and telecommunications networks that people build and use to collect, create, and distribute useful data, typically in organizational settings.”2

· “Information systems are interrelated components working together to collect, process, store, and disseminate information to support decision making, coordination, control, analysis, and viualization in an organization.”3

1. Wikipedia entry on "Information Systems," as displayed on August 19, 2012. Wikipedia: The Free Encyclopedia. San Francisco: Wikimedia Foundation. http://en.wikipedia.org/wiki/Information_systems_(discipline).

2. Excerpted from Information Systems Today - Managing in the Digital World, fourth edition. Prentice-Hall, 2010. 3. Excerpted from Management Information Systems, twelfth edition, Prentice-Hall, 2012.

Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.




6 Information Systems for Business and Beyond

As you can see, these definitions focus on two different ways of describing information systems: the components that make up an information system and the role that those components play in an organization. Let’s take a look at each of these.

The Components of Information Systems

As I stated earlier, I spend the first day of my information systems class discussing exactly what the term means. Many students understand that an information system has something to do with databases or spreadsheets. Others mention computers and e-commerce. And they are all right, at least in part: information systems are made up of different components that work together to provide value to an organization.

The first way I describe information systems to students is to tell them that they are made up of five components: hardware, software, data, people, and process. The first three, fitting under the category technology, are generally what most students think of when asked to define information systems. But the last two, people and process, are really what separate the idea of information systems from more technical fields, such as computer science. In order to fully understand information systems, students must understand how all of these components work together to bring value to an organization.


Technology can be thought of as the application of scientific knowledge for practical purposes. From the invention of the wheel to the harnessing of electricity for artificial lighting, technology is a part of our lives in so many ways that we tend to take it for granted. As discussed before, the first three components of information systems – hardware, software, and data – all fall under the category of technology. Each of these will get its own chapter and a much lengthier discussion, but we will take a moment here to introduce them so we can get a full understanding of what an information system is.


Information systems hardware is the part of an information system you can touch – the physical components of the technology. Computers, keyboards, disk drives, iPads, and flash drives are all examples of information systems hardware. We will spend some time going over these components and how they all work together in chapter 2.


Software is a set of instructions that tells the hardware what to do. Software is not tangible – it cannot be touched. When programmers create software programs, what they are really doing is simply typing out lists of instructions that tell the hardware what to do. There are several categories of software, with the two main categories being operating-system software, which makes the hardware usable, and application software, which does something useful. Examples of operating systems include Microsoft Windows on a personal computer and Google’s Android on a mobile phone. Examples of application software are Microsoft Excel and Angry Birds. Software will be explored more thoroughly in chapter 3.


Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.




The third component is data. You can think of data as a collection of facts. For example, your street address, the city you live in, and your phone number are all pieces of data. Like software, data is also intangible. By themselves, pieces of data are not really very useful. But aggregated, indexed, and organized together into a database, data can become a powerful tool for businesses. In fact, all of the definitions presented at the beginning of this chapter focused on how information systems manage data. Organizations collect all kinds of data and use it to make decisions. These decisions can then be analyzed as to their effectiveness and the organization can be improved. Chapter 4 will focus on data and databases, and their uses in organizations.

Networking Communication: A Fourth Technology Piece?

Besides the components of hardware, software, and data, which have long been considered the core technology of information systems, it has been suggested that one other component should be added: communication. An information system can exist without the ability to communicate – the first personal computers were stand-alone machines that did not access the Internet. However, in today’s hyper-connected world, it is an extremely rare computer that does not connect to another device or to a network. Technically, the networking communication component is made up of hardware and software, but it is such a core feature of today’s information systems that it has become its own category. We will be covering networking in chapter 5.


When thinking about information systems, it is easy to get focused on the technology components and forget that we must look beyond these tools to fully understand how they integrate into an organization. A focus on the people involved in information systems is the next step. From the front-line help-desk workers, to systems analysts, to programmers, all the way up to the chief information officer (CIO), the people involved with information systems are an essential element that must not be overlooked. The people component will be covered in chapter 9.


The last component of information systems is process. A process is a series of steps undertaken to achieve a desired outcome or goal. Information systems are becoming more and more integrated with organizational processes, bringing more productivity and better control to those processes. But simply automating activities using technology is not enough – businesses looking to effectively utilize information systems do more. Using technology to manage and improve processes, both within a company and externally with suppliers and customers, is the ultimate goal. Technology buzzwords such as “business process reengineering,” “business process management,” and “enterprise resource planning” all have to do with the continued improvement of these business procedures and the integration of technology with them. Businesses hoping to gain an advantage over their competitors are highly focused on this component of information systems. We will discuss processes in chapter 8.

Ch.1:What Is an Information System? 7


Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.



8 Information Systems for Business and Beyond

The Role of Information Systems

Now that we have explored the different components of information systems, we need to turn our attention to the role that information systems play in an organization. So far we have looked at what the components of an information system are, but what do these components actually do for an organization? From our definitions above, we see that these components collect, store, organize, and distribute data throughout the organization. In fact, we might say that one of the roles of information systems is to take data and turn it into information, and then transform that into organizational knowledge. As technology has developed, this role has evolved into the backbone of the organization. To get a full appreciation of the role information systems play, we will review how they have changed over the years.

The Mainframe Era

From the late 1950s through the 1960s, computers were seen as a way to more efficiently do calculations. These first business computers were room-sized monsters, with several refrigerator-sized machines linked together. The primary work of these devices was to organize and store large volumes of information that were tedious to manage by hand. Only large businesses, universities, and government agencies could afford them, and they took a

IBM 704 Mainframe (Copyright: Lawrence Livermore crew of specialized personnel and specialized facilities to National Laboratory) maintain. These devices served dozens to hundreds of users at a time through a process called time-sharing. Typical functions included scientific calculations and

accounting, under the broader umbrella of “data processing.”

In the late 1960s, the Manufacturing Resources Planning (MRP) systems were introduced. This software, running on a mainframe computer, gave companies the ability to manage the manufacturing process, making it more efficient. From tracking inventory to creating bills of materials to scheduling production, the MRP systems (and later the MRP II systems) gave more businesses a reason to want to integrate computing into their processes. IBM became the dominant mainframe company. Nicknamed “Big Blue,” the company became synonymous with business computing. Continued improvement in software and the availability of cheaper hardware eventually brought mainframe computers (and their little sibling, the minicomputer) into most large businesses.

The PC Revolution

In 1975, the first microcomputer was announced on the cover of Popular Mechanics: the Altair 8800. Its immediate popularity sparked the imagination of entrepreneurs everywhere, and there were quickly dozens of companies making these “personal computers.” Though at first just a niche product for computer hobbyists, improvements in usability and the availability of practical software led to growing sales. The most prominent of these early personal computer makers was a little company known as Apple Computer, headed by Steve Jobs and Steve Wozniak, with the hugely successful “Apple II.” Not wanting to be left out of the revolution, in 1981 IBM (teaming with a little company called Microsoft for their operating-

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Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.


Registered trademark of International Business Machines


system software) hurriedly released their own version of the personal computer, simply called the “PC.” Businesses, who had used IBM mainframes for years to run their businesses, finally had the permission they needed to bring personal computers into their companies, and the IBM PC took off. The IBM PC was named Time magazine’s “Man of the Year” for 1982.

Because of the IBM PC’s open architecture, it was easy for other companies to copy, or “clone” it. During the 1980s, many new computer companies sprang up, offering less expensive versions of the PC. This drove prices down and spurred innovation. Microsoft developed its Windows operating system and made the PC even easier to use. Common uses for the PC during this period included word processing, spreadsheets, and databases. These early PCs were not connected to any sort of network; for the most part they stood alone as islands of innovation within the larger organization.


In the mid-1980s, businesses began to see the need to connect their computers together as a way to collaborate and share resources. This networking architecture was referred to as “client-server” because users would log in to the local area network (LAN) from their PC (the “client”) by connecting to a powerful computer called a “server,” which would then grant them rights to different resources on the network (such as shared file areas and a printer). Software companies began developing applications that allowed multiple users to access the same data at the same time. This evolved into software applications for communicating, with the first real popular use of electronic mail appearing at this time.


Registered trademark of SAP

This networking and data sharing all stayed within the confines of each business, for the most part. While there was sharing of electronic data between companies, this was a very specialized function. Computers were now seen as tools to collaborate internally, within an organization. In fact, these networks of computers were becoming so powerful that they were replacing many of the functions previously performed by the larger mainframe computers at a fraction of the cost.

It was during this era that the first Enterprise Resource Planning (ERP) systems were developed and run on the client-server architecture. An ERP system is a software application with a centralized database that can be used to run a company’s entire business. With separate modules for accounting, finance, inventory, human resources, and many, many more, ERP systems, with Germany’s SAP leading the way, represented the state of the art in information systems integration. We will discuss ERP systems as part of the chapter on process (chapter 9).

The World Wide Web and E-Commerce

First invented in 1969, the Internet was confined to use by universities, government agencies, and researchers for many years. Its rather arcane commands and user applications made it unsuitable for mainstream use in business. One exception to this was the ability to expand electronic mail outside the confines of a single organization. While the first e-mail messages on the Internet were sent in the early 1970s, companies who wanted to expand their LAN-based e-mail started hooking up to the Internet in the 1980s. Companies began connecting their internal networks to the Internet in order to allow communication between their employees and employees at other companies. It was with these early Internet connections that the computer truly began to evolve from a computational device to a communications device.

In 1989, Tim Berners-Lee developed a simpler way for researchers to share information over the

4 network at CERN laboratories, a concept he called the World Wide Web. This invention became the

launching point of the growth of the Internet as a way for businesses to share information about themselves.

Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D. saylor.org

Ch.1:What Is an Information System? 9


10 Information Systems for Business and Beyond

As web browsers and Internet connections became the norm, companies rushed to grab domain names and create websites.


In 1991, the National Science Foundation, which governed how the Internet was used, lifted restrictions on its commercial use. The year 1994 saw the establishment of both eBay and Amazon.com, two true pioneers in the use of the new digital marketplace. A mad rush of investment in Internet-based businesses led to the dot-com boom through the late 1990s, and then the dot-com bust in 2000. While much can be learned from the speculation and crazy economic theories espoused during that bubble, one important outcome for businesses was that thousands of miles of Internet connections were laid around the world during that time. The world became truly “wired” heading into the new millenium, ushering in the era of globalization, which we will discuss in chapter 11.

As it became more expected for companies to be connected to the Internet, the digital world also became a more dangerous place. Computer viruses and worms, once slowly propagated through the sharing of computer disks, could now grow with tremendous speed via the Internet. Software written for a disconnected world found it very difficult to defend against these sorts of threats. A whole new industry of computer and Internet security arose. We will study information security in chapter 6.

Web 2.0

As the world recovered from the dot-com bust, the use of technology in business continued to evolve at a frantic pace. Websites became interactive; instead of just visiting a site to find out about a business and purchase its products, customers wanted to be able to customize their experience and interact with the business. This new type of interactive website, where you did not have to know how to create a web page or do any programming in order to put information online, became known as web 2.0. Web 2.0 is exemplified by blogging, social networking, and interactive comments being available on many websites. This new web-2.0 world, in which online interaction became expected, had a big impact on many businesses and even whole industries. Some industries, such as bookstores, found themselves relegated to a niche status. Others, such as video rental chains and travel agencies, simply began going out of business as they were replaced by online technologies. This process of technology replacing a middleman in a transaction is called disintermediation.

As the world became more connected, new questions arose. Should access to the Internet be considered a right? Can I copy a song that I downloaded from the Internet? How can I keep information that I have put on a website private? What information is acceptable to collect from children? Technology moved so fast that policymakers did not have enough time to enact appropriate laws, making for a Wild West–type atmosphere. Ethical issues surrounding information systems will be covered in chapter 12.

The Post-PC World

After thirty years as the primary computing device used in most businesses, sales of the PC are now beginning to decline as sales of tablets and smartphones are taking off. Just as the mainframe before it, the PC will continue to play a key role in business, but will no longer be the primary way that people interact and do business. The limited storage and processing power of these devices is being offset by a move to “cloud” computing, which allows for storage, sharing, and backup of information on a massive scale. This

4. CERN's "The Birth of the Web." http://public.web.cern.ch/public/en/about/web-en.html

Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.


Registered trademark of Amazon Technologies, Inc.


will require new rounds of thinking and innovation on the part of businesses as technology continues to advance.

Ch.1:What Is an Information System? 11

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Mainframe (1970s)

The Eras of Business Computing

Operating System

Time-sharing (TSO) on MVS


Terminals connected to mainframe computer.


Custom-written MRP software

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PC (mid-1980s)

IBM PC or compatible. Sometimes connected to mainframe computer via expansion card.


WordPerfect, Lotus 1-2-3

Client-Server (late 80s to early 90s)

IBM PC “clone” on a Novell Network.

Windows for Workgroups

Microsoft Word, Microsoft Excel

World Wide Web (mid-90s to early 2000s)

IBM PC “clone” connected to company intranet.

Windows XP

Microsoft Office, Internet Explorer

Web 2.0 (mid-2000s to present)

Post-PC (today and beyond)

Laptop connected to company Wi-Fi.

Apple iPad

Windows 7 iOS

Microsoft Office, Firefox

Mobile-friendly websites, mobile apps

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Can Information Systems Bring Competitive Advantage?

It has always been the assumption that the implementation of information systems will, in and of itself, bring a business competitive advantage. After all, if installing one computer to manage inventory can make a company more efficient, won’t installing several computers to handle even more of the business continue to improve it?

In 2003, Nicholas Carr wrote an article in the Harvard Business Review that questioned this assumption. The article, entitled “IT Doesn’t Matter,” raised the idea that information technology has become just a commodity. Instead of viewing technology as an investment that will make a company stand out, it should be seen as something like electricity: It should be managed to reduce costs, ensure that it is always running, and be as risk-free as possible.

As you might imagine, this article was both hailed and scorned. Can IT bring a competitive advantage? It sure did for Walmart (see sidebar). We will discuss this topic further in chapter 7.

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Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.



12 Information Systems for Business and Beyond

Sidebar: Walmart Uses Information Systems to Become the World’s Leading Retailer

Walmart is the world’s largest retailer, earning $15.2 billion on sales of $443.9 billion in the fiscal year that ended on January 31, 2012. Walmart currently serves over


One of the keys to this success was the implementation of Retail Link, a supply-chain management system. This system, unique when initially implemented in the mid-1980s, allowed Walmart’s suppliers to directly access the inventory levels and sales information of their products at any of Walmart’s more than ten thousand stores. Using Retail Link, suppliers can analyze how well their products are selling at one or more Walmart stores, with a range of reporting options. Further, Walmart requires the suppliers to use Retail Link to manage their own inventory levels. If a supplier feels that their products are selling out too quickly, they can use Retail Link to petition Walmart to raise the levels of inventory for their products. This has essentially allowed Walmart to “hire” thousands of product managers, all of whom have a vested interest in the products they are managing. This revolutionary approach to managing inventory has allowed Walmart to continue to drive prices down and respond to market forces quickly.

Today, Walmart continues to innovate with information technology. Using its tremendous market presence, any technology that Walmart requires its suppliers to implement immediately becomes a business standard.


In this chapter, you have been introduced to the concept of information systems. We have reviewed several definitions, with a focus on the components of information systems: technology, people, and process. We have reviewed how the business use of information systems has evolved over the years, from the use of large mainframe computers for number crunching, through the introduction of the PC and networks, all the way to the era of mobile computing. During each of these phases, new innovations in software and technology allowed businesses to integrate technology more deeply.

We are now to a point where every company is using information systems and asking the question: Does it bring a competitive advantage? In the end, that is really what this book is about. Every businessperson should understand what an information system is and how it can be used to bring a competitive advantage. And that is the task we have before us.


200 million customers every week, worldwide. rise to prominence is due in no small part to their use of information systems.


Registered trademark of Wal-Mart Stores, Inc.

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Assignment 1.

Study Questions

1. What are the five components that make up an information system?

2. What are three examples of information system hardware?

3. Microsoft Windows is an example of which component of information systems?

4. What is application software? 5. What roles do people play in information systems?


3. We all interact with various information systems every day: at the grocery store, at work, at school, even in our cars (at least some of us). Make a list of the different information systems you interact with every day. See if you can identify the technologies, people, and processes involved in making these systems work


Chapter 2: Hardware David T. Bourgeois

Learning Objectives

Upon successful completion of this chapter, you will be able to:

· describe information systems hardware;

· identify the primary components of a computer and the functions they perform; and

· explain the effect of the commoditization of the personal computer.


As we learned in the first chapter, an information system is made up of five components: hardware, software, data, people, and process. The physical parts of computing devices – those that you can actually touch – are referred to as hardware. In this chapter, we will take a look at this component of information systems, learn a little bit about how it works, and discuss some of the current trends surrounding it.

As stated above, computer hardware encompasses digital devices that you can physically touch. This includes devices such as the following:

· desktop computers

· laptop computers

· mobile phones

· tablet computers

· e-readers

· storage devices, such as flash drives

· input devices, such as keyboards, mice, and scanners

· output devices such as printers and speakers.

Besides digital devices are now becoming computerized themselves. Digital technologies are now being integrated into many everyday objects, so the days of a device being labeled categorically as computer hardware may be ending. Examples of these types of digital devices include automobiles, refrigerators, and even soft- drink dispensers. In this chapter, we will also explore digital devices, beginning with defining what we mean by the term itself.

these more traditional computer hardware devices, many items that were once not considered

Saylor URL: http://www.saylor.org/courses/bus206/ Attributed to David T. Bourgeois, Ph.D.




Digital Devices

A digital device processes electronic signals that represent either a one (“on”) or a zero (“off”). The on state is represented by the presence of an electronic signal; the off state is represented by the absence of an electronic signal. Each one or zero is referred to as a bit (a contraction of binary digit); a group of eight bits is a byte. The first personal computers could process 8 bits of data at once; modern PCs can now process 64 bits of data at a time, which is where the term 64-bit processor comes from.

Sidebar: Understanding Binary

As you know, the system of numbering we are most familiar with is base-ten numbering. In base-ten numbering, each column in the number represents a power of ten, with the far-right column representing 10^0 (ones), the next column from the right representing 10^1 (tens), then 10^2 (hundreds), then 10^3 (thousands), etc. For example, the number 1010 in decimal represents: (1 x 1000) + (0 x 100) + (1 x 10) + (0 x 1).

Computers use the base-two numbering system, also known as binary. In this system, each column in the number represents a power of two, with the far-right column representing 2^0 (ones), the next column from the right representing 2^1 (tens), then 2^2 (fours), then 2^3 (eights), etc. For example, the number 1010 in binary represents (1 x 8 ) + (0 x 4) + (1 x 2) + (0 x 1). In base ten, this evaluates to 10.

As the capacities of digital devices grew, new terms were developed to identify the capacities of processors, memory, and disk storage space. Prefixes were applied to the word byte to represent different orders of magnitude. Since these are digital specifications, the prefixes were originally meant to represent multiples

of 1024 (which is 210), but have more recently been rounded to mean multiples of 1000. A Listing of Binary Prefixes

Ch.2: Hardware 15

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Tour of a PC

All personal computers consist of the same basic components: a CPU, memory, circuit board, storage, and input/output devices. It also turns out that almost every digital device uses the same set of components, so examining the personal computer will give us insight into the structure of a variety of digital devices. So let’s take a “tour” of a personal computer and see what makes them function.

Saylor URL: http://www.saylor.org/courses/bus206/ Attributed to David T. Bourgeois, Ph.D.



16 Information Systems for Business and Beyond Processing Data: The CPU

As stated above, most computing devices have a similar architecture. The core of this architecture is the central processing unit, or CPU. The CPU can be thought of as the “brains” of the device. The CPU carries out the commands sent to it by the software and returns results to be acted upon.

The earliest CPUs were large circuit boards with limited functionality. Today, a CPU is generally on one chip and can perform a large variety of functions. There are two primary manufacturers of CPUs for personal computers: Intel and Advanced Micro Devices (AMD).

The speed (“clock time”) of a CPU is measured in hertz. A hertz is defined as one cycle per second. Using the binary prefixes mentioned above, we can see that a kilohertz (abbreviated kHz) is one thousand cycles per second, a megahertz (mHz) is one million cycles per second, and a gigahertz (gHz) is one billion cycles per second. The CPU’s processing power is increasing at an amazing rate (see the sidebar about Moore’s Law). Besides a faster clock time, many CPU chips now contain multiple processors per chip. These chips, known as dual-core (two processors) or quad-core (four processors), increase the processing power of a computer by providing the capability of multiple CPUs.

Sidebar: Moore’s Law

We all know that computers get faster every year. Many times, we are not sure if we want to buy today’s model of smartphone, tablet, or PC because next week it won’t be the most advanced any more. Gordon Moore, one of the founders of Intel, recognized this phenomenon in 1965, noting that microprocessor

1 transistor counts had been doubling every year. His insight eventually evolved into Moore’s Law, which

states that the number of transistors on a chip will double every two years. This has been generalized into the concept that computing power will double every two years for the same price point. Another way of looking at this is to think that the price for the same computing power will be cut in half every two years. Though many have predicted its demise, Moore’s Law has held true for over forty years (see figure below).


1. Moore, Gordon E. (1965). "Cramming more components onto integrated circuits" (PDF). Electronics Magazine. p. 4. Retrieved 2012-10-18.

Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.



Ch.2: Hardware 17


A graphical representation of Moore’s Law (CC-BY-SA: Wgsimon)

There will be a point, someday, where we reach the limits of Moore’s Law, where we cannot continue to shrink circuits any further. But engineers will continue to seek ways to increase performance.

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Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.



18 Information Systems for Business and Beyond



Motherboard (click image to enlarge)

Random-Access Memory

The motherboard is the main circuit board on the computer. The CPU, memory, and storage components, among other things, all connect into the motherboard. Motherboards come in different shapes and sizes, depending upon how compact or expandable the computer is designed to be. Most modern motherboards have many integrated components, such as video and sound processing, which used to require separate components.

The motherboard provides much of the bus of the computer (the term bus refers to the electrical connection between different computer components). The bus is an important determiner of the computer’s speed: the combination of how fast the bus can transfer data and the number of data bits that can be moved at one time determine the speed.

When a computer starts up, it begins to load information from the hard disk into its working memory. This working memory, called random-access memory (RAM), can transfer data much faster than the hard disk. Any program that you are running on the computer is loaded into RAM for processing. In order for a computer to work effectively, some minimal amount of RAM must be installed. In most cases, adding more RAM will allow the computer to run faster. Another characteristic of RAM is that it is “volatile.” This means that it can store data as long as it is receiving power; when the computer is turned off, any data stored in RAM is lost.

RAM is generally installed in a personal computer through the use of a dual-inline memory module (DIMM). The type of DIMM accepted into a computer is dependent upon the motherboard. As described by Moore’s Law, the amount of memory and speeds of DIMMs have increased dramatically over the years.

Memory DIMM (click image to enlarge)


Hard Disk

While the RAM is used as working memory, the computer also needs a place to store data for the longer term. Most of today’s personal computers use a hard disk for long-term data storage. A hard disk is where data is stored when the computer is turned off and where it is retrieved from when the computer is turned on. Why is it called a hard disk? A hard disk consists of a stack of disks inside a hard metal case. A floppy disk (discussed below) was a removable disk that, in some cases at least, was flexible, or “floppy.”


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Hard disk enclosure (click image to enlarge)

Solid-State Drives

A relatively new component becoming more common in some personal computers is the solid-state drive (SSD). The SSD performs the same function as a hard disk: long-term storage. Instead of spinning disks, the SSD uses flash memory, which is much faster.

Solid-state drives are currently quite a bit more expensive than hard disks. However, the use of flash memory instead of disks makes them much lighter and faster than hard disks. SSDs are primarily utilized in portable computers, making them lighter and more efficient. Some computers combine the two storage technologies, using the SSD for the most accessed data (such as the operating system) while using the hard disk for data that is accessed less frequently. As with any technology, Moore’s Law is driving up capacity and speed and lowering prices of solid-state drives, which will allow them to proliferate in the years to come.

Removable Media

Besides fixed storage components, removable storage media are also used in most personal computers. Removable media allows you to take your data with you. And just as with all other digital technologies, these media have gotten smaller and more powerful as the years have gone by. Early computers used floppy disks, which could be inserted into a disk drive in the computer. Data was stored on a magnetic disk inside an enclosure. These disks ranged from 8′′ in the earliest days down to 3 1/2′′.

Floppy-disk evolution (8′′ to 5 1/4′′ to 3 1/2′′) (Public Domain)

Around the turn of the century, a new portable storage technology was being developed: the USB flash drive (more about the USB port later in the chapter). This device attaches to the universal serial bus (USB) connector, which became standard on all personal computers beginning in the late 1990s. As with all other storage media, flash drive storage capacity has skyrocketed over the years, from initial capacities of eight megabytes to current capacities of 64 gigabytes and still growing.

Network Connection

When personal computers were first developed, they were stand-alone units, which meant that data was brought into the computer or removed from the computer via removable media, such as the floppy disk. Beginning in the mid-1980s, however, organizations began to see the value in connecting computers together via a digital network. Because of this, personal computers needed the ability to connect to these networks. Initially, this was done by adding an expansion card to the computer that enabled the network connection, but by the mid-1990s, a network port was standard on most personal computers. As wireless

Ch.2: Hardware 19


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20 Information Systems for Business and Beyond

technologies began to dominate in the early 2000s, many personal computers also began including wireless networking capabilities. Digital communication technologies will be discussed further in chapter 5.

Input and Output

USB connector (click image to enlarge)

In order for a personal computer to be useful, it must have channels for receiving input from the user and channels for delivering output to the user. These input and output devices connect to the computer via various connection ports, which generally are part of the motherboard and are accessible outside the computer case. In early personal computers, specific ports were designed for each type of output device. The configuration of these ports has evolved over the years, becoming more and more standardized over time. Today, almost all


devices plug into a computer through the use of a USB port. This port type, first introduced in 1996, has increased in its capabilities, both in its data transfer rate and power supplied.


Besides USB, some input and output devices connect to the computer via a wireless-technology standard called Bluetooth. Bluetooth was first invented in the 1990s and exchanges data over short distances using radio waves. Bluetooth generally has a range of 100 to 150 feet. For devices to communicate via Bluetooth, both the personal computer and the connecting device must have a Bluetooth communication chip installed.

Input Devices

All personal computers need components that allow the user to input data. Early computers used simply a keyboard to allow the user to enter data or select an item from a menu to run a program. With the advent of the graphical user interface, the mouse became a standard component of a computer. These two components are still the primary input devices to a personal computer, though variations of each have been introduced with varying levels of success over the years. For example, many new devices now use a touch screen as the primary way of entering data.

Besides the keyboard and mouse, additional input devices are becoming more common. Scanners allow users to input documents into a computer, either as images or as text. Microphones can be used to record audio or give voice commands. Webcams and other types of video cameras can be used to record video or participate in a video chat session.

Output Devices

Output devices are essential as well. The most obvious output device is a display, visually representing the state of the computer. In some cases, a personal computer can support multiple displays or be connected to larger-format displays such as a projector or large-screen television. Besides displays, other output devices include speakers for audio output and printers for printed output.

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Sidebar: What Hardware Components Contribute to the Speed of My Computer?

The speed of a computer is determined by many elements, some related to hardware and some related to software. In hardware, speed is improved by giving the electrons shorter distances to traverse to complete a circuit. Since the first CPU was created in the early 1970s, engineers have constantly worked to figure out how to shrink these circuits and put more and more circuits onto the same chip. And this work has paid off – the speed of computing devices has been continuously improving ever since.

The hardware components that contribute to the speed of a personal computer are the CPU, the motherboard, RAM, and the hard disk. In most cases, these items can be replaced with newer, faster components. In the case of RAM, simply adding more RAM can also speed up the computer. The table below shows how each of these contributes to the speed of a computer. Besides upgrading hardware, there are many changes that can be made to the software of a computer to make it faster.

Ch.2: Hardware 21


Speed measured by




Clock speed


The time it takes to complete a circuit.


Bus speed


How much data can move across the bus simultaneously.


Data transfer rate


The time it takes for data to be transferred from memory to system.

Hard Disk

Access time


The time it takes before the disk can transfer data.

Data transfer rate


The time it takes for data to be transferred from disk to system.

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Other Computing Devices

A personal computer is designed to be a general-purpose device. That is, it can be used to solve many different types of problems. As the technologies of the personal computer have become more commonplace, many of the components have been integrated into other devices that previously were purely mechanical. We have also seen an evolution in what defines a computer. Ever since the invention of the personal computer, users have clamored for a way to carry them around. Here we will examine several types of devices that represent the latest trends in personal computing.

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22 Information Systems for Business and Beyond

Portable Computers


A modern laptop

In 1983, Compaq Computer Corporation developed the first commercially successful portable personal computer. By today’s standards, the Compaq PC was not very portable: weighing in at 28 pounds, this computer was portable only in the most literal sense – it could be carried around. But this was no laptop; the computer was designed like a suitcase, to be lugged around and laid on its side to be used. Besides portability, the Compaq was successful because it was fully compatible with the software being run by the IBM PC, which was the standard for business.

In the years that followed, portable computing continued to improve, giving us laptop and notebook computers. The “luggable” computer has given way to a much lighter clamshell computer that weighs from 4 to 6 pounds and runs on batteries. In fact, the most recent advances in technology give us a new class of laptop that is quickly becoming the standard: these laptops are extremely light and portable and use less power than their larger counterparts. The MacBook Air is a good example of this:

it weighs less than three pounds and is only 0.68 inches thick! Finally, as more and more organizations and individuals are moving much of their computing to the

Internet, laptops are being developed that use “the cloud” for all of their data and application storage. These laptops are also extremely light because they have no need of a hard disk at all! A good example of this type of laptop (sometimes called a netbook) is Samsung’s Chromebook.


The first modern-day mobile phone was invented in 1973. Resembling a brick and weighing in at two pounds, it was priced out of reach for most consumers at nearly four thousand dollars. Since then, mobile phones have become smaller and less expensive; today mobile phones are a modern convenience available to all levels of society. As mobile phones evolved, they became more like small computers. These smartphones have many of the same characteristics as a personal computer, such as an operating system and memory. The first smartphone was the IBM Simon, introduced in 1994.

In January of 2007, Apple introduced the iPhone. Its ease of use and intuitive interface made it an immediate success and solidified the future of smartphones. Running on an operating system called iOS, the iPhone was really a small computer with a touch-screen interface. In 2008, the first Android phone was released, with similar functionality.

Tablet Computers

A tablet computer is one that uses a touch screen as its primary input and is small enough and light enough to be carried around easily. They generally have no keyboard and are self-contained inside a rectangular case. The first tablet computers appeared in the early 2000s and used an attached pen as a writing device for input. These tablets ranged in size from small personal digital assistants (PDAs), which were handheld,

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to full-sized, 14-inch devices. Most early tablets used a version of an existing computer operating system, such as Windows or Linux.

These early tablet devices were, for the most part, commercial failures. In January, 2010, Apple introduced the iPad, which ushered in a new era of tablet computing. Instead of a pen, the iPad used the finger as the primary input device. Instead of using the operating system of their desktop and laptop computers, Apple chose to use iOS, the operating system of the iPhone. Because the iPad had a user interface that was the same as the iPhone, consumers felt comfortable and sales took off. The iPad has set the standard for tablet computing. After the success of the iPad, computer manufacturers began to develop new tablets that utilized operating systems that were designed for mobile devices, such as Android.

The Rise of Mobile Computing

Mobile computing is having a huge impact on the business world today. The use of smartphones and tablet computers is rising at double-digit rates each year. The Gartner Group, in a report issued in April, 2013, estimates that over 1.7 million mobile phones will ship in the US in 2013 as compared to just over 340,000

2 personal computers. Over half of these mobile phones are smartphones. Almost 200,000 tablet computers

are predicted to ship in 2013. According to the report, PC shipments will continue to decline as phone and


Along with advances in computers themselves, computing technology is being integrated into many everyday products. From automobiles to refrigerators to airplanes, computing technology is enhancing what these devices can do and is adding capabilities that would have been considered science fiction just a few years ago. Here are two of the latest ways that computing technologies are being integrated into everyday products:

· The Smart House

· The Self-Driving Car

The Commoditization of the Personal Computer

Over the past thirty years, as the personal computer has gone from technical marvel to part of our everyday lives, it has also become a commodity. The PC has become a commodity in the sense that there is very little differentiation between computers, and the primary factor that controls their sale is their price. Hundreds of manufacturers all over the world now create parts for personal computers. Dozens of companies buy these parts and assemble the computers. As commodities, there are essentially no differences between computers made by these different companies. Profit margins for personal computers are razor-thin, leading hardware developers to find the lowest-cost manufacturing.

There is one brand of computer for which this is not the case – Apple. Because Apple does not make computers that run on the same open standards as other manufacturers, they can make a unique product that no one can easily copy. By creating what many consider to be a superior product, Apple can charge more

2. Smartphone shipments to surpass feature phones this year. CNet, June 4, 2013. http://news.cnet.com/8301-1035_3-57587583-94/ smartphone-shipments-to-surpass-feature-phones-this-year/

tablet shipments continue to increase.

Integrated Computing

3. Gartner Press Release. April 4, 2013. http://www.gartner.com/newsroom/id/2408515

Saylor URL: http://www.saylor.org/courses/bus206 Attributed to: David T. Bourgeois, Ph.D.


Ch.2: Hardware 23


24 Information Systems for Business and Beyond

for their computers than other manufacturers. Just as with the iPad and iPhone, Apple has chosen a strategy of differentiation, which, at least at this time, seems to be paying off.

The Problem of Electronic Waste


Electronic waste (Public Domain)

Personal computers have been around for over thirty-five years. Millions of them have been used and discarded. Mobile phones are now available in even the remotest parts of the world and, after a few years of use, they are discarded. Where does this electronic debris end up?

Often, it gets routed to any country that will accept it. Many times, it ends up in dumps in developing nations. These dumps are beginning to be seen as health hazards for those living near them. Though many manufacturers have made strides in using materials that can be recycled, electronic waste is a problem with which we must all deal.


Information systems hardware consists of the components of digital technology that you can touch. In this chapter, we reviewed the components that make up a personal computer, with the understanding

that the configuration of a personal computer is very similar to that of any type of digital computing device. A personal computer is made up of many components, most importantly the CPU, motherboard, RAM, hard disk, removable media, and input/output devices. We also reviewed some variations on the personal computer, such as the tablet computer and the smartphone. In accordance with Moore’s Law, these technologies have improved quickly over the years, making today’s computing devices much more powerful than devices just a few years ago. Finally, we discussed two of the consequences of this evolution: the commoditization of the personal computer and the problem of electronic waste.

Assignment 2.

Study Questions

1. Write your own description of what the term information systems hardware means. 2. What is the impact of Moore’s Law on the various hardware components described in this chapter? 3. Write a summary of one of the items linked to in the “Integrated Computing” section. 4. Explain why the personal computer is now considered a commodity. 5. The CPU can also be thought of as the _____________ of the computer. 6. List the following in increasing order (slowest to fastest): megahertz, kilohertz, gigahertz.

7. What is the bus of a computer?

8. Name two differences between RAM and a hard disk. 9. What are the advantages of solid-state drives over hard disks? 10. How heavy was the first commercially successful portable computer?


2. Review the timeline of computers at the Old Computers website. Pick one computer from the listing and write a brief summary. Include the specifications for CPU, memory, and screen size. Now find the specifications of a computer being offered for sale today and compare. Did Moore’s Law hold true?


Chapter 2


The iT Dilemma

We have seen much discussion in recent writing about how informa- tion technology has become an increasingly significant component of corporate business strategy and organizational structure (Bradley & Nolan, 1998; Levine et al., 2000; Siebel, 1999). But, do we know about the ways in which this significance takes shape? Specifically, what are the perceptions and realities regarding the importance of technology from organization leaders, business managers, and core operations personnel? Furthermore, what forms of participation should IT assume within the rest of the organization?

The isolation of IT professionals within their companies often pre- vents them from becoming active participants in the organization. Technology personnel have long been criticized for their inability to function as part of the business and are often seen as a group falling outside business cultural norms (Schein, 1992). They are frequently stereotyped as “techies” and segregated into areas of the business where they become marginalized and isolated from the rest of the organization. It is my experience, based on case studies such as the one reviewed in Chapter 1 (the Ravell Corporation), that if an orga- nization wishes to absorb its IT department into its core culture, and if it wishes to do so successfully, the company as a whole must be pre- pared to consider structural changes and to seriously consider using organizational learning approaches.

The assimilation of technical people into an organization presents a special challenge in the development of true organizational learning practices (developed more fully in Chapter 3). This challenge stems from the historical separation of a special group that is seen as stand- ing outside the everyday concerns of the business. IT is generally acknowledged as having a key support function in the organization as a whole. However, empirical studies have shown that it is a challenging


22 InForMAtIon teChnoloGY

endeavor to successfully integrate IT personnel into the learning fold and to do so in such a way that they not only are accepted, but also understood to be an important part of the social and cultural struc- ture of the business (Allen & Morton, 1994; Cassidy, 1998; Langer, 2007; Schein, 1992; Yourdon, 1998).

In his book In Over Our Heads, Kegan (1994) discusses the chal- lenges of dealing with individual difference. IT personnel have been consistently regarded as “different” fixtures; as outsiders who do not quite fit easily into the mainstream organization. Perhaps, because of their technical practices, which may at times seem “foreign,” or because of perceived differences in their values, IT personnel can become marginalized; imagined as outside the core social structures of business. As in any social structure, marginalization can result in the withdrawal of the individual from the community (Schlossberg, 1989). As a result, many organizations are choosing to outsource their IT services rather than confront and address the issues of cultural absorption and organizational learning. The outsourcing alternative tends to further distance the IT function from the core organiza- tion, thus increasing the effects of marginalization. Not only does the outsourcing of IT personnel separate them further from their peers, but it also invariably robs the organization of a potentially important contributor to the social growth and organizational learning of the business. For example, technology personnel should be able to offer insight into how technology can support further growth and learning within the organization. In addition, IT personnel are usually trained to take a logical approach to problem solving; as a result, they should be able to offer a complementary focus on learning. Hence, the inte- gration of IT staff members into the larger business culture can offer significant benefits to an organization in terms of learning and orga- nizational growth.

Some organizations have attempted to improve communications between IT and non-IT personnel through the use of an intermedi- ary who can communicate easily with both groups. This intermediary is known in many organizations as the business analyst. Typically, the business analyst will take responsibility for the interface between IT and the larger business community. Although a business analyst may help facilitate communication between IT and non-IT personnel, this arrangement cannot help but carry the implication that different

the It dIleMMA 23

“languages” are spoken by these two groups and, by extension, that direct communication is not possible. Therefore, the use of such an intermediary suffers the danger of failing to promote integration between IT and the rest of the organization; in fact, it may serve to keep the two camps separate. True integration, in the form of direct contact between IT and non-IT personnel, represents a greater chal- lenge for an organization than this remedy would suggest.

Recent Background

Since the 1990s, IT has been seen as a kind of variable that possesses the great potential to reinvent business. Aspects of this promise affected many of the core business rules used by successful chief executives and business managers. While organizations have used IT for the process- ing of information, decision-support processing, and order processing, the impact of the Internet and e-commerce systems has initiated revolutionary responses in every business sector. This economic phe- nomenon became especially self-evident with the formation of dot-coms in the mid- and late 1990s. The advent of this phenomenon stressed the need to challenge fundamental business concepts. Many financial wizards surmised that new technologies were indeed changing the very infrastructure of business, affecting how businesses would operate and compete in the new millennium. Much of this hoopla seemed justified by the extraordinary potential that technology offered, particularly with respect to the revolutionizing of old-line marketing principles, for it was technology that came to violate what was previously thought to be protected market conditions and sectors. Technology came to reinvent these business markets and to allow new competitors to cross market in sectors they otherwise could not have entered.

With this new excitement also came fear—fear that fostered unnat- ural and accelerated entry into technology because any delay might sacrifice important new market opportunities. Violating some of their traditional principles, many firms invested in creating new organi- zations that would “incubate” and eventually, capture large market segments using the Internet as the delivery vehicle. By 2000, many of these dot-coms were in trouble, and it became clear that their notion of new business models based on the Internet contained significant flaws and shortfalls. As a result of this crisis, the role and valuation

24 InForMAtIon teChnoloGY

of IT is again going through a transformation and once more we are skeptical about the value IT can provide a business and about the way to measure the contributions of IT.

IT in the Organizational Context

Technology not only plays a significant role in workplace operations, but also continues to increase its relevance among other traditional components of any business, such as operations, accounting, and marketing (Earl, 1996b; Langer, 2001a; Schein, 1992). Given this increasing relevance, IT gains significance in relation to

1. The impact it bears on organizational structure

2. The role it can assume in business strategy

3. The ways in which it can be evaluated

4. The extent to which chief executives feel the need to manage

operational knowledge and thus to manage IT effectively

IT and Organizational Structure

Sampler’s (1996) research explores the relationship between IT and organizational structure. His study indicated that there is no clear-cut relationship that has been established between the two. However, he concluded that there are five principal positions that IT can take in this relationship:

1. IT can lead to centralization of organizational control.

2. Conversely, IT can lead to decentralization of organizational


3. IT can bear no impact on organizational control, its signifi-

cance being based on other factors.

4. Organizations and IT can interact in an unpredictable


5. IT can enable new organizational arrangements, such as net-

worked or virtual organizations.

According to Sampler (1996), the pursuit of explanatory models for the relationship between IT and organizational structure continues to be a challenge, especially since IT plays dual roles. On the one

the It dIleMMA 25

hand, it enhances and constrains the capabilities of workers within the organization, and because of this, it also possesses the ability to create a unique cultural component. While both roles are active, their impact on the organization cannot be predicted; instead, they evolve as unique social norms within the organization. Because IT has changed so dramatically over the past decades, it continues to be difficult to compare prior research on the relationship between IT and organizational structure.

Earl (1996a) studied the effects of applying business process reen- gineering (BPR) to organizations. BPR is a process that organizations undertake to determine how best to use technology, to improve busi- ness performance. Earl concludes that BPR is “an unfortunate title: it does not reflect the complex nature of either the distinctive underpin- ning concept of BPR [i.e., to reevaluate methods and rules of business operations] or the essential practical challenges to make it happen [i.e., the reality of how one goes about doing that]” (p. 54).

In my 2001 study of the Ravell Corporation (“Fixing Bad Habits,” Langer, 2001b), I found that BPR efforts require buy-in from business line managers, and that such efforts inevitably require the adaptation by individuals of different cultural norms and practices.

Schein (1992) recognizes that IT culture represents a subculture in collision with many others within an organization. He concludes that if organizations are to be successful in using new technologies in a global context, they must cope with ceaseless flows of information to ensure organizational health and effectiveness. His research indicates that chief executive officers (CEOs) have been reluctant to implement a new sys- tem of technology unless their organizations felt comfortable with it and were ready to use it. While many CEOs were aware of cost and effi- ciency implications in using IT, few were aware of the potential impact on organizational structure that could result from “adopting an IT view of their organizations” (p. 293). Such results suggest that CEOs need to be more active and more cognizant than they have been of potential shifts in organizational structure when adopting IT opportunities.

The Role of IT in Business Strategy

While many chief executives recognize the importance of IT in the day-to-day operations of their business, their experience with

26 InForMAtIon teChnoloGY

attempting to utilize IT as a strategic business tool, has been frustrat- ing. Typical executive complaints about IT, according to Bensaou and Earl (1998), fall into five problem areas:

1. A lack of correspondence between IT investments and busi- ness strategy

2. Inadequate payoff from IT investments

3. The perception of too much “technology for technology’s


4. Poor relations between IT specialists and users

5. The creation of system designs that fail to incorporate users’

preferences and work habits

McFarlan created a strategic grid (as presented in Applegate et al., 2003) designed to assess the impact of IT on operations and strategy. The grid shows that IT has maximum value when it affects both oper- ations and core business objectives. Based on McFarlan’s hypothesis, Applegate et al. established five key questions about IT that may be used by executives to guide strategic decision making:

1. Can IT be used to reengineer core value activities, and change the basis of competition?

2. Can IT change the nature of the relationship, and the balance of power, between buyers and sellers?

3. Can IT build or reduce barriers to entry?

4. Can IT increase or decrease switching costs?

5. Can IT add value to existing products and services, or create

new ones?

The research and analysis conducted by McFarlan and Applegate, respectively, suggest that when operational strategy and its results are maximized, IT is given its highest valuation as a tool that can transform the organization. It then receives the maximum focus from senior management and board members. However, Applegate et al. (2003) also focus on the risks of using technology. These risks increase when executives have a poor understanding of competitive dynamics, when they fail to understand the long-term implications of a strategic system that they have launched, or when they fail to account for the time, effort, and cost required to ensure user adop- tion, assimilation, and effective utilization. Applegate’s conclusion

the It dIleMMA 27

underscores the need for IT management to educate senior man- agement, so that the latter will understand the appropriate indi- cators for what can maximize or minimize their investments in technology.

Szulanski and Amin (2000) claim that while emerging technologies shrink the window in which any given strategy can be implemented, if the strategy is well thought out, it can remain viable. Mintzberg’s (1987) research suggests that it would be useful to think of strategy as an art, not a science. This perspective is especially true in situations of uncertainty. The rapidly changing pace of emerging technologies, we know, puts a strain on established approaches to strategy—that is to say, it becomes increasingly difficult to find comfortable implemen- tation of technological strategies in such times of fast-moving envi- ronments, requiring sophisticated organizational infrastructure and capabilities.

Ways of Evaluating IT

Firms have been challenged to find a way to best evaluate IT, particularly using traditional return on investment (ROI) approaches. Unfortunately, in this regard, many components of IT do not generate direct returns. Cost allocations based on overhead formulas (e.g., costs of IT as a percentage of revenues) are not applicable to most IT spend- ing needs. Lucas (1999) established nonmonetary methods for evalu- ating IT. His concept of conversion effectiveness places value on the ability of IT to complete its projects on time and within its budgets. This alone is a sufficient factor for providing ROI, assuming that the project was approved for valid business reasons. He called this overall process for evaluation the “garbage can” model. It allows organizations to present IT needs through a funneling pipeline of conversion effec- tiveness that filters out poor technology plans and that can determine which projects will render direct and indirect benefits to the organiza- tion. Indirect returns, according to Lucas, are those that do not pro- vide directly measurable monetary returns but do provide significant value that can be measured using his IT investment opportunities matrix. Utilizing statistical probabilities of returns, the opportunities matrix provides an effective tool for evaluating the impact of indirect returns.

28 InForMAtIon teChnoloGY

Executive Knowledge and Management of IT

While much literature and research have been produced on how IT needs to participate in and bring value to an organization, there has been relatively little analysis conducted on what non-IT chief execu- tives need to know about technology. Applegate et al. (2003) suggest that non-IT executives need to understand how to differentiate new technologies from older ones, and how to gauge the expected impact of these technologies on the businesses, in which the firm competes for market share. This is to say that technology can change the rela- tionship between customer and vendor, and thus, should be examined as a potential for providing competitive advantage. The authors state that non-IT business executives must become more comfortable with technology by actively participating in technology decisions rather than delegating them to others. They need to question experts as they would in the financial areas of their businesses. Lou Gerstner, former CEO of IBM, is a good example of a non-IT chief executive who acquired sufficient knowledge and understanding of a technology firm. He was then able to form a team of executives who better understood how to develop the products, services, and overall business strategy of the firm.

Allen and Percival (2000) also investigate the importance of non- IT executive knowledge and participation with IT: “If the firm lacks the necessary vision, insights, skills, or core competencies, it may be unwise to invest in the hottest [IT] growth market” (p. 295). The authors point out that success in using emerging technologies is dif- ferent from success in other traditional areas of business. They con- cluded that non-IT managers need to carefully consider expected synergies to determine whether an IT investment can be realized and, especially, whether it is efficient to earn cost of capital.

Recent studies have focused on four important components in the linking of technology and business: its relationship to organizational structure, its role in business strategy, the means of its evaluation, and the extent of non-IT executive knowledge in technology. The chal- lenge in determining the best organizational structure for IT is posed by the accelerating technological advances since the 1970s and by the difficulty in comparing organizational models to consistent business cases. Consequently, there is no single organizational structure that has been adopted by businesses.

the It dIleMMA 29

While most chief executives understand the importance of using technology as part of their business strategy, they express frustra- tion in determining how to effectively implement a technology-based strategic approach. This frustration results from difficulties in under- standing how IT investments relate to other strategic business issues, from difficulty in assessing payoff and performance of IT generally and from perceived poor relations between IT and other departments.

Because most IT projects do not render direct monetary returns, exec- utives find themselves challenged to understand technology investments. They have difficulty measuring value since traditional ROI formulas are not applicable. Thus, executives would do better to focus on valuing tech- nology investments by using methods that can determine payback based on a matrix of indirect returns, which do not always include monetary sources. There is a lack of research on the question of what general knowl- edge non-IT executives need to have to effectively manage the strategic use of technology within their firms. Non-IT chief executives are often not engaged in day-to-day IT activities, and they often delegate dealing with strategic technology issues to other managers. The remainder of this chapter examines the issues raised by the IT dilemma in its various guises especially as they become relevant to, and are confronted from, the top management or chief executive point of view.

IT: A View from the Top

To investigate further the critical issues facing IT, I conducted a study in which I personally interviewed over 40 chief executives in vari- ous industries, including finance/investment, publishing, insurance, wholesale/retail, and hotel management. Executives interviewed were either the CEO or president of their respective corporations. I canvassed a population of New York-based midsize corporations for this interview study. Midsize firms, in our case, comprise businesses of between 200 and 500 employees. Face-to-face interviews were conducted, to allow participants the opportunity to articulate their responses, in contrast to answering printed survey questions; execu- tives were therefore allowed to expand, and clarify, their responses to questions. An interview guide (see questions in Tables 2.1 through 2.3) was designed to raise issues relevant to the challenges of using technology, as reported in the recent research literature, and to


Table 2.1


InForMAtIon teChnoloGY

Perception and Role of IT

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1. How do you define the role and the mission of IT in your firm?

2. What impact has the Internet had on your business strategy?

3. Does the firm have its own internal software development activity? Do you develop your own in-house software or use software packages?

4. What is your opinion of outsourcing? Do you have the need to outsource technology? If so, how is this accomplished?

5. Do you use consultants to help formulate the role of IT? If yes, what specific roles do they play? If not, why?

6. Do you feel that IT will become more important to the strategy of the business? If yes, why?

7. How is the IT department viewed by other departments? Is the IT department liked, or is it marginalized?

8. Do you feel there is too much “hype” about the importance and role of technology?

9. Have the role and the uses of technology in the firm significantly changed over the last 5 years? If so, what are the salient changes?


Fifty-seven percent responded that their IT organizations were reactive and did not really have a mission. Twenty-eight percent had an IT mission that was market driven; that is, their IT departments were responsible for actively participating in marketing and strategic processes.

Twenty-eight percent felt the impact was insignificant, while 24% felt it was critical. The remaining 48% felt that the impact of the Internet was significant to daily transactions.

Seventy-six percent had an internal development organization. Eighty-one percent had internally developed software.

Sixty-two percent had outsourced certain aspects of their technology needs.

Sixty-two percent of the participants used consultants to assist them in formulating the role of IT.

Eighty-five percent felt that IT had recently become more important to the strategic planning of the business.

Twenty-nine percent felt that IT was still marginalized. Another 29% felt it was not very integrated. Thirty-eight percent felt IT was sufficiently integrated within the organization, but only one chief executive felt that IT was very integrated with the culture of his firm.

Fifty-three percent felt that there was no hype. However, 32% felt that there were levels of hype attributed to the role of technology; 10% felt it was “all hype.”

Fourteen percent felt little had changed, whereas 43% stated that there were moderate changes. Thirty-eight percent stated there was significant change.

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consider significant phenomena, that could affect changes in the uses of technology, such as the Internet. The interview discussions focused on three sections: (1) chief executive perception of the role of IT, (2) management and strategic issues, and (3) measuring IT performance and activities. The results of the interviews are summarized next.

Table 2.2 Management and Strategic Issues QUESTION


the It dIleMMA 31

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1. What is the most senior title held by someone in IT? Where does this person rank on the organization hierarchy?

2. Does IT management ultimately report to you?

3. How active are you in working with IT issues?

4. Do you discuss IT strategy with your peers from other firms?

5. Do IT issues get raised at board, marketing, and/or strategy meetings?

6. How critical is IT to the day-to-day business?

Sixty-six percent called the highest position chief information officer (CIO). Ten percent used managing director, while 24% used director as the highest title.

Fifty percent of IT leaders reported directly to the chief executive (CEO). The other half reported to either the chief financial officer (CFO) or the chief operating officer (COO).

Fifty-seven percent stated that they are very active—on a weekly basis. Thirty-eight percent were less active or inconsistently involved, usually stepping in when an issue becomes problematic.

Eighty-one percent did not communicate with peers at all. Only 10% actively engaged in peer-to-peer communication about IT strategy.

Eighty-six percent confirmed that IT issues were regularly discussed at board meetings. However, only 57% acknowledged IT discussion during marketing meetings, and only 38% confirmed like discussions at strategic sessions.

Eighty-two percent of the chief executives felt it was very significant or critical to the business.

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Table 2.3 Measuring IT Performance and Activities QUESTION

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1. Do you have any view of how IT should be measured and accounted for?

2. Are you satisfied with IT performance in the firm?

3. How do you budget IT costs? Is it based on a percentage of gross revenues?

4. To what extent do you perceive technology as a means of increasing marketing or productivity or both?

5. Are Internet/Web marketing activities part of the IT function?

ANALYSIS Sixty-two percent stated that they had a view on

measurement; however, there was significant

variation in how executives defined measurement. There was significant variation in IT satisfaction. Only

19% were very satisfied. Thirty-three percent were satisfied, another 33% were less satisfied, and 14% were dissatisfied.

Fifty-seven percent stated that they did not use gross revenues in their budgeting methodologies.

Seventy-one percent felt that technology was a significant means of increasing both marketing and productivity in their firms.

Only 24% stated that Internet/Web marketing efforts reported directly to the IT organization.

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32 InForMAtIon teChnoloGY

Section 1: Chief Executive Perception of the Role of IT

This section of the interview focuses on chief executive perceptions of the role of IT within the firm. For the first question, about the role and mission of IT, over half of the interviewees responded in ways that suggested their IT organizations were reactive, without a strate- gic mission. One executive admitted, “IT is not really defined. I guess its mission is to meet our strategic goals and increase profitability.” Another response betrays a narrowly construed understanding of its potential: “The mission is that things must work—zero tolerance for failure.” These two responses typify the vague and generalized percep- tion that IT “has no explicit mission” except to advance the important overall mission of the business itself. Little over a quarter of respon- dents could confirm a market-driven role for IT; that is, actively par- ticipating in marketing and strategic processes. Question 2, regarding the impact of the Internet on business strategy, drew mixed responses. Some of these revealed the deeply reflective challenges posed by the Internet: “I feel the Internet forces us to take a longer-term view and a sharper focus to our business.” Others emphasized its transformative potential: “The Internet is key to decentralization of our offices and business strategy.”

Questions 3 and 4 focused on the extent to which firms have their own software development staffs, whether they use internally developed or packaged software, and whether they outsource IT services. Control over internal development of systems and applications remained important to the majority of chief executives: “I do not like outsourcing—surrender control, and it’s hard to bring back.” Almost two-thirds of the partici- pants employed consultants to assist them in formulating the role of IT within their firms but not always without reservation: “Whenever we have a significant design issue we bring in consultants to help us—but not to do actual development work.” Only a few were downright skepti- cal: “I try to avoid consultants—what is their motivation?” The percep- tion of outsourcing is still low in midsize firms, as compared to the recent increase in IT outsourcing abroad. The lower use could be related to the initial costs and management overheads that are required to properly implement outsource operations in foreign countries.

A great majority of chief executives recognized some form of the strategic importance of IT to business planning: “More of our business

the It dIleMMA 33

is related to technology and therefore I believe IT is more important to strategic planning.” Still, this sense of importance remained some- what intuitive: “I cannot quantify how IT will become more strategic to the business planning—but I sense that job functions will be dra- matically altered.” In terms of how IT is viewed by other departments within the firm, responses were varied. A little over a third of respon- dents felt IT was reasonably integrated within the organization: “The IT department is vitally important—but rarely noticed.” The major- ity of respondents, however, recognized a need for greater integra- tion: “IT was marginalized—but it is changing. While IT drives the system—it needs to drive more of the business.” Some articulated clearly the perceived problems: “IT needs to be more proactive—they do not seem to have good interpersonal skills and do not understand corporate politics.” A few expressed a sense of misgiving (“IT people are strange—personality is an issue”) and even a sense of hopeless- ness: “People hate IT—particularly over the sensitivity of the data. IT sometimes is viewed as misfits and incompetent.”

Question eight asked participants whether they felt there was too much “hype” attributed to the importance of technology in business. Over half responded in the negative, although not without reserva- tion: “I do not think there is too much hype—but I am disappointed. I had hoped that technology at this point would have reduced paper, decreased cost—it just has not happened.” Others felt that there is indeed some degree of sensationalism: “I definitely think there is too much hype—everyone wants the latest and greatest.” Hype in many cases can be related to a function of evaluation, as in this exclama- tion: “The hype with IT relates more to when will we actually see the value!” The last question in this section asks whether the uses of technology within the firm had significantly changed over the last five years. A majority agreed that it had: “The role of IT has changed significantly in the last five years—we need to stay up-to-date because we want to carry the image that we are ‘on the ball’.” Many of these stressed the importance of informational flows: “I find the ‘I’ [infor- mation] part to be more and more important and the ‘T’ [technol- ogy] to be diminishing in importance.” Some actively downplayed the significance: “I believe in minimizing the amount of technology we use—people get carried away.”

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Section 2: Management and Strategic Issues

This section focuses on questions pertaining to executive and man- agement organizational concerns. The first and second questions asked executives about the most senior title held by an IT officer and about the reporting structure for IT. Two-thirds of the par- ticipants ranked their top IT officer as a chief information officer (CIO). In terms of organizational hierarchy, half of the IT leaders were at the second tier, reporting directly to the CEO or presi- dent, while the other half were at the third tier, reporting either to the chief financial officer (CFO) or to the chief operating offi- cer (COO). As one CEO stated, “Most of my activity with IT is through the COO. We have a monthly meeting, and IT is always on the agenda.”

The third question asked executives to consider their level of involvement with IT matters. Over half claimed a highly active rela- tionship, engaging on a weekly basis: “I like to have IT people close and in one-on-one interactions. It is not good to have artificial barri- ers.” For some, levels of involvement may be limited: “I am active with IT issues in the sense of setting goals.” A third of participants claimed less activity, usually becoming active when difficulties arose. Question four asked whether executives spoke to their peers at other firms about technology issues. A high majority managed to skip this potential for communication with their peers. Only one in 10 actively pursued this matter of engagement.

Question 5 asked about the extent to which IT issues were discussed at board meetings, marketing meetings, and business strategy sessions. Here, a great majority confirmed that there was regular discussion regarding IT concerns, especially at board meet- ings. A smaller majority attested to IT discussions during market- ing meetings. Over a third reported that IT issues maintained a presence at strategic sessions. The higher incidence at board meet- ings may still be attributable to the effects of Year 2000 (Y2K) preparations. The final question in this section concerned the level of criticality for IT in the day-to-day operations of the business. A high majority of executives responded affirmatively in this regard: “IT is critical to our survival, and its impact on economies of scale is significant.”

the It dIleMMA 35 Section 3: Measuring IT Performance and Activities

This section is concerned with how chief executives measured IT per- formance and activities within their firms. The first question of this section asked whether executives had a view about how IT performance should be measured. Almost two-thirds affirmed having some formal or informal way of measuring performance: “We have no formal pro- cess of measuring IT other than predefined goals, cost constraints, and deadlines.” Their responses demonstrated great variation, sometimes leaning on cynicism: “I measure IT by the number of complaints I get.” Many were still grappling with this challenge: “Measuring IT is unqualified at this time. I have learned that hours worked is not the way to measure IT—it needs to be more goal-oriented.” Most chief execu- tives expressed some degree of quandary: “We do not feel we know enough about how IT should be measured.” Question two asked execu- tives to rate their satisfaction with IT performance. Here, also, there was significant variation. A little more than half expressed some degree of satisfaction: “Since 9/11 IT has gained a lot of credibility because of the support that was needed during a difficult time.” Slightly fewer than half revealed a degree of dissatisfaction: “We had to overhaul our IT department to make it more customer-service oriented.”

Question three concerned budgeting; that is, whether or not chief executives budgeted IT costs as a percentage of gross revenues. Over half denied using gross revenues in their budgeting method: “When handling IT projects we look at it on a request-by-request basis.”

The last two questions asked chief executives to assess the impact of technology on marketing and productivity. Almost three quarters of the participants felt that technology represented a significant means of enhancing both marketing and productivity. Some maintained a cer- tainty of objective: “We try to get IT closer to the customer—having them understand the business better.” Still, many had a less-defined sense of direction: “I have a fear of being left behind, so I do think IT will become more important to the business.” And others remained caught in uncertainty: “I do not fully understand how to use technol- ogy in marketing—but I believe it’s there.” Chief executive certainty, in this matter, also found expression in the opposite direction: “IT will become less important—it will be assumed as a capability and a service that companies provide to their customers.” Of the Internet/

36 InForMAtIon teChnoloGY

Web marketing initiatives, only one quarter of these reported directly to the IT organization: “IT does not drive the Web activities because they do not understand the business.” Often, these two were seen as separate or competing entities of technology: “Having Web develop- ment report to IT would hinder the Internet business’s growth poten- tial.” Yet, some might be willing to explore a synergistic potential: “We are still in the early stages of understanding how the Internet relates to our business strategy and how it will affect our product line.”

General Results

Section 1 revealed that the matter of defining a mission for the IT organization remains as unresolved as finding a way to reckon with the potential impact of IT on business strategy. Executives still seemed to be at a loss on the question of how to integrate IT into the workplace—a human resource as well as a strategic issue. There was uncertainty regard- ing the dependability of the technology information received. Most agreed, however, in their need for software development departments to support their internally developed software, in their need to outsource certain parts of technology, and in their use of outside consultants to help them formulate the future activities of their IT departments.

Section 2 showed that while the amount of time that executives spent on IT issues varied, there was a positive correlation between a structure in which IT managers reported directly to the chief executive and the degree of activity that executives stated they had with IT matters. Section 3 showed that chief executives understood the potential value that technol- ogy can bring to the marketing and productivity of their firms. They did not believe, however, that technology can go unmeasured; there needs to be some rationale for allotting a spending figure in the budget. For most of the firms in this study, the use of the Internet as a technological vehicle for future business was not determined by IT. This suggests that IT does not manage the marketing aspects of technology, and that it has not achieved significant integration in strategic planning.

Defining the IT Dilemma

The variations found in this study in terms of where IT reports, how it is measured, and how its mission is defined were consistent with

the It dIleMMA 37

existing research. But, the wide-ranging inconsistencies and uncer- tainties among executives described here left many of them wonder- ing whether they should be using IT as part of their business strategy and operations. While this quandary does not in itself suggest an inadequacy, it does point to an absence of a “best practices” guideline for using technology strategically. Hence, most businesses lacked a clear plan on how to evolve IT contributions toward business develop- ment. Although a majority of respondents felt that IT was critical to the survival of their businesses, the degree of IT assimilation within the core culture of organizations still varied. This suggests that the effects of cultural assimilation lag behind the actual involvement of IT in the strategic direction of the company.

While Sampler (1996) attributes many operational inconsistencies to the changing landscape of technology, the findings of this study suggest that there is also a lack in professional procedures, rules, and established governance, that could support the creation of best practices for the profession. Bensaou and Earl (1998), on the one hand, have addressed this concern by taking a pro-Japanese perspective in extrapolating from five “Western” problems five “general” principles, presumably not cul- ture bound, and thence a set of “best principles” for managing IT. But, Earl et al. (1995), on the other hand, have sidestepped any attempt to incorporate Earl’s own inductive approach discussed here; instead, they favor a market management approach, based on a supply-and-demand model to “balance” IT management. Of course, best practices already embody the implicit notion of best principles; however, the problems confronting executives—the need for practical guidelines—remain. For instance, this study shows that IT performance is measured in many different ways. It is this type of practical inconsistency that leaves chief executives with the difficult challenge of understanding how technol- ogy decisions can be managed.

On a follow-up call related to this study, for example, a CEO informed me of a practical yet significant difference she had instituted since our interview. She stated:

The change in reporting has allowed IT to become part of the main- stream vision of the business. It now is a fundamental component of all discussions with human resources, sales and marketing, and accounting. The change in reporting has allowed for the creation of a critical system,

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which has generated significant direct revenues for the business. I attri- bute this to my decision to move the reporting of technology directly to me and to my active participation in the uses of technology in our business.

This is an example of an executive whom Schein (1994) would call a “change agent”—someone who employs “cognitive redefinition through scanning,” in this case to elicit the strategic potential of IT. We might also call this activity reflective thinking (Langer, 2001b). Schein’s change agents, however, go on to “acknowledge that future generations of CEOs will have been educated much more thoroughly in the possibilities of the computer and IT, thus enabling them to take a hands-on adopter stance” (p. 343). This insight implies a distanc- ing (“future”) of present learning responsibilities among current chief executives. The nearer future of this insight may instead be seen in the development of organizational learning.* These are two areas of contemporary research that begin to offer useful models in the pursuit of a best practices approach to the understanding and managing of IT.

If the focus of this latter study was geared toward the evaluation of IT based on the view of the chief executive, it was, indeed, because their views necessarily shape the very direction for the organizations that they manage. Subsequent chapters of this book examine how the various dilemmas surrounding IT that I have discussed here are affecting organizations and how organizational learning practices can help answer many of the issues of today as raised by executives, man- agers, and operations personnel.

Recent Developments in Operational Excellence

The decline in financial markets in 2009, and the continued increase in mergers and acquisitions due to global competition have created an interesting opportunity for IT that reinforces the need for integration via organizational learning. During difficult economic periods, IT has traditionally been viewed as a cost center and had its operations

* My case study “Fixing Bad Habits” (Langer, 2001b) has shown that integrating the practices of reflective thinking, to support the development of organizational learning, has greatly enhanced the adaptation of new technologies, their strategic valuation to the firm, and their assimilation into the social norms of the business.


the It dIleMMA 39

reduced (I discuss this further in Chapter 3, in which I introduce the concept of drivers and supporters). However, with the growth in the role of technology, IT management has now been asked to help improve efficiency through the use of technology across departments. That is, IT is emerging as an agent for business transformation in a much stronger capacity than ever before. This phenomenon has placed tremendous pressure on the technology executive to align with his or her fellow executives in other departments and to get them to partici- pate in cost reductions by implementing more technology. Naturally, using technology to facilitate cuts to the workforce is often unpopular, and there has been much bitter fallout from such cross-department reductions. Technology executives thus face the challenge of position- ing themselves as the agents of a necessary change. However, opera- tional excellence is broader than just cutting costs and changing the way things operate; it is about doing things efficiently and with qual- ity measures across corporate operations. Now that technology affects every aspect of operations, it makes sense to charge technology execu- tives with a major responsibility to get it accomplished.

The assimilation of technology as a core part of the entire orga- nization is now paramount for survival, and the technology execu- tive of today and certainly tomorrow will be one who understands that operational excellence through efficiency must be accomplished by educating business units in self-managing the process. The IT executive, then, supports the activity as a leader, not as a cost cut- ter who invades the business. The two approaches are very different, and adopting the former can result in significant long-term results in strategic alignment.

My interviews with CEOs supported this notion: The CEO does not want to be the negotiator; change must be evolutionary within the business units themselves. While taking this kind of role in organiza- tional change presents a new dilemma for IT, it can also be an oppor- tunity for IT to position itself successfully within the organization.

Assignment 3.

– Note why the IT organizational structure is an important concept to understand.  Also, note the role of IT in the overall business strategy. from 

(Information Technology and Organizational Learning Textbook)  - 

This submission should be two pages in length and adhere to APA formatting standards.

**Remember the APA cover page and the references (if required) do not count towards the page length**