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Information Technology for Management

On-Demand Strategies for Performance, Growth and Sustainability

Eleventh Edition

Eleventh Edition

Information Technology for Management

On-Demand Strategies for Performance, Growth and Sustainability

EFRAIM TURBAN

CAROL POLLARD Appalachian State University

GREGORY WOOD Canisius College

VP AND EDITORIAL DIRECTOR Mike McDonald EXECUTIVE EDITOR Lise Johnson EDITORIAL ASSISTANT Ethan Lipson EDITORIAL MANAGER Judy Howarth CONTENT MANAGEMENT DIRECTOR Lisa Wojcik CONTENT MANAGER Nichole Urban SENIOR CONTENT SPECIALIST Nicole Repasky PRODUCTION EDITOR Loganathan Kandan PHOTO RESEARCHER Billy Ray COVER PHOTO CREDIT © Ditty_about_summer/Shutterstock

This book was set in 9.5/12.5 pt Source Sans Pro by SPi Global and printed and bound by Strategic Content Imaging.

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ISBN: 978-1-118-89079-0 (PBK) ISBN: 978-1-119-39783-0 (EVALC)

Library of Congress Cataloging in Publication Data:

Names: Turban, Efraim, author. | Pollard, Carol (Carol E.), author. | Wood, Gregory R., author. Title: Information technology for management : on-demand strategies for performance, growth and sustainability / Efraim Turban, Carol Pollard, Gregory R. Wood. Description: 11th edition. | Hoboken, NJ : John Wiley & Sons, 2018. | Includes bibliographical references and index. | Identifiers: LCCN 2017037711 (print) | LCCN 2017046158 (ebook) | ISBN 9781118890868 (epub) | ISBN 9781119172390 (pdf) | ISBN 9781118890790 (pbk.) Subjects: LCSH: Management information systems. Classification: LCC T58.6 (ebook) | LCC T58.6 .T765 2017 (print) | DDC 658.4/038011—dc23 LC record available at https://lccn.loc.gov/2017037711

The inside back cover will contain printing identification and country of origin if omitted from this page. In addition, if the ISBN on the back cover differs from the ISBN on this page, the one on the back cover is correct.

v

Brief Contents

PREFACE xiii ACKNOWLEDGMENTS xviii

PART 1 Reshaping Enterprises and Consumers in the On-Demand Economy

1 Disruptive IT Impacts Companies, Competition, and Careers 1

2 Information Systems, IT Architecture, Data Governance, and Cloud Computing 25

3 Data Management, Data Analytics, and Business Intelligence 65

4 Networks, Collaborative Technology, and the Internet of Things 101

5 Cybersecurity and Risk Management Technology 127

PART 2 Winning, Engaging, and Retaining Consumers for Growth

6 Search, Semantic, and Recommendation Technology 165

7 Web 2.0 and Social Technology 199

8 Retail, E-commerce, and Mobile Commerce Technology 240

PART 3 Optimizing Performance, Processes, and Productivity

9 Functional Business Systems 269

10 Enterprise Systems 300

11 Data Visualization and Geographic Information Systems 331

PART 4 Managing Business Relationships, Projects, and Ethical Responsibilities

12 IT Strategy, Sourcing, and Strategic Technology Trends 354

13 Systems Development and Project Management 385

14 IT Ethics, Privacy, and Sustainability 417

GLOSSARY 443 ORGANIZATION INDEX 448 NAME INDEX 450 SUBJECT INDEX 451

vi

PREFACE xiii ACKNOWLEDGMENTS xviii

PART 1 Reshaping Enterprises and Consumers in the On-Demand Economy

1 Disruptive IT Impacts Companies, Competition, and Careers 1

Case 1.1 Opening Case: Uber and Airbnb Revolutionize Business Models in the On-Demand Economy 3

1.1 Doing Business in the On-Demand Economy 4 Growth of the On-Demand Economy 5 Digital Business Models 6 IT’s Role in the On-Demand Economy 7 IT Business Objectives 8

1.2 Business Process Improvement and Competitive Advantage 8 What Is a Business Process? 9 Improving Business Processes 9 Don’t Automate, Obliterate! 10 Gaining a Competitive Advantage 11 Software Support for BPM 13

1.3 IT Innovation and Disruption 13 Social–Mobile–Analytics–Cloud (SMAC) Model 13 Technology Mega Trends 14 Lessons Learned from Companies Using Disruptive Technologies 16

1.4 IT and You 17 On-Demand Workers 17 IT Adds Value to Your Performance and Career 19 Becoming an Informed IT User 21

Case 1.2 Business Case: The Internet of Things Comes to the NFL 23

Case 1.3 Video Case: Knowing More and Doing More 24

2 Information Systems, IT Architecture, Data Governance, and Cloud Computing 25

Case 2.1 Opening Case: Detoxing Location-Based Advertising Data at MEDIATA 27

2.1 IS Concepts and Classification 28

Components of an IS 29 Data, Information, Knowledge, and Wisdom 30 Types of ISs 31 Transaction Processing System (TPS) 32 Management Information System (MIS) 33 Decision Support System (DSS) 34 Executive Information System (EIS) 35 ISS Exist within Corporate Culture 36

2.2 IT Infrastructure, IT Architecture, and Enterprise Architecture 37 EA Helps to Maintain Sustainability 38 Developing an Enterprise Architecture (EA) 41

2.3 Information Management and Data Governance 42 Information Management Harnesses Scattered Data 43 Reasons for Information Deficiencies 43 Factors Driving the Shift from Silos to Sharing and Collaboration 45 Business Benefits of Information Management 45 Data Governance: Maintaining Data Quality and Cost Control 46

2.4 Data Centers and Cloud Computing 48 Data Centers 48 Integrating Data to Combat Data Chaos 50 Cloud Computing 52 Selecting a Cloud Vendor 52 Cloud Infrastructure 54 Issues in Moving Workloads from the Enterprise to the Cloud 54

2.5 Cloud Services and Virtualization 55 Anything as a Service (XAAS) Models 55 Going Cloud 58 Virtualization and Virtual Machines 58

Case 2.2 Business Case: Data Chaos Creates Risk 62 Case 2.3 Video Case: Cloud Computing at Coca-Cola Is

Changing Everything 63

3 Data Management, Data Analytics, and Business Intelligence 65

Case 3.1 Opening Case: Coca-Cola Strategically Manages Data to Retain Customers and Reduce Costs 66

3.1 Data Management and Database Technologies 69 Database Management Systems and SQL 69 DBMS and Data Warehousing Vendors Respond to Latest Data Demands 72

Contents

CONTENTS vii

3.2 Centralized and Distributed Database Architectures 73 Garbage In, Garbage Out 75 Data Ownership and Organizational Politics 76 Data Life Cycle and Data Principles 77 Master Data and Master Data Management 78

3.3 Data Warehouses 79 Procedures to Prepare EDW Data for Analytics 80 Building a Data Warehouse 80 Real-Time Support from an Active Data Warehouse 81

3.4 Big Data Analytics and Data Discovery 83 Human Expertise and Judgment are Needed 85 Data and Text Mining 88 Creating Business Value 88 Text Analytics Procedure 90 Analytics Vendor Rankings 90

3.5 Business Intelligence and Electronic Records Management 91 Business Benefits of BI 92 Common Challenges: Data Selection and Quality 92 Aligning BI Strategy with Business Strategy 92 BI Architecture and Analytics 93 Electronic Records Management 94 Legal Duty to Retain Business Records 94 ERM Best Practices 94 ERM Benefits 95 ERM for Disaster Recovery, Business Continuity, and Compliance 95

Case 3.2 Business Case: Big Data Analytics is the “Secret Sauce” for Revitalizing McDonald’s 98

Case 3.3 Video Case: Verizon Improves Its Customer Experience with Data Driven Decision-Making 99

4 Networks, Collaborative Technology, and the Internet of Things 101

Case 4.1 Opening Case: Sony Builds an IPv6 Network to Fortify Competitive Edge 102

4.1 Network Fundamentals 104 Network Types 104 Intranets, Extranets, and Virtual Private Networks 105 Network Terminology 105 Functions Supported by Business Networks 106 Quality of Service 107

4.2 Internet Protocols (IP), APIs, and Network Capabilities 109

Comparing 3G, 4G, 4G LTE, and 5G Network Standards 110 Circuit versus Packet Switching 111 Application Program Interfaces and Operating Systems 111

4.3 Mobile Networks and Near-Field Communication 113 Increase in Mobile Network Traffic and Users 114 Higher Demand for High-Capacity Mobile Networks 115 Mobile Infrastructure 115 Two Components of Wireless Infrastructure 116 Business Use of Near-Field Communication 117 Choosing Mobile Network Solutions 118

4.4 Collaborative Technologies and the Internet of Things 119 Virtual Collaboration 120 Group Work and Decision Processes 120 The Internet of Things (IoT) 121 IoT Sensors, Smart Meters, and the Smart Grid 121

Case 4.2 Business Case: Google Maps API for Business 125

Case 4.3 Video Case: Small Island Telecom Company Goes Global 126

5 Cybersecurity and Risk Management Technology 127

Case 5.1 Opening Case: Yahoo Wins the Gold and Silver Medal for the Worst Hacks in History! 129

5.1 The Face and Future of Cyberthreats 130 Intentional Threats 132 Unintentional Threats 132 Hacking 133 Cyber Social Engineering and Other Related Web-Based Threats 134 Denial-of-Service 137 Insider and Privilege Misuse 137 Physical Theft or Loss 138 Miscellaneous Errors 138 New Attack Vectors 138

5.2 Cyberattack Targets and Consequences 139 “High-Profile” and “Under-the-Radar” Attacks 139 Critical Infrastructure Attacks 140 Theft of Intellectual Property 141 Identity Theft 142 Bring Your Own Device 142 Social Media Attacks 144

5.3 Cyber Risk Management 146 IT Defenses 146 Business Continuity Planning 149 Government Regulations 149

vii i CONTENTS

5.4 Defending Against Fraud 150 Occupational Fraud Prevention and Detection 151 General Controls 152 Internal Controls 153 Cyber Defense Strategies 153 Auditing Information Systems 155

5.5 Frameworks, Standards, and Models 155 Risk Management and IT Governance Frameworks 155 Industry Standards 157 IT Security Defense-In-Depth Model 157

Case 5.2 Business Case: Lax Security at LinkedIn Exposed 161

Case 5.3 Video Case: Botnets, Malware Security, and Capturing Cybercriminals 163

PART 2 Winning, Engaging, and Retaining Consumers for Growth

6 Search, Semantic, and Recommendation Technology 165

Case 6.1 Opening Case: Mint.com Uses Search Technology to Rank Above Established Competitors 166

6.1 Using Search Technology for Business Success 168 How Search Engines Work 168 Web Directories 168 How Crawler Search Engines Work 169 Why Search Is Important for Business 172

6.2 Organic Search and Search Engine Optimization 178 Strategies for Search Engine Optimization 178 Content and Inbound Marketing 180 Black Hat versus White Hat SEO: Ethical Issues in Search Engine Optimization 181

6.3 Pay-Per-Click and Paid Search Strategies 182 Creating a PPC Advertising Campaign 182 Metrics for Paid Search Advertising 184

6.4 A Search for Meaning—Semantic Technology 184 What Is the Semantic Web? 185 The Language(s) of Web 3.0 185 Semantic Web and Semantic Search 186 Semantic Web for Business 187

6.5 Recommendation Engines 188 Recommendation Filters 189

Case 6.2 Business Case: Deciding What to Watch—Video Recommendations at Netflix 195

Case 6.3 Video Case: Power Searching with Google 196

7 Web 2.0 and Social Technology 199

Case 7.1 Opening Case: Social Customer Service Takes Off at KLM 200

7.1 Web 2.0—The Social Web 201 The Constantly Changing Web 201 Invention of the World Wide Web 202 A Platform for Services and Social Interaction 202 Emergence of Social Applications, Networks, and Services 203 Why Managers Should Understand Web Technology 205 Communicating on the Web 206 Social Media Applications and Services 207 Social Media Is More than Facebook, YouTube, and Twitter 207 With Web 2.0, Markets are Conversations 209

7.2 Social Networking Services and Communities 210 The Power of the Crowd 212 Crowdfunding 212 Social Networking Services 213 Facebook Dominates Social Networking 214 Google Takes on Facebook with G+ 216 Be in the Now with Snapchat 217 And Now for Something Different: Second Life 218 Private Social Networks 219 Future of Social Networking Systems 220

7.3 Engaging Consumers with Blogs and Microblogs 220 What Is the Purpose of a Blog? 220 Blogging and Public Relations 222 Reading and Subscribing to Blogs 222 Blogging Platforms 222 Microblogs 223 Twitter 223 Tumblr Blogs 225

7.4 Mashups, Social Metrics, and Monitoring Tools 226 What Makes a Mashup Social 226 RSS Technology 227 Social Monitoring Services 227

7.5 Enterprise 2.0: Workplace Collaboration and Knowledge Sharing 229 Tools for Meetings and Discussions 230 Social Tools for Information Retrieval and Knowledge Sharing 230 Social Bookmarking Tools 231 Content Creation and Sharing 232

Case 7.2 Business Case: Facebook Helps Songkick Rock the Ticket Sales Industry 236

Case 7.3 Business Case: AT&T’s “It Can Wait” Campaign against Distracted Driving 237

CONTENTS ix

8 Retail, E-commerce, and Mobile Commerce Technology 240

Case 8.1 Opening Case: Macy’s Races Ahead with Mobile Retail Strategies 241

8.1 Retailing Technology 243 Keeping Up with Consumer Demands and Behavior 243 The Omni-Channel Retailing Concept 244

8.2 Business-to-Consumer (B2C) E-commerce 246 Online Banking 246 International and Multiple-Currency Banking 246 Online Recruiting 246 Issues in Online Retailing 250 Online Business and Marketing Planning 250

8.3 Business-to-Business (B2B) E-commerce and E-procurement 251 Sell-Side Marketplaces 251 E-Sourcing 252 E-Procurement 252 Electronic Data Interchange (EDI) Systems 253 Public and Private Exchanges 253

8.4 Mobile Commerce 253 Information: Competitive Advantage in Mobile Commerce 255 Mobile Entertainment 258 Hotel Services and Travel Go Wireless 259 Mobile Social Networking 259

8.5 Mobile Transactions and Financial Services 260 Mobile Payment Systems 260 Mobile Banking and Financial Services 262 Short Codes 263 Security Issues 263

Case 8.2 Business Case: Chegg’s Mobile Strategy 266 Case 8.3 Video Case: Searching with Pictures

Using MVS 267

PART 3 Optimizing Performance, Processes, and Productivity

9 Functional Business Systems 269 Case 9.1 Opening Case: Ducati Redesigns Its

Operations 271 9.1 Business Management Systems and Functional

Business Systems 272 Business Management Systems (BMSs) 273 Management Levels 273 Business Functions vs. Cross-Functional Business Processes 274 Transaction Processing Systems 275

9.2 Production and Operations Management Systems 277 Transportation Management Systems 278 Logistics Management 278 Inventory Control Systems 279 Computer-Integrated Manufacturing and Manufacturing Execution Systems 281

9.3 Sales and Marketing Systems 282 Data-Driven Marketing 284 Sales and Distribution Channels 284 Social Media Customer Service 284 Marketing Management 285

9.4 Accounting, Finance, and Regulatory Systems 286 Financial Disclosure: Reporting and Compliance 286 Fraud Prevention and Detection 289 Auditing Information Systems 291 Financial Planning and Budgeting 291

9.5 Human Resource Systems, Compliance, and Ethics 293 HR Information Systems 293 Management and Employee Development 295 HR Planning, Control, and Management 295

Case 9.2 Business Case: HSBC Combats Fraud in Split- second Decisions 297

Case 9.3 Video Case: United Rentals Optimizes Its Workforce with Human Capital Management 298

10 Enterprise Systems 300 Case 10.1 Opening Case: 3D Printing Drives the “Always-

On” Supply Chain 301 10.1 Enterprise Systems 303

Implementation Challenges of Enterprise Systems 305 Investing in Enterprise Systems 305 Implementation of Best Practices 306 Enterprise Systems Insights 307

10.2 Enterprise Resource Planning (ERP) 307 Brief History of ERP 308 Technology Perspective 308 Achieving ERP Success 311

10.3 Supply Chain Management Systems 313 Managing the Flow of Materials, Data, and Money 315 Order Fulfillment and Logistics 315 Steps in the Order Fulfillment Process 315 Innovations Driving Supply Chain Strategic Priorities 316

10.4 Customer Relationship Management Systems 319 How are CRM Apps Different from ERP? Why are they Different? 319 CRM Technology Perspective 320

x CONTENTS

Customer Acquisition and Retention 320 CRM for a Competitive Edge 320 Common CRM Mistakes: How to Avoid Them 321 Justifying CRM 322

10.5 Enterprise Social Platforms 323 Growth of Enterprise Social Investments and Markets 323 Sharepoint 324 Oracle’s Social Network 326 Jive 326 Chatter 326

Case 10.2 Business Case: Lowe’s Fresh Approach to Supply Chain Management 328

Case 10.3 Video Case: Procter & Gamble: Creating Conversations in the Cloud with 4.8 Billion Consumers 329

11 Data Visualization and Geographic Information Systems 331

Case 11.1 Opening Case: Safeway and PepsiCo Collaborate to Reduce Stock Outages using Data Visualization 332

11.1 Data Visualization and Learning 334 Learning, Exploration, and Discovery with Visualization 336 Data Discovery Market Separates from the BI Market 336 How Is Data Visualization Used in Business? 340 Data Visualization Tools 341

11.2 Enterprise Data Mashups 342 Mashup Architecture 343 Why Do Business Users Need Data Mashup Technology? 344 Enterprise Mashup Technology 344

11.3 Digital Dashboards 345 Dashboards are Real Time 347 How Operational and Strategic Dashboards Work 348 Benefits of Digital Dashboards 348

11.4 Geographic Information Systems and Geospatial Data 349 Geocoding 350 GIS Is Not Your Grandfather’s Map 350 Infrastructure and Location-Aware Collection of Geospatial Data 350 Applying GIS in Business 351

Case 11.2 Visualization Case: Are You Ready for Football? 353

Case 11.3 Video Case: The Beauty of Data Visualization—Data Detective 353

PART 4 Managing Business Relationships, Projects, and Ethical Responsibilities

12 IT Strategy, Sourcing, and Strategic Technology Trends 354

Case 12.1 Opening Case: Intel Reaps Rewards from Sustainable IT Strategy 355

12.1 IT Strategic Planning 357 Value Drivers 358 IT Strategic Plan Objectives 358 IT and Business Disconnects 359 Corporate and IT Governance 359 Reactive Approach to IT Investments Will Fail 359 IT Strategic Planning Process 359

12.2 Aligning IT with Business Objectives 362 Achieving and Sustaining a Competitive Advantage 364

12.3 IT Sourcing Strategies 367 Sourcing and Cloud Services 368 Factors Driving Outsourcing 369 Outsourcing Risks and Hidden Costs 370 Offshoring 370 Outsourcing Life Cycle 371 Managing IT Vendor Relationships 373 Contracts: Get Everything in Writing 373

12.4 Balanced Scorecard 374 The Balanced Scorecard 374 Using the Balance Scorecard 375 Applying the BSC 377

12.5 Strategic Technology Trends 378 Strategic Technology Scanning 380 Finding Strategic Technologies 380

Case 12.2 Business Case: Cisco IT Improves Strategic Vendor Management 382

Case 12.3 Data Analysis: Third-Party versus Company- Owned Offshoring 383

13 Systems Development and Project Management 385

Case 13.1 Opening Case: Denver International Airport Learns from Mistakes Made in Failed Baggage- Handling System Project 386

13.1 System Development Life Cycle 388 Stages of the SDLC 388

13.2 Systems Development Methodologies 391 Waterfall Model 391 Object-Oriented Analysis and Design 392 Agile Methodology 392

CONTENTS xi

The DevOps Approach to Systems Development 394

13.3 Project Management Fundamentals 395 What Is a Project? 396 Choosing Projects 396 The Triple Constraint 397 The Project Management Framework 397

13.4 Initiating, Planning, and Executing Projects 399 Project Initiation 400 Project Planning 400 Project Execution 403

13.5 Monitoring/Controlling and Closing Projects 404 Project Monitoring and Controlling 404 Project Closing or Post Mortem 407 Why Projects Fail 408 IT Project Management Mistakes 410

Case 13.2 Business Case: Steve Jobs’ Shared Vision Project Management Style 412

Case 13.3 Demo Case: Mavenlink Project Management and Planning Software 413

14 IT Ethics, Privacy, and Sustainability 417

Case 14.1 Opening Case: Lessons Learned: How Google Glass Raised Risk and Privacy Challenges 418

14.1 IT Ethics 420 Ethical versus Unethical Behavior 420 Competing Responsibilities 423

14.2 Privacy and Civil Rights 424 Privacy and the New Privacy Paradox 424 Social Media Recruiting 425 Legal Note: Civil Rights 426 Competing Legal Concerns 427 Financial Organizations Must Comply with Social Media Guidelines 428

14.3 Technology Addictions and Focus Management 430 Digital Distractions and Loss of Focus 430 Focus Management 430

14.4 ICT and Sustainable Development 432 Global Temperature Rising Too Much Too Fast 432 IT and Global Warming 433 Technology to Transform Business and Society 436 Next Wave of Disruption Will Be More Disruptive 438

Case 14.2 Business Case: Android Auto and CarPlay Keep Drivers Safe, Legal, and Productive 439

Case 14.3 Video Case: IT Ethics in the Workplace 440

GLOSSARY 443 ORGANIZATION INDEX 448 NAME INDEX 450 SUBJECT INDEX 451

xiii

Information Technology for Management discusses a variety of business strategies and explains how they rely on data, digital technology, and mobile devices to support them in the on- demand economy. Our goal is to provide students from any business discipline with a strong foundation for understand- ing the critical role that digital technology plays in enhancing business sustainability, profitability, and growth and excel in their careers. Enabling technologies discussed in this textbook include the following:

• Performance Combining the latest capabilities in big data analytics, reporting, collaboration, search, and digital com- munication helps enterprises be more agile and cuts costs to optimize business performance and profitability.

• Growth Strategic technologies enable business to create new core competencies, expand their markets, and move into new markets to experience exponential growth in the on-demand economy.

• Sustainability Cloud services are fundamental to sus- taining business profitability and growth in today’s on- demand economy. They play a critical role in managing projects and sourcing agreements, respecting personal pri- vacy, encouraging social responsibility, and attracting and engaging customers across multimedia channels to promote sustainable business performance and growth.

In this 11th edition, students learn, explore, and understand the importance of IT’s role in supporting the three essential components of business performance improvement: technology, business processes, and people.

What’s New in the 11th Edition? In the 11th edition of IT for Management, we present and dis- cuss concepts in a comprehensive yet easy-to-understand for- mat by actively engaging students through a wide selection of case studies, interactive figures, video animations, tech notes, concept check questions, online and interactive exercises, and critical thinking questions. We have enhanced the 11th edition in the following ways:

New Author Dr. Carol Pollard, Professor of Computer Infor- mation Systems at the Walker College of Business and former Executive Director of the Center for Applied Research in Emerg- ing Technologies (CARET) at Appalachian State University in North Carolina, has taken the helm for the 11th edition. Carol

has applied her innovative teaching and learning techniques to create a stronger pedagogical focus and more engaging format for the text. Diverse Audience IT for Management is directed toward undergraduate, introductory MBA courses, and Executive Educa- tion courses in Management Information Systems and General Business programs. Concepts are explained in a straightforward way, and interactive elements, tools, and techniques provide tangible resources that appeal to all levels of students. Strong Pedagogical Approach To encourage improved learn- ing outcomes, we employed a blended learning approach, in which different types of delivery and learning methods, enabled and supported by technology, are blended with traditional learning methods. For example, case study and theoretical content are presented visually, textually, and/or interactively to enable different groups of students to use different learning strategies in different combinations to fit their individual learn- ing style and enhance their learning. Throughout the book, content has been reorganized to improve development of the topics and improve understanding and readability. A large number of images that did not enhance understanding have been removed and replaced with informative and interactive figures and tables that better convey critical concepts. Leading-Edge Content Prior to and during the writing pro- cess, we consulted with a number of vendors, IT professionals, and managers who are hands-on users of leading technologies, to learn about their IT/business successes, challenges, experi- ences, and recommendations. To integrate the feedback of these business and IT professionals, new or updated chapter opening and closing cases have been added to many of the chapters along with the addition of relevant, leading-edge content in the body of the chapters. New Technologies and Expanded Topics New to this edition are the IT framework, business process reengineering, geoco- ding, systems developments methodologies, including Water- fall, object-oriented analysis, Agile and DevOps, advances in Search Technology, the growth of Mobile Commerce and Mobile Payment Systems, the Always-On Supply Chain, and the Project Management framework. In addition, with more purchases and transactions starting online and attention being a scarce resource, students learn how search, semantic, and recommendation technologies function to improve revenue. Table P-1 provides a detailed list of new and expanded topics. Useful Tools and Techniques New to this edition is a feature we call the “IT Toolbox.” This involves the provision of a set of useful tools or techniques relevant to chapter content. Collec- tively, these tools and techniques equip readers with a suite of IT tools that will be useful in their university classes, workplace, and personal life.

Preface

xiv PREFACE

Chapter New and Expanded IT and Business Topics Innovative Enterprises 1. Disruptive IT Impacts

Companies, Competition, and Careers

• IT’s role in the on-demand economy • Business process improvement • Business process re-engineering • SMAC model • Nature of on-demand work • Becoming an informed IT user • Technology mega trends

• Uber • Airbnb • FitBit • NFL • Teradata

2. Information Systems, IT Archi- tecture, Data Governance, and Cloud Computing

• IS concepts and framework • Information, knowledge, wisdom model • Software-defined data center

• Mediata • National Climatic Data center • U.S. National Security Agency • Apple • Uber • WhatsApp • Slack • Vanderbilt University Medical Center • Coca-Cola

TABLE P-1 Overview of New and Expanded Topics and Innovative Enterprises Discussed in the Chapters

Engaging Students to Assure Learning The 11th edition of Information Technology for Management engages students with up-to-date coverage of the most impor- tant IT trends today. Over the years, this IT textbook has dis- tinguished itself with an emphasis on illustrating the use of cutting-edge business technologies for supporting and achiev- ing managerial goals and objectives. The 11th edition contin- ues this tradition with more interactive activities and analyses.

Real-World Case Studies Each chapter contains numerous real-world examples illustrating how businesses use IT to increase productivity, improve efficiency, enhance communication and collaboration, and gain a competitive edge. Faculty will appreciate a variety of options for reinforcing student learning that include three different types of Case Studies (opening case, video case, and business case), along with interactive figures and whiteboard animations that provide a multimedia overview of each chapter. Interactive Figures and Whiteboard Animations The unique presentation of interactive figures and whiteboard anima- tions facilitates reflection on the textual content of the book and provides a clear path to understanding key concepts. The whiteboard animations fit particularly well with the “flipping the classroom” model and complement additional functional- ity and assets offered throughout the 11th edition. The interac- tive figures actively engage the students in their own learning to effectively reinforce concepts. Learning Aids Each chapter contains various learning aids, which include the following:

• Learning Objectives are listed at the beginning of each chapter to help students focus their efforts and alert them to the important concepts that will be discussed.

• IT at Work boxes spotlight real-world cases and innova- tive uses of IT.

• Definitions of Key Terms appear in the margins throughout the book.

• Tech Note boxes explore topics such as “Key Performance Indicators” and “Six Basic Systems Development Guidelines.”

• Career Insight boxes highlight different jobs in the IT for management field.

End-of-Chapter Activities At the end of each chapter, features designed to assure student learning include the following:

• Critical Thinking Questions are designed to facilitate student discussion.

• Online and Interactive Exercises encourage students to explore additional topics.

• Analyze and Decide questions help students apply IT concepts to business decisions.

• Concept Questions test students’ comprehension of each learning objective at the end of each chapter to ensure that the students are clear on the concepts. Students are provided with immediate feedback on their performance.

Details of New and Enhanced Features of the 11th Edition The textbook consists of 14 chapters organized into four mod- ules. All chapters have new or updated sections, as shown in Table P-1.

PREFACE xv

Chapter New and Expanded IT and Business Topics Innovative Enterprises 3. Data Management, Data

Analytics, and Business Intelligence

• Dirty data costs and consequences • Data life cycle • Genomics and big data • Aligning business intelligence with business strategy

• Coca-Cola • Capitol One • Travelocity • First Wind • Argo Corporation • Walmart • Infinity Insurance • DoD and Homeland Security • CarMax • McDonald’s • Verizon

4. Networks, Collaborative Technology, and the Internet of Things

• IPv6 protocol • Types of networks • Network terminology • Quality of service • Net neutrality • Mobile networks and near-field communication • Internet of Things

• Sony • AT & T • Time-Warner • Amazon • Warner Music • Proctor & Gamble • Walmart • Ford • Asda • Unilever • Caterpillar • Santander • Google • Isle of Man

5. Cybersecurity and Risk Management Technology

• Data breaches • Major sources of cyberthreats • Classes of hackers • Spear phishing • Crimeware categories • Denial of service • KPMG data loss barometer • Enterprise risk management framework

• Yahoo • Global Payments, Inc. • Government of China • Google • U.S. Chamber of Commerce • Brookings Institution • LinkedIn • Damballa

6. Search, Semantic, and Recom- mendation Technology

• Social search technologies • Personal assistant and voice search • Mobile search and mobile SEO • On-page and off-page SEO factors • Updates to Google’s ranking algorithm • Semantic search technologies

• Mint.com • Google • Microsoft • Yahoo • Netflix • Apple • Amazon • Diigo • World Wide Web Consortium (W3C)

TABLE P-1 Overview of New and Expanded Topics and Innovative Enterprises Discussed in the Chapters (continued)

(continued)

xvi PREFACE

Chapter New and Expanded IT and Business Topics Innovative Enterprises 7. Web 2.0 and Social Technology • Snapchat, the #2 social platform

• Social bookmarking • Social customer service moves from optional

to essential • Role of APIs in development of new Web applications

and functionality • The dominance of Facebook and the demise

of Google+ • Emerging virtual-world technology

• KLM Royal Dutch Airlines • Facebook, Inc. • Myntra • Snap, Inc. • Kickstarter.com • GoFundMe.com • Oculus VR • High Fidelity • Twitter • Social Mention • Diigo • Clipix • Dropbox

8. Retail, E-commerce, and Mobile Commerce Technology

• Direct and marketplace B2B ecommerce • In-store retail technology • Omni-channel retailing • Growth of mobile commerce • Growth of the mobile gaming market • Mobile payment methods • Mobile visual search

• Macys Department Stores • Amazon.com • Ally Bank • LinkedIn.com • Alibaba.com • Dell, Inc. • The Walt Disney Company • PayPal, Inc. • Chegg.com

9. Functional Business Systems • Business management systems • Cross-functional coordination and integration

of systems • Systems that support supply-chain management • Social customer service • eXtensible Business Reporting Language (XBRL)

• Ducati Motor Holding S.p.A. • Office Depot • Schurman Fine Papers • BAE Systems • Adweek • Salesforce.com • LinkedIn • HSBC Bank • United Rentals

10. Enterprise Systems • 3D printing impact on supply chain • Selecting an ERP vendor • Factors for ERP success • Order fulfillment • Always-on supply chain • Enterprise social platforms

• Organovo • Ferrari • GE • Siemens • Organic Valley Family of Farms • Boers & Co. • Peters Ice Cream • ScanSource • Avanade • Dillards • FoxMeyer Drugs • Joint Munitions Command • Flower.com • Red Robin • Lowe’s • Procter & Gamble

TABLE P-1 Overview of New and Expanded Topics and Innovative Enterprises Discussed in the Chapters (continued)

PREFACE xvii

Supplemental Materials An extensive package of instructional materials is available to support this 11th edition. These materials are accessible from the book companion website at www.wiley.com/college/ turban.

• Instructor’s Manual The Instructor’s Manual presents objectives from the text with additional information to make them more appropriate and useful for the instructor. The manual also includes practical applications of concepts, case-study elaboration, answers to end-of-chapter ques- tions, questions for review, questions for discussion, and Internet exercises.

• Test Bank The test bank contains over 1,000 ques- tions and problems (about 75 per chapter) consisting of multiple-choice, short answer, fill-ins, and critical thinking/ essay questions.

• PowerPoint Presentation A series of slides designed around the content of the text incorporates key points from the text and illustrations where appropriate.

• Chapter Summary Whiteboard Animations A series of video animations that summarize the content of each chapter in an entertaining way to engage the students in grasping the subject matter.

Chapter New and Expanded IT and Business Topics Innovative Enterprises 11. Data Visualization and

Geographic Information Systems

• Increasing reliance on data discovery • Data visualization tools • Enterprise data mashups • Geocoding

• Safeway • PepsiCo • IBM • ADP Corp. • Department of Veterans Affairs • General Motors

12. IT Strategy, Sourcing, and Strategic Technology Trends

• Business–IT alignment • IT strategic planning • Porter’s competitive forces model • Porter’s value chain model • Five-phase outsourcing life cycle • IT sourcing strategies • Strategic technology trends • Technology scanning

• Intel • Nestle Nespresso • LinkedIn • ESSA Academy • Cisco • Citigroup

13. Systems Development and Project Management

• SDLC stages • Systems development methodologies • DevOps • Project management framework • PM core and support knowledge areas • Responsibility matrix

• Denver International Airport • U.S. Census Bureau • Apple • Mavenlink

14. IT Ethics, Privacy, and Sustainability

• Ethical vs. unethical behavior • Privacy paradox • Climate change • Technology addiction • “People-first” approach to technology • Disruptive technologies

• Google • Target • Facebook • SnapChat • NASA • Apple

TABLE P-1 Overview of New and Expanded Topics and Innovative Enterprises Discussed in the Chapters (continued)

xviii PREFACE

Acknowledgments No book is produced through the sole efforts of its authors, and this book is no exception. Many people contributed to its crea- tion, both directly and indirectly, and we wish to acknowledge their contributions.

Special thanks go to the team at John Wiley, particularly Darren Lalonde, Emma Townsend-Merino, Ethan Lipson, and Loganathan Kandan for their ongoing and encouraging edito- rial expertise and leadership. Their guidance, patience, humor, and support during the development and production of this most recent version of the textbook made the process much easier. We couldn’t have done it without you!

Our sincere thanks also go to the following reviewers of the 11th edition. Their feedback, insights, and suggestions were invaluable in ensuring the accuracy and readability of the book:

Joni Adkins, Northwest Missouri State University Ahmad Al-Omari, Dakota State University Rigoberto Chinchilla, Eastern Illinois University Michael Donahue, Towson University Samuel Elko, Seton Hill University Robert Goble, Dallas Baptist University Eileen Griffin, Canisius College Binshan Lin, Louisiana State University in Shreveport Thomas MacMullen, Eastern Illinois University James Moore, Canisius College Beverly S. Motich, Messiah College Barin Nag, Towson University

Luis A. Otero, Inter-American University of Puerto Rico, Metropolitan Campus

John Pearson, Southern Illinois University

Daniel Riding, Florida Institute of Technology

Josie Schneider, Columbia Southern University

Derek Sedlack, South University

Eric Weinstein, The University of La Verne

Patricia White, Columbia Southern University

Gene A. Wright, University of Wisconsin–Milwaukee

Many thanks also go to our dedicated graphic designers, Kevin Hawley and Nathan Sherrill, without whose help we would not have been able to create the innovative Whiteboard Animations, and to Senior Photo Editor, Billy Ray, whose exten- sive and expert research into the images used in the textbook greatly enhanced the overall “look” of this 11th edition.

Extra special thanks go to our families, friends, and col- leagues for the enormous encouragement, support, and under- standing they provided as we dedicated time and effort to creating this new edition.

Finally, we dedicate the 11th edition of Information Technology for Management to the Memory of Dr. Linda Volonino, the driving force behind editions 7 through 10 of IT for Management. Thank you Linda, for all your hard work in providing the foundation for this latest edition of the textbook.

CAROL POLLARD GREGORY WOOD

1

CHAPTER 1

Disruptive IT Impacts Companies, Competition, and Careers

LEARNING OBJECTIVES

1.1 Describe how the on-demand economy is changing the way that business is conducted.

1.2 Explain the role of IT in business process improvement. Understand the concepts of business process reengineering and competitive advantage.

1.3 Describe innovating technologies and explain how they are disrupting enterprises.

1.4 Understand the value of being an “informed user” of IT and the ways in which IT can add value to your career path and performance in the on-demand economy.

CHAPTER OUTLINE

Case 1.1 Opening Case: Uber, Airbnb, and the On-Demand Economy

1.1 Doing Business in the On-Demand Economy

1.2 Business Process Improvement and Competitive Advantage

1.3 IT Innovation and Disruption

1.4 IT and You

Case 1.2 Business Case: The Internet of Things Comes to the NFL

Case 1.3 Video Case: What Is the Value of Knowing More and Doing More?

Introduction The more digital technology advances, the more it is almost instantly integrated into our daily lives. Many managers and entrepreneurs recognize the need to integrate digital technology into their products and services. For example, it has been estimated that 78% of business

2 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

leaders expect their organizations to be a digital business by 2020. Outdated and complex application architectures with a mix of interfaces can delay or prevent the release of new products and services, and maintaining these obsolete systems absorbs large portions of the information technology (IT) budget.

Companies such as Uber, Airbnb, Shyp, TaskRabbit, and other participants in the on- demand economy are leveraging IT to create exciting new business models and revolu- tionize the way workers, businesses, and customers interact and compete. Peter Hinssen, a well-known business author, university lecturer, and digital consultant, described the change in digital technology as follows:

Technology used to be nice. It used to be about making things a little bit better, a little bit more efficient. But, technology stopped being nice: it’s disruptive. It’s changing our business models, our consumer markets, our organizations. (MacIver, 2015)

As businesses continue to join the on-demand economy, IT professionals must constantly scan for innovative new technologies to provide business value and help shape the future of the business. For example, smart devices, mobile apps, sensors, and technology platforms— along with increased customer demand for digital interactions and on-demand services—have moved commerce in fresh new directions. We’ve all heard the phrase “there’s an app for that” and that kind of consumer thinking is what drives the on-demand economy.

Business leaders today need to know what steps to take to get the most out of mobile, social, cloud, big data, analytics, visualization technologies, and the Internet of Things (IoT) to move their business forward and enable new on-demand business models. Faced with oppor- tunities and challenges, managers need to know how to leverage IT earlier and more efficiently than their competitors.

A goal of this book is to empower you to improve your use and management of IT at work by raising your understanding of IT terminology, practices, and tools and developing your IT skills to transform you into an informed IT user. Throughout this book, you will learn how digital technology is transforming business and society in the on-demand economy as the IT function takes on key strategic and operational roles that determine an enterprise’s success or failure. You will also be provided with an in-depth look at IT trends that have immediate and future capacity to influence products, services competition, and business relationships. Along the way, we’ll describe many different ways in which IT is being used and can be used in business and provide you with the some of the terminology, techniques and tools that enable organizations to leverage IT to improve growth, performance, and sustainability.

In this opening chapter, you will learn about the powerful impacts of digital technology on people, business, government, entertainment, and society that are occurring in today’s on- demand economy. You will also discover how leading companies are deploying digital tech- nology and changing their business models, business processes, customer experiences, and ways of working. We will present examples of innovative products, services, and distribution channels to help you understand the digital revolution that is currently shaping the future of business, the economy and society and changing management careers. And, we’ll explain why IT is important to you and how becoming an “informed user” of IT will add significant value to your career and overall quality of life.

Introduction 3

Case 1.1 Opening Case THE ON-DEMAND BUSINESS FRAMEWORK

CORE ON-DEMAND SERVICES

Logistics Management Offline Services Move Online Vendor Management Interface Layer

CONSUMER TECHNOLOGY

Ubiquitous Connectivity Mobile Adoption App Marketplace

COMPLIMENTARY RESOURCES

Payment Systems Cloud Services CRM Platforms 1099 Community

CONSUMER BEHAVIOR

THE ON-DEMAND ECONOMY

Convenience Efficiency Simplicity Instant Gratification

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Uber and Airbnb Revolutionize Business Models in the On-Demand Economy If you’ve used Uber or Airbnb, then you have participated in the on-demand economy where speed, convenience, and simplicity are key factors in consumer behavior and purchasing decisions. Michael Boland, author of What’s Driving the Local On-Demand Econ- omy, explains that as consumers, “We’re being conditioned to expect everything on-demand as the mobile device increasingly becomes the remote control for the physical world” (Boland, 2015). For example, the majority of consumers who tap an Uber app to get a ride would not consider dialing an 800 number for a taxi. With all transactions performed by apps and automated processes, the entire process from hailing to paying for a ride is slick, quick, and easy, without cash or credit cards.

Tech Platforms Enabled On-Demand Services to Take Off Decades of technological innovation have given us smartphone apps, mobile payment platforms, GPS and map technology, and social authentication. These technologies are being used to build the infra- structure needed for on-demand services. This infrastructure—also referred to as a technology platform or technology stack—supports the exchange and coordination of staggering amounts of data. The term technology stack reflects the fact that the platform is made up of multiple layers (stacks) of hardware, software, network connectivity, and data analytics capabilities.

In many consumer markets today, companies that do not have iPhone or Android apps or technology platforms that support the exchange of goods and services—no matter how useful their website— may find themselves losing their competitive edge.

On-Demand Economy Requires a New Business Model Uber and Airbnb are popular examples of companies that developed on-demand business models to transform slow-to-innovate indus- tries. A simple definition of business model is the way a company generates revenue and makes a profit. On-demand business mod- els provide real-time fulfillment of goods and services, which have attracted millions of users worldwide. This model fits best when speed and convenience matter the most. The ground transporta- tion, grocery, and restaurant industries are examples of hyper-growth

categories in the on-demand world. Forward-thinking companies are reshaping these industries.

Uber Business Model Uber disrupted the taxi industry with a workforce that is essentially any person with a smartphone and a car. Location-aware smartphone apps bring drivers and passengers together, while in-app accounts make the cashless payment process effortless. By simply opening the Uber app and pressing the middle button for several seconds (a long press), customers can order a ride to their current location, selecting the kind of car they want. Payment is automatically charged to the credit card on file with receipts via email.

The Uber concept developed in response to taxi scarcities. It started on a snowy Paris night in 2008 when the two founders could not get a cab. They wanted a dead-simple app that could get them a car with a tap. On June 1, 2015, the entrepreneurs celebrated Uber fifth anniversary and announced that the company had grown into a transportation network covering 311 cities in 58 countries in North and South Americas, Europe, Africa, Asia Pacific, and the Middle East.

Uber has invested in new and developing technologies and part- nerships. The company partnered with Carnegie Mellon University to build robotic cars and new mapping software. In March 2015, Uber pur- chased deCarta, a 40-person mapping start-up to reduce its depend- ence on Google maps.

Airbnb Business Model Another disruption to a traditional industry occurred when Airbnb blindsided the hotel industry. Airbnb allows anyone with a spare apartment or room—even if only for a day—to run their own bed and breakfast by giving them a technology platform to market themselves to a global market. By 2016, the Airbnb site had over 1.5 million list- ings in 190 countries and 34,000 cities. Over 40 million guests have used Airbnb worldwide. For comparison, Hilton, InterContinental, and Marriott, the largest hotel chains in the world, have less than 1 million rooms each.

Uber and Airbnb do not own inventory. Instead, they scale up (expand) by improving their ability to acquire and match customers and service providers.

4 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

1.1 Doing Business in the On-Demand Economy The on-demand economy is revolutionizing commercial activities in businesses around the world. The businesses in this new economy are fueled by years of technology innovation and a radical change in consumer behavior. As companies become more highly digitized, it becomes more and more apparent that what companies can do depends on what their IT and data man- agement systems can do. For over a decade, powerful new digital approaches to doing business have emerged. And there is sufficient proof to expect even more rapid and dramatic changes due to IT breakthroughs and advances.

In market segment after market segment, mobile communications and technology stacks make it financially feasible for companies to bring together consumers and providers of prod- ucts and services. These capabilities have created the on-demand economy. As Ev Williams, cofounder of Twitter says,

The internet makes human desires more easily attainable. In other words, it offers convenience. Convenience on the internet is basically achieved by two things: speed, and cognitive ease. If you study what the really big things on the internet are, you realize they are masters at making things fast and not making people think.

On-demand economy is the economic activity created by technology companies that fulfill consumer demand through the immediate provisioning of products and services.

Business Success in Terms of Company Growth and Valuation The ride-hailing app Uber and the housing rental app Airbnb are two of the most valuable start-ups, as displayed in Figure 1.1. Valuation of a company at its early stages is based heavily on its growth potential and future value. In contrast, the valuation of an established company is based on its present value, which is calculated using traditional financial ratios and techniques related to revenues or other assets.

Uber’s massive market value—estimated at $60 billion—is greater than 80% of all Standard & Poor (S&P) 500 companies, many of which have been around for 25, 50, or 100 years. Investors valued Airbnb at $24 billion—higher than the value of the hotel giant Marriott

International. These companies would never have been able to grow in the old way as a traditional organization, with their own inventory of products, services, and workforce and traditional forms of technology.

Questions 1. In what ways are the Uber and Airbnb business similar or

different?

2. How did Uber achieve its new business model? 3. To what extent do you think changing their business models con-

tributed to the success of Uber and Airbnb?

Sources: Compiled from Primack (2015), Storbaek (2015), Winkler and MacMillan (2015,) Jaconi (2014), Uber.com (2017), Airbnb.com (2017).

Started in 2008 Airbnb—short for Air Bed and Breakfast

The leading disrupter in the hotel and vacation rental market

By 2016, Airbnb was valued at about $25 billion. Exceeded the value of Marriott International

Uber

Started in 2009. Founder Garrett Camp wanted to tackle the taxi shortage problem in San Francisco

Uber epitomizes disruption

Changed the way customers think about grabbing a ride

By 2016, Uber had higher valuation than companies that make the cars its drivers use–GM, Honda, and Ford

Airbnb

FIGURE 1.1 On-demand business models of Airbnb and Uber have been extremely successful.

Doing Business in the On-Demand Economy 5

The proliferation of smartphone-connected consumers, simple and secure purchase flows, and location-based services are a few of the market conditions and technological innovations that are propelling the explosion of on-demand services.

Just as the rapid growth of online-only Amazon and eBay transformed retail, the even faster growth of app-driven companies, like Uber, Airbnb, and Grubhub, has disrupted the taxi, hotel, and restaurant markets. As you read in the opening case, in six short years, Uber changed the taxi industry as it rose from start-up to the world’s most valuable private technology company, and Airbnb tackled the fiercely competitive hotel market and attracted more than 60 million customers to become the third most valuable venture-capital-backed company in the world. Another example is Grubhub who became No. 1 in online food ordering, controlling over 20% of that $9 billion market. What today’s successful technology businesses have in common are platform-based business models. Platforms consist of hardware, software, and networks that provide the connectivity for diverse transactions, such as ordering, tracking, user authen- tication, and payments. These business models are designed to serve today’s on-demand economy, which is all about time (on-demand), convenience (tap an app), and personalized service (my way). For example, millennials want the ease of online payment over cash and insist on efficiency for all aspects of their lives, including shopping, delivery, and travel.

Key strategic and tactical questions that determine an organization’s profitability and management performance are shown in Figure 1.2. Answers to each question require an understanding of the capabilities of mundane to complex IT, which ones to implement and how to manage them.

Growth of the On-Demand Economy Whether it is ease of scheduled deliveries or the corresponding time savings, the growth of the on-demand economy is a product of its alignment with consumers’ growing appetite for greater convenience, speed, and simplicity. A recent survey reported that 86.5 million Americans have used the services of at least one on-demand start-up company (Chriss, 2016).

The growth of the on-demand economy demonstrates the high level of interest consumers have in on-demand services from dog walking to laundry services, short-term home rentals, massages, and truck hauling. Although just applying a mobile app to an existing service will not ensure a company’s success, IT is a vital and integral part of the all businesses that are part of the on-demand economy.

Business processes, producers, and technology

Strategic direction: industry, markets, and customers

Business model

• What do we do? • What is our direction? • What markets & customers should we be targeting and how do we prepare for them?

• How do we do it? • How do we generate revenues & profits to sustain ourselves and build our brand?

• How well do we do it? • How can we be more efficient?

FIGURE 1.2 Key strategic and tactical questions.

6 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

Low Cost of Entry One of the reasons that the on-demand economy has taken off is that it is easier than ever to become an on-demand business. Companies like Dispatch, a soft- ware as-a-service company, allow entrepreneurs to move into the on-demand world quickly and inexpensively. For example, Aatlantic Fitness, a fitness equipment repair service company, moved into the on-demand economy using Dispatch, and Handyman Connection, a 20-year- old home repair service company, is using Dispatch’s platform to compete with Handy, an on- demand service for house cleaning that has raised $60 million in venture capital.

Digital Business Models The on-demand economy is driving the transformation of traditional business models to digital business models to serve customers what they want and where they want it.

Business models are the ways enterprises generate revenue or sustain themselves. Digital business models define how businesses make money via digital technology. Companies that adopt digital business models are better positioned to take advantage of business opportu- nities and survive, according to the Accenture Technology Vision 2013 report (Accenture, 2013). Figure 1.3 contains examples of new technologies that destroyed old business models and created new ones.

The ways in which market leaders are transitioning to digital business models include the following:

• NBA talent scouts rely on sports analytics and advanced scouting systems NBA talent scouts used to crunch players’ stats, watch live player performances, and review hours of tapes to create player profiles. Now software that tracks players’ performance has changed how basketball and soccer players are evaluated. For example, STATS’ SportVU technology is revolutionizing the way sports contests are viewed, understood, played, and enjoyed. SportVU uses six palm-sized digital cameras that track the movement of every player on the court, record ball movement 25 times per second, and convert movements into statistics. SportVU produces real-time and highly complex statistics to complement the tra- ditional play-by-play. Predictive sport analytics can provide a 360-degree view of a player’s performance and help teams make trading decisions. Sports analytics bring about small competitive advantages that can shift games and even playoff series.

• Dashboards keep casino floor staff informed of player demand Competition in the gaming industry is fierce, particularly during bad economic conditions. The use of manual spreadsheets and gut-feeling decisions did not lead to optimal results. Casino opera- tors facing pressure to increase their bottom line have invested in analytic tools, such as

Location-aware technologies track items through production and delivery to reduce wasted time and inefficiency in supply chains and other business-to- business (B2B) transactions

Twitter dominates the reporting of news and events as they are still happening

Facebook became the most powerful sharing network in the world

Smartphones, tablets, other touch devices, and their apps reshaped how organizations interact with customers—and how customers want businesses to interact with them

FIGURE 1.3 Digital business models refer to how companies engage their customers digitally to create value via websites, social channels, and mobile devices.

Doing Business in the On-Demand Economy 7

To address these issues, IT leaders said they need to focus on relationships, meet more frequently with top management, and spend significant amounts of time with functional leaders, customers, and suppliers. Companies also need to emphasize finding, keeping, and developing IT talent and on improving IT to improve business performance. These findings point to one clear message—IT in the on-demand economy is about meeting cus- tomer needs.

Tangam’s Yield Management solution (TYM). TYM is used to increase the yield (profitability) of blackjack, craps, and other table games. The analysis and insights from real-time apps are used to improve the gaming experience and comfort of players.

Today, a top concern of well-established corporations, global financial institutions, born-on-the- Web retailers, and government agencies is how to design their digital business models in order to

• Deliver an incredible customer experience • Turn a profit • Increase market share • Engage their employees

In the digital (online) space, the customer experience must measure up to the very best the Web has to offer. Stakes are high for those who get it right—or get it wrong. Forrester research repeatedly confirms there is a strong relationship between the quality of a firm’s customer experience and loyalty, which, in turn, increases revenue (Schmidt-Subramanian et al., 2013).

IT’s Role in the On-Demand Economy According to the 2016 survey conducted by the Society of Information Management (SIM), 1,213 IT leaders (including 490 chief information officers (CIOs)) from 801 companies reported com- panies that are more highly digitized and tightly connected are putting a greater emphasis on the strategic use of IT to enhance growth and improve performance. As a result, IT priorities and spending are changing (Kappelman et al., 2017).

A review of the top 10 IT management priorities reported in the survey results is shown in Table 1.1. Along with business-IT alignment and security, Table 1.1 clearly demonstrates a need for companies to focus on strategic and organizational priorities such as innovation, IT and business agility, speed of IT delivery, and business productivity and efficiency.

TABLE 1.1 10 Top IT Management Priorities

IT Management Issues 1 Technology Alignment with the Business

2 Security, Cybersecurity & Privacy

3 Innovation

4 IT Agility & Flexibility

5 Business Agility & Flexibility

6 Business Cost Reduction & Controls

7 IT Cost Reduction & Controls

8 Speed of IT Delivery & IT Time to Market

9 Business Strategic Planning

10 Business Productivity & Efficiency

Adapted from Kappelman et al. (2017).

8 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

IT Business Objectives Now, more than ever, IT must be responsive to the needs of consumers who are demanding a radical overhaul of business processes in companies across diverse industry sectors. Intuitive interfaces, around-the-clock availability, real-time fulfillment, personalized treatment, global consistency, and zero errors—this is the world to which customers have become increasingly accustomed. And, it’s not just about providing a superior user or customer experience—when companies get it right, they can also offer more competitive prices because of lower costs, bet- ter operational controls, and open themselves up to less risk.

According to Chirantan Basu of Chron (Basu, 2017), to stay abreast of the ever- changing business landscape and customer needs, IT today must concentrate on the following six business objectives:

1. Product development From innovations in microprocessors to efficient drug-delivery systems, IT helps businesses respond quickly to changing customer demands.

2. Stakeholder integration Companies use their investor relations websites to communicate with shareholders, research analysts, and others in the market.

3. Process improvement An ERP system replaces dozens of legacy systems for finance, human resources, and other functional areas, to increase efficiency and cost-effectiveness of internal business processes.

4. Cost efficiencies IT allows companies to reduce transaction and implementation costs, such as costs of duplication and postage of email versus snail mail.

5. Competitive advantage Companies can use agile development, prototyping, and other systems methodologies to being a product to market cost-effectively and quickly.

6. Globalization Companies can outsource most of their noncore functions, such as HR and finance, to offshore companies and use ICT to stay in contact with its global employ- ees, customers, and suppliers 24/7.

Every technology innovation triggers opportunities and threats to business models and strat- egies. With rare exceptions, every business model depends on a mix of IT, knowledge of its potential, the requirements for success, and, equally important, its limitations.

Questions

1. What precipitated the on-demand economy? 2. How is IT contributing to the success of the on-demand economy? 3. List the six IT business objectives. 4. What are the key strategic and tactical questions that determine an organization’s profitability and

management performance?

5. What is a business model? 6. What is a digital business model? 7. Give two examples of how companies are transitioning to digital business models. 8. What factors are driving the move to digital business models?

1.2 Business Process Improvement and Competitive Advantage Given that a company’s success depends on the efficiency of its business processes, even small improvements in key processes can have significant payoff. All functions and departments in the enterprise have tasks they need to complete to produce outputs, or deliverables, in order to meet their objectives.

Business Process Improvement and Competitive Advantage 9

Before you can begin to improve something, you have to understand what it is you are improving. We’ll start by defining a business process, looking at its characteristics, and then exploring ways in which a business process can be improved either incrementally or radically through Business Process Reengineering.

What Is a Business Process? Business processes are series of steps by which organizations coordinate and organize tasks to get work done. In the simplest terms, a process consists of activities that convert inputs into outputs by doing work.

Examples of common business processes are as follows:

• Accounting Invoicing; reconciling accounts; auditing • Finance Credit card or loan approval; estimating credit risk and financing terms • Human resources (HR) Recruiting and hiring; assessing compliance with regulations;

evaluating job performance • IT or information systems Generating and distributing reports and data visualizations;

data analytics; data archiving • Marketing Sales; product promotion; design and implementation of sales campaigns;

qualifying a lead • Production and operations Shipping; receiving; quality control; inventory management • Cross-functional business processes Involving two or more functions, for example,

order fulfillment and product development

Three Components of a Business Process Business processes have the three basic components shown in Figure 1.4. They involve inputs, activities, and deliverables.

Processes can be formal or informal. Formal processes are documented and have well- established steps. Order taking and credit approval processes are examples. Routine formal processes are referred to as standard operating procedures (SOPs). An SOP is a well-defined and documented way of doing something. An effective SOP documents who will perform the tasks; what materials to use; and where, how, and when the tasks are to be performed. SOPs are needed for the handling of food, hazardous materials, or situations involving safety, secu- rity, or compliance. In contrast, informal processes are typically undocumented, have inputs that may not yet been identified, and are knowledge-intensive. Although enterprises would prefer to formalize their informal processes in order to better understand, share, and optimize them, in many situations process knowledge remains in people’s heads.

Processes range from slow, rigid to fast-moving, adaptive. Rigid processes can be struc- tured to be resistant to change, such as those that enforce security or compliance regulations. Adaptive processes are designed to respond to change or emerging conditions, particularly in marketing and IT.

Improving Business Processes Designing an effective process can be complex because you need a deep understanding of the inputs and outputs (also known as deliverables), how things can go wrong, and how to prevent

Deliverables are the outputs or tangible things that are produced by a business process. Common deliverables are products, services, actions, plans, or decisions, such as to approve or deny a credit application. Deliverables are produced in order to achieve specific objectives.

raw materials, data, knowledge, expertise

work that transforms inputs and acts on data and knowledge

products, services, plans, or actions

Inputs Activities

Business Process

Deliverables

FIGURE 1.4 Three components of a business process.

10 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

things from going wrong. For example, Dell had implemented a new process to reduce the time that tech support spent handling customer service calls. In an effort to minimize the length of the call, tech support’s quality dropped so much that customers had to call multiple times to solve their problems. The new process had backfired—increasing the time to resolve computer problems and aggravating Dell customers.

The importance of efficient business processes and continuous process improvement cannot be overemphasized. Why? Because 100% of an enterprise’s performance is the result of its processes. Maximizing the use of inputs in order to carry out similar activities better than one’s competitors is a critical success factor (CSF). Poorly designed, flawed, or outdated business processes waste resources, increase costs, cause delays, and aggravate customers. For example, when customers’ orders are not filled on time or correctly, customer loyalty suffers, returns increase, and reshipping increases costs. The blame may not be employee incompetence, but a flawed order fulfillment process.

Don’t Automate, Obliterate! In today’s on-demand economy, incrementally improving a business process isn’t always sufficient to create the type of change required. Instead, radical changes need to occur to meet higher customer expectations. To do this, companies have to go beyond simply automating an existing process. They must reinvent the entire business process, including reducing the number of steps required, eliminating documents, developing automated decision-making, and dealing with regulatory and fraud issues. Operating models, skills, organizational struc- tures, and roles need to be redesigned to match the reinvented processes. Data models should be adjusted and rebuilt to enable better decision-making, performance tracking, and cus- tomer insights.

Leading organizations have come to recognize that it can take a long time to see the benefits of traditional large-scale projects that migrate all current processes to digital and sometimes they don’t work. Instead, successful companies are reinventing processes, challenging every- thing related to an existing process and rebuilding it using cutting-edge digital technology. For example, rather than creating technology tools to help back-office employees type customer complaints into their systems, leading organizations create self-serve options for customers to type in their own complaints.

Business Process Reengineering (BPR) The process by which these types of rad- ical process change can be achieved is referred to as business process reengineering (BPR), its slogan is “Don’t automate, obliterate!” (Hammer and Champy, 2006). Consisting of eight stages, shown in Figure 1.5, BPR proposes that simply applying IT to a manual or outdated pro- cess does not always optimize it. Instead, processes need to be examined to determine whether they are still necessary. After unnecessary processes are identified and eliminated, the remain- ing ones are redesigned (or reengineered) in order to automate or streamline them. Next, the new process is implemented and put into operation and its performance is evaluated. Finally, the process is reassessed over time to continually improve it.

The goal of BPR is to eliminate unnecessary, non-value-added processes, and simplify and automate the remaining processes to significantly reduce cycle time, labor, and costs. For example, reengineering the credit approval process cuts time from several days or hours to minutes or less. Simplifying processes naturally reduces the time needed to complete the pro- cess, which also cuts down on errors.

After eliminating waste, technology can enhance processes by (1) automating existing manual processes; (2) expanding the data flows to reach more functions in order to make it pos- sible for sequential activities to occur in parallel; and (3) creating innovative business processes that, in turn, create new business models. For instance, consumers can scan an image of a product and land on an e-commerce site, such as Amazon.com, selling that product. This pro- cess flips the traditional selling process by making it customer-centric.

You will read more about optimizing business processes and role of business process management (BPM) role in the alignment of IT and business strategy in Chapter 13.

Business Process Improvement and Competitive Advantage 11

Gaining a Competitive Advantage Understanding trends that affect the new ways business is being done and getting in front of those trends by changing adding, deleting, and changing existing business processes gives organizations an important competitive advantage over their competitors. Helping a company gain, maintain, and sustain a competitive advantage in the market is a very impor- tant function of IT. In business, as in sports or politics, companies want to win—customers, market share, and position in the industry. Basically, this requires gaining an edge over com- petitors by being first to take advantage of market opportunities, providing better customer experiences, offering unique products or services, or convincing customers why your business is a more attractive alternative than your competitors.

Influential industry leaders cite “new competition” as their largest business challenge. Once an enterprise has developed a competitive edge, it can only be sustained by continually pursuing new and better ways to compete. Maintaining a competitive advantage requires forecasting trends and industry changes and figuring out what the company needs to do to stay ahead of the game. It demands continuously tracking competitors and their future plans and promptly taking corrective actions. Competitiveness depends heavily on IT agility and responsiveness. The benefit of IT agility is that it enables organizations to take advantage of opportunities faster or more effectively.

Closely related to IT agility is flexibility. For example, mobile networks are flexible—able to be set up, moved, or removed easily, without dealing with cables and other physical require- ments of wired networks. Mass migration to mobile devices from PCs has expanded the scope of IT beyond traditional organizational boundaries—making location practically irrelevant.

IT agility, flexibility, and mobility are tightly interrelated and fully dependent on an organi- zation’s IT infrastructure and architecture, which are discussed in Chapter 2.

With mobile devices, applications, platforms, and social media becoming inseparable parts of work life and corporate collaboration and with more employees working from home, the result is the rapid consumerization of IT. IT consumerization is the migration of consumer

Competitive advantage is an edge that enables a company to outperform its average competitor.

Agility means being able to respond quickly.

Responsiveness means that IT capacity can be easily scaled up or down as needed, which essentially requires cloud computing.

Flexibility means having the ability to quickly integrate new business functions or to easily reconfigure software or applications.

1. Develop Vision and Objectives

2. Understand Existing

Processes

3. Identify Process for Redesign

4. Identify Change Levers

5. Implement New Process

6. Make New Process

Operational

7. Evaluate New Process

8. Perform Continuous

Improvement

Business Process Reengineering

FIGURE 1.5 Eight phases of business process reengineering.

12 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

technology into enterprise IT environments. This shift has occurred because personally owned IT is as capable and cost–effective as its enterprise equivalents. IT at Work 1.1 demonstrates how FitBit has maintained a competitive advantage with its fitness tracker.

As evidenced by the mergers of Grubhub/Seamless in food delivery and Handybook/Exec in home services, consolidation will accelerate as competition grows. This trend is underscored in the following examples:

• Collaboration of complementary, noncompetitive businesses will become commonplace as a means to collectively educate consumers about the benefits of on-demand ser- vices, increase awareness, and provide added value to core users. These range from cross- promotions similar to that of Instacart/Washio to close partnerships such as that of WunWun/Gett.

• Legacy providers in hospitality, transportation, and other Fortune 500s will “partner with” or “acquire” more innovative on-demand companies. Ken Chenault, Chairman and CEO of American Express, conceded in their annual report, “Our industry is being redefined by many forces, including the continued revolution in online and mobile technologies, which is transforming commerce and society.” Given the emerging influence of on-demand ser- vices, Amex launched a partnership with Uber earlier this year. American Express was able to get a foot in the door by allowing customers to earn 2× points for its spend on Uber with an American Express credit card.

• As on-demand businesses solve for the current technological and logistical challenges, design will increasingly become one of the most meaningful forms of competitive advantage. Creating a memorable, frictionless user interface is the next battleground for addressing con- sumers’ insatiable appetite for greater simplicity and convenience. Scott Belsky points out, “A new cohort of design-driven companies are adding a layer of convenience between us and the underlying services and utilities that improve our lives. This could change everything.”

Sources: Compiled from Ashcroft (2015), Nusca (2015), Grand View Research (2016), and Fitbit.com (2016).

IT at Work 1.1

FitBit: Smart, Connected Device Transforms Competition and Promotes Sustainability In the first year of its existence, FitBit sold 100,000 devices. At the time, there were countless weight loss and exercise programs, plans, and gimmicks. But smart, connected wearable activity trackers were virtually nonexistent. Five years later, FitBit managed to take the title biggest selling manufacturer of wearable tech when it sold a whopping 21 million devices in 1 year. It still holds that title today.

Vision: Simple Approach Plus Smart Device FitBit was launched in San Francisco, California, by Eric Friedman and James Park. These entrepreneurs took a basic approach to personal health and fitness—eating right and keeping active. Their vision was to develop a smart device that would motivate users to be more active, eat a well-rounded diet, and ultimately become healthier.

Throughout the day, FitBit logs data about the wearer’s activi- ties, including the number of steps taken, distance travelled, calories burned, and what needs to be done to reach a personal daily goal, for example, walking 2 miles. FitBit’s internal memory can store at least a week of activity data.

One of FitBit’s competitive strengths is the app that is accessi- ble from a smartphone. Users can sync FitBit devices and view their online profile, activity levels, and sleep patterns on dashboards that display on more than 150 mobile devices, including iOS, Android, and Windows Phone products. This compatibility maximizes the number

of friends and family in each user’s network to share performance stats. It also motivates and increases user retention.

First Class Fitness A smart wearable product that fits effortlessly into users’ life styles launched an industry and made FitBit a market leader. In the sec- ond quarter of 2015 (2Q15), FitBit shipped 4.4 million units, up 159% from the same quarter a year ago (2Q14) and held 24.3% global market share. Second in line was Apple with 3.6 million units shipped in 2Q15 and 19.9% global market share. Thanks to the technology that enabled FitBit and the company’s growing reputation, Friedman and Park are likely to be in business for a long time.

IT at Work Questions 1. How did FitBit manage to take the title of biggest selling

manufacturer of wearable technology tech and sustain it?

2. What could other companies who produce fitness trackers challenge FitBit in the marketplace?

3. What other features do you think consumers would like Fit- Bit to incorporate into its fitness tracker to further improve it? How would consumers and FitBit benefit from these improvements?

IT Innovation and Disruption 13

Software Support for BPM The purpose of business process management (BPM) is to help enterprises become more agile and effective by enabling them to better understand, manage, and adapt their business pro- cesses. Vendors, consulting and tech firms offer BPM expertise, services, software suites, and tools.

BPM software is used to map processes performed either by computers or manually—and to design new ones. The software includes built-in templates showing workflows and rules for various functions, such as rules for credit approval. These templates and rules provide consistency and high-quality outcomes. For example, Oracle’s WebLogic Server Process Edition includes server software and process integration tools for automating complex business processes, such as handling an insurance claim.

But, BPM initiatives can be extremely challenging, and in order to be successful, BPM requires buy-in from a broad cross section of the business, the right technology selection, and highly effective change management processes.

Questions

1. What is a business process? Give three examples. 2. What is the difference between business deliverables and objectives? 3. List and give examples of the three components of a business process. 4. Explain the differences between formal and informal processes. 5. What is an SOP? 6. What is the purpose of BPM?

1.3 IT Innovation and Disruption Digital technology creates new markets, businesses, products, and careers. As digital changes the way consumers and retailers buy and sell products, companies must adapt and innovate to ensure their product offerings, platforms, technologies, and search options cater to these changing needs.

Social–Mobile–Analytics–Cloud (SMAC) Model We are in the era of social–mobile–analytics–cloud (SMAC) computing that is reshaping business strategies and day-to-day operations (Figure 1.6).

Business process management consists of methods, tools, and technology to support and continuously improve business processes.

Estimated 15 billion devices are connected to the Internet—forecasted to hit 50 billion by 2020

as more devices connect via mobile networks

Current 4.2 billion IoT devices projected to

increase to 24 billion in 2020. This represents

73% of the total Internet- connected base

79% of online adults and 68% of all Americans use

Facebook. Mobile use generates 30% of

Facebook’s ad revenue.

U.S. mobile commerce sales top $104.05 billion

Facebook dominates all other social platforms with audience reach

FIGURE 1.6 SMAC reshapes business strategies and day-to-day operations.

14 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

The cloud consists of huge data centers accessible via the Internet and forms the core by providing 24/7 access to storage, applications, and services. Handhelds and wearables, such as FitBit, Pebble, and the Apple Watch, and their users form the edge. Social channels con- nect the core and edge. The SMAC integration creates the technical and services infrastructure needed for digital business. This infrastructure makes it possible to meet the expectations of employees, customers, and business partners given that almost everyone is connected (social), everywhere they go (mobile), gets the information they need (analytics), and has 24/7 access to products and services (cloud).

Here are three examples of SMAC’s influence:

1. Powerful social influences impact advertising and marketing Connections and feed- back via social networks have changed the balance of influence. Consumers are more likely to trust tweets from ordinary people than recommendations made by celebrity endorse- ments. And, negative sentiments posted or tweeted can damage brands.

2. Consumer devices go digital and offer new services The Nike+ FuelBand wristband helps customers track their exercise activities and calories burned. The device links to a mobile app that lets users post their progress on Facebook.

3. eBay’s move to cloud technology improves sellers’ and buyers’ experiences The world’s largest online marketplace, eBay, moved its IT infrastructure to the cloud. With cloud computing, eBay is able to introduce new types of landing pages and customer experiences without the delay associated with having to buy additional computing resources.

The balance of power has shifted as business is increasingly driven by individuals for whom mobiles are an extension of their body and mind. They expect to use location-aware services, apps, alerts, social networks, and the latest digital capabilities at work and outside work. To a growing extent, customer loyalty and revenue growth depend on a business’s ability to offer unique customer experiences that wow customers more than competitors can.

Technology Mega Trends For 21st-century enterprises, connectivity, big data and analytics, and digitization are tech- nology mega trends that cannot be ignored. Business breakthroughs and innovation would be impossible without them. They also mark the difference between outdated 20th-century business models and practices and those of today’s on-demand economy.

The most influential IT mega trends driving digital transformation of companies in the on- demand economy are discussed next.

Connectivity Companies need to connect with consumers and business partners across multiple channels and devices using digital platforms that consist of hardware, software ( mobile apps), networks (social media), (embedded sensors), and cloud computing.

For example, rather than run applications or programs from software stored on a com- puter or server owned by the company, cloud computing allows companies to access the same kinds of applications through the Internet. Major business cloud computing providers include Amazon Web Services (AWS), Cisco Powered, Dell Cloud Solutions, Google Cloud, IBM Cloud Solutions, and Teradata Cloud. One of the many benefits of cloud is that it provides the flexibility to acquire or expand connectivity and computing power as needed for operations, business transactions, and communication.

Expanded connectivity supports smart products, which have the ability to sense, process, report, and take corrective action, such as smart clothing, watches, phones, to smart buildings and smart cities. This IoT is becoming a driving force in the on-demand economy.

Connectivity pushes other sub trends, like big data, to create market opportunities for new products and services, such as social sentiment analysis, open innovation, new insurance business models, and micro personalized marketing and medicines. Big data is one of the many disruptive technologies that are impacting people, processes, and profits.

Mega trends are forces that shape or create the future of business, the economy, and society.

IT Innovation and Disruption 15

Big Data and Data Analytics There is no question that the increasing volume of data can be valuable, but only if they are processed and available when and where they are needed. The problem is that the amount, variety, structure, and speed of data being generated or collected by enterprises differ significantly from traditional data. Big data are what high- volume, mostly text data are called. Big data stream in from multiple channels and sources, including the following:

• Mobile devices and machine-to-machine sensors embedded in everything from airport runways to casino chips (Later in this chapter, you will read more about the IoT.)

• Social content from texts, tweets, posts, blogs • Clickstream data from the Web and Internet searches • Video data and photos from retail and user-generated content • Financial, medical, research, customer, and business-to-business transactions.

Big data are 80% to 90% unstructured. Unstructured data do not have a predictable format like a credit card application form. Huge volumes of unstructured data flooding into an enterprise are too much for traditional technology to process and analyze quickly. Big data tend to be more time-sensitive than traditional (or small) data. Data collected from social, mobile, and other channels are analyzed to gain insights and make smart decisions that drive up the bottom line. Machine-generated data from sensors and social media texts are main sources of big data.

Big data has been one of the most disruptive forces businesses have seen in a long time. But when an enterprise harnesses its data and is able to act on analytic insights, it can turn the challenges into opportunities.

Digitization Across industries, companies are attempting to transform their disconnected or disjointed approaches to customers, products, services, and operating models to an always-on, real-time, and information-rich marketplace. Some leaders are redesigning their capabilities and operating models to take full advantage of digital technologies to keep step with the “connected” consumer and attract talent. Others are creating qualitatively new business models—and tremendous value—around disruptive digital opportunities. In doing so, these companies secure not only continued relevance but also superior returns.

Digitization often requires that old wisdom be combined with new skills, for example, by training a merchandising manager to program a pricing algorithm and creating new roles, such as user-experience designer. The benefits of digitizing processes, through business process reengineering, are huge. By digitizing information-intensive processes, costs can be cut by up to 90% and turnaround times improved by several orders of magnitude.

Examples span multiple industries. For example, one bank digitized its mortgage appli- cation and decision process, cutting the cost per new mortgage by 70% and slashing time to preliminary approval from several days to just one minute. A telecommunications company created a self-serve, prepaid service where customers could order and activate phones without back-office involvement. A shoe retailer built a system to manage its in-store inventory that enabled it to know immediately whether a shoe and size was in stock—saving time for cus- tomers and sales staff. An insurance company built a digital process to automatically adjudi- cate a large share of its simple claims.

In addition, replacing paper and manual processes with software allows businesses to automatically collect data that can be mined to better understand process performance, cost drivers, and causes of risk. Real-time reports and dashboards on digital-process performance enable managers to address problems before they get out of control. For example, quality issues in a company’s supply chain can be identified and remedied more rapidly by monitoring customer buying behavior and feedback in digital channels.

Machine-to-Machine Technology Sensors can be embedded in most products. Objects that connect themselves to the Internet include cars, heart monitors, stoplights, and appliances. Sensors are designed to detect and react, such as Ford’s rain-sensing front wipers that use an advanced optical sensor to detect the intensity of rain or snowfall and adjust wiper speed

Digitization is the process of transforming any kind of activity or information into a digital format that can be collected, stored, searched, and analyzed electronically—and efficiently.

16 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

accordingly. Machine-to-machine (M2M) technology enables sensor-embedded products to share reliable real-time data via radio signals. M2M and the Internet of Things (IoT) are widely used to automate business processes in industries ranging from transportation to health care. By adding sensors to trucks, turbines, roadways, utility meters, heart monitors, vending machines, and other equipment they sell, companies can track and manage their products remotely.

When devices or products are embedded with sensors, companies can track their move- ments or monitor interactions with them. Business models can be adjusted to take advantage of what is learned from this behavioral data. For example, an insurance company offers to install location sensors in customers’ cars. By doing so, the company develops the ability to price the drivers’ policies on how a car is driven and where it travels. Pricing is customized to match the actual risks of operating a vehicle rather than based on general proxies—driver’s age, gender, or location of residence. Table 1.2 lists a number of opportunities for improvement through the application of embedded physical things.

Lessons Learned from Companies Using Disruptive Technologies Those companies who have adapted to change by exploiting digital technology and software are outperforming their peers. According to a survey conducted by CA Associates, companies who have turned the way they use technology from being a cost center and operational function to being a genuine competitive differentiator are reaping the benefits. Many reported doubling their revenue growth, experiencing a higher profit by a factor of 2.5 and increasing new business-based revenue by a factor of 1.5 (Vaughn-Brown, 2014). The five factors to which companies attribute these benefits can be summed up in the following Lessons Learned:

1. Exploit the power of software Become “app-centric” and extend core business func- tions to include software development.

2. Develop, deliver, disrupt—quickly! Embrace agile development techniques and broadly implement DevOps.

3. Boost speed and efficiency with automated programming interfaces (APIs) Take a managed approach to use APIs for building full-function Web applications (particularly mobile apps) and for integrating back-office systems.

Internet of Things (IoT) refers to a set of capabilities enabled when physical things are connected to the Internet via sensors.

TABLE 1.2 Improvement Opportunities from Embedded Sensors

Industry Sector Application Payoff Oil and gas Exploration and development rely on extensive sensor

networks placed in the earth’s crust. Sensors can produce accurate readings of the location, structure, and dimensions of potential fields

Lower development costs and improved oil flows

Health care Sensors and data links can monitor patients’ behavior and symptoms in real time and at low cost allowing physicians to more precisely diagnose disease and prescribe treatment regimens

Reduce hospitalization and treatment costs by $1 billion per year in the United States

Retail Sensors can capture shoppers’ profile data stored in their membership cards to help close purchases

Additional information and discounts at point of sale

Farming Ground sensors can take into account crop and field conditions and adjust the amount of fertilizer that is spread on areas that need more nutrients

Reduction in time and cost

Advertising Billboards can scan people passing by, assessing how they fit consumer profiles, and instantly change displayed messages based on those assessments

Better targeted marketing campaigns; flexibility; increased revenues

Automotive Systems can detect imminent collisions and take evasive action, such as automatic braking systems

Potential accident reduction savings of more than $100 billion annually

IT and You 17

4. Leverage third-party innovation Take a more managed approach to use APIs for integrating third-party services into applications and enable external develop access to systems and data.

5. Maximize returns with smarter IT investments Get smarter at assessing and prioritiz- ing IT investments to maximize return on investment and put portfolio management in place to prioritize and track IT programs.

Business opportunities and challenges presented by today’s technology innovations are on an unprecedented scale. Cloud services, big data, mobility, digitization, and the IoT are likely to disrupt many industries and shake up competitive positions.

Innovation is necessary for any company that wants to remain relevant, retain customers, and increase profits. Increased competition, expanded global markets, and empowered customers define today’s on-demand business environment.

Questions

1. What are the benefits of cloud computing? 2. What is M2M technology? Give an example of a business process that could be automated with M2M. 3. Describe the relationships in the SMAC model. 4. What impacts is the SMAC model having on business? 5. Why have mobile devices given consumers more power in the marketplace? 6. Explain why connectivity is important in today’s on-demand economy. 7. In what ways is IT disrupting business?

1.4 IT and You Today, IT and information systems touch nearly all aspects of our lives. IT is a part of our social life, our work, and every business process, and it is no longer the sole responsibility of the IT department. Just think about much of your day you spend interacting with technology—your iPad, PC, and smartphone. It has been reported that the average American checks his/her phone 46 times every day! That’s an increase of 35% over the 33 looks per day reported in a similar study just one year earlier. Aggregated across the 185 million American smartphone users, that’s 8 billion “looks” per day (Eadicicco, 2015).

IT impacts the way you work, the way you learn, the way you communicate and socialize and the way you entertain yourself. Today, success in any field, be it health care, marketing, finance, accounting, law, education, sports, entertainment, etc. requires much more than a cur- sory knowledge of IT. IT is and will remain the foundation of the global economy and is espe- cially important in the on-demand economy.

On-Demand Workers A recent survey of on-demand economy (Chriss, 2016) in the United States and online talent recruiters reported an increase in people working in the on-demand economy who are enjoy- ing a new way of working. Other facts and stats from the survey reveal the U.S. On-Demand workforce as a community of 45 million workers, the majority of whom are younger, optimistic, and urban-based (Table 1.3).

The survey also revealed that fewer and fewer people are looking for traditional employment. For example, 91% like the control over where, when, and how they work that the on-demand jobs offer them. The motivation for most is not to replace a traditional job, but to earn supplemental income (Table 1.4).

Cloud service is any computing resource that is provided over the Internet on demand.

18 CHAPTER 1 Disruptive IT Impacts Companies, Competition, and Careers

The data also shows a strong entrepreneurial drive behind people choosing on-demand work. Just over one-third of respondents owned full- or part-time business and approximately one quarter reporting they are working in the on-demand economy to build a business. This entre- preneurial spirit is reflected in the ways that on-demand worker are compensated. While the 40-hour workweek is still alive and well, sources of income have changed. Instead of one pay- check, on-demand workers typically receive their income from three different sources:

1. On-demand work 2. Contracting and consulting 3. Running a business

Changes in Work Status While the on-demand economy provides positive opportunities, it can also offer limited benefits and inferior infrastructure. Take, for example, the “ contractor” model that companies like Uber use. Initially, Uber set the standard for on-demand business by labeling its drivers “independent contractors” and essentially claiming that all of its 160,000 drivers were self-employed. This pushed many of the costs of doing business onto the independent contractors’ shoulders and deprived them of baseline labor protections such as worker’s compensation, social security contributions, minimum wage, and discrimination protections.

This business model also allowed companies using the Uber model to sidestep federal, state, and county taxes and insurance premiums and undercuts competitors that used a traditional W-2 hiring model. However, not all on-demand businesses use the Uber model.

Some companies treat their workers as employees from the start, while others have switched to the W-2 model and both approaches are reaping benefits. Shyp CEO Kevin Gibbon posted on LinkedIn that the move to employee status was “an investment in a longer-time relationship with our couriers, which we believe will ultimately create the best experience for our customers.” After moving to the W-2 model, Shyp had only 1 out of 245 employees quit and customer complaints decreased at the package delivery company. And Instacart, a food shopping and delivery service, offered its shoppers the option to convert to part-time employees so they could offer training to ensure a consistent customer experience and greater customer satisfaction (National Employment Law Project, 2016).

Regardless of their work status, it would appear that overall on-demand workers are highly satisfied with their work environment, perhaps because it fits a unique need. Intuit’s on- demand economy survey reported the following:

• 70% of on-demand workers are satisfied with their work. • 81% plan to continue working with the same provider over the next year. • 63% are happier to be working in the on-demand economy.

Overall, on-demand workers are forward-looking, eager to embrace new opportunities, and want to take charge of their careers.

TABLE 1.3 Profile of U.S. On-Demand Workers

Characteristic Number Financial situation had improved over the past year 23 million

Expected their financial situation to improve over the coming year 28.8 million

Under 35 years of age 23 million

Live in urban areas 18.45 million

TABLE 1.4 Motivation to Work in the On-Demand Economy

Motivation Percent Earn supplemental income 63

Create and control their own schedule 46

Turned to on-demand work because they couldn’t find another traditional job 11

IT and You 19

IT Adds Value to Your Performance and Career Whether you join the ranks of the on-demand workers, or choose to stay in a traditional job, IT can greatly enhance your performance at work and the ways you move through your career path.

Staying current in emerging technologies affecting markets is essential to the careers of knowledge workers, entrepreneurs, managers, and business leaders—not just IT and CIO.

In the current marketplace, organizations are finding it particularly difficult to find quali- fied IT Talent, as illustrated in IT at Work 1.2.

IT at Work 1.2

Scott Zulpo Is Facing Stiff Competition He’s adding a senior project manager, a network analyst, and a help desk worker to his 55-member IT staff at BCU, a Vernon Hills, Illinois-based credit union where he is vice president of IT. And, Zulpo will need to add even more people to keep up with an increasing demand for tech-driven innovations.

“The challenge is twofold—first finding talent, and then deter- mining if that talent has the skills, experience and personality to thrive in the position,” says Zulpo, who’s mindful that “the cost and impact of not hiring an ‘A’ player is huge.”

Zulpo has his work cut out for him. He’s hiring at time when very few IT professionals are out of work. Consequently, competition for tech talent is fierce. The unemployment rate for tech workers is about 2%, according to reports on recent data from the U.S. Bureau of Labor Statistics (Bureau of Labor Statistics, 2016).

And, Zulpo isn’t the only one who’s having a difficult time finding good IT talent. Many of his fellow IT leaders are seeking the same skills. Computerworld’s Forecast 2017 survey of 196 IT professionals found that both project management and technical

support were among the top 10 most sought-after skills among companies that plan to recruit in the new year.

“The IT labor market is still very hot. The candidate is very much in the driver’s seat,” says Jason Hayman, market research manager for IT staffing firm TEKsystems.

Hayman cites a government report that estimates that 500,000 to 1 million IT jobs go unfilled every year, but notes that some ana- lysts say the figure is closer to 2 million. He says there’s a classic supply-and-demand scenario working here, with demand for talent far exceeding supply.

The takeaway is that there are not enough IT workers! Compiled from: Bureau of Labor Statistics (2016), Pratt (2016),

and Computerworld (2017).

IT at Work Questions 1. What are two reasons why Zulpo had trouble finding quali-

fied IT talent? 2. What of position was Zulpo trying to fill? 3. What methods would you recommend to Zulpo help him in

his efforts to recruit new IT personnel?

IT as a Career Fueled by corporate growth, systems expansion, need for competitive or unique services to increase business and security initiatives, companies are increasing their IT hires. Companies need new tech hires who have a background in both technology and business and who can articulate IT’s value in meeting business goals. In particular, companies are seeking IT employees with skills in programming, application development, technical support, security, cloud, business intelligence, Web development, database administration, and project management.