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Information Technology FOR Managers

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George W. Reynolds Strayer University

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

Information Technology Managers

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Information Technology for Managers, Second Edition George W. Reynolds

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To my grandchildren: Michael, Jacob, Jared, Fievel, Aubrey, Elijah, Abrielle, Sofia, Elliot, Serina, and Kendall

GWR

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TABLE OF CONTENTS

Preface xiii

Chapter 1 Managers: Key to Information Technology Results 1 The E-Borders Program 1

Why Managers Must Provide Leadership for Information Technology (IT) 1 Why Managers Must Understand IT 3 What Is Information Technology? 4

Personal IT 5 Group IT 6 Enterprise IT 7

The Role of Managers Vis-À-Vis IT 11 Identifying Appropriate IT Opportunities 12 Smooth Introduction and Adoption of IT 13 Ensuring That IT Risks Are Mitigated 18

What if Managers Do Not Participate in IT Projects? 19 Overview of Remaining Text 20 Key Terms 23 Chapter Summary 23 Discussion Questions 24 Action Needed 24 Web-Based Case 25 Case Study 25 Notes 28

Chapter 2 Strategic Planning 31 Apple’s Innovative Business Strategy 31 Why Managers Must Understand the Relationship Between Strategic Planning and IT 33 Strategic Planning 33

Analyze Situation 35 Set Direction 37 Define Strategies 41 Deploy Plan 42

Setting the IT Organizational Strategy 43 Identifying IT Projects and Initiatives 45 Prioritizing IT Projects and Initiatives 46

Effective Strategic Planning: Chevron 47 Background 47 Situation Analysis 48 Set Direction 51 Define Strategies 52 Deploy Plan 52

Key Terms 57 Chapter Summary 57 Discussion Questions 57 Action Needed 58 Web-Based Case 59 Case Study 59 Notes 59

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Chapter 3 Project Management 61 The BBC Digital Media Initiative 61 Why Managers Must Understand Project Management 63 What Is a Project? 64

Project Variables 64 What Is Project Management? 69 Project Management Knowledge Areas 69

Scope Management 70 Time Management 71 Cost Management 72 Quality Management 75 Human Resource Management 76 Communications Management 78 Risk Management 80 Procurement Management 83 Project Integration Management 85

Key Terms 87 Chapter Summary 87 Discussion Questions 88 Action Needed 89 Web-Based Case 89 Case Study 90 Notes 92

Chapter 4 Business Process and IT Outsourcing 95 Salesforce.com and Its Cloud-Based Success 95 Why Managers Must Understand Outsourcing 97 What Are Outsourcing and Offshore Outsourcing? 98

Why Do Organizations Outsource? 99 Issues Associated with Outsourcing 102

IT Outsourcing 105 Public Cloud Computing 105 Virtualization 108 Autonomic Computing 108 Private Cloud Computing 109 Hybrid Cloud Computing 109

Planning an Effective Outsourcing Process 109 Establish a “Smart” Outsourcing Strategy 111 Evaluate and Select Appropriate Activities and Projects for Outsourcing 111 Evaluate and Select Appropriate Service Providers 112 Evaluate Service Provider Locations 113 Benchmark Existing Service Levels 114 Define the Service-Level Agreement 115 Develop an Outsourcing Contract 116 Establish an Outsourcing Governance Process 116 Measure and Evaluate Results 117

Key Terms 119 Chapter Summary 119 Discussion Questions 120 Action Needed 121 Web-Based Case 121 Case Study 122 Notes 125

viii Table of Contents

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Chapter 5 Corporate and IT Governance 129 Credit and Debit Card Theft 129

Why Managers Must Get Involved in IT Governance 129 What Is IT Governance? 131

Ensuring That an Organization Achieves Good Value from Its Investments in IT 133 Mitigating IT-Related Risks 134

Why Managers Must Understand IT Governance 137 IT Governance Frameworks 137

IT Infrastructure Library (ITIL) 139 Control Objectives for Information and Related Technology (COBIT) 140 Using PDCA and an IT Governance Framework 142

Business Continuity Planning 144 Process for Developing a Disaster Recovery Plan 148

Key Terms 153 Chapter Summary 153 Discussion Questions 154 Action Needed 154 Web-Based Case 155 Case Study 155 Notes 158

Chapter 6 Collaboration Tools 161 Eagle Investment Employs Unified Communications 161 Why Managers Must Understand Collaboration Tools 164 Collaboration Tools 164

Electronic Bulletin Boards 164 Blogs 165 Calendaring Software 168 Desktop Sharing 168 Instant Messaging (IM) 169 Podcasts 170 Really Simple Syndication (RSS) 171 Shared Workspace 171 Online Project Management 171 Web Conferencing, Webinars, and Webcasts 172 Wikis 175 Presence Information 176 Unified Communications (UC) 176

Key Terms 179 Chapter Summary 179 Discussion Questions 180 Action Needed 180 Web-Based Case 181 Case Study 181 Notes 183

Chapter 7 E-commerce 185 Alibaba Opening the Door to the Largest Domestic Retail Market in the World 185 Why Managers Must Understand E-Commerce 187 Forms of E-Commerce 189

Business-to-Business (B2B) E-Commerce 189 Business-to-Consumer (B2C) E-Commerce 192 Consumer-to-Consumer (C2C) E-Commerce 194 E-Government Commerce 194 Mobile Commerce 196

Table of Contents ix

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E-Commerce Critical Success Factors 198 Identifying Appropriate E-Commerce Opportunities 198 Acquiring Necessary Organizational Capabilities 198 Directing Potential Customers to Your Site 200 Providing a Good Customer Online Experience 201 Providing an Incentive for Customers to Purchase and Return in the Future 201 Providing Timely, Efficient Order Fulfillment 202 Offering a Variety of Easy and Secure Payment Methods 203 Handling Returns Smoothly and Efficiently 205 Providing Effective Customer Service 205

Advantages of E-Commerce 206 Issues Associated with E-Commerce 207

Customers Fear That Their Personal Data May Be Stolen or Used Inappropriately 207 Cultural and Linguistic Obstacles 208 Difficulty Integrating Web and Non-Web Sales and Inventory Data 208

Key Terms 210 Chapter Summary 210 Discussion Questions 211 Action Needed 212 Web-Based Case 212 Case Study 213 Notes 215

Chapter 8 Enterprise Systems 219 Coca-Cola: Global Reach Through Local Distribution 219 What Is an Enterprise System? 222 Enterprise Resource Planning 222

Benefits of Using an ERP System 225 Tier I, Tier II, and Tier III ERP Vendors 228 ERP Customization 229 Supply Chain Management (SCM) 230

Customer Relationship Management 232 Product Life Cycle Management (PLM) 236 Avoiding Enterprise Systems Failures 240 Hosted Software Model for Enterprise Software 241 Key Terms 244 Chapter Summary 244 Discussion Questions 245 Action Needed 246 Web-Based Case 246 Case Study 247 Notes 249

Chapter 9 Business Intelligence and Big Data 253 Amazon: Beating the In-Store Advantage with Business Intelligence 253 What Is Business Intelligence? 255

Data Warehouse/Data Marts 256 Big Data 258

Structured and Unstructured Data 259 Business Intelligence Tools 263

Spreadsheets 264 Reporting and Querying Tools 265 Online Analytical Processing (OLAP) 265 Drill-Down Analysis 266

x Table of Contents

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Data Mining 267 Dashboards 268 Data Governance 269

Challenges of Big Data 272 Key Terms 275 Chapter Summary 275 Discussion Questions 276 Action Needed 277 Web-Based Case 277 Case Study 278 Notes 281

Chapter 10 Knowledge Management 285 How Knowledge Management Is Helping Nelnet Service Student Loans 285 What Is Knowledge Management (KM)? 287

Knowledge Management Applications and Associated Benefits 289 Best Practices for Selling and Implementing a KM Project 290

Technologies That Support KM 292 Communities of Practice 293 Social Network Analysis (SNA) 293 Web 2.0 Technologies 295 Business Rules Management Systems 295 Enterprise Search Software 297

Key Terms 300 Chapter Summary 300 Discussion Questions 301 Action Needed 302 Web-Based Case 302 Case Study 302 Notes 305

Chapter 11 Cybercrime and IT Security 307 Health Data Cybertheft: The Plunder of Anthem 307 Why Managers Must Understand IT Security 309

Why Computer Incidents Are So Prevalent 309 Types of Exploits 313 Federal Laws for Prosecuting Computer Attacks 324

Implementing Trustworthy Computing 325 Risk Assessment 326 Establishing a Security Policy 327 Educating Employees and Contract Workers 329 Prevention 329 Detection 333 Response 333

Key Terms 339 Chapter Summary 339 Discussion Questions 340 Action Needed 341 Web-Based Case 342 Case Study 342 Notes 345

Table of Contents xi

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Chapter 12 Ethical, Legal, and Social Issues of Information Technology 349 Artificial Intelligence: Robots on the Rise 349 What Is Ethics? 352

The Difference Between Morals, Ethics, and Laws 352 Including Ethical Considerations in Decision Making 353

Privacy 355 Data Brokers 360 Treating Customer Data Responsibly 360 Workplace Monitoring 362 Social Networking and Privacy 364

Internet Censorship 367 Internet Access 368

The Digital Divide 369 E-Rate Program 370 Net Neutrality 370 Internet of Things 371

Key Terms 376 Chapter Summary 376 Discussion Questions 378 Action Needed 378 Web-Based Case 379 Case Study 379 Notes 382

Glossary 387 Index 401

xii Table of Contents

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PREFACE

Why This Text? The undergraduate capstone course on information technology and the MBA level infor- mation technology course required of College of Business graduates are two of the most challenging courses in the business curriculum to teach. Students in both courses often start the term skeptical of the value of such a course. Indeed, “Why do I need to take this course?” is frequently their attitude. Unfortunately, this attitude is only perpetuated by most texts, which take the approach of “Here is a lot of technical stuff you have to understand.” As a result, students complete the course without getting as much from it as they could. The instructors of such courses are disappointed, receive poor student eva- luations, and wonder what went wrong. An opportunity to deliver an outstanding and meaningful course has been missed.

Information Technology for Managers, 2nd edition, takes a fundamentally different approach to this subject in three ways. First, it is targeted squarely at future managers, making it clear why IT does indeed matter to them and the organization. Second, it enables future business managers to understand how information technology can be applied to improve the organization. Third, it provides a framework for business managers to understand their important role vis-à-vis information technology. Said another way, Information Technology for Managers, 2nd edition, answers three basic questions—Why do I need to understand IT? What good is IT? What is my role in delivering results through the use of IT?

Approach of This Text Information Technology for Managers, 2nd edition, is intended for future managers who are expected to understand the implications of IT, identify and evaluate potential oppor- tunities to employ IT, and take an active role in ensuring the successful use of IT within the organization. Thoroughly updated, the text is also valuable for future IT managers who must understand how IT is viewed from the business perspective and how to work effec- tively with all members of the organization to achieve IT results.

Organization and Coverage in the 2nd Edition Chapter 1: Managers: Key to Information Technology Results presents a clear rationale for why managers must get involved in information technology strategic planning and project implementation. The chapter helps managers identify what they must do to advance the effective use of IT within their organizations, and it helps them understand how to get involved with IT at the appropriate times and on the appropriate issues, as demonstrated by new examples from Walmart, Avon, Ellie Mae, and more.

Chapter 2: Strategic Planning describes how to develop effective strategic planning by defining key business objectives and goals, which are used to identify a portfolio of

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potential business projects that are clearly aligned with business needs, as illustrated by the new opening vignette featuring Apple, Inc. Further refinement is required to narrow the portfolio to the projects that should be executed and for which sufficient resources are available. This process is illustrated by the example of Chevron, a major global organiza- tion respected for its highly effective use of IT to support business objectives.

Chapter 3: Project Management provides a helpful overview of the project manage- ment process. The presentation is consistent with the Project Management Institute’s Body of Knowledge, an American National Standard. The chapter describes the nine proj- ect management knowledge areas of scope, time, cost, quality, human resources, commu- nications, risk, procurement, and integration. This chapter identifies the many roles a business manager might take throughout the project life cycle, including champion, spon- sor, project manager, subject matter expert, project team member, and end user, whether in private enterprise, such as Vermont Health Connect, or government facilities, such as the National Audit Office of the United Kingdom or the Russian Olympic committee.

Chapter 4: Business Process and IT Outsourcing discusses the major business rea- sons for outsourcing as well as many of its potential pitfalls. It also outlines and describes an effective process for selecting an outsourcing firm and successfully transitioning work to the new organization. The chapter provides a thorough discussion of cloud computing as an example of IT outsourcing. Using current examples from Supervalu, Amazon, and others, the chapter covers the importance of establishing service-level agreements and monitoring performance.

Chapter 5: Corporate and IT Governance describes the responsibilities and practices that a company’s executive management uses to ensure delivery of real value from IT and to ensure that related risks are managed appropriately, all brought to life with real-world examples from Home Depot, Target, and Michaels. The chapter covers two frameworks for meeting these objectives: the IT Infrastructure Library (ITIL) and Control Objectives for Information and Related Technology (COBIT). The discussion includes related issues such as mitigating IT-related risks, use of the PDCA model to improve IT governance, and business continuity planning.

Chapter 6: Collaboration Tools identifies and discusses the variety of collaboration tools that managers can use to improve communications and enhance productivity, such as blogs, Webinars, and wikis. It also discusses the benefits and some of the issues that can arise from their use, as demonstrated by the opening vignette about Eagle Investment Systems.

Chapter 7: E-Commerce discusses the use of electronic business methods to buy and sell goods and services, interact with customers, and collaborate with business partners and government agencies. Several forms of e-business are covered, including business-to- business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C), and e-government commerce. The chapter also covers m-commerce, an approach to conduct- ing e-commerce in a wireless environment. The chapter prepares managers to understand and deal with many of the business, legal, and ethical issues associated with e-business, and contemporary examples like Alibaba and Amazon reinforce the international reach of e-commerce.

Chapter 8: Enterprise Systems discusses enterprise planning, customer relationship, and product life cycle management systems used to ensure that business transactions are processed efficiently and accurately and that the resulting information can be accessed by end users and managers in all business areas. Including references to Coca-Cola, IBM, and

xiv Preface

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others, it identifies several of the benefits associated with enterprise system implementa- tion, outlines measures to take to avoid enterprise system failures, and describes the hosted software model for enterprise software. The chapter also explains the key role that business managers play in successfully implementing enterprise systems.

Chapter 9: Business Intelligence and Big Data discusses a wide range of applications that help businesses gather and analyze data to improve decision making at organizations like Amazon and Memorial Sloan Kettering Cancer Center, including spreadsheets, reporting and querying tools, online analytical processing, drill-down analysis, data min- ing, and dashboards. The chapter also covers many big data topics, including structured and unstructured data, ACID properties, NoSQL Databases, Hadoop, in-memory data- bases, and data governance. The challenges associated with business intelligence systems and big data are also discussed as well as the role of the business manager in developing and using these systems.

Chapter 10: Knowledge Management describes explicit and tacit information and how organizations like NASA and Nelnet use knowledge management to identify, select, organize, and disseminate that information. In this chapter, you will learn about techni- ques for capturing tacit knowledge, communities of practice, social network analysis, Web 2.0 technologies, business rules management systems, and enterprise search. The chapter also covers how to identify and overcome knowledge management challenges, and it includes a set of best practices for selling and implementing a knowledge management project.

Chapter 11: Cybercrime and IT Security discusses commonly occurring computer- related security incidents (using recent examples from Anthem and Sony), describes why computer incidents are so prevalent, identifies various perpetrators of computer crime, offers a computer security self-assessment test, describes types of exploits, outlines vari- ous federal laws for prosecuting computer attackers, and describes how to implement trustworthy computing, including specific tasks to prevent, detect, and respond to com- puter security incidents.

Chapter 12: Ethical, Legal, and Social Issues of Information Technology provides a brief overview of ethics and how to include ethical considerations in decision making. A variety of topics related to privacy, freedom of expression versus censorship, and Internet access—all based on current situations from Verizon, Zendesk, and more—are discussed from the perspective of what managers need to know about these topics.

Chapter Features Opening Vignette: Business majors and MBA students often have difficulty appreciating why they need to comprehend IT or what their role (if any) is vis-à-vis IT. In recognition of this, each chapter begins with an opening vignette that raises many of the issues that will be covered in the chapter. The vignette touches on these topics in such a way as to provide a strong incentive to the student to read further in order to gain clarity regarding the potential impact of IT on the business as well as management’s responsibility in rela- tion to IT.

Learning Objectives: A set of learning objectives follows the opening vignette and provides a preview of the major themes to be covered in the chapter.

Real-World Examples: In an effort to maintain the interest and motivation of the reader, each chapter includes numerous real-world examples of business managers

Preface xv

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struggling with the issues covered in the chapter—some successfully, some unsuccessfully. The goal is to help readers understand the manager’s role in relation to information tech- nology and to discover key learnings they can apply within their organizations.

What Would You Do: This special feature presents realistic scenarios that encourage students to think critically about the concepts presented in the chapter. There are three of these features placed appropriately in each chapter to cause the reader to reflect on the topics just covered.

A Manager’s Checklist: Each chapter contains a valuable set of guidelines for future business managers to consider as they weigh IT-related topics, including how they might use IT in the future within their organization.

Chapter Summary: Each chapter includes a helpful summary that highlights the managerial implications and key technical issues of the material presented.

Discussion Questions: A set of thought-provoking questions to stimulate a deeper understanding of the topics covered in the chapter.

Action Needed: Each chapter includes three mini-cases requiring a decision or response from the reader. These mini-cases provide realistic scenarios and test the stu- dent’s knowledge, insight, and problem-solving capability.

Web-Based Case: Each chapter includes an “open-ended” case that requires students to gather their own research information and do some critical thinking to address the questions raised in the case.

Case Study: Each chapter ends with a challenging real-world case of managers strug- gling with the issues covered in the chapter. These cases are unique because they look at IT from a manager’s perspective, not from an IT technologist’s point of view.

INSTRUCTOR RESOURCES

The teaching tools that accompany this text offer many options for enhancing a course. As always, we are committed to providing one of the best teaching resource packages available in this market.

Instructor’s Manual An Instructor’s Manual provides valuable chapter overviews, chapter learning objectives, teaching tips, quick quizzes, class discussion topics, additional projects, additional resources, and key terms. It also includes solutions to all end-of-chapter discussion ques- tions, exercises, and case studies.

Test Bank and Test Generator Cognero® is a powerful objective-based test generator that enables instructors to create paper-, LAN- or Web-based tests from test banks designed specifically for their Course Technology text.

PowerPoint Presentations A set of Microsoft PowerPoint slides is available for each chapter. These slides are included to serve as a teaching aid for classroom presentation. The presentations help

xvi Preface

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students focus on the main topics of each chapter, take better notes, and prepare for examinations. The slides are fully customizable. Instructors can either add their own slides for additional topics they introduce to the class or delete slides they won’t be covering.

CourseMate Engaging and affordable, the new Information Technology for Managers CourseMate Web site offers a dynamic way to bring course concepts to life with interactive learning, study, and exam preparation tools that support this printed edition of the text. Watch student comprehension soar with flash cards, games, and quizzes that help them prepare for exams. A complete e-book provides you with the choice of an entire online learning experience. Information Technology for Managers CourseMate goes beyond the book to deliver what students need.

ACKNOWLEDGMENTS

I want to thank all of the folks at Cengage Learning for their role in bringing this text to market. I offer many thanks to Mary Pat Shaffer, my wonderful development editor, who deserves special recognition for her tireless efforts and encouragement. Thanks also to the many people who worked behind the scenes to bring this effort to fruition, includ- ing Joe Sabatino, product director and Jason Guyler, product manager. Special thanks to Jennifer King, the content development manager, and Anne Merrill, the content developer, for coordinating the efforts of the team of many people involved in this project and for keeping things moving forward.

I especially want to thank Naomi Friedman, who wrote the opening vignettes and end- of-chapter cases.

Last, but not least, I want to thank my wife, Ginnie, for her patience and support in this major project.

TO MY REVIEWERS

I greatly appreciate the following reviewers for their perceptive feedback on this text: Larry Booth, Clayton State University Nicole Brainard, Principal, Archbishop Alter High School, Dayton, Ohio Ralph Brueggemann, University of Cincinnati Rochelle A. Cadogan, Viterbo University Wm. Arthur Conklin, University of Houston Barbara Hewitt, Texas A&M University, Kingsville William Hochstettler, Franklin University Jerry Isaacs, Carroll College Marcos Sivitanides, Texas State University Gladys Swindler, Fort Hays State University Jonathan Whitaker, University of Richmond

Preface xvii

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MY COMMITMENT

I welcome your input and feedback. If you have any questions or comments regarding Information Technology for Managers, 2nd edition, please contact me through Course Technology at www.cengage.com or through your local representative.

George W. Reynolds

xviii Preface

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CHAPTER 1 MANAGERS: KEY TO INFORMATION TECHNOLOGY RESULTS

PROVIDING LEADERSHIP “A leader takes people where they want to go. A great leader takes people where they don’t necessarily want to go, but ought to be.”

—Rosalynn Carter, former First Lady of the United States

THE E-BORDERS PROGRAM

Why Managers Must Provide Leadership for Information Technology (IT)

In late August 2014, the British government raised the terror threat level for the United Kingdom to

four—or “severe.” According to the government, at least 500 British citizens had recently left the

United Kingdom and traveled to Syria or Iraq to join the Islamic fundamentalist militant group ISIL

(also known as ISIS and the Islamic State), which had conquered large swaths of territory in the

Middle East. The government suspected that many of those citizens were being trained to return to

the United Kingdom to carry out terrorist attacks. The British government’s chief defense strategy

against this threat lay in border control—preventing U.K. citizens from flying out of the country to

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join ISIL, canceling the citizenship of those U.K. residents who were already fighting for ISIL, and

apprehending ISIL trainees returning to the United Kingdom.

In 2003, anticipating the need for tighter border control, the British government launched

the e-Borders project. The main objective of the program was to collect information about all

scheduled inbound and outbound passengers in advance of travel. This data would then be

used to prevent passengers considered a threat from entering or leaving the country, arrest ter-

rorist and organized crime suspects, and improve passenger clearance times. In March 2014,

the government canceled the project at a cost of £224 million ($350 million) to British

taxpayers. An evaluation of the e-Borders program in 2013 had determined that while the IT

system supporting the program had been effectively deployed at London’s Heathrow Airport,

the system had failed in the maritime and rail sectors. The effective elements of the e-Borders

system were subsequently merged into the new Border Systems Programme with the hope that

the capabilities of this system would be expanded.