Error 97 sms origination denied moto g6

Information Technology for Management

This book is licensed under a Creative Commons Attribution 3.0 License

Information Technology for Management

Henry C. Lucas, Jr.

Copyright © 2009 by Henry C. Lucas, Jr.

For any questions about this text, please email: drexel@uga.edu

The Global Text Project is funded by the Jacobs Foundation, Zurich, Switzerland

This book is licensed under a Creative Commons Attribution 3.0 License

This edition was scanned and converted to text using Optical Character Recognition. We are in the process of

converting this edition into the Global Text Project standard format. When this is complete, a new edition will be

posted on the Global Text Project website and will be available in a variety of formats upon request.

Information Technology for Management 2 A Global Text

http://creativecommons.org/licenses/by/3.0/
http://creativecommons.org/licenses/by/3.0/
mailto:drexel@uga.edu?subject=Information%20Technology%20for%20Managment
mailto:drexel@uga.edu?subject=Information%20Technology%20for%20Managment
mailto:drexel@uga.edu?subject=Information%20Technology%20for%20Managment
http://creativecommons.org/licenses/by/3.0/
http://creativecommons.org/licenses/by/3.0/
To Scott and Jonathan

TO THE STUDENT

Information technology surrounds you-on your campus and in local businesses. When you order merchandise over the telephone, chances are your sales represen­ tative is using an information system to check inventory and to trigger the ship­ ment of your goods. Increasingly you will order products using the Internet, dis­ pensing with the telephone and becoming a participant in electronic commerce. When you use an automatic teller machine, make an airline reservation, or rent a car, information technology (IT) is working for you again.

Information technology is pervasive in modem organizations-from the largest manufacturing firms to your comer drugstore, and the stakes are high, as busi­ nesses confronted with global competition strive to succeed. Some organizations will flourish; others will fail. Those that succeed will understand how to use and manage information technology to their advantage.

The purpose of Information Technology for Management, Seventh Edition, is to help you learn enough about technology to play an active role in managing infor­ mation technology. It is important to understand the strategic uses of IT and how to apply technology when developing a corporate strategy. You will see how cre­ ative organizations have integrated technology with strategy, allowing them to gain and sustain a competitive advantage. What role does the Internet play for your firm? What are the advantages your business can obtain from implementing In­ tranets and Extranets? How does technology facilitate the operations of global firms?

v

vi PREFACE

You will also see how to use information technology to transform the organiza­ tion and to create new lines of business and new relationships with other firms. The text stresses how you as a manager can use information technology-enabled organi­ zational design variables to create new organizational structures, including the T-Form firm. This new structure takes advantage of electronic communications and linking, technological matrixing, technological leveling, virtual components, elec­ tronic workflows, production automation, and electronic customer-supplier relation­ ships to create a flat organization closely linked to other organizations. It uses tech­ nology to reduce the number of administrative levels, to decentralize decision making, and generally to design a highly efficient and effective organization.

You will learn how to exploit technology to enhance your professional and per­ sonal productivity. Information technology is a resource. It enables you to re­ design the organization, change the firm's relationship with customers and suppli­ ers, as well as its communications patterns. Technology is a variable that you as a manager will be able to manipulate to effect significant improvements in what the organization and its employees can accomplish.

A theme throughout the book is that information technology brings change to organizations, individuals, work groups, relationships among companies, and even national governments. Information technology provides the manager with a pow­ erful resource for bringing about change.

Once you have completed your course, look through a newspaper or business publication. You will be surprised at your understanding of many of the issues raised in articles dealing with information technology.

In sum, this text is designed to prepare you for the important role of managing information technology, to give you and your company a competitive edge.

TO THE INSTRUCTOR

This book is designed for business students with no particular background in in­ formation systems. Its primary goal is to help prepare students to assume an active and significant role in the management, design, and use of information technology. This edition stresses the changes enabled by IT. Each chapter begins with a short Focus on Change because technology is creating dramatic changes in the way in­ dividuals, work groups, organizations, and even governments function.

The Objectives of This Text

During the past decade, computers and communications technologies have prolif­ erated in offices and homes. Organizations distribute the responsibility for tech­ nology to all levels of management and to different geographic locations. As a re­ sult, managers from supervisor to CEO encounter information technology on a daily basis. Every day managers make decisions that determine how much value the firm obtains from its investment in technology.

Organizations have the opportunity to become more efficient and competitive. Skilled and creative managers are required to accomplish these goals. Today's MBAs need the knowledge and confidence to deal with issues related to technology.

They must apply technology aggressively if they are to compete successfully in our global economy. They must take advantage of the ability that IT gives them to change the way work is done, communications patterns, and the very structure of the organization.

One of the most important parts of using the technology is the design of informa­ tion systems. Much of the distribution of technology to users results from the rapid diffusion of personal computers or workstations. Applications once considered per­ sonal are being shared across networks. Knowledge workers access a number of dif­ ferent applications on different computers through a LAN and the Internet.

Knowledge workers may design systems for themselves alone, or they may be one of many users of a system designed by others. The design of multiuser appli­ cations is much more complex than the design of a personal computer system for an individual user. Many more people are involved in the process, each with unique and often conflicting needs and expectations.

Recent graduates are likely to find themselves on design teams for multiuser systems. Thus, it is critical that a course in information systems prepare students to play an active role in the development of new applications that will affect their productivity and their company's competitiveness.

Based on the discussion above, this book is designed to help students meet these three major objectives:

1. To understand the emerging technological issues facing management so stu­ dents can effectively manage information systems in organizations

2. To play an active role in applying technology through the analysis, design, and implementation of multiuser systems that will meet the information needs of the organization

3. To learn how to use technology to transform the organization and create new relationships, structures, and entirely new organizations

ORGANIZATION

The text is organized into six major parts to help students meet these objectives:

Part One The Role of Managers in Information Technology

The purpose of Part One is to emphasize to students the value of information as a corporate asset and illustrate the myriad information systems applications they will face as graduates. Frameworks help them understand the role of technology in business.

Part Two Organizational Issues

In Part Two we deal with the impact of information technology on the organiza­ tion. The book stresses the use of IT design variables in creating new kinds of or­ ganization structures. In particular, I advocate developing T-Form organizations in order to be successful in the highly competitive environment of the twenty-first century. This section also discusses how the firm can use technology as part of its

PREFACE vii

viii PREFACE

strategy to gain a competitive advantage. This discussion of key managerial issues surrounding the technology and its application helps motivate student learning.

Part Three Information Technology

Important managerial decisions increasingly require an understanding of the tech­ nology. Therefore, graduates need to have knowledge of hardware and software fundamentals. In Part Three I have included the technical information I consider most important and relevant to future managers.

Part Four Systems Analysis and Design

Poorly designed systems are responsible for many information system problems. When information needs are not met, users are alienated and the value of the sys­ tem diminishes. Part Four prepares graduates to participate in the development of multiuser systems and make an immediate contribution to their employer.

Part Five Exciting Directions in Systems

Part Five deals with alternatives to traditional transactions processing applications such as decision-support systems, expert systems, groupware, multimedia, and ar­ tificial intelligence. An understanding of these emerging applications offers stu­ dents great potential to enhance their organizations' competitiveness.

Part Six Issues for Senior Management

At the end of the text, we return to the issues facing management currently. Man­ agers need to be concerned with security and control, and how to achieve the max­ imum benefits possible for the firm's investment in technology. Part Six encour­ ages students to evaluate the problems-and opportunities-that changing societal conditions and technological advances will create for their businesses. The table below arrays our three objectives against the six major parts of the text.

Managing Applying Transform the Part technology technology organization

One The role of managers in IT [Xl [ 1 [Xl Two Organizational issues [Xl [Xl [Xl Three Information technology [Xl [Xl [ 1 Four Systems analysis and design [Xl [Xl [Xl Five EXCiting directions in systems [Xl [Xl [Xl Six Management control of IS [Xl [ 1 [ 1

Note that the first objective-managing information technology-is a theme woven throughout every chapter. To manage technology effectively, students must understand its strategic significance and potential impact on the organization. In addition to these underlying organizational issues, managers must understand the related technical issues.

The second objective-learning to apply technology through a systems analy­ sis and design team-is supported by Parts Two, Three, Four, and Five. These

parts cover the fundamentals of systems development from a managerial perspec­ tive. Using the Simon Marshall case, which is found throughout the book, stu­ dents complete the logical design of a system. This exercise encourages students to confront the myriad decisions and trade-offs that constitute the design of a multiuser system and gain a "real world" understanding of what otherwise would remain abstract.

The third and final objective-transforming the organization-is a theme throughout the text. It is a significant component of Parts One, Two, Four, and Five. In one sense, the entire text is devoted to preparing students to use technol­ ogy to change the way organizations are structured and operate.

Learning Tools for Your Students

The text has a number of features designed to facilitate student learning, including the following:

• Management Problems and topical vignettes Most chapters contain Man­ agement Problems and topical vignettes . Management Problems are "mini­ cases" for students to ponder alone or in groups; some instructors use the problems to stimulate class discussion. The vignettes illustrate the many dif­ ferent ways that information technology is used. They are intended to help the student become more creative in discovering how to benefit from information systems.

• Chapter Summary A summary of each chapter in the form of a numbered list containing the most important points in the chapter is found at the end of each chapter.

• Implications for Management Another feature is a paragraph after the Chapter Summary that contains my thoughts on the implications of the chapter material for a manager. This personal statement explains the importance of the material the student has just read.

• Chapter Projects Most chapters contain a Chapter Project. The projects are de­ signed to help students apply concepts discussed in the chapter. Some projects require the student to conduct research or contact an organization to find out more about its information processing. I usually use one of the systems design projects as a group assignment. Students report that the experience of designing the logic of a system helps pull together much of the material in the course.

• The Simon Marshall case Several of the chapter projects involve the Simon Marshall case. There is a systems analysis and design problem for Simon Mar­ shall that involves PCs, a server, a local area network, a mainframe data source, and a satellite distribution system. This assignment, carried out as a group proj­ ect, helps students master the technical and design material in the text.

Instructor's Manual

The Instructor's Manual contains a course outline, teaching hints, and answers to selected questions. Also included are a discussion of all the Management Prob­ lems and sample course syllabi.

PREFACE ix

X PREFACE

OVERVIEW OF THE SEVENTH EDITION

The seventh edition of Information Technology for Management reflects current thinking about the role of IT in management. In particular, it stresses the fact that managers implement new technology to change something: the organization, the nature of work, relationships with other organizations, or some other facet of busi­ ness. The student should look at IT as a resource that he or she can employ to make major improvements in the organization.

Compared with the previous edition, the seventh edition contains less emphasis on the technical details and more on the managerial issues of IT and state-of-the­ art topics. The tremendous growth of the Internet and Web has had a major influ­ ence on the text. Material on the value of information technology and how man­ agement should decide on IT investments is greatly expanded. There are also many new topical vignettes in each chapter.

Over the years, we have seen major changes in the way leading firms use infor­ mation technology. Transactions processing systems helped improve efficiencies. Strategic systems provide some companies with a competitive advantage. Now, with workgroup technology, group DSS, and extensive connectivity, we have the ability to use IT to transform the organization. This theme of change is reflected throughout this current edition.

The text has been extensively updated to reflect advances in technology and in its application. There are many more examples of applications and systems in the text to supplement the topical vignettes that are ruled off in the text.

The first chapter sets the stage for the text and attempts to motivate students to study information technology. The next two chapters discuss the nature of infor­ mation and frameworks for IT. Frameworks help students understand the role of technology in the firm.

Chapter 4 is extremely important; it discusses the impact of information tech­ nology on the organization. Consistent with the theme of change, the chapter pre­ sents examples of how technology has dramatically changed organizations. It also presents an approach to actively using technology in the design of new organiza­ tional forms. Chapter 5 on the strategic use of IT stresses the difficulty of sustain­ ing an advantage once it is achieved. This chapter also contains a lengthy descrip­ tion of a firm that has used the technology over the years to develop a clear competitive advantage. The section on the issues in managing information tech­ nology is now clearer and more streamlined.

Globalization is now a major trend in business. Trade barriers are falling, and firms are expanding their markets beyond their own borders. Chapter 6 explores the implications of globalization for information technology. What can IT con­ tribute to the international firm? What are the special IT problems created by try­ ing to operate globally?

Part Three of the text is devoted to information technology; it attempts to pro­ vide the student with sufficient familiarity with technology so that he or she can make good management decisions.

Chapter 8 places the different types of computers available today in perspective. It discusses the different generations of Intel chips and the features that are used to

increase the speed of these processors. I have attempted to provide a balanced and realistic picture of the role and future of mainframes, both in this chapter and throughout the text Chapter 9 contains a discussion of the major operating sys­ tems choices today: Windows 98, Unix, and Windows NT.

Chapter 10 presents the fundamentals of database management and describes how the organization uses a DBMS for transactions processing and to extract in­ formation to be used in managing the firm. The chapter also stresses how the stu­ dent can use a DBMS for his or her own personal productivity.

Chapter l I on communications emphasizes the role of this technology in trans­ forming organizations. The chapter features more material on networks and connec­ tivity along with examples of how firms are using communications technology in creative ways. Chapter 12 on networks covers topics ranging from EDI to the Inter­ net Networks are one of the fastest growing phenomena in the field, and this chapter tries to excite the reader about their potential. Chapter 12 contains much new mate­ rial on electronic commerce and the new models of business that IT enables.

There is a great deal of confusion about what kind of architecture is best for a given application or organization. Chapter 13 attempts to clarify any confusion the student may have about people who use the different types of technology de­ scribed in earlier chapters. This chapter discusses the role of large, medium, and small computers and illustrates them with examples of different systems, ranging from a centralized, mainframe airline reservations system to a highly decentral­ ized, client-server system at Chevron Canada. New to this edition is a discussion of Travelocity, a Web site that allows a user with a browser to connect to an exist­ ing mainframe reservations system.

A key objective of the text is to prepare students to apply technology through participation in systems analysis and design projects. We have encountered users who developed their own systems on PCs that served as the specifications for the same system to be developed for the entire corporation! The manager who under­ stands how to build systems is at a distinct advantage.

Chapter 15 introduces systems analysis and design while Chapter 16 covers some design details. One of the highlights of this section is the appendix to the chapter. This appendix presents a high-level design for a system for the Hardserve company. There are complete DFDs for the retail store component of the system and for the subsystem in the company's warehouse. This in-depth example should provide students with a good understanding of the output of the design process and the way in which one describes a system. A second example of object-oriented de­ sign for a hypothetical community hospital is also in an appendix to this chapter.

Chapter 17 talks about enhancements to the traditional life-cycle approach to developing a system, especially packages and prototyping. Chapter 1 8 is devoted to the popular topic of business process reengineering. This chapter presents two examples of process reengineering and two examples where IT design variables have been used to reengineer the entire organization.

Implementation is concerned with how you bring about change in the organi­ zation. You are trying to see, at the level of the individual system, that systems provide the maximum return from the firm's investment in IT. In using IT design

PREFACE xi

xii PREFACE

variables, you are likely to be trying to change the structure of the entire organi­ zation, a major challenge. Chapter 19 is devoted to implementation; it is still true that systems are underutilized and that users take advantage of only a fraction of the capabilities of existing, installed technology. Chapter 19 integrates research findings to produce an implementation framework to help the student understand and manage this process.

When the first edition of this text was published, there were no hands-on users outside of the IS department. We have moved from no contact to terminals to workstations on the user's desk. Chapter 20 discusses the range of knowledge worker interaction with technology and suggests ways to encourage it. The evolv­ ing model of client-server computing means that users on workstations will obtain the data and programs they need to answer their questions from the server.

Chapter 21 describes how IT can be used in nontraditional ways to enhance the effectiveness of individuals and organizations. The DSS part of the chapter con­ tains examples of how these applications contribute to improving productivity. Material on EIS and group DSS is also found in the chapter. Groupware is one of the most exciting applications for transforming organizations and is discussed in this chapter. A section on multimedia stresses how this technology can be used for business, as opposed to entertainment, purposes.

Chapter 22 on intelligent systems contains an in-depth example of an expert system we developed at the American Stock Exchange. There is also material on neural networks and coverage of case-based reasoning and genetic algorithms.

Part Six deals with management issues. Chapter 24 includes a discussion of several different models of IT in the firm and an in-depth discussion of the role of the CIG. It also contains guidelines or steps for diagnosing and improving the IT effort in an organization. New to this chapter is an extensive discussion of how the firm can make decisions about investing in information technology, including cov­ erage of the IT Value Equation and the IT Investment Equation. Chapter 25 pre­ sents framework for categorizing social issues and a discussion of ethics. It also includes a discussion about living with future technology.

CONCLUSION

This seventh edition of the text is intended to help your students appreciate the contribution of information technology and learn how to manage it.

I am indebted to a number of students and colleagues whose comments and rec­ ommendations have greatly influenced the original text and its revisions. Mr. Won­ seok Oh at NYU helped conduct research for the book; I am grateful for his ef­ forts. The following reviewers have helped in making the major changes found in this edition of the text:

Mark Frolick, the University of Memphis; James L. Haner, City University; Lorin M. Hitt, the University of Pennsylvania; and A. B. Schwarzkopf, the Univer­ sity of Oklahoma.

I would like to thank the following people at IrwinlMcGraw-Hill who worked very hard to design and produce this text: Rick Williamson, Carrie Peters, Chris­ tine Vaughan, and JoAnne Schopler.

Finally, I gratefully acknowledge the invaluable support of my wife, Ellen, and family, who encourage and tolerate the idiosyncrasies of an author.

Henry C. Lucas, Jr. New York University

xiii

Preface

Acknowledgments

PART ONE

1. USING TECHNOLOGY TO TRANSFORM

v

xiii

THE ORGANIZATION 5

The Senior Manager 6

Information Technology in the Workplace 6

A Visit to Brun Pas sot in France 10

What Is Information Technology? 11

Transforming Organizations 13

Information Technology and the Manager 15

The Challenge of Change 16

Six Major Trends 17

A Preview of the Book 19

2. INTERPRETING AND UNDERSTANDING INFORMATION 25

The Nature of Information 26 What Is Information? 26

How People Interpret Information 26 A Model for Interpreting Information 28

Characteristics of Information 30

From Information to Knowledge 31 The Decision-Making Process 34

Problem Finding and Solving 34

Types of Decisions 34

How Do Individuals Make Decisions? 35 Stages in the Decision-Making Process 35

The Influence of the Organization 38

A Scenario for the Not-Too-Distant Future 39

xv

xvi CONTENTS

3. INFORMATION TECHNOLOGY IN PERSPECTIVE

Frameworks for Information Technology

Decision-Oriented Frameworks

A Synthesized Framework

Adding Organizations and Decisions

to a Framework

A Framework Based on IT Changing Technology and Applications

Processing Transactions

Decision Support, Executive IS,

and Expert Systems

Knowledge Work Support

Supporting Groups and Cooperative

Work-Groupware

Interorganizational Systems

Key Technologies: Communications,

Networking, and Database

A More Contemporary Framework

The Basics of Information Systems Some Generic Types of Systems

Using Diff erent Types of Technology

Is There Value in IT? Investment Opportunities Matrix

What Is Value?

The Case of Chrysler

PART TWO

4. THE IMPACT OF INFORMATION TECHNOLOGY ON THE

46

47

47

48

49

51

51

51

52

52

52

53

53

53

55

55

55

57

58

65

66

ORGANIZATION 75

Modern Organizations 76 Organizational Structure and Design 76

What Is Organizational Flexibility? 78

Impact on Flexibility 79

Information Technology Runs the Airline 79

Co-opting the Travel Agent 81

Technology Transforms

the Securities Industry 82

Natural Growth Generates an Impact 83

Conclusions 83

Creating New Types of Organizations 84 Examples of Designs Using IT Variables 86

Adding People to the Design 91

Building a T-Form Organization 94 People in the T-Form 94

Other Design Possibilities 94

Adopting the T-Form: An Example 96

5. STRATEGIC ISSUES OF INFORMATION TECHNOLOGY 104

Information Technology and Corporate Strategy 105

Some Examples of Technology

and Strategy 106

The Value Chain 107

Some Generic Strategies 108

A Frameworkfor the Strategic Use

of IT 109

Capitalizing on Information

Technology 111

Creating and Sustaining a Competitive Edge 112

Using Resources to Advantage 112

Protecting an IT Innovation 113

An Example of Technology

for Competitive Advantage 114

Integrating Technology with the Business Environment 116

Managing Information Technology 118 A Vision of the Organization

and Technology 119

Technology for Structuring

the Organization 119

Integrating Technology

and Decision Making 120

A Corporate Plan for Strategy 120

Alliances and Partnerships 121

New IT Initiatives

The IT Infrastructure

Ongoing Management of IT

6. INTERNATIONAL BUSINESS AND INFORMATION TECHNOLOGY

The Impact of Globalization on Business

International Business Strategies Multinational

Global

International

Transnational

Key Issues in an International Environment

Information Needs

Implementing International IT

Managing Information Technology Internationally

Concentrate on Interorganizational

Linkages

Establish Global Systems

Development Skills

Build an Infrastructure

Take Advantage of Liberalized

Electronic Communications

Strive for Uniform Data

Develop Guidelines for Shared

versus Local Systems

Three Examples Standard Pharmaceuticals International

Asea Brown Boveri

VeriFone

Transnational Virtual Firms and IT

Business Models and IT Management Independent Operations

Headquarters Driven

Intellectual Synergy

Integrated Global IT

The Internet, Imperialism, and Developing Countries

122

122

123

127

128

129

130

130

130

130

130

130

131

134

135

135

135

136

136

137

138

138

139

140

144

145

145

146

147

147

149

CONTENTS xvii

PART THREE

7. THE FUNDAMENTALS 157

The Components of a Personal Computer 158

Primary Memory or RAM 160

The Arithmetic Basis of Computers 160

How Memory Is Organized 162

Memory Technology 163

The Central Processing Unit 164

Doing Arithmetic 165

How Does the CPU Work? 165

An Instruction Set 167

CISC versus RISC 167

What Makes a Chip Perform? 169 What Techniques Increase Speed? 171