Infotech it management & governance framework

InfoTech Import In Strat Plan

Read case study 9-1 IT Governance at Toyota. Describe the advantages and disadvantages of TMS’s move to a “hybrid” decentralized IS structure. Would you recommend this change to the board? Why or why not? Write a 1-2 page paper in APA format. An abstract is not required. Two to three references are required.

S · I B · 0 Mobile St t g, E C: Cla us1ness O Knowledge ra egy u 2 0 Customer Relationship Management ~ Intern et~ Mash Up~ ; ~ :;:: >>est t . T' I C +-0>0 coO C g, a. ·c; ra eg1c nang e § • w :§ ~ o cd > ~ !B BPM- ; Alignment :E 0( Things ~ +- Pro~esses 0 Cl) • 0 , Cl) Cl) E Architecture _g O C Business C ~ Portfolio ,iw, ID O · t· 11 t o o "'- C: Resources ._ , \. en (.) t:; rganiza iona mpac s (!) 1) L.J Model a> -

'0 Q) ·- >, S ·1 :::, > Q) ~aluing N~twor~.= >-~ ecur1 y 3 C) ~ 2 i ~ o Collaboration .: "" C o ProJ·ect Management ·- om e a -~ B ' C >- () VI E ,.,.. '+- Q_ > Q US1n9SS ase 8 :5 ::l C: 0 Enterprise Engagement 1.1.1 a E 8 "g e= Governance ct ~ CQ

Wiley Binder Version WILEY

Managing and Using Information Systems

A STRATEGIC APPROACH

Sixth Edition

Keri E. Pearlson KP Partners

Carol S. Saunders W.A. Franke College of Business Northern Arizona University Dr. Theo and Friedl Schoeller Research Center for Business and Society

Dennis F. Galletta Katz Graduate School of Business University of Pittsburgh. Pittsburgh. PA

6., WILEY

VICE PRESIDENT & DIRECTOR EXECUTIVE EDITOR DEVELOPMENT EDITOR

ASSOCIATE DEVELOPMENT EDITOR SENIOR PRODUCT DESIGNER MARKET SOLUTIONS ASSISTANT SENIOR DIRECTOR PROJECT MANAGER PROJECT SPECIALIST PROJECT ASSISTANT EXECUTIVE MARKETING MANAGER

ASSISTANT MARKETING MANAGER ASSOCIATE DIRECTOR SENIOR CONTENT SPECIALIST PRODUCTION EDITOR

George Hoffman Lise Johnson Jennifer Manias Kyla Buckingham Allison Morris Amanda Dallas Don Fowley Gladys Soto Nichole Urban Anna Melhorn Christopher DeJohn Puja Katariwala Kevin Holm Nicole Repasky Loganathan Kandan

This book was set in 10/12 Times Roman by SPi Global and printed and bound by RR Donnelley.

This book is printed on acid free paper.

Founded in 1807, John Wiley & Sons, Inc. has been a valued source of knowledge and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Our company is built on a foundation of principles that include responsibility to the communities we serve and where we live and work. In 2008, we launched a Corporate Citizenship Initiative, a global effort to address the environmental, social, economic, and ethical challenges we face in our business. Among the isrnes we are addressing are carbon impact, paper specifications and procurement, ethical conduct within our business and among our vendors, and community and charitable support. For more information, please visit our website: www.wiley.com/go/citizenship.

Copyright© 2016, 2013, 2010, 2006, 2004, 2001 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be repro- duced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections I 07 or I 08 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA O 1923 (Web site: www.copyright.com). Requests to the Publisher for pern1ission should be addressed to the Permissions ..,,,,J Department, John Wiley & Sons. Inc., 111 River Street, Hoboken, NJ 07030-5774, (201) 748-6011, fax (201) 748-6008, or online at: www. wiley.com/go/permissions.

Evaluation copies are provided to qualified academics and professionals for review purposes only, for use in their courses during the next academic year. These copies are licensed and may not be sold or transferred to a third party. Upon completion of the review period, please return the evaluation copy to Wiley. Return instructions and a free of charge return shipping label are available at: www.wiley.com/go/ return label. If you have chosen to adopt this textbook for use in your course, please accept this book as your complimentary desk copy. Outside of the United States, please contact your local sales representative.

ISBN: 978-1-119-24428-8 (BRV) ISBN: 978-l-119-24807-l (EVALC)

Library of Congress Cataloging-in-Publication Data Names: Pearlson, Keri E. I Saunders, Carol S. I Galletta, Dennis F. Title: Managing and using information systems: a strategic approach / Keri

E. Pearlson, Carol S. Saunders, Dennis F. Galletta. Description: 6th edition. I Hoboken, NJ : John Wiley & Sons, Inc., [2015] I

Includes index.

Identifiers: LCCN 2015041210 (print) I LCCN 2015041579 (ebook) I ISBN 9781119244288 (loose-leaf: alk. paper) I ISBN 9781119255208 (pdf) I ISBN 9781119255246 (epub)

Subjects: LCSH: Knowledge management. I Information technology-Management. I Management information systems. I Electronic commerce.

Classification: LCC HD30.2 .P4 2015 (print) I LCC HD30.2 (ebook) I DOC 658.4/03801 l-dc23 LC record available at http://lccn.loc.gov/2015041210

Printing identification and country of origin will either be included on this page and/or the end of the book. In addition, if the ISBN on this page and the back cover do not match, the ISBN on the back cover should be considered the correct ISBN.

Printed in the United States of America

10 9 8 7 6 5 4 3 2

To Yale & Hana

To Rusty, Russell, Janel & Kristin

To Carole, Christy, Lauren, Matt, Gracie, and Jacob

..

Preface

Information technology and business are becoming inextricably interwoven. I don't think anybody can talk meaningfully about one without the talking about the other.

Bill Gates Microsoft 1

I'm not hiring MBA students for the technology you learn while in school, but for your ability to learn about, use and subsequently manage new technologies when you get out.

Give me a fish and I eat for a day; teach me to fish and I eat for a lifetime.

IT Executive Federal Express2

Proverb

Managers do not have the luxury of abdicating participation in decisions regarding information systems (IS). Managers who choose to do so risk limiting their future business options. IS are at the heart of virtually every business interaction, process, and decision, especially when the vast penetration of the Web over the last 20 years is considered. Mobile and social technologies have brought IS to an entirely new level within firms and between ,.J individuals in their personal lives. Managers who let someone else make decisions about their IS are letting someone else make decisions about the very foundation of their business. This is a textbook about managing and using information written for current and future managers as a way to introduce the broader implications of the impact of IS.

The goal of this book is to assist managers in becoming knowledgeable participants in IS decisions. Becoming a knowledgeable participant means learning the basics and feeling comfortable enough to ask questions. It does not mean having all the answers or having a deep understanding of all the technologies out in the world today. No text will provide managers everything they need to know to make important IS decisions. Some texts instruct on the basic technical background of IS. Others discuss applications and their life cycles. Some take a comprehensive view of the management information systems (MIS) field and offer readers snapshots of current systems along with chapters describing how those technologies are designed, used, and integrated into business life.

This book takes a different approach. It is intended to provide the reader a foundation of basic concepts relevant to using and managing information. This text is not intended to provide a comprehensive treatment on any one aspect of MIS, for certainly each aspect is itself a topic of many books. This text is not intended to provide readers enough technological knowledge to make them MIS experts. It is not intended to be a source of discussion of any particular technology. This text is written to help managers begin to form a point of view of how IS will help or hinder their organizations and create opportunities for them.

The idea for this text grew out of discussions with colleagues in the MIS area. Many faculties use a series of case studies, trade and popular press readings, and Web sites to teach their MIS courses. Others simply rely on one of the classic texts, which include dozens of pages of diagrams, frameworks, and technologies. The initial idea for this text emerged from a core MIS course taught at the business school at the University of Texas at Austin. That course was considered an "appetizer" course-a brief introduction into the world of MIS for MBA students. The course had two main topics: using information and managing information. At the time, there was no text like this

1 Bill Gates, Business@ the Speed of Thought. New York: Warner Books, Inc. 1999. ' Source: Private conversation with one of the authors. ""1111

Preface • one; hence, students had to purchase thick reading packets made up of articles and case studies to provide them the basic concepts. The course was structured to provide general MBA students enough knowledge of the MIS field so that they could recognize opportunities to use the rapidly changing technologies available to them. The course was an appetizer to the menu of specialty courses, each of which went much more deeply into the various topics. But completion of the appetizer course meant that students were able to feel comfortable listening to, contributing to, and ultimately participating in IS decisions.

Today, many students are digital natives-people who have grown up using information technologies (IT) all of their lives. That means that students come to their courses with significantly more knowledge about things such as tablets, apps, personal computers, smartphones, texting, the Web, social networking, file downloading, online purchasing, and social media than their counterparts in school just a few years ago. This is a significant trend that is projected to continue; students will be increasingly knowledgeable the personal use of technologies. That knowledge has begun to change the corporate environment. Today's digital natives expect to find in corporations IS that provide at least the functionality they have at home. At the same time, these users expect to be able to work in ways that take advantage of the technologies they have grown to depend on for social interaction, collaboration, and innovation. We believe that the basic foundation is still needed for managing and using IS, but we understand that the assumptions and knowledge base of today's students is significantly different.

Also different today is the vast amount of information amassed by firms, sometimes called the "big data" prob- lem. Organizations have figured out that there is an enormous amount of data around their processes, their interac- tions with customers, their products, and their suppliers. These organizations also recognize that with the increase in communities and social interactions on the Web, there is additional pressure to collect and analyze vast amounts of unstructured information contained in these conversations to identify trends, needs, and projections. We believe that today's managers face an increasing amount of pressure to understand what is being said by those inside and outside their corporations and to join those conversations reasonably and responsibly. That is significantly different from just a few years ago.

This book includes an introduction, 13 chapters of text and mini cases, and a set of case studies, supplemental readings, and teaching support on a community hub at http://pearlsonandsaunders.com. The Hub provides faculty members who adopt the text additional resources organized by chapter, including recent news items with teaching suggestions, videos with usage suggestions, blog posts and discussions from the community, class activities, addi- tional cases, cartoons, and more. Supplemental materials, including longer cases from all over the globe, can be found on the Web. Please visit http://www.wiley.com/college/pearlson or the Hub for more information.

The introduction to this text defends the argument presented in this preface that managers must be knowledge- able participants in making IS decisions. The first few chapters build a basic framework of relationships among business strategy, IS strategy, and organizational strategy and explore the links among them. The strategy chapters are followed by ones on work design and business processes that discuss the use of IS. General managers also need some foundation on how IT is managed if they are to successfully discuss their next business needs with IT pro- fessionals who can help them. Therefore, the remaining chapters describe the basics of information architecture and infrastructure, IT security, the business of IT, the governance of the IS organization, IS sourcing, project management, business analytics, and relevant ethical issues.

Given the acceleration of security breaches, readers will find a new chapter on IS security in this sixth edition of the text. Also, the material on analytics and "big data" has been extensively updated to reflect the growing impor- tance of the topic. Further, the chapter on work design has been reorganized and extensively revised. Each of the other chapters has been revised with newer concepts added, discussions of more current topics fleshed out, and old, outdated topics removed or at least their discussion shortened.

Similar to the fifth edition, every chapter begins with a navigation "box" to help the reader understand the flow and key topics of the chapter. Further, most chapters continue to have a Social Business Lens or a Geographic Lens feature. The Social Business Lens feature reflects on an issue related to the chapter's main topic but is enabled by or fundamental to using social technologies in the enterprise. The Geographic Lens feature offers a single idea about a global issue related to the chapter's main topic.

No text in the field of MIS is completely current. The process of writing the text coupled with the publication process makes a book somewhat out-of-date prior to delivery to its audience. With that in mind, this text is written

• Preface to summarize the "timeless" elements of using and managing information. Although this text is complete in and of itself, learning is enhanced by combining the chapters with the most current readings and cases. Faculty are encouraged to read the news items on the faculty Hub before each class in case one might be relevant to the topic of the day. Students are encouraged to search the Web for examples related to topics and current events and bring them into the discussions of the issues at hand. The format of each chapter begins with a navigational guide, a short case study, and the basic language for a set of important management issues. These are followed by a set of managerial concerns related to the topic. The chapter concludes with a summary, key terms, a set of discussion questions, and case studies.

Who should read this book? General managers interested in participating in IS decisions will find this a good reference resource for the language and concepts of IS. Managers in the IS field will find the book a good resource for beginning to understand the general manager's view of how IS affect business decisions. And IS students will be able to use the book's readings and concepts as the beginning in their journey to become informed and success- ful businesspeople.

The information revolution is here. Where do you fit in?

Keri E. Pearlson, Carol S. Saunders, and Dennis F. Galletta

Acknowledgments

Books of this nature are written only with the support of many individuals. We would like to personally thank several individuals who helped with this text. Although we've made every attempt to include everyone who helped make this book a reality, there is always the possibility of unintentionally leaving some out. We apologize in advance if that is the case here.

Thank you goes to Dr. William Turner of LeftFour, in Austin, Texas, for help with the infrastructure and architecture concepts and to Alan Shimel, Editor-in-Chief at DevOps.com for initial ideas for the new security chapter.

We also want to acknowledge and thank pbwiki.com. Without its incredible and free wiki, we would have been relegated to e-mailing drafts of chapters back and forth, or saving countless files in an external drop box without any opportunity to include explanations or status messages. For this edition, as with earlier editions, we wanted to use Web 2.0 tools as we wrote about them. We found that having used the wiki for our previous editions, we were able to get up and running much faster than if we had to start over without the platform.

We have been blessed with the help of our colleagues in this and in previous editions of the book. They helped us by writing cases and reviewing the text. Our thanks continue to go out to Jonathan Trower, Espen Andersen, Janis Gogan, Ashok Rho, Yvonne Lederer Antonucci, E. Jose Proenca, Bruce Rollier, Dave Oliver, Celia Romm, Ed Watson, D. Guiter, S. Vaught, Kala Saravanamuthu, Ron Murch, John Greenwod, Tom Rohleder, Sam Lubbe, Thomas Kern, Mark Dekker, Anne Rutkowski, Kathy Hurtt, Kay Nelson, Janice Sipior, Craig Tidwell, and John Butler. Although we cannot thank them by name, we also greatly appreciate the comments of the anonymous reviewers who have made a mark on this edition.

The book would not have been started were it not for the initial suggestion of a wonderful editor in 1999 at John Wiley & Sons, Beth Lang Golub. Her persistence and patience helped shepherd this book through many previous editions. We also appreciate the help of our current editor, Lise Johnson. Special thanks go to Jane Miller, Gladys Soto, Loganathan Kandan, and the conscientious JaNoel Lowe who very patiently helped us through the revision process. We also appreciate the help of all the staff at Wiley who have made this edition a reality.

We would be remiss if we did not also thank Lars Linden for the work he has done on the Pearlson and Saunders Faculty Hub for this book. Our vision included a Web-based community for discussing teaching ideas and post- ing current articles that supplement this text. Lars made that vision into a reality starting with the last edition and continuing through the present. Thank you, Lars!

From Keri: Thank you to my husband, Yale, and my daughter, Hana, a business and computer science student at Tulane University. Writing a book like this happens in the white space of our lives-the time in between everything else going on. This edition came due at a particularly frenetic time, but they listened to ideas, made suggestions, and celebrated the book's completion with us. I know how lucky I am to have this family. I love you guys!

From Carol: I would like to thank the Dr. Theo and Friedl Schoeller Research Center of Business and Society for their generous support of my research. Rusty, thank you for being my compass and my release valve. I couldn't do it without you. Paraphrasing the words of an Alan Jackson song ("Work in Progress"): I may not be what you want me to be, but I'm trying really hard. Just be patient because I'm a work in progress. I love you, Kristin, Russell, and Janel very much!

From Dennis: Thanks to my terrific family: my wife Carole, my daughters Christy and Lauren, and my grand- daughter Gracie. Also thanks to Matt and Jacob, two lovable guys who take wonderful care of my daughters. Finally, thanks to our parents and sisters' families. We are also blessed with a large number of great, caring neighbors whom we see quite often. I love you all, and you make it all worthwhile!

IJII

m

About the Authors

Dr. Keri E. Pearlson is President of KP Partners, an advisory services firm working with business leaders on issues related to the strategic use of information systems (IS) and organizational design. She is an entrepreneur, teacher, researcher, consultant, and thought leader. Dr. Pearlson has held various positions in academia and industry. She has been a member of the faculty at the Graduate School of Business at the University of Texas at Austin where she taught management IS courses to MBAs and executives and at Babson College where she helped design the popular IS course for the Fast Track MBA program. Dr. Pearlson has held positions at the Harvard Business School, CSC, nGenera (formerly the Concours Group), AT&T, and Hughes Aircraft Company. While writing this edition, she was the Research Director for the Analytics Leadership Consortium at the International Institute of Analytics and was named the Leader of the Year by the national Society of Information Management (SIM) 2014.

Dr. Pearlson is coauthor of Zero Time: Providing Instant Customer Value-Every Time, All the Time (John Wiley, 2000). Her work has been published in numerous places including Sloan Management Review, Academy of Management Executive, and Information Resources Management Journal. Many of her case studies have been published by Harvard Business Publishing and are used all over the world. She currently writes a blog on issues at the intersection of IT and business strategy. It's available at www.kppartners.com.

Dr. Pearlson holds a Doctorate in Business Administration (DBA) in Management Information Systems from the Harvard Business School and both a Master's Degree in Industrial Engineering Management and a Bachelor's Degree in Applied Mathematics from Stanford University.

Dr. Carol S. Saunders is Research Professor at the W. A. Franke College of Business, Northern Arizona University in Flagstaff, Arizona, and is a Schoeller Senior Fellow at the Friedrich-Alexander University of Erlangen-Nuremberg, Germany. She served as General Conference Chair of the International Conference on Information Systems (ICIS) in 1999 and as Program Co-Chair of the Americas Conference of Information Systems (AMCIS) in 2015. Dr. Saunders was the Chair of the ICIS Executive Committee in 2000. For three years, she served as Editor-in-Chief of MIS Quarterly. She is currently on the editorial boards of Journal of Strategic Information Systems and Organization Science and serves on the advisory board of Business & Information Systems Engineering. Dr. Saunders has been recognized for her lifetime achievements by the Association of Information Systems (AIS) with a LEO award and by the Organizational Communication and Information Systems Division of the Academy of Management. She is a Fellow of the AIS.

Dr. Saunders' current research interests include the impact of IS on power and communication, overload, virtual teams, time, sourcing, and interorganizational linkages. Her research is published in a number of journals including MIS Quarterly, Information Systems Research, Journal of MIS, Communications of the ACM, Journal of Strategic Information Systems, Journal of the AIS, Academy of Management Journal, Academy of Management Review, Communications Research, and Organization Science.

Dr. Dennis F. Galletta is Professor of Business Administration at the Katz Graduate School of Business, University of Pittsburgh in Pennsylvania. He is also the Director of the Katz School's doctoral program and has taught IS Management graduate courses in Harvard's summer program each year since 2009. He obtained his doctorate from the University of Minnesota in 1985 and is a Certified Public Accountant. Dr. Galletta served as President of the Association of Information Systems (AIS) in 2007. Like Dr. Saunders, he is both a Fellow of the AIS and has won a LEO lifetime achievement award. He was a member of the AIS Council for five years. He also served in leadership roles for the International Conference on Information Systems (ICIS): Program Co-Chair in 2005 (Las Vegas) and Conference Co-Chair in 2011 (Shanghai); as Program Co-Chair for the

About the Authors -Americas Conference on Information Systems (AMCIS) in 2003 (Tampa, Florida) and Inaugural Conference Chair in 1995 (Pittsburgh). The Pittsburgh conference had several "firsts" for an IS conference, including the first on-line submissions, reviews, conference registration and payment, placement service, and storage of all papers in advance on a website. Dr. Galletta served as ICIS Treasurer from 1994 to 1998 and Chair of the ICIS Execu- tive Committee in 2012. He taught IS courses on the Fall 1999 Semester at Sea voyage (Institute for Shipboard Education) and established the concept of Special Interest Groups in AIS in 2000. In 2014, he won an Emerald Citation of Excellence for a co-authored article that reached the top 50 in citations and ratings from the fields of management, business, and economics.

Dr. Galletta's current research addresses online and mobile usability and behavioral security issues such as phishing, protection motivation, and antecedents of security-related decision making. He has published his research in journals such as Management Science; MIS Quarterly; Information Systems Research; Journal of MIS; European Journal of Information Systems; Journal of the AIS; Communications of the ACM; Accounting, Management, and Information Technologies; Data Base; and Decision Sciences and in proceedings of conferences such as ICIS, AMCIS, and the Hawaii International Conference on Systems Sciences. Dr. Galletta's editorship includes working as current and founding Coeditor in Chief for AIS Transactions on Human-Computer Interaction and on editorial boards at journals such as MIS Quarterly, Information Systems Research, Journal of MIS, and Journal of the AIS. He is currently on the Pre-eminent Scholars Board of Data Base. He won a Developmental Associate Editor Award at the MIS Quarterly in 2006. And during the off-hours, Dr. Galletta's fervent hobby and obsession is digital pho- tography, often squinting through his eyepiece to make portrait, macro, Milky Way, and lightning photos when he should be writing.

..

Contents

Preface iv Acknowledgments vii About the Authors viii

Introduction 1

The Case for Participating in Decisions about Information Systems 2

What If a Manager Doesn't Participate? 5

Skills Needed to Participate Effectively in Information Technology Decisions 6

Basic Assumptions 8

Economics of Information versus Economics of Things 12

Social Business Lens 14

Summary 15

KeyTerms 16

The Information Systems Strategy Triangle 17

Brief Overview of Business Strategy Frameworks 19

Business Models versus Business Strategy 21

Brief Overview of Organizational Strategies 25

Brief Overview of Information Systems Strategy 26

Social Business Lens: Building a Social Business Strategy 27

Summary 28

KeyTerms 29

Discussion Questions 29

Case Study 1-1 Lego 30

Case Study 1-2 Google 31

2 Strategic Use of Information Resources 33 ------

Evolution of Information Resources 34

Information Resources as Strategic Tools 36

How Can Information Resources Be Used Strategically? 37

Sustaining Competitive Advantage 43

Social Business Lens, Social Capital 47

Strategic Alliances 47

Risks 49

Geographic Box: Mobile-Only Internet Users Dominate Emerging Countries 50

Co-Creating IT and Business Strategy 50

Summary 51

Key Terms 51

Discussion Questions 51

Case Study 2-1 Groupon 52

Case Study 2-2 Zipcar 53

3 Organizational Strategy and Information Systems 55

Information Systems and Organizational Design 58

Social Business Lens, Social Networks 63

Information Systems and Management Control Systems 63

Information Systems and Culture 66

Geographic Lens, Does National Culture Affect Firm Investment in IS Training? 70

Summary 71

KeyTerms 71

Discussion Questions 71

Contents 1111

Case Study 3-1 The Merger of Airtran by Southwest Airlines, Will the Organizational Cultures Merge? 72 Case Study 3-2 The FBI 73

4 Digital Systems and the Design of Work 75

Work Design Framework 77

How Information Technology Changes the Nature of Work 78

Social Business Lens, Activity Streams 84

Where Work Is Done and Who Does It: Mobile and Virtual Work Arrangements 86

Geographic Lens, How Do People Around the World Feel About Working Remotely? 88

Geographic Lens, Who Telecommutes? A Look at Global Telecommuting Habits 89

Gaining Acceptance for IT-Induced Change 94

Summary 96

KeyTerms 97

Discussion Questions 97

Case Study 4-1 Trash and Waste Pickup Services. Inc. 97

Case Study 4-2 Social Networking, How Does IBM Do It? 98

5 Information Systems and Business Transformation 99

Silo Perspective versus Business Process Perspective 100

Building Agile and Dynamic Business Processes 104

Changing Business Processes 105

Workflow and Mapping Processes 107

Integration versus Standardization 109

Enterprise Systems 110

Geographic Lens, Global vs. Local ERPs 113

Social Business Lens, Crowdsourcing Changes Innovation Processes 118

Summary 119

'-,. Key Terms 120

Ill Contents Discussion Questions 120

Case Study 5-1 Santa Cruz Bicycles 121

Case Study 5-2 Boeing 787 Dreamliner 122

6 Architecture and Infrastructure 124 ----·-···-·--·--------·------------

From Vision to Implementation 125

The Leap from Strategy to Architecture to Infrastructure 126

From Strategy to Architecture to Infrastructure, An Example 133

Architectural Principles 135

Enterprise Architecture 136

Virtualization and Cloud Computing 137

Other Managerial Considerations 139

Social Business Lens, Building Social Mobile Applications 143

Summary 144

Key Terms 144

Discussion Questions 145

Case Study 6-1 Enterprise Architecture at American Express 145

Case Study 6-2 The Case of Extreme Scientists 146

7 Security 147

IT Security Decision Framework 149

Breaches and How They Occurred 151

The Impossibility of 100% Security 154

What Should Management Do? 155

Summary 162

Key Terms 163

Discussion Questions 163

Case Study 7-1 The Aircraft Communications Addressing and Reporting System (ACARS) 163

Case Study 7-2 Sony Pictures, The Criminals Won 164

8 The Business of Information Technology 165

Organizing to Respond to Business, A Maturity Model 167

Understanding the IT Organization 168

What a Manager Can Expect from the IT Organization 168

What the IT Organization Does Not Do 170

Chief Information Officer 171

Building a Business Case 173

IT Portfolio Management 175

Valuing IT Investments 176

Monitoring IT Investments 177

Funding IT Resources 182

How Much Does IT Cost? 184

Summary 187

Key Terms 188

Discussion Questions 188

Case Study 8-1 KLM Airlines 189

Case Study 8-2 Balanced Scorecards at BIOCO 190

9 Governance of the Information Systems Organization 191

IT Governance 192

Decision-Making Mechanisms 199

Governance Frameworks for Control Decisions 200

Social Business Lens, Governing the Content 204

Summary 205

Key Terms 205

Discussion Questions 205

Case Study 9-1 IT Governance at University of the Southeast 205

Case Study 9-2 The "MyJohnDeere" Platform 207

10 Information Systems Sourcing 208

Sourcing Decision Cycle Framework 209

Social Business Lens, Crowdsourcing 214

Geographic Lens: Corporate Social Responsibility 220

Outsourcing in the Broader Context 224

Summary 225

Key Terms 225

Discussion Questions 225

Case Study 10-1 Crowdsourcing at AOL 225

Case Study 10-2 Altia Business Park 226

11 Managing IT Projects 228

What Defines a Project? 230

What Is Project Management? 231

Organizing for Project Management 232

Project Elements 233

IT Projects 239

IT Project Development Methodologies and Approaches 240

Social Business Lens: Mashups 247

Managing IT Project Risk 247

Summary 253

Key Terms 254

Discussion Questions 254

Contents

Case Study 11-1 Implementing Enterprise Change Management at Southern Company 254

Case Study 11-2 Dealing with Traffic Jams in London 255

m

Ill Contents .J 12 Business Intelligence. Knowledge Management. and Analytics 258

Competing with Business Analytics 259

Knowledge Management. Business Intelligence. and Business Analytics 260

Data. Information. and Knowledge 261

Knowledge Management Processes 264

Business Intelligence 264

Components of Business Analytics 265

Big Data 268

Social Media Analytics 269

Social Business Lens: Personalization and Real-Time Data Streams 271

Geographic Lens: When Two National Views of Intellectual Property Collide 272

Caveats for Managing Knowledge and Business Intelligence 274

Summary 274

Key Terms 275

Discussion Questions 275

Case Study 12-1 Stop & Shop's Scan It! App 275

Case Study 12-2 Business Intelligence at CKE Restaurants 276

13 Privacy and Ethical Considerations in Information Management 278

Responsible Computing 280

Corporate Social Responsibility 283

PAPA: Privacy. Accuracy. Property. and Accessibility 284

Social Business Lens: Personal Data 289

Geographic Lens: Should Subcultures Be Taken into Account When Trying to Understand National Attitudes Toward Information Ethics? 292

Green Computing 292

Summary 293

Key Terms 294

Discussion Questions 294

Case Study 13-1 Ethical Decision Making 295

Case Study 13-2 Midwest Family Mutual Goes Green 297

Glossary 299 Index 313

Introduction

Why do managers need to understand and participate in the information systems decisions of their organizations? After all, most corporations maintain entire departments dedicated to the management of information systems (IS). These departments are staffed with highly skilled professionals devoted to the field of technology. Shouldn't managers rely on experts to analyze all the aspects of IS and to make the best decisions for the organization? The answer to that question is an emphatic "no."

Managing information is a critical skill for success in today's business environment. All decisions made by companies involve, at some level, the management and use of IS and the interpretation of data from the business and its environment. Managers today need to know about their organization's capabilities and uses of information as much as they need to understand how to obtain and budget financial resources. The ubiquity of personal devices such as smart phones, laptops, and tablets and of access to apps within corporations and externally over the Internet, highlights this fact. Today's technologies form the backbone for virtually all business models. This backbone easily crosses oceans, adding the need for a global competency to the manager's skill set. Further, the proliferation of supply chain partnerships and the vast amount of technology available to individuals outside of the corporation have extended the urgent need for business managers to be involved in information systems decisions. In addition, the availability of seemingly free (or at least very inexpensive) appli- cations, collaboration tools, and innovation engines in the consumer arena has put powerful tools in everyone's hands, increasing the difficulty of ensuring that corporate systems are robust, secure, and protected. A manager who doesn't understand the basics of managing and using information can't be successful in this business environment.

The majority of U.S. adults own a smart phone and access online apps. According to the Pew Research Center, in 2014, 90% of U.S. adults had a cell phone of some kind, and 87% of American adults used the Internet. 1 Essentially the use of these types of devices implies that individuals now manage a "personal IS" and make decisions about usage, data, and applications. Doesn't that give them insight into managing information systems in corporations? Students often think they are experts in corporate IS because of their personal experience with technology. Although there is some truth in that perspective, it's a very dangerous perspective for managers to take. Certainly knowing about interesting apps, being able to use a variety of technologies for different personal purposes, and being familiar with the ups and downs of networking for their personal information systems pro- vide some experience that is useful in the corporate setting. But in a corporate setting, information systems must be enterprise-ready. They must be scalable for a large number of employees; they must be delivered in an appropriate manner for the enterprise; they must be managed with corpo- rate guidelines and appropriate governmental regulations in mind. Issues like security, privacy, risk, support, and architecture take on a new meaning within an enterprise, and someone has to manage them. Enterprise-level management and use of information systems require a unique perspective and a different skill set.

' Internet Use and Cell Phone Demographics, http://www.pewintemet.org/data-trend/internet-use/intemet-use-over-time (accessed August 18, 2015).

1111

lfll Introduction Consider the now-historic rise of companies such as Amazon.com, Google, and Zappos. Amazon.com began as

an online bookseller and rapidly outpaced traditional brick-and-mortar businesses like Barnes and Noble, Borders, and Waterstones. Management at the traditional companies responded by having their IS support personnel build Web sites to compete. But upstart Amazon.com moved ahead, keeping its leadership position on the Web by lever- aging its business model into other marketplaces, such as music, electronics, health and beauty products, lawn and garden products, auctions, tools and hardware, and more. It cleared the profitability hurdle by achieving a good mix of IS and business basics: capitalizing on operational efficiencies derived from inventory software and smarter storage, cost cutting, and effectively partnering with such companies as Toys "R" Us Inc. and Target Corporation. 2

More recently, Amazon.com changed the basis of competition in another market, but this time it was the Web ser- vices business. Amazon.com Web services offers clients the extensive technology platform used for Amazon.com but in an on-demand fashion for developing and running the client's own applications. Shoe retailer Zappos.com challenged Amazon's business model, in part by coupling a social business strategy with exemplary service and sales. It was so successful that Amazon.com bought Zappos.

Likewise, Google built a business that is revolutionizing the way information is found. Google began in 1999 as a basic search company but its managers quickly learned that its unique business model could be leveraged for future success in seemingly unrelated areas. The company changed the way people think about Web content by making it available in a searchable format with an incredibly fast response time and in a host of languages. Further, Google's keyword-targeted advertising program revolutionized the way companies advertise. Then Google expanded, offering a suite of Web-based applications, such as calendaring, office tools, e-mail, collaboration, shopping, and maps and then enhanced the applications further by combining them with social tools to increase collaboration. Google Drive is one of the most popular file-sharing tools and Gmail one of the most popular email apps. In 2015, Google's mission was to "organize the world's information and make it universally accessible and useful." It is offering its customers very inexpensive fiber connections. In so doing, Google further expanded into infrastructure and on-demand services. 3

These and other online businesses are able to succeed where traditional companies have not, in part because their .,,,,,J management understood the power of information, IS, and the Web. These exemplary online businesses aren't suc- ceeding because their managers could build Web pages or assemble an IS network. Rather, the executives in these new businesses understand the fundamentals of managing and using information and can marry that knowledge with a sound, unique business vision to dominate their intended market spaces.

The goal of this book is to provide the foundation to help the general business manager become a knowledge- able participant in IS decisions because any IS decision in which the manager doesn't participate can greatly affect the organization's ability to succeed in the future. This introduction outlines the fundamental reasons for taking the initiative to participate in IS decisions. Moreover, because effective participation requires a unique set of manage- rial skills, this introduction identifies the most important ones. These skills are helpful for making both IS decisions and all business decisions. We describe how managers should participate in the decision-making process. Finally, this introduction presents relevant models for understanding the nature of business and information systems. These models provide a framework for the discussions that follow in subsequent chapters.

The Case for Participating in Decisions about Information Systems In today's business environment, maintaining a back-office view of technology is certain to cost market share and could ultimately lead to the failure of the organization. Managers who claim ignorance of IS can damage their reputation. Technology has become entwined with all the classic functions of business-operations, marketing, accounting, finance-to such an extent that understanding its role is necessary for making intelligent and effec- tive decisions about any of them. Furthermore, a general understanding of key IS concepts is possible without the extensive technological knowledge required just a few years ago. Most managers today have personal technology

' Robert Hof, "How Amazon Cleared the Profitability Hurdle" (February 4, 2002), http://www.bloomberg.com/bw/stories/2002-02-03/how-amazon- cleared-the-profitability-hurdle (accessed on October 29, 2015). ' For more information on the latest services by these two companies, see http://aws.amazon.com/ec2 and http://www.google.com/enterprise/cloud/. .,,,,J

The Case for Participating in Decisions about Information Systems 11111

Reasons IS must be managed as a critical resource since it permeates almost every aspect of business.

--... ---·-·····-·······-.. ·-···-·- --·--------····----·-·····-- -----···---··----·-···---------------- IS enable change in the way people work both inside and outside of the enterprise.

··-·- ·-·- ·--·--- ·-·····-·- ···-···· ..... .. ·····--· - --- -------·· - ··-·······--· --········-- -·-·-··-··-- -··--· - ............ - ···--·-··-----

IS are at the heart of integrated Internet-based solutions that are replacing standard business processes . ..... -· .. - -······· ·- -·-· --- . ··--· . ·····- ···-·· .. . ... ···-·····. --· ·- ······-· -. ·-··· ·- .. ·---- --··· - ····- ... ········--. -·-·--·-- IS enable or inhibit business opportunities and new strategies.

····---------- -····- ·--····· ·-···- --··-·--······--·-

IS can be used to combat business challenges from competitors. --- ·-- --- -····--·--------------····----··------~------···--- -----·-----·---·----

IS enable customers to have greater pull on businesses and communities by giving them new options for voicing their concerns and opinions using social media.

·-·-·-····-··· --·····---····· -········---·····

IS can support data-driven decision making.

IS can help ensure the security of key assets.

FIGURE 1-1 Reasons why business managers should participate in information systems decisions.

such as a smart phone or tablet that is more functional than many corporate-supported personal computers provided by enterprises just a few years ago. In fact, the proliferation of personal technologies makes everyone a "pseudo- expert." Each individual must manage applications on smart phones, make decisions about applications to purchase, and procure technical support when the systems fail. Finally, with the robust number of consumer applications available on the Web, many decisions historically made by the IS group are increasingly being made by individuals outside that group, sometimes to the detriment of corporate objectives.

Therefore, understanding basic fundamentals about using and managing information is worth the investment of time. The reasons for this investment are summarized in Figure 1-1 and are discussed next.

6., A Business View of Critical Resources Information technology (IT) is a critical resource for today's businesses. It both supports and consumes a significant amount of an organization's resources. Just like the other three major types of business resources-people, money, and machines-it needs to be managed wisely.

IT spending represents a significant portion of corporate budgets. Worldwide IT spending topped $3.7 trillion in 2014. It is projected to continue to increase.4 A Gartner study of where this money goes groups spending into five categories including devices (e.g., PCs, tablets, and mobile phones), data center systems (e.g., network equipment, servers, and storage equipment), enterprise software and apps (e.g., companywide software applications), IT ser- vices (e.g., support and consulting services), and telecommunications (e.g., the expenses paid to vendors for voice and data services).

Resources must return value, or they will be invested elsewhere. The business manager, not the IS specialist, decides which activities receive funding, estimates the risk associated with the investment, and develops metrics for evaluating the investment's performance. Therefore, the business manager needs a basic grounding in managing and using information. On the flip side, IS managers need a business view to be able to explain how technology impacts the business and what its trade-offs are.

People and Technology Work Together In addition to financial issues, managers must know how to mesh technology and people to create effective work processes. Collaboration is increasingly common, especially with the rise of social networking. Companies are reaching out to individual customers using social technologies such as Facebook, Twitter, Reddit, Renren, YouTube, and numerous other tools. In fact, Web 2.0 describes the use of the World Wide Web applications that incorporate information sharing, user-centered design, interoperability, and collaboration among users. Technology facilitates