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Case Study ( Information System Managment)

2MANAGEMENTINFORMATIONSYSTEMS MOVING BUSINESS FORWARD

RAINER PRINCE WATSON

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Management Information Systems Moving Business Forward

Second Edition

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R. Kelly Rainer, Jr. Brad Prince

Hugh Watson

Management Information Systems Moving Business Forward

Second Edition

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Library of Congress Cataloging-in-Publication Data

Rainer, R. Kelly (Rex Kelly) Management information systems / R. Kelly Rainer, Jr., Brad Prince, Hugh Watson.—Second edition. pages cm Includes index. ISBN 978-1-118-44359-0 (pbk.) 1. Management information systems. I. Watson, Hugh J. II. Prince, Brad, 1978- III. Title. HD30.213.R35 2013 658.4’038011—dc23 2012046981

Publisher Don Fowley Executive Editor Beth Lang Golub Content Manager Kevin Holm Production Editor Tim Lindner Executive Marketing Manager Chris Ruel Marketing Assistant Marissa Carroll Design Director Harry Nolan Product Designer Jenny Welter Editorial Operations Manager Melissa Edwards Senior Designer Maureen Eide Senior Photo Editor Lisa Gee Cover Designer Jasmine Lee Senior Content Editor Wendy Ashenberg Assistant Editor Samantha Mandel Editorial Program Assistant Katherine Willis Content Assistant Helen Seachrist Production Management Services Aptara®, Inc.

This book was set in Minion Pro 10/12 by Aptara®, Inc. and printed and bound by Quad Graphics.

This book is printed on acid free paper. �

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Evaluation copies are provided to qualifi ed 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/returnlabel. 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-13: 978-1-118-44359-0 BRV ISBN: 978-1-118-47768-7

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Dear Student,

Why are you here? We are not asking you a philosophical question—that is a diff erent course. We are asking, “Why are you about to spend an entire term learning about informa- tion systems? Why are you—an accounting major, or a marketing or management major— being required to study this topic?” You may be asking, “What’s in IT for me?” Th e short answer is that “IT’s About Business,” and the longer answer is the goal of this book.

Information systems are making the world a very small place and are contributing to rapidly increasing global competition. As a result, organizations are constantly trying to fi nd ways to gain a competitive advantage—by achieving operational excellence, developing new products and services, developing new business models, providing superb customer service, improving decision making, and so on. It should be obvious, then, that an introduc- tory course in information systems is critically important for success in your chosen career.

Rapid advances in information systems mean that, as business students, change will be the only constant you will encounter in today’s dynamic digital business environment. We wrote this book for business students of all majors who will soon become business profes- sionals. We have three goals in mind:

1. To help you be immediately successful when you join your organization 2. To help you understand the importance of information systems for individuals,

organizations, and society as a whole 3. To enable you to become informed users of your organization’s information

systems

To accomplish these goals, we have tried to provide the essential, relevant knowledge that you need to understand to eff ectively use information systems in your careers.

Th e way we propose to do this is by keeping you actively involved in the material. Every section of the chapters has an activity that asks you to do something beyond just reading the textbook that will help you see why the content is useful for your future business career.

We hope you will enjoy this active approach and successfully complete the course with a richer understanding of what’s in IT for you.

Kelly Rainer, Brad Prince, and Hugh Watson

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Dear Instructor,

We are like you. All of us who teach the introductory course in information systems realize that it is diffi cult for students to understand the importance and relevance of the topics in the course. As a result, students oft en memorize the content just before the exam, and then forget it as soon as the exam is over. We all want to engage students at a much deeper level. We know that the best way to accomplish this objective is through hands-on active learning, leading to increased student engagement in our course content.

Accordingly, active learning and student engagement are key principles of our new book. We recognize the need to actively involve students in problem solving, creative thinking, and capitalizing on opportunities. Every section of every chapter includes extensive hands- on exercises, activities, and mini-cases. End-of-chapter material also includes exercises that require students to use soft ware application tools. Th rough these activities, we enable stu- dents to understand how to do something with the concepts they learn, such as meet busi- ness goals using information systems, confi gure products, and use spreadsheets and data- bases to facilitate problem solving.

Th e preface on the next page further outlines the goals, features, and support material provided with our new text. We hope you will enjoy teaching with this approach!

Kelly Rainer, Brad Prince, and Hugh Watson

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Preface Chapter Organization Each chapter contains the following elements:

• Chapter Outline: Lists the major concepts covered in each chapter. • Learning Objectives: Provide an overview of the key learning goals that students

should achieve aft er reading the chapter. • Chapter-Opening Case: A short case that focuses on a small or start-up company

that is using information systems to solve a business problem. Cases in introductory information systems textbooks typically involve very large organizations. In contrast, our chapter-opening cases demonstrate that small and start-up companies also have business problems that they address using information systems. Students will see that small fi rms usually have to be quite creative in building and implementing IS solu- tions, because they do not have MIS departments or large budgets. Th ese small-busi- ness cases also add an entrepreneurial fl avor to each chapter for students who are planning to start their own businesses.

• Ruby’s Club Internship Case: • At the start of each chapter is a “Ruby’s Club internship scenario” that presents a

problem at Ruby’s Club, a downtown music venue that needs help with redesigning its online presence, overhauling its technological infrastructure, etc. Th roughout the semester, the student is presented with problems as if he/she were working as an IT intern for Ruby’s Club. Each chapter-opening scenario presents a business prob- lem that the student will be able to solve aft er reading that chapter.

• Th roughout the chapter are “Ruby’s Club Questions” that help students focus on the concepts they will need to solve the Ruby’s Club business problem. At the end of each chapter is a “Ruby’s Club Internship Assignment” that puts students into the role of an IT Intern. Many assignments are in the form of a business letter that students must address to their employers to solve the problem. Ultimately, this provides students with an opportunity to apply the knowledge they have gained in a business setting, instead of just on their exams.

A supplementary chapter on business writing is available in WileyPLUS for students who need a review.

• Apply the Concept Activities: Th is book’s unique pedagogical structure is designed to keep students actively engaged with the course material. Reading material in each chapter subsection is immediately followed by an “Apply the Concept” activity. Th ese activities include links to online videos and articles and other hands-on activities that require students to immediately apply what they have learned. Via WileyPLUS, instructors can assign a section of text along with an Apply the Concept activity and gradable quiz. Each Apply the Concept has the following elements:

> Background (places the activity in the context of relevant reading material) > Activity (a hands-on activity that students carry out) > Deliverable (various tasks for students to complete as they perform the

activity) > Discussion Questions (discussion questions regarding the activity)

Quiz Questions (assignable in WileyPLUS, or available on the Book Companion Site)

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x Preface

• IT’s About Business: Short cases that demonstrate real-world applications of IT to business. Each case is accompanied by questions relating the case to concepts covered in the chapter. Icons relate these boxes to the specifi c functional areas.

• IT’s Personal: Sprinkled throughout the chapters, these short vignettes explain the relevance of MIS concepts to students’ daily lives.

• Before You Go On: End-of-section reviews prompt students to pause and test their understanding of concepts before moving on to the next section.

• Examples: Interspersed throughout the text, these highlight the use (and misuse) of information systems by real-world organizations, thereby illustrating the concepts discussed in the chapter.

• What’s in IT for Me?: A unique end-of-chapter summary that demonstrates the rel- evance of each key chapter topic to diff erent functional areas, including accounting, fi nance, marketing, production/operations management, human resources manage- ment, and management information systems. Th is cross-functional focus makes the book accessible for students from any major.

• Summary: Keyed to the Learning Objectives listed at the beginning of the chapter, the summary enables students to review major concepts covered.

• Discussion Questions and Problem-Solving Activities: Provide practice through active learning. Th ese exercises are hands-on opportunities to apply the concepts dis- cussed in the chapter.

• Collaboration Exercises: Team exercises that require students to take on diff erent functional roles and collaborative to solve business problems. Th ese exercises allow students to get fi rst-hand experience solving business problems using IS tools while also experiencing an authentic business team dynamic.

• Closing Cases: Each chapter concludes with two cases about business problems faced by actual companies and how they used IS to solve those issues. Th e cases are broken down into four parts: a description of the problem, an overview of the IS solu- tion implemented, a presentation of the results of the implementation, and an analy- sis of key takeaways from the case. Each case is followed by discussion questions, so that students can further explore the concepts presented in the case.

• Spreadsheet Activity: Every chapter includes a hands-on spreadsheet project that requires students to practice their Excel skills while using concepts learned in the chapter. Each activity includes deliverables and discussion questions, with multiple choice quiz questions also assignable in WileyPLUS for automatic grading or down- loadable through the Book Companion Site. WileyPLUS includes an Excel Lab Manual for students who need introductory coverage or review.

• Database Activity: Every chapter includes a hands-on database project that requires students to practice their Access skills while using concepts learned in the chapter. Each activity includes deliverables, quiz questions, and discussion questions. Th ese can be assigned within WileyPLUS for automatic grading. WileyPLUS includes an Access Lab Manual for students who need introductory coverage or review.

• Glossary: A study tool that highlights vocabulary within the chapters and facilitates studying.

Key Features

Student Engagement As discussed in the note addressed to instructors at the beginning of this preface, one of the chief goals of this text is to engage students at a level beyond recognition of key terms. We believe the best way to achieve this goal is through hands-on, active learning that will lead to increased student engagement with the course and its content.

Accordingly, every section of every chapter provides resources that actively involve students in problem solving, creative thinking, and capitalizing on opportunities. Every

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Preface xi

chapter includes extensive hands-on exercises, activities, and mini-cases, including exer- cises that require students to solve business problems using Excel and Access.

Cross-Functional Approach We emphasize the importance of information systems by calling attention in every chapter to how that chapter’s topic relates to each business major. Icons guide students to relevant issues for their specifi c functional area—accounting (ACC), fi nance (FIN), marketing (MKT), operations management (OM), human resources management (HRM), and man- agement information systems (MIS). Chapters conclude with a detailed summary (entitled ‘What’s in IT for Me?’) of how key concepts in the chapter relate to each functional area. Additionally, each chapter has a collaboration exercise that helps students view the same problem from the perspective of diff erent functional areas.

Diversifi ed and Unique Examples from Different Industries Extensive use of vivid examples from large corporations, small businesses, and government and not-for-profi t organizations enlivens the concepts from the chapter. Th e examples illus- trate everything from the capabilities of information systems, to their cost and justifi cation and the innovative ways that corporations are using IS in their operations. Small businesses have been included in recognition of the fact that many students will work for small-to mid-sized companies, and some will even start their own small business. In fact, some stu- dents may already be working at local businesses, and the concepts they are learning in class can be readily observed or put into practice in their part-time jobs. Each chapter constantly highlights the integral connection between business and IS. Th is connection is especially evident in the chapter-opening and closing cases, the “IT’s About Business” boxes, and the highlighted examples.

Successes and Failures Many textbooks present examples of the successful implementation of information systems, and our book is no exception. However, we go one step beyond by also providing numerous examples of IS failures, in the context of lessons that can be learned from such failures. Misuse of information systems can be very expensive.

Global Focus An understanding of global competition, partnerships, and trading is essential to success in a modern business environment. Th erefore, we provide a broad selection of international cases and examples. We discuss the role of information systems in facilitating export and import, the management of international companies, and electronic trading around the globe. Th ese global examples are highlighted with the global icon.

Innovation and Creativity In today’s rapidly changing business environment, creativity and innovation are necessary for a business to operate eff ectively and profi tably. Th roughout our book, we demonstrate how information systems facilitate these processes.

Focus on Ethics With corporate scandals appearing in the headlines almost daily, ethics and ethical ques- tions have come to the forefront of business people’s minds. In addition to devoting an entire chapter to ethics and privacy (Chapter 6), we have included examples and cases throughout the text that focus on business ethics. Th ese examples are highlighted with the ethics icon.

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xii Preface

What’s New in the Second Edition? • New chapter on social computing, focusing on how organizations use social

computing for business purposes • New “Plug IT In” on cloud computing, featuring expanded coverage of this

important topic • All new or updated chapter opening and closing cases • All new or updated “IT’s About Business” • All new or updated examples • Remodeled student activities that provide a variety of thought-provoking, gradable

homework assignments • New “IT’s Personal” vignettes that bring home to students the personal relevance

of concepts • New “Collaboration Exercises” that require students to take on diff erent functional

roles and use collaborative soft ware to solve business problems • Spreadsheet and Database Activities that have been revised to incorporate

reviewer feedback • Remodeled Learning Objectives that clearly defi ne learning goals for each section

of book content • New images and updated interior design that promote visual learning and easy

teaching use

Online Supplements www.wiley.com/college/rainer

Our book also facilitates the teaching of an Introduction to Information Systems course by providing extensive support materials for instructors and students. Visit www.wiley. com/college/rainer to access the Student and Instructor Companion Sites.

Instructor’s Manual Th e Instructor’s Manual includes a chapter overview, teaching tips and strategies, answers to all end-of-chapter questions, supplemental mini-cases with essay questions and answers, and experiential exercises that relate to particular topics. It also includes answers and solu- tions to all spreadsheet and database activities, along with a guide to teaching these exer- cises, and links to the separate Excel and Access solutions fi les.

Test Bank Th e test bank is a comprehensive resource for test questions. Each chapter contains multiple choice, true/false, short answer, and essay questions. In addition, each chapter includes “Apply Your Knowledge” questions that require more creative thought to answer. Each mul- tiple choice and true/false question is labeled to indicate its level of diffi culty: easy, medium, or hard.

Th e test bank is available for use in Respondus’ easy-to-use soft ware. Respondus® is a powerful tool for creating and managing exams that can be printed or published directly to Blackboard, WebCT, Desire2Learn, eCollege, ANGEL, and other learning systems. For more information on Respondus® and the Respondus Test Bank Network, please visit www.respondus.com.

PowerPoint Presentations Th e PowerPoint Presentations consist of a series of slides for each chapter. Th e slides are designed around each chapter’s content, incorporating key points from the chapter and

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Preface xiii

chapter illustrations as appropriate, as well as real-life examples from the Web. Th e slides also include links to relevant videos and articles to enhance classroom discussion. Th ey make extensive use of images and video clips.

Student PowerPoints Posted on the Student Companion Site, these are stripped-down versions of the Instructor slides that students can use for note-taking.

Image Library All textbook fi gures are available for download from the Web site. Th ese fi gures can easily be added to PowerPoint presentations.

Wiley Information Systems Hub Th is community Web site is free and open to all instructors who teach an Introduction to IS/MIS course, regardless of book in use. Th e Hub is topic driven and is a place to ask ques- tions, respond to ideas with comments of your own, share videos, assignments, cases, and news links with other users, and much more. We are delighted to announce David Firth of the University of Montana as the community manager for the site. Please check the Instruc- tor Companion Site for information on how to join.

Updates (http://wileyinformationsystemsupdates.com) Weekly updates, harvested from around the Internet by David Firth of the University of Montana, provide you with the latest IT news and issues. Th ese are posted every Monday morning throughout the year at http://wileyinformationsystemsupdates.com/ and feed through to the Wiley Information Systems Hub. Th ey include links to current articles and videos as well as discussion questions to assign or use in class.

BusinessExtra Select Th is feature allows instructors to package the text with lab manuals, cases, articles, and other real-world content from sources such as INSEAD, Ivey and Harvard Business School cases, Fortune, Th e Economist, and Th e Wall Street Journal. You can combine the book with the content you choose to create a fully customized textbook. For additional information, please visit www.wiley.com/college/bxs.

Practice Quizzes Th ese multiple choice conceptual questions reinforce knowledge and understanding of basic concepts. Th ey are available in Respondus, the WileyPLUS course, and the Book Companion Site.

WileyPLUS Th is online teaching and learning environment integrates the entire digital textbook with the most eff ective instructor and student resources to accommodate every learning style. With WileyPLUS:

• Students achieve concept mastery in a rich, structured environment that is available 24/7.

• Instructors personalize and manage their course more eff ectively with assessment, assignments, grade tracking, and more.

WileyPLUS can complement the textbook or replace the printed textbook altogether.

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xiv Preface

For Students Diff erent learning styles, diff erent levels of profi ciency, diff erent levels of preparation—each of your students is unique. WileyPLUS empowers each student to take advantage of his or her strengths.

• Integrated, multimedia resources—including audio and visual exhibits—provide multiple study paths to fi t each student’s learning preferences and encourage active learning. Resources include

> E-book > Minilecture by author for each chapter section > Student PowerPoints for note taking > Video interviews with managers > Lab Manual for Microsoft Offi ce 2010

• WileyPLUS also includes many opportunities for self-assessment. Students can take control of their own learning and practice until they master the material. Resources include

> Automatically graded practice questions from the Test Bank > Pre- and postlecture quizzes > Vocabulary fl ash cards and quizzes

For Instructors WileyPLUS empowers you with the tools and resources you need to make your teaching as eff ective as possible.

• You can customize your classroom presentation with a wealth of resources and function- ality. You can even add your own materials to your WileyPLUS course. Resources include

> PowerPoint presentations > Link to weekly updates > Library of additional “IT’s About Business” cases

• With WileyPLUS you can identify students who are falling behind and intervene accordingly, without having to wait for them to come to offi ce hours.

• WileyPLUS simplifi es and automates such tasks as assessing student performance, creating assignments, scoring student work, tracking grades, and more.

Acknowledgments Creating, developing, and producing a text for the introduction to information systems course is a formidable undertaking. Along the way, we were fortunate to receive continuous evaluation, criticism, and direction from many colleagues who regularly teach this course.

We would like to acknowledge the contributions made by the following individuals who participated in focus groups, telesessions, surveys, chapter walkthroughs, class tests, and reviews:

Monica Adya Marquette University Lawrence Andrew Western Illinois University, Macomb Orakwue (Bay) Arinze Drexel Laura Atkins James Madison University Nick Ball Brigham Young University Nicholas Barnes Nicholls College Susan Barzottini Manchester CC Kristi Berg Minot State University Andy Borchers Lipscomb University David Bouchard Metropolitan State University Dave Bourgeois Biola University Mari Buche Michigan Tech University

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Preface xv

Richard Burkhard San Jose State University Ashley Bush Florida State University Donald Carpenter Mesa State College Teuta Cata Northern Kentucky University Wendy Ceccucci Quinnipiac University Susan Chinn University of Southern ME, Portland Richard Christensen Metropolitan State University Dmitriy Chulkov Indiana University Kokomo Phillip Coleman Western Kentucky University Emilio Collar Western CT State University Daniel Connolly University of Denver Lee Cornell Minnesota State University, Mankato David Croasdell University of Nevada, Reno Reet Cronk Harding University Marcia Daley Clark, Atlanta Donald Danner San Francisco State University Roy DeJoie Purdue, West Lafayette Dawna Dewire Babson College Kevin Duff y Wright State Lauren Eder Rider University Ahmed Eshra St. John’s University Roger Finnegan Metropolitan State University Th omas Fischer Metropolitan State University Jerry Flatto University of Indianapolis Jonathan Frankel University Massachusetts, Boston Judith Gebauer University of North Carolina, Wilmington Jennifer Gerow Virginia Military Institute Matt Graham University of Maine Katie Gray University of Texas, Austin Penelope (Sue) Greenberg Widener University Naveen Gudigantala University of Portland Saurabh Gupta University of North Florida Bernard Han Western Michigan University Hyo-Joo Han Georgia Southern College John Hagle Texas State Technical College Peter Haried University of Wisconsin, LaCrosse Ranida Harris Indiana University Southeast Ranida Harris Indiana University Southeast Roslin Hauck Illinois State University Jun He University of Michigan, Dearborn Richard Herschel St. Joseph’s University Bodgan Hoanca University of Alaska Mary Carole Hollingsworth Georgia Perimeter College, Clarkston Campus Terri Holly Indian River State College Derrick Huang Florida Atlantic University Maggie Hutchison Flagler College Mark Hwang Central Michigan University Lynn Isvik Upper Iowa University, Fayette Arpan Jani University of Wisconsin, River Falls Jonathan Jelen St. John’s University Nenad Jukic Loyola University Stephen Klein Ramapo College Brian Kovar Kansas State University Subodha Kumar Texas A&M Diane Lending James Madison University Kevin Lertwachara Cal Poly San Luis Obispo Terry Letsche Wartburg College

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Victor Lipe Trident Tech Chuck Litecky Southern Illinois University, Carbondale Joan Lumpkin Wright State Nicole Lytle Cal State, San Bernardino George Mangalaraj Western Illinois University Parand Mansouri-Rad University of Texas, El Paso Michael Martel Ohio University Nancy Martin Southern Illinois University, Carbondale Richard McMahon University of Houston, Downtown Tony McRae Collin College Vishal Midha University of Texas, Pan American Esmail Mohebbi University West Florida Luvai Motiwalla University Mass Online Mahdi Nasereddin Penn State, Berks Sandra K. Newton Sonoma State University Ann O’Brien University of Wisconsin, Madison Sungjune Park University of North Carolina, Charlotte Yang Park Georgia Southwestern State University Alan Peace West Virginia University Jacqueline Pike Duquesne University Tony Pittarese East Tennessee State University Jennifer Pitts Columbus State University Richard Platt University of West Florida Larisa Preiser Cal Poly, Pomona Michelle Ramim Nova Southeastern University Alison Rampersad Lynn University Ralph Reilly University of Hartford Wes Rhea Kennesaw State University Julio Rivera University of Alabama, Birmingham Th omas Roberts William Patterson University Cynthia Ruppel Nova Southeastern University Russell Sabadosa Manchester CC Tom Sandman Cal State, Sacramento Kala Seal Loyola Marymount Tod Sedbrook University of Northern Colorado Elaine Seeman East Carolina University Richard Segall Arkansas State University Lee Sellers EOU—Mt. Hood Metro Center Judy Ann Serwatka Purdue, North Central John Seydel Arkansas State University Jollean Sinclaire Arkansas State University Vivek Shah Texas State, San Marcos Mehrdad Sharbaf Loyola Marymount Suengjae Shin Mississippi State University, Meridian Todd Stabenow Hawkeye Community College Jo Lynne Stalnaker University of Wyoming Cynthia Stone Indiana University Nathan Stout University of Oklahoma Yi Sun California State University, San Marcos Winston Tellis Fairfi eld University Doug Francis Tuggle Chapman University Wendy Urban Temple University Darlene de Vida Lower Columbia College James Villars Metropolitan State University Padmal Vitharana Syracuse University Haibo Wang Texas A&M International Hong Wang NC Carolina A&T State University

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June Wei University of West Florida Melody White University of North Texas Rosemary Wild Cal Poly San Luis Obispo Tom Wilder Cal State, Chico Karen Williams University of Texas, San Antonio Marie Wright Western CT Yaquan Xu Virginia State University Bee Yew Fayetteville State University Jigish Zaveri Morgan State University Grace Zhang Augusta State University Wei Zhang University of Massachusetts, Boston Zuopeng Zhang SUNY, Plattsburgh Fan Zhao Florida Gulf Coast University Robert Zwick Yeshiva University

Special thanks to contributors Dawna Dewire, Joan Lumpkin, Kevin Lertwachara, Roy DeJoie, and Kala Seal for working on the Apply the Concept activities that appear in every chapter. Th anks also to Efrem Mallach for creating the database activities; to Dawna Dewire for writing test questions; to Aditi Mukherjee, Judy Serwatka, and Ranida Harris for working on the Instructor’s Manual; and to Terri Holly, Penelope Greenberg, and Aditi Mukherjee for writing quiz questions. We are grateful for the dedication and creativity of all these con- tributors in helping us craft this new text.

We would like to thank the Wiley team: Beth Lang Golub, Executive Editor; Samantha Mandel, Assistant Editor; Jenny Welter, Product Designer; Wendy Ashenberg, Content Edi- tor; and Chris Ruel, Executive Marketing Manager. We also thank the Content Manage- ment team, including Kevin Holm, Content Manager; Jill Spikereit and Tim Lindner, Pro- duction Editors; and Dennis Free of Aptara. And thanks to Maureen Eide, Senior Designer; and Lisa Gee, Photo Editor. We would also like to thank Samantha Mandel for managing all the many details of this new text and her skillful and thorough editing of the manuscript.

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Chapter 1 | Introduction to Information Systems 2

Chapter 2 | Organizational Strategy, Competitive Advantage, and Information Systems 42

Chapter 3 | Data and Knowledge Management 78

Chapter 4 | Telecommunications and Networking 122

Chapter 5 | Business Intelligence 168

Chapter 6 | Ethics and Privacy 202

Chapter 7 | Information Security 226

Chapter 8 | Social Computing 272

Chapter 9 | E-Business and E-Commerce 324

Chapter 10 | Wireless, Mobile Computing, and Mobile Commerce 364

Chapter 11 | Information Systems Within the Organization 408

Chapter 12 | Extending the Organization to Customers 436

Chapter 13 | Extending the Organization Along the Supply Chain 466

Chapter 14 | Acquiring Information Systems and Applications 490

Plug IT In 1 | Business Processes and Business Process Management 530

Plug IT In 2 | Hardware and Software 539

Plug IT In 3 | Cloud Computing 561

Plug IT In 4 | Intelligent Systems 586

Plug IT In 5 | Project Management 601

Plug IT In 6 | Protecting Your Information Assets 612

Photo Credits 635

Index 636

Brief Contents

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Contents

Chapter 1 | Introduction to Information Systems 2

1.1 Why Should I Study Information Systems? 5

1.2 Overview of Computer-Based Information Systems 12

1.3 How Does IT Impact Organizations? 22

1.4 Why Are Information Systems Important to Society? 25

Chapter 2 | Organizational Strategy, Competitive Advantage, and Information Systems 42

2.1 Business Pressures, Organizational Responses, and IT Support 45

2.2 Competitive Advantage and Strategic Information Systems 56

2.3 Business–IT Alignment 63

Chapter 3 | Data and Knowledge Management 78

3.1 Managing Data 81

3.2 The Database Approach 85

3.3 Database Management Systems 91

3.4 Data Warehouses and Data Marts 97

3.5 Knowledge Management 105

Chapter 4 | Telecommunications and Networking 122

4.1 What Is a Computer Network? 125

4.2 Network Fundamentals 128

4.3 The Internet and the World Wide Web 134

4.4 Network Applications 140

Chapter 5 | Business Intelligence 168 5.1 Managers and Decision Making 171

5.2 What Is Business Intelligence? 176

5.3 Business Intelligence Applications for Data Analysis 180

5.4 Business Intelligence Applications for Presenting Results 183

5.5 Business Intelligence in Action: Corporate Performance Management 190

Chapter 6 | Ethics and Privacy 202 6.1 Ethical Issues 204

6.2 Privacy 209

Chapter 7 | Information Security 226 7.1 Introduction to Information Security 229

7.2 Unintentional Threats to Information Systems 231

7.3 Deliberate Threats to Information Systems 235

7.4 What Organizations Are Doing to Protect Information Resources 243

7.5 Information Security Controls 245

Chapter 8 | Social Computing 272 8.1 Web 2.0 275

8.2 Fundamentals of Social Computing in Business 283

8.3 Social Computing in Business: Shopping 286

8.4 Social Computing in Business: Marketing 293

8.5 Social Computing in Business: Customer Relationship Management 301

8.6 Social Computing in Business: Human Resource Management 303

8.7 Crowdsourcing 307

Chapter 9 | E-Business and E-Commerce 324

9.1 Overview of E-Business and E-Commerce 328

9.2 Business-to-Consumer (B2C) Electronic Commerce 335

9.3 Business-to-Business (B2B) Electronic Commerce 346

9.4 Ethical and Legal Issues in E-Business 348

Chapter 10 | Wireless, Mobile Computing, and Mobile Commerce 364

10.1 Wireless Technologies 367

10.2 Wireless Computer Networks and Internet Access 374

10.3 Mobile Computing and Mobile Commerce 383

10.4 Pervasive Computing 390

10.5 Wireless Security 395

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xxii Contents

Chapter 11 | Information Systems Within the Organization 408

11.1 Transaction Processing Systems 410

11.2 Functional Area Information Systems 412

11.3 Enterprise Resource Planning Systems 419

11.4 Reports 424

Chapter 12 | Extending the Organization to Customers 436

12.1 Defi ning Customer Relationship Management 439

12.2 Operational Customer Relationship Management Systems 443

12.3 Analytical Customer Relationship Management Systems 449

12.4 Other Types of Customer Relationship Management Systems 450

Chapter 13 | Extending the Organization Along the Supply Chain 466

13.1 Supply Chains 468

13.2 Supply Chain Management 471

13.3 Information Technology Support for Supply Chain Management 476

Chapter 14 | Acquiring Information Systems and Applications 490

14.1 Planning for and Justifying IT Applications 493

14.2 Strategies for Acquiring IT Applications 497

14.3 The Traditional Systems Development Life Cycle 503

14.4 Alternative Methods and Tools for Systems Development 511

14.5 Vendor and Software Selection 517

Plug IT In 1 | Business Processes and Business Process Management 530

PI1.1 Business Processes 530

PI1.2 Business Process Reengineering and Business Process Management 535

Plug IT In 2 | Hardware and Software 539 PI2.1 Introduction to Hardware 540

PI2.2 Introduction to Software 551

Plug IT In 3 | Cloud Computing 561 PI3.1 Introduction 562

PI3.2 What Is Cloud Computing? 563

PI3.3 Different Types of Clouds 568

PI3.4 Cloud Computing Services 569

PI3.5 Cloud Computing Benefi ts 573

PI3.6 Concerns and Risks with Cloud Computing 576

PI3.7 Web Services and Service-Oriented Architecture 579

Plug IT In 4 | Intelligent Systems 586 PI4.1 Introduction to Intelligent Systems 586

PI4.2 Expert Systems 589

PI4.3 Neural Networks 593

PI4.4 Fuzzy Logic 595

PI4.5 Genetic Algorithms 595

PI4.6 Intelligent Agents 596

Plug IT In 5 | Project Management 601 PI5.1 Project Management for Information Systems

Projects 601

PI5.2 The Project Management Process 603

PI5.3 The Project Management Body of Knowledge 605

Plug IT In 6 | Protecting Your Information Assets 612

PI6.1 How to Protect Your Assets: The Basics 612

PI6.2 Behavioral Actions to Protect Your Information Assets 613

PI6.3 Computer-Based Actions to Protect Your Information Assets 616

Photo Credits 635

Index 636

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1

CHAPTER OUTLINE

1.1 Why Should I Study Information Systems?

1.2 Overview of Computer-Based Information Systems

1.3 How Does IT Impact Organizations?

1.4 Why Are Information Systems Important to Society?

Introduction to Information Systems

LEARNING OBJECTIVES >>>

1. Identify the reasons why being an informed user of information systems is important in today’s world.

2. Describe the various types of computer-based information systems in an organization.

3. Discuss ways in which information technology can aff ect managers and nonmanagerial workers.

4. Identify positive and negative societal eff ects of the increased use of information technology.

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Warby Parker (www.warbyparker.com) is an online eyewear retailer founded in 2010. Th e idea for the company was conceived when the fi rm’s founders (MBA students at the time) wondered why glasses—uncomplicated, easily breakable, and mass produced—were typically quite expensive ($500 or more, for example). Th ey felt that they knew why. Th e optical industry is an oligopoly, meaning that a small number of companies monopolize the business and are making large margins.

Consider, for example, Luxottica (www.luxottica.com), based in Milan, Italy. It owns LensCraft ers, Pearle Vision, Sunglass Hut, and the optical shops in Target and Sears. It also owns Ray-Ban, Oakley, and Oliver Peoples. Based on license agree- ments, it manufactures eyewear for more than 20 top brands, including Chanel, Burberry, Prada, and Stella McCartney. Warby Parker’s founders realized that Luxottica had “created the illusion of choice,” while in fact they monopolized the industry.

Warby Parker uses the same materials and the same Chinese factories as Luxottica. It then sells its glasses at a lower price because it does not have to pay

licensing fees, which can amount to as much as 15 percent of the $100 wholesale cost of a pair of glasses. Warby Parker also does not have to deal with retailers, whose markups can double prices.

Warby Parker’s business model allows customers to test the company’s retro-style glasses via a mail-order, try-it-at-home program. Th e glasses (including prescription lenses) cost a mere $95, and customers may test up to fi ve frames at a time. On its Web site, Warby Parker even off ers a way to upload photos and “try on” frames virtually. Such large-scale individualized shopping experiences have attracted a devoted following among young, trendy professionals and have made the fi rm a commer- cial success.

By mid-2011, Warby Parker had sold more than 50,000 pairs of glasses. Th e company raised $1.5 million from investors in May 2011. Although Warby Parker currently only has a > > >

OPENING CASE > Warby Parker

Ruby’s Club is a small jazz club that opened in 2000 after its owners, Ruben and Lisa, graduated from college. Throughout their college years, they played together in a jazz band and earned business degrees in management and marketing, respectively. They decided to put their collective knowledge together and open their own club.

Ruby’s Club has been very successful. However, they realize that they can now be more successful by collecting, analyzing, and using the data that is available to them. To do this, they need to upgrade their infrastructure. This is the perfect time to upgrade everything because they have recently closed for renovation.

Information technology (IT) was not even taught when they were in college, so they have not used much (if any) technology in their club. While they are considering its use as they restructure, they are not sure how much and in what ways they should pursue the use of IT. To help them on this front, they have hired you as an IT intern to help answer many of their questions about technology. They have teamed up with your IT professor and designed questions to go along with the topics you will be learning about in your information systems course. This Internship is designed to accomplish two things. First, it will give them (Ruben and Lisa) the benefi t of learning technology in a class that was not offered when they were in school. Second, it will give you the benefi t of applying the textbook knowledge you learn to the real world.

As this chapter states, your generation is considered Homo conexus. This constant connectivity has to play a role in the restructuring of Ruby’s Club. It is your job to help Ruben and Lisa understand exactly how this will look. As you read through the chapters, you will be provided with some discussion questions to help you consider the impact of ISs on Ruby’s Club.

© Amanda Rohde/iStockphoto

RUBY’S CLUB

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4 1 l Introduction to Information Systems

Sources: Compiled from L. Sanders, “Ditto Lets You Try on Glasses via Webcam,” San Francisco Chronicle, April 27, 2012; D. Muse, “Th e New Startup Scene: From Silicon Strip to Silicon Mitten,” Forbes, December 19, 2011; S. Berfi eld, “A Startup’s New Prescription for Eyewear,” Bloomberg BusinessWeek, July 4–10, 2011; D. Mau, “Warby Parker vs. Eyefl y,” Fashionista, June 6, 2011; H. Elliot, “Th e New Model for Retail: Buying Glasses Online,” Forbes, January 17, 2011; N. Perlroth, “Name You Need to Know in 2011: Warby Parker,” Forbes, November 22, 2010; www. warbyparker.com, www.eyefl y.com, accessed February 18, 2012.

Questions 1. Provide two examples of how Warby Parker uses

information technology to support its business model.

2. How might Warby Parker further use information technology to counter large competitors who want to copy their business model? Be specifi c.

small, appointment-only showroom, it will soon be opening a 2,500-square-foot store in New York City.

In addition to enjoying great commercial success, Warby Parker also has a social mission. For every pair of glasses it sells, it provides subsidies to help someone in need buy a pair— although not one of Warby’s creations.

Th e company’s success is inspiring competition from more established retailers. For example, in June 2011, the discount fashion site Bluefl y (www.bluefl y.com) introduced Eyefl y (www.eyefl y.com), which sells custom, vintage-looking glasses for $99.

Another competitor is Ditto (www.ditto.com), where shoppers use a computer webcam to record a video of their faces and create a virtual, three-dimensional “you.” Th en, shoppers can virtually try on diff erent frames, look side to side, and blink. Shoppers can solicit feedback from friends on Facebook by sharing shots of their virtual selves wearing diff erent frames.

Introduction

Before you proceed, it is important to defi ne information technology and information sys- tems. Information technology (IT) relates to any computer-based tool that people use to work with information and to support the information and information-processing needs of an organization. An information system (IS) collects, processes, stores, analyzes, and disseminates information for a specifi c purpose.

IT has far-reaching eff ects on us as individuals, on organizations, and on our planet. Although this book is largely devoted to the many ways in which IT has transformed mod- ern organizations, you will also learn about the signifi cant impacts of IT on individuals and societies, the global economy, and our physical environment. In addition, IT is making our world smaller, enabling more and more people to communicate, collaborate, and compete, thereby leveling the digital playing fi eld.

When you graduate, either you will start your own business or you will go to work for an organization, whether it is public sector, private sector, for profi t, or not for profi t. Your organization will have to survive and compete in an environment that has been radically changed by information technology. Th is environment is global, massively interconnected, intensely competitive, 24/7/365, real time, rapidly changing, and information intensive. To compete successfully, your organization must use IT eff ectively.

As the Warby Parker case illustrates, small business owners do not need to be experts in technology to be successful. Th e core competency of Warby Parker’s business is not tech- nology. Rather, it is the company’s business model. However, the company is eff ectively using IT to support its business model and thus to create a successful business.

As you read this chapter and this book, keep in mind that the information technolo- gies you will learn about are important to businesses of all sizes. No matter what area of business you major in, what industry you work for, or the size of your company, you will benefi t from learning about IT. Who knows? Maybe you will have a great idea and use the tools you learn about in this class to make your dream a reality much the way Warby Parker has!

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Why Should I Study Information Systems? 5

Th e modern environment is not only intensely competitive for your organization, but for you as well. You must compete with human talent from around the world. Th erefore, you will also have to make eff ective use of IT.

Accordingly, this chapter begins with a discussion of why you should become knowledgeable about IT. It also distinguishes among data, information, and knowledge, and it diff erentiates computer-based information systems from application programs. Finally, it considers the impacts of information systems on organizations and on society in general.

1.1 Why Should I Study Information Systems? You are the most connected generation in history. You have grown up online. You are, quite literally, never out of touch. You use more information technologies (in the form of digital devices) for more tasks, and are bombarded with more information, than any generation in history. Th e MIT Technology Review refers to you as Homo conexus. Information technolo- gies are so deeply embedded in your life that your daily routines would be almost unrecog- nizable to a college student just 20 years ago.

Essentially, you are practicing continuous computing, where you are surrounded with a movable information network. Your network is created by constant cooperation between the digital devices you carry (for example, laptops, media players, and smart phones); the wireline and wireless networks that you access as you move about; and Web-based tools for fi nding information and communicating and collaborating with other people. Your network enables you to pull information about virtually anything from anywhere, at any time, and to push your own ideas back to the Web, from wherever you are, via a mobile device. Th ink of everything you do online, oft en with your phone: register for classes; take classes (and not just at your university); access class syllabi, information, PowerPoints, and lectures; research class papers and presentations; conduct banking; pay your bills; research, shop, and buy products from companies or other people; sell your “stuff ”; search for, and apply for, jobs; make your travel reservations (hotel, airline, rental car); have your own blog and post your own podcasts and videocasts to it; have your own page on Facebook; make and upload videos to YouTube; take, edit, and print your own digital photographs; “burn” your own custom-music CDs and DVDs; use RSS feeds to create your personal electronic newspaper; text and tweet your friends and family throughout your day; and many other activities. (Note: If any of these terms are unfamiliar to you, do not worry. You will learn about every- thing mentioned here in detail later in this book.)

The Informed User—You! So, the question is, Why should you learn about ISs and ITs? Aft er all, you can comfortably use a computer (or other elec- tronic device) to perform many activities, you have been surf- ing the Web for years, and you feel confi dent that you can man- age any IT application that your organization’s management information systems (MIS) department installs. Th e answer lies in your becoming an informed user—that is, a person knowledgeable about information systems and information technology. Th ere are several reasons why you should be an informed user.

In general, informed users tend to get more value from whatever technologies they use. You will enjoy many benefi ts from being an informed user of IT. First, you will benefi t more

from your organization’s IT applications because you will understand what is “behind” those applications (see Figure 1.1). Th at is, what you see on your com- puter screen is brought to you by your MIS depart-

ment operating “behind” your screen. Second, you will be in a Students today are connected by many devices—almost all are wireless.

Media Bakery

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6 1 l Introduction to Information Systems

position to enhance the quality of your organization’s IT applications with your input. Th ird, even as a new graduate, you will quickly be in a position to recommend—and perhaps help select—the IT applications that your organization will use. Fourth, being an informed user will enable you to keep abreast of both new information technologies and rapid develop- ments in existing technologies. In fact, as you will see in the chapter’s Closing Case 1, every company today is a technology company, making it even more important for you to be an informed user of information technologies.

Remaining “on top of things” will help you to anticipate the impacts that “new and improved” technologies will have on your organization and to make recommendations on the adoption and use of these technologies. Finally, you will understand how IT can be used to improve your organization’s performance and teamwork as well as your own productivity.

Managing the IS function within an organization is no longer the exclusive respon- sibility of the IS department. Rather, users now play key roles in every step of this pro- cess. Our overall objective in this book is for you to be able to immediately contribute to managing the IS function in your organization from your user’s perspective. In short, we want to help you become a very informed user!

In addition, if you wish to become an entrepreneur, then being an informed user will help you use IT when you start your own business. IT’s About Business 1.1 illustrates how you can build your own apps for your startup company or small business.