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ISBN-13: 978-0-13-463520-0 ISBN-10: 0-13-463520-5

INFORMATION SYSTEMS TODAY M A N A G I N G I N T H E D I G I T A L W O R L D

E I G H T H E D I T I O N

Joseph Valacich Christoph Schneider

www.pearsonhighered.com

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MIS: Engage, Apply, Empower

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• Branching, Decision-Making Simulations—students take on the role of manager as they make a series of decisions based on a realistic business challenge, fostering decision making and problem solving skills. The simulations change and branch based on their decisions, creating various scenario paths. At the end of each simulation, students receive a grade and a detailed report of the choices they made with the associated consequences included.

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Office 2016 Grader Projects—Students complete projects in Excel and Access to demonstrate problem solving, critical thinking, and data analysis skills. Projects are automatically graded and include feedback. Integrity tokens in each project prevent and detect cheating.

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PROBLEM SOLVING

TEAMWORK DECISION MAKING

CRITICAL THINKING

ABILITY TO APPLY

KNOWLEDGE

COMMUNICATION

NEW

HIR E

Information systems have become pervasive. Mobile devices, social media, and cloud computing have transformed organizations and society. The Internet of Things can generate a wealth of potentially useful Big Data. The rapid development of transportation and telecommunication technologies, national and global infrastructures, and information systems as well as a host of other factors has created a number of pressing societal issues that tremendously influence the world we live in. These issues include demographic changes, urbanization, shifts in economic power, resource scarcity, and climate change. As a consequence, sustainable development will become an ever increasingly important aspect for organizations. Throughout this revision, we discuss how organizations can harness radical innovations and other technological developments, as well as the role of information systems in influencing and addressing pressing societal issues; further, we added a new chapter element about the role of Green IT. We designed the book’s cover to emphasize how IT resides within and influences various societal issues.

• Learning Catalytics™—is an interactive, student response tool that uses students’ smartphones, tablets, or laptops to engage them in more sophisticated tasks and critical thinking as well as collaboration with other class members. Included with MyLab with eText, Learning Catalytics enables you to generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics.

• Enhanced eText—keeps students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material. The embedded videos, simulations, and activities bring learning to life. to apply the very concepts they are reading about. Combining resources that illuminate content with accessible self-assessment, MyLab with Enhanced eText provides students with a complete digital learning experience—all in one place.

• Dynamic Study Modules—help students learn the language of MIS by continuously assessing their activity and performance in real time by adapting to the student's knowledge and confidence on each concept. These are available as graded assignments prior to class, and accessible on smartphones, tablets, and computers.

• Reporting Dashboard—View, analyze, and report learning outcomes clearly and easily, and get the information needed to keep students on track throughout the course with the new Reporting Dashboard. Available via the MyLab Gradebook and fully mobile-ready, the Reporting Dashboard presents student performance data at the class, section, and program levels in an accessible, visual manner.

• Accessibility (ADA)—Pearson is working toward WCAG 2.0 Level AA and Section 508 standards, as expressed in the Pearson Guidelines for Accessible Educational Web Media. Moreover, our products support customers in meeting their obligation to comply with the Americans with Disabilities Act (ADA) by providing access to learning technology programs for users with disabilities.

Please email our Accessibility Team at disability.support@pearson.com for the most up-to-date information.

• LMS Integration—You can now link from Blackboard Learn, Brightspace by D2L, Canvas, or Moodle to MyISLab. Professors can acess assignments, rosters, and resources, and synchronize grades with your LMS gradebook.

Single sign-on provides students access to all the personalized learning resources that make studying more efficient and effective.

A L W A Y S L E A R N I N G

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330 Hudson Street, NY NY 10013

INFORMATION SYSTEMS TODAY

Joseph Valacich University of Arizona

Christoph Schneider City University of Hong Kong

M A N A G I N G I N T H E D I G I T A L W O R L D

E I G H T H E D I T I O N

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VP Editorial Director: Andrew Gilfillan Senior Portfolio Manager: Samantha Lewis Content Development Team Lead: Laura Burgess Program Monitor: Ann Pulido/SPi Global Editorial Assistant: Madeline Houpt Product Marketing Manager: Kaylee Carlson Project Manager: Katrina Ostler/ Cenveo® Publisher Services Text Designer: Cenveo® Publisher Services Cover Designer: Brian Malloy/ Cenveo® Publisher Services

Cover Art: Kanate/Shutterstock; Zera93/Shutterstock; Maglara/Shutterstock; iDesign/Shutterstock; Fine Art/ Shutterstock Full-Service Project Management: Cenveo® Publisher Services Composition: Cenveo® Publisher Services Printer/Binder: RR Donnelley/Menasha Cover Printer: Phoenix Color Text Font: 10/12 Times LT Pro Unattributed figures in text: Joseph Valacich, Christoph Schneider, Information Systems Today, 8Ed., © 2018. Pearson Education, Inc., New York, NY.

Microsoft and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published as part of the services for any purpose. All such documents and related graphics are provided “as is” without warranty of any kind. Microsoft and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all warranties and conditions of merchantability, whether express, implied or statutory, fitness for a particular purpose, title and non-infringement. In no event shall Microsoft and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from the services.

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Dedication

To my mother Mary, you are the best. —Joe

To Birgit for your love and support. —Christoph

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Joseph (Joe) Valacich is an Eller Professor of MIS within the Eller College of Management at the University of Arizona, a Fellow of the Association for Information Systems (2009), and the Chief Science Officer (CSO) of Neuro-ID, Inc. He was previously on the faculty at Indiana University, Bloomington, and Washington State University, Pullman. He has had visiting faculty appointments at City University of Hong Kong, Buskerud College (Norway), the Helsinki School of Economics and Business, the Norwegian University of Life Sciences, and Riga Technical University (Latvia). He received a PhD degree from the University of Arizona (MIS) and MBA and BS (Computer Science) degrees from the University of Montana. Prior to his academic career, Dr. Valacich worked in the software industry in Seattle in both large and startup organizations.

Dr. Valacich has served on various national task forces designing model curricula for the information systems discipline, including IS ‘97, IS 2002, and IS 2010: The Model Curriculum and Guidelines for Undergraduate Degree Programs in Information Systems, where he was co-chairperson. He also served on the task force that designed MSIS 2000 and 2006: The Master of Science in Information Systems Model Curriculum. He served on the executive committee, funded by the National Science Foundation, to define the IS Program Accreditation Standards and served on the board of directors for CSAB (formally the Computing Sciences Accreditation Board) representing the Association for Information Systems (AIS). He was the general confer- ence co-chair for the 2003 International Conference on Information Systems (ICIS) and the 2012 Americas Conference on Information Systems (AMCIS); both were held in Seattle.

Dr. Valacich has conducted numerous corporate training and executive development pro- grams for organizations, including AT&T, Boeing, Dow Chemical, EDS, Exxon, FedEx, General Motors, Microsoft, and Xerox. He has served in a variety of editorial roles within various academic journals and conferences. His primary research interests include human–computer interaction, deception detection, technology-mediated collaboration, mobile and emerging tech- nologies, and e-business. He is a prolific scholar, having published more than 200 scholarly articles in numerous prestigious journals and conferences, including: MIS Quarterly, Information Systems Research, Management Science, Academy of Management Journal, Journal of MIS, Decision Sciences, Journal of the AIS, Communications of the ACM, Organizational Behavior and Human Decision Processes, and Journal of Applied Psychology. He is a coauthor of the leading textbooks Modern Systems Analysis and Design (8th ed.) and Essentials of Systems Analysis and Design (6th ed.), both published by Pearson.

In 2016, Dr. Valacich was awarded the University of Arizona, Tech Launch Arizona, “Innova- tion & Impact Award” for Information Technology. He was awarded the “Distinguished Alumnus Award” from the University of Montana Alumni Association in 2012 and the “Outstanding Alum- nus Award” from the University of Montana’s School of Business Administration in 2009. Dr. Valacich is also ranked as one of the most prolific authors in the history of MIS Quarterly—his discipline’s top journal—over the life of the journal (1977–2016) (see misq.org). Throughout his career, he has also won numerous teaching, service, and research awards.

Christoph Schneider is an assistant professor in the Department of Information Systems at City University of Hong Kong and previously held a visiting faculty appointment at Boise State University. He earned a Swiss Higher Diploma in Hotel Management at the University Centre César Ritz in Brig, Switzerland, a BA in Hotel and Restaurant Administration at Washington State University, and a PhD in Business Administration (Management Information Systems) at Washington State University. His teaching interests include the management of information systems and web design.

About the Authors

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viii ABOUT THE AUTHORS

Dr. Schneider is an active researcher. His primary research interests include human–com- puter interaction, electronic commerce, and computer-mediated collaboration. His research has appeared in peer-reviewed journals, such as Information Systems Research, Management Infor- mation Systems Quarterly, Management Science, and IEEE Transactions on Professional Com- munication; further, he has presented his research at various international conferences, such as the International Conference on Information Systems, the European Conference on Informa- tion Systems, and the Hawaii International Conference on System Sciences. He serves as a member of the International Steering Committee of the International Conference on Informa- tion Systems Development (ISD) and as senior editor at Information Systems Journal.

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ix

Preface xix

Chapter 1 Managing in the Digital World 2

Chapter 2 Gaining Competitive Advantage Through Information Systems 48

Chapter 3 Managing the Information Systems Infrastructure and Services 90

Chapter 4 Enabling Business-to-Consumer Electronic Commerce 138

Chapter 5 Enhancing Organizational Communication and Collaboration Using Social Media 182

Chapter 6 Enhancing Business Intelligence Using Big Data and Analytics 224

Chapter 7 Enhancing Business Processes Using Enterprise Information Systems 270

Chapter 8 Strengthening Business-to-Business Relationships via Supply Chain and Customer Relationship Management 306

Chapter 9 Developing and Acquiring Information Systems 344

Chapter 10 Securing Information Systems 390

Technology Briefing Foundations of Information Systems Infrastructure 442

Acronyms 491

Glossary 493

Name Index 513

Organization Index 514

Subject Index 517

Brief Contents

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Preface xix

Chapter 1 Managing in the Digital World 2 MANAGING IN THE DIGITAL WORLD: Open Innovation 2

Information Systems Today 4 The Emergence of the Digital World 4 Globalization and Societal Issues in the Digital World 7 ◾ COMING ATTRACTIONS: Memory Crystals 7 Five IT Megatrends That Shape the Digital Future 10 ◾ WHO’S GOING MOBILE: Wearable Technologies 10 ◾ GREEN IT: The Green Internet of Things 16

Information Systems Defined 16 Data: The Root and Purpose of Information Systems 18 Hardware, Software, and Telecommunications Networks: The Components of Information Systems 18 People: The Builders, Managers, and Users of Information Systems 19 ◾ SECURITY MATTERS: Ransomware 24 Organizations: The Context of Information Systems 25 ◾ WHEN THINGS GO WRONG: Technology Addiction 28

The Dual Nature of Information Systems 29 Case in Point: An Information System Gone Awry: Outages Outrage Gamers 29 Case in Point: An Information System That Works: FedEx 29 Information Systems for Competitive Advantage 30 ◾  ETHICAL DILEMMA: The Social and Environmental Costs of the Newest

Gadgets 31 IS Ethics 32

Information Privacy 32 Intellectual Property 36 The Need for a Code of Ethical Conduct 37 ◾ INDUSTRY ANALYSIS: Business Career Outlook 38

Key Points Review 39 • Key Terms 39 • Review Questions 40 • Self- Study Questions 40 • Problems and Exercises 41 • Application Exercises 42 • Team Work Exercise 42 • Answers to the Self-Study Questions 43

◾ APPLE 44 ◾ HEALTHCARE IS 45

Chapter 2 Gaining Competitive Advantage Through Information Systems 48

MANAGING IN THE DIGITAL WORLD: Startups and New Business Models 48

Enabling Organizational Strategy through Information Systems 50 Organizational Decision-Making Levels 50 Organizational Functional Areas 52

Contents

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Information Systems for Automating: Doing Things Faster 53 Information Systems for Organizational Learning: Doing Things Better 55 Information Systems for Supporting Strategy: Doing Things Smarter 56 Identifying Where to Compete: Analyzing Competitive Forces 56 Identifying How to Compete: Choosing a Generic Strategy 57 Identifying How to Compete: Resources and Capabilities 58 ◾ GREEN IT: The Electric Navy 59 Identifying How to Compete: Analyzing the Value Chain 60 The Role of Information Systems in Value Chain Analysis 60 The Technology/Strategy Fit 61

Business Models in the Digital World 61 ◾ WHO’S GOING MOBILE: Digital Nomads 62 Revenue Models in the Digital World 62 ◾ WHEN THINGS GO WRONG: The Pains of Uber in China 65 Platform-Based Business Models and the Sharing Economy 65 Service-Based Business Models 67 ◾ ETHICAL DILEMMA: The Ethics of the Sharing Economy 68

Valuing Innovations 69 The Need for Constant IS Innovation 71 Successful Innovation Is Difficult 72 Open Innovation 73 Organizational Requirements for Innovation 74 ◾ COMING ATTRACTIONS: The CITE Project 75 The Innovation Process 75 ◾ SECURITY MATTERS: The Bangladesh SWIFT Theft 78 Startups and Crowdfunding 78 ◾ INDUSTRY ANALYSIS: Education 80

Key Points Review 81 • Key Terms 81 • Review Questions 82 • Self- Study Questions 82 • Problems and Exercises 83 • Application Exercises 84 • Team Work Exercise 84 • Answers to the Self-Study Questions 84

◾ GROUPON 85 ◾ STREAMING VIDEO 86

Chapter 3 Managing the Information Systems Infrastructure and Services 90

MANAGING IN THE DIGITAL WORLD: From Google to Alphabet 90

The IS Infrastructure 92 ◾ �WHO’S GOING MOBILE: Mobile Payments Are Transforming Developing

Countries 94 Applications and Databases Supporting Business Processes 96 ◾ ETHICAL DILEMMA: Putting People’s Lives Online 97

IS Infrastructure Components 98 Hardware 98 System Software 100 Storage 102 ◾ COMING ATTRACTIONS: Making Death Optional? 102 Networking 103 ◾ GREEN IT: Alphabet Renewables 109 Data Centers 111

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Issues Associated with Managing the IS Infrastructure 112 Rapid Obsolescence and Shorter IT Cycles 112 Big Data and Rapidly Increasing Storage Needs 115 Demand Fluctuations 115 Increasing Energy Needs 116

Cloud Computing 116 ◾ �WHEN THINGS GO WRONG: Old and Dirty Energy Drives Global Internet

Growth 117 What Is Cloud Computing? 117 Managing the Cloud 121 Advanced Cloud Applications 124 ◾ SECURITY MATTERS: Car Hacking 126 Green Computing 129 ◾ INDUSTRY ANALYSIS: Movie Industry 130

Key Points Review 131 • Key Terms 131 • Review Questions 132 • Self- Study Questions 132 • Problems and Exercises 133 • Application Exercises 134 • Team Work Exercise 134 • Answers to the Self-Study Questions 135

◾ A CATALYST FOR INNOVATION: AMAZON WEB SERVICES 135 ◾ THE DARK WEB 136

Chapter 4 Enabling Business-to-Consumer Electronic Commerce 138

MANAGING IN THE DIGITAL WORLD: Taobao and the World of E-commerce 138

E-Commerce and E-Government 140 Types of Electronic Commerce 140 E-government 141 E-finance 142

Business-To-Consumer E-Commerce 143 ◾ COMING ATTRACTIONS: The AI Hedge Fund 144 E-tailing: Capabilities and Opportunities 146 Benefits of E-tailing 149 ◾ ETHICAL DILEMMA: The Ethics of Reputation Management 150 Drawbacks of E-tailing 151

Electronic Commerce Websites and Internet Marketing 151 Designing Websites to Meet Online Consumers’ Needs 152 ◾ SECURITY MATTERS: Too Small to Be Hacked? 152 Internet Marketing 154 ◾ WHEN THINGS GO WRONG: Buying Likes 158

Mobile Commerce, Consumer-To-Consumer EC, and Consumer-To-Business EC 159

C2C EC 161 C2B EC 162

Securing Payments and Navigating Legal Issues in EC 163 Securing Payments in the Digital World 163 ◾ GREEN IT: Green Online Shopping 164 ◾ WHO’S GOING MOBILE: Mobile Payments 165 Legal Issues in EC 168 ◾ INDUSTRY ANALYSIS: Retailing 171

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Key Points Review 172 • Key Terms 172 • Review Questions 173 • Self- Study Questions 173 • Problems and Exercises 174 • Application Exercises 175 • Team Work Exercise 175 • Answers to the Self-Study Questions 176

◾ WEB ANALYTICS 177 ◾ ROCKET INTERNET—CLONING BUSINESS MODELS 178

Chapter 5 Enhancing Organizational Communication and Collaboration Using Social Media 182

MANAGING IN THE DIGITAL WORLD: Facebook 182

The Need for Communication and Collaboration 184 Virtual Teams 184 Groupware 185 Videoconferencing 186 ◾ GREEN IT: Green IT Fueling Renewable Energy 188 Intranets and Employee Portals 188

The Evolving Web 190 ◾ COMING ATTRACTIONS: Dissolvable Electronics 191 Evolving Web Capabilities 191 Evolving Social Interaction 192 The Evolving Workspace 193 Future Web Capabilities 193

Social Media and the Enterprise 194 Enhancing Communication Using Social Media 194 Enhancing Cooperation with Social Media 197 ◾ SECURITY MATTERS: Terrorism Is Winning the Social Media Battle 200 Enhancing Collaboration with Social Media 201 ◾ WHO’S GOING MOBILE: Going SoLoMo: Yelp 203 Enhancing Connection with Social Media 205 ◾ ETHICAL DILEMMA: Anonymity, Trolling, and Cyberharassment 207

Managing Social Media Applications in the Enterprise 208 Organizational Issues 208 ◾ WHEN THINGS GO WRONG: Crowdfunding Failures 210 Downsides and Dangers of using Social Media Applications 211 ◾ INDUSTRY ANALYSIS: Online Travel 213

Key Points Review 214 • Key Terms 214 • Review Questions 215 • Self- Study Questions 215 • Problems and Exercises 216 • Application Exercises 216 • Team Work Exercise 217 • Answers to the Self-Study Questions 218

◾ LIVING IN A BUBBLE: FACEBOOK, NEWSFEEDS, AND JOURNALISM 218 ◾ LIKE FARMING AND CLICKBAIT 219

Chapter 6 Enhancing Business Intelligence Using Big Data and Analytics 224

MANAGING IN THE DIGITAL WORLD: Intelligence Through Drones 224

Enhancing Organizational Decision Making 226 Why Organizations Need Business Intelligence and Advanced Analytics 226 ◾ �GREEN IT: Big Data, Internet of Things, and Analytics Fuel Greener

Facilities 229 Databases: Providing Inputs into Business Intelligence and Advanced Analytics 229

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◾ WHEN THINGS GO WRONG: Twitter Fever—Look Before You Tweet 233 ◾ COMING ATTRACTIONS: Emotion Aware Gaming 239

Business Intelligence and Advanced Analytics 239 Business Intelligence 240 ◾ WHO’S GOING MOBILE: Identifying Malaria Hotspots 245 Advanced Analytics 245 ◾ ETHICAL DILEMMA: Orwellian Internet of Things 247 ◾ �SECURITY MATTERS: Hacktivists Versus Fembots: The Ashley Madison

Case 253 Knowledge Management and Geographic Information Systems 254

Knowledge Management Systems 254 Geographic Information Systems 257 ◾ INDUSTRY ANALYSIS: Healthcare 260

Key Points Review 261 • Key Terms 261 • Review Questions 262 • Self- Study Questions 262 • Problems and Exercises 263 • Application Exercises 264 • Team Work Exercise 265 • Answers to the Self-Study Questions 265

◾ NSA: NATIONAL SURVEILLANCE AGENCY? 265 ◾ GATHERING SOCIAL INTELLIGENCE 266

Chapter 7 Enhancing Business Processes Using Enterprise Information Systems 270

MANAGING IN THE DIGITAL WORLD: Amazon.com 270

Core Business Processes and Organizational Value Chains 272 Core Business Processes 272 Organizational Activities Along the Value Chain 274 ◾ GREEN IT: Why Your Enterprise Systems Should Be in the Cloud 277 Value Systems: Connecting Multiple Organizational Value Chains 279

Enterprise Systems 279 The Rise of Enterprise Systems 280 Supporting Business Processes 281 ◾ ETHICAL DILEMMA: Too Much Intelligence? RFID and Privacy 282 ◾ �COMING ATTRACTIONS: The Internet of Things Will Transform ERP and

Organizations 285 Enterprise Resource Planning 288

Responding to Compliance and Regulatory Demands 289 Choosing an ERP System 289 ◾ �SECURITY MATTERS: To Update or Not to Update, That Shouldn’t Be the

Question 290 Enabling Business Processes Using ERP Core Components 291 ERP Installation 294 ERP Limitations 294

Achieving Enterprise System Success 294 ◾ WHO’S GOING MOBILE: Big ERP Systems Embracing Small Mobile Devices 295 Secure Executive Sponsorship 295 Get Help from Outside Experts 296 Thoroughly Train Users 296 Take a Multidisciplinary Approach to Implementations 296 Evolve the Implementation 296 ◾ �WHEN THINGS GO WRONG: Software Error Frees Prisoners Early and Is

Linked to Killings 297

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◾ INDUSTRY ANALYSIS: The Automobile Industry 298 Key Points Review 299 • Key Terms 299 • Review Questions 300 • Self- Study Questions 300 • Problems and Exercises 301 • Application Exercises 302 • Team Work Exercise 302 • Answers to the Self-Study Questions 302

◾ SOFTWARE AS A SERVICE: ERP BY THE HOUR 303 ◾  AMAZON’S ORDER FULFILLMENT, AUTOMATION, AND TECHNOLOGICAL

UNEMPLOYMENT 304

Chapter 8 Strengthening Business-to-Business Relationships via Supply Chain and Customer Relationship Management 306

MANAGING IN THE DIGITAL WORLD: Walmart 306

Supply Chain Management 308 What Is a Supply Chain? 308 Business-to-Business Electronic Commerce: Exchanging Data in Supply Networks 308 Managing Complex Supply Networks 311 Benefits of Effectively Managing Supply Chains 312 Optimizing the Supply Chain Through Supply Chain Management 314 ◾ �WHEN THINGS GO WRONG: SpaceX Rocket Failure due to Supply Chain

Failure 315 Developing an SCM Strategy 316 ◾ GREEN IT: Nike’s Green Supply Chain 317 Supply Chain Planning 317 Supply Chain Execution 318 Supply Chain Visibility and Analytics 321

Customer Relationship Management 321 ◾ COMING ATTRACTIONS: Augmenting Supply Chain Success 322 ◾ �SECURITY MATTERS: Disclosing the Customer Data of the Most

Vulnerable 325 Developing a CRM Strategy 325 Architecture of a CRM System 326 ◾ �WHO’S GOING MOBILE: Developing a Mobile CRM App for

Customers 330 ◾ ETHICAL DILEMMA: When Algorithms Discriminate 334 Ethical Concerns with CRM 335 ◾ INDUSTRY ANALYSIS: Manufacturing 335

Key Points Review 336 • Key Terms 336 • Review Questions 337 • Self- Study Questions 337 • Problems and Exercises 338 • Application Exercises 339 • Team Work Exercise 339 • Answers to the Self-Study Questions 339

◾ SUPPLY CHAIN HAVOC 340 ◾ EFFICIENTLY DELIVERING PRODUCTS OVER THE “LAST MILE” 341

Chapter 9 Developing and Acquiring Information Systems 344 MANAGING IN THE DIGITAL WORLD: The Maker Movement 344

Making the Business Case 346 Business Case Objectives 346 The Productivity Paradox 346 Making a Successful Business Case 348 ◾ GREEN IT: Project Natick—Microsoft’s Underwater Data Centers 350

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◾ COMING ATTRACTIONS: Harvesting Human Energy 352 Presenting the Business Case 354 ◾ ETHICAL DILEMMA: Ethical App Development 356

The Systems Development Process 357 Custom Versus Off-the-Shelf Software 357 Open Source Software 358 Systems Integration: Combining Custom, Open Source, and Off-the-Shelf Systems 359 IS Development in Action 359 The Role of Users in the Systems Development Process 361 Systems Development Controls 361 Steps in the Systems Development Process 361 ◾ WHO’S GOING MOBILE: Creating Mobile Apps 362 Phase 1: Systems Planning and Selection 362 Phase 2: Systems Analysis 363 Phase 3: Systems Design 366 Phase 4: Systems Implementation and Operation 367 Repeating the SDLC: Systems Maintenance 369 ◾ SECURITY MATTERS: Mobile Cybercrime 371 Other Approaches to Designing and Building Systems 371

Acquiring Information Systems 373 External Acquisition 373 ◾ WHEN THINGS GO WRONG: Top Security Threats 374 Outsourcing Systems Development 378 ◾ INDUSTRY ANALYSIS: Broadcasting 380

Key Points Review 381 • Key Terms 381 • Review Questions 382 • Self- Study Questions 382 • Problems and Exercises 383 • Application Exercises 384 • Team Work Exercise 384 • Answers to the Self-Study Questions 385

◾  NEXT GENERATION IDENTIFICATION: FBI, ICE DATABASES EXPAND AND JOIN FORCES 386

◾ BIG DATA, HADOOP, MAP REDUCE 387

Chapter 10 Securing Information Systems 390 MANAGING IN THE DIGITAL WORLD: Not So “Anonymous”—Activists, Hacktivists, or Just Plain Criminals? 390

Computer Crime 392 Hacking and Cracking 392 Types of Computer Criminals and Crimes 392 ◾ �GREEN IT: Anonymous Protests the Killing of Dolphins and Whales in

Japan 396 Computer Viruses and Other Destructive Code 397 ◾ �WHEN THINGS GO WRONG: The Bug That Almost Killed the

Internet 402 Cyberharassment, Cyberstalking, and Cyberbullying 404 Software Piracy 404 Cybersquatting 406 Laws Against Computer Crime 406

Cyberwar and Cyberterrorism 407 ◾ WHO’S GOING MOBILE: Backdoors in Every Mobile Phone? 408 Cyberwar 408 Cyberterrorism 409

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xviii CONTENTS

Foundations of Information Systems Infrastructure 442 Foundational Topics in IS Hardware 443

Input Technologies 443 Processing: Transforming Inputs into Outputs 445 Output Technologies 449

Foundational Topics in IS Software 450 System Software 451 Programming Languages and Development Environments 451

Foundational Topics in Networking 457 Evolution of Computer Networking 457 Types of Networks 459 Packet Switching 462 Network Standards and Protocols 462 Network Technologies 466 The Internet 472

Foundational Topics in Database Management 478 Relational Database Design 478 Advanced Database Models 483

Key Points Review 483 • Key Terms 484 • Review Questions 485 • Self-Study Questions 486 • Problems and Exercises 487 • Answers to the Foundational Hardware Self-Study Questions 489 • Answers to the Foundational Software Self-Study Questions 489 • Answers to the Foundational Networking Self-Study Questions 489 • Answers to the Foundational Database Self-Study Questions 489

Acronyms 491

Glossary 493

Name Index 513

Organization Index 514

Subject Index 517

TECHNOLOGY BRIEFING

◾ �ETHICAL DILEMMA: Ethics and Cyberwar: Just Because We Can, Should We? 412

Managing Information Systems Security 412 Assessing Risks 414 Developing a Security Strategy 416 Implementing Controls and Training 418 ◾ �SECURITY MATTERS: Back to the Future: Analog May Be the Future of

Securing Critical Infrastructure 419 ◾ COMING ATTRACTIONS: Can You Become Your Password? 425 Monitoring Security 428 ◾ INDUSTRY ANALYSIS: Cybercops Track Cybercriminals 431

Key Points Review 432 • Key Terms 432 • Review Questions 433 • Self- Study Questions 433 • Problems and Exercises 434 • Application Exercises 436 • Team Work Exercise 436 • Answers to the Self-Study Questions 437

◾ STOPPING INSIDER THREATS: EDWARD SNOWDEN AND THE NSA 438 ◾ CHINA’S GREAT (FIRE) WALL 439

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xix

Approach Information systems have become pervasive. Mobile devices, social media, and cloud computing have transformed organizations and society. Organizations see the possibilities of the Internet of Things, in that not only computers but various sensors, motors, actuators, or even cameras can generate a wealth of potentially useful data. Businesses face unprecedented opportunities, but also challenges, through the ability to utilize Big Data. What does all this mean? What are the catalysts of these concepts and of all this change? More important, how can organizations thrive in this dynamic and highly competitive marketplace? The answer to these and many similar ques- tions is that information systems and related information technologies are driving innovation, new business models, and hypercompetition. It is little wonder that teaching an introductory course on information systems has never been more crucial—or more challenging.

One of the greatest challenges that we face in teaching information systems courses is how to keep pace in the classroom with what is happening out in the real world. Being relevant to students while at the same time providing the necessary foundation for understanding the breadth, depth, and complexity of information systems has never been more difficult. We wrote Informa- tion Systems Today, Eighth Edition, with this overarching goal in mind, to be both rigorous and relevant. To accomplish this, we want students not only to learn about information systems but also to clearly understand the importance of information systems for individuals, organizations, and society. Additionally, we do not want to simply spoon-feed students with technical terms and the history of information systems. Instead, students must understand exactly what innovative organizations are doing with contemporary information systems and, more important, where things are heading. Finally, we want to empower students with the essential knowledge needed to be successful in the use and understanding of information systems in their careers.

To this end, we wrote Information Systems Today, Eighth Edition, so that it is contemporary, fun to read, and useful, focusing on what business students need to know about information sys- tems to survive and thrive in the digital world.

Audience Information Systems Today, Eighth Edition, is primarily for the undergraduate introductory infor- mation systems course required of all business students. The introductory information systems course typically has a diverse audience of students majoring in many different areas, such as accounting, economics, finance, marketing, general management, human resource management, production and operations, international business, entrepreneurship, and information systems. This book was also written for students studying topics outside of business, especially in the growing and broad area of information sciences. Given the range of students taking this type of course, we have written this book so that it is a valuable guide to all students, providing them with the essential information they need to know. Therefore, this book has been written to appeal to a diverse audience.

Information Systems Today, Eighth Edition, can also be used for the introductory course offered at the graduate level—for example, in the first year of an MBA program. Such usage would be especially appropriate if the course heavily focused on the diverse set of cases provided in each chapter.

What’s New to the Eighth Edition Our primary goal for Information Systems Today, Eighth Edition, was to emphasize the impor- tance of information systems to all business students as the role of information technology and systems continues to expand within organizations and society. Most notably, we extensively

Preface

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xx PREFACE

examine how five big megatrends—mobile, social media, the Internet of Things, cloud comput- ing, and Big Data—are transforming individuals, organizations, and society. Given this clear focus, we are better able to identify those topics most critical to students and future business professionals. Consequently, we have made substantial revisions to the basic content of the chap- ters and pedagogical elements as well as introduced several new elements that we believe help achieve this goal. New or expanded chapter topics include the following:

�■ An extensively revised chapter—Chapter 1, “Managing in the Digital World”—focuses not only on defining what an information system consists of but also provides new content on globalization and societal issues in the digital world as well as the role of five IT mega- trends in fueling and addressing these issues.

�■ An extensively revised chapter—Chapter 2, “Gaining Competitive Advantage Through Information Systems”—provides new content describing how information systems play a key part in enabling different types of innovation and innovative business models.

�■ A revised chapter—Chapter 3, “Managing the Information Systems Infrastructure and Services”—provides updated content on the need for a reliable, adaptable, and scalable infrastructure to support the needs of today’s organizations as well as on essential infra- structure concepts related to hardware, software, storage, networking and the Internet, data centers, and cloud computing.

�■ A revised chapter—Chapter 4, “Enabling Business-to-Consumer Electronic Commerce”— provides updated content related to e-commerce involving the end consumer as well as new and expanded coverage of e-finance, fintech, and related issues.

�■ A revised chapter—Chapter 5, “Enhancing Organizational Communication and Collabora- tion Using Social Media”—centers around various topics related to the need for organiza- tional communication and provides updated content on how individuals and organizations use both traditional communication and collaboration tools and social media for communi- cation, collaboration, cooperation, and connection.

�■ An extensively revised chapter—Chapter 6, “Enhancing Business Intelligence Using Big Data and Analytics”—provides extended coverage on business intelligence and advanced analytics and greatly expanded content on machine learning, predictive modeling, artificial intelligence, unstructured data analytics, and spatial decision support.

�■ A revised chapter—Chapter 8, “Strengthening Business-to-Business Relationships via Supply Chain and Customer Relationship Management”—provides updated content on business-to-business electronic commerce and supply chain management as well as customer relationship management (CRM).

�■ A revised chapter—Chapter 9, “Developing and Acquiring Information Systems”— provides updates to various topics and extended content on alternative system development methodologies.

�■ A revised chapter—Chapter 10, “Securing Information Systems”—provides an update to all topics and deeper coverage on industrial espionage and cyberterrorism.

�■ A revised Technology Briefing covers foundational concepts related to various informa- tion technologies. The Technology Briefing provides the foundations for a deeper under- standing of the topics introduced in Chapter 3 and is intended for use in more technically oriented courses. Each section of this briefing was designed to stand alone—it can be read with or without the other sections.

In addition to the changes within the main chapter content, we have also added two new features to each chapter—Green IT and Security Matters. Green IT presents environmental issues arising from the use of information systems. For example, in Chapter 4, we discuss the environ- mental impacts of online shopping. Security Matters presents some current issues and threats arising from the ubiquitous use of information systems. For example, in Chapter 5, we discuss how hacktivists challenged the extramarital dating website Ashley Madison.

Beyond the chapter content and features, we have also made substantial changes and refine- ments to the end of each chapter. In particular, we carefully revised many of the end-of-chapter problems and exercises to reflect content changes and new material. Further, we have carefully updated the end-of-chapter cases about contemporary organizations and issues to illustrate the complexities of the digital world. Each case mirrors the primary content of its chapter to better emphasize its relevancy within the context of a real organization. All these elements are discussed more thoroughly next.

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Our goal has always been to provide only the information that is relevant to all business students, nothing more and nothing less. We believe that we have again achieved this goal with Information Systems Today, Eighth Edition. We hope you agree.

Key Features As authors, teachers, developers, and managers of information systems, we understand that in order for students to best learn about information systems with this book, they must be motivated to learn. To this end, we have included a number of unique features to help students quickly and easily assess the true value of information systems and their impact on everyday life. We show how today’s professionals are using information systems to help modern organizations become more efficient and competitive. Our focus is on the application of technology to real-world, con- temporary situations. Next, we describe each of the features that contribute to that focus.

Pedagogy—A Multitiered Approach Each chapter provides a list of learning objectives to lay the foundation for the chapter content, followed by an opening case to highlight how contemporary organizations are utilizing informa- tion systems to gain competitive advantage, streamline organizational processes, or improve customer relationships or how information systems fuel societal change. In addition, throughout each chapter, various short pedagogical elements are presented to highlight key information sys- tems issues and concepts in a variety of contexts. These elements help to show students the broader organizational and societal implications of various topics. At the end of each chapter, the Key Points Review repeats the learning objectives and describes how each objective was achieved; a variety of questions and exercises helps students assess their understanding of the chapter mate- rial and encourages them to synthesize and apply the concepts learned. A list of references appears at the end of each chapter.

OPENING CASE—MANAGING IN THE DIGITAL WORLD. Each chapter begins with an opening case describing a real-world company, technology, and/or issue to spark students’ interest in the chapter topic. We have chosen engaging cases that relate to students’ interests and concerns by highlighting why information systems have become central for managing in the digital world. Each opening case includes a series of associated questions the students will be able to answer after reading the chapter contents. The organizations, technologies, or issues highlighted in these cases are as follows:

�■ The rise of open innovation �■ How information systems fuel startups and new business models �■ Google’s meteoric rise and its transition to Alphabet �■ How Chinese e-commerce company Taobao became a leader in the world of e-commerce �■ How Facebook has emerged as one of the most successful and powerful social media sites �■ Intelligence through drones �■ Amazon.com’s use of its sophisticated infrastructure to automate the supply chain for both

large and small customers �■ How Walmart became a leader in managing its global supply chains �■ The rise of the maker movement �■ How the hacking group “Anonymous” uses various tactics to further its ideological goals

Green IT Case Climate change and resource scarcity are among the most pressing issues societies face. To highlight the role of information systems in this context, each chapter includes a Green IT case. This new feature discusses important issues related to the environmental impacts of information systems as well as how information systems can be used to reduce negative environmental impacts. The Green IT cases are embedded in the text of the chapter and highlight concepts from the surrounding chapter material. The issues and organizations highlighted in these cases are as follows:

�■ Green IT and the Internet of Things �■ How the U.S. Navy is using alternative energy sources to address power consumption of its

fleets

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�■ How Alphabet uses renewably energy to power its data centers �■ The environmental impacts of online shopping �■ How green IT is fueling the use of renewable energy �■ How the Internet of Things, Big Data, and analytics fuel greener facilities �■ Why your ERP system should be in the cloud �■ How Nike builds a greener supply chain �■ How companies are trying to reduce the carbon footprint of modern data centers �■ How Anonymous protests the killing of dolphins and whales in Japan

Security Matters With information systems becoming ever more ubiquitous, security is of growing concern, not only for organizations but also for individuals. While we dedicate an entire chapter to issues sur- rounding securing information systems, this new feature presents some current issues and threats. The topics discussed in this element are as follows:

�■ How computer criminals use ransomware to extort money from organizations and everyday people

�■ How attackers use the SWIFT system to conduct virtual bank robberies �■ How attackers can remotely hack into a car’s onboard systems �■ How even small companies are not immune from being targeted �■ How terrorism is winning the social media battle �■ How hacktivists challenged the extramarital dating website Ashley Madison �■ How companies have to weigh the benefits and dangers of not updating ERP systems �■ How VTech’s attackers disclosed the customer data of the most vulnerable �■ How attackers use mobile malware to steal online banking users’ login credentials �■ How analog may be the future of securing critical infrastructure

Coming Attractions We worked to ensure that this book is contemporary. We cover literally hundreds of different current and emerging technologies throughout the book. This feature, however, focuses on innovations that are likely to soon have an impact on organizations or society. The topics dis- cussed are as follows:

�■ Storing the history of humankind in memory crystals �■ CITE—a city-sized test lab for innovations �■ Extending the human lifetime indefinitely �■ Using artificial intelligence to manage hedge funds �■ Dissolvable electronics to fight bacteria �■ Emotion aware gaming �■ Transforming ERP and organizations using the Internet of Things �■ Reducing supply chain problems using augmented reality �■ Harvesting human energy �■ Using brainwaves to verify people’s identities

When Things Go Wrong Textbooks don’t usually describe what not to do, but this can be very helpful to students. This feature enables students to learn about a real-world situation in which information systems did not work or were not built or used well. The topics and issues discussed are as follows:

�■ The negative effects of technology addiction �■ The pains of Uber in China �■ Dirty data centers and the environmental impact of cloud computing �■ How companies are trying to rig “likes” to gain reputation on social networking sites �■ Crowdfunding failures �■ How Twitter can quickly disseminate misinformation, with unforeseen consequences

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�■ How a software error freed prisoners early �■ How a supply chain failure caused SpaceX rocket failure �■ Top security threats �■ How the “heartbleed” bug almost killed the Internet

Who’s Going Mobile Mobile technologies have become pervasive throughout society. New opportunities and issues have emerged with the growing importance of mobile devices, such as smartphones and tablets, which are in people’s immediate reach 24/7. Related to each chapter’s content, this feature exam- ines topics related to the growth in mobile device usage throughout the world. The topics dis- cussed are as follows:

�■ The rise of wearable technologies �■ How information systems support the lifestyle of the digital nomads �■ How mobile payment systems have transformed developing countries �■ The rise of mobile payments �■ Going SoLoMo: Yelp �■ Identifying malaria hotspots using mobile phone data �■ Managing businesses on the road using mobile ERP �■ Developing mobile CRM apps for customers �■ How to succeed in mobile app development �■ Backdoors in mobile phones

Ethical Dilemma Ethical business practices are now a predominant part of contemporary management education and practice. This feature examines contemporary dilemmas related to the chapter content and highlights the implications of these dilemmas for managers, organizations, and society. Discus- sion questions are provided to seed critical thinking assignments or class discussions. The topics discussed are as follows:

�■ The social and environmental costs of the newest gadgets �■ The ethics of the sharing economy �■ The ethics of publishing street photography on the web �■ The ethics of reputation management �■ Anonymity, trolling, and cyberharassment �■ The Orwellian Internet of Things �■ Privacy issues of radio frequency identification �■ Using CRM systems to target or exploit consumers �■ Ethical app development �■ The ethics of cyberwar

Industry Analysis Every industry is being transformed by the Internet and the increasing use of information systems by individuals and organizations. To give students a feel for just how pervasive and profound these changes are, each chapter presents an analysis of a specific industry to highlight the new rules for operating in the digital world. Given that no industry or profession is immune from these changes, each Industry Analysis highlights the importance of understanding information systems for every business student, not only for information systems majors. Discussion questions help students better understand the rapidly changing opportunities and risks of operating in the digital world. Chapter 1 examines how the digital world is transforming the opportunities for virtually all busi- ness professions. Subsequent chapters examine how globalization and the digital world have forever transformed various industries, including education, entertainment, retail, travel, health care, automobile, manufacturing, broadcasting, and law enforcement. Clearly, we are in a time of tremendous change, and understanding this evolution will better equip students to not only sur- vive but also thrive in the digital world.

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End-of-Chapter Material Our end-of-chapter material is designed to accommodate various teaching and learning styles. It promotes learning beyond the book and the classroom. Elements include the following:

�■ Key Terms—Highlight key concepts within the chapter. �■ Review Questions—Test students’ understanding of basic content. �■ Self-Study Questions—Enable students to assess whether they are ready for a test. �■ Problems and Exercises—Push students deeper into the material and encourage them to

synthesize and apply it. �■ Application Exercises—Challenge students to solve two real-world management problems

using spreadsheet and database applications from a running case centered on a university travel agency. Student data files referenced within the exercises are available on the book’s website: www.pearsonhighered.com/valacich.

�■ Team Work Exercise—Encourage students to keep up with, discuss, visualize, and pres- ent interesting, important trends and forecasts related to Internet usage within a variety of contexts.

We have extensively updated these elements to reflect new chapter content and the natural evolution of the material.

End-of-Chapter Cases To test and reinforce chapter content, we present two current real-world cases at the end of each chapter. Like the Opening Cases of each chapter, these cases are taken from the news and are contemporary. However, these are longer and more substantive than the Opening Cases. Sources for these cases include BusinessWeek, CIO magazine, InformationWeek, Wired, and various web- sites. They too are followed by discussion questions that help the student apply and master the chapter content. The organizations, products, and issues highlighted in these cases are as follows:

�■ Apple’s rise, fall, and reemergence as a global technology giant �■ How electronic health records are transforming healthcare �■ How Groupon achieved a first-mover advantage by reinventing the business model of

group buying �■ How streaming video is disrupting the movie rental and TV broadcasting industries �■ How Amazon Web Services are a catalyst for innovation �■ How the dark web fuels illegal activities �■ How web analytics are providing unprecedented insights into online consumer behavior �■ How Rocket Internet aims to become a European Internet giant by cloning business models �■ How algorithms determine news feeds �■ How scammers use like farming and clickbait to game Facebook’s newsfeed algorithms �■ How the National Security Agency, or NSA, is being viewed as the National Surveillance

Agency �■ How companies gather social intelligence through social media �■ How software as a service has enabled small and medium-sized organizations to utilize

enterprise resource planning (ERP) systems �■ How Amazon’s order fulfillment fuels technological unemployment �■ How natural disasters disrupt global supply chains �■ How companies attempt to use information systems to efficiently deliver products to the

“last mile” �■ How the Federal Bureau of Investigation and Department of Homeland Security joined

forces in developing a comprehensive database of biometric information to better track and apprehend criminals

�■ How Hadoop and MapReduce fuel the use and analysis of Big Data �■ How the National Security Agency is attempting to stop insider leaks �■ How China limits information exchange within its society through its “great firewall”

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http://www.pearsonhighered.com/valacich
Organization The content and organization of this book are based on our own teaching as well as on feedback from reviewers and colleagues throughout the field. Each chapter builds on the others to reinforce key concepts and allow for a seamless learning experience. Essentially, the book has been struc- tured to answer three fundamental questions:

1. What are contemporary information systems, and how are they being used in innovative ways?

2. Why are information systems so important and interesting? 3. How best can we build, acquire, manage, and safeguard information systems?

The ordering and content of our chapters were also significantly influenced by the “IS 2010 Curriculum Guidelines for Undergraduate Degree Programs in Information Systems”1; these guidelines, written by prominent information systems scholars, define the information systems core body of knowledge for all business students. By design, the content of Information Systems Today, Eighth Edition, carefully follows these guidelines, and we are, therefore, very confident that our book provides a solid and widely agreed-on foundation for any introductory information systems course.

The chapters are organized as follows:

�■ Chapter 1: Managing in the Digital World—Information systems are fueling change in the digital world. Here, we help students understand what information systems are, the press- ing issues societies in the digital world are facing, how five IT megatrends—mobile, social media, the Internet of Things, cloud computing, and Big Data—influence organizations and society, and how information systems have become a vital part of modern organiza- tions. We walk the student through the technology, people, and organizational components of an information system, and lay out types of jobs and career opportunities in information systems and in related fields. We also focus on how technology is creating countless ethical concerns.

�■ Chapter 2: Gaining Competitive Advantage Through Information Systems—Given the rapid advancement of new technologies, we explain why and how companies are continu- ally looking for innovative ways to use information systems for competitive advantage, and how information systems support organizations’ business strategies. Here, we discuss how companies from GE to Uber can use information systems for automation, organizational learning, and strategic advantage by creating new and innovative business models.

�■ Chapter 3: Managing the Information Systems Infrastructure and Services—With the ever-increasing complexity of maintaining a solid information systems infrastructure, it becomes increasingly important for organizations such as Google to design a reliable, robust, and secure infrastructure. Here, we provide an overview of the essential information systems infrastructure components and describe why they are necessary for satisfying an organization’s informational needs. We also examine the rapid evolution toward the deliv- ery of infrastructure capabilities through a variety of cloud-based services.

�■ Chapter 4: Enabling Business-to-Consumer Electronic Commerce—Perhaps nothing has changed the landscape of business more than the use of the Internet for electronic com- merce. Here, we describe how firms such as Amazon.com, Dell, or Taobao; governments; financial services providers; and e-finance startups use the Internet to conduct commerce in cyberspace. Further, we describe the requirements for successful e-commerce websites and discuss Internet marketing and mobile commerce as well as consumer-to-consumer and consumer-to-business e-commerce. Finally, we discuss payment and legal issues in e-commerce.

�■ Chapter 5: Enhancing Organizational Communication and Collaboration Using Social Media—Social media have forever changed how people interact. In addition to enabling various business opportunities, social media have also enabled companies to better har- ness the power and creativity of their workforce. Here, we provide an overview of tradi- tional communication and collaboration tools and examine how different social media can

PREFACE xxv

1 Topi, H., Valacich, J., Wright, R. T., Kaiser, K., Nunamaker Jr., J. F., Sipior, J. C., & de Vreede, G. J. (2010). IS 2010: Curriculum guidelines for undergraduate degree programs in information systems. Communica- tions of the Association for Information Systems, 26(18).

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enhance communication, collaboration, cooperation, and connection within organizations but also between organizations and their customers. Further, we discuss the importance of carefully managing the use of social media within organizations. Finally, using examples such as Twitter and Facebook, we describe how companies can deal with potential pitfalls associated with social media.

�■ Chapter 6: Enhancing Business Intelligence Using Big Data and Analytics—A key to effective management in a global, highly competitive, and rapidly changing environment is high-quality and timely information to support decision making in order to realize the strategic goals of the organization. Here, we first describe the need for enhanced decision making and explain how databases serve as a foundation for gaining business intelligence. We then discuss concepts related to business intelligence and advanced analytics, including data mining, machine learning, and predictive modeling. Finally, we discuss how knowl- edge management and geographic information systems help organizations make better business decisions.

�■ Chapter 7: Enhancing Business Processes Using Enterprise Information Systems— Enterprise systems have become a critical technology in a broad range of organizations, both large and small, to integrate information and span organizations’ boundaries to better connect a firm with customers, suppliers, and other partners. Here, we focus on founda- tional concepts related to enterprise systems, walking students through various core busi- ness processes, and then examine how enterprise resource planning systems can be applied to improve these processes and organizational performance.

�■ Chapter 8: Strengthening Business-to-Business Relationships via Supply Chain and Customer Relationship Management—Two additional types of enterprise systems, supply chain management systems and customer relationship management systems, are being used to facilitate various business processes between suppliers and customers. Here, we begin by introducing business-to-business electronic commerce. Next, we examine how supply chain management systems can support the effective management of supply networks. Finally, we examine customer relationship management systems and their role in attracting and retaining customers and, using examples from companies such as Dell, discuss how organizations can integrate social media in their CRM efforts.

�■ Chapter 9: Developing and Acquiring Information Systems—Nearly every organization needs to develop or acquire information systems. Here, we begin by describing how to for- mulate and present the business case to build or acquire a new information system. We then walk the student through the traditional systems development approach and explain how numerous other approaches, such as agile development, can be utilized depending on the situation. Finally, we examine the steps followed when acquiring an information system from an outside vendor.

�■ Chapter 10: Securing Information Systems—With the pervasive use of information sys- tems, new dangers have arisen for organizations, and the interplay between threats, vulner- abilities, and potential impacts has become a paramount issue within the context of global information management. Here, we contrast several types of computer crime and discuss the growing significance of cyberwar and cyberterrorism. We then highlight the primary threats to information systems security and explain how systems can be compromised and safeguarded. We conclude this chapter with a discussion of the role of auditing, informa- tion systems controls, and the Sarbanes–Oxley Act. Note that some instructors may choose to introduce this chapter prior to the discussion of the information systems infrastructure in Chapter 3.

�■ Technology Briefing—In addition to these 10 chapters, we include a Technology Briefing that focuses on foundational concepts regarding hardware, software, networking and the Internet, and databases. While Chapter 3, “Managing the Information Systems Infrastruc- ture and Services,” provides a more managerial focus to these enabling technologies, this foundational material provides a more in-depth examination of these topics. By delivering this material as a Technology Briefing, we provide instructors the greatest flexibility in how and when they can apply it.

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Available in MyMISLab: �■ MIS Video Exercises – videos illustrating MIS concepts, paired with brief quizzes �■ MIS Decision Simulations – interactive exercises allowing students to play the role of a

manager and make business decisions �■ Auto-Graded writing exercises – taken from the end of each chapter �■ Assisted-Graded writing exercises – taken from the end of each chapter, with a rubric

provided �■ Chapter Warm Ups, Chapter Quizzes – objective-based quizzing to test knowledge �■ Discussion Questions – taken from the end of each chapter �■ Dynamic Study Modules – on-the-go adaptive quizzing, also available on a mobile phone �■ Learning Catalytics – bring-your-own-device classroom response tools �■ Enhanced eText – an accessible, mobile-friendly eText �■ Excel & Access Grader Projects – live in the application auto-graded Grader projects pro-

vided inside MyMISLab to support classes covering Office tools

Instructor Resources At the Instructor Resource Center, www.pearsonhighered.com/irc, instructors can easily register to gain access to a variety of instructor resources available with this text in downloadable format. If assistance is needed, our dedicated technical support team is ready to help with the media supplements that accompany this text. Visit http://support.pearson.com/getsupport for answers to frequently asked questions and toll-free user support phone numbers.

The following supplements are available with this text:

�■ Instructor’s Resource Manual �■ Test Bank �■ TestGen® Computerized Test Bank �■ PowerPoint Presentation �■ Image Library

Reviewers We wish to thank the following faculty who participated in reviews for this and previous editions:

Lawrence L. Andrew, Western Illinois University Karin A. Bast, University of Wisconsin–La Crosse David Bradbard, Winthrop University Rochelle Brooks, Viterbo University Brian Carpani, Southwestern College Amita Chin, Virginia Commonwealth University Jon D. Clark, Colorado State University Paul Clay, Fort Lewis College Khaled Deeb, Barry University Thomas Engler, Florida Institute of Technology Badie Farah, Eastern Michigan University Roy H. Farmer, California Lutheran University Mauricio Featherman, Washington State University David Firth, University of Montana Frederick Fisher, Florida State University Jonathan Frank, Suffolk University James Frost, Idaho State University Frederick Gallegos, California State Polytechnic

University–Pomona Dale Gust, Central Michigan University Peter Haried, University of Wisconsin–La Crosse Albert Harris, Appalachian State University Michelle Hepner, University of Central Oklahoma Traci Hess, University of Massachusetts Bruce Hunt, California State University–Fullerton Carol Jensen, Southwestern College

Bhushan Kapoor, California State University–Fullerton

Elizabeth Kemm, Central Michigan University Beth Kiggins, University of Indianapolis Chang E. Koh, University of North Texas Brian R. Kovar, Kansas State University Kapil Ladha, Drexel University Linda K. Lau, Longwood University Amy Lavin, Temple University Cameron Lawrence, University of Montana Martha Leva, Penn State University–Abington Weiqi Li, University of Michigan–Flint Clayton Looney, University of Montana Dana L. McCann, Central Michigan University Richard McCarthy, Quinnipiac University Patricia McQuaid, California State Polytechnic

University, San Louis Obispo Michael Newby, California State

University–Fullerton Kathleen Noce, Penn State University–Erie W. J. Patterson, Sullivan University Timothy Peterson, University of Minnesota–Duluth Lara Preiser-Houy, California State Polytechnic

University, Pomona Sridhar Ramachandran, Indiana University

Southeast

PREFACE xxvii

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Eugene Rathswohl, University of San Diego Rene F. Reitsma, Oregon State University Jose Rodriguez, Barry University Bonnie Rohde, Albright College Kenneth Rowe, Purdue University Dana Schwieger, Southeast Missouri State

University G. Shankaranarayanan, Boston University James Sneeringer, St. Edward’s University Cheri Speier, Michigan State University

Bill Turnquist, Central Washington University Craig K. Tyran, Western Washington University William Wagner, Villanova University Minhua Wang, State University of New

York–Canton John Wells, University of Massachusetts Nilmini Wickramasinghe, Cleveland State

University Yue Zhang, California State University–Northridge

Acknowledgments Although only our two names are listed as the authors for this book, this was truly a team effort that went well beyond the two of us. Pearson has been an outstanding publishing company to work with. Pearson is innovative, has high standards, and is as competitive as we are.

Among the many amazingly helpful people at Pearson, there are a handful of people we wish to thank specifically. First, Katrina Ostler, our project manager, helped to whip us and this book into shape and get it finished on time. Additionally, Ann Pulido from SPI Global helped in getting approval for photos, figures, websites, and other graphics, as well as coordinating refinements as the book moved through the stages of production. Finally, we want to thank our editor, Samantha Lewis.

In addition to our colleagues at Pearson Prentice Hall, several individuals have been particu- larly instrumental in making the eighth edition the best ever. First, Michael Byrd, PhD candidate at the University Arizona, did an outstanding job on creating and revising several of our case elements. Also, a special thanks goes out to Dave Wilson (University of Oklahoma) and Catherine Chan (Hong Kong Baptist University), who were instrumental in drafting earlier chapter ele- ments. Thanks, team! We could not have done it without you.

Most important, we thank our families for their patience and assistance in helping us to com- plete this book. Joe’s wife Jackie, daughter Jordan, and son James were a constant inspiration, as was Christoph’s wife Birgit. This one is for all of you.

xxviii PREFACE

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Preview

Managing in the Digital WorlD:

Open Innovation

Where do good ideas come from? An eccen-tric inventor toiling alone? A secretive lab filled with researchers in white coats? Views of innovation are shifting away from these traditional

stereotypes. For decades, corporations funded internal

research and development units and tightly controlled

both the inputs and outputs of these operations. Oppor-

tunities to interact with customers were limited, and

the possibility of spending months or years and millions

of dollars developing products that no one wanted was

a real threat. New technologies are enabling a shift in

the way innovation occurs.

Traditionally, universities would conduct basic and

applied research, but the results of this research only

sometimes would make their way to the private sector.

Corporations would fund their own research and devel-

opment operations, often at great expense. Such opera-

tions took years to set up and were often highly

constrained in the types of research they could carry

out. Programs of research were evaluated against busi-

ness plans that had been studied, reviewed, and

approved by multiple layers of management. The time

and complexity involved in these bureaucratic processes

often left the actual research out of date and out of

touch with the realities of the marketplace and actual

customer wants and needs. The resulting products

Managing in the Digital World1

Today, organizations from Apple to Zappos use informa-

tion systems to better manage their organizations in the

digital world. These organizations use information systems

to provide high-quality goods and services as well as to

gain or sustain competitive advantage over rivals. In addi-

tion to helping organizations to be competitive, informa-

tion systems have contributed to tremendous societal

changes. Our objective for this chapter is to help you

understand the role of information systems as we con-

tinue to move further into the digital world, the role of

information systems in current issues faced by societies in

the digital world, and the role of information technology

(IT) megatrends in influencing the digital future. We then

highlight what information systems are, how they have

evolved to become a vital part of modern organizations,

and why this understanding is necessary for you to

become an effective manager in the digital world. We

conclude by discussing ethical issues associated with the

use of information systems.

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After reading this chapter,

you will be able to do the

following:

After reading this chapter, you will be able to answer

the following:

1. How do the five IT megatrends fuel open innovation?

2. What are the primary information systems compo-

nents that enable open innovation?

3. What intellectual property issues arise from engag-

ing in open innovation?

Based on:

Board of Innovation. (n.d.). List of open innovation and crowdsourcing examples. Retrieved June 20, 2016, from http://www.boardofinnovation .com/list-open-innovation-crowdsourcing-examples

GE. (2016). GE open innovation. GE.com. Retrieved April 24, 2016, from http://www.ge.com/about-us/openinnovation

Open Innovation Community. (2016). Open innovation. Retrieved Apr i l 24 , 2016, f rom http : / /openinnovat ion.net /about-2 / open-innovation-definition

would often fail in the market due to being years late or

no longer being relevant.

Open innovation is a new approach. Instead of rely-

ing on tightly controlled internal research projects, com-

panies are opening up their research and development

efforts to a broad audience (Figure 1.1). Customers, sup-

pliers, and other companies are invited to participate

more directly in different phases of the innovation pro-

cess, and companies are working more collaboratively

with universities.

Many companies take these ideas even further and

open up the research and development efforts to any-

one who wishes to participate online or in person. For

example, Starbucks introduced “My Starbucks Idea,”

where customers can post ideas and suggestions as well

as vote on or discuss others’ ideas. Hundreds of

customer-generated ideas have been launched over the

years. Likewise, more than 37,000 ideas have been sub-

mitted to Dell’s “IdeaStorm” website, with more than

550 ideas implemented, and Heineken’s “Innovators

Brewhouse” uses open innovation to generate ideas

related to topics ranging from methods for counterfeit

detection to brewing closer to the consumer or new,

more convenient packaging. Further, new tools like

interactive 3D visualization and rapid prototyping tech-

nologies like 3D printing allow for tremendously low-

ered barriers to entry to innovation. Many companies

and institutions have set up collaborative spaces to share

resources and encourage the fusion of ideas and skills

that can lead to exciting breakthroughs. As with many

innovations themselves, this innovative way of innovat-

ing would not be possible without information systems.

1. Describe the characteristics of the digital world, contemporary societal issues of the digital world, and IT megatrends shaping the digital future.

2. Explain what an information system is, contrasting its data, technology, people, and organizational components.

3. Describe the dual nature of information systems in the success and failure of modern organizations.

4. Describe how computer ethics affect the use of information systems and discuss the ethical concerns associated with information privacy and intellectual property.

Open innovation

FIGURE 1.1 Open innovation entails opening up the innovation process to outside entities, including academia, individual innovators, research labs, other companies, or suppliers.

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http://www.boardofinnovation.com/list-open-innovation-crowdsourcing-examples
http://www.ge.com/about-us/openinnovation
http://openinnovation.net/about-2/open-innovation-definition
http://www.boardofinnovation.com/list-open-innovation-crowdsourcing-examples
http://openinnovation.net/about-2/open-innovation-definition
http://ge.com
4 Chapter 1 • Managing in the Digital WorlD

Information Systems Today Today, information systems (IS) are ubiquitous: Be it traditional desktop computers, laptop com- puters, smartphones, tablets, you name it; information systems are all around us, whether you see them or not. Companies such as FedEx and UPS use information systems to route trucks and track packages. Retailers such as Walgreens and Walmart use information systems for every- thing from optimizing supply chains to recording purchases and analyzing customer tastes and preferences. Cities use information systems for adaptive traffic control systems or variable speed limits. Cars use information systems for everything from ignition control to airbags to distance control and park assist systems. Many innovative business models, ranging from Airbnb to Uber, are built on or around information systems. Alternatively, just look around your school or place of work. At your school, you register for classes online; use e-mail, Twitter, or Facebook to com- municate with fellow students and your instructors; access e-books from your library; and com- plete or submit assignments on online learning platforms such as Blackboard, Moodle, Canvas, or Sakai. At work, you may use a PC for e-mail and many other tasks. Your paychecks are prob- ably generated by computer and automatically deposited into your bank account via high-speed networks. Even in your spare time, information systems are ubiquitous: You use social network- ing sites like Facebook to stay connected with your friends and family, you watch videos on YouTube, you upload pictures taken with your smartphone to picture-sharing sites like Insta- gram, you listen to music on Pandora or Spotify, and you use your smartphone for playing games, sending e-mails, or reading books. Chances are that each year you see more information systems than you did the year before, and these systems are a more fundamental and important part of your social, academic, and work life than ever before.

The Emergence of the Digital World Over the past decades, the advent of powerful, relatively inexpensive, easy-to-use computers has had a major impact on business and society. When you stop and think about it, it is easy to see why information systems are important. Increasing global competitiveness has forced companies to find ways to be better and to do things less expensively. The answer for many firms continues to be to use information systems to do things better, faster, and cheaper. Many organizations use information systems to support innovative business models, or build their entire business models around technological innovations. Likewise, using global telecommunications networks, compa- nies can more easily integrate their operations to access new markets for their products and ser- vices as well as access a large pool of talented labor in countries with lower wages.

Clearly, we are living in a digital world. Given the proliferation of mobile devices such as tablets or smartphones, some have even argued that we are living in the post-PC era, where wire- less, mobile devices will replace traditional desktop and laptop computers. In fact, already in the last quarter of 2011, Apple sold more iPads than HP (traditionally one of the world’s leading PC makers) sold PCs, and in the United States, smartphone penetration has reached 82 percent (Nielsen, 2016). Initially created as consumer devices, tablets have become commonplace in various professional settings, including warehouses, showrooms, airplane cockpits, and hospi- tals (Figure 1.2).

Yet desktop PCs and laptops are unlikely to go away. Rather, devices with newer form fac- tors will work in tandem with older form factors to provide truly ubiquitous experiences; mobile devices complement traditional computers, providing different devices for different users and different tasks, where not the device but the services and data provided are of primary impor- tance. Further, the changes we’ve seen so far have given rise to developments such as wearable computers, augmented reality devices, or surface computers.

Changes in technology have enabled new ways of working and socializing; whereas tradi- tionally, people were bound to a stationary PC to do essential tasks, they can now perform such tasks from almost anywhere they have a cell phone signal. Likewise, workdays traditionally had a clear beginning and a clear end—from when you powered your computer on to when you turned it off at night. Today, many tasks (especially more casual tasks such as reading or sending e-mails) can be done at any time, often in small chunks in between other tasks, such as when waiting in line at the supermarket cashier.

Computing has changed from an activity primarily focused on automating work to encom- pass various social and casual activities. Devices such as smartphones or tablets, paired with mobile broadband networks, allow for instant-on computing experiences, whenever and

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Chapter 1 • Managing in the Digital WorlD 5

wherever; advances in cloud computing (think Gmail, Office Online, or Dropbox) allow for accessing e-mails, files, notes, and the like, from different devices, further enhancing portability and mobility.

In effect, we are in a virtuous cycle (or in a vicious cycle, considering the creep of work life into people’s leisure time and the increasing fixation on being permanently “on call”), where changes in technology lead to social changes and social changes shape technological changes. For example, communication, social networking, and online investing almost necessitate mobil- ity and connectivity, as people have grown accustomed to checking e-mails, posting status updates, or checking on real-time stock quotes while on the go. In addition, the boundaries between work and leisure time are blurring, so that employees increasingly demand devices that can support both and often bring their own devices into the workplace.

KnowlEDgE worKErS anD ThE KnowlEDgE SocIETy. In 1959, Peter Drucker predicted that information and information systems would become increasingly important, and at that point, more than half a century ago, he coined the term knowledge worker. Knowledge workers are typically professionals who are relatively well educated and who create, modify, and/or synthesize knowledge as a fundamental part of their jobs.

Drucker’s predictions about knowledge workers were accurate. As he predicted, they are generally paid better than their prior agricultural and industrial counterparts; they rely on and are empowered by formal education, yet they often also possess valuable real-world skills; they are continually learning how to do their jobs better; they have much better career oppor- tunities and far more bargaining power than workers ever had before. Knowledge workers make up about a quarter of the workforce in the United States and in other developed nations, and their numbers are rising quickly.