ntroduction to Information Systems

James A. O'Brien George M. Marakas ntroduction to Information Systems fifteenth edition The McGraw-Hill Companie. ISBN 978-0-07-337677-6 MHID 0-07-337677-9 900 00 ^XConnect M \ L^rn M y Succeed" 6776 www.mhhe.com

ie Foundation Concepts Foundations of Information Systems in Business 3 Section I: Foundation Concepts: Information Systems in Business 4 The Real World of Information Systems 4 What Is an Information System? 4 Real World Case 1: ecourier, Cablecom, and Bryan Cave: Delivering Value through Business Intelligence 5 The Fundamental Roles of IS in Business 8 Trends in Information Systems 10 The Role of e-business in Business 12 Types of Information Systems 13 OperationsSupport Systems 13 Management Support Systems 14 Other Classifications of Information Systems 16 Managerial Challenges of Information' Technology 16 Success and Failure with IT 17 Developing IS Solutions 18 Challenges and Ethics of IT 20 -. Challenges of IT Careers 21 The IS Function 24 Section II: Foundation Concepts: The Components of Information Systems 26 System Concepts: A Foundation 26 What Is a System? 26 Real World Case 2: JetBlue and the Veterans Administration: The Critical Importance of IT Processes 27 Feedback and Control 29 Other System Characteristics 29 Components of an Information System 31 Information System Resources 32 People Resources 32 Hardware Resources 32 Software Resources 33 Data Resources 33 Network Resources 34 Information System Activities 3 5 Input of Data Resources 35 Processing of Data into Information 35 Output of Information Products 35 Storage of Data Resources 36 Control of System Performance 36 Recognizing Information Systems 36 Real World Case 3: Sew What? Inc.: The Role of Information Technology in Small Business Success 41 Competing with Information Technology 43 Section I: Fundamentals of Strategic Advantage 44 Strategic IT 44 Competitive Strategy Concepts 44 Competitive Forces and Strategies 44 Real World Case 1: IT Leaders: Reinventing IT as a Strategic Business Partner 45 Strategic Uses of Information Technology 48. Other Competitive Strategies 48 Building a Customer-Focused Business 52 The Value Chain and Strategic IS 54 Value Chain Examples 55 Section II: Using Information Technology for Strategic Advantage 56 Strategic Uses of IT 56 Reengineering Business Processes 56 The Role of Information Technology 56 Real World Case 2: For Companies Both Big and Small: Running a Business on Smartphones 57 Becoming an Agile Company 60 Creating a Virtual Company 62 Virtual Company Strategies 62 Building a Knowledge-Creating Company 64 Knowledge Management Systems 65 Real World Case 3: Wachovia and Others: Trading Securities at the Speed of Light 70 XXVII

XXViii Contents Module is Information Technologies Computer Hardware 73 Section I: Computer Systems: End User and Enterprise Computing 74 Introduction 74 A Brief History of Computer Hardware 74 Real World Case 1: IBM, Wachovia, and Paypal: Grid Computing Makes It Easier and Cheaper 75 Types of Computer Systems ' 78 Microcomputer Systems 79 Computer Terminals 81 Network Computers 82 Information Appliances 82 Midrange Systems 83 Mainframe Computer Systems 85. Supercomputer Systems 86 The Next Wave of Computing 88 Technical Note: The Computer System Concept 88 Computer Processing Speeds 90 Moore's Law: Where Do We Go from Here? 90 Section II: Computer Peripherals: Input, Output, and Storage Technologies 93 Peripherals 93 Input Technologies/,'9 3 Pointing Devices 93 Real World Case 2: Apple, Microsoft, IBM and Others: The Touch Screen Comes of Age 94 Pen-Based Computing 96 ^Speech Recognition Systems 91 Optical Scanning, 99 Other Input Technologies 101 Output Technologies 101 Video Output.102 Printed Output 102 Storage Trade-Offs 103 Computer Storage Fundamentals 104 Direct and Sequential Access 105 Semiconductor Memory 106 Magnetic Disks 108 Types of Magnetic Disks 108 RAID Storage 109 Magnetic Tape 109 Optical Disks 109 Business Applications 111 Radio Frequency Identification 111 Predictions for the Future 112 Real World Case 3: Kimberly-Clark and Daisy Brands: Secrets to RFID Success 120 4 Computer Software 123 Section I: Application Software: End-User Applications 124 Introduction to Software 124 What Is Software? 124 Types of Software 124 Application Software for End Users 124 Real World Case 1: GE, H.B. Fuller Co., and Others: Successful Implementations of Software-as-a-Service 125 Business Application Software 128 Software Suites and Integrated Packages 129 Web Browsers and More 130 Electronic Mail, Instant Messaging; and Weblogs 130 Word Processing and Desktop Publishing 132 Electronic Spreadsheets 133 Presentation Graphics 134 Personal Information Managers 135 Groupware 135 Software Alternatives 136 Application Service Providers 136 Cloud Computing 138 Software Licensing 139 Section II: System Software: Computer System Management 140 System Software Overview 140 Overview 140 Operating Systems 140 Operating System. Functions 140 Real World Case 2: Power Distribution and Law Enforcement: Reaping the Benefits of Sharing Data Through XML 141 Microsoft Windows 144 UNIX 145 Linux 146 Open-Source Software 146 OpenOffice.org 3 141 Mac OS X 141 Application Virtualization 148 Other System Management Programs 149 Programming Languages 150 Machine Languages 150 Assembler Languages 151 High-Level Languages 151

Contents xxix Fourth-Generation Languages 152 Object-Oriented Languages 153 Web Languages and Services 154 HTML 154 XML 155 Javaand.NET 151 Web Services 151 Programming Software 160 Language Translator Programs 160 Programming Tools 160 Real World Case 3: Wolf Peak International: Failure and Success in Application Software for the Small-to-Medium Enterprise 166 Data Resource Management 169 Section I: Technical Foundations of Database Management 170 Database Management 170 Fundamental Data Concepts 170 Character 110 Field po Record 110 Real World Case 1: Cogent Communications, Intel, and Others: Mergers Go More Smoothly When Your Data Are Ready 171 File 113 y.:- Database 113 Database Structures 175 Hierarchical Structure 116 Network Structure 116 Relational Structure 116 Relational Operations 111 Multidimensional Structure 111 Object-Oriented Structure 111 Evaluation of Database Structures 119 Database Development 180 Data Planning and Database Design 181 Section II: Managing Data Resources 185 Data Resource Management 185 Types of Databases 185 Operational Databases 185 Distributed Databases 185 Real World Case 2: Applebee's, Travelocity, and Others: Data Mining for Business Decision 186 External Databases 189 Hypermedia Databases 189 Data Warehouses and Data Mining 191 Data Mining 192 Traditional File Processing 194 Problems of File Processing 195 The Database Management Approach 196 Database Management System 196 Database Interrogation 198 Database Maintenance 200 Application Development 200 Real World Case 3: Amazon, ebay, and Google: Unlocking and Sharing Business Databases 205 Telecommunications and Networks 207 Section I: The Networked Enterprise 208 Networking the Enterprise 208 The Concept of a Network 208 Metcalfe's Law 208 Real World Case 1: Starbucks and Others: The Future of Public Wi-Fi 209 Trends in Telecommunications 211 Industry Trends 211 Tech?iology Trends 212 Business Application Trends 213 Intemet2 213 The Business Value of Telecommunications Networks 214 The Internet Revolution 215 Internet Service Providers 215 Internet Applications 216 Business Use of the Internet 211 The Business Value of the Internet 218 The Role of Intranets 219 The Business Value of Intranets 219 The Role of Extranets 222 Section II: Telecommunications Network Alternatives 225 Telecommunications Alternatives 225 A Telecommunications Network Model 225 Real World Case 2: Brain Saving Technologies, Inc. and the T-Health Institute: Medicine through Videoconferencing 226 Types of Telecommunications Networks 228 Wide Area Networks 228 Metropolitan Area Networks 228 Local Area Networks 229 Virtual Private Networks 229 Client/Server Networks 231 Network Computing 232 Peer-to-Peer Networks 233 Digital and Analog Signals 234 Telecommunications Media 235

XXX Contents Wired Technologies 236 Twisted-Pair Wire 236 Coaxial Cable 236 Fiber Optics 236 The Problem of u The Last Mile " 236 Wireless Technologies 237 Terrestrial Microwave 231 Communications Satellites 231 Cellular and PCS Systems 238 Wireless LANs 239 Bluetooth 239 The Wireless Web 239 Telecommunications Processors 241 Modems 241 Internetwork Processors 242 Multiplexers 242 Telecommunications Software 243 Network Management 243 Network Topologies 244 Network Architectures and Protocols 245 Protocols 245 Network Architectures 245 The OSI Model 245 The Internet's TCP/IP 241 Voice Over IP 248 Bandwidth Alternatives 249 Switching Alternatives 250 Network Interoperability 251 Real World Case 3: Metric & Multistandard Components Corp.: The Business Value of a Secure Self-Managed Network for a Small-to-Medium Business 256 Business Applications Electronic Business Systems 259 Section I: Enterprise Business Systems 260 Introduction 260/ Cross-Functional Enterprise Applications 260 Enterprise Application Architecture 260 Real World Case 1: NetSuite Inc., Berlin Packaging, Churchill Downs, and Others: The Secret to CRM is in the Data 261 Getting All the Geese Lined Up: Managing at the Enterprise Level 264 Customer Relationship Management: The Business Focus 265 What Is CRM? 266 Contact and Account Management 266 Sales 266 Marketing and Fulfillment 261 Customer Service and Support 261 Retention and Loyalty Programs 261 The Three Phases of CRM 268 Benefits and Challenges of CRM 2 69 CRM Failures 210 WhatlsERP? 271 Benefits and Challenges of ERP 273 The Costs of ERP 213 Causes of ERP Failures 215 Supply Chain Management: The Business Network 276 WhatlsSCM? 276 Electronic Data Interchange 219 The Role of SCM 279 Benefits and Challenges of SCM 2 80 Enterprise Application Integration 282 Transaction Processing Systems 283 The Transaction Processing Cycle 285 Enterprise Collaboration Systems 286 Tools for Enterprise Collaboration 286 Section II: Functional Business Systems IT in Business 289 Marketing Systems 289 Interactive Marketing 289 289 Real World Case 2: OHSU, Sony, Novartis, and Others: Strategic Information Systems It's HR's Turn 290 Targeted Marketing 293 Sales Force Automation 294 Manufacturing Systems 295 Computer-Integrated Manufacturing 296 Human Resource Systems 297 HRM and the Internet 291 HRM and Corporate Intranets 298 Accounting Systems 300 Online Accounting Systems 300 Financial Management Systems 302 Real World Case 3: Perdue Farms and Others: Supply Chain Management Meets the Holiday Season 308 Electronic Commerce Systems 311 Section I: Electronic Commerce Fundamentals 312 Introduction to Electronic Commerce 312

Contents XXXJ The Scope of e-commerce 312 e-commerce Technologies 312 Real World Case 1: KitchenAid and the Royal Bank of Canada: Do You Let Your Brand Go Online All by Itself? 313 Categories of e-commerce 316 Essential e-commerce Processes 317 Access Control and Security 318 Profiling and Personalizing 318 Search Ma?iagement 318 Content and Catalog Management 318 Workflow Management 320 Event Notification 321 Collaboration and Trading 321 Electronic Payment Processes 322 Web Payment Processes 322 Electronic Funds Transfer 322 Secure Electronic Payments 323 Section II: e-commerce Applications and Issues 324 e-commerce Applications and Issues 324 e-com,m,erce Trends 324 Business-tb-Consumer e-commerce 324 Real World Case 2: Linkedln, Umbria, Mattel, and Others: Driving the "Buzz" on the Web 325 e-commerce Success Factors 321 Web Store Requirements 331 Developing a Web Store 331 Getting Customers to Find You 332 Serving Your Customers 333 Managing a Web Store 334 Business-to-Business e-commerce 335 e-commerce Marketplaces 336 Clicks and Bricks in e-commerce 338 e-commerce Integration 338 Other Clicks-and-Bricks Strategies 340 e-commerce Channel Choices 341 Real World Case 3: Entellium, Digg, Peerflix, Zappos, and Jigsaw: Success for Second Movers in e-commerce 347 Decision Support Systems 349 Section I: Decision Support in Business 3 50 Introduction 350 Information, Decisions, and Management 350 Information Quality 350 Real World Case 1: Hillman Group, Avnet, and Quaker Chemical: Process Transformation through Business Intelligence Deployments 351 Decision Structure 354 Decision Support Trends 354 Decision Support Systems 357 Example 351 DSS Components 351 Management Information Systems 359 Management Reporting Alternatives 360 Online Analytical Processing 361 Geographic Information and Data Visualization Systems 364 Using Decision Support Systems 367 What-IfAnalysis 361 Sensitivity Analysis 368 Goal-Seeking Analysis 368 Optimization Analysis 369 Data Mining for Decision Support 369 Executive Information Systems 3 72 Features of an EIS 312 Enterprise Portals and Decision Support 374 Enterprise Information Portals 314 Knowledge Management Systems 376 Section II: Artificial Intelligence Technologies in Business 378 Business and AI 378 An Overview of Artificial Intelligence 378 Real World Case 2: Goodyear, JEA, OSUMC, and Monsanto: Cool Technologies Driving Competitive Advantage 379 The Domains ofartificial Intelligence 381 Expert Systems -384 Components of an Expert System 384 Expert System Applications 385 Benefits of Expert Systems 386 Limitations of Expert Systems 386 Developing Expert Systems 388 Knowledge Engineering 389 Neural Networks 390 Fuzzy Logic Systems 391 Fuzzy Logic in Business 392 Genetic Algorithms 392 Virtual Reality 394 VR Applications 394 Intelligent Agents 395 Real World Case 3: Harrah's Entertainment, LendingTree, DeepGreen Financial, and Cisco Systems: Successes and Challenges of Automated Decision Making 402

XXXii Contents lod u le Development Processes Developing Business/IT Solutions 405 Section I: Developing Business Systems 406 IS Development 406 The Systems Approach 406 Systems Thinking 406 Real World Case 1: PayPal: Going Global All Languages at a Time 407 Systems Analysis and Design 409 The Systems Development Life Cycle 409 Starting the Systems Development Process 410 Feasibility Studies 410 Operational Feasibility 411 Economic Feasibility 412 Techn ical Feasibility 412 Human Factors Feasibility 413 Legal/Political Feasibility 413 Systems Analysis 414 Organizational Analysis 414 Analysis of the Present System 414 Logical Analysis 415 Functional Requirements Analysis and Determination 415 Systems Design 416 Prototyping 416 The Prototyping Process 411 User Interface Design 418 System Specifications 420 End-User Development 420 Focus on IS Activities 420 Doing End- User Development 421 Technical Note: Overview of Object-Oriented Analysis and Design 423 Section II: Implementing Business Systems 426 Implementation 426 Implementing New Systems 426 Real World Case 2: Blue Cross and Blue Shield and Others: Understanding the Science behind Change 427 Project Management 430 What Is a Project? 430 The Process of Project Management 430 Evaluating Hardware, Software, and Services 432 Hardware Evaluation Factors 433 Software Evaluation Factors 434 Evaluating IS Services 434 Other Implementation Activities 435 Testing 435 Data Conversion 435 Documentation 436 Training 431 System Conversion Strategies 431 Postimplementation Activities 439 Systems Maintenance 439 Postimplementation Review 440 Implementation Challenges 441 User Resistance and Involvement 441 Change Management 442 A Change Management Process 443 Real World Case 3: Infosys Technologies: The Implementation Challenges of Knowledge Management Initiatives 449 o cl u S e V anagement Challenges Security and Ethical Challenges 453 Section I: Security, Ethical, and Societal Challenges of IT 454 Introduction 454 Business/IT Security, Ethics, and Society 454 Ethical Responsibility of Business Professionals 454 Business Ethics 454 Real World Case 1: Ethics, Moral Dilemmas, and Tough Decisions: The Many Challenges of Working in IT 455 Technology Ethics 458 Ethical Guidelines 458 Computer Crime 460 Hacking and Cracking 461 Cyber Theft 463 Unauthorized Use at Work 463 Software Piracy 466 Theft of Intellectual Property 461

Contents XXXJM Computer Viruses and Worms 468 Adware and Spyware 410 Privacy Issues 472 Privacy on the Internet 413 Computer Matching 414 Privacy Laws 414 Computer Libel and Censorship 416 The Current State of Cyberlaw 476 Other Challenges 477 Employment Challenges 411 Computer Monitoring 411 Challenges in Working Conditions 418 Challenges to Individuality 418 Health Issues 479 Ergonomics 419 Societal Solutions 479 Section II: Security Management of Information Technology 481 Introduction 481 Tools of Security Management 481 Real World Case 2: Raymond James Financial, BCD Travel, Houston Texans, and Others: Worrying about What Goes Ouf, Not What Comes In 482 Internetworke'd Security Defenses 484 Encryption 485 Firewalls 486 Denial of Service Attacks 481 / e-mail Monitoring 489 Virus Defenses 489 Other Security Measures 491 Security Codes 491 Backup Files 491 Security Monitors 492 Biometric Security 492 Computer Failure Controls 493 Fault-Tolerant Systems 493 Disaster Recovery 495 System Controls and Audits 495 Information System Controls 495 Auditing IT Security 496 Real World Case 3: Cyber Scams: Four Top Cyber Criminals Who They Are and What They Do 501 Enterprise and Global Management of Information Technology 503 Section I: Managing Information Technology 504 Business and IT 504 Managing Information Technology 504 Real World Case 1: Toyota, Procter & Gamble, Hess Corporation, and Others: Retiring CIOs and the Need for Succession Planning 505 Business/IT Planning 507 Information Technology Architecture 508 Managing the IT Function 509 Organizing IT 510 Managing Application Development 510 Managing IS Operations 511 IT Staff Planning 512 The CIO and Other IT Executives 512 Technology Management 513 Managing User Services 513 Outsourcing and Offshoring IT and IS 514 Outsourcing 514 Offshoring 515 Failures in IT Management 517 Management Involvement and Governance 518 \ Section II: Managing Global IT 522 The International Dimension 522 Global IT Management 522 Real World Case 2: Reinsurance Group of America and Fonterra: Going for Unified Global Operations 523 Cultural, Political, and Geoeconomic Challenges 525 Global Business/IT Strategies 527 Global Business/IT Applications 528 Global IT Platforms 530 The Internet as a Global IT Platform 531 Global Data Access Issues 532 Internet Access Issues 534 Global Systems Development 535 Systems Development Strategies 535 Real World Case 3: IBM Corporation: Competing Globally by Offshoring IT Workers and Giving Away Technology 541 Review Quiz Answers 543 Selected References 547 Glossary for Business Professionals 557 Name Index 577 Company Index 579 Subject Index 582