Business Driven nformation Systems

Paige Baltzan Daniels College of Business, University of Denver Amy Phillips Daniels College of Business, University of Denver Business Driven nformation Systems SECOND EDITION McGraw-Hill Irwin Boston Burr Ridge, IL Dubuque, IA New York San Francisco St. Louis Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

CONTENTS MODULE ONE SYSTEMS 1 BUSINESS DRIVEN INFORMATION CHAPTER 1 Information Systems in Business 2 ie INTRODUCTION 7 Section 1.1 Information Systems in Business 7 INFORMATION TECHNOLOGY'S ROLE IN BUSINESS 7 Information Technology's Impact on Business Operations 7 INFORMATION TECHNOLOGY BASICS 10 Data, Information, and Business Intelligence 10 IT Resources 11 IT Cultures 13 ROLES AND RESPONSIBILITIES IN INFORMATION TECHNOLOGY 13 The Gap Between Business Personnel and IT Personnel 15 MEASURING INFORMATION TECHNOLOGY'S SUCCESS 16 Efficiency and Effectiveness Metrics 17 Benchmarking Baseline Metrics 17 The Interrelationship Between Efficiency and Effectiveness IT Metrics 18 Section 1.2 Business Strategy 20 IDENTIFYING COMPETITIVE ADVANTAGES 21 THE FIVE FORCES MODEL EVALUATING BUSINESS SEGMENTS 21 Buyer Power 21 Supplier Power 22 Threat of Substitute Products or Services 23 Threat of New Entrants 23 Rivalry among Existing Competitors 23 THE THREE GENERIC STRATEGIES CREATING A BUSINESS FOCUS 24 VALUE CHAIN ANALYSIS TARGETING BUSINESS PROCESSES 25 Value Creation 25 Summary of Key Themes 28 Key Terms 28 Closing Case One: Business 2.0: Bad Business Decisions 29 Closing Case Two: Innovative Business Managers 31 Closing Case Three: The World Is Flat Thomas Friedman 33 Making Business Decisions 34 Apply Your Knowledge 35 Business Driven Best Sellers 39 CHAPTER 2 Strategic Decision Making 42 INTRODUCTION 47 Section 2.1 Decision-Making Systems 47 DECISION MAKING 47 TRANSACTION PROCESSING SYSTEMS 49 DECISION SUPPORT SYSTEMS 50 EXECUTIVE INFORMATION SYSTEMS 52 Digital Dashboards 52 ARTIFICIAL INTELLIGENCE 55 Expert Systems 56 Neural Networks 56 Genetic Algorithms 57 Intelligent Agents 58 Data Mining 59 Section 2.2 Business Processes 59 UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESSES 59 BUSINESS PROCESS IMPROVEMENT 62 BUSINESS PROCESS REENGINEERING 63 Finding Opportunity Using BPR 63 Selecting a Process for Reengineering 64 Pitfalls of BPR 65 BUSINESS PROCESS MODELING 65 BUSINESS PROCESS MANAGEMENT 68 IS BPM for Business or Information Technology? 68 BPM Risks and Rewards 69 Business Process Modeling Examples 69 Summary of Key Themes 73 Key Terms 73 Closing Case One: Defense Advanced Research Projects Agency (DARPA) Grand Challenge 74

Closing Case Two: Revving Up Sales at Marley-Davidson Closing Case Three: Delta Air Lines Plays Catch-Up 77 Making Business Decisions 79 Apply Your Knowledge 80 Business Driven Best Sellers 82 CHAPTER 3 Ehusiness 84 INTRODUCTION 87 Section 3.1 Business and the Internet 87 DISRUPTIVE TECHNOLOGY 87 Disruptive versus Sustaining Technology 88 The Internet Business Disruption 89 EVOLUTION OF THE INTERNET 90 Evolution of the World Wide Web 91 WEB 2.0 93 Mashups 94 THE FUTURE WEB 3.0 95 Transforming the Web into a Database 95 An Evolutionary Path to Artificial Intelligence 96 The Realization of the Semantic Web and SOA 96 Evolution Toward 3D 96 ACCESSING INTERNET INFORMATION 96 Intranet 96 Extranet 97 Portal 97 Kiosk 97 PROVIDING INTERNET INFORMATION 98 Internet Service Provider 98 Online Service Provider 99 Application Service Provider 99 Section 3.2 Ebusiness 101 EBUSINESS BASICS 101 EBUSINESS MODELS 102 Business-to-Business(B2B) 103 Business-to-Consumer(B2C) 103 Consumer-to-Business (C2B) 104 Consumer-to-Consumer(C2C) 104 ORGANIZATIONAL STRATEGIES FOR EBUSINESS 105 Marketing/Sales 105 Financial Services 106 Procurement 107 Customer Service 108 Intermediaries, 109 MEASURING EBUSINESS SUCCESS 110 Website Metrics 111 EBUSINESS BENEFITS AND CHALLENGES 113 NEW TRENDS IN EBUSINESS: EGOVERNMENT ANDMCOMMERCE 114 Mcommerce 115 75 Summary of Key Themes 117 Key Terms 117 Closing Case One: ebay The Ultimate Ebusiness 118 Closing Case Two: Ebiz 120 Closing Case Three: How Do You Value Friendster? 122 Making Business Decisions 123 Apply Your Knowledge 123 Business Driven Best Sellers 127 MODULE TWO ESSENTIALS OF INFORMATION SYSTEMS 128 CHAPTER 4 Ethics and Information Security 129 Finamce, and INTRODUCTION 132 Section 4.1 Ethics 132 ETHICS 132 INFORMATION ETHICS 133 Information Has No Ethics 134 DEVELOPING INFORMATION MANAGEMENT POLICIES 135 Ethical Computer Use Policy 135 Information Privacy Policy 137 Acceptable Use Policy 138 Email Privacy Policy 138 Internet Use Policy 140 Anti-spam Policy 140 ETHICS IN THE WORKPLACE 141 Monitoring Technologies 142 Employee Monitoring Policies 143 Section 4.2 Information Security 144 HOW MUCH WILL DOWNTIME COST YOUR BUSINESS? 144 PROTECTING INTELLECTUAL ASSETS 146 THE FIRST LINE OF DEFENSE PEOPLE 148 THE SECOND LINE OF DEFENSE TECHNOLOGY 150 Authentication and Authorization 151 Prevention and Resistance 153 Content Filtering 153 Encryption 154 Firewalls 154 Detection and Response 155 Summary of Key Themes 157 Key Terms 157 Closing Case One: Banks Banking on Security 158 Closing Case Two: Hacker Hunters 159 Closing Case Three: Executive Dilemmas in the Information Age 160 Making Business Decisions 162 Apply Your Knowledge 163 Business Driven Best Sellers 165 VIII

CHAPTER 5 Enterprise Architectures 167 INTRODUCTION 170 Section 5.1 Managing Enterprise Architectures 170 ENTERPRISE ARCHITECTURES 170 INFORMATION ARCHITECTURE 172 Backup and Recovery 172 Disaster Recovery 173 Information Security 175 INFRASTRUCTURE ARCHITECTURE 176 Flexibility 177 Scalability 177 Reliability 177 Availability 178 Performance 178 APPLICATION ARCHITECTURE 178 Web Services 179 Open Systems 180 Section 5.2 Architecture Trends 181 ARCHITECTURE TRENDS 181 SERVICE ORIENTED ARCHITECTURE 182 SOA Business Benefits 182 Service 183 Interoperability 184 Loose Coupling 185 VISUALIZATION 186 What Are Virtual Machines? 187 / Virtualization Business Benefits 187 Additional Virtualization Benefits 189 GRID COMPUTING 189 Grid Computing Business Benefits 190 Summary of Key Themes 192 Key Terms 193 Closing Case One: Chicago Tribune's Server Consolidation a Success 193 Closing Case Two: The U.S. Open Supports SOA 194 Closing Case Three: ebay's Grid 195 Making Business Decisions 196 Apply Your Knowledge 197 Business Driven Best Sellers 199 CHAPTER 6 Databases and Data Warehouses 200 INTRODUCTION 204 Section 6.1 Database Fundamentals 204 ORGANIZATIONAL INFORMATION 204 The Value of Transactional and Analytical Information 206 The Value of Timely Information 206 The Value of Quality Information 207 STORING ORGANIZATIONAL INFORMATION 209 RELATIONAL DATABASE FUNDAMENTALS 210 Entities and Attributes 210 Keys and Relationships 210 RELATIONAL DATABASE ADVANTAGES 212 Increased Flexibility 212 Increased Scalability and Performance 212 Reduced Information Redundancy 213 Increased Information Integrity (Quality) 213 Increased Information Security 213 DATABASE MANAGEMENT SYSTEMS 214 Data-Driven Websites 214 Data-Driven Website Business Advantages 215 Data-Driven Business Intelligence 215 INTEGRATING INFORMATION AMONG MULTIPLE DATABASES 217 Section 6.2 Data Warehouse Fundamentals 219 ACCESSING ORGANIZATIONAL INFORMATION 219 HISTORY OF DATA WAREHOUSING 219 DATA WAREHOUSE FUNDAMENTALS 220 Multidimensional Analysis 220 Information Cleansing or Scrubbing 222 DATA MINING AND BUSINESS INTELLIGENCE 223 Summary of Key Themes 224 Key Terms 225 Closing Case One: Searching for Revenue Google 225 Closing Case Two: Mining the Data Warehouse 228 Closing Case Three: Harrah's Gambling Big on Technology 229 Making Business Decisions 231 Apply Your Knowledge 232 Business Driven Best Sellers 235 CHAPTER 7 Networks, Telecommunications, and Mobile Technology 236 INTRODUCTION 239 Section 7.1 Networks and Telecommunications 239 NETWORK BASICS 239 Using Networks and Telecommunications for Business Advantages 240 VOICE OVER IP 240 NETWORKING BUSINESSES 242 INCREASING THE SPEED OF BUSINESS 244 SECURING BUSINESS NETWORKS 245 Data Sharing 246 Section 7.2 Mobile Technology 247

BUSINESS DRIVERS FOR A MOBILE WORKFORCE 247 USING CELLULAR TECHNOLOGIES IN BUSINESS 249 Personal Data Assistants 252 Bluetooth 252 USING SATELLITE TECHNOLOGY IN BUSINESS 253 Global Positioning System (GPS) 256 USING WIRELESS TECHNOLOGIES IN BUSINESS 258 WiMAX 260 Radio Frequency Identification (RFID) 260 MOBILE WORKFORCE TRENDS 263 Summary of Key Themes 266 Key Terms 266 Closing Case One: Public Safety 266 Closing Case Two: UPS versus FedEx: Head-to-Head on Wireless 267 Closing Case Three: Improving IT's Bedside Manner at Florida Hospital 268 Making Business Decisions 270 Apply Your Knowledge 271 Business Driven Bestsellers 274 MODULE THREE SYSTEMS 276 ENTERPRISE INFORMATION CHAPTER 8 Operations Management and SuppSy Chain Management 277 penubinig Case S t u d y: S?eiJTs INTRODUCTION 280 Section 8.1 Operations Management 280 OPERATIONS MANAGEMENT FUNDAMENTALS 280 OM IN BUSINESS 282 IT'S ROLE IN OM 283 0M Strategic Business Systems 283 COMPETITIVE OM STRATEGY 285 Cost 285 Quality 285 Delivery 286 Flexibility 286 Service 287 OM AND THE SUPPLY CHAIN 287 Section 8.2 Supply Chain Management 290 SUPPLY CHAIN FUNDAMENTALS 290 IT'S ROLE IN THE SUPPLY CHAIN 292 Visibility 293 Consumer Behavior 293 Competition 294 Speed 295 SUPPLY CHAIN MANAGEMENT SUCCESS FACTORS 295 SCM Success Metrics 295 Make the Sale to Suppliers 297 Wean Employees Off Traditional Business Practices 297 Ensure the SCM System Supports the Organizational Goals 297 Deploy in Incremental Phases and Measure and Communicate Success 297 Be Future Oriented 297 SUPPLY CHAIN MANAGEMENT SUCCESS STORIES 297 FUTURE SUPPLY CHAIN TRENDS 299 Summary of Key Themes 300 Key Terms 300 Closing Case One: BudNet 301 Closing Case Two: Listerine's Journey 302 Closing Case Three: How Levi's Got Its Jeans into Wal-Mart 303 Making Business Decisions 305 Apply Your Knowledge 306 Business Driven Best Sellers 310 CHAPTER 9 Customer Relationship Management and Business Intelligence 312 p ih)iin)cj) Csis Stifldly; Customer First Awards 313 Section 9.1 Customer Relationship Management 316 CUSTOMER RELATIONSHIP MANAGEMENT FUNDAMENTALS 316 CRM as a Business Strategy 318 Business Benefits of CRM 318 Evolution of CRM 319 Operational and Analytical CRM 320 USING IT TO DRIVE OPERATIONAL CRM 321 Marketing and Operational CRM 321 Sales and Operational CRM 322 Customer Service and Operational CRM 325 Customer Relationship Management (CRM) Metrics 327 USING IT TO DRIVE ANALYTICAL CRM 328 CRM TRENDS: SRM, PRM, ERM 330 Supplier Relationship Management 330 Partner Relationship Management 330 Employee Relationship Management 331 THE UGLY SIDE OF CRM: WHY CRM MATTERS MORE NOW THAN EVER BEFORE 331 Section 9.2 BUSINESS INTELLIGENCE 333 BUSINESS INTELLIGENCE 333 The Problem: Data Rich, Information Poor 333 The Solution: Business Intelligence 334 OPERATIONAL, TACTICAL, AND STRATEGIC Bl 336 Bl's Operational Value 337 DATA MINING 338 Cluster Analysis 339 Association Detection 339 Statistical Analysis 340

BUSINESS BENEFITS OF Bl 342 Bl Business Benefits 343 Summary of Key Themes 345 Key Terms 345 Closing Case One: Calling All Canadians 345 Closing Case Two: Fighting Cancer with Information 346 Closing Case Three: Intelligent Business: Is It an Oxymoron? 348 Making Business Decisions 350 Apply Your Knowledge 351 Business Driven Best Sellers 354 CHAPTER 10 Enterprise Resource Planning and Collaboration Systems 355 INTRODUCTION 358 Section 10.1 Enterprise Resource Planning 358 ENTERPRISE RESOURCE PLANNING 358 The Heart of ERP 361 The Evolution of ERP 362 CORE ERP COMPONENTS 365 Accounting and Finance ERP Components 365 Production and Materials Management ERP Components 365 Human Resources ERP Components /365 EXTENDED ERP COMPONENTS 366 Business Intelligence ERP Components 366 Customer Relationship Management ERP Components 366 Supply Chain Management ERP Components 367 Ebusiness ERP Components 367 INTEGRATING SCM, CRM, AND ERP 367 Integration Tools 369 MEASURING ERP SUCCESS 370 CHOOSING ERP SOFTWARE 371 Finding the Right ERP Solution 371 Section 10.2 Collaboration Systems 373 TEAMS, PARTNERSHIPS, AND ALLIANCES 373 COLLABORATION SYSTEMS 374 KNOWLEDGE MANAGEMENT SYSTEMS 375 KM in Business 376 Explicit and Tacit Knowledge 376 KM Technologies 378 KM and Social Networking 378 CONTENT MANAGEMENT SYSTEMS 379 Working Wikis 379 WORKFLOW MANAGEMENT SYSTEMS 380 GROUPWARE SYSTEMS 381 Videoconferencing 383 Web Conferencing 383 Instant Messaging 384 Summary of Key Themes 385 Key Terms 385 Closing Case One: Dreamworks Animation Collaboration 386 Closing Case Two: Enterprise Content Management at Statoil 387 Closing Case Three: Shell Canada Fuels Productivity with ERP 389 Making Business Decisions 390 Apply Your Knowledge 391 Business Driven Best Sellers 396 MODULE FOUR SYSTEMS 397 DEVELOPING INFORMATION CHAPTER 11 Systems Development and Project Management 398 penddirog Case Stiady: IP's Software Problems 399 INTRODUCTION 401 Section 11.1 Developing Enterprise Applications 401 DEVELOPING SOFTWARE 401 THE SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC) 402 TRADITIONAL SOFTWARE DEVELOPMENT METHODOLOGY: WATERFALL 403 Waterfall Methodology 404 AGILE SOFTWARE DEVELOPMENT METHODOLOGIES 405 Rapid Application Development (RAD) Methodology 406 Extreme Programming Methodology 406 Rational Unified Process (RUP) Methodology 407 Scrum Methodology 407 Implementing Agile Methodologies 408 DEVELOPING SUCCESSFUL SOFTWARE 408 Slash the Budget 408 If It Doesn't Work, Kill It 409 Keep Requirements to a Minimum 409 Test and Deliver Frequently 409 Assign Non-IT Executives to Software Projects 409 Section 11.2 Project Management 410 INTRODUCTION 410 MANAGING SOFTWARE DEVELOPMENT PROJECTS 410 The Triple Constraint 410 PROJECT MANAGEMENT FUNDAMENTALS 412 CHOOSING STRATEGIC PROJECTS 413 UNDERSTANDING PROJECT PLANNING 414 Project Charter 415 Project Plan 415 MANAGING PROJECTS 417 Managing People 418 Managing Communications 418 Managing Change 418

OUTSOURCING PROJECTS 419 Outsourcing Benefits 423 Outsourcing Challenges 423 Summary of Key Themes 424 Key Terms 425 Closing Case One: Disaster at Denver International Airport 425 Closing Case Two: Reducing Ambiguity in Business Requirements 426 Closing Case Three: Staying on Track Toronto Transit 427 Making Business Decisions 428 Apply Your Knowledge 430 Business Driven Best Sellers 433 CHAPTER 12 Globalization, Innovation, and 21 st Century Organizational Trends 435 INTRODUCTION 439 Section 12.1 GLOBALIZATION 439 GLOBALIZATION 439 Cultural Business Challenges 439 Political Business Challenges 440 Global Geoeconomic Business Challenges 440 GLOBAL IT BUSINESS STRATEGIES 441 Governance and Compliance 442 GLOBAL ENTERPRISE ARCHITECTURES 444 GLOBAL INFORMATION ISSUES 444 Information Privacy 446 Europe 447 The United States 448 Canada 448 GLOBAL SYSTEMS DEVELOPMENT 449 Integrating Global Systems 449 Section 12.2 21 st CENTURY ORGANIZATIONAL TRENDS 451 21 ST CENTURY ORGANIZATION TRENDS 451 INNOVATION: FINDING NEW 452 Find Your Relevant Edge 453 Assemble Innovation Hothouses 453 Reward Risk Takers 453 Celebrate Diversity 453 Look Around 453 Mix Practitioners and Developers 454 SOCIAL ENTREPRENEURSHIP: GOING GREEN Energy Consumption 454 Recycle IT Equipment 456 Greener IT 457 SOCIAL NETWORKS: WHO'S WHO 458 Passive Search 458 Boomerangs 459 Marketing Networks 460 VIRTUAL WORLDS: IT'S A WHOLE NEW WORLD Virtual Worlds 460 Virtual Workforce 462 Summary of Key Themes 464 Key Terms 464 Closing Case One: Tata's Nano $2,500 Car 464 Closing Case Two: Collective Innovation 466 Closing Case Three: Confusing Carbon 468 Making Business Decisions 470 Apply Your Knowledge 471 Business Driven Best Sellers 473 Appendices 475 Technology Plug-In Overview Notes 480 Glossary 490 Credits 505 Index 507 476 454 460