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Management Information Systems, Second EditionEffy Oz

Chapter 11Chapter 11Interorganizational and Interorganizational and International International Information SystemsInformation Systems

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Learning ObjectivesLearning Objectives

When you finish this chapter, you will Understand the importance of

interorganizational and international ISs.

Recognize the role EDI plays in saving costs in business operations.

Be able to describe the vertical and horizontal information integration among companies.

Know the legal, cultural, and other challenges to implementing informational exchange systems.

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Sharing Information SystemsSharing Information Systems

Interorganizational Information Systems

Systems shared by two or more organizations Built and owned by one organization Increases efficiency and effectiveness Organizations use similar systems to serve

international sites

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Vertical Information ExchangeVertical Information Exchange

Vertically related

Output of one organization used in processes of another

Integrating ISs between vertically related organizations highly beneficial Saves time and money Better serves customers

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Vertical Information InterchangeVertical Information Interchange

Figure 11.1 Vertical relationships among organizations

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Electronic Data InterchangeElectronic Data Interchange

What is EDI?

Exchange of electronic data using interorganizational information systems

Set of hardware, software, and standards that accommodate the EDI process

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Electronic Data InterchangeElectronic Data Interchange

Benefits of EDI

Cost Savings

Speed

Accuracy

Security

System Integration

Just-in-time Support

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Figure 11.2 Benefits of EDI

Electronic Data InterchangeElectronic Data Interchange

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Electronic Data InterchangeElectronic Data Interchange

Figure 11.3 Suppliers, manufacturers, and retailers cooperate in some of the most successful applications of EDI.

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Electronic Data ExchangeElectronic Data Exchange

How does EDI work? (Figure 11.4)

Supplier’s proposal sent electronically to purchasing organization.

Electronic contract approved over network.

Supplier manufactures and packages goods, attaching shipping data recorded on a bar code.

Quantities shipped and prices entered in system and flowed to invoicing program; invoices transmitted to purchasing organization

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Electronic Data ExchangeElectronic Data Exchange

Manufacturer ships order.

Purchasing organization receives packages, scans bar code, and compares data to invoices actual items received.

Payment approval transferred electronically.

Bank transfers funds from purchaser to supplier’s account using electronic fund transfer (EFT).

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Electronic Data InterchangeElectronic Data Interchange

Figure 11.4How EDI works

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Electronic Data InterchangeElectronic Data InterchangeEDI Standards

EDI requires companies to agree on standards Compatible hardware and software Agreed upon electronic form format

Established EDI standards Automotive Industry Action Group (AIAG) X.12 de facto umbrella standard in U.S. and

Canada EDI for Administration, Commerce, and Trade

(EDIFACT) umbrella of standards in Europe

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Electronic Data InterchangeElectronic Data Interchange

How to Subscribe to EDI

Larger companies purchase hardware and software

Medium and small companies seek third-party service Value-added networking (VAN) Managed network services available for a fee

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Electronic Data InterchangeElectronic Data Interchange

EDI on the Web

Advantages of Web EDI Lower cost More familiar software Worldwide connectivity

Disadvantages of Web EDI Low speed Poor security

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Electronic Data InterchangeElectronic Data Interchange

Legal Problems of EDI

Increased risk of unauthorized interception

Contractual responsibility for incomplete or corrupted telecommunications

Questionable validity of digital contracts

Protection against the ease of collaborative pricing and other activities that may violate antitrust laws

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Electronic Data InterchangeElectronic Data Interchange

Figure 11.5 Legal issues that arise from the use of EDI

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Electronic Data InterchangeElectronic Data Interchange

The Importance of EDI

Need for timely, reliable data exchange in response to rapidly changing markets

Emergence of standards and guidelines

Spread of information into many organizational units

Greater reliability of information technology

Globalization of organizations

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Horizontal Information Horizontal Information InterchangeInterchange

Horizontal Information Interchange

Organizations performing similar activities share information Real estate agencies maintain multiple listing

service Financial institutions share financial

information Airlines share reservation systems

Legal implications and risks similar to those of EDI

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Horizontal Horizontal Information InterchangeInformation Interchange

Figure 11.6 Horizontal information interchange

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International and International and Multinational OrganizationsMultinational Organizations

Multinational organizations need integrated ISs

Flow of information across borders essential

Managers increasing attention to international IS integration

Some large companies build their own international ISs

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Figure 11.7 The importance of international integration to companies with international operations

International and International and Multinational OrganizationsMultinational Organizations

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Using the Web for Using the Web for International CommerceInternational Commerce

International Web Commerce Benefits

Increased revenues Increased international Web participation Potential Web participation

Cost savings Printing and shipping costs Customer service costs

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Using the Web for Using the Web for International CommerceInternational Commerce

Figure 11.8 Worldwide distribution of people regularly online, 1999

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Using the Web for Using the Web for International CommerceInternational Commerce

Figure 11.9 Countries projected to lead in Internet use by 2005

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Challenges to Global Challenges to Global Information SystemsInformation Systems

Technological Challenges

Non-uniform information infrastructures

Payment Mechanisms

Non-uniform preferred payment method

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Challenges to Global Challenges to Global Information SystemsInformation Systems

Language Differences

Translation delays

Laws forbid foreign language accounting and other systems

Cultural Differences

Cultural imperialism

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Challenges to Global Challenges to Global Information SystemsInformation Systems

Economic, Scientific, and Security Interests Government restriction on sharing sensitive

information Varying treatment of trade secrets, patents,

and copyrights

Political Challenges Fear that access to information threatens

sovereignty Government pressure to buy only national

software

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Challenges to Global Challenges to Global Information SystemsInformation Systems

Standards

Varying standards for date format, measurements, etc.

Legal Barriers to International Data Transfer

Incompatible data privacy laws in U.S. and Europe

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Ethical and Societal IssuesEthical and Societal IssuesThe Electronic ImmigrantThe Electronic Immigrant

Electronic Immigrant Telecommutes to company in another country

Competes with local workers in foreign countries Often can work for less

Drawbacks Reduced government control of foreign labor Pockets of unemployment in host country

Advantages Ultimately benefits consumer by lowering costs Helps limit ‘physical immigration’ Satisfies unmet demand for developers