CHAPTER 8 INTERORGANIZATIONAL AND GLOBAL INFORMATION SYSTEMS

1 Introduction to Information TechnologyTurban, Rainer and Potter

Chapter 8 Interorganizational and Global Information Systems

CHAPTER 8INTERORGANIZATIONAL

AND GLOBALINFORMATION SYSTEMS



Learning Objectives Describe the role, benefits and structure of

interorganizational systems Distinguish between interorganizational and global

information systems Describe EDI and compare a traditional EDI with an

Internet-base EDI Define extranets and explain their infrastructure, types and

benefits Describe planning and other issues related to

interorganizational and global systems



Chapter Overview

Interorganizational Information Systems• Response to Business Pressures• Types of Interorganizational systems

Global Information Systems• Who Needs Global Systems?• Benefits of Global IS• Issues in Electronic Global Trading• Global E-Commerce

Electronic Data Inerchange and Electronic Funds Transfer• EDI and IOS• EFT and IOS

Extranets• Components and Structure• Types• Benefits

Implementing IOS• Security• Ethical and Social Issues• Planning



The Problem

Case: The Harper Group Collaborates With Honda in International Trade

highly competitive environment where hundreds of freight moving companies in the United States and abroad operate

large amounts of information flow among several trading partners and support services

HOW TO EFFECTIVELY MANAGE THE INFORMATION?

HOW TO DO IT AT COMPETITIVE PRICES?



Case (continued…)

Use information technology that links the computers of involved organizations, resulting in a paperless flow of routine information

The Solution

The Results allows cheaper, faster, and more reliable information to flow among all business partners supports Harper’s global business maintains the company’s position as the second largest trading facilitator in the United States operates the company with thin profit margins adopted an intranet for improving the internal operations in 1997



What have we learned from this case??

Case (continued…)

Global information system - EDI» enables efficient flow of large amounts of transactional

information among several business partners around the globe

» keeps current customers» attracts new customers



Interorganizational Information Systems (IOS)

Objective efficient processing of transactions, such as transmitting orders,

bills, and payments

Major Characteristics determine customer-supplier relationship in advance built around privately or publicly accessible networks

» employ value-added networks (VANs) when use telecommunications companies for communication

use the Internet with either an electronic data interchange (EDI), with extranets, or with EDI/Internet



IOS (continued …)

IOS Response to Business Pressures reduce the costs of routine business transactions improve the quality of the information flow by reducing or

eliminating errors compress cycle time in the fulfilment of business

transactions, regardless of geographical distance eliminate paper processing and its associated inefficiencies

and costs make the transfer and processing of information easy for

users



Types of Interorganizational Systems Global systems - information systems connecting two or more companies in two

or more countries

Electronic data interchange (EDI) - the electronic movement of standard business documents between business partners

Electronic funds transfer (EFT) - the transfer of money using telecommunication networks

Extranets - link the intranets of business partners

Shared databases - databases that can be shared by trading partners, often used to reduce time in communicating information between parties as well as arranging cooperative activities

Integrated messaging - delivery of electronic mail and fax documents through a single transmission system that can combine electronic mail and electronic business documents

IOS (continued …)



Global Information System

Global Information System connect companies located in two or more countries

Who Uses Global Systems? Multinational Companies

» companies that operate in several countries

International Companies» companies that do business with other companies in different

countries

Virtual Global Corporations» joint ventures whose partners are form different countries



Effective communication at a reasonable cost Effective collaboration with groupware

software, Group DSS, extranets, and teleconferencing devices

Organizations access each other’s databases and frequently work on the same projects while their members are in different locations

Benefits ofGlobal Information System



Issues in ElectronicGlobal Information System

Cultural Differences many different aspects ranging from legal and ethical

issues to what information is considered offensive localization - use different names, colors, sizes, and

packaging for overseas products and services Economic and Legal Differences

differ considerably in their economical and legal environments

Transfer of Data Across International Borders cross-border data transfer - several countries impose

strict laws to control the flow of corporate data across their borders; to protect the privacy of their citizens



Access to larger markets, the possibility of saving on taxes, and the flexibility to employ workers and manufacture products anywhere using a world telecommuting workforce

Benefits the Internet and the extranets resulted in an

inexpensive and flexible infrastructure can do business anytime and from anywhere can do it rapidly at a reasonable cost

Global Electronic Commerce



Barriers Legal barriers

» jurisdiction issues, export/import regulations and compliance; contacts

» Intellectual property (enforcement of ), privacy, and content issues» Cryptography (encryption), security, authentication procedures,

and notarized documents» Cross-border transactions, as described earlier» Consumer protection (e.g. liability for wrong transactions)

Market access barriers» building a telecommunications infrastructure capable of

accommodating all users and all types of data is a necessity

Global Electronic Commerce (continued …)



Global Electronic Commerce (continued …)

Barriers Financial barriers

» including taxation, customs and electronic payment systems, different currencies

Others» need to match buyers and sellers across international borders and

establish trust between them» existence of cultural diversity» lack of sufficient international agreements» deciding on the collection of sales and other taxes» compliance with diversified export/import regulations and fees» need for language translation (the Web page, transactions)



Electronic Data Interchange (EDI) Elements of EDI

Data formatting standards» to shorten the length of the messages, reducing long distance telephone

charges and eliminating data entry errors EDI translators

» conversion of data into standard format

Private line (VANs) versus the Internet VANs-based EDI - expensive, high security and capacity, incompatible

hardware and software of the telecommunication companies Internet-based EDI - less security and capacity as compare to VAN-

based EDI, but cheaper; requires coordination and integration with the company’s back-end processing systems



Order-delivery CycleWith and Without EDI

Without EDI

With EDI

Start

Specifier

Purchasing

Accounting

Mailroom

ShippingReceiving

Buyer

P.O. delivery

Order confirmationBill delivery

Sales

Accounting

Mailroom

ShippingReceiving

Seller

Receiving

Buyer Seller

Start

Specifier

POStandardized PO Form

PO

Invo

ice

Flas

hre

port

Shipping

EDI transmissions Computer Generates Standardized P.O. Form

Instant data to :•Sales•Manufacturing•Engineering

Automatic billing

Automatic order confirmation• Approval• Prices• Availability



Benefits of EDIBenefits How the Benefit is Achieved?

Speed, volume EDI enables companies to send and receive large amounts of routine transaction information quickly around the globe in a paperless environment

Sales and other information is delivered to manufacturers, shippers, and warehouse almost in real time

Once EDI documents are received ,they are automatically forwarded to the appropriate department for processing

Accuracy There are very few errors in the transformed data as a result of computer-to-computer data transfer. Information is also consistent



Benefits of EDI (continued …)Benefits How to Benefit is Achieved?Collaboration Companies can access partners databases to retrieve and store

standard transactions

Commitment EDI fosters true (and strategic) partnership relationships, since it involves a commitment to a long-term investment and the refinement of the system over time

Profit The time for collecting payments can be shortened by several weeks, benefiting the recipients of payments

Cost saving EDI creates a complete paperless transfer processing environment, saving money and increasing efficiency

EDI enables a just-in-time environment, which means lower (or no) inventories for manufacturers



Manufacturing - to communicate with suppliers, customers, and other business partners

Retailing - to streamline deliveries of goods from the suppliers to the stores and reduce inventories

Global trade - to shorten the elapse time by 70% or more and to reduce administrative expenses by 30%

Service Industry - used EDI and its companion, electronic funds transfer, for a long time

Large trading networks - provide efficient and effective trading environments (e.g. TradeNet)

EDI Applications



Electronic Funds Transfer (EFT) transfer of money to and from financial institutions using

telecommunication networks used as an IOS, a global system, and a communication system

among organizations and to individuals fast - reduces delays associated with sending hard-copy

documents and it eliminates returned checks security issues - how can a business ensure that a hacker is

not bilking corporate accounts by electronically transferring funds to his account, or that competitive snoops are not gaining a complete picture of corporate financial assets?



TradeNet (Singapore)(1) Trader fills up Inward declaration form on the terminal.

(2) TDB retrieves and approves Inward declaration (It is an import permit).

TDB

(3) TradeNet automatically forwards approved Inward declaration to Customers

Tradenet

(4) Customers retrieves and approves Inward declaration (It is a customs permit).

(5) Trader prints a form for Customs clearance (trader may inquire status of declaration at any time).

(6) Port Authority retrieves data required for delivery of cargo.

Port Authority

Trader

Customers



Extranet A network that links business partners to one

another over the Internet by providing access to certain areas of each other’s corporate intranets

Components Servers

TCP/IP protocols E-mail Web browsers as

the Internet

StructureExtranet

Company A

Intranetcorporate data, e-mail,orders, customer data,inventory, documents

Company B

Intranet

Other userscustomers, suppliers,

contractors, distributors, government

Corporate employees

travelling or at home

Internet

Internet InternetInternet



A company and its dealers, customers, or suppliers centered around one company

An industry’s extranet (Trading Network) teamed up and created by the major players in an

industry (e.g. the automotive industry)

Joint ventures and other business partnerships used as a vehicle for communications and collaboration

among several companies partnering in a joint venture

Types of Extranet



Benefits of Extranets (continues …)

Fewer help-desk employees are needed Improved quality Lower communications and travel costs Lower administrative and other overhead costs Faster processes and information flow Reductions in paperwork and delivery of accurate

information in a timely manner Improved order entry and customer service Better communication



Implementing Interorganizational Information System

Security protection mechanisms : firewalls and VPNs

Ethical and Societal Issues takes a great risk for its trade secrets, the privacy of the

employees and the controlling of some processes

Planning complex IT planning when involving several organizations several IT planning teams should be created and supported

by e-mail, extranets,and groupware



What’s in IT for Me?

For Accounting procedures in multinational corporations and issues in

taxation include data collection and transfer and auditing For Finance

EDI and EFT have been the pioneering systems for over 20 years; now global financial services and trading

For Human Resource Management recruitment, HR development and training in a local and

multinational corporations can be improved by using IT



For Marketing marketing and sales in global markets can be

enhanced by appropriate information systems For Production/Operations Management

the logistics systems can be greatly improved by using IOSs

For Non-Business everyone will encounter interorganizational systems

in almost any organization, public or private

What’s in IT for Me?(continued …)

CHAPTER 8 INTERORGANIZATIONAL AND GLOBAL INFORMATION SYSTEMS

Documents

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