INTRODUCTION TOINFORMATIONSYSTEMSSixteenth Edition

GEORGE M. MARAKASKU School of Business

University of Kansas

JAMES A. O'BRIENCollege of Business Administration

Northern Arizona University

I McGraw-HillI irwin

Foundations of Information Systemsin Business 2FOUNDATION CONCEPTS:INFORMATION SYSTEMS INBUSINESS 3The Real World of Information Systems 3

REAL WORLD CHALLENGE: Modernizing

Legacy Systems at Crescent Healthcare Inc. 4

What Is an Information System? 6

The Fundamental Roles of IS in Business 7

Trends in Information Systems 9

The Role of e-Business in Business 11

Types of Information Systems 12

Operations Support Systems 12

Management Support Systerfts 14

Other Classifications of Information Systems 15

Managerial Challenges of Information Technology 16

Success and Failure with IT 17

Developing IS Solutions 18

Challenges and Ethics of IT 19

Challenges of IT and IS Careers 2 0

The IS Function 2 3

FOUNDATION CONCEPTS: T H ECOMPONENTS OF INFORMATIONSYSTEMS 25System Concepts: T h e Foundation for

Business Processes 2 5

What Is a System? 2 5

Feedback and Control 26

Other System Characteristics 26

Components of Information Systems 2 8

Information System Resources 29

People Resources 29

Hardware Resources 3 0

Software Resources 31

Data Resources 31

Network Resources 3 3

Information System Activities 3 3

Input of Data Resources 33

Processing of Data into Information 3 3

Output of Information Products 34

Storage of Data Resources 34

Control of System Performance 34

Recognizing Information Systems 34

REAL WORLD SOLUTION: Crescent HealthcareInc.: From Green Screens to Online Access 35

REAL WORLD CASE 1: eCourier, Cablecom,and Bryan Cave: Delivering Value throughBusiness Intelligence 42

REAL WORLD CASE 2: The New York Timesand Boston Scientific: Two Different Ways ofInnovating with Information Technology 45

Competing with Information TechnologyFUNDAMENTALS OF STRATEGICADVANTAGEStrategic IT

Competitive Strategy Concepts

Competitive Forces and Strategies

REAL WORLD CHALLENGE: CenterPointProperties—Creating a New Company for aNew Business

Strategic Uses of Information Technology

Other Strategic Initiatives

Building a Customer-Focused Business

The Value Chain and Strategic IS

Value Chain Examples

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Contents

USING INFORMATIONTECHNOLOGY FOR STRATEGICADVANTAGE 61Strategic Uses of IT 61

Reengineering Business Processes 61

The Role of Information Technology 62

Becoming an Agile Company 64

Creating a Virtual Company 65

Virtual, Company Strategies 65

Building a Knowledge-Creating Company 67

Knowledge Management Systems 67

REAL WORLD SOLUTION: CenterPointProperties—Reinventing a Company with theHelp of IT 69

REAL WORLD CASE 1: How to Win Friendsand Influence Business People: Quantify ITRisks and Value 76

REAL WORLD CASE 2: For Companies BothBig and Small: Running a Business on Smartphones 79

Computer HardwareCOMPUTER SYSTEMS-END USERAND ENTERPRISE COMPUTINGIntroduction

A Brief History of Computer Hardware

REAL WORLD CASE 1: Budway EnterprisesInc.—Looking for a Low-Cost, High-ReturnAlternative to Paper

Types of Computer Systems

Microcomputer Systems

Computer Terminals

Network Computers

Information Appliances

Midrange, Mainframe, and Supercomputer Systems

The Next Wave of Computing

Technical Note: The Computer System Concept

Computer Processing Speeds

Moore's Law: Where Do We Go from Here

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COMPUTER PERIPHERALS:INPUT, OUTPUT, AND STORAGETECHNOLOGIESPeripherals

Input Technologies

Speech Recognition Systems

Optical Scanning

Other Input Technologies

Output Technologies

Video Output

Printed Output

Storage Trade-Offs

Computer Storage Fundamentals

Direct and Sequential Access

Semiconductor Memory

Ready Boost

Solid-State Drive

Magnetic Disks

RAID Storage

Magnetic Tape

Optical Disks .

Radio Frequency Identification

RFID Privacy Issues

Predictions for the Future

REAL WORLD SOLUTION: BudwayEnterprises Inc.—Custom Technology withStandard Components

REAL WORLD CASE 1: AstraZeneca,United Health, and Others: IT AssetManagement—Do You Know What You've Got?

REAL WORLD CASE 2: IT in Health Care:Voice Recognition Tools Make Roundsat Hospitals

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Computer Software 134APPLICATION SOFTWARE:END-USER APPLICATIONS 13 5Introduction to Software 135

What Is Software? 135

Types of Software 135

Application Software for End Users 135

REAL WORLD CHALLENGE: Japan PostNetwork—from Government Entity to PrivateCompany 136

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Business Application SoftwareSoftware Suites and Integrated Packages

Web Browsers and More

Electronic Mail, Instant Messaging, and Blogs

Word Processing and Desktop Publishing

Spreadsheets

Presentation Graphics

Personal Information Managers

Groupware

Software Alternatives

Application Service Providers

Cloud Computing

Software Licensing

SYSTEM SOFTWARE: COMPUTERSYSTEM MANAGEMENTSystem Software Overview

Overview

Operating Systems

Operating System Functions x

Microsoft Windows

UNIX

Linux

Open-Source Software

OpenOjftce.org 3

Mac OS X

Application Virtualization •'•

Other System Management Programs

Programming Languages

Machine Languages

Assembler Languages

High-Level Languages

Fourth-Generation Languages

Object-Oriented Languages

Web and Internet Languages and Services

HTML

XML

Java and.NET

Web Services

Programming Software

Language Translator Programs

Programming Tools

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REAL WORLD SOLUTION: Japan PostNetwork—Savings and Competitive Advantagewith Software as a Service

REAL WORLD CASE 1: GE, H.B. Fuller Co.,and Others: Successful Implementations of

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Software as a ServiceREAL WORLD CASE 2: U.S. Department ofDefense: Enlisting Open-Source Applications

Data Resource ManagementTECHNICAL FOUNDATIONS OFDATABASE MANAGEMENTDatabase Management System

Fundamental Data Concepts

Character

Field

REAL WORLD CHALLENGE: U.S. Xpress—Lots of Data, Not Enough Quality

Record

File

Database

Database Structures

Hierarchical Structure

Network Structure

Relational Structure

Relational Operations

Multidimensional Structure

Object-Oriented Structure

Evaluation of Database Structures

Database Development

Data Planning and Database Design

MANAGING DATA RESOURCESData Resource Management

Types of Databases

Operational Databases

Distributed Databases

External Databases

Hypermedia Databases

Data Warehouses and Data Mining

Data Mining

Traditional File ProcessingProblems of File Processing

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The Database Management Approach 213

Database Management System 213

Database Interrogation 215

Database Maintenance 217

Application Development 217

REAL WORLD SOLUTION: U.S. Xpress—Data Quality Drives Millions in Savings 218

REAL WORLD CASE 1: Beyond Street Smarts:Data-Driven Crime Fighting 225

REAL WORLD CASE 2: Duke UniversityHealth System, Beth Israel Deaconess MedicalCenter, and Others: Medical IT Is Getting Personal 227

Telecommunications and NetworksTHE NETWORKED ENTERPRISENetworking the Organization

The Concept of a Network

REAL WORLD CHALLENGE: Adena HealthSystem and Cherokee Health Systems—TheChallenge of Medicine in the Rural United States

Metcalfe's Law

Trends in Telecommunications

Industry Trends

Technology Trends

Business Application Trends

Internet2

The Business Value of TelecommunicationsNetworks

The Internet Revolution

Internet Service Providers

Internet Applications

Business Use of the Internet

The Business Value of the Internet

The Role of Intranets

The Business Value of Intranets

The Role of Extranets

TELECOMMUNICATIONSNETWORK ALTERNATIVESTelecommunications Alternatives

A Telecommunications Network Model

Types of Telecommunications Networks

Wide Area Networks

Metropolitan Area Network

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Local Area Networks 250

Virtual Private Networks 251

Clien t/Server Networks 253

Network Computing 253

Peer-to-Peer Networks 254

Digital and Analog Signals 256

Telecommunications Media 256

Wired Technologies 257

Twisted-Pair Wire 257

Coaxial Cable 257

Fiber Optics 257

The Problem ofuThe Last Mile " 258

Wireless Technologies 258

Terrestrial Microwave 259

Communications Satelites 259

Cellular and PCS Systems 260

Wireless LANs 260

Bluetooth 261

The Wireless Web 261

Telecommunications Processors 262

Modems 263

Inter-Network Processors 263

Multiplexers 264

Telecommunications Software 264

Network Management 265

Network Topologies 266

Network Architectures and Protocols 267

Protocols 267

Network Architectures 267

The OSI Model 267

The Internet's TCP/IP 269

Voice over IP 270

Bandwidth Alternatives 272

Switching Alternatives 272

Network Interoperability 273

REAL WORLD SOLUTION: Adena HealthSystem and Cherokee Health Systems—ReachingFar Away with the Help of Technology 2 74

REAL WORLD CASE 1: DLA Piper, PepsiCo,and Others: Telepresence Is Finally Coming of Age 281

REAL WORLD CASE 2: Brain SavingTechnologies, Inc. and the T-Health Institute:Medicine through Videoconferencing 283

Contents xii i

e-Business Systemse-BUSINESS SYSTEMSIntroduction

Cross-Functional Enterprise Applications

REAL W O R L D C H A L L E N G E : Qualcomm—Silos, Silos, Everywhere

Enterprise Application Architecture

Enterprise Application Integration

Transaction Processing Systems

The Transaction Processing Cycle

Enterprise Collaboration Systems

Tools for Enterprise Collaboration

FUNCTIONAL BUSINESS SYSTEMSIntroduction

IT in Business

Marketing Systems

Interactive Marketing ;

Targeted Marketing

Sales Force Automation

Manufacturing Systems J&.

Computer-Integrated Manufacturing

Human Resource Systems

HRM and the Internet

HRM and Corporate Intranets

Accounting Systems

Online Accounting Systems

Financial Management Systems

REAL W O R D S O L U T I O N : Qualcomm—Breaking Down Silos and Integrating -Applications

REAL W O R L D CASE 1: Toyota Europe,Campbell Soup Company, Sony Pictures,and W.W. Grainger: Making the Case forEnterprise Architects

REAL W O R L D CASE 2: Nationwide Insurance:Unified Financial Reporting and "One Versionof the Truth"

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Business across the Enterprise 324G E T T I N G ALL T H E GEESELINED UP: MANAGING AT T H EENTERPRISE LEVEL 325Introduction 325

CUSTOMER RELATIONSHIPMANAGEMENT: T H E BUSINESSFOCUS 326Introduction 326

W h a t is C R M 326

Contact and Account Management 326

Sales 326

REAL W O R L D C H A L L E N G E : Jelly Belly

Candy Company—Getting Your Arms Around Sales 327

Marketing and Fulfillment 329

Customer Service and Support 329

Retention and Loyalty Programs 330

T h e Three Phases of C R M 3 31

Benefits and Challenges of C R M 332

CRM Failures 333

Trends in C R M 334

ENTERPRISE RESOURCEPLANNING: T H E BUSINESSBACKBONE 337Introduction 337

WhatlsERP? 337

Benefits and Challenges of ERP 339

The Costs of ERP 339

Causes of ERP Failures 341

Trends in ERP 342

SUPPLY CHAIN MANAGEMENT:T H E BUSINESS N E T W O R K 345Introduction 345

W h a t is SCM 345

Electronic Data Interchange 347

T h e Role of S C M 349

Benefits and Challenges of SCM 351

Trends in S C M 354

REAL W O R L D S O L U T I O N : Jelly BellyCandy Company—Compet ing with C R M 356

REAL W O R L D CASE 1: Kennametal,Haworth, Dana Holding, and Others: ERPsGet a Second Lease on Life 362

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REAL WORLD CASE 2: Cisco Systems,Black & Decker, and O'Reilly Auto Parts:Adapting Supply Chains to Tough Times 364

e-Commerce Systemse-COMMERCE FUNDAMENTALSIntroduction to e-Commerce

The Scope of e-Commerce

e-Commerce Technologies

REAL WORLD CHALLENGE:Ticketmaster—New Clients, New Outlets,New Needs

Categories of e-Commerce

Essential e-Commerce Processes

Access Control and Security

Profiling and Personalizing

Search Management

Content and Catalog Management

Workflow Management

Event Notification

Collaboration and Trading

Electronic Payment Processes

Web Payment Processes

Electronic Funds Transfer

Secure Electronic Payments

e-COMMERCE APPLICATIONSAND ISSUES

e-Commerce Trends

Business-to-Consumer e-Commerce

e-Commerce Success Factors

Web Store Requirements

Getting Customers to Find You

Serving Your Customers

Managing a Web Store

Business-to-Business e-Commerce

• e-Commerce Marketplaces

Clicks and Bricks in e-Commerce

e-Commerce Integration

Other Clicks-and-Bricks Strategies

e-Commerce Channel Choices

REAL WORLD SOLUTION: Ticketmaster—Changing the Way Tickets Are Sold

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REAL WORLD CASE 1: Sony, 1-800-Flowers,Starbucks, and Others: Social Networks, MobilePhones, and the Future of Shopping 405

REAL WORLD CASE 2: Linked In, Umbria,Mattel, and Others: Driving the "Buzz" onthe Web 408

Supporting Decision MakingSUPPORTING DECISIONMAKINGIntroduction

Information, Decisions, and Management

Information Quality

REAL WORLD CHALLENGE: DeutschePost DHL—The Challenges of Creating andManaging a Global Brand

Decision Structure

Decision Support Trends

Decision Support Systems

Example

DSS Components

Management Information Systems

Management Reporting Alternatives

Online Analytical Processing

OLAP Examples

Geographic Information and DataVisualization Systems

Using Decision Support Systems

What-IfAnalysis

Sensitivity Analysis

Goal-Seeking Analysis

Optimization Analysis

Data Mining for Decision Support

Executive Information Systems

Features of an EIS

Enterprise Portals and Decision Support

Enterprise Information Portals

Knowledge Management Systems

ADVANCED TECHNOLOGIESFOR DECISION SUPPORTBusiness and AI

An Overview of Artificial Intelligence

The Domains of Artificial Intelligence

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Contents xv

Expert Systems 447

Components of an Expert System . 447

Expert System Applications 448

Benefits of Expert Systems 449

Limitations of Expert Systems 449

Developing Expert Systems 451

Knowledge Engineering 452

Neural Networks 452

Fuzzy Logic Systems 454

Fuzzy Logic in Business 455

Genetic Algorithms 455

Virtual Reality 456

VR Applications 458

Intelligent Agents 459

REAL WORLD SOLUTION: DeutschePost DHL—Decision Support forLocal Brand Investments 462

REAL WORLD CASE 1: Valero Energy, ElkayManufacturing, J&J, and Overstock.com: The MoveToward Fact-Based Decision Making 469

REAL WORLD CASE 2: Kimberly-Clark Corp.:Shopping for Virtual Products in Virtual Stores 472

Dew©

Business/IT Strategies for DevelopmentIT PLANNING FUNDAMENTALSIntroduction

Organizational Planning

The Scenario Approach

REAL WORLD CHALLENGE: Sloan ValveCompany—ERP, Business Processes, and theNeed to Change

Planning for Competitive Advantage

SWOT Analysis

Business Models and Planning

Business/IT Architecture Planning

Information Technology Architecture

Balanced Scorecard

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Identifying Business/IT Strategies

Business Application Planning

Business/IT A rchitecture Planning

IMPLEMENTATION CHALLENGESImplementation

Implementing Information Technology

End-User Resistance and Involvement

Change Management

A Change Management Process

REAL WORLD SOLUTION: Sloan ValveCompany—IT and the Redesign of theNew Product Development Process

REAL WORLD CASE 1: IT Leaders: IT/Business Alignment Takes on aWhole New Meaning

REAL WORLD CASE 2: Centene, Flowserve,and Shaw Industries: Relationships, Collaboration,and Project Success

Developing Business/IT SolutionsDEVELOPING BUSINESS SYSTEMSIS Development

The Systems Approach

Systems Thinking

REAL WORLD CHALLENGE: StarwoodHotels and Resorts—Success and GrowthBring on IT Challenges

Systems Analysis and Design

The Systems Development Life Cycle

Starting the Systems Development Process

Feasibility Studies

Operational Feasibility

Economic Feasibility

Technical Feasibility

Human Factors Feasibility

Legal/Political Feasibility

Systems Analysis

Organizational Analysis

Analysis of the Present System

Logical Analysis

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Functional Requirements Analysis and Determination 528

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Systems Design 528

Prototyping 529

The Prototyping Process 530

User Interface Design 531

System Specifications 533

End-User Development 533

Focus on IS Activities 534

Doing End-User Development 535

Technical Note: Overview of Object-OrientedAnalysis and Design 537

IMPLEMENTING STRATEGICBUSINESS SYSTEMS 539The World of Systems Implementation 539

Implementing New Systems 539

Project Management 541

What Is a Project? 541

The Process of Project Management 541

Evaluating Hardware, Software, and Services 543

Hardware Evaluation Factors 544

Software Evaluation Factors 546

Evaluating IS Services 547

Other Implementation Activities , 547

Testing 547

Data Conversion 548

Documentation 549

Training •$ 549

System Conversion Strategies 550

Direct Conversion 551

Parallel Conversion 551

Pilot Conversion 551

Phased Conversion 552

Postimplementation Activities 552

Systems Maintenance 552

Postimplementation Review 553

REAL WORLD SOLUTION: StarwoodHotels and Resorts—Toward a CompletelyNew Infrastructure 554

REAL WORLD CASE 1: Microsoft, SiCortex,and Others: How Virtualization HelpsSoftware Developers 561

REAL WORLD CASE 2: JetBlue Airways,West Jet Airlines, and Others: The DifficultPath to Software Upgrades 563

Security and Ethical Challenges 566SECURITY, ETHICAL, AND SOCIETAL

CHALLENGES OF IT 567

Introduction 567

The Nexus of IT, Ethics, Security, and Safety 567

Ethical Responsibility of Business Professionals 567

REAL WORLD CHALLENGE: HarlandClarke—Reinventing the Company,

Reinventing Security 568

Business Ethics 570

Ethical Use ofTechnology 571

Ethical Guidelines 571

Computer Crime 573

Hacking and Cracking 575

Cyber-Theft 576

Cyberterrorism 577

Cyber-Warfare 577

Unauthorized Use at Work 579

Software Piracy 580

Theft of Intellectual Property 581

Computer Viruses and Worms 582

Adware and Spy ware 585

Privacy Issues 586

Privacy on the Internet 587

Computer Matching 589

Privacy Laws 589

Computer Libel and Censorship 590

The Current State of Cyber Law 590

Other Challenges 591

Employment Challenges 591

Computer Monitoring 592

Challenges in Working Conditions 593

Challenges of Individuality 593

Health Issues 593

Ergonomics 594

Societal Solutions 594

Contents I x v i i

SECURITY MANAGEMENT OFINFORMATION TECHNOLOGYIntroduction

Tools of Security Management

Inter-Networked Security Defenses

Encryption

Firewalls

Denial of Service Attacks

E-mail Monitoring

Viral Defenses

Other Security Measures

Security Codes

Backup Files

Security Monitors

Biometric Security

Computer Failure Controls

Fault-Tolerant Systems

Disaster Recovery

System Controls and Audits

Information System Controls

Auditing IT Security

REAL WORLD SOLUTION: HarlandClarke—Toward a Comprehensive RiskManagement Program

REAL WORLD CASE 1: Texas HealthResources and Intel: Ethics, IT, and Compliance

REAL WORLD CASE 2: Wyoming MedicalCenter, Los Angeles County, and RaymondJames: End-Point Security Gets Complicated

Enterprise and Global Management ofInformation TechnologyMANAGING IT FOR THEENTERPRISEBusiness and IT

Managing Information Technology

REAL WORLD CHALLENGE: State StreetCorporation—The Need to Reshape ITInfrastructure

Business/IT Planning

Information Technology Architecture

Manaeinff the IT Function

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Organizing IT

Managing Application Development

Managing IS Operations

IT Staff Planning

The CIO and Other IT Executives

Technology Management

Managing User Services

Outsourcing and Offshoring IT and IS

Outsourcing

Offshoring

Trends in Outsourcing and Offshoring

Failures in IT Management

Management Involvement

IT Governance

MANAGING GLOBAL ITThe International Dimension

Global IT Management

Cultural, Political, and GeoeconomicChallenges

Global Business/IT Strategies

Global Business/IT Applications

Global IT Platforms

The Internet as a Global IT Platform

Global Data Access Issues

Internet Access Issues

Global Systems Development

Systems Development Strategies

REAL WORLD SOLUTION: State StreetCorporation—Changing the "Where, When

and How" of ITREAL WORLD CASE 1: Reinventing IT at BP

REAL WORLD CASE 2: Cadbury, ForresterResearch, A.T. Kearney, and Others: IT LeadersFace New Challenges in a Globalized World

Review Quiz AnswersSelected References

Glossary for Business ProfessionalsName IndexCompany IndexSubject Index

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