CHAPTER 1—THE IMPORTANCE OF INFORMATION SYSTEMS MANAGEMENT
This chapter traces the growing importance of information systems management and presents a conceptual model to show the key areas, how they fit together, and the principal issues for CIOs in each area. It sets up the context for the book: first by describing today’s business organizational and technical environment; second by describing a framework for viewing the work of the IS organization; and third by describing an IS organization’s evolution from 1985 to present. MeadWestvaco, described from the mid-1980s to the present, is a case example of how these areas are being implemented in an IS organization.
CHAPTER 2—THE TOP IS JOB
The responsibilities of the head of the IS function now go far beyond operating highly efficient “production programming shops.” These executives must understand the goals of the enterprise and work in partnership with line executives to deploy IT to attain the organization’s goals. This chapter discusses the top IS executive’s job, looking first at the top job itself by summarizing six major responsibilities, and then exploring several ways the information systems function is evolving in organizations. The SABRE system, Lifescan, BP, Aetna Life and Casualty, AXA Financial, and Rexam provide examples of how the role of systems management is changing.
Four approaches to global IS governance (aligning IS decision rights with the corporate culture) are:
¨ Centralized – Centralize governance of all three IS macro-processes because these enterprises face high pressure to integrate globally and low pressures for local responsiveness.
¨ Parent-led – Decentralize most of their assets but duplicate parent practices worldwide because they face low pressure to integrate globally and to be locally responsive. They take mixed approach (central and local) to driving innovation and delivering change, but local control of infrastructure support.
¨ Federated – Centralize strategic assets but decentralize others because they face high pressures for both global integration and local responsiveness. They take mixed approach to driving innovation and infrastructure support, but deliver change locally.
¨ Multi-local – Emphasize local autonomy in all three IS macro-processes because they face high pressures for local responsiveness but low pressures for global integration.
· Investing: Shaping the IT Portfolio – Shaping the portfolio is the third of four current CIO roles. Companies face more IT opportunities than they can fund, so prioritizing projects has become an important issues.
q CASE EXAMPLE: AXA Financial – Introduced a finance-based methodology to define hierarchy of importance and to prioritize projects against this hierarchy of business objectives. Benefits have been a panoramic view of the business by the business heads, CEO blessing of approved projects, powerful group concurrence of projects and corporate direction, and use of the practice for all major investments (not just IT).
¨ Numerous benefits can come when the team decision making is handled properly. Important business discussions, decisions, and enterprise-wide perspective arise when discussing projects and how well they support business objectives – actually more important than the prioritizations. Projects are put in comparable categories, so executives see the breadth of use of IT. Risk factors in projects need to be addressed to compare projects. Budgets get apportioned throughout the year, not just at the start, so decision making becomes more consistent.
· Managing: Fostering Change – Fostering change is the fourth of four current CIO roles. Change management is the process of helping people make manor changes in their working environment – often as the result of a new computer system. Methodologies exist to help companies systematically understand the readiness of the change sponsors, change agents, and targets (people being asked to change how they work) to do their change management job, and tools to help them do that job better.
¨ Working Across Organizational Lines. New systems now affect people outside their firm, so CIOs now need to work with suppliers and customers to help them change as well.
q CASE EXAMPLE: REXAM - This beverage can manufacturer implemented a system to permit customers to order cans via the Internet, despite management reservations. The CIO pilot tested the new system with its major customer, got rave views, and has moved on to creating customer portals to more closely work with customers via the Internet to assist them in running their business better. The CIO now spends as much time outside his firm as inside because of the supply-chain systems Rexam is developing. His charge from the CEO is to focus on strategy and getting the external relationships under control.
CONCLUSION — IS organizations are grappling with how to share decision making. To achieve this transformation, CIOs must play a leadership role in their enterprise and develop partnerships with the senior management team, external customers, and suppliers.
CHAPTER 3—Strategic Uses of Information technology
Use of the Internet by businesses set off a revolution in the use of IT, so that utilizing the Internet to conduct business became the strategic use of information technology. The questions that remain are: has the revolution ended, or does an even larger revolution loom? And what sorts of strategic uses are companies making?
Strategic roles of IT fall into one of three categories: “working inward” (improving a firm’s internal processes and structure), “working outward” (improving the firm’s products and relationships with customers) and “working across” (improving its processes and relationships with its business partners). Stated simply, the strategic value of IT comes from communication, which allows companies to reorganize and integrate business processes within and across boundaries. With the rapid growth of the Internet, a public network with low communication costs, many of the traditional strategic systems are being replaced with Internet-based, e-business applications. Grainger, Microsoft, BearingPoint, Wire Nova Scotia, Semco, S. A., A Day in the Life of an E-lancer, General Mills and Land O’ Lakes, Sara Lee Bakery Group, and Dell Computer serve as examples of how companies are using information systems in strategic roles.
INTRODUCTION – Strategic uses of IT means “having a significant, long-term impact on a firm’s growth rate, industry, and revenue.”
q CASE EXAMPLE: Grainger – Grainger has discovered that its Internet presence makes its physical sites more valuable. It cuts ordering costs and shipments to its stocking locations (where customers pick up items). Furthermore, online customers purchase more and its paper catalog actually leads to more online orders.
· Building an Intranet – Based on Internet standards, an employee intranet helps ease global corporate operations.
q CASE EXAMPLE: Microsoft – The software company built a secure human resources intranet to improve employee satisfaction and enthusiasm worldwide. It has streamlined processes, saved money, saved employee time, and reduced hassle.
· Managing an Intranet – An intranet needs to interface with legacy and ERP systems, and company information must be safeguarded. Many companies have thus created a corporate portal for employees to get their information.
q CASE EXAMPLE: BearingPoint – To make its intranet interactive, the company added content from third parties and a “where can I find this information?” advisor to the site, now making items “actionable.”
· Fostering a Sense of Belonging – With employees becoming so dispersed, an intranet may be their main connection to the company. Hence, a major role providing the foundation for creating a sense of belonging among employees.
q CASE EXAMPLE: Wire Nova Scotia – The program coordinator built an intranet to provide a sense of belonging among students on a summer work program establishing community Internet sites in rural towns in Nova Scotia, Canada. The summer program was also administered via this intranet, each worker having a personal conference site. Staff conferences were held weekly, and regional conferences were held to coordinate joint ventures.
· The Emergence of Electronic Tenders – With computers embedded in products, those products and services can now be tended (monitored or cared for) remotely by the manufacturer, service provider, or a third party. So the importance IT’s communication role is adding to its computational role.
· Getting Closer to Customers – The first use of the Web to reach customers was in retailing. Now connections to customers often involves knowing a lot about them and their various interactions with the firm. Overall, the trend is toward staying in closer contact. Such customer centricity changes company structure and offerings.
q CASE EXAMPLE: Semco, S.A. – This Brazilian heavy manufacturer has evolved naturally, and grown larger, by providing services customers ask for and by using the Internet to provide some of those services. Semco services the cooling towers it makes for commercial buildings.; building owners then asked Semco to provide other building services. It also joined with Johnson controls to manage retail facilities, and then became an inventory manager for retailers because that’s what retailers said they needed. Using the Internet, it maintains an online exchange for the construction industry and holds virtual trade fairs. Employees listen to what customers want, and management gives employees the support to satisfy these needs.
· Being an Online Customer – The other side of the coin is being an online customer.
q CASE EXAMPLE: A Day in the Life of an E-lancer – One entrepeneur gains all his work and his working partners via eLance, an online services marketplace. This case tracks a typical day in his use of eLance’s site.
WORKING ACROSS: BUSINESS-TO-BUSINESS – The next big management challenge is streamlining processes across organizational boundaries. There are numerous ways to work across businesses.
· Working with co-suppliers – One arrangement is working with non-competitors who supply the same customers.
q CASE EXAMPLE: General Mills and Land O’ Lakes – Both supply non-competing refrigerated goods to retailers (yogurt and butter) yet neither has full truckloads of these goods. Hence, they have teamed up to coordinate their shipments to stores. They use the Internet to easily share information.
· Establishing Close and Tight Relationships – Firms can establish three types of relationships with each other:
¨ Loose integration – One party gives another party ac hoc access to information, probably not confidential information. There’s little or no integration; business processes remain distinct. Companies may have many such relationships.
¨ Close integration – Parties exchange information formally. Some of that information may be confidential. Processes are distinct, but some tasks are joint. Both risks and benefits increase due to the sharing of confidentialities. Companies can manage a number of these relationships.
¨ Tight integration – Two parties share a business process in an area important to them. Often lots of data is exchanged, it is highly confidential, and it includes key events. Their goal is to synchronize operations, so organizational boundaries may blur. Companies can only have a few such relationships because of the cost and the management attention required.
q CASE EXAMPLE: Sara Lee Bakery Group – SLBG was one of the first to initiate scan-based trading with large retailers that sell its baked goods. Using this technology, SLBG does not get paid until a loaf of bread is sold and passes through the point of sale scanner. The technology requires drawing from a single database hosted by a third party. Its use has improved the quality of delivery people, lowered costs, and increased revenues. But SLBG requires retailers to adhere to a number of prerequisites – to demonstrate that they are good trading partners.
· Becoming a Customer-Centric Value Chain – The demand-pull world, where products and services are built to order, is a major trend these days. But getting there means becoming customer centric and having a tightly integrated supply chain.
q CASE EXAMPLE: Dell Computer – Dell is the foremost example of the demand-pull business model. Customers configure their on PCs on Dell’s web site, and once an order is initiated, Dell’s suppliers can see the ordering information and production schedule on Dell’s extranet. In fact, their production systems grab this information automatically; as a result, Dell’s extranet has become a private exchange. Dell is even working to give suppliers two tiers down access to customer order information, so they can react to changes even faster.
¨ Pros and Cons of Demand-Pull. Value-chain transparency is much talked about because it can reduce duplicate orders, hasten response to changes, and allow all participants to become collaborators. But the ecosystem participants depend on the provider’s infrastructure, so seepage of confidential information could occur.
¨ Getting the Back-End Systems in Shape – To have a hope of making working-across viable, internal back-end systems must be in shape. Companies are using ERP, extranets, and other approaches to do this.
CONCLUSION – IT has become a strategic tool in every industry. This chapter has shown three approaches – working inward, outward, and across.
CHAPTER 4—INFORMATION SYSTEMS PLANNING
Systems planning, especially strategic systems planning, is becoming more difficult and more important at the same time. Technology is changing so fast that it is seems futile to plan for it, yet the dependence on this technology makes planning its effective use a matter of organizational life and death.
This chapter contrasts the traditional view of planning with the sense-and-respond approach of strategy-making, presenting seven IS planning techniques. Case examples include Microsoft, Skandia Future Centers, Shell Oil, an automobile manufacturer, Cisco Systems, and Electric Power Research Institute.
INTRODUCTION – Planning means developing a view of the future that guides decision making today. Strategy means stating the direction you want to go and how you intend to get there. The result of strategy-making is a plan.
THE CHANGING WORLD OF PLANNING – The Internet has changed how people plan.
q CASE EXAMPLE: Microsoft – Has taken a sense-and-respond approach to its Internet strategy by undertaking a wide range of efforts, some of which have panned out and some of which have not. These include operating system for handhelds, cable modems, Web news site, online music standard, and the Xbox gaming platform, to name a few.
q CASE EXAMPLE: Skandia AFS – Skandia has an incubator for testing out new ideas. It developed a knowledge café to discuss the future – a concept presented by a 3G team with employees 25+, 35+ and 45+.
q CASE EXAMPLE: Shell Oil – The general manager of oil products, and his direct reports, initiated the concept of action labs, whereby front-line gas station employees could propose strategic projects for their gas stations. They presented their ideas at lab meetings, where the executives listened and gave go-aheads as warranted. New guerilla leaders appeared and their successes spurred on others. The approach circumvented the “cement corporate middle” that killed most innovative ideas, helping Shell change.
· Stages of Growth - Organizations go through four stages in the introduction and assimilation of new technologies: early success, contagion, control, and integration. More recently, three eras have been identified (data processing, micro, and network), which overlap slightly at points of “technological discontinuity.” It’s important for IS management to understand where a technology lies at the moment because the management principles differ from one stage to another.
· Critical Success Factors - For each executive, critical success factors are the few key areas of the job where things must go right for the organization to flourish. Executives usually have fewer than 10 of these factors. They can come from the company, industry, environment, or temporary conditions, and should receive constant attention.
· Competitive Forces Model – Companies must contend with five forces: 1) the threat of new entrants, 2) the bargaining power of buyers, 3) the bargaining power of suppliers, 4) substitute products and services, and 5) intensity of rivalry among competitors. There are three strategies for dealing with these forces: differentiate your products and services, be the lowest-cost producer and focus on a niche.
¨ Framework Example: Five Forces Analysis of the Internet – The Internet tends to dampen the profitability of industries and reduce firms’ ability to create sustainable operational advantages because: it increases the bargaining power of buyers, decreases barriers to entry, increases the bargaining power of suppliers, increases the threat of substitute products and services, and intensifies rivalry among competitors.
· Value Chain Analysis – A value chain for a product or service consists of major activities that add value during its creation, development, sale, and after-sales service. There are five primary activities that deal with creating a product or service, that get it to buyers, and also service it afterward: inbound logistics, operations, outbound logistics, marketing and sales, and service. Four supporting activities underlie the entire value chain – organizational infrastructure, HR management, technology development, and procurement. By studying how a firm performs the primary and support activities for a product or service, a firm can explore how it might add more value at every activity. Alternatively, it could determine where another company could add more value, and team up with that firm, outsourcing that activity to that partner.
¨ Virtual Value Chains – These chains take place in marketspace, where information substitutes for physical products and physical location. At every step, value via information can be added in five ways: gathering, organizing, selecting, synthesizing, or distributing. Companies seem to follow an evolution in using information to add value: first by making operations visible, then by putting in place mirroring capabilities, and finally by creating space-based customer relationships.
q CASE EXAMPLE: An Automobile Manufacturer – The rental car subsidiary turned to auctioning off clean used cars to dealers to sell, via marketspace. Dealers can view the cars (and their stats) to be auctioned from a screen in their dealership, and then place bids during the on-line auction, held once or twice a month. The auction saves them time and effort, and the cars are guaranteed.
· E-Business Value Matrix – IT projects can be categorized in four ways as a way to better manage a firm’s e-business portfolio: 1) New fundamentals are projects to provide a fundamentally new way of working in overhead areas, not business-critical areas. 2) Operational excellence projects revolve around providing faster access to information. 3) Rational experimentation projects test new technologies and new ideas, and thus are risky. 4) Breakthrough strategy projects, if successful, have the potential to impact the entire company, and perhaps even on the industry.
q CASE EXAMPLE: Cisco Systems – Cisco’s expense reporting system fits in its new fundamentals category. Its executive dashboards are example of operational excellence projects. Multicast streaming video used for company meetings is a rational experiment. And its development of a virtual supply chain is seen as a breakthrough strategy.
· Linkage Planning Analysis – To create a strategy for utilizing electronic channels, the power relationships among the players and stakeholders must first be defined. Then the extended enterprise must be mapped out to include suppliers, buyers, and strategic partners. Finally, electronic channels should plan to deliver the information component of products and services.
q CASE EXAMPLE: Electric Power Research Institute – EPRI, which provides research to electric utilities, found itself with so much information that research delivery was slow to understand what products and services members wanted and would want in the future, and results were not accessible by members. PRI installed an online system for use by members, following its use of linkage analysis planning.
· Scenario Planning – Scenarios are stories about the way the world might be in the future. The goal of scenario planning is not to predict the future, but to explore the forces that could cause different futures to take place, and then decide on actions to take if those forces begin to materialize.
q CASE EXAMPLE: Scenarios on the Future of IS Management – Four potential futures are presented: 1) The Firewall scenario could occur if companies use traditional forms of management and see their data as proprietary. 2) The Worknet Enterprise scenario could occur if companies outsource management of their data and share it extensively with specific partners. 3) The Body Electric scenario could occur if new organizational forms flower (such as people owning parts of work cells in which they work) and obtain all their IT from interconnected service providers. 4) The ‘Tecknowledgy’ scenario could occur if there is an open information society where any kind of information is available for a price. The main job of IS could be facilitation of knowledge processes across organizations.
CONCLUSION – Successful planning needs to support “peering into an unknown future”— most likely in a sense-and-respond fashion. Information system planning must be intrinsic to business planning so that the two align.
Ø PART I DISCUSSION CASE: What IT Strategy Would You Recommend Based on Royal Dutch/Shell Group’s Scenarios? – This case presents brief synopses of the eight real-life scenarios Shell has made public since 1992 – especially the two published in 2001 (the next two will be in early 2004). Based on these scenarios (which can be found in their entirely on Shell’s website), students are asked which of the 2001 scenarios they believe is an accurate prediction of how the world will develop. From that, present an IT strategy they would advise their company to follow to succeed in this world and why, and list examples of its implementation.
CHAPTER 5—DISTRIBUTED SYSTEMS:THE OVERALL ARCHITECTURE
This chapter describes seven types of distributed systems and discusses the concepts of IT architecture and IT infrastructure. Case examples include Northwest Airlines, an aerospace company, Chubb & Son Insurance Company, The SABRE Group, 3i, General Motors, FMC Corporation, and the city of Sunnyvale.
INTRODUCTION – An IT architecture is a blueprint. An IT infrastructure, on the other hand, is the implementation of an architecture. Today, people talk about IT infrastructures and the applications that operate on those infrastructures. The first IT architecture was mainframes doing all the processing with dumb terminals providing some input and output. Today, devices of all sizes handle input-processing-output – a much different architecture.
q CASE EXAMPLE: Northwest Airlines – Northwest Airlines built a distributed passenger revenue accounting system with products from eleven vendors and just about as many different technologies: expert systems, imaging, relational databases, high-resolution workstations, servers, and LANs.
q CASE EXAMPLE: An Aerospace Company – Builds client-server systems with application code on the clients, data on the servers, and communication middleware shared between them.
¨ Benefits of Client-Server Computing – Client/server gives people access to data or information when they need it because data either resides on their local machine or it can be downloaded from the host using the client-server protocol. It blends the autonomy of PCs with the system-wide rules and connectivity of mainframe systems. Client-server supports new organizational structures by providing a platform that supports dispersed individuals and groups.
q CASE EXAMPLE: Chubb & Son Insurance Company – The company took advantage of the Internet by converting their legacy cargo certificate issuance system to a Java-based extranet application. It has also done the same with other applications. All the apps feed into Chubb’s mainframe but have a Java-based Web front end so that client machines only need access to the Web to perform the application.
q CASE EXAMPLE: The Sabre Group – This airline reservation company is working with Nokia (the handheld phone manufacturer) to create a real-time, interactive travel service delivered via mobile phone. The service draws on SABRE’s online corporate travel purchasing system and Nokia’s server (which transmits the travel information to a wireless network and to its Internet-enabled phones).
¨ Server-Based Computing – This form of Internet computing houses programs on the Internet so that mobile employees can gain access to in-house applications no matter where they are located.
q CASE EXAMPLE: 3i – This venture capital firm houses its applications on Internet-based servers so that its employees have a virtual office with just a laptop and a modem, and can therefore conduct business and complete deals on the spot, anywhere.
¨ Peer-to-Peer Computing – This form of Internet computing distributes a task over a wide number of computers (peers) connected to the Internet. This grassroots movement, like the open source movement, is now taken seriously by some corporations. It became famous with Napster, the music swapping P2P network. The main issue now is how to make money in this environment. One answer: subscriptions, where people pay for access rather than for ownership.
¨ The Significance of Web Services – Viewing IS as proprietary has led to rigid business processes, which are slow to change and respond to market changes. Web Services offers an IT architecture based on the openness of the Internet. Rather than build proprietary systems, companies can obtain the functionality they need from the Internet. This modularity permits handling a huge variety of possibilities by mixing and matching, and allows easier cross-company system linking. Companies thus only pay for the functionality they use when they use it, which reduces the number of IT assets companies need to house and maintain.
q CASE EXAMPLE: General Motors – One GM executive believes that the Web Services architecture could be used to move GM from its supply-driven, build-to-stock business model to a demand-driven, build-to-order business model – an otherwise impossible feat. To begin, GM first enhanced its supply-driven model by offering new functions via a Web Services architecture. One Web Service is a locate-to-order service that dealers can use to easily find a specific car a customer might want in the inventory of other GM dealers.
DEFINING THE OVERALL IT ARCHITECTURE – The intent of an IT architecture is to bring order to the otherwise chaotic world of information systems by defining a set of guidelines and standards, and then adhering to them. Because the architecture needs to support how the company operates, it reflects the business strategy.
q CASE EXAMPLE: FMC Corporation – When FMC split in two, it designed two new IT architectures. The architecture and technology director led five teams – for data, applications, integration, desktop, and platform. Each created a today architecture, a tomorrow architecture, and the “next minute” steps. The companies have now split and the tomorrow architecture has given FMC a standard that everyone agrees with, making standard-setting far easier. Now it is working on a new tomorrow architecture, for 2004-2005, when voice-over IP and Web Services kick in.
q CASE EXAMPLE: The Sabre System – The architecture underlying American Airline’s website is modular. The existing SABRE computer reservation system serves as “the reservation service” module. Other modules perform the functions related to the Web. Due to this component-based architecture, it was fairly easy to add new functions.
THE IMPORTANCE OF IT INFRASTRUCTURE – Infrastructure investments are a vital part of corporate information systems portfolios, yet they are the most difficult to cost-justify initially and to quantify benefits afterwards.
¨ The bottom of four layers consists of technology components, such as computers and database management system packages.
¨ The third layer is the human IT infrastructure layer, which translates the components (which technologists can understand) into services (which business users can understand).
¨ The second layer is shared IT services, which present the infrastructure as a set of services that users can draw upon and share to conduct business.
¨ The top layer is the shared and standard applications layer, which include stable applications (such as accounting and HR).
q CASE EXAMPLE: City of Sunnyvale – The city’s performance-based budgeting system gives it a way to build for the future. The IT director installed honeycombed fiber ducting that could easily be upgraded with new forms of fiber cable in the future. Super rules guide technology investments, and can lead to more participatory decisions.
CONCLUSION – Distributed systems dominate the current computing landscape and the Internet is now at the heart. Distributing processing, databases, and communications allow companies to move more quickly because they can more easily “snap in” new products and services into their existing systems. The advent of Web Services is fueling the use of the Internet to extend the tenets of distributed systems even further.
CHAPTER 6—MANAGING TELECOMMUNICATIONS
Telecommunications is the flow of information among individuals, work groups, departments, customer sites, regional offices, between enterprises, and with the outside world. The Internet has also opened up a “cyberspace” where people can be in a virtual world, where organizations can conduct business, and in fact, a place where organizational processes exist. This is providing the foundation for the e-business economy, as just about everything about telecom is shifting. This chapter devotes itself heavily to this evolving telecommunications scene, utilizing case examples from ICG Communications, National Semiconductor, Louisville Metro Sewer District, BMW, Country Company Insurance Group, and American Greetings.
INTRODUCTION – Telecom can be viewed as a highway, electronically sending information. It can also be viewed as a space – cyberspace – where people can “exist” in a virtual world, where organizations can conduct business, and where organizational processes can exist. Telecom provides the foundation for this e-world.
THE EVOLVING TELECOMMUNICATIONS SCENE – Even during this telecom downturn, changes are occurring.
q CASE EXAMPLE: ICG Communications – This competitive local exchange carrier provides voice and data services in 25 metropolitan areas in the United States. It was formed in 1984 to provide local telephone service in Denver. It expanded to provide long distance, buying up companies with fiber routes. It later focused on being an Internet backbone provider, serving ISPs. When the dot-com bubble burst, ICG filed for bankruptcy, but moved out of bankruptcy in late 2002.
q CASE EXAMPLE: XYZ Company – To illustrate how a company might build a corporate network from scratch utilizing the Internet, this fictitious example follows a CTO through exploring technology options for serving remote users, serving local users, and communicating between offices.
¨ Extranets – Not long after creating intranets for employees, businesses realized they could extend the concept into extranets—a special part of the intranet for use by trading partners, customers, and suppliers for e-commerce.
q CASE EXAMPLE: National Semiconductor – National Semiconductor created an extranet for distributors and channel partners and a website for design engineers who work around the globe. This was in order to gain market share and move into new markets around the world in a core competency (signaling devices used in information appliances). This site contains descriptions of more than 30,000 products in the form of PDF databooks. Design engineers can view these databooks and order samples either via the Web or through distributors. To give the far-flung engineers competitive and unprecedented download times, National outsourced to Cable & Wireless 1,000,000 engineers around the globe, downloading more than 10,000 databooks a day in about two seconds each.
¨ Voice Over IP – Voice-over IP uses the Internet for voice phone calls. So even in voice, the Internet could become the network of choice.
¨ Wireless Long Distance – Two technologies are infrared light and radio airwaves. Cell phones use radio transmitters and receivers.
§ The first cell phones used analog technology and circuit switching, now called first-generation (1G) wireless.
§ 2G cellular. 2G, which predominates today, uses digital technology, though it is still circuit switched. It aims at digital telephony, not data transmission, but 2G phones can carry data.
q CASE EXAMPLE: Louisville Metro Sewer District – When Louisville encountered big storms, sewer repair workers had to return to headquarters to get assignment details and look up customer records – a process that slowed their response to the flooding. Now they have laptops and wireless modems. As customers call in for emergency repairs, operators at the sewer district’s headquarters enter the orders into a database that work crews can immediately access from the field. They can view neighborhood maps, locate broken water mains and pipes, and check out the most likely areas of damage, potentially saving entire neighborhoods from flooding.
§ 2G can carry messages using short messaging service (SMS). The key attribute of Instant Messaging (IM) is that it provides presence, which means that a person on your buddy list can see when you are using a computer or phone and therefore knows you are “present” and available to receive an IM. Presence is important in the real-time enterprise.
§ 2.5G cellular is extending the life of 2G digital technologies. The problem with adoption has been pricing, since who can justify $400 a month per user?
§ The goals of 3G are to provide WANs for PCs and multimedia, allowing bandwidth on demand. CDMA (code division multiple access) is the universal standard for 3G, but it faces the same pricing issues at 2.5G – perhaps worse.
§ New entrants are looking for 3G alternatives. One is mobile broadband IP, which could actually provide 4G services (the user paying for different kinds of services).
§ Vsat technology is taking off because it is the best technology for providing stationary wireless broadband.
¨ Wireless LANS – Are used within a building or among buildings on a campus. They generally do not replace existing wired LANs but extend them to portable devices. Microwave and radio frequency (RF) are the most popular WLAN technologies. WLANs use two topologies: peer to peer (each unit communicates with each other unit) and client-server (the units communicate with a central coordinating node).
q CASE EXAMPLE: BMW – A plant in South Carolina has more than 30 suppliers nearby. Real-time delivery of data to the suppliers is key to efficiency. Suppliers especially needed accurate inventory data of the components they supply to BMW, so they know when to make just-in-time deliveries to the plant. To gather inventory data for SAP to track parts, scanner terminals in the factory transmit the data from the barcode readers (as parts move through the assembly process) to SAP via a wireless network that covers the entire 2-million-square-foot plant. The system uses RF technology. A number of suppliers have followed suit.
§ Wi-fi is the 802.11b wireless Ethernet standard that transmits up to 11 megabits per second, and adapters cost just $70. Wi-fi’s use has taken off. Wi-Fi networks run in unlicensed bandwidth, and they are appearing in places where people congregate, such as airports, hotels, conference centers, and coffeehouses. For many people, WLAN services could be equivalent to 3G, at about 1/13th the current cost.
§ A new idea in the WLAN arena is self-organizing wireless LANs, which operate in a peer-to-peer mode. A message is routed to the nearest access point – the closest device – which routes it to the next nearest point, and so on. The unusual phenomenon is that the more users, the more capacity. This technology could strongly influence the future of wireless.
¨ Wireless Local Loops – This use of wireless technology is also called “fixed wireless” and is an approach to solving “the last mile” problem of how to get high bandwidth to the home or office.
¨ Wireless PANS – A Personal Area Network is a short-distance network of about 30 feet (10 meters). This new type of network could be used to synchronize a laptop and a PDA, to load cash onto a cash card from a banking machine, to dispense money to a toll booth, to link several laptops in a room, and so on.
¨ M-commerce – Mobile commerce is expected to change how we interact with the Internet. The vision is being able to conduct commerce digitally from wireless devices.
q CASE EXAMPLE: Country Company Insurance Group – This Insurance Company now relies on wireless technology for its claims appraisers. Customers with a claim call a toll-free number and give the information to an agent. The information is entered into the company’s host computer and, within 15 minutes, an appraiser is assigned and the information is transmitted over BellSouth’s wireless data network to that appraiser’s laptop. The appraisers use a land line network to transmit their appraisals back to the office. The approach makes wireless affordable.
§ A second way to send e-mail wirelessly is to use a cell phone enabled with Wireless Application Protocol (WAP). WAP is fairly complex because, unlike a PC, cell phones do not have a hard disk.
q CASE EXAMPLE: American Greetings – American Greetings, a leader in exploiting the Internet, is extending its Internet presence to cell phones using WAP to garner a wireless presence. The company was one of the first with a website — it sends reminders to subscribers, and often finds itself overwhelmed on holidays such as Mother’s Day. It also forms “side door” alliances with retailers’ websites. And now, subscribers can order cards from their cell phone. The company reasons that when people have idle time, besides checking e-mail or playing a game using their cell phone, they also might want to send an animated funny card to someone.
§ The third way to send e-mail wirelessly is to use a handheld e-mail device and subscribe to a mobile radio service that uses packet-switching technology. The most significant aspect of this mode of operation is that the connection is “always on,” whereas cell phones require dialing in. “Always on” is the communication mode of the future.
¨ Is Wireless Secure? – Wireless security is not really a major additional concern because signals fade fast when they travel through the air. Eavesdroppers would need special equipment to pick up radio signals from far away. But the network is often not the main problem, since security leaks happen at the end, in the notebook computers, therefore data needs to be encrypted on the equipment.
¨ Is Wireless Safe? – A troubling question has not yet been answered: Are these transmissions safe for humans? The higher frequency services are in the microwave range. Some studies on rats showed damage to DNA that can cause disease, such as cancer. Many have long believed that electromagnetic radiation from power lines, electrical appliances, and computers can interfere with the body’s bioelectromagnetic field, causing an imbalance.
THE ROLE OF THE IS DEPARTMENT – IS has three roles: create the telecom architecture for the enterprise, run it, and stay close to the forefront of the field.
CONCLUSION – The first generation of the Internet economy has been wired. The second could be wireless. This untethering could change how we live our lives and do our work. You only need to sit in an airport for a short time to realize how those with cell phones are doing different things than those without phones. Today, telecom is all about connecting, and the number of possible connections is exploding worldwide.
CHAPTER 7—MANAGING INFORMATION RESOURCES
This chapter explores the management of data, information, and knowledge. It begins by identifying some problems in managing data, and then surveys the evolution of database management systems, including the next-generation systems. It explores the various types of information that companies need to manage as they treat information as an organizational resource. Then it concludes by discussing one of the most important issues facing companies today: how to manage knowledge. Case examples include Monsanto, Owens & Minor, HICSS Personal Proceedings, Tapiola Insurance Group, Tenessee Valley Authority, and Eastman Chemical Company.
INTRODUCTION – Data consists of facts devoid of meaning or intent, where meaning and intent are supplied by a particular use. Information is data in context, which means the data has been given an explicit meaning in a specific context. The term content arose with the Web and means information presented electronically in a variety of media: charts, text, voice, sound, graphics, animation, photographs, diagrams, and video. As the breadth of the kinds of information resources has expanded, so has the job of managing them. Oftentimes, that job ends up in the IS organization.
MANAGING DATA – Data is primarily facts about entities, such as individual employees, customers, parts, or transactions. Well-structured data records hold a set of attributes that describe each entity. Database management systems (DBMSs) are the main tools for managing these entities
¨ In the hierarchical model, each data element is subordinate to another in a strict hierarchical manner, like the boxes on an organization chart.
¨ In the network model, each data item can have more than one parent; assembly parts lists illustrate this structure.
¨ In the relational model, it is up to the DBMS to find the related items, based on the values of specified data fields. Thus, all employees of a certain department are found by searching for the department number in each employee record. Relational systems allow people to create relationships among data on the fly.
¨ The object model can be used to store any type of data, whether a traditional name or address, an entire spreadsheet, a video clip, a voice annotation, a photograph, or a segment of music. The tenets of objects have become increasingly important in the world of computing. They become even more important in the world of Web Services because the XML modules utilize object principles.
q CASE EXAMPLE: Monsanto – Monsanto established three large enterprisewide IT projects: 1) to redevelop operational and financial transaction systems using SAP, 2) to develop a knowledge-management architecture, including data warehousing, and 3) to link transaction and decision support systems via common master data, known as enterprise reference data (ERD). They created a distributed SAP architecture, with separate instances of SAP for reference data, finance, and operations in each business unit. The master reference data integrates these distributed components. To convert SAP data to knowledge, Monsanto uses data warehouses. The sole source of master data is the ERD, but the data can be distributed wherever it is needed. To get corporate data in shape, Monsanto created a department called ERD Stewardship to set data standards and enforce quality—hence its nickname, “the data police.” Getting the data in shape was a huge undertaking, but it has made the company more flexible.
MANAGING INFORMATION – Information is data in context.
· Four Types of Information – The four types are formed by being either internal and external, and either record-based or document-based data. Data warehouses address internal and external record-based data. Document management and content management address internal and external document-based data.
· Data Warehouses – Data warehouses house data used to make decisions. The data is generally obtained periodically from transaction databases, thus presenting a snapshot at a point in time. Like ERP systems, they, too, spurred getting record-based data into shape. The most common data warehoused is customer data, used to discover how to more effectively market to current customers as well as noncustomers with the same characteristics.
¨ Key Concepts in Data Warehousing – Metadata defines the data, setting the standard. Quality data is the biggest challenge, since the data must be consistent to be comparable to see patterns. Data marts are subsets of data warehouses.
¨ Steps in a Data Warehousing Project –The business uses of the data must be defined, the data model created, the data cleansed, the user tools selected, and usage and data performance monitored.
q CASE EXAMPLE: Owens & Minor – This distributor of name-brand medical and surgical supplies uses ERP, data warehousing, and the Web, not only for internal use of data, but as the basis for new revenue-generating services to customers and suppliers. It is using its data for competitive advantage. It augmented its ERP system to automate order forecasting, which improved inventory turns, lowered ordering rates from five-times-a-week to once-a-week, and improved customer service. It implemented an Internet-based inventory management system so that customers could order over the Internet, even using handheld devices. It even offered access to its data warehouse and decision support software to customers and suppliers who use the data to run their businesses. Delivering this information over the Web has strengthened its relationships with trading partners, given it a market-leading feature to entice new customers, and turned the data warehouse into a new source of revenue. When the system was rolled out, it was the first “e-business intelligence application” in the medical and surgical supply distribution industry. As a result, O&M has become an important “informediary” in its industry.
· Document Management – Even in today’s Internet-rich world, paper still plays a major role in most enterprises. There is also a need to move seamlessly between digital and printed versions of documents; hence, the importance of document management. The field of electronic document management (EDM) uses new technologies to manage information resources that do not fit easily into traditional databases. EDM addresses organizing and managing conceptual, descriptive, and ambiguous multimedia content. Applying technology to process traditional documents makes a major change in what documents can accomplish in organizations.
¨ Improving the Publishing Process – Technology enables a major restructuring of the process of publishing and distributing paper documents. For organizations that produce documents as a product or as support for a product, this change is reengineering their document production processes.
q CASE EXAMPLE: HICSS Personal Proceedings – This annual conference brings together academics and professionals to discuss research papers. The conference proceedings have made an important contribution to the literature for many years. But they have grown to 4,500 pages in nine volumes, weighing 25 pounds. So conference management introduced personal proceedings. A month before the conference, participants can use a Web site to choose 20 papers they would like to have in their personal paper proceedings. The papers are printed on a Xerox Docutech machine with their name on the cover, and delivered to them at the conference. Additional papers can be printed individually at the conference, on demand.
¨ Supporting Communications Among People and Groups – The value of documents is that they transfer information across time and space. EDM can be used to facilitate such communications among people and groups.
q CASE EXAMPLE: Tapiola Insurance Group – This Finnish insurance group formerly offered 150 kinds of insurance policies and had 300 different insurance policy forms—half in Swedish and half in Finnish—because both are official languages in Finland. The policy forms were preprinted by an outside print shop. To personalize the forms and cut costs, Tapiola brought the process in-house and defined just four forms, which are printed on-demand. Reprogramming the applications was easy but ensuring each envelope had the right sheets of paper required printing a code on each sheet that the envelope inserter read. The new process allows printing some forms at branch offices, an even more personalizing step. A poll of Finnish citizens showed that Tapiola is seen as a dynamic company, and it has the best reputation among young people. This document management system aims to reinforce that reputation.
¨ Supporting Organizational Processes – Documents are still the vehicle for accomplishing many processes in organizations, such processing a claim in an insurance company. Using IT to support these processes generates significant value. In addition to improving transaction-oriented business processes with EDM, many organizations are improving the management processes of reporting, control, decision making, and problem solving as well.
q CASE EXAMPLE: Tennessee Valley Authority – The nuclear division of this large U.S. power supplier revamped its maintenance management system. TVA spends more than $48 million a year creating maintenance work orders and then planning and performing the work. One plant alone processes 14,000 work orders a year. The new process electronically combined maintenance orders in one system with procedural document management in another system, and eliminated a number of existing systems that did not talk to one another. Work orders are generated electronically and then routed for approval, with the most current drawings and procedures electronically attached. The documents are indexed by and the three plants use the same systems, so maintenance people can review past activity and better plan for the future. The system has been successful, but the team underestimated the change management effort needed.
· Content Management – Corporate intranets now house documents that were previously paper-based. A major reason content has become important to CIOs is because it is a core management discipline underlying e-business. Without production-level Web content, management processes, and technologies, large-scale e-business is not possible. Use of XML moves Web content from being in a human-only readable format to being in a computer-readable format. Thus, the content can be passed to back-end transaction processing systems and cause an action to take place. To create a content management strategy, companies need to understand the three phases of the content management life cycle.
¨ Managing Content Creation and Acquisition – Content creation and acquisition need to focus on creating content quality. That’s why it might be wise to buy some content from specialists – which is called syndicated content – rather than create it in-house. The best organizational structure is to distribute content creation and maintenance to content-expert employees. But to avoid anarchy, these dispersed experts should be directed centrally, and use centrally-created formats and an automated workflow system that moves their work along.
¨ Content Administration and Safeguarding – The emphasis in this phase, like any operational phase, is efficiency. Content management tools can be used to identify types of content and the business rules that apply to each type. So, while content creation should be distributed, content administration should be centralized.
¨ Content Deployment and Presentation – The emphasis in this phase should be effectiveness: presenting the content so that it attracts visitors, allows them to navigate the site easily, and leads them to the desired actions. Because this phase can determine the success of a firm’s e-commerce efforts, it’s best to design a website beginning with this phase, then move on to ensuring content quality and processing efficiency.
q CASE EXAMPLE: Eastman Chemical Company – This global manufacturer of chemicals had a website in 1994. It redesigned the site in 1999 to become more customer-focused and to launch a major e-commerce program. Eastman changed the website structure from presenting an inside-out view (based on its corporate structure) to presenting an outside-in view (with sections devoted to the markets the company serves). Eastman selected a content management product to create pre-approved templates for employees to use. The benefits of the redesign were far greater than expected. Today, traffic has tripled (more than 50 percent from outside the United States) and 70 percent of the hits are in the market sectors, where Eastman sells its products. Customers report that the on-line availabiity of technical data has significantly accelerated their internal decision-making processes. It’s now working on globalizing and personalizing the site even more.
CONCLUSION – The job of managing information resources is widening significantly. Not only must IS departments get corporate data in shape, but they also need to create and build an infrastructure for managing the full range of information types. In some ways, the Internet helps because it gives companies an easily accessible place to store information. On the other hand, the Internet has also contributed mightily to the information glut we all face.
CHAPTER 8—MANAGING OPERATIONS
The three major operational issues discussed are outsourcing information systems functions, information security, and planning for business continuity. Case examples include Microsoft, ANZ Banking Corporation, Eastman Kodak, Honda Motor Company, Credit Card Fraud, Plymouth Rock Assurance, and Household International.
INTRODUCTION – Due to mergers, the Internet, e-commerce, and the September 11 terrorist attacks, the subject of computer operations has been receiving a lot of attention. Systems operations are important because, if they are not professionally run (and backed up properly), a computer or network crash could shut down a company’s business for some period of time. The main change in operations is a shift in viewpoint. Traditionally, managing operations has meant managing inward — managing one’s own operations staff, including those who work in the data center, data administration, network administration, and systems programming. Today, it is just as likely to mean managing outward — managing the company’s relationships with IT external service providers (ESPs) who have taken over day-to-day operational work.
WHAT ARE OPERATIONS?
¨ Companies Have “Cleaned Their Operational House” – Y2K and the Internet forced companies to “clean house” in their data and network center operations. The resulting changes have led to far better operational structures because management took the time to define the rules for operations and put better policies and procedures in place. Had they not gone through Y2K, most companies would not be operationally prepared for the Internet.
¨ More Operations Managers are Managing Outward – A growing number of companies are turning to a third party to run their data centers. Even for companies keeping their own data centers, an increasing number are taking advantage of operational services provided by third parties, especially for e-business operations.
¨ Operations are Being Simplified – Operations are frequently simplified by centralizing programs – via server-based computing – rather than distributing them on PCs.
¨ Certain Operations are Being Offloaded –Web “event management” means hosting a real-time event on the Web. When successful, these “Webcasts” lead to huge spikes in website hits. To avoid being swamped and having the website crash, companies offload the operational aspects of these events to third parties that specialize in hosting such activities.
q CASE EXAMPLE: Microsoft – When Microsoft officially announced a new version of Windows, it did so not only at a major launch event in San Francisco, California, but also via a public Internet broadcast, and a private Webcast to 6,000 original equipment manufacturer (OEM) system builders in 83 countries. That private Webcast was handled by a company that has “edge servers” in 66 countries, giving users in far-flung locations fast downloads of Web content and streaming media.
OUTSOURCING INFORMATION SYSTEMS FUNCTIONS – Outsourcing means turning over a firm’s computer operations, network operations, or other IT function to a provider for a specified time—generally, at least a few years.
· The Driving Forces Behind Outsourcing – Outsourcing descended on IS departments as a follow-on to the merger and acquisition activities in the 1980s. Companies faced global competition, so they had to focus on their core competencies, and do some restructuring. Outsourcing is part of the drive for focus and value, and it is not solely an IT issue.
· Changing Customer-Vendor Relationships – Relationships have expanded from buying professional services, to buying products and transactions, to integrating systems, to outsourcing – the most bundled approach to contracting. In this evolution, CIOs have increasingly lost control, vendors take on more risks, margins increase, and importance of choosing the right provider becomes more important.
q CASE EXAMPLE: ANZ Banking Group Ltd. – Australia’s largest bank has outsourced its procurement function, not to reduce costs, but to gain greater quality purchases and lower ANZ’s annual purchasing spend. The bank has learned numerous lessons in this world-leading outsourcing deal: be prepared to change the contract as your environment changes, make step changes in technology and processes to save time and money, focus on having an effective transition, do your best to make the outsourced group appear seamless to your employees, focus early on what you want and don’t get sidetracked, keep incentive mechanism simple and transparent, be able to benchmark performance, and understand, to a fair degree of detail, the value chain you plan to embrace.
q CASE EXAMPLE: Eastman Kodak Company – Kodak was the first major company to outsource its well-run IS department. It put in place a robust organizational structure: a management board (including senior management from both companies and focuses on strategic issues), advisory council (handling technical and operational issues by focusing on what Kodak wants, not how the services are delivered), supplier and alliance management group (managing all longer-term outsourcing relationships and other contracts with large IT suppliers), relationship (the focal point of Kodak’s relationship with one provider), working groups (to facilitate changes in processes, promulgate standards, achieve business recovery in case of disruption, and promote effective use of IS services), and client surveys (conducted twice a year).
q CASE EXAMPLE: Honda Motor Company – This automobile manufacturer conducted pioneering work in improving suppliers’ capabilities by pairing Honda engineers with a supplier’s engineers to drastically lower the cost of one part supplied to Honda. The results are like “waling around picking money up off the floor.”
INFORMATION SECURITY – Even CEOs are now knowledgeable about this subject now.
q CASE EXAMPLE: Credit Card Fraud – In one case, MSNBC reported that a bug in one shopping cart software product used by 4,000 e-commerce sites exposed customer records at those sites. One small e-commerce site did not receive the warning. Within days, cybercriminals charged thousands of dollars on the credit cards of users of this small site. In another case, two foreigners stole 56,000 credit card numbers, bank account information, and other personal financial information from U.S. banks, then tried to exhort money from the cardholders and the banks, threatening to publicize the sensitive information they had unearthed.
¨ Hackers use nine approaches to cause harm: cracking the password, tricking someone, network sniffing, misusing administrative tools, paying middlemen, denial of service attacks, Trojan horse programs, viruses, and spoofing. Because airtight security is not possible, companies need to prioritize their risks and work on safeguarding against the greatest threats.
q CASE EXAMPLE: An Internet Services Company – This firm’s starting point in protecting its systems is to deny all access to and from the Internet. From there, it opens portals only where required, and each opening has a firewall and only permits specific functions. The security team constantly “checks the locks” by keeping track of the latest bugs found, staying up-to-date on the latest security attacks, subscribing to hacker e-mail lists and bulletin boards, personally exploring some risks, logging and monitoring all incoming and outgoing traffic, and testing the system monthly from a remote site. Most importantly, it educates employees and clients as the greatest security precaution.
q CASE EXAMPLE: Plymouth Rock Assurance Corporation – This automobile insurance company created an extranet that independent agents could use to transact business with the company. The most cost-effective approach was to create a DSL-based virtual private network between each agent and PRAC, an offering of a local company.
PLANNING FOR BUSINESS CONTINUITY – Business continuity is broader than disaster recovery because it includes safeguarding people during a disaster, documenting business procedures (instead of relying on certain employees who may become unavailable), and giving employees the tools and space to handle personal issues first so that they can then concentrate on work. In short, it is a business issue, because IT disaster recovery is just one component.
· Using Internal Resources – Organizations that rely on internal resources for IT disaster recovery generally see this planning as a normal part of systems planning and development. They use multiple data centers, distributed processing, backup telecom facilities, and local area networks to provide the backup and recovery they need.
· Using External Resources – In many cases, a cost-versus-risk analysis may not justify committing permanent resources to contingencies; therefore, companies use the services of a disaster recovery firm. These firms provide integrated disaster recovery services, specialized disaster recovery services, and online and off-line data storage facilities.
q CASE EXAMPLE: Household International – More than 9 inches of rain fell on the Chicago area in 12 hours causing widespread flooding. By 10:30 a.m. the water had risen to 31 inches in the data center—9 inches above the 22-inch false floor. Computer operations were transferred to a disaster recovery site. From this disaster recovery, Household learned: to consider the risks of a natural disaster in selecting a data center location, to create a plan to return to the primary site after the disaster, not to expect damaged equipment to always be replaced or restored to original condition, to test hot-site resources under full workload conditions, to plan for alternate telecom routing for multiple-site operations during a disaster, and to maintain critical data at the alternate site.
CONCLUSION – The subject of managing computer operations is, perhaps surprisingly, at an all-time high because of the emergence of e-commerce, the increasing use of outsourcing, news-grabbing viruses, attacks on major websites, and the terrorists acts on September 11th. As enterprises increasingly rely on computing and telecom to work closely with others, they open themselves up to more threats by electronic means. Companies must be increasingly vigilant to outside threats. In short, the view of operations is shifting from managing inward to managing outward.
Ø PART II DISCUSSION CASE: Managing Information Security on a Shoestring Budget – This case illustrates the Indian Institute of Management, Lucknow’s (IIML) implementation of a robust security management infrastructure with a limited budget on hand. The case discusses the importance of developing security policies, and selecting a proper combination of freeware and proprietary software components. The case illustrates the trade-offs involved and presents experiences of IIML in outsourcing the post-implementation phase to a Security Service Provider. Case is from Idea Group. Students are asked to assess the current situation and propose routes they feel management should take.
CHAPTER 9—TECHNOLOGIES FOR DEVELOPING SYSTEMS
This chapter reviews the evolution of system development to provide an understanding of the underlying principles of building applications. It discusses underlying technologies, development methodologies, Internet-based systems, and project management. Case examples include Santa Fe Railroad, Du Pont Cable Management Services, MGM, Colgate-Palmolive, a telecommunications firm, and Hong Kong Exchanges and Clearing, with a discussion case on ExxonMobil.
INTRODUCTION – In spite of the complexity of system development, the IT field has made significant progress in improving the process of building systems. The system development life cycle emerged in the 1970s. More friendly languages and automation of portions of development occurred in the 1980s. The 1990s focused more on packages and on building systems by linking components (system integration). These days, virtually every application is a network application, since the network is becoming the system. Web-based applications were the first generation of Internet-centric computing; the new field, Web Services, is touted as the second. In addition, the increasing interconnectedness of supply chains is leading companies to build inter-organizational systems.
FOUNDATIONS OF SYSTEM DEVELOPMENT – Structured development, 4GLs, prototyping, CASE, OO, and client-server systems have all proven to be foundations of today’s system development environment.
q CASE EXAMPLE: Santa Fe Railroad – The railroad took the unusual approach of using a 4GL to develop a core application (its new waybill system), and by teaching a freight scheduler and several clerical supervisors the language. The group first created generic databases (that could be used at all its freight yards), and built a complete expediter system in just 18 months. In using a 4GL for operations in the most volatile part of the railroad, Santa Fe was more likely to keep abreast of changes.
q CASE EXAMPLE: DuPont Cable Management Services – To manage its telephones and wiring in its many offices, DuPont needed a cable management system. No packages on the market could handle its needs, so it called on a DuPont subsidiary to use CASE and timeboxing to build a custom system. Day One was the go-ahead, and Days 2-30 defined the components of the system. Days 31-90 designed the specs, prototyped the system, and refined the prototype (which became the production system). Days 91-120 installed the system, and a second timebox followed. The resulting system, which took nine months, took others two to three years to develop in-house.
q CASE EXAMPLE: MGM – MGM has a huge library of TV shows and movies. Its first client-server application collected and consolidated all data on the film library so that MGM would know what films they have rights to license to whom. MGM’s film rights salespeople could visit the head of a cable TV network, play 20–30 second clips of their films using the built-in CD-ROM, browse the laptop’s inventory database to verify availability of films, and then print the licensing deal memo on the spot. The system had a three-tier architecture and was built via prototyping using a RGL development tool.
SYSTEM INTEGRATION – More and more often, companies integrate existing packages to create systems rather than code from scratch. Three approaches to integration stand out: 1) database management systems (integrate by sharing the data stored in a single or distributed database), 2) ERP (all applications come from a single vendor and are specifically designed to communicate with each other), and 3) middleware (applications communicate with each other through third-party translation software).
· ERP Systems - An enterprise resource planning (ERP) system aims to integrate corporate systems by providing a single set of applications, from a single vendor, operating with a single database. The goal is to provide the means to integrate business departments and functions across an organization. The history of ERP contains both successes and failures, and the system contains a model of the business. Often, that model differs from the way the customer actually operates, so the customer must change its organizational structure, culture, and processes. Those that succeed in this tumultuous undertaking then focus on how to change their organization.
q CASE EXAMPLE: Colgate-Palmolive – This consumer products company had a decentralized structure, but to become truly global, it needed to standardize business processes and integrate their supply chain. A key element to achieving this integration was a global ERP system. Implementation took five years and cost $430 million, but it was a success. The product delivery cycle dropped and purchasing and other costs were cut. Its is attributed to the fact that senior management convinced all employees that the company faced a crisis that only a dramatic change in strategy and organization could solve.
· Middleware – Middleware is software that works between applications and connects them, allowing them to share data. A popular type of middleware is Enterprise Application Integration (EAI) products, which use a message broker to transfer data between applications. EAI tools allow users to define business processes and make data integration subject to rules that govern those processes.
q CASE EXAMPLE: A Telecom Company – It has been estimated that 65 percent of new and change orders in the telephone industry have errors that must be corrected after the fact. Rather than build a new system, the company looked to EAI to automate the process using three existing systems: 1) the customer relationship management system (which contains the customer information), 2) the ERP system (which retrieves information for the application to validate the request and ensures that the new service is compatible with the customer’s existing services), and 3) the accounting system (which contains the pricing information).
INTER-ORGANIZATIONAL SYSTEM DEVELOPMENT – One of the main business trends is the appearance of business ecosystems — “groupings” of businesses that work closely together. Supply Chain Management systems integrate supply chains, which are now a major trend as they compete against one another on their ability to reduce costs and time across their entire chains. Development of such inter-organizational systems requires teams from the different organizations to work together. Another type of inter-organizational system is a platform, which provides the infrastructure for the operation of a business ecosystem, a region, or an industry. Platform development is a major trend in an increasing number of industries.
Ø DISCUSSION CASE: How Should ExxonMobil Leverage Its IT Asset? – Mobil created Speedpass, a system that uses a 1.5-inch-long wand that motorists can attach to their key chain and “wave” at an electronic reader on a Mobil gas pump to pay for gas. Mobil’s goal was to speed motorists in and out of its stations. ExxonMobil now has five million Speedpass holders. They buy more Mobil gas than non-Speedpass customers, they visit Mobil stations one more time per month, and they spend 2-3 percent more money. To leverage this technology, it has teamed up with McDonald’s restaurants in Chicago to test use of Speedpass to pay for food. How should Mobil leverage this platform even more?
q CASE EXAMPLE: Hong Kong Exchanges and Clearing – HKEx is Asia’s second largest stock market. To extend its reach beyond Hong Kong, it decided to embed its business processes in an open trading architecture by building a third-generation automatic order matching and execution system. HKEx’s goal is integrated end-to-end computerized trading processes, from investors through brokers to markets. The project was daunting, involving both internal and external people – 40 staff members from varying departments, 150 consultants, and 500 brokerage firms. The project had five development teams: a network team, a host and open gateway team, a multi-workstation system team (for brokerages wanting to use HKEx’s system instead of their own back office system), an order routing team (for access via the Internet or mobile phones), and a user acceptance testing team. Development took two years, and ended with three levels of testing. One level involved testing the systems that some 100 brokerage firms built to interface with the open gateway. Rollout was phased so that Hong Kong’s stock market was not disrupted. HKEx has built its processes into an open architecture and coordinated the construction of an inter-organizational system – with components from numerous sources and participants of many kinds. It is now the foundation for its industry ecosystem.
INTERNET-BASED SYSTEMS – Internet users have become so sophisticated that Internet-based systems must now be scalable, reliable, and integrated, both internally and externally, with the systems of customers and business partners. Cyberspace is where the action is in system development.
q CASE EXAMPLE: Building a Web Service – The steps involve: exposing the code, writing a service description, publishing the service, finding the service, and invoking a Web service.
PROJECT MANAGEMENT – Perhaps the most difficult component of IT project management is keeping in mind, and under control, all the interdependencies of the numerous tasks undertaken. Many of the best IT managers do not have a background in IT at all, but they possess the important skills of communication, organization, and motivation.
· Keys to Project Management Success – The keys are: establish the ground rules; foster discipline, planning, documentation, and management; obtain and document user requirements; obtain tenders from all appropriate potential vendors, include suppliers in decision making; convert existing data; and follow through after implementation.
· Internet Project Management – The rules of project management do not change for Internet-based systems. However, Internet projects do tend to be more collaborative and iterative than traditional IT projects. Web-based project management tools are appearing; in fact, all project management tools will be Web-based and support virtual teams.
· Tips for Good Project Management – Good project management depends on: proper planning, appropriate user involvement and strong visible management support, project managers with authority and time, good change management, working as a team, proper project monitoring and control, and proper project closure.
CONCLUSION – The traditional approach to system development from the 1960s evolved to give the process more discipline, control, and efficiency. It was valuable in moving programming and system analysis from pure free-form “art” to a better defined “craft.” The 1970s and 1980s brought techniques and tools for more rapid development and even experimental development The 1990s brought the need for integrated enterprise systems and Internet-based systems. Development now focuses on the Internet, interorganizational development, and ecosystem applications – systems where project management skills are even more important due to the complexity of the systems.
CHAPTER 10—MANAGEMENT ISSUES IN SYSTEM DEVELOPMENT
This chapter discusses issues IS management faces when developing systems: staffing, successfully implementing systems (change management), ways to replace legacy systems, and measuring the benefits of systems. Case examples include Fidelty Investments, UPS, the BOC group, GTE Directories, Toyota Motor Sales, and a trucking company.
INTRODUCTION – Companies are in three businesses: infrastructure management, customer relationship, product innovation. IS organizations can be viewed as being in the same three businesses. Operations are infrastructure management. The help desk is the customer relationship business. And system development is product innovation. Each should be viewed and managed differently. The goal of product innovation is speed because it provides nimbleness. The key to success is talent, so management issues surrounding system development begin with staffing.
MANAGING IS STAFF – Managing staff is complex. It begins with hiring, goes through training and coaching, and continues on to performance appraisal, assigning work, career planning, and maintaining a skills inventory.
q CASE EXAMPLE: Fidelity Investments – During the Internet boom, this investment management firm made great efforts to create a “technology environment” to attract innovative workers who preferred Fidelity’s security to dot-coms. It gave people easy ways to reach the company and recruited bright young employees from its customer service department to the IT group. The company then focuses on retaining IT employees who are key to the business, have high potential, contain important knowledge, are working on mission critical systems, and/or make the company run.
q CASE EXAMPLE: UPS – An important jobholder at this package delivery company is the delivery driver. Drivers have important skills (such as understanding street numberings, commercial park layouts, and so on) and are in the crucial customer-contact role. Hiring a new driver is costly, so to reduce turnover, UPS discovered that the job the drivers dislike most is loading the packages into the delivery vans. So UPS created a new job – loader – which pays well but expects high turnover. It has a ready market of part-timers, and lowers the driver turnover.
¨ Gauging IT Staff – Knowing what motivates IT staff is important in designing jobs. In a long research study it was discovered that developers have a high need for personal growth and development in the job. They are internally motivated, so they have a low need to interact with others to feel they are doing a good job.
¨ Improving the Maintenance Job – Developers have often disliked maintenance work. Improving the job involves redesigning it to better fit their needs, and hence motivate them better.
IMPLEMENTING SYSTEMS SUCCESSFULLY – IS staff members are often so enthralled with the technical aspects of a new system that they presume a technically elegant system is a successful system. However, many technically-sound systems have turned into implementation failures because the people side of the system was not handled correctly. Change management is the process of assisting people to make major changes in their working environment. One approach to change management is to identify and work with sponsors, change agents, and targets to implement the change a new system causes.
q CASE EXAMPLE: The BOC Group – This industrial gases manufacturer followed a change management process to successfully implement nine reengineering projects – a significant achievement. They worked on garnering true executive sponsorship for each (and taught sponsors how to be sponsors). They helped truck drivers feel comfortable with new handheld devices. And they involved middle management in an advisory role, thereby gaining their support rather than their resistance to the changes.
IMPROVING LEGACY SYSTEMS – Most information systems executives feel trapped by the past. They have thousands of old legacy programs and data files they would love to replace. Replacement is not the only option, though, and in many cases it is not the wisest course of action.
· To Replace or Not to Replace? – One study found that upgrading (rather than replacing) made more sense in most cases, even if it was difficult and not as exciting as a totally new system.
· Options for Improving a Legacy System – Companies have a spectrum of options, from least to most disruptive:
¨ Restructure the System – If the system is running but fragile, restructure the code, using automated tools, to make the system more maintainable.
¨ Reengineer the System – Extract the data elements from the existing file and the business logic from the existing program and move them to new hardware platforms, using automated tools.
q CASE EXAMPLE: GTE Directories – The directory publishing system had four main databases, designed application-by-application, so the data elements were difficult to change, enhance, and reuse. The data administration group acquired reverse engineering tools to help them improve these databases. In another project, the company used an automated tool to reverse-engineer a poorly designed database from its physical model to its data model, and then create a properly designed data model using entity relationship modeling techniques. In a third project, database administrators reused some data elements in a large database for a new production scheduling system, again using reengineering tools.
¨ Refurbish the System – Old but maintainable systems that are causing no major problems may just need some extensions to be more useful. Companies are leaving existing systems in place but adding an Internet front end.
¨ Rejuvenate the System – Rejuvenating adds enough new functions to a system to make it more valuable to the firm.
¨ Rearchitect the System – This option involves having a to-be architecture for new systems, then using that architecture to upgrade legacy systems.
q CASE EXAMPLE: Toyota Motor Sales – This car manufacturer began building an IT architecture by creating a standard, integrated application development environment in order that all systems would be developed in the same way. The chief architect then used her budget to describe the as-is architecture of Toyota’s six largest systems. Then Toyota defined the global to-be architecture, which was used to convince the business that remediating some pieces of a legacy system would both upgrade the system and move it toward the to-be architecture and would cost a lot less than full replacement. The architecture thus helped the company remediate legacy systems, kept systems designs robust, delivered applications faster, and permitted future flexibility.
¨ Replace With a Package or Service – Many old systems built in-house have been replaced by a package developed by a third party. This alternative has become the norm; another option, one being touted as “the future,” is to replace a system with a service delivered over the Internet.
¨ Rewrite the System – In some cases, a legacy system is too far gone to rescue. Few companies write new applications from scratch, though, since it is so time-consuming and expensive; rewriting now means system integration — finding packages that do pieces of the work, then using middleware tools to link them together.
MEASURING THE BENEFITS OF SYSTEMS – Executives want specific links between new systems and corporate financial measures, such as increased revenue, stockholder value, or earnings. Achieving this link is devilishly difficult because IT is only one of the factors contributing to successful use of systems. Various approaches can be used.
· Distinguish Between the Different Roles of Systems – To measure the value of systems that help other departments do their job better, measure how they improve organizational efficiency. For systems that carry out a business strategy, measure them by their contribution to the success or failure of that plan. And for systems that are sold as a product or service, measure them by their performance in the market.
· Measure What Is Important to Management – Besides financial benefits, relate proposed benefits to certain indicators can make it easier to “sell” the system to management, at both the individual and aggregate levels. Concentrating only on cost and monetary measures may be shortsighted; other measures can be even more important.
· Assess Investments Across Organizational Levels – The Value Assessment Framework measures benefits at three organizational levels (individual, division, and corporation) and across three kinds of impacts (economic performance payoffs, organizational process impacts, and technology impacts).
q CASE EXAMPLE: A Trucking Company – This medium-size trucker was hit hard by deregulation. To differentiate itself, it installed a state-of-the-art satellite system and a computer in every truck cab, so that drivers could be in constant voice and data communication with the company and customers. As a result, its business improved and it became an industry leader in the innovative manipulation of information. In measuring the value of the system using the Value Assessment Framework, management discovered that customers were willing to pay a premium price for the ability to call a truck driver directly from the customer’s warehouse. This discovery gave management even more confidence in their decision to bet on the technology.
· Do Investors Value IT Investments? – An even more intriguing question than how business executives value IT investments is how investors value IT investments. A study found that every $1 invested in computers yielded up to $17 in stock market value – and no less than $5. Whereas, $1 invested in property, plant, and equipment (book value) only yielded $1 in stock market value; and $1 investment in other assets (inventory, liquid assts, and accounts receivables) yielded only 70 cents. The researchers reason that investors value $1 spent on computers more than the other investments because it leads to organizational changes that create $16 worth of “intangible assets” – know-how, skills, organizational structures, and such. Investments in “organizational capital” generally lead to adopting decentralized work practices: using teams more often, giving employees broader decision-making authority, and offering more employee training. Firms with these three decentralized work practices had a market value of 8 percent higher than the mean.
CONCLUSION – Managing development staff is part of the people job in system development. A second part is helping people adjust to the organizational changes that occur with a new system. Most software is devilishly difficult to keep up-to-date. As a result, at some point in time, management needs to decide what to do with aging software. Finally, the question continually asked about applications is, “What is it worth to us?” — another difficult system development issue.
Ø PART III DISCUSSION CASE: A Dream Project Turns Into a Nightmare: How Flawless Software Never Got Implemented – This case details the experience of Integra (a large Canadian life insurance institution) and Intex Consulting (the Canadian subsidiary of a large international information system (IS) integration firm) and their partner launch of the Banking and Loan Insurance Software System (BLISS) development project. After 1.3 million dollars of investment from each partner and twelve months of intensive efforts, the project came to an abrupt stop. Specifically, this case looks at the ramifications of introducing a new and unproven IS product and how to avoid or recover from an IS project failure. Case is from Idea Group and students are asked to assess the overall problems in the case, the factors affecting the problems, issues in the case, the role of different players, alternatives, and make a recommendation to management.
CHAPTER 11—SUPPORTING DECISION MAKING
This chapter discusses technologies for supporting decision making: decision support systems (DSS), data mining, executive information systems (EIS), and expert systems. It then discusses IT issues related to creating the real-time enterprise. Case examples include: a problem-solving scenario, Ore-Ida Foods, a major services company, Harrah’s Entertainment, Xerox Corporation, American Express, Delta Air Lines, a real-time interaction on a website, and General Electric.
INTRODUCTION – Most computer systems support decision making because all software programs involve automating decision steps that people would take. Decision making is a process that involves a variety of activities, most of which handle information. A wide variety of computer-based tools and approaches can be used to confront the problem at hand and work through its solution.
q CASE EXAMPLE: A Problem-Solving Scenario – A vice president of marketing discovered a sales shortfall in one region. To uncover the cause, he used an executive information system, the Internet, and sales reports. He asked for an analysis of sales data and a marketing DSS that includes a set of models to analyze sales patterns. He met with regional sales managers in a room equipped with a group decision support system. No discernable singular cause led to the shortfall in sales, so the managers decided on a new marketing campaign, and then they held a sales meeting using video conferencing.
TECHNOLOGIES THAT SUPPORT DECISION MAKING – The purpose of computers has been to enhance our mental capabilities. Hence, a major use of IT is to relieve humans of some decision making or help us make more informed decisions.
¨ The Architecture of DSS – DSS contains a dialog component to link the user to the system, a data component to either be accessed directly by the user or is an input to the model component, and a model component to perform analysis.
q CASE EXAMPLE: Ore-Ida Foods – In the frozen potato division, the institutional DSS helped managers find answers to the questions, “What has happened?” “Why did it happen?” and “What will happen if..?” Modeling, for projection purposes, offers the greatest potential value to marketing management.
q CASE EXAMPLE: A Major Services Company – The vice chairman was considering a new employee benefit program: an employee stock ownership plan (ESOP). To determine the impact, he described the assumptions that should be used, and the rules that should be followed for issuing ESOP stock to the manager of the information services, who then created a 40-line “quick-hit” DSS. The board then used the results to make the decision, and each member wanted their stock holdings analyzed.
q CASE EXAMPLE: Harrah’s Entertainment – To better know its customers, Harrah’s encourages them to sign up for its frequent-gambler card, Total Rewards. Harrah’s mined its Total Rewards database to uncover patterns and clusters of customers. It has created 90 demographic clusters, each of which is sent different direct mail offers – encouraging them to visit other Harrah’s casinos. Within the first two years of operation of Total Rewards, revenue from customers who visited more than one Harrah’s casino increased by $100 million.
q CASE EXAMPLE: Xerox Corporation – The EIS at Xerox began small and evolved to the point where even skeptical users became avid supporters. Its objective was to improve communications and planning, such as giving executives pre-meeting documents. It was also used in strategic planning and resulted in better plans, especially across divisions.
¨ Doing It Wrong – A hypothetical company did it all wrong because the project lacked executive support, had undefined objectives, used poorly defined information requirements, obtained inadequate staff support, and had a poorly planned evolution.
¨ Why Install an EIS? – Three reasons to install an EIS are: 1) to attack a critical business need, 2) to fulfill a strong desire by an executive, and 3) because it is the thing to do.
¨ What Should the EIS Do? – There are two possibilities: be a status access system, or be a human communications support system. The point is not which one to choose but that the choice be made consciously.
¨ Knowledge Representation – Knowledge can be represented in a number of ways. One is as cases; case-based reasoning expert systems using this approach draw inferences by comparing a current problem (or case) to hundreds or thousands of similar past cases. A second form is Neural networks, which store knowledge as nodes in a network and are more intelligent than the other forms of knowledge representation because they can learn. Third, knowledge can be stored as rules (the most common form of knowledge representation) which are obtained from experts drawing on their own expertise, experience, common sense, ways of doing business, regulations, and laws.
q CASE EXAMPLE: American Express – Authorizer’s Assistant is an expert system that approves credit at the point of sale. It has over 2,600 rules and supports all AmEx card products around the world. The rules were generated by interviewing authorizers with various levels of expertise – comparing good decisions to poor decisions. The system can be adapted quickly to meet changing business requirements.
¨ Degree of Expertise – As an assistant, the lowest level of expertise, the expert system can help a person perform routine analysis and point out those portions of the work where the expertise of the human is required. As a colleague, the second level of expertise, the system and the human can “talk over” the problem until a “joint decision” has been reached. As an expert, the highest level of expertise, the system gives answers that the user accepts, perhaps without question.
TOWARD THE REAL-TIME ENTERPRISE – Through IT, organizations have been able to see the status of operations more and more toward real time. The Internet is giving companies a way to disseminate closer-to-real-time information about events. The essence of the phrase real-time enterprise is that organizations can know how they are doing at the moment, rather than have to wait days, weeks, or months for analysis results. It is occurring on a whole host of fronts, including: enterprise nervous systems (to coordinate company operations), straight-through processing (to reduce distortion in supply chains), real-time CRM (to automate decision making relating to customers), and communicating objects (to gain real-time data about the physical world).
q CASE EXAMPLE: Delta Air Lines – Delta has built an enterprise nervous system to manage its gate operations by incorporating the disparate systems the airline had in the late 1990s. Information about each flight is managed by the system, in real time, and everyone who needs to know about a change can get the data. The system uses a publish-and-subscribe approach using enterprise application integration (EAI) products, whereby the messaging middleware allows disparate applications to share data. When an event occurs, it ripples to everyone. Delta is now expanding those ripples out to their partners who serve their passengers, such as caterers and security companies.
q CASE EXAMPLE: A Real-Time Interaction on a Website – A potential guest visits the website of a hotel chain, checking for a hotel in Orlando. The real-time CRM system initiates requests to create a profile of the customer – all past interactions with that customer, past billing information, past purchasing history. Using this information, it makes real-time offers to the website visitor, and the visitor’s responses are recorded and taken into account for future website visitors.
q CASE EXAMPLE: General Electric – Most senior GE executives have a real-time view of their portion of GE via an executive dashboard. Each dashboard compares expected goals (sales, response times, etc) with actual, alerting the executive when gaps of a certain magnitude appear. GE’s goal is to gain better visibility into all its operations in real time and give employees a way to monitor corporate operations quickly and easily. The system is based on complex enterprise software that interlinks existing systems. GE’s actions are also moving its partners and business ecosystem closer to real-time operation.
CONCLUSION – Use of IT to support decision making covers a broad swath of territory. Some technologies aim to alert people to anomalies, discontinuities, and shortfalls. Others aim to make decisions, either as recommendations to people or to act on behalf of people. CIOs need to alert their management team of potential social and economic effects of computer-based decision making because errant computer-based decisions have devastated corporate reputations and cost a lot of money. With vendors pushing toward the real-time enterprise, this is a use of computers that should give pause to explore the ramifications.
CHAPTER 12—SUPPORTING COLLABORATION
This chapter discusses various kinds of groups and the types of systems that support their collaborations. It ends by discussing managing collaboration in virtual organizations. Case examples illustrating collaboration include DaimlerChrysler, The Open Source Movement, Burr-Brown, HICSS, and Boeing-Rocketdyne.
INTRODUCTION – The company of the future could be a collection of online communities: some are internal and others reach outside the organization’s boundaries into one’s business ecosystem; some are designed and formed outright and others just grow on their own. Thus a main job of executives and managers is to foster these communities and the collaboration they engender. A major job of CIOs is to provide the technology to support online communities and online collaboration.
UNDERSTANDING GROUPS – Collaboration is all about getting work done in a group rather than individually.
¨ Membership – Some groups are open, some are closed.
¨ Interaction – Some groups are loosely coupled (salespeople with their own territories), others work closely together (project team).
¨ Hierarchy – Some groups have a chain of command (tiers of committees).
¨ Location – Some members are co-located, some are dispersed.
¨ Time – Some groups are short-lived, some are on-going. Some work intensely at times, others do not.
¨ Authority Groups – These are boss and subordinate.
¨ Intradepartmental Groups – These are where all members do the same type of work.
¨ Project Teams – These usually have members who work full-time to accomplish a goal within a specific schedule.
¨ Interdepartmental Work Groups – Passing work from department to department in a chain, these form a super group.
¨ Committees and Task Forces – These are formed to deal with a subject area or issue.
¨ Business Relationship Groups – These are relationships with customers, groups of customers, suppliers, and so on.
¨ Peer Groups – These meet to exchange ideas and opinions.
¨ Networks – Groups of people socialize, exchange information, and expand the number of their personal acquaintances.
¨ Electronic Groups – Groups are formed on the Internet to socialize, find information, entertain themselves, gain comfort, or just experiment with the online world.
¨ Communities of Practice (CoP) – A group of people can work or socialize together for so long that they develop an identifiable way of doing things.
¨ Network Armies – Widely dispersed groups of people form to further a cause.
q CASE EXAMPLE: DaimlerChrysler – To compete against the Japanese, Chrysler management reorganized the company into “car platforms,” such as Jeep, minivan, truck, and small car. This change significantly reduced development time, but employees with similar jobs needed to communicate across the platforms, so some began meeting informally. Rather than formalize these cross-platform groups, they became known as Tech Clubs (communities of practice) supported and sanctioned by top management. They began to take responsibility for their area of expertise by conducting design reviews, and even revived the old idea of Engineering Books of Knowledge. Creating the books has led to debates and discussions; thus, while they build practice standards, they also build community.
¨ Identifying Potential CoPs – Companies can use CoP consultants to help employees interested in forming a CoP.
¨ Providing a CoP Infrastructure – Executives need to give CoPs legitimacy because they lack resources and formal standing in the enterprise.
¨ Measuring CoPs – To measure CoPs appropriately often means measuring their contributions non-traditionally because their effects may only show up in a team member’s department, not in the community’s work.
q CASE EXAMPLE: The Open Source Movement – In the open source movement, members are volunteers and none is paid. They code for the fun of it because they like to fraternize with like-minded developers and be part of a worthy cause, such as “writing software that doesn’t suck.” The movement has a massive flat structure with four “influencers,” six to eight distributors, 200 project leaders, and 750,000 volunteer developers. It is not wise to underestimate the claims of network armies. Microsoft, which raised the ire of the open source movement, has found that its past tactics for addressing competitors are not appropriate for dealing with this network army. There are no open source revenues, so Microsoft cannot undercut prices. There’s no one to negotiate with, so the movement cannot be bought and then taken apart. All “negotiations” must be in public, and consist of actions, not words – which is what Microsoft is now doing. Its executives are arguing against the movement in public forums, hoping to dissuade executives from using open source software.
SYSTEMS TO SUPPORT COLLABORATION – Group Decision Support Systems (GDSS) have existed for 25 years. Their intent has been to support the decision making of more than one person, working together to reach a decision. One framework for categorizing the work of groups has time on one dimension (same time/different time) and place on the other (same place/different place).
· Supporting Same Time/Same Place Collaboration – This has generally meant supporting meetings.
¨ The Problem with Meetings – Meetings can have many shortcomings: lack of agenda, people arrive late, the necessary information does not arrive, and so on.
¨ Information Technology Can Help – By eliminating some meetings (using e-mail instead), permitting better preparation (discussing items online beforehand), IT improves the effectiveness and efficiency of meetings.
q CASE EXAMPLE: Burr-Brown Corporation – This electronics manufacturer installed a decision room with workstations arranged in a semi-circle on two tiers. Up to 48 people could participate by typing in their comments to the topic at hand at a workstation. Led by a facilitator, the annual three-day strategic planning meeting increased involvement (more comments by more attendees), and the planning process was more effective (the group considered issues from a company-wide perspective).
· Supporting Same Time/Same Place Presentations and Discussions – In studying the use of a GSS in a presentation-discussion setting, two researchers hypothesized it would generate more opportunities for discussion, more equal participation, a permanent record of discussion, improved feedback to presenters, improved learning, and remote and asynchronous participation. On the other hand, having people type while presenters are presenting could distract participants.
q CASE EXAMPLE: HICSS – Over a two-year experience at this conference, the researchers learned that participants in the GSS-supported sessions contributed hundreds of comments to online discussions, and more were involved than in oral discussion. They said the typing did not distract them, and that they received positive value from the sessions.
· Supporting Different-Place Collaboration – This is support of virtual teams.
q CASE EXAMPLE: Boeing-Rocketdyne – To build an “impossible” engine, experts from three locations formed a virtual team and conducted the project online, completing their mission beyond expectations. The team learned it needed: a formal agreement for sharing intellectual property openly (and have it signed before the project began), technology that fit its virtual meetings, “rules of engagement” to be creative online (traditional work styles did not work), and the realization that the focus would change over time as the project evolved.
MANAGING COLLABORATION IN VIRTUAL ORGANIZATIONS
CONCLUSION – IT-based collaboration tools change the collaboration process by altering who can participate, how they participate, and even the kind of work they do. Collaboration is at the heart of the business world, since “partnering” with others has become the standard style of work. For this reason, this area of IT-based collaboration support is likely to grow and mature quickly in the years ahead.
CHAPTER 13—SUPPORTING KNOWLEDGE WORK
This chapter isolates two of the most illusive, yet important, topics that relate to supporting knowledge work: managing knowledge and computer ethics. Managing knowledge means encouraging people to share knowledge in a form that others can easily access, as well as customer knowledge and researchers’ knowledge – and how to embed this outside knowledge in a real-time system. Under this topic are the intellectual capital issues of valuing intellectual property, usage, and sharing knowledge.
Computer ethics deals with such areas as information privacy, intellectual property rights and other legal, ethical, and issues relating to information and knowledge. Old laws and regulations were written before the computer age, yet they are being applied to today’s software, challenging the applicability the entire realm of intellectual capital challenges. Case examples involving knowledge work include Buckman Laboratories, BP, a Phatmaceutical Company, Skandia Future Centers, a U.S. Energy Company, a North American bank, Partners HealthCare System, and Clickwrap Agreements.
A MODEL FOR MANAGING KNOWLEDGE – The model is circular with four stages, which represent what people generally do with knowledge. First they create it, or capture it from a source. Second, they organize it and put it into categories for easy retrieval. Third, they distribute it (push) or access it (pull). Fourth, they absorb another’s knowledge for their own use or to create more new knowledge. Thus, the cycle begins again. These four stages create three types of capital: human capital, structural capital, and customer capital.
¨ Knowledge Creation and Capture – This phase deals with generating knowledge, either by nurturing employees to create it or by acquiring it from outside.
q CASE EXAMPLE: Buckman Labs – This industrial chemical company, with employees around the world, brings the knowledge of all its employees to bear on a customer problem anywhere in the world via a knowledge transfer system. When employees need information or help, they ask via forums, which are Buckman-only online forums over the Internet. The online conversations are the basis for transferring knowledge around the company, important threads being captured and stored in the forum library. The prime benefit is timely, high-quality responses to customer needs.
¨ Knowledge Absorption and Reuse – This phase of building human capital addresses the notion of getting knowledge into people’s heads where it can be enhanced and reused. One of the problems is that management often does not realize which employees are vital to information sharing because they house the organizational memory. One way to foster sharing is via T-managers. These are executives who have both a vertical role (such as running a business unit) and a horizontal role (such as sharing knowledge with their peers in other business units).
q CASE EXAMPLE: BP – BP is exemplary in its use of the T-manager concept. From studying BP, two researchers learned that mechanisms must be put in place to both foster and guide managers’ knowledge-sharing activities; otherwise, they start to take up too much time and produce little results. Peer groups in one division increased sharing among business unit leaders in similar businesses, but it was not until these groups were made responsible for allocating capital amongst themselves, and for setting their performance levels, that their sharing started to truly impact business performance. One business unit head who is a T-manager has a knowledge-sharing role in which he connects people, acting in some ways like a “human portal” by suggesting who might help solve a problem.
¨ Knowledge Organization and Categorization – This phase is often handled by creating best practices knowledge bases. A few have even tried to measure intellectual capital.
q CASE EXAMPLE: A Pharmaceutical Company – A project at a major pharmaceutical company aimed at improving the process of developing new drugs and getting them approved by the U.S. Food and Drug Administration (FDA). The team found the filed files were not complete, so it created a generic knowledge tree of the questions the FDA asks when deciding whether to approve a drug. The team also commissioned their 10-year drug study beforehand, so they were clear about the data they needed to gather and present to the FDA, creating the report template publicly as a team. The result: faster reports and faster approvals.
q CASE EXAMPLE: Skandia Future Centers – One project in this insurance company addressed the question of putting a value on intangibles, such as knowledge. It aimed to find a common mechanism for establishing value and trading that value. The knowledge exchange began as a network for exchanging knowledge. It has evolved into a Web-based trading arena where people can buy and sell knowledge assets.
¨ Knowledge Distribution and Access – This phase emphasizes both “pushing” knowledge out to users (distribution) and accommodating users who “pull” information to themselves (access). Generally, companies focus on high-tech approaches, such as implementing networks and networking tools to access human and structural capital.
q CASE EXAMPLE: A U.S. Energy Company – To instill a sharing culture in this highly autonomous energy company where the business units each focused on their own performance, management focused on promulgating best practices. It defined them as a practice, know-how, or experience that had proven effective or valuable in one organization, and might be applicable to another. A number of programs to collect best practices arose, but they were disparate. So a booklet was created based on TQM principles; it became the guide for sharing best practices. Certain people were designated “technical knowledge experts” because they knew about best practices across the company, so their job was to disseminate tacit knowledge.
q CASE EXAMPLE: A North American Bank – The vice president wanted to find a way to value intangibles so the bank would have a sounder means for evaluating potential loan customers than simply look at the tangible assets they possessed. Intellectual capital had to be worth something. In addition to defining human and structural capital, he defined customer capital and measured three aspects: depth of knowledge about the bank in a customer organization, breadth of knowledge by a customer, and loyalty to the bank. To strengthen these aspects, the vice president believed the bank needed to assist its customers in learning, such as learning more about the bank, requiring the bank’s values and strategies to be congruent with its customers. This helped senior bank officers focus more on customers.
¨ There are behavioral red flags that can derail a knowledge management effort: 1) people avoiding early warnings, 2) disagreeing with internal documents, or 3) people fearing they will lose their place as a knowledge gatekeeper. Knowledge management efforts often need to build “cultural workarounds” so that these kinds of reactions do not block the work.
¨ A knowledge management system needs to be designed to fit the people who will use it and gain value from it. One system that works is demand-driven, roots out tacit knowledge, is in members’ e-mail box every day, and is full of intriguing opinions. It’s a conversation rather than a library, which is just what these professionals need. So beware of creating a system that supports the wrong culture.
q A CASE EXAMPLE: Partners HealthCare System – This hospital and physician group system is delivery just-in-time knowledge to physicians by way of their online order entry system, notifying them of drug interactions when they enter a prescription order. The system can also tell the doctor about a newer, more effective drug or warn the doctor that the prescribed medication could worsen a patient disease, making the system a recommender system. It also has an event-detection mechanism, which alerts a physician when it learns of an event that can endanger the health of a patient. Committees of top clinicians identify the knowledge that needs to be in the knowledge bases and keeps it up-to-date.
INTELLECTUAL CAPITAL ISSUES – Data, information, content, and intellectual capital all raise thorny issues that have prompted legislation in some, but not all, countries around the globe (which causes even more problems in today’s intertwined, global society). Their “resolution” is important for global e-commerce, even though such resolution could be a long way off.
· Value Issues - Information’s value depends on the recipient and the context; most people cannot put a value on a piece of information until they have seen it. The only practical way to establish the value of information is to establish a price for it and see if anyone buys. A number of tools are being used within companies to increase the value of information: information maps, information guides, business documents, and groupware.
· Usage Issues – Information management is a management issue because it deals with how people use information. Information use is difficult to manage because the information’s complexity must be preserved, people do not share easily, and technology does not change culture.
· Sharing Issues – A sharing culture must be in place or the existing disincentives will thwart using a sharing system. But forcing employees to share information with those above them can lead to intrusive management. Unlimited sharing also does not work, so there need to be limits.
THE VAST ARENA OF COMPUTER ETHICS – New technologies pose ethical issues when they open up new possibilities for human action.
q CASE EXAMPLE: ClickWrap Agreements – This “clickwrap contract” is an example of what the law calls a “contract of adhesion”—a contract you did not really bargain over in any way, but which was presented as more of a take-it-or-leave-it offer. Generally speaking, adhesion contracts are legally enforceable.
CONCLUSION – To properly support knowledge work, companies need to understand the life cycle of knowledge because the each phase is best supported by specific approaches (two by high-touch people approaches, and two by high-tech approaches). Likewise, it behooves management to understand the vast arena of computer ethics. IT adds new twists and, often, greater ramifications to long-standing ethical issues. Ethical use of IT is creeping into corporate policies, sometimes due to regulation. Companies in some countries are now required to state their privacy policies with respect to the personally identifiable information they handle. Many companies have also decided whether or not e-mail is company or private property, and made their stance known to employees. It would be wise for CIOs to bring up other ethical issues and see that company policies are set, promulgated, and enforced, so that knowledge and other forms of intellectual property are properly used for good, not harm.
Ø PART IV DISCUSSION CASE: How Should Lego Protect Its Trademark, Operating System, and Applications? – This case discusses Lego’s dilemma on what to do about fans of its Mindstorms robot that have created an operating system and applications that extend the usefulness of this toy. Students are asked what they would recommend for Lego’s trademark, operating system, and applications.
CHAPTER 14—THE CHALLENGES AHEAD
The computer’s capability to leverage people’s brain power allows companies to not only communicate in new ways, but to compete in new ways. Using the four goals for thriving in the e-world environment goals as a base, this chapter explores the organizing principles being proposed for thriving in an Internet-based economy. It looks at the challenges facing IS organizations worldwide by assembling a collage of opinions about possible principles underlying the e-world. Acknowledging our transformation into a networked world, it describes three viewpoints of the differences between non-networked and networked and their importance. The chapter concludes with ways to move forward with the people who need to lead us into this new business world and the people who will be led into it. Case examples include NYNEX, a football team, Cemex, Semco S.A., National Semiconductor, and Sun Microsystems, and MIT’s IT for the Non-IT Executive Program.
ORGANIZING PRINCIPLES – These principles are areas enterprises need to focus on to succeed in an e-economy.
q CASE EXAMPLE: Nynex – A reengineering project at this telephone company used a participatory design approach, and succeeded. It followed a sociotechnical approach to design a new process for handling customer orders. Rather than pass a customer among specialized groups, all the people in the process worked together, in one area, as a multifunctional team — with engineers working alongside salespeople.
q CASE EXAMPLE: A Football Team – A football team is a good example of a process-centered organization, since it has two processes: offense and defense. It has process owners (whose concern is the performance of the process), “position coaches” acting as counselors and mentors for training and developing the athletes for specific tasks (whose concern is the performance of the athletes), and a head coach (who creates the organization, its culture, and its values).
¨ Examples of Self-Organization – Examples include a light-bulb experiment, computer-generated bats that flock, and a large audience that learns to control a plane on an airplane flight simulator.
q CASE EXAMPLE: Cemex – This Mexican cement company had trouble delivering cement on time. To deal with its biggest problem of unpredictability of orders, management said there would be no reservations required and delivery would be faster than pizza. They turned to managing information rather than assets by installing a companywide telecom system that included a global positioning satellite (GPS) system for the trucks and full information to all employees. Instead of dispatchers scheduling drivers, the drivers were to schedule themselves in real-time as calls came in. To ensure fast delivery, the drivers stationed themselves throughout the city, forming a kind of web. The driver closest to a call then delivered the cement. The results were above expectations.
¨ The Self-Organizing Point-of-View – Self-organizing systems create their own structure, patterns of behavior, and processes to accomplish the work. As conditions change, the people change the process. The only way to create truly complex systems may be to use biology’s logic of self-governance, self-replication, partial learning, and some self-repair.
q CASE EXAMPLE: Semco – This Brazilian heavy manufacturer breaks all the rules to deal and has effectively dealt with Brazil’s inflation. Factory workers at times set their own production quotas, help redesign products, formulate marketing plans, and even choose their own bosses. Bosses set their own salaries, yet everyone knows what they are because workers have unlimited access to Semco’s one set of books. And all employees have been taught how to read balance sheets and cash flow statements. Finally, on the big decisions, such as relocating a factory, everyone decides.
q CASE EXAMPLE: National Semiconductor – The company has gone far in promoting CoPs. They energize and mobilize the firm’s engineers. They even shape strategy and enact it. A community of practice on signal processing, for example, grew slowly over 18 months. It now includes engineers from numerous product lines and has been influential in strategy decisions. National is extending CoPs by formally recognizing them, offering funding for their projects, and handing out a toolkit to help people form their own CoP.
q CASE EXAMPLE: Sun Microsystems – Sun’s network creates the company, since e-mail flow determines employees’ part in the organization and the mailing lists say a lot about the power they have.
¨ Personal Mastery – People reach a special level of proficiency when they live creatively. This personal mastery forms the spiritual foundation for the learning organization, so organizations need to foster these aspirations.
¨ Mental Models – People’s mental models are the deeply ingrained assumptions, generalizations, and images that influence how they see the world and what actions they take. Organizations can accelerate their organizational learning by spurring executives to surface their assumptions and test them for relevancy.
¨ Shared Vision – A shared vision is an organization's view of its purpose. It provides the common identity by which its employees and others view it. A shared vision is vital to a learning organization because it provides the rudder for the learning process.
¨ Team Learning — When teams learn, they produce extraordinary results. One of the major tools for team learning is “dialog,” where people essentially think together.
¨ Systems Thinking – To understand systems, people need to understand the underlying patterns by contemplating its whole, not its parts. Systems thinking is a conceptual framework for making complete patterns clearer.
UNDERSTANDING A NETWORKED WORLD – Our networked world has different characteristics from the non-networked world many people are used to living in.
¨ Core and Periphery Services – Value moves to the ends. Value is in the core (leadership and strategy handled by top management) and the periphery (customer-facing employees making decisions and taking actions) – or in the IT infrastructure and end devices.
¨ Common Infrastructures – Elements of any infrastructure – an organization, a system, a business process – that were distributed are being pulled together and operated as a utility.
¨ Modules – Software, devices, organizational capabilities, and business processes are being divided into self-standing modules so that they can quickly and easily connect to form a value chain for responding to circumstances.
¨ Orchestrating Modules – When modules are abundant, there’s value in being able to bring them together.
¨ Aim for Relationship Tech – Networks embody an amazing phenomenon: Connecting more devices to a network exponentially increases the value of the network for everyone on it because so many new possible connections are created. The network age is about amplifying relationships. Thus companies aim for technologies that amplify relationships, such as recommender systems.
¨ Follow the Free – In the network economy, the most valuable goods and services are those that are most abundant because they increase the value of every other one. If they become cheaper as they become more plentiful, then the most valuable items are ubiquitous and free. The fastest way to make something ubiquitous is to make it free. This strategy of the network economy is the anathema of the strategy of the industrial age where scarcity was of the highest value.
¨ Feed the Web First – In the Industrial age, loyalty to one’s enterprise was important. In the network age, it is more important to be on the right network or network platform. Choosing the right platform makes an enterprise “in” or “out,” so choice becomes important. Once the choice is made, it is important for the company to “feed” that choice to ensure it grows on the right network that prospers. In the network economy, a company’s success depends more on the standards it chooses than it did in the past.
MOVING FORWARD – Moving forward is about people who need to lead us into this new business world and the people who will be led.
¨ Eager Beavers: The Innovators and Pioneers – The smallest group is the noisiest: the zealots. The recommended approach to eager beavers is to support them with some funding and to learn from them.
¨ Early Adopters: The First Consumers – In the early Internet days, companies could barely constrain early adopters of Internet technology. They were the disciples, not too far behind the innovators. Enterprises can miss a market by ignoring these folks, but they do need to be managed.
¨ Early Majority: The First Big Wave – The first of the two big consumption waves includes the people, departments, and companies that say they are willing to use new technologies but need some help. They are not the self-sufficient pioneers nor the risk takers. These early majority folks tend to be in relatively important positions in the organization, so they can make or break the introduction of a new technology, more so than top management. The real business impact of a new technology depends on what these early majority folks do with that technology.
¨ Late Majority: The Technology Skeptics – Late majority people, departments, and companies are not afraid of a technology, but they do have serious concerns about risks and costs. For these late majority folks, IS management needs to be prepared to address risks and costs as well as addressing technology opportunities. IS needs to show an appreciation of bottom-line concerns and answer security questions at the level that late majority people can appreciate.
¨ Technically Averse: “Not On My Time You Don’t” – These people, departments, and companies resist technology. In many cases, their concerns about loss of privacy, security, control, and possible exposure to competition override any perceivable benefits of new technologies. To guide the technically averse, IS first needs to understand their concerns and address their justifiable business fears before any thought of using a new technology for business purposes can be entertained.
¨ The dot-com boom and bust also had a “damaging” effect on collective opinions about IT because many executives and venture capitalists believe the money they spent creating websites and funding new e-businesses was wasted. New channels to the customer did not pay off. As a result, many now de-emphasize the importance of e-commerce at the very time when early promise is being realized in many industries and sectors. There is an e-commerce boom taking place right now, even though the hype is gone. CIOs need to be concerned with the potential gap between what their fellow business executives believe is important about IT versus what they really need to know to effectively guide the use of IT.
¨ Executives’ Leadership Roles – These roles include: setting the tone of the enterprise toward technology, envisioning how IT can serve business strategy, governing as well as leading, using IT to promote business change, and assessing costs and benefits.
¨ Current, Longstanding, and Upcoming IT Issues – The impact of new regulations is a current issue, with a potential huge impact. Project management is another topic of current interest. Measuring the value of IT is a continuing topic of interest, as is change management and organization and control of the IS organization. Cross-organizational e-processes are areas on the verge of breaking through, as is obtaining services via the Web.
¨ Means for Executive Learning – These include learning by doing, learning by governing, and learning via educational programs.
q CASE EXAMPLE: MIT’s IT for the Non-IT Executive Program – This two-day course is given three times a year and has 60-75 attendees. The program is not about technology; rather, it presents frameworks and a vocabulary to help non-IT managers and executives understand, in business terms, what is going on with the technology.
CONCLUSION – We are indeed in a business revolution. With it, the use of IT is changing in kind. It has shifted from amplifying thinking and processing to amplifying communicating and connecting. It is now much more about relationships than transactions (which happen in the background and are becoming increasingly sophisticated). Now that this shift has been made, IT becomes about business and needs to be the responsibility of the business folks, not just technology folks. The foundations of past ways of working are changing. That is the exciting exploration that is going on right now, as people grapple with creating the new work environment and the challenge it presents.