Chapter 2: Information Systems in Organizations
This chapter looks at how information systems are used in organizations, as well as how they shaped, and are shaped, by the organization.
After completing Chapter 2, you should be able to accomplish the objectives on the next 3 slides.
Information systems add value to organizations, yet their use is strongly influenced by the structure and culture of the organization.
Organizations must ensure that new information systems or changes to existing systems help the business compete by lowering costs, increasing profits, improving service or sustaining a competitive advantage.
A team organizational structure centers on work groups. These teams may be large or small. Usually, the team leader reports to a high level manager, so they are fairly independent. As in a project structure, information systems are used for horizontal communication, facilitating workgroup collaboration. As businesses become more global, teams are often not co-located. Information systems and technologies become very important in coordinating work.
New or modified information systems are a change for employees and may change an organization’s culture. Conversely, the information system may be shaped by employees or the corporate culture.
An organization’s culture includes the major understandings, values, assumptions, and procedures in a business. These are often not formally stated. Employees in a particular organization might be expected to dress in “business formal” or “business casual” or they may be expected to behave in certain ways with clients.
An organization’s culture influences the development and deployment of information systems. For example, if a Monday morning sales meeting in which the Vice President of Sales reports last weeks’ numbers is part of the organization’s culture, there may be resistance to developing an information system that allows employees to view those statistics on their desktop computers.
The concept of quality has evolved beyond a product or service merely meeting specifications and performing its intended function to its ability to meet or surpass customer expectations.
A website performs its function if it provides product information and takes your order correctly. But we expect more from a website today. We expect it to be easy to use, aesthetically pleasing and to provide features or information not provided by other websites. Drugstore.com is such an example. The website provides a variety of information and additional features, such as a quick price lookup feature.
TQM is a collection of tools, techniques and processes supporting an organization-wide commitment to quality.
One way to stay competitive is for a business to control costs. Some organizations control costs by cutting the number of employees and outsourcing their functions. Outsourcing involves using external contractors to meet specific business needs. With the current shortage of technical personnel, many functions relating to information systems are now outsourced. For example, network management and support or writing code is often outsourced. Companies find this more cost effective than paying the ongoing high salaries and benefits required to employ technical specialists. However, contracts must be carefully written in order for outsourcing to actually lower costs.
A competitive advantage is a significant and sustainable benefit to a firm over its competition. Establishing and keeping a competitive advantage is necessary to a business’s survival.
A management theorist, Michael Porter, identified 5 market forces that motivate firms to seek competitive advantage.
First, the greater the rivalry among existing competitors, the greater the pressure on a firm to gain competitive advantage. The more competitive the industry, the more firms are fighting to gain a competitive advantage.
The greater the threat of new entrants into an industry, the greater the pressure to gain and keep a competitive advantage. The threat of new entrants largely depends on the costs (or other barriers) to entering the industry, as well as exit costs. The lower the costs associated with entering an industry, the more new entrants will be attracted to it. For example, it requires relatively little investment to put a small business on the Internet, thus little is lost if the business fails. We see many Internet businesses come & go.
The easier it is for your customers to use a substitute product or service instead of yours, the greater the pressure on your company to gain competitive advantage. This usually happens with fairly homogeneous products or services. For example, it doesn’t matter to most consumers which brand of gas they use in their cars. For many people, tea is an easy caffeine substitute when the price of coffee gets too high. Competitors in these industries would feel pressure to gain a competitive advantage, perhaps by lowering their costs so they can offer a lower price.
If there are many suppliers of a certain product, say widgets, then a large buyer of widgets would have a lot of bargaining power with its suppliers. If the buyer didn’t like a particular suppliers terms, it would take its business elsewhere. On the other hand, if there are few suppliers of a product, then the suppliers have more power to control price and other terms, since buyers cannot easily find another supplier. The lower a particular firm’s power is with regard to its customers or suppliers, the more pressure that firm feels to seek and hold competitive advantage in other areas.
In order for a business to be competitive, its information systems strategy must be aligned with its business strategy and objectives.
Porter described 3 strategies that businesses can use to gain competitive advantage in the face of the 5 forces: changing the industry structure, creating new products or services, and improving existing products or services. Recently, product differentiation and using information technology for strategic purposes have been added to these core strategies.
When a firm alters the industry structure, the industry becomes more favorable to them. Developing an expensive new process or technology that improves your product or service raises the cost of entry to your industry. For example, ATMs changed the structure of the banking industry in the 1970s by increasing the investment in technology required. Entering into strategic partnerships with other firms also makes it more difficult for others to compete.
Finding a market niche means obtaining real or perceived differentiation of your product or service.
Using information technology for strategic purposes involves gaining competitive advantage through the use of technology. For example the use of information systems or technology to mass customize a product such as athletic shoes, jeans, or suits would involve using information technology to compete.
When planning a new information system it is necessary to consider how well the proposed project meets a business need.
Additionally the risks accompanying the information systems project should be identified, as should the benefits. When considering the cost of an information system many companies now consider TCO, or the total cost of ownership,rather than just acquisition cost. The total cost of ownership includes not only the cost to acquire the technology but also accompanying administrative and support costs, training costs, and replacement costs.
These risks must be balanced with benefits accruing from the information. These include quantifiable, or tangible benefits, such as decreased production costs, as well as intangible benefits, such as improved employee morale.
A cost benefit analysis, however, is not always applicable. For example, a particular information system may be required by state or federal law, a business may implement a new system just to gain experience in a new technology, or implementing a new system or technology may be a competitive necessity.
There are numerous job titles and job descriptions in information systems. Many businesses employ a chief information officer, a CIO, to oversee that information systems and technology needs of the entire business. The chief information officer is responsible for the corporate planning, management, and deployment of information systems. Typically the CIO is a senior manager at the vice presidential level who works in conjunction with other senior management to ensure that information systems support business goals and needs.
With the growth of computer networks, administrators of both wide area and local area networks are becoming increasingly important. Network administrators manage network infrastructure, security, and use, as well as identifying and correcting problems.
Similarly, with the growth of the Internet and e-commerce, the need for Internet personnel is growing. A new position of chief Internet officer has been suggested for companies with critical Internet operations.
Major consulting firms such as EDS and Andersen also require skilled information systems personnel with excellent communication and project management skills in addition to technical skills.
Often information systems personnel get some type of certification. Certification is achieved by passing specified skill & knowledge tests. Some of the more popular certifications include Novell’s certified network engineer, Microsoft certified systems engineer, and Cisco’s certified internetwork expert.
Chapter 2: Information Systems in Organizations
This chapter looks at how information systems are used in organizations, as well as how they shaped, and are shaped, by the organization.
After completing Chapter 2, you should be able to accomplish the objectives on the next 3 slides.
Information systems add value to organizations, yet their use is strongly influenced by the structure and culture of the organization.
Organizations must ensure that new information systems or changes to existing systems help the business compete by lowering costs, increasing profits, improving service or sustaining a competitive advantage.
A team organizational structure centers on work groups. These teams may be large or small. Usually, the team leader reports to a high level manager, so they are fairly independent. As in a project structure, information systems are used for horizontal communication, facilitating workgroup collaboration. As businesses become more global, teams are often not co-located. Information systems and technologies become very important in coordinating work.
New or modified information systems are a change for employees and may change an organization’s culture. Conversely, the information system may be shaped by employees or the corporate culture.
An organization’s culture includes the major understandings, values, assumptions, and procedures in a business. These are often not formally stated. Employees in a particular organization might be expected to dress in “business formal” or “business casual” or they may be expected to behave in certain ways with clients.
An organization’s culture influences the development and deployment of information systems. For example, if a Monday morning sales meeting in which the Vice President of Sales reports last weeks’ numbers is part of the organization’s culture, there may be resistance to developing an information system that allows employees to view those statistics on their desktop computers.
The concept of quality has evolved beyond a product or service merely meeting specifications and performing its intended function to its ability to meet or surpass customer expectations.
A website performs its function if it provides product information and takes your order correctly. But we expect more from a website today. We expect it to be easy to use, aesthetically pleasing and to provide features or information not provided by other websites. Drugstore.com is such an example. The website provides a variety of information and additional features, such as a quick price lookup feature.
TQM is a collection of tools, techniques and processes supporting an organization-wide commitment to quality.
One way to stay competitive is for a business to control costs. Some organizations control costs by cutting the number of employees and outsourcing their functions. Outsourcing involves using external contractors to meet specific business needs. With the current shortage of technical personnel, many functions relating to information systems are now outsourced. For example, network management and support or writing code is often outsourced. Companies find this more cost effective than paying the ongoing high salaries and benefits required to employ technical specialists. However, contracts must be carefully written in order for outsourcing to actually lower costs.
A competitive advantage is a significant and sustainable benefit to a firm over its competition. Establishing and keeping a competitive advantage is necessary to a business’s survival.
A management theorist, Michael Porter, identified 5 market forces that motivate firms to seek competitive advantage.
First, the greater the rivalry among existing competitors, the greater the pressure on a firm to gain competitive advantage. The more competitive the industry, the more firms are fighting to gain a competitive advantage.
The greater the threat of new entrants into an industry, the greater the pressure to gain and keep a competitive advantage. The threat of new entrants largely depends on the costs (or other barriers) to entering the industry, as well as exit costs. The lower the costs associated with entering an industry, the more new entrants will be attracted to it. For example, it requires relatively little investment to put a small business on the Internet, thus little is lost if the business fails. We see many Internet businesses come & go.
The easier it is for your customers to use a substitute product or service instead of yours, the greater the pressure on your company to gain competitive advantage. This usually happens with fairly homogeneous products or services. For example, it doesn’t matter to most consumers which brand of gas they use in their cars. For many people, tea is an easy caffeine substitute when the price of coffee gets too high. Competitors in these industries would feel pressure to gain a competitive advantage, perhaps by lowering their costs so they can offer a lower price.
If there are many suppliers of a certain product, say widgets, then a large buyer of widgets would have a lot of bargaining power with its suppliers. If the buyer didn’t like a particular suppliers terms, it would take its business elsewhere. On the other hand, if there are few suppliers of a product, then the suppliers have more power to control price and other terms, since buyers cannot easily find another supplier. The lower a particular firm’s power is with regard to its customers or suppliers, the more pressure that firm feels to seek and hold competitive advantage in other areas.
In order for a business to be competitive, its information systems strategy must be aligned with its business strategy and objectives.
Porter described 3 strategies that businesses can use to gain competitive advantage in the face of the 5 forces: changing the industry structure, creating new products or services, and improving existing products or services. Recently, product differentiation and using information technology for strategic purposes have been added to these core strategies.
When a firm alters the industry structure, the industry becomes more favorable to them. Developing an expensive new process or technology that improves your product or service raises the cost of entry to your industry. For example, ATMs changed the structure of the banking industry in the 1970s by increasing the investment in technology required. Entering into strategic partnerships with other firms also makes it more difficult for others to compete.
Finding a market niche means obtaining real or perceived differentiation of your product or service.
Using information technology for strategic purposes involves gaining competitive advantage through the use of technology. For example the use of information systems or technology to mass customize a product such as athletic shoes, jeans, or suits would involve using information technology to compete.
When planning a new information system it is necessary to consider how well the proposed project meets a business need.
Additionally the risks accompanying the information systems project should be identified, as should the benefits. When considering the cost of an information system many companies now consider TCO, or the total cost of ownership,rather than just acquisition cost. The total cost of ownership includes not only the cost to acquire the technology but also accompanying administrative and support costs, training costs, and replacement costs.
These risks must be balanced with benefits accruing from the information. These include quantifiable, or tangible benefits, such as decreased production costs, as well as intangible benefits, such as improved employee morale.
A cost benefit analysis, however, is not always applicable. For example, a particular information system may be required by state or federal law, a business may implement a new system just to gain experience in a new technology, or implementing a new system or technology may be a competitive necessity.
There are numerous job titles and job descriptions in information systems. Many businesses employ a chief information officer, a CIO, to oversee that information systems and technology needs of the entire business. The chief information officer is responsible for the corporate planning, management, and deployment of information systems. Typically the CIO is a senior manager at the vice presidential level who works in conjunction with other senior management to ensure that information systems support business goals and needs.
With the growth of computer networks, administrators of both wide area and local area networks are becoming increasingly important. Network administrators manage network infrastructure, security, and use, as well as identifying and correcting problems.
Similarly, with the growth of the Internet and e-commerce, the need for Internet personnel is growing. A new position of chief Internet officer has been suggested for companies with critical Internet operations.
Major consulting firms such as EDS and Andersen also require skilled information systems personnel with excellent communication and project management skills in addition to technical skills.
Often information systems personnel get some type of certification. Certification is achieved by passing specified skill & knowledge tests. Some of the more popular certifications include Novell’s certified network engineer, Microsoft certified systems engineer, and Cisco’s certified internetwork expert.
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