Chapter 2+4+All

7/31/2019 Chapter 2+4+All

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Chapter 2: Information systems defined.

Information systems are formal, socio-technical theory: the interplay of technology with other

aspects, or components of the work system. designed to collect process, store, and distribute

information. This can also be without computers, example: guest list in hotels 100 years ago.

Information technology (IT) is a fundamental component of a modern information system (IS)

Four components of IT based IS

- Information technology: hardware, software and telecommunication equipment.- Process: series of steps necessary to complete a business activity: example, restocking

inventory, check, call suppliers, compare suppliers, order, receive, pay. ( If the IS process

design is not used in the manner of which it is designed will lead to failures of IS )

- People: those people who are involved in the information system. A good understanding oftheir skills, motivations, interest is necessary to implement a new IS.

- Structure: organizational structure of the organization. Hierarchy, decentralized, reportingrelationships, reward systems ect. The IS design should keep these structures in mind.

For an IS to be successful it should be build around an explicit goal fulfilling the specific needs of the

organizationevery organization is unique:

- Strategy: How does the organization want to achieve its intentions- Culture: beliefs, values, language of members of the organzition. How do they do business.- Infrastructure: IT infrastructure, the technological backbone of the firm, this constrains/

enables new information systems.

- External environment: regulations, competitive landscape, outsourced functions etc.These factors lead to the INFORMATION SYSTEM which is used to increase effectiveness and

financial improvements of the firm.

Information systems do not only have effectiveness and financial improvements for the

organization, but also effects on people within and without the firm. Positive ( empowermentemployees and widening scope of responsibility) negative: reduction of scope or loss of responsibility

and creation of a monotonous working environment.


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There are 3 levels of organizational change brought about the introduction of a new IT:

1. First-order change: Automate: affects only technical system, new technologies, internetbanking for example: Most easy to manage because mangers understand this changes and

see the economical benefits easily

2. Second-order change: Informate: Not only the manner of how the process is performed butalso the inidvivuals who performed the process are affected, their role changes for example

customer self-service at ryan air self online check-in.

3. Thirt order change: Transform: most radical form. The technology affect people, technologyand which together have affects on the structure of the company. This requires significant

managerial and executive involvement.

Chapter 4: The changing competitive environment.

The internet: worldwide, publicly accessible system of interconnected computer networks that

transmit data by packet switching using the standard internet protocol (IP).

The WWW(world wide web) and internet are not the same. Internet is the infrastructure. The web

is a service available on the internet. Other services: VoIP, Real simple syndication feeds RSS, file

transfer protocol FTP.

The internet is for everyone and a lot of people own itmain strength limited regulation,experimentation and widespread access growth of the internet.

Each small node is part of the internet. Nodes: home networks, GPS device

The internet relies on open technology standard and protocols agreed-on set of rules or

conventions governing communication among elements of a network. (HTML for writing a webpage,

TCP/IP protocol for the internet.

How is value created in networks?:

- Scarcity: the value is proportional to its rarity, being unique. ( EBAY, facebook)- Networks are value if they are in plentitude: if only 1 person has telephone the telephone

network technology and telephones is worthless, if a lot of people have it its useful.

Virtual network: intangible and invisible, the nodes are people connected to each other, for

example a user network of forum.


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Positive feedback: The adoption of a new technology product/service follows according to the S

cure over time in market penetration. In positive feedback, the stronger gets stronger ( economies

of scale, fixed costs spreading) the weaker gets weaker ( loss of market share).

Negative feedback: stronger gets weaker and the weaker gets stronger, the dominant firm has

reached such a size that there are no more economies of scale so overhead costs increase if the firmgets more market share growth is hampered.

Network effects: (evangelist effect): members of the network spread the word and convince others

to join it (Facebook).

Postive feedback and network effects can lead to 1 dominant firm in the marketwinner takesall.

Tippy market: A market that is subject to strong positive feedback, such that the market will tip infavor of a firm that is able to reach critical mass and dominate it, there is no point of return there will

be 1 winner and 1 loser in the end. Ex, Skype.

Not all markets (internet markets) tip.

Factors that a market will tip:

- The presence and strength of economies of scale- The variety of customer needs, creates potential of distinct market niches that the dominant

player may be unable to fulfill.

Highest when there are economies of scale and customers needs are standard and in-line.

Network effects can also occur in two-sided networks: 2 types of members which create value for

each other. For example. Adobe makes its software free to read the files to create pdf as a standard

for the document maker market. But people who want to make pdf files need to pay for the package.

Network effects are not only restricted to the technology.

- They also depend on the users, do they select the network or not, do you use MAC orWindows(networks) on your computer(product).

- Controlling the network provides competitive advantage- The importance of mutual exclusivity the steeper the set up costs the more important it is

retain and control ownership of a network

Data: codified raw facts, things that happened, coded as letters or numbers

Information: data in context, if data has a meaning which can be interpreted by individuals or

technology.

Classic information goods: producst that give you acces to the information they contain: studybooks,

TV, website stock market. Information goods are products which can be digitalized.


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Economic characteristics of information:

- Information has high production costs, producing the first one is costly.- Neglibible replication costs: they are not physical so its cheap and easy to duplicate.- The information is not the carrier: carriers are CD,DVD, internet download- Negligible distribution costs: digital distribution for example- Costs are sunk: the costs to create the product cannot be recuperated.- No natural capacity limits: almost no constraints in reproduction.- Not consumed by use: can be reused multiple times- Experience goods: products or services that need to be tried before their quality can be

assessed.

Implications for managers:

- Information is customizable: can be modified with relative ease-

Information is reusable: reasable and customizable in multiple forms- Information is often time valued: stock quotes for example- Information goods can achieve significant gross profit margins: High set up costs, low

production costs

Information delivery is a trade off between richness ( the depth of the message) and reach (the

number of possible recipients of a message). Nowadays, the reach is broadened because of easily

accessible information infrastructure, internet etc. No physical carriers ( salespersons ,

consultants at traveling agencies)

Implications it is important for customers to have a good interface.The emergence of technologies who make information more available for everyone also reduce

asymmetric information in the market.

For a new technologie to succeed it must be in line with a few things:

- New technology must replace all characteristics of the old one: newspapers for example(most easy to carry and read etc)

- Retaliotion from incumbents:legal mean, legislative means, hybrid offers, heightenedcompetition ( dont ignore these retaliations)

- Human resistance to change: people need to learn/accept new ways of doing business- Attention challenges: educate customers about the advantages ect.

Sustaining technologies: are those new technologies that enable a products performance to

continue to grow extend the useful life of the product as the market demand further

improvements ( electrical cars) S-curve growth you get a new S curve after the old technologie S-

curve so SS curve


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Disruptive technologies:

- The technology offers a different set of attributes than the technology the firm currently usesin its products.

- The performance improvement rate of the technology is higher than the rate ofimprovement demanded by the market. ( hard dist of 1million GB?)

-


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Chapter 5: Electronic commerce, new ways of doing business.

Electronic commerce: an online exchange of value the process of distributing, buying, selling,

marketing and servicing products and services over computer networks such as the internet.

Electronic business use of internet technologies and other advanced IT to enable business

processes and operations.

Why is e-commerce so boomed the last years if it was around already such a long time:

- Affordable computing equipment- Access to the internet- Ease of use- Open standards: technology standards that are freely available and can be used for free.

Catogorizing electronic commerce initiatives

- Categorizing ventures by transaction types: to indentify the parties involved in thetransaction:

o Business to consumer (B2C): online retailers like amazon, organization end productto consumers, this can also be without physical goods

o Business to Business (B2B): transactions in which more business entities take part.Dell website for other organizations who want to retail and buy large packages s of

dell computers

o Consumer to Consumer (C2C): for example Ebayo Consumer to Business (C2B)o Egovernment: all transactions involving legislative and administrative institutions

electronic filling out of tax forms

Catogorizing ventures by company structure: to categorize the companies involved in ecommerce

on the basis of their structure:

- Bricks and mortar: traditional organizations have physical operations and locations anddont provide their services exclusively through the internet.

- Bricks and clicks: hybrid operations have physical locations but also sell their products viainternet example bookstores, music stores. Or via co-opetititon ( coopereation and

competition) competitors strike beneficial partnerships. Amazon and Borders bookshops.

- Pure play: organizations born online like eBay., google only provide services via the internet.Not having stores does not mean not having physical operations, Amazon has distributions

centres etc.


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Business model: what the firm does for its customers, how it does it , and how it is going to be

compensated for what it does.

For businesses doing business online it is important what revenue model they choose:

- Pay for service: like a store, you buy for a book etc- Subscription: similar as pay for service, you pay for the service you get in forms off news,

sport highlights.

- Advertisement support: firm sells access to its audience, advertisements on Google for ex.- Affiliate: generates money from a third party based on customer traffic to that firms

website. Like a commission if the visitor buys the product on the other linked site.

Dominant business models in business:

- Online retailing: pure play and brick and click organizations and a pay for service revenuemodel

- Infomediaries: organizations that use the internet to provide specialized information on thebehalf of product or service providers they do not sell these goods only review them.

- Content providers: organizations that develop and publish content, like news, travelinformation, historic etc. Revenue model can be subscription, advertisement supported, or

pay per download.

- Online communities: group of people brought together by common interests they get ridof physical constraints like distances. For surfing freaks etc.lead to virtual communities of

interests

- Exchanges: organizations that create a marketplace for buyers and sellers to come togetherand transact, eBay

- Infrastructure providers: developing and managing the infrastructure of e commerce.Specialized networking equipment, secure transactions on the internet. PayPal etc.

The internet has caused disintermediation: shortening of the distribution chain by eliminating

intermediaries

The internet has also caused reintermediation new business opportunities for intermediaries

for example an online website for insurance brokers so they need less personnel to inform their

potential clients about their products.

The internet reduced search cost on information making the market more efficient.

Channel conflict: they way you put your products on the market can cause a conflict. Compaq first

sold its computers via retailers if it does now via internet the retailers will be unhappy.


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Ecommerce and e-business trends:

Web2.0 tools: they are able to enable services that are free and essy to use, less structured and

more interactive than traditional internet services:

-

Wiki: coauthoring and editing of web content to conducive online collaboration. Wikipedia- Blogs: online journals, reports.- RSS: Real simple syndication, create web feeds, short summaries of content with a link to

the full fledged versions that are broadcast to all those who subscribe to the feed once a

trigger event occurs.

- Tags: short descripotros associated with an objectM-commerce: mobile commerce, the ability to complete commercial transactions using mobile

devices such as cellular phones of PDAs personal digital assistants.

U-commerce: Ultimate commerce, support personalized and uninterrupted communications and

transactions.

U commererce is predicated on four requirements:

1. Ubiquity; enables users to access resources anywhere at anytime2. Uniqueness; can always use the resource also if someone else wants to use it.3. Universality; use their devices anywhere using commonly accepted standards4. Unison; enables consistent cross-platform, device independent view of available resources


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Chapter 7: Value creation and strategic information systems

Economic value is generated when worthwhile things that did not excist before are created

The transformation process is like this a good which cost $x is sold for $x+$v

The components of value created:

- Supplier of opportunity cost (SOC): minimum amount of money suppliers are willing toaccept to provide the firm with the needed resources. Negotiation process, suppliers will

supply if the amount of money paid for it exceeds their opportunity costs to use the supplies

for something else.

- Firm cost (FC): The actual amount of money the firm disbursed to acquire the resourcesneeded to create its product or service.

- Customer willingness to pay(CWP): the maximum amount customers are willing to spend inorder to obtain the product. The products is only useful if customers see the point in it and

are willing to spend something on it.

- Total Value created (TVC): The difference between customer willingness to pay and supplieropportunity costs so TVC = CWS SOC This is the value you create to society by

transforming resources in a product usefull for customers.

A firms added value is defined as that portion of the total value created that would be lost if the

firm did not take part in the exchange.

If you cant be unique you can add value but you are not able to because of competition lowering the

price down equal to the price of SOC giving you a TVC of 0

Two ways to create new value:

- Increase customer willingness to pay: by doing something more valuable for customers youincrease their willingness to pay for it, example good after services

- Decreasing supplier opportunity cost: reduce this by for example better relations so you canbetter fine tune your orders in a more economical size for the supplier. Wall-marts

continuous replenishment: pulled logistics supplier( P&G) is in charge of managing theinventory at the customer (wall-mart) wall-mart give P&G real time inventory knowledge of

its consumer demand enabling P&G to optimize its production schedules leading to

cheaper product offering to wall-mart.

* Tangible as intangible outcomes provide value for a product

* Competitive advantage and added value are closely related.


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Strategic information systems: those information systems used to support or shape the competitive

strategy of an organization. Those that enable the creation and appropriation of value.

IT investments are only appropriate within a larger IS design, as a component of the IS. With only IT

investments you cant be competitive .

Strategic information systems are important/crucial for businesss operations but do not ad value.

Like HR systems, e-mail systems.

IT dependent strategic initiatives: projects that enable added value and rely heavily on the use of IT

to e successfully implemented. They rely on 3 characteristics:

1. Initiative specific projects and goals2. Strategic objective of producing new value, seek competitive advantage3. IT-dependent use of IT at their core.

Examples : internet cafes on cruise ships, FED-ex package tracking.


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Chapter 8: Value creation with information systems.

There are 3 analytical tools to look for what strategy can make the most value for a firm:

- Industry Analysis-

Value chain analysis- Customer service life cycle analysis

Industry analysis: Grounded in the basic notion that different industries offer different potential for

profitability.

Industry analysis along Porters five forces: Can the use of IT increase/decrease these barriers ?

1. Threat of new entrantsIT can increase this by ATM networks needed for banks for ex.2. The threat of substitute products or services3. The bargaining power of buyers high concentrated buyers and low switching costs increase

this power of buyersIT can increase this power because more information available.

4. The bargaining power of suppliersIT can decrease this barrier by making more informationavailable for the form on products via internet etc.

5. The rivalry among existing competitorscan change the basis of industry competition, forexample for any retailer online distribution channel is necessary.

Value chain analysis: looks at the intra-industry, look to create added value and a competitive

advantage by deploying strategic information systems within the company. To identify opportunities

to change the transformation process your organization engages in and uncover ways to create

value.

The value chain model maps the set of economic activities that a firm engages in and groups them in

2 sets:

1. Primary activities: firms actions that are directly related to value creation. Classic 5activitiesinbound logistics, operations, outbound logistics, marketing and sales, service.

2. Support activities: are not directly related to the transformation process (value). But arenecessary to enable it. Like firm infrastructure, HR management, technology development

procurement.

The role of IT in thisIT can transform some of the activities like RFID (radiofrequencyidentification) chips in goods.

The value chain also gives new insights in recognizing relationships upstream and downstream the

firm.


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The CSLC( customer service life cycle): looks at the firm-customer relationships, to look for potential

value creation through superior customer service. CSLS looks if customers are dissatisfied at some

stages of the transaction with the firm etc. The CSLS consists of 4 phases of the buying process with

13 stagesevaluation of firms relationships with customers, benchmarking against competitors and

uncovering opportunities to use the internet and IT to improve customer willingness to pay through

outstanding customer service.

Requirements

establish requirements establish a need or the product/service,//each and communicate with customers

specify Determine the product or service attributes,//customers select the product they want

Acquisition

Select source Determine where to obtain the product or service// are visible to customers(internet)

Order order the products or service from a supplier // make it easy to order

Authorize and pay for transfer funds or extend credit//convenience and security are important for customers

Acquire take possession of the product or receive service

Evaluate and accpet ensure that the product or service meets specifications// give them try-out period? Demo?

Ownership

Integrate add to an existing inventory or integrate with existing internal business processes

Monitor control access and use of the product or service// make sure resources remain in state

Upgrade upgrade the product or service if conditions change// to better fit their unique needs

Maintain repair the product as necessary//help them with problems etc.

Retirement

Transfer or dispose move, return or dispose of products/service // help them with it if it's difficult (legal)

Account for monitor expenses related to product/service.

Virtual value chain (VVC) to enable a firm to transform data in input into some output

information that, once distributed to the appropriate user has higher value than the original data.

This is done by: Gather, Organize, Select, Synthesize, Distribute the information.

This output can give them 3 classes of strategic initiatives:

1. Visibility get insight in process that first were unknown, consumer buying patterns etc2. Mirroring capabilitiesmoving economic activities from physical to virtual computer

simulations

3. New digital valueconcerned with the organizations relationship with the customer andthe firms ability to increase customers wiliness to pay, using the info via the VVC.


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Degree of customizability

High Low

Theoretical High Rewards strategy Personalization

repurchase

Frequence Low Low payoff Acquisition strategy

Personalization strategy: has a lot of customer data because of repeated interactions, offer

customized products

Rewards strategy: standard products but high repurchases use data to evaluate different customers

Acquisition strategy: collect customer data to profile them en develop predictive models to attract

new customers while avoiding the non -profitable ones.

No potential(low payoff): nog potential for crafting a strategy around customer data because of low

profits.

Keep in mind that firms are sometimes constrained in collecting customer data (legal, small base etc)

How to extract the correct data out of a big stock of data?

1. Indentify relevant transaction processing systems : which ones hold relevant data on thearea you are focusing on?

2.

Inventory data currently available in these systems:3. Conceptualize initiatives: given what I have, what would I Like to now4. Prioritize among selected initiatives:

a. Upside potential: assessment of financial benefits of the initiative depending on:i. Time sensitivity, impact immediacy, aggregation requirements, trending

requirements.

b. Data availability: how quickly and costly can the initiative be implemented.Depending on

i. Accuracy and comprehensiveness (without errors ,missing values)upside potential

High trade-offs imperatives

Low Losing causes quick wins

Low High

Data availability

Imperatives: can be implemented quickly and rely on available info and have upside potential.

Scanners for grocery stores

Quick wins: low upside potential, lot o f info, implemented quickly without much costs.

Trade-offs: are not sure because you dont have much info on it, is it profitable?


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Chapter 10: Funding information systems.

If you want to be more effective with information systems and seek funding for projects you need to

master the following concepts

TCO= total cost of ownership, the full life cycle costs of IT assets. (selection, licensing, implementing,maintaining).

The business case= is a formal document about the project to attract investors/sponsors with ROI,

IRR NPV etc. downsides = all lot of estimates and speculations. to overcome this

Heuristics: a simple rule is good enough to make decisions by recognizing that you will need to make

adjustments along the way.

Steering committee: All representatives in a committee (CEO, IS professionals CIO).

3 ways to fund information systems

1. Chargeback: direct billing of the IS resources and services tot the organizational function ordepartment which uses them. + fairness of allocating costs and accountability - costly,

detailed.

2. Allocation: also direct billing to departments but not on the base of use but based on the sizerevenues and numbers of users in that department.

3. Overhead: treats IS as overall expense and its costs are withdrawn from the overallorganizational budget.lack of accountability, people dont care about economic usage.

The budget is set up to allocate and asses where capital flows come from and are most needed, what

projects have more priority etc.

Individual IS project risk is based on : Projects size(monetary), experience with the technology,

organizational change.

Some organizations choose to outsource services to other more experienced organizations

Drivers: Reduce costs, access to superior talent/skills, improve control( get control over the IT again),

improve strategic focus(now have time to focus on its strengths, weakness is outsourced), Financial

appeal( liquidate assets in the IT infrastructure)

Risks: Outsourcing paradox( if you cant do it well, how can another organization do it well?) , dark

side of partnerships (they both work in their own interest), changing requirements(length of contract

changing technologies), hidden coordination costs (communications), deceptive role of IS (IS is one of

the most critical functions of an organization)

Always keep inhouse IT experts when you outsource IT functions and also keep a group of internal

employees who know the core values and services the organization stands for.


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Chapter 11:

Do you make or buy an information processing functionalities / systems? There are 3 approaches:

1. Custom design and development: Fits the unique needs of the firm.a.

Advantages: designs perfectly for the unique needs of the form, has high flexibilityand control because its build from scratch.

2. System selection and acquisition: buy an off the shelf software application.a. Advantages: fast roll-out quickly implemented and acquire new knowledge by buying

it knowledge infusion. Cheaper/ higher quality because the vendors achieve

economies of scale.

3. End-user development: software application build by its end users rather than the firms ISprofessionals.

4. Blended: buy a system and then modify them yourself extensively.The systems development lifecycle (SDLC): reduce risk and uncertainty in systems designs byplanning upfront and justification. This is done step by step each next step relying on the output

of the previous one. 3 phases:

1. Definition: identifying the features of the proposed information system(by end users,managers, stakeholders)

a. Investigation: formulate main goals, scope and value proposition of new system b. Feasibility analysis:

i. Technical feasibility: will the hardware, software etc work as intended?ii. Operational feasibility: is the whole IS feasible, do employees have the skills

to handle it?iii. Economic feasibility: What is the ROI, NPV, payback etc of the proposal.

c. System analysis: once proposal accepted the system requirements need to bearticulated. What inputs to accept, what outputs to produce, who has access?

2. Build: domain of systems architects and programmers.a. System design: structure of system, what application will perform its tasks, what

hardware to use, languages etc.

b. Programming: translating abstract software design into a set of command/instructions that can be executed by the hardware.

c. Testing: alpha testing: developers themselves test the new system. Beta testing:some actual users test the new system. check performance and correcting errors.

3. Implementation: integrate it with the other components of the ISa. Installation: system is loaded on the production hardware and databases populated.

i. Parallel: Old and new system run together for a timeii. Direct: New replaces old at one stage

iii. Phased: New replaces old in phased stages till 100% over a period of timeiv. Pilot: the new system Is run for a time in one business unit before it gets

implemented in all units/departments.

b. Operations: the system is up and running and the firm begins to use it.


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c. Maintenance: errors / bugs information, prioritizing this and implementing the fixesand improvements.

Advantages SDLC: reducing uncertainty and risk, well suited for large-scale projects, good

communication and negotiation in the project time because of many evaluations.

Limitations SDLC: takes a lot of time and associated costs with it.

Prototyping lifecycle: Requirements definitions, Initial prototype, Evaluation, Revision, Completion

Advantages: more quickly implemented, closer to users expectations because it is real, better for

small-scale projects

Limitations: because its done quickly it can lack security and robustness and reliability.

Buying of the shelf applications: a system selection process

1. Definition: investigation and feasibility analysis are similar to the SDLCa. Investigation, feasibility analysis, system analysis formulate evaluation criteria.

request for proposal process. Appropriate applications should have:

b. Essential featurescapabilities the system must havec. Value adding featuresadvantages that others dont haved. Nonessential featuresnice to have things, firms are willing to pay a premium.

2. Compile a shortlist of vendors: seek information on the internet, brochers.a. Create targeted RFP that yield high-quality responses and evaluate them.b. Evaluate all the alternatives and responses on the RFPsc. Negotiate with some of them and pick one.

3. Builda. System design (customizations), programming (customizations) , testing

4. Implementation:a. Installation, operations, maintenance.


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Chapter 12: Information system trends

Enterprise systems: a modular, integrated software application that spans all organizational

functions and relies on one database at the core. With the following principal characteristics:

1.

Modularity: purchaser can decide which functionalities to enable or not2. Application and data integration: application entegration, an event in 1 module triggers

another event in one or more separate modules. Sales&marketing to operations and logistics

and financials etc.

3. Configurable: there are configuration tables that enable the adopting firm to choose amonga predefined set of options during the implementation of the application further tailoring

of the ES

Advantages of an ES

- Efficiency: data integration saves time and reduces direct costs- Responsiveness: up to date information you can respond quicker to changing market

demands

- Knowledge infusion: you buy in knowledge with an professional system- Adaptability: you can alter the ES with the configuration tables etc.

Limitations of an ES:

- Standardization and flexibility: in the beginning you can change easily, once implementedyou can only follow this course.

- Is the best practive embedded in the ES really best?: your own best practice may not besupported by the ES, how are the best practices identified?, it is not enough to implement asoftware program to enact a new practice.

- Strategic clash: are the established business processes supported enough by the new ES?- High costs and risks: consulting and gathering all the information is costly.

o Hype cycle: Technology trigger new technology comes available Peak of inflated expectations over enthusiasm rapid adoption Trough of disillusionment failure becomes public Slop of enlightenment true benefits of technology become apparent Plateau of productivity benefits and risks of technology become widely

understood and accepted.

Supply chain management: the set of logistic and financial processes associated with the planning,

executing and monitoring of supply chain operations. (upstream: suppliers)(downstream: customers)

Radiofrequency identification: promise substantial efficiency improvements in the supply chain,

from speeding the process of receiving and warehousing products to improving the monitoring and

control of inventories. On RFID you can store info(digital), rewrite the tags, embed them in

products and you can see them everywhere.

Best of breed integration: enables a firm to choose the module or application that best suits itsinformation processing need. Integration by the use of different applications.


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A service oriented architecture(SOA): focuses on the reusability of software components,

interoperability and ongoing optimization of business processes.

Knowledge is categorized in 3 objects:

1.

Knowing what: ability to collect, categorize and assimilate information2. Knowing how: sequence of steps that are needed to complete a task/activity3. Knowing why: understanding of cause-effect relationships and the laws that govern a given

phenomenon

We have two categories of knowledge: Explicit knowledge can be articulated, codified and

transferred with relative ease (manuals) and tacit knowledge knowledge an individual possesses

(instinct), which is harder to identify.

Knowledge management: enacts organizations to manage the wealth of knowledge it possesses and

ensure that it is properly safeguarded and put to use to help the firm achieve its objectives. By:

1. Creating knowledge: generate new info, devise solutions to handle problems, identifyexplanations

2. Capturing and storing knowledge: codify new knowledge store it in the memory of the firm3. Disseminating knowledge: usable knowledge for new problems which can be found easily.

DBMS (database management systems): tool to manage date Business intelligence : low cost of

computing and storage of data gives the organizations more access to data than ever . the ability

of gathering and making sense of information about your business with IT as necessary

component. With the use of a Data warehouse: large is size, scope(wide variety of sources),

enabling data integration, designed for analytics.

Transactional database uses current data at individual level.

Analytical database uses historical data at multiple levels.

Analytical databases are optimized for enabling complex querying and the analysis of large amounts

of data with a response time of a few seconds. They use the following:

1. Data mining: scaled down version of data warehouse focused on specific audience2. Online analytical processing: (OLAP) easily and selectively extracting and view data from

analytical databases by issuing a query that specifies what data you are interested in3. Data mining: automatically discovering non obvious relationships in large databases

analyzing historical data used to identify: associations (buying patterns in certain events),

sequences(one event leads to another), classifications(customer profiles), forecasting.

CRM(customer relationship management)is a strategic initiative that relies on customers personal

transactional data and used to identify buying patterns, values and preferences of customers.

maintain relationships, gives insights which customers are profitable or not.

Limitations CRM: relies only on transactional and behavioral customer data, not all products bought

are for customers themselves. Only has access to transactions with your own company, some events


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are unforeseeable. CMI (cust mang interactions: collection and control of data is done by

customer XML

Open source software is not free software, but is accessible for everyone. It is:

-

Free redistributable- Available source code- Derived works you can modify the software- No discrimination available to any entity also for commercial uses- Technology neutrality free of restrictions tied to the use of the technology or type of

interface.

Nowadays there are 3 models of open source:

1. Sponsored open source: non for profit foundations provide support and coordination toopen source efforts

2. Open source service: Linux3. Professional open source: being part of an open source license which is tightly controlled.

Advantages:

- Robustnes: high quality and realiable because more matured projects- Creativity: a lot of people worked on it around the world- Limited lock-in. lower switching costs that proprietary software like windows- Simplified licensing: no complex legal constraints- Free license: costs are lower than proprietary software.

Disadvantages:

- Unpredictable costs: unplanned costs along the way?- Support varies widely- Security: everyone can break it because of open source code- Compatibility: they may not be compatible with proprietary software like windows- The legal landscape: not protected by copyrights.

Software as a service (SAAS): a provider hosts the application in its data centers and the customer

can access the needed applications. Like web based e-mail. Business process outsourcing (BPO)

Application sevice providers (ASP) office online etc

Quick implementation of new applications but relies on the internet so if internet falls out its useless.


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Chapter 13: Security, privacy and ethics.

Securities dont gain any money they just can prevent losses, thats why its hard to gain funds for

security of the IT infrastructure of a firm. Managers must get involved and understand the threats

and asses the degree of risk that the firm should be allowed to take

Risk assessment: process consists of auditing the current resources, technological as well as human

to map the current state of IS security to provide an idea of the current set of vulnerabilities the

firm is facing.

Risk mitigation is the process of matching the appropriate response to the security threats your firm

identifies. There are 3 mitigation strategies:

1. Risk acceptance: not investing in countermeasures2. Risk reduction: investing in safeguards to mitigate security threats3. Risk transference: passing risks to a third party outsourcing security or insurance.

2 types of threats:

1. Internal by malicious behavior someone gives valuable information/access to thirdparties by purpose for money. careless behavior, by Ignorance or disinterests in security

policies.

2. External because of widespread connectivity via the internet we have more and morethreats:

a. Intrusion threat: someone gains access to the organizational IT resourcesencounter by passwords, biometrics (fingerprints), encryption.

b. Social engineering: obtaining restricted or private information by lying to legitimateusers by telephone or false names.

c. Phishing: spamming and asking by sensitive information via e-mail like passwords.d. Backdoors and security weaknesses: backdoor is a code build into a software

program to allow access to the application by circumventing password protection.

e. Threat of malicious code: malware, software programs that are designed to causedamage to individuals or organizations IT assets. encounter by detection

software like antivirus, spyware sweepers.

i. Viruses: attaches itself to software with a payload, harmful set of actionsii. Trojan horses: does not self-replicate like virus but is passed on by those

who share it with others.

iii. Worms: exploits security holes in network software to replicate itself, has nopayload but infects more and more machines on the network.

iv. Spyware software that collects user behavior and transfers this to a 3thparty.

f. Denial of service attack: digital assault to force a online service offline boverwhelming it with demands. very hard to encouter

Total cost of security= costs of anticipation costs (anti-virus software etc) and failure costs in case of

a breach of security


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To protect themselves from internal threats firms write down security policies in which is stated how

the behavior of employees should be in an organization. Different rights the users have. What can

be downloaded and shared with outside people or not.

Privacy is the ability of individuals to control the terms and conditions under which their personal

information is collected, managed, an utilized. It is taken for sure that companies deal well with thisprivate information in terms ofethics. Because of information technology firms have a lot of privacy

now a days. All this customer information creates high potential for privacy violations by:

- Function creep you use collected date for other purposes than intended.- Proliferating data sources proliferation (snel toename) of data sources and technologies

that generate customer data, like cell phones who give exact physical location of someone.

- Improving data management technologiesmerging of different databases to get an exactprofile of customers, this because of a lot of opportunities of data driven strategies, so firms

are willing to take more risks.

- The legal landscape it is hard for legislations to enter the internet because of world wideacces so different governments etc.

Fair information practices are based on the following five principles:

1. Noticebe noticed when your personal is used for something2. Choiceyou must be able to choose where your information is used for3. Accessmust be able to acces your information to change things4. Securityorganizations must ensure your information is kept safe5. Enforcementsorganizations who use the information for enforceable procedures must

keep the 4 points above in mind.

Ethics: the discipline dealing with what is good and bad and with moral duty obligations.

Information system ethics. new ways of doing business give potential for new ethical dilemmas.

Like downloading dvds , cds. all because of new technologies. What is right or wrong?

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