F o u r t h E d i t i o n

I n t e r n a t i o n a l E d i t i o n

David M. Kroenke

Boston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto

Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

PART 1: Introduction to MIS 25

1: Ml! 26

Q1 Why Is Introduction to MIS the Most Important Class in theBusiness School? 28Are There Cost-Effective Business Applications of Facebook and Twitter? 29How Can I Attain Job Security? 29How Can Intro to MIS Help You Learn Nonroutine Skills? 30

Q2 What Is MIS? 32Components of an Information System 32Development and Use of Information Systems 33Achieving Business Goals and Objectives 33

Q3 How Can You Use the Five-Component Model? 34The Most Important Component—YOU 35High-Tech Versus Low-Tech Information Systems 35Understanding the Scope of New Information Systems 35Using MIS InClass 1: A Group Exercise 36Components Ordered by Difficulty and Disruption 37

Q4 What Is Information? 37Definitions Vary 37Information Is Subjective 37

9 Ethics Guide: Ethics of Misdirected Information Use 38

Q5 What Makes Some Information Better Than OtherInformation? 40Accurate 41Timely 41Relevant 41Just Barely Sufficient 41Worth Its Cost 42

Q6 Why Is the Difference Between Information Technologyand Information Systems Important? 42

Q7 2021? 430 Guide: Understanding Perspectives and Points of View0 Guide: Passwords and Password Etiquette 46

wmi Case Study 1: Requirements Creep at the IRS 50

44

12 ' Contents

2: Information Systems for Teamwork 52Q1 What Is Collaboration? 54

The Importance of Feedback and Iteration 54Critical Collaboration Drivers 54

Q2 What Are the Components of a Collaboration InformationSystem? 55Hardware 55Software 55Data 56Procedures 56People 58

Q3 How Can You Use Collaboration Systems to Improve TeamCommunication? 59

Q4 How Can You Use Collaboration Systems to ManageContent? 62Shared Content with No Control 63Shared Content with Version Management 63Shared Content with Version Control 66Using MIS InClass 2: A Group Exercise 67

Q5 How Can You Use Microsoft SharePoint for Team Projects? 69SharePoint Features Recommended for Student Teams 69

Q6 How Do Businesses Use Collaboration Systems? 73Using Collaboration Systems for Problem Solving 73

• Ethics Guide: Virtual Ethics? 74Using Collaboration Systems for Project Management 76Using Collaboration Systems for Decision Making 76

Q7 2021? 78

• Guide: Securing Collaboration 80m Guide: Egocentric Versus Empathetic Thinking 82

Case Study 2: Microsoft SharePoint at Intermountain Healthcare 87

90

Q1 How Does Organizational Strategy Determine InformationSystems Structure? 92

Q2 What Five Forces Determine Industry Structure? 92

Q3 How Does Analysis of Industry Structure DetermineCompetitive Strategy? 94

Contents 13

Q4 How Does Competitive Strategy Determine Value ChainStructure? 95Primary Activities in the Value Chain 95Support Activities in the Value Chain 96Value Chain Linkages 96Using MIS InClass 3: A Group Exercise 97

Q5 How Do Business Processes Generate Value? 97

Q6 How Does Competitive Strategy Determine Business Processesand the Structure of Information Systems? 99

0 Ethics Guide: Yikes! Bikes 100

Q7 How Do Information Systems Provide CompetitiveAdvantages? 103Competitive Advantage via Products 103Competitive Advantage via Business Processes 104How Does an Actual Company Use IS to Create Competitive Advantages? 104How Does This System Create a Competitive Advantage? 106

Q8 2021? 1070 Guide: Limiting Access to Those Who Have Access 108° Guide: Your Personal Competitive Advantage 110rmmk Case Study 3: Bosu Balance Trainer 115

PART 2: Fundamentals of Technology 117

118

Q1 What Do Business Professionals Needto Know About Computer Hardware? 120Basic Components 120Computer Data 121In Fewer Than 300 Words, How Does a Computer Work? 123Why Does a Manager Care How a Computer Works? 123What Is the Difference Between a Client and a Server? 124Cloud Computing 125

0 Ethics Guide: Churn and Burn 126

Q2 What Do Business Professionals Need to Know AboutSoftware? 128What Are the Four Major Operating Systems? 129Own Versus License 130Virtualization 130What Types of Applications Exist, and How Do Organizations

Obtain Them? 132What Is Firmware? 133Why Are Thin Clients Preferred to Thick Clients? 134

14 Contents

Q3 Is Open Source Software a Viable Alternative? 135Why Do Programmers Volunteer Their Services? 135Using MIS InClass 4: A Group Exercise 136How Does Open Source Work? 137So, Is Open Source Viable? 138

Q4 How Can You Use This Knowledge? 138What Buying Decisions Do You Make? 138What Process Should I Use to Establish a Computer Budget? 139

Q5 2021? 1419 Guide: Keeping Up to Speed 1440 Guide: QuestioningYour Questions 146

• • • Case Study 4: Dell Leverages the Internet, Directly, but for How Long? 152

Q1 What Is the Purpose of a Database? 156

Q2 What Is a Database? 157What Are Relationships Among Rows? 158Metadata 160Using MIS InClass 5: A Group Exercise 161

Q3 What Are the Components of a Database ApplicationSystem? 162What Is a Database Management System? 162

0 Ethics Guide: Nobody Said I Shouldn't 164

Q4 How Do Database Applications Make DatabasesMore Useful? 167What Are Forms, Reports, and Queries? 167Why Are Database Application Programs Needed? 168Multi-User Processing 169Enterprise DBMS Versus Personal DBMS 169

Q5 How Are Data Models Used for Database Development? 170What Is the Entity-Relationship Data Model? 171

Q6 How Is a Data Model Transformed into a Database Design? 174Normalization 174Representing Relationships 176

Q7 What Is the Users'Role in the Development of Databases? 179

Q8 2021? 1800 Guide: No, Thanks, I'll Use a Spreadsheet 182e Guide: Immanuel Kant, Data Modeler 184

mmi Case Study 5: Benchmarking, Bench Marketing, or Bench Baloney 190

Contents 15

Q1 What Is a Computer Network? 194

Q2 What Are the Components of a LAN? 195ATypicalSOHOLAN 195

Q3 What Are the Alternatives for Connecting to a WAN? 198DSL Modems 199Cable Modems 200WAN Wireless Connection 200Using MIS InClass 6: A Group Exercise 201

Q4 What Are the Fundamental Concepts You Should Know Aboutthe Internet? 202An Internet Example 202The TCP/IP Protocol Architecture 203Application-Layer Protocols 203TCP and IP Protocols 204IP Addressing 205

Q5 What Processing Occurs on a Typical Web Server? 206Three-Tier Architecture 207Watch the Three Tiers in Action! 208Hypertext Markup Language (HTML) 209

0 Ethics Guide: Personal Work at Work? 210XML, Flash, Silverlight, and HTML 5 213

Q6 How Do Organizations Benefit from Virtual Private Networks(VPNS) and Firewalls? 213Virtual Private Network 213Firewalls 215

Q7 2021? 2160 Guide: Thinking Exponentially Is Not Possible, but... 2186 Guide: Human Networks Matter More 220

mm Case Study 6: Keeping Up with Wireless 224

PART 3: IS and the Enterprise 227

7: IS and Organizations 228Q1 How Do Information Systems Vary by Scope? 230

Personal Information Systems 230Workgroup Information Systems 231Enterprise Information Systems 232Interenterprise Information Systems 232

16 Contents

Q2 When Are Information Silos a Problem? 232How Do Information Silos Arise? 232What Are Common Departmental Applications? 234What Problems Do Information Silos Cause? 235

Q3 How Do Enterprise Information Systems Eliminate Silos? 237An Enterprise System at Fox Lake 237

0 Ethics Guide: Dialing for Dollars 238An Enterprise System for Patient Discharge 240Business Process Reengineering 240

Q4 How Do CRM, ERP, and EAI Support EnterpriseProcesses? 241Customer Relationship Management (CRM) 242Enterprise Resource Planning (ERP) 243Using MIS InClass 7: A Group Exercise 244Enterprise Application Integration (EAI) 247

Q5 What Are the Elements of an ERP System? 248ERP Application Programs 248ERP Databases 249Business Process Procedures 249Training and Consulting 250Industry-Specific Solutions 251

Q6 How Do the Major ERP Vendors Compare? 251ERP Vendor Market Ranking 251ERP Products 252

Q7 What Are the Challenges When ImplementingNew Enterprise Systems? 254Collaborative Management 254Requirements Gaps 254Transition Problems 255Employee Resistance 255

Q8 2021? 255» Guide: The Flavor-of-the-Month Club 260• Guide: ERP and the Standard, Standard Blueprint 262

i i i i i Case Study 7: Process Cast in Stone 268

^s te rns 270

Q1 How Do Organizations Use E-Commerce? 273E-Commerce Merchant Companies 273Nonmerchant E-Commerce 274How Does E-Commerce Improve Market Efficiency? 274What Economic Factors Disfavor E-Commerce? 275

Contents 17

Q2 How Do Organizations Use Web 2.0? 276What Is Web 2.0? 276How Can Businesses Benefit from Web 2.0? 278

Q3 How Do Social Networking Information Systems IncreaseSocial Capital? 279What Is Social Capital? 279How Do Social Networks Add Value to Businesses? 280Using MIS InClass 8: A Group Exercise 281Using Social Networking to Increase the Number of Relationships 281Using Social Networks to Increase the Strength of Relationships 284Connecting to Those with More Assets 285

0 Ethics Guide: Hiding the Truth? 286

Q4 What Are Business Applications for Facebook, Twitter, andUser-Generated Content (UGC)? 288Facebook 288Twitter 291User-Generated Content 293

Q5 How Does Social CRM Empower Customers? 295What Are the Characteristics of Enterprise 2.0? 295Social CRM Is Enterprise 2.0 CRM 296

Q6 How Can Organizations Manage the Risks of SocialNetworking Applications? 296Problem Sources 297Responding to Social Networking Problems 298

Q7 2021? 2980 Guide: Blending the Personal and the Professional 300® Guide: Interorganizational Information Exchange 302

mm Case Study 8: Tourism Holdings Limited (THL) 306

308

Q1 Why Do Organizations Need Business Intelligence? 310

Q2 What Business Intelligence Systems Are Available? 311Business Intelligence Tools 311Tools Versus Applications Versus Systems 312

Q3 What Are Typical Reporting Applications? 312Basic Reporting Operations 313RFM Analysis 315Online Analytical Processing 316Using MIS InClass 9: A Group Exercise 318

Q4 What Are Typical Data-Mining Applications? 318Unsupervised Data Mining 320Supervised Data Mining 321

18 v Contents

Market-Basket Analysis 321Decision Trees 323

9 Ethics Guide: The Ethics of Classification 326

Q5 What Is the Purpose of Data Warehouses and Data Marts? 328Problems with Operational Data 329Data Warehouses Versus Data Marts 330

Q6 What AreTypicai Knowledge Management Applications? 331Sharing Document Content 332Expert Systems 334

Q7 How Are Business Intelligence Applications Delivered? 336What Are the Management Functions of a BI Server? 336What Are the Delivery Functions of a BI Server? 337

Q8 2021? 338• Guide: Semantic Security 3400 Guide: Data Mining in the Real World 342

mm Case Study 9: THL (cont.) 347

PART 4: MIS Management 351

10: Froe®sses for Managing 352Q1 Why Do Organizations Need to Manage Business

Processes? 354A Sample Ordering Business Process 354Why Does This Process Need Management? 355

Q2 What Are the Stages in Business ProcessManagement (BPM)? 357

Q3 How Can BPMN Process Diagrams Help Identify and SolveProcess Problems? 358Need for Standard for Business Processing Notation 358Documenting the As-Is Business Order Process 358Using Process Diagrams to Identify Process Problems 359How Can Business Processes Be Improved? 361Fox Lake Wedding Planning and Facility Maintenance Processes 362

Q4 Which Comes First, Business Processes or InformationSystems? 363How Are Business Processes and Information Systems Related? 364Which Comes First? 366And the Answer Is . . . 367

Contents 19

Q5 What Are Systems Development Activities? 368Define the System 369

° Ethics Guide: Estimation Ethics 370Determine Requirements 373Design System Components 374Implementation Activities 375What Are the Tasks for System Maintenance? 376Using MIS InClass 10: A Group Exercise 378

Q6 Why Are Business Processes and Systems DevelopmentDifficult and Risky? 378The Difficulty of Requirements Determination 379Changes in Requirements 380Scheduling and Budgeting Difficulties 380Changing Technology 380Diseconomies of Scale 380

Q7 What Are the Keys for Successful Process and SystemsDevelopment Projects? 381Create a Work-Breakdown Structure 381Estimate Time and Costs 381Create a Project Plan 383Adjust Plan via Trade-offs 384Manage Development Challenges 385

Q8 2021? 387° Guide: Dealing with Uncertainty 388 .° Guide: The Real Estimation Process 390

'mm Case Study 10: Slow Learners, or What? 394

11: Managing information Systems 396Q1 What Are the Functions and Organization of the IS

Department? 398How Is the IS Department Organized? 398What IS-Related Job Positions Exist? 400

Q2 How Do Organizations Plan the Use of IS? 402Align Information Systems with Organizational Strategy 402Communicate IS Issues to the Executive Group 402Develop Priorities and Enforce Them Within the IS Department 402Sponsor the Steering Committee 403

Q3 What Tasks Are Necessary for Managing ComputingInfrastructure? 403Align Infrastructure Design with Organizational Structure 403

0 Ethics Guide: Using the Corporate Computer 404Create, Operate, and Maintain Computing Infrastructure 407Establish Technology and Product Standards 407

20 v Contents

Track Problems and Monitor Resolutions 408Manage Computing Infrastructure Staff 408Using MIS InClass 11: A Group Exercise 409

Q4 What Tasks Are Necessary for Managing EnterpriseApplications? 409Develop New Applications 410Maintain (Legacy) Systems 410Adapting Systems to Changing Requirements 410Tracking User Problems and Monitoring Fixes 410Integrate Enterprise Applications 410Manage Development Staff 411Administer Data 411

Q5 What Are the Advantages and Disadvantages ofOutsourcing? 413Outsourcing Information Systems 414International Outsourcing 415What Are the Outsourcing Alternatives? 416What Are the Risks of Outsourcing? 416

Q6 What Are Your User Rights and Responsibilities? 418Your User Rights 419Your User Responsibilities 420

Q7 2021? 420• Guide: Is Outsourcing Fool's Gold? 4229 Guide: What If You Just Don't Know? 424

• H Case Study 11: Marriott International, Inc. 428

430

Q1 What Are the Threats to Information Security? 432What Are the Sources of Threats? 432What Are the Types of Security Problems? 432What Are the Components of an Organization's Security Program? 435Using MIS InClass 12: A Group Exercise 436

Q2 What Is Senior Management's Security Role? 437The NIST Handbook of Security Elements 437What Are the Elements of a Security Policy? 438How Is Risk Managed? 438

9 Ethics Guide: Security Privacy 440

Q3 What Technical Safeguards Are Available? 442Identification and Authentication 442Encryption 444Firewalls 448Malware Protection 448Design Secure Applications 451

Q4 What Data Safeguards Are Available? 451

Contents 21

Q5 What Human Safeguards Are Available? 452Human Safeguards for Employees 452Human Safeguards for Nonemployee Personnel 454Account Administration 455Systems Procedures 456Security Monitoring 457

Q6 How Should Organizations Respond to SecurityIncidents? 458Disaster-Recovery Backup Sites 458Incident-Response Plan 459

Q7 What Is the Extent of Computer Crime? 459

Q8 2021? 4610 Guide: Security Assurance, Hah! 4620 Guide: The Final, Final Word 464

H ^ Case Study 12: The ChoicePoint Attack 468

The International Dimension 470

Application Exercises 486

Glossary 503

Index 521