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ITM 100 (123)
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Chapter 3


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Information Technology Management
ITM 100
Deb Fels

Chapter3- Information Systems, Organizations, and Strategy 3.1- Organizing and Information Systems: What is an organization?  Technical definition: - Stable, formal social structure that takes resources from environment and processes them to produce outputs - A formal legal entity with internal rules and procedures, as well as a social structure  Behavioral definition: - A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution Features of organizations:  Routines and business processes: Precise rules, procedures, and practices  Organizational politics: All large Information Systems investments by a firm brings changes into the firm charges a political events.  Organizational culture: Encompasses set of assumptions that define goal and product - What products the organization should produce - How and where it should be produced - For whom the products should be produced - Social aspect of organization - May be powerful unifying force as well as restraint on change  Organizational environments: Organizations and environments have a reciprocal relationship - Organizations are open to, and dependent on, the social and physical environment - Organizations can influence their environments - Environments generally change faster than organizations - Information systems can be instrument of environmental scanning, act as a lens  Organizational structure: Organizational Type Description Examples Entrepreneurial Structure -young small firms Small Startup Business -managed by an entrepreneur also the chief executive officer Machine bureaucracy -large bureaucracy Midsize manufacturing firms Centralized management team and a centralized decision making Divisionalized bureaucracy -multiple machine General Motors bureaucracy -each produces a different product/service -1 central HQ Professional Bureaucracy -Knowledge based Law firms, universities, Goods/service depends on the hospitals knowledge of professionals -department heads Adhocracy -task force Consulting firms such as Rand -large group of specialists Corporation -short-lived multidisciplinary teams  Other organizational features Disruptive Technology: - Technology that brings about sweeping change to businesses, industries, markets - Examples: personal computers, word processing software, the Internet, the PageRank algorithm - First movers and fast followers - First movers – inventors of disruptive technologies - Fast followers – firms with the size and resources to capitalize on that technology - Substitute products that work well or better than anything currently produced. 3.2- How Information Systems Impact Organizations and Business Firms:  Economic impacts  Organizational and behavioral impacts - IT flattens organizations - Postindustrial organizations - Understanding organizational resistance to change  The Internet and organizations  Implications for the design and understanding of information systems Economic Impacts:  IT changes relative costs of capital and the costs of information  Information systems technology is a factor of production, like capital and labor  IT affects the cost and quality of information and changes economics of information  Information technology helps firms contract in size because it can reduce transaction costs (the cost of participating in markets)  Outsourcing 1) Transaction Cost Theory:  Developed in 1931  Search and information costs = cost of finding source, best pricing, who is selling, availability  Bargaining costs = costs of coming to an acceptable agreement, negotiating, drawing up contract, bid vs ask  Enforcement costs = cost of making sure everything goes according to contract or agreement, and if not doing something about it  If transaction cost in market is high, then companies tend to internalize function (e.g., multinational company. Negotiation with outside companies)  Firms seek to economize on cost of participating in market (transaction costs)  IT lowers market transaction costs for firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees 2) Agency Theory:  Firm is connection of contracts among self-interested parties (employees) requiring supervision  Firms experience agency costs (the cost of managing and supervising) which rise as firm grows  IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees Organizational and Behavioral Impacts: 1) IT Flattens Organizations:  Reduces number of levels in an organization by providing managers with information to supervise large number of workers  As a result lower level employees get more decis
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