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Chapter 3

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Information Technology Management
ITM 100
Deb Fels

Chapter 3 - Information Systems, Organizations, and Strategy 3.1 - Organizations 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  Organizational politics  Organizational culture  Organizational environments  Organizational structure  Other organizational features Organizational Politics  Divergent viewpoints lead to political struggle, competition, and conflict  Political resistance greatly hampers organizational change 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 Disruptive Technologies  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 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 of 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) Transaction Cost Theory  Transaction Cost - Cost of participating in market  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 Agency Theory  Firm is nexus 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 Understanding Organizational Resistance to Change  Information systems become bound up in organizational politics because they influence access to a key resource - information  Information systems potentially change an organization's structure, culture, politics, and work  Most common reason for failure of large projects is due to organizational and political resistance to change The Internet and Organizations  The Internet increases the accessibility, storage, and distribution of information and knowledge for organizations  The Internet can greatly lower transaction and agency costs - Example: Large firm delivers internal manuals to employees via corporate Web site, saving millions of dollars in distribution costs 3.3 - Using Information Systems to Achieve Competitive Advantage Porter's Competitive Forces Model  Traditional competitors  New market entrants  Substitute products and
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