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Chapter 2

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Administrative Studies
ADMS 2511
Dona Rex

1 Chapter 2 INFORMATION TECHNOLGY GOVERNANCE AND MANAGEMENT • Large organizations expect the board of directors and executives to effectively manage the organization, which is called corporate governance • IT governance, is defined as, “a structure of relationships and processes to direct and control the enterprise in order to achieve the enterprise’s goal by adding value while balancing risk versus return over IT and its processes”. We can se that this definition has three parts. First, it talks about relationships and processes; these would be designed by those who lead the organization. These actions are taken to meet the organization’s goals. The second part of the definition is that these actions should add value; that is, they should make money or bring some kind of intangible benefit to the organization. Finally, there should be a balance between risks and profits. • Without effective IT governance, there are many things that could go wrong. Information systems might not meet organizational business objectives, or systems could be error prone, over budget, or hard to use. If there was poor security, data and programs could be damaged or copied by unauthorized individuals. • Implementing effective IT governance involves adopting good controls over the acquisition and ongoing use of information systems. It also involves establishing good security and privacy controls. • Effective IT governance is an organization-wide process, requiring competent management that sets the tone that controls over IT are important, so that employees follow the best practices that are implanted by the organization. TYPES AND PURPOSES OF INFORMATION SYSTEMS • Computer Based Information Systems – the IT architect and It infrastructure provide the basis for all information systems in the organization. An information system (IS) collects, processes, stores, analyzes, and disseminates information for a specific purpose. A computer based information system (CBIS) is an information system that uses computer technology to perform some or all of its intended tasks. • for this reason the term “information system” is typically used synonymously with “computer based information system” • Basic components of information systems are: o Hardware – a device such as the processor, monitor, keyboard, and printer. These devices accept data and information, process and display it. o Software – program or collection of programs that enables the hardware to process data o Database – a collection of related files or tables containing data o Network – a connecting system (wireline or wireless) that permits different computers to share resources o Procedures – set of instructions about how to combine the above components in order to process information and generate the desired output o People – individuals who use the hardware and software, interface with it, or use its output • Application Programs o an application program is a computer program designed to support a specific task or business process 2 o Application programs are synonymous with applications • Breadth of Support of Information Systems o As we have seen, each department or functional area within an organization has its own collection of application programs, or functional systems. These are called functional area information systems (FAIS) o Each information system supports a particular functional area in the organization o Just below the functional area ISs are two information systems that support the entire organization: enterprise resource planning systems and transaction processing systems. Enterprise resource planning (ERP) systems are designed to correct a lack of communication among the functional area ISs. o Experts credit ERP systems with greatly increasing organizational productivity. Nearly all ERP systems are transaction processing systems (which we discuss next), but transaction processing systems are not all ERP systems. o A transaction processing system (TPS) supports the monitoring, collection, storage, and processing of data from the organization’s basic business transactions, each of which generates data. o Interorganizational information systems (IOSs) are information systems that connect two or more organizations. IOSs support many interorganizational operations; supply chain management is the best known. o Digitizable products are those that can be represented in electronic form, such as music and software. Information flows, financial flows, and digitizable products go through the Internet, whereas physical products are shipped. o Electronic commerce systems are another type of interorganizational information system. These systems enable organizations to conduct transactions, called business to business (B2B) electronic commerce, and customer to conduct transactions with businesses, called business to consumer (B2C) electronic commerce. • Support for Organizational Employees o Clerical workers – support managers and work groups at all levels of the organization, include bookkeepers, secretaries, electronic file clerks, and insurance claim processors. Lower-level managers handle day-today operations of the organizations, making routine decisions such as assigning tasks to employees and placing purchase orders. o Middle Managers – make tactical decisions, which deal with activities such as short-term planning, organizing, and control. o Knowledge Workers – professional employees such as financial and marketing analysts, engineers, lawyers, and accountants. All knowledge workers are experts in a particular subject area. They create information and knowledge, which they integrate into the business. o Executives – make decisions that deal with situations that can significantly change the manner in which business is done o Office Automation System (OASs) – typically support the clerical staff, lower and middle managers, and knowledge workers and are often used by other employees, too. Employees use OASs to develop documents, schedule resources, and communicate. 3 Functional area information systems summarize data and prepare reports, primarily for middle managers, but sometimes for lower- level managers o Business Intelligence Systems (BI) – provide computer-based support for complex, non-routine decisions, primarily for middle managers and knowledge workers. o Expert Systems (ES) – attempt to duplicate the work of human experts by applying reasoning capabilities, knowledge, and expertise within a specific domain. Primarily designed to help knowledge workers o Dashboards - support all managers of the organization. Provide rapid access to timely information and direct access to structured information in the form of reports. Dashboards that are tailored to the information needs of executives are called executive dashboards. COMPETITVE ADVANTAGE AND STRATEGIC INFORMATION SYSTEMS • Through its competitive strategy, an organization seeks a competitive advantage on an industry. That is, it seeks to outperform its competitors in some measure such as cost, quality or speed. Competitive advantage helps a company control a market and generate larger than average profits. • Strategic information systems (SIS) provide a competitive advantage by helping an organization implement its strategic goals and increase its performance and productivity. Any information systems that helps an organization gain a competitive advantage or reduce a competitive disadvantage is a strategic information system. PORTER’S COMPETITVE FORCES MODEL • The best-known framework for analyzing competitiveness is Michael Porter’s competitive forces model. Significantly, Porter concludes that the overall impact of the Web is to increase competition, which generally diminishes a firm’s profitability. • Porter’s Five forces: o The threat of new competitors – this threat is high when entry is easy and low when significant barriers to entry exist. An entry barrier is a product or service feature that customers have learned to expect from organizations in a certain industry. o For most firms, the web increases the threat that new competitors will enter the market by sharply reducing traditional barriers to entry, such as the need for a sales force or a physical storefront to sell goods and services. This threat of increased competition is particularly acute in industries that perform an intermediation role, which is a link between buyers and sellers as well as in industries where the primary product or service is digital. o The bargaining power of suppliers – supplier’s power is high when buyers have few choices form whom to buy and low when buyers have many choices. The Internets impact on suppliers is mixed. On the one hand, it enables buyers to find alternative suppliers and compare prices more easily, thereby reducing the suppliers bargaining power. On the other hand, as companies use 4 the Internet to integrate their supply chains, participating suppliers prosper by locking in customers. o The bargaining power of customers (buyers) – buyer power is high when buyers have many choices form whom to buy and low when buyers have few choices o
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