Information Systems in Organizations

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Information Systems in Organizations

• Chapter 2

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Chapter 2 Outline

• Organizations and Information Systems
• Competitive Advantage
• Performance-Based Information Systems
• Careers in Information Systems

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Organizations Information Systems
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Value Chain
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Porters Firm Value Chain
Support Activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Outbound Logistics
Marketing Sales
Inbound Logistics
Operations
Service
Product Pricing Promotion Place
Customer service Repair
Materials handling delivery
Mfg. assembly
Order processing Shipping
Primary Activities
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The Value System interconnecting
Relationships between organizations
Firms value chain
Suppliers value chain
Channels value chains
Buyers value chains
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Example of strategic targets
Suppliers Raw materials Information Labor Capital Insurance Utilities Transportation Customers Channel distributors Consumers Industrial Reseller Government International Competitors Direct Potential Substitute
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Organizational Structure

• Organizational subunits and their relationship
  with the overall organization
• Categories of organizational structure
• Team
• Traditional
• Multidimensional
• Project
• Virtual

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Traditional Organizational Structure
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Traditional Organizational Structure
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Hierarchical (Traditional) Organizational
Structures

• In hierarchical (traditional) organizations,
  middle managers tell subordinates what to do and
  tell superiors the outcomes.
• The information system supports this hierarchy.

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Project/Team Organizational Structure

• (Here, we will assume project team
  organizational structure are the same).
• Organizational unit is often temporary
  project-based teams assembled from members of
  various functional areas, then disbanded at the
  end of the project
• Project teams vary in size, often work groups
• Projects are usually based on major products and
  services

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Project Organizational Structure
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Multidimensional Organizational Structure

• May incorporate several structures at the same
  time
• Advantage
• ability to simultaneously stress both traditional
  corporate areas and important product lines
• Disadvantage
• multiple lines of authority

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Multidimensional Organizational Structure
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Matrix Organizational Structure

• In matrixed organizations, work is organized in
  small work groups and integrated regionally and
  nationally/globally.
• IS reduces operating expenses by allowing
  information to be easily shared among different
  managerial functions.

Region Industry Region 1 Region 2 Region 3
Ind. 1 Position for Ind. 1 in region 1 Pos. for Ind.1 in region 2 Pos. for Ind.1 in region 3
Ind. 2 Pos. for Ind.2 in region 1 Pos. for Ind.2 in region 2 Pos. for Ind.2 in region 3
Ind. 3 Pos. for Ind.3 in region 1 Pos. for Ind.3 in region 2 Pos. for Ind.3 in region 3
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Virtual Organizational Structure

• Virtual organization refers to the extensive use
  of IS and electronic links to create an extremely
  flexible organization
• Employs business units in geographically
  dispersed areas
• People may never meet face to face
• Can be permanent or temporary

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Virtual Organizations

• IT has made it possible for an individual to work
  for an organization and live anywhere
• Virtual organization structure is networked.
  Extensive collaboration takes place
  electronically, esp. e-mail
• Managers in a virtual environment monitor
  results, not progress
• Forms are electronic, tech. support through a
  web interface
• Business processes are also usually through the
  Web

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Flat Organizational Structures

• In flat structured organizations, work is more
  flexible and employee do whatever is needed.
• IS allows offloading extra work and supports
  intra-firm communications.

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The Networked Virtual Organization
Instead of rigid hierarchies, all parts of the
company are connected by formal and informal
communications.
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Organizational Culture and Change
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Organizational Culture

• Shared understandings, values, and assumptions in
  an organization
• Influences information systems

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Organizational Change
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Reengineering
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Reengineering
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Continuous Improvement

• Constantly seeking ways to improve business
  processes
• Benefits
• Increased customer loyalty
• Reduction in customer dissatisfaction
• Reduced opportunity for competitive inroads

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Continuous Improvement vs. Reengineering
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Technology Diffusion, Infusion, and Acceptance

• Technology diffusion - measure of widespread use
  of technology
• Technology infusion - extent to which technology
  permeates a department
• Technology Acceptance Model (TAM) - specifies
  factors that can lead to higher usage of
  technology

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Total Quality Management (TQM)

• Quality ability of a product or service to meet
  or exceed customer expectations
• TQM approaches and techniques used to achieve
  quality throughout the organization

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Outsourcing and Downsizing

• Outsourcing contracting with outside
  professionals
• Downsizing cutting the number of employees

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Outsourcing

• Why Outsource?
• Means of cost control e.g., maintenance
• Classic model only outsource functions that
  dont give a competitive advantage
• Later (90s) sometime outsourcing even CA
  functions is a good idea if done by outside
  experts (but this is risky).
• Now, selective outsourcing choose which IT
  capabilities to retain in-house and which to
  outsource.

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Factors driving outsourcing

• Cost savings
• Highly qualified IT staff are difficult to find
  and retain
• By bringing in outside expertise, management
  needs to focus less on IS operations and more on
  the information itself.
• Outsourcers are specialists, should understand
  how to manage IS staff more effectively.
• Outsourcers may have larger IS resources that
  provide greater capacity on demand.

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Disadvantages of outsourcing

• Abdication of control
• High switching costs
• Lack of technological innovation
• Loss of ownership

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Competitive Advantage
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Competitive Advantage

• Competitive Advantage a significant, long-term
  benefit to a company over its competition
• The ability to establish and maintain a
  competitive advantage is vital to the companys
  success

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Competitive Advantage

• Five forces motivate firms to seek competitive
  advantage
• Rivalry among existing competition
• Threat of new entrants
• Threat of substitutions
• Buyers bargaining power
• Suppliers bargaining power

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Porters competitive forces with potential
strategic use of information

• Strategic use
• Switching costs
• Access to dist. channels
• Economics of scale

• Strategic use
• Cost effectiveness
• Market access
• Differentiation of
• product or service

Potential threat of new entrants
Industry competitors
Bargaining power of buyers
Bargaining power of suppliers

• Strategic use
• Buyer selection
• Switching costs
• Differentiation

• Strategic use
• Selection of supplier
• Threat of backward
• integration

Threat of substitutes

• Strategic use
• Redefine products and services
• Improve price/performance

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Strategic Planning for Competitive Advantage
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Strategic Planning for Competitive Advantage

• Change the structure of the industry
• Create new products or services
• Improve existing products or services

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Use information systems for strategic planning

• Initially IS used to reduce costs
• Later, improve efficiency meet corp. strategic
  goals
• Usually embodied in a product or service (SABRE
  is a classic example)
• Competitive advantage is often only temporary
• This is partly due to companies using IS to
  compete with others who have created successful
  IS-based products and services

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Performance-Based Information Systems
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Productivity

• Productivity a measure of output achieved
  divided by input required
• A higher level of output for a given level of
  input means increased productivity
• The text implicitly discusses labor
  productivity, i.e., the level of output for a
  given unit of labor.

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Return on Investments and the Value of
Information Systems

• Earnings growth
• Market share
• Customer awareness and satisfaction
• Total cost of ownership (TCO) includes indirect
  costs

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Justifying Information Systems

• Information Systems can be justified by solving
  the risk/reward equation.
• Many IS departments try to formally assess and
  manage risk.
• Assess risks
• Identify benefits

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Justifying Information Systems

• Assessment of Risk
• 1. How well are the requirements understood?
• 2. To what degree does the project require
  pioneering effort in technology?
• 3. Is there a risk of severe business
  repercussions if the project is poorly
  implemented?

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Justifying Information Systems

• The benefits from most IS projects fall into one
  of the following categories
• Tangible Savings
• Intangible Savings
• Needed to meet a Legal Requirement
• Keep the company modernized
• Pilot Project to gain experience in a new area

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Careers in Information Systems
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The 10 Best Places to Work for IS
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Roles, Functions, and Careers in Information
Systems Department

• Operations - focuses on the efficiency of
  information
• Systems development - focuses on specific
  development projects and ongoing maintenance and
  review
• Support - provides user assistance

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Typical IS Titles and Functions

• Chief Information Officer (CIO) - employs the IS
  departments equipment and personnel to help the
  organization attain its goals
• LAN administrators - set up and manage the
  network hardware, software, and security
  processes
• Internet careers
• Strategists
• Programmers
• Website operators
• Chief Internet Officer
• Consulting firms

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Chief Information Officer (CIO)

• Gartner group definition
• To provide technology vision and leadership for
  developing and implementing IT initiatives that
  create and maintain leadership for the enterprise
  in a constantly changing and intensely
  competitive marketplace.

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The Three Primary Responsibilities of
Information Systems
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Summary

• Value-added processes increase the relative worth
  of combined inputs on their way to becoming final
  outputs
• Business process reengineering involves the
  radical redesign of business processes,
  organizational structures, and information
  systems
• Information systems personnel typically work in
  an IS department that headed by a CIO and
  includes systems analysts, and computer
  programmers

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Principles and Learning Objectives

• Identify the value-added processes in the supply
  chain and describe the role of information
  systems within them.
• Provide a clear definition of the terms
  organizational structure, culture, and change and
  discuss how they affect the implementation of
  information systems.
• Identify some of the strategies employed to lower
  costs or improve service.
• Define the term competitive advantage and discuss
  how organizations are using information systems
  to gain such an advantage.
• Discuss how organizations justify the need for
  information systems.
• Define the types of roles, functions, and careers
  available in information systems.

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End of Chapter 2