Summary with the 8th edition of Information Systems Today: Managing in the Digital World by Valacich and Schneider

How to manage the digital world? - Chapter 1

Open innovation entails opening up the innovation process to outside entities, including academia, individual innovators, research labs, other companies and suppliers.

What are the information systems of today?

The most important components of the information systems (IS) are computers. These can be laptops, cameras, smartphones etc. Information systems are used by many organizations to record purchases, optimize the supply chain, and many other tasks. Because of the increased global competition, firms had to find a way to do things faster, better, and at lower cost. This can be achieved by using information systems. Through these systems new markets were more easily accessed.

Because of the changes in technology new ways of working and socializing have developed over the last few years. People are no longer bound to a stationary PC but can now do their work wherever there is a phone signal. Because of cloud computing, like Dropbox and Gmail, people can access their email, files pictures from any device. The technology changes also affect our social life. For socializing and communication people nowadays really need mobility and connectivity.

In 1959 Peter Drucker argued that information technology (IT) would become more and more important. He defined a knowledge worker as a professional who is relatively well-educated and who creates and modifies knowledge as a fundamental part of his/her job. These workers have great career opportunities and are paid more than other workers. According to Drucker, the number of knowledge workers would increase over time and this would lead to a knowledge society. Many call this knowledge society the digital world. Some argue that there is a digital divide. Meaning that people who have access to IT have an advantage over people who do not have access.

What is the effect of globalization?

Globalization is the integration of economies over the world. Globalization leads to several changes, namely:

• Economic changes
• Technological changes
• Cultural changes

If an organization is moving its business processes or tasks to another company, either offshore or onshore (domestically), then we speak of outsourcing. The tremendous decrease in communication costs has increased the use of outsourcing. Often entire functions of a business, like accounting, are outsourced to another firm. This other firm can be located in the domestic country but it can also be located in a foreign country. Many firms set up factories in emerging countries because it enables them to mass-produce products at low cost. An organization can outsource for many more reasons, like to get access to certain capabilities or to increase efficiency.

Globalization has created many opportunities, like the reduction in transportation costs. Cultures have become closer to each other because of the increased use of television and social media. We can receive television programs from other countries on our TV.

Changes in the global society

The global society is developing in a number of ways. There are demographic changes; people are becoming older and older for instance. Also, (mainly in the third and second world) more and more people are moving to the cities, this is called urbanization. There are shifts in economic power, on one hand because economic differences between people are getting bigger, but also because resource scarcities will be more common in the future, for example scarcities of oil and gas. Sustainable development is becoming more important, this leads to many technological innovations that make businesses more sustainable. There are five trends that seem to be shaping the IT future.

• Mobile
  • Devices are very mobile nowadays. Compare the landline phones to mobile phones with apps, and the PCs from ten years ago to your laptop nowadays. One one hand, customers can be reached easier (most of them have their phone with them all the time), with the use of more and more devices with different software. On the other hand, employees are also using more and more different devices. Consumeration of IT means that technological innovation is often first introduced in the marketplace before using it in organizations.
• Social Media
  • You can use social media like Whatsapp and Facebook to communicate to friends and family; business can communicate to their customers; university professors can update their students on course materials via social media groups, etc. Social media is likely to maintain its presence in the future. The value of social media is based on the network effect: the valuing of networks.
• The Internet of Things
  • More and more devices are connected to the internet. Not only phones and computers, but also building heating systems, cars and refridgerators. Also industrial manufacturing technologies are using more and more internet devices.
• Cloud Computing
  • Originally data was stored mainly on the devices themselves (computers, cameras, phones). Furthermore, most software was installed directly and completely on the computer. Nowadays, apps are using the internet to store their data. Google apps (pictures, mpas, gmail, docs, etc.) or ICloud are good examples of apps that store their collected information in the cloud.
• Big Data
  • Social Media and the Internet of Things trends make it easier and easier to collect data. This enables advances in robotics, the use of robots for manual labor. Nowadays, most people know how to work with computers: they are computer literate. But as the use of computers increases, it is not only important to know how to use computers but also to be able to independently learn new technologies. This is called computer fluency.

What are information systems?

To collect, distribute and create useful data, information systems use information technology. Information technology includes telecommunications networks, software and hardware. Physical computer equipment is defined as hardware and the program that tells the computer what to do is the software. If two or more computer systems are linked with communications equipment then we speak of a telecommunications network.

It is important to make a distinction between data and information. Data are just symbols, like words or numbers, without meaning. If this data is transformed, organized, formatted or processed such that it is useful then we speak of information. Information is a representation of reality and can therefore be used solve problems. Knowledge is defined as the ability to understand information. Without knowledge, information is useless.

Computer hardware is able to transform data into useful information and then software is used to tell the computer which tasks and processes it must perform. Finally, information can be shared and global communication is possible because of the telecommunications networks.

The opportunities for people in the information system (IS) field are increasing as more and more companies need people with the skills to optimize business processes. The field of IS includes the people in organizations who design, build, use and manage information systems. Information systems are an important tool for the successes of the company. The importance of IS is expected to increase even further over the next 10 years. Furthermore, it is likely that the opportunities in the IS field can be found in several areas.

The analysts, programmers, administrators, designers and managers in an organization are the people who develop the systems and manage them. The nature of the IS work has changed over the years. The IS departments in organizations no longer exist of male nerds but now also contain women and people who can speak fluently about technology and business. The IS people are highly-skilled and earn high wages. A good IS employee must possess skills in three different areas:

• Technical competency
  This includes skills and knowledge about networking, hardware and software. The person must know how these three work and what an organization can do with them. Since technology is something that develops very fast it is hard to keep your technology knowledge updated.
• Business competency
  Besides knowledge about the technologies it is also very important to have knowledge about business aspects, like business integration and communication. If a worker has these business skills he has the opportunity to get management positions.
• Systems competency
  These skills include the integration of systems, the design and development of systems, critical thinking and problem solving. Good IS employees must also have social skills that enable them to work well with others.

A good candidate for the IS field must thus have several skills. Organizations often have a hard time finding personnel with these skills. Therefore, we see that technology-based companies are often clustered in areas where such skilled people are located. An organization can offer benefits, like flextime or educational grants, to attract people.

Understanding information systems is not only useful in an IS career but it is also useful in your personal life. In many fields that are related to business, information systems are used. So understanding and being able to use information systems gives you an advantage over the competition. Even in your private live it may be handy. For instance when you try to sync all your files across different computers of mobile devices.

What types of information systems are there?

IS is the combination of people and information technology (IT) that create, collect, process, store and distribute data. IT includes hardware, software and telecommunication networks. IS personal has to have technical competency, business competency and systems competency. Information systems can be used to improve customer service, to increase productivity or profitability, to reach more customers or to gain competitive advantage. There are several different information systems that organizations can use. These can be classified into different categories. Some of the main categories are:

• Transaction processing system (TPS)
• Management information system
• Office automation system
• Decision support system
• Business intelligence system
• Electronic commerce system

Transaction processing systems are used by many different organizations to make customer transactions more efficient and to generate data that can be used to gather information about customers or changes in product trends. The data that is generated by TPS can be organized in order for managers to make decisions with a system. A common system that is used for this is a management information system.

An organization can connect host computers, along with their network, together to create a larger network. One can also connect several information systems with each other. These systems enable workers to perform certain tasks. The electronic commerce system, like the Web, is also important since it enables consumers to search for information about products and buy them online. Business intelligence systems are used to analyse date in order to understand the business better.

Nowadays, we see that in many organizations the builders and managers of a system work at the business unit to work together with the users of the system. We often see that these builders have an office in the building where the users work to help the users when necessary. IS personnel generally has to report to two groups, the central IS group and to the business function where they work.

What is the dual nature of information systems?

Information technology has a dual nature. It can effectively be used as a competitive weapon but it can also lead to negative outcomes. For instance, PlayStation created a Network to offer premium services, but it has been plagued with outages, outraging gamers. If the system would work as it was supposed to, it would have led to great advantages, but instead it remains an Achilles heel. Another example is FedEx, which is a global leading company in the transportation industry. If a transport company improves the transport by making use of an information system then this gives the company a competitive advantage over other companies namely.

The systems that companies use are often very large and complicated and are critical for the success of the company. It is a strategic choice for a company to develop an information system. Companies make this choice because they hope that this will give them a competitive advantage. Such information systems to gain competitive advantage can be used by small firms as well as by large firms. Nowadays, almost every company has an information system, it has become a necessity. Information systems can thus be used to create efficiencies and to get a competitive advantage over rivals.

What are the ethics of information systems?

Computer ethics is defined as the moral issues and standards of conduct corresponding to the use of information systems. As the use of computers increased, several ethical issues have emerged. Especially concerns about privacy have emerged due to increased sharing of information and digitally duplicating. There are also issues related to intellectual property.

We nowadays make more use of things like email, Facebook and the internet. If you visit a website or use Facebook you may see advertising that is directed towards you, using your name or showing your preferences. This can make you feel like you are being watched and that your privacy is at risk. Information privacy is defined as the information that an individual should have to share with others in transactions, like online shopping, or in the workplace.

The increased access to information also this means that other people might have access to information that you would like to keep to yourself, this is a downside of the increased access. This can be personal information like credit card numbers, medical information and social security numbers. Via the internet one can find almost anything that a person has posted on the internet. Many pages remain available on the internet for a very long time. There are several countries that want to protect their citizens and try to stop this. In 2014, there came a rule that stated that search engines had to remove links with personal information that is not accurate, relevant or adequate anymore.

Companies can sell our personal information to other companies. Our email addresses are sold and therefore we get emails with magazines, advertising etc were we didn't subscribe for. If you buy a product from a company than the company has data about you that it legally owns and may sell to others. Data from surveys can be combined with data from credit card transactions and this gives even more information about the purchases preferences of a person.

Almost everyone has an email address to communicate. It is one of the most popular software applications ever. Companies are not obligated to respect the privacy of people. Many governments put pressure on companies to put their privacy policies on their Web sites. Businesses often list the following information practices:

• Notice/awareness: tell what data is gathered
• Choice/consent: give options about what will be done with the data
• Access/participation: give customers access to the data
• Integrity/security: ensuring integrity
• Enforcement/redress: provide means to enforce the practices

Unfortunately we see that the privacy of customers is often not protected. Some tips to maintain your privacy are:

• Use websites that are monitored by independent organizations.
• Try to avoid that cookies are saved on your computer.
• Use the anonymous mode when you visit websites.
• Use caution when you request for a confirmation email.
• Beware of all the things you post online.

Intellectual property is something that is created by the mind and which has commercial value. There are ethical issues related to this intellectual property, downloading and copying information, and distributing information. Years ago it was not possible to copy a music song without losing its quality, but nowadays this is easy done. There are also 3D printers, which create physical three-dimensional objects from a digital model. Some schools have a license to use a certain software. Most students who install this software will not uninstall the software when they graduated and will keep on using it or lend it to friends. You could also download a software illegally if you do not have a license.

These cases are not only associated with legal issues but also with ethical issues. For instance if you illegally download a software, then the vendor of the program does not receive the money that you would have paid if you bought the software legally. There are megazines that use photoshop software to change photos. Some argue that this is also not ethical. So the internet also asks for some ethical conduct.

In many businesses there are guidelines for the ethical use of computer systems and information. Also on universities and schools there are certain guidelines for the students how to use computers or software. Most organizations ask their people to act responsibly and legally. The Computer Ethics Institute is a study organization that studies the impact of information technology on ethics and public and corporate policy. This institute has several guidelines for how to use computers. These include things like do not use the computer to harm others, to steal, to look in someone's files.

Open innovation entails opening up the innovation process to outside entities, including academia, individual innovators, research labs, other companies and suppliers.

How to gain competitive advantage? - Chapter 2

How can information systems enhance strategy?

Information systems can have strategic value to a company since much information is needed for an organization to support its business processes. Business processes are defined as the activities an organization performs to reach its business goals. These activities include the core activities to transform inputs into outputs as well as the supporting activities that make the core activities possible. Businesses can use several types of information systems for the different levels in the organization. Every level has different responsibilities and therefore needs different information systems.

Which organizational levels are there?

The operational level of the firm is the level where the day-to-day, routine processes and interactions with customers occur to increase efficiency. It can for instance be used to process the transactions of a company; a routine thing that needs to be recorded. Operational planning is used to organize the structured day-to-day decisions. Structured decisions are decisions for which one can specify in advance what the procedures are for a particular situation. These decisions can be structured into operational information systems so that they can be made without much human intervention. Efficiency is reached by IS optimizing processes and better understanding problems related to performance.

Another level in the firm is the managerial level. At this level functional managers are controlling and monitoring activities that are on operational levels and they provide information to higher levels of the firm. They focus on increasing the effectiveness by deploying resources to reach the goals of the firm. The managers at this level are called midlevel managers.The decisions at this level are less structured than the decisions at the operational level. These decisions are therefore called semistructured decisions. For these some procedures to follow in a particular situation can be specified in advance. But it is not possible to make a specific recommendation for the situation. To assess the performance of an organization one could make use of the key performance indicators (KPIs).

The level where the managers focus on long-term strategic problems of the organization is called the executive level. These decisions include which products to produce and in which countries to operate. The president and the chief executive officer are active at this level. The decisions that are made at this level are unstructured decisions since one cannot specify certain procedures in advance. At this level information systems are used to obtain summaries of trends and predictions for the future. These IS provide the firms KPIs which are used balance the performance of the firm.

In an organization we do not only have different decision making levels but we also have different functional areas. A functional area is a part of an organization that is focused on specific activities. Some examples of functional areas are human resources, marketing, production and finance. Each functional area uses different functional area information systems. These are designed to support the process of each different functional area.

Why use information systems?

Information systems can be used for several reasons. Some reasons are:

• Automating; doing things faster
• Organizational learning; doing things better
• Supporting strategy: doing things smarter

Organizational learning is defined as the ability of an organization to use information and behavior from the past to improve the business processes. The information system provides information from the past which can help you tackling problems in the future. Combining automatic processes together with the learning part is better than just doing everything automatic.

What is an information system strategy?

The organizational strategy of a firm is its plan to achieve its goals and mission or to gain competitive advantage over rivals. Senior managers can make a plan of where they see the organization heading in the future. This vision of the future can be converted into measurable objectives and targets. After this a strategy is made to achieve these desired goals. This process is called strategic planning.

When thinking about strategy, organizations first have to analyze competitive forces, to identify where in the market they should compete. Being the first to enter a market, gives the first-more advantage. Then an organization has to choose a generic strategy. For instance, it could use the low-cost leadership strategy. With this strategy a firm offers the best prices in its industry for its goods or services. Another strategy that an organization can pursue is the differentiation strategy. This strategy means that the firm will provide better products or services than its rivals. The differentiation can be focused on a particular segment of the consumers. An organization can also choose to provide products or services with reasonable good quality at competitive prices. Such a strategy is called the best-cost provider strategy. The third step includes identifying resources and capabilities. These can give a cost or differentiation advantage. Value creation occurs when an organization can provide products at a lower cost or with superior benefits for the customer. The last step in identifying how to compete, is the analyzing of the value chain. A value chain consists of activities that add value throughout the organization. IS plays a role in optimizing this chain.

How to apply this on the competitive advantage of a firm?

If a firm has an advantage over its rivals in the field of consumer attraction and defending against competitive forces than it is said to have a competitive advantage. There are several sources of competitive advantage. Some examples are:

• Superior customer service
• Best made product of the market
• Lower costs than rivals
• Brand name and reputation
• First entrant of the market (first-mover advantage)
• Technology benefits
• Shorter developing time

When a competitive advantage is achieved the firm needs resources and capabilities to keep this advantage. The resources of a company are its specific assets and its capabilities are the abilities to bring these resources to the market. The resources and capabilities of the organization define what the distinctive competencies are (like quality or innovation). These competencies are used for the organizational strategy of an organization to make products valuable to customers.

If an organization provides products at lower cost or with superior benefits relative to its competitors then we speak of superior value creation. Information systems can be used to gain or keep the sources that provide the firm a competitive advantage. The information systems can support the firm in adding value. Therefore, an IS is essential to survival in the long run for the firm.

Organizations must define how they can best use their resources to execute their strategy. To define this a company analyzes the different competitive forces of the industry where it operates.

A company must also evaluate its value chain. To do this managers can use a value chain analysis. Value chain analysis is defined as a process where the activities of an organization are analyzed to identify where value is added to services or products and what the associated costs are. With this analysis managers can determine which opportunities they can have from using information systems to get a competitive advantage. The value chain of a company can thus be improved by using information systems. A company can for instance reach its customers via social media like Facebook or Twitter.

A company wants that its information systems match with its strategy. They are trying to maximize the IT alignment of the business. Information systems are seen as competitive assets where one must invest in. Sometimes a company must make investments that are not in line with the strategy but need to be made in order for the company to survive. These investments are called a strategic necessity.

Just implementing an information system is not what will give a company a competitive advantage. In order to have an effect, there must be significant organizational changes. The functioning of the entire company has to be changed and improved.

How to determine the value of information systems?

It is very difficult to determine the value of the IS infrastructure of a company. There are several different methods that can be used to determine the value. Four approaches are:

• Economic value
  This is the value of the investment in terms of improving the infrastructure to increase profitability.
• Architectural value
  This value measures if the investment can make use of the capabilities of the infrastructure to meet the business needs.
• Operational value
  This value is derived from determining if the investment improves the business processing requirements.
• Regulatory and compliance value
  This value is based on whether the investment is able to meet the requirements for security, control and integrity.

Which business models are used in the digital world?

A business model is defined as a summary of the strategic decision of the business which outlines how the business will achieve its objectives. In this business model are the value proposition and how a company will create value specified. Also customer segments, key resources and channels are specified in this summary. The business model reflects:

• What does the company do?
• How does the company do it uniquely?
• What does the company earn for doing what it does?
• What are the key resources and activities?
• What are the associated costs?

Each component must be assessed in the business model and each has a critical role in shaping the business.

How to generate revenue?

For any organization it is important to determine how it must generate revenue. This is done by using a revenue model in which is described how the firm will generate profits, earn revenue and produce a return on the invested capital. A company can advertise in the offline world but since the Internet companies are also able to advertise online. An example of an advertising-based business model is affiliate marketing. Companies use the web to reach a great amount of customers. This large group of customers enable companies to turn over their inventory quickly. Because of this companies can sell their products at low prices and still make profits.

Freeconomics is defined as business strategy using the digital technologies to provide customers free products and services. Companies can use this business strategy to gain a competitive advantage. Some examples are Google and Yahoo!. These two are free search engines which make millions of revenue. Freemium (free and premium) includes a free limited version of a product or service for in order to build a large customer base, while charging for unrestricted versions.

A digital platform enables others to co-create value. This type of business model creates a digital ecosystem where users and other businesses can create value, while others can consume, like Wikipedia. A shared of collaborative economy is a system in which assets or services are shared between private individuals, either free of for a fee, typically by means of the Internet.

Xaas stands for X as a service, which entails a type of business model centered around not selling products, but providing these as services. This is a service-based business model. A pipe-based business model includes the selling of a product to an end user, while service-based business models include a manufacturer offering equipment services.

How to value innovations?

Companies have to innovate in order to differentiate themselves. If a company upgrades its old systems to a new system this will only give him a short competitive advantage over its rivals. To sustain a competitive advantage the firm must keep investing in new technologies. However, it is impossible to keep track of all the new technologies. You have to focus on the ones that will make or break your success.

Incremental innovation entails enhancing or upgrading existing products, services or processes, while radical or disruptive innovation entails using a markedly new or different technology to access new customer segments and provide benefits an replacement. Disruptive technologies are defined as new technologies, services or products that eventually will replace the existing dominant technology in the market. Such innovations lead to a lot of changes in the market. The innovation will be adapted in the industry and this will lead to improvements.

How to implement IS innovation?

Architects and interior designers use virtual reality (VR) headsets nowadays to explore offices and buildings before construction has started, like the Oculus Rift. Augmented reality uses IS to enhance a person’s perception of reality by providing relevant information about the user’s surroundings, like special glasses.

The need for IS innovation is constant, to not lose the competitive advantage, but successful innovation is difficult. Innovation is often fleeting, risky and choices are often difficult. Open innovation is the process of integrating external stakeholder into the innovation process, which can prove to be very beneficial.

If an organization wants to deploy a new information system then the processes, resources etc of the firm need to be ready to adapt to the new system. The organization needs the following:

• Process requirements: the people in the organization must be willing to change
• Resource requirements: to make a change one must have the necessary human resources available
• Risk tolerance requirements: the people of the organization must have tolerance for risk and uncertainty

The innovation process consists of:

• Organizing to make innovation choices: Making smart innovative choices is done best when starting early when identifying investors, displaying executive leadership, building a team of expert innovators and educating the organization.
• Implementing the innovation process: The disruptive innovation cycle consists of choosing enabling/emerging technologies, matching technologies to (economic) opportunities, executing business innovation for growth and assessing value of the technology. Growth will be most successful when selecting technologies that have the biggest potential.
• Thinking about investments in radical innovations: this consist of putting technology ahead of strategy and ahead of marketing, while taking into consideration that innovation is continuous.

Nowadays startups and crowdfunding are becoming more and more common and successful. A startup is defined as a technology-based new venture with a high potential for scalability and growth. These are confounded by entrepreneurs etc with a promising idea. Crowdfunding is the securing of business financing from individuals in the marketplace to fund an initiative.

If a firm has an advantage over its rivals in the field of consumer attraction and defending against competitive forces than it is said to have a competitive advantage. There are several sources of competitive advantage. Some examples are:

• Superior customer service
• Best made product of the market
• Lower costs than rivals
• Brand name and reputation
• First entrant of the market (first-mover advantage)
• Technology benefits
• Shorter developing time

How to manage infrastructure and services? - Chapter 3

Companies who operate in the digital world need comprehensive information system infrastructure to support their business strategy. In order to get a great return on IS investments, companies have to manage their IS infrastructure.

What is the information systems infrastructure?

Infrastructure is defined as the technical structures that enable the provision of services. An infrastructure is needed in any area where people work or live. People are often not aware of all the components of the infrastructure since these are invisible for people. For instance, people often do not know where their water comes from. Both the people and businesses located in an area depend on the infrastructure of a city. Cities with a good infrastructure are more livable and attract more inhabitants and businesses.

Each area has its own characteristics and infrastructure and these create challenges for global organizations. The decisions of an organization depend on the provision of services in an area. In some emerging economies there is no continuous supply of water and no electricity. If a company is moving its activities to such an emerging economy then it must keep those things in mind.

How to implement a strategy?

When making decisions and strategy, companies rely on information systems infrastructure. This infrastructure consists of software, hardware, storage, data centers and networking. Organizations depend on three capabilities supported by information systems to enable their business processes. These three capabilities are storage, transmission of data and processing. Almost all the business processes rely on an information system infrastructure. IS architecture entails the organization’s technologies, systems and processes that support an organization’s specific business processes and strategy.

The business environment is changing every day and therefore it is necessary that companies can adapt quickly to these changes. As new competitors can arise quickly, competitive advantages are often of short duration. To adapt quickly an organization must be flexible and agile. To be flexible and agile a company has to align its business processes with the information systems infrastructure. As the business environment is changing there is a continuous process where business goals are adjusted in line with the information systems infrastructure.

The data that a company has is essential for gaining business knowledge and performing business activities. For every business process data are used or generated. The data can be analyzed to gain insights that can make the company more productive. However, just having data is not enough. A company must also be able to use the data effectively.

What is software?

To effectively use data companies use software. Software is used to automate processes to reduce costs or to generate more revenue. With application software, companies are able to automate business processes. With this software a company can perform processes that otherwise would not have been possible. Websites such as Bol.com would not be possible without a system for automatically processing transactions.

Microsoft Office is also an application software that people use. There are many more different application software that individuals or companies use. The application software interacts with databases. The software stores the data that is needed for business processes and for gaining business intelligence.

A database is defined as a collection of related data that is organized in such a way that it enables data searches, and is crucial to the operations and competitive advantage of a company. It is therefore important for the success of a company. Often several business processes make use of the same data. If the data can be accessed quickly by the applications then these business processes can be optimized.

Database management systems (DBMSs) are a type of software that enables an organization to more easily retrieve, store and analyze data. These systems are used by organizations in order to harness the power of the databases. How the data is gathered, stored and manipulated has a large effect on the success of organizations.

What are the components of information system infrastructure?

A company must decide which software, hardware, storage, networking and data centers it will choose. It is important to make the right choice since this can support the success of the firm.

What is hardware?

Hardware are the computers that run the databases and applications that are necessary for analyzing the business and processing transactions. In a company there are many different business processes and therefore the company needs different types of computers to support these processes. The computers can be divided into classes. The five general classes are:

• Supercomputer
  This computer is used to solve massive scientific problems. It is the most powerful and expensive computer and is generally not used by business organizations.
• Mainframe
  These computers are the main computing system for most organizations. They are optimized for resource utilization, security and high availability. Mainframes are used for mission-critical applications like transaction processing.
• Server
  A sever is a computer on a network. Users of the network have access to all the files, communications and other services of the network. These computers are used in large organizations so that many users can access the network at the same time. Organizations often have different servers for different parts of the organization.
• Workstation
  These computers are designed for engineering, animation and graphic design users. They are optimized for visualization and you can make 3D models with these computers. The memory of these computers is generally very large and they have video cards and fast processors.
• Personal computer
  Personal computers (PCs) are used for personal or business computations. Over the last years portable PCs, like tablets and notebooks, have become more popular. They have become a part of organizations.

In contrast to general-purpose computers, embedded systems, like an MP3, are optimized to perform a well-defined set of tasks. Radio frequency identification (RFID) uses electromagnetic energy to transmit data between a reader and processing device (the tag). It is rapidly replacing the standard bar codes. RFID tags can be used anywhere.

Mainframes and servers are designed so that many people can use them at the same time while workstations and personal computers are designed to be used by one user at a time. One can have an embedded system on the computer that is designed to perform a specific set of tasks. The application software interacts with the software system and the software system interacts with the hardware.

What is software?

System software is defined as the collection of programs that control the basic operations of the computer hardware. The operation system is the primary used system software. This system coordinates interaction between application software, users and peripherals. Peripherals are things like printers. Examples of operation systems are OS X and Windows 10.

These systems are often written such that the computer can operate quickly and efficiently. The computer can communicate with several different hardware devices which is possible because of the device drivers. All the day-to-day operations are performed by the operating system. There are several tasks that are performed by almost all computers:

• Input from mouse or keyboard
• Presenting information via monitor
• Writing to a storage device, like a hard disk drive

How can data be storaged?

The storage of data is crucial for the success of the organization. Organizations store data for three purposes on the basis of life span, access speed and timeliness. These three purposes are:

• Operational (like processing transactions)
• Backup (short-term copies of organizational data)
• Archival (long-term copies of organizational data)

For these three purposes we need different storage technologies. Operational data is often stored in databases or files on a disk or hard drive. Companies make backups such that they can ensure that their business operations will continue in case of a disaster. The data is then stored to a redundant system which the company can use if the primary system fails.

How to link these systems?

Technologies and computers have to be connected to be valuable. For instance, a database is not valuable if it is not accessible to the right people. There is networking hardware and software that enables computers to connect. This allows interconnection within and between organizations around the world.

Human communication is the sharing of information and messages between senders and receivers. The sender formulates its message in a code which is then transmitted through a communication path to the receiver. The receiver decodes the message. This process is similar to the process of computer networking.

Computer networking is defined as the sharing of data and services. The information is encoded, transmitted via a communication channel and then decoded by the receiver. For computer networking we need three things:

• A sender and a receiver
• A transmission medium
• Rules or protocols about the communication between senders and receivers

Transmission media is defined as the physical pathway used to carry the network information. This physical pathway can be cables or be wireless. For the receiver and the sender to understand each other a language of communication must be established. The protocols are the procedures that computers perform when they transmit and receive data. For instance, a French speaking person and a German speaking person decide that the communication protocol will be English, which they can both understand.

How can information systems communicate?

Even though computer communication and human communication are alike, there is an important difference. Human communication consists of words while computer communication consists of bits. Bits are the information units of a computer. With a computer it is possible to transmit any type of information (art, music, documents). However, the transmission of each different type is different. Some information is much larger of size than other information. For instance, a page of 10 KB is while a photograph can be more than 200 MB. The requirements for transmission of these two are different.

The bandwidth of a computer or communications channel is defined as the transmission capacity measured in bits per seconds. It shows how much binary data the computer or channel can transmit reliably in one seconds.

Each computer in a network has one of the three following roles:

• Server: a computer makes it possible for the users of the network to access files, communications, printing and other services.
• Client: a computer that uses the services that are provided by the server, like a PC, laptop, Outlook email. Clients usually have one user and can only request services. Tin clients are microcomputers that have little memory, processing capabilities and storage.
• Peer: a computer that can both provide and request a service.

In many businesses we see client-server networks in which the roles of the client and the server are defined. Another network is the peer-to-peer network, which are used by small homes and offices. These networks enable that all the computers and devices on the network can request and provide services.

Computing networks are often classified into three types:

• Personal area network (PAN): wireless communication between devices, like Bluetooth
• Local area network (LAN): users share data, software applications and other resources. Generally the size of a LAN is a building
• Wide area network (WAN): connects multiple LANs and distributes management and ownership. The physical distance of this network is large and ranges from multiple buildings (campus area network) to a city (metropolitan area network) or even worldwide (Internet).

Many organizations install wireless local area networks (WLANs) to enable the connection between devices. These are also known as Wi-Fi networks.

How can the World Wide Web be implemented in these systems?

The World Wide Web is a very powerful and is defined as a system of documents that are interlinked on the Internet. To locate and display these documents a software application, the Web Browser, is used. Hyperlinks are references or links to other documents which are often included in a document. Such documents are called hypertext. Web pages are structured with the standard method Hypertext Markup Language (HTML).

The pages of the web are stored on the Web servers, which process the requests of users using the Hypertext Transfer Protocol (HTTP). To locate and identify a page on the Web a Uniform Resource Locater (URL) is used. The URL consists of three parts; the domain name, the host name and the top-level domain name. For www.google.nl; www is the host name, Google is the domain name and .nl is the top-level domain name.

The domain names and the host names are associated with several Internet protocol (IP) addresses. IP addresses enable us the identify all the devices and computers on the internet. The IP address is essentially the destination address of the computer. Many Web servers are interconnected and form together the Web. To facilitate the transmission of Web pages and information the Transmission Control Protocol/Internet Protocol (TCP/IP) is used. The deep web refers to those parts of the web that cannot be indexed by conventional search engines. It consists of private areas requiring authentication, dynamic web pages created from databases and displayed on demand based on database queries.

What is an intranet and what is an extranet?

Organizations make use of intranet. This consists of webpages that are behind the firewall of the company, such that information is secured within the local area network or wide range network. The information on the webpages can only be viewed by the authorized users.

There is also the extranet, which enables two companies to use the Internet to do business together. The companies then have a private part of the Internet that is closed for ordinary users. Corporations can benefit from the use of the extranet since it improves communication.

Every organization needs to process and store large amounts of data and for this they need thousands of servers, a data center. For storing and processing huge amounts of data you need lots of power and air-conditioning to keep the temperature of the equipment optimal. Since data is nowadays a necessity to companies it is important that the data can be accessed reliably.

What issues can arise?

Computing technology has evolved very rapidly and will continue to develop. Companies face challenges as technology changes continuously. The information systems have to be upgraded when there are changes in technology to gain or sustain competitive advantage.

In 1936 the first computer was introduced and this led to fundamental changes in the way computing technologies worked. In 1965 Gordon Moore introduced Moore's Law which stated that the number of transistors on a chip would double very two year. Later, in the 1990s, there was the introduction of multimedia and low-cost PC's. The storage capacity increased and processors and networks worked at higher speed. In 2000 the Internet became accessible around the world and in 2010 mobile connectivity was introduced, which included cloud computing and social networking.

For companies it is important to have a large amount of data available because they need to be ahead of competition. This creates challenges for companies. Furthermore, companies face challenges because of the fluctuations in demand. Because of the fluctuating demand they either have too many resources or too few resources.

Another concern of companies is the worldwide increased demand for energy. To process data a computer needs electricity and to control the temperature of the computer we also need devices. To enable this we need a lot of energy. Power and cooling could be huge costs for companies. Organizations have looked for alternative ways to manage their IS infrastructure that are better.

What is cloud computing?

We nowadays see that companies hire other parties to build their applications. They assume that the other party will deliver an application that works. Because of this trend a good infrastructure is needed. In the cloud data is processed, stored and transmitted. A utility computing model is used by the cloud that enables companies to pay for computing resources only when they need them. These resources include processing, networking or data storage. The cloud computing model has several characteristics, which are:

• On-demand self-service
• Rapid elasticity
• Broad network access
• Resource pooling
• Measured service

The cloud provides different services. Furthermore, there are several different cloud computing service models that you can use. These models are:

• Infrastructure as a service (IaaS) model
  This model only provides you the basis capabilities of storage, processing and networking.
• Platform as a service (PaaS) model
  This model enables you to run your own applications and you have control over your applications. However, as a user you have limited control over the underlying infrastructure.
• Software as a service (SaaS) model
  A user of this model you can only use applications that are provided by the cloud infrastructure. Examples of such applications are Gmail and Google Docs.

Scalability is defined as the ability to adapt to changes in demand for data storage or processing. There is a distinction between a public cloud and a private cloud. A public cloud is generally used for applications that need rapid scalability and is for instance used by Amazon.com. A private cloud is internal to an organization and enables the organization to balance demand and supply of the computing resources.

Cloud computing has become popular but it also comes with some issues which the management must consider. The management must choose which services, data or applications it wants to move to the cloud. Organizations need different cloud computing providers since one provider cannot offer all needs of the organization. When evaluating different public cloud services the management must consider the following strategic issues:

• Availability/reliability of the service
• Scalability
• Viability
• Security, privacy and compliance
• Diversity of offerings
• Openness
• Costs

Cloud computing has led to other trends, these trends are:

• Service-oriented architecture (SOA)
  Organizations use this because it enables them to achieve greater flexibility and agility. SOA breaks business processes into individual components, which are designed to achieve the desired result for the service customer. The individual services are used as building blocks so that the system can easily be reconfigured as the requirements change. To obtain the benefits the service must have the following characteristics; reusability (usable in different applications), interoperability (able to work with other services) and componentization (simple and modular).
• Grid computing
  This is used by organizations to solve large-scale computing problems. Grid computing is defined as combining the computing power of a large number of smaller, independent, networked computers into a system that can solve problems. Before grid computing these problems could only be solved by supercomputers.
• Content delivery networks
  This is used to increase the performance of websites. The longer the geographical distance between a user and web server, the longer it takes to transmit the content. This can be reduced by content delivery networks. These provide a network of servers in several physical locations, which stores a copy of several web sites.
• IP convergence
  Internet protocol (IP) convergence is used for transmitting video and voice communication over the Internet. This enables organizations to use new forms of communication and collaboration.

Voice over IP (VoIP) is the use of the Internet technologies to make a telephone call. The quality of VoIP has improved over the last years. IP can not only be used to transmit voice communications but it can also be used to transmit video data.

Because of the rapid development of the world there has been an increased demand for energy and also the costs of energy have increased. Green efforts can save money on energy and water use. Green computing can help by using computers more efficiently, doing the same with less.

Companies who operate in the digital world need comprehensive information system infrastructure to support their business strategy. In order to get a great return on IS investments, companies have to manage their IS infrastructure.

What is e-commerce? - Chapter 4

For conducting business electronically on a global basis the Internet and the Web are well suited. The e-commerce via the web has created many opportunities for marketing.

What is the electronic business, what are the main definitions?

The electric commerce (EC) is defined as the exchange of services, goods and money supported by communication technologies, especially the Internet. The exchange occurs between firms, between firms and customers and between customers. The online market has become a major part of the global economy nowadays. Therefore, it has become a strategic necessity for companies to be on the Web.

• Business-to-consumer (B2C) EC is defined as the transactions between consumers and businesses.
• However, EC is also used by organizations to conduct business. They make use of business-to-business (B2B) EC, in which there are transactions between business and business partners like intermediaries or suppliers.
• There are also transactions that do not involve firms. This EC is called consumer-to-consumer (C2C) EC, like eBay.
• Another form is consumer-to-business (C2B) EC. With C2B consumers offer products, services and labor to companies.

The mobile commerce (m-commerce) is defined as an electronic transaction or information interaction that is made using a wireless, mobile device and mobile networks. This transaction must lead to the transfer of real value in exchange for goods, services or information. The m-commerce trend is the result of the increased use of the mobile devices.

Through social media, organizations try to influence the social networks of their visitors to create a relationship or create other value. This has become a trend and is referred to as social commerce. Because of the Internet and the different trends, organizations have more data and can better understand each individual consumer.

E-government is defined as the use of information systems to provide organizations, citizens and other governmental agencies with information about public services and to enable interaction with the government. We can consider three different relationships when it comes to e-government:

• Government-to-citizens (G2C) EC
  This includes interactions between local, state and federal governments and their citizens.
• Government-to-business (G2B) EC
  This includes business relationships with all levels of government.
• Government-to-government (G2G) EC
  This includes electronic interactions between different levels of a government within a country or interactions between countries.

E-finance is the use of IS to provide financial services and markets. This includes E-banking and online brokerage. Online banking or the paying of bills using electronic bill pay is increasing. Online brokerage has seen a steady growth over the past several years. Fintech or financial technology refers to technologies that support activities in the financial sector.

What is business-to-consumer EC?

Because of the global marketplace, companies face increased competition in all markets. Therefore, they have to position themselves to be able to compete in the EC area.

E-tailing is defined as the online sales of goods and services. There are several different strategies a company can use:

• Brick-and-mortar business strategy
  The company decides to operate solely in the physical market. The business activities are approached in a traditional way by using physical locations like retail stores. Companies using this strategy do not sell their products or services online.
• Click-and-mortar business strategy (also called bricks-and-clicks business strategy)
  Companies using this strategy choose to extend their traditional offline retail channels by using the Internet. So they use both EC and physical locations.
• Click-only strategy
  These companies conduct business electronically in the cyberspace. They focus completely on EC and do not have physical locations.

The EC revolution has affected companies using the click-and-mortar business strategy the most. These companies need to maximize commercial opportunities in both the physical and virtual world. This creates challenges for the company.

The companies that use the click-only strategy can generally compete more effectively in price. This is because they do not need to take the physical aspects into consideration, which allows them to reduce prices to bottom levels. Examples of click-only firms are eBay and Amazon.

What are the main business and revenue models that rely on the internet?

When the Web was introduced this created new ways of communication between companies and customers. The Web is not only used for communication between companies and their customers but also to facilitate transactions. This reduced the transaction costs of companies. The Internet has also led to new business and revenue models. Some of these models are:

• Mass customization
  This enables firms to adapt their products and services the meet the particular needs of each of its customers on a large scale. With this model online product configuration systems are linked with just-in-time production. Therefore, companies are able to assemble each product on the preferences of the customer.
• Disintermediation
  The Web makes it possible to sell products directly to the customers without intermediary retailers or distributors. Such a process where the intermediary is cut out is known as disintermediation. This method enables companies to offer their products and services at a lower price.
• Group buying
  Some companies offer large scale discounts. If many people agree to buy the product or service then the customers get significant discounts.
• New revenue and pricing models
  Because of the Internet, companies can generate revenue by advertising on the Web. A new pricing model that developed is menu-driven pricing. With this model companies set the prices that the customers pay for the products. In a reverse pricing model, customers specify which product they want and how much they want to pay for it and then the bids from the customers are matched with the offers from companies
• Social commerce
  When companies try to influence the social networks of their visitors in order to build lasting relationships, create value or advertise then we speak of social commerce.

What is e-tailing?

The use of e-tailing can provide a company with several benefits over the traditional model with physical locations. E-tailing is able to offer a virtually unlimited amount of different products because it is not restricted by the space of physical locations. Furthermore, as the Web can be reached from computers at any location, e-tailers can compete more effectively. E-tailers are also able to compete more efficiently in prices. This is because they are able to turn over their inventory more often than companies using the traditional model.

The Long Tail business model is centered around these three benefits in terms of product, place and price. This business model refers to catering to niche markets while also purely selling mainstream products. The distribution of the customers is a standard normal distribution. The mass market is reflected by the center of the distribution and the niche markets are reflected by the long tails.

However, e-tailing also has some drawbacks. One of the main drawbacks of e-tailing is trust. Customers hesitate to purchase products online from companies they never heard off. This is especially a challenge for companies that are new. The trust issues arise because customers do not have direct product experience and they are questioning product delivery and returns.

The customers can only see the product online and read additional information but they do not know how the product feels or tastes. Customers often have to pay first and then delivery of the product follows. This might keep them from ordering a product from a company online. It can also be that they do not want to share their credit card information via the Internet.

What is Internet marketing?

How can companies use their own web-pages?

The success of an e-commerce website is measured with the conversions rate. This is the percentage of visitors that perform the desired action, like a purchase or subscription. There are several recommendations to increase the conversion rate of your website:

• It must offer something unique
• The website must motivate people to visit, stay and return
• Advertise your presence on the Internet
• Learn from your website

The exit rate of a page is the percentage of visitors who leave the site after viewing that page. The bounce rate is defined as the percentage of people who visit only one page. To increase the performance of a Website, the behavior of the visitors of the Web is analyzed. This process of analyzing is called Web analytics.

Companies design their websites such that the online experience of their customers is improved. The online needs of customers can be categorized in terms of three concepts. These concepts are:

• Structural firmness
  This refers to the characteristics that influence the security and performance of the Web site.
• Functional convenience
  This refers to the characteristics that make interacting with the Web site more convenient and easier.
• Representational delight
  This refers to the characteristics that stimulate the senses of the customer. People are more likely to visit sites that look good.

Companies want to maximize all these three concepts. However, in reality this is not possible and they have to make trade-offs between different factors. In order to do this it is important to know the relative needs of the customers. Each website must have a basic level of all the three sets of characteristics.

How to implement marketing strategies for a website?

For the success of a Website, marketing is crucial. Before 2013, most of the budget for advertising was spent on non-interactive campaigns, like billboards and television ads. However, after 2013 more money was spent on Internet marketing, like:

• Search marketing
• Display ads
• E-mail marketing
• Social media
• Mobile marketing

If you enter the name of a product in a search engine you obtain several pages with information. Because of this trend, search marketing has grown. The search engine shows results which can be categorized into organic results and sponsored results. The organic results are based on the content of the page.

Search advertising (or sponsored search) means that a company bids to be listed at the first page that users see when they search for a specific term. The search engine (like Google) then determines which pages are most relevant and will be listed at the top. There are also search engines that raise the position of a company after they pay a fee. This is called paid inclusion.

Search engines order the organic results of a specific search term with the use of complex, proprietary formulas. The position of a particular page in the search results is largely outside the control of the owner of the Web site. Companies use search engine optimization (SEO) to try to improve their ranking on the organic search engine results. Companies do this because visitors often do not look further than the first page of results.

What are the main trends?

When the beginning, the main form of online advertising was display advertising. Companies advertised their company on other Web sites. Nowadays, a popular trend is contextual advertising. With this type of advertising the ads that are placed on a page are in some way related to the content of that particular page.

A more recent trend is the use of the power of social media. More and more people use social media, like Facebook, to stay in contact with friends or business associates. Therefore, it is natural for companies to use this type of Internet marketing. Social networking sites are used by companies to get interactive communication with their customers.

Since 2011 the use of tablets and smartphones has increased substantially. Marketers can also advertise through this channel. For instance, in 2010 Apple allowed that ads could be placed into the iPhone apps. Because of this, app developers could offer apps for lower prices.

To measure the performance of Internet marketing you can use the click-through rate or the conversion rate. The click-through rate reflects the number of surfers who click on an ad divided by the number of times it was displayed. The conversion rate is the percentage of visitors who perform the desired action.

There are several advertising models. In a pay-per-click model the company who places the advertisement only pays when someone actually clicks on the advertisement. However, one could repeatedly click on a link to influence revenue. This is a drawback of the pay-per-click model and is called click fraud.

What is mobile commerce?

The mobile commerce is defined as any electronic transaction or information interaction that is made using a wireless mobile device and mobile networks. The mobile commerce has grown substantially the past few years. The mobile commerce is primarily driven by the use of tablets. Tablets are often used as couch computers.

Location-based services are defined as highly personalized mobile services based on the location of the user. This is another key driver of the e-commerce and allows the provider of the service to offer information or services that are tailored to the needs of the customer.

Because of mobile devices people have all the information available wherever they are. The increased use of the smartphone has also led to showrooming, which refers to shoppers going to a store to evaluate the feel and look of a product and then purchase it online or from a competitor.

What are the main trends?

Since the use of the mobile devices has increased, people increasingly make purchases of products or services online on the go. Because of this trend, many retailers that sell online have made a mobile version of their Web site. These mobile version should enhance the shopping process on mobile devices. Some companies even develop a mobile app, even though this is very costly.

Consumers use the Internet to sell things to other consumers, which is the C2C EC. The two most popular mechanisms that consumers use to trade with other consumers online are e-cautions and online classifieds.

Electronic auctions (e-auctions) provide a place where sellers can offer goods and products for sale and where buyers can bid on the items. This generally occurs on a one-to-one basis. The largest e-caution site we know is eBay. Another popular mechanism are online classifieds, which are sites that use the Web capabilities but where the transaction does not occur online.

C2C EC is beneficial because it allows consumers to buy and sell to broader markets, it is available anytime, it eliminates the middleman and it increases the number of buyers and sellers. However, C2C EC also has a downside since there is no quality control, there is a possibility of fraud and it is harder to use traditional payment methods, like ATM cards.

Online classfields are C2C e-commerce enabled by web capabilities, like craigslist, but in contrast to e-auctions for example, no transaction is made online. Platform based C2C models such as Uber, allows people to lend, borrow and purchase a service.

Consumers cannot only sell to other consumers but they can also sell their products or services to businesses. For instance, on the site shutterstock you can sell pictures or videos to newspapers or advertising agencies. The photos and videos on this site are from amateur photographers.

How to manage finances and legal issues?

Related to EC, there are some legal issues and Web-based financial transactions that a company must consider. Nowadays, people do not have to go to the bank anymore to conduct financial transactions. We can manage our cards and saving accounts using online banking and we can pay our bills using electronic bill pay services.

A crucial part for EC and m-commerce is that the transactions on Web sites are secure. Even though we think that people are critical when it comes to online transactions, there are many people that do not hesitate to reveal sensitive information to sites that are unknown or fraudulent. There are many people that have become a victim of fraudulent sites.

Which forms of payment can be used?

The most accepted forms of payment in B2C EC are the credit card and the debit card. With a credit card it is very easy to make a transaction online. To authorize a transaction one must enter some card information and the Card Verification Value (CVV2), which is digital code with three digits. To make a transaction you often have to enter more personal information. People are scared that this information will be abused.

Cryptocurrencies, like the Bitcoin, are virtual currencies that are not issued by any central bank and use encryption technology to secure transaction and to generate new units of the currency. A blockchain is an indelible, decentralized public ledger to which transactions are added in blocks, serving as proof of all transactions ever made.

How to prevent fraude?

The merchant is financially responsible for the online transactions of consumers. If cardholders of credit cards dispute a transaction then the credit card issuers will charge back the transaction. For the merchant this results in a loss. Therefore, it is for online merchants important to minimize chargebacks.

To make a transaction the information of the issuer's card must be entered. If a transaction is made with the credit card this does not mean that the person that makes the transaction is the actual holder of the card. The card could be lost or stolen. To prevent becoming a victim of fraudulent transaction you could look at indicators like:

• E-mail addresses: legitimate addresses often contain the name of the customer while fraudulent addresses consist of meaningless characters
• Shipping and billing addresses: often with fraud addresses are not correctly spelled and the merchandise is shipped to a foreign country
• Transaction patterns: fraudulent transactions generally show distinct patterns

Because of the security concerns there are now independent payment services, like PayPal. If you make an online purchase using such an independent service then you do not have to reveal much private information to the actual seller. You can just use your account of the payment service and only have to reveal private information to the payment service.

Which legal issues should be considered?

Businesses that engage in EC need to consider several legal issues. The two most important issues are the protection of intellectual property and the taxation of online purchases. These two will be discussed next.

In the Internet Tax Freedom Act is stated that sales on the Internet are treated the same as mail-order sales. Furthermore, a company is required to collect sales tax only from customers that live in a state where the business has substantial presence. Therefore, companies often strategically choose a home base such that they can offer tax-free shopping to most of the consumers.

Taxation especially raises issues on the international level. If you order a product from the US you do not have to pay the US tax on sales but you do have to pay the tax in your home country on the arrival of the shipment.

Besides taxation there are also other issues a company can face. A company must have explicit, enforceable terms of contract. When a company posts content on its site it must ensure that this content does not contain any trademarks or copyrights.

Digital rights management (DRM) allows publishers to control their digital media in order to limit, discourage or prevent illegal copying and distribution. Such DRM restrictions include how many times the media can be played, in which devices the media will play and on how many devices the media will play.

Because people try to illegally share DRM-free content, there are often watermarks placed which can be traced back to the original purchaser. A digital watermark is defined as an electronic version of physical watermarks that are placed on paper currency to prevent copying.

The principle of net neutrality means that all data on the Internet should be treated the same. Not everyone agrees with the principle of net neutrality. The proponents argue that the Internet should allow anyone to freely communicate with any content or application without the interference of a third party. Furthermore, they believe strong laws are necessary to protect the Internet.

The electric commerce (EC) is defined as the exchange of services, goods and money supported by communication technologies, especially the Internet. The exchange occurs between firms, between firms and customers and between customers. The online market has become a major part of the global economy nowadays. Therefore, it has become a strategic necessity for companies to be on the Web.

• Business-to-consumer (B2C) EC is defined as the transactions between consumers and businesses.
• However, EC is also used by organizations to conduct business. They make use of business-to-business (B2B) EC, in which there are transactions between business and business partners like intermediaries or suppliers.
• There are also transactions that do not involve firms. This EC is called consumer-to-consumer (C2C) EC, like eBay.
• Another form is consumer-to-business (C2B) EC. With C2B consumers offer products, services and labor to companies.

How can businesses make use of social media? - Chapter 5

Social media has offered us a new set of capabilities for individuals and businesses. Social media can enhance organizational collaboration and communication.

Why do organizations need communication and collaboration?

Organizations depend on effective collaboration and communication within and outside the boundaries of the organization. It is necessary that there is communication and collaboration between the different departments, business partners, external stakeholders and customers. Companies that operate globally need good communication and collaboration between the different locations or subsidiaries.

Organizations used task forces to solve problems. These task forces are temporary working groups with a finite life cycle and task. However, due to the increased globalization companies now use virtual teams. These teams consist of members from different geographic locations which are put together to collaborate on a project.

The members of this team come and go as they are needed and can be part of several different teams. The tasks of these virtual teams are very dynamic and the members need to be flexible.

If you work with a team on a project you need several different communications, like talking, sharing files and making decisions with each other. There are several ways in which you can communicate with each other. We can distinguish between synchronous and asynchronous communication. Synchronous communication happens at the same time, like a phone call, while asynchronous communication is not coordinated in time, like an e-mail.

What is Groupware?

Virtual teams often have virtual meetings. These virtual meetings take place in an online environment and can be done synchronously, like a teleconference, or asynchronously, like discussion boards. In the past few years, several different tools to support communication and collaboration have emerged.

Groupware is defined as a class of software that enables people to work together more effectively. We can distinguish groupware on the ground of whether there is synchronous or asynchronous collaboration and communication and whether groups work together face-to-face or distributed.

Groupware supports several modes of group interaction:

• Live meetings in electronic meeting facility
• Electronic meeting facility as home base
• Virtual teams
• Synchronous distributed meetings

Discussion forms are widely used for group communications. Discussion forms are also known as discussion boards or online forums and replace traditional bulletin boards and allow for discussions between participants.

There are many forms of synchronous and asynchronous software. An electronic meeting system (EMS) is defined as a sophisticated software tool that is used to support group members in solving problems and making decisions through interactive structured processes. Examples of such structured processes are idea evaluation, electronic idea generation and voting. Groups stay on track with the help of these structured processes.

Over the years the power of processors of personal computers has increased and Internet connections are faster now. Because of this we are now able to engage in desktop videoconferencing. To do this you need a webcam, a speaker or microphone, videoconferencing software and an Internet connecting with high speed. Many conference rooms of organizations have a videoconferencing system that enables team members across the world to communicate with each other.

How can a intranet be implemented?

Most large organizations use intranet-based employee portals. An intranet is a private network of an organization and the members of the organization can access the intranet with their Web browser. The member of the organization can communicate with each other via the intranet network. Because of the increased use of mobile devices it is necessary that the intranet can be accessible from any device. Because of this companies allow their employees to use virtual private networks (VPNs).

The intranet allows employees to access information at any time (real-time access) which increases the efficiency and effectiveness of collaboration. The intranet makes updating, managing and distributing corporate information less complicated.

Companies have very much information in their intranet. It is therefore hard to locate the relevant information that the company needs. Special enterprise search engines are designed such that an organization can better find documents, data sources etc. This enhance productivity and makes the users of the intranet more satisfied.

Intranets are not only used for communication and collaboration but also to provide employee portals that enable employee self-service for applications that are based on human resources, like managing retirement plans or administering benefits. For companies it is very costly to process human resources related forms. Using the intranet enables the company to save money.

How has the Web evolved?

A few years ago the Web was seen as a one-way medium with a strict restriction between content creators and content consumers. This Web was referred to as Web 1.0. Over the past few years there have been several technology changes which has led to new uses of the Web. People can now share information online and collaborate because of dynamic web applications. These applications are referred to as Web 2.0 applications in which the role of the users, the passive consumer, is shifted to the creator. Many organizations have incorporated Web 2.0 applications into their business models.

The success of the applications depends on the network effect. The network effect means that the value of a network increases as more people use the network. Web sites can choose to make parts of their data or functionality available to other Web sites. This enables them to create dynamic and unique applications, or mashups, easily and quickly. A mashup is defined as an application that uses data from one or more service providers.

Companies give others this access because it enables the organization to extend their reach and build and strengthen the relationships with customers.

What are social media?

Social media (or social software) are Web 2.0 applications that embody core Web 2.0 values like collaboration. Social media allows people to interact, communicate and collaborate in several ways. People nowadays share more personal information online than in the past.

The generation that grew up with the social media is known as generation Y or the millennials. This generation is now entering the workforce and has different expectations than the older generations. This changes the workforce. This has led to the movement of companies using social media more to improve communication, connection, collaboration and cooperation.

There are design principles that will allow a computer to be able to index Web pages, subjects and topics better. This set of principles is called the semantic Web. If you use semantic principles to design a Web page then it is easier for computers to understand the content of the page. This enables search engines to provide answers that are richer and more accurate.

Enterprise 2.0 refers to companies using social media within the boundaries of the company or between the company and its customers or stakeholders. This can help a company when sharing organizational knowledge, increasing productivity of the business or connecting with customers. Web 3.0 might be centered around mobility or around context, with information filters based on contextual factors.

How should the enterprise use social media?

The use of social media applications can enhance cooperation, communication, collaboration and connection. Social media enables companies to present themselves to customers. Companies can use several social media tools for communication, like:

• Blogs
  Blogging is defined as creating an online text diary, consisting of chronological entries that include everything from the daily life of a person. Bloggers write stories about their lives and often do this to improve their writing skills. Blogging is often referred to as the amateurization of journalism. Blogging is valuable because it can bring breaking news very fast to the public.
• Microblogging tools
  Microblogging tools enable people to let other people know their thoughts. These tools are sometimes also referred to as social presence tools. The text updates of microblogging are relatively short compared to the text of blogs. Anyone can follow the microblog of another person. An example of a microblog is Twitter. There are many organizations that have a Twitter account which they use to post news about the company. When posting a twee people can use hashtags. If a topic is tagged relatively much than it is said to be trending.
• Instant messaging
  Instant messaging, also called online chat, enables people to have real-time written conversations. With instant messaging you can get immediate feedback from the partners you are having a conversation with. Snapchat is a new form of instant messaging which allow users to set a time limit on how long others can see the message.
• Virtual worlds
  In virtual words there is real-time communication and people can use avatars for this communication. In the beginning virtual worlds were very popular but the popularity for business use has faded.

How can social media enhance cooperation?

As stated before, social media can also enhance cooperation. Cooperation between organizations and individuals creates benefits for both. A company can use several cooperative social media applications:

• Media sharing
  Sharing photos, videos etc has become increasingly popular. Something that is often used for media sharing is webcasting (or podcasting). This is the distribution of digital media for on-demand playback on digital media players.
• Social bookmarking
  It is a challenge for people to find the right information and being able to find it again. Therefore, people have long lists of bookmarks to sites. Social bookmarking allows users to share Internet bookmarks and and to use a categorization system. These systems are referred to as folksonomies. The value for each user grows as more people participate in social bookmarking.
• Social cataloging
  This is the creation of a categorization system by users. People can organize their topics and can create virtual bookshelves. Companies can use this to structure the large amounts of information they have, making the information better accessible and useful.
• Tagging
  Tagging is defined as manually adding metadata to media or other content. Metadata is defined as data about data, it describes the data (like who, where, when). Social cataloging depends on tagging. Many social media applications make us of tagging. A tag cloud shows which words and concepts are key to social media.
• Geotagging
  The geospatial nature of a photo refers to where the photos is taken, what the location of the sender is etc. This is valuable information. If geospatial metadata is added to media then we speak of geotagging.
• Social bookmarking
  This depends on the networking effect and helps to address the problem of not finding information or product you want, by offering related and potentially interesting websites. It helps share interesting content and creates categorization systems or folksonomies.
• Social cataloging
  Similar to social bookmarking, this is the creation of a categorization system by users.

People can subscribe to webcasts, blogs via the iTunes store or via real simple syndication (RSS) feeds to receive the most current content. These feeds are provided by the publishers of the content and users receive a notification if the content is updated.

How can social media enhance collaboration?

Also collaboration can be enhanced by social media. Telephones and e-mail are very useful to companies. Team members need to interact with each other and therefore a company needs technologies that facilitate this. There are several social media applications that companies can use:

• Cloud-based collaboration tools
  Collaboration has improved due to cloud computing. It enables easy access and transfer of files from one person to another. Services like Dropbox store the files and the files can also be accessed from multiple devices. Users of a service always have the latest version of the file. This enables users to work when they are traveling.
• Content management systems
  This system allows its users to edit, publish, version track and retrieve digital content. Many organizations use open source content management systems like WordPress to be able to create Web sites or blogs. This allows the creators of the content to make changes when necessary. Similar to content management systems there are also learning management systems to facilitate business processes in educational field, like Blackboard.
• Collective intelligence
  This refers to the notion that distributed groups of people with divergent expertise and information can outperform the capabilities of individual experts. This can be very valuable for a company. The creation of services or goods by self-organizing communities is defined as peer production. Examples of peer production are open source software (like Apache Open Office) and wikis (like Wikipedia). A wiki is a Web site that allows people to edit, create and delete content and to discuss content with other members.
• Human-based computing (crowdsourcing)
  Companies use everyday people as a cheap labor force. This is called crowdsourcing. Companies also integrate external stakeholders into the innovation process. This is called open innovation and can create great benefits.

Of course, social media also enhances the connection of people. Social networking has become very popular over the past few years. Social online communities are created where individuals can meet and communicate. The most used site on the Web is Google and the second most used site is Facebook. This proves that social communities are very popular. In the beginning these sites were only popular under teenagers but this has slowly shifted over the years. Clickbait are headlines that make user want to click on a link. The company then earns revenue through ads posted on the page containing the article the headline is about, which is often a disappointment.

The Web has grown over the past years and the number of Web sites increased. This makes finding the relevant information more difficult. Social search is used to increase the relevance of search results by including content from blogs, social networks or microblogging.

Virtual marketing is defined as using the network effect to increase brand awareness. The advertisers of companies use virtual marketing to promote their products or services. This marketing tool can be very powerful for an organization.

How to manage the Enterprise 2.0 strategy?

Companies can use several tools to communicate with external stakeholders. The company can use the Enterprise 2.0 tools but these tools also have a downside. Not only the technology of an Enterprise 2.0 tool, but also the change management is very important for the success of the tool. The employees need to be aware of the tools and the corporate culture of the company is crucial for the success of the tools. Some other organizational issues that can arise are:

• Not all Web-based technologies are a success in the corporate environment.
• Culture is also a critical success factor for implementing social media applications in organizations and can cause resistance.
• Organizational context: The chosen tool must fit the objectives of the firm.
• Organizational hierarchies: implementation of Enterprise 2.0 tools often need organizational changes and to achieve this the senior management must be involved.
• The dependence on the network effect and the long tail and the time an implications needs to achieve a critical mass
• Generation gap: if a workforce consists of millennials then Enterprise 2.0 tools are more likely to be successful.
• Technological inertia: people are not willing to change to another technology
• Technological integration: the applications must be well integrated with the existing information system
• Security and intellectual property issues

What possible issues should be taken into account?

Once something is on the Internet it never disappears, the Internet does not forget. There are many organizations that have known public relations blunders. Companies must be able to react quickly and appropriate to issues that emerge in social media. There are several catches when using social media applications. Some of them are:

• Online product reviews
  Many consumers first read online reviews but these reviews are not always unbiased. Companies can hire people to place positive reactions on their site, which is unethical.
• Microblogging
  This can be valuable but posting a wrong tweet can have severe consequences.
• Social networks
  For organizations it is important to monitor their social network and take appropriate action when needed. Again, the wrong content on the social network of the company can have severe consequences.
• Bad vibes going viral
  Everyone can see your content and reaction and these can go viral very fast.

Because of the Internet, news travels very fast. This is a threat for companies since negative publicity reaches people very fast. To deal with such crises, companies sometimes have crisis teams and monitor their social media environment carefully.

Social media has changed the way we interact and will continue to do so. Attitudes towards sharing content have changed. On the one hand, it is easier and more common to share your opinion and other people’s opinions are more accessible, but on the other hand everyone’s ability to create content and the way this content is spread might be a downside.

The use of social media applications can enhance cooperation, communication, collaboration and connection. Social media enables companies to present themselves to customers. Companies can use several social media tools for communication, like:

• Blogs
  Blogging is defined as creating an online text diary, consisting of chronological entries that include everything from the daily life of a person. Bloggers write stories about their lives and often do this to improve their writing skills. Blogging is often referred to as the amateurization of journalism. Blogging is valuable because it can bring breaking news very fast to the public.
• Microblogging tools
  Microblogging tools enable people to let other people know their thoughts. These tools are sometimes also referred to as social presence tools. The text updates of microblogging are relatively short compared to the text of blogs. Anyone can follow the microblog of another person. An example of a microblog is Twitter. There are many organizations that have a Twitter account which they use to post news about the company. When posting a twee people can use hashtags. If a topic is tagged relatively much than it is said to be trending.
• Instant messaging
  Instant messaging, also called online chat, enables people to have real-time written conversations. With instant messaging you can get immediate feedback from the partners you are having a conversation with. Snapchat is a new form of instant messaging which allow users to set a time limit on how long others can see the message.
• Virtual worlds
  In virtual words there is real-time communication and people can use avatars for this communication. In the beginning virtual worlds were very popular but the popularity for business use has faded.

How can information systems be used to enhance business intelligence? - Chapter 6

High quality and timely information are very important for the effective management of a company. This can be provided by several different information systems.

How to enhance organizational decision making?

Wat is business intelligence?

Business intelligence (BI) is defined as the use of information systems to collect and analyze data and information to improve making good business decisions. It refers to tools and techniques for analyzing and visualizing past data. The data and information can be both internal and external. Companies use business intelligence to gain or sustain a competitive advantage. Business processes occur at different organization levels and they are highly interconnected.

Advanced analytics refers to tools and techniques used to understand why something happened, predict future outcomes or discover hidden patterns in large data sets. Business analytics is used as an umbrella term for the concepts of advanced analytics.

What is a data-driven organization?

Organizations need BI and advanced analytics because today’s organizations are data-driven, to respond to threats and opportunities and because of big data. To monitor and control its business processes a company needs accurate and integrated information. This information is necessary to realize the strategic goals of the organization. Companies that make decisions that can be backed up with verifiable data are called data-driven organizations.

Data-driven organizations are measurably more productive and profitable, can better respond to threats and opportunities and can better plan for the future. Modern organizations face challenges from external factors, but these factors can also create opportunities. Examples of such external factors are globalization, societal changes and governmental regulations. The business environment is very complex and business intelligence can help organizations to better make decisions in this environment. Business intelligence can help by collecting and analyzing internal and external data more effectively.

How can companies use big data?

With ever-increasing amounts of data, organizations need BI and advanced analytics to find meaningful patterns and relationships. If a company is able to effectively manage their data then this will increase the organizational performance of the company. However, many organizations are not able to harness the value of Big data. Big data is data which has high volume, velocity and variety. The trends in social and mobile field have led to an enormous amount of potential data. The large volume of data enables companies to make decisions that are based on more factors. However, managing and storing such large amount is a challenge for companies. Companies obtain data at a very high rate. Useful data can have several forms:

• Structured data, like transaction data, which can be fitted in a spreadsheet or database
• Semi-structured data, sensor data and like clickstreams
• Unstructured data, like video and audio data

For many companies it remains hard to successfully use Big data.

First, organizations did not have the right tools and information to plan their future continuously. Since the environment is nowadays changing very fast it is important that companies can react quickly and this requires new ways of planning. Many companies that are successful use a continuous planning process. With such a process, companies continuously analyze and monitor information and data. This continuously planning can only be executed because of accurate and timely business intelligence.

The most important assets for an organization are data and knowledge since these are crucial for business processes and gaining business intelligence. The database is used to place dynamic and customized information on their Web pages. At many Web sites of companies, customers can view product catalogs and place orders. On the Web site customers can find information on all products, there is a web page for each product.

How can databases be used?

There are electronic commerce applications which have to process millions of transactions each day. Organizations need to manage their online data effectively so that they are able to understand consumer behavior and to create adequate system performance.

To interact with the data in a database we can use database management systems (DBMs). DBMS is defined as a software application that enables you to store, organize, create and retrieve data from one or more databases. An example of a DBMS is Microsoft Access. Something that we can collect data about, like people, is called an entity. Entities are often referred to as tables, where each column is called an attribute and where each row is called a record.

Most databases under a DBMS consist of multiple tables, which are organized in multiple files. With DBMS you can manage many tables simultaneously. Other advantages of a database approach are improved data consistency, improved data sharing, increased security, improved data quality and accessibility. However, there are also costs like the installation costs and conversion costs.

There are several different database types. A relational database management system (RDBMS) tries to balance efficiency of storage needs, ease of retrieval and other things by storing data in tables that are linked via relationships. Many organizations have used such a system to support their business processes. A management system that has become more popular is NoSQL. These databases can be distributed across multiple machines and can handle more types of data.

A data model is a diagram or map that represents entities and their relationships. In these data models the structure of the data is captured. There are multiple data types and each attribute in the database is of a certain type. Data types enable the DBMS to organize and sort the data, allocate storage space and make calculations.

After the data model is formed, a data dictionary is used to capture the format of the data. A data dictionary is defined as a document that explains multiple pieces of information for each attribute, like name and the type of the data.

Business rules are the policies by which a business runs. These rules are generally included in data dictionaries and help to prevent that illogical or illegal entries enter the database.

The data must be entered into a data base and traditionally this is done by a data entry professional. However, nowadays most data are captured automatically. To enter information, one can use a form. This form has banks in which the user can enter information like the name and date. Such a form shows the user which information to enter.

A report is defined as a compilation of data from the database that is organized and produced in printed format. This can be either on paper or electronic. Data that is stored in the database is often used for reporting. To build interactive records and visualizations to present data, users can use report generators.

A query is used to retrieve data from a database. The structured query language (SQL) is the language that is most used to interface with RDBMSs.

What is an online transaction processing system?

Operational systems are used to run a business in real time and interact with customers. For a company’s internet success, it is crucial to respond quickly to consumers. Therefore, it is necessary to have immediate automated responses when users make requests. This can be done using an online transaction processing (OLTP) system. These systems are designed to deal with multiple concurrent transactions from customers.

The OLTP system gathers, transforms and updates data in the system. It is important that the speed of DMBS for processing transactions is high. Another factor that is important is the choice of which technology is used to process the transactions.

Which types of data are there?

Information systems are systems that are designed to support decision making which is based on stable point-in-time or historical data. It is easy to access and use the data. Information systems are primarily used by managers, customers and business analysts.

Master data is the data that is the most important to the business. Such data includes data about suppliers, customers, employees and inventory. Master data management is important because all the corporate levels of the company need to understand the master data.

Business intelligence applications can access multiple databases or they can use a data warehouse. Data warehouses are used to integrate multiple large databases and other information sources into a single repository. These warehouses consist of both current and historic data and are suitable for direct analysis.

The historical data in the warehouse remains the same but there is also new data from operational systems added each period. Extraction, transformation and loading the data into the warehouse are crucial processes for consolidating data from operational systems.

In the transformation stage the data is cleansed, which is the process of detecting, correcting or removing inaccurate or corrupt data that is retrieved from different systems.

A data warehouse that is limited in scope is defined as a data mart. Each data mart is customized and contains selected data from the warehouse. These data marts are popular among small and medium-sized businesses. Since data marts contain less data than data warehouses, we need less powerful hardware for these which can lead to significant cost differences between marts and warehouses.

Wat are business intelligence and advanced analytics?

To extract information from existing data, companies often use information and knowledge discovery tools. Companies formulate hypotheses and business intelligence tools are used to test for relationship between data.

Information is often represented as a report or query. Some common forms are:

• Scheduled reports
• Drill-down reports (reports with great detail)
• Key-indicator reports
• Ad hoc queries (these are created because there are information needs which are unplanned, and these are generally not saved for later use)
• Exception reports

How can data be analized?

Some applications of business intelligence are decision supporting (DSSs), online analytical processing and information visualization. DSSs use models to manipulate data. A what-if analysis allows users to make hypothetical changes to the data associated with a problem and observe how these changes influence the results. Online analytical processing (OLAP) refers to the process of quickly conducting complex, multidimensional analyses of data stored in a database that is optimized for retrieval. It typically uses graphical software tools. The OLAP server understands how data is organized in the database and has special functions for analyzing data. In-memory computing is a place to store data in a computer’s main memory rather than on a comparatively slow hard drive, removing bottlenecks associated with reading and writing data.

Measures or facts are the values and numbers the user wants to analyze, while dimensions provide a way to summarize the data. Drill down is a way to organize data from bigger to smaller categories, while rolling up goes from smaller to bigger. An OLAP cube is a data structure that allows for multiple dimensions to be added to a traditional two-way table. The slicing and dicing refers to the analyzing of the data on subsets of a dimension.

Information visualization is done with digital dashboards and visual analytics. Digital dashboards are a summary of information used by managers and executives to make decisions. They present key performance indicators. Visual analytics or visual data discovery is the combination of various analysis techniques and interactive visualization to solve complex problems.

What is data mining?

Advanced analytics or data science, is designed to help users gain a deeper understanding of why things happened and builds predictive models to support human and automated decision making. In contrast, BI focusses primarily on analyzing data to examine past and current performance. Advanced analytics consist of data mining, unstructured data analysis, machine learning, predictive modeling and intelligent systems.

Data mining enables us to find hidden predictive relationships in the data. Often data mining algorithms are used to find patterns and trends to develop prediction models. Algorithms are step-by-step procedures that are used in a computer program to make calculations or to perform other types of computer based processes. It can take a long time to run data mining algorithms. Therefore, it is important to reduce the complexity of the data that you want to analyze. This process of reducing complexity is called data reduction.

Association discovery is a data mining technique used to find associations or correlations among sets of items. Sequence discovery is used to discover associations over time. Clustering is the process of grouping related records together on the basis of having similar values for attributes, thus finding structure in the data. Classification is used when the groups are known beforehand and records are segmented into these classes.

Companies try to reach the entire truth by analyzing unstructured data using:

• Text mining
  Analytical techniques are used to extract information from textual documents
• Web content mining
  Extracting textual information from Web documents.
• Web usage mining
  Used to determine patterns in the usage data of consumers. With clickstream data companies can analyze how customers navigate through a Web page. Clickstream is a recording of a user’s path through a website. This helps assess the sites stickiness, or the ability to attract and keep visitors attention.

What is AI and how can it be implemented by businesses?

For an organization it is useful to analyze textual documents because it enables decision makers to gather competitive intelligence, allows the marketing department to use sentiment analysis and operations management can learn about performance of their products. There are also business intelligence applications to support human and automated decision making.

An expert system is defined as an intelligent system that makes use of reasoning methods, which are based on knowledge about a problem domain, to give an advice like a human expert. These systems try to mimic human expertise. This is done by manipulating knowledge instead of manipulating data. Experts often only have limited information and have therefore developed fuzzy logic. With fuzzy logic experts broaden the capabilities of IS.

The science that uses information technologies (hardware, networks and software) to simulate human intelligence is called artificial intelligence (AI). It is used for human intelligence like learning and reasoning or other sensing capabilities. Conventional computers are not able to adapt to changing circumstances or deal with data that is noisy. AI can be used to enable systems to learn by identifying patterns in massive amounts of data. This is called machine learning and has led to improvements in intelligent systems, language processing, Web searching etc. Intelligent systems consist of software, sensors and computers embedded in machines and devices. There are many different types of intelligent systems. All these types are based on machine learning.

There are programs that provide a service when a certain event occurs. This program runs in the background and is called an intelligent agent or bot. There are different types of agents:

• User agents
• Buyer agents (shopping bots)
• Monitoring and sensing agents
• Data mining agents
• Web crawlers (or Web spiders)
• Destructive agents

What are knowledge management and geographic information systems?

Knowledge management is defined as the process to obtain the greatest value from the knowledge assets of the organization. The knowledge assets are routines, principles, formulas, methods, underlying skills etc. They can be explicit or tacit. Explicit knowledge can be documented while tacit knowledge refers to the processes in the mind.

A knowledge management system contains a set of technology-based tools such as communication technologies and retrieval systems. The benefits of these systems are enhanced innovation, improved customer service, enhanced employee retention and improved performance of the organization.

However, there are also challenges to knowledge management. These include focusing too much on technology, forgetting the main goal, dealing with too much knowledge and getting employee buy-in.

An organization can us a map of the contacts of a person to determine if there are connections or links in the organization. This method is called social network analysis and can be used to find groups or people that work together.

Information visualization is another pillar of business intelligence applications. Visualization is defined as displaying complex relationships in the data by using graphical methods. This enables managers to get a quick view of the results and enhances business intelligence.

When making decisions, managers often use digital dashboards to present a summary or key indicators of performance. A digital dashboard shows a quick overview and enables managers to identify items that require immediate attention. These dashboards can use several graphical representations like a bar graph, a map or plot.

If several analysis techniques are combined with interactive visualization to solve complex problems then we speak of visual analytics.

Often geographic information systems are incorporated into digital dashboards. A geographic information system (GIS) is defined as a system designed to create, store, manage and analyze geographical information. These systems are used in many different industries like banking, media, agriculture, retail and insurance. GISs enable organizations to combine demographic, geographic and other data.

High quality and timely information are very important for the effective management of a company. This can be provided by several different information systems.

How to use enterprise information systems? - Chapter 7

Enterprise information systems can be used to enhance core business processes. These systems support the integration of several business activities.

What are the core business processes and organizational value chains?

Generally, we see five different functional areas in a company:

• Marketing
• Manufacturing and operations
• Accounting and finance
• Supply chain management
• Human resources

Customers do not care about the how but only care that things are done such that they are satisfied. A firm has to monitor its revenues and expense etc. When generating revenue there are several core business processes involved:

• Order-to-cash
  The process that is associated with selling a service or product.
• Procedure-to-pay
  All the processes associated with procuring goods from external sellers.
• Make-to-stock and make-to-order
  The first is the process where goods are produced based on forecasts and stocked in warehouses. The second is the process where raw materials, accessories and subcomponents are procured based on forecasts but where the actual manufacturing only starts when the order is received.

Companies want to optimize their core business processes to gain or sustain competitive advantage. The value chain is defined as the activities that add value to the end product. The activities of the value chain can support business processes.

Core activities are the activities occur in the functional areas of the organization that process inputs and outputs. Core activities include:

• Marketing and sales activities
• Manufacturing and operations activities
• Customer service activities
• Inbound logistics activities
• Outbound logistics activities

Inbound logistics consists of the activities associated with receiving and stocking raw materials, products and parts. Outbound logistics consists of distributing the end products.

Core activities can take place because of support activities. Support activities include:

• Administrative activities
• Infrastructure activities
• Human resource activities
• Technology development activities
• Procurement activities

Procurement is the purchasing of goods and services that are needed as inputs to allow the primary activities to take place.

The value chain framework can be used to analyze both the value adding activities of manufacturing based industries as service-based industries. The difference is that service-based industries deal with products based on information instead of physical products.

Companies can connect their internal value chains which leads to a value system. In this system information can flow from the value chain of one company to the value chain of another company. A value system can consist of multiple company’s value chains.

Information flows from a certain source to another destination. An upstream information flow refers to information that you receive from another organization. A downstream information flow consists of information that is produced by a company and then send to another company.

What is an enterprise system?

If a company wants to conduct its core business activities effectively then the functional areas of the company need to be able to share data with each other. Individual departments often have specific needs and their systems are not designed to communicate with other departments. Such systems are called standalone applications. Standalone applications which are typically either fast approaching or beyond the end of their useful life within an organization, is called a legacy system.

If departments need to share information then it is not very useful to have such systems. Personnel then needs access to two different systems which is very inefficient. If the data in one system is updated but not in another then the data is inconsistent.

Because of these challenges many organizations now use an enterprise-wide information system, also called enterprise system. This system has business applications for every business process and allows companies to integrate data across operations. The system uses an integrated database with a central storage which all users can access.

How can it be implemented?

These systems can be used by organizations to support business processes and internal and external operations. Information systems can be used to support activities of the value chain and by doing so gaining or sustaining competitive advantage. Both externally and internally focused business processes can be supported by information systems. Internally focused systems support functional areas, decision making and business processes within an organization.

Externally focused systems support the communication and coordination of business processes with suppliers, customers and others outside the boundaries of the organization. An interorganizational system (IOS) enables a company to communicate across organizational boundaries. Integrating both internally and externally focused applications can be valuable for organizations in global markets.

Software programs can have two forms; packaged and custom. Packaged, also called off-the-shelf software is written by a third part and is used by many different organizations. Such software supports tasks that are standardized and repetitive. Custom software is developed exclusively for specific organizations. This software enables a company to accommodate its specific needs.

Since each company has different needs it is impossible to create a software application that fits the needs of all companies. Therefore, the enterprise systems of companies often are built around modules. Modules are defined as components that you can select an implement when you need them.

Each standalone legacy system is replaced by a module in an enterprise system. The vanilla version of an enterprise system includes the chosen features and modules. If the business processes of a company cannot be supported by this version then it may ask for a customized version. This customized version may contain additional software or direct changes of the vanilla version.

What is Business Process Management (BPM)?

Best practices are industry-standard business processes; the techniques and processes that have shown superior results. Generally, enterprise systems operate according to these practices. Based on these best practices, vendors offer industry-specific versions.

Business process management (BPM) is a process in which people critically rethink and redesign business processes with the goal to improve performance measures. It is an improvement from Business process reengineering (BPR) that is structured and systematic. BMP uses information systems to streamline business processes.

The steps of BPM are:

1. Develop a vision
2. Identify key processes
3. Understand and measure existing processes
4. Identify how the processes can be improved
5. Design and implement the new processes

BPM is still a popular approach to improve the business processes of organizations. There are several factors that lead to successful process improvement like, appropriate funding, realistic expectations, support by senior management and participants that are willing to make changes. BPR and BPM combined with these conditions lead to success:

• Support by senior management,
• Shared vision by all organization managers.
• Realistic expectations.
• Participants empowered to make changes.
• The right people participating.
• Sound management practices.
• Appropriate funding.

An enterprise system has benefits but the acquisition of one also has some costs. Some benefits of enterprise systems are improved information availability, reduced IS costs, reduced operating expenses and improving customer interaction. Some costs include project governance costs, training and travel costs for the personnel, business process studies and continuously customization and integration costs.

What is an enterprise resource planning?

A form of enterprise system that is often used is the enterprise resource planning (ERP) system. ERP systems use modules based on a common database that support the entire enterprise instead of just parts of it. With ERP it is easier to access information because it uses a central storage. Because of the central storage the information is available to everyone of the organization.

With an ERP system it is also easier for organizations to implement audit controls and to comply with regulations imposed by the government. Many organizations that struggle with regulation and legal mandates are deploying an ERP.

An organization can choose several ERP systems and it has to choose which one it will use. When making this decision it must take several factors into consideration and determine which system will meet the requirements of the organization. The management must especially look at ERP control and ERP business requirements.

ERP control refers to the locus of control over computing systems and their data. It also refers to the locus of the authority to make decisions. Most companies have a centralized control or the business units have their own control. With some ERP systems you can customize the locus of control.

Organizations must determine which modules they want in their ERP. The two main categories of ERP components are core components and extended components. ERP core components support the internal activities. Examples of such internal activities are operations management, financial management and human resource management. ERP extended components support the external activities for dealing with customers and suppliers.

There are industry-specific ERP systems in which all the modules work together to enhance business processes that are needed to run a business effectively. Different vendors offer specific ERP systems that might differ from each other. For the management of an organization it is essential to understand the naming conventions and software modules of the vendor. Enabling business processes using ERP core components is done through order-to-cash processes, procure-to-pay, make-to-stock/make-to-order and other business processes, generic as well as industry-specific.

The configuration of ERP systems is a difficult activity. Configuration is an activity that has to be performed during the implementation of the ERP system. A key factor for the success of ERP implementation is setting up the database. To do this, the organization has to make many decisions but to make good decisions one must have knowledge. Therefore, companies often hire expert analysist to help them with these configuration tasks.

How to achieve success?

As said before, the success of an enterprise system depends on the implementation of the system. Companies that have successfully installed an enterprise system often follow the following recommendations:

• Secure executive sponsorship
  Most enterprise systems fail because there is no support from top level management.
• Hire experts
  ERP systems are complex so it is wisely to hire experts
• Train the users
  It is hard to learn how to use an enterprise system and therefore you should train the users of the system. This is often underestimated by companies.
• Evolve the implementation
  Once an ERP system is implemented, organizations must be able to adapt when the business requirements change.
• Use a multidisciplinary approach for implementation
  The implementation of an enterprise system has an effect on the entire organization. Therefore, personnel from different levels must be included in the implementation project.
• Evolve the implementation
  Some organizations fear the ability to quickly respond to changing business requirements, particularly because large ERP systems are difficult to install, maintain and upgrade, while this can have huge payoffs.

Enterprise information systems can be used to enhance core business processes. These systems support the integration of several business activities.

How to strengthen B2B relationships? - Chapter 8

Via supply chain management and customer relationships management companies can strengthen business-to-business relationships.

What is supply chain management?

If companies develop strong and integrated relationships with suppliers, then they can compete more effectively. This is possible because the integrated relationships will enable them to reduce costs and to respond to market demands.

The supply chain is defined as a collection of processes and companies, which are involved in the process from the raw materials’ suppliers, to the suppliers of intermediate components, to the final product and then to the consumer.

There are several parties between the suppliers and the customers. The flow of materials from suppliers to customers is called the supply network.

Companies rely on several key supplies to produce their good or service. To secure the supply of these components, companies seek for lasting B2B relationships with suppliers. They spend a lot of time and money in selecting their suppliers and business partners.

For B2B transactions it is necessary that companies communicate information with their business partners. Some companies keep such information private because this has strategic value.

What is electronic data interchange?

Before the Internet and the Web, electronic data interchange (EDI) was used to communicate information. EDI is defined as computer-to-computer communication that follows certain standards and occurs without human intervention. There were telecommunication networks between suppliers and customers.

Only large organizations could use EDI. However, since the Internet also small and mid-sized companies can use EDI to communicate business information. Many organizations sued extranets to exchange data and to process transactions between customers and suppliers.

What are portals?

Often portals are used to interact with business partners. Portals are access points which enable business partners to access secured, proprietary information. This information can be distributed through an organization using an extranet. There are supplier portals and customer portals.

A supplier portal is a subset of an extranet of an organization which is created to automate business processes that happen before, during and after the transaction of sales. The transaction occurs between an organization and its suppliers. Supplier portals are used by companies that have many suppliers.

Customer portals automate the business processes that happen before, during and after the transaction of sales between a supplier and its customers.

What are B2B marketplaces?

Both portals have the goal to make a single company interact with its customers or suppliers. However, for small to medium-sized business it is not possible to set up such portals since they do not have the monetary resources.

These companies instead use B2B marketplaces. These marketplaces are maintained by a seperate vendor/entity and is not associated with a specific supplier or buyers. They bring many sellers and buyers together and therefore create greater efficiencies for companies.

Often the marketplaces allow firms to trade with companies in their vertical market. A vertical market is a market that consists of companies that operate within a certain industry. There are also marketplaces that are not focused on a particular industry.

How can these networks be managed?

Companies can have very complex supply chain networks. To manage complex networks you need expertise, especially when there are unexpected events. It is important for companies to monitor their suppliers.

If the collaboration between firms within a supply network is not effective, then this can lead to problems for the company. Examples of problems are excessive inventories and inaccurate manufacturing plans. Because of the problems that can arise it is important to effectively manage the supply network.

When using a just-in-time (JIT) strategy, a company tries to optimize its ordering quantities such that the raw materials or components just arrive when they are needed for production. The order quantities are smaller and therefore the costs associated with storage and inventory are minimized. For this strategy, tight cooperation between the partners of the network is needed.

With vendor-managed inventory (VMI), the suppliers to a manufacturer manage the inventory of the manufacturer based on service levels that are negotiated. So, the manufacturer or retailer does not manage its own inventories. The supplier monitors the stock levels and the sales of the manufacturer.

When effectively managing supply chains, the bullwhip effect is reduced. this entails forecast errors and safety stocks multiplying, when moving up the chain. Thus a small fluctuation ripples ito a large one the further down the chain it gets.

How to implement a sustainabel business practice?

If we look at social responsibility, effectively managing the supply network also has become an important aspect. Two issues that are related to this are sustainable business practices and product recalls.

Because of corporate social responsibility, people place more emphasis on sustainable business practices. A company has to deal with ethical treatment of workers and environmental practices. Some companies try to create a green image.

There are many players involved in a supply network. This creates hundreds of possibilities where it could go wrong. Sometimes a company is able to identify these problems but in other cases the issue remains unnoticed until the product reaches the consumer.

How to use a SCM for optimizing business processes?

Supply chain management (SCM) systems can be used to improve the coordination of suppliers, distribution and the production of products or services. When using SCM a company is able to reduce its inventory costs and improve customer service, which leads to increased revenue.

SCM is used for optimizing business processes that span organizational boundaries. If the SCM system is tightly integrated with the ERP than this leads to great benefits for an organization. For an SCM to be successful it must contain data that is goods and it must overcome distrust between partners in the supply network.

The extent to which the supply chain of a company is focusing on minimizing procurement, transportation costs and production is called supply chain efficiency. Sometimes even sacrificing customer service. On the contrary we have supply chain effectiveness, which is the extent to which the supply chain of a company is focused on maximizing customer service. Here there is less focus on reducing production, procurement and transportation costs.

A company’s supply chain strategy must seek for a balance between supply chain efficiency and effectiveness. SCM systems allow you to make trade-offs between efficiency and effectiveness.

What is Supply Chain Planning?

Supply chain planning is defined as the development of several resource plans to support the effective and efficient production of services and goods. The following four key processes are generally supported by SCP:

• Demand planning and forecasting
• Distribution planning
• Production scheduling
• Inventory and safety stock planning

How to execute a SCP?

The execution of SCP is called supply chain execution (SCE). SCE is the process of improving the collaboration between all members of the supply chain. The four members are suppliers, producers, distributers and customers.

There are three key elements of the supply chain that are involved in SCE:

• Product flow
  The movement of goods from supplier → production → distribution → consumer
• Information flow
  The movement of information along the supply chain
• Financial flow
  The movement of financial assets through the supply chain

Companies use radio frequency identification (RFID) to monitor their product flows. With RFID, electromagnetic energy is used to transmit information between reader and a processing device, or RFID tag. An RFID tag is used whenever a unique identification system is needed.

RFID is favorable compared to standard bar code technologies because it does not require line-of-sight reading and time-consuming hand scanning.

To optimize information flows you could best use extensible markup language (XML). This is a standard for exchanging structured information via the Web. With XML you can create documents with customized tags.

XML can be customized and this has led to several variations of XML. An example of a variation is the extensible business reporting language (XBRL), which is used for publishing financial information. Such a language makes it easier for public and private companies to share information with each other.

Supply chain visibility is defined as the ability to both track products as they move in the supply chain and to foresee external events. If companies are able to see where their shipments are this gives them advantage.

You can use key performance indicators to monitor performance of the entire supply chain. This is called supply chain analytics.

How to manage customer relationships?

Companies must not only generate new business but also attract business from existing customers. In order to do this companies must keep their customer satisfied. In the relationship between companies and customers, customers have the power.

Because of the trends in social media, Big data, Internet etc., the way organizations interact with their customers has changed. The customers must not be seen as a passive audience but a company must have conversations with their customers. However, having conversations with customers is costly.

To reduce these costs, companies can try to increase first-call resolution. They have to address the issues of the customer during the first call.

The relationships between companies and customers are nowadays more complex than before. To develop a strategy for managing these relationships companies can use customer relationship management (CRM) systems.

Companies can obtain CRM applications in the form of packaged software that can be bought from vendors. If a company can implement CRM successfully, then it can generate greater customer satisfaction.

However, a company must make several changes in the enterprise to successfully implement CRM. This includes changes in:

• Policies and business processes
• Customer service
• Employee training
• Data collection, sharing and analyzing

There are three primary components that each comprehensive CRM system has:

• Operational CRM
  system to automate fundamental business processes for interacting with customers
• Analytical CRM
  System to analyze customer behavior and perceptions
• Collaborative CRM
  System to provide efficient and effective communication with customers

Operational CRM consists of the systems for interaction and service of customers. An operational CRM consists of several components:

• Sales force automation (SFA)
  This are the modules that support the daily sales activities. An SFA system is beneficially for sales managers, marketing managers and sales personnel.
• Customer service and support (CSS)
  This are the modules that are used to automate the service and information requests, product returns and complaints. To support the communication of the preferences of customers, organizations use customer engagement centers (CEC).
• Enterprise marketing management (EMM)
  This tool can help a company to execute the CRM strategy by improving promotion campaigns to reach consumers and attract them to the Web. Different channels, like Twitter and Facebook, are nowadays used by companies.

How to implement analytical CRM?

Analytical CRM is focused on analyzing customer perceptions and behavior. This analysis is done to obtain the business intelligence that is necessary to determine new opportunities and to provide good customer service.

If analytical CRM can be done effectively, then the company can better customize marketing campaigns. Technologies that are key for analytical CRM are business intelligence technologies like decision support and data mining. Analytical CRM can also be used to optimize prices by creating models of customer demand. These models look at factors like customer satisfaction but also at price and quality. To visualize the key performance metrics of CRM you can use digital dashboards.

Customers can share negative and positive information via social media. Organizations can monitor the conversations of consumers to improve customer satisfaction and maintain a positive brand image. If you monitor the conversations of customers you can identify what customers think about a product.

So, a company can use social media for CRM. This is called social CRM. Since social media is becoming more and more important, many companies have formal groups that monitor the social media behavior of customers. Social media monitoring consists of assessing what customers say about a company, product, brand or individual.

Collaborative CRM consists of systems that provide effective and efficient communication with the customer. It facilitates collaboration and information sharing between different departments of an organization. The goal is to increase loyalty and customer satisfaction.

Collaboration CRM can enhance communication in different ways, namely through:

• Greater customer focus
• Increased information integration.
• Lower communication barriers

CRM is used by companies to create and maintain relationships with customers. However, not everyone is positive about CRM. Some argue that it is unethical to invade customer privacy. Some people do not want that companies have that much personal information about them.

Via supply chain management and customer relationships management companies can strengthen business-to-business relationships.

How to develop and acquire information systems? - Chapter 9

What is ‘making the business case’?

People only want to invest money in a project if they are convinced that it is a good investment. The process of identifying, presenting and quantifying the value that a system generates is referred to as making the business case.

To prove that an information system adds value to the organization, managers must provide strong arguments and evidence. If you are working in the field of finance, marketing, management or accounting then it is likely that you have to make the case for new or existing information systems.

Before a company will invest in a new information system, the system is first proposed. Making the business case is important for this proposition because it shows whether an investment adds value.

How to prove a systems effectivity?

It is relatively easy to identify the costs that arise when a new IS is developed. However, quantifying the tangible productivity is much harder. There has been a lot of research in the past years about the impact of investments in IS on worker productivity. They have found cases where salaries, IS expenditures and number of IS staff have increased. Unfortunately, the results from the investments are often disappointing.

It is hard to identify if expenditures on technologies lead to increased productivity. Information systems may increase productivity but it possible that at the same time, other forces have reduced productivity. Examples of such factors are government regulations and taxes.

It should be that technology investments increase the productivity of the organization. However, there are cases where information systems have led to less effective communication and less productivity. This contradiction is known as the productivity paradox. There are several factors that lead to this productivity paradox of information systems:

• Measurement problems
  Organizations often measure the wrong thing; they measure efficiency instead of effectiveness.
• Time lags
  There may be a time lag between when the investment is made and when the investment leads to improvements.
• Redistribution
  The new IS may lead to improvements for individual firms but not for an entire industry.
• Mismanagement
  It could be that the new IS is not managed or implemented well.

What arguments can be used?

When making the business case, several different arguments can be used. Managers often use three types of arguments:

• Arguments based on faith
• Arguments based on fear
• Arguments based on facts

Arguments based on faith are based on beliefs about the strategy of the organization, industry forces, customer perceptions, competitive advantage etc. The arguments that are based on faith are often the most compelling. If there is faith, then the lack of hard data can be overcome.

In the faith-based arguments the manager must include the objectives of the firm, the strategy and which different information systems are needed. Cases must be built on all three types of arguments in order to convince the company of the investment.

Arguments that are based on fear can be based on several factors, like the factors of competition or the factors of the industry where the firm operates. Competition or rivalry can affect technology investments. This is the most important factor. The arguments that are based on fear are like: we need to implement this new system because otherwise the competitors will beat us and we will have to leave the market.

Many people want to see convincing, quantitative facts. Such facts can be provided by a cost-benefit analysis of the IS. When a small firm develops a Web-based order entry system then it will follow the following steps:

• Identify costs
• Identify benefits
• Perform cost-benefit analysis
• Compare competing investments

How to draw up a cost benifit analysis?

To determine the total cost of ownership (TCO) for an investment, you could use a cost-benefit analysis. The goal of TCO is to understand the total cost of acquisition and the costs associated with maintenance of the system.

There are two types of costs; recurring costs and non-recurring costs. Non-recurring costs are those that occur once and are not expected to continue after implementation of the system, like reparation costs. Recurring costs continue during the life of the system, like personnel costs. Personnel costs are often the largest recurring costs for a company. One must also look at the tangible and intangible costs.

In the next step you have to determine the intangible and tangible benefits. Tangible benefits are relatively easy to determine, while it is quite difficult to quantify intangible benefits. Intangible benefits of a system include things like improvement in customer service. Intangible benefits can be very important for a company and can lead to implementing the system even if the overall cost-benefit analysis is negative.

When the costs and benefits are identified, the cost-benefit analysis can be performed. In such an analysis you could compare total expected tangible costs with tangible benefits. You could also perform a break-even analysis, in which you calculate at which point costs and benefits are equal. Another analysis you cloud perform is the net-present-value analysis, which computes the present value of future cash flows by using the rate of return.

When the necessary analyses are done, the companies must compare competing investments to decide in which ones to invest. A method that can be used to make a decision is the weighted multicriteria analysis. With this method you put weights on the requirements and constraints for each investment to compare them.

When you are ready to make your case then you have to present your arguments and evidence to the decision-making people of the firm. Some recommendations for presenting your case are:

• Know your audience
  People can have different perspectives on subjects.
• Convert benefits to monetary terms
  For people it is easier to rationalize decisions if monetary terms are used.
• Devise proxy variables
  Proxy variables can be used to clarify the effect of the investment on the firm, if it is not easy to quantify this effect.
• Measure what is important to the management
  It is, naturally, important to show the thinks that the senior managers find most important.

How is a system developed?

System analysis and design is defined as the process of building, designing and maintaining information systems. This process is done by individuals who are referred to as system analysts.

When a company wants a new information system it can choose between off-the-shelf and custom software. Some software can be used by many different industries and can therefore be bought off the shelf.

To meet the specifications of a company, custom software is developed. This development can be performer by people of the company itself or it may be outsourced. Compared to general purpose commercial technologies, custom software has two main benefits:

• Customizability
• Problem specificity (the company only pays for the features that it requires)

There are not many companies that build an entire system themselves. Many develop information systems that include a large number of preprogrammed modules and technologies.

Off-the-shelf software has the advantage that it is generally less costly, faster to procure, less risky and has higher quality than custom software.

There are programs that have a source code that is open and can be modified and seen by anyone. Such software is referred to as open source software. This program uses inputs form a larger base of users that allows us to improve the software and help to solve problems. An example of an open source software is Firefox.

All three software that we mentioned above have benefits, which can be combined. A company can buy off-the-shelf software and then add custom software. Generally, off-the-shelf software is acquired from an external vendor.

What tools and techniques can be used?

There are several tools and techniques that can be used to develop information systems. These techniques and tools evolve rapidly. A system analyst puts many small software modules and technologies together into a comprehensive system. The decomposition of a problem makes it easier to solve complex, large problems. The analyst has the primary responsibility for the system.

The development project is often also managed by the system analyst. In his role as project manager he needs skills in the field of management, technology, customer relationships, conflict management and leadership. He is responsible for the failure or success of the project.

When an information system is built or modified, then the system analysts depend on the information that is provided by the users of the system.

Different phases

The life of an information system, from conception to retirement, is described by the system development life cycle (SDLC). This cycle has the following four phases:

1. System planning and selection
2. System analysis
3. System design
4. System implementation and operation

Some companies use an information system planning process for the first phase. With this system, all possible systems development projects are identified and assessed by the senior manager, business group or steering committee.

In the second phase, the goal of the designers is to fully understand how the business is currently using its information systems. This phase has three sub phases:

1. Collecting requirements
   This is the process of gathering and organizing information from customers, business processes, managers, users and documents. This is done to understand the functioning of the proposed IS. There are several techniques that can be used to collect information, like questionnaires, interviews, observations, document analysis and joint application design (group meetings).
2. Modeling data
   Data includes the facts that tell something about people, events or objects.
3. Modeling process and logic
   In this phase we model how we input, process and present data to users.

The third phase of the cycle is the system design in which the proposed system designed. When building an IS, the following elements must be designed:

• Processing and logic operations
• Databases and files
• Human-computer interface (HCI); an HCI is the contact point between a system and its users,

When systems are easy to understand, which is called usability, then the error rate is lower, users are more satisfied and the efficiency is increased.

The fourth phase is the implementation of the system. There are several activities that have the goal to transform the designed system into a working system. Activities include testing a software programming. Before a system can be used one must do several tests. Methods that can be used are beta testing, alpha testing and developmental testing.

Besides these activities there are also activities that are focused on preparing the company for the use of the new IS. Such activities include training for users and system conversion. System conversion refers to the process of decommissioning how things are currently done and installing the new system in the organization.

For each information system there are many types of documentation. These documents can include training manuals, user guides, reference guides and installation procedures.

The maintenance phase

After a system is installed it enters the phase of maintenance. This is a repeating phase. There are several maintenance types:

• Corrective maintenance
• Adaptive maintenance
• Preventive maintenance
• Perfective maintenance

If there are proposed changes to the system, these changes have to be documented, reviewed, authorized and managed. This process is referred to as change request management.

Patch management systems are used to facilitate the different forms of systems maintenance for the user. In many off-the-shelf packages these patch management systems are included.

Other methods

We have showed that SLCD can be used to manage the development of information systems. However, there are also other approaches that can be used. An alternative that is often used is prototyping. This approach uses trial-and-error to find out how the systems should operate.

Agile methodologies utilizes evolutionary systems development approach that focuses on creating small, client-approved parts of the system as the project progresses rather than delivering one large application at the end of the project. It can be seen as different sprints in a spiral form through planning, analysis, design and implementation phases. This is highly recommended with unpredictable or dynamic requirements, responsible and motivated developers and customers who understand the process and will get involved. An example is eXtreme Programming (XP), which centers around fast release to customers, small teams and extensive testing.

How to acquire information systems?

We have showed several approaches that can be used to develop a system. However, there are many situations where such approaches are not feasible. The following four situations might require alternative approaches:

• When the information systems staff is limited
• When the information systems staff has limited skills
• When the information systems staff is overworked
• When there are problems with the performance of the information systems staff

External acquisition and outsourcing are alternatives to developing a system in-house. An external acquisition is defined as buying an existing system from an external party (vendor). When making an external acquisition, many organizations will use a competitive bid process. Most processes have the following five stages:

1. Systems planning and selection
2. Analysis of the systems
3. Development of request for proposal
4. Evaluation of the proposal
5. Selection of the vendor

A request for proposal (RFP) is a document that companies use to tell the vendor what your requirements are and to invite the vendor to provide him information. Included are things like the existing applications and systems, the criteria and time and budget constraints.

In the fourth step the proposal system has to be evaluated. This can be done with a method called systems benchmarking. This method uses standardized performance tests to compare different systems.

What can the decision be based upon?

There are often multiple systems that meet your requirements. You choose the one that will fit better than the other ones. This can be done on the basis of certain criteria that you set.

When companies buy an off-the-shelf software they often have to sign a license agreement. Each license has different restrictions. The two most important types of licenses are:

• Shrink-wrap licenses and click-wrap licenses: the first is activated when the shrink wrap on the package is removed and the latter is used for downloaded software (like the accept button when downloading software)
• Enterprise license (also called volume license)
  These licenses often contain limitations of liability and warranty disclaimers to protect the software.

Companies can outsource the development of new systems. A company can have several reasons to outsource the development. Such reasons include:

• Cost and quality concerns (outsourcing achieves higher quality and a lower price)
• IS performance problems
• Supplier pressures
• Simplifying, downsizing and reengeneering
• Financial factors
• Organizational culture
• Internal tensions

For an outsource project to be successful there must be a good relationship between the company and the outsourcing party. It is important that the chief information officer makes sure that the legal and professional relationship with the outsourcing partner is good. Furthermore, there must be clear and realistic performance measurements.

System analysis and design is defined as the process of building, designing and maintaining information systems. This process is done by individuals who are referred to as system analysts.

When a company wants a new information system it can choose between off-the-shelf and custom software. Some software can be used by many different industries and can therefore be bought off the shelf.

How to secure information systems? - Chapter 10

Company’s dependence on information systems, tablets and other mobile devices to communicate is huge. We are very dependent on technology and therefore, many companies and individuals also focus on the security of information systems.

What is computer crime?

Computer crime is the use of a computer to commit an illegal act. This includes, targeting a computer while committing an offense, the use of computers for a criminal act where the computer is not targeted, and the use of a computer to commit an offense.

Hackers are defined as people who have the knowledge to gain access to computer systems without authorization. These people often steal or damage information that belongs to others.

Some hackers only engage in hacking a system because they are curious and not because they want to harm others. Nowadays, we define those people that hack computers with the intention to harm others as crackers or black hats.

There are also people that hack a system or Web sites to promote their political or ideological goals. Such people are referred to as hacktivists.

Which groups commit computer crimes with what aims?

There are many types of computer crimes which can be committed by many different types of people. There are crimes that involve stealing information, or stealing money. There are also cyberterrorists which place a destructive program into a computer system. These people threat to activate the program if they do not get what they want, which is often money.

Nowadays, not only technology nerds are able to break into a system but there are more and more people who have the skills to break into a system. When a system is hacked this can lead to great losses in terms of money, information and goodwill with customers.

There are studies that try to categorize computer criminals. They use the following categorization:

• People with technical skills
• Career criminals
• Outside hackers that try to find information
• Current or former employees

Vulnerability scanners can automatically test a targeted system for weaknesses. Packet sniffers can be used to analyze the network traffic and identify unencrypted passwords. These two are sophisticated software tools that criminals use to gain access to a computer system.

If people who are not authorized look through or use particular information than we speak of unauthorized access. It can be that employees steal from their own company to do personal business. People who steal information are a great concern for governments and corporate agencies.

Insider threats are defined as trusted opponents who operation in an organization and can be a significant threat to the public and private sectors.

When someone breaks into a system and then changes the electronic information then we speak of information modification. It is often quite easy to break into an information system because organizations and individuals do not have proper safety guards. For instance, some people keep their passwords on a piece of paper on their desk.

Because of the increased use of the mobile devices, these devices contain much information. When the mobile device is lost, the owner does not have the capabilities to remove the data from the device.

What is malware?

Malicious software, also called malware, can be a virus or worm that is affecting the computer system. Such software can have a large effect in organizations and it costs them a lot of money.

A virus is defined as a destructive program that leads to a disruption of the normal functioning of a computer system. Viruses can reproduce themselves and infect only a single computer. However, the virus can be spread to other computers via infected files.

Other malicious software are worms and trojan horses. Worms are defined as a sort of virus that targets networks. The virus can spread by itself, without the sharing of infected files. A trojan horse is defined as something that appears to legitimate but contains a destructive virus.

There are also variations on trojans horses, which are called logic bombs or time bombs. These operate without disrupting the normal functioning of a computer and are not able to reproduce themselves. These bombs are triggered by a specific action of the user.

Ransomware is a relatively new type of malware. This software is taking the computer hostage; it takes control over the computer and locks files. Often ransom is demanded by the criminals.

Denial-of-service (DoS) attacks are electronic attacks that disable the users of the system to use a certain service. The criminals often do this by using up all the resources of the system. These attacks are often performed by creating zombie computers. The computers in a certain location are infected with viruses and worms.

Information systems can be threatened by three traditional things:

• Spyware
  This is any software that gathers information about users via an Internet connection. The user does not know that his activities are being monitored. Keyloggers are able to find information like e-mail addresses, passwords and credit card numbers.
• Spam
  This is electronic junk mail that usually has the goal of advertising. The worst form of spam is phising. Criminals exploit human weaknesses by using phishing attacks, shoulder surfing, social engineering and dumpster diving. Spear phising targets a specific person. Completely Automated Public Turing Test to Tell Computers and Humans Apart (CAPTCHA) consists of a distorted image with letters and numbers the user has to fill out in order to submit something.
• Cookies
  A cookie is a small text file that is passed from the server to the Web browser on the computer of the user. The browser stores the text file message and then the message is send back to the server each time the browser requests a page from the server.

Organizations often use spam filters to fight spam mail. Hardware and software with defense layers can be used for this. Sometimes, there is spam mail that contains the false message that a new virus is circulating. Such messages are called Internet hoax. Spam can also be used to get authentication information about financial accounts and credit cards. This is called phishing.

Bots are destructive software robots which are, via the Internet, working together with zombie computers, this creates a botnet. The amount of attacks using botnets is increasing and has led to many specialized criminals.

A crime that is often committed nowadays is identity theft. This is defined as stealing personal information, like the social security number, of another person.

People can act anonymous on the Internet. This had led to online harassing, stalking and bullying. This is referred to as cyberharassment. One message that is offensive can already be seen as cyberharassment. If there is repeated contact with the victim, then we also call this cyberstalking. There are many forms of cyberstalking.

Online predators generally target vulnerable people. Young and old people are usually vulnerable. Online predators target people mostly for financial or sexual purposes.

How to ensure privacy?

Companies sometimes buy a software application and then try to copy the application to distribute it to all its employees. This copying is illegal and is referred to as software piracy. These practices are illegal because software often has patents and copyrights. Patents are often inventions of machines and material, and copyrights refer to creations of the mind.

Software piracy is something that we see all over the world, it is a common practice. Not everyone around the world wants to recognize the ownership of intellectual property rights. Here copyright, stolen software (warez), reverse engineering and key generators come into play.

Cybersquatting is a form of piracy. It is defined as registering a domain name and then trying to sell the name for a great amount of money to the person, organization or company that wants it most.

There are several laws that are designed to fight computer crime. In the United States there are two main federal laws which are the electronic communications privacy act and the computer fraud and abuse act. Besides these two main federal laws there are many other laws. The U.S. secret service and the FBI enforce these federal computer crime laws together.

What are cyberwars and cyberterrorism?

A cyberwar is defined as an organized attempt by the military of a country to disrupt or destroy the information and communication systems of another country. Cyberwars are done with the purpose to obtain information that is beneficial for the country while it diminishes capabilities of the other country.

For a cyberwar, different technologies can be used. Cyberwars often try to control the content and distribution of propaganda and information to the government and troops of the opponent. Cyberwars are launched by governments.

In contrast, cyberterrorism is launched by individuals and organized groups. There are many types of cyberterrorist attacks. Examples include coordinated bomb attacks, manipulation of banking and financial information and the physical destruction of computer systems.

Because of the internet, the business process of terrorists has changed. Terrorists are using the internet for data mining, training, fundraising, recruiting, information gathering and networking. As we rely more and more on technology, cyberterrorism will continue to be a threat. Government should design coordinated responses to various scenarios of cyberterrorism.

How should you manage information systems security?

The security of information systems is mostly threatened by the following factors:

• Natural disasters
• Accidents
• Consultants and employees
• People outside the organization
• Links to outside business contacts

If a disaster occurs, this comes with huge costs to recover in terms of money and time. Information systems security is defined as the precautions that are taken to keep all aspects of information systems safe from destruction or manipulation. Organizations especially have to consider:

• Integrity
• Availability for users
• Accountability
• Confidentially

Managing the potential risks of IS is crucial for organizations. Threats are continuously evolving and therefore securing information systems is a continuously process consisting of the following steps:

1. Assessing risks
2. Developing a security strategy
3. Implementing controls and training
4. Monitoring security

In the first step, organizations perform information system risk assessment. They do this to understand the risks associated to availability, confidentially and integrity of data systems. We define threats as undesirable events that will cause harm. Vulnerabilities are the weaknesses of the information system security of an organization.

To implement effective information systems controls, an organization needs to understand the interaction between threats, impacts and vulnerabilities. An organization rates the risks and then determines what steps to undertake to secure the system. Several approaches can be used, like risk reduction, risk acceptance, risk transference or risk avoidance.

In the second step is determined which information systems controls need to be implemented. For an information systems security strategy to be effective it must focus on the following controls:

• Preventive controls
• Detective controls
• Corrective controls

Security of a system can also be achieved by changes in the organization. Most organizations provide their employees and customers with an acceptable use policy. The decisions of users are often guided by the following policies:

• Confidential Information Policy
• Security policy
• Use policy
• Backup policy
• Account management policy
• Incident handling procedures
• Disaster recovery plan

Sometimes it is not possible to prevent disasters. How a business continues after a disaster, before the normal operations are restored is described in a business continuity plan. A disaster recovery plan describes the procedures for recovery of the systems. In an event of a disaster, backup sites are crucial for the continuity of the business.

A cold backup site is an empty warehouse that contains all necessary connections for power and communication. A hot backup contains much more information. It is a fully equipped facility that has a backup of every data. In a disaster recovery plan is the maximum time allowed to recover determined.

The third step is implementing controls and training. To safeguard information systems, the following controls are often used:

• Firewalls
• Systems development controls
• Secure data centers
• Human controls
• Physical access restrictions
• Encryption
• Virus monitoring and prevention

Many organizations control the access of information by authentication to confirm your identity. To prevent someone else from accessing your information you should make it dependent on:

• Something you are (fingerprints)
• Something you have (key, card)
• Something you know (password)

Physical access controls need to be implemented. There are several methods that could be used. Some methods are:

• Biometrics
  With this method employees have to identify themselves with their fingerprints or other body characteristics.
• Access-control software
  This software enables users of a computer to access only the files that are related to their work.
• Wireless LAN control
  With this method the WLAN is configured such that only users with authorization have access.
• Virtual private networks
  A virtual private network (VPN) is a network connection that is constructed dynamically within an existing network. Users are connected via this VPN.

Firewalls are part of your computer system which are designed to detect intruders of your computer and prevent unauthorized access from a private network.

Encryption is the process where messages are encoded with an encryption key before they enter the network. Different types are end-to-end encryption, symmetric encryption, public key encryption, asymmetric encryption, certificate authority. Secure Sockets Layer (SSL) is a popular public key encryption method.

Cloud security is becoming increasingly important. An important task for IS departments is virus prevention. They try to detect and prevent the computer viruses.

Another important thing to do is securing data centers. To protect itself from threats an organization must ensure business continuity and secure its facilities infrastructure. It is very important that data centers are secured and there are many safeguards that an organization can use to achieve this. Such safeguards include:

• Site selection
• Physical access restrictions
• Intrusion detection
• Uninterruptible cooling and power
• Protection from environmental threats

Mobile Device Management (MDM) is the administration of an organization’s mobile devices to enforce authorization policies, prevent the downloading or installing of non-approved apps, or remotely lock the devices or wipe data. Not only technological controls can be used protect information systems but also human controls can be used. Examples are ethics, laws and effective management.

The last step of the process of securing information systems is monitoring the security. Organizations have to monitor the controls continuously. Both internal event and external events should be monitored. This can be done through monitoring external events, IS auditing, the Sarbanes-oxley act (protects investors from fraudulent practices through control objective for information and related technology (COBIT) for example), responding to security incidents and computer forensics.

It can also be beneficial for an organization to hire an external entity to review its controls. An information system audit is performed by an external auditor. When testing the tools and data, auditors often depend on computer-assisted audit tools. Such an audit can be beneficial for organizations since it can reduce costs or sustain competitive advantage.

Computer forensics uses formal investigative techniques to look at digital information for judicial review. They use many storage devices to see whether there are tracks of illegal activity. To track crackers, the FBI or other agencies, can design a network site that detects illegal activities. Such network sites are referred to as honeypots.

Managing the potential risks of IS is crucial for organizations. Threats are continuously evolving and therefore securing information systems is a continuously process consisting of the following steps:

1. Assessing risks
2. Developing a security strategy
3. Implementing controls and training
4. Monitoring security