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MANAGEMENT OF INFORMATION SYSTEMS

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Disclaimer
MANAGEMENT OF INFORMATION SYSTEMS

Reviewer
Dr. Reema Thareja

Disclaimer
This Study Material is duly recommended in the meeting of Standing
Committee held on 08/05/2023 and approved in Academic Council meeting
held on 26/05/2023 Vide item no. 1014 and subsequently Executive Council
Meeting held on 09/06/2023 vide item no. 14 {14-1(14-1-11)}

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 Contents

PAGE
Lesson 1: Introduction to Management Information System 1–20

Lesson 2: Business Processes and Decision Making 21–39

Lesson 3: Information Systems: An Overview 40–59

Lesson 4: Computer-Based Information Systems 60–89

Lesson 5: IT and Strategic Advantage 90–124

Lesson 6: Inter-Organisational and International Information System 125–153

Lesson 7: Structured System Analysis and System Development Life Cycle 154–186

Lesson 8: Enhancing Business Efficiency with ERP, CRM and SCM 187–214

Lesson 9: Information Infrastructure 215–235

Lesson 10: Strategic Information System and Technology 236–259

Glossary 261–266

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 L E S S O N

1
Introduction to
Management
Information System
Ritika Tehelramani
Assistant Professor
Shyama Prasad Mukherji College for Women
University of Delhi
Email-Id: [email protected]

STRUCTURE
1.1 Learning Objectives
1.2 Introduction
1.3 Role, Objectives, Characteristics and Dimensions of MIS
1.4 Limitations of MIS
1.5 Aspects of MIS
1.6 Summary
1.7 Answers to In-Text Questions
1.8 Self-Assessment Questions
1.9 References
1.10 Suggested Readings

1.1 Learning Objectives

After finishing this unit, you’ll be able to:
‹ Describe how information aids in the planning and decision-making process.
‹ Explain the idea of MIS and its significance to an organization.
‹ Describe the various MIS’s methods for processing information.

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Notes
1.2 Introduction
Concepts: The word “MIS” comprises three basic elements that can be
broken down into the following categories:
Management: Includes the planning, directing, and supervising of
an organization’s operations. Top management oversees planning,
middle management is focused on controlling, and bottom manage-
ment oversees actual administration.
Information: In MIS, information is the processed data that aids
management in planning, controlling, and operational procedures. All
the information obtained from a business’s operations is referred to as
data. Recording, summarizing, comparing, and finally providing the
MIS report to management are all parts of the data processing process.
System: Data are transformed into information via a system. To give
the management reliable information so that it can do its obligations,
a system’s input variables include input data, preparation, output,
and responses or regulations.
Management Information System Definition
A management information system, or MIS, is a system that is intended
to collect, distribute, and store data in the form of information needed
to carry out management duties.
The MIS can be understood and defined in a variety of ways. Information
systems, decision systems, and computer-based information systems are
further names for it.
Examples of MIS definitions include:
1. A system that provides information help for organizational decision-
making is what the MIS is referred to be.
2. MIS is an integrated system of people and technology that offers data to
support management, operations, and decision-making within organizations.

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 Introduction to Management Information System

1.2.1 Information System Types Notes

Different types of information are used to carry out various organizational
functions. Information could be widely categorized into the following
types based on its use and purpose:
‹ Strategic Information
‹ Tactical Information
‹ Operational Information

Strategic Information
Strategic information aids senior management in creating the internal
business strategies that must be implemented. Strategic information is
essential for organizational decision-making and typically utilized for
long-term planning. Consider, for instance, to plan for the adoption of
new technologies to boost production, an organization’s top management
needs strategic knowledge.

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Notes Tactical Information

Middle-level management uses tactical knowledge to create and put into
practice organisational strategies. Making decisions pertaining to control
within an organisation requires tactical information. Typically, records of
an organization’s daily operations are where this information is found.
For instance, a company’s regional sales manager must project future
product sales based on sales data from the previous three to four years.
Under such circumstances, the basis for obtaining tactical intelligence
is an organization’s daily records. Tactical information is significantly
influenced by outside data, such as rival records.
Operational Information
The plans that must be adopted in a company are developed by lower-level
management using operational data. For short-term planning and day-to-day
decision-making, operational information is essential. Examples of operational
data include stock-in-hand data, customer orders, and work status.

1.2.2 Functions of an Information System

Information about a company and its surroundings can be found in an
information system. The three core processes of input, processing, and
output are what organisations need information for. The right individuals
or departments inside the organisation receive the output of the feedback
to review and improve the input. Interactions between the company and
its information systems and customers, suppliers, rivals, stockholders,
and regulatory bodies are common.
Informal information systems rely on unspoken behavioral norms, including
workplace rumor networks. There is disagreement on what information
is and how it will be processed and stored. A study of these systems’
properties is outside the purview of this text, even though they are es-
sential to an organization’s survival.
Systems for formalized information might be manual or computer-based.
In manual systems, paper and pencil technology is employed. These
manual systems perform crucial tasks, but they are not the main subject
of this article. Contrarily, information is processed and distributed using
computer hardware and software in computer-based information systems
(CBIS). From now on, when we talk about information systems, we mean
formal organizational systems that are computer-based.

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 Introduction to Management Information System

Several of the prevalent technologies found in today’s computer-based in- Notes

formation systems are described in The Window on Technology. To increase
the effectiveness of its operations and the quality of its customer service,
United Parcel Service (UPS) makes significant investments in information
technology. It uses a range of information technologies, including bar-code
scanning devices, wireless networks, powerful mainframe computers, porta-
ble computers, the Internet, and several pieces of software, to track goods,
calculate fees, keep track of client accounts, and manage logistics.
There is a distinct difference between a computer and a computer pro-
gramme on the one hand, and an information system on the other, even
though computer-based information systems transform raw data into useful
information. Electronic computers and accompanying software programmes
serve as the technical basis, resources, and tools for modern informa-
tion systems. Data processing and storage can be done using computers.
Computer programmes, usually referred to as software, are collections of
instructions that govern and guide a computer’s computation. Although
computers are only one part of an information system, understanding
how computer systems and computer programmes operate is essential for
developing answers to problems that already exist.
A nice comparison is a house. Hammers, nails, and wood are used in
the construction of houses, yet a house is not made of these items. The
house’s architectural style, design, location, landscaping, and all decisions
that led to the creation of these aspects are all essential in resolving the
problem of giving someone a roof over their head.
Computers and software are CBIS’s hammer, nails, and timber, but they
are unable to independently provide the information that a certain or-
ganisation needs. You must first comprehend the issues that information
systems are intended to address, as well as the architectural and design
components that result in these issues being addressed.
IN-TEXT QUESTIONS
1. Planning is not a part of MIS. (True/False)
2. The tool by which data is converted into information is called
a system. (True/False)
3. Recording, summarizing, comparing, and eventually presenting,
all these a part of the data processing. (True/False)

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Notes
1.3 Role, Objectives, Characteristics and Dimensions of
MIS
Role
The function of an organization’s MIS is comparable to its heart. MIS is
the heart, and information is the blood. Pure blood is delivered to every
part of the body, including the brain, via the heart. The heart pumps
more blood as quickly as needed. The brought-in impure blood is moni-
tored and managed, processed, and sent in the necessary quantity to the
location. It provides the human body with regular and emergency blood
supply needs.
The MIS does the same task for the company. The system ensures that
the correct information is acquired from various sources, created, and dis-
tributed to all locations that require it. The system must be able to satisfy
the information needs of one person, a group of people, and managerial
functionaries such as senior management and executives.
The MIS uses a variety of systems, including query systems, analytical
systems, modelling systems, and decision support systems, to address a
wide range of demands. Strategic planning, managerial control, opera-
tional control, and transaction processing are all made easier by the MIS.

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 Introduction to Management Information System

Making Decisions Notes

Any organization’s management information system is crucial to its abil-
ity to make decisions (MIS). Any institution decides based on pertinent
information collected from the MIS.
Coordination between Departments
The various functional departments of an organization are served by
management information systems.
Identifying Issues
We are all aware that MIS offers essential data on all aspects of opera-
tions. As a result, if management makes a mistake, MIS data will help
in figuring out the best course of action.
Business Performance Comparison
All prior data and information are kept by MIS in its database. As a re-
sult, the management information system is quite helpful for evaluating
how well different corporate groups are performing.
Organizational Strategies
Every company today competes for customers in a market. An MIS
helps a business create effective plans for success in a cutthroat en-
vironment.
The MIS aids the administrative staff in processing transactions and an-
swers their questions about transaction-related information, the standing
of a particular record, and references to other records. The MIS assists
the junior management staff by delivering operational data for planning,
scheduling, and control, allowing them to handle an out-of-control sce-
nario more efficiently at the operational level. The MIS helps middle
management in areas including making short-term plans, creating goals,
and controlling corporate functions. It is supported by the use of man-
agement strategies such as planning and control.
Every organisation nowadays needs an efficient information system to
handle the different changes that occur in the world’s economies and
commercial organisations. Communication between internal and external
members of an organisation is made possible through the information

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Notes system. This indicates that an information system facilitates communica-

tion inside an organisation and guarantees that all pertinent information
is conveyed to all organisation members.
By improving the flow of information, an information system enables an
organisation to be more flexible in adopting new methods and technolo-
gy. Also, it manages international trade and business for the institution.
The Management Information System (MIS) facilitates communication,
problem identification, problem-solving, and information generation. As a
result, the management, administration, and operations of an organisation
depend on the MIS.
Objectives

To better manage the company and realize the information system’s

potential for competitive advantage, an MIS implements the enterprise’s
organizational structure and dynamics.
The fundamental objectives of a MIS are as follows:
‹ Collecting Data: Compiling contextual or operational data from a
variety of organisational internal and external sources that might
help with decision-making.
‹ Data Processing: The data is converted into the knowledge needed
for tactical, strategic, and operational level planning, organisation,
coordination, and control. Data processing refers to the act of
performing calculations on data.
Doing calculations using the data, sorting the data, classifying the data,
and summarizing the data.
‹ Storing Information: For later use, data processing and information
storage are both required.
‹ Information Retrieval: The system should be able to access this
data from the storage as and when it is required by various users.
‹ Information Propagation: Information or the finished product from
the MIS should be constantly transmitted to its consumers using
the organisational network. For the users who sporadically use the
business network, information must be retained, or processed data
must be kept.

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Characteristics Notes

‹ System Approach: The information system employs a systems

approach. The term “system approach” refers to a thorough method
of examining the system and how well it serves its intended purpose.
‹ Management Oriented: The MIS must be designed using the
top-down method. The top-down method states that identifying
management needs and overarching company goals is the first step
in system development. The entire business plan should serve as
the foundation for the MIS development plan. Management actively
guides system development since MIS is management-oriented.
‹ Need-Based: The design and development of MIS should be based
on the information requirements of managers at various levels, such
as strategic planning, management control, and operational control.
In other words, MIS should consider the unique requirements of
managers at various corporate rungs.

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Notes ‹ Exception-Based: MIS should be developed on the exception-based

reporting principle, which means an abnormal situation, that is the
maximum, minimum or expected values vary beyond the limits.
In such cases, there should be exception reporting to the decision-
maker at the required level.
‹ Future-Oriented: Together with exception-based reporting, MIS
should consider the future. In other words, MIS should provide
data based on projections in addition to past or historical data that
can be used to spark action.
‹ Integrated: Integration is a required component of a management
information system. Integration is crucial because it makes it
possible to produce more insightful data. For instance, it’s important
to balance aspects like setup costs, labor prices, overtime rates,
production capacity, inventory levels, capital needs, and customer
service while creating a production scheduling system.
‹ Long-term Planning: MIS is created over relatively long stretches
of time. Such a system does not appear out of nothing. Planning
is essential and will take time. The company’s long-term demands
and aspirations must be considered by the MIS designer.
‹ Sub-system Concept: Due to the complexity of the MIS creation
process, time can easily slip your mind. As a result, even when
viewed as a whole, the system needs to be divided into manageable
sub-systems that are more significant during the planning stage.
In other terms, the following characteristics of a well-designed comput-
erised MIS include:
‹ It should be able to swiftly and accurately process data using a
range of techniques, including simulation, heuristics, and operations
research.
‹ It must be able to compile, organise, manage, and update a substantial
amount of raw data from both internal and external sources over
a range of time periods—data that is both pertinent and unrelated.
It needs to provide unrestricted real-time information on ongoing events.
‹ It must support a range of output formats and comply with all
applicable rules and regulations.

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‹ The ultimate flexibility in data storage and retrieval should be the Notes
goal.
‹ It should provide well-organized and appropriate information for
tactical, operational, and all other levels of management.
Dimensions
Next, let’s examine the three crucial aspects of information systems:

Organizations
Information systems are essential to the operation of organisations. In fact,
some organisations, like credit reporting bureaus, would cease to exist
without an information system. People, structure, business procedures,
politics, and culture make up a company’s core elements.
Important Functions of Business
Functions Purpose
Marketing and Sales Promoting and selling the organizations produce
Production Manufacturing and producing the goods and
services
Human Resources Recruiting, retaining, and developing the or-
ganization’s workforce, as well as keeping
employee records
Accounts and Finance Managing the organization’s financial assets
and keeping accurate financial records

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Notes An organisation uses a hierarchical hierarchy and its previously estab-

lished business processes to coordinate work. In a hierarchy, people are
grouped in a pyramidal framework with progressively more responsibilities
and authority. The administrative, professional, and technical employees
make up the hierarchy’s upper levels, while operational personnel make
up its lower levels.
The majority of businesses have clear procedures in place for carrying
out duties that have been created over time. These guidelines help staff
with a variety of tasks, such as resolving customer complaints and billing.
While some of these procedures have been formally created and are duly
documented, others are more informal standard operating procedures that
are not officially written, such as the obligation to return phone calls
from clients or coworkers.
Every firm has a culture, which is a fundamental set of beliefs, ideals,
and ways of doing things that the majority of its employees share. A
company’s information systems will always reflect some of its core
principles. For instance, United Parcel Service’s organizational culture
may be seen in the company’s parcel tracking systems, which emphasize
customer service as the company’s first priority.
Within an organization, there are varying levels of specialization, which
leads to a range of interests and viewpoints. These ideas usually conflict
with one another. Conflict is the foundation of organizational politics.
Information systems are created from the muck of divergent opinions,
arguments, settlements, and agreements that are typical components of
all institutions.
Management
It is the responsibility of management to build an awareness of the various
situations that organisations encounter, to make decisions, and to design
action plans to address organisational issues. In order to successfully
coordinate efforts and achieve success, managers identify environmental
business concerns, create organisational strategies to meet those diffi-
culties and deploy human and financial resources. They must continue
to exercise responsible leadership. The corporate information systems
discussed in this book are a reflection of the goals, dreams, and realities
of managers in the actual world.

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Yet, managers must do more than just oversee what is currently in place. Notes
In addition, they must re-create the organisation and develop new ser-
vices and goods. A sizeable chunk of managerial duties involve creative
labour motivated by fresh knowledge and information. By reorienting
and rebuilding an organisation, information technology has the power to
change it. In-depth discussions of managerial actions and decision-making
will be covered in later chapters.
It is important to keep in mind that managerial decisions and abilities
change depending on the stage a business is in. Top executives decide
which services and goods to manufacture in the long term. Plans and
initiatives from upper management are presented by middle managers. The
task of overseeing the company’s everyday operations falls to operational
managers. Leadership at all levels is expected to develop ground-breaking
approaches to a variety of problems. Different information needs and
technical requirements apply at each level of management.
Technology
Information technology is one of several tools used by managers to deal
with change. The physical components utilized for input, processing, and
output in an information system are referred to as hardware. A computer
processing system, various input, output, and storage systems, as well as
physical media to connect these devices, make up this system.
The precise, pre-programmed instructions that manage and coordinate
the hardware components of an information system are referred to as
computer software. Data is transferred between physical locations using
communications technology, which consists of both hardware and software
components. Computers and communications devices may share voice,
data, images, audio, and even video clips thanks to networks. A system
that connects multiple computers and allows them to share resources like
printers and information.
The Internet is the largest and most used network in the world. A global
network of both private and public channels makes up the Internet. More
than 200 countries’ worth of networks are connected by the Internet. In
the fields of research, education, government, and business, more than
800 million people utilize the Internet to communicate with one another
and transact business.

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Notes A brand-new “unified” technological platform has been produced by the

internet enabling the creation of a wide range of novel goods, services,
tactics, and business models. Internal uses for this same software plat-
form include linking various systems and networks within the business.
Intranets are private corporate networks that make use of the Internet.
Firms use extranets, which are private intranets made available to autho-
rised users outside the business, to coordinate their actions with those of
other organisations when making purchases, working together on designs,
and performing other inter-firm tasks.
The Information Technology (IT) infrastructure of the company is made
up of these technologies, which are all resources that may be shared
throughout the many institutions. The company’s unique information
systems can be created on top of the IT infrastructure as its base or
platform. To guarantee that each company has the right collection of
technology services for the job it expects to undertake with information
systems, each must carefully plan and manage its information technology
infrastructure.

IN-TEXT QUESTIONS
4. The MIS assists the__________ staff in processing transactions.
5. Making __________ with data is considered __________data.
6. Properly curated __________ should be able to gather, arrange,
manage and update raw data.

1.4 Limitations of MIS

A company has intrinsic problems, like subpar management and unclear
organisational positions. When a corporation decides to adopt an MIS,
the following issues have an immediate influence and constraint:
Organizational Framework: Some managers think they can solve a
company’s problems by using MIS. MIS cannot help in reaching this
goal without effective planning and control within the boundaries of an
organisational structure. The management must be the cornerstone around
which MIS is built, with the organisational configurations, structures, and
processes required for efficient planning and control.

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Information Generation: The lack of managerial and operational MIS Notes

applications has a big impact because it indicates that the knowledge
creation process isn’t being managed properly. If information is not
created, shared, and used for management, neither a system manual nor
a computer will be able to fix the organisational problems. For MIS,
information is the cornerstone of decision-making.
Managerial Involvement: The management has been viewed as having
a duty for the development of MIS, which is the most noticeable char-
acteristic of a successful company. Their success is directly attributable
to the demand that managers take part in the development of their own
systems. This includes both operational line management and top manage-
ment. The president of the company must also take a personal interest in
and actively participate in the decision-making process over what duties
the computer should carry out for the company.
Expensive: Implementing MIS can be prohibitively expensive for com-
panies wanting to increase the effectiveness of their operations. When
deciding what data management needs extracted for decision-making
purposes, all divisions and processes must be examined. Large business-
es may find the price of this study and the subsequent implementation
fees to be unreasonably expensive. The cost of implementation may also
increase due to the hiring of new employees or staff training for MIS.
Employee Education and Training: A properly trained workforce is a
crucial part of a Management Information System (MIS). The day-to-day
activities of the company are created or managed by employees, who
are on the front lines of corporate operations. When a system problem
is found by a MIS or management decides to alter a process based on
MIS data, employees typically need to be retrained. Estimating the cost
is challenging due to the potential variability in the training’s depth and
length. In addition, management will be responsible for any missed output
during the training period.
Insufficient Adaptability: A MIS may prove to be an inflexible system
once it has been created and implemented in a business. It could be
challenging to adjust fast to reflect shifting business activities depending
on the style and functionality of the MIS. Changes to company-wide
practices like service improvements, production upgrades, or marketing
strategies may be more challenging than modifying individual policies like

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Notes internal controls or operating procedures. The MIS will need to undergo
considerable adjustments because of significant business developments,
which will increase expenses and disrupt information reporting.
Flaws in Information: The goal of the MIS is to give management the
data they need to make wise business choices. The fact that a MIS gives
management inaccurate or insufficient information is its most critical
drawback. This problem costs the business time and money because it
requires a new evaluation of the MIS to fix the data problems.

1.5 Aspects of MIS

Information on the associated expenses, business challenges, and technical
challenges is provided to management. The many informational dimen-
sions are as follows: Economic, Business, and Technical.
Economic Aspect
The information’s economic dimension determines both the expense of
acquiring it and the benefits it yields. On the basis of the cost and benefit
analysis of the data, the economic aspects of the information are evaluated.
The factors that the cost and benefit analysis determines are as follows:
Information Cost: It determines the overall cost of the information
collection process. Data acquisition costs, database maintenance fees,
information extraction fees from database fees, and message delivery
fees are only a few of the expenses related to gathering information from
diverse sources.
Both the relative costs of capital and information are economically impacted
by IT. A crucial component of manufacturing that potentially takes the
role of traditional capital and labour is information systems technology.
Information technology is replacing labour, historically a rising cost, as
its cost declines. As a result, the number of middle managers and ad-
ministrative workers should decline as information technology replaces
their labour (Laudon, 1990).
As the price of new information technology decreases, it can be utilised
to replace more expensive capital assets like machinery and buildings.
When the cost of IT decreases relative to other capital expenditures,
we can anticipate managers expanding their IT investment opportunities
over time.
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Information economics, as well as information cost and quality, are un- Notes
doubtedly impacted by IT. Information technology can lower transaction
costs, or the fees incurred when a company buys something it can’t
produce itself, which helps businesses minimise their size.
According to the transaction cost theory, businesses and consumers prefer
to reduce transaction costs over production costs. The use of markets
is expensive (Coase, 1937; Williamson, 1985) because of a variety of
expenses, such as the cost of finding and contacting relevant sources,
monitoring compliance with standards, purchasing insurance, getting
product information, and so forth. In the past, businesses have sought to
reduce transaction costs by growing in size, hiring more personnel, and
acquiring their own suppliers and distributors.
Information technology, especially network utilisation, can help businesses
cut the price of market performance (transaction costs), making it more
profitable for businesses to hire external suppliers rather than internal ones.
By employing computer connectivity to external suppliers, the Chrysler
Corporation, for instance, can save money by sourcing more than 70%
of its parts from other businesses. Information systems allow businesses
like Cisco Systems and Dell Computer to outsource production to contract
manufacturers like Flextronics rather than producing their own goods.
Basic math must be used to calculate the information’s true value. The
genuine worth of the information must be subtracted from the cost in-
curred to obtain it.
Business Aspect
Determining the usefulness of information at different management levels
is aided by the business dimension of information. Top-level management’s
business dimension of information is entirely different from lower-level
management’s business dimension of information. The varying levels and
types of work performed at the various levels of management account
for the disparities in business dimensions.
Data Management in Business
Entrepreneurs must be aware of the main duties and responsibilities as
well as the overall business operations. The sales manager must react if
the president calls and inquires about the percentage rise in sales over
the last four years. You can get important information from management

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Notes information systems regarding both the company and your department.
An excellent source of reference data for a bid or for regulatory purposes
is management information systems.
Making Business Decisions More Informed
The quality of a decision depends on the information it is based on. By
giving you information that is accurate, timely, relevant, and complete,
management information systems assist you in making better decisions.
IT specialists build management information systems with self-checking
and cross-checking tools to present a complete picture of a scenario or to
emphasise that some information is lacking in order to minimise errors.
All managers must use the same data set and base their judgements on
the same data, which is ensured through management information systems.
Technical Aspect
The technical aspect of information comprises its technological compo-
nents, such as the kind of database being utilised and the volume of data
that will be stored there. Information storage is aided by the database
type. The database’s storage capacity and the time it takes to retrieve
data are included in the technical dimension.
IN-TEXT QUESTIONS
7. In which regard the management is given information about?
8. What does business dimension of information determine?

1.6 Summary
‹ Data that has been turned into a form that is meaningful to the
recipient and has actual or perceived value in present-day or upcoming
actions or decisions is referred to as information.
‹ In order to manage the environment and activities of a corporate
organisation, information systems are often utilised to process data.
‹ By increasing the effectiveness and fluidity of information flow, an
information system allows the business flexibility in implementing
new procedures and technologies.
‹ The primary goal of MIS is to improve organisational management,
and to accomplish this, accurate and timely data regarding a number

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of organisational sectors, including marketing, finances, and human Notes

resources, are essential.
‹ To create organisational strategies that must be put into action, top
management uses strategic information.
‹ Middle management uses tactical data to create organisational
strategies that must be put into practice. Using tactical knowledge
is necessary while making control decisions inside an organisation.
‹ Information’s business relevance aids in determining its applicability
at various management levels. Top-level management’s business
dimension of information is entirely different from lower-level
management’s business dimension of information.

1.7 Answers to In-Text Questions

1. False
2. True
3. True
4. Administrative
5. Computations, Processing
6. Computerized MIS
7. Cost, etc.
8. Applicability of Information

1.8 Self-Assessment Questions

1. Clearly define the MIS concept. What is the primary objective of
MIS?
2. Describe the role of MIS in the business sector.
3. Go over the different MIS characteristics and explain them in detail.
4. What are the various MIS dimensions?
5. Do you agree with the limitation that MIS possesses? If yes, support
your answer.

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Notes
1.9 References
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. Management information systems.
‹ Bishop, A. (1993). The National Information Infrastructure: Policy
Trends and Issues. ERIC. Clearinghouse on Information and Technology.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).
‹ Post, G., & Anderson, D. (2006). Management information systems.
Boston, Mass.: McGraw-Hill/Irwin.
‹ What Is MIS? Characteristics, Objectives, Role, Component. Retrieved
from https://www.geektonight.com/what-is-mis/

1.10 Suggested Readings

‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. Management information systems.

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 L E S S O N

2
Business Processes and
Decision Making
Ritika Tehelramani
Assistant Professor
Shyama Prasad Mukherji College for Women
University of Delhi
Email-Id: [email protected]

STRUCTURE
2.1 Learning Objectives
2.2 Introduction
2.3 What are Business Processes?
2.4 Evolution of IT and Problem Solving
2.5 Factors Affecting the Cost and Value of the Information
2.6 Summary
2.7 Self-Assessment Questions
2.8 References
2.9 Suggested Readings

2.1 Learning Objectives

After finishing this unit, you’ll be able to:
‹ Explain what is a business process and how it works.
‹ Understand and describe the evolution of the information system and decision making.
‹ Explain the importance of decision making and MIS.
‹ Describe the emerging technological issues.

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Notes
2.2 Introduction
Most information systems up until the 1960s were used for straightforward
transaction processing, record keeping, accounting, and other electronic data
processing applications. Later, as the idea of management information sys-
tems emerged, a new position was established (MIS). By the 1970s, many
of the management’s needs for making decisions were not being sufficiently
met by the specialized information products that such MIS created. As a
result, the idea of a Decision Support System (DSS) was created. Several
new information system roles emerged in the 1980s. The phenomena of
end-user computing were first made possible by the quick microcomputer
processing power, application software packages, and telecommunication
networks, which are all being developed. Instead of relying on the indirect
support of corporate information services, end users can now support their
job requirements with their own computing resources.
Second, Executing Information Systems made an effort to provide top
executives with a simple method of obtaining critical information when
they needed it in the formats they preferred.
Third, a new role for information systems was created by the application
of Artificial Intelligence (AI) techniques to Expert Systems (ES), business
information systems, and other knowledge-based systems.
Last but not least, the 1990s saw a rapid expansion of the internet,
intranet, extranet, and other global networks that were interconnected.
Business information systems, E-business and e-commerce are intertwined
in a networked enterprise.

2.3 What are Business Processes?

Business processes are the methods by which work is planned, synchro-
nized, and concentrated in order to produce a valuable good or service.
The series of tasks necessary to create a good or service are known
as business processes. The participants in business processes exchange
materials, information, and knowledge to support these operations. Busi-
ness processes also refer to the distinctive ways in which organizations
organize work, information, and knowledge as well as the methods that
management uses to do so.

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Fulfilling an order, which at first glance seems like a straightforward Notes

business operation, actually involves a complex web of business proce-
dures that call for careful coordination across key functional areas in-
side a company. Furthermore, a lot of information is needed in order to
efficiently complete each of these steps in the order fulfilment process.
Rapid information exchange is necessary between decision makers with-
in the company, with business partners like delivery services, and with
customers. This is made feasible by computer-based information systems.

2.3.1 Information Technology and Business Process Improvement

In what specific ways do information systems enhance company proce-
dures? Many procedures in company processes that were previously done
manually, such as confirming a client’s credit or creating an invoice and
shipping order, are now automated by information technology. Modern
information technology, on the other hand, is far more capable. Indeed,
new technology has the potential to change the way information is shared
and accessed, allowing for the completion of several activities concurrently
rather than sequentially and the elimination of decision-making delays. The
way a firm operates is frequently altered by new information technology,
which also supports whole new business models. Three completely new
business procedures based on new business models are downloading a
Kindle e-book from Amazon, purchasing a computer online from Best
Buy, and downloading music from iTunes.
Due to this, it is crucial that you focus on business processes in your
information systems course and throughout your career. You can have
a very clear grasp of how a business operates by studying its business
procedures. Additionally, by performing a business process analysis, you’ll
learn how to alter the company by enhancing its operations to make it
more productive or efficient.

2.3.2 Components of Information System and Its Types

MIS Components and Their Connections
Five main elements make up a management information system: people,
business processes, data, hardware, and software. To accomplish corporate
goals, each of these elements must cooperate.

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Notes 1. People: Users/People are those who utilize the system to record
daily business transactions. The users have frequently educated
professionals like accountants and human resource managers. The
ICT department often houses the support staff who ensure the system
is operating properly.
2. Business Procedures: Business procedures are best practices that
have been established to guide users and every other component
in how to function efficiently. Business procedures are developed
by users, consultants, and other parties.
3. Data: These are the regular commercial dealings that were recorded.
Banks collect data through transactions like withdrawals and deposits.
4. Hardware: Hardware includes things like computers, printers,
networking gear, and other things. The hardware offers the capacity
to process data. Furthermore, networking and printing options are
available. The hardware accelerates the transformation of data into
information.
5. Software: Applications that are run on hardware are referred to as
software. The two basic categories of software are system software
and applications software. System software refers to the operating
system, such as Windows, Mac OS, and Ubuntu. Applications
software is specialized software used to run business operations,
including point-of-sale, banking, and payroll software.
Information System Types
There are two different categories in which information systems can be
categorized:
1. Operation Support System
2. Management Support System
Operation Support System
A system of information that gathers, processes, and stores data produced
by an organization’s operational systems and creates data and information
for input into management information systems or the administration of
operational systems. For both internal and external use, these systems
provide a variety of information products. Operation Support Systems play
several important roles in business organizations, including controlling

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industrial processes, facilitating company communication and collabora- Notes

tion, and maintaining corporate databases.
Operation Support Systems come in five different categories:
System for Processing Transactions
This system is employed to store and handle regular business operations.
A transaction processing system example is an Automated Teller Machine
(ATM) (TPS). This method expedites data processing, lowers administra-
tive expenses, and enhances customer service. A system for processing
transactions can do it in two different ways.
Batch Processing
It involves accumulating transaction data over time and processing it on
a regular basis.
Real-Time Processing
It refers to the act of processing data right away following a transaction.
Process Control System
This system keeps track of and manages physical processes. For instance,
a petroleum refinery uses computerized electronic sensors to continuously
monitor chemical reactions and make quick (real-time) modifications that
regulate refinery operations.
Office Automation Systems
It gathers, processes, stores, and transfers data in the form of electronic
office communications. Office automation systems give users the tools
they need to publish web pages, send messages, produce and share
graphics and documents, and schedule appointments. The Office Automa-
tion System improves productivity and office communication. The three
most important types of office automation software are word processing,
spreadsheets, and databases. Presentation, email, a web browser, and the
management of personal information.
For instance, a corporation might use word processing for business corre-
spondence, email for sending and receiving messages, desktop publishing
to create company newsletters, and teleconferencing for virtual meetings.

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Notes Management Support System

Systems may be made up of a variety of subsystems, each of which has
components, interactions, and goals. Specialized tasks pertaining to the
overarching goals of the complete system are carried out by subsystems.
A system can be made up of subsystems or basic components and exists
on multiple levels.
These are the Management Information System’s Subsystems:
Transaction Processing System
In the transaction processing system, a transaction is defined as an ex-
change between two or more business entities. The primary business
activities of a company, such as sales, production, inventory, shipping,
receiving, billing, accounts payable, accounts receivables, payroll, general
ledger, and so on, are reflected in overall transaction processing, also
known as data processing.
The process of gathering information on transactions, which are significant
events for an organization, is known as transaction processing. A trans-
action processing system’s primary function is to encapsulate, manage,
confirm, and store transactions that occur across multiple operational
areas of an organization for later retrieval and usage.
Management Reporting System
The management reporting system is the most complex MIS component
for management-oriented reporting. Its primary goal is to provide access
to printed reports and inquiry tools to lower and middle management in
order to promote the company’s organizational and operational control.
Decision Support System
Decision support systems are a type of computerized information sys-
tem that is used to help people make decisions. DSSs are interactive
computer-based systems and components that are designed to assist de-
cision-makers. To convey information graphically, a DSS may employ
an expert system or artificial intelligence. DSSs are frequently designed
with managers in management control and strategic planning in mind.
Office Information System
An information system that employs networks, hardware, and software to
improve employee communication. An office information system is what

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we call workflow. The use of computer and communication technology for Notes
administrative tasks is known as office automation. Office automation sys-
tems are intended to increase the productivity of managers at various levels
of management by providing secretarial support and improved communica-
tion facilities. Office automation systems are a combination of hardware,
software, and human resources in information systems that process office
transactions and assist administrative tasks at all organizational levels. Word
processing, electronic filing, email, message switching, data storage, voice
and data connection, and other support tools are included in these systems.
Business Expert System
A business expert system is a knowledge-based information system that
acts as an expert by applying its knowledge of a specific, difficult ap-
plication area. This is one of the knowledge-based information systems.
Managers can use an expert system to get advice from a subject-matter
expert. Expert systems are used in many different fields, such as medi-
cine, engineering, and business.

2.4 Evolution of IT and Problem Solving

A business expert system is a knowledge-based information system that
acts as an expert by applying its knowledge of a specific, difficult ap-
plication area. This is one of the knowledge-based information systems.
Managers can use an expert system to get advice from a subject-matter
expert. Expert systems are used in many various fields, such as health-
care, technology, and industry.
Instead of relying on the EDP or MIS departments, the management
could now immediately access the information base thanks to the personal
computing revolution. This improved management’s capacity for making
decisions and gave rise to the Decision Support Systems (DSS) that Keen
invented. With the aid of contemporary software programs like spread-
sheets, word processing, and Database Management Systems (DBMS),
etc., the direct usage of information bases developed the possibility for
“What-if” analysis.
Knowledge-based systems were created as a result of the phenomenal
advancement of Artificial Intelligence and Expert Systems (KBS). By

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Notes offering software packages with self-learning capabilities, expert systems,

when combined with DSS, could provide a superior class of MIS.
The DSS philosophy changed the “What-if” capabilities into “What-
is-best” by fusing the strength of the Operation Research models with
Management Science. Model Management Systems (MMS), as they are
now known, assist management in selecting the best course of action
from a variety of accessible options.
Lower-level management was the focus of the EDP. The middle level
of management was the focus of the MIS/DSS/MMS. The top level of
management, whose time is exceedingly valuable, is served via the Ex-
ecutive Information System (EIS) or Executive Support System (ESS). In
this case, the user interface needs to be top-notch and include features
like natural language processing, voice response, multi-media (graphics,
sound, and video), etc.
It’s Not Just Technology: A Business View of Information Systems
System and information technology are important to managers and busi-
ness owners because they add real economic value to the organization.
The decision to build or maintain an information system is based on the
assumption that the return on investment will be greater than that of
other investments in buildings, machines, or other assets. These superior
returns will be manifested as increases in productivity, revenues (which
will increase the firm’s stock market value), or strategic positioning of the
firm in specific markets (which produce superior revenues in the future).
Companies may also invest in information systems to meet government
regulations or other environmental requirements. For example, creating
a document management system that can track the flow of virtually all
material documents is one of the most important ways for businesses
to comply with the recent Sarbanes-Oxley Act or the Health Insurance
Portability and Accountability Act (HIPAA).
Businesses are sometimes required to invest in information systems just
to stay in business. For example, as a “cost of doing business,” some
small banks may be forced to invest in ATM networks or provide com-
plex banking services that necessitate large technological investments.
Despite this, it is assumed that the majority of investments in information
management systems will be justified by favorable returns.

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From a business standpoint, we can see that an information system is a Notes

valuable tool for increasing the firm’s value. Information systems enable
the firm to increase revenue or decrease costs by providing information
that helps managers make better decisions or improves the execution of
business processes.
Every business has an information value chain in which raw data is ob-
tained systematically and then transformed through various stages that
add value to the data. The value of an information system to a company,
as well as the decision to invest in any new information system, are
largely determined by the system’s ability to lead to better management
decisions, more efficient business processes, and higher firm profitability.
Although systems are built for a variety of reasons, their primary goal
is to add value to the company.

2.4.1 IT Systems are More Than Just Computers

Understanding the organization, management, and information technology
that shape the systems is required for effective use of information systems.
By providing an organizational and management solution to environmental
challenges, an information system adds value to a company.
A manager must understand information systems in their broader organ-
isational, management, and information technology dimensions (refer to
Lesson 1), as well as their ability to provide solutions to business challenges
and problems. Information systems literacy refers to a broader understanding
of information systems that includes both the management and organizational
dimensions of systems as well as the technical dimensions of systems. Infor-
mation systems literacy includes both a behavioral and a technical approach
to studying information systems. Computer literacy, on the other hand, is
primarily concerned with information technology knowledge.

2.4.2 The Systems Method for Solving Problems

The systems approach’s traits are as follows:
1. A top-down strategy: A well-done systems analysis begins with an
examination of the project’s strategy and objectives before moving
on to the specifics.

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Notes 2. A logical, impartial framework for analysis: Decisions are based

on meticulously obtained data that has been logically assessed.
3. Considers a broad problem, including the context: In an appropriate
systems analysis, the problem environment, including all stakeholders,
is always taken into account.
4. Attention to the client
5. Performance and goal/objectives index
6. The significance of options - “What do you mean you didn’t consider
any alternatives?”
7. Decomposition of the issue
8. Typical
Decision Making
One of the most significant contributions of information technology and
systems to business firms is the reduction of information uncertainty and
the resulting improvement in decision-making. IT has directly contributed
to an improvement in the quality of information flowing to management
and employee decision-makers over the last decade.
Prior to the Internet and corporate-wide enterprise information systems,
business decision-makers had restricted, postponed, and erroneous under-
standing of consumers, revenues, inventory levels, and business operations
like delivery fulfilment times, and order entry.
This intended that choices were made based on data that was, at best,
accurately estimated, and often incorrect. Due to the uncertainty of in-
formation, the solution in this environment was to double the number of
people, increase spare part production buffers, and construct very large
warehouses to store excess production.
Significant investments in information technology, as documented through-
out this book, have lifted the fog of uncertainty, and replaced it with a
much more precise, timely, and accurate level of decision-making that was
unthinkable just a few years ago. As new wireless communications tech-
nologies and mobile computing platforms expand their reach, these trends
toward more real-time information and decision-making will accelerate.

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How IT Impacts Decision Making? Notes

Even though almost everybody believes that information technology has
improved management decision-making, there have been few large-scale
quantitative studies on the subject. The positive impact of information
technology on management decision-making is typically inferred from
productivity measures and the firm’s overall performance in terms of
profitability, as well as its stock market share price.
The role of a manager is extremely complex and entails far more than
just decision-making.
Models of Decision Making
‹ Consider the rational individual model as a starting point for thinking
about decision-making. Individual decision-making models assume
that humans are rational in some way. The rational model of human
behavior assumes that people make essentially consistent, rational,
value-maximizing decisions. This model states that an individual
recognizes objectives, continues to rank all potential alternative
actions based on their contributions to those goals, and selects the
alternative that contributes the most to those goals.
‹ The most important goal of an organization, according to bureaucratic
decision-making models, is survival. Another significant goal is to
reduce uncertainty. Policy tends to be incremental, only marginally
different from the past because radical policy departures involve too
much uncertainty. These models depict organizations in general as
not making rational choices or decisions. Bureaucratic models, on
the other hand, believe that whatever organizations do is the result
of routines and existing business processes that have been refined
over years of active use.
‹ According to political decision-making models, what an organization
does is the result of political bargains struck between key leaders
and interest groups. Organizations do not create solutions that are
selected to solve a problem. Instead, they reach compromises that
reflect the conflicts, major stakeholders, diverse interests, unequal
power, and confusion of organizational politics.

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Notes 2.4.3 Simon’s Decision Making Model

According to Simon’s Model for Decision Making, there are three main
stages of decision-making.
1. Intelligence
(a) Problem Identification and Definition
(i) What is the problem?
(ii) Why is it a problem, exactly?
(iii) Whose issue is it, exactly?
2. Design
(a) Problem-Solving
(i) Come up with alternatives.
(ii) Establish standards and goals.
To analyze options, develop models and scenarios. To evaluate alterna-
tives, solve models.
3. Choice
(a) Solution
(i) Predict the result of the selected options.
(ii) Select the “best alternate”.
In the beginning, neither the managerial structure nor the function of
managers in the company were familiar to the system analysts and pro-
grammers who built and implemented the MIS. As a result, they were
unable to comprehend how managers handled issues within the firms.
They created the systems approach to solve problems in order to create
a uniform and organized framework for problem solutions. Regardless
of the nature of the issue, any manager can adopt the systems approach.
It offers a general methodology with an underlying rationale to address
any issue through a series of actions.
(i) Define the Issue: Finding the issue is the first stage in this strategy.
A difficulty is viewed as a restriction or obstruction to the normally
efficient flow of activity. It can be recognized by its signs and
symptoms. A symptom is an indication of an issue; it is not always

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the cause. These potential indicators must be found by system Notes

analysts. For instance, a decline in sales is a sign of trouble. When
such a sign appears, management must investigate the potential
reasons for the fall and pinpoint the main issue(s). Once a problem
is identified, it needs to be described more precisely so that there is
no room for ambiguity when transmitting the issue up the hierarchy.
(ii) Find Potential Solutions: Multiple approaches can be used to solve a
problem. Therefore, coming up with just one solution and attempting
to apply it is not advised. A decision like that would prevent the
manager from considering other potential alternate solutions and
the benefits linked to them. Therefore, it is advised that several
solutions be devised for the issue, with the best solution being
chosen. Such options are produced and identified in this process.
Finding new ideas can be aided by looking at earlier solutions that
have been successful. Advice from internal and external consultants
can offer new perspectives on the issue.
(iii) Weigh those Options: The best answer must be selected after the
other alternatives have been produced and appraised. Evaluation is
mostly done to see how well a potential solution fits as the best
approach to the issue at hand. Each alternative is assessed using
various methods, such as cost-benefit analysis, etc. To comprehend
their impact on finding a solution to the issue, various criteria for
each choice are assessed.
(iv) Choose the Best One: The best choice must then be selected as the
problem’s solution. To do this, certain aspects of each option are
compared to other options in order to eliminate the less practical
options. The best option is chosen after multiple comparisons.
Sometimes, though, none of the potential solutions can actually
solve the issue. Then, novel alternatives must be created. There are
instances when taking no action is the best plan of action.
(v) Put the Solution into Action: To fix the issue, the chosen answer
must be put into practice. Sometimes a new approach needs to be
taken in order to accomplish the solution. For instance, if installing
new, specially constructed equipment is thought to be the best option,

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 MANAGEMENT OF INFORMATION SYSTEMS

Notes the equipment must first be developed appropriately before being

placed. This also applies to information systems. MIS modifications
must be created and redesigned to meet organizational needs.
(vi) Follow up: The strategy’s last phase is this. Even the best solution may
not work as intended if it is used in the real world. Therefore, it is
usually advised to track and assess the effects the solution produces.
Follow-up is the term for this. The system’s post-implementation
performance is monitored to ensure it is satisfactory.

ACTIVITY
1. Identify and state a real-world example of Simon’s Model of
Decision making.
2. Write a short note on Systems’ method of problem-solving.

Implications for Information System Design and Understanding

Information systems must be designed with a thorough understanding of
the organization in which they will be used and how they can contrib-
ute to managerial decision-making in order to provide genuine benefits.
In our experience, the following are the most important organizational
factors to consider when designing a new system:
‹ The setting in which the organization must operate.
‹ Organizational structure: hierarchy, specialization, routines, and
business processes.
‹ The culture and politics of the organization.
‹ The type of organization and its leadership style.
‹ The system’s primary interest groups, as well as the attitudes of
workers who will use it.
‹ The tasks, decisions, and business processes that the information
system is intended to help with.
‹ Individual, group, and organizational decision-making should be
supported by systems. Builders of information systems should create
systems that have the following characteristics:
‹ They are adaptable and offer numerous options for handling data
and evaluating information.

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 Business Processes and Decision Making

‹ They can support a wide range of styles, skills, and knowledge Notes
while also keeping track of numerous alternatives and consequences.

2.5 Factors Affecting the Cost and Value of the Information

There is still little formal knowledge about how to design or synthesize
efficient information systems, despite the significant investment made in
computer systems to give more and better information. All management
information systems must, by necessity, deal with a variety of difficulties.
This section will discuss some of the research that has been done on the
impact of information’s amount, quality, and timeliness on its cost and
utility as a guide to intuition.
The Costs Aspect of MIS
Cost is the basic attribute. If one is aware of the data being collected and
processed, one can theoretically estimate the cost the format and style
of the management information that will be displayed, the frequency of
processing, and the level of timeliness necessary. Even if it’s a rough
estimate, it should be in the appropriate sequence if it was created by
a capable manager or consultant for data processing. Costs are continu-
ously falling and work economic boundaries are shifting as a result of
technological advancement in hardware and software. Add to this the
growing expertise in implementing computer systems, and it becomes
clear that for a given degree of complexity, costs are declining and risks
are decreasing over time.
The new systems come with two different types of costs: non-recurring
(such as those for data processing equipment, analysis, basic design and
development, and programming time), and recurring (in staff and equip-
ment for running and normal developments).
Primary non-recurring costs are:
‹ Equipment Cost: These costs don’t rise linearly when processing is
increased. Price reductions are probably possible depending on the
volume, frequency, and promptness of processing as well as reporting.
At some point, each of these may need additional equipment, such
as to speed up specific processes. Data processing is the provision
and upkeep of reporting, which may call for data-gathering tools,
random access memory devices, or more processing power.

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Notes ‹ Systems Development Costs: These depend on the systems that are
in place, the level of integration that has been tried, the system’s
sophistication, and the calibre of the management and system staff.
Any major change from current practices will require further systems
analysis, synthesis, and instructional effort.
‹ Installation and Change-over Costs: These types of costs depend
on the same elements that affect system development costs. They
cover expenses for running multiple processes simultaneously
and retraining any employees whose jobs have changed. The risk
of failure also entails expenses, such as the opportunity costs of
advantages lost or the costs of demoralizing employees and running
an ineffective system.
‹ Recurrent Costs: These are the obvious ones, such as maintenance
of systems and programming, staff and stationery, and equipment.
The Value Aspect of Information
As we’ve seen, the value of information comes from the decisions made as
a result of it and how those decisions affect the system’s goals. The easiest
of these to investigate is timeliness, which results from the availability
of information and its accuracy, timeliness, and categorization. Additional
effects of information being presented more quickly are observed in a
variety of contexts; the value of this information gain depends on the
organizational structure and the sensitivity of the measure of effectiveness
to predictions of erratic and biased organizational improvement behavior.
The decision theory proposes methods for resolving decision-making
problems under conditions of certainty, risk, and uncertainty. A deci-
sion-making situation is certain when the decision-maker is fully aware of
the alternatives and their outcomes. When perfect information is available,
this is possible. As a result, the information is perceived to be valuable
in terms of decision-making. When additional information is received in
the case of a decision made under uncertainty or risk, the decision maker
feels more secure. If the information eliminates uncertainty or risk, it is
referred to as perfect information. Perfect information, on the other hand,
is a popular misconception.
The concept of information value is used in MIS to determine the benefit
of perfect information, and if the value is significantly high, the system

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 Business Processes and Decision Making

should provide it. If the value is in signification, it is not worthwhile to Notes

collect additional information. Decisions at the operational and middle
management levels place a low value on additional or new information,
whereas at the higher levels of management, where decisions are primar-
ily strategic and tactical in nature, the value of additional information
is extremely high.

2.6 Summary
‹ A business process is the method by which work is planned,
synchronized, and concentrated in order to produce a valuable good
or service.
‹ New technology has the potential to alter the way information is
shared and accessed, allowing for the simultaneous completion of
several activities in place of sequential ones and the elimination of
decision-making delays.
‹ There is major two information system types - Operation Support
System and Management Support System.
‹ Management Information System subsystems include transaction
processing systems, management reporting systems, decision support
systems, office information systems, and business export systems.
‹ With the aid of contemporary software programs like spreadsheets,
word processing, Database Management Systems (DBMS), etc.,
the direct usage of information bases developed the possibility for
“What-if” analysis.
‹ The Systems Method of Problem Solving considers a broad problem,
including context. In an appropriate systems analysis, the problem
environment, including all stakeholders, is always taken into account.
‹ According to Simon’s Decision Making Model, there are three main
stages of decision-making - Intelligence, Decision and Choice.
‹ The new systems come with two different types of costs: non-recurring
(such as those for data processing equipment, analysis, basic design
and development, and programming time), and recurring (in staff
and equipment for running and normal developments).

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Notes ‹ The value of this information gain depends on the organizational

structure and regarding the sensitivity of the measure of effectiveness
to predictions of erratic and biased organizational improvement
behavior.

2.7 Self-Assessment Questions

1. Define the term “Business Processes” & throw some light on how
IT has helped in improving the overall business processes.
2. List the sub-systems of MIS and their impact.
3. Do you agree with the Systems’ Model of Problem Solving? If yes,
support your answer.
4. “According to Simon’s Model for Decision Making, there are three
main stages of decision-making”. Considering this statement, explain
the decision-making model & the steps involved in it.

2.8 References
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. Management information systems.
‹ Bishop, A. (1993). The National Information Infrastructure: Policy
Trends and Issues. ERIC. Clearing house on Information and
Technology.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).
‹ Post, G., & Anderson, D. (2006). Management information systems.
Boston, Mass.: McGraw Hill/Irwin.
‹ What Is MIS? Characteristics, Objectives, Role, Component. Retrieved
from https://www.geektonight.com/what-is-mis/

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Notes
2.9 Suggested Readings
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. Management information systems.

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 L E S S O N

3
Information Systems:
An Overview
Asha Yadav
Assistant Professor
Shaheed Rajguru College of Applied Sciences for Women
University of Delhi
Email-Id: [email protected]

STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.3 Data vs Information
3.4 Information System
3.5 Approaches of IS Development
3.6 Constraints of IS
3.7 Advantages of IS
3.8 Disadvantages of IS
3.9 Role of IS in Business Development
3.10 Limitations of IS
3.11 Summary
3.12 Answers to In-Text Questions
3.13 Self-Assessment Questions
3.14 References
3.15 Suggested Readings

3.1 Learning Objectives

After going through this unit, you should be able to:
‹ Understand the fundamental ideas behind IS.
‹ Identify the basic components of IS.

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 Information Systems: An Overview

‹ Conceptualize IS as combinations of hardware and software technologies. Notes

‹ Requirement of IS for running and managing a business.
‹ Learn how IS are used at different management levels.
‹ Identifying managerial challenges.

3.2 Introduction
Every area of our lives is being affected by computers, including enter-
tainment, shopping, work, and even how we interact with friends and
family. Computers have become vital part of almost all organizations and
generate data daily. This data could be processed to obtain information
and used to learn crucial facts about the organisation. Information is now
understood to be a vital corporate resource that enables greater insights
of other key resources, including people, machines, resources, money,
and procedures. Relevant information must be available at the right time
and place, to fully exploit available resources and for decision making.
Information is live because it must constantly be updated and renewed.
Due to the exponential growth of information, it is necessary to collect,
store, and retrieve information in a variety of fields as needed.
For better management and rational decision-making, people have long
employed Information Systems (IS) as an established management tool.
IS is a software system that focuses on the administration of information
to deliver efficient, effective, and strategic decisions. IS is employed in
the academic study of businesses and has ties to various fields, including
informatics, e-commerce, and computer science.
“Information System is a system that collects, organises, handles,
and disseminates information pertinent to a company (or to a
community) in a way that makes it usable and accessible to
management, employees, customers, and citizens.”
Information System is an accumulation of two different terms as ex-
plained below:
Information: The term “information” refers to data that has been pro-
cessed or, more technically, data that can be transformed into a form
that is meaningful and helpful for a particular user. Any business that

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Notes generates or captures data has the potential to have information retrieved
from it, which can aid in decision-making.
System: A set of components, activities, processes, and people that are
interconnected and work together towards a common objective by taking
input and generating output in the context of an organised transformation
process is called system.
Some examples of IS include Airline reservations, bank operations and
logistics management.

3.3 Data vs Information

When we talk about data, we are referring to the facts or figures that
represent an item, place, or the events that are taking place in the or-
ganisation. Simply having data is not sufficient. The data is not useful
in its original form; however, we need to process and interpret data to
uncover its real meaning and make it useful.
Processing raw data will ultimately result in the generation of informa-
tion. One definition of information describes it as; “Data that has been
organised and presented at a time and place in such a way as to enable
the decision-maker to take the necessary action.” Data that has been
retrieved, processed, or otherwise used for the purposes of providing
information or drawing inferences, making arguments, or serving as a
foundation for forecasting constitutes information.
The key differences between data and information are as follows:
‹ A collection of facts is called data. Information helps you put such
facts in their proper context.
‹ Information is structured or ordered, whereas data is unstructured
and raw.
‹ Data points are unique and occasionally unrelated. Information depicts
that data to give a broad overview of how everything fits together.
‹ Data has no significance on its own. It becomes meaningful
information after it has been processed, analysed, and interpreted.
‹ Data is not dependent on information, but information is dependent
on data.

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 Information Systems: An Overview

‹ Data alone is insufficient for decision-making, but information may Notes

be utilized to make decisions.
To further explain the difference between data and information some of
the examples are:
‹ Prices of competitors are individual data elements, but processing
that data can reveal where competitors have an advantage, where
gaps in the market may exist, and how a business can emerge above
its competitors.
‹ A single piece of data is the number of likes on a post on social
media. When combined with other engagement on social media
statistics, such as followers, comments, and shares, a business can
deduce which social media platforms perform much better and which
platforms should be prioritised in order to engage their audience
more effectively.

3.3.1 Characteristics of Information

The information that is used and adds value is the best kind of informa-
tion. It has been demonstrated through both experience and studies that
good information possesses a variety of qualities, including the following:
1. Relevant: The information must be relevant to the problem under
consideration. Reports, communications, tabulations, and other
documents frequently contain irrelevant material that makes it difficult
for the recipient to understand the true intent of the communication.
2. Accurate: The information must be accurate enough for the management
to be able to rely on it, as well as accurate enough for the problem
that it is intended to solve. Accuracy is crucial because wrong
information can cause severe consequences to the organisation.
3. Complete: In a perfect world, all the knowledge that is necessary to
decide would be readily available. However, in practice, this is not
generally possible. The information must be up to date and inclusive
of the essential components of the problems. Partial information
must be avoided as it will hamper the decision-making.
4. Reliable Source: Confidence in the source of information must be
high for it to be used by managers. Good communication between
the information producer and the manager is essential for value of

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Notes information to be maximised. Reliability is enhanced if the source

has been trustworthy in the past.
5. Available to the Right Person: Every individual has a certain area of
responsibility and activity, and they all deserve access to information
that will enable them to effectively complete their assigned jobs.
This is seldom as simple as it seems in practice. Information is
frequently given at the incorrect level in an organisation.

3.3.2 Relevance of Information to Management

There is so much of data and we can mine it to get information that will
assist a manager in carrying out major tasks. The importance of avail-
ability of information to management is given below:
‹ There is always some degree of uncertainty whenever there is not
enough complete information. It is extremely rare, if not impossible,
to have perfect knowledge, yet having pertinent information might
assist in reducing the amount that is unknown.
‹ Management has a greater ability to exert control over operations
when they are provided with information regarding performance as
well as the degree to which actual performance deviates from the
level of performance that was intended.
‹ Managers have a responsibility to remain informed of upcoming
developments, plans, and projections, as well as other relevant
information.
‹ The availability of historical information regarding performance,
transactions, and the consequences of actions and choices made in
the past helps to enhance individual decisions.
‹ Problems and circumstances are both simplified and made more
manageable when uncertainty and misunderstanding are reduced
and knowledge is improved.

3.3.3 Classification of Information in Organisation

The information obtained and used in the organisations can be classified
into following categories:
(a) Descriptive Information: This makes it easier for the people
making decisions by providing them with a picture of the

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 Information Systems: An Overview

world that concerns them. For example, description of the Notes

rules, the current state of the organisation, and changes that
can be obtained by pre-defined rules of organisation.
(b) Probabilistic Information: The information that falls within
this category is typically derived through statistical inferences,
forecasts, or assumptions regarding behaviour. This information
helps the management in planning the operations.
(c) Explanatory and Evaluated Information: The managers
need to have background knowledge in order to comprehend
what is going on in their immediate environment. Most of
this information is informal and that’s why IS cannot assist
in it.
(d) Internal Information: The information that has been produced
as a result of the day-to-day activities of the organisation at
a variety of levels of management and functional areas is an
example of internal information. During the processing, the
internal information is summed up to give patterns. This is
helpful for supporting the management in decision-making for
the operation of the organization.
(e) External Information: In most cases, information on the
surroundings of a corporate organisation is gathered through
collection of external data. The term “external information”
refers to any information that comes from outside of an
organisation and has the potential to affect how well that
organisation does its job. The policies of the government,
the competition, the current state of the economy, and the
international market. In most cases, the upper management
will insist on incorporating external information in order to
formulate the organization’s strategy for the long run.

IN-TEXT QUESTIONS
1. __________ is the raw facts and figures with no meaning.
2. Can we make decisions by raw data? (True/False)
3. Student test score is __________ whereas average score of a
class refers to __________.

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Notes 4. The government policy to keep private data of a client safe is

an example of __________.
5. Production and Marketing statistics of an organisation is a part
of __________.

3.4 Information System

Customer service, operations, product and market strategy, and distribution
are all substantially or even fully dependent on IT, which is changing the
fundamentals of the company. All the consumer data that a hard disk can
store can be gathered and maintained by an organisation. A manager can
obtain every output report that a disk is physically capable of holding.
The quickest Internet connection ever made is available to the manager.
However, if the company does not leverage client data to open new pros-
pects, then all that it has is useless data. If the production report does
not alert management to a significant issue on the production floor, then
it is nothing more than garbage. If management does not understand how
to use data from a website to analyse it in order to benefit from fresh
sales leads, then there is no use of that data. This is where the use of
IS comes into play.
Information systems are a group of interconnected elements that work
together to gather, analyse, store, and distribute data in order to assist
organisational decision-making, coordination, control, analysis, and vi-
sualisation.
When most people think of an IS, they solely consider the hardware and
software. The human, or “live ware,” is another aspect of the triangle
that needs to be considered. The feedback procedure is crucial, but re-
grettably, it is the one that gets the most disregard. The hardware (input
and output) and software (processing), just as we described earlier, get
the most focus but without knowledge of the “live ware” to close the
feedback loop IS is incomplete. An IS is distinct from other types of
systems in terms that its goal is to observe and record the activities of
another system, or target system. Without such a target system, an IS
would not be possible. IS have been existing in organisations for a long,
Figure 3.1 below shows the evolution of IS for the industry.

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 Information Systems: An Overview

Notes

Figure 3.1: Evolution of Information System

Characteristics of IS
Systems Approach: IS uses a system approach that examines all an or-
ganization’s interrelated subsystems. IS should be considered as a unified
entity, yet split into digestible sub-systems.
Central Database: In the IS, there ought to be a centralised data re-
pository for the entire system. Common data flow involves eliminating
duplication, merging related functions, and, whenever possible, simplifying
procedures. Although the creation of a common data flow is a logical
and economically viable notion, it must be considered from a practical
perspective.
Management Oriented: IS is management-oriented; hence, management
directs system development. Top-down development begins with manage-
ment’s needs and company goals. The manager must examine and partic-
ipate in the execution of system policies to meet system specifications.
Design: The design of the IS should consider the various information
needs of managers. The development of IS should also be exception-based,
which calls for timely reporting of extraordinary circumstances to the
appropriate decision-makers in the event of an abnormal circumstance.
Information from IS should not only be past or historical; rather, it should
be based on future estimates of the actions to be taken.
Integrated: Integration is important since it can result in more insightful
information. Integration refers to taking a broad perspective or examining
the full picture of the interconnected subsystems that run the business.

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Notes 3.4.1 Framework

It is important to consider the rising relationship between a company’s
ability to employ information technology and its capacity to carry out
corporate strategy and accomplish corporate objectives. To specifically
accomplish the following six strategic business goals, corporate firms
extensively invest in IS implementation as shown in Figure 3.2.

‹ Operational excellence
‹ Customer and supplier relationship
‹ New products, services, and business models
‹ Competitive advantage
‹ Improved decision making
‹ Market Survival

Figure 3.2: Implementation Plan of IS

3.4.2 IS and Organisation Structure

Like how the physical body and nervous system are interconnected,
organisational structure and information system are connected as well.

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The understanding of organisational structure and a proper track record Notes

of authority delegation inside the organisation are requirements for IS.
In practicality, this aids in outlining authority and responsibility, set-
ting boundaries for decision-making, and identifying the goals of each
subsystem. It is important to consider the rising relationship between a
company’s ability to employ information and take decisions.
Senior managers make long-term choices in every organisation, while
intermediate managers carry out the plans and objectives set by senior
managers, and operational managers manage the day-to-day activities of
the business. We will see that the output of IS needs to be tailored to
each of these management levels. Department-wise information require-
ments of an organisation are shown in Table 3.1 below.

Table 3.1: Department-wise Information Requirements

Information
Department Strategic Tactical Operational
Production Production quotas Managing high- Monitoring current
Management for the year, the cost locations. production data by
month, and sub- Finding produc- looking at assem-
stitute schedules tion bottlenecks blies, spotting po-
Identifying the best that must be fixed. tential shortages,
product combina- Choosing differ- and providing early
tion. Policies on ent production warning. Planning
machine replace- schedules based better manufactur-
ment, augmenta- on the available ing. Schedules for
tion, and modern- equipment. Ma- preventive mainte-
ization. chine performance nance. Monitoring
evaluations to de- the availability of
termine replace- tools, equipment,
ment. and personnel.

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Notes Information
Department Strategic Tactical Operational
Marketing Find new markets Analysing the Analysis of sales
Management and marketing ap- effects of adver- by region, customer
proaches. Exam- tising strategies. type, and salesper-
ining the tactics Interviews about son. Target versus
of competitors. consumer prefer- actual sales. Trends
Predictions on ences, relationship in market share,
technology, de- between prices and seasonal changes,
mographics, and sales. Targets for impact of model
product changes. the sales force’s modifications, per-
deployment. Look- formance of retail
ing for alternative locations, campaign
marketing ave- expenses and ben-
nues. efits.
Material Identifying suppli- D e f i n i n g m e t- List of received
Management ers for essential rics for vendor surplus and inad-
items Choosing performance and equate goods. List
the ideal invento- deciding on the of things that were
ry levels, calculat- best reorder levels. rejected. Import-
ing the amount of Balancing shop is- ant goods arrived.
material required, sues with standard transporting and
lowering the vari- requirements for inspecting stores
ety of stock. items. Managing Value of the current
expensive inven- inventory. Receiv-
tories, evaluat- ing, rejecting, and
ing the effects of issuing of goods.
new designs and
modifications to
procurement on
material costs.

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Information Notes
Department Strategic Tactical Operational
Finance Financing options, Credit and pay- Financial accounts
Management pricing principles, ment history, out- report, status of the
and tax preparation. standing payments budget to all func-
and invoices, and tional managers,
budget discrepan- tax returns, share
cies, price hikes transactions, a profit
and inflation, the and loss statement
effect of taxes on transfers and re-
pricing. ceipts, payroll, and
retirement accounts.
Human Long-term needs Evaluation of per- Routine inspection,
Resource for human resourc- formance, promo- Skill sets invento-
Management es at different lev- tion of production, ry, recoveries, and
els, guidelines on reduction of ab- advances, leave re-
personnel welfare senteeism, leave cord track.
and facilities, poli- and overtime rules,
cies on developing and regulations of
human resources personnel deploy-
and training. ment.

IN-TEXT QUESTIONS
6. Long term decisions are taken by __________.
7. Data and reports about consumer preferences and buying pattern
is a __________ information for marketing team.
8. Leave records managed by the HR Department is an example
of __________.
9. Accessing data from a central system with multiple end user
system over a network is __________ approach.

3.5 Approaches of IS Development

Various approaches to IS development are listed below:

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Notes Top-Down Approach

Using this method, a business strategy is created as a manual for creating
the IS. In this situation, top management takes the initiative to create
goals, policies, and plans and conveys them to middle and supervisory
management so they may be implemented.
Bottom-Up Approach
The Planning of this approach starts from root level integrating the top lev-
els. Transition processing, file updating, and simple reports are among the
functional applications that are proposed individually. A database is created
by indexing and integrating the files from several functional applications.
To operate on the database and management control level, many functions
are added. Models for data-driven strategic planning are added to the IS.
Integrative Approach
This strategy enables managers at all levels to have an impact on IS de-
sign. Here, top management continues to evaluate, modify, and approve
until a final design is accepted by all levels.
Conventional Approach
Activities are carried out in this instance sequentially. Only after the prior
activity is finished is the subsequent activity started. In order to assure
correctness and completeness, managers and users evaluate and assess
the work done by IS professionals at each level of processing.
Prototyping Approach
Using a prototyping technique, all potential delays are avoided. Prototypes
are small, pilot versions that are created quickly and inexpensively with
the goal of changing them as necessary.
End-user Development Approach
With the growing accessibility of affordable technology, end-user de-
velopment is a common strategy in many organisations. Here, system
development is the responsibility of the end user.
Systematic Approach
This approach is majorly used in very small organisations because there
are fewer IS specialists working. Each one of them will have a wider range
of tasks, which means they will have less time to design new systems
for users. So, they perform identification of requirements; locate, analyse,

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and safeguard software development; Identify, inspect, and safeguard the Notes
hardware; and put the systems into action.

3.6 Constraints of IS
Businesses invest tens of thousands of dollars in computer hardware and
software, only to discover that most of this technology is never used.
Typically, this is because they did not pay sufficient attention to the
comprehensive incorporation of technology into the company. It is not
very productive to simply purchase the technology without taking advan-
tage of the new possibilities it presents for conducting business in a way
that is both more efficient and effective. Think carefully about what you
do and figure out how you might improve it by thinking about it again
and again. The only constant is change, and in order to keep up with it,
information needs to be managed like any other resource.
The following are the restrictions that must be faced when designing an
efficient IS:
1. There is no pre-existing management structure to build upon.
2. There is no precise articulation of the aim and purpose.
3. There are no goals set for the company.
4. A breakdown in communication.
5. An absence of participation from management.
6. Less knowledge of Information Architecture of the Organisation.
7. Budget constraints for investing in IS.
8. Lack of strategic knowledge to gain value from investments in
information technology.

3.7 Advantages of IS
1. IS are far more efficient than people at doing mathematical computations
and sorting through paperwork.
2. The use of IS can assist businesses in gaining a better understanding
of the purchasing habits and preferences of their clients.
3. IS enables new efficiencies to be realised through the provision of
services such as Automated Teller Machines (ATMs), telephone
networks, or computer-controlled aeroplanes and air terminals.
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Notes 4. New medical advancements in the fields of surgery, radiography,

and patient monitoring have been made feasible via information
technology.
5. Information can be immediately disseminated to hundreds of millions
of individuals all over the world thanks to the internet.

3.8 Disadvantages of IS
1. New technologies, especially for automation, make certain workers’
skills obsolete. Automobile, steel, insurance, and banking industries
have experienced enormous layoffs due to automation. Computerization
can raise operational efficiency and revenues, but it can also reduce
the workforce.
2. Excessive information might overwhelm managers who must digitise
it and make judgments.
3. Employees fear computers may replace them. Unless their employment
is safe, individuals may be sceptical of IS.
4. Increasing competition is pushing small and medium-sized businesses
out of the market.
5. Many organisations cannot evaluate the IS and technology for their
ROI (Return on Investment).
6. When companies implement new and sophisticated technologies,
they must find new ways to secure assets against theft, pilferage,
and security breaches.

3.9 Role of IS in Business Development

IS serves as the bedrock upon which modern-day corporate operations are
built. Without considerable use of information technology, it is difficult
to survive in many different industries; in some cases, it may even be
impossible. The use of technology has expanded significantly beyond the
traditional desktop computer in recent years, particularly in the world of
business. Some examples of this expansion include the growth of online
software as a service and cloud computing, as well as the emergence of
mobile digital platforms.

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An IS offers a solution to a problem or difficulty that a company is now Notes

facing, and it also offers significant economic value to the company. A
digital company can be distinguished from the majority of companies that
claim to be digital in that it possesses many following mentioned traits
that set it apart from them:
‹ The use of digital technology has enabled and mediated significant
corporate interactions, including those with customers, suppliers,
and staff.
‹ The execution of fundamental business procedures takes place across
digital networks, which may span an entire firm or connect many
separate enterprises.
‹ The management of essential aspects of a corporation, such as its
intellectual property, core competencies, financial resources, and
human resources, takes place digitally.
‹ Rapid recognition and response are shown toward both the internal
and exterior worlds.
When deciding whether to construct or operate an IS, one must begin
with the presumption that the returns on this investment will be higher
than the returns on investments made in other buildings, machinery,
or other types of assets. Productivity gains to be realised, increased
sales and profits and improved efficiency throughout the organisation.

3.10 Limitations of IS
1. The use of IS cannot take the role of managerial discretion in
decision-making. It is nothing more than a useful instrument for
managers in the process of decision-making and problem resolution.
2. An IS has less of an impact on the success of a business when
information is not shared with other employees.
3. IS is unable to supply individualised information packages upon
request. Before deciding, it is necessary to do an analysis of the
information that is currently available.
4. The quality of the IS’s output is directly proportional to the quality
of the processes and inputs it receives.
5. The IS solely considers quantitative aspects of the situation.

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Notes 6. The frequently occurring shifts in top management, organisational

structure, and operational staff have a negative impact on the
effectiveness of IS.
IN-TEXT QUESTIONS
10. Pilot versions of a system are developed in __________.
11. __________ starts from root and goes to top management.
12. __________ is a major parameter to check the success of deploying
Information System.
13. __________ helps to assist managers for decision making.

CASE STUDY
“Jack Eatery” is a fast-food restaurant that has recently expanded its
business in the city by opening five new joints. Primarily, Jack Eatery
used to maintain its operations like order taking, menu, bill, and revenue
information manually. Due to expansion manual operation management
and record keeping have become difficult. It has planned to implement
a new online information system and a mobile-based application for its
business. The main server is required to be on the cloud that holds the
sales and accounting software for managing the chain of restaurants. The
manager can use a computer in any of the branches and the waiters use
handheld devices (mobile/tablet) that connect to the server via wi-fi. As
soon as the order is taken, it is printed into the kitchen and updated in
the accounting information system.
When a table is cleared, the bill can be printed instantaneously for
the customer. Customers can also download the Jack Eatery app for
services like pre-orders, and online bills, and earn points by eating at
any store of Jack Eatery. With this new system, customers are better
served because their orders are delivered faster and there is a lower
chance of mistakes when the bill is made. Also, frequent customers
get discounts and become loyal. The detailed report of employees,
sales, inventory, raw material requirements and customer visits across
all branches can be printed by the manager whenever required.
Questions
1. Which IS development strategy will be best suited for Jack
Eatery?

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2. What Strategic business goals could be achieved by the IS? Notes

3. Write one constraint that can be seen here.

Answers
1. Bottom-up approach is best suited for this scenario as Information
System for Jack Eatery has to be developed from scratch and
there are no defined top management and pre-existing policies.
2. Strategic business goals that can be achieved are operational
excellence, centralised control and advantage over competitors.
3. One foremost constraint is there is no pre-existing management
structure to build upon and less knowledge of information
architecture of Jack Eatery.

3.11 Summary
In this Chapter, we have gone over several fundamental ideas that are
pertinent to Information Systems, such as the fundamental difference
between data and information, concepts, and importance of IS, types
of information in organisations, and examples of IS. An IS is a way
of evaluating, analysing, and processing the data of an organisation to
produce information that is meaningful and useful to the management
of the organisation so that they can make decisions that will ensure the
organization’s continued growth and development in the future.
In the next lesson, we will talk about the various kinds of computer-based
information systems that exist, as well as how they help the various levels
of management in a company.

3.12 Answers to In-Text Questions

1. Data
2. False
3. Data and Information
4. External Information
5. Internal Information

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Notes 6. Senior Management

7. Tactical
8. Operational Information
9. Client/Server
10. Prototype Approach
11. Bottom-Up
12. Return on Investment
13. Information System

3.13 Self-Assessment Questions

1. Explain the characteristics of good information.
2. What is the difference between data and information?
3. What are the various types of information in an organisation?
4. Define Information System and discuss its need.
5. What is the importance of Information System for an organisation?
6. What are the steps for implementation of Information System for
an organisation?
7. Why do organisations refrain from implementing Information Systems
for their business?

3.14 References
‹ Lucas, Henry C (Jr.). 1986. Information Systems for Management
(3rd Ed.), McGraw Hill Book.
‹ McNurlin, B. C., & Sprague, R. H. (2005). Information systems
management in practice. Prentice-Hall, Inc.
‹ Baltzan, P., & Phillips, A. (2014). Ebook: Business Driven Information
Systems. McGraw Hill.
‹ Stair, R., & Reynolds, G. (2017). Fundamentals of information
systems. Cengage Learning.

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‹ Stair, R., & Reynolds, G. (2020). Principles of information systems. Notes

Cengage Learning.

3.15 Suggested Readings

‹ Checkland, P., & Holwell, S. (1998). Information, systems, and
information systems (p. 90). Chichester: John Wiley & Sons.
‹ Ward, J., & Peppard, J. (2002). Strategic planning for information
systems. John Wiley & Sons, Inc.
‹ Nilsson, F., Olve, N. G., & Parment, A. (2011). Controlling for
competitiveness: Strategy formulation and implementation through
management control. Copenhagen Business School Press DK.
‹ Valacich, J. (2017). Information systems today: Managing the digital
world. Pearson.

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 L E S S O N

4
Computer-Based
Information Systems
Ms. Neha Gandhi
Assistant Professor
Shaheed Rajguru College of Applied Sciences for Women
University of Delhi
Email-Id: [email protected]
Ms. Tulika Kumari
Assistant Professor
Shaheed Rajguru College of Applied Sciences for Women
University of Delhi
Email-Id: [email protected]
Ms. Monika
Assistant Professor
Shaheed Rajguru College of Applied Sciences for Women
University of Delhi
Email-Id: [email protected]

STRUCTURE
4.1 Learning Objectives
4.2 Introduction
4.3 Office Automation System (OAS)
4.4 Transaction Processing System (TPS)
4.5 Management Information System (MIS)
4.6 Decision Support System (DSS)
4.7 Group Decision Support System (GDSS)
4.8 Executive Information System (EIS)
4.9 Artificial Intelligence and Expert Systems
4.10 Understanding End-User Computing
4.11 Types of EUC
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4.12 Advantages and Disadvantages of EUC Notes

4.13 Significance of EUC
4.14 Benefits of EUC
4.15 Summary
4.16 Answers to In-Text Questions
4.17 Self-Assessment Questions
4.18 References
4.19 Suggested Readings

4.1 Learning Objectives

The learning outcomes of this lesson are:
‹ To understand various types of computer-based information systems.
‹ To understand the changing nature of information and its role at
different levels in the management hierarchy.
‹ To understand the role of computer-based information systems and
their importance in business organizations.
‹ To understand components of computer-based information system
their working, and applications.
‹ To understand the concept of End-User Computing and its types.
‹ To understand advantages and disadvantages of EUC.
‹ To understand the significance and benefits of EUC.

4.2 Introduction
The advent of computers and information technology has revolutionized
the working of almost every section of society. Today, computer systems
and technologies are playing a widespread role in major activities such
as administration and management of a workplace. Information is a vital
component at almost all levels in an organization. Due to changing roles
along the organization hierarchy, the nature and forms of information vary
significantly at different levels in the organization. A set of methods used
in any business to collect, process, store, and distribute information in

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Notes order to support operational needs, managerial-level decision-making, and

control is referred to as an information system. Organizations employ var-
ious information systems at different levels to aid business functioning in
an efficient manner. Such systems facilitate organization’s functioning by
tracking transaction details at a lower level, assisting middle management
in making critical decisions, and supporting top management in establish-
ing long-term goals to bring strategic advantage to the organization. The
previous chapter provided an in-depth understanding of concepts related
to information systems, associated development approaches, advantages,
disadvantages, constraints, etc.
Since the information requirements vary considerably along the organizational
hierarchy. To cater, to these divergent needs, different types of information
systems are developed to serve operational, decision-making functions and
to bring strategic advantage to the organization. Computer-based Information
Systems (CBIS) combine people, Information Technology (IT), and business
processes to support management in making crucial decisions effectively. This
chapter discusses the major types of computer-based information systems,
their components, and their application in business.
The major categories of CBIS are Office Automation System, Transaction
Processing System, Management Information System, Decision Support
System, Group Decision Support System, Executive Information System,
and Artificial Intelligence-based Expert System as shown in Figure 4.1.
Let us discuss each of these categories in detail in further sections.

Figure 4.1: Types of Information Systems

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Notes
4.3 Office Automation System (OAS)
With the application of computers over the past few decades, the funda-
mental nature of office tasks (administrative or management) has changed
substantially. Earlier, tasks such as document preparation, distribution,
processing, and employee communication were not technology-assisted.
Today, with the application of computers and related technologies like
networking, the overhead in performing these operational tasks in offices
has alleviated to a greater extent. This information system is responsible
for automating the common operations in the organization.
What is Automation?
Automation refers to the method of employing machines to perform tasks
to enhance productivity.
What is an Office Automation System?
Office automation system (OAS) refers to the employment of computers
and related technologies in performing operational tasks, and smooth
communication in the organization thereby enhancing work productivity.

4.3.1 Objectives of OAS

With the growing size of organizations, their needs are growing too.
Therefore, this is almost impossible to achieve smooth functioning in an
office without office automation in today’s time. OAS refers to computers,
devices, and systems that serve operational and management staff needs
such as word processing, document storage, scheduling, and facilities
supporting communication of documents, voice, and text messages. These
systems help clerks and managerial staff at operational and management
control levels. The significant objectives of OAS are listed as follows:
‹ To lower the administrative overhead in an organization: OAS
involves computer-aided document creation and management and
thus reduces the manual overhead of document preparation and
management.
‹ To enhance productivity in office work: It significantly reduces
the total time taken from the creation of a message or document
till its delivery to the appropriate recipient.

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Notes ‹ To offer efficient services within and outside the organization:

Automation helps in achieving work targets timely and thus increases
organization’s efficiency.
‹ To enhance accuracy in official tasks: Manual document preparation
and record keeping are error-prone. Automation in such tasks helps
enhance work accuracy.
‹ To offer better communication within and outside organization:
Email, video conferencing, facsimile, etc. facilities allow employees
in a team sitting at different locations to connect online, establish
smooth communication, and discuss projects through presentations,
and thus aid seamless communication.
‹ Reducing Organization’s Cost: Machines-aided tasks are efficient,
less error-prone, and require less manual intervention and thus help
organizations in cutting costs.

4.3.2 Categories of OAS

OAS spans a vast number of office activities to enhance work efficien-
cy which can be grouped into the following broad categories based on
the type of operation it aids in. Each of these categories is discussed in
detail as follows:
‹ Text Processing Systems: The most commonly utilized OAS
components are text processing systems. These systems automate
the creation of frequently needed documents in an organization
like letters, reports, memos, etc. They also enable the creation of
customized documents using standard stored information. It includes
capabilities like processing and analysis thereby reducing effort
and the possibility of errors. Text processors include systems like
simple word processors or desktop publishing systems.
‹ Document Management Systems: An organization’s functioning
hugely depends on various types of documents. Manual management
of documents is a time-consuming task. This category of OAS
consists of software required for storing documents and making
them available as per requirement. This enables remote access to
documents and therefore, irrespective of location office executives
can get hold of information anytime anywhere. Computer-based

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document management systems also help in efficient management of Notes

documents for internal as well as external communication purposes.
‹ Electronic Communication Systems: Efficient working in any
organization requires an efficient and established communication
system. This kind of OAS refers to the tools used for sending messages,
electronic mail, documents, and data. Electronic communication
systems involve e-mail, voice mail, fax, etc.
‹ Teleconferencing Systems: It includes all three forms of electronically
assisted conferencing i.e. audio, video, and computer. A software
and hardware tool that enables real-time exchange of information
through computer networks constitutes computer conferencing e.g.
whiteboards, text-based chat programs, etc. Audio conferencing
involves tools that allow multiple users to connect live for voice-
only communication over networks. Video conferencing tools enable
users to connect live for audio-visual communication. These systems
enable employees in the organization to connect with teams sitting
across different locations and also facilitate conducting meetings
and training programs online.
‹ Other Support Systems: Apart from the above-discussed major
systems, all other support systems that assist in the efficient
functioning of the organization can be grouped under this category.
These include utilities such as calendars for scheduling, calculators,
image processing, etc.

4.4 Transaction Processing System (TPS)

Transaction Processing System (TPS) is the most fundamental information
system in any organization. It helps in the smooth conduct of routine
transactions in an organization and also records these for later purposes.
A transaction simply denotes any business activity in which the exchange
of goods, services, and payments take place and relevant databases are
updated. All updates in relevant databases affected by any transaction
must be complete before it’s considered successful. Some examples of
transactions are accepting an order, purchasing any item, cash deposits,
payroll, investment, bill payment, shipping an item, etc.

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Notes There are two types of transactions:

‹ Internal Transaction: A business transaction that takes place within
the organization. It refers to the intra-departmental exchange of
resources. E.g. Inventory transfer within the organization.
‹ External Transaction: A business transaction that takes place
between the organization and its external parties. It involves the
exchange of resources among enterprise and external parties. For
example, customer orders, purchases from outside parties.
TPS captures all kinds of transactions happening in any enterprise be it
internal or external. TPS acts as the major producer of information for all
other information systems employed at different levels in any organization.
This information system employed at the lowest level in the office hierarchy
helps to organize and manipulate transaction data to fulfil the information
needs of higher management. Data collection, data processing, database
maintenance, document, and report preparation, and inquiry processing are
the fundamental tasks involved in a transaction processing system. These
systems are highly reliable and important for performing crucial activities
in an organization. There may be multiple TPS for various functional units
in an organization like finance, accounts, marketing, human resource, pro-
duction, etc. However, a trend is initiated to develop cross-functional TPS
to offer an easy exchange of information among these units rather than
standalone TPS for each unit with almost no connection with other units
of the organization. Some examples of TPS include Point of Sale (POS)
Systems – record daily sales, happening in an organization, employee payroll
systems –responsible for processing employees’ salaries, loans management,
etc., and stock control systems – keeping track of inventory levels.

4.4.1 Types of TPS

There are two types of TPS based on the processing modes. These are
discussed as follows:
‹ Batch Processing: In this type of TPS, the transaction processing
happens in batches after a predefined span of time. A time delay
is observed in such type of transaction processing systems as many

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requests are executed together. The result of each transaction is not Notes
readily available.
Example: Processing payroll of employees in organization on
monthly basis. Other examples include credit card bill generation.
‹ Real-time/Online Processing: In this type of TPS, the transaction
processing happens in real-time, and the result of every transaction
becomes readily available. This aids in avoiding any time delays.
Example: Bank ATMs, inventory control, etc.

4.4.2 Components of TPS

A TPS is primarily constituted of the following components:
‹ Input: Input for the TPS is source documents related to any kind
of transaction in the system such as customer orders, invoices,
receipts, employee time cards, etc. Input data may be from external
transactions e.g. customer orders, vendor invoices, or from internal
transactions e.g. employee time cards.
‹ Processing: Based on the type of processing mode adopted by TPS,
data is processed in the transaction system to generate output. In
batch mode, the files are updated after a fixed span of time and
in online mode, the files are updated as and when any transaction
occurs.
‹ Storage: This component refers to the unit which keeps the input and
output data. This component ensures accessibility to any information
later. Data is usually stored in ledgers or databases.
‹ Output: TPS processes data to generate outputs such as query
responses, transaction documents, and limited range of pre-planned
reports. The content and format of reports is programmed in TPS
software which produces scheduled reports. These generated reports
are transaction logs, error reports, and limited summary reports.
Various components of transaction processing system are shown in
Figure 4.2.

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Notes

Figure 4.2: Components of Transaction Processing System

4.4.3 Working of TPS

All organizations employ various TPS for different business activities
related to major business functions such as marketing, production, finan-
cial, personnel, etc. Any activity e.g. customer order, purchase, payroll
processing, production, etc. involves a lot of transactions that need to
be captured for future information retrieval. For instance, a simple trans-
action like a customer order involves recording and updating customer
data, payment data, invoice data, and inventory data. TPS utilizes this
data to produce usable information in the form of reports. Working of
TPS involves recording data into files or databases, processing these files
using relevant software, generating reports, and query processing. A TPS
may either follow batch processing or an online processing mechanism for
transaction processing. Figure 4.3 depicts an Account Receivable System
TPS which keeps track of unpaid invoices or the money an organization
owes to its customer. The account receivable master file consists of many
data elements like the customer, invoices, payments, etc. On receipt of
any new order, TPS fetches relevant data from account receivable master
and performs updates in customer data, payments data, and invoice data.
It further updates relevant ledgers or databases. Data elements in mas-
ter files are combined to generate various kinds of reports that interest
management for purposes like accessing an organization’s performance.

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TPS also processes online queries like what is the account status for this Notes
customer? A TPS system is so crucial to any organization that even a
failure for a few hours can stop organization’s operations.

Figure 4.3: Working of TPS (Account Receivable System)

4.4.4 Characteristics of TPS

The basic characteristics of a TPS are as follows:
‹ Responsible for carrying out and recording routine transactions that
are vital for business needs and thereby, reducing the workload of
people employed at the operational level.
‹ The output of TPS such as documents or reports, in turn, forms
input to other information systems such as management information
systems and decision support systems to be used by upper-level
management in the organization hierarchy.
‹ TPS acts as a channel between the organization and external parties
such as customers, suppliers, distributors, regulatory bodies, etc.
‹ TPS systems also take care of authorization needs to avoid any
security risks. This ensures that only authorized staff can access
the system and access transaction data.
‹ These systems are fast and user-friendly.

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Notes
4.5 Management Information System (MIS)
MIS consists of tools that assist middle-level management in generating
scheduled reports from the data extracted by the underlying TPS. This
category of information system possesses limited analytical capabilities
and basically serves management in planning, controlling and routine
decision-making. Management personnel can monitor and control per-
formance of the organization by relying on the reports created by the
MIS in contrast to TPS, which majorly deals with the operational needs
of the business.
Example: Data collected by a POS system can be used to examine trends
in the sale of products, and thus future inventory orders can be placed
based on these findings.

4.5.1 Working of MIS

The working of MIS can be understood in three basic steps:
‹ Data Extraction: The MIS pulls data from the organization’s TPS
into MIS files.
‹ Data Summarisation: The data files are then accessed by software
with a user-friendly interface which then summarize data using tools
encompassed in MIS and supports the manager to structure reports
as per requirement.
‹ Reports Generation: Different kinds of reports are generated
depicting important trends in sales, revenue, etc. which are further
utilized in decision-making.
Figure 4.4 depicts a typical MIS of an organization. This system obtains
data into relevant MIS files from the organization’s TPS. Here, three TPSs
(Order processing system, Materials resource planning system, General
ledger system) supply summarized transaction data to MIS. Managers
access MIS data using special software and structure reports as per re-
quirements using user-friendly dashboards. These reports then help man-
agement in planning, controlling, and decision-making in the interest of
organization. MIS performs analysis on TPS data using routine algorithms
which consolidate, compare, and summarize results to generate routine
and exception reports but do not possess much analytical capabilities.

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Notes

Figure 4.4: Working of an MIS

4.5.2 Characteristics of MIS

The characteristics of MIS are as follows:
‹ MIS mostly assists management employees in making routine or
less complex decisions that are majorly based on pre-defined rules.
‹ MIS systems provide weekly, monthly, or yearly reports to the
management control level and thus enable them to access the
organization’s current and past performance.
‹ MIS are majorly reporting systems that condense TPS recorded
transactions and present routine summary reports or exception
reports to management.
‹ MIS possesses very limited analytical capabilities and therefore
focuses on past or present and is less future-centric. Instead of
relying on intricate models, they gather information from databases
by applying predetermined criteria and then summarise the results.
‹ Earlier MIS did not support managers to structure reports. But
nowadays managers can structure reports using MIS as per requirement.

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Notes 4.5.3 Limitations of MIS

‹ The MIS majorly relies on TPS for its input data, and therefore
the quality of output from an MIS depends significantly on the
information from TPS.
‹ MIS serves as a tool for middle-level management in making
everyday decisions but it cannot be considered a replacement for
managerial decision-making.
‹ MIS supports limited analytical and prediction capabilities and thus
is not suitable for decisions that are complex in nature and require
a lot of analysis.
‹ MIS is less interactive as it doesn’t offer managers the customization
capabilities to draw new data by changing underlying assumptions
with time to aid complex decision-making.
IN-TEXT QUESTIONS
1. __________ are computer-based information systems which perform
and keeps a of record all types of transactions happening in
any organization.
2. __________ consist of facilities like word-processing, email,
fax, etc.
3. __________ involves accumulating transactions and processing
them after a predefined span of time.
4. __________ information system possesses limited analytical
capabilities and support management with structured decision
making.

4.6 Decision Support System (DSS)

The success of a business, by and large, is influenced by the quality of
the decisions that its personnel make. Often, organizations come across
problems that require a large amount of data and its processing. In such
situations, computer-based systems aid in supporting the decision-making
process.
Let us first understand decisions that form the basis of various support
systems such as decision support systems, group decision support sys-
tems etc. in decision-making. A decision is defined as a selection of an

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option among the available options in order to resolve a given situation. Notes
It is broadly classified as structured, semi-structured and unstructured
decisions as described below.
‹ Structured Decision: Decisions which are repetitive and accustomed
in nature. Such decisions can be solved using well-defined and
standard solutions. In a structured decision, identifying the problem,
determining potential options, and making a choice are performed
in a specific sequence. Also, the process of obtaining the potential
solution is known. Decisions such as tax calculation of an individual
and student results in an examination are some of its examples.
‹ Semi-structured Decision: These are decisions having only some
of the decision-making phases as structured. Such decisions utilize
both standard solution procedures as well as human judgments to
arrive at a decision. Decisions regarding departmental budget, and
buying and selling of a company’s stock are some examples of
semi-structured decisions.
‹ Unstructured Decision: Decisions intended to tackle complex
problems for which there are no standard solutions, are referred to
as unstructured decisions. There is no well-known standard solution
for arriving at a decision and such decisions usually rely largely on
human intuition and judgment. Deciding long-term objectives for a
company, and choosing a policy for a new technology for the near
future are some examples of unstructured decisions.
To understand how information systems help managers of any organization
in decisional roles, you must first understand the decision-making process.

4.6.1 Decision-making
Decision-making is a fundamental activity in any organization. Deci-
sion-makers in any organization often strive to make efficient and ef-
fective decisions using various kinds of intellectual assets such as data,
information, business intelligence, experience, and expertise.
The three distinct phases of decision-making proposed by Herbert Simon
(1960) are as follows:
‹ Intelligence Phase: It involves identifying the problem and collecting
facts, beliefs, and ideas related to it.

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Notes ‹ Design Phase: Decision makers identify all the potential strategies
for solving the problem in this phase.
‹ Choice Phase: Decision makers select the most promising strategy
in the choice phase.
After the choice phase, the selected strategy is implemented. These phases
of the decision-making process can also be non-linear. Sometimes, you
might find it beneficial to backtrack to a previous phase for efficient
decision-making. For example, when selecting a strategy in the choice
phase, you may come across another possible strategy which might look
more promising. This can cause you to go back to the design phase in
order to add this newly observed strategy. Afterwards, you will revisit
the choice phase and compare the new strategy with the other strategies
you have generated. Figure 4.5 illustrates decision-making process and
its phases.

Figure 4.5: The Process and Phases in Decision-making

To summarize, decision-makers inspect a situation to recognize and state
the problem in the intelligent phase. In the next phase, a model intend-
ed to address the problem is obtained. The model is validated using the
test data. This is followed by decision-makers assessing all the possible
solutions for the problem. In the choice phase, best-suited solution is

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selected to solve the problem. Lastly, this solution is implemented. The Notes
proposed solution is deemed to be successful if it can solve the problem.
However, the process goes back to the earlier phases in case the solution
fails to solve the problem.
Computer-based information systems can aid the decision-making for
an organization, especially when a large amount of information and lots
of processing are required while decision-making. A Decision Support
System (DSS) is one such CBIS that attempts to aid decision-makers of
an organization by selecting one of the potential solutions to a problem.
DSS provides assistance to the decision-maker with an aim of improving
managerial decision-making.

4.6.2 Components of DSS

A typical DSS consists of three main components, namely, (1) Data Man-
agement, (2) Model Management, and (3) User Interface Management
(shown in Figure 4.6).
‹ Data Management Module: It includes a database or data warehouse
that has the data relevant to the decision-making process, for which
DSS is designed.
‹ For example, the data management module for your investment
portfolio stores set of financial assets such as cash, bonds, stocks,
currencies, and commodities.
‹ A DSS might use a database from internal or external data source.
‹ Internal data within an organization is usually generated by
systems such as TPS and MIS.
‹ External data is the data extracted from external sources such
as newspapers, social media, and government data.
‹ Model Management Module: The objective of the model management
module is to convert the data from the data management module
into information that is further used to make decisions.
‹ Models are used to analyse inputs or different conditions that
might produce a correct output.
‹ Models are generally built on some mathematical study or
experiences that provide analytic capabilities to decision-makers
in an organization.
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Notes ‹ A model can be specific to the needs of an organization or it

can be a general method that caters to the needs of various
organizations.
‹ For example, a clothing company may use a statistical model
such as regression analysis to govern the underlying trends in
customer purchasing patterns and predict sales for the company.
‹ User Interface Module: It provides a communication mechanism
between users and different components of DSS.
‹ Its fundamental aim is to improve system users’ ability to utilize
and benefit from the DSS.
‹ It allows users to select a model, retrieve the database, and
choose relevant data for the decision-making process.
‹ It facilitates the user in analysing how changes in different
parameters affect the result of analysis.
‹ User interface can be in various forms such as commands, icons,
dialogue boxes, etc. that can facilitate user interaction with the
system.

Figure 4.6: Components of a Decision Support System

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Notes
4.7 Group Decision Support System (GDSS)
Group Decision Support System (GDSS) is one of the computer-based
information systems that aids the exchange of ideas and information
among users to arrive at a decision as a group. Such systems are often
referred to as collaborative systems, group systems or group intelligence
systems. The primary objective of GDSS is to enable ideation, exchange
of ideas, and selection of likely solutions.
Decision-making in GDSS usually begins by clearly defining the problem
that must be solved. This is followed by the exchange of ideas in an
open and collaborative environment. Ideas contributed by the participating
group members are evaluated and ranked with the help of some means of
voting. The proposed decision is then given to the final decision maker
or the decision at the top-most rank is adopted, in case the group has
the authority to make the decision.
4.7.1 Components of GDSS
The main components of GDSS are Hardware, Software, and People.
‹ Hardware: It includes electronic devices such as computers, network
equipment, display boards, and audio, or visual equipment. It can
also include conference facilities and physical set-ups such as rooms
to aid group discussion and team collaboration.
‹ Software: Tools and techniques such as questionnaires, idea organizers,
electronic tools for conceptualizing, policy formation tools, etc.,
which provide support to the group decision-makers for planning,
organising ideas, and documenting the meeting proceedings.
‹ People: It refers to the group members involved in decision-making
and sometimes a trained facilitator who directs the group members
through the decision-making process.
I N
IN-TEXT QUESTIONS
5. __________ decision is the one which usually relies largely on
human intuition and judgment.
6. __________ is a computer-based information system which
supports decision-making in an organization.

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Notes 7. __________ is used to assist groups make decisions in an

organization.
8. __________ includes tools that aid the users of a DSS to navigate
through the system.

4.8 Executive Information System (EIS)

Executive Information System (EIS) refers to the CBIS designed par-
ticularly for the information needs of top executives. Executives of any
organization generally work in a very unstructured way. They have to
often deal with problems which are spontaneous in nature and require
their attention as and when necessary. EIS utilizes various technologies
such as Graphical User Interfaces (GUI), computers, databases, and
network connections to present key information to the management. It
supports various work styles and is capable of incorporating information
from multiple sources.

4.8.1 Elements of an EIS

‹ Database Interface Features
‹ EIS can access information from internal sources such as the
company’s internal databases, including manufacture, client,
and seller information or external sources that provide industry
information to executives.
‹ It should be able to retrieve databases that can be arranged in
several ways and portrayed in multidimensional views.
‹ It should be able to display real-time information.
‹ Presentation Features
‹ User-friendly graphics can turn a large amount of text and
information into a pictorial format for executives.
‹ Natural language interfaces allow the usage of a set of commands
similar to our natural i.e., everyday language or lingua, in place
of difficult computer commands.
‹ Decision Support Activities
‹ Drill Down: Drill-down analysis helps executives to get a more
detailed and granular view of the underlying data starting from
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a general view of a particular data. This helps the executive to Notes

get specific and fine details of the data.
‹ Integration with Spreadsheets: This integration simplifies data
analysis with the means of spreadsheets.
‹ Decision Support: EIS helps executives in decision-making by
allowing easy access to information needed in an organization
to achieve tactical goals.
‹ Knowledge Discovery
‹ Knowledge discovery tools help in extracting potentially useful
information from the data.
IN-TEXT QUESTIONS
9. __________ primarily highlights the usage of good graphical
user interface for top executives of the company.
10. Drill-down capabilities are often present in an __________.
11. Which of the following are primary features of an EIS?
(a) Information presentation
(b) Integration of external and internal data
(c) Analysing the trend
(d) All of the above
12. EIS is used at the strategic level of a company or organization.
(True/False)

4.9 Artificial Intelligence and Expert Systems

Artificial Intelligence (AI) is a discipline of computer science that deals
with the study and creation of intelligent computer systems. It focuses
on methodologies and technologies to understand how the human brain
reasons, learns and decides while solving a problem and then uses the
findings of this study to develop intelligent software and systems. AI can
be defined as the theory and development of information systems that
are able to accomplish tasks that normally involve human intelligence.
AI is used in a variety of applications, such as robotics, game-playing,
logistic planning, and medical diagnosis. It is an ever-growing field due

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Notes to the rapid growth in pace, magnitude, and variety of data businesses
are now gathering. It allows businesses to gain more insight into the
data with tasks such as finding the underlying patterns in the data more
proficiently than people. From a business perspective, AI refers to pre-
vailing tools and practices and using them to solve business problems.
A variety of AI systems have been developed that businesses use in the
present age. In this section, we will discuss expert systems, which is one
of the earliest and most prevalent AI technologies.

4.9.1 Expert Systems (ES)

People who perform important and critical business tasks are valuable to
any organization. Often, many tasks in an organization require expertise,
and only few people have the required expertise or intelligence to perform
such tasks. With expert systems, you can seize expertise, and make it
accessible to others who may not be an expert in the specific field. This
enables the users to either use it for solving tasks or in learning ways
to solve the task.
An expert system is a computer-based information system capable of
solving intricate problems in a specific domain, which usually requires
extraordinary human intellect and proficiency. An expert system consists
of a knowledge base, inference engine, and user interface.
‹ The knowledge base comprises the knowledge obtained from
specialists or other sources of expertise. Knowledge can be defined
as concepts, procedures, ideas, facts, justified beliefs, etc. Knowledge
is closely related to intelligence. Accurate and precise knowledge
is important for intelligence.
‹ The inference engine manipulates the knowledge to perform reasoning
and derive inferences about a task. Efficient reasoning procedures
with the help of an inference engine are able to deduce correct
conclusions.
‹ The user interface enables interaction between the parties involved
namely, the user and the system.
In essence, an expert system takes expertise from a domain expert or
other sources, which is kept in the knowledge base. The system makes

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inferences using an inference engine and arrives at conclusions. Then, it Notes

offers advice or recommendations to users. Figure 4.7 shows the com-
ponents of an ES and their interaction.

Figure 4.7: Components of a Typical Expert System

Expert systems have been implemented in various applications, such as
healthcare, financial services, and agriculture. An expert system is gen-
erally built for a specific application area, which is known as a domain.
Some of its application areas are as follows:
‹ Healthcare: Expert systems can be used to assist doctors with the
diagnosis of symptoms and recommend medication for patients.
‹ Financial Management: Expert systems can be used to identify
fraudulent accounts in the loan departments of banks.
‹ Production Management: Expert systems can be used to provide
guidance to the manufacturer for various products.
Major challenges that can be encountered when building an expert sys-
tem are:
‹ It is sometimes difficult to transfer or capture domain expertise
to the expert system, especially when the domain experts cannot
give complete reasoning and their decisions are mostly based on
experience or instinct.

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Notes ‹ Automating the reasoning process is sometimes infeasible, especially

when the process is too complex, ambiguous, or requires lots of
rules. It is also difficult to deal with inconsistency while reasoning.
IN-TEXT QUESTIONS
13. An __________ is a computer-based information system which
imitates the decision-making ability of a human expert.
14. __________ contains expertise in an expert system.
15. __________ is responsible for applying rules to the identified
facts in order to infer conclusions.

4.10 Understanding End-User Computing

What is End-User Computing (EUC)?
End-User Computing are those tools and applications which are designed by a
programmer that can be easily used by non-programmers/non-IT professionals/
employees/business people, etc. EUC is made for all non-technical profes-
sionals to easily use all the tools and applications to produce better work.
These systems are designed in such a way that it allows non-programmers to
grasp basic technology concepts enabling them to create functional software
applications. Even non-programmers can create easy applications and tools
for themselves to understand and analyse their work or data. EUC aims for
an advanced technical fast-paced work environment for non-programmers to
enhance their skills in the technical world.
To simplify it further, let us take example of Google Analytics/ You-
Tube Analytics which are software that were designed by programmers
but are now widely used by all types of people across the globe. If one
needs to know the traffic on their website, one can simply log into the
dashboard of Google Analytics and see the numbers that are hitting the
website, similarly on the other hand, all the YouTubers can simply look
for the number of views, likes, dislikes and analyse their audience data
without any difficulty.
Under this topic, we will learn about those tools and applications that
the end-users make for themselves to produce better work environments,
and take a deeper understanding of end-users, their types, and their need
in today’s technically inclined world.

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Notes
4.11 Types of EUC
There are many types of EUC. Some of the user-facing resources along
with the tools used in that domain are mentioned below in Table 4.1.

Table 4.1: Depicting User-Facing Resources along with their Tools

User-Facing Resources Tools Used

Desktop and Laptops Tools safety and security;
Windows Management and Security
Tools.
Desktop OS (Operating Systems) Desktop platforms;
and Applications Unified Endpoint Management (UEM)
Tools.
Smartphones, Tablets, Digital Mobile Device Management;
Watches Mobile Application Management.
Mobile, Web and Cloud Appli- Enterprise Mobility Management Soft-
cations ware; Enterprise File Sync-and-Share
Services;
App-Refactoring (to create responsive
all devices friendly User Interface).
Virtual Desktops and Applica- Application Virtualisation Platforms;
tions Monitoring and Management Tools.

IN-TEXT QUESTIONS
16. End-user computing can be ________ when faced with fast
changing regulations.
17. End-user computing encompasses a wide variety of _____________.

4.12 Advantages and Disadvantages of EUC

EUC plays a very crucial part in today’s technically inclined world.
It has many advantages but also possesses some disadvantages to the
end-users. In this topic, we will be taking up points related to its
pros and cons.
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Notes Advantages
‹ Computing is made easy now as anyone can use software, tools,
and applications without getting into the complexity of backend.
‹ The tools are so responsive that they can be accessed from any type
of digital devices such as desktops, laptops, smartphones, digital
watches, tablets, or any other technical device.
‹ The connectivity is so high that the end-user tools and applications
can be accessed from anywhere across the globe.
‹ EUC helps in increasing the awareness of the end-user and at the
same time enabling the creative use of Management Information
Systems (MIS).
Disadvantages
‹ Redundancy of data is a common problem in EUC.
‹ EUC can lead to distractions ultimately taking user away from
their real jobs which can become a threat to the organisation in
the long run.
‹ Lack of attention towards the algorithms that play a key role in the
background of EUC can lead to major problems in the Management
Information System (MIS).
‹ Sometimes EUC may be complex for one to understand and learn.
IN-TEXT QUESTIONS
18. End-user tools and applications can be accessed from ____________.
19. ____________ is a common problem in End-User Computing.
20. Mobile, web and Cloud applications are __________.

4.13 Significance of EUC

Whether it is the pandemic or the desire to hire the best talent, the
workplace has changed dramatically, regardless of location. Businesses
must look for newer ways to survive, maintain their success, and grow.
These indicators are causing organisations to rethink and revamp their
operations. EUC services are among the most successful application de-
livery methods to a workforce.

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‹ EUC solutions help in the automation of most of the steps involved Notes
in computing and delivering resources. These services can increase
efficiency and reduce staff workload, allowing them to devote more
time towards other innovative projects.
‹ At the enterprise level, there are hundreds of thousands of physical
computers, and managing them all is an administrative nightmare. This
problem can be solved by EUC. Centralised control for installing updates,
applications, patches, and operating systems, is now relatively simple.
‹ Many businesses nowadays choose a BYOD (Bring Your Own Device)
policy. This strategy helps in the reduction of multiple IT expenses.
Once these devices are supplied as virtual desktops via the cloud,
we must rely on EUC systems to provide the optimal technology
infrastructure.

4.14 Benefits of EUC

EUC comes with its benefits to the organisations. Some of them are
listed below:
1. Business Continuity: Due to several factors, the employees have shifted
online on remote basis where the need to access the organisation’s
hardware has become a must. EUC has successfully connected all
the employees of the company by making work easy by accessing
business-related information and data as per the requirement on
their personal devices.
2. Security: EUC provides high-level security by being a centrally
managed system storing all the information and data on the cloud
and streaming only pixels out to endpoint devices. End-users use
multi-factor authentication access making it difficult for third parties
to interrupt with any kind of personal data or information.
3. Cost Savings: Cost is reduced to a very large extent due to EUC
being a cloud platform where anyone can access data and resources
as per their need. This can cut the cost of over expenditure for
hardware and licenses.
4. Collaboration: EUC services provide secure collaboration on projects
between users via cloud infrastructure. A cross-organisational
collaboration is also made possible with changes in real-time.
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Notes IN-TEXT QUESTIONS

21. A __________ is also made possible with changes in real-time.
22. EUC follows a __________ such as cloud management.

CASE STUDY
TN PVT. LTD., an Indian electronics retail chain, has implemented a
new information system to improve its primary business activities. The
system comprises a main server that holds the management application
for sales and accounting, and a back-office computer utilized by the
manager. Sales executives are equipped with handheld devices that
connect to the server via Wi-Fi technology. Sales executives use these
devices, which are equipped with point-of-sale software and touch
screens, to take orders quickly and accurately. The orders are then
printed at the cashier counter and recorded in the accounting system.
The system also enables the automatic printing of invoices on one
of the three printers in the shop, thereby enhancing customer service
by reducing errors and shortening the order and invoice process. At
the end of the day, the manager can produce a detailed report of all
invoices, including information on items ordered, revenue collected,
and items to be procured based on sales.
Questions
1. In this case, what type of information system is used?
2. What technology components are utilized in this case?
Answers
1. Transaction Processing System (TPS) as it handles the daily
and routine activities at the operational level of management.
Decision-making at this level is highly structured. The system
is used to record daily activities (invoices) and manage internal
data at the operational level only.
2. Server, back-office computer, handled device, POS system,
application for accounting and sales, printers.

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Notes
4.15 Summary
Computer-based Information Systems (CBIS) predominate in various
aspects of our lives. They have become vital, especially in business and
management, due to their ability to ease the task of solving a problem
and arriving at a decision. CBIS use computer technologies to execute
various tasks. These systems usually access data in its raw form and then
process the data to generate potentially useful information as the output.
There are several types of computer-based information systems, namely,
Office Automation System (OAS), Transaction Processing System (TPS),
Management Information System (MIS), Decision Support System (DSS),
Executive Information System (EIS) and artificial intelligence-based sys-
tems such as Expert System (ES).
OAS provides assistance to the clerical workforce and knowledge workers
for creating documents, scheduling resources, and enhancing communi-
cation in the workplace. TPS is responsible for collecting, monitoring,
and managing data obtained from business transactions that happen in
an organization. MIS is concerned with tasks which involve planning,
managing, and using information technology tools to assist people in an
organization. DSS refers to a class of systems which provides assistance
for decision-making. EIS provides help to executives or managers in
analysing and summarising large volumes of data. ES is used to solve
complex tasks with the help of knowledge, reasoning capabilities, and
expertise in a specific domain.
End-user computing is a way to easily learn and use applications, tools,
or software by anyone, from anywhere to multiply work productivity in
an organisation. These tools are made by programmers, from which any
non-technical person can benefit and use in day-to-day life. We, as an
individual or as an organisation can immensely benefit from EUC by
strong Connectivity, High Security, Cost-Cutting, and Cross Organisa-
tional Collaboration.

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Notes
4.16 Answers to In-Text Questions
1. Transaction Processing System
2. Office automation system
3. Batch processing
4. Management
5. Unstructured
6. Decision support system
7. Group decision support system
8. User interface
9. Executive information system
10. Executive information system
11. (d) All of the above
12. True
13. Expert system
14. Knowledge base
15. Inference engine
16. Beneficial
17. User-Facing Resources
18. Anywhere across the globe
19. Redundancy of Data
20. User-Facing Resources
21. Cross-organisational collaboration
22. Centrally Managed System

4.17 Self-Assessment Questions

1. Design a TPS for payroll system and discuss its components. Also,
depict its working through a diagram.
2. What is the difference between batch and online processing?

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3. What are the characteristics of MIS? How does MIS differ from Notes
TPS?
4. Explain what is a model in DSS. Give an example.
5. What is an expert system? What are the major challenges encountered
while building it?
6. Discuss the differences among TPS, MIS, DSS, and EIS.
7. Explain EIS and its elements.
8. What is a computer-based information system? Discuss different
categories of computer-based information system.
9. Differentiate structured and unstructured decision-making.
10. Describe Simon’s model of decision-making along with the diagram.
Also, state the outcomes of each phase.

4.18 References
‹ Rainer, R. K., & Prince, B. (2015). Management Information Systems:
Moving Business Forward. John Wiley & Sons.
‹ Effy, O. Z. (2013). Management information systems (7th ed.).
USA: Cengage Learning.
‹ Laudon, K. C., & Laudon, J. P. (1988). Management information
systems: a contemporary perspective. Macmillian Publishing Company.

4.19 Suggested Readings

‹ Simon, H. A. (1960). The new science of management decision.
‹ Power, D. J. (2002). Decision support systems: concepts and resources
for managers. Greenwood Publishing Group.
‹ Sadagopan, S. (1998). Management information systems. PHI
Learning Pvt. Ltd.

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 L E S S O N

5
IT and Strategic
Advantage
Renu Singh
Assistant Professor (Guest)
College of Vocational Studies
University of Delhi
Email-Id: [email protected]

STRUCTURE
5.1 Learning Objectives
5.2 Introduction
5.3 Using IT for Competitive Advantage
5.4 Role of Internet and Emerging Technologies
5.5 IT-Enabled Services
5.6 Seamless Organisations
5.7 Virtual Corporations
5.8 Web-Enabled Computing as a Strategic Tool
5.9 Outsourcing as a Strategic Alternative
5.10 Summary
5.11 Answers to In-Text Questions
5.12 Self-Assessment Questions
5.13 References
5.14 Suggested Readings

5.1 Learning Objectives

After reading this lesson you will be able to:
‹ Discuss the importance of IT for competitive advantage.
‹ Define the role of the internet and emerging technologies.

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 IT and Strategic Advantage

‹ Study economic organizational and behavioural impacts. Notes

‹ Understand IT impact on decision-making.
‹ Tell about IT-enabled services.
‹ Define virtual organization.
‹ Discuss web-enabled computing as a strategic tool.
‹ Describe outsourcing as a strategic alternative.

5.2 Introduction
IT has become a part and parcel of the business. IT provides so much
help to the business, In the 21st century you cannot imagine any business
without IT being involved in the business. Nowadays, organisations are
able to use IT to gain competitive advantage. Utilizing information tech-
nology to create goods, services, and capabilities that give a business a
significant competitive advantage over its rivals in the global market is
the strategic role of information systems.
Only if a business successfully creates strategies to deal with the five
competitive forces that determine how the competition in its industry
is structured can it survive and thrive over the long term. According to
Michael Porter’s traditional model of competition, a company must suc-
cessfully create and implement strategies to counter:
(1) The rivalry of competitors within its industry,
(2) The threat of new entrants into an industry and its markets,
(3) The danger presented by competing products that might take market
share,
(4) The bargaining power of customers, and
(5) The bargaining power of suppliers.
In business, competition is a good thing, and there is often healthy rivalry
between rivals. This competition motivates and perhaps necessitates a con-
tinuous attempt to establish a competitive edge in the marketplace. This con-
stant force of competition demands enormous resources from a corporation.
‹ Cost-leadership Approach: Being a low-cost provider of goods
and services in the sector, or figuring out how to assist suppliers
or clients in cutting prices or raising competitors’ expenses.

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Notes ‹ Diversification Tactics: Creating methods to set a company’s

goods and services apart from those of its rivals or reducing the
differentiation advantages of rivals. With the help of this tactic,
a business may be able to concentrate its offerings to obtain a
competitive advantage in certain market segments or niches.
‹ A Plan for Innovation: Discovering innovative business practises.
This tactic might entail creating distinctive goods and services or
breaking into distinctive markets or market niches. It could also
entail making fundamentally new business decisions that affect the
way an industry is organised at its core, such as making drastic
changes to the business processes for producing or distributing
goods and services.
‹ Growth Management: A corporation’s ability to create goods and
services is significantly increased. A company may also diversify
into new products and services, enter international markets, or
integrate into related products and services.
‹ Partnership Strategies: Forming new commercial connections
and links with clients, suppliers, rivals, consultants, and other
organisations. These connections could be made through mergers,
purchases, joint ventures, the creation of “virtual firms,” or other
marketing, production, or distribution contracts between a company
and its business partners.

5.3 Using IT for Competitive Advantage

Information technology is viewed and used by organisations in a vari-
ety of ways. For instance, businesses may decide to use IT to support
effective day-to-day operations or they may want to use IT strategically.
Information technology would be seen as a significant competitive dif-
ference by a company’s management if it focused on strategic business
uses of IT. Then they would create business plans that make use of IT to
provide goods, services, and capabilities that give the business a signifi-
cant competitive edge in the marketplaces in which it operates. We give
numerous instances of such strategic business applications of information
technology in this area.

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Reengineering Business Processes Notes

Business process reengineering is one of the key ways that competitive
strategies are put into practice (BPR). To achieve significant gains in
cost, quality, speed, and service, reengineering is a deep rethinking and
radical restructuring of business processes. Business Process Reengineer-
ing (BPR) combines a strategy of fostering business innovation with a
plan of making significant improvements to business processes in order
to help a business become a much stronger and more successful compet-
itor in the marketplace. Reengineering has a large potential payoff, but
it also has a high risk of failure and a high degree of disturbance to the
organisational environment. Making major changes to corporate processes
to dramatically improve efficiency and effectiveness is not an easy feat.
For instance, numerous businesses have redesigned, automated, and in-
tegrated their manufacturing, distribution, financial, and human resource
business operations using cross-functional Enterprise Resource Planning
(ERP) software. Although many businesses have achieved tremendous
advantages from such ERP reengineering initiatives, many others have
either suffered egregious setbacks or failed to make the changes they
aimed for. Along with the use of IT, many businesses have discovered
that organisational redesign methodologies are a key enabler of reengi-
neering. Utilizing self-directed cross-functional or interdisciplinary process
teams is one popular strategy, for instance. In the product development
process, a team of workers from several departments or specialties, such
as engineering, marketing, customer support, and manufacturing, may
collaborate. Another illustration is the usage of case managers, who take
on nearly all of the tasks in a business process rather than distributing
them among numerous specialists.

5.3.1 The Role of IT

The majority of business processes have been re-engineered with the
help of information technology. Computer and Internet technologies’
speed, information-processing power, and connectivity can significantly
improve business operations’ efficiency as well as communications
and teamwork among those in charge of running and managing them.

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Notes Becoming an Agile Company

We are moving from a competitive environment in which businesses
compete globally with niche market products and services that are cus-
tomised, short-lived, information-rich, and frequently exchanged with
customers to one in which mass-market products and services are stan-
dardised, long-lived, information-poor, and exchanged with customers in
one-time transactions.
When referring to a company’s ability to succeed in the increasingly
fragmented, rapidly evolving global markets for premium, high-perfor-
mance goods and services, the term “agile” is used. An agile business
may produce orders individually and in arbitrary lot sizes and still turn
a profit in marketplaces with large product ranges and short model life-
times. By providing personalised items and sustaining high production
rates, it encourages mass customization. Agile businesses heavily rely on
Internet technologies to manage, integrate, and coordinate their business
operations while also providing the information processing power nec-
essary to handle a large number of customers individually. A company
needs to employ four fundamental techniques in order to be agile.
First, the corporation must first make sure that clients see the goods or
services it offers as answers to their particular challenges. It can therefore
set product prices based on how valuable things are as solutions rather
than how much it costs to make them.
Second, an agile business collaborates with its rivals as well as with cli-
ents, vendors, and other businesses. No matter where resources are located
or whose resources they are, this collaboration enables a corporation to
bring items to market as quickly and affordably as feasible.
Third, an agile business is structured to capitalise on change and unpre-
dictability. It makes use of adaptable organisational structures that are
tailored to the needs of various and dynamic client opportunities.
Fourth, an agile business makes use of the influence and expertise of
its people. An agile organisation fosters an entrepreneurial culture,
which offers strong incentives for worker accountability, flexibility,
and creativity.

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Table 5.1: How IT can help a Company be an Agile Competitor, Notes

with the help of Customers and Business Partners

Type of Agility Description Role of IT

Customer Ability to co-opt customers in Technologies for build-
the exploitation of innovation ing and enhancing virtual
opportunities: customer communities
� A s source of innovative for product design, feed-
ideas back and testing.
� As co-creators of innovation
�  s users in testing ideas or
A
helping other users learn
about ideas
Partnering Ability to leverage assets, Technologies facilitating
knowledge and competen- interfirm collaboration,
cies of suppliers, distribu- such as collaborative
tors, contract manufacturers platforms and portals,
and logistics providers in the supply chain systems.
exploration and exploitation
of innovation opportunities.
Operational Ability to accomplish speed, Technologies for modu-
accuracy, and cost economy larisation and integration
in the exploitation of inno- of business processes.
vation opportunities.

5.3.2 Synergies, Core Competencies, and Network-Based Strategies

A huge firm is often made up of various companies. Financially, the com-
pany is frequently structured as a group of strategic business units, and
the success of each of these divisions directly affects the firm’s profits.
By encouraging synergies and core competencies, information systems
can enhance these business divisions’ overall performance. Synergies The
concept of synergy states that when two organisations pool their markets
and knowledge or when certain units’ output may be used as an input by
other units, these interactions reduce costs and increase revenues. Recent

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Notes bank and financial business mergers, such as those involving Bank of
America and Countrywide Financial Corporation and JPMorgan Chase
and Bank of New York, happened specifically for this reason.
Information technology can be used in these synergy scenarios to coor-
dinate the operations of several corporate units so that they can function
as one. For instance, by purchasing Countrywide Financial, Bank of
America was able to expand its mortgage lending division and reach a
sizable new client base that would be interested in its consumer banking,
credit card, and other financial services. Information technology would
assist the combined businesses in streamlining operations, reducing retail
expenses, and boosting cross-selling of financial products.

Enhancing Core Competencies

As yet another way to use information systems for competitive advantage,
think about how they might enhance essential competencies. The assertion
is that each company unit’s performance will increase when it develops
or produces a core set of competencies. A company’s core competency is
an endeavour in which it excels. Being the world’s best maker of thin-
film products, package delivery service, or small components designer are
examples of core competencies. A core competency typically draws on
knowledge accumulated over many years of hands-on experience working
with technology. The usual additions to this practical expertise include
a sustained study effort and dedicated staff. Competency is improved by
any information system that promotes knowledge transfer between corpo-
rate units. Such technologies could promote or improve already-existing
competencies, assist staff in learning about fresh external knowledge, and
assist a company in leveraging such competencies in connected markets.

Network-Based Strategies
Strategies that profit from businesses’ capacity to build networks or net-
work with one another were inspired by the availability of the Internet
and networking technology. A virtual firm model, business ecosystems,
and network economics are all examples of network-based tactics.

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Network Economics Notes

Network-based business models may aid organisations strategically by
utilising network economics. Production encounters declining returns in
conventional economics, which governs industries like manufacturing
and agriculture. Up until a point where the additional inputs yield no
additional outputs, the marginal increase in output of any given resource
decreases with increasing application to production. This idea, sometimes
known as the law of diminishing returns, serves as the foundation for a
lot of contemporary economics. Sometimes the law of diminishing re-
turns does not hold true. In a network, for instance, the marginal costs
of bringing on a new person are roughly zero, but the marginal return
is significantly higher. A telephone system or the Internet will be more
valuable to all users if there are more subscribers since each user will
be able to communicate with more users. Operating a television station
with 1,000 subscribers is not significantly more expensive than one with
10 million. A community’s worth increases with growth, but the expense
of bringing in new members is negligible. This network economics
viewpoint suggests that information technology has potential strategic
applications. Businesses can utilise websites to create user communities
made up of like-minded customers who wish to exchange experiences.
This fosters client satisfaction and loyalty while creating special bonds
with clients. Network economics offers commercial software companies
additional strategic advantages. The value of their software and associated
software products increases with the number of users since they have a
larger installed base to support ongoing use of the product and vendor
maintenance.

Virtual Company Model

Another network-based tactic builds a competitive corporation using the
virtual company paradigm. A virtual firm, also called a virtual organ-
isation, links people, resources, and ideas via networks so that it can
collaborate with other businesses to produce and offer services without
being constrained by conventional organisational structures or physical
locations. Without being physically connected to that company, one
company can utilise the resources of another company. When a business

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Notes finds it more cost-effective to purchase goods, services, or skills from

an outside vendor or when it wants to act fast to take advantage of new
market opportunities but lacks the time and resources to do so on its
own, the virtual company model can be helpful.

5.3.3 Sustaining Competitive Advantage

Strategic systems can offer competitive advantages, but those benefits
may not endure long enough to guarantee sustained profitability. Compet-
itive advantage is not always tenable since rivals can retaliate and steal
strategic systems. Globalization has accelerated and produced unforeseen
changes in markets, customer expectations, and technology. Given that
almost all businesses can use the Internet, competitive advantage can go
very quickly. Systems that were initially designed with a strategic pur-
pose frequently turn into tools for survival, necessities for any company
to remain in operation, or they may prevent businesses from making the
strategic changes necessary for long-term success.

5.4 Role of Internet and Emerging Technologies

5.4.1 Economic Impacts

Information technology can lower transaction costs—the expenses incurred
when a corporation purchases something from the market that it cannot
produce itself—helping businesses minimise their size. The transaction cost
theory asserts that businesses and individuals aim to reduce transaction
costs in a manner similar to how they reduce production costs. Utilizing
markets is costly due to expenses such as finding and corresponding with
far-off suppliers, checking contract compliance, purchasing insurance,
learning about items, and so forth. Additionally, information technology
helps lower the cost of internal management. In contrast to being seen
as a single, profit-maximizing organisation, the firm is seen in agency
theory as a “nexus of contracts” among self-interested persons. Employ-
ing “agents” (workers) allows a principle (owner) to handle business on
their own. However, in order to prevent agents from prioritising their
own interests over those of the owners, they must be closely monitored
and managed.

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5.4.2 Organizational and Behavioural Theories Notes

Information technology, according to behavioural experts, may alter the
hierarchy of decision-making in businesses by bringing down the cost of
knowledge acquisition and expanding the availability of information. By
bringing information directly from operating units to senior management,
information technology might do away with middle managers and their
administrative support staff. As an alternative, information technology
could provide information to lower-level employees directly, allowing
them to make decisions on their own without management participation.
Firms typically see an increase in agency fees as they expand in size
and complexity. IT causes the agency cost curve to shift downward and
to the right, enabling businesses to grow while incurring lower agency
costs. The implementation of information systems has an impact on the
people, structures, and task arrangements.

5.4.3 IT Impact on Decision-making/Role of Information Technology

More and more often, decisions are made at every level of an organisation.
Managers may make more tactical decisions about how their particular
department may contribute most effectively to the overall business objec-
tives while the Board of Directors may make the big strategic decisions
regarding investments and the direction of future growth. However, even
routine employees are increasingly required to make judgments regarding
how to carry out their own tasks, how to deal with clients, and how to
enhance business procedures. This requires rigorous recruiting, selection,
and training as well as informed people. The processes used by managers
to make choices have changed along with the times. The rapidity of the
process change has been aided by information technology.
Organizational hierarchies in businesses have been able to be flattened
thanks to traditional and modern management technology. Middle man-
agers have been leaving in droves during the past few years. Because
of technological advancements that make it possible for lower levels of
employees to connect and collaborate more easily and quickly than ever
before, businesses simply didn’t need the extra layers. In these newly
decentralised organisations, managers are now in charge of educating
staff members about the organization’s environmental impacts, its ob-
jectives, and how to adapt the organisation to these influences. Then,

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Notes managers let their staff members to accomplish both the organisational
and individual goals.
By increasing the quantity of information available to all employees,
information systems can assist managers and employees in working
more productively and efficiently in this new environment. With mod-
ern technologies, communication is quicker and more extensive, allow-
ing for closer teamwork and collaboration between managers and staff,
modernised information systems. Additionally, notes make it possible for
geographically separated teams and groups to collaborate to achieve both
individual and group objectives.

Implications for System Design

In the organisation of today, decision-making is done in a very different
way than it was a few years ago. The risk of designing a system to fit the
way things work today is that it won’t take these changes into account.
Understanding how people and organisations make decisions is necessary
to build a system that can support both the organisation and the employees.
Information systems should be developed to aid in better communication
between all organisational levels and units as well as decision-making
by managers and employees. Bear in mind that decisions are not made
in a vacuum. More importantly, the system should consider the reality
that decisions have an impact on a variety of people.
The true risk of employing information technologies to aid in deci-
sion-making is that those decisions may be made on incorrect information.
Managers might not be as cautious as they would be if the circumstance
were completely novel since they might presume that it is similar to an
earlier experience they had. Because the new packaging materials are the
same colour as the old ones, for instance, management can assume that
they are equally as good. Therefore, while making the decision to switch
suppliers, managers won’t take the same care to carefully consider all
the information, all the potential outcomes, and all the available options.
They choose depending on the first option that advances them closer to
their ultimate objective. The fact that the packaging materials are inferior
to the old ones is discovered too late, resulting in more damaged items
and dissatisfied customers.

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The following qualities should be present in information systems: Notes

‹ Flexibility and a wide range of alternatives for handling data and
assessing information.
‹ They can accommodate a wide range of styles, abilities, and expertise.
‹ They are effective because they include a variety of analytical and
intuitive models for evaluating data and the capacity to keep track
of a wide range of options and outcomes.
‹ They represent the political and administrative demands of systems.
‹ They demonstrate an understanding of the boundaries of organisational
transformation and a comprehension of the capabilities and limitations
of information technology.

5.5 IT-Enabled Services

The term “IT-enabled Services” (ITeS), also known as “web-enabled
services,” “remote services,” or “teleworking,” refers to the full range of
activities that make use of information technology to boost an organiza-
tion’s productivity. These services offer a variety of career opportunities,
including call centres, medical transcription, billing and coding, back
office operations, processing revenue claims, legal databases, content
development, payrolls, logistics management, GIS (Geographical Infor-
mation System), HR services, web services, etc.
IT-enabled services are technology that helps the organisation run more
efficiently. The value addition of services that are IT-enabled is the most
crucial factor. Customer relationship management, an enhanced database,
an improved appearance and feel, etc. might all be examples of value
addition. An IT-enabled service has two types of outcomes: Direct Im-
proved Service and Indirect Advantages.
Just two of the IT-intensive processes and services supplied by ITeS are
Business Process Outsourcing (BPO) and Knowledge Process Outsourcing
(KPO), both of which are provided from a remote location and distribut-
ed over telecom networks. ITeS focuses on industries including content
management, accounting and finance, and the research and analytics
sector. ITeS comprises:
‹ Services that facilitate client connection include call centres with
enough telecom infrastructure, competent advisors, access to the
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Notes relevant databases, and Internet and other online information

infrastructure to provide customers with information and help.
‹ Back office operations include data entry, data conversion, accounting,
and HR services, services for transcription and translation.
‹ Development, animation, engineering, design, and GIS of content.
‹ Other offerings include network administration, remote education,
data search, market research, and consultancy.
The most frequently used application areas are those in which a sig-
nificant amount of data must be processed and used to give results,
or in which the data is a byproduct of the service. In every scenario,
the task would be impossible to complete without the usage of IT.
The following are some of the key areas where IT-enabled services
can be used:
‹ Telemarketing
‹ Helpdesk
‹ Customer Support Centers
‹ Data Ware House
‹ Transcription Centers
‹ GIS Mapping for Transport Tracking
‹ Electronic Distribution

5.5.1 Business Process Outsourcing (BPO)

The practice of contracting out various company-related operations to
outside suppliers is known as Business Process Outsourcing (BPO).
Although BPO used to only apply to manufacturing companies, such as
soft drink producers, who outsourced significant portions of their supply
chains, term now also covers the outsourcing of services.
‹ Third-party vendors or subcontractors are used by businesses that
outsource some of their business operations (BPO).
‹ Large industrial organisations used BPO initially to help with supply
chain management, but today BPO has expanded to cover a variety
of industries, including services businesses.

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‹ If the vendor or subcontractor is based in another nation, like in Notes

the case of customer assistance, BPO will be regarded as “offshore
outsourcing.”
In today’s dynamic, fiercely competitive business environment, many
businesses—from small startups to established corporations—choose to
outsource certain activities.
Generally speaking, businesses use BPO techniques in both front-office
and back-office activities. Back office BPO describes a business outsourc-
ing its essential business support functions to outside experts who make
sure the operation works successfully. These functions include accounting,
payment processing, IT services, human resources, regulatory compliance,
and quality assurance. Contrarily, front-office BPO duties frequently
involve client-facing functions like tech support, sales, and marketing.

5.5.2 Driving Factors of BPO Revolution

Numerous benefits of outsourcing include enhanced focus on core business
operations, cost control, and increased reach and efficiency. The same
benefits apply to outsourcing corporate processes (BPO). Businesses that
choose for BPO should be aware of its primary driving forces.
1. Robust IT Infrastructure: An organisation may quickly, economically,
and safely move data to a company on the other side of the world
thanks to infrastructural and IT advancements. This enables raising
shareholder value and ROI. Additionally, this lowers expenditures
for businesses.
Since they can concentrate on their core competencies, these businesses
provide better services. As a result, businesses can offer their services
more successfully and at lower costs by collaborating with offshore
BPO providers. Therefore, a strong IT infrastructure turns out to
be a crucial BPO trigger.
2. Globalisation: Globalization is one of the most significant forces
influencing the BPO sector. Outsourcing and foreign migration become
two competing forces as a result of this process. Both have a significant
effect on the world economy.
Demand for skilled labour from developing nations is rising. This
serves as a catalyst for increased job growth. But this brain drain also

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Notes contributes to the loss of skilled workers in underdeveloped nations.

Regarding benefits, offshore outsourcing enables rich countries to
add new jobs in underdeveloped nations. As a result, it increases
the amount of foreign currency entering a country and serves as a
major driver of growth in the fields of health care, education, and
outsourcing.
3. Cost-conscious Aspect: As a product’s overall output increases, unit
costs decrease. That is the fundamental notion of economies of
scale. This suggests that a larger manufacturer can produce tools
at a lower cost. Manufacturing output is increased through worker
specialisation and technological innovation.
Additionally, exporting goods and services is advantageous for
nations, according to the notion of comparative advantage. If the
cost of producing these goods and services is lower in other nations,
it is true. The emergence of the BPO sector was prompted by
globalisation and the expansion of profitable trade between nations.
The key drivers of BPO industry growth are salary disparities and
low-cost production.
4. Demographics: The availability of educated labour is another factor
supporting the BPO sector. For instance, one of the most well-
liked BPO locations is Ukraine, which has a robust educational
system. 87% of school graduates in Ukraine enrol in colleges and
universities. Even more significant, 35% of them select courses in
information technology. Great BPO drivers include a high literacy
rate, fluency in English, and a willingness to focus heavily on their
professional growth.
5. Geopolitical Situation: You must have noticed the significance and
regularity of political meetings, conferences, summits, etc. if you
keep up with the news. The need to promote international dialogue
and collaboration is the fundamental driver behind their holding. This
promotes technical advancement, globalisation, and eases international
trade. Additionally, it has a favourable impact on BPO.

5.5.3 Types of BPO

1. Back-Office BPO: Back-office business process outsourcing includes
hiring services that are not customer-facing. They include services

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for IT, accounting, business process automation, human resources, Notes

quality assurance, and other things. A number of BPO subtypes have
emerged, including Knowledge Process Outsourcing (KPO), which
contracts out programme management or implementation knowledge,
IT-enabled Services (ITeS) BPO, which uses IT analysts, Legal
Process Outsourcing (LPO), which uses paralegals or consultants,
and others. Instead of spending time and money on internal training
and onboarding, businesses may focus on their main objective by
outsourcing these tasks.
2. Front-Office BPO: This phrase refers to consumer-facing services
including tech support, customer service, sales, and marketing. These
services are typically provided outside of the premises due to the
technical competence necessary. Businesses can outsource front-
office tasks like customer support or web development and save
money by utilising specialised personnel with unique experience.
3. Offshore BPO: When services are outsourced abroad, this is called
offshoring. The availability of resources, political stability, cheaper
labour costs, various tax benefits, and other factors all encourage
this. Companies frequently outsource their customer support divisions
by signing contracts with call centre providers around the globe. As
a result, companies can get skilled labour and services at a reduced
cost, lowering overhead expenses and possibly lowering the cost of
goods or services to consumers.
4. Nearshore BPO: The practice of hiring contractors in nearby nations
is known as nearshore business process outsourcing. This might
encompass Central America, as well as Canada and Mexico, for
enterprises in the US. This type of outsourcing typically takes place
when specialised skills are less expensively available in a nearby
country, but certain considerations, such as time zones or language
proficiency, must be made. This can be seen, for instance, when
a Silicon Valley company hires Canadian experts to handle its IT
and coding needs or when a Canadian business hires an American
marketing agency to handle its marketing needs.
5. Onshore/Domestic BPO: The act of hiring outsiders to perform
services inside the boundaries of a country is known as domestic
outsourcing, and it is precisely what it sounds like. To put it another

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Notes way, services provided to businesses in one city, state, or province

may be outsourced to a vendor in a different city, state, or province.
Numerous factors, such as the accessibility of specialised skills in
certain regions or regional variances in expenses and pricing, may
be to blame for this.

5.5.4 Advantage of BPO

‹ The fact that costs are reduced is one of the main benefits. Internally,
it costs a given amount to carry out a particular job function. In
order to lower the overall cost of carrying out that job function,
BPO can lower these costs by outsourcing this task to an outside
party, frequently in a less expensive country.
‹ Another advantage is that a company can focus on its core
operations, which are crucial to its success, rather than on other
aspects of running a company, such as non-essential administrative
tasks.
‹ BPO aids expansion in other ways as well, particularly when it
expands globally. Employing a BPO company with local market
knowledge and language proficiency is particularly helpful for
a corporation intending to open an overseas branch or conduct
business abroad.
‹ Businesses usually choose BPO because it affords them more
operational flexibility.
‹ By outsourcing non-essential and administrative chores, businesses
can reallocate time and resources to core competencies like customer
interactions and product leadership, giving them a competitive
advantage over other enterprises in their market.
‹ Companies that use BPO have access to cutting-edge technological
tools that they might not otherwise have. Businesses and BPO partners
are constantly looking to improve their operations by integrating
the newest technology and techniques.
‹ Businesses benefit from outsourcing operations to countries with
lower income taxes and cheaper labour costs.

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5.5.5 Benefits and Threats of ITeS Notes

Benefits
Increases Company’s Flexibility: Business Process Outsourcing (BPO),
which is a component of ITeS, will give businesses more flexibility. The
majority of ITeS suppliers’ services are supplied on a fee-per-service basis.
This enables the business to switch from a fixed to a variable cost struc-
ture. A variable cost makes a business more flexible through outsourcing
and enables it to react to changes extremely fast. Another method ITeS
increases a company’s flexibility is by allowing it to concentrate on its
core skills free from the burden of bureaucratic constraints. As a result,
key personnel are freed up to concentrate more time and effort on grow-
ing the company’s core activities rather than handling administrative or
non-essential tasks. By accelerating business processes, ITeS also helps
organisations become more flexible. We can reduce production times and
inventory levels using methods like linear programming, which can boost
productivity and control or lower costs. The proper use of chain partners
and business process outsourcing in Supply Chain Management (SCM)
accelerates a number of business processes. Finally, one of the organi-
sational life cycle stages is flexibility. Nortel was transformed by ITeS
from a bureaucratic company to a fierce rival. ITeS enables businesses
to preserve their agility and skill, which they would otherwise have to
give up in order to increase their efficiency. As a result of having fewer
restrictions imposed by substantial capital expenditures for personnel or
equipment, which may take years to progressively write off the cost, a
firm grows more quickly. Although the aforementioned justifications for
ITeS are favourable and promote organisational flexibility, management
must exercise extreme caution when putting it into practice. Before de-
ciding to engage in business process outsourcing, the corporation must
consider the difficulties. Another problem is that it’s often difficult to tell
one BPO from another by size. They both offer the same services and
use the same technology stacks and quality improvement methodologies.
Threats
Risk Poses the Biggest Threat to ITeS: A system that has been out-
sourced for information purposes can have communication and privacy
security flaws. It is extremely challenging to maintain the security of
North American or European corporate data when accessed or controlled

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Notes in the Sub-Continent. By changing employee attitudes, underestimating

existing costs, and the major danger of losing independence, outsourcing
modifies the relationship between businesses. The risks and hazards of
outsourcing can be managed in order to enjoy any rewards. If we can
manage outsourcing in a systematic way while maximising good results,
lowering risks, and avoiding any dangers, a Business Continuity Man-
agement (BCM) model emerges.

5.6 Seamless Organisations

What is the ideal IT environment defined as? Here are some examples
of the traits:
‹ Executive managers who are knowledgeable and dedicated to the
company.
‹ Business goals and objectives that are perfectly linked for success.
‹ Strategic decisions that take into account a dynamic, quickly changing
business environment.
‹ Cost-effectiveness.
‹ Common architecture (tools, standards, etc.).
‹ Taking care of people rather than letting them sink in bureaucracy.
Your company must be created to surpass the enterprise’s strategic goals
while also supporting people to attain extraordinary productivity and job
happiness if you want to create a world-class IT organisation. This gives
the company a mission that is meaningful to each employee. The more
important it is to those concerned, the harder they will strive to make
it successful.
According to the CIO desk reference, organisations whose IT is seen as
being extremely important to the business are those where the CIO has
learned that marketing the IT organisation helps raise awareness of the
value that IT brings to the company and ensures the CIO is a business
partner.
The best method to accomplish this cooperation is to set up IT to cater
to the requirements of various business groups. This can only be accom-
plished by developing collaborative working connections with all business
partners on both an individual and group level that allow business teams,

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including IT as a “business,” to collaborate. The sole IT initiative is Notes

enterprise infrastructure. IT is a member of a business team headed by
a business project champion, whether it is in charge of 10% or 90% of
the responsibilities. Business projects and unit champions are necessary
for any project.
Though they are highly encouraged on an individual level, connections
must also be understood on a communal level. For instance, the technol-
ogy department must identify this and take action to establish the proper
relationships if a partner who is notoriously tough has been unable to
connect with the employees. Senior technology managers are required to
pinpoint the root causes of the relationship issue and work diligently to
address them. Successful alliances are founded on:
‹ Consistently cultivated relationships.
‹ Institutionalized relationships are another example.
‹ Connections that extend from people to departments.
‹ Connections that are thought to add value.
‹ Constantly expecting your partner’s viewpoint.
‹ A partner who has the ability to anticipate questions.
Success depends on:
Using technology management as a strategic asset as opposed to a cost
centre by:
‹ Risk management,
‹ Expectation management,
‹ Business alignment, and
‹ Vision management deciding between a plan and tactics.
Partnering with the company and assimilating into it rather than avoiding
it by:
‹ Creating business teams,
‹ Forming partnerships,
‹ Presenting business cases,
‹ Recognizing business unit leaders Creating a reputation.

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Notes Creating a culture based on common ideals, such as:

‹ Leading values
‹ Common culture
‹ Life quality
Identifying and expressing the value of IT to the business by:
‹ Outlining that value to the business
‹ Identifying value
‹ Measuring value
‹ Communicating value
IT organisations must persuade their business counterparts that IT can
and should be used to expand and add value to their companies. Dedi-
cation demands knowledge of the subject. It is the CIO’s duty to show
how understanding key technological efforts and the company’s long-term
success are related.

5.7 Virtual Corporations

Creating a virtual firm can be one of the most significant strategic uses
of information technology in the fast-paced, international business cli-
mate of today. A virtual company is an organisation that uses information
technology to connect people, organisations, assets, and ideas. It is also
known as a virtual corporation or virtual organisation.
Virtual companies, also known as “virtual organisations” or “virtual en-
terprises,” are temporary partnerships between different businesses that
were formed to suit client demands as a result of today’s corporate world’s
online collaborative activities. As they travel through the corporate world,
these hyper-agile entities dissolve and reconstruct as required to finish
supply or manufacturing chains and market goods to customers. Virtual
corporations are joined together by specialisation and efficiency, work-
ing on a customer-by-customer basis without using long-term contracts,
as opposed to functioning by the formal contracts and carefully crafted
procedures regular businesses employ in partnerships.

5.7.1 Business in the Internet Age

The success of virtual corporations is made feasible by contemporary
internet communication tools. These tools are used by businesses to
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collaborate on manufacturing. One company might have a partnership Notes

online with another that specialises in beverage distribution while also
specialising in beverage manufacturing. To get the products to customers,
these two businesses collaborate and communicate with one another during
each shipment. Of course, email is a crucial component of this procedure,
but social networking and other Web 2.0 tools are also beneficial. Online
forums enable staff from both businesses to connect whenever necessary
to discuss specific problems or specifics of their jobs, instantaneously
exchanging information. In the virtual company, blogs are used for up-
dates, chat rooms can be used for meetings, and Wikis can be used for
documentation or research. The paperless business, in which legal papers
are sent and signed by certified e-signatures without the need to ship
or receive physical parcels, is one of the most crucial Internet concepts
for virtual firms. In the end, a fully virtual corporation will be able to
conduct almost all of its operations online, particularly its interactions
with affiliate businesses.
Based on how businesses execute their operations, virtual organisations
can be classified into three different categories:
‹ Online: With entirely electronic organisational structures, online
virtual businesses function in the e-commerce sector. These businesses
employ Internet tools to deliver services, necessitating the least
amount of actual office space. Both Amazon.com and eBay are
mentioned as instances of well-known online businesses. These
businesses typically join in some type of virtual company to distribute
or produce their goods and services.

‹ Collaborative: Collaborative virtual businesses are ones that use

IT tools to locate other businesses online that can offer the services
they need. The firm is able to deliver an efficient supply chain
by combining its knowledge resources, skill sets, and areas of
expertise. These businesses typically have a physical presence and
well-established specialty, but they lack the resources necessary
to completely create or distribute their products or services. The
most widely used definition of the virtual corporation, an online
alliance of businesses that cooperate to offer the complete range
of services a traditional firm would typically hold within a single

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Notes entity, is derived from this collaborative definition. Higher quality is

attained in production and service because each of the collaborative
enterprises has a niche market.
‹ Hybrid: Hybrid businesses alternate between existing solely online
and functioning as collaborative groups inside a virtual corporation.
They can accomplish objectives on their own in some areas, but
they rely on their virtual organisation to complete other operations.
A virtual organisation will be able to respond quickly to cultural trends
and unexpected market shifts by acquiring or eliminating departmental
capabilities from cooperating businesses. Partners may be separated in a
variety of ways, such by living in different cities, nations, or even just
different buildings, but they must always be reachable via online com-
munication. If face-to-face meetings are necessary, videoconferencing can
be employed, and mobile workers can use instant messaging (IM) and
smartphone technologies. How effectively a company responds to such
developments will depend on the volume of online communication it has.

5.7.2 Establishing a Virtual Corporation

Effective electronic communication can be included into business rela-
tionships at three different stages, paving the way for fully online col-
laboration over time.
The first stage is physical system integration, which involves linking
the organization’s physical divisions and employees to one another and
to other organisational units that make up the virtual corporation. This
involves straightforward employee data exchange and transfer over in-
tranets and other online networks, including the sending and receiving of
simple files. This first level has been attained if this capability is present.
Application integration, sometimes referred to as information integration,
is the second level. Any communication-related applications that the
virtual corporation makes use of fall under this category. Now that the
physical barrier has been overcome by online capacity, the collaborating
businesses advance with the development of specific forms of collabo-
ration. Wikis, forums, chat rooms, blogs, social networking sites, IM,
audio and video conferencing, and VoIP (Voice over Internet Protocol)
services can all be considered among them. So that information may be
transmitted quickly and easily, the specific services must be agreed upon

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by all businesses in the virtual corporation and be formatted in the same Notes
way. These applications should be taught to all staff.
Business integration is the third stage, where organisations coordinate
their efforts into one supply chain while employing their specialisations
to reach the highest levels of quality and efficiency. At this point, or-
ganisations collaborate to develop improved strategies for selling their
services or disseminating their products, inventing fresh procedures in
the process. Although there are no written agreements between the virtual
organization’s partners, this phase does bind the businesses together and
reduces the likelihood that they will split apart.

5.7.3 Issues with Virtual Corporations

Trust is crucial to the success of virtual organisations, as seen by impres-
sion management’s efforts. It is not always simple for the cooperating
companies to trust one another morally and legally.
‹ How legally enforceable are e-signatures when used with virtual
documents?
‹ How responsible are the other partners in the corporation if one of
the partners is found guilty of misconduct or an unethical practice?
‹ How is the issue resolved if one of the partners is dissatisfied with
the calibre of the other partner?

5.8 Web-Enabled Computing as a Strategic Tool

5.8.1 Cloud and Mobile Computing Era

The client/server approach has been advanced toward the “Cloud Com-
puting Model” as a result of the Internet’s expanding bandwidth power. A
computing model known as “cloud computing” gives users online access
to a shared pool of computing resources, such as computers, storage,
software, and services. Any linked device and location can access these
“clouds” of computing resources as needed. Cloud computing is the type
of computing that is currently expanding the quickest, with businesses
spending roughly $109 billion on public cloud services in 2012 and a
projected $207 billion by the end of 2016. (Gartner, 2012).As personal
and business computing progressively shifts to mobile platforms, dozens

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Notes or even hundreds of thousands of computers are housed in cloud data

centres that may be accessed by desktops, laptops, tablets, entertainment
centres, smartphones, and other client machines connected to Internet.
Large-scale cloud computing facilities are run by IBM, HP, Dell, and
Amazon. These facilities offer high-speed Internet connections, comput-
ing capacity, and data storage to businesses that want to manage their
IT systems remotely. Applications for software are sold as services that
are offered through the Internet by software companies like Google,
Microsoft, SAP, Oracle, and Salesforce.com.

5.8.2 Cloud Computing

Cloud: A network or the internet is referred to as a “cloud.” In other
words, something that exists in a distant area is a cloud. WAN, LAN, or
VPN are examples of public or private networks via which cloud services
can be delivered. Email, online conferencing, and Customer Relationship
Management (CRM) programmes all run in the cloud.
Cloud Computing: Remotely modifying, configuring, and gaining access to
hardware and software resources are all covered by the term “cloud comput-
ing.” It provides infrastructure, applications, and online data storage. Due to
the lack of a local PC installation needed for the software, cloud computing
allows platform independence. As a result, our business applications are
becoming more mobile and collaborative thanks to cloud computing.
A computing architecture known as “cloud computing” makes use of a
pool of virtualized resources to deliver computer processing, storage,
software, and other services through a network, typically the Internet.
Any linked device and location can access these “clouds” of computing
resources as needed.
The Cloud computing is practical and available to end users thanks to a
number of services and models operating in the background. The working
models for cloud computing are as follows:
‹ Deployment Models
‹ Service Models
Deployment Models/Types
The type of access to the cloud, or where the cloud is situated, is de-
fined by deployment models. Access to the cloud might be either public,
private, hybrid, or community-based.
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1. Public Cloud: Users can easily access systems and services thanks Notes
to the public cloud. Public clouds may be less secure because they
are more easily accessed.
2. Private Cloud: Within an enterprise, systems and services can be
accessed using the private cloud. Because of its private character,
it is more secure.
3. Community Cloud: A lot of organisations can access systems and
services thanks to the community cloud.
4. Hybrid Cloud: The vital operations are performed in the private
cloud, while the non-critical functions are performed in the public
cloud, to create a hybrid cloud.
Service Models
Three different service categories make up cloud computing:
1. Cloud Infrastructure as a Service (IaaS): Customers employ cloud
service providers’ processing, storage, networking, and other computer
capabilities to power their information systems. For instance, Amazon
offers a broadly based cloud environment where IT infrastructure
services are sold by utilising the extra capacity of its IT infrastructure.
These include its Elastic Compute Cloud (EC2) service for running
its apps and its Simple Storage Service (S3) for storing the data of
customers. Users only pay for the storage and computational power
they really utilise.
This is the most basic type, where cloud servers or storage is
present. Typically, IT organisations choose this setup because they
don’t want the trouble of setting up or maintaining the facility but
still want access to their materials as needed.
2. Cloud Platform as a Service (PaaS): Using the infrastructure and
programming tools provided by the cloud service provider, customers
develop their own apps. For software development and testing on
the IBM Cloud, for instance, IBM provides a service called Smart
Business Application Development and Test. Another illustration is
Force.com by Salesforce.com, which enables programmers to create
apps that are hosted as a service on its servers.
Employees can use this platform to write code, create applications,
and integrate with their current resources. With installed technologies

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Notes like .NET, Java, Ruby on Rails, Python, and others that may prepare
code and then host it for sharing, the environment is favourable for
development.
3. Cloud Software as a Service (SaaS): Customers utilise software that
is network-distributed and hosted on the vendor’s cloud infrastructure
by the vendor. Leading examples include Salesforce.com, which also
rents out customer relationship management and related software
services online, and Google Apps, which offers basic business
applications online. Both have an annual subscription price, though
Google Apps also offers a condensed version for free. The data and
software for these applications are kept on the remote servers of
the providers, and users access them through a Web browser.
This is the cloud service that is the most developed and consists of apps
that use a virtual database rather than a physical one. CRM The first
company to do this was Salesforce.com, which offers all analytics and
customer relationship data on the cloud rather than on hard drives.
Benefits of Cloud Computing
1. Through the Internet, one can access apps used as utilities.
2. The applications can be modified and set up at any moment online.
3. There is no software to download in order to use or access cloud
applications.
4. Through the PaaS model, cloud computing provides online tools
for development and deployment as well as a runtime environment
for programmes.
5. Cloud resources are accessible across the network in a way that gives
any kind of client platform-independent access.
6. Self-service is available on demand using cloud computing. Without
interacting with the cloud service provider, the resources can be
used.
7. Due to its great efficiency and optimal use, cloud computing is very
cost-effective. All that is needed is an Internet connection.
8. Load balancing is a feature of cloud computing that increases its
dependability.

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Features of Cloud Computing Notes

1. High Scalability: This refers to on-demand resource provisioning
on a big scale without the need for direct human contact with each
service provider.
2. High Availability and Reliability: Because it reduces the likelihood
of infrastructure failure, server availability is higher and more
dependable.
3. Agility: It operates swiftly and divides resources among users.
4. Multi-sharing: By employing cloud computing to share a shared
infrastructure, several users and applications can operate more
effectively and affordably.
5. Maintenance: Since cloud computing apps don’t need to be installed
on every computer and can be accessed from a variety of locations,
maintenance is simpler and the overall cost is lower.
6. Low Cost: The corporation no longer needs to put up its own
infrastructure, making it cost-effective. It pays out in accordance
with the resources it has used.
7. Services that are Pay-Per-Use: Users are given APIs (Application
Programming Interfaces) to access cloud services, and users are
charged based on how often they use the service.
8. On-Demand Self-Service: Cloud computing enables customers to
access resources and web services whenever they need them. A
website can be accessed and used at any time by logging in.
9. Wide-Ranging Network Access: Because cloud computing is totally
web-based, it may be accessed from anywhere at any time.
10. Resource Pooling: Multiple tenants can share a pool of resources
thanks to cloud computing. On a single physical instance, hardware,
databases, and the necessary infrastructure can all be shared.
11. Rapid Elasticity: The resources can be scaled either horizontally or
vertically at any time. The ability of resources to scale up or down
in response to demand is known as resource scaling. The resources
that clients are using at any one time are automatically tracked.

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Notes 12. Measurable Service: With this service, the cloud provider manages
and keeps an eye on every facet of the cloud service. It is necessary
for things like resource efficiency, billing, and capacity planning.
Drawbacks of Cloud Computing
The supplier is in charge of data storage and control unless users make
provisions for storing their data locally. Some businesses are concerned
about the security concerns associated with handing over their vital in-
formation and systems to a third-party vendor. Businesses expect their
systems to be operational around the clock and do not want to lose any
business capabilities due to faulty cloud infrastructures. Users’ dependence
on the cloud computing provider is another drawback of the technology,
and as the case study at the end of the chapter shows, this dependence
isn’t always ideal. In spite of this, businesses are increasingly moving
more of their computer processing and storage to a cloud infrastructure.
Small and medium-sized firms who lack the capacity to buy and own
their own gear and software will find cloud computing more immedi-
ately appealing. Large firms, however, make significant expenditures in
sophisticated proprietary systems that support special business procedures,
some of which give them competitive advantages. For large businesses
with existing IT infrastructures, it can be difficult to calculate the cost
savings from migrating to cloud services. Corporate data centres often
operate on an IT budget that includes a combination of construction and
operations costs. Pricing for cloud services is frequently determined by
an hourly rate or other per-use fee. A business must consider how much
of its network management, storage management, system administration,
electricity, and real estate costs should be devoted to a single on-premises
IT service even if it can roughly estimate the costs of the hardware and
software required to run a particular computing task on-site. It’s possi-
ble that an information systems department lacks the necessary data to
examine such factors on a service-by-service basis. Large businesses are
more likely to use a hybrid cloud computing strategy where they utilise
their own infrastructure for their most crucial core functions and public
cloud computing for less critical systems or extra processing power during
busy business seasons. With the use of cloud computing, businesses will
progressively transition from having a set infrastructure capacity to one

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that is more flexible and partially owned by the company and partially Notes
rented from massive data centres run by computer hardware providers.

5.8.3 Key Considerations in Cloud Computing Strategies

It is essential to develop a thorough cloud plan before implementing
cloud computing; yet, most businesses develop their cloud strategies after
using the technology for a while. But the more problems you’ll prevent
the earlier you implement a cloud approach.
In addition to being in line with supporting strategies for data, security,
governance, and architecture, cloud strategy should be optimised for
business goals, including speed, resilience, and agility.
Design Cloud Strategy for Speed and Business Value
Start by connecting the three main CIO priorities (as they relate to en-
terprise strategy) to cloud strategies:
1. Innovation and Strategy: How can cloud services promote creativity
and help businesses address problems?
2. Security and Governing: Can cloud enable flexible governance
frameworks handle varying deployment requirements and risk
profiles?
3. Migration and Mobilisation: How might the cloud help with business
goals like digital transformation?
Build Resilience into Application Architecture
Your operational model’s choice of cloud models, architecture, and ser-
vice providers will be crucial, and it must support both your current
and future cloud strategies. The primary results you hope to achieve in
terms of capability, reliability, agility, automation, efficiency, and cost
optimization should be taken into account when developing your strategy.
Cloud Skills and Talent
Your readiness to implement and adapt your cloud strategy must be
reviewed. To head a cloud centre of excellence, for instance, determine
whether you require a chief cloud architect. To fill skills gaps if you’re
moving to the public cloud, you could need to hire new talent and up-
skill current workers.

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Notes
5.9 Outsourcing as a Strategic Alternative
Using an outsourced strategy to manage the organization’s IS and IT op-
erations is becoming more and more common. In a broad sense, outsourc-
ing refers to the acquisition of goods or services from external partners
that were previously supplied domestically. A wide range of information
technology operations that are selectively contracted to an external service
provider are collectively referred to as outsourcing.
The creation of software applications is a typical outsourcing of IS tasks.
The contracting (or subcontracting) of activities and/or resources that
support the software development life cycle as well as the development
of full or partial software products or projects as well as the procurement
of packaged or customised software products are all included in this
process. The functions that are commonly outsourced, the justifications
for the decision to outsource, and a number of factors that contribute to
effective vendor selection and outsourcing efforts are listed in Figure 4.8.
There are five key reasons why businesses opt to outsource, even though
they can, theoretically, do so for any organisational function.
Save Money-Achieve Greater Return on Investment (ROI): One clever
way to stretch tight funds is to outsource IS/IT functions to qualified
service providers. A well-managed outsourcing strategy can result in cost
reductions of up to 40–80 percent for businesses.
Focus on Core Competencies: An organisation and its personnel can
concentrate on the business they are in rather than one they are not, thanks
to outsourced professionals. An enterprise can direct its IS specialists
to pinpointing and resolving business problems as opposed to designing
and prototyping new applications by employing an outsourced strategy
for application development.
Achieve Flexible Staffing Levels: Strategic use of an outsourcing strategy
for IS/IT functions can boost revenue without raising costs. For specialised,
specialty, or overflow projects, outsourcing offers a reservoir of skilled
experts. Outsourcing can help a business acquire the specialised knowl-
edge it needs if it is difficult to locate or expensive to keep in-house.
Gain Access to Global Resources: According to The Outsourcing In-
stitute, the criteria for expanding a company successfully have changed:

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 IT and Strategic Advantage

“Success is now dependent on the resources and skills you can access, Notes
rather than what you own or build.” By utilising global expertise, a com-
pany can take advantage of competent workers, wherever it may be, and
considerably improve the quality of its output. As a result, outsourcing
can provide smaller organisations access to possibilities that they might
not otherwise have owing to financial or geographic limitations.
Decrease Time to Market: The conventional advantages of flexibility
and responsiveness for small businesses are extended by outsourcing,
enabling smaller businesses to successfully compete with larger ones.
The addition of offshore support to a current workforce could enable
productivity throughout the day. A significant competitive advantage
can be gained by having access to resources that can work on important
projects even when local employees are sleeping.
IN-TEXT QUESTIONS
1. Information technology helps firms contract in size, because it
can reduce __________ costs.
2. A firm is said to have a __________ when the firm produces
greater Return On Investment (ROI) than its industry’s average
return.
3. __________ position is recognized by observing competitive
indicators.
4. Information systems can help managers and employees work more
efficiently and effectively in this new environment by increasing
the amount of __________ available to all employees.

5.10 Summary
In this lesson, you have studied that numerous competitive strategies
can be supported by information technologies. They can aid a company
in reducing costs, differentiating and innovating its goods and services,
fostering growth, forging alliances, securing long-term relationships
with clients and suppliers, putting up barriers to entry, raising switching
costs, and maximising its investment in IT resources. Therefore, infor-
mation technology can aid a company in gaining a competitive edge in

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Notes its interactions with clients, partners, suppliers, rivals, newcomers, and
manufacturers of replacement goods.
Building a business that strategically prioritises customer value while
it develops its business value is a fundamental strategic application of
Internet technologies. Customers’ preferences are tracked by custom-
er-focused businesses using Internet, intranet, and extranet e-commerce
Websites and services, which also enable them to give goods, services,
and information to them wherever they are and whenever they need it.
Creating virtual corporations has emerged as a crucial competitive tactic
in today’s fast-paced international markets. The provision of computer
and telecommunications resources to enable the required communications,
coordination, and information flows relies heavily on the Internet and
other information technologies. In order to take advantage of opportunities
in the market that are changing quickly, managers of virtual companies
rely on IT to assist them in managing a network of people, expertise,
financial, and physical resources given by several business partners.

5.11 Answers to In-Text Questions

1. Transaction
2. Competitive Advantage
3. Strategic
4. Information

5.12 Self-Assessment Questions

1. How could a business use Internet technologies to form a virtual
company or become an agile competitor?
2. How can Porter’s concept of competing forces assist businesses in
creating cutting-edge information-based competitive strategies?
3. How can information systems support firms in leveraging network-
based strategies, core strengths, and synergies to gain an advantage
over their competitors?
4. Describe the effects of disruptive technology and the Internet on
businesses.
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5. What factors should you take into account when deciding if the Notes
Internet might give your company a competitive advantage?
6. How outsourcing can be used as a strategic alternative?
7. What is cloud computing? What are its benefits? What are the
working models of cloud computing?
8. How do IT-enabled services assist businesses in growth?
9. Discuss the role of the Internet and emerging technologies in business.
10. How IT can be used to gain competitive advantage in business?

5.13 References
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. (2014). Management information systems.
Pearson Education Limited.
‹ Bishop, A. (1993). The National Information Infrastructure: Policy
Trends and Issues. ERIC Clearinghouse on Information and Technology.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).
‹ Post, G., & Anderson, D. (2006). Management information systems.
Boston, Mass.: McGraw Hill/Irwin.
‹ Burn, Janice, Peter Marshall, and Martin Barnett. E-Business
Strategies for Virtual Organizations. Butterworth-Heinemann, 2001.
‹ Zemlianksy, Pavel, and Kirk St. Amant. Handbook on Research of
Virtual Workplaces and the New Nature of Business. Idea Group
Inc, 2008.
‹ https://www.investopedia.com/terms/b/business-process-outsourcing.asp
‹ https://www.hcmworks.com/blog/5-different-types-of-business-process-
outsourcing
‹ https://cio-wiki.org/wiki/Information_Technology_Enabled_Services_
(ITeS)
‹ https://www.encyclopedia.com/management/encyclopedias-almanacs-
transcripts-and-maps/virtual-corporations
‹ https://www.zdnet.com/article/defining-the-ideal-it-organization/
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Notes
5.14 Suggested Readings
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. (2014). Management information systems.
Pearson Education Limited.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).

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 L E S S O N

6
Inter-Organisational and
International Information
System
Renu Singh
Assistant Professor (Guest)
College of Vocational Studies
University of Delhi
Email-Id: [email protected]

STRUCTURE
6.1 Learning Objectives
6.2 Introduction
6.3 International Information System
6.4 Inter-Organizational Information System
6.5 Summary
6.6 Answers to In-Text Questions
6.7 Self-Assessment Questions
6.8 References
6.9 Suggested Readings

6.1 Learning Objectives

After reading this lesson you will be able to:
‹ Define an International Information system.
‹ Discuss the growth of international information system.
‹ List the challenges in managing a global firm.
‹ Describe the Inter-organisational Information system.
‹ Discuss EDI.

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Notes ‹ Define Extranet and its benefits.

‹ Tell about XML.
‹ Discuss Web services.

6.2 Introduction
In the previous chapter, we have discussed about the IT and its impact on
business management and How IT is used to gain competitive advantage
in the 21st century. Numerous competitive strategies can be supported
by information technologies. They can aid a company in reducing costs,
differentiating and innovating its goods and services, fostering growth,
forging alliances, securing long-term relationships with clients and suppli-
ers, putting up barriers to entry, raising switching costs, and maximising
its investment in IT resources. Therefore, information technology can aid
a company in gaining a competitive edge in its interactions with clients,
partners, suppliers, rivals, newcomers, and manufacturers of replacement
goods.
This chapter explains how to create a global information systems archi-
tecture that works with your global strategy. The fundamental information
systems needed by organisations to organise international trade and other
operations make up an international information systems architecture.
Information systems design and business strategy are related. Interna-
tional businesses must create networked system topologies that allow for
significant decentralisation of operations and development.
A strategy for deployment of a worldwide system must take into account
both business design and technological platforms. Systems integration
and connectivity are the key hardware and telecoms issues. Either a
proprietary architecture or open systems technology can be used for
integration. Global networks are exceedingly challenging to design and
run. Companies can either develop their own worldwide networks or
networks based on the Internet (intranets or virtual private networks).
Building interfaces to current systems and choosing applications that can
operate with various cultural, linguistic, and organisational frameworks
are the key software concerns.

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Notes
6.3 International Information System
The fundamental information systems needed by organisations to organise
international trade and other operations make up an international infor-
mation system architecture. Understanding the worldwide environment in
which your company operates is the fundamental plan of action to take
while constructing an international system. This entails being aware of
the general market factors, or business drivers, pushing your sector into
international competition. A business driver is an external force to which
firms must adapt and which affects the course of the business. Similarly,
pay close attention to the barriers or unfavourable conditions that result
in management difficulties—factors that could thwart the growth of a
global business. You must think about a corporate strategy for competing
in that environment after examining the worldwide environment. How will
your company react? You may disregard the global market and concen-
trate primarily on domestic rivalry, sell internationally from a domestic
foundation, or arrange worldwide manufacturing and distribution. There
are other options in between.

Figure 6.1: International Information System Architecture

(Source: Adapted from “Management Information Systems: Managing Global
Systems” Kenneth C. Laudon, Jane P. Laudon (2018))

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Notes After you have created a strategy, you need to think about how to organise
your company to implement the strategy. How are you going to divide
up the work in a global setting? Where will the operations for market-
ing, accounting, production, and administration be located? Who will be
in charge of the system operation? The management problems involved
in putting your strategy into practice and bringing the organisation’s
design to life must then be taken into account. The design of business
procedures will be crucial in this case. How can user requirements be
identified and managed? How can local units be persuaded to adapt so
that they comply with global standards? How can system development
be coordinated, and how can global reengineering be accomplished? The
technology platform should be the last thing you think about. Although
evolving technology is a major component influencing the development of
global markets, you need a corporate strategy and organisational structure
before you can make an informed choice regarding technology. After you
have finished this line of thinking, you will be well on your way to a
suitable international information systems portfolio that can help your
company achieve its objectives.

6.3.1 Global Business Environment: Drivers and Challenges

General cultural elements and specialised business variables make up the
two categories of global business drivers. Technology advancements in
information, communication, and transportation have led to the emergence
of a global village where communicating across the world via telephone,
television, radio, or computer network is no more challenging or ex-
pensive than communicating locally. Transporting products and services
between geographically distant regions is becoming far less expensive.
A second way in which the development of global communications has
ushered in a global village is by enabling various cultures and peoples
to come to share common expectations about what is right and wrong,
desirable and undesirable, and brave and cowardly. This global culture
has been cultivated by television, the Internet, and other globally shared
media like movies. The fall of the Eastern Bloc has significantly sped up
the development of global culture, increased support for capitalism and
commerce, and significantly decreased Europe’s degree of intercultural
conflict.

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The knowledge base is now much more democratic and broadly spread Notes
thanks to the development of strong educational, industrial, and scientific
hubs in Latin America, China, India, southern Asia, and Eastern Europe.
These overarching cultural variables that encourage globalisation produce
specific business globalisation factors that have an impact on the majority
of industries. Global markets—consumers around the world interested in
buying similar items that are socially acceptable—are made possible by
the development of potent communications technologies and the creation
of world cultures.
Marketing via the Internet involves reaching out to people and social
networks all around the world. The localization of corporate activity
according to comparative advantage is now possible for the first time in
history thanks to these unprecedented degrees of global coordination. The
best place for design, as well as for marketing, production, and finance,
should be chosen. Finally, the circumstances for strong, long-lasting
global economies of scale are created by global markets, production,
and administration. Global demand for goods and services allows for the
concentration of production where it can be carried out most effectively,
the distribution of fixed resources over longer production runs, and the
more accurate estimation and efficient scheduling of production runs
in larger plants. Wherever they appear, lower-cost production elements
can be taken advantage of. The outcome is a significant competitive
advantage for businesses that can organise internationally. These broad
and narrow commercial forces have significantly increased global trade
and commerce. Not all industries are influenced by these changes in the
same way. Clearly, manufacturing has been more negatively impacted
than domestic and extremely inefficient services. However, in the areas
of telecommunications, entertainment, transportation, banking, law, and
general business, the localism of services is disintegrating. Clearly, the
productivity and stability of those companies within an industry that can
comprehend the internationalisation of the business and adapt appropri-
ately will increase significantly.
Business Challenges
Although there are huge opportunities for economic success as a result
of globalisation, there are basic forces at work that aim to stifle a glob-
al economy and disrupt global trade. On a cultural level, particularism,

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Notes which involves making decisions and taking action based on specific or
individual characteristics, is rejected in all of its manifestations (religious,
nationalistic, ethnic, regionalism, geopolitical position). It also rejects the
invasion of domestic markets by foreign goods and services. Different
cultures result in different social norms, political systems, and eventually
legal systems. Customers in some nations, including the United States,
expect local name-brand products to be manufactured domestically. When
they discover that many things they believed to be made domestically are
actually manufactured elsewhere, they are unhappy. Diverse political sys-
tems result from different cultures. Different regulations apply in various
nations regarding the transfer of information, citizen privacy, the origins
of software and hardware in systems, and radio and satellite telecom-
munications. Even business hours and trading terms differ significantly
between political cultures. The complexity of various legal systems must
be taken into account while developing global systems. The accounting
procedures are closely related to the tax laws, corporate philosophies,
and legal systems of every nation. For major international corporations
with units in many countries, these divergent accounting practices make
it challenging to assess their performance. Language still poses a serious
obstacle. Although English has essentially become the de facto business
language, this is more prevalent at the upper levels of organisations than
it is at the middle and lower levels. A new information system may need
to be created with local language interfaces before it can be successfully
implemented. Planning models and estimates can be severely impacted
by currency fluctuations. A product that seems successful in Mexico or
Japan can really turn into a loss due to fluctuations in the value of the
local currency. These impediments must be taken into account while
creating and constructing global systems for your company. Companies
attempting to deploy “lean production” methods across national borders,
for instance, frequently underestimate the time, cost, and logistical chal-
lenges of ensuring that items and information flow freely across borders.

6.3.2 Approaches to Building Global Businesses

Business Organisation and International Strategies
The organisational structure of global enterprises is based on four primary
worldwide strategies. These include transnational, franchiser, multinational,

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and domestic exporter. Each of these tactics is carried out using a certain Notes
type of corporate organisational structure. For ease of explanation, we
divide organisational structure or governance into three categories:
‹ Centralised (inside the home country),
‹ Decentralised (to local foreign entities), and
‹ Coordinated (all units participate as equals).
In particular companies, other governance patterns can be seen (e.g.,
authoritarian dominance by one unit, a confederacy of equals, a federal
structure balancing power among strategic units, and so forth). The primary
characteristic of the local exporter strategy is the intense centralization
of corporate operations within the country of origin. This is how almost
all multinational corporations start, while some later adopt other struc-
tures. To maximise resources in the home country, production, finance/
accounting, sales/marketing, human resources, and strategic management
are set up. Although agency contracts or subsidiaries are occasionally used
to distribute international sales, global marketing nevertheless draws its
marketing themes and tactics from its domestic home base. This type of
company includes Caterpillar Corporation and other large capital equip-
ment producers.
The multinational strategy decentralises production, sales, and marketing
operations to units in other nations while concentrating financial man-
agement and control out of a central home base. The goods and services
offered for sale in various nations are customised to the demands of the
local market. The company expands into a global network of manufactur-
ing and marketing operations spread over numerous nations. This pattern
is shared by a large number of financial service companies and a large
number of manufacturers, including General Motors, Chrysler, and Intel.
Franchisers are a fascinating blend of the old and the new. On the one
hand, the product is developed, funded, and first manufactured in the home
nation, but for product-specific reasons, further production, marketing,
and human resources must heavily rely on foreign employees. Franchisers
of food like KFC, Mrs Fields Cookies, and McDonald’s suit this trend.
McDonald’s invented a brand-new type of fast-food business in the US
and still heavily draws its ideas for new items, strategic management, and
funding from here. However, as the product must be manufactured locally

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Notes because it must be perishable, substantial coordination and distribution of

production, local marketing, and local staff hiring are necessary. Typically,
overseas franchisees are exact replicas of the mother country units, but
it is not feasible to have fully coordinated global production that might
maximise production parameters. For instance, cattle and potatoes must
be produced quite locally to the area of consumption and cannot typically
be purchased where it is cheapest on the global market.
In the future, transnational enterprises, which are really stateless and
globally managed, may make up a larger portion of international trade.
Transnational corporations typically have multiple regional headquarters
in addition to a possible global headquarters rather than a single national
one. Nearly all value-adding operations in a transnational strategy are
managed from a global perspective without consideration of national
borders, optimising supply and demand sources wherever they occur
and taking advantage of any local competitive advantages. International
businesses use the world as their management frame of reference rather
than their own nation. These businesses’ governance has been compared
to a federal organisation, where there is a strong central management
core for decision-making but significant power and financial sway dis-
persed across the worldwide divisions. In reality, very few businesses
have achieved multinational status. International businesses now have
more freedom to sculpt their worldwide strategies because of informa-
tion technology and advancements in international telecommunications.
Companies are encouraged to distribute their manufacturing facilities and
at the very least become international by protectionism and the desire
to better service local customers. At the same time, transnationals are
driven to adopt a global management view and concentrate control and
authority due to their desire to attain economies of scale and benefit from
momentary local advantages. Thus, there are forces of global coordination
and centralization as well as forces of dispersion and decentralisation.

6.3.3 Global Systems to Support the Strategy

International businesses now have more freedom to sculpt their world-
wide strategies because to information technology and advancements
in international telecommunications. Systems are typically configured,
managed, and developed in accordance with the overall plan selected.

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We use the term “systems” to refer to the entire range of information Notes
system development and management tasks, including system conception
and alignment with the strategic business strategy, system development,
continuous operation, and system maintenance. We focus on four dif-
ferent system configuration types to keep things simple. Systems that
are completely developed and operated domestically are referred to as
centralised systems. Systems that are duplicated are ones in which de-
velopment takes place at the home base but operations are delegated to
autonomous entities abroad. When a system is decentralised, each exter-
nal unit creates its own special solutions and systems. Systems that are
networked have operations and system development that are integrated
and coordinated across all components. Domestic exporters frequently
have highly centralised systems, where a single domestic systems devel-
opment team creates global applications. A clear and startling contrast is
provided by multinationals: Foreign units create their own system solu-
tions based on local requirements here, sharing little to no applications
with headquarters (the exceptions being financial reporting and some
telecommunications applications). Franchisers have the most straightfor-
ward systems: Franchisers create a single system, typically at their home
base, and then duplicate it all over the world, much like the things they
sell. No matter where it is, every unit has the same applications. Last
but not least, multinational corporations use the most ambitious system
development approach: Systems that are networked provide a stable,
unified global environment for system development and operation. This
often assumes a strong communications foundation, a shared application
development culture, and a shared management culture that transcends
cultural boundaries. In financial services, where the homogeneity of the
product—money and money instruments—seems to overcome cultural
barriers, the networked system’s structure is most apparent.

6.3.4 Global Systems Strategy

First, keep in mind that not all systems should be coordinated on a
global scale; only a small subset of key systems are actually financially
and practically feasible to share. Essential organisational functions are
supported by core systems. Other systems may not necessarily need to
be completely shared across national borders, but they should be partial-
ly coordinated because they share important components. A significant

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Notes amount of local variation is both possible and preferred for such systems.
One further set of systems is purely local, truly provincial, and required
to meet local needs. Describe the essential business procedures.
Define the Core Business Processes
Establishing a concise list of crucial core business processes is the first
step. Business processes, in a nutshell, are groups of logically connected
operations that together achieve particular business outputs, like sending
consumers the right orders or bringing new products to market. Each
business process often incorporates a wide range of functional areas
that communicate and collaborate on projects to share knowledge and
information.
A business process analysis is the best method for locating these funda-
mental business procedures. What happens to customer orders after they
are received, who fulfils the orders, and how are they transported to the
customers? What about the vendors? Do they have access to MRP sys-
tems so that supply comes in automatically? You should be able to list
the top 10 business procedures for the company from a short list of 20
and assign priorities to each one. When it comes to these procedures, can
you name any centres of excellence? Are American, German, and Asian
human resources superior? Are American, German, and Asian manufac-
turing process control superior? For some business lines, you should be
able to pinpoint specific parts of the firm where a division or unit excels
at performing one or more business tasks. You can rank them once you
comprehend a company’s business procedures. After that, you can choose
which operations should be local and regional and which should be core
applications that are globally coordinated, created, and deployed. Addition-
ally, by identifying the most crucial business processes, you have made
significant progress in defining the future you should be striving toward.
Determine the Core Systems for Centralized Coordination
You can start to see prospects for international systems by determining the
essential core business processes. Conquering the key systems and defining
them as really international is the second strategic step. The definition
and implementation of global systems come at a very high cost, both
financially and politically. So, keep the list as short as possible, leaning
toward minimalism and letting experience be your guide. You can divide
opposition to a multinational plan by designating a small subset of systems

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as absolutely essential. The growth of peripheral systems can continue Notes

unabatedly with the exception of a few technical platform needs, which
will satisfy those who oppose the central global coordination envisaged
by the transnational system.
Select a Strategy
The third step is to select a strategy. Avoid using a piecemeal strategy.
Due to lack of visibility, hostility from those who stand to lose from
transnational development, and the inability to persuade senior manage-
ment that the transnational systems are worthwhile, these initiatives will
undoubtedly fail. Avoid large design strategies that attempt to accomplish
everything at once. These also frequently fall short due to a lack of ability
to concentrate resources. Nothing is done properly, and because it takes
a lot of resources, those who are opposed to organisational reform are
unnecessarily emboldened. An alternative strategy is to gradually develop
global applications from current ones while having a clear and specific
vision of the global capabilities the business should have in five years.
One slice at a time, or the “salami strategy,” is another name for this.
Make the Advantages Clear
Constructing global systems merely for the sake of building global systems
is among the worst situations to avoid. It is essential that senior manage-
ment at headquarters and overseas division managers fully comprehend the
advantages that will accrue to both the company and specific units from
the outset. Despite the fact that each system caters to a certain budget
in a different way, four categories make up the overall contribution of
global systems. To achieve superior management and coordination, global
systems—truly integrated, distributed, and transnational systems—are
necessary. The value of this contribution cannot be summarily quantified,
and no capital planning approach will account for the benefit. It is the
capacity to transfer production in reaction to natural disasters, switch
suppliers at a moment’s notice from one place to another, and utilise
excess capacity in one region to satisfy burgeoning demand in another.
Significant improvements in supply, operation, production, and distribu-
tion are a second significant contribution. Consider a worldwide supply
chain with international vendors and a global distribution system. Senior
managers now have the ability to find value-adding operations where they
can be carried out most cheaply. Third, by “global systems,” we imply

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Notes “global marketing” and “global customers.” Globally, fixed costs can
be spread out over a much wider client base. Production facilities will
benefit from additional economies of scale as a result. Last but not least,
global systems allow for the efficient utilisation of business finances over
a much broader capital base. This implies, for example, that capital in a
surplus zone can be moved efficiently to increase output in a place where
capital is scarce; it also implies that cash can be managed and used more
effectively within the organisation. Global systems won’t be produced by
these tactics alone. You’ll need to put your strategy into action.

6.3.5 The Management Solution: Implementation

Choosing Common User Requirements
A rational comparison process between the various divisions of the
company will be launched by creating a concise list of the core busi-
ness processes and core support systems. This will also help to create a
common language for discussing the business and will inevitably result
in an understanding of common elements.
Introducing Modifications to Business Procedures
Your credibility, your position of power, and your capacity to involve
users in the change design process will all play a role in how success-
ful you are as a change agent. The degree to which people recognise
your authority due to your ability, foresight, or other traits is known as
legitimacy. You should be able to persuade people that change is both
possible and desirable if you choose a sound change strategy, which we
have defined as evolutionary but visionary. One crucial strategy is to
involve individuals in the change process and reassure them that it will
benefit the firm and their local units.
Coordinating the Development of Applications
Selecting the right change strategy is crucial for this issue. To undertake
a big design plan of transformation, there is far too much complexity on
a global scale. By taking tiny, incremental moves in the direction of a
bigger objective, change can be coordinated much more easily. Consider
a five-year action plan as opposed to a two-year one, and to cut down
on coordination expenses, keep the number of transnational systems to
a bare minimum.

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Coordinating the release of the Software Notes

In order to ensure that everyone’s software is compatible, businesses
might set up protocols to make sure that all operating units update to
new software at the same time.
Promoting Local Users’ Support for International Systems
The solution to this issue is to incorporate users in the design process
without ceding final decision-making authority to vested interests. In a
transnational corporation, co-optation is the general strategy for handling
local units that are recalcitrant. Co-optation is described as including the
opposition in the process of developing and putting into practice the solu-
tion while retaining control over the scope and character of the change.
The use of raw electricity should be minimised. However, in order to
prove that transnational systems of some kind are actually necessary, it
may be necessary for local units to agree on a limited number of transna-
tional systems. What steps should co-optation take? There are numerous
options. One option is to give each country unit the chance to create one
transnational application, initially in its own country and subsequently
globally. In this way, local units take an active role in the development of
a transnational system and each major country systems group receives a
share of the activity. This has the drawback of assuming that high-quality
system development skills are broadly distributed and that, for instance,
a German team can successfully install systems in France and Italy. This
won’t always be true. Creating additional international centres of excel-
lence or a single centre of excellence is a second strategy. There could
be a number of centres around the world that concentrate on particular
business operations. These centres are founded on multinational teams,
significantly rely on local national units, and are accountable to global
management. Centres of excellence complete all design and testing tasks
as well as the initial identification and specification of business processes,
information needs definition, business, and systems analysis. However,
pilot testing and implementation are expanded to other regions of the
world. The message that all key groups are participating in the design
and will have an influence is strengthened by enlisting a wide range of
local organisations in international centres of excellence. Technology
difficulties can still cause problems, even with the right organisational
structure and managerial decisions. The last step in creating transnational

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Notes information system designs is selecting technological platforms, networks,

hardware, and software.

6.3.6 Factors to be Considered while Creating Global Information

Systems
Businesses must choose hardware, software, networking, and essential
system applications to enable global business processes after defining a
global business model and systems strategy. In an international scenario,
networking, hardware, and software present unique technological hurdles.
Finding a solution to standardise a worldwide computing platform in the
face of the such wide operating unit and national variations is one of the
biggest challenges. Finding specialised software tools that are user-friendly
and significantly increase the efficiency of global work teams is another
significant difficulty. Worldwide adoption of the Internet has significantly
lowered networking issues. But because not all business units use the same
apps and Internet service quality might vary greatly, the sheer existence
of the Internet does not ensure that information will flow effortlessly
throughout the global corporation (just as with the telephone service).
For instance, German business units might share documents and interact
using an open-source collaboration platform that is incompatible with
American headquarters teams’ use of Microsoft products. Global system
connectivity and integration are required to meet these difficulties.
Integration of Computing Platforms and Systems
The question of how the new core systems will integrate with the current
suite of applications developed globally by various divisions, individuals,
and for various types of computing hardware is raised by the development
of a transnational information systems architecture based on the idea of
core systems. The objective is to create global, distributed, and intercon-
nected systems to facilitate cross-border digital business activities. In a
nutshell, these are the same issues that any significant domestic systems
development initiative faces. However, in a global setting, the issues are
exacerbated. Just consider how difficult it would be to integrate systems
that were based on Windows, Linux, Unix, or proprietary operating sys-
tems and were running on hardware from IBM, Oracle, Sun, HP, and
other manufacturers. Additionally, integration is not ensured by using the
same hardware and operating system across all sites. Data standards and

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other technical standards that sites must adhere to must be established by Notes
a central authority inside the company. Technical accounting terms, such
as the start and end of the fiscal year, as well as the acceptable interfaces
between systems, communication speeds, and architectures, and network
software, for instance, must be standardised (review the earlier discussion
of the cultural challenges to building global businesses).
Connectivity
Connectivity, or the capacity to connect the systems and personnel of a
global company into a single integrated network that can transmit voice,
data, and images, is a prerequisite for truly integrated global systems.
The Internet has created an incredibly strong platform for connecting
the scattered parts of international corporations. But there are still many
of problems. There is no service level guarantee on the public internet
(even in the United States). Few large organisations trust the security of
the Internet; instead, they typically exchange sensitive information over
private networks and use Internet Virtual Private Networks (VPNs) for
less secure conversations. Not all nations support even the most basic
form of Internet access, which calls for securing dependable circuits,
coordinating efforts between various carriers and the local telecommu-
nications authority, and securing agreements that are uniform in terms
of the quality of telecommunications service offered. The Internet serves
as the main foundation for international corporate networks when lesser
security and service levels are acceptable, despite the fact that private
networks have assured service levels and higher security than the Inter-
net. Extranets and global intranets can be developed by businesses to
facilitate faster information exchange with supply chain partners. They
can use VPNs from Internet service providers, which offer many features
of a private network using the public Internet, to use it to create global
networks. However, VPNs might not be able to serve a significant num-
ber of remote users, and they might not be as speedy and dependable as
private networks, especially when Internet traffic is particularly heavy
at certain times of the day. Many poor countries have limited access to
Internet connectivity due to the expensive cost of PCs and low wages.
When Internet infrastructure does exist in less developed nations, it
frequently has insufficient bandwidth capacity and is unreliable in part
because of problems with the power system. Access to Internet services

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Notes is extremely expensive in local currencies due to the low purchasing

power of the majority of people in underdeveloped nations. In India, the
development of e-commerce has been impeded by inconsistent Internet
connectivity and a poorly constructed infrastructure for distributing and
paying for items.
Many nations also keep an eye on communications. China, Singapore,
Iran, and Saudi Arabian governments all keep an eye on Internet traffic
and restrict access to sites that they deem to be morally or politically
harmful. On the other hand, compared to North America and Europe,
where the Internet population is expanding slowly or not at all, the rate
of expansion of the Internet population is much quicker in Asia, Afri-
ca, and the Middle East. Therefore, Internet connectivity will be much
more accessible and dependable in less developed parts of the world in
the future, and it will significantly contribute to the integration of local
economies with the global economy.
Software Localisation
The creation of core systems presents particular difficulties for application
software: How will the outdated systems work with the modern ones?
If outdated systems are preserved in local areas, entirely new interfaces
must be developed and tested (which is common). Building these inter-
faces can be expensive and complicated. Given that business units are
accustomed to their distinct business processes and definitions of data,
creating software that can be realistically utilised by numerous business
units from various regions is another challenge. There are issues with
system functionality and human interface design in addition to merging
the new with the outdated systems. For instance, software interfaces must
be simple to understand and quick to grasp in order to be truly beneficial
for increasing productivity of a global workforce. The best options for
this are graphical user interfaces, but they require a shared language,
frequently English. When only knowledge workers are involved in in-
ternational systems, English may be taken as the accepted international
standard. Although a common language may not always be assumed, as
global systems become more pervasive among management and admin-
istrative groups, human interfaces must be developed to support many
languages and even norms. Software localization refers to the full process
of modifying software to function in a second language. What software

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programmes are the most crucial? Basic transaction and management Notes
reporting systems are the main emphasis of many international systems.
Supply chain management and enterprise resource planning systems are
becoming more and more popular among businesses as a means of stan-
dardising their business procedures globally and establishing coordinated
worldwide supply chains and workforces (see the Interactive Session on
Management). However, these cross-functional systems aren’t necessarily
compatible with other countries’ diverse linguistic, cultural, and busi-
ness traditions. Trying to manage the technical complexity of enterprise
systems can be challenging for business units in less technologically
advanced nations. Manufacturing and distribution companies frequently
utilise supply chain management and Electronic Data Interchange (EDI)
technologies to communicate with global suppliers. For knowledge- and
data-based businesses like advertising agencies, research-based compa-
nies in medical and engineering, and graphics and publishing businesses,
collaboration platforms, e-mail, and videoconferencing are particularly
crucial global collaboration tools. Internet-based tools will be used for
these things more and more.

6.4 Inter-Organizational Information System

The main goal of an inter-organizational information system is the
efficient processing of transactions, such as sending orders, bills, and
payments, and it involves the movement of information between two or
more organisations.
‹ It may be local or worldwide.
‹ IOSs use value-added networks when communicating with telecom
companies (VANS). They are personal.
Different Types of Inter-Organizational Information System (IOS)
B2B Trading Systems:
‹ These solutions are made to make trade between company partners
easier.
‹ The partners may be from the same country or from separate nations.
B2B Support Systems: These include hubs, directories, and other
non-trading systems and services.

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Notes Global Systems: SABRE, the airline booking system, is an example of

a significant worldwide system that links two or more businesses in two
or more nations.
Electronic Funds Transfer (EFT): With EFT, money is moved between
financial institutions via telecommunications networks.
Groupware: Groupware solutions facilitate collaboration and communi-
cation among enterprises.
Integrated Messaging: Electronic mail and fax messages can be sent
between enterprises using a single transmission method.
Shared Databases: In order to speed up information exchange and co-
ordinate joint actions, trading partners occasionally share databases.
Systems that Assist Virtual Corporations: These IOSs facilitate virtual
corporations, which are made up of two or more business partners who
are located in separate places and who pool their resources and costs in
order to deliver a good or service.
6.4.1 Electronic Data Interchange
EDI is the exchange of commercial documents electronically between
participants in the business.
Electronic Data Interchange: The exchange of business documents using
an established format is known as electronic data interchange (EDI). A
common electronic format that substitutes paper-based documents like
purchase orders or invoices is the most basic definition of EDI. By au-
tomating paper-based processes, businesses can save time and eliminate
costly errors caused by human error.
In EDI transactions, data is transferred directly from an organization’s
computer application to an additional organization’s computer application.
The position and hierarchy of information inside a document format are
specified by EDI standards. With these automated features, data can be
shared fast rather than taking hours, days, or weeks when using paper
documents or other methods.
Industries now share a variety of document types via EDI connectivity,
including purchase orders, invoices, requests for quotes, loan applications,
and more. These companies are typically trading partners since they
frequently exchange products and services as part of their supply chains
and Business-to-Business (B2B) networks.
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With EDI, thousands of common business transaction papers can be sent Notes
automatically. Purchase orders, invoices, shipping updates, customs
data, inventory records, and payment confirmations are a few typical
examples.
Benefits of EDI
B2B procedures depend on EDI transactions, which are still the primary
method for exchanging Time and Money: Through the automation of
a procedure that was previously manually documented and conducting
transactions between small and large firms.
1. Saves carried out with paper documents, EDI technology helps save
time and money.
2. Improve Efficiency and Productivity: EDI solutions boost productivity
and efficiency because more business documents are shared and
processed in less time and with higher accuracy.
3. Reduces Errors: Due to strict standardization, which ensures that
information and data are appropriately prepared before entering
business processes or applications, EDI data transfer helps to
decrease errors.
4. Improves Traceability and Reporting: EDI integration improves
traceability and reporting since it enables the integration of electronic
documents with a range of IT systems to allow data gathering,
visibility, and analysis.
5. Supports Positive Customer Experience: Through the facilitation
of effective transaction execution and quick, dependable goods and
service delivery, EDI automation enhances pleasant client experiences.

6.4.2 Extranets
Extranets are networks that connect business partners via the Internet by
giving them access to certain sections of one another’s corporate intranets.
An extranet is a restricted private network that gives authorized custom-
ers, vendors, and partners access to a portion of the information available
on an organization’s intranet. An extranet is similar to a DMZ in that it
gives authorized parties access to necessary services without giving them
access to a company’s full network.

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Notes In the past, the phrase was occasionally also used to refer to two firms
utilizing a virtual private network to share their internal networks (VPN).
Types of Extranets
1. Project Extranets: An extranet can be a beneficial and effective
project management tool when numerous parties are involved in a
forthcoming endeavor. Private information should only be in the
hands that need it, thanks to privacy and authorization settings that
may be customized. The foundation of many industries, including
healthcare, architecture, retail, and e-commerce, is cross-organizational
cooperation. Extranets are a simple approach to guarantee that each
contributor remains responsible for their fair portion of the work
and guard against certain project elements sliding through the gaps.
2. Logistic Extranets: Extranets might be very important for businesses
in the e-commerce industry. When an exchange or modification is
required, these systems may connect suppliers with distributors,
couriers, and customers and maintain these channels open. By
guaranteeing that customers can easily obtain real-time updates on
their products and services, logistic extranets can assist businesses
in enhancing the customer experience.
3. Integration Extranets: An integrating extranet keeps track of
inventory and changes it instantly, which is another game-changing
technology for businesses that sell things online. This information
can be used to do an inventory and make sure that all parties who
need it have easy access to it. Integration extranets can be created
on top of an organization’s intranet or hosted on a totally different
system.
4. Employee Information Hub: Extranets can be a helpful tool for
conveying employee information to franchisees and other businesses
with sizable frontline personnel. The platform can hold timesheets
for employees and other employee-specific data in addition to
acting as a direct route to a company’s corporate office. Employee
suggestions and complaints can be submitted anonymously using
this kind of extranet. Employee extranets can be a useful tool for
communicating with front-line employees, a crucial group of the
workforce who are notoriously difficult to engage.

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5. Financial Data Extranet: Extranets are among the safest and most Notes
secure ways to exchange private information, which is crucial when
working with sensitive topics like finances. Accounting firms using
extranets during tax season is one example of how they might be
used in a financial sector. Enterprises must immediately exchange
highly sensitive facts and figures in this high-stakes situation without
sacrificing confidentiality. Extranets can assist partners in effectively
exchanging updates and guaranteeing that only the right users have
access to crucial metrics.
6. Customer Platform: A consumer information platform may boost
productivity, enhance accuracy, and place the client in the driver’s
seat. Businesses that allow users to self-report various data and
metrics via an extranet effectively automate this step of the job
process while introducing self-serve capabilities.
Benefits of Extranet
1. Maximize Knowledge Sharing: The outside expertise and distinctive
viewpoint that third-party contributors bring to the table is one of
their greatest advantages. An extranet allows an organization to
fully utilize the knowledge and suggestions of all collaborators.
External partners are provided with a strong platform to exchange
best practices, comment on hot-button issues, and offer insightful
input to fix problems for upcoming interactions. An extranet promotes
participation from all users and improves information flow between
all parties.
2. Maintain Data Security and Confidentiality: Stakeholders in various
cross-organizational relationships need to make sure that third-party
users have access to the data they need to interact without revealing
private information. With extranets’ flexible permissions choices and
a variety of authentication mechanisms, administrators can easily
manage who can read what. External platforms are recognized as
one of the safest ways to transmit documents and data due to their
extensive variety of privacy and authorization controls.
3. Receive Real-time Updates Seamlessly: Customers today demand
as many details as they can get. Consumers anticipate being able to
follow the progress of the things they’ve ordered, much as clients

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Notes desire regular updates on impending projects. Extranets enable

organizations to deliver the kind of minute-by-minute updates that
customers have grown to expect without compromising employee
productivity. Customers and clients can be given access to a third-
party network so they can get real-time updates anytime they want
or need them.
4. Reduce Silos: The growth of silos, which can impede stakeholder
relationships and make activities take longer, is one of the most
difficult aspects of cross-organizational collaboration. Reduced chatter
and quicker access to the tools, updates, and documents needed
by each collaborator are two benefits of a streamlined extranet.
High-functioning search features available on modern extranets can
increase productivity and lessen the lag time that is all too prevalent
when interacting with several parties.
5. Keep Everyone Accountable: For stakeholders who want to make sure
that everyone stays on target, extranets offer an advanced digital option.
External networks can be used in project management scenarios to
guarantee open lines of communication and comprehension between
all parties. Additionally, these platforms can highlight contributors
who are falling behind as well as those who have finished their
pre-determined deliverables.

6.4.3 XML
XML: An emerging B2B standard, promoted as a companion or even a
replacement for EDI systems.
Utilizing XML, data descriptions are created (Extensible Markup Lan-
guage). A flexible method for creating information formats and electroni-
cally distributing structured data across both private and public networks
in enterprises is the XML standard.
The main purpose of XML is to produce data formats that are used to
encapsulate data for records in databases, transactions, and many other
sorts of data. By developing various types of content—such as web, print,
and mobile content—that are based on XML data, numerous content types
can be created using XML data.
Unlike HTML, which describes the format of Web pages, XML (Exten-
sible Markup Language) does not. Instead, by assigning identifying tags

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or contextual labels to the data in Web documents, XML specifies the Notes
contents of Web pages (including business documents created for use on
the Web). For instance, to categorize each airline flight time on a travel
agency Web page containing airline names and flight timings, hidden XML
tags such as “airline name” and “flight time” might be used. Another
option is to categorize the product inventory information that is accessi-
ble on a website with terms like “brand,” “price,” and “size.” This kind
of data classification allows XML to greatly improve the searchability,
portability, and analytical capabilities of website content.
For instance, if the product information on the website had been marked
up with distinguishing XML tags, XML-capable search tools would have
no trouble finding the precise product you specified. An XML-based
website may also more readily track the characteristics of the web pages
its visitors utilize and the products they are interested in. By allowing
the automatic electronic interchange of business data between businesses
and their consumers, suppliers, and other business partners, XML there-
fore promises to make electronic business and commerce processes much
simpler and more effective.
Features of XML
‹ Information and data are described in XML.
‹ The appearance of the data is not specified by XML.
‹ Complex communications containing several files can be sent using
XML.
‹ XML and HTML differ from one another.
‹ The XML language is adaptable.
‹ XML is simple to read and comprehend.
‹ Less specialist knowledge is needed for XML.

6.4.4 WEB Services

Web Services: The emerging technology for integrating B2B and in-
tra-business applications.
A variety of systems can share data and services thanks to WEB services,
which are prefabricated, universal business process software modules that
are distributed over the Internet.

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Notes Web services are computer program elements that electronically connect
the applications of various users and computing platforms. They are based
on a foundation of Web and object-oriented standards and technologies for
using the Web. Web services can thus connect crucial business processes
for the real-time interchange of data within Web-based applications that a
company may share with its clients, suppliers, and other business partners.
Web services, for instance, would allow a business’s purchasing applica-
tion to use the Internet to check a supplier’s inventory before placing a
sizable order, while the supplier’s sales application could use Web services
to automatically check the business’s credit rating with a credit-reporting
agency before approving the purchase. Web services are so frequently used
to refer to the Web-based business and computing operations or services
carried out by Web services software technologies and standards among
both IT and business professionals.
One of the major technologies that enables Web services to make programs
run across many computing systems is the XML language. Also crucial
are SOAP (Simple Object Access Protocol), an XML-based protocol with
standards for connecting applications to the data they require, and UDDI
(Universal Description, Discovery, and Integration), the “yellow pages”
directory of all Web services and how to identify and utilize them.
The main software technology for automating data access and application
operations between a firm and its trading partners is predicted to be web
services. Web services will be crucial for the creation of the simple and
effective e-business and e-commerce applications that will be needed as
businesses transfer more and more of their operations online. In today’s
dynamic global business world, ties between a corporation and its busi-
ness partners frequently change quickly. To deal with these interactions,
Web services must be flexible and interoperable.
A web service is any piece of software that uses a standardized XML
messaging system and makes itself accessible via the Internet. All com-
munications to a web service are encoded in XML. As an illustration, a
client might submit an XML message to invoke a web service, and then
wait for an XML answer. Because XML is used for all communication,
web services are not limited to any one operating system or programming
language. Java may communicate with Perl, and Windows applications
can communicate with Unix applications.

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Web services are dynamic, distributed, self-contained modules that can Notes
be described, published, located, or used in a supply chain across a net-
work. These programmes can be distributed, local, or web-based. Web
services are developed on top of open standards such as TCP/IP, HTTP,
Java, HTML, and XML.
Web services are XML-based platforms for information exchange that allow
for direct application-to-application communication via the Internet. These
systems may consist of documents, objects, messages, or programmes.
A web service is a group of open standards and protocols used to transfer
data between apps or other systems. Web services enable data exchange
over computer networks like the Internet in a fashion that is akin to
inter-process communication on a single computer. Web services enable
software applications operating on a range of platforms and written in
a number of programming languages. This interoperability, for instance
between Java and Python or Windows and Linux programmes, is made
possible through the use of open standards.
In conclusion, a full web service is any service that:
‹ is accessible via private (intranet) networks or the Internet
‹ use an established XML communications system
‹ not dependent on a particular operating system or programming
language
‹ self-descriptive using a standard XML syntax
‹ is easily findable using a find method.

IN-TEXT QUESTIONS
1. The purchase of goods or services from third-party partners that
were previously provided internally is known as __________.
2. Rapidly changing technological developments must be anticipated,
identified, and implemented in __________.
3. A business depends heavily on its information systems and
Internet technologies to help it integrate its global business
activities is called __________.
4. Global customers, products, operations, resources, and collaboration
are examples of ____________.

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Notes 5. Managing IT to support a company’s international business

operations is called __________.
6. __________ are security requirements for personal information
in corporate databases within a host country are a top concern.
7. In __________ agreement is needed on common user interfaces
and Web site design features in global IT.
8. Managing business/IT planning and the IS function within a
company is called __________.

6.5 Summary
A global culture with consistent expectations or norms has been developed
as a result of the expansion of affordable international communication
and transportation. World culture also benefits from political stability
and an expanding body of widely disseminated knowledge on a global
scale. Global markets, global manufacturing, coordination, distribution,
and economies of scale are made possible by these broad factors.
Domestic exporter, multinational, franchiser, and transnational are the
four fundamental types of international strategies. All production factors
are coordinated globally as part of a transnational strategy. The kind of
business and product, though, affect the approach chosen.
Information systems design and business strategy are related. International
businesses must create networked system topologies that allow for signif-
icant decentralization of operations and development. Franchisers usually
always use centralized financial controls and reproduce their systems
across numerous nations. The majority of the time, multinationals rely
on the dispersed independence of their international subsidiaries with a
slight tendency toward network expansion. With some decentralized ac-
tivities allowed, domestic exporters are typically centralized at domestic
headquarters.
Global information systems provide difficulties because linguistic, polit-
ical, and cultural diversity highlights organizational culture and business
process disparities and promotes the growth of disjointed local information
systems that are challenging to integrate. International systems typically

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 Inter-Organisational and International Information System

develop organically, without explicit planning. The solution is to identify a Notes

limited subset of essential business processes and concentrate on creating
the technologies that will support them. In order to design and run these
systems, managers will have to strategically co-opt widely distributed
foreign units while taking care to keep overall control.
A strategy for deployment of a worldwide system must take into account
both business design and technological platforms. Systems integration
and connectivity are the key hardware and telecoms issues. Either a
proprietary architecture or open systems technology can be used for
integration. Global networks are exceedingly challenging to design and
run. Companies can either develop their own worldwide networks or
networks based on the Internet (intranets or virtual private networks).
Building interfaces to current systems and choosing applications that can
operate with various cultural, linguistic, and organizational frameworks
are the key software concerns.

6.6 Answers to In-Text Questions

1. Outsourcing
2. Technology Management
3. Transnational strategy
4. Global business drivers
5. Global Information Technology Management
6. Data access issues
7. Systems development issues
8. Managing Information Technology

6.7 Self-Assessment Questions

1. Define and describe Web services and the role played by XML.
2. What do you understand by Extranet? What are the different types
of Extranet?

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Notes 3. What are the main technologies of Inter-organizational information

systems?
4. How are Internet technologies changing the organizational structure
and job descriptions of contemporary businesses?
5. How might Internet usage by a multinational company be impacted
by cultural, political, or geoeconomic challenges? Give some
illustrations.
6. How might the Internet, intranets, and extranets affect the business
drivers or requirements responsible for a company’s use of global
IT?
7. What concerns and technical options should be taken into account
while creating global information systems?
8. What alternatives exist for growing international businesses?
9. Describe possible applications of the Internet in global information
systems.
10. What problems are caused by international information systems,
and what are the solutions?

6.8 References
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. (2018). Management information systems.
Pearson Education Limited.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).
‹ Post, G., & Anderson, D. (2006). Management information systems.
Boston, Mass.: McGraw Hill/Irwin.

6.9 Suggested Readings

‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.

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‹ Laudon, K., & Laudon, J. (2018). Management information systems. Notes

Pearson Education Limited.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).

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 L E S S O N

7
Structured System Analysis
and System Development
Life Cycle
Tina Sachdeva
Assistant Professor
Shaheed Rajguru College of Applied Sciences for Women
University of Delhi
Email-Id: [email protected]
Anshika Singh
Assistant Professor
Shaheed Rajguru College of Applied Sciences for Women
University of Delhi
Email-Id: [email protected]

STRUCTURE
7.1 Learning Objectives
7.2 Introduction
7.3 Structured System Analysis
7.4 Structured System Analysis Tools
7.5 System Design
7.6 Introduction to System Development
7.7 System Development Life Cycle
7.8 SDL Models
7.9 Summary
7.10 Answers to In-Text Questions
7.11 Self-Assessment Questions
7.12 References

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Notes
7.1 Learning Objectives
After completing this chapter, the readers will be able to:
‹ Understand Structured System Analysis and application of different
Structured. System Analysis tools to understand the system requirements
thoroughly, which will further help develop a System with better
quality.
‹ Understand and define System Development Life Cycle (SDLC)
and its needs.
‹ Define different phases of SDLC and relation between them.
‹ Understand different SDLC models and compare and contrast them.

7.2 Introduction
Structured System Analysis and Design (SSAD) is the methodology that
helps to develop quality systems and better procedures for the business.
SSAD methodology analyses the existing systems and defines problems
and system specifications to design a new or updated version of the
proposed system. Several Structured system analysis tools are used to
understand the system better.
SSAD was produced for the Central Computer and Telecommunications
Agency (which intends to provide computer and telecommunication sup-
port to UK government departments) for use from 1980 onwards.

7.3 Structured System Analysis

7.3.1 What is Structured System Analysis?

Structured System Analysis is a systematic approach which applies differ-
ent graphical tools and techniques to understand and analyse the problem
and existing systems to design an information system with high quality
meeting the user requirements. It starts with gathering data (reviewing
written documents, interviews, developing questionnaires, observing peo-
ple at work and processes), analysing it using Structured system analysis
tools and formulating a report. It will graphically portray various aspects
of the system, like what objective the system is intended to fulfil, how
objectives will be accomplished, different entities and their relationships,
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Notes data flow etc. It ensures that the developed information system is easy to
understand by the user. The Report must explain the following aspects:
working of the existing system, its problem areas and requirements, and
recommendations on how to proceed with building a new system.

7.3.2 Why Use Structured System Analysis?

The objective of Structured System Analysis is to understand end-user
requirements closely. It studies the existing systems and finds the problem
areas to improve the new system. It helps in determining the size of the
project team and task allocation while ensuring correct distribution as
per their expertise. As it reviews all aspects of the system, including the
analysis of alternative solutions, managers can perform better risk anal-
ysis for the project and ensure that it meets the deadline and is within
budget. It also guides rapid project turnarounds and builds more flexible
and updated systems. It overall controls the working of the project.

IN-TEXT QUESTIONS
1. __________ is a method of analysis that applies a set of graphical
tools.
2. __________ analyses the problem and existing systems to design
an information system with high quality meeting the user
requirements.

7.4 Structured System Analysis Tools

The following tools are used in Structured system analysis, as given in
Figure 7.1.

Figure 7.1: Structure System Analysis Tools

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7.4.1 Data Flow Diagram (DFD) Notes

Larry Constantine developed the Data Flow Diagram (DFD). DFD is
a graphical visualisation of the flow of data in an information system.
Using DFD, we can visualise the following aspects: how the system will
operate, its goal and how it will be implemented. There are four main
elements of DFD: external entities or sources/sinks (external to the sys-
tem but communicate with the system such as employees, customers, and
departments in the organisations), processes (a sequential execution of
steps or events for decision making involving a change in data or access
to data), data stores and the direction of data flow. These elements are
represented by the symbols given in Figure 7.2. Designers and developers
use detailed DFDs to write pseudocodes or the actual code.

Figure 7.2: Elements of DFD

DFDs can be multilevel to add more details at each level, numbered as
0, 1, 2, 3 or beyond, depending on the scope of the system. Each pro-

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Notes cess represented in the current level DFD is expanded into its constituent
processes in the next level DFD:
1. DFD Level 0, also known as Context Diagram, displays the complete
system as a single process. Context level diagram of an Information
system is given in Figure 7.3. For example, Context level Diagram
for School Convocation gown and cap ordering system represents the
orders entering the system and receipt to the student, given in the
Figure 7.3.
2. DFD Level 1; display a more detailed system than Level 0, illustrated
in Figure 7.4. For example, DFD Level 1 for School Convocation
gown and cap ordering system representing different processes
involved in the system like Process 1: Place order, Process 2:
Receive order etc., data flows like order, order information etc. and
data stores like Students, Inventory to link them together, given in
the Figure 7.4.
3. DFD Level 2; displays a more detailed system than Level 1, illustrated
in Figure 7.5.
4. DFD Level 3; displays a more detailed system than Level 2, illustrated
in Figure 7.6.
Further progressing to 4, 5, and so on, depending on the added details.
Designers and developers use detailed DFDs to write pseudocodes or
even the code.
Rules for constructing DFD:
1. Assign a unique name, number and description to each Process.
2. Each process and data store should have at least one input data flow
and one output data flow.
3. Output data flows and input data flows usually have different names
as the process transforms the input into a different output.
4. Each data flow, data store and entity should be given a unique name
and a description.
5. Each data flow should be connected to at least one process.

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6. The data flow should always be unidirectional. Notes

7. Each external entity must have at least one input or output data flow.
8. The names of the data stores and external entities should be
capitalised.
9. The First letter of the Process and data flow name should be a
capital letter.
10. Processes should be appropriately numbered when explored or split
into the lower levels.

Figure 7.3: Context Level DFD

Figure 7.4: DFD Level 1

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Notes

Figure 7.5: DFD Level 2

Figure 7.6: DFD Level 2

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Notes

Figure 7.7: Context Level Diagram for School Convocation Gown

and Cap Ordering System

Figure 7.8: DFD Level 1 for School Convocation Gown

and Cap Ordering System
Deliverables of Structured System Analysis after application of DFDs:
1. Context Data flow diagram; to visualise the system scope, displaying
the inside and outside elements of the system.
2. DFD of the current physical system; to understand the current system
by specifying the people and technology used in processes to access
or transform the data, accept inputs and generate outputs.

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Notes 3. DFD of the current logical system; displaying what functions of data
processing are performed by the current system.
4. DFD of the new logical system; display flow of data, structure and
functional requirements of the new system.
5. Detailed description of each component in DFDs.

7.4.2 Data Dictionary

A data dictionary is a structured repository which comprises the informa-
tion about the data and data groupings in a system. Data Dictionary is
also known as Metadata which means data about data. Data Dictionary
prevents ambiguity and synchronises the work while using the same
object reference at multiple places. DFDs can be validated using a data
dictionary. It comprises information about the following:
1. Data Elements: Data Elements are the smallest unit of data that
cannot be decomposed further. Data dictionary stores data about
data elements in DFDs, created along with DFDs, and updates if
any changes occur in DFDs. Each data element should be given a
name and comprises information about data and control items, data
stores(Internal or external) with the following data: Name, Alias
or secondary name, Use-case (describing How and where to use),
Content Description (Notation etc.) and supplementary information
(preset values, constraints etc.). For example, Student ID is a data
element used to uniquely determine a student of a college represented
in Figure 7.9.

Figure 7.9: Example of Data Element

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2. Data Structure: It is a group of data elements handled as a unit. Notes

For example- a mobile number is a data structure consisting of data
elements: area-code-subscriber-number. Data Structure uses algebraic
notations as given in Figure 7.10. For example, data structure for
an order is given in Figure 7.11.

Figure 7.10: Algebraic Notations (symbols) for Representing

Data Structure

Figure 7.11: Data Structure for an Order

3. Data Flows include name, description, source, destination, type
(Form, Report, Screen etc.), data structure name, volume per unit
time, and comment area.

Figure 7.12: Example of Data Flow for an Order

4. Data Store: It stores information about data entry and data exits in
a system.

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Notes

Figure 7.13: Example of Datastore

5. Data Processing: It can be logical (as perceived by the user) or
physical (as perceived by the system).

Rules for Constructing Data Dictionary

1. The terms describing the data structures should always be capitalised.
2. Simple and user-oriented names should be assigned.
3. Every data element, data structure, data store and data flow should
have names.
4. Integrity checks should be done.
5. The names of the processes and their identification numbers should
be listed in the data dictionary.

7.4.3 Decision Tree

A Decision tree is a method of representing logic in the form of a tree-
like structure. Alternative actions and conditions are displayed in a hor-
izontal tree format. It depicts the hierarchy of conditions. It defines the
relationships between each condition and its allowed actions. An action
is indicated by a square node, and a condition is indicated by a circle as
shown in Figure 7.14. With the help of a decision tree, we can identify
the actual decision that must be taken and it is easy to build, read and
update. A limitation of the decision tree is that there isn’t enough infor-
mation in the format to specify the alternative combination of conditions
that we can use for testing.

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Notes

Figure 7.14: Decision Tree

Figure 7.15: Decision Tree for Student Convocation Gown

and Cap Ordering System
In Figure 7.15, Decision Tree is used to check the conditions like whether
the student is found in the college, if student is graduating or not and
if item is available or not based on the conditions allow the respective
actions like Accept order or Reject order.

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Notes 7.4.4 Decision Tables

A decision table is a method in which a matrix of rows and columns dis-
playing conditions and actions represents a complex logical relationship.
It is helpful when one or more combinations of independent conditions
must occur before the consequent actions can take place. Decision ta-
bles work best when handling complicated branching processes, such as
inventory control. In each rule, a condition is often assigned a value of
“Y” for “Yes, if true,” “N” for “No” and a dash for “Do not care”. It
is useful for recording situations where the decision-making process is
very structured and understandable.

Elements of a Decision Table

‹ The condition stub, located in the upper left quadrant, contains a
list of all the conditions that must be met.
‹ The lower left quadrant displays an action stub that lists every
action that must be taken to satisfy the condition.
‹ The condition entry, which is in the upper right quadrant, provides
the answer to the query in the condition stub quadrant.
‹ The action that should be taken in response to the conditions in
the condition entry quadrant is shown in the lower right quadrant
i.e., action entry.
Decision rules specify the relationships between various combinations of
conditions and possible courses of action and provide entries in a decision
table. Notations in the rule section are:
Y indicates whether a condition is present.
N denotes the condition, which is not met.
Ignore it if there is a blank - against action state.
Carry out it if there is an X or against action states.
General Rules for constructing the decision table:
1. A header denoting the name of the decision table.
2. Condition stubs with entries for each possible condition.
3. Action stubs with entries for each possible action that can be taken.
4. Language should be standardized and consistent.
5. Avoid using the same term more than once as much as possible.
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For example: Notes

The Decision Table for validating orders in Student Convocation gown
and cap ordering system given in Figure 7.16 represents the condition
stub listing all the conditions like the student found in the college, if
student is graduating and if item is in stock and action stub listing all
the actions like Accept order and Reject order. Based on the condition
entry and action entry respective decisions are taken.
Another example is a bank sending a monthly statement to the custom-
er. Accounts with balances less than Rs. 10000 will be given a warning
notice with monthly statements if their account has been inactive during
the past month. Decision table for sending a monthly statement of an
account is given in Figure 7.17.

Figure 7.16: Decision Table for Student Convocation Gown

and Cap Ordering System

Figure 7.17: Decision Table for Sending a Monthly Statement

of an Account
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Notes 7.4.5 Structured English

Structure English is derived from a structured programming language
that describes a process more precisely and is understandable. It relishes
the benefits of programming logic as well as natural language. It uses
imperative sentences to construct logical specifications. It does not fol-
low any strict syntax rules and describes all logic in terms of sequential
decision structures and iterations. IF-THEN-ELSE phrases are used to
make decisions and CASE is used in the case of branching. The words
and content of its sentences should be clear, simple, and exact. Simple
sentences are used. It uses the following logic patterns:
1. The sequence structure represents the actions.
Do Action 1
Do Action 2
2. The decision structure represents actions corresponding to the
conditions.
IF (condition is true)
Do Action 1
Else
Do Action 2
ENDIF.
3. The case structure represents a special type of decision structure
for mutually exclusive cases.
IF Case 1
Do Action 1
ELSE IF Case 2
Do Action 2
ELSE IF Case 3
Do Action 3
ELSE print error
ENDIF

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4. The iteration structure represents the repetition of certain actions Notes

until the condition occurs.
DO WHILE (condition is true)
Action X
ENDDO
For example, A process of validating student status involves checking
whether the student is found in the Student record and if found then check
its year and month of graduation for validating whether the student is
graduating or not. This process can be represented in structured English
as given in Figure 7.18.

Figure 7.18: Structured English for Process Validating Student Status

Another example is the process of sending a monthly statement to the
customer by a bank. Accounts with balances less than Rs. 10000 will
be given a warning notice with monthly statements if their account has
been inactive during the past month. This process can be represented in
structured English as given in Figure 7.19.

Figure 7.19: Structured English for Sending a Monthly Statement

of an Account
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Notes 7.4.6 Pseudocode

Pseudocode is a method which outlines the lines of code that need to be
written in detail, using programming structures and a generic language.
Without writing actual code, it may describe the physical programming
logic before and after the physical design. Its main advantage is that it
focuses on developing processing logic independent of the strict syn-
tax guidelines of any programming language. Pseudocode is similar to
Structured English with a major difference- Structured English neither
represents program specifications nor resembles any specific programming
language. For example, the pseudocode for process validating student
status is given in Figure 7.20.

Figure 7.20: Pseudocode for Process Validating Student Status

Figure 7.21 represents different criteria based on which we can decide
which approach is best suited for our problem. For example, Decision
trees and Structured English are best suited when sequence of conditions
and their respective actions are important.

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Notes

Figure 7.21: Criteria for Deciding among Structured English,

Decision Tree and Decision Table
Figure 7.22 represents different criteria based on which we can decide
whether the Decision tree or Decision table is best suited for our problem.
For example, Decision tables are used whenever they involve complex
logical relationships. While Decision trees work best for representing
simple problems.

Figure 7.22: Criteria for Deciding among Decision Tree

and Decision Tables

7.5 System Design

System Design is a process which carries out Preliminary Design and
Detailed Design of the information system and formulates a detailed re-
port. The preliminary Design explains the functional capabilities of the
information system by applying CASE (Computer-Aided Software Engi-
neering) tools, prototyping tools, and other project management software
to the information system. Detailed Design explains how the system will
deliver these capabilities, defining input requirements, output requirements,
storage requirements, processing and system control and backup.

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Notes IN-TEXT QUESTIONS

3. __________ uses imperative sentences to construct logical
specifications.
4. __________ is useful for recording situations where the decision-
making process is very structured and understandable.
5. The main difference between a Decision tree and a decision
table is __________.
6. Decision tables are tabular methods of representing __________.
7. Which of the following is not allowed in DFD:
(a) Processes with input but no output
(b) Processes with more outputs than inputs
8. Which of the following is not a component of the data flow
diagram?
(a) External entity
(b) Recursion
9. DFD Level-0 depicts the system in:
(a) One part
(b) Two parts

7.6 Introduction to System Development

The Systems Development Life Cycle (SDLC) is a conceptual model used
in project management and outlines the steps involved in development
of an information system. It involves an initial feasibility study till the
maintenance of the final product developed.

7.7 System Development Life Cycle

7.7.1 What is the System Development Life Cycle?

It is a well-defined and widely followed approach for developing Infor-
mation Systems. It is a structured step-by-step approach and involves
seven key steps which are called phases. Further, within each phase,
there are a number of activities involved. Following a SDLC approach is

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indispensable to get a high-quality system. Such a system meets customer Notes

satisfaction, is completed well on time and is cost-effective.

7.7.2 Phases of SDLC

The SDLC methodology follows the following seven major phases as
shown in Figure 7.23:
‹ Planning
‹ Analysis
‹ Design
‹ Development
‹ Testing
‹ Implementation
‹ Maintenance

Figure 7.23: Phases of Software Development Life Cycle

The above phases could be taken up in a mutually exclusive manner (one
after another) or two or more phases could be under execution at the same
time depending on the SDLC model adopted (discussed further in chapter).
Planning
During this phase, the project plan is outlined which summarizes timelines,
budget, resources required, broad need for the system and tasks that it
is expected to do. A feasibility report along with timelines is discussed.
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Notes It is a vital step in the SDLC and ensures that the entire process moves
smoothly and the end system is of good quality. A well-planned project
ensures timely delivery, fewer errors, and decreased costs. Every system
under consideration, however small or big must be planned well. Also,
in this phase, the scope of the existing system (if any) is discussed along
with its shortcomings. Other important aspects such as constraints, secu-
rity, and integration w.r.t. the new system is also discussed.
Analysis
During this phase, the detailed requirements of the customer are gathered
i.e., what is the system supposed to do? This information is further an-
alysed and validated. Various alternatives are discussed and prioritized.
Business requirements are tried to convert into system functionalities. This
phase does not talk about the specific technology required. A broad-level
process diagram is drawn. A feasibility report popularly called the re-
quirements specification document is prepared.
Design
In this phase, the technical requirements that were specified during the
analysis phase take physical or technical form. The focus of the IT spe-
cialists here is to build a technical prototype of the system. This con-
siders the technical infrastructure i.e., hardware and software required.
One important difference between the analysis and design phases is that
in the former requirements are specified majorly in a theoretical form
whereas the latter considers specifically all technical and infrastructural
support that will be required when the requirements take the shape of
a working model. Out of many, the two important activities performed
during the design phase are specifying technical aspects that would be
required and designing the system model.
Development
In this phase, the logical model of the previous steps now starts coming
into existence i.e., a physical one. This physical model tries to address
all documented requirements. IT specialists devote a lot of time to this
phase as they do implementation, develop database programs, etc. The
blueprint of the underlying technology required is also prepared. The
organization purchases and installs this technology to create a sound base
for the project to be used further. This phase may take a few months or
maybe years for a realistic high-end system.
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Testing Notes
The testing phase of the Software Development Life Cycle checks whether
the system developed caters to and fulfils all the requirements that were
outlined in the analysis phase or not. Testing is a critical and crucial step.
Major activity that one performs during this step is developing the test
conditions to carry out an intensive test. Test inputs or conditions are
the broad inputs that are stated usually in the form of a table along with
the expected outputs. The tester then runs this testing set and ensures
that generated results match the actual results. If this happens, then one
can say that the system functions correctly. If the generated result does
not match the expected result, it implies that a bug exists in the system
developed. The developer or specialist who had developed the concerned
module is informed to correct it.
Test conditions are usually developed in a way that takes into account
all extreme possible values for inputs. Such out of range, borderline
inputs and wrong inputs are the ones that actually determine the robust-
ness of any system. There are a huge variety of test conditions possible
and equally important is to ensure correctness of the system at different
points. These two constraints are a little conflicting, and thus the selec-
tion of best or promising test cases is a vital step. Further, depending on
whether part or whole of the system is checked, testing is being called
by various names. First is unit testing in which the smallest individual
parts of a system that are capable of being tested are taken up. In this
their independent operation is checked for. Next is Integration testing—
which verifies how well the separate units or individual components can
work together when tested in groups. Further, we have system testing in
which one ensures that the independent components or units developed
for a system function fine or not when combined into the total system.
Last is the User Acceptance Testing (UAT) which tells us if the sys-
tem satisfies all the requirements and enables end-users to perform the
required tasks correctly or not.
Implementation
During this, the first tested version of the system is handed over to ac-
tual end users. They start with the usage of their respective components
and report issues or difficulties, if any, experienced by them. Two main
activities performed during this phase are writing of user documentation

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Notes and the provision of training. The end users usually find the user manual
or documentation extremely useful as it provides a smooth transition from
the old system (if it exists) to the new one. End users are accustomed
to the old systems and the transition to a new one is difficult and thus
initial training provides a much-needed uplift to them. Training can be
conducted in the form of online sessions or workshops.
Maintenance
It is the last and final phase of the System Development Life Cycle.
During this phase, the service provider supports and monitors the work-
ing of the system to ensure that it meets all business goals. The system
must be flexible enough, i.e., it must be able to adapt to the changing
business requirements. Regularly monitoring and supporting the new
system implies bringing out simple upgrades like generation of reports
or summary summaries in an updated format. It could also imply re-
trieval of information by applying different conditions or formulae for
decision-making and reviewing the system to ensure that it constantly
moves the organization towards its end goals.
One important activity that we perform during the maintenance phase is
setting up a help desk for providing support to end users of the system.
A popular way is setting up a dedicated help desk that consists of a team
of telecallers that answer users’ questions. To avail of this service, users
call up the customer support numbers provided to them. They expect any
issues or questions raised by them to be addressed in a time-bound man-
ner. Existence of such a help desk facility which answers user questions
is a time-tested way of providing comprehensive support for users using
new systems.
IN-TEXT QUESTIONS
10. Generally during which phase the technical aspects of a system
are catered to or start taking form?
(a) Analysis (b) Design
(c) Development (d) Testing
11. __________ testing ensures that a system fulfils all business
requirements and performs all operations required by users.
12. Goals and broad objectives of a system are discussed during
which phase of SDLC?

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13. What types of test conditions are necessary to ensure robustness Notes
of system developed?
14. What is the importance of requirements specification document
in SDLC?
15. What activities or tasks are performed during maintenance
phase?

7.8 SDL Models

SDLC can be used to develop both technical as well as non-technical
products. Most of the time, the system to be developed is an IT product
which may comprise both hardware and software. Expert manpower hav-
ing specialization in their fields work during different phases of SDLC,
along with hardware and software engineers, dedicated development
groups and end-users.
Every system to be developed, consisting of hardware and software, un-
dergoes a development process which comprises multiple steps. These
steps may also be revisited at times. SDLC provides an outline structure
or architecture for the phases or steps involved during the development
of a system.
Numerous SDLC methodologies have been used for decades to guide
the processes involved. SDLC methodology refers to the order and de-
pendency of various phases of SDLC. Popular SDLC models followed
are the Waterfall Model, Rapid Application Development (RAD), Joint
Application Development (JAD), Fountain Model, Spiral Model, Xtreme
Programming and a newer one Agile Software Development.
In SDLC, documentation is an important aspect, irrespective of which
model is followed. It is done in parallel with the development process.
Some methods work better for specific kinds of projects, but in the final
analysis, the most crucial factor for the success of a project may be how
closely the plan was followed.

7.8.1 The Waterfall Model

It is one of the oldest SDLC models and has experienced declining usage
in the last few years. It follows the natural sequential approach in which
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Notes SDLC phases are executed one after the other with no or minimal overlap
between any two. Because of this rigid structure, it demands that a com-
plete set of system requirements be finalized or closed at the beginning
of the project. Only after this, the design and development stages begin.
It is difficult to go back to a previous phase to make any updates there.
Once development is complete, the product is tested against the initial
requirements and in case of any non-compliance, all re-working needs
to be done. Companies typically need more flexibility than what the
waterfall methodology offers, but it is still a preferred methodology for
certain types of projects where requirements are well-defined and free
of any ambiguities. It is also suitable in scenarios wherein a system al-
ready exists in an organization and the new one is an improvement or
up gradation of the existing one. Figure 7.24 shows the linear Waterfall
Model along with individual phases. Observe how strict completion of
previous phase is required before moving to next.

Figure 7.24: The Linear Waterfall Model1

7.8.2 The Spiral Model

The spiral methodology allows specialists to blend the iterative and
waterfall approaches with work of one phase overlapping with that of
another. The real difficulty with the spiral model is knowing when is the
right time to move on to the next phase.

1. (http://www.tutorialspoint.com/sdlc/sdlc_waterfall_model.htm)

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Business projects which have fluctuating requirements or high-risk proj- Notes

ects can benefit from this methodology as it is scalable. Projects which
are being developed for the first time or organizations where all work is
shifted from manual to automated mode for the first time benefit from
this model as employees constantly keep coming up with requirements.
Figure 7.25 shows a spiral model with overlapping phases.

Figure 7.25: The Spiral Model2

7.8.3 RAD
The Rapid Application Development (RAD) or rapid prototyping methodolo-
gy lays emphasis on extensive end-user participation in fast development of
working prototypes of a system. It speeds up the system development process
Figure 7.26 shows such a model with user intervention at various phases.
The planning and analysis phases are carried out in the same manner
as in other basic SDLC models. The software repository is examined to
determine if the required units of source code already exist. If yes, then
they can be used in the new system and save time and cost. Next, the
prototypes of the final system are developed. These are the mini working
models and portray major characteristics and functionalities of the system.
The team then designs, develops, and tests the prototypes till they become

2. (http://www.tutorialspoint.com/sdlc/sdlc_waterfall_model.htm)

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Notes fully functional units of code. Now the developed or re-used software
units are integrated and tested as a complete fully functional system.
Providing support and maintenance to the client company is also crucial
at the end. The end-user involvement and the development of software
prototypes speed up the entire process by a huge factor. Re-usability is
another important factor in speeding up the timelines.

Figure 7.26: The RAD Model3

7.8.4 Extreme Programming Methodology

This methodology breaks a project into many small phases and it is not
possible for the developers to start with the next phase until the current
phase is completely done. XP is similar to a jigsaw puzzle like there
are many small interleaving software components that need to be fitted
together. Stand-alone pieces are not meaningful but when combined, they
give the visibility of the entire organization. The main difference between
the basic methodologies and XP is that XP divides its phases into iter-
ations. The XP methodology also just like RAD both extensively reuse
existing software units available in the organization’s software library.

3. (http://www.geeksforgeeks.org/software-engineering-rapid-application-development-model-
rad/)

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Notes

Figure 7.27: The Xtreme Programming Methodology4

7.8.5 Agile Methodology

The agile methodology tries to achieve customer satisfaction through
quick and continuous deliveries of most useful system components. Ag-
ile is similar to XP and does not lay much emphasis on development
in team mode. In this, we set a minimum number of requirements and
convert them into a pre-final usable product. Agile caters to projects that
are fast and efficient, small, have low budgets, few functionalities, and
shorter durations.
IN-TEXT QUESTIONS
16. What is the disadvantage of using Waterfall Model? Can systems
with constantly changing requirements be developed using this
model? Why or why not?

4. (http://en.wikipedia.org/wiki/Extreme_programming)

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Notes 17. Which of the following models has advantages of both Waterfall
and Iterative Model?
(a) Agile Methodology
(b) Spiral Model
(c) Xtreme Programming
(d) Rapid Application Development Model
18. Waterfall Model mandates that the system requirements be
___________ in the beginning.
19. Which models rely heavily on reusing existing software components?
20. What kind of projects are best suited using Agile methodology?
Give a hypothetical example.
21. Define system prototype. State its importance.

7.9 Summary
Structured System analysis is an approach which defines what a system
should perform before deciding how it can be accomplished. It under-
stands and analyses the requirements of the proposed system or existing
systems and uses modelling tools to explain different aspects of the system
or project and formulate a report. Structured System analysis involves a
graphical representation of the functions or processes that capture, ma-
nipulate, store, and distribute data between components of a system and
their environment. Understanding system operations will be aided by data
flow or sequence flow diagrams, which are high-level depictions of the
flow of data or events in the system.
Structured System analysis helps in controlling project management, esti-
mating team size, allocation of work considering expertise and analysing
the risk. It ensures the project is completed within the proposed deadline
and budget. Using DFD, we can visualise the following aspects: how
the system will operate, its goal and how it will be implemented. Data
Dictionary prevents ambiguity and synchronises the work while using the
same object reference at multiple places. A decision tree defines complex
relationships between each condition and its allowed actions. The Deci-
sion Table specifies all possible conditions with their respective actions.
Structured English is used to specify the logical information which the
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system will process. Pseudocode is similar to Structured English with a Notes

major difference that structured English neither represents program spec-
ifications nor resembles any specific programming language.
System development life cycle refers to all steps, activities or tasks per-
formed starting from planning to final deployment and support phase of
a system. It is a well-defined, structured task and away from any random
approaches. Following SDLC approach ensures that system development
meets all end users’ requirements, free of bugs, is delivered timely and
hence minimizes cost.
It involves seven major steps or phases namely- planning, analysis,
design, development, testing, implementation and maintenance. For big
realistic systems or projects, usually a dedicated team is employed for
each phase having requisite experience. Throughout SDLC, documentation
is an essential aspect.
SDLC models refer to the order and dependencies between various
phases that are followed during system development. Popular models are
- Waterfall model, Spiral model, Rapid Application Development (RAD),
Xtreme Programming, Agile Methodology. Each model has advantages
and disadvantages associated with it. Characteristics of the system to be
developed decide the best suitable model.

7.10 Answers to In-Text Questions

1. Structured System Analysis
2. Structured System Analysis
3. Structured English
4. Decision table
5. Form of representation
6. Logical rules
7. (a) Processes with input but no output
8. (b) Recursion
9. (a) One part
10. (b) Design
11. User acceptance

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Notes
12. Planning phase
13. Both valid and invalid test conditions. Even for invalid inputs, the
system must not get stuck and display appropriate error messages and
suggestions. Boundary value inputs are equally important to check.
14. System requirements specification is a set of documents that describes
the broad working or features and behaviour of a system. It tells
us what the system is expected to do. It serves as an agreement
between the client company and the developer company and also
among different teams of the developer company.
15. Providing help desk, error correction, training support, etc.
16. Disadvantage of waterfall model is that the requirements need to
be frozen in the beginning. No, because requirements fluctuate in
such cases.
17. (b) Spiral Model
18. Fixed or freeze
19. XP methodology and RAD
20. Systems that are small, have fewer features or functionalities, and
fast development required. Billing system of a small-scale shop.
21. A system prototype is a mini working replication of the actual
product. It gives a rough idea to the end users of how the final
system will work. By working with prototypes, end-users can give
their important feedback.

7.11 Self-Assessment Questions

1. What is Structured System Analysis? Discuss its advantages and
disadvantages.
2. Write a short note on Data flow diagram.
3. What is a data dictionary?
4. Define Pseudocode. Why is it different from structured English?
5. What is a decision table? Discuss its components.
6. What is a decision tree? How it is different from the decision table?
What are the different criteria for selecting the decision table over
decision tree?
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7. Which of the following phase generally consumes majority of the Notes

time in SDLC?
(a) Planning (b) Analysis (c) Testing (d) Design
8. The management information system already exists in an insurance
company but does not support newer options required by employees.
Which of the SDLC models will be best suited for developing a
new model in such a scenario?
(a) Waterfall Model (b) Agile Methodology (c) Xtreme Pro-
gramming Methodology (d) Rapid Application Development
9. A banking information system is to be developed for usage by
bank employees to cater to customer operations in physical mode.
Compare and contrast Rapid Application Development Model with
that of Xtreme programming in developing this system.
10. Give an example of a hypothetical system to be developed for which
waterfall model is a preferable choice.
11. Define the spiral model. What are the advantages and disadvantages
associated with using this model?
12. What are the characteristics of a system which is best suited for
development using Agile Methodology? Give a hypothetical example
for such a system.
13. Is it necessary to follow any one of SDLC models during system
development? If yes, then how is it better than ad hoc approaches?
14. Define (a) Test Conditions (b) Integration Testing (c) System Prototype

7.12 References
‹ Laudon, K. C., & Laudon, J. P. (1988). Management information
systems: a contemporary perspective. Macmillan.
‹ Gupta, P. (2008). System Analysis and Design. India: Laxmi
Publications Pvt Limited.
‹ Hoffer, J. A., George, J. F., Valacich J. S. (2004). Modern systems
analysis and design. Prentice Hall.
‹ Dennis, A., Wixom, B., Roth, R. M. Systems Analysis and Design.
United Kingdom: Wiley.

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 MANAGEMENT OF INFORMATION SYSTEMS

Notes ‹ Laudon, K. C., & Laudon, J. P. (2010). Management information

systems: Managing the digital firm (11th ed.). Prentice-Hall.
‹ O’Brien, J. Management Information Systems – Managing Information
Technology in the Internetworked Enterprise. Boston: Irwin McGraw
Hill.
‹ Joshi, Girdhar. (2013). Management Information Systems. New
Delhi: Oxford University Press.
‹ Learning Zone - MIS: Time to plunge into automated systems.
Printing World.6 April 2006.
‹ www.geeksforgeeks.org/management-information-system-mis/
‹ Caserio, C., & Trucco, S. (2018). Enterprise Resource Planning
and Business Intelligence Systems for Information Quality. Cham,
Switzerland: Springer.

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 L E S S O N

8
Enhancing Business
Efficiency with
ERP, CRM and SCM
Seema
Assistant Professor
Shaheed Rajguru College of Applied Sciences for Women
University of Delhi
Email-Id: [email protected]

STRUCTURE
8.1 Learning Objectives
8.2 Enterprise Resource Planning (ERP)
8.3 Customer Relationship Management (CRM)
8.4 Supply Chain Management (SCM)
8.5 Difference between SCM, ERP, CRM
8.6 Summary
8.7 Answers to In-Text Questions
8.8 Self-Assessment Questions
8.9 References

8.1 Learning Objectives

The objectives of the chapter are to get familiar with concepts of enhancing business’s
various aspects with:
‹ Enterprise Resource Planning (ERP).
‹ Customer Relationship Management (CRM).
‹ Supply Chain Management (SCM).
‹ Key factors, Implementation details and advantages of ERP, CRM and SCM.

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Notes ‹ Success factors and challenges encountered for successful ERP,

CRM and SCM.

8.2 Enterprise Resource Planning (ERP)

Global organisations are becoming more complex every day. Organizations
strive to increase their efficiency and agility in order to meet customer
expectations and operate in a highly competitive environment. Unprece-
dented levels of competition are a result of globalisation. Shortened life
cycles necessitate continuous design improvement, manufacturing flexibility,
extremely effective logistics management, better supply chain management,
quicker access to accurate information from both inside the organisation
and from the entire supply chain outside, other issues call for successful
corporations and industry best practices. Enterprise Resource Planning (ERP)
systems are a popular choice among businesses to increase their compet-
itiveness since they can fundamentally alter how business is conducted.
While implementing enterprise resource planning, the entire organization
is considered as a system and the departments as its subsystems.
8.2.1 Introduction
An Enterprise Resource Planning (ERP) system consists of integrated
sets of comprehensive software used to manage and integrate all of the
business processes within an organisation. These sets often comprise a
collection of established business applications and tools for financial and
cost accounting, sales and distribution, materials management, human
resource management, production planning with computer-integrated
manufacturing, supply chain, and customer information. ERP systems
are flexible information systems that combine information and informa-
tion-based operations across and within functional areas of a company.
Finance needs an ERP in order to quickly close the books. ERP is required
by sales to manage all client orders. To timely deliver the appropriate
goods and services to consumers, logistics requires ERP software that
functions well. ERP is necessary for accounts payable to rapidly and
accurately pay vendors. Management requires real-time access to data
regarding business performance in order to make sound decisions. Further,
the ERP system is crucial for keeping accurate financial records, which
is why banks and shareholders rely on the data and analysis it provides.

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 Enhancing Business Efficiency with ERP, CRM and SCM

8.2.1.1 Evolution of Enterprise Resource Planning Notes

The evolution of ERP has progressed through a number of stages. Figure 8.1
shows the evolution stages of resource planning system development with
respect to time.

Figure 8.1: Evolution of ERP

Organizations began using inventory control packages for automation
systems in the 1960s. Material Requirement Planning (MRP) came into
the picture in the 1970s to plan the necessary parts and products for
the management and manufacturing of goods. Material requirement plan
holds information regarding the capacity required to achieve the expected
output rate. MRP-II, however, was utilized in the 1980s to enhance the
production process. It included new elements human resources, shop floor,
engineering, finance, and distribution. Extending these ideas, Enterprise
Resource Planning (ERP) systems were able to integrate business activ-
ities across an enterprise in the 1990s. ERP vendors added new features
including data warehousing, Advanced Planner and Optimizer (APO),
supply chain management, and customer relationship management (CRM)
in the 2000s, which led to an Expanded ERP (E-ERP). E-ERP is an ad-
vancement in the field of ERP that uses Internet and World Wide Web
(WWW) technology to streamline an organization’s operations online.
Because ERP-II is a web-friendly application, it solves the problem of
having different multiple office locations.
Numerous fields of industries covered by ERP are financial accounting,
asset management and portfolio management of finance industry, recruit-
ment and compensation management, training and development of human
resource management industry, production planning, quality management
sales and distribution etc.

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Notes Before an ERP system, each department maintained its own database.
Employees in one department were unaware of what happened in the other
departments. After the ERP system, databases from various departments
are maintained by an ERP system. It maintains a log of every database
in the system. Employees from one department in this situation know
information about employees from the other departments. Some vendors
of ERP are Baan, JD Edwards, Oracle, PeopleSoft, SAP, Net Suite, Sage
300, In for etc.

Figure 8.2: Different Database Interaction before and after ERP5

8.2.1.2 Benefits of Enterprise Resource Planning

The most important benefit of ERP is business integration with different
modules of organisation. Some other benefits of ERP are:
‹ ERP is powerful, flexible and easily accessible GUI technology.
‹ ERP systems improve resource allocation for efficient utilisation.
‹ Work centre loopholes can be identified and equipment maintenance
can be planned more effectively.
‹ Client-server architecture facilitates interaction between modules
using ERP.
‹ It assists in removing unnecessary or non-value-added operations.

5. (https://www.geeksforgeeks.org/introduction-to-erp/)

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‹ It serves as the engine of the business concept. In this role, Notes

information is saved, updated, retrieved, and managed.
‹ The system has regained the trust of the workforce, which has
improved departmental collaboration and communication.

IN-TEXT QUESTIONS
1. __________ is an integrated tool for financial and cost accounting,
sales and distribution, materials management, human resource
management, and production planning with computers integrated.
2. The material requirement plan includes data on all of the
following, with the exception of:
(a) Breakdown of all sub assemblies’ quantities and due dates
(b) The final product’s quantities and necessary delivery dates
(c) Available inventory for each finished good
(d) The capacity needs to provide the anticipated output rate
3. __________ The departments are its subsystems, and the entire
organisation is seen as a system.

8.2.2 Functional Module of ERP

Organizations are deploying Enterprise Resource Planning systems to op-
timize their internal business processes and to facilitate the flow of data
between multiple functional divisions, such as inventories, procurement,
manufacturing, accounting, etc. The multiple operational modules of the
ERP programme take care of each functional department. Some of the
functional modules in the ERP are as follows:
‹ Production Planning Module: The Material Resource Planning
system, which was utilised by businesses for their manufacturing
needs, has evolved into the Enterprise Resource Planning system.
ERP is more reliable software for production planning because it
uses production data and sales forecasting to maximise the use of
manufacturing capacity, material resources, and part availability.
‹ Purchasing Module: This module helps to streamline the acquisition
of necessary raw materials. It is integrated with the production
planning and inventory control modules, as well as frequently with

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Notes supply chain management software. This module automates the

supplier evaluation and identification procedure. It is utilised for
purchasing management and automation.
‹ Inventory Control Module: This module supports the management
of the company’s product and resource inventories. It aids in
managing product replenishment and keeping the product stock
levels at a healthy level. The inventory control module keeps track
of the inventory stock that is present at several sites, including
the warehouse, office, and shops. The inventory of raw materials
needed for product planning can be managed using the module. It
enables the business to schedule upcoming production and maintain
a supply of products in case demand drops below a crucial level.
‹ Sales Modules: The tasks related to sales, customer orders, billing,
and product shipping are handled by this module. The company’s
e-commerce websites are integrated with it, and many vendors
include an e-commerce store as part of this section.
‹ Accounting and Finance Modules: An organization’s essential
functions are accounting and finance. To gather the financial
information for the general ledger and other financial statements
of the organisation, this module communicates with the other
functional modules.
‹ Manufacturing Module: This module includes product designing,
bills of material, cost management, workflow, etc.
Each of the aforementioned functional modules for ERP software has a
crucial function. Depending on their needs, the organisations can decide
whether to adopt all of the modules or just a few. The modules that are
both technically and financially feasible for the companies are chosen.
These modules integrate many functional areas to streamline communi-
cation throughout the organisation. All of these functional modules are
connected to the enterprise resource management system. The functional
components of ERP software aid in cost reduction, operational efficiency,
and profit maximisation. In the business world, ERP would provide a
single database including all of the information for the software modules
listed in Table 8.1.

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Table 8.1: ERP Software Module with Database Information Notes

Software Module Database Information
Manufacturing Engineering, Bills of Material, Scheduling, Ca-
pacity, Workflow Management, Quality Control,
Cost Management, Manufacturing Process, Man-
ufacturing Projects, Manufacturing Flow
Supply Chain Inventory, Order Entry, Purchasing, Product
Management Configurator, Supply Chain Planning, Supplier
Scheduling
Financials General Ledger, Cash Management, Accounts
Payable, Accounts Receivable, Fixed Assets
Project Costing, Billing, Time and Expense, Activity
Management
Human Resources Human Resources, Payroll, Training, Time and
Attendance, Benefits
Customer Relationship Sales and Marketing, Commissions, Service,
Management Customer Contact and Call Centre support
Data Warehouse and Various Self-Service interfaces for Customers, Suppliers,
and Employees

8.2.3 ERP Implementation

The ERP implementation process refers to the process of implementing
it to automate business activities. From the very beginning, it involves a
number of stages and steps, including project implementation planning,
analysis, design, implementation, transition, and operations.
1. During the pre-evaluation phase, potential ERP vendors are evaluated
based on the needs of the organisation. ERP programs that don’t
fit the needs of the business are discontinued.
2. During the phase of package evaluation, the chosen package is
assessed in comparison to the needs of several departments.
3. Managers from various departments participate in a thorough analysis
of the requirements. The list of all the functionalities needed to
support effective processes throughout the organisation is made
possible by requirement analysis.
4. A thorough project plan is created based on the examination of
requirements and functionalities. Senior management team members

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Notes and ERP specialists are involved in finalized designs. Important

project participants were identified in several departments, and
special arrangements were made to address contingencies.
5. Following completion of the planning, business process re-engineering
occurs. Many employees’ job responsibilities will change as a result
of ERP implementation. Employees will therefore be given new
tasks and duties. Restructuring processes and integrating them with
ERP systems are required.
6. Staff and management need to receive sufficient training after
implementation and integration so they can put what they’ve
learned into practice. Employees will receive hands-on training
from consultants in using the ERP technologies.
7. At last, the tools that are applied are tested carefully. Problems
that surfaced during the testing process are resolved, and necessary
adjustments are made.
An essential part of an implementation strategy is the choice of implemen-
tation methodology. The most common implementation process is the “big
bang” strategy, in which the complete system is implemented throughout
the organisation on a predetermined deadline. Manual or archaic systems
are abandoned as everyone switches to the new one.

8.2.4 ERP Implementation Challenges

The success of an organisation is dependent on the competence and
expertise of its employees, as well as their familiarity with the system
and how to properly operate it. While implementing ERP, following
challenges can happen:
‹ Significant storage requirements, networking needs, and training costs.
‹ ERP initiatives are big, expensive, and challenging, and they demand
a lot of money, people, and management time.
‹ Due to its high cost, small enterprises are unable to set up an ERP
system.
‹ The effectiveness of an ERP system may be hampered by privacy
concerns and a lack of skilled personnel.
‹ An ERP project’s implementation is tough, customization is expensive
and time-consuming.
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 Enhancing Business Efficiency with ERP, CRM and SCM

‹ To function properly, many integrated linkages require great accuracy Notes

in other applications.
‹ Switching costs for any partners are extremely high once a system
is created (reducing flexibility and strategic control at the corporate
level).
‹ The software’s usefulness may be hampered by departments’
unwillingness to provide sensitive internal data.
‹ The system might be over-engineered in comparison to the customer’s
actual demands.

8.2.5 Factors Affecting ERP Implementation Process

To successfully adopt ERP, firms must understand and comprehend several
critical success elements to establish an effective fundamental approach.
Some of the factors affecting ERP process are:
‹ Effective project management and good communication with the
top manager.
‹ Understanding how to reengineer company processes and adapt to
corporate cultural change.
‹ Lack of an executive sponsor.
‹ Incomplete documentation of implementation procedure.
‹ Lack of collaboration and vendor support.
‹ The lack of re-engineering efforts and persistence in continuation
of current practices.
‹ Profound transformation and unmanageable change without enough
employee understanding.
System’s efficiency will decrease and its lifespan will be decreased
without a maintenance schedule of ERP. To maintain efficiency some of
key points are:
‹ One of the primary facets of ERP maintenance is staying current
with vendor upgrades. These updates not only include crucial bug
fixes and boost security, but they also prevent your solution from
becoming stale because many updates enhance functionality or add
features. This is one technique to make sure your ERP solution
continues to match the demands of your business.

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Notes ‹ Improving operations since the needs of the business are continually
changing. The way a company handles the addition of new clients,
services, or technology will define its success.
‹ Training of people is an important component of ERP success.
‹ Improve the system to enhance the system’s functionality for ERP
solutions effectiveness.
‹ Analysing the metrics of the equipment to see whether there has
been a decline in performance.
ERP CASE STUDY
Fulton & Roark
Men’s grooming retailer Fulton & Roark implemented ERP successfully.
North Carolina’s business tracked inventory in a spreadsheet and
financial data in Sage Live before switching to ERP. When revenues
doubled year over year, the company’s operations couldn’t keep
up. Spreadsheets couldn’t account for shifting inventory costs, and
accounting software lacked the workflows needed to record Cost of
Goods Sold (COGS). Fulton & Roark double-entered data manually.
The company’s co-founders installed NetSuite ERP to consolidate
work. Fulton & Roark’s ERP deployment took 20 days. After a
three-week rollout, team members noticed rapid changes. Fulton &
Roark finally:
‹ Correct inventory bookkeeping errors.
‹ Stop using external accountants and boost unit and dollar
volumes without adding staff.
‹ Increase sales 50% without adding staff.
‹ Accurate margins and inventories helped expand e-commerce.

8.3 Customer Relationship Management (CRM)

Anyone who purchases a good or service from a company is considered
a ‘customer’. Everybody who walks into the store has the potential to
become a customer. Even if they might not buy anything now, they might
do so tomorrow.

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“A Customer is the most important visitor on our premises. Notes

He is not dependent on us; we are dependent on him.

He is not an interruption of our work; He is the purpose of it.
He is not an outsider to our business; He is a part of it.
We are not doing him a favour by serving him; He is doing us a
favour by giving us an opportunity to do so.”
 —Mahatma Gandhi

8.3.1 Introduction
CRM is a key concept or strategy to improve customer connections while
reducing expenses, boosting productivity, and boosting profitability. CRM
encompasses a vast array of practices and instruments for managing
interactions with clients, customers, and business partners in marketing,
sales, and service, regardless of the communication channel. CRM puts
an emphasis on attracting, keeping, and growing a clientele. CRM is an
automated procedure for business transformation that centers everything
it does on the customer. By understanding the preferences, tastes, and
habits of their consumers, businesses may use technology to raise the
level of service for long-lasting connections in the future.
CRM combines software and operational procedures. It works to achieve
a specific set of objectives, which are frequently focused on boosting top-
line revenues. To turn clients into devoted and dependable customers, it is
important to have a continuous customer history. Customer Relationship
Management is a strategy that is tailored by an organisation to effective-
ly manage and administrate its clients and suppliers in order to achieve
commercial excellence. Companies that are becoming adept in Customer
Relationship Management (CRM) concentrate their efforts on building pro-
grammes to recruit and retain the proper customers as well as satisfying
the particular requirements of valued customers. The term “customer value”
refers to the aggregate of a customer’s perceived tangible and intangible
benefits, as well as the associated costs. Some popular CRM software are
SAP CRM, Salesforce, Oracle NetSuite, Salesforce, Fresh sales, Zoho CRM,
and HubSpot.

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Notes 8.3.2 CRM Process

The CRM process begins with customer acquisition by providing them with
value. Understanding customers and their purchasing psychology will help to
create value for them. Figure 8.3 provides a basic idea of the CRM process.

Figure 8.3: CRM Process

Basic steps of CRM process are:
1. Businesses use the Internet and conventional mass media to reach
broad audiences and pick up new customers. It’s important to assess
customer needs in order to attract new customers.
2. Finding successful customers and putting retention and profitability
plans in place for them is the core of customer strategy.
3. A CRM solution can be created, altered, or used by a large number
of users. System experts, business analysts, backroom operations
specialists, managers who use customised reports to fine-tune sales,
marketing, and customer service strategies, and frontline sales and
service personnel can all be included in this group. Frontline sales
and service personnel are in charge of entering the vast majority
of the data. CRM initiative needs to generate insightful data and
are also in charge of acting on that data.
4. The art of minimizing customer churn is known as customer retention.
It helps organisations maintain a sizable customer base and cultivate
client loyalty. Through recommendations from pleased clients, the
business can attract new customers thanks to its loyal clientele.
Marketing management has been made possible by the growth of infor-
mation, communication, and industrial technology. These technologies
are now being used by a variety of businesses, from packaged goods
to services, to get to know their customers, and then fortify their ties

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with them through recurrent contacts. In order to meet their needs for Notes
production, delivery, and customer service, marketers could gather infor-
mation about their customers. CRM is the fusion of the emergence of
database technology with the core marketing principles of client loyalty
and retention. CRM can assist in attaining the following objectives by
recognising consumer requirements:
‹ Improving lines of communication.
‹ Collect essential data, such as client information and order history.
‹ Create extensive consumer profiles that include preferences.
‹ Providing immediate, enterprise-wide access to client histories.
‹ Recognizing new sales opportunities.
CRM is increasingly used to identify, entice, and retain a business’s most
valuable customers, hence sustaining sustainable growth. Designing products
or services that meet or exceed customer expectations begins with a solid
CRM. As businesses establish one-to-one client relationships online, the
rapid development of internet-based technology has a significant impact on
the management of customer interactions. Some advantages of CRM are:
‹ CRM gives all business members convenient data access. This helps
the company’s employees communicate and market to clients.
‹ Having detailed information about each customer, such as their
order history, correspondence, survey replies, and marketing emails,
improves customer care and increases customer satisfaction.
‹ A CRM system can be used to determine which groups to target in a
marketing effort. A customer’s past purchases can predict his next buy.
‹ CRM increases profitability through more effective customer care,
successful marketing, and happier customers.
‹ Having automated CRM systems saves time by decreasing redundant
work and giving more time for analysing new consumers. A computer
database can speed up the retrieval of important data.
‹ Strong CRM can help in lead generation. Many CRMs can interact
with website and social media campaigns to give leads to sales/
marketing users.

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Notes ‹ CRM increases analytical data and reporting by integrating tools

or plugins to generate automatic reports.
‹ CRM lets you automate appointment scheduling, follow-up reminders,
emailing, and preparing sales quotes to save time and money.

8.3.3 Key Components of CRM

CRM consists of three major components: Technology, people, business
culture and relationship, and Process.
‹ Technology: Technology is the computing power that allows a
company to gather, organise, store, and use customer data. CRM
systems’ objectives of gathering, classifying, and keeping priceless
customer data are made possible by technology. Integration technology
enables organisations to build up closer bonds with their customers by
giving a more complete picture of consumer behaviour. As a result,
businesses are expected to integrate IT to improve their abilities to
comprehend consumer behaviour, create predictive models, create
successful customer encounters, and provide customers with accurate
information in real time. For a business to incorporate IT, ideas
like data warehousing, software customization, process automation.
‹ People: Customers and employers play crucial participants in
CRM projects. CRM was developed with the intention of managing
profitable connections by collecting information on numerous client
attributes. CRM’s main objective is to turn consumer data into
customized products and services that meet their changing needs
in order to gain their loyalty. The Effective Customer Feedback
technique is utilised in order to acquire additional information
regarding both existing and new customers. Educating customers
about the range of available items is an excellent technique to
determine their needs.
‹ Business Process: CRM, or customer relationship management, is a
business strategy that is conceptually supported by business process
relationship marketing. Business procedures must be modified to
become more customer-focused for CRM to be successful. In order
to properly evaluate and analyse all business operations, both direct
and indirect customer engagement must be included.

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IN-TEXT QUESTIONS Notes

4. Good customer service focus on:

(a) Establishing a dynamic and active relationship with customer
(b) Producing money
(c) Aggressive marketing
(d) Compulsive selling
5. Arrangement of the step in CRM process:
(a) Developing CRM
(b) Customer data collection
(c) Customer data analysis
(d) Target customers
(e) Implementing CRM program
6. _________ is a technique for learning more about current and
potential customers.
7. Companies that are learning Customer Relationship Management
concentrate on:
(a) Understanding purchasers’ expectations
(b) Cost-cutting for customers
(c) Creating a program to attract and retain the right clients
and meet the needs of valued customers
(d) Giving a product or service’s qualities and characteristics
that affect its capacity to meet expressed or implied needs
8. Customer value reflects physical and intangible benefits and
costs to a customer. (True/False)

8.3.4 CRM Success Factor

The fast development of business-customer interaction-enabling informa-
tion systems applications and the proliferation of internet technologies
have increased businesses’ capacity to respond to customers’ expanding
knowledge and fluctuating product and service needs. While most business
organisations strive to implement CRM systems, they are met with the

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Notes depressing reality that a sizeable portion of CRM project implementations

fail due to a lack of a customer-centric vision, a lack of appreciation
for customer lifetime value, a lack of support from top management,
an underestimation of the importance of change management, a lack of
vision and strategy, a failure to re-engineer business processes, an un-
derestimation of the importance of vision and strategy. The success of
CRM depends on the following components:
Top Management Commitment: This component focuses on top-level
management’s readiness to offer resources for implementation.
CRM Strategy: This element emphasises how well the CRM strategy is
developed and how it fits with the organization’s plan.
Data Management: This part gathers and evaluates client data to meet
customer needs.
Cultural Shift: The organization’s ability to become customer-focused
and perceive CRM as a shared philosophy.
Process/Structure Change: This part focuses on adjusting the organiza-
tion’s structure and operations to be CRM-compatible, including hierarchy
and reporting connections.
IT Programs: This part includes data warehouse management, ERP ca-
pabilities, internet connectivity, and software selection and configuration.
Skilled, Driven, and Trained Employees: This factor focuses on access
to competent people and the ability to deliver training.
Analysing Valuing Customers: This element improves customer consul-
tation, interaction, and communication by boosting company-consumer
engagement.
Feedback, Control, Measurement, Observation: This part focuses on
building appropriate feedback channels to increase CRM implementation
learning for necessary revisions, as well as CRM influence on organisa-
tion performance measures.
Inter-departmental Integration: This component integrates several or-
ganisational departments and areas to fulfil both departmental and CRM/
corporate goals.

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CASE STUDY: ONE Notes

Practo is one of the most prominent healthcare applications in India.

Their primary objective is to broaden people’s access to medical treat-
ment. Practo is being utilised by a number of healthcare providers
as a platform to enhance their visibility in the market, expand their
operations, and engage patients on a deeper level than ever before. As
they grew rapidly as a company, they began facing problems in the
following areas:
‹ Marketing campaigns
‹ Workflows for customer journeys that are not accurate
‹ The absence of reports regarding their procedure
‹ Taking care of the ever-growing number of representatives
They started looking for a way to tackle these problems and eventually
found a CRM that offered a variety of options, including:
‹ Highly developed automation for the workflows of sales
‹ Smart Views, which shorten the amount of time needed for decision-
making
‹ Management leadership and specific instruments for performance
evaluation
As per Sidhartha Nihalani, Vice President of Product at Practo, “All the
automation running with CRM ensures that lead management activities,
from lead allocation to lead prioritisation, are handled easily. Successful
implementation of CRM helped them to increase the average daily pro-
ductivity of call centre agents by sixty percent.

CASE STUDY: TWO

One of the most reputable online educational communities is BY-
JU’S (Think and Learn Pvt Ltd). Since receiving funding from the
Chan-Zuckerberg initiative, they have become the first Asian compa-
ny of their kind to be featured as a case study at Harvard Business
School. The majority of their work entails dealing with existing
clients on an ongoing basis, and their client life cycles are typically
lengthy. That’s why they went in search of a customer relationship
management system with a built-in database for past transactions. At

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Notes first, they used a combination of Excel spreadsheets and customer

relationship management programmes. Since they were reluctant to
embrace a wholly new tool, they settled for this complex hybrid
approach to lead management.
Fears were finally allayed when they implemented a customer relation-
ship management system that excelled in three key areas: Flexibility,
Rapid deployment and High levels of adaptability.
Within the first few hours of implementing the CRM system, the
team saw that it was a tremendous improvement over their previous
tool. Their sales staff uses a CRM system, but it’s also utilised for
order management, hiring, and pre- and post-sales activities. CRM
helped them to streamline the process.
Mrinal Mohit, BYJU’S COO, said about the CRM platform: “The plat-
form is adaptable, making adoption and execution of your existing sales
process very straightforward. We are able to keep tabs on all physical
and online sales activity and monitor them properly. It’s a well-designed
programme that can surprise you with the results it produces.

8.4 Supply Chain Management (SCM)

Supply Chain Management (SCM) oversees key firm operations across
the supply chain’s network of enterprises. The management of the flow
of goods and services that starts at the point of origin and concludes with
consumption is known as Supply Chain Management.

8.4.1 Introduction
The idea of Supply Chain Management provides a framework for coor-
dinating a company’s information, assets, and finances from suppliers
to customers. Supply chain and supply management demonstrate how
suppliers, producers, distributors, and customers of goods and services
coordinate material, informational, and monetary flows. In accordance
with one definition, the supply chain is “A network of autonomous and
semi-autonomous business participants engaged through upstream and
downstream connection in various processes and activities that produce
value in the form of tangible goods and services in the hands of ultimate
customers.” Supply chain Management is the web of companies that
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connects suppliers and end users. It provides a route for raw materials to Notes
be turned into finished products and reach consumers. The movement of
commodities from suppliers via manufacturing and distribution channels
to the final consumers is referred to as supply chain management. The
main objective of supply chain management is to oversee and coordinate
the production, distribution, and shipment of commodities. From the point
of origin to the point of consumption, all businesses or organisations
that the focal company interacts with directly or indirectly through its
suppliers or customers are considered to be members of the supply chain.
The planning and administration of all activities related to sourcing, pro-
curement, conversion, and logistics management are included in supply
chain management, according to the Council of Supply Chain Management
Professionals (CSCMP). Additionally, it includes the essential elements
of coordination and collaboration among channel partners, including cus-
tomers, suppliers, intermediaries, and third-party service providers. Supply
chain management essentially unifies supply and demand control within
and among businesses. The top SCM software vendors include NetSuite
(ERP), Oracle SCM Cloud, Epicor, SAP SCM.
In today’s globalised market, firms fight to offer customers high-quality
goods and meet all of their needs. SCM network design models strive
to provide the highest possible level of customer satisfaction. Businesses
need effective supply chain management. Some important advantages of
Supply chain management are:
‹ SCM boosts efficiency and business operations and helps in
establishment of faster delivery mechanisms for in-demand goods
and services.
‹ Reduces storage and transportation costs.
‹ Helps in delivering the right stuff on schedule.
‹ Enhances inventory control, allowing just-in-time stock models.
‹ Helps firms adapt to globalisation, economic change, expanding
consumer demands, and inequities.
‹ Reduces waste, cuts costs, and boosts supply chain efficiency.
‹ Develops plans for obtaining and maintaining all inventory. Supply
chain management prevents under- and overstocking.
‹ Supplier-customer information sharing enhances channel efficiency,
reduces manufacturing costs and inventory levels.
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Notes Objectives of SCM

Every business strives to match supply and demand in a timely manner
while utilising all of its resources. The purpose of SCM is:
1. Cutting costs, boosting resource productivity, raising profit, improving
customer and supplier relations, and producing value-added services.
2. Offering the right product at the best pricing.
3. Minimizing inventory and focusing on customer value.
4. Synchronizing and speeding up processes related to the systematic
administration of client orders and their fulfilment, as well as the
purchase and supply of raw materials for industrial operations.
5. Bringing clients together to better meet their wants and acquire their
loyalty.
6. Management of flows between and among stages in a supply chain
to maximize total supply chain profitability.
7. Efficiency and Cost Usefulness across the entire Chain SCM objective
is to maximize the overall value generated.

8.4.2 Key Components of SCM

To optimize the movement of information and products across the pro-
cesses and business partners throughout the supply chain, SCM depends
on information technology and management techniques. These SCM
components have been described below:
Suppliers Management: Reduce suppliers by using e-commerce and
encourage them to collaborate on projects.
Inventory Management: Businesses use a variety of strategies, including
inventory management, to reduce supply and demand imbalances in the
supply chain. SCM use e-commerce to cut inventory and shorten order-
ship-bill cycles.
Optimal Distribution: Electronic data interchange moves shipping docu-
ments (bills of lading, purchase orders, advanced ship notices, and so on).
Managing Channels: Use email, bulletin boards, and newsgroups to
update trading partners about operational changes.
Payments Management: Electronic funds transfer can be used to pay
and receive payments from distributors and suppliers.
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Finances Management: Electronic commerce lets global firms manage Notes

several foreign exchange accounts.
Salesforce Management: Use sales force automation to improve com-
munication across production, customer service, and sales.

IN-TEXT QUESTIONS
9. SCM network models maximise __________.
10. SCM encompasses the following:
(a) Transportation (b) Material Handling
(c) Storage (d) All of the above
11. __________ Contributes significantly to supply chain management.
(a) Finance (b) Marketing
(c) Information system (d) None of the above

8.4.3 SCM Process

The SCM is a network of many businesses and relationships rather than
a chain of companies with direct, business-to-business interactions. To
take advantage of the synergy of intra- and intercompany integration,
management is provided by SCM. Table 8.2 gives components of SCM
process and functional activities performed by SCM.

Table 8.2: SCM Process with Functional Activities

Step Business Process for SCM Functional Activities
1. Customer relationship management Requirements Definition
Sourcing Strategies
Customer Profitability
2. Customer service management Technical Service
Performance Specifications
Cost to Serve
3. Demand management Process Requirements
Trade-off Analysis
Forecasting
Capability Planning

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Notes Step Business Process for SCM Functional Activities

4. Order fulfilment Environmental Requirement
Network Planning
Distribution Cost
Suppliers Selection
5. Manufacturing flow management Packaging Specifications
Process Stability
Production Planning
Manufacturing Cost
6. Procurement Material Specification
Supplier Management
7. Product development and Business Plan
commercialization Product Design
Process Specification
Material Specification
R&D Costs
8. Return management. Product life cycle
Re-manufacturing

8.4.4 SCM Performance Measures

Success of SCM depends on following key points:
Resource Management: Efficient use of resources is essential for prof-
itability. It included total cost, distribution costs, manufacturing costs,
inventory costs, and Return on Investment (ROI).
Emphasize on Customer Satisfaction: Things like the percentage of
on-time delivery, customer satisfaction, good product quality, customer
response time, and profit are used to gauge customer happiness and loyalty.
Adaptability: Adaptable enough to change with the environment. It
should be flexible to introduce and produce new products and ability to
introduce modification in existing products.

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8.4.5 Challenges for Successful SCM Notes

To help a business succeed financially is the goal of supply chain man-
agement. It aims to guide companies using the supply chain to improve
differentiation, increase sales, and enter new markets in addition to all of
the aforementioned reasons. Gaining a competitive edge and increasing
shareholder value are the objectives. With all these benefits SCM also
have some challenges which affect its performance. Some of them are:
‹ Due to a widening of the project’s scope, its implementation has
been inadequate.
‹ Information access and security.
‹ Interruptions in the supply chain.
‹ Unidirectional loss of negotiating power.
‹ Training and change management.
‹ System maintenance.
‹ Difficulty in building trust and handling inter-organizational
interdependence.
IN-TEXT QUESTIONS
12. Keeping the inventory in the warehouse up to date, as well as
working with the material in the production process using the
appropriate equipment, are both components of __________.
(a) Supply Chain Management
(b) Retail Management
(c) Sales management
(d) None of these is correct
13. For service industries like SCM bonding with __________ is
important.
(a) Manufacturers
(b) Customers
(c) Landowners
(d) Sellers

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Notes CASE STUDY: SCM

Sunsweet Growers
This study shows how extra supply chain expenses can be linked to
inefficiencies in manufacturing or production and—often at the root
of it all—forecasting and planning.
Sunsweet Growers, the world’s largest producer of dried fruits, ob-
served that high production expenses were ballooning end-to-end
supply chain expenditures a little over a decade ago.
Reduce supply chain costs: When Sansweet’s leaders investigated
production cost issues, they realised the distribution network was
largely to blame. The corporation redesigned the network to cut costs.
Later, it became clear that while a redesign might have some benefits,
demand forecasting was a major challenge. Sunsweet used spread-
sheets for forecasting.

The inefficiencies of this system hindered forecasting and production

planning, and the knock-on consequence was an excess of warehouses
in the network—so forecasting drove production costs and improved the
distribution network.
Cost-cutting: As in other cases, technology helped Sunsweet solve its
challenges. After assessing 30 software alternatives, the company chose
a supply chain planning suite and organised its improvement programme
to use each module in order, allowing ROI to be realised in phases as
each module was integrated and leveraged.
Sunsweet also created a sales and operations planning programme (S&OP)
that predicted plant resource needs months, not weeks, in advance. Pos-
itive results gathered as the total improvement plan proceeded through
its five phases, and software ROI reached 100% before the organisation
completed its full deployment.
Cost-effective supply chain management Sansweet’s improvement cam-
paign wasn’t just to maximise its supply chain planning platform’s ROI.
The company attempted to lower production costs and has claimed the
following wins:

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‹ 15-20% more accurate forecasts. Notes

‹ A 25% reduction in production facility overtime.
‹ 30% less product spoilage.
‹ 28 US warehouses reduced to 8.
‹ Stable unit transportation costs despite increased use of expensive
chilled freight and rising fuel prices.

8.5 Difference between SCM, ERP, CRM

Features SCM ERP CRM

Scope Narrow (One Broad (Multiple Customer And
Business Process) Business Process) Clients
Complexity Lower Higher High
Focus External Relation Internal Processes Customer Interaction
and Task and Client Retention
Oriented Product Shipment Enterprises Customer
Onwards
Emphasize Tracking Of Materi- Improve Accura- Increasing Sales and
al and Product Ship- cy and Effective- Customer Satisfac-
ment ness of System tion
Manage Product and Service Operational and Customer and Sales
Information Accounting Infor- Information
mation
Purpose Execute Sales Reduce Costs Increase Profit and
Sales

8.6 Summary
Enterprise Resource Planning (ERP) is a platform used by businesses to
coordinate and manage the key elements of their operations. Numerous
ERP software programmes are essential to businesses because they enable
resource planning by integrating all the operations required to manage their
operations into a single system. A software system for Enterprise Resource
Planning (ERP) can also incorporate planning, inventory buying, sales,
marketing, finance, and other functions. With the ERP system, Different
departments of an organisation can interact with each other and are aware
about any changes in the information and structure of the ERP system.

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Notes Customer Relationship Management (CRM) refers to a set of computerised

processes for bringing about organisational change with the customer at
the core. Every business that wants to expand should spend more money
on an intelligent CRM that can assist them in overcoming their unique
problems. Companies must employ tools that grow along with client ex-
pectations. CRM provides lead management, sales automation, marketing
automation, and data centralization, all of which increase productivity.
Any business may automate repetitive chores, prioritise hot leads, expe-
dite sales processes, and receive thorough performance reports by using
an intelligent CRM. More and more businesses are turning to Customer
Relationship Management (CRM) systems in order to pinpoint, persuade,
and keep their most valued clients.
Supply chain management integrates suppliers of raw materials or compo-
nents, manufacturers or assemblers of finished products, and distributors
of products or services into one cohesive process. This includes demand
forecasting, materials requisition, order processing, order fulfilment, trans-
portation services, receiving, invoicing, and payment processing. Supply
chain management manages the flow of raw materials into an organisation,
the internal processing of materials into completed commodities, and the
outflow of finished goods to the end consumer. Service providers only
get value from customers. These functions are outsourced to companies
who can do them better or cheaper. The supply chain focuses on custom-
ers and suppliers. Supply chain management involves controlling all the
processes and activities that create value for the consumer. Supply chain
management helps companies compete globally. They must constantly at-
tract new and existing clients. Supply chain management entails planning
and controlling actions to reach a goal and developing the company to
settle conflicts and make effective decisions.

8.7 Answers to In-Text Questions

1. ERP
2. (d) The capacity needs to provide the anticipated output rate
3. In ERP system
4. (a) Establishing a dynamic and active relationship with customer

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Notes
5. (b), (c), (d), (a), (c)
6. Efficient Customer Feedback technique
7. (c) Creating a program to attract and retain the right clients and
meet the needs of valued customers
8. True
9. Customer Satisfaction
10. (d) All of the above
11. (c) Information system
12. (a) Supply Chain Management
13. (b) Customers

8.8 Self-Assessment Questions

1. What is ERP? Discuss the evolution of ERP.
2. What is the Importance of ERP systems?
3. What is an ERP software module and what kind of database is
provided by these software modules?
4. What are the primary factors affecting the implementation process
of ERP?
5. Why is CRM important for the success of an enterprise?
6. Explain the process of CRM.
7. What are the key components of CRM?
8. What are SCM and functional activities of SCM?
9. What are the performance measures of SCM?
10. What are the challenges encountered while implementing SCM?

8.9 References
‹ Caserio, C., & Trucco, S. (2018). Enterprise Resource Planning
and Business Intelligence Systems for Information Quality. Cham,
Switzerland: Springer.

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Notes ‹ Stefanou, C. (1999). Supply chain management (SCM) and organizational

key factors for successful implementation of enterprise resource
planning (ERP) systems. AMCIS 1999 proceedings, 276.
‹ Azhakarraja, C. (2020). An Overview of Customer Relationship
Management. Clear International Journal of Research in Commerce
& Management, 11(12).
‹ Hendricks, K. B., Singhal, V. R., & Stratman, J. K. (2007). The
impact of enterprise systems on corporate performance: A study of
ERP, SCM, and CRM system implementations. Journal of operations
management, 25(1), 65-82.
‹ Kale, V. (2016). Enhancing Enterprise Intelligence: Leveraging
ERP, CRM, SCM, PLM, BPM, and BI. CRC Press.
‹ Chorafas, D. N. (2001). Integrating ERP, CRM, supply chain
management, and smart materials. CRC Press. https://www.geeksfor
geeks.org/introduction-to-erp/

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 L E S S O N

9
Information Infrastructure
Shikha Singh
Research Scholar
IMSAR
Maharshi Dayanand University
Email-Id: [email protected]

STRUCTURE
9.1 Learning Objectives
9.2 Introduction
9.3 Planning Building IT Architecture
9.4 Information Infrastructure
9.5 Legal Issues and National Information Infrastructure
9.6 Summary
9.7 Answers to In-Text Questions
9.8 Self-Assessment Questions
9.9 References
9.10 Suggested Readings

9.1 Learning Objectives

The following chapter will help you understand Information Infrastructure for a better
understanding of Information Technology for business or managerial purposes.
‹ Explain how IT management can be helpful in planning and building Information
Technology Architecture.
‹ Understand the concept of IT Infrastructure and its evolutions.
‹ List many concerns about how the application of information technologies in the
workplace affects employment, individuality, working conditions, privacy, criminality,
health, and solutions to social problems.

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Notes
9.2 Introduction
An organization-wide, centrally controlled IT infrastructure consists of
technological elements (such as communication technologies and data) that
experts in their fields can employ to provide common, shared services.
Then, in accordance with the standards set forth in the IT architecture,
these services are offered for common and standard, company-wide, and
business-specific applications at the needed service levels. The strategic
and operational significance of information technology in a corporation is
now beyond question. As the twenty-first century progresses, numerous
businesses throughout the world are determined to transform themselves
into powerful international corporations by making significant investments
in international e-business, e-commerce, and other IT efforts. Therefore, it
is imperative that business managers and other professionals comprehend
how to oversee this crucial organizational task. The term “IT infrastruc-
ture” is used to describe the network of interconnected computer systems
that provides the backbone for various types of corporate information
systems. A firm’s entire business units or the entire company may invest
in hardware, software, and services including consulting, training, and
education as part of its IT infrastructure. The foundation of a company’s
management of internal business operations, interactions with vendors,
and customer service is its IT infrastructure.
Information technology has aided in the advancement of materials
through lower costs, quicker delivery, greater product quality, features,
and functions, as well as a wider range of consumer product selections.
Therefore, the question of whether it is moral to utilize IT so passion-
ately and accept its bad effects arises. The challenge, then, is how to
ethically handle societal concerns while weighing the positive effects of
IT against its negative effects.

9.3 Planning Building IT Architecture

Information technology architecture is a thorough explanation of all
the different information processing tools required to achieve corporate
goals, the regulations that control them, and the data they are connected
to. Within an organization, it has an impact on three levels, including
the server, middleware, and client, as demonstrated in Figure 9.1 below.

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Notes

Figure 9.1
Server: This level typically has hardware and is positioned in the center
of the organization, providing the fundamental computing power.
Middleware: The infrastructure needed to keep the hardware functioning
and the information flowing is provided by this level, which is typically
software and resides atop the server level.
Client: This level, which brings together hardware and software, gives
users access to the capabilities and lets them access the information that
a firm has available.

9.3.1 Managing Information Technology

For business and IT managers and experts, managing the information
systems and technology that underpin the contemporary business processes
of firms is a significant task.
The approach to managing information technology in a large company
has three components.
‹ Managing Business and IT Strategy: Proposals are created by
business and IT managers and professionals addressing the usage
of IT to support the strategic business priorities of the company, in
accordance with the guidance of the CEO (Chief Executive Officer)
and CIO (Chief Information Officer). This method of business and
IT planning link IT with strategic aims in business. Evaluating the
business case for funding the creation and implementation of each
proposed business/IT project is another step in the process.
‹ Managing Application Development and Technology: The CIO
and CTO (chief technology officer) are primarily responsible for this
stage. This branch of IT management is responsible for overseeing
the development and deployment of information systems as well as

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Notes the investigation of new information technologies’ strategic business

applications.
‹ Managing the IT Organization and Infrastructure: The task
of overseeing the work of IT experts, who are often grouped into
various project teams and other organizational subunits, is shared
by the CIO and IT managers. Additionally, they are in charge of
managing the IT infrastructure, which includes the purchasing,
running, maintaining, and monitoring of hardware, software, databases,
telecommunications networks, and other IT resources.

IN-TEXT QUESTIONS
1. The usage of IT to support the strategic business priorities of
the company, under the direction of the CEO (chief executive
officer) and CTO (chief technology officer). (True/False)
2. Client level combines hardware and software that gives users
access to the capabilities and lets them access the information
that a firm has available. (True/False)
3. The task of overseeing the work of IT experts, who are often
grouped into various project teams and other organizational
subunits, is shared by the CIO and IT managers. (True/False)

9.3.2 Business/IT Planning

The business/IT planning process is concerned with coming up with fresh
ideas for achieving a company’s objectives for both business value and
customer value. Through this planning process, new business applica-
tions, processes, goods, and services are developed, along with strategies
and business models. After that, a business can create IT plans and an
IT architecture to enable the creation and implementation of its newly
planned business applications.
To achieve its customer value and business value goal, a company’s CEO
and CIO must jointly manage the development of complementary business
and IT initiatives. As we have often shown in this work, information
technologies are a rapidly evolving but essential part of many strategic
business endeavors, necessitating this co-adaptation process.
The three main steps in the business/IT planning process are as follows:

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‹ Strategy Creation: Creating business plans that assist an organization Notes

in achieving its goals. Using information technology, for instance,
to develop cutting-edge e-business systems with an emphasis on
customer and business value. This procedure will be covered in
more depth in the next sections.
‹ Resource Administration: Creating a company’s IT resources,
including its Information System staff, hardware, software, data,
and network resources, according to a strategic strategy.
‹ Technology Architecture: Implementing information technology in a
manner that supports business and IT activities inside an organization.

9.3.3 Information Technology Architecture

The conceptual design, or blueprint, for the IT architecture developed by the
strategic business/IT planning process includes the following key elements:
‹ Platform for Technology: The Internet, intranets, extranets, and
other networks, computer systems, integrated enterprise application
software, and system software all provide the computing and
communication infrastructure, or platform, that supports the strategic
usage of information technology for e-business, e-commerce, and
other business/IT applications.
‹ Resources for Data: Data and information are stored and made
available for business operations and decision support through a
variety of operational and specialized databases, including data
warehouses and Internet/intranet databases.
‹ The Architecture of Applications: Information technology applications
for business are created as an integrated architecture or portfolio of
enterprise systems that support cross-functional business activities
as well as strategic business initiatives.
ACTIVITY 1
Investigate executive succession planning and the various strategies
that businesses already employ online. Do the dynamics of techno-
logical change and evolution differ in any way for people working in
information technology as opposed to those in other functional areas?
What skill sets are IT executives expected to possess? To summarize
your findings, write a report.

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Notes
9.4 Information Infrastructure
Companies and enterprises are beginning to appreciate the significance of
IT infrastructure more and more. The academic literature is replete with
research and studies on IT infrastructure, adding to the growing interest
in the topic among practitioners. The value and return that businesses
may obtain from investing in and utilizing IT infrastructure will improve
and increase the earlier they do so.
9.4.1 Definition of Information Infrastructure
The IT infrastructure is made up of the various hardware and software
programs needed to run the complete business. However, a group of
corporate-wide services is also a part of an IT infrastructure that man-
ages budgets and that includes both technical and human resources. The
following are some of these services:
‹ Computing services that connect employees, clients, and suppliers
into a unified digital environment are provided via computing
platforms such as large mainframes, midrange computers, desktop
and laptop computers, mobile handheld devices, and remote cloud
computing services.
‹ Telecommunications services that use data, audio, and video to link
employees, customers, and suppliers.
‹ Application software services, such as online software services, that
provide enterprise-wide functionality including customer relationship
management, supply chain management, enterprise resource planning,
and knowledge management systems that are shared by all business
divisions, services for managing, storing, and offering the ability
to analyze company data.
‹ Services for the development and operation of physical installations
needed for computing, telecommunications, and data management.
‹ IT management services that include infrastructure planning and
development, business unit coordination for IT services, accounting
management for IT expenditure, and project management services.
‹ IT standards services that give the company and its business units
guidelines on how, when, and with which information technology
will be employed.
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‹ IT research and development services that give the company Notes

information on prospective future IT projects and investments that
could help the firm stand out in the market. These services instruct
employees on how to use systems and train managers on how to
prepare for and manage IT investments.

9.4.2 Evolution of Information Infrastructure

Modern commercial IT infrastructure is the consequence of more than
50 years of platform development. In this history, there have been five
stages, each corresponding to a particular arrangement of infrastructure
and computational resources. The general-purpose mainframe and mini-
computer, client/server networks, enterprise computing, cloud computing,
and mobile computing are the five eras of computing. Technologies that
are typical of one age might also be employed for other purposes in a
different era. For instance, several businesses continue to employ main-
frame computers as powerful servers for corporate enterprise applications
and legacy mainframe systems.
The Era of the General-Purpose Mainframe and the Minicomputer
(1959 to Present)
It wasn’t until the arrival of IBM’s designed 1401 and 7090 machines in
1959 that mainframe computers were used widely in business. In 1965,
with the debut of the IBM 360 series, the mainframe computer achieved
its zenith. Advanced versions of the 360’s operating system enabled time
sharing, multitasking, and virtual memory, making it the first commercial
computer to do so. Since then, IBM’s mainframes have been the industry
standard. Today’s mainframe computers are powerful enough to handle
such a workload and can support thousands of online remote terminals
connected to the centralized mainframe via proprietary communication
protocols and data lines.
In the days of the mainframe, computer operations were controlled by a
small group of highly trained programmers and systems operators (often
in a corporate data center). The majority of the infrastructure was pro-
vided by a single vendor, the company that produced the hardware and
software. With the debut of minicomputers made by Digital Equipment
Corporation (DEC) in 1965, this pattern started to alter. Decentralized
computing, instead of time sharing on a single huge mainframe, customized

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Notes to the specific demands of each department or business division, was

made possible by DEC minicomputers (PDP-11 and later the VAX ma-
chines), which provided powerful machines at much lower prices than
IBM mainframes. The minicomputer has developed into an intermediate
computer or intermediate server in recent years and is now a component
of a network.
The Era of Personal Computers (1981 to Present)
The Xerox Alto, the MITS Altair 8800, and the Apple I and II, to mention
a few, were among the earliest completely Personal Computers (PCs) to
be produced, although they were only generally available to computer
enthusiasts. Because the IBM PC was the initial to gain widespread
popularity and embraced by American corporations, its introduction in
1981 is typically seen as the start of the PC era. After using a text-
based command language and the DOS operating system, the Wintel PC
eventually shifted to Microsoft Windows, which is now the standard for
desktop personal computers. There are thought to be 1.2 billion PCs in
use worldwide as of 2012, and 300 million new PCs are sold annually.
It is believed that 90% of them run a Windows OS and the remaining
percentage run a Mac OS. The dominance of the Wintel (computers that
run Windows on an Intel processor) computing platform is waning as
more people choose iPhones and Android phones.
Around the world, about a billion individuals use cell phones, and the
majority of these users utilize their portable devices to access the In-
ternet. Word processors, spreadsheets, electronic presentation software,
and tiny data management systems all saw huge increases in popularity
with the widespread use of Personal Computers (PCs) in the 1980s and
1990s. Both household and corporate customers benefited greatly from
these products. These PCs were freestanding devices before the 1990s
saw the development of operating system software for personal computers.
The Era of Client/Server (1983 to Present)
Computers such as laptops or desktops are used in clients/servers referred
to as clients and are connected via a network to robust server machines,
which offer the clients a range of services and functionalities. These
two different sets of devices where each is capable of handling different
aspects of computer processing. The client serves as the user’s point
of entry, whereas the server frequently administers networks, processes

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shared data, stores it, and provides host websites. The term “server” can Notes
apply to either the software itself or the physical machine that runs the
program that makes up the network. The server might be a mainframe,
but in current times, server computers are typically more efficient versions
of personal computers constructed on inexpensive chips and frequently
employing multiple processors in a single computer unit or server racks.
In the simplest client/server network, in a client-server setup, work is split
between the client computer and the server computer. This is a two-tier
client/server design. Small businesses often use straightforward client/
server networks, but most large corporations use more intricate, multitiered
(commonly referred to as N-tier, see Figure 9.2) client/server architectures
in which the workload of the network as a whole is distributed across
various levels of servers according to the type of service sought.

Figure 9.2: N-tier Architecture

Client/server computing enables companies to spread out computer tasks
among a number of more affordable, smaller workstations rather than a
single, centralized mainframe system. As a result, the organization as a
whole experiences an explosion of computer power and software appli-
cations.
The Era of Enterprise Computing (1992 to Present)
Early in the 21st century, corporations looked to networking regulations
and software techniques to integrate diverse networks and applications
into the corporate infrastructure. As the Internet became a dependable
communication medium after 1995, business enterprises began utilizing
networking protocols like Transmission Control Protocol/Internet Protocol
(TCP/IP) to connect their various networks.

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Notes In order to enable seamless information exchange within the business and
between the company and other organizations, the resulting IT infrastructure
connects various pieces of computer hardware, as well as smaller networks
to a larger enterprise network. It is capable of establishing connections
between numerous types of computing equipment, including mainframes,
servers, desktops, and digital phones, as well as with public infrastruc-
tures like the phone network, the Internet, and public communications
networks. Software, such as enterprise apps and Web services, is also
needed for the enterprise infrastructure to connect disparate applications
and allow data to freely move across various business areas.
The Era of Mobile and Cloud Computing (2000 to Present)
The client/server approach has been advanced toward the “Model for
Cloud Computing” as a result of the Internet’s expanding bandwidth
power. A computing model known as “cloud computing” gives users on-
line access to a shared pool of computer resources, including computers,
storage, software, and services. These “clouds” of computer resources are
accessible from any connected device and place as needed.
As personal and business computing progressively shifts to mobile plat-
forms, dozens or perhaps tens of millions of computers are housed in
cloud data centres that may be accessed by desktop, laptop, tablet, en-
tertainment center, smartphone, and other client machines connected to
the Internet. Large-scale cloud computing facilities are run by IBM, HP,
Amazon, and Dell. These facilities offer high-speed Internet connections,
computing capacity, and data storage to businesses that want to oversee
their IT systems remotely. Software is sold as a service that is offered
through the Internet by companies like Google, Microsoft, Amazon, SAP,
Oracle, and Salesforce.com.

9.4.3 Components of Information Infrastructure

Seven key components make up the IT infrastructure of today’s world.
These are the building blocks of a system, and the best manufacturers in
each category are shown in Figure 9.3. These are all investments that need
to work together for the business’s infrastructure to run well. In the past,
technology suppliers that provided these components were frequently in
rivalry with one another and offered purchasing companies a combination

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of proprietary, incompatible partial solutions. However, significant clients Notes

have increasingly compelled vendor companies to collaborate in strategic
alliances with one another.

Figure 9.3: Components of IT Infrastructure

‹ Web-based platforms (Apache, Microsoft IIS, .NET, Unix, Cisco,
Nortel, Java)
‹ Hardware platforms for computers (Dell, IBM, Sun, HP, Apple,
Linux machines)
‹ Platform Operating Systems (Microsoft Windows, Unix, Linux,
Mac OS X)
‹ Business Software Programs (including middleware, SAP, Oracle,
PeopleSoft, Microsoft, BEA)
‹ Network/Telecommunications (Microsoft Windows Server, Linux,
Novell, Cisco, Lucent, Nortel, MCI, ATT, Verizon)
‹ Consultants and System Integrators (IBM, KPMG, Accenture,
Capgemini)
‹ Storage and Management of Data (IBM DB2, Oracle, SQL Server,
Sybase, MYSQL, EMC Systems)

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Notes CASE STUDY

The IT systems of a service company needed updating significantly.
The company’s current server hardware was over nine years old and
was showing signs of instability. Microsoft also stopped providing
updates and fixes for Windows 2008 R2 Server Operating System,
which the server was using. In addition, many already-existing PCs
ran slowly due to their age and the fact that their Operating Systems
were on the verge of reaching their own end-of-life. We proposed
other enhancements, but financial limits hindered their implementation.
Their business operations process informed the suggestion to upgrade to
on-premises infrastructure rather than the cloud. A phishing attack’s nega-
tive effects were ultimately what convinced them to green-light the project.
The following infrastructure upgrades were planned and carried out by
staff members after a site assessment and report were submitted to the
customer.
‹ Deployment of a brand-new, physically-present Host Server,
loaded with VMWare ESXi and four separate virtual machines.
‹ Transfer files and programs to other virtual servers.
‹ Upgrading and installing brand-new firewalls, switches, network-
managed battery backup, and a server rack to house the upgraded
hardware are all part of the networking equipment deployment
and upgrade.
‹ The customer gave their stamp of approval to Network Doctor’s
security bundle, which would improve their organization’s defenses.
What do you think the client should prefer as the solution from the
above points? What are the benefits associated with it?
Solution: An updated IT system was built and installed rapidly by
Network Doctor.
Using virtualization, servers and workstations have become more
adaptable assets with reduced maintenance burdens.
Benefits:
‹ Increased levels of efficiency, reliability, and productivity.
‹ Improved the level of security.

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IN-TEXT QUESTIONS Notes

4. The five eras of IT infrastructure are __________ special-

purpose machines, general-purpose mainframe and minicomputer
computing, personal computers, client/server networks, and
enterprise and Internet computing.
5. Professional programmers and system administrators controlled
highly centralized computing during the__________ era.

9.5 Legal Issues and National Information Infrastructure

One of the main issues societies are experiencing in the modern era
is information system security. Information systems are now a crucial
component of daily life in the workplace, home, government, and other
institutions. The way individuals live their lives, conduct business and
even run the government has altered on account of information systems.
Information systems can be used in a variety of ways to complete various
jobs more quickly and easily, or even to perform many tasks at once.
This is why information systems have become such a crucial component
of daily life.
In their short history, Information systems have emerged into something
so complex and intricate. Society has advanced alongside information
systems, creating the so-called “digital firm era,” or a generation that
is more technologically dependable. The digital company age has led to
increased profitability, competitiveness, and efficiency for any business
of any size that employs an information system, in addition to increased
reliability for information systems.

9.5.1 Issues and Security of Information Infrastructure

Due to the importance of information systems in today’s high-tech so-
ciety, disruptions to these networks can have serious consequences for
people’s ability to carry out their usual, habitual activities. There are
still a number of modern issues, such as advertising, hacking, blocking,
harmful software, eavesdropping, faking, and identity theft, despite the
fact that the complex role that information systems play in everyday life
has been honed to a near-perfect level. These problems presently pose a
danger to the safety and reliability of our information networks.

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Notes Users of information systems have been searching for novel approaches
and state-of-the-art technology to deal with the serious repercussions of
the problems they face. Individuals who use computer systems must take
precautions to keep themselves safe in addition to using new methods and
technology to solve these issues. Individuals who use computer systems
can safeguard themselves against all current issues with a few specific
methods. Information systems’ future is uncertain because it’s up to the
users to decide. The users will encounter numerous unforeseen issues on
account of this unexpectedness.
The term “information system security” refers to the safeguards put in
place to prevent the system from being hacked or otherwise compromised
in any way, even by accidental or malicious use.
Information systems’ security primarily consists of two components:
‹ Use of Security in Information Technology: This involves protecting
the system from malicious cyber-attacks that aim to obtain sensitive
private information or take over internal systems.
‹ Data Security: Protecting the integrity of data in the event of
emergencies such as natural catastrophes, computer/server problems,
physical theft, etc. For such issues, data backups are typically kept
off-site.

9.5.2 Threats to Information Systems

Threats to information security can take many different forms, including
software attacks, intellectual property theft, identity theft, equipment theft,
information theft, sabotage, and information extortion. Threats can be
something that has the potential to damage, destroy, or adversely influence
a target item or targets of interest by taking advantage of a security flaw.
Attacks by computer viruses, bugs, Trojan horses, and other malware are
examples of software attacks. A lot of users think that malware, viruses,
worms, and bots are all the same thing. However, they are not identical;
the sole factor that unites them is that each one is harmful software.
Malware is an acronym for malicious software. Therefore, malware is
simply defined as malicious software, which might include intrusive
computer code or anything else created with the intention of damaging
the mechanism.

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Malware can be categorized into two groups: Notes

1. Infection Techniques
2. Malware Behavior
Following are examples of malware based on the techniques of infection:
1. Virus: By attaching to the applications on a computer, they can
reproduce themselves. The host computer, such as music, films,
etc., and then spread over the Internet. The initial detection of the
Creeper Virus was made on ARPANET. File viruses, macro viruses,
boot sector viruses, stealth viruses, etc. are a few examples.
2. Worms: Worms are naturally self-replicating, but they do not attach
themselves to the host computer’s software. Worms are aware of the
network, which is the main distinction between them and viruses.
If a network is present, it can simply move between computers.
For instance, they won’t do any harm to the target device, but they
might slow it down by taking up hard disk space.
3. Trojan: Trojans operate entirely differently than viruses and worms.
The word “Trojan” comes from Greek mythology’s “Trojan Horse”
story, which describes how the Greeks entered the walled city of Troy
by concealing their men within a large wooden horse that had been
presented as a gift to the Trojans. The Trojans naively trusted the gift
since they loved horses so much. The soldiers emerged throughout the
night and launched an inside assault on the city. In computers also,
when the software is used, it will accomplish its goal of information
theft or carry out any other task for which it was designed. Their aim
is to conceal themselves inside software that seems to be trustworthy.
They usually provide backdoor entry points via which risky software or
criminals can invade your system and extract your private data without
your consent or agreement. FTP Trojans, Proxy Trojans, Network
Access Trojans, etc. are a few examples.
4. Bots: Considered a more sophisticated version of bugs. These processes
run automatically to communicate online without requiring human
participation. Either way, they are possible. A malicious bot only
needs to infiltrate a single host in order to establish communication
with the botnet’s central computer and send instructions to every
compromised device in the network.

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Notes Malware Based on Behavior:

1. Adware: Although not precisely malevolent, ads do violate consumers’
privacy. They show advertisements on the desktop of computers or
within specific programs. They are bundled with free software, which
serves as the primary source of income for such creators. They keep
track of your preferences and present relevant adverts. Adware can
keep an eye on your computer activity and potentially damage your
computer if malicious code is embedded inside the software.
2. Spyware: This is a program, or more precisely, a software component,
that keeps track of your online activity and divulges the data it
gathers to parties that express an interest. The majority of the time,
viruses, Trojans, and worms release spyware. Once dropped, they
establish themselves and remain motionless to avoid being noticed.
KEYLOGGER is among the most prevalent types of spyware.
Keyloggers’ primary function is to log user keystrokes together
with a timestamp. Consequently, interesting data is collected, such
as usernames, passwords, credit card information, etc.
3. Ransomware: Software of this kind can lock your computer or
encrypt your files, rendering it partially or completely inaccessible.
After that, a screen will appear demanding payment or a ransom.
4. Scareware: This malicious software poses as a utility to repair your
computer, but when it is run, it will corrupt or entirely destroy it.
The software will display an alert to frighten you and induce you
to act, such as paying them to patch your system.
5. Rootkits: These programs are made to take over the user system and
get administrative rights, or root access. The exploiter is free to take
anything once they have admin privileges, including confidential
files and data.
6. Zombies: They function in a manner akin to spyware. The infection
method is the same, except instead of spying and stealing information,
they wait for a hacker’s order.
‹ Intellectual property theft is the infringement of such rights as
copyrights, patents, etc.
‹ The term “identity theft” refers to the act of someone else
utilizing another person’s login information to access a person’s

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computer or social media account or to acquire the personal data Notes

of that person.
‹ Thievery of equipment and data is on the rise today due to the
transportable nature of electronics and the expanding informational
capacity.
‹ Sabotage refers to ruining a company’s website in order to
undermine client faith.
‹ Information extortion is the robbery of a corporation’s assets or
information with the intention of receiving cash. As an illustration,
ransom ware might lock victims’ files, rendering them inaccessible,
and demand payment in exchange.

9.5.3 National Information Infrastructure

1991’s High-Performance Computing Act established the National In-
formation Infrastructure (NII). During the Clinton administration, Vice
President Al Gore helped popularize this communication policy term.
National Information Infrastructure (NII) refers to the global system of
interlinked computer networks, data storage facilities, and electronic de-
vices that allows for easy access to enormous quantities of data. The term
refers to a broad category of interconnected networks that encompasses
the likes of the public internet, the public switched telephone network,
and other technologies like cable, wireless, and satellite.
Creating public and commercial access to huge volumes of information
required the development of communication networks, interactive services,
compatible computer equipment, computers, spreadsheets, and consumer
devices. Besides the physical infrastructure (cameras, scanners, keyboards,
telephones, faxes, desktops, switches, diskettes, sound and video tape, cable,
wire, satellite communication, optical fibre power grids, microwave nets,
flat screens, monitors, and printers) used to convey, store, procedures, and
display speech, data, and images, NII was intended to include a variety of
interactive features, user-tailored services, and a host of other features.
Understanding which tasks should be assigned to the NII and which
responsibilities are not public goods and should not be assigned to the
NII is the challenge that we currently confront in India [McKnight and
Bailey 1997; Council 1994].

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Notes The following summarizes the essential requirements that the NII
must meet:
(1) Every town in the nation with a population of more than five lakh
people should be connected by a computer network called the NII.
This network will be known as IndiaNET.
(2) Users should be charged for access to the network regardless of the
physical location of the destinations they reach over the network.
(3) IndiaNET should supply “leased lines” to retail users, who should
be charged a fixed monthly fee rather than a cost per unit of
consumption for the connection.
(4) No limitations should be placed on how these lines are used, i.e.,
on the applications users discover for this computer connectivity.
The pricing strategies chosen will determine if the NII is successful in
having considerable influence on the nation. Due to exorbitant costs and
usage limitations, several telecom initiatives in the nation have failed
[Shah 1997]. A clear departure from conventional beliefs in India’s
telecom sector is required as it relates to price if the NII is to have its
full economic impact. Delivering networking to Indian residents and
businesses at costs that are competitive with global best practices should
be IndiaNET’s primary goal. The above-suggested rate of Rs. 35,000 per
month for 2 Mb/s is standard practice around the world.
This kind of pricing for a “pure data conduit,” with no limitations on how
that pipe is utilized, will mark a significant advancement for the Indian
telecom industry. A large portion of India’s economy will find long-haul
computer networking to be a feasible alternative thanks to these prices.
Only the most telecom-hungry segment of India’s corporate sector can yet
afford the high-capacity telecommunications infrastructure there. We may
anticipate that institutions like schools, libraries, co-ops, governments,
municipalities, non-profit organizations, etc. will all be able to take ad-
vantage of the network for sharing and consuming information as well
as communicating with one another for pricing like Rs. 35,000 for each
month for 2 Mb/s. Many of these enterprises might not require 2 Mb/s
in its entirety and instead buy portions of it from resellers.

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ACTIVITY 2 Notes

‹ Identify common threats to Information System with some

real-world examples.
‹ Write a short note on NII.

9.6 Summary
‹ Although IT infrastructure is described in a variety of ways, the
key components always remain the same.
‹ Components of IT infrastructure include Web-based platforms,
Hardware platforms for computers, Platform Operating Systems,
Business Software Programs, Network/Telecommunications, Consultants
and System Integrators, and Storage and Management of Data.
‹ Information Technology Architecture within an organization has an
impact on three levels, including the server, middleware, and client.
‹ The design concept or layout for the IT architecture produced by
the corporate strategy planning phase consists of a Platform for
technology, Data Resources, and the architecture of applications.
‹ Human IT infrastructure relies on technology components as its
base to deliver the necessary IT services for business requirements.
‹ Today’s IT infrastructure in businesses is the result of almost fifty
years of advancements in computer platforms. There are five stages
to this evolution, each of which represents a distinct arrangement
of the computer resources and infrastructure.
‹ Malware is simply defined as malicious software, which might
include intrusive computer code or anything else created with the
intention of damaging a system.
‹ Malware can be categorized into two groups: Infection Techniques
and Malware Behavior.
‹ The High-Performance Computing Act of 1991 gave rise to the National
Information Infrastructure (NII). It was a phrase in communications
policy that Vice President Al Gore helped popularize during the
Clinton Presidency.

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Notes
9.7 Answers to In-Text Questions
1. False
2. True
3. True
4. Automated
5. Mainframe

9.8 Self-Assessment Questions

1. Give a comprehensive history of the development of IT infrastructure
and illustrate your points with relevant examples.
2. Enlighten the various parts of IT architecture.
3. How have advances in IT affected managers’ ability to collaborate
with their staff and allocate scarce resources?
4. What are the issues with the IT infrastructure? Explain the threats
IT information includes.
5. Discuss Planning and Building IT Architecture.
6. What are the approaches to managing IT in various companies?
7. Describe Trojan. What are the other components of Infection techniques?
8. Discuss IT planning and its process.
9. What is the essential requirement of National Information Infrastructure?

9.9 References
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. (2014). Management information systems.
Pearson Education Limited.
‹ Bishop, A. (1993). The National Information Infrastructure: Policy
Trends and Issues. ERIC Clearinghouse on Information and Technology.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).
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‹ Post, G., & Anderson, D. (2006). Management information systems. Notes

Boston, Mass.: McGraw-Hill/Irwin.

9.10 Suggested Readings

‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. (2014). Management information systems.
Pearson Education Limited.

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 L E S S O N

10
Strategic Information
System and Technology
Shikha Singh
Research Scholar
IMSAR
Maharshi Dayanand University
Email-Id: [email protected]

STRUCTURE
10.1 Learning Objectives
10.2 Introduction
10.3 IT Leadership
10.4 IS Strategy Planning
10.5 IS Strategy and Effect of IT on Competition
10.6 Re-Engineering Work Processes for IT Application
10.7 Case on the Strategic Use of IT in Different Industries
10.8 Summary
10.9 Answers to In-Text Questions
10.10 Self-Assessment Questions
10.11 References
10.12 Suggested Readings

10.1 Learning Objectives

In this lesson, the learning objectives we will be discussing are:
‹ Identify the role of IT Leadership and the recent trends it has been following for
changing the business environments.
‹ Identify several basic competitive strategies and explain how they use information
technologies to confront the competitive forces faced by a business.

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‹ Explain how knowledge management systems can help a business Notes

gain strategic advantage.
‹ Describe some instances when business process reengineering makes
strategic use of internet technologies.

10.2 Introduction
Every organization needs strong IT leadership. Companies gain from
having a senior leader who can use technological advancements in the
sector and inspire employees both inside and outside the IT department.
A company’s core competency must be technology, and the CIO needs to
sit on the board with a voice as powerful as any other executive. More
IT executives are ascending to the top of the company nowadays. A wise
CIO would connect with the rest of the business and take the initiative
to lead the corporation into a technology-equipped future rather than
accepting the position due to internal concerns. This chapter will discuss
the significance of IT leadership.
This chapter will show that information systems are more than just a
collection of technologies. These systems help companies make good
decisions, work well together, and run their businesses efficiently. The
way businesses compete may alter as a result of information technology.
Numerous competitive strategies can be supported by information tech-
nologies. They can aid a company in reducing costs, differentiating and
innovating its goods and services, fostering growth, forging alliances,
securing long-term relationships with clients and suppliers, putting up
barriers to entry, raising switching costs, and maximizing its investment
in IT resources. Therefore, information technology can aid a company
in gaining a competitive edge in its interactions with clients, partners,
suppliers, rivals, newcomers, and manufacturers of replacement goods.
Business Process Reengineering (BPR) is often referred to as “core pro-
cess redesign,” “new industrial engineering,” or “working smarter.” All of
them suggest the same idea, which centers on merging business process
redesign with the use of Information Technologies (IT) to support the
reengineering activity.
Before initiating a reengineering project, businesses must fulfil certain
prerequisites to ensure its thoroughness and effectiveness. Initially, the

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Notes management should abandon all previously implemented policies and

procedures. Moreover, they must discard other ineffective organizational
and manufacturing approaches. At this time, the redesign and renovation
of an organization should commence.

10.3 IT Leadership
Your ability to adapt to an ambiguous and dynamic digital environment
will be a key factor in determining how successful your firm is in the
digital age. It will also entail utilizing the chances for organizational
development given by technological advancements and digital trends. To
put it another way, outstanding IT (information technology) leadership
will be essential for your success.
The value of having knowledgeable and creative IT leadership is becoming
more and more apparent as businesses and industries continue to change
as a result of adjusting to technology breakthroughs and the trends that
result from them.
No matter how big or small your business is, if you make and use a
successful digital transformation strategy, your chances of success will
probably go up.

10.3.1 Meaning of IT Leadership

IT leadership is the management of an organization’s IT infrastructure,
software, applications, and resources by an individual or group of individ-
uals in senior roles. This serves as the framework for the organization’s
business technology strategy and goals.
The senior executives in charge of an organization’s Information Tech-
nology (IT) infrastructure and applications that support and propel the
overarching business strategy and objectives are known as the IT lead-
ership group. The chief information officer, often known as the CIO, is
typically referred to as the senior IT leader, but at some firms, this duty
is now shared with a number of other “information chiefs,” including the
chief digital officer, the chief data officer, and the chief analytics officer.
With organizations increasingly focusing on leveraging IT for initiatives
that generate revenue and as IT becomes a driver of business change,
strong IT leadership is essential to aligning IT and the business.

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Organizational IT leadership involves having a clear vision for using IT to Notes

enhance services and goods, sharing that vision to others, and creating a clear
IT action plan to make the vision a reality. True leaders decide where they
want their organization to go, put that plan into action, and then provide the
resources required to make that plan successful over the long term.
It is now crucially important for an organization’s IT leadership. The
primary method for achieving an organization’s strategy and objectives
is now information technology. As a result, relying on IT is necessary
to implement corporate strategy, facilitate innovation, and establish op-
erational stability. As a result, IT leadership needs to possess: excellent
technical abilities and knowledge of market trends and best practices to
provide continuous service delivery and operational stability. Thorough
knowledge of the business operations and strategies of the corporation,
as its role pervades the entire range of functions.

10.3.2 The Role of IT Leadership

Information technology is advancing and changing so quickly that in a
few years, a lot of what we know now may not even be relevant. Having
said that, a few long-term leadership positions have been chosen. Refer
Figure 10.1 in text.

Figure 10.1: Role of IT Leadership

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Notes ‹ Information Seeker: It’s not an option to keep up with the most
recent technological advancements. Change is inevitable, and when it
does, you must adjust, just as with the weather. Given that company
executives cannot keep up with everything, trend spotting has become
a crucial part of IT leadership. IT leadership needs to stay on top of
emerging trends and technologies that give them a clear competitive
edge. When combined with distinctive business methods, such an
advantage could result in a high return on investment and support
brand innovation. Current dangers and vulnerabilities that can utterly
disrupt company strategy and profitability must be constantly kept
at the forefront of IT leadership’s mind. Every company’s worst
nightmare is fraud and lost data as a result of cyber-attacks.
‹ Conciliator and Negotiator: Technology-related decisions need to
be made frequently in today’s world. These can include decisions
on security, data storage, choosing a vendor, etc. The negotiation,
acquisition, and execution of each of these elements are required.
Another important aspect of IT leadership is finding a way to balance
competing business needs with the demands of technology. Leadership
in IT is often involved in budget and spending negotiations.
‹ Information Manager: Every new invention and piece of technology
has unique data components that need to be recorded and handled.
It is crucial for IT leaders to keep up with the latest developments
and innovations. Knowing what data is internal to the firm and
what data is external might help reduce risk.
‹ Powerful Leader: Being knowledgeable about infrastructure’s
technical components is only one piece of the puzzle. The IT
professional needs to be able to take charge. IT can experience the
negative effects of weak leadership, just like business operations.
To establish and maintain a comfortable workplace while ensuring
that the company is aware of all elements of IT, personnel must
possess excellent leadership abilities. The business must be well-
understood by IT leaders as well.
Some other responsibilities of IT leadership are:
‹ Creating a thorough organizational transformation plan.
‹ Managing and supervising the tasks essential for the strategy’s
effective execution.
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‹ Ensuring efficient use of IT applications and infrastructure that Notes

help your firm succeed.

10.3.3 Areas Driving IT Leadership

An effective IT leader must communicate well. Here are six communi-
cation-related ideas that IT leaders need to thoroughly understand:
‹ Both the business and IT must be understood by each other.
‹ Effective value metrics that make evident IT’s contribution to the
business are a must.
‹ Effective strategic, tactical, and operational governance mechanisms
should be developed by IT.
‹ IT must encourage cooperation between IT and business stakeholders.
‹ In order for business leaders to grasp the magnitude of IT’s
contribution and that the technology is performing well both inside
the company’s walls and for outside clients, IT must effectively
convey its scope and architecture.
‹ Both leadership and IT abilities are required of IT leaders.
IN-TEXT QUESTIONS
1. The primary method for achieving an organization’s strategy
and objectives is now __________.
2. Given that company executives cannot keep up with everything
__________ has become a crucial part of IT leadership.

10.3.4 Trends in IT Leadership

The key IT leadership trends you need to be aware of in order to suc-
cessfully transform your business are listed below:
‹ Added Responsibilities for the CIO: The work requirements for
the CIO position have significantly changed as a result of the digital
revolution. Information officers can no longer solely concentrate
on the operational side of IT because IT now directly affects the
organization’s bottom line.

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Notes Success for CIOs is increasingly determined by business results. CIOs

must make sure that every IT installation has a beneficial impact on the
business because the majority of firms rely on digital technology for
daily operations. Additionally, it is their obligation to make sure that
the organization’s culture is strong and that its leadership strategy is
compatible with those principles.
‹ Function of Data: CIOs use data to make informed decisions, increase
conversion rates and profitability, and cut expenses regardless of
the type of organization they are running.
CIOs can find areas of the organization’s business processes that
need to be optimized by reengineering the way data is gathered,
processed, and reported. The organization’s character will determine
how the obtained data is used.
CIOs of companies in the service sector typically look to gain a
competitive edge by figuring out how to use the abundant amounts
of data that their company generates most effectively, whereas CIOs
of companies that work with sensitive data and high-profile clients
place a higher emphasis on ensuring data security.
‹ Artificial Intelligence (AI): The replication of human intelligence
functions by machines, particularly computer systems, is known as
artificial intelligence. Expert systems, natural language processing,
speech recognition, and machine vision are some examples of
specific AI applications. The adoption of AI will be one of the
most notable developments in IT leadership in 2021. Dr. Kai-Fu
Lee, an AI expert, claims that AI might double conversion rates
while cutting costs in half for businesses.
‹ Analytics of Data: Organizations are still drawn to data analytics
to provide better customer service. Automation is made easier and
more autonomous behavior among organization employees is made
possible by using data analytics.
‹ Remote Work: In light of the state of the world today, remote work
has become a trend that is probably here to stay, at least for the
near future. When developing a leadership strategy, it is important
to take into account that teams that operate remotely may provide

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challenges for organizational transformation. The conflict between Notes

people’s personal and professional lives is more likely to cause
problems for remote workers. The capacity to concentrate on one’s
work may be hampered by distractions from home, which could
ultimately influence employee performance.
‹ Transformation of Organizational Culture: The workplace, the nature
of their jobs, their places, and their origins can impact employees’
IT ideals and views. Leadership often supports distinct values than
lower management, which may impede change. Information officers
must be aware of the value of organizational culture and be able to
identify and assess the culture already present in your company. IT
leadership should give company culture transformation top attention
if any flaws are found.

10.4 IS Strategy Planning

An organization can adapt or otherwise modify its business strategy and/
or organizational structure with the aid of a Strategic Information Sys-
tem (SIS). In order to gain a competitive edge, it is frequently used to
streamline and accelerate the response time to environmental changes.

10.4.1 Meaning of Strategic Information Systems (SIS)

Information systems known as Strategic Information Systems (SIS) are
created in response to business initiatives within corporations. They are
designed to provide the organization with a competitive advantage. They
might offer a good or service that is more affordable, distinctive, tar-
geted at a certain market niche, or innovative. The field of information
technology has a prominent aspect known as Strategic Information Man-
agement (SIM) (IT). SIM essentially assists companies and organizations
in classifying, storing, processing, and transferring the information they
produce and receive. Additionally, it provides solutions to assist busi-
nesses in applying measurements and analytical tools to their information
repositories, enabling them to spot growth prospects and determine how
to boost operational efficiency.

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Notes 10.4.2 Characteristics and Indicators of SIS

These are some of the salient characteristics of Strategic Information
Systems:
‹ Decision support tools that make it possible to create a strategic
plan for integrating information systems and technologies with an
organization’s business objectives.
‹ The majority of Enterprise Resource Planning (ERP) solutions
combine and link business processes to achieve organizational goals
and maximize available resources.
‹ Database systems that can “mine” information to make the best use
of the business data that is accessible for marketing, production,
promotion, and innovation. To help maximize database marketing
prospects, the SIS systems also make it easier to identify the data
collection tactics.
‹ A company may benefit from Strategic Information Systems (SIS)
in terms of competitiveness. Competitive indicators are used to
determine strategic position. A company in a strong competitive
position typically has strong competitive indications.
‹ Information Systems (SIS) can be considered strategic if they:
‹ Support the company’s competitive strategy.
‹ Modify how a company competes.
‹ Alter the organization of industries.
‹ SIS may provide you with a competitive edge.
‹ The following are indicators of competitive position:
‹ Increased sales
‹ A larger market share, whether fixed or not
‹ New clients
‹ Enhanced client loyalty
‹ A reduction in production expenses
‹ Reduction in service (operations) expenses
‹ An improved market repute

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IN-TEXT QUESTIONS Notes

3. New clients is one of the Indicators of Competitive Position.

(True/False)
4. To accomplish company goals and utilize resources to their
fullest, the majority of enterprise resource planning (ERP)
solutions consolidate and connect business processes. (True/
False)
5. Information officers can solely concentrate on the operational
side of IT. (True/False)

10.4.3 Competitive Strategies and Forces

Only by successfully overcoming the five competitive factors that deter-
mine how the competition in a given industry is structured can a company
survive and thrive over the long term. According to Michael Porter’s
classic model of competition, any company that wants to succeed and
survive must successfully develop and put into place strategies to com-
bat five different threats: (1) rivalry among competitors within the same
industry, (2) the threat of new entrants into an industry and its markets,
(3) the threat posed by substitute products that might capture market
share, (4) the bargaining power of customers, and (5) the bargaining
power of suppliers.
A company needs to take precautions against the forces that don’t always
get along with customer and supplier bargaining power. Customers may
force prices to unreasonably low levels or simply refuse to purchase the
good or service if their negotiating power becomes excessive. When a
significant supplier has excessive bargaining power, it can drive up the
cost of goods and services to unaffordable levels or simply starve a
company by restricting the flow of components or raw materials needed
to make a product. Refer Figure 10.2.

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Notes

Figure 10.2: Competitive Forces

The above figure shows how organizations can use one or more of the
five fundamental competitive strategies to mitigate the dangers posed by
competitive forces.
‹ Cost-leadership Strategy: It is being a low-cost provider of goods
and services in the sector or figuring out how to assist suppliers or
clients in cutting prices or raising competitors’ expenses.
‹ Differentiation Strategy: Creating ways to set a company’s goods
and services apart from those of its competing companies or reducing
the advantages that competitors have in this area. With the help
of this tactic, a business may be able to concentrate its offerings
to gain a competitive edge in certain market segments or niches.
‹ Innovation Strategy: Discovering innovative business methods.
This plan can entail entering new markets or market segments,
creating distinctive goods and services, or both. The production or
distribution of goods and services may also include making drastic
changes to business practices that are so dissimilar from the way a
business has traditionally operated to affect the fundamental makeup
of an industry.
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‹ Growth Strategies: A company’s ability to create goods and services Notes

is significantly increased, as is its reach into international markets,
its ability to diversify into new products and services, or its ability
to integrate into related products and services.
‹ Alliance Strategies: Forming new commercial partnerships and links
with clients, suppliers, rivals, consultants, and other businesses.
These connections could be made through mergers, acquisitions,
joint ventures, the creation of “virtual firms,” or other marketing,
manufacturing, or distribution arrangements between a company
and its trading partners.
These approaches are not mutually exclusive, which is another important
aspect. In varying degrees, a company may employ one, a few, or all of
the methods to control the forces of competition. A specific action may
therefore fit into one or more competitive strategy categories. Implement-
ing a system that enables consumers to track their orders or shipments
online, for instance, might be regarded as a source of differentiation if
the other players in the market do not provide this service. Online order
tracking would not, however, serve to distinguish one company from
another if they did offer the service.

IN-TEXT QUESTIONS
6. Developing strategies to differentiate a company’s products
and services from those of its competitors or lessening the
__________ advantages of competitors.
7. __________ strategies aid in establishing new business relationships
and connections with customers, suppliers, competitors, consultants,
and other companies.

10.5 IS Strategy and Effect of IT on Competition

The Internet has increased competitive competition while maintaining
the old competitive dynamics in play (Porter, 2001). Due to the univer-
sal standards that underpin internet technology, it is simple for rivals to
compete solely on price and for new competitors to enter the market.

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Notes 10.5.1 Strategic Uses of Information Technology

Business strategies can be strategically shifted with the help of IT in
many companies. IT could help a business that has always offered its
wares in stores create an online retail strategy that allows it to expand
its client base, lower its delivery costs, and provide its customers with
more efficient service.
Information technology can assist a company in implementing the five
fundamental competitive strategies in a variety of ways.
Lower Costs:
‹ Use IT to significantly minimize business process expenses.
‹ Use IT to lower costs associated with consumers or suppliers.
Differentiate:
‹ Create new IT features to distinguish goods and services.
‹ Employ IT features to lessen competitors’ advantages in differentiation.
The rise of IT has altered business practices. It is having a profound
effect on how businesses develop their products overall. It is also
changing the merchandise itself, which includes everything a company
sells to a customer in order to satisfy their needs.
‹ Use IT characteristics to target specific market niches with products
and services.
Innovate:
‹ Develop new goods and services with IT components.
‹ Use IT to create distinctive new markets or market niches. IT allows
firms to reorganize and improve their operations, create innovative
goods and services, and even alter the very nature of the market
they operate in.
‹ Use IT to make significant, cost-cutting changes to corporate
processes that also enhance customer service, quality, and efficiency.
Encourage Growth:
‹ Manage regional and international business growth with IT.
‹ Diversify and incorporate IT into other goods and services.

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Create Alliances: Notes

‹ Establish virtual networks of business partners using IT.
‹ Create intra- and inter-enterprise information networks connected via
extranets and the Internet to enable strategic business partnerships
with clients, partners, and other parties.
ACTIVITY
Go online and research the uses of smartphones in industries different
from the ones reviewed here. Prepare a report to share your findings.

10.5.2 Examples of Strategic Uses of Information Technology

There are several instances of how certain businesses have used strategic
information systems to put each of these five fundamental strategies for
competitive advantage into practice. Refer Table 10.1.

Table 10.1: Strategic Uses of Information Technology

Strategic Uses
of Information
Strategy Company Technology Business Advantage
Cost Leadership -Dell Computer -Online custom -Lowest-cost producer
construction
-Priceline.com -Internet vendor -Buyer-set pricing
-eBay.com -Internet auctions -Auction-set prices
Differentiation -AVNET Marshall -E-commerce client -Growing Market Share
or provider
-Moen Inc. -Internet-based user -Growing Market Share
design
-Consolidated -Tracking customer -Growing Market Share
Freightways shipments online
Innovation -Charles Schwab -Trading discounted -Market leadership
& Co. stocks online
-Federal Express -Online flight -Market leadership
management and
parcel tracking
-Amazon.com -Full-service online -Market leadership
customer systems

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Notes Strategic Uses

of Information
Strategy Company Technology Business Advantage
Growth -Citicorp -Worldwide intranet -Growth in the
worldwide market
-Wal-Mart -Ordering of goods -Market leadership
using the Market
Global Satellite
Network
-Toys ‘R’ Us Inc. -POS inventory -Market leadership
management
Alliance -Wal-Mart/Procter -The supplier’s - Lower inventory costs
& Gamble automatic inventory and higher sales
replenishment
-Cisco Systems -Alliances for virtual -Competitive market
manufacturing agility
-Staples Inc. and -Online partners’ - Growing Market Share
Partners one-stop shopping

There are yet more ways that information technology can be applied
to the implementation of competitive strategy
‹ Create inter-enterprise information systems that are efficient and
convenient, preventing customers or suppliers from switching.
‹ Invest heavily in cutting-edge IT programs that create barriers to
entry for outsiders or competitors in the business.
‹ Include IT components in goods and services to make it more
challenging for customers to switch to alternatives.
‹ Turn operational investments in IS personnel, equipment, software,
databases, and networks into strategic applications.

10.6 Re-Engineering Work Processes for IT Application

Business processes are described as “a set of logically related tasks
carried out to accomplish a stated business objective” by Davenport &
Short (1990). “A structured, measured collection of actions designed to
create a specified outcome for a certain consumer or market” is what is
meant by a process. It suggests placing a lot of emphasis on how work
is carried out within organizations (Davenport 1993). According to them,

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processes have two crucial qualities: (i) They have clients, either internal Notes
or external; and (ii) they have cross-organizational borders, i.e., they take
place across or between organizational subunits. The value chain method
suggested by Porter and Millar is one method for identifying business
processes in an organization (1985).
The beginning and end points, interfaces, and organizational units involved
in a process—particularly the customer unit—are typically identified.
Process owners ought to be assigned to high-impact processes.

10.6.1 Business Process Re-engineering (BPR)

Business Process Re-engineering (BPR), often known as re-engineer-
ing, is one of the most crucial applications of competitive strategies.
Re-engineering is fundamentally rethinking and completely redesigning
corporate processes in order to achieve significant gains in cost, quality,
speed, and service. BPR combines a plan to support business innovation
with a strategy to significantly enhance business procedures so that a
company can become a far more formidable and successful competitor
in the marketplace.
Ideas for BPR are predicated on the assumption that every organization
needs a sense of purpose. The organization lacks a base upon which to
make process changes without that guidance, which comes in the form
of business and strategic strategies.
The goal of BPR is to reorganize tasks, personnel, and information tech-
nology in innovative ways that will support organizational objectives. It
entails reviewing and changing all of the organization’s business procedures.
Re-engineering has a large potential payoff, but it also has a significant
risk of failure and degree of organizational environment upheaval. It is
difficult to make drastic changes to corporate procedures in order to sig-
nificantly increase efficiency and effectiveness. For instance, numerous
businesses have redesigned, automated, and integrated their manufactur-
ing, distribution, financial, and human resource business operations using
cross-functional Enterprise Resource Planning (ERP) software. Although
many businesses have achieved tremendous advantages from such ERP
reengineering initiatives, many others have either suffered setbacks or
failed to make the changes they aimed for as shown in Table 10.2.

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Notes Table 10.2: Some of the Most Significant Distinctions between

Business Improvement and Business Process Re-engineering
Business Process
Basics Business Improvement Re-engineering
Level of change Incremental Radical
Process change Improved new version of Brand new process
the process
Starting point Existing Processes Clean slate
Frequency of change One-time or continuous Periodic one-time change
Time required Short Long
Typical Scope Narrow, within functions Broad, cross-functional
Horizon Past and present Future
Participation Bottom-up Top-down
Path to Execution Cultural Cultural Structural
Primary Enabler Statistical Control Information Technology
Risk Moderate High
(Source: Adapted from Howard Smith and Peter Fingar, Business Process Management:
The Third Wave (Tampa, FL: Meghan-Kiffer Press, 2003), p. 118)

Along with the use of IT, many businesses have discovered that organiza-
tional redesign methodologies are a key enabler of reengineering. Utilizing
self-directed cross-functional or multidisciplinary process teams is one
typical strategy, for instance. During the product development process,
a team of workers from several departments or specialties, such as engi-
neering, marketing, customer support, and manufacturing, may collaborate.

10.6.2 The Role of Information Technology in Business Process

Re-engineering (BPR)
The majority of business processes have been re-engineered with the help
of information technology. Computer and Internet technologies’ speed,
information-processing power, and connectivity can significantly improve
business operations’ efficiency as well as communications and teamwork
among those in charge of running and managing them.
For instance, the order management procedure shown in Figure 10.3 is
essential to the success of the majority of businesses. Many of them are

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reengineering this process using ERP software and Web-enabled e-busi- Notes
ness and e-commerce platforms.
Figure 10.3 shows the order management process consists of several busi-
ness processes and crosses the boundaries of traditional business functions.

Figure 10.3: Order Management Process

Information technology examples that assist in reengineering order
management processes:
‹ Systems for managing customer relationships that use corporate
intranets and the Internet.
‹ Extranets and Internet-based supplier-managed inventory systems.
‹ ERP software that combines the functions of production, distribution,
finance, and human resources.
‹ E-commerce websites that allow customers to enter orders, check
their status, make payments, and get service.
‹ Customer, product, and order status databases that employees and
suppliers can access through intranets and extranets.

10.7 Case on the Strategic Use of IT in Different Industries

CASE STUDY 1
LG Electronics
LG makes TVs, PCs, laptops, CD drives, DVD players, microwaves,
refrigerators, and cosmetics. In the early 1950s, we were a chemical
company that made unbreakable cosmetic caps. In 1958, a Korean
firm called Goldstar was founded and manufactured Korea’s first
radio in 1959. After this, we became consumer electronics majors.

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Notes LG Electronics India began in 1997. Today, we’re in several fields.

We have home PCs (MyPC), notebook PCs (XNote), CD drives, LCD
monitors, CRT monitors, and more in the computers and peripherals
sector. We have GSM mobile phones and Reliance India Mobile for
CDMA. We’re the largest CDMA handset maker. IT progressed well
in 2004. We recently opened a 150-crore factory in Pune. Our PC
endeavor expanded from almost nothing to 10,000 PCs every month.
IT sales increased 63% in the first half of 2004. IT sales hit 325
crores, up from 199 previous year. We’re a leader in optical storage
devices and have aggressive intentions to lead in monitors and PCs.
LG India plans to become a $10 billion firm by 2010, including 30%
from exports. We’ll consolidate our leadership in consumer electron-
ics, home appliances, IT, and GSM with our steadfast commitment
to our goals.
To realize our ambition, we’ll launch new items in 2005. We’ll add
servers. F-engine LCD monitors, the world’s only all-format DVD
writer, etc. We have over 900 regional distributors in India and hope
to enhance this number in the next years. New products, new markets,
and channel profitability will create many opportunities. 2005’s goals
are high-end merchandise and upselling.
In 2005, we’ll appoint new distributors in B and C-class cities.
We’ll expand our service center nationwide. India has 238 service
centers and 30 IT service centers. Most consumer electronics and IT
businesses launched showrooms in India in 2004. We’ll expand our
cybershop network to offer world-class services.
Questions:
1. Describe the choice and steps LG is taking to maintain its position
as a market leader in consumer electronics.
2. Offer ideas on how to transform LG into an online business that
integrates distributors, service facilities, and online retailers.
(Source acknowledgment: Adapted from article, Get Closer to customers, Dream
Big and Get Success by Monidar Jain, Country Manager, Logitech, 360 Magazine,
Volume 4, No. 23, Nov. 2004.)

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CASE STUDY 2 Notes

Precision Watches Ltd. (PWL)

Precision is a well-known brand of wristwatches, and PWL claims
it achieved this status through numerous management initiatives to
become an IT-enabled, Internet-driven E-enterprise. PWL is cus-
tomer-focused. E-environment reveals client desires and market
developments. This is possible because we collect real-time internet
information about client product choices, product sales by location,
sector, and market, and unsuccessful sales by reason, etc. With an
established communication network, PWL can respond faster to cus-
tomer requirements and expectations. Bangalore, Jammu, Gurgaon,
and Mumbai are PWL’s plants. PWL has daily management informa-
tion on Product Inventory due to networking all work centers, sales
locations, dealers, and distributors and using the enterprise business
process application suite.
Inventory of Products: Brand, Model, Price, and Location
Product Sales: Rapid and Moderate Movement
Market: Segment, Regions, and Areas
Client: Preferences, Profile, and Lost Clients
PWL says SAP makes all this feasible. SAP ERP’s deployment goal
was to improve information access.
‹ Protect user data.
‹ Supply-chain integration.
‹ Reduce watch inventory and know where everything is.
With ERP adoption, IT becomes an E-business enterprise. PWL’s
management can handle diverse consumer preferences efficiently.
Management can compete in a dynamic wristwatch industry with
gray markets and multinational brands. Supply chain integration with
IT-enabled applications and the Internet is difficult. PWL implemented
B2B solutions to handle, configure, track, and deliver orders online to
promote strategic initiatives. PWL is also considering implementing
Radio Frequency Identification Device (RFID) technology because
it’s more efficient for handling watches and high-value products.

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Notes Strategic use of IT and the Internet has made PWL an E-company
where IT and the Internet are business drivers and enablers. Manage-
ment says E-Enterprise solutions are key to the company’s success.
PWL’s weekly business, operating, and client meetings now have
online MIS support.
Questions:
1. What prompted PWL to deploy SAP-ERP?
2. What new initiatives are available for PWL thanks to E-Enterprise?
3. Explain how SAP-ERP improved PWL’s efficiency.
4. Explain how IT-enabled E-Enterprise has benefited PWL.
5. Describe PWL’s MIS role. Identify each level’s PWL information
system.
6. Who uses MIS in E-business? Determine user information needs.

10.8 Summary
‹ IT leadership is the management of an organization’s IT infrastructure,
software, applications, and resources by an individual or group of
individuals in senior roles. This serves as the framework for the
organization’s business technology strategy and goals.
‹ IT leadership needs to possess: excellent technical abilities and
knowledge of market trends and best practices to provide continuous
service delivery and operational stability.
‹ The role of IT leadership includes Information Seeker, Conciliator
and negotiator, Information manager, and Powerful leader for the
successful transformation of Businesses.
‹ A Strategic Information System (SIS) is a system that aids organizations
in changing or otherwise modifying their corporate structure and/
or business strategy.
‹ By enhancing the quantity of information that is available to all
employees, information systems can assist managers and employees in
working more productively and efficiently in this new environment.

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‹ More and more often, decisions are made at every level of an Notes
organization. Managers may make more tactical decisions about
how their particular department may contribute most effectively to
the overall business objectives while the Board of Directors may
make the big strategic decisions regarding investments and the
direction of future growth.
‹ According to Michael Porter’s classic model of competition, any
company that wants to succeed and survive must develop and
implement strategies to combat five different threats: (1) rivalry
among competitors within the same industry, (2) new entrants
into an industry and its markets, (3) substitute products that might
capture market share, (4) customer bargaining power, and (5) supplier
bargaining power.
‹ Five key competitive strategies are cost leadership, differentiation,
innovation, growth, and alliance.
‹ Information technology can help a corporation implement the five key
competitive strategies by lowering costs, differentiating, Innovating,
Encourage Growth, and Create Alliances.
‹ Reengineering is fundamentally rethinking and completely redesigning
business processes in order to achieve significant gains in crucial,
modern performance metrics like cost, quality, service, and speed.
With the use of information technology, the bulk of business
processes has been re-engineered.

10.9 Answers to In-Text Questions

1. Information Technology
2. Trend spotting
3. True
4. True
5. False
6. Differentiation
7. Alliance

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Notes
10.10 Self-Assessment Questions
1. How can Porter’s model of competitive forces assist businesses in
creating competitive information systems?
2. How can information systems help organizations gain a competitive
edge by using synergies, core strengths, and network-based strategies?
3. Describe how the Internet has changed competitive forces and
competitive advantage.
4. Explain why aligning IT with business objectives is essential for the
strategic use of systems.
5. Give examples to illustrate how each of these competitive strategies
can be supported by information systems.
6. It has been said that the management of cutting-edge merchants like
Dell and Walmart gives them an advantage over their rivals rather
than technology. In your opinion? Whether or not.
7. Discuss the role of IT Leadership.
8. What are the recent trends in IT Leadership that help in transforming
businesses?
9. Describe BPR and its implications.
10. What strategic role can information play in business process
reengineering?

10.11 References
‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. (2014). Management information systems.
Pearson Education Limited.
‹ Jawadekar, W. (2015). Management information systems. New Delhi:
McGraw Hill Education (India).
‹ Post, G., & Anderson, D. (2006). Management information systems.
Boston, Mass.: McGraw Hill/Irwin.
‹ Blokdyk, G. (2022). Information and Technology Leadership A
Complete Guide (p. 319). 5STARCooks. (2022). Retrieved from
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https://study.com/academy/lesson/the-role-of-it-leadership-in-modern- Notes
organizations.html
‹ What is IT leadership (information technology leadership)? - Definition
from WhatIs.com. (2022). Retrieved from https://www.techtarget.com/
searchcio/definition/IT-leadership-information-technology-leadership
‹ What is IT Leadership? Roles, Trends, and Transforming Culture.
(2022). Retrieved from https://www.liquidweb.com/blog/it-leadership/

10.12 Suggested Readings

‹ O’Brien, J., & O’Brien, J. (1994). Introduction to information
systems. Burr Ridge, Ill.: Irwin.
‹ Laudon, K., & Laudon, J. (2014). Management information systems.
Pearson Education Limited.
‹ Blokdyk, G. (2022). Information and Technology Leadership A
Complete Guide (p. 319). 5STARCooks.

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 Glossary

Alliance: A union or association formed for mutual benefit.

Artificial Intelligence: The study and creation of computer programs that exhibit human
intelligence.
BPR: Business Process Re-Engineering (BPR) is a business management approach that was
first developed in the early 1990s. It focuses on the study and design of organizational
workflows and business processes.
Business Continuity: The Business should continue irrespective of all the problems that
might come into the picture.
Business Ecosystem: Loosely coupled but interdependent networks of suppliers, distribu-
tors, outsourcing firms, transportation service firms, and technology manufacturers.
Business Objective: Goals that a company sets goals for itself, those goals should be
specific and measurable so that they can be monitored as the company evolves.
Business Processes: It refers to the way that work is planned, synchronized, and concen-
trated to produce a valuable good or service.
Business/IT Planning: The process of developing a company’s business vision, strategies,
and goals, as well as how they will be supported by the architecture of the company’s
information technology and its business application development process.
Chief Information Officer: A Chief Information Officer (CIO) is the company executive
responsible for the management, implementation, and usability of information and com-
puter technologies.
Client/Server Network: A computer network in which end-user workstations (clients) are
linked via telecoms to web servers and perhaps mainframe super servers.
Client: (1) An end user. (2) The end user’s networked microcomputer in client/server net-
works. (3) The version of a software package suited for use with an end user’s networked
microcomputer, such as a Web browser client and a groupware client.
Collaboration: Working with others to achieve shared and explicit goals.
Competitive Advantage: A company’s ability to produce goods or services faster, more
efficiently, or for less money than its competitors.

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Notes Competitive Forces Model: This model provides a general view of the
firm, its competitors, and the firm’s environment.
Competitive Forces: Shape the structure of competition in its industry.
Competitive Strategies: It is a long-term action plan of a company that
is directed to gain a competitive advantage over its rivals.
Conciliator: A person who acts as a mediator between two disputing
people or groups.
Core Competency: Activity at which a firm excels as a world-class leader.
Cost: The value of money that has been used up to produce something
or deliver a service, & hence is not available for use anymore.
CRM: CRM comprises practices and tools for managing client, customer,
and business partner interactions in marketing, sales, and service, regard-
less of communication channel. CRM emphasises customer acquisition,
retention, and growth.
Database Maintenance: The process of updating a database by adding,
modifying, or deleting data.
Database Management Approach: A technique for storing and data
processing in which individual files are merged into a shared pool, or
database, of information accessible to diverse application programs and
users of the product for processing and data extraction.
Database Management System (DBMS): A set of computer programs
that controls the creation, maintenance, and utilization of the databases
of an organization.
Database: Database refers to an organized collection of data used by
application software in an information system. Examples of databases
include Access, MySQL, etc.
Decision Support Systems (DSS): DSS are information systems that
help organizations make decisions. DSS is also used in organizational
planning and error handling.
Documentation: Descriptions of how an information system works from
either a technical or end-user standpoint.
Electronic Data Interchange (EDI): The direct computer to computer
exchange between two organizations of standard business transactions,
such as orders, shipment instructions, or payments.

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 Glossary

Enterprise-level Software: It is software that provides business logic Notes

support functionality for an enterprise, typically in commercial organiza-
tions, which aims to improve the enterprise’s productivity and efficiency.
ERP: An Enterprise Resource Planning (ERP) system integrates software to
manage and integrate a company’s business processes. These sets include
financial and cost accounting, sales and distribution, materials manage-
ment, human resource management, production planning with computer
integrated manufacturing, supply chain, and customer information.
Exception Report: A report stating all occurrences where actual perfor-
mance didn’t turn out as expected.
Expert System: It consists of knowledge base, inference engine, and
dialog management module to mimic the decision-making process of a
human expert.
Extranet: A network that connects certain firm resources to its clients,
suppliers, and other business partners by connecting their intranets over
the Internet or other private networks.
Facts: A piece of data that is presented as having some sort of objective
reality.
Global Information Technology: The application of computer-based in-
formation systems and communication networks that make use of a range
of information technologies to assist the management and operations of
a global company.
Globalization: Establishing a global firm through market expansion, the
use of global production facilities, the creation of global partnerships,
and other means.
Group Decision Support System: It provides mechanism for facilitating
decision-making for a group of people rather than an individual.
Groupware: Software tools for electronic communications, electronic
conferencing, and collaborative work management are available to en-
able and improve communication, coordination, and cooperation across
networked teams and workgroups.
Hacking: (I) Obsessive use of a computer. (II) The usage of computers
without authorization.

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Notes Hybrid Cloud: Computing model where firms use both their own IT
infrastructure and also public cloud computing services.
Information System: (I) A collection of people, methods, and resources
within an organization that collects, transforms, and disseminates infor-
mation. (II) A computer program takes as its input various types of data
and outputs some form of useful knowledge.
Information Technology (IT): Computer-based information systems uti-
lize hardware, application, telecommunications, data analytics, and more
information processing technologies.
Information Technology Architecture: An abstract plan detailing the
IT department’s structure, data resources, application architecture, and
other related aspects.
Inter-Enterprise Information Systems: Organized internally into clusters
of process and cross-functional teams linked by intranets.
Inter-organizational Information Systems: Information systems that
link one organization to another, such as a company and its clients and
vendors.
ITeS: Range of activities that make use of information technology to
boost an organization’s productivity.
Leadership: The ability to inspire a team to achieve a certain goal.
Ledger: A physical book or electronic document that contains a record
of all business transactions. Financial statement of a company is prepared
using summary total in ledgers.
Management: The act of overseeing something, often known as the di-
rection or supervision of something (like business).
Methodology: A well-defined method of doing a task or developing some
product. It lays down the set of steps to be followed.
Multi-Factor Authentication: A level of security that must be passed to
get inside any system for accessing data.
Network: A network is a specific kind of relationship joining a particular
group of people, objects, or events.
Operational Information: It refers to day-to-day activities and is ben-
eficial for controlling repetitious operations.

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 Glossary

Operations Research: Organizational administration benefits from the Notes

analytical problem-solving and decision-making method known as Oper-
ations Research (OR). In operations research, problems are broken down
into their most basic components before being quantitatively examined
and solved through a sequence of steps.
Organisation: Business enterprise or organisation, also known as an entity
that was established for the purpose of engaging in commercial activity.
Organizing: Allocating the tasks required to accomplish the objectives
set during project planning is the process of organizing.
Outsourcing: The practice of contracting computer center operations,
telecommunications networks, or applications development to external
vendors.
Particularism: Making decisions and taking action based on specific or
individual characteristics.
Planning: Planning is the process of determining the project’s goals and
objectives before the project is put into action. Planning can bridge the
gap between the project’s current status and its desired position.
Recurrent Costs: These are the obvious ones, such as maintenance of
systems and programming, staff and stationery, and equipment.
SCM: Supply chain and supply management coordinate material, in-
formational, and monetary movements between suppliers, producers,
distributors, and customers.
Seamless: Perfect, Flawless.
Staffing: The process of staffing involves putting the right person in the
right job. It refers to giving someone a position based on their qualifi-
cations or identifying the employees inside the company who are most
suited to perform a particular task.
Strategic Information Systems: Support or shape the competitive posi-
tion and strategies of a business enterprise.
Strategic Information: Statistics from the internal systems of an organisa-
tion are integrated with data from other sources before being manipulated
to produce forecasts regarding the performance of the firm and the future
of the market. Mostly used by high level management.

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Notes Synergies: A mutual advantageous conjunction or compatibility of distinct

business participants.
System Prototype: A basic working model of a system which is under
development. It includes few functionalities so that end users can give
their feedback and become familiar with it.
System Requirements: Set of functionalities (operations), interfaces,
sample outputs that a system is expected to perform or support.
Tactical Information: A strategy that focuses on the accomplishment
of a short-term objective is known as a tactic. This involves arranging
individual activities and working on them for improvement.
Test Conditions or Cases: Different possible input values to check the
correctness of a system during the testing phase. Generally, boundary
values and incorrect values are also included to ensure robustness of
the system.
Value of Information: It is the amount a decision maker would be will-
ing to pay for information prior to making a decision.
Virtual Company: Organization using networks to link people, assets
and ideas to create and distribute products and services without being
limited to traditional organizational boundaries or physical location.
Virtual: Occurring or existing primarily online.
Web Services: A group of object-oriented and web technologies for con-
necting web applications that are running on various hardware, software,
database, or network platforms. Web services, for instance, could connect
important business operations within the apps that a company uses to
share with its clients, suppliers, and partners.
XML: A Web language used to describe the substance of documents and
the information on Web pages using concealed identifying techniques
data in Web documents with tags or contextual labels. This categorization
and classification of Web data by XML makes Web material more easily
searchable, recognizable, analyzed, and choose a computer to computer
exchange.

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