Information Technology for Management Advancing Sustainable, Profitable Business Growth

9th Edition

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Information Technology for Management Advancing Sustainable, Profitable Business Growth

9th Edition


LINDA VOLONINO, Canisius College

GREGORY R. WOOD, Canisius College

contributing author:

JANICE C. SIPIOR, Villanova University

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ASSISTANT EDITOR: Katherine Willis




DESIGNER: Kenji Ngieng



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1 A Look Toward the Future of Information Technology 1 2 Information Management and IT Architecture 28 3 Database, Data Warehouse, and Data Mining 56 4 Networks, Collaboration, and Sustainability 85 5 CyberSecurity, Compliance, and Business Continuity 112

6 E-Business & E-Commerce Models and Strategies 145 7 Mobile Technologies and Commerce 191 8 Web 2.0 and Social Media 225

9 Functional Area and Compliance Systems 269 10 Enterprise Systems and Applications 301 11 Performance Management using Data Visualization, Mashups, and

Mobile Intelligence 333

12 IT Strategy, Sourcing, and Vendor Relationships 355 13 Business Process and Project Management 387 14 IT Ethics and Responsible Conduct 418

Glossary G-1

Organizational Index O-1

Name Index N-1

Subject Index S-1

Part I

Maximizing the Value of Data and Information Technology

Part II

Digital, Mobile and Social Commerce

Part III

Enterprise Systems and Analytics

Part IV

IT Planning, Strategy, and Ethics


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Part I Maximizing the Value of Data and Information Technology

1 A Look Toward the Future of Information Technology 1 Case #1, Opening Case: Need Start-up Cash? Try Crowdfunding at 2 1.1 IT and Management Opportunities and Challenges 4 1.2 Top Management Concerns and Influential ITs 7 1.3 IT Agility, Consumerization, and Competitive Advantage 13 1.4 Strategic Planning and Competitive Models 15 1.5 Why IT is Important to Your Career, and IT Careers 20 Case #2, Business Case: Building a Sustainable Big City with a Competitive Edge 25 Case #3, Video Case, Public Sector: ACCESS NYC—IT Strategy and Transformation 26 Data Analysis & Decision Making: Evaluating Cost-Savings from Switching to the Cloud 26

2 Information Management and IT Architecture 28 Case #1, Opening Case: Paul McCartney’s Artistic Legacy (and its IT architecture) 29 2.1 Information Management in the 2010s 32 2.2 IT Architecture 36 2.3 Information Systems and IT Infrastructure 38 2.4 Cloud Computing and Services 47 2.5 Virtualization and VM (Virtual Machines) 50 Case #2, Business Case: Online Gamers’ Statistics Stored in the Cloud 54 Case #3, Video Case: Three Cloud Computing Case Studies 54 Data Analysis & Decision Making: DSS to Control and Manage Gasoline Costs 55

3 Database, Data Warehouse, and Data Mining 56 Case #1, Opening Case: Zero-Downtime at BNP Paribas 57 3.1 Database Technology 60 3.2 Data Warehouse and Data Mart Technologies 69 3.3 Data and Text Mining 72 3.4 Business Intelligence (BI) and Analytics 75 3.5 Digital and Physical Document Management 78 Case #2, Business Case: Global Defense Contractor Gains Competitive Edge with Analytics 82 Case #3, Video Case: Privacy vs. Convenience: How We Enable Data Mining 82 Data Analysis & Decision Making: Calculating Document Management Costs 83

4 Networks, Collaboration, and Sustainability 85 Case #1, Opening Case: Mobile Network Gives Haneda Airport Its Competitive Edge 86

4.1 Business IT Networks and Components 88 4.2 Wireless Network Applications and Mobile Infrastructure 93 4.3 Network Management and Search 96 4.4 Collaboration and Communication Technologies 102 4.5 Sustainability and Ethical Issues 104 Case #2, Business Case: Avoiding a Future of Crippling Car Congestion 109 Case #3, Video Case: Advocate Health Care achieves Fast ROI with Business Video 110 Data Analysis & Decision Making: Cost Comparison of Web Conferencing 110

5 CyberSecurity, Compliance, and Business Continuity 112 Case #1, Opening Case: Managing BYOD Security Risks 113 5.1 Up Close Look at Cybercrimes, Criminals, and Motivations 116 5.2 IT Vulnerabilities and Threats 122 5.3 Defending Against Fraud 130 5.4 Information Assurance and Risk Management 131 5.5 Network Security 134 5.6 Internal Control and Compliance 137 5.7 Business Continuity and Auditing 139 Case #2, Business Case: Army Deploys Androids, Securely 143 Case #3, Video Case: Cars, Appliances Could Be Hack Targets 143 Data Analysis & Decision Making: Financial Impact of Breached Protected Health Information 144

Part II Digital, Mobile and Social Commerce

6 E-Business & E-Commerce Models and Strategies 145 Case #1, Opening Case: The Google Universe 147 6.1 E-Business Challenges and Strategies 156 6.2 Business to Consumer (B2C) E-Commerce 166 6.3 Business to Business (B2B) E-Commerce and E-Procurement 169 6.4 E-Government and Public Sector IT Trends 172 6.5 E-Commerce Support Services and Digital Marketing Communications 174


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6.6 E-Business Ethics and Legal Issues 182 Case #2, E-Government: Increasing Productivity and Efficiency with Cloud and Mobile Technologies 187 Case #3, Video Case: Finding Your Dream Home in the Age of E-Commerce 188 Data Analysis & Decision Making: Creating Visualizations Using Public Online Datasets 189

7 Mobile Technologies and Commerce 191 Case #1, Opening Case: Macy’s Races Ahead with Mobile Retail Strategies 192 7.1 Mobile Computing Technology 194 7.2 Mobile Commerce 199 7.3 Mobile Transactions and Financial Services 206 7.4 Location-Based Services and Commerce 210 7.5 Mobile Enterprise Applications 214 Case #2, Business Case: Mobile eTextbooks with 220 Case #3, Video Case: Future Tech: Searching with Pictures using MVS 221 Data Analysis & Decision Making: Estimating Financial Benefits of Increased Customer Loyalty 222

8 Web 2.0 and Social Media 225 Case #1, Opening Case: Organizations WOW Customers with Social Customer Service 226 8.1 Web 2.0 and Social Media 229 8.2 Virtual Communities and Social Networking Services 237 8.3 Enterprise 2.0—Social Networks and Tools for Business 245 8.4 Social Media Metrics 250 8.5 The Future: Web 3.0 256 Case #2, Business Case: Is Google+ a Better Social Network? 264 Case #3, Video Case: Creating Customer Engagement for Danone Activia 265 Data Analysis & Decision Making: Estimating the Value of Social Media 266

Data Analysis & Decision Making: SunWest Foods’ Improved Bottom Line 299

10 Enterprise Systems and Applications 301 Case #1, Opening Case: Managing the U.S. Munitions Supply Chain 302 10.1 Enterprise Systems 304 10.2 Enterprise Resource Planning (ERP) Systems 307 10.3 Supply Chain Management (SCM) Systems 315 10.4 Collaborative Planning, Forecasting, and Replenishment (CPFR) Systems 320 10.5 Customer Relationship Management (CRM) Systems 324 Case #2, Business Case: Supply Chain Collaboration in the Cloud at Lenovo 330 Case #3, Video Case: Supply Chain Performance Management 331 Data Analysis & Decision Making: Assessing the Cost/Benefits of Cloud CRM 331

11 Performance Management using Data Visualization, Mashups, and Mobile Intelligence 333 Case #1, Opening Case: Data Viz iPad App Improves America First’s Performance 334 11.1 Data Visualization and Data Discovery 338 11.2 Enterprise Data Mashups 343 11.3 Business Dashboards 347 11.4 Mobile Dashboards and Intelligence 349 Case #2, Visualization Case: Are You Ready for Some Football? 353 Case #3, Video Case: Mashup-Driven Dashboards and Reporting 353 Data Analysis & Decision Making: Know Your Facebook Fans with Mobile Intelligence 353

Part III Enterprise Systems and Analytics

9 Functional Area and Compliance Systems 269 Case #1, Opening Case: International Speedway Gets Lean 270 9.1 Management Levels and Functional Systems 272 9.2 Manufacturing, Production, and Transportation Systems 276 9.3 Sales and Marketing Systems 282 9.4 Accounting, Finance, and Compliance Systems 285 9.5 Human Resources Systems, Compliance, and Ethics 292 Case #2, Business Case: Station Casinos’ Loyalty Program 298 Case #3, Video Case: Superior Manufacturing Wipes the Competition 299

Part IV IT Planning, Strategy, and Ethics

12 IT Strategy, Sourcing, and Vendor Relationships 355 Case #1, Opening Case: Consumer Banks Reinvent with New Business and IT Strategies 356 12.1 IT Strategy and the Strategic Planning Process 358 12.2 IT Governance 367 12.3 Aligning IT with Business Strategy 369 12.4 IT Operating Plans and Sourcing Strategies 373 12.5 IT Vendor Relationships 380 Case #2, Business Case: PUMA Sources Its Billing Department 383 Case #3, Webinar Case: Strategic Value of Health Info Exchange at UMass Memorial 385 Data Analysis & Decision Making: Third-Party vs. Company-Owned Offshoring 385

viii Contents

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Contents ix

13 Business Process and Project Management 387 Case #1, Opening Case:’s Order Process Goes from Fragile to Flexible 388 13.1 Business Process Management (BPM) 390 13.2 Software Architecture and IS Design 399 13.3 IT Project Management 405 13.4 Systems Development 408 Case #2, Business Case: Pep Boys’ IT Planning Process 416 Case #3, Video Case: BlueWorksLive 417 Process Modeling: Modeling a Business Process and Brainstorming a Business Using ARIS Express and Blueprint 417

14 IT Ethics and Responsible Conduct 418 Case #1, Opening Case: Recognizing Corporate Social Media Discrimination 419

14.1 Can IT Cut its Global Carbon Footprint? Can Users? 422 14.2 Responsible Conduct 428 14.3 Connectivity Overload and a Culture of Distraction 431 14.4 On the Verge of a New Tech Revolution 433 Case #2, Business Case: Target’s Big Data Analytics Know Too Much 437 Case #3, Video Case: Backlash against Google Street View 437 Simulation: Global Warming Calculator 437

Glossary G-1

Organizational Index O-1

Name Index N-1

Subject Index S-1

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Mega-forces in Information Technology (IT) are creating

an exciting new world. Leading technology trends—

namely social, mobile, cloud, big data, and analytics—offer unprecedented business opportunities. When these tech-

nologies converge, organizations are able to gain a com-

petitive edge, to expand market reach, to build brands, and

to develop innovative features or ways of doing business.

Today’s managers, leaders, entrepreneurs and knowledge

workers need to know how to leverage the power of inno-

vative technologies, media, networks, platforms, services,

and devices. They now need talents and skills that were not

part of our vocabulary five years ago—or maybe five

months ago.

In this 9th edition, students learn, explore and ana-

lyze the latest information technologies and their impact

on, well, almost everything. Students learn how strategy, operations, supply chains, customer and supplier relation-

ships, collaboration, reporting, recruiting, financing, per-

formance, growth, productivity, and their career success

are driven by and dependent on IT-capabilities. Here are

a few examples of influential IT developments as well as

disruptive impacts of IT covered in this book:

• Big data, or databases so large they can’t be handled with traditional software, is the next frontier for inno- vation, competition, and productivity. Big data is pro-

duced by companies that track all of our Internet

activity, online purchases, and social media interac-

tions. Big data analytics turns ambiguity into clarity

and action.

• Financing is a core component of any business.

Crowdfunding, raising small amounts of money from many people, grew from a $32 million market in May 2010 to a $123 million market by May 2012.

Kickstarter transformed the investment process for investors and entrepreneurs by providing a funding

alternative to turn good business ideas into reality.

• From customer service and qualitative research to pro-

motional support and reinforcing a brand, Facebook is a tremendous marketing tool. The value of social media lies in the fact that it is the most pervasive form of 2 way communication ever created. Social media

helps grow business and create meaningful customer


• Twitter enables direct contact with customers. Brands can chat with existing customers and jump into conver-

sations to grow their fan base.


• Mobility and cloud computing are changing how peo- ple and companies interact with information. Mobile

technology has a huge impact on customer behavior

and expectations.

• Sustainability and green business are smart business.

• With data visualization, dashboards, and enterprise mashups, users can better prepare for and respond to unanticipated events and make more effective deci-

sions in complex, dynamic situations.

Engaging Students to Assure Learning Information Technology for Management 9th edition engages students with up-to-date coverage of the most

important IT trends today. Over the years, this leading IT

textbook had distinguished itself with an emphasis on

illustrating the use of cutting edge business technologies

for achieving managerial goals and objectives. The 9th

edition continues this tradition with more hands-on activ-

ities and analyses.

Each chapter contains numerous case studies and

real world examples illustrating how businesses increase

productivity, improve efficiency, enhance communication

and collaboration, and gain a competitive edge through

the use of ITs. Faculty will appreciate a variety of options

for reinforcing student learning, that include:

3 Cases

• Case #1, Opening case • Case #2, Business case • Case #3, Video case

Within chapter learning aids

• Vocabulary in the margins

• Videos references

• Tech notes

End-of-Chapter learning aids

• “Evaluate and Expand Your Learning” sections

1. IT and Data Management Decisions

2. Questions for Discussion & Review

3. Online Activities

4. Collaborative Work

• Data Analysis & Decision Making sections


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Other pedagogical features

• Quick Look. The chapter outline provides a quick indication of the major topics covered in the chapter.

• Learning Outcomes. Learning outcomes listed at the beginning of each chapter help students focus

their efforts and alert them to the important con-

cepts that will be discussed.

• IT at Work. The IT at Work boxes spotlight real- world cases and innovative uses of IT.

New and Enhanced Features of 9th Edition The textbook consists of 14 chapters organized into four

parts. Chapters 1 and 11 are new. All other chapters have

new sections as well as updated sections, as shown in

Table P-1.

xii Preface

Overview of New and Expanded IT Issues; and Several of the Innovative Organizations that are Discussed in the Chapters

Chapter New & Expanded Issues Innovative Organizations


1: A Look Toward the Crowdfunding

Future of Information Cloud computing

Technology The Internet of Things

IT consumerization

2: Information Management Enterprise mashups

and IT Architecture Information management

Cloud services


Virtual machines (VM)

3: Database, Data Warehouse, Big data

and Data Mining Operational intelligence msnNow

Data ownership


4: Networks, Collaboration, Mobile infrastructure

and Sustainability Sustainability Evernote

Machine-to-machine communication

Near-field communication iMindmap Online


5: CyberSecurity, Compliance, BYOD Anonymous & LulzSec

and Business Continuity Hacktivism AT&T Toggle

IT consumerization

Advanced persistent threats

Do not carry policies IT governance

6: E-Business & E-Commerce International e-business Google, Inc.

Models and Strategies Internet Advertising

Search engine marketing (SEM)

7: Mobile Technologies Consumer use of mobile tech

and Commerce Innovation in traditional and Shopkick

web-based retail

Location-based marketing

In-store mobile payments

8: Web 2.0 and Social Media Social media platforms & services Bottlenose

Feature convergence

Application Programmint Interfaces (APIs) Google+

Social semantic web services

9: Functional Area and Customer touchpoints SquareUp

Compliance Systems Tag management AdWeek

Interactive data

10: Enterprise Systems On-demand CRM Joint Munitions Command

and Applications Enterprise application integration


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Preface xiii

• Solid theoretical foundations. Throughout the book, students learn the theoretical foundation necessary for

understanding IT.

• Up-to-date. Every topic in the book has been researched to find the most up-to-date information

and features.

• Economic justification. With the sluggish economic recovery, IT costs and proofs of concept are being

demanded prior to investments. Students learn about

various cost factors, including total cost of ownership

and service level agreements.

• IT Ethics, sustainability, and responsible conduct. IT has become so pervasive, invasive, prevalent, and a

power-guzzler that ethics, sustainability and responsi-

ble conduct need to be addressed. For example, we

clearly explain how contributions from the field of IT

can lead to reduced carbon emissions and global

warming, improving quality of life on the plant now

and for future generations. We also help students to

understand the critical issues related to cyber security,

privacy invasion and other data-related abuses so that

students can and assess characteristics of responsible


Supplementary Materials An extensive package of instructional materials is avail-

able to support this 9th edition.

• Instructor’s Manual. The Instructor’s Manual presents objectives from the text with additional information to

make them more appropriate and useful for the

instructor. The manual also includes practical applica-

tions of concepts, case study elaboration, answers to

end-of-chapter questions, questions for review, ques-

tions for discussion, and Internet exercises.

• Test Bank. The test bank contains over 1,000 questions and problems (about 75 per chapter) consisting of

multiple-choice, short answer, fill-ins, and critical

thinking/essay questions.

• Computerized Test Bank. This electronic version of the test bank allows instructors to customize tests and

quizzes for their students.

• PowerPoint Presentation. A series of slides designed around the content of the text incorporates key points

from the text and illustrations where appropriate.

• Video Series. A collection of video clips provides stu- dents and instructors with dynamic international busi-

ness examples directly related to the concepts

introduced in the text. The video clips illustrate the

ways in which computer information systems are uti-

lized in various companies and industries.

• Textbook Web Site. ( The book’s Web site greatly extends the content and themes

of the text to provide extensive support for instructors

and students. Organized by chapter, it includes Chapter

Resources: tables, figures, link libraries, exercises, and

downloadable media-enhanced PowerPoint slides.

Acknowledgments Many individuals participated in focus groups or review-

ers. Our sincere thanks to the following reviewers who

Overview of New and Expanded IT Issues; and Several of the Innovative Organizations that are Discussed in the Chapters (continued)

Chapter New & Expanded issues Innovative Organizations


11: Performance Management Data visualization

using Data Visualization, Mobile dashboards Tableau software

Mashups, and Mobile User experience AlphaVision

Intelligence D3—data driven documents WeDo Technologies


12: IT Strategy, Sourcing, Transparency

and Vendor Relationships High-end analytics


Business processing outsourcing

IT vendor relationships

13: Business Process and BPM mashups

Project Management Who’s accountable for IT failures

ARIS Express

14: IT Ethics and Social discrimination

Responsible Conduct Responsible conduct Social Intelligence

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provided valuable feedback, insights, and suggestions that

improved the quality of this text.

Joni Adkins, Northwest Missouri State University

Karlyn Barilovits, Walden University

Nathan Boyer, Grantham University

Dr. Lewis Chasalow, The University of Findlay

Kuan Chen, Purdue University Calumet

Henry D. Crockett, Tarleton State University

Amir Dabirian, CSU, Fullerton

Norzaidi Mohd Daud, Universiti Teknologi MARA

Michael Donahue, Towson University

Richard Egan, NJIT

Samuel Elko, Seton hill university

Jerry Fjermestad, NJIT

Robert Gordon, Molloy College

Raj Heda, Boston University

Robert Hofkin, Walden University

Lionel M. Holguin Jr., Athens State University

Laurence Laning, Xavier University

Hiram Marrero, Universidad Del Turabo

Stew Mohr, Rutgers University

Barin Nag, Towson University

Mike O’Dowd, Colorado Technical University

Dee Piziak, Concordia University Wisconsin

Mahesh Raisinghani, TWU School of Management

Lisa Rich, Athens State University

Tricia Ryan, Laureate Education/ Walden University

Nancine Vitale, Dowling College

Minhua Wang, SUNY Canton

Charles Wankel, St. John’s University

Gene Wright, UW Milwaukee

We are very thankful for help of Graidi Ainsworth,

our assistant, who carried out countless research, edito-

rial and record keeping tasks.

We are grateful for the expert and encouraging lead-

ership of Christopher Ruel, Beth Golub, and Katherine

Willis. Our sincere thanks for their guidance, patience and

support during the development of this most recent ver-

sion of the book.

Efraim Turban Linda Volonino

Gregory R. Wood Janice C. Sipior

xiv Preface

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A Look Toward the Future of Information Technology1


Learning Outcomes � Describe IT and management issues, opportunities, and


� Identify management’s top concerns and the most

influential ITs.

� Assess the role of IT agility, IT consumerization, and

changes in competitive advantage in the second part of the

Information Age.

� Explain the strategic planning process, SWOT analysis, and

competitive models.

� Realize how IT impacts your career and the positive

outlook for IS management careers.

Quick Look

Case 1, Opening Case: Need Start-up Cash? Try Crowdfunding at

1.1 IT and Management Opportunities and Challenges

1.2 Top Management Concerns and the Most Influential ITs

1.3 IT Agility, Consumerization, and Competitive Advantage

1.4 Strategic Planning and Competitive Models 1.5 Why IT Is Important to Your Career, and IT Careers

Key Terms

Chapter 1 Link Library

Evaluate and Expand Your Learning

• IT and Data Management Decisions • Questions for Discussion & Review • Online Activities • Collaborative Work

Case 2, Business Case: Building a Sustainable Big City with a Competitive Edge

Case 3, Video Case, Public Sector: ACCESS NYC—IT Strategy and Transformation

Data Analysis & Decision Making: Online Interactive Demo: Estimating Cost-Savings from Switching to the Cloud


Part I Maximizing the Value of Data and Information Technology

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In this opening chapter, you read about management’s top

concerns and the information systems (ISs) they consider

most influential to their organizations. Understanding sen-

ior management’s priorities is a smart starting point for

your career. You learn about the latest information tech-

nology (IT) trends that are important across all industry

sectors—small and medium businesses (SMB), multina-

tionals, government agencies, healthcare, and nonprofits.

Faced with business challenges, as a manager you need to

implement IT solutions and track how well they improve

performance. Faced with the latest new technology, as a

manager you need to be able to determine whether to

invest in it and how to acquire or implement it.

The power of IT to turn challenges into opportunities,

to create new markets and industries, to disrupt the way

work is done, and to make commerce more social and

mobile stems from the creativity and talent of managers—

not the capabilities of technology. Managers and workers

now need talents and skills that weren’t part of our

vocabulary five to ten years ago—or maybe five to ten

months ago.

The opening case describes how Kickstarter responded to a universal business challenge facing entre-

preneurs and artists—getting enough start-up cash—with


QUICK LOOK at Chapter 1, A Look Toward the Future of Information Technology

Figure 1.1 gives entrepreneurs and those in creative industries online access to money to fund their artistic or business ideas.

If you have a brilliant idea for a film, music album, street art, or cool tech gadget, where would you get start-up money to make it happen? Hint: It’s unlikely that you’d get a bank loan and certainly not easily. Huge numbers of cash-challenged entrepreneurs and artists could not achieve their visions because of the lack of financing options available to them.

That is, until crowdfunding. In simplest terms, people who need money ask for donations to reach their financial goal and explain what they will produce if they reach that goal; and citizens of the Internet—the “crowd”—decide whether to donate and how much.

Kickstarter is the world’s largest crowdfunding site for creative projects. Kickstarter is to crowdfunding as eBay is to auctions. They’re IT platforms with payment systems that became fun and popular social commerce sites.

Crowdfunding Opportunities for Cash-Challenged Artists and Entrepreneurs Crowdfunding bypasses banks, family, and friends as funding sources. Crowdfunding needs an IT platform that makes it easy and secure to request, donate, and collect online contributions.

CASE 1 OPENING CASE Need Start-Up Cash? Try Crowdfunding at

Crowdfunding is a way to raise money (capital) for new projects by asking for contributions from a large number (crowd) of people via the Web. It’s peer-to-peer funding. Also known as crowdsource fund- ing or crowdfinancing.

Kickstarter is the world’s largest crowdfunding platform for cre- ative projects.

Project creator is the creative person who posts his or her proj- ect with a video, a description of the concept, and target dollar amount on

Backer pledges money to a proj- ect, in effect making a financial vote of confidence in the project and creator.

Funding goal is the amount of money requested by the project creator. If this goal is not reached, the deal is off.

© D

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u rs

t/ A

la m

y Li

m it

e d

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CASE 1 Opening Case 3

Project creators build a website where they explain their projects with a video, a description, and target funding goal. A deadline is set.

Each pledge is treated as a financial transaction. The pledge amount is charged to the pledger’s Amazon account, where the funds are held until the project’s deadline.

If the project does not hit its target by the deadline, all pledges are returned to the backers and no fees are charged.

If a project hits its target by the deadline, the project creator receives the money from Amazon Payments Services as an electronic fund transfer (EFT) to their bank account, minus fees. Kickstarter charges 5% commission, and 3% to 5% is deducted for Amazon’s service.

Visitors to the website make pledges.

Figure 1.2 The crowdfunding process.

Anyone with a creative project—called project creator—can post an online pitch to potential backers across the world on Every week, tens of thousands of people (the crowd) pledge typically from $1 to $1,000—totaling millions of dollars—to film, music, art, technology, design, food, publishing, and other creative projects. The crowd decides which projects are worth their investments by pledging funds. Project creators keep 100% ownership and control over their work. Figure 1.2 shows how crowdfunding at Kickstarter works.

Social Commerce and Incentives Kickstarter provides the IT platform and payment systems that enable people-to-people commerce, or social commerce. Clever incentives and exclusive memberships are offered to backers, which provide the forum for social commerce. Here are three examples:

1. Two California design students in their early twenties, Jesse Genet and Stephan Angoulvant, set a $12,000 goal to launch Lumi Co., a new textile printing technology. They raised $13,597 from 188 backers. To entice backers to pledge $500 or more, they offered a personalized leather envelope, invitations to their launch party and an exclu- sive event at their Los Angeles offices for the fashion line release, and exclusive newslet- ters and discounts.

2. TikTok�LunaTik kits turn an iPod nano into a multitouch watch. Project creators asked for $15,000; but raised nearly $1 million from 13,512 backers. Backers who pledged $500 were offered a LunaTik Kickstarter Backer Edition including an 8GB iPod Nano that was laser-signed by designer Scott Wilson. It’s now a real product and for sale in the Apple store.

3. Designers of PID-Controlled Espresso Machine, which brings the consistency of expen- sive espresso machines to a low-cost machine, set a $20,000 goal. They raised $369,569 by its January 20, 2012, deadline. The $1,000 backers were offered a free custom-built machine. Every Kickstarter backer was able to buy the $400 machine for only $200.

In 2012, Kickstarter reported that $100 million was pledged into projects in 2011 with $84 million going into projects that were actually funded. Movies and music projects were the largest funded areas. Over $32 million was pledged for films and video—leading to 3,284 successful projects. For music, backers pledged close to $20 million for 3,653 successful projects. These 2011 stats roughly tripled the 2010 stats.

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4 Chapter 1 A Look Toward the Future of Information Technology


Consider how often and in how many ways companies or brands ask you to connect

with them, as shown in Figure 1.3. Why do businesses ask you to like, follow, fan, snap,

share, sign up, watch, join, or download?

Like us on Facebook Join our circle

Follow us on Twitter

Watch us on YouTube

Be a fan Snap our tag

Download our app

Share us on LinkedIn

Sign up for mobile alerts

Figure 1.3 Common requests from companies and brands to connect with consumers and prospects via social media or mobile devices.

Crowdfunding—a Creative Integrated IT Solution Crowdfunding—which is an integration of social networking, e-commerce, and financing and payment systems—clearly is responsive to the needs of the market. In tough economic times, Kickstarter and other crowdfunding platforms offer the ability to support economic growth by funding project creators worldwide.

Sources: Compiled from (2012), Pogue (2012), (2012), and (2012).

Discuss 1. Visit and review the “Project of the Day.” What is the project? Review

the offerings and number of backers in each level. Which two pledge levels ($1 through $1,000) have the highest number of backers? Which pledge levels are sold out, if any? Do the answers to these questions suggest that backers are actually customers making purchases (pre-sales) rather than donors making selfless contributions?

2. Explain crowdfunding and its advantages to new entrepreneurs. 3. Compare Kickstarter and eBay. 4. What characteristics make Kickstarter a social commerce site?

Decide 5. Research how Kickstarter and two other crowdfunding sites manage or provide for the

collection and transfer of pledges. Based on what you learn, is there a site that you would recommend. Explain why or why not.

Debate 6. Crowdfunding could be viewed as a technology that disrupts the financing industry. Or

it could be viewed as so unique that it has created a new industry. Create two teams, and have each team select one of these views. Debate which of view better reflects the impact of crowdfunding.

1.1 IT and Management Opportunities and Challenges The first section provides background on IT (information technology) and manage-

ment trends, issues, challenges, and/or opportunities discussed in this chapter.

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The short answer is to get access to consumers and data about them to improve

performance. Three examples are:

1. Jonathan Johnson, a retail executive at, explained: “We’re not trying to use social media as a sales piece as much as an information-

gathering piece. Finding out what our customers want; whether they like a product;

how could we sell it better” (Jopson et al., 2011). See Figure 1.4.

2. Best Buy. Electronics retailer Best Buy learned how unpopular its restocking fees were through social media. The company changed its product-return policies elimi-

nating those fees that were hurting sales.

3. Starbucks. Coffee retailer Starbucks prepared to monitor customers’ tweets about a new coffee flavor on the day it was introduced. Managers were surprised

to learn that a huge majority of tweets were not about the coffee’s intense taste, but

were complaints about the higher price. By the next day, they had dropped the price.

Like many companies, Overstock, Best Buy, and Starbucks are making every

effort to learn how to improve performance. Several examples of learning efforts to improve performance are listed in Table 1.1.

1.1 IT and Management Opportunities and Challenges 5

Figure 1.4 uses data analytics to discover what their customers want, whether they like a product, and how they can sell it better.

TABLE 1.1 Common Learning Efforts to Improve Performance

• Which marketing campaigns are the most and least effective and why

• What products to develop

• What customers value and dislike

• How to appeal to key customer groups

• How to select and implement enterprise apps that will make a competitive difference

• What perks strengthen customer loyalty most cost-effectively


Four current technology trends that offer valuable business opportunities are social, mobile, cloud, and data analytics. These ITs are often used in combination to gain a competitive edge, to expand market reach, and to develop new features or ways of

doing business. They make it easier and cheaper to connect with customers and sup-

pliers, to work with others from anywhere, and to manage files and data.

Tech Note 1-1

The state of Wyoming switched to cloud computing in 2011. This was done by putting 10,000 employees on Google Apps for Government.

The financial impact of mobility because employees could work from anywhere and better collaboration among employees led to a savings of over $1 million per year.

A short video about Wyoming’s Story is posted on the Google Apps for Government site

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6 Chapter 1 A Look Toward the Future of Information Technology


Simply collecting data has no effect on performance. Data needs to be analyzed. Data analytics refers to the specialized software, capabilities, and components all geared toward exploring huge volumes of data to provide greater insight and intelligence—

and doing so quickly. Why is it important to analyze quickly? One reason is to be

able to know how a particular sale or marketing campaign has influenced sales.

The processes needed to prepare for and conduct data analytics are complex and

expensive—and require expertise in statistics and modeling. Data analytic processes


1. Locating and collecting reliable data from multiple sources that are in various formats.

2. Preparing the data for analysis. Collected data is not usable until it has been organized, standardized, duplicates are removed (called deduping), and other data- cleansing processes are done.

3. Performing the correct analyses, verifying the analyses, and then reporting the findings in meaningful ways.

In the early 2000s, the ability to perform data analytics in real time, or near-real

time, improved when vendors and consulting companies started offering it as a serv-

ice. In the 2010s, vendors offered pre-built, hosted analytics and advanced analytics

solutions that reduced total cost of ownership (TCO) and made it feasible for com-

panies to implement data analytics.

Macys’ and other large retailers used to spend weeks reviewing their last season’s

sales data. With data analytic capabilities, they can now see instantly how an e-mailed

discount code or flash sale for athletic wear played out in different regions. Charles W.

Berger, CEO of ParAccel (, a data analytics provider said: “We have a banking client that used to need four days to make a decision on whether or not to

trade a mortgage-backed security. They do that in seven minutes now.” Data analytics

is used by Wal-Mart stores to adjust its inventory levels and prices; and by FedEx for

tweaking its delivery routes. IT at Work 1.1 identifies other users of data analytics.

IT at Work 1.1w

Data analytics have interesting applications. Here is one famous example of data analytics in action.

Watson is a computer system created by a team of 25 IBM scientists over four years. In 2011, Watson competed against Ken Jennings for Brad Rutter on the game show Jeopardy (see Figure 1.5) in a three-day tournament and won. Watson received the clues as electronic texts at the same time they were made visible to Ken and Brad. Watson would then parse the clues into different keywords and sentence fragments in order to find sta- tistically related phrases. Watson won by using its ability to quickly execute thousands of language analysis algorithms simultaneously to compile potential answers and determine its level of confidence in any given answer.


1. Explain how Watson figured out the most likely response to win the tournament.

2. View the IBM demo, “Turning insight into outcomes,” at outperform_with_smarter_analytics.html.

3. Discuss how companies in various industries are using the insights from analytics to achieve significant outcomes in cus- tomer satisfaction and retention, operational efficiency, finan- cial processes, and/or risk, fraud, and compliance management.

Watson Wins Jeopardy, Leaving Human Champions in its Silicon Dust

Figure 1.5 Using data analytics, Watson beats Ken and Brad playing Jeopardy.

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Data analytics can help companies achieve these business outcomes:

• Grow their customer base

• Retain the most profitable customers.

• Continuously improve operational efficiency.

• Transform and automate financial processes.

• Detect and deter fraud.

One example is Florida Power and Light (FPL). Mark Schweiger, a senior business

analyst at FPL, helped implement a data analytics program to detect electricity theft.

Theft was being detected using visual inspection by meter readers and field investi-

gators. FPL knew that an advanced metering infrastructure system would provide

data that could flag suspicious accounts for closer examination. In 2009, FPL began

implementing a meter data analytics program with the help of vendor DataRaker

( estimated for use by 2013. FPL feeds its vendor meter and customer data, which the vendor crunches to

create meaningful red flags indicating electricity theft. The program helps detect

when someone is using an unauthorized meter, is bypassing an approved meter, is

using a powerful magnet to suppress usage (and billing) data, and has reconnected

service without authorization.

1.2 Top Management Concerns and Influential ITs 7

MESSY DATA As you know from your own experience, a lot of data is now text—and text is messy. Messy data is the term used to refer to data (e.g., tweets, posts, click streams, images, including medical images) that cannot be organized in a way that a computer can

easily process. Data sources include smartphones, social networks, microblogs, click

streams from online activities, location-aware mobile devices, scanners, and sensors

that automatically collect everything from inventory movement to heart rates.

Michael Olson, CEO of Cloudera ( explained:

The old days were about asking, “What is the biggest, smallest, and average?” Today it’s, “What do you like? Who do you know? “It’s answering these complex questions.

In 2012, research firm Gartner predicted that data will grow 800 percent over the

next five years, and 80 percent of the data will be unstructured.


Huge sets of messy data from sources such as multi-petabyte data warehouses, social

media, and mobile devices are called big data. Research by the McKinsey Global Institute found that big data analytics, which is the ability to analyze big data sets, is the next frontier of opportunities for competition, productivity growth, and innova-

tion (Manyika, 2011). Most other research and consulting firms agree that data ana-

lytics to gain insights and a competitive edge is one of the biggest opportunities and

challenges facing managers.

Questions 1. Why do businesses ask you to like, follow, fan, or interact with them via social

networks or web sites? 2. Why is data analytics challenging for companies? 3. Explain messy data. 4. What are the sources of messy data? 5. Explain big data analytics.

1.2 Top Management Concerns and Influential ITs What do managers consider the most critical building blocks to improving their abil-

ity to do their jobs and organizational performance? What ITs are most influential?

You will read answers to these questions in this section.

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8 Chapter 1 A Look Toward the Future of Information Technology


Business performance is directly related to the quality of information. Table 1.2

describes the key characteristics of high-quality information.

An important principle is that what a company can accomplish or achieve

depends on what its ITs can do. And for many, business survival depends on IT

innovation. Oana Garcia, vice president and Chief Data Officer at Citigroup New

York, pointed out that “business and technology teams need to work together and

understand the benefits of smart, cost-effective, and collaborative data manage-

ment, and the implementation of this knowledge is key (McKinsey Quarterly, 2011). Managers of a large U.S. retailer experienced this principle in 2011 as they strug-

gled to understand why their sales were dropping. They had been implementing new

online promotions, yet continued losing market share in several profitable segments

to a major competitor. When senior managers researched their competitor’s prac-

tices, they discovered that their problem ran deeper than they had imagined. The

competitor had invested heavily in ITs to develop capabilities to collect, integrate,

and analyze data from each store and every sales unit. Data was used to run real-

world experiments prior to making business decisions. In addition, the competitor

had linked its databases to suppliers’ databases, which made it possible to adjust

prices in real time, to reorder hot-selling items automatically, and to shift items from

store to store easily. Their rival’s agility and flexibility enabled them to gain an edge

and market share.

Despite potential benefits, managers must be careful to avoid “paralysis of analy-

sis.” They should not lose agility and flexibility in the hope of gathering perfect data

when making time-sensitive decisions.


Another well-known principle states what’s important gets done. With economic and business conditions recovering slowly, but not steadily, from the worldwide

2008–2011 recessions, budgets and resources are tight. Investment options are

TABLE 1.2 Summary of Characteristics of High-Quality Information

Quality Characteristic Description

Relevant Information is either relevant or irrelevant to a decision.

Irrelevant information interferes with the process—no

matter how interesting it is—because it wastes time or

causes confusion or delay. Irrelevant information is a

persistent problem because ISs are good at generating

lots of it.

Timely This characteristic means that the decision maker receives

the information when he or she needs it—that is, when

it would be meaningful to the decision.

For example, the manager of a retail chain needs daily

information on stores’ performance and products that

are selling unusually high or low, so that immediate cor-

rective action can be taken. Receiving performance

information at the end of the month leaves thirty-day

gaps in corrective actions.

Reliable, accurate This characteristic means that the information can be

trusted and that the decision maker has confidence that

information is free from errors, to the extent possible.

For example, calculations are correct and data are in

correct categories. When information is trusted, it elimi-

nates wasting time having to verify it. Typically, it is

more important for the information to be timely than

to be perfect.

Easy to understand This characteristic means that information is presented

and use clearly, and concisely, and is well-documented.

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1.2 Top Management Concerns and Influential ITs 9

Figure 1.6 Top 5 management concerns and 5 most influential ITs. These findings are based on survey responses from 472 organizations—172 U.S., 142 European, 103 Asian, and 55 Latin America—in mid-2010.

• Business productivity and cost reduction • IT and business alignment • Business agility and speed to market • Business process reengineering (BPR) • IT reliability and efficiency

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scrutinized to determine their value potential. With limited resources available, pri-

orities (those with the highest payoff potential) get funded, while non-priorities get

cut when budget decisions are made.

A helpful way to understand business priorities, issues, challenges, and trends is

to look at what managers in the United States, Europe, Asia, and Latin America have

reported as their top concerns and the ITs that are most influential to success. Refer

to Figure 1.6. The two top 5 lists summarize the Society for Information Management

(SIM) survey responses from 472 organizations—172 U.S., 142 European, 103 Asian,

and 55 Latin American—in mid-2010. In previous economic downturns, business

executives typically had cut back on IT budgets (as well as advertising and new prod-

uct development) to reduce costs. But in the latest recession, which was worse than

prior ones, the opposite has occurred. Taking both top 5 lists into consideration indi-

cates that executives are relying on IT to help cut costs and boost productivity. You

read about the ITs listed in Figure 1.6 in the next sections and chapters.


Business productivity and cost reduction. Business productivity and cost reduc- tion were the top concerns by a wide margin. Productivity is a measure of efficiency and can be represented by the following model (formula).

Types of outputs depend on the industry. Outputs can be the number of units manu-

factured or sold, the number of customers serviced, or the value of new deposits. Inputs

are the resources used to produce the outputs. Examples are the number of labor hours,

amount of raw materials, and technology. Productivity gains can be achieved by:

• Increasing output, while maintaining the same level of inputs

• Maintaining output, while reducing the level of inputs

• A combination of the above

IT and Business Alignment. Aligning IT with business means leveraging opportu- nities for IT to support business strategy and improve success. IT-business alignment

depends on the IT department understanding strategy, risks, opportunities; and the

business understanding IT’s potential and limitations.

Business Agility and Speed to Market. Boom economic conditions typically pro- vide companies with plenty of opportunities to improve performance. But during

downturns and global financial crises, opportunities are harder to find, and the risk

of failure rises. As markets recover from a worldwide recession, managers are explo-

ing new strategies to improve business performance, or profitability. One approach

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10 Chapter 1 A Look Toward the Future of Information Technology

Video 1-1 Business Processes IkE&feature=related

5 MOST INFLUENTIAL ITs Business Intelligence (BI). You’re familiar with the importance and role of intelli- gence in national security and the military. Intelligence activities also improve the suc-

cess of business strategy and operations. BI technologies can help to run the business

more efficiently, identify trends and relationships in organizational data, and create or

take advantage of business opportunities. Implementing BI successfully is extremely

challenging technically because it requires the integration, computation, and analysis

of massive data repositories, which is not easy to do. Chapter 11 covers BI in depth.

Cloud Computing. The cloud is a term for networked computers, including the pub- lic Internet. Often “cloud” means “Internet.” Cloud computing (or cloud infrastruc- ture or cloud services) does not refer to a specific arrangement, but rather to various

computing and network arrangements. To maximize the benefits of cloud comput-

ing, companies can build a private cloud, public cloud, or leverage their current IT

environment to build a hybrid cloud. See Tech Note 1-2 for more details.

Cloud computing makes it possible for almost anyone to deploy tools that can

scale on demand to serve as many users as needed. Many users can access the same

apps and from any networked location because they are stored (hosted) on a pow-

erful shared infrastructure in the cloud.

is to develop the agility needed to identify and capture opportunities more quickly than rivals. The importance of being an agile enterprise, which is one that has the ability to adapt and respond rapidly, has never been greater because of struggling

economic recoveries and advances in mobile and social technologies.

Business Process Reengineering (BPR). A business process is a series of tasks per- formed by people or systems that are designed to produce a specific output or achieve

a predetermined outcome. Tasks are carried out according to certain rules, standards,

or policies. Examples of business processes are customer order processing, credit

approval, opening a new account, order fulfillment, processing an insurance claim,

and shipping a product. The credit approval process involves a series of steps and

decisions to determine whether or not to extend credit and the terms of the loan.

Processes range from fully-automated to manual. For additional examples of busi-

ness processes, view Video 1-1. In a business process, electronic or hard copy

business records or documents are created, used, and changed.

The goal of business process reengineering (BPR) is to eliminate the unnecessary non–value added processes, then to simplify and automate the remaining processes to

significantly reduce cycle time, labor, and costs. Cycle time is the time required to com- plete a given process. For example, reengineering the credit approval process can cut

time from several days or hours to minutes or less. Simplifying processes naturally

reduces the time needed to complete the process, which also cuts down on errors.

IT Reliability and Efficiency. Managers and others need to know that they can trust the data—be able to rely on the accuracy, availability, security, and accessibility of

data and information systems. Federal and state regulations have made data privacy

and protection a legal requirement and impose huge fines for violations.

Tech Note 1-2

Companies may lease a cloud computing solution from a service provider. This is known as a public cloud. A public cloud allows companies to avoid purchasing and managing certain hardware and software while still delivering their IT services.

For other companies, the most effective way to deliver IT services is to leverage exist- ing IT infrastructure alongside public and private cloud resources to build a hybrid cloud. By building a hybrid cloud, companies get the benefits of a public cloud while main- taining control and security.

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1.2 Top Management Concerns and Influential ITs 11

In 2011, the U.S. government issued the Federal Cloud Computing Strategy that describes cloud computing as a:

profound economic and technical shift (with) great potential to reduce the cost of Federal Information Technology (IT) sys- tems while . . . improving IT capabilities and stimulating inno- vation in IT solutions.

The strategy is designed to facilitate federal agencies’ adoption of cloud computing, support the private sector, and improve the information available to decision makers.

The chart in Figure 1.7 shows the government estimates shift- ing $20 billion of IT spending to cloud computing from its current environment. The benefits of the shift are listed in Figure 1.8.

Questions 1. Why did the federal government shift to the cloud?

2. What external pressures are motivating the shift to cloud com- puting?

3. What three types of benefits did they expect?

4. In your opinion, was this shift to the cloud a smart decision for taxpayers? Explain.

Federal Cloud Computing Strategy

IT at Work 1.2w

Figure 1.7 Estimated portion of Federal IT spending that is able to be moved to cloud computing. 1. Based on agency estimates as reported to the Office Management and Budget (OMB). © Federal Cloud Computing Strategy, February 8, 2011,

$80 Billion

Total IT spending Potential spending on cloud computing

$20 Billion

Figure 1.8 Three categories of cloud benefits are efficiency, agility, and innovation. © Federal Cloud Computing Strategy, February 8, 2011, Strategy.pdf.




Cloud Benefits

Cloud Benefits

Current Environment

Current Environment

Current EnvironmentCloud Benefits

• Improved asset utilization (server utilization > 60–70%)

• Aggregated demand and accelerated system con- solidation (e.g., Federal Data Center Consolidation Initiative)

• Improved productivity in application development, application management, network, and end-user

• Low asset utilization (server utilization < 30% typical)

• Fragmented demand and duplicative systems

• Difficult-to-manage systems

• Purchase “as-a-service” from trusted cloud providers

• Near-instantaneous increases and reductions in capacity

• More responsive to urgent agency needs

• Shift focus from asset ownership to service management

• Tap into private sector innovation

• Encourages entrepreneurial culture

• Better linked to emerging technologies (e.g., devices)

• Years required to build data centers for new services

• Months required to increase capacity of existing services

• Burdened by asset management

• De-coupled from private sector innovation engines

• Risk-adverse culture

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12 Chapter 1 A Look Toward the Future of Information Technology

IT at Work 1.3w

The Internet of things refers to a set of capabilities emerging because of physical things being connected to the Internet or net- worked via sensors. Networks link data from products or operations, which can generate better information and analysis. These networks capture huge volumes of data that flow to computers for analysis.

Application of the Internet of things: Embedded sensors When devices or products are embedded with sensors, companies can track their movements or monitor interactions with them. Business models can be fine-tuned to take advantage of this behav- ioral data. How a company generates revenue from its assets is determined by its business model. A business model describes how a company actually operates—how work is done, the degree of automation, the pricing and design of products or services, and how the company generates sales revenue and profit to sustain itself.

The Internet of Things

For example, an insurance company offers to install location- sensors in customers’ cars. By doing so, the company develops the ability to price the drivers’ policies on how a car is driven and where it travels. Pricing is customized to match the actual risks of operating a vehicle rather than based on general proxies—driver’s age, gender, or place of residence.

Objects are becoming embedded with sensors and gaining the ability to communicate. The resulting information networks promise to create new business models, improve business processes, and reduce costs and risks. For example, sensors and network connections can be embedded in rental cars. Zipcar has pioneered this business model, which includes renting cars by the hour. See Figure 1.9. Cars are leased for short time spans to reg- istered members making rental centers unnecessary. Traditional car rental agencies are starting to experiment with sensors so that each car’s use can be optimized for higher revenues.

Enterprise Resource Planning (ERP). ERP also refers to technology infrastructure and/or apps that support essential business processes and operations. ERP systems

are commercial software packages that are bought as modules. Examples of mod-

ules are accounting, inventory management module, supply chain management man-

ufacturing, financial, human resources, budgeting, sales, and customer service. The

modules that are bought are integrated—and the result is an ERP. ERP solutions

are often cloud-based, as you read in Chapter 10.

Software as a Service (SaaS). Software-as-a-service (SaaS) is pay-per-use arrange- ment. Software is available to users when they need it. Since pay-per-use is the

arrangement for most utilities (electricity, water, gas) other terms for SaaS are on-

demand computing, utility computing, and hosted services.

It’s tough to understand how SaaS differs from cloud computing. Cloud com-

puting enables users to access data, software, or services via the Internet. SaaS is an

arrangement where instead of buying and installing enterprise apps, users access

those apps from a SaaS vendor over a network via a browser. Usually there is no

hardware and software to buy since apps are used over the Internet and paid for

through a fixed subscription fee, or on a pay-per-use basis such as electricity or gas.

Collaboration and Workflow Tools. These tools help people work together in an organized way and manage their tasks more effectively regardless of their location.

Employees and managers expect to be able to do work from their mobile and digi-

tal devices. Hendrick Motorsports is one of the most famous and highest-winning

NASCAR racing teams. For details on how the crew uses Group Chat to collabo-

rate on racetracks, view Video-1-2.

These sets of five business priorities and influential ITs provide a helpful foun-

dation and framework for understanding the strategic and operational role of IT in

small and medium businesses (SMB), multinationals, government agencies, health-

care, and nonprofits. IT at Work 1.3 describes not a single IT, but a concept made possible by a group of ITs.

Questions 1. What are the top five concerns of management? Briefly explain each. 2. What are the five most influential ITs? Briefly explain each. 3. Describe a business process. 4. Explain the Internet of things.

Video-1-2 Collaboration NASCAR and Hendrick Motorsports Microsoft-Lync-Server/Hendrick- Motorsports/NASCAR-racing- team-uses-Lync-to-put- themselves-in-a-position-to- win-the-race/4000011091

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1.3 IT Agility, Consumerization, and Competitive Advantage 13

1.3 IT Agility, Consumerization, and Competitive Advantage Agility means being able to respond quickly. In Figure 1.8, a benefit of a scalable cloud IT infrastructure is that the IT function can be more responsive to urgent

agency needs. Responsive means that IT capacity can be easily scaled up or down as needed. In contrast, with a traditional non-cloud environment, it took months to

increase the capacity of existing IT services because of the need to acquire and install

additional hardware and software. Agora Games had the same time lag before tran-

sitioning to cloud storage. The benefit of IT agility to business operations is being

able to take advantage of opportunities faster or better than competitors.

Closely related to IT agility is flexibility. Flexible means having the ability to quickly integrate new business functions or to easily reconfigure software or apps.

For example, mobile networks are flexible—able to be set up, moved, or removed

easily, without dealing with cables and other physical requirements of wired networks.

Mass migration to mobile devices from PCs has expanded the scope of IT beyond

traditional organizational boundaries—making location irrelevant for the most part. IT agility, flexibility, and mobility are tightly interrelated and fully dependent on

an organization’s IT infrastructure and architecture, which are covered in greater

detail in Chapter 2.

IT CONSUMERIZATION With mobile devices, apps, platforms, and social media becoming inseparable parts of work life and corporate collaboration and with more employees work from home,

the result is the rapid consumerization of IT.

Figure 1.9 A Zipcar reserved parking sign in Washington, DC.

many of these signs remotely and continuously, giving practi- tioners early warning of conditions that could lead to expen- sive emergency care. Better management of congestive heart failure alone could reduce hospitalization and treatment costs by $1 billion per year in the U.S.

• In retail, sensors can capture shoppers’ profile data stored in their membership cards to help close purchases by providing additional information or offering discounts at the point of sale.

• Farm equipment with ground sensors can take into account crop and field conditions, and adjust the amount of fertilizer that is spread on areas that need more nutrients.

• Billboards in Japan scan passersby, assessing how they fit con- sumer profiles, and instantly change the displayed messages based on those assessments.

• The automobile industry is developing systems that can detect imminent collisions and take evasive action. Certain basic appli- cations, such as automatic braking systems, are available in high-end autos. The potential accident reduction savings result- ing from wider deployment of these sensor systems could exceed $100 billion annually.

Questions and online activity

1. Research Zipcar. How does this company’s business model dif- fer from traditional car rental companies, such as Hertz or Avis?

2. Think of two physical things in your home or office that, if they were embedded with sensors and linked to a network, would improve the quality of your work or personal life. Describe these two scenarios.

3. What demands does the Internet of things place on IT budg- ets or data centers?

4. What are some privacy concerns?

Opportunities for improvement Other applications of embedded physical things are:

• In the oil and gas industry, exploration and development can rely on extensive sensor networks placed in the earth’s crust to produce more accurate readings of the location, structure, and dimensions of potential fields. The payoff would be lower development costs and improved oil flows.

• In health care, sensors and data links can monitor patient’s behavior and symptoms in real time and at low cost, allowing physicians to better diagnose disease and prescribe tailored treatment regimens. Sensors have been embedded in patients with heart or chronic illnesses so that their conditions can be monitored continuously as they go about their daily activities. Sensors placed on congestive heart patients can now monitor

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14 Chapter 1 A Look Toward the Future of Information Technology

IT consumerization is the migration of consumer technology into enterprise com- puting environments. This shift has occurred because personally-owned IT is as capa-

ble and cost-effective as its enterprise equivalents.

IT at Work 1.4w

The Information Age is in its second half, according to Gartner, Inc., which differs significantly for the first half. In the Information Age’s first 80 years, the primary focus was the technology itself. This led to enormous growth and profits for IBM, Microsoft, and other giant IT providers. To a large extent, organizations gained competitive advantages from access to ITs from these providers: for instance, by investing more capital in IT or by having better skills at installing IT in their businesses. The opportunities to gain a competitive edge in these ways don’t exist anymore.

Mark Raskino, vice president and Gartner Fellow predicted:

In the second half of the age, as technology becomes ubiq- uitous, consumerized, cheaper and more equally available to all, the focus for differentiation moves to exploitation of the technology and to the information it processes.

It is already noticeable that the great fortunes of the sec- ond half of the age are being made by companies like Google and Facebook, which are not traditional makers of technology.

In this period, the majority of companies that enjoy com- petitive advantage will gain it from a differential ability to see and exploit the opportunities of new kinds of information (Gartner, December 2011)

Despite the weak and uncertain economic situation, no dra- matic cuts to enterprise IT budgets were expected through the mid-2010s. Budgets are being scrutinized closely, and companies have conservative business plans, but IT investments are looked at as critical for ongoing business success.

Questions and Online Activity

1. Explain the differences in the first and second halves of the Information Age, according to Gartner.

2. Register for a free account at Search for the lat- est webinar on hot IT trends, such as The Gartner Hype Cycle Special Report. Watch the webinar. In a report, identify the title and URL of the webinar; then describe three important trends and their impacts that were covered in the webinar.

Radical Change in Opportunities to Gain a Competitive Advantage


Two key components of corporate profitability are:

1. Industry structure: An industry’s structure determines the range of profitability of the average competitor and can be very difficult to change.

2. Competitive advantage: This is an edge that enables a company to outperform its average competitor. Competitive advantage can be sustained only by continually pur-

suing new ways to compete.

IT plays a key role in competitive advantage, but that advantage is short-lived

if competitors quickly duplicate it. Research firm Gartner defines competitive advan- tage as a difference between a company and its competitors that matters to cus- tomers. IT at Work 1.4 describes changes in opportunities for leadership.

It is important to recognize that some types of IT are commodities, which do not provide a special advantage. Commodities are basic things that companies need to

function, like electricity and buildings. Computers, databases, and network services

are examples of commodities. In contrast, how a business applies IT to support busi-

ness processes transforms those IT commodities into competitive assets. Critical busi-

ness processes are those that improve employee performance and profit margins.

The next section focuses on technology issues and provides an overview of core

IS and IT concepts.

Questions 1. What are the characteristics of an agile organization? 2. Explain IT consumerization. 3. What are two key components of corporate profitability? 4. Define competitive advantage. 5. What is a business model?

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1.4 Strategic Planning and Competitive Models 15

1.4 Strategic Planning and Competitive Models Strategy planning is critical for all organizations, including government agencies,

health care, education, military, and other nonprofit ones. We start by discussing

strategic analysis and then explain the activities or component parts of strategic


Strategic technologies are those with the potential for significant impact on the

enterprise during the next three years.


There are many views on strategic analysis. In general, strategic analysis is the scan- ning and review of the political, social, economic, and technical environment of the

organization. For example, any company looking to expand its business operations

into a developing country has to investigate that country’s political and economic

stability and critical infrastructure. That strategic analysis would include review-

ing the U.S. Central Intelligence Agency’s (CIA) World Factbook ( publications/the-world-factbook/). The World Factbook provides information on the history, people, government, economy, geography, communications, transportation,

military, and transnational issues for 266 world entities. Then the company would

need to investigate competitors and their potential reactions to a new entrant into

their market. Equally important, the company would need to assess its ability to com-

pete profitably in the market and impacts of the expansion on other parts of the com-

pany. For example, having excess production capacity would require less capital than

if a new factory needed to be built.

The purpose of this analysis of the environment, competition, and capacity is to

learn about the strengths, weaknesses, opportunities, and threats (SWOT) of the

expansion plan being considered. SWOT analysis, as it is called, involves the evalu- ation of strengths and weaknesses, which are internal factors; and opportunities and

threats, which are external factors. Examples are:

• Strengths: Reliable processes; agility; motivated workforce • Weaknesses: Lack of expertise; competitors with better IT infrastructure • Opportunities: A developing market; ability to create a new market or product • Threats: Price wars or other fierce reaction by competitors; obsolescence

SWOT is only a guide. The value of SWOT analysis depends on how the analy-

sis is performed. Here are several rules to follow:

• Be realistic about the strengths and weaknesses of your organization

• Be realistic about the size of the opportunities and threats

• Be specific and keep the analysis simple, or as simple as possible

• Evaluate your company’s strengths and weaknesses in relation to those of com-

petitors (better than or worse than competitors)

• Expect conflicting views because SWOT is subjective, forward-looking, and based

on assumptions

SWOT analysis is often done at the outset of the strategic planning process. Now

you will read answers to the question, “what is strategic planning?”


Strategic planning is a series of processes in which an organization selects and arranges its businesses or services to keep the organization viable (healthy or func-

tional) even when unexpected events disrupt one or more of its businesses, mar-

kets, products, or services. Strategic planning involves environmental scanning and

prediction, or SWOT analysis, for each business relative to competitors in that

business’ market or product line. The next step in the strategic planning process

is strategy.

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16 Chapter 1 A Look Toward the Future of Information Technology

Video-1-3 Five Competitive Forces That Shape Strategy, by Michael Porter mYF2_FBCvXw

WHAT IS STRATEGY? Strategy defines the plan for how a business will achieve its mission, goals, and objec- tives. It specifies the necessary financial requirements, budgets, and resources.

Strategy addresses fundamental issues such as the company’s position in its indus-

try, its available resources and options, and future directions. A strategy addresses

questions such as:

• What is the long-term direction of our business? • What is the overall plan for deploying our resources? • What trade-offs are necessary? What resources will it need to share? • What is our position compared to our competitors? • How do we achieve competitive advantage over rivals in order to achieve or max- imize profitability?

Two of the most well-known methodologies were developed by Porter. Their

essentials are presented next.


Michael Porter’s competitive forces model, also called the five-forces model, has been used to identify competitive strategies. The model demonstrates how IT can enhance

competitiveness. Professor Porter discusses this model in detail in a 13-minute

YouTube video from the Harvard Business School.

The model recognizes five major forces (think of them as pressures or drivers) that could influence a company’s position within a given industry and therefore, the strat- egy that management chooses to pursue. Other forces, such as those cited in this chap-

ter, including new regulations, affect all companies in the industry, and therefore may

have a rather uniform impact on each company in an industry. Although the details of

the model differ from one industry to another, its general structure is universal.

According to Porter, an industry’s profit potential is largely determined by the

intensity of competitive forces within the industry, shown in Figure 1.10. A good under-

standing of the industry’s competitive forces and their underlying causes is a crucial

component of strategy formulation, which is the building of defenses against the com-

petitive forces, or finding a viable position in an industry where the forces are weaker.

Basis of the Competitive Forces Model. Before examining the model, it’s helpful to understand that it is based on the fundamental concept of profitability and profit margin.

PROFIT � TOTAL REVENUES minus TOTAL COSTS. Profit is increased by increasing total revenues and/or decreasing total costs. Profit is decreased when total

revenues decrease and/or total costs increase.

PROFIT MARGIN � SELLING PRICE minus COST OF THE ITEM. Profit mar- gin measures the amount of profit per unit of sales, and does not take into account all costs of doing business.

Five Industry Forces. According to Porter’s competitive forces model, the five major forces in an industry affect the degree of competition, which impact profit mar-

gins and ultimately profitability. These forces interact so while you read about them

individually, their interaction determines the industry’s profit potential. For exam-

ple, while profit margins for pizzerias may be small, the ease of entering that indus-

try draws new entrants into that industry. Conversely, profit margins for delivery

services may be large, but the cost of the IT to support the service is a huge barrier

to entry into the market.

Here is an explanation of the five industry (market) forces.

1. Threat of entry of new competitors. Industries that have large profit margins attract others (called entrants) into the market to a greater degree than small margins. It’s the same principle as jobs—people are attracted to higher-paying jobs, provided that

they can meet or acquire the criteria for that job. In order to gain market share, entrants

typically sell at lower prices or offer some incentive. Those companies already in the

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industry may be forced to defend their market share by lowering prices, which

reduces their profit margin. Thus, this threat puts downward pressure on profit mar-

gins by driving prices down.

This force also refers to the strength of the barriers to entry into an industry, which is how easy it is to enter an industry. The threat of entry is lower (less power-

ful) when existing companies have ISs that are difficult to duplicate or very expen-

sive. Those ISs create barriers to entry that reduce the threat of entry.

2. Bargaining power of suppliers. Bargaining power is high where the supplier or brand is powerful, such as Apple, Microsoft, and auto manufacturers. Power is determined by

how much a company purchases from a supplier. The more powerful company has the

leverage to demand better prices or terms, which increase its profit margin. Conversely,

suppliers with very little bargaining power tend to have small profit margins.

3. Bargaining power of customers or buyers. This force is the reverse of the bar- gaining power of suppliers. Examples are Dell Computers, Wal-Mart, and govern-

ments. This force is high where there a few, large customers or buyers in a market.

4. Threat of substitute products or services. Where there is product-for-product sub- stitution, such as Kindle for Nook or e-mail for fax, there is downward pressure on

prices. As the threat of substitutes increases, profit margin decreases because sellers

need to keep prices competitively low.

5. Competitive rivalry among existing firms in the industry. Fierce competition involves expensive advertising and promotions, intense investments in research and

development (R&D), or other efforts that cut into profit margins. This force is most

likely to be high when entry barriers are low; threat of substitute products is high,

and suppliers and buyers in the market attempt to control. That’s why this force is

placed in the center of the model.

The strength of each force is determined by the industry’s structure. Existing

companies in an industry need to protect themselves against these forces.

Alternatively, they can take advantage of the forces to improve their position or to

challenge industry leaders. The relationships are shown in Figure 1.10.

Companies can identify the forces that influence competitive advantage in their

marketplace and then develop a strategy. Porter (1985) proposed three types of

strategies—cost leadership, differentiation, and niche strategies.

In Table 1.3, Porter’s three classical strategies are listed first, followed by a list

of nine other general strategies for dealing with competitive advantage. Each of these

strategies can be enhanced by IT, as will be shown throughout the book.

1.4 Strategic Planning and Competitive Models 17

Figure 1.10 Porter’s competitive forces model.

Threat of New Entrants

Supplier Power (Bargaining Power of Suppliers and Brands)

Buyer Power (Bargaining Power of Buyers and Distribution Channels)


Competing Companies

Our Company

Threat of Substitute Products or Services

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Primary activities are those business activities through which a company pro- duces goods, thus creating value for which customers are willing to pay. Primary activ-

ities involve the purchase of materials, the processing of materials into products, and

delivery of products to customers. Typically, there are five primary activities:

1. Inbound logistics, or acquiring and receiving of raw materials and other inputs 2. Operations, including manufacturing and testing 3. Outbound logistics, which includes packaging, storage, delivery, and distribution 4. Marketing and sales to customers 5. Services, including customer service

The primary activities usually take place in a sequence from 1 to 5. As work pro-

gresses, value is added to the product in each activity. To be more specific, the incom-

ing materials (1) are processed (in receiving, storage, etc.) in activities called inbound logistics. Next, the materials are used in operations (2), where significant value is added by the process of turning raw materials into products. Products need to be prepared

for delivery (packaging, storing, and shipping) in the outbound logistics activities (3). Then marketing and sales (4) attempt to sell the products to customers, increasing prod- uct value by creating demand for the company’s products. The value of a sold item is

much larger than that of an unsold one. Finally, after-sales service (5), such as warranty service or upgrade notification, is performed for the customer, further adding value.

The goal of these value-adding activities is to make a profit for the company.

Primary activities are supported by the following support activities:

1. The firm’s infrastructure, accounting, finance, and management. 2. Human resources (HR) management. For an IT-related HR trend, see IT at Work 1.5.

18 Chapter 1 A Look Toward the Future of Information Technology

TABLE 1.3 Strategies for Competitive Advantage

Strategy Description

Cost leadership Produce product/service at the lowest cost in the industry.

Differentiation Offer different products, services, or product features.

Niche Select a narrow-scope segment (market niche) and be the best in quality, speed, or cost in that segment.

Growth Increase market share, acquire more customers, or sell

more types of products.

Alliance Work with business partners in partnerships, alliances, joint

ventures, or virtual companies.

Innovation Introduce new products/services; put new features in

existing products/services; develop new ways to produce


Operational effectiveness Improve the manner in which internal business processes

are executed so that the firm performs similar activities

better than rivals.

Customer orientation Concentrate on customer satisfaction.

Time Treat time as a resource, then manage it and use it to the

firm’s advantage.

Entry barriers Create barriers to entry. By introducing innovative products

or using IT to provide exceptional service, companies can

create entry barriers to discourage new entrants.

Customer or Encourage customers or suppliers to stay with you rather

supplier lock-in than going to competitors. Reduce customers’ bargaining

power by locking them in.

Increase switching costs Discourage customers or suppliers from going to

competitors for economic reasons.

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3. Technology development, and research and development (R&D). 4. Procurement, or purchasing.

Each support activity can be applied to any or all of the primary activities.

Support activities may also support each other, as shown in Figure 1.11.

Innovation and adaptability are critical success factors, or CSFs, related to Porter’s models. CSFs are those things that must go right for a company to achieve

its mission.

1.4 Strategic Planning and Competitive Models 19

Accounting, legal & finance

Human resources management

INBOUND LOGISTICS Quality control, receiving, raw materials control


Manufacturing, packaging, production control, quality control

OUTBOUND LOGISTICS Order handling, delivery, invoicing

SALES & MARKETING Sales campaigns, order taking, social networking, sales analysis, market research


Warranty, maintenance


Product and technology development

Legal, accounting, financial management

Personnel, recruitment, training, staff planning, etc.

Supplier management, funding, subcontracting

Product and process design, production engineering, market testing, R&D


S u

p p

o rt

A c ti

v it

ie s

P ri

m a ry

A c ti

v it

ie s

Figure 1.11 A firm’s value chain. The arrows represent the flow of goods, services, and data.

IT at Work 1.5w

Managers at a global energy services company could not find or access their best talent to solve clients’ technical problems because of geographic boundaries and business unit barriers. The company’s help desks supported engineers well enough for com- mon problems, but not for difficult issues that needed creative solu- tions. Using Web technologies to expand access to experts worldwide, the company set up new innovation communities across its business units, which have improved the quality of its services.

Dow Chemical set up its own social network to help managers identify the talent they need to carry out projects across its diverse business units and functions. To expand its talent pool, Dow extended the network to include former employees and retirees.

Other companies are using networks to tap external talent pools. These networks include online labor markets, such as Amazon Mechanical Turk and contest services, such as InnoCentive that help solve business problems.

• Amazon Mechanical Turk ( ) is a marketplace for work that requires human intelligence. Their

web service enables companies to access a diverse, on- demand workforce.

• InnoCentive ( ) is an “open inno- vation” company that takes R&D problems in a broad range of areas such as engineering, computer science, and business and frames them as “challenge problems” for anyone to solve them. It gives cash awards for the best solutions to solvers who meet the challenge criteria.

Sources: Compiled from McKinsey Global Institute ( insights/mgi.aspx), Amazon Mechanical Turk ( ), and InnoCentive ( ).

Questions and Online Activities

1. Visit and review the Amazon Mechanical Turk web site. Explain HITs. How do they provide an on-demand workforce?

2. Visit and review the InnoCentive web site. Describe what they do and how.

Finding Qualified Talent

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Adaptive and Innovative Organizations. Charles Darwin, the renowned scien- tist, said, “It’s not the strongest of species that survives, nor the most intelligent;

but the one most responsive to change.” What is true in nature is true today for

organizations that operate in a rapidly changing environment, as you have read ear-

lier. The digital revolution and rapid environmental changes bring opportunities

and risks. Bill Gates is aware of this. Microsoft is continually developing new

Internet and IT products and services to defend itself against Google. Google is

defending itself against Facebook.

Competition is not only among products or services, but also among business

models, customer service, and supply chains. The concept of value chain has been sup-

plemented by the concepts of value system and value network. A firm’s value chain is part of a larger stream of activities, which Porter calls a

value system. A value system includes the suppliers that provide the inputs neces- sary to the firm and their value chains. Once the firm creates products, they pass

through the value chain of distributors, all the way to the buyers (customers). All parts

of these chains are included in the value system. Gaining and sustaining a competitive

advantage, and supporting that advantage by means of IT—this requires an under-

standing of entire value system.

A value network is a complex set of social and technical resources. Value net- works work together via relationships to create social goods (public goods) or eco-

nomic value. This value takes the form of knowledge and other intangibles and/or

financial value.

Real-time, On-Demand IT Support. Eliminating blind spots requires real-time sys- tems. A real-time system is an IS that provides fast-enough access to information or data so that an appropriate decision can be made, usually before the data or situa-

tion changes (operational deadlines from event to system response). Fast enough may

mean less than a second if you are buying a stock, or before a business opens in the

morning when you determine a price. It can be a day or two in other situations. When

a patient is admitted to the hospital, the patient’s medical records must be readily

accessible. The longer the wait, the greater the risk to the patient. The real-time enter-

prise is a necessity since the basis of competition is often time or speed. Web-based

systems (such as tracking stocks online) provide us with these capabilities. Some

examples are the following:

• Salespeople can check to see whether a product is in inventory by looking directly into the inventory system.

• Suppliers can ensure adequate supplies by looking directly into the forecasting and inventory systems.

• An online order payment by credit card is checked for the balance and the amount of the purchase is debited all in one second. This way authorization is given “fast

enough” for both a seller and a buyer.

20 Chapter 1 A Look Toward the Future of Information Technology

Questions 1. Describe strategic planning. 2. Describe SWOT analysis. 3. Explain Porters’ five forces model, and give an example of each force. 4. Describe adaptive organization. 5. Describe real-time business.

1.5 Why IT is Important to Your Career, and IT Careers Executives, managers, and workers depend on IT in order to make informed deci-

sions, collaborate, communicate, and carry out other activities discussed in this chap-

ter and that you do on a regular basis with your mobiles. A survey of 4,000 employees

by the consulting firm Accenture (2011) found that a large proportion of them make

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1.5 Why IT is Important to Your Career, and IT Careers 21

their own technology decisions, and one-fourth use their own devices to access enter-

prise apps and databases (McKendrick, 2011).

The latest trend (or over-hyped term) is “consumerization of IT.” As with cloud

computing, the term is somewhat ambiguous. In CIO Magazine, Bernard Golden (2011) points out, “Consumerization of IT isn’t about employees using consumer

devices; it’s about consumers becoming the primary users of internal IT applications.”

The greater volume and variety of application access, as consumers tap into what used

to be internal IT systems from any device and location will have huge implications

for companies and IT architecture. With IT consumerization and the bring your own device (BYOD) trend, many of today’s businesses are being run by employees on their own devices, rather than on equipment specified and purchased by the IT department.

Next-generation (next gen) digital enterprises are being driven by business man-

agers and individual employees who know what IT they need, how to acquire them,

and how to use them. This movement frees up the IT function to develop enterprise

systems and innovative solutions. Cloud computing is changing many job descriptions,

as you read in IT at Work 1.6. Software engineers are in high demand because of the growth of the cloud.

Consider the fact that in 2011, CareerCast determined software engineers to be the

best job to have in today’s economy, thanks largely to the rise of cloud computing.

For details, visit

IT at Work 1.6w

Cloud computing is not only driving changes in organizations, it is also changing the nature of jobs–not only within the IT department—but throughout the enterprise as well.

IT Takes on More Strategic and Executive Roles For chief information officers (CIOs) and other chief executives, cloud-driven changes reflect the more strategic role IT plays in set- ting the direction of businesses. For businesses, cloud storage, services, and other computing arrangement have led to more reli- able and predictable supporting IT.

IT and other managers recognize that the best and most cost-effective solutions—including IT solutions—are those that may have been built, tested, and verified elsewhere.

Being able to identify and leverage from a public cloud or company-owned data centers is becoming a key part of IT lead- ers’ responsibilities. The ability to introduce and develop valuable cloud computing engagements or infrastructure may even be the career path to the corner office, according to a study from CA Technologies ( About 54% of 685 CIOs surveyed, believe that cloud computing has enabled them to spend more time on business strategy and innovation. Approximately 71% who have adopted cloud computing see their position as a viable path to pursue other management roles, compared to only 44% of non–cloud adopting CIOs.

Growing Demand for Cloud Professionals and Managers Because of the shift to the cloud, there is growing demand for pro- fessionals and managers who are more focused on business devel- opment than they are in application development. There are greater opportunities for enterprise architects, cloud architects, cloud capacity planners, cloud service managers, and business solu- tions consultants. Jobs being created may not always bear the term cloud in their titles, but cloud is at the core of their job descriptions.

Cloud-Related Job Descriptions—a few examples Here are two excerpts from the titles and descriptions posted on online job sites. Notice that each job deeply engages the person with business strategy or operations.

• Cloud Computing Architect: Serves a critical role to drive the architect/design and implementation for [our] cloud-based solu- tions. Interact effectively with CTO, product manager, and engi- neering managers to drive an optimized solution under known constraints. Provide innovative idea or direction to our product.

• Lead Software Developer—Cloud Computing Focused: This position is a great opportunity for someone who is motivated by building high business value applications and working with smaller teams to directly influence company growth.

Cloud Computing Is Changing the Nature of Jobs


For most organizations, if their computer network goes down, so does the business.

Imagine not having Internet access for 24 hours—no texting, e-mail, downloads,

ebooks, Facebook, Twitter, data access, status reports, and so on. Looking at what

you could still accomplish without IT gives a clear perspective of its importance and


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22 Chapter 1 A Look Toward the Future of Information Technology


IT creates markets, businesses, products, and careers. As you continue to read

throughout this book, exciting IT developments are changing how organizations

and individuals do things. New technologies and IT-supported functions, such as

the 4G networks, embedded sensors, on-demand work forces, and e-readers point

to ground-breaking changes., one of the most respected news media, has

created a new market whose impacts are yet to be realized. Visit iReport at, where a pop-up reads “iReport is the way people like you report the news. The stories in this section are not edited, fact-checked or screened before

they post.” invites everyone to become a reporter and to “take part in the news with CNN. Your voice, together with other iReporters, can help shape what CNN cov-

ers and how. At CNN we believe that looking at the news from different angles gives

us a deeper understanding of what’s going on. We also know that the world is an

amazing place filled with interesting people doing fascinating things that don’t always

make the news” (, 2010).


The Occupational Outlook Handbook, published by the U.S. Bureau of Labor Statistics, published the occupations that have the most projected growth—

2010–2020—and have a bachelor’s degree as the typical level of education needed

to enter the occupation. Figure 1.12 shows the occupations and their median


Elementary school teachers, except special education


Median annual wages, May 2010




























Accountants and auditors

Management analysts

Software developers, applications

Software developers, systems software

Computer systems analysts

Market research analysts and marketing specialists

Middle school teachers, except special and career/technical education

Network and computer systems administrators

Secondary school teachers, except special and career/technical education

Medical and health services managers

Personal financial advisors

Information security analysts

Cost estimators

Figure 1.12 Top 13 growth occupations, 2010–2020. The highest mean annual incomes, as May 2010, are in computer, software, and systems occupations. © U.S. Bureau of Labor Statistics,

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Key Terms 23

IT as a Career: The Nature of IS and IT Work. In today’s workplace, it is imper- ative that ISs work effectively and reliably. IS managers play a vital role in the imple-

mentation and administration of technology within their organizations. They plan,

coordinate, and direct research on the computer-related activities of firms. In

consultation with other managers, they help determine the goals of an organization

and then implement technology to meet those goals. They oversee all technical

aspects of an organization, such as software development, network security, and

Internet operations.

Chief technology officers (CTOs) evaluate the newest and most innovative tech- nologies and determine how they can be applied for competitive advantage. CTOs

develop technical standards, deploy technology, and supervise workers who deal with

the daily IT issues of the firm. When innovative and useful new ITs are launched,

the CTO determines implementation strategies, performs cost-benefit or SWOT

analysis, and reports those strategies to top management, including the chief infor-

mation officer (CIO).

IT project managers develop requirements, budgets, and schedules for their firm’s

information technology projects. They coordinate such projects from development

through implementation, working with their organization’s IT workers, as well as

clients, vendors, and consultants. These managers are increasingly involved in proj-

ects that upgrade the information security of an organization.

IT Job Prospects. Prospects for qualified IS managers should be excellent. Workers with specialized technical knowledge and strong communications and business skills,

as well as those with an MBA with a concentration in ISs, will have the best prospects.

Job openings will be the result of employment growth and the need to replace work-

ers who transfer to other occupations or leave the labor force (Bureau of Labor

Statistics, 2012–2013).

agile enterprise 10 agility 13 barriers to entry 17 big data 7 business intelligence (BI) 10 business model 12 business process 10 business process reengineering

(BPR) 10 cloud computing 10

commodity 14 competitive advantage 14 competitive forces model 16 critical success factor (CSF) 19 cycle time 10 data analytics 6 enterprise resource planning

(ERP) 12 inbound logistics 18 Internet of Things 12

IT consumerization 14 messy data 7 outbound logistics 18 primary activities 18 productivity 9 profit margin 16 real-time system 20 Software-as-a-service (SaaS) 12 support activities 19 SWOT analysis 15

Key Terms

Questions 1. Why is IT a major enabler of business performance and success? 2. Explain why it is beneficial to study IT today. 3. Why are IT job prospects so strong?

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IT and Data Management Decisions 1. Visit Government Apps at and

click on Social Media Apps. Four of the categories that you find are (1) Analytics and Search Tools, (2) Blogs

and Microblogs, (3) Bookmarking/Sharing, and (4)

Idea Generation/General Discussion.

a. Select one of these four categories. Within that cate- gory, select 3 apps by clicking ENROLL for each app.

b. Click on the URL to load the web site for the app. Then research and review its features and functions.

c. Using a table to organize the results of your research, compare the features and functions of the

three apps.

d. Assume you have been asked to recommend one of the apps in the category to senior management. You

need to decide which app provides the best overall

features and functions.

e. Prepare a one-page report that clearly explains your recommendation.

Questions for Discussion & Review 1. Select five companies you do business with. Does each

one need to engage their customers, as shown in Figure

1.1? Explain why or why not.

2. What are the next big tech trends?

3. Under what conditions does cloud storage reduce costs?

4. Why is messy data important?

5. Refer to Figure 1.6. Select and explain two of the top five management concerns.

6. How can productivity be improved?

Evaluate and Expand Your Learning 7. Consider how much time you waste trying to find a file,

message, data, or other information that you know

you’ve saved somewhere. What IT could decrease the

time you waste? Explain.

8. Consider truck tires. How can embedded sensors—the Internet of things—create a competitive advantage for a

transportation company?

9. Refer to your answer in #10. Which of Porter’s 5 compet- itive forces would be impacted by the use of embedded

sensors in the fleet of trucks?

10. Why or how would understanding the latest IT trends influence your career?

Online Activities 1. Visit the U.S. Department of Commerce Bureau of

Economic Analysis (BEA) web site at a. Review the BEA home page to learn the types of

information, news, reports, and interactive data avail-

able. Search for the page that identifies who uses BEA measures. Identify two users of Industry Data and two users of International Trade and Investment Data.

b. Click on the Glossary. Use the Glossary to explain GDP in your own words.

c. Under the NEWS menu, select U.S. Economy at a Glance. The URL is glance.htm. (1) Review the GDP, Current Numbers for that last

two reported quarters. How did GDP change in

each of those two quarters?

(2) Click on “View Larger Image.” Review the Gross Domestic Product (GDP) Graph, which shows


You find clickable Link Libraries for each chapter on the Companion website.

Google Apps for Government McKinsey Global Institute IBM demo, “Turning insight into outcomes”

article/outperform_with_smarter_analytics.html Manage All Unstructured Data with SAS Text Analytics Text Analytics video from SAS software Analysis of economic conditions, from the Federal Reserve Federal Cloud Computing Strategy NASCAR and Hendrick Motorsports

Motorsports/NASCAR-racing-team-uses-Lync-to-put-themselves-in-a-position-to-win-the- race/4000011091

Five Competitive Forces That Shape Strategy, by Michael Porter

U.S. Bureau of Labor Statistics


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CASE 2 Business Case 25

the Quarter-to-Quarter Growth in Real GDP. glance.htm. Based on quarterly GDP data, are business conditions improving, stagnant, or

deteriorating? Explain your answer.

2. Visit the web site of UPS (, Federal Express (, or a comparable logistics and delivery company. Select your country.

a. Find out what information is available to customers before they send a package.

b. Find out about the “package tracking” system; be specific.

c. Compute the cost of delivering a 10� � 20� � 15� box, weighing 20 pounds, from your location to

another location. Compare the fastest delivery against

the least cost.

d. Prepare a spreadsheet for two different types of calculations available on the site. Enter data and

solve for two different calculators. Use Excel.

3. Visit and search for two videos on Michael Porter’s strategic or competitive forces models. For each

video, report what you learned. Specify the complete

URL, video title, who uploaded the video and the date,

video length, and number of views.

4. Visit and to simulate buying a laptop computer. Compare and contrast the selection

process, degree of customization, and other buying

features. What are the barriers to entry into this market,

based on what you learned from this exercise?

Collaborative Work 1. Your team has been tasked with researching and report-

ing on the growing importance of big data analytics. Your

team needs to use online collaborative tools for storing

and organizing the content and then writing and editing

the report.

a. Each person researches the features and benefits of one online collaborative platform or software; and

distributes the analysis to all members.

b. Using e-mail or texting, the team reviews and selects a collaborative work space—composed of one or more of those collaborative platforms or software.

c. Implement your work space selected in (b). d. Now, each person researches and posts four big data

analytics articles, PDFs, or presentations; and book-

marks several web sites to the workspace.

e. In a report, describe the collaborative work space and the value of using that space to store and share content.

Large cities with growing populations need to sustainably bal- ance their social, economic and environmental resources. Two environmental concerns for urban areas are that they consume huge amounts of energy and generate 60 percent of the global carbon emissions.

Charlotte’s Sustainability Plan Gives it a Competitive Edge Over Other Large Cities In mid-2011, a public-private collaboration named Envision Charlotte was announced among businesses in the City of Charlotte in North Carolina, Duke Energy, and Cisco to change energy-use habits and consumer behavior. This first- of-its kind collaboration is making commercial buildings in Charlotte’s urban core, known as the I-277 loop, more energy efficient—and ultimately the most sustainable urban core in the U.S.

Michael Smith, the president of Charlotte Center City Partners, explained that “Charlotte differentiates itself by tak- ing a very ’private sector’ approach to city-building through the action of corporate leadership. With Envision Charlotte, we are once again setting a priority (environmental sustain- ability) and creating an architecture that aligns infrastructure investments, policy and commerce to achieve a shared goal.”

Behavioral Feedback Loops Facilitating Energy Improvements Envision Charlotte will cut energy use in Uptown Charlotte by 20 percent and avoid approximately 220,000 metric tons of greenhouse gases by 2016. Unlike other eco-cities or smart-grid

(see projects, Envision Charlotte provides behavioral feedback loops that show people how their behav- ior affects energy-usage and how to modify their actions accord- ingly. Feedback that is gathered is helping Duke Energy and other stakeholders develop strategies to promote energy- efficient behaviors to building occupants.

Envision Charlotte’s IT Infrastructure Verizon Wireless provided the telecommunications network that connects the digital meters, signs, and media players used in Envision Charlotte—creating its IT infrastructure.

As of fall 2011, large interactive screens from Cisco were installed in the lobbies of all buildings participating in Envision Charlotte. Using digital energy technologies con- nected by Verizon Wireless’ 4G LTE (fourth generation) net- work, Duke Energy collects and processes energy usage data from about 70 participating buildings and streams it to the screens in lobbies.

Building tenants see the near real-time commercial energy consumption data for the community and suggested actions they can take to reduce their personal energy usage in the office. Having near real-time energy usage information keeps people aware and is a first step toward proactive human engagement to reduce wasted energy in commercial buildings.

Machine-to-Machine IT Supports Sustainability Envision Charlotte is important because of its environment benefits and the application of the latest 4G technology to

CASE 2 BUSINESS CASE Building a Sustainable Big City with a Competitive Edge

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26 Chapter 1 A Look Toward the Future of Information Technology

sustainability. Mark Bartolomeo, a Verizon Wireless vice pres- ident, pointed out: “This is a real-life example of how machine- to-machine (M2M) technology is an effective way to empower people as they become stewards for energy savings.”

Sources: Compiled from, Pentland (2011), (2012).

Questions and Activities 1. Why was Charlotte a good candidate for this project to

reduce energy waste? For your answer, research Charlotte’s economic condition as of 2010–2011.

2. What competitive edge does Envision Charlotte provide the I-277 loop over other urban centers?

3. How is near real-time information the substitute for energy use?

4. Explain the role of the behavioral feedback loop. 5. What core technologies were needed for this project? 6. Visit the Smart Energy Now web site at

SmartEnergyNow/. a. What information is made available to the public? b. In what ways does the site try to engage visitors? c. What might this real-time information impact or influ-

ence achieving Charlotte’s goal of sustainability?

ACCESS NYC is a powerful tool that is transforming the way human services are delivered to New York City’s (NYC) need- iest people and families.

Under the leadership of Mayor Michael Bloomberg, NYC is using IT to increase the transparency, accountability, and accessibility of city government, focused on providing city services to an ever-broader constituency. To accelerate this objective, Mayor Bloomberg created the Integrated Human Services System (IHSS) Task Force to examine issues facing NYC’s human services agencies and identify ways in which technology might be employed to enhance and streamline service delivery, while making services more efficient and responsive to residents’ needs.

To do:

1. Visit: access-nyc-it-strategy-transformation.aspx where you find four tabs: Overview, Business Challenge, How We Helped, and High Performance Delivered.

2. From the Overview site • View the Video • Download and read the PDF

3. Read the Business Challenge. 4. Read How We Helped. 5. Read the High Performance Delivered.

Questions 1. Explain why disparate information systems severely limited

NYC government’s ability to coordinate and deliver serv- ices to residents.

2. What other challenges did the NYC agencies face trying to serve residents in need?

3. Discuss the IT issues that were addressed or solved by the NYC partnership with Accenture.

4. Describe the ACCESS NYC and performance improve- ments.

5. What contributed to the success of ACCESS NYC?


Evaluating Cost-Savings from Switching to the Cloud

1. Visit Your Company Goes Google at http://www. to access the Cost Savings Calculator. a. Input a company name and number of employees.

You will see an estimated savings per year. On that

web page, you will see Assumptions in the upper-right corner. Click onto EDIT, and then do a screen cap-

ture or print the Assumptions. You will use this data

later. Click return to site. b. Continue through the interactive demo.

Data Analysis & Decision Making c. When complete, click Generate my unique URL.

Copy, paste, and save your unique URL so you can return and edit the assumptions.

d. Download the file as a pdf and review your results. e. Download the file as a pdf spreadsheet and review

your results.

f. Using your unique URL, return to the interactive demo and edit 5 of the values—decreasing each of

them. Record which items you edited and the first

values and the new values.

g. Repeat steps (b) through (e).

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References 27

Accenture. “Rising Use of Consumer Technology in the Workplace Forcing

IT Departments to Respond, Accenture Research Finds,” December 12,


Bureau of Labor Statistics (2012–2013), U.S. Department of Labor,

Occupational Outlook Handbook.

Central Intelligence Agency (CIA) World Factbook, publications/the-world-factbook/.

Eaton, K. “Facebook More Popular Than Google? Let the Ad Wars Begin,”

Fast Company, March 16, 2010. Envision Charlotte, Gartner. Gartner Says Second Half of the Information Age to Focus on

Exploitation of Technology and the Information It Processes, December

15, 2011.

Gartner. Market Trends: Gaming Ecosystem, June 10, 2011.

Golden, B. “Cloud CIO: What ‘Consumerization of IT’ Really Means to

CIOs.” CIO Magazine, August 12, 2011. iReport, Jopson. B, D. Gelles, and A. Dembosky. “Retailers wait for Facebook to

deliver,” The Financial Times (, December 23, 2011.

References Luftman, J., and H.S. Zadeh. “Key information technology and management

issues 2010–11: An international study,” Journal of Information Technology 26(3), September 2011.

Luftman, J.; and T. Ben-Zvi. “Key Issues for IT Executives 2010: Judicious

IT Investments Continue Post-Recession,” MIS Quarterly Executive 9(1), March 2010.

Manyika, J., et al. “Big data: The next frontier for innovation, competition,

and productivity.” McKinsey Global Institute (MGI) Report, May 2011. McKendrick, J. “End users becoming accidental IT managers: survey.” December 14, 2011. McKinsey Quarterly, January 2011. Pentland. W. “How Charlotte Businesses Are Tackling Energy Waste

Through Data.” Forbes, December 22, 2011. Pogue, D. “Embracing the Mothers of Invention.” New York Times. January

25, 2012.

Porter, M. E. “Strategy and the Internet.” Harvard Business Review, March 2001.

U.S. Government Apps, 2012.

Resources on the Book’s Web site More resources and study tools are located on the Student web site. You’ll find additional chap- ter materials and useful web links. In addition, self-quizzes that provide individualized feedback are available for each chapter.

h. Again using your unique URL, return to the interac- tive demo and edit the same 5 values—but this time

increase each of them above the original values.

Record the new values.

i. Repeat steps b through e. j. Compare the differences in cost savings—original val-

ues, decreased values, and increased values. What is

the difference in cost-savings? Explain how changes

in your values impacted the cost-savings.

k. Would you recommend that the company invest in this Google solution? Explain.

l. Which report format is more useful to you, the pdf or spreadsheet? Explain why.

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Information Management and IT Architecture2


Learning Outcomes � Identify current information management challenges and

evaluate potential solutions.

� Recognize the role of IT architecture and how it guides

and governs IT growth and maintenance.

� Map the functions of various types of information systems

to the type of support needed by business operations and

decision makers.

� Evaluate cloud-computing solutions and services.

� Explain the characteristics and assess the benefits of

virtualization and virtual machines (VM).

Quick Look

Case 1, Opening Case: Paul McCartney’s Artistic Legacy (and Its IT Architecture)

2.1 Information Management in the 2010s

2.2 IT Architecture

2.3 Information Systems and IT Infrastructure

2.4 Cloud Computing and Services

2.5 Virtualization and VM (Virtual Machines) Key Terms

Chapter 2 Link Library

Evaluate and Expand Your Learning

• IT and Data Management Decisions • Questions for Discussion & Review • Online Activities • Collaborative Work

Case 2, Business Case: Online Gamers’ Statistics Stored in the Cloud

Case 3, Video Case: Three Cloud Computing Case Studies

Data Analysis & Decision Making: DSS to Control and Manage Gasoline Costs


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You are experienced in information management and its benefits and challenges. You manage online accounts across multiple mobile devices and computers—and

social media, texts, photos, videos, music, docs, address

books, events, downloads, and other content that make up

your digital library. Not being able to transfer and syn-

chronize whenever you add a device or app is annoying

and inefficient. To simplify add-ons, upgrades, sharing,

and access, you might leverage cloud services such as

iTunes, Instagram, Diigo, and At some point, a

user may want to start over with the latest mobile

device—and re-organize everything to make dealing with

information and devices easier. That’s a glimpse at the

information management situations facing organizations

today—and why a plan is needed to guide, control, and

govern IT growth. As with building construction (e.g.,

Figure 2.1), blueprints and models help guide and govern

IT assets.

To better reflect organizational content, the term

information management is used instead of data manage- ment. The most potentially valuable and challenging type is human information—the semistructured or unstruc- tured content generated by humans from social media,

mobile devices, search engines, and sensors as well as

texts, images, audio, and video.

To function in the big, cloudy, mobile and social world, companies need a well-designed set of plans—a

blueprint—to guide and govern software add-ons and

upgrades, hardware, systems, networks, cloud services, and

other IT. These blueprints are known as IT architectures, or enterprise architectures. Having the right architecture in place cuts IT costs significantly and increases produc-

tivity by giving decision makers access to information,

insights, and ideas where and when they need them.

Figure 2.1 Blueprints and models, like those used for building construction, are needed to guide and govern an enterprise’s IT assets.

Paul McCartney is one of the top entertainers of all time. Formerly of The Beatles (1960–1970) and Wings (1971–1981), he is listed in Guinness World Records as the most successful musician and composer in popular music history.

Five Decades and 1 Million� Artifacts McCartney has over five decades worth of recordings, videos of live concerts, short video clips, handwritten lyrics, photos, rolls of film, original works of art, and memorabilia in his personal collection. At the start of 2011, his personal collection of over 1 million artifacts was not organized or cataloged. And a large portion was in paper or analog (non-digital) format.

In 2011, McCartney’s MPL Communications (McCartney Productions Ltd.) started planning a new interactive portal,, to provide a fun and exciting experience for fans. MPL is the holding company for his post-Beatles business interests and work (Figure 2.2).

CASE 1 OPENING CASE Paul McCartney’s Artistic Legacy (and Its IT Architecture)

QUICK LOOK at Chapter 2, Information Management and IT Architecture

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Private Collection Transformed into a Digital Library During 2011, MPL partnered with technology company HP ( to develop the IT archi- tecture needed for the content-rich interactive portal (web site). The foundation of the IT architecture is the digital library that houses Paul’s collection. To create the digital library, HP collected artifacts from multiple warehouses, converted them from multiple formats— some obsolete—in digital format, then organized and cataloged them. The digital library was built using HP servers, storage, networking, and management software.

Portal and Digital Library The web site is the portal that fans see and interact with that feeds content from the mas- sive library. The digital library is stored on a private cloud and plugs directly into the back end of the portal. With this IT architecture, as soon as new content from concerts and other events is added to the library, it is pushed immediately to the site for fans to view.

Once the McCartney digital library was in place, HP worked with him and MPL to replace all aspects of the existing site, its platform, and the underlying infrastructure. Portal The portal leverages the functionality of the underlying digital library to create an engaging and immersive experience for the music community. Through the use of metatags, related content is identified and linked. For example, if a fan searches the Rubber Soul album, other content with “Rubber Soul” metatags such as the lyrics, photog- raphy, and videos, is displayed, too.

30 Chapter 2 Information Management and IT Architecture

Figure 2.2 Sir Paul McCartney’s live concerts are accessible from his new interactive portal,

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IT Architecture Supports Paul’s Vision McCartney wanted to “make it something really exciting.” A really exciting portal was made possible by the IT architecture that powers his media business, making it simpler and more efficient for fans to identify, locate, and use assets in the huge collection. McCartney explained his vision saying:

The idea is to intrigue people and bring them into our world with new facts, new photographs, news of what’s happening, accounts of what happened, backstage moments and all the stuff we can give that nobody else can. The website really brings the digital library to life by constantly pulling new content from my personal collection so there’s always a new experience for visitors (HP, 2012).

The portal also features a unique music player—The Jukebox—that fans use to listen to songs and build personal playlists with music pulled from the digital library.

At you can find all of McCartney’s post-Beatles albums, listen to songs before buying an album, and listen to others’ playlists. The Rude Studio lets you cre- ate your own playlist using McCartney songs, and then post the list on the site for other members to listen to and comment on. You can see all the albums a song was recorded on, the first time and location a song was played in concert, the number of times a song was played in concert, the date and location of every concert where each song was played and the set list for each of the concerts.

Jan Zadak, an HP executive vice president, said: “This is an exciting journey as we con- tinue to work closely with Paul McCartney to develop technology solutions that will pre- serve and extend his legacy.”

Sources: Compiled from (2012), Reuters (2012), (2011), and (2012).


1. Explain the state or condition of McCartney’s private collection before this visionary proj- ect began in 2011.

2. Using your answer to #1, what had to be done to get McCartney’s collection ready for the digital library?

3. What are the benefits to fans of the new portal? 4. Why is it important to be able to offer real-time content from McCartney’s concerts or

other events on the portal? 5. As new content was created, how did it get to the portal?


6. Visit and review the features of Consider what Jan Zadak, an HP executive vice president, said: “Fans expect a richer and deeper experience than ever before.” Do you agree with this statement? Explain. What features of the portal created a richer and deeper fan experience?


7. According to MPL, the online music player Jukebox is unique. Not only can fans listen to songs and build their own playlists, but they can gain access to all information related to any particular song or album. Fans can listen to full tracks, buy albums, make dedications, and download Jukebox to their desktops. To encourage return visits, the site lets fans cre- ate a custom personal page with their profile, playlists, blogs, private messaging, and videos. Based on these features, debate whether or not the portal is a competitor of Facebook. Your debate should include the issue of whether or not it is a social media site.

CASE 1 Opening Case 31

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32 Chapter 2 Information Management and IT Architecture

Enterprise mashups are an information management tool

that collects and integrates

structured and unstructured

content for business purposes.

IT (Enterprise) architecture defines the enterprise’s mission,

the information necessary to

perform the mission, and the

processes for implementing new

ITs in response to business


CIO Chief Information Officer, the executive in charge of IT.

2.1 Information Management in the 2010s Business and career success depends on understanding and leveraging all types of

data—from structured transaction data to unstructured texts. As data types and

sources have changed so have information management technologies. Information management deals with how information is stored and organized; and the speed at which it is captured, analyzed, and reported. Mashups are a familiar example of infor- mation management technology. Consumer mashups are applications that collect and combine data from multiple public sources and then organize them through a

browser-user interface. For instance, Housing Maps ( combines Craigslist rental listings with Google Maps to show the locations of apart-

ments available for rent.

Enterprise mashups, also referred to as business mashups, combine data from multiple internal and public sources and publish the results to enterprise portals,

dashboards, or the cloud. Enterprise mashups are widely used in social media

(described in Chapter 7) and to support performance management and reporting

(described in Chapter 11).

In the past few years, information has increased in volume, velocity, variety, and

complexity. Images, audio, video, location data, and social data from within and out-

side the enterprise are being captured for business purposes. These trends have major

implications for information management. You’ll be managing in a world that’s

mobile, connected, interactive, immediate and fluid—and dependent on how well

information is managed.


The overall goal of information management is the design and implementation of a

well–planned out IT architecture, policies, and procedures needed to effectively and

efficiently support the information and decision needs of an organization. Business

information is generally scattered throughout an enterprise, in separate ISs dedicated

to specific purposes such as enterprise resource planning, supply chain optimization,

or customer relationship management.

Major organizations have over 100 repositories (storage areas) of information.

In many companies, the integration of these disparate ISs is limited—as is users’ abil-

ity to access all the information they need. Providing easy access to large volumes

of information is just one of the challenges facing organizations. Managing infor-

mation effectively is an equally tough task. Despite all the information flowing

through companies, executives, managers, and workers throughout the organization

often struggle to find the information they need to make sound decisions or do

their jobs.

The days of simply managing structured data are over. Now, organizations must

manage semi- and unstructured content, which may be of questionable data quality,

from external sources—mostly social media and the Internet.

CIOs must ensure data security and compliance with continually evolving

regulatory requirements, such as the Sarbanes–Oxley Act, Basel III, the Computer

Fraud and Abuse Act (CFAA), the USA PATRIOT Act, and the Health Insurance

Portability and Accountability Act (HIPAA).

Issues of information access, management, and security must also deal with infor-

mation degradation and disorder—where people do not understand what data means

or how it can be useful.


Companies’ information and decision support technologies have developed over

many decades. During that time span, there have been different management

teams with their own priorities and understanding of the role of IT; technology

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2.1 Information Management in the 2010s 33

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