Information Systems

CONTENTS: CASE STUDIES

CASE STUDY 1 Midsouth Chamber of Commerce (A): The Role of the Operating Manager in Information Systems

CASE STUDY I-1 IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform

CASE STUDY I-2 VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier

CASE STUDY I-3 The VoIP Adoption at Butler University

CASE STUDY I-4 Supporting Mobile Health Clinics: The Children’s Health Fund of New York City

CASE STUDY I-5 Data Governance at InsuraCorp

CASE STUDY I-6 H.H. Gregg’s Appliances, Inc.: Deciding on a New Information Technology Platform

CASE STUDY I-7 Midsouth Chamber of Commerce (B): Cleaning Up an Information Systems Debacle

CASE STUDY II-1 Vendor-Managed Inventory at NIBCO

CASE STUDY II-2 Real-Time Business Intelligence at Continental Airlines

CASE STUDY II-3 Norfolk Southern Railway:The Business Intelligence Journey

CASE STUDY II-4 Mining Data to Increase State Tax Revenues in California

CASE STUDY II-5 The Cliptomania™ Web Store: An E-Tailing Start-up Survival Story

CASE STUDY II-6 Rock Island Chocolate Company, Inc.: Building a Social Networking Strategy

CASE STUDY III-1 Managing a Systems Development Project at Consumer and Industrial Products, Inc.

CASE STUDY III-2 A Make-or-Buy Decision at Baxter Manufacturing Company

CASE STUDY III-3 ERP Purchase Decision at Benton Manufacturing Company, Inc.

CASE STUDY III-4 The Kuali Financial System: An Open-Source Project

CASE STUDY III-5 NIBCO’s “Big Bang”: An SAP Implementation

CASE STUDY III-6 BAT Taiwan: Implementing SAP for a Strategic Transition

CASE STUDY III-7 A Troubled Project at Modern Materials, Inc.

CASE STUDY III-8 Purchasing and Implementing a Student Management System at Jefferson County School System

CASE STUDY IV-1 The Clarion School for Boys, Inc.– Milwaukee Division: Making Information Systems Investments

CASE STUDY IV-2 FastTrack IT Integration for the Sallie Mae Merger

CASE STUDY IV-3 IT Infrastructure Outsourcing at Schaeffer (A):The Outsourcing Decision

CASE STUDY IV-4 IT Infrastructure Outsourcing at Schaeffer (B): Managing the Contract

CASE STUDY IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico

CASE STUDY IV-6 The Challenges of Local System Design for Multinationals: The MaxFli Sales Force Automation System at BAT

CASE STUDY IV-7 Meridian Hospital Systems, Inc.: Deciding Which IT Company to Join

CASE STUDY IV-8 Mary Morrison’s Ethical Issue

Managing Information Technology

Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River

Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

Seventh Edition

Carol V. Brown

Howe School of Technology Management, Stevens Institute of Technology

Daniel W. DeHayes

Kelley School of Business, Indiana University

Jeffrey A. Hoffer

School of Business Administration, The University of Dayton

E. Wainright Martin

Kelley School of Business, Indiana University

William C. Perkins

Kelley School of Business, Indiana University

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Library of Congress Cataloging-in-Publication Data Managing information technology / Carol V. Brown . . . [et al.]. — 7th ed.

p. cm. Includes bibliographical references and index. ISBN-13: 978-0-13-214632-6 (alk. paper) ISBN-10: 0-13-214632-0 (alk. paper) 1. Management information systems. I. Brown, Carol V. (Carol Vanderbilt), 1945- T58.6.M3568 2012 658.4’038011—dc22

2010048598

10 9 8 7 6 5 4 3 2 1

ISBN 10: 0-13-214632-0 ISBN 13: 978-0-13-214632-6

www.pearsonhighered.com
BRIEF CONTENTS

Chapter 1 Managing IT in a Digital World 1

PART I Information Technology 17

Chapter 2 Computer Systems 19 Chapter 3 Telecommunications and Networking 60 Chapter 4 The Data Resource 95

PART II Applying Information Technology 187

Chapter 5 Enterprise Systems 189 Chapter 6 Managerial Support Systems 223 Chapter 7 E-Business Systems 253

PART III Acquiring Information Systems 327

Chapter 8 Basic Systems Concepts and Tools 329 Chapter 9 Methodologies for Custom Software Development 361 Chapter 10 Methodologies for Purchased Software Packages 390 Chapter 11 IT Project Management 410

PART IV The Information Management System 517

Chapter 12 Planning Information Systems Resources 519 Chapter 13 Leading the Information Systems Function 536 Chapter 14 Information Security 561 Chapter 15 Social, Ethical, and Legal Issues 575

Glossary 668 Index 691

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CONTENTS

Preface xvii

Chapter 1 Managing IT in a Digital World 1 Recent Information Technology Trends 2

Computer Hardware: Faster, Cheaper, Mobile 2

Computer Software: Integrated, Downloadable, Social 2

Computer Networks: High Bandwidth, Wireless, Cloudy 4

New Ways to Compete 4

New Ways to Work 5

Managing IT in Organizations 5 Managing IT Resources 5

IT Leadership Roles 7

The Topics and Organization of This Textbook 8 Review Questions 9 • Discussion Questions 9 • Bibliography 9

� CASE STUDY 1 Midsouth Chamber of Commerce (A): The Role of the Operating Manager in Information Systems 10

PART I Information Technology 17

Chapter 2 Computer Systems 19 Basic Components of Computer Systems 20

Underlying Structure 20

Input/Output 20

Computer Memory 21

Arithmetic/Logical Unit 23

Computer Files 23

Control Unit 25

The Stored-Program Concept 25

Types of Computer Systems 28 Microcomputers 29

Midrange Systems 30

Mainframe Computers 33

Supercomputers 34

Key Types of Software 34

Applications Software 36 An Example of an Application Product 37

Personal Productivity Software 38

Support Software 41 The Operating System 41

Language Translators 43

v

Third Generation Languages 43

Fourth Generation Languages 46

Markup Languages 48

Object-Oriented Programming 49

Languages for Developing Web Applications 51

Database Management Systems 52

CASE Tools 54

Communications Interface Software 54

Utility Programs 54

The Changing Nature of Software 55

The Information Technology Industry 55 Review Questions 56 • Discussion Questions 57 • Bibliography 58

Chapter 3 Telecommunications and Networking 60 The Need for Networking 61

Sharing of Technology Resources 61

Sharing of Data 61

Distributed Data Processing and Client/Server Systems 62

Enhanced Communications 62

Marketing Outreach 62

An Overview of Telecommunications and Networking 62

Key Elements of Telecommunications and Networking 63 Analog and Digital Signals 63

Speed of Transmission 64

Types of Transmission Lines 65

Transmission Media 65

Topology of Networks 70

Types of Networks 72

Network Protocols 86

The Exploding Role of Telecommunications and Networking 88 Online Operations 88

Connectivity 89

Electronic Data Interchange and Electronic Commerce 89

Marketing 89

The Telecommunications Industry 90 Review Questions 92 • Discussion Questions 92 • Bibliography 93

Chapter 4 The Data Resource 95 Why Manage Data? 96

Technical Aspects of Managing the Data Resource 97 The Data Model and Metadata 97

Data Modeling 98

Database Programming 100

vi Contents

Managerial Issues in Managing Data 101 Principles in Managing Data 101

The Data Management Process 106

Data Management Policies 110 Review Questions 114 • Discussion Questions 114 • Bibliography 114

� CASE STUDY I-1 IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 116

� CASE STUDY I-2 VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier 128

� CASE STUDY I-3 The VoIP Adoption at Butler University 144 � CASE STUDY I-4 Supporting Mobile Health Clinics: The Children’s Health

Fund of New York City 157 � CASE STUDY I-5 Data Governance at InsuraCorp 166 � CASE STUDY I-6 HH Gregg: Deciding on a New Information Technology

Platform 170 � CASE STUDY I-7 Midsouth Chamber of Commerce (B): Cleaning up an

Information Systems Debacle 177

PART II Applying Information Technology 187

Chapter 5 Enterprise Systems 189 Application Areas 189

Critical Concepts 191 Batch Processing versus Online Processing 191

Functional Information Systems 192

Vertical Integration of Systems 192

Distributed Systems 192

Client/Server Systems 193

Virtualization 194

Service-Oriented Architecture and Web Services 194

Transaction Processing Systems 196 Payroll System 196

Order Entry System 196

Enterprise Resource Planning Systems 198 An Example ERP System: SAP ERP 199

Data Warehousing 201

Customer Relationship Management Systems 204

Office Automation 206 Videoconferencing 207

Electronic Mail 208

Groupware and Collaboration 209 An Example Groupware System: Lotus Notes 210

Contents vii

Intranets and Portals 213

Factory Automation 215 Engineering Systems 216

Manufacturing Administration 216

Factory Operations 217

Robotics 217

Supply Chain Management Systems 217 Review Questions 219 • Discussion Questions 220 • Bibliography 220

Chapter 6 Managerial Support Systems 223 Decision Support Systems 223

Data Mining 224

Group Support Systems 228

Geographic Information Systems 229 Business Adopts Geographic Technologies 230

What’s Behind Geographic Technologies 231

Issues for Information Systems Organizations 232

Executive Information Systems/Business Intelligence Systems 234

Knowledge Management Systems 237 Two Recent KMS Initiatives within a Pharmaceutical Firm 239

KMS Success 240

Artificial Intelligence 241

Expert Systems 241 Obtaining an Expert System 242

Examples of Expert Systems 242

Neural Networks 244

Virtual Reality 245 Review Questions 250 • Discussion Questions 250 • Bibliography 251

Chapter 7 E-Business Systems 253 Brief History of the Internet 254

E-Business Technologies 254

Legal and Regulatory Environment 257

Strategic E-Business Opportunities (and Threats) 259

B2B Applications 260

B2C Applications 263 Two Dot-Com Retailers 264

Two Traditional Catalog Retailers 266

Two Traditional Store Retailers 267

Summary: B2C Retailing 268

viii Contents

Dot-Com Intermediaries 269 Summary: Successful Online Intermediary Models 273

Special Issue: What Makes a Good Web Site for Consumers 273

Special Issue: What Makes a Good B2C Social Media Platform 275

Review Questions 276 • Discussion Questions 276 • Bibliography 277

� CASE STUDY II-1 Vendor-Managed Inventory at NIBCO 279

� CASE STUDY II-2 Real-Time Business Intelligence at Continental Airlines 284

� CASE STUDY II-3 Norfolk Southern Railway: The Business Intelligence Journey 294

� CASE STUDY II-4 Mining Data To Increase State Tax Revenues in California 300

� CASE STUDY II-5 The CliptomaniaTM Web Store 308

� CASE STUDY II-6 Rock Island Chocolate Company, Inc.: Building a Social Networking Strategy 321

PART III Acquiring Information Systems 327

Chapter 8 Basic Systems Concepts and Tools 329 The Systems View 329

What Is a System? 330

Seven Key System Elements 330

Organizations as Systems 334

Systems Analysis and Design 335

Business Processes 336 Identifying Business Processes 336

Business Process Redesign 336

Processes and Techniques to Develop Information Systems 339

The Information Systems Development Life Cycle 339

Structured Techniques for Life-Cycle Development 340

Procedural-Oriented Techniques 341

Techniques for the As-Is Model 343

Techniques for the Logical To-Be Model 344

Techniques for Documenting the Physical To-Be System 348

Object-Oriented Techniques 351

Core Object-Oriented Concepts 351

Summary of Processes and Techniques to Develop Information Systems 353

Contents ix

Information Systems Controls to Minimize Business Risks 354 Types of Control Mechanisms 355

Controls in the Definition and Construction Phases 355

Controls in the Implementation Phase 357 Review Questions 358 • Discussion Questions 359 • Bibliography 359

Chapter 9 Methodologies for Custom Software Development 361 Systems Development Life Cycle Methodology 361

The SDLC Steps 362

Initiating New Systems Projects 363

Definition Phase 363

Construction Phase 365

Implementation Phase 366

The SDLC Project Team 370

Managing an SDLC Project 371

SDLC Advantages and Disadvantages 371

Prototyping Methodology 373 The Prototyping Steps 373

The Prototyping Project Team 375

Managing a Prototyping Project 375

Prototyping Advantages and Disadvantages 375

Prototyping Within an SDLC Process 376

Newer Approaches 377 Rapid Application Development (RAD) 377

Agile Methodologies 378

Managing Software Projects Using Outsourced Staff 381

Supporting User Application Development (UAD) 382 Advantages and Disadvantages of User-Developed Applications 382

Assessing the Risks from UAD 384

Guidelines for User Developers 385 Review Questions 387 • Discussion Questions 387 • Bibliography 388

Chapter 10 Methodologies for Purchased Software Packages 390 The Make-or-Buy Decision 391

Purchasing Methodology 391 The Purchasing Steps 392

Project Team for Purchasing Packages 400

Managing a Purchased System Project 401

Purchasing Advantages and Disadvantages 402

Special Case: Enterprise System Packages 403

Open Source Software 405

x Contents

New Purchasing Option: Application Service Providers (ASPs) 406

Review Questions 408 • Discussion Questions 408 • Bibliography 409

Chapter 11 IT Project Management 410 IT Portfolio Management 411

Project Management Roles 412 Project Manager 412

Project Sponsor and Champion Roles 413

Project Initiation 415

Project Planning 416 Scheduling 416

Budgeting 417

Staffing 418

Planning Documents 420

Project Execution and Control 420

Managing Project Risks 423

Managing Business Change 424

Project Closing 426

Special Issue: Managing Complex IT Projects 427

Special Issue: Managing Virtual Teams 427 Review Questions 430 • Discussion Questions 430 • Bibliography 431

� CASE STUDY III-1 Managing a Systems Development Project at Consumer and Industrial Products, Inc. 432

� CASE STUDY III-2 A Make-or-Buy Decision at Baxter Manufacturing Company 442

� CASE STUDY III-3 ERP Purchase Decision at Benton Manufacturing Company, Inc. 449

� CASE STUDY III-4 The Kuali Financial System: An Open-Source Project 455

� CASE STUDY III-5 NIBCO’s “Big Bang”: An SAP Implementation 468

� CASE STUDY III-6 BAT Taiwan: Implementing SAP for a Strategic Transition 484

� CASE STUDY III-7 A Troubled Project at Modern Materials, Inc. 498

� CASE STUDY III-8 Purchasing and Implementing a Student Management System at Jefferson County School System 506

PART IV The Information Management System 517

Chapter 12 Planning Information Systems Resources 519 Benefits of Information Resources Planning 519

Creating a Context for IS Resource Decisions 520

Aligning IS and Business Goals 520

Contents xi

Balancing the Trade-offs Between Standardization and Agility 520

Obtaining IT Capital Investment Approvals 520

The Information Resources Planning Process 520

Assessing The Current Information Resources 521 Measuring IS Use and Attitudes 521

Reviewing the IS Organizational Mission 522

Assessing Performance versus Goals 523

Creating an Information Vision 524

Designing the IT Architecture 524

Formulating the Strategic IS Plan 526 The Strategic IS Planning Process 526

Tools for Identifying IT Strategic Opportunities 527

Formulating Operational IS Plans 532

Guidelines for Effective IS Planning 532 Review Questions 534 • Discussion Questions 534 • Bibliography 534

Chapter 13 Leading the Information Systems Function 536 IS Organization Responsibilities and Governance 537

Managing IT Service Delivery 539 Chargeback Systems 539

Service Level Agreements (SLAs) 541

IT Service Management with ITIL 542

Supporting Computer Users 543

Strategies for User Computing 543

Support Services 544

Control Policies and Procedures 546

Supporting Telecommuters 546

Managing IT Applications 548 An Applications Portfolio Approach 548

Metrics for IT Applications Management 549

Managing IT Human Resources 549

Managing the Business/IT Relationship 553

Measuring Overall IS Performance 554

Special Issue: IS Management in Global Organizations 554

Special Issue: Managing IT Outsourcing 556 Review Questions 558 • Discussion Questions 559 •

Bibliography 559

Chapter 14 Information Security 561 Computer Crime 561

The Chief Security Officer Role 565

xii Contents

Risk Management for Information Security 565

Compliance with Laws and Regulations 567 Sarbanes-Oxley (SOX) 567

Gramm-Leach-Bliley Act of 1999 (GBLA) 569

Health Insurance Portability and Accountability Act (HIPAA) 569

The PATRIOT Act 569

Organizational Polices for Information Security 569

Planning for Business Continuity 571

Electronic Records Management (ERM) 571

Review Questions 573 • Discussion Questions 574 • Bibliography 574

Chapter 15 Social, Ethical, and Legal Issues 575 The Legal Environment 575

Ethics Frameworks 576 Identifying Ethical Problems 576

Analyzing Ethical Problems 577

Social Issues 578

Privacy 579 Privacy Problems 579

E-Commerce Privacy Concerns 580

Workplace Privacy 581

Ethics of Invasion of Privacy 582

Laws on Privacy 582

Identity Theft 583 Impact of Identity Theft 584

Laws on Identity Theft 585

Intellectual Property Rights 585 Software Piracy 586

Copyright Protection 586

Patent Protection 586

Digital Entertainment Piracy 587

Internet File Sharing 587

Ethical Questions 589

Other Social Issues 589 Access to the Technology 589

Freedom of Speech 590

Hazards of Inaccuracy 590

Impact on Workers 590

The Future 591

Review Questions 591 • Discussion Questions 592 • Bibliography 592

Contents xiii

� CASE STUDY IV-1 The Clarion School for Boys, Inc.—Milwaukee Division: Making Information Systems Investments 594

� CASE STUDY IV-2 FastTrack IT Integration for the Sallie Mae Merger 611

� CASE STUDY IV-3 IT Infrastructure Outsourcing at Schaeffer (A): The Outsourcing Decision 628

� CASE STUDY IV-4 IT Infrastructure Outsourcing at Schaeffer (B): Managing the Contract 634

� CASE STUDY IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico 642

� CASE STUDY IV-6 The Challenges of Local System Design for Multinationals: The MaxFli Sales Force Automation System at BAT 647

� CASE STUDY IV-7 Meridian Hospital Systems, Inc.: Deciding Which IT Company to Join 660

� CASE STUDY IV-8 Mary Morrison’s Ethical Issue 666

Glossary 668

Index 691

xiv Contents

CONTENTS: CASE STUDIES

Case Study 1 Midsouth Chamber of Commerce (A): The Role of the Operating Manager in Information Systems 10

Case Study I-1 IMT Custom Machine Company, Inc.: Selection of an Information Technology Platform 116

Case Study I-2 VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier 128 Case Study I-3 The VoIP Adoption at Butler University 144 Case Study I-4 Supporting Mobile Health Clinics: The Children’s Health Fund

of New York City 157 Case Study I-5 Data Governance at InsuraCorp 166 Case Study I-6 HH Gregg: Deciding on a New Information Technology

Platform 170 Case Study I-7 Midsouth Chamber of Commerce (B): Cleaning Up an Information

Systems Debacle 177 Case Study II-1 Vendor-Managed Inventory at NIBCO 279 Case Study II-2 Real-Time Business Intelligence at Continental Airlines 284 Case Study II-3 Norfolk Southern Railway: The Business Intelligence Journey 294 Case Study II-4 Mining Data to Increase State Tax Revenues in California 300 Case Study II-5 The Cliptomania™ Web Store 308 Case Study II-6 Rock Island Chocolate Company, Inc.: Building a Social Networking

Strategy 321 Case Study III-1 Managing a Systems Development Project at Consumer and

Industrial Products, Inc. 432 Case Study III-2 A Make-or-Buy Decision at Baxter Manufacturing Company 442 Case Study III-3 ERP Purchase Decision at Benton Manufacturing Company, Inc. 449 Case Study III-4 The Kuali Financial System: An Open-Source Project 455 Case Study III-5 NIBCO’s “Big Bang”: An SAP Implementation 468 Case Study III-6 BAT Taiwan: Implementing SAP for a Strategic Transition 484 Case Study III-7 A Troubled Project at Modern Materials, Inc. 498 Case Study III-8 Purchasing and Implementing a Student Management System at

Jefferson County School System 506 Case Study IV-1 The Clarion School for Boys, Inc.—Milwaukee Division: Making

Information Systems Investments 594 Case Study IV-2 FastTrack IT Integration for the Sallie Mae Merger 611 Case Study IV-3 IT Infrastructure Outsourcing at Schaeffer (A):

The Outsourcing Decision 628 Case Study IV-4 IT Infrastructure Outsourcing at Schaeffer (B):

Managing the Contract 634 Case Study IV-5 Systems Support for a New Baxter Manufacturing Company Plant

in Mexico 642 Case Study IV-6 The Challenges of Local System Design for Multinationals:

The MaxFli Sales Force Automation System at BAT 647 Case Study IV-7 Meridian Hospital Systems, Inc.: Deciding Which IT

Company to Join 660 Case Study IV-8 Mary Morrison’s Ethical Issue 666

xv

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PREFACE

Today’s private and public organizations are increasingly dependent on information technologies for achieving their strategic and operational objectives. Over the past decade alone, enterprise systems have been expanded to provide secure, electronic linkages with suppliers and customers, and the Internet has become a mainstream channel for communications and business transac- tions. As a result, decision making about information technology resources has also become even more visible as the roles and accountabilities of the IS function have become important not only operationally but also strategically.

The overall objectives and targeted audience for this edition remain the same as for the prior sixth edition: to provide comprehensive coverage of IS management practices and technology trends for advanced students and managers. Earlier editions of this textbook have been used for courses in MBA, MS in IS, and executive education programs, as well as in advanced undergraduate courses. We believe that our approach of providing both up-to-date chapter content and full-length case studies, written by the same authors, results in a unique set of materials for educators to customize for students seeking careers as business managers, IS managers, or IS specialists.

NEW TO THIS EDITION

• All 15 chapters in this edition have been revised to reflect up-to-date technology trends and state-of-the-art IS management practices.

• The total number of chapters has been reduced from 17 to 15 to better match the semester schedules of many of our textbook adopters.

• Overall topical coverage has been retained, but we have reduced some presentations of the content as follows: • Chapter 2 (Computer Systems) includes content from separate chapters on computer

hardware and computer software in the sixth edition. • The content from Chapter 13 of the sixth edition has now been incorporated into two

chapters in the seventh edition: The discussion of key characteristics of user-developed applications appears in Chapter 9 (Methodologies for Custom Software Development) and the discussion of support and control mechanisms for end-user computing appears in Chapter 13 (Leading the Information Systems Function).

• The in-depth case studies in this edition include five completely new case studies and six that have been significantly revised.

THE CHAPTER CONTENT

Following an introductory chapter that sets the stage for learning about IS management roles and technology trends, the textbook chapters are presented in four parts:

Part I—Information Technology provides background knowledge about major infor- mation technology components: hardware and software, networks, and data. Depending on the targeted audience, these chapters may be assigned as background readings as a kind of “level-setting” for students from different educational and work backgrounds and experiences.

Part II—Applying Information Technology introduces in detail the capabilities of three categories of software applications: enterprise systems, managerial support systems, and e-business systems.

Part III—Acquiring Information Systems prepares the reader for leading and participat- ing in projects to design or select, implement, and support the utilization of software

xvii

applications—including methodologies for custom-developed systems and purchased software packages, as well as IT project management.

Part IV—The Information Management System provides knowledge about effectively planning IS resources for the business, leading IS units responsible for provisioning these resources, and best practices for addressing information security, as well as larger social, legal, and ethical issues related to information technologies.

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