IT AND BUSINESS

Page 38 in Baltzan, Project II. Write a 2 pages paper answering the question, “Why is it challenging for businesses to align MIS and their other operations?” Use the question in the Project to help you along.

After reading the New Century Health Wellness Group Case Study, Group  pg. 42-43, pg 83 in the Rosenblatt textbook prepare and submit responses to the four “Assignments” questions. 

f o u r t h e d i t i o n
4e
Pa i g e B a lt z a n
B
usiness D
riven Inform
ation System
s
www.mhhe.com
ISBN 978-0-07-337689-9
MHID 0-07-337689-2
www.domorenow.com
www.mhhe.com/baltzan
B
a
lt
z
a
n
Business
Driven
Information
Systems
M
D
D
A
L
IM
#1216453 11/28/12 C
Y
A
N
M
A
G
Y
E
L
O
B
L
K

StudentS get:
• Interactive, engaging content.
• Interactive Applications – chapter
assignments that help you APPLY what you’ve
learned in the course.
• Immediate feedback on how you’re doing.
(No more wishing you could call your
instructor at 1 a.m.)
• Quick access to lectures, practice materials,
eBook, and more. (All the material you need
to be successful is right at your fingertips.)
With McGraw-Hill’s Connect™ Plus MIS,

Want to get better grades? (Who doesn’t?)
Ready to do online interactive assignments that help you apply what you’ve
learned? (You need to know how to use this stuff in the real world…)
Need new ways to study before the big test? (A little peace of mind is a good thing…)
StudentS…
M
D
D
A
L
IM
#1216453 11/28/12 C
Y
A
N
M
A
G
Y
E
L
O
B
L
K
B
A
C
K
U
P

StudentS get:
• Interactive, engaging content.
• Interactive Applications – chapter
assignments that help you APPLY what you’ve
learned in the course.
• Immediate feedback on how you’re doing.
(No more wishing you could call your
instructor at 1 a.m.)
• Quick access to lectures, practice materials,
eBook, and more. (All the material you need
to be successful is right at your fingertips.)
With McGraw-Hill’s Connect™ Plus MIS,

Want to get better grades? (Who doesn’t?)
Ready to do online interactive assignments that help you apply what you’ve
learned? (You need to know how to use this stuff in the real world…)
Need new ways to study before the big test? (A little peace of mind is a good thing…)
StudentS…
M
D
D
A
L
IM
#1216453 11/28/12 C
Y
A
N
M
A
G
Y
E
L
O
B
L
K
B
A
C
K
U
P

Rev. Confirming Pages
Less managing. More teaching. Greater learning.
Would you like your students to show up for class more prepared? (Let’s face it,
class is much more fun if everyone is engaged and prepared…)
Want ready-made application-level interactive assignments, student progress
reporting, and auto-assignment grading? (Less time grading means more time
teaching…)
Want an instant view of student or class performance relative to learning
objectives? (No more wondering if students understand…)
Need to collect data and generate reports required for administration or
accreditation? (Say good-bye to manually tracking student learning outcomes…)
Want to record and post your lectures for students to view online?
INSTRUCTORS…
Less managing. More teaching. Greater learning.
INSTRUCTORS GET:
• Interactive Applications—book-specific interactive
assignments that require students to APPLY what
they’ve learned.
• Simple assignment management, allowing you to
spend more time teaching.
• Auto-graded assignments, quizzes, and tests.
• Detailed visual reporting, where student and
section results can be viewed and analyzed.
• Sophisticated online testing capability.
• A filtering and reporting function
that allows you to easily assign and
report on materials that are correlated
to accreditation standards, learning
outcomes, and Bloom’s taxonomy.
• An easy-to-use lecture capture tool.
With McGraw-Hill’s Connect™ Plus MIS,
baL76892_fm_i-xxxii.indd ibaL76892_fm_i-xxxii.indd i 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Want an online, searchable version of your textbook?
Wish your textbook could be available online while you’re doing
your assignments?
Want to get more value from your textbook purchase?
Think learning MIS should be a bit more interesting?
Connect™ Plus MIS eBook
If you choose to use Connect™ Plus MIS, you have an affordable and
searchable online version of your book integrated with your other
online tools.
Connect™ Plus MIS eBook offers features like:
• Topic search
• Direct links from assignments
• Adjustable text size
• Jump to page number
• Print by section
Check out the STUDENT RESOURCES
section under the Connect™ Library tab.
Here you’ll find a wealth of resources designed to help you
achieve your goals in the course. You’ll find things like quizzes,
PowerPoints, and Internet activities to help you study. Every
student has different needs, so explore the STUDENT RESOURCES
to find the materials best suited to you.
baL76892_fm_i-xxxii.indd iibaL76892_fm_i-xxxii.indd ii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Business Driven
Information Systems
baL76892_fm_i-xxxii.indd iiibaL76892_fm_i-xxxii.indd iii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
baL76892_fm_i-xxxii.indd ivbaL76892_fm_i-xxxii.indd iv 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
TM
Business Driven
Information Systems
F O U R T H E D I T I O N
P a i g e B a l t z a n
Daniels College of Business, University of Denver
baL76892_fm_i-xxxii.indd vbaL76892_fm_i-xxxii.indd v 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
TM
BUSINESS DRIVEN INFORMATION SYSTEMS, FOURTH EDITION
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of
the Americas, New York, NY, 10020. Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights
reserved. Printed in the United States of America. Previous editions © 2012, 2009, and 2008. No part of
this publication may be reproduced or distributed in any form or by any means, or stored in a database
or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including,
but not limited to, in any network or other electronic storage or transmission, or broadcast for distance
learning.
Some ancillaries, including electronic and print components, may not be available to customers outside
the United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4 3
ISBN 978-0-07-337689-9
MHID 0-07-337689-2
Senior Vice President, Products & Markets: Kurt L. Strand
Vice President, General Manager, Products & Markets: Brent Gordon
Vice President, Content Production & Technology Services: Kimberly Meriwether David
Director: Scott Davidson
Senior Brand Manager: Wyatt Morris
Executive Director of Development: Ann Torbert
Development Editor II: Alaina G. Tucker
Digital Development Editor: Kevin White
Marketing Manager: Tiffany Russell
Project Manager: Kathryn D. Wright
Senior Buyer: Michael R. McCormick
Senior Designer: Matt Diamond
Cover Designer: Lisa Buckley
Cover Image: Getty Images
Lead Content Licensing Specialist: Keri Johnson
Photo Researcher: Colleen Miller
Media Project Manager: Brent dela Cruz
Typeface: 10/12 Times Roman
Compositor: Laserwords Private Limited
Printer: R. R. Donnelley
All credits appearing on page or at the end of the book are considered to be an extension of the copyright
page.
Library of Congress Cataloging-in-Publication Data
Baltzan, Paige.
Business driven information systems/Paige Baltzan, Daniels College of Business, University
of Denver.—FOURTH EDITION.
pages cm
Includes index.
ISBN 978-0-07-337689-9 (alk. paper)—ISBN 0-07-337689-2 (alk. paper)
1. Information technology—Management. 2. Industrial management—Data processing. I. Title.
HD30.2.B357 2014
658.4’038011—dc23
2012040826
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a web-
site does not indicate an endorsement by the authors or McGraw-Hill, and McGraw-Hill does not guaran-
tee the accuracy of the information presented at these sites.
www.mhhe.com
baL76892_fm_i-xxxii.indd vibaL76892_fm_i-xxxii.indd vi 30/11/12 2:01 PM30/11/12 2:01 PM

Rev. Confirming Pages
D E D I C AT I O N
To Tony, Hannah, Sophie, and Gus:
What do you always remember?
That I Love You! That I’m Proud of You!
Paige
baL76892_fm_i-xxxii.indd viibaL76892_fm_i-xxxii.indd vii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Brief Contentsviii
MODULE 1 Business Driven MIS
Chapter 1 Management Information Systems: Business Driven MIS
Chapter 2 Decisions and Processes: Value Driven Business
Chapter 3 Ebusiness: Electronic Business Value
Chapter 4 Ethics and Information Security: MIS Business Concerns
MODULE 2 Technical Foundations of MIS
Chapter 5 Infrastructures: Sustainable Technologies
Chapter 6 Data: Business Intelligence
Chapter 7 Networks: Mobile Business
MODULE 3 Enterprise MIS
Chapter 8 Enterprise Applications: Business Communications
Chapter 9 Systems Development and Project Management: Corporate
Responsibility
APPENDIX
Appendix A Hardware and Software Basics
Appendix B Networks and Telecommunications
Appendix C Designing Databases
The Technology Plug-Ins
Apply Your Knowledge
Glossary
Notes
Credits
Index
BRIEF CONTENTS
baL76892_fm_i-xxxii.indd viiibaL76892_fm_i-xxxii.indd viii 30/11/12 2:01 PM30/11/12 2:01 PM

Rev. Confirming Pages
ixContents
module 1
Business Driven MIS 1
CHAPTER 1
Management Information Systems:
Business Driven MIS 2
Opening Case Study: The World
Is Flat: Thomas Friedman 3
Section 1.1 Business Driven MIS 5
COMPETING IN THE INFORMATION AGE 5
Data 6
Information 7
Business Intelligence 8
Knowledge 10
THE CHALLENGE: DEPARTMENTAL COMPANIES 11
THE SOLUTION: MANAGEMENT INFORMATION
SYSTEMS 12
MIS Department Roles and Responsibilities 14
Section 1.2 Business Strategy 15
IDENTIFYING COMPETITIVE ADVANTAGES 15
THE FIVE FORCES MODEL—EVALUATING
INDUSTRY ATTRACTIVENESS 18
Buyer Power 18
Supplier Power 19
Threat of Substitute Products or Services 19
Threat of New Entrants 20
Rivalry among Existing Competitors 20
Analyzing the Airline Industry 20
THE THREE GENERIC STRATEGIES—CHOOSING
A BUSINESS FOCUS 22
VALUE CHAIN ANALYSIS—EXECUTING
BUSINESS STRATEGIES 23
Learning Outcome Review 27
Opening Case Questions 29
Key Terms 29
Review Questions 29
Closing Case One: Apple—Merging Technology,
Business, and Entertainment 30
Closing Case Two: Best of the Best of the Best—Under 25 32
Critical Business Thinking 34
Entrepreneurial Challenge 36
Apply Your Knowledge Business Projects 37
AYK Application Projects 41
C O N T E N T S
CHAPTER 2
Decisions and Processes:
Value Driven Business 42
Opening Case Study: Action
Finally—Actionly 43
Section 2.1 Decision Support Systems 45
MAKING BUSINESS DECISIONS 45
The Decision-Making Process 46
Decision-Making Essentials 46
METRICS: MEASURING SUCCESS 48
Efficiency and Effectiveness Metrics 50
The Interrelationship Between Efficiency
and Effectiveness MIS Metrics 51
SUPPORT: ENHANCING DECISION MAKING WITH MIS 53
Operational Support Systems 54
Managerial Support Systems 55
Strategic Support Systems 56
THE FUTURE: ARTIFICIAL INTELLIGENCE 60
Expert Systems 61
Neural Networks 61
Genetic Algorithms 62
Intelligent Agents 62
Virtual Reality 63
Section 2.2 Business Processes 64
EVALUATING BUSINESS PROCESSES 64
MODELS: MEASURING PERFORMANCE 66
SUPPORT: ENHANCING BUSINESS PROCESSES
WITH MIS 71
Improving Operational Business
Processes—Automation 72
Improving Managerial Business
Processes—Streamlining 73
Improving Strategic Business
Processes—Reengineering 74
THE FUTURE: BUSINESS PROCESS MANAGEMENT 77
Learning Outcome Review 78
Opening Case Questions 80
Key Terms 80
Review Questions 81
Closing Case One: Political Micro-Targeting: What
Decision Support Systems Did for Barack Obama 81
Closing Case Two: Second Life: Succeeding
in Virtual Times 83
Critical Business Thinking 84
Entrepreneurial Challenge 86
baL76892_fm_i-xxxii.indd ixbaL76892_fm_i-xxxii.indd ix 30/11/12 2:01 PM30/11/12 2:01 PM

Rev. Confirming Pages
Contentsx
Apply Your Knowledge Business Projects 87
AYK Application Projects 89
CHAPTER 3
Ebusiness: Electronic Business Value 90
Opening Case Study: Pinterest—
Billboards for the Internet 91
Section 3.1 WEB 1.0: Ebusiness 94
DISRUPTIVE TECHNOLOGIES AND WEB 1.0 94
Disruptive versus Sustaining Technology 94
The Internet and World Wide Web—The Ultimate
Business Disruptors 95
Web 1.0: The Catalyst for Ebusiness 96
ADVANTAGES OF EBUSINESS 98
Expanding Global Reach 98
Opening New Markets 98
Reducing Costs 100
Improving Operations 100
Improving Effectiveness 100
THE FOUR EBUSINESS MODELS 101
Business-to-Business (B2B) 102
Business-to-Consumer (B2C) 102
Consumer-to-Business (C2B) 103
Consumer-to-Consumer (C2C) 103
Ebusiness Forms and Revenue-Generating
Strategies 103
EBUSINESS TOOLS FOR CONNECTING
AND COMMUNICATING 106
Email 106
Instant Messaging 106
Podcasting 107
Videoconferencing 107
Web Conferencing 108
Content Management Systems 108
THE CHALLENGES OF EBUSINESS 108
Identifying Limited Market Segments 109
Managing Consumer Trust 109
Ensuring Consumer Protection 109
Adhering to Taxation Rules 109
Section 3.2 WEB 2.0: Business 2.0 109
WEB 2.0: ADVANTAGES OF BUSINESS 2.0 109
Content Sharing Through Open Sourcing 111
User-Contributed Content 111
Collaboration Inside the Organization 111
Collaboration Outside the Organization 112
NETWORKING COMMUNITIES WITH BUSINESS 2.0 113
Social Tagging 114
BUSINESS 2.0 TOOLS FOR COLLABORATING 116
Blogs 116
Wikis 117
Mashups 117
THE CHALLENGES OF BUSINESS 2.0 118
Technology Dependence 118
Information Vandalism 119
Violations of Copyright and Plagiarism 119
WEB 3.0: DEFINING THE NEXT GENERATION
OF ONLINE BUSINESS OPPORTUNITIES 119
Egovernment: The Government Moves Online 120
Mbusiness: Supporting Anywhere Business 121
Learning Outcome Review 121
Opening Case Questions 123
Key Terms 124
Review Questions 124
Closing Case One: Social Media and
Ashton Kutcher 125
Closing Case Two: Amazon.com—Not Your Average
Bookstore 126
Critical Business Thinking 128
Entrepreneurial Challenge 130
Apply Your Knowledge Business Projects 131
AYK Application Projects 135
CHAPTER 4
Ethics and Information Security:
MIS Business Concerns 136
Opening Case Study: To Share—Or
Not to Share 137
Section 4.1 Ethics 141
INFORMATION ETHICS 141
Information Does Not Have Ethics, People Do 144
DEVELOPING INFORMATION MANAGEMENT POLICIES 145
Ethical Computer Use Policy 145
Information Privacy Policy 146
Acceptable Use Policy 146
Email Privacy Policy 147
Social Media Policy 148
Workplace Monitoring Policy 149
Section 4.2 Information Security 151
PROTECTING INTELLECTUAL ASSETS 151
Security Threats Caused by Hackers
and Viruses 153
THE FIRST LINE OF DEFENSE—PEOPLE 155
THE SECOND LINE OF DEFENSE—TECHNOLOGY 156
People: Authentication and Authorization 156
Data: Prevention and Resistance 159
Attack: Detection and Response 160
Learning Outcome Review 161
Opening Case Questions 162
Key Terms 163
Review Questions 163
Closing Case One: E-Espionage 164
Closing Case Two: Hacker Hunters 165
Critical Business Thinking 167
Entrepreneurial Challenge 168
Apply Your Knowledge Business Projects 169
AYK Application Projects 171
baL76892_fm_i-xxxii.indd xbaL76892_fm_i-xxxii.indd x 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
xiContents
module 2
Technical Foundations of MIS 172
CHAPTER 5
Infrastructures: Sustainable
Technologies 173
Opening Case Study: Pandora’s
Music Box 174
Section 5.1 MIS Infrastructures 176
THE BUSINESS BENEFITS OF A SOLID MIS
INFRASTRUCTURE 176
SUPPORTING OPERATIONS: INFORMATION MIS
INFRASTRUCTURE 177
Backup and Recovery Plan 178
Disaster Recovery Plan 179
Business Continuity Plan 181
SUPPORTING CHANGE: AGILE MIS INFRASTRUCTURE 183
Accessibility 183
Availability 184
Maintainability 185
Portability 185
Reliability 185
Scalability 185
Usability 187
Section 5.2 Building Sustainable MIS Infrastructures 187
MIS AND THE ENVIRONMENT 187
Increased Electronic Waste 188
Increased Energy Consumption 189
Increased Carbon Emissions 189
SUPPORTING THE ENVIRONMENT: SUSTAINABLE MIS
INFRASTRUCTURE 189
Grid Computing 189
Virtualized Computing 192
Cloud Computing 195
Learning Outcome Review 199
Opening Case Questions 200
Key Terms 201
Review Questions 201
Closing Case One: UPS Invests $1 Billion to Go Green 202
Closing Case Two: Turning Ewaste into Gold 203
Critical Business Thinking 203
Entrepreneurial Challenge 205
Apply Your Knowledge Business Projects 206
AYK Application Projects 209
CHAPTER 6
Data: Business Intelligence 210
Opening Case Study: Informing
Information 211
Section 6.1 Data, Information, and Databases 214
THE BUSINESS BENEFITS OF HIGH-QUALITY INFORMATION 214
Information Type: Transactional and Analytical 214
Information Timeliness 216
Information Quality 216
Information Governance 219
STORING INFORMATION USING A RELATIONAL DATABASE
MANAGEMENT SYSTEM 219
Storing Data Elements in Entities and Attributes 221
Creating Relationships Through Keys 221
USING A RELATIONAL DATABASE FOR BUSINESS
ADVANTAGES 222
Increased Flexibility 222
Increased Scalability and Performance 223
Reduced Information Redundancy 223
Increased Information Integrity (Quality) 224
Increased Information Security 224
DRIVING WEBSITES WITH DATA 224
Section 6.2 Business Intelligence 227
THE BUSINESS BENEFITS OF DATA WAREHOUSING 227
PERFORMING BUSINESS ANALYSIS WITH DATA MARTS 228
Multidimensional Analysis 229
Information Cleansing or Scrubbing 230
UNCOVERING TRENDS AND PATTERNS WITH DATA MINING 231
Cluster Analysis 234
Association Detection 235
Statistical Analysis 236
SUPPORTING DECISIONS WITH BUSINESS INTELLIGENCE 236
The Problem: Data Rich, Information Poor 237
The Solution: Business Intelligence 237
Visual Business Intelligence 238
Learning Outcome Review 239
Opening Case Questions 240
Key Terms 241
Review Questions 241
Closing Case One: Data Visualization: Stories for the
Information Age 242
Closing Case Two: Zillow 243
Critical Business Thinking 244
Entrepreneurial Challenge 246
Apply Your Knowledge Business Projects 246
AYK Application Projects 249
CHAPTER 7
Networks: Mobile Business 250
Opening Case Study: The Ironman 251
Section 7.1 Connectivity: The Business Value of
a Neworked World 253
OVERVIEW OF A CONNECTED WORLD 253
Network Categories 254
Network Providers 254
Network Access Technologies 255
Network Protocols 258
Network Convergence 260
baL76892_fm_i-xxxii.indd xibaL76892_fm_i-xxxii.indd xi 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Contentsxii
BUILDING A CONNECTED CORPORATION
THROUGH INTEGRATIONS 300
Integration Tools 301
SUPPLY CHAIN MANAGEMENT 302
THE BENEFITS OF SCM 303
Improved Visibility 305
Increased Profitability 306
THE CHALLENGES OF SCM 307
THE FUTURE OF SCM 308
Section 8.2 Customer Relationship Management
and Enterprise Resource Planning 309
CUSTOMER RELATIONSHIP MANAGEMENT 309
THE BENEFITS OF CRM 311
Evolution of CRM 311
Operational and Analytical CRM 312
Marketing and Operational CRM 313
Sales and Operational CRM 314
Customer Service and Operational CRM 315
Analytical CRM 316
Measuring CRM Success 317
THE CHALLENGES OF CRM 317
THE FUTURE OF CRM 319
ENTERPRISE RESOURCE PLANNING 319
THE BENEFITS OF ERP 320
Core ERP Components 322
Extended ERP Components 324
Measuring ERP Success 325
THE CHALLENGES OF ERP 327
THE FUTURE OF ENTERPRISE SYSTEMS: INTEGRATING
SCM, CRM, AND ERP 327
Learning Outcome Review 328
Opening Case Questions 330
Key Terms 330
Review Questions 330
Closing Case One: Can Customer Loyalty
Be a Bad Thing? 331
Closing Case Two: Got Milk? It’s Good for You—Unless
It’s Contaminated! 332
Critical Business Thinking 334
Entrepreneurial Challenge 336
Apply Your Knowledge Business Projects 337
AYK Application Projects 340
CHAPTER 9
Systems Development and Project
Management: Corporate Responsibility 341
Opening Case Study: Getting Your
Project On Track 342
Section 9.1 Developing Enterprise Applications 345
THE SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC) 345
Phase 1: Planning 345
Phase 2: Analysis 346
Phase 3: Design 348
BENEFITS OF A CONNECTED WORLD 263
Sharing Resources 263
Providing Opportunities 265
Reducing Travel 265
CHALLENGES OF A CONNECTED WORLD 266
Security 266
Social, Ethical, and Political Issues 266
Section 7.2 Mobility: The Business Value
of a Wireless World 267
WIRELESS NETWORK CATEGORIES 267
Personal Area Networks 268
Wireless LANs 268
Wireless MANs 269
Wireless WAN—Cellular Communication System 270
Wireless WAN—Satellite Communication System 272
BUSINESS APPLICATIONS OF WIRELESS NETWORKS 274
Radio-Frequency Identification (RFID) 274
Global Positioning System (GPS) 275
Geographic Information Systems (GIS) 276
BENEFITS OF BUSINESS MOBILITY 278
Enhances Mobility 278
Provides Immediate Data Access 279
Increases Location and Monitoring Capability 279
Improves Work Flow 279
Provides Mobile Business Opportunities 280
Provides Alternative to Wiring 280
CHALLENGES OF BUSINESS MOBILITY 280
Protecting Against Theft 280
Protecting Wireless Connections 282
Preventing Viruses on a Mobile Device 283
Addressing Privacy Concerns with RFID and LBS 283
Learning Outcome Review 284
Opening Case Questions 286
Key Terms 286
Review Questions 287
Closing Case One: Wireless Bikes 287
Closing Case Two: Google Latitude . . . Without an Attitude? 288
Critical Business Thinking 289
Entrepreneurial Challenge 291
Apply Your Knowledge Business Projects 292
AYK Application Projects 295
module 3
Enterprise MIS 296
CHAPTER 8
Enterprise Applications: Business
Communications 297
Opening Case Study: Zappos Is
Passionate for Customers 298
Section 8.1 Supply Chain Management 300
baL76892_fm_i-xxxii.indd xiibaL76892_fm_i-xxxii.indd xii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
xiiiContents
Output Devices A.8
Communication Devices A.9
COMPUTER CATEGORIES A.9
SOFTWARE BASICS A.12
System Software A.12
Application Software A.13
Distributing Application Software A.14
Key Terms A.15
Apply Your Knowledge A.15
APPENDIX B
Networks and Telecommunications B.1
INTRODUCTION B.1
NETWORK BASICS B.1
ARCHITECTURE B.3
Peer-to-Peer Networks B.3
Client/Server Networks B.4
TOPOLOGY B.5
PROTOCOLS B.6
Ethernet B.6
Transmission Control Protocol/Internet Protocol B.7
MEDIA B.8
Wire Media B.8
Wireless Media B.9
Key Terms B.10
Apply Your Knowledge B.10
APPENDIX C
Designing Databases C.1
INTRODUCTION C.1
THE RELATIONAL DATABASE MODEL C.1
Entities and Attributes C.2
BUSINESS RULES C.3
DOCUMENTING ENTITY RELATIONSHIP DIAGRAMS C.4
Basic Entity Relationships C.4
Relationship Cardinality C.6
RELATIONAL DATA MODEL AND THE DATABASE C.7
From Entities to Tables C.7
Logically Relating Tables C.8
Key Terms C.9
Apply Your Knowledge C.9
The Technology Plug-Ins T.1
Apply Your Knowledge AYK.1
Glossary G.1
Notes N.1
Credits C.1
Index I.1
Phase 4: Development 348
Phase 5: Testing 349
Phase 6: Implementation 349
Phase 7: Maintenance 350
SOFTWARE DEVELOPMENT METHODOLOGY:
THE WATERFALL 351
AGILE SOFTWARE DEVELOPMENT METHODOLOGIES 352
Rapid Application Development (RAD) Methodology 353
Extreme Programming Methodology 353
Rational Unified Process (RUP) Methodology 353
Scrum Methodology 354
Section 9.2 Project Management 354
USING PROJECT MANAGEMENT TO DELIVER
SUCCESSFUL PROJECTS 355
Unclear or Missing Business Requirements 356
Skipped Phases 356
Changing Technology 356
The Cost of Finding Errors in the SDLC 356
Balance of the Triple Constraint 357
PRIMARY PROJECT PLANNING DIAGRAMS 359
OUTSOURCING PROJECTS 361
Outsourcing Benefits 364
Outsourcing Challenges 364
Learning Outcome Review 367
Opening Case Questions 368
Key Terms 368
Review Questions 369
Closing Case One: Disaster at Denver International
Airport 370
Closing Case Two: Reducing Ambiguity in Business
Requirements 370
Critical Business Thinking 372
Entrepreneurial Challenge 373
Apply Your Knowledge Business Projects 374
AYK Application Projects 378
appendices
APPENDIX A
Hardware and Software Basics A.1
INTRODUCTION A.1
HARDWARE BASICS A.2
Central Processing Unit A.2
Primary Storage A.3
Secondary Storage A.5
Input Devices A.7
baL76892_fm_i-xxxii.indd xiiibaL76892_fm_i-xxxii.indd xiii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Prefacexiv
Business Driven Information Systems discusses various business initiatives first and how
technology supports those initiatives second. The premise for this unique approach
is that business initiatives should drive technology choices. Every discussion first
addresses the business needs and then addresses the technology that supports those
needs. This text provides the foundation that will enable students to achieve excellence
in business, whether they major in operations management, manufacturing, sales, mar-
keting, finance, human resources, accounting, or virtually any other business discipline.
Business Driven Information Systems is designed to give students the ability to under-
stand how information technology can be a point of strength for an organization.
Common business goals associated with information technology projects include
reducing costs, improving productivity, improving customer satisfaction and loyalty,
creating competitive advantages, streamlining supply chains, global expansion, and so
on. Achieving these results is not easy. Implementing a new accounting system or mar-
keting plan is not likely to generate long-term growth or reduce costs across an entire
organization. Businesses must undertake enterprisewide initiatives to achieve broad
general business goals such as reducing costs. Information technology plays a critical
role in deploying such initiatives by facilitating communication and increasing business
intelligence. Any individual anticipating a successful career in business whether it is in
accounting, finance, human resources, or operation management must understand the
basics of information technology that can be found in this text.
We have found tremendous success teaching MIS courses by demonstrating the
correlation between business and IT. Students who understand the tight correlation
between business and IT understand the power of this course. Students learn 10 percent
of what they read, 80 percent of what they personally experience, and 90 percent of what
they teach others. The business driven approach takes the difficult and often intangible
MIS concepts, brings them to the student’s level, and applies them using a hands-on
approach to reinforce the concepts. Teaching MIS with a business driven focus helps:
■ Add credibility to IT.
■ Open student’s eyes to IT opportunities.
■ Attract majors.
■ Engage students.
FORMAT, FEATURES, AND HIGHLIGHTS
Business Driven Information Systems is state-of-the-art in its discussions, presents concepts
in an easy-to-understand format, and allows students to be active participants in learn-
ing. The dynamic nature of information technology requires all students, more specifically
business students, to be aware of both current and emerging technologies. Students are
facing complex subjects and need a clear, concise explanation to be able to understand and
use the concepts throughout their careers. By engaging students with numerous case stud-
ies, exercises, projects, and questions that enforce concepts, Business Driven Information
Systems creates a unique learning experience for both faculty and students.
■ Audience. Business Driven Information Systems is designed for use in undergradu-
ate or introductory MBA courses in Management Information Systems, which are
required in many Business Administration or Management programs as part of the
common body of knowledge for all business majors.
■ Logical Layout. Students and faculty will find the text well organized with the topics
flowing logically from one chapter to the next. The definition of each term is provided
before it is covered in the chapter and an extensive glossary is included at the back of
the text. Each chapter offers a comprehensive opening case study, learning outcomes,
closing case studies, key terms, and critical business thinking questions.
P R E FA C E
baL76892_fm_i-xxxii.indd xivbaL76892_fm_i-xxxii.indd xiv 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
xvPreface
■ Thorough Explanations. Complete coverage is provided for each topic that is intro-
duced. Explanations are written so that students can understand the ideas presented
and relate them to other concepts.
■ Solid Theoretical Base. The text relies on current theory and practice of informa-
tion systems as they relate to the business environment. Current academic and pro-
fessional journals cited throughout the text are found in the Notes at the end of the
book—a road map for additional, pertinent readings that can be the basis for learning
beyond the scope of the chapters or plug-ins.
■ Material to Encourage Discussion. All chapters contain a diverse selection of case
studies and individual and group problem-solving activities as they relate to the use
of information technology in business. Two comprehensive cases at the end of each
chapter reinforce content. These cases encourage students to consider what concepts
have been presented and then apply those concepts to a situation they might find in
an organization. Different people in an organization can view the same facts from dif-
ferent points of view and the cases will force students to consider some of those views.
■ Flexibility in Teaching and Learning. While most textbooks that are “text only” leave
faculty on their own when it comes to choosing cases, Business Driven Information
Systems goes much further. Several options are provided to faculty with case selec-
tions from a variety of sources including CIO, Harvard Business Journal, Wired, Forbes,
and Time, to name just a few. Therefore, faculty can use the text alone, the text and a
complete selection of cases, or anything in between.
■ Integrative Themes. Several integrative themes recur throughout the text, which
adds integration to the material. Among these themes are value-added techniques
and methodologies, ethics and social responsibility, globalization, and gaining a
competitive advantage. Such topics are essential to gaining a full understanding of
the strategies that a business must recognize, formulate, and in turn implement. In
addition to addressing these in the chapter material, many illustrations are provided
for their relevance to business practice.
baL76892_fm_i-xxxii.indd xvbaL76892_fm_i-xxxii.indd xv 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthroughxvi
Learning Outcomes
Learning Outcomes. These outcomes focus on what
students should learn and be able to answer upon
completion of the chapter.
WA L K T H R O U G H
section 3.1 Web 1.0: Ebusiness
L E A R N I N G O U T C O M E S
3.1 Compare disruptive and sustaining technologies, and explain how the Internet and WWW caused
business disruption.
3.2 Describe ebusiness and its associated advantages.
3.3. Compare the four ebusiness models.
3.4. Describe the six ebusiness tools for connecting and communicating.
3.5 Identify the four challenges associated with ebusiness.
baL76892_ch03_090-135.indd 94 12/10/12 5:05 PM
baL76892_fm_i-xxxii.indd xvibaL76892_fm_i-xxxii.indd xvi 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthrough xvii
1. Knowledge: Do you consider Pinterest a form of disruptive or sustaining technology?
2. Comprehension: Categorize Pinterest as an example of Web 1.0 (ebusiness) or Web 2.0
(Business 2.0).
3. Application: Describe the ebusiness model and revenue model for Pinterest.
4. Analysis: What is open source software and how could Pinterest take advantage of it?
O P E N I N G C A S E Q U E S T I O N S
baL76892_ch03_090-135.indd 123 12/10/12 5:06 PM
opening case study
Pinterest—Billboards for the Internet
Pinterest has been called the latest addiction for millions of people around the world.
Pinterest, a visual social media network, allows users to create “interest boards” where
they “pin” items of interests found on the web. Terms you need to understand to use
Pinterest include:
■ Pin: A link to an image from a computer or a website. Pins can include captions for other
users. Users upload, or “pin,” photos or videos to boards.
■ Board: Pins live on boards and users can maintain separate boards, which can be cat-
egorized by activity or interests, such as cooking, do-it-yourself activities, fitness, music,
movies, etc.
■ Repin: After pinning an item, it can be repinned by other Pinterest users, spreading the
content virally. Repinning allows users to share items they like with friends and family.
baL76892_ch03_090-135.indd 91 12/10/12 5:05 PM
Chapter Opening Case Study. To enhance student interest, each chapter begins
with an opening case study that highlights an organization that has been time-tested
and value-proven in the business world. This feature serves to fortify concepts with
relevant examples of outstanding companies. Discussion of the case is threaded
throughout the chapter.
Opening Case Questions. Located at the end of the chapter, poignant questions
connect the chapter opening case with important chapter concepts.
Chapter Opening Case Study and Opening Case Questions
baL76892_fm_i-xxxii.indd xviibaL76892_fm_i-xxxii.indd xvii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthroughxviii
Projects and Case Studies
Case Studies. This text is packed with 27 case studies illustrating how a variety of prominent organizations and
businesses have successfully implemented many of this text’s concepts. All cases are timely and promote critical
thinking. Company profiles are especially appealing and relevant to your students, helping to stir classroom discus-
sion and interest.
Apply Your Knowledge. At the end of each chapter you will find several Apply Your Knowledge projects that challenge
students to bring the skills they have learned from the chapter to real business problems. There are also 33 Apply Your
Knowledge projects on the OLC that accompanies this text ( www.mhhe.com/baltzan ) that ask students to use IT
tools such as Excel, Access, and Dreamweaver to solve business problems. These projects help to develop the applica-
tion and problem-solving skills of your students through challenging and creative business-driven scenarios.
PROJECT I Making Business Decisions
You are the vice president of human resources for a large consulting company. You are compiling a
list of questions that you want each job interviewee to answer. The first question on your list is, “How
can MIS enhance your ability to make decisions at our organization?” Prepare a one-page report to
answer this question.
PROJECT I I DSS and EIS
Dr. Rosen runs a large dental conglomerate—Teeth Doctors—that employs more than 700 dentists
in six states. Dr. Rosen is interested in purchasing a competitor called Dentix that has 150 dentists in
three additional states. Before deciding whether to purchase Dentix, Dr. Rosen must consider several
issues:
■ The cost of purchasing Dentix.
■ The location of the Dentix offices.
■ The current number of customers per dentist, per office, and per state.
■ The merger between the two companies.
■ The professional reputation of Dentix.
■ Other competitors.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch02_042-089.indd 87 05/10/12 10:32 PM
baL76892_fm_i-xxxii.indd xviiibaL76892_fm_i-xxxii.indd xviii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthrough xix
End-of-Chapter Elements
Key Terms. With page
numbers referencing
where they are discussed
in the text.
Each chapter contains complete pedagogical support in the form of:
Critical Business Thinking. The best way to learn MIS is to apply it to scenarios and real-world business
dilemmas. These projects require students to apply critical thinking skills and chapter concepts to analyze
the problems and make recommended business decisions.
Entrepreneurial Challenge. This unique feature represents a running project that allows students to chal-
lenge themselves by applying the MIS concepts to a real business. The flexibility of the case allows each
student to choose the type of business he or she would like to operate throughout the case. Each chapter
provides hands-on projects your students can work with their real-business scenarios.
Two Closing Case Studies.
Reinforcing important concepts
with prominent examples from
businesses and organizations.
Discussion questions follow each
case study.
Business intelligence (BI), 8
Business process, 23
Business strategy, 15
Buyer power, 18
Chief information officer
(CIO), 15
Chief knowledge officer
(CKO), 15
Fact, 5
Feedback, 14
First-mover advantage, 17
Goods, 12
Information, 7
Information age, 5
Knowledge, 10
Knowledge worker, 10
Product differentiation, 20
Rivalry among existing
competitors, 20
Services, 12
Supplier power, 19
Supply chain, 19
Support value activities, 24
Switching costs, 18
K E Y T E R M S
baL76892_ch01_001-041.indd 29 05/10/12 7:01 PM
C L O S I N G C A S E O N E
Political Micro-Targeting: What Decision Support
Systems Did for Barack Obama
On the day he took the oath of office in 2009, President Barack Obama spoke a word rarely heard
in inaugural addresses— data— referencing indicators of economic and other crises. His use of the
word is perhaps not so surprising. Capturing and analyzing data were crucial to Obama’s rise to
baL76892_ch02_042-089.indd 81 05/10/12 10:32 PM
1. Modeling a Business Process
Do you hate waiting in line at the grocery store? Do you find it frustrating when you go to the video
rental store and cannot find the movie you wanted? Do you get annoyed when the pizza delivery
person brings you the wrong order? This is your chance to reengineer the process that drives you
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch02_042-089.indd 84 05/10/12 10:32 PM
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. You realize that you need a digital dashboard to help you operate your business. Create a list of
all of the components you would want to track in your digital dashboard that would help you run
your business. Be sure to justify how each component would help you gain insight into the opera-
tions of your business and flag potential issues that could ruin your business. (Be sure to identify
baL76892_ch02_042-089.indd 86 05/10/12 10:32 PM
baL76892_fm_i-xxxii.indd xixbaL76892_fm_i-xxxii.indd xix 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthroughxx
About the Plug-Ins
Located on the OLC that accompanies this text ( www.mhhe.com/baltzan ), the overall goal of the plug-ins
is to provide an alternative for faculty who find themselves in the situation of having to purchase an extra
book to support Microsoft Office 2010 or 2013. The plug-ins presented here offer integration with the core
chapters and provide critical knowledge using essential business applications, such as Microsoft Excel,
Microsoft Access, DreamWeaver, and Microsoft Project. Each plug-in uses hands-on tutorials for compre-
hension and mastery.
Each plug-in contains complete pedagogical support in the form of:
Plug-In Summary. Revisits the plug-in highlights in summary format.
Making Business Decisions. Small scenario-driven projects that help students focus individually on
decision making as they relate to the topical elements in the chapters.
End-of-Plug-In Elements
Plug-In Description
T1. Personal Productivity Using IT This plug-in covers a number of things to do to keep a personal computer running effectively
and efficiently. The 12 topics covered in this plug-in are:
■ Creating strong passwords.
■ Performing good fi le management.
■ Implementing effective backup and recovery strategies.
■ Using Zip fi les.
■ Writing professional emails.
■ Stopping spam.
■ Preventing phishing.
■ Detecting spyware.
■ Threads to instant messaging.
■ Increasing PC performance.
■ Using anti-virus software.
■ Installing a personal fi rewall.
bal76825_plugins_T1-T3.indd 1 12/13/10 2:05 PM
T2. Basic Skills Using Excel This plug-in introduces the basics of using Microsoft Excel, a spreadsheet program for data
analysis, along with a few fancy features. The six topics covered in this plug-in are:
■ Workbooks and worksheets.
■ Working with cells and cell data.
■ Printing worksheets.
■ Formatting worksheets.
■ Formulas.
■ Working with charts and graphics.
bal76825_plugins_T1-T3.indd 1 12/13/10 2:05 PM
T4. Decision Making Using Excel This plug-in examines a few of the advanced business analysis tools used in Microsoft Excel
that have the capability to identify patterns, trends, and rules, and create “what-if” models.
The four topics covered in this plug-in are:
■ IF
■ Goal Seek
■ Solver
■ Scenario Manager
bal76825_plugins_T1-T3.indd 1 12/13/10 2:05 PM
baL76892_fm_i-xxxii.indd xxbaL76892_fm_i-xxxii.indd xx 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthrough xxi
Support and Supplemental Material
All of the supplemental material supporting Business Driven Information Systems was developed by the author to
ensure you receive accurate, high-quality, and in-depth content. Included is a complete set of materials that will
assist students and faculty in accomplishing course objectives.
Online Learning Center ( www.mhhe.com/baltzan ) The McGraw-Hill website for Business Driven Information
Systems includes support for students and faculty. All supplements will be available exclusively on the OLC. This
will allow the authors to continually update and add to the instructor support materials. The following materials will
be available on the OLC:
Video Exercises. Each of the videos that accompany the text is supported by detailed teaching notes on how to
turn the videos into classroom exercises where your students can apply the knowledge they are learning after
watching the videos.
Test Bank. This computerized package allows instructors to custom design, save, and generate tests. The test
program permits instructors to edit, add, or delete questions from the test banks; analyze test results; and organize
a database of tests and students’ results.
Instructor’s Manual (IM). The IM, written by the author, includes suggestions for designing the course and
presenting the material. Each chapter is supported by answers to end-of-chapter questions and problems, and
suggestions concerning the discussion topics and cases.
PowerPoint Presentations. A set of PowerPoint slides, created by the author, accompanies each chapter and fea-
tures bulleted items that provide a lecture outline, plus key figures and tables from the text, and detailed teaching
notes on each slide.
Image Library. Text figures and tables, as permission allows, are provided in a format by which they can be
imported into PowerPoint for class lectures.
Project Files. The author has provided files for all projects that need further support, such as data files.
Cohesion Case. The Broadway Café is a running case instructors can use to reinforce core material such as customer
relationship management, supply chain management, business intelligence, and decision making. The case has
15 sections that challenge students to develop and expand their grandfather’s coffee shop. Students receive hands-on
experience in business and learn technology’s true value of enabling business. Please note that the Cohesion Case is
not a McGraw-Hill product but a Baltzan direct product. The case can be found at www.cohesioncase.com .
Video Content. Twenty videos accompany this text and cover topics from entrepreneurship to disaster recovery.
Video content icons are placed throughout the text highlighting where we recommend watching the videos. Video
IMs are also available so you can turn the videos into engaging classroom activities.
baL76892_fm_i-xxxii.indd xxibaL76892_fm_i-xxxii.indd xxi 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthroughxxii
McGraw-Hill Connect MIS

TM
Less Managing. More Teaching. Greater Learning.
McGraw-Hill Connect MIS is an online assignment and assessment solution that connects students with the tools
and resources they’ll need to achieve success.
McGraw-Hill Connect MIS helps prepare students for their future by enabling faster learning, more efficient
studying, and higher retention of knowledge.
McGraw-Hill Connect MIS features
Connect MIS offers a number of powerful tools and features to make managing assignments easier, so faculty can
spend more time teaching. With Connect MIS, students can engage with their coursework anytime and anywhere,
making the learning process more accessible and efficient. Connect MIS offers you the features described next.
Simple Assignment Management
With Connect MIS, creating assignments is easier than ever, so you can spend more time teaching and less time
managing. The assignment management function enables you to:
■ Create and deliver assignments easily with selectable end-of-chapter questions and test bank items.
■ Streamline lesson planning, student progress reporting, and assignment grading to make classroom manage-
ment more efficient than ever.
■ Go paperless with the eBook and online submission and grading of student assignments.
Smart Grading
When it comes to studying, time is precious. Connect MIS helps students learn more efficiently by providing
feedback and practice material when they need it, where they need it. When it comes to teaching, your time also is
precious. The grading function enables you to:
• Have assignments scored automatically, giving students immediate feedback on their work and side-by-side
comparisons with correct answers.
• Access and review each response; manually change grades or leave comments for students to review.
• Reinforce classroom concepts with practice tests and instant quizzes.
Instructor Library
The Connect MIS Instructor Library is your repository for additional resources to improve student engagement in
and out of class. You can select and use any asset that enhances your lecture.
baL76892_fm_i-xxxii.indd xxiibaL76892_fm_i-xxxii.indd xxii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthrough xxiii
Student Study Center
The Connect MIS Student Study Center is the place for students to access additional resources. The Student Study
Center:
• Offers students quick access to lectures, practice materials, ebooks, and more.
• Provides instant practice material and study questions, easily accessible on the go.
• Gives students access to the Personalized Learning Plan described next.
Student Progress Tracking
Connect MIS keeps instructors informed about how each student, section, and class is performing, allowing for
more productive use of lecture and office hours. The progress-tracking function enables you to:
• View scored work immediately and track individual or group performance with assignment and grade reports.
• Access an instant view of student or class performance relative to learning objectives.
• Collect data and generate reports required by many accreditation organizations, such as AACSB.
Lecture Capture
Increase the attention paid to lecture discussion by decreasing the attention paid to note taking. For an additional
charge, Lecture Capture offers new ways for students to focus on the in-class discussion, knowing they can revisit
important topics later. Lecture Capture enables you to:
• Record and distribute your lecture with a click of button.
• Record and index PowerPoint presentations and anything shown on your computer so it is easily searchable,
frame by frame.
• Offer access to lectures anytime and anywhere by computer, iPod, or mobile device.
• Increase intent listening and class participation by easing students’ concerns about note taking. Lecture Capture
will make it more likely you will see students’ faces, not the tops of their heads.
McGraw-Hill Connect Plus MIS
McGraw-Hill reinvents the textbook learning experience for the modern student with Connect Plus MIS. A seamless
integration of an ebook and Connect MIS, Connect Plus MIS provides all of the Connect MIS features plus the
following:
• An integrated ebook, allowing for anytime, anywhere access to the textbook.
• Dynamic links between the problems or questions you assign to your students and the location in the ebook
where that problem or question is covered.
• A powerful search function to pinpoint and connect key concepts in a snap.
In short, Connect MIS offers you and your students powerful tools and features that optimize your time
and energies, enabling you to focus on course content, teaching, and student learning. Connect MIS also
baL76892_fm_i-xxxii.indd xxiiibaL76892_fm_i-xxxii.indd xxiii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthroughxxiv
offers a wealth of content resources for both instructors and students. This state-of-the-art, thoroughly tested
system supports you in preparing students for the world that awaits.
For more information about Connect, go to www.mcgrawhillconnect.com , or contact your local McGraw-Hill
sales representative.
Tegrity Campus: Lectures 24/7
Tegrity Campus is a service that makes class time available 24/7 by automatically capturing every lecture in a
searchable format for students to review when they study and complete assignments. With a simple one-click
start-and-stop process, you capture all computer screens and corresponding audio. Students can replay any part
of any class with easy-to-use browser-based viewing on a PC or Mac.
Educators know that the more students can see, hear, and experience class resources, the better they learn. In
fact, studies prove it. With Tegrity Campus, students quickly recall key moments by using Tegrity Campus’s unique
search feature. This search helps students efficiently find what they need, when they need it, across an entire
semester of class recordings. Help turn all your students’ study time into learning moments immediately supported
by your lecture.
To learn more about Tegrity watch a two-minute Flash demo at http://tegritycampus.mhhe.com .
Assurance of Learning Ready
Many educational institutions today are focused on the notion of assurance of learning, an important element of
some accreditation standards. Business Driven Information Systems is designed specifically to support your assur-
ance of learning initiatives with a simple, yet powerful solution.
Each test bank question for Business Driven Information Systems maps to a specific chapter learning outcome/
objective listed in the text. You can use our test bank software, EZ Test and EZ Test Online, or in Connect MIS to
easily query for learning outcomes/objectives that directly relate to the learning objectives for your course. You can
then use the reporting features of EZ Test to aggregate student results in similar fashion, making the collection and
presentation of assurance of learning data simple and easy.
AACSB Statement
The McGraw-Hill Companies is a proud corporate member of AACSB International. Understanding the importance
and value of AACSB accreditation, Business Driven Information Systems 4e recognizes the curricula guidelines
detailed in the AACSB standards for business accreditation by connecting selected questions in the test bank to the
six general knowledge and skill guidelines in the AACSB standards.
The statements contained in Business Driven Information Systems 4e are provided only as a guide for the users
of this textbook. The AACSB leaves content coverage and assessment within the purview of individual schools, the
mission of the school, and the faculty. While Business Driven Information Systems 4e and the teaching package
make no claim of any specific AACSB qualification or evaluation, within Business Driven Information Systems 4e
we have labeled selected questions according to the six general knowledge and skills areas.
baL76892_fm_i-xxxii.indd xxivbaL76892_fm_i-xxxii.indd xxiv 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthrough xxv
McGraw-Hill Customer Care Contact Information
At McGraw-Hill, we understand that getting the most from new technology can be challenging. That’s why our
services don’t stop after you purchase our products. You can email our product specialists 24 hours a day to get
product-training online. Or you can search our knowledge bank of Frequently Asked Questions on our support
website. For Customer Support, call 800-331-5094 or visit www.mhhe.com/support where you can look for
your question on our FAQ or you can email a question directly to customer support. One of our technical support
analysts will be able to assist you in a timely fashion.
baL76892_fm_i-xxxii.indd xxvbaL76892_fm_i-xxxii.indd xxv 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthroughxxvi
Apply Your Knowledge
Business Driven Information Systems contains 33 projects that focus on student application of core concepts and tools.
These projects can be found on the OLC at www.mhhe.com/baltzan .
Project
Number Project Name Project Type Plug-In Focus Area Project Level Skill Set
Page
Number
1 Financial
Destiny
Excel T2 Personal
Budget
Introductory Formulas AYK.4
2 Cash Flow Excel T2 Cash Flow Introductory Formulas AYK.4
3 Technology
Budget
Excel T1, T2 Hardware
and Software
Introductory Formulas AYK.4
4 Tracking
Donations
Excel T2 Employee
Relationships
Introductory Formulas AYK.4
5 Convert
Currency
Excel T2 Global
Commerce
Introductory Formulas AYK.5
6 Cost
Comparison
Excel T2 Total Cost of
Ownership
Introductory Formulas AYK.5
7 Time
Management
Excel or Project T12 Project
Management
Introductory Gantt Charts AYK.6
8 Maximize
Profit
Excel T2, T4 Strategic
Analysis
Intermediate Formulas or
Solver
AYK.6
9 Security
Analysis
Excel T3 Filtering Data Intermediate Conditional
Formatting,
Autofilter,
Subtotal
AYK.7
10 Gathering
Data
Excel T3 Data
Analysis
Intermediate Conditional
Formatting
AYK.8
11 Scanner
System
Excel T2 Strategic
Analysis
Intermediate Formulas AYK.8
12 Competitive
Pricing
Excel T2 Profit
Maximization
Intermediate Formulas AYK.9
13 Adequate
Acquisitions
Excel T2 Break-Even
Analysis
Intermediate Formulas AYK.9
14 Customer
Relations
Excel T3 CRM Intermediate PivotTable AYK.9
15 Assessing
the Value of
Information
Excel T3 Data
Analysis
Intermediate PivotTable AYK.10
16 Growth,
Trends, and
Forecasts
Excel T2, T3 Data
Forecasting
Advanced Average,
Trend, Growth
AYK.11
17 Shipping Costs Excel T4 SCM Advanced Solver AYK.12
18 Formatting
Grades
Excel T3 Data
Analysis
Advanced If, LookUp AYK.12
(Continued)
bal76825_AYK_AYK.2-AYK.24.indd 2 11/24/10 6:56 PM
baL76892_fm_i-xxxii.indd xxvibaL76892_fm_i-xxxii.indd xxvi 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthrough xxvii
Project
Number Project Name Project Type Plug-In Focus Area Project Level Skill Set
Page
Number
19 Moving
Dilemma
Excel T2, T3 SCM Advanced Absolute
vs. Relative
Values
AYK.13
20 Operational
Efficiencies
Excel T3 SCM Advanced PivotTable AYK.14
21 Too Much
Information
Excel T3 CRM Advanced PivotTable AYK.14
22 Turnover Rates Excel T3 Data Mining Advanced PivotTable AYK.15
23 Vital
Information
Excel T3 Data Mining Advanced PivotTable AYK.15
24 Breaking Even Excel T4 Business
Analysis
Advanced Goal Seek AYK.16
25 Profit Scenario Excel T4 Sales
Analysis
Advanced Scenario
Manager
AYK.16
26 Electronic
Résumés
HTML T9, T10,
T11
Electronic
Personal
Marketing
Introductory Structural
Tags
AYK.17
27 Gathering
Feedback
Dreamweaver T9, T10,
T11
Data
Collection
Intermediate Organization
of Information
AYK.17
28 Daily Invoice Access T5, T6,
T7, T8
Business
Analysis
Introductory Entities,
Relationships,
and
Databases
AYK.17
29 Billing Data Access T5, T6,
T7, T8
Business
Intelligence
Introductory Entities,
Relationships,
and
Databases
AYK.19
30 Inventory Data Access T5, T6,
T7, T8
SCM Intermediate Entities,
Relationships,
and
Databases
AYK.20
31 Call Center Access T5, T6,
T7, T8
CRM Intermediate
Entities,
Relationships,
and
Databases AYK.21
32 Sales Pipeline Access T5, T6,
T7, T8
Business
Intelligence
Advanced Entities,
Relationships,
and
Databases
AYK.23
33 Online
Classified Ads
Access T5, T6,
T7, T8
Ecommerce Advanced Entities,
Relationships,
and
Databases
AYK.23
bal76825_AYK_AYK.2-AYK.24.indd 3 11/24/10 6:56 PM
baL76892_fm_i-xxxii.indd xxviibaL76892_fm_i-xxxii.indd xxvii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthroughxxviii
SimNet Online is McGraw-Hill’s leading solution for learning Microsoft Office skills and beyond! SimNet is our online
training and assessment solution for Microsoft Office skills, computing concepts, Internet Explorer, and Windows
content. With no downloads for installation and completely online (requires Adobe Flash Player), SimNet is accessible
for today’s students through multiple browsers and is easy to use for all. Its consistent user interface and functional-
ity will help save you time and help you be more successful in your course.
Moreover, SimNet offers you lifelong learning. Our codes never expire and the online program is designed with Self-
Study and SimSearch features to help you immediately learn isolated Microsoft Office skills on demand. It’s more
than a resource; it’s a tool you can use throughout your entire time at your higher education institution.
Finally, you will see powerful, measurable results with SimNet Online. See results immediately in the student grade-
book and also generate custom training lessons after an exam to help you determine exactly which content areas
you still need to study.
SimNet Online is your solution for mastering Microsoft Office skills!
SIMnet: Keep IT SIMple!
To learn more, visit www.simnetkeepitsimple.com
baL76892_fm_i-xxxii.indd xxviiibaL76892_fm_i-xxxii.indd xxviii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Walkthrough xxix
McGraw-Hill Higher Education and Blackboard have teamed up. What does this mean for you?
1. Your life, simplified. Now you and your students can access McGraw-Hill’s Connect™ and Create™ right from
within your Blackboard course—all with one single sign-on. Say good-bye to the days of logging in to multiple
applications.
2. Deep integration of content and tools. Not only do you get single sign-on with Connect™ and Create™, you
also get deep integration of McGraw-Hill content and content engines right in Blackboard. Whether you’re choos-
ing a book for your course or building Connect™ assignments, all the tools you need are right where you want
them—inside of Blackboard.
3. Seamless Gradebooks. Are you tired of keeping multiple gradebooks and manually synchronizing grades into
Blackboard? We thought so. When a student completes an integrated Connect™ assignment, the grade for that
assignment automatically (and instantly) feeds your Blackboard grade center.
4. A solution for everyone. Whether your institution is already using Blackboard or you just want to try Blackboard
on your own, we have a solution for you. McGraw-Hill and Blackboard can now offer you easy access to industry
leading technology and content, whether your campus hosts it, or we do. Be sure to ask your local McGraw-Hill
representative for details.
Craft your teaching resources to match the way you teach! With McGraw-Hill Create, www.mcgrawhillcreate.com , you can
easily rearrange chapters, combine material from other content sources, and quickly upload content you have written, like
your course syllabus or teaching notes. Find the content you need in Create by searching through thousands of leading
McGraw-Hill textbooks. Arrange your book to fit your teaching style. Create even allows you to personalize your book’s appear-
ance by selecting the cover and adding your name, school, and course information. Order a Create book and you’ll receive a
complimentary print review copy in 3–5 business days or a complimentary electronic review copy (eComp) via email in about
one hour. Go to www.mcgrawhillcreate.com today and register. Experience how McGraw-Hill Create empowers you to teach
your students your way.
baL76892_fm_i-xxxii.indd xxixbaL76892_fm_i-xxxii.indd xxix 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
Acknowledgmentsxxx
Stephen Adams
Lakeland Community College
Adeyemi A. Adekoya
Virginia State University—Petersburg
Joni Adkins
Northwest Missouri State University
Chad Anderson
University of Nevada—Reno
Anne Arendt
Utah Valley University
Laura Atkins
James Madison University
William Ayen
University of Colorado
David Bahn
Metropolitan State University—St.
Paul
Nick Ball
Brigham Young University—Provo
Patrick Bateman
Youngstown State University
Terry Begley
Creighton University
Craig Beytien
University of Colorado—Boulder
Sudip Bhattacharjee
University of Connecticut
Meral Binbasioglu
Hofstra University
Joseph Blankenship
Fairmont State College
Beverly Bohn
Park University
Brenda Bradford
Missouri Baptist University
Casey Cegielski
Auburn University—Auburn
Amita Chin
Virginia Commonwealth University
Steve Clements
Eastern Oregon University
Cynthia Corritore
Creighton University
Dan Creed
Normandale Community College
Don Danner
San Francisco State University
Sasha Dekleva
DePaul University
Robert Denker
Baruch College
Hongwei Du
California State University, East Bay
Kevin Duffy
Wright State University—Dayton
Annette Easton
San Diego State University
Barry Floyd
California Polytechnic State
University
Valerie Frear
Daytona State College
Laura Frost
Walsh College
Don Gaber
University of Wisconsin—Eau Claire
Biswadip Ghosh
Metropolitan State College of Denver
Richard Glass
Bryant University
Lakshmi Goel
University of North Florida
Mark Goudreau
Johnson & Wales University
Katie Gray
The University of Texas at Austin
Gary Hackbarth
Northern Kentucky University
Shu Han
Yeshiva University
Peter Haried
University of Wisconsin—La Crosse
Rosie Hauck
Illinois State University
Jun He
University of Michigan—Dearborn
James Henson
California State University—Fresno
Terri Holly
Indian River State College
Scott Hunsinger
Appalachian State University
Ted Hurewitz
Rutgers University
Yan Jin
Elizabeth City State University
Brian Jones
Tennessee Technological University
ACKNOWLEDGMENTS
Working on the fourth edition of Business Driven Information Systems has been an
involved undertaking, and there are many people whom we want to heartily thank for
their hard work, enthusiasm, and dedication.
This text was produced with the help of a number of people at McGraw-Hill, including
Brand Manager Wyatt Morris, Development Editor Alaina Tucker, and Kathryn Wright,
our Project Manager.
Additionally, we would like to thank Scott Davidson (Director), Tiffany Russell
(Marketing Manager), Matt Diamond (Designer), Kevin White (Digital Development
Editor), and Keri Johnson (Content Licensing Specialist) for your support and dedica-
tion to the success of this text.
Finally, we offer our sincerest gratitude and deepest appreciation to our valuable
reviewers whose feedback was instrumental in successfully compiling this text. We could
not have done this without you!
baL76892_fm_i-xxxii.indd xxxbaL76892_fm_i-xxxii.indd xxx 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
xxxiAcknowledgments
Robert Judge
San Diego State University
B. Kahn
Suffolk University
Virginia Kleist
West Virginia University
Meagan Knoll
Grand Valley State University
Rick Kraas
Kalamazoo Valley Community
College
Chetan Kumar
California State University—San
Marcos
Guolin Lai
University of Louisiana—Lafayette
Jose Lepervanche
Florida State College—Jacksonville
Norman Lewis
Wayne State University
Mary Lind
North Carolina A&T State University
Steve Loy
Eastern Kentucky University
Joan Lumpkin
Wright State University—Dayton
Linda Lynam
University of Central Missouri
Nicole Lytle-Kosola
California State University—San
Bernardino
Garth MacKenzie
University of Maryland University
College
Michael Martel
Ohio University—Athens
Dana McCann
Central Michigan University
David McCue
University of Maryland
Lynn McKell
Brigham Young University
Patricia McQuaid
California Polytechnic State
University
Fiona Nah
University of Nebraska—Lincoln
Eric Nathan
University of Houston Downtown
Bill Neumann
University of Arizona
Richard Newmark
University of Northern Colorado
Kathleen Noce
Pennsylvania State University—Erie
Gisele Olney
University of Nebraska—Omaha
Kevin Parker
Idaho State University—Pocatello
Neeraj Parolia
Towson University
Gang Peng
Youngstown State University
Julie Pettus
Missouri State University
Craig Piercy
University of Georgia
Clint Pires
Hamline University
Jennifer Pitts
Columbus State University
Carol Pollard
Appalachian State University
Lara Preiser-Houy
California State Polytechnic
University—Pomona
John Quigley
East Tennessee State University
Muhammad Razi
Western Michigan University
Lisa Rich
Athens State University
Russell Robbins
University of Pittsburgh
Fred Rodammer
Michigan State University
Steve Ross
Western Washington University
Mark Schmidt
St. Cloud State University
Dana Schwieger
Southeast Missouri State University
Darrell Searcy
Palm Beach Community College
Jay Shah
Texas State University
Vivek Shah
Texas State University
Vijay Shah
West Virginia University—
Parkersburg
Jollean Sinclaire
Arkansas State University
Changsoo Sohn
St. Cloud State University
Toni Somers
Wayne State University
Denise Sullivan
Westchester Community College
Yi Sun
California State University—San
Marcos
Mike Tarn
Western Michigan University
Mark Thouin
The University of Texas at Dallas
Lise Urbaczewski
University of Michigan—Dearborn
Hong Wang
North Carolina A&T State University
Barbara Warner
University of South Florida
Connie Washburn
Georgia Perimeter College
Bruce White
Quinnipiac University
Raymond Whitney
University of Maryland University
College
Rosemary Wild
California Polytechnic State
University
Marie Wright
Western Connecticut State University
Yajiong Xue
East Carolina University
Ali Yayla
Binghamton University
Grace Zhang
Midwestern State University
Lin Zhao
Purdue University—Calumet
Jeanne Zucker
East Tennessee State University
baL76892_fm_i-xxxii.indd xxxibaL76892_fm_i-xxxii.indd xxxi 30/11/12 2:01 PM30/11/12 2:01 PM

Rev. Confirming Pages
About the Authorxxxii
A B O U T T H E A U T H O R
Pa ige Ba l tzan
Paige Baltzan teaches in the Department of Business Information and Analytics at the
Daniels College of Business at the University of Denver. She holds a B.S.B.A. specializing
in Accounting/MIS from Bowling Green State University and an M.B.A. specializing in
MIS from the University of Denver. She is a coauthor of several books, including Business
Driven Technology, Essentials of Business Driven Information Systems, I-Series, and a con-
tributor to Management Information Systems for the Information Age.
Before joining the Daniels College faculty in 1999, Paige spent several years working
for a large telecommunications company and an international consulting firm, where
she participated in client engagements in the United States as well as South America
and Europe. Paige lives in Lakewood, Colorado, with her husband, Tony, and daughters
Hannah and Sophie.
baL76892_fm_i-xxxii.indd xxxiibaL76892_fm_i-xxxii.indd xxxii 28/11/12 11:06 AM28/11/12 11:06 AM

Rev. Confirming Pages
2
3
1
MODULE 1:
Business Driven MIS
MODULE 3:
Enterprise MIS
MODULE 2:
Technical Foundations
of MIS
module 1 Business Driven MIS
M OST COMPANIES TODAY rely heavily on the use of management information sys-
tems (MIS) to run various aspects of their businesses. Whether they need to order and ship
goods, interact with customers, or conduct other business functions, management information
systems are often the underlying infrastructure performing the activities. Management informa-
tion systems allow companies to remain competitive in today’s fast-paced world and especially
when conducting business on the Internet. Organizations must adapt to technological advances
and innovations to keep pace with today’s rapidly changing environment. Their competitors cer-
tainly will!
No matter how exciting technology is, successful companies do not use it simply for its own
sake. Companies should have a solid business reason for implementing technology. Using a
technological solution just because it is available is not a good business strategy.
The purpose of Module 1 is to raise your awareness of the vast opportunities made possible
by the tight correlation between business and technology. Business strategies and processes
should always drive your technology choices. Although awareness of an emerging technology
can sometimes lead us in new strategic directions, the role of information systems, for the most
part, is to support existing business strategies and processes.
Module 1: Business Driven MIS
CHAPTER 1:  Management Information Systems: Business Driven MIS
CHAPTER 2:  Decisions and Processes: Value Driven Business
CHAPTER 3:  Ebusiness: Electronic Business Value
CHAPTER 4:  Ethics and Information Security: MIS Business Concerns
baL76892_ch01_001-041.indd 1baL76892_ch01_001-041.indd 1 30/11/12 1:49 PM30/11/12 1:49 PM

Rev. Confirming Pages
What’s in IT for me?
This chapter sets the stage for the textbook. It starts from ground zero by providing a clear description of what information
is and how it fits into business operations, strategies, and systems. It provides an overview of how companies operate in
competitive environments and why they must continually define and redefine their business strategies to create competi-
tive advantages. Doing so allows them to survive and thrive. Information systems are key business enablers for successful
operations in competitive environments.
You, as a business student, must understand the tight correlation between business and technology. You must first rec-
ognize information’s role in daily business activities, and then understand how information supports and helps implement
global business strategies and competitive advantages. After reading this chapter, you should have a solid understanding of
business driven information systems and their role in managerial decision making and problem solving.
1
■ I d e n t i f y i n g C o m p e t i t i v e
A d v a n t a g e s
■ T h e F i v e F o rc e s M o d e l —
E v a l u a t i n g I n d u s t r y
A t t r a c t i v e n e s s
■ T h e T h re e G e n e r i c S t r a t e g i e s —
C h o o s i n g a B u s i n e s s F o c u s
■ Va l u e C h a i n A n a l y s i s —
E x e c u t i n g B u s i n e s s S t r a t e g i e s
SECTION 1.2
Business Strategy
■ C o m p e t i n g i n t h e I n f o r m a t i o n
A g e
■ T h e C h a l l e n g e : D e p a r t m e n t a l
C o m p a n i e s
■ T h e S o l u t i o n : M a n a g e m e n t
I n f o r m a t i o n S y s t e m s
SECTION 1.1
Business Driven MIS
C
H
A
P
T
E
R
O
U
T
L
IN
E

C H A P T E R
Management Information
Systems: Business Driven MIS
baL76892_ch01_001-041.indd 2baL76892_ch01_001-041.indd 2 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
3Business Driven MIS Module 1
opening case study
The World Is Flat: Thomas Friedman
Christopher Columbus proved in 1492 that the world is round. For centuries, sailors maneu-
vered the seas discovering new lands, new people, and new languages as nations began
trading goods around the globe. Then Thomas Friedman, a noted columnist for The New
York Times, published his book The World Is Flat.
Friedman argues that the world has become flat due to technological advances connecting
people in China, India, and the United States as if we were all next-door neighbors. Physicians
in India are reading X-rays for U.S. hospitals, and JetBlue Airways ticket agents take plane
reservations for the company from the comfort of their Utah homes. Technology has elimi-
nated some of the economic and cultural advantages developed countries enjoy, making the
world a level playing field for all participants. Friedman calls this Globalization 3.0.
Globalization 1.0 started when Christopher Columbus discovered the world is round and
the world shrank from large to medium. For the next several hundred years, countries domi-
nated by white men controlled business. Globalization 2.0 began around 1800, during the
Industrial Revolution, when the world went from medium to small. In this era international
companies dominated by white men controlled business. Globalization 3.0 began in early
2000, removing distance from the business equation, and the world has gone from small to
tiny. In this era, people of all colors from the four corners of the world will dominate busi-
ness. Farmers in remote villages in Nepal carry an iPhone to access the world’s knowledge
at, say, Wikipedia or the stock market closing prices at Bloomberg.
Outsourcing, or hiring someone from another country to complete work remotely, will
play an enormous role in this era. It has advantages and disadvantages. Outsourcing work
to countries where labor is cheap drives down production costs and allows companies to
offer lower prices to U.S. consumers. Having an accountant in China complete a U.S. tax
return is just as easy as driving to the H&R Block office on the corner, and probably far
cheaper. Calling an 800 number for service can connect consumers to an Indian, Canadian,
or Chinese worker on the other end of the line. Of course, outsourcing also eliminates some
U.S. manufacturing and labor jobs, causing pockets of unemployment. In fact, the United
States has outsourced several million service and manufacturing jobs to offshore, low-cost
producers.
Figure  1.1 shows Friedman’s list of forces that flattened the world. They converged
around the year 2000 and “created a flat world: a global, web-enabled platform for mul-
tiple forms of sharing knowledge and work, irrespective of time, distance, geography, and
increasingly, language.” Three powerful new economies began materializing at this time. In
baL76892_ch01_001-041.indd 3baL76892_ch01_001-041.indd 3 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
4 Chapter 1 Management Information Systems: Business Driven MIS
India, China, and the former Soviet Union, more than 3 billion new willing and able partici-
pants walked onto the business playing field. Business students will be competing for their
first jobs not only against other local students, but also against students from around the
country and around the globe.1
Friedman’s 10 Forces That Flattened the World
1. Fall of the Berlin Wall The events of November 9, 1989, tilted the worldwide balance of
power toward democracies and free markets.
2. Netscape IPO The August 9, 1995, offering sparked massive investment in fiber-
optic cables.
3. Work flow software The rise of applications from PayPal to VPNs enabled faster, closer
coordination among far-flung employees.
4. Open sourcing Self-organizing communities, such as Linux, launched a
collaborative revolution.
5. Outsourcing Migrating business functions to India saved money and a
Third World economy.
6. Offshoring Contract manufacturing elevated China to economic
prominence.
7. Supply chaining Robust networks of suppliers, retailers, and customers
increased business efficiency.
8. In-sourcing Logistics giants took control of customer supply chains, helping
mom-and-pop shops go global.
9. Informing Power searching allowed everyone to use the Internet as a “personal
supply chain of knowledge.”
10. Wireless Wireless technologies pumped up collaboration, making it mobile and
personal.
FIGURE 1.1
Thomas Friedman’s 10 Forces
That Flattened the World
baL76892_ch01_001-041.indd 4baL76892_ch01_001-041.indd 4 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
5Business Driven MIS Module 1
section 1.1 Business Driven MIS
L E A R N I N G O U T C O M E S
1.1 Describe the information age and the differences among data, information, business intelligence,
and knowledge.
1.2 Identify the different departments in a company and why they must work together to achieve success.
1.3 Explain systems thinking and how management information systems enable business
communications.
COMPETING IN THE INFORMATION AGE
Did you know that . . .
■ The movie Avatar took more than four years to create and cost $450 million.
■ Lady Gaga’s real name is Stefani Joanne Angelina Germanotta.
■ Customers pay $2.6 million for a 30-second advertising time slot during the Super
Bowl. 2
A fact is the confirmation or validation of an event or object. In the past, people pri-
marily learned facts from books. Today, by simply pushing a button people can find out
anything, from anywhere, at any time. We live in the information age , when infinite
quantities of facts are widely available to anyone who can use a computer. The impact of
information technology on the global business environment is equivalent to the printing
press’s impact on publishing and electricity’s impact on productivity. College student
startups were mostly unheard of before the information age. Now, it’s not at all unusual
to read about a business student starting a multimillion-dollar company from his or her
dorm room. Think of Mark Zuckerberg, who started Facebook from his dorm, or Michael
Dell (Dell Computers) and Bill Gates (Microsoft), who both founded their legendary
companies as college students.
You may think only students well versed in advanced technology can compete in the
information age. This is simply not true. Many business leaders have created exceptional
opportunities by coupling the power of the information age with traditional business
methods. Here are just a few examples:
■ Amazon is not a technology company; its original business focus was to sell books,
and it now sells nearly everything.
■ Netflix is not a technology company; its primary business focus is to rent videos.
■ Zappos is not a technology company; its primary business focus is to sell shoes, bags,
clothing, and accessories.
Amazon’s founder, Jeff Bezos, at first saw an opportunity to change the way people
purchase books. Using the power of the information age to tailor offerings to each
customer and speed the payment process, he in effect opened millions of tiny virtual
bookstores, each with a vastly larger selection and far cheaper product than traditional
bookstores. The success of his original business model led him to expand Amazon to
carry many other types of products. The founders of Netflix and Zappos have done the
same thing for videos and shoes. All these entrepreneurs were business professionals,
not technology experts. However, they understood enough about the information age
to apply it to a particular business, creating innovative companies that now lead entire
industries.
Students who understand business along with the power associated with the infor-
mation age will create their own opportunities and perhaps even new industries, as co-
founders Chris DeWolfe and Tom Anderson did with MySpace and Mark Zuckerberg did
LO. 1.1: Describe the information
age and the differences among data,
information, business intelligence,
and knowledge.
baL76892_ch01_001-041.indd 5baL76892_ch01_001-041.indd 5 30/11/12 1:49 PM30/11/12 1:49 PM

Rev. Confirming Pages
BUSINESS DRIVEN DISCUSSION
Bill Gates, founder of Microsoft, stated that 20 years ago most people would
rather have been a B student in New York City than a genius in China because
the opportunities available to students in developed countries were limitless.
Today, many argue that the opposite is now true due to technological advances
making it easier to succeed as a genius in China than a B student in New York.
As a group, discuss if you agree or disagree with Bill Gates statement. 3
View from a
Flat World
APPLY YOUR KNOWLEDGE
6 Chapter 1 Management Information Systems: Business Driven MIS
with Facebook. Our primary goal in this course is to arm you with the knowledge you
need to compete in the information age. The core drivers of the information age are:
■ Data
■ Information
■ Business intelligence
■ Knowledge (see Figure 1.2 )
Data
Data are raw facts that describe the characteristics of an event or object. Before the
information age, managers manually collected and analyzed data, a time-consuming
and complicated task without which they would have little insight into how to run their
FIGURE 1.2
The Differences among
Data, Information, Business
Intelligence, and Knowledge
Data Information Business
Intelligence
Knowledge
•
•
• Data converted
into a meaningful
and useful
context
• Information collected
from multiple sources
that analyzes patterns,
trends, and relationships
for strategic decision
making
• The skills, experience,
and expertise, coupled
with information and
intelligence, that creates
a person’s intellectual
resources.
• Choosing not to fire a
sales representative
who is underperforming
knowing that person is
experiencing family
problems
• Listing products that are
about to expire first on
the menu or creating
them as a daily special
to move the product
• Raw facts that
describe the
characteristics
of an event
or object
• Order date
• Amount sold
• Customer
number
• Quantity
ordered
• Best-selling
product
• Best customer
• Worst-selling
product
• Worst
customer
• Lowest sales per week
compared with the
economic interest rates
• Best-selling product by
month compared to
sports season and city
team wins and losses
baL76892_ch01_001-041.indd 6baL76892_ch01_001-041.indd 6 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
7Business Driven MIS Module 1
business. Lacking data, managers often found themselves making business decisions
about how many products to make, how much material to order, or how many employ-
ees to hire based on intuition or gut feelings. In the information age, successful manag-
ers compile, analyze, and comprehend massive amounts of data daily, which helps them
make more successful business decisions.
Figure 1.3 shows sales data for Tony’s Wholesale Company, a fictitious business that
supplies snacks to stores. The data highlight characteristics such as order date, cus-
tomer, sales representative, product, quantity, and profit. The second line in Figure 1.3 ,
for instance, shows that Roberta Cross sold 90 boxes of Ruffles to Walmart for $1,350,
resulting in a profit of $450 (note that Profit  5  Sales  2  Costs). These data are useful for
understanding individual sales; however, they do not provide us much insight into how
Tony’s business is performing as a whole. Tony needs to answer questions that will help
him manage his day-to-day operations such as:
■ Who are my best customers?
■ Who are my least-profitable customers?
■ What is my best-selling product?
■ What is my slowest-selling product?
■ Who is my strongest sales representative?
■ Who is my weakest sales representative?
What Tony needs, in other words, is not data but information.
Information
Information is data converted into a meaningful and useful context. Having the right
information at the right moment in time can be worth a fortune. Having the wrong infor-
mation at the right moment; or the right information at the wrong moment can be disas-
trous. The truth about information is that its value is only as good as the people who use
it. People using the same information can make different decisions depending on how
they interpret or analyze the information. Thus information has value only insofar as the
people using it do as well.
Tony can analyze his sales data and turn them into information to answer all the
above questions and understand how his business is operating. Figures  1.4 and 1.5 ,
for instance, show us that Walmart is Roberta Cross’s best customer, and that Ruffles is
Tony’s best product measured in terms of total sales. Armed with this information, Tony
can identify and then address such issues as weak products and underperforming sales
representatives.
A variable is a data characteristic that stands for a value that changes or varies
over time. For example, in Tony’s data, price and quantity ordered can vary. Changing
FIGURE 1.3
Tony’s Snack Company DataOrder
Date Customer
Sales
Representative Product Qty
Unit
Price
Total
Sales
Unit
Cost
Total
Cost Profit
4-Jan Walmart PJ Helgoth Doritos 41 $24 $ 984 $18 $738 $246
4-Jan Walmart Roberta Cross Ruffles 90 $15 $1,350 $10 $900 $450
5-Jan Safeway Craig Schultz Ruffles 27 $15 $ 405 $10 $270 $135
6-Jan Walmart Roberta Cross Ruffles 67 $15 $1,005 $10 $670 $335
7-Jan 7-Eleven Craig Schultz Pringles 79 $12 $ 948 $ 6 $474 $474
7-Jan Walmart Roberta Cross Ruffles 52 $15 $ 780 $10 $520 $260
8-Jan Kroger Craig Schultz Ruffles 39 $15 $ 585 $10 $390 $195
9-Jan Walmart Craig Schultz Ruffles 66 $15 $ 990 $10 $660 $330
10-Jan Target Craig Schultz Ruffles 40 $15 $ 600 $10 $400 $200
11-Jan Walmart Craig Schultz Ruffles 71 $15 $1,065 $10 $710 $355
baL76892_ch01_001-041.indd 7baL76892_ch01_001-041.indd 7 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
8 Chapter 1 Management Information Systems: Business Driven MIS
FIGURE 1.4
Tony’s Data Sorted by
Customer “Walmart” and Sales
Representative “Roberta Cross”
Order
Date Customer
Sales
Representative Product Quantity
Unit
Price
Total
Sales Unit Cost
Total
Cost Profit
26-Apr Walmart Roberta Cross Fritos 86 $ 19 $ 1,634 $ 17 $ 1,462 $ 172
29-Aug Walmart Roberta Cross Fritos 76 $ 19 $ 1,444 $ 17 $ 1,292 $ 152
7-Sep Walmart Roberta Cross Fritos 20 $ 19 $ 380 $ 17 $ 340 $ 40
22-Nov Walmart Roberta Cross Fritos 39 $ 19 $ 741 $ 17 $ 663 $ 78
30-Dec Walmart Roberta Cross Fritos 68 $ 19 $ 1,292 $ 17 $ 1,156 $ 136
7-Jul Walmart Roberta Cross Pringles 79 $ 18 $ 1,422 $ 8 $ 632 $ 790
6-Aug Walmart Roberta Cross Pringles 21 $ 12 $ 252 $ 6 $ 126 $ 126
2-Oct Walmart Roberta Cross Pringles 60 $ 18 $ 1,080 $ 8 $ 480 $ 600
15-Nov Walmart Roberta Cross Pringles 32 $ 12 $ 384 $ 6 $ 192 $ 192
21-Dec Walmart Roberta Cross Pringles 92 $ 12 $ 1,104 $ 6 $ 552 $ 552
28-Feb Walmart Roberta Cross Ruffles 67 $ 15 $ 1,005 $ 10 $ 670 $ 335
6-Mar Walmart Roberta Cross Ruffles 8 $ 15 $ 120 $ 10 $ 80 $ 40
16-Mar Walmart Roberta Cross Ruffles 68 $ 15 $ 1,020 $ 10 $ 680 $ 340
23-Apr Walmart Roberta Cross Ruffles 34 $ 15 $ 510 $ 10 $ 340 $ 170
4-Aug Walmart Roberta Cross Ruffles 40 $ 15 $ 600 $ 10 $ 400 $ 200
18-Aug Walmart Roberta Cross Ruffles 93 $ 15 $ 1,395 $ 10 $ 930 $ 465
5-Sep Walmart Roberta Cross Ruffles 41 $ 15 $ 615 $ 10 $ 410 $ 205
12-Sep Walmart Roberta Cross Ruffles 8 $ 15 $ 120 $ 10 $ 80 $ 40
28-Oct Walmart Roberta Cross Ruffles 50 $ 15 $ 750 $ 10 $ 500 $ 250
21-Nov Walmart Roberta Cross Ruffles 79 $ 15 $ 1,185 $ 10 $ 790 $ 395
29-Jan Walmart Roberta Cross Sun Chips 5 $ 22 $ 110 $ 18 $ 90 $ 20
12-Apr Walmart Roberta Cross Sun Chips 85 $ 22 $ 1,870 $ 18 $ 1,530 $ 340
16-Jun Walmart Roberta Cross Sun Chips 55 $ 22 $ 1,210 $ 18 $ 990 $ 220
1,206 $383 $20,243 $273 $14,385 $5,858
Sorting the data reveals the information that Roberta Cross’s total sales to Walmart were $20,243 resulting in a profit of $5,858.
(Profit $5,858 5 Sales $20,243 2 Costs $14,385)
variables allows managers to create hypothetical scenarios to study future possibilities.
Tony may find it valuable to anticipate how sales or cost increases affect profitability. To
estimate how a 20 percent increase in prices might improve profits, Tony simply changes
the price variable for all orders, which automatically calculates the amount of new prof-
its. To estimate how a 10 percent increase in costs hurts profits, Tony changes the cost
variable for all orders, which automatically calculates the amount of lost profits. Manip-
ulating variables is an important tool for any business.
Business Intelligence
Business intelligence (BI) is information collected from multiple sources such as sup-
pliers, customers, competitors, partners, and industries that analyzes patterns, trends,
and relationships for strategic decision making. BI manipulates multiple variables and
in some cases even hundreds of variables including such items as interest rates, weather
conditions, and even gas prices. Tony could use BI to analyze internal data such as
company sales, along with external data about the environment such as competitors,
finances, weather, holidays, and even sporting events. Both internal and external vari-
ables affect snack sales, and analyzing these variables will help Tony determine ordering
levels and sales forecasts. For instance, BI can predict inventory requirements for Tony’s
business for the week before the Super Bowl if, say, the home team is playing, average
baL76892_ch01_001-041.indd 8baL76892_ch01_001-041.indd 8 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
9Business Driven MIS Module 1
Tony’s Business Information Name Total Profit
Who is Tony’s best customer by total sales? Walmart $ 560,789
Who is Tony’s least-valuable customer by total sales? Walgreens $45,673
Who is Tony’s best customer by profit? 7-Eleven $ 324,550
Who is Tony’s least-valuable customer by profit? King Soopers $ 23,908
What is Tony’s best-selling product by total sales? Ruffles $ 232,500
What is Tony’s weakest-selling product by total sales? Pringles $ 54,890
What is Tony’s best-selling product by profit? Tostitos $ 13,050
What is Tony’s weakest-selling product by profit? Pringles $ 23,000
Who is Tony’s best sales representative by profit? R. Cross $1,230,980
Who is Tony’s weakest sales representative by profit? Craig Schultz $ 98,980
What is the best sales representative’s best-selling
product by total profit? Ruffles $ 98,780
Who is the best sales representative’s best customer
by total profit? Walmart $ 345,900
What is the best sales representative’s weakest-selling product
by total profit? Sun Chips $ 45,600
Who is the best sales representative’s weakest
customer by total profit? Krogers $ 56,050
FIGURE 1.5
Information Gained after
Analyzing Tony’s Data
BUSINESS DRIVEN MIS
How can global warming be real when there is so much snow and cold weather?
That’s what some people wondered after a couple of massive snowstorms bur-
ied Washington, D.C. Politicians across the capital made jokes and built igloos
as they disputed the existence of climate change. Some concluded the planet
simply could not be warming with all the snow on the ground.
These comments frustrated Joseph Romm, a physicist and climate expert
with the Center for American Progress. He spent weeks turning data into infor-
mation and graphs to educate anyone who would listen as to why this reason-
ing was incorrect. Climate change is all about analyzing data, turning it into
information to detect trends. You cannot observe climate change by looking out
the window; you have to review decades of weather data with advanced tools to
really understand the trends.
Increasingly we see politicians, economists, and newscasters taking tough
issues and boiling them down to simplistic arguments over what the data
mean, each interpreting the data and spinning the data to support their views
and agendas. You need to understand the data and turn them into useful infor-
mation or else you will not understand when someone is telling the truth and
when you are being lied to.
Brainstorm two or three types of data economists use to measure the
economy. How do they turn the data into information? What issues do they
encounter when attempting to measure the economy? As a manager, what do
you need to understand when reading or listening to economic and business
reports? 4
Manipulating
the Data to Find
Your Version of
the Truth
APPLY YOUR KNOWLEDGE
baL76892_ch01_001-041.indd 9baL76892_ch01_001-041.indd 9 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
10 Chapter 1 Management Information Systems: Business Driven MIS
temperature is above 80 degrees, and the stock market is performing well. This is BI at
its finest, incorporating all types of internal and external variables to anticipate business
performance.
Top managers use BI to define the future of the business, analyzing markets, indus-
tries, and economies to determine the strategic direction the company must follow to
remain profitable. Tony will set the strategic direction for his firm, which might include
introducing new flavors of potato chips or sport drinks as new product lines or schools
and hospitals as new market segments.
Knowledge
Knowledge includes the skills, experience, and expertise, coupled with information and
intelligence, that creates a person’s intellectual resources. Knowledge workers are indi-
viduals valued for their ability to interpret and analyze information. Today’s workers are
commonly referred to as knowledge workers and they use BI along with personal experi-
ence to make decisions based on both information and intuition, a valuable resource for
any company.
Imagine that Tony analyzes his data and finds his weakest sales representative for
this period is Craig Schultz. If Tony considered only this information, he might con-
clude that firing Craig was a good business decision. However, because Tony has
knowledge about how the company operates, he knows Craig has been out on medi-
cal leave for several weeks; hence, his sales numbers are low. Without this additional
knowledge, Tony might have executed a bad business decision, delivered a negative
message to the other employees, and sent his best sales representatives out to look for
other jobs.
The key point in this scenario is that it is simply impossible to collect all the infor-
mation about every situation, and yet without that, it can be easy to misunderstand the
problem. Using data, information, business intelligence, and knowledge to make deci-
sions and solve problems is the key to finding success in business. These core drivers of
the information age are the building blocks of business systems.
BUSINESS DRIVEN ETHICS AND SECURITY
We live in the information age where the collection, storage, and use of data are
hot topics. One example of inappropriate data handling occurred at a college
where the monitoring of restrooms occurred every 15 seconds to observe the
use of toilets, mirrors, and sinks. Students, faculty, and staff began complaining
that the data collection was an invasion of their privacy and a violation of their
rights.
Another example of inappropriate data handling occurred when a profes-
sor of accounting at a college lost a flash drive containing information for
more than 1,800 students, including Social Security numbers, grades, and
names. Social Security numbers were included because the data went back
to before 1993 when the college used Social Security numbers to identify
students.
What types of student data does your college collect? What could happen if
your professor lost a thumb drive with all of your personal information? What
types of issues could you encounter if someone stole your personal data?
What can your college do to ensure this type of data storage violation does
not occur? 5
Information
Issues in the
Information Age
APPLY YOUR KNOWLEDGE
baL76892_ch01_001-041.indd 10baL76892_ch01_001-041.indd 10 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
11Business Driven MIS Module 1
Finance
Tracks strategic financial
issues including money,
banking, credit,
investments, and assets.
Human resources
Maintains policies, plans,
and procedures for the
effective management of
employees.
Sales
Performs the function of
selling goods or services.
Operations
management
Manages the process of
converting or transforming
or resources into goods or
services.
Marketing
Supports sales by
planning, pricing, and
promoting goods or
services.
Accounting
Records, measures, and
reports monetary
transactions.
FIGURE 1.6
Departments Working
Independently
THE CHALLENGE: DEPARTMENTAL COMPANIES
Companies are typically organized by department or functional area such as:
■ Accounting: Records, measures, and reports monetary transactions.
■ Finance: Deals with strategic financial issues including money, banking, credit,
investments, and assets.
■ Human resources: Maintains policies, plans, and procedures for the effective man-
agement of employees.
■ Marketing: Supports sales by planning, pricing, and promoting goods or services.
■ Operations management: Manages the process of converting or transforming or
resources into goods or services.
■ Sales: Performs the function of selling goods or services (see Figure 1.6 ).
Each department performs its own activities. Sales and marketing focus on mov-
ing goods or services into the hands of consumers; they maintain transactional data.
Finance and accounting focus on managing the company’s resources and maintain
monetary data. Operations management focuses on manufacturing and maintains
production data, while human resources focuses on hiring and training people and
maintains employee data. Although each department has its own focus and data, none
can work independently if the company is to operate as a whole. It is easy to see how a
LO 1.2: Identify the different depart-
ments in a company and why they
must work together to achieve
success.
baL76892_ch01_001-041.indd 11baL76892_ch01_001-041.indd 11 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
12 Chapter 1 Management Information Systems: Business Driven MIS
business decision made by one department can affect other departments. Marketing
needs to analyze production and sales data to come up with product promotions and
advertising strategies. Production needs to understand sales forecasts to determine the
company’s manufacturing needs. Sales needs to rely on information from operations to
understand inventory, place orders, and forecast consumer demand. All departments
need to understand the accounting and finance departments’ information for budget-
ing. For the firm to be successful, all departments must work together as a single unit
sharing common information and not operate independently or in a silo (see Figure 1.7 ).
THE SOLUTION: MANAGEMENT INFORMATION
SYSTEMS
You probably recall the old story of three blind men attempting to describe an elephant.
The first man, feeling the elephant’s girth, said the elephant seemed very much like a
wall. The second, feeling the elephant’s trunk, declared the elephant was like a snake.
The third man felt the elephant’s tusks and said the elephant was like a tree or a cane.
Companies that operate departmentally are seeing only one part of the elephant, a criti-
cal mistake that hinders successful operation.
Successful companies operate cross-functionally, integrating the operations of all
departments. Systems are the primary enabler of cross-functional operations. A system
is a collection of parts that link to achieve a common purpose. A car is a good example
of a system, since removing a part, such as the steering wheel or accelerator, causes the
entire system to stop working.
Before jumping into how systems work, it is important to have a solid understand-
ing of the basic production process for goods and services. Goods are material items
or products that customers will buy to satisfy a want or need. Clothing, groceries, cell
phones, and cars are all examples of goods that people buy to fulfill their needs. Services
LO 1.3: Explain systems thinking
and how management informa-
tion systems enable business
communications.
FIGURE 1.7
Departments Working Together
Accounting
Monetary data
Finance
Monetary data
Human resources
Employee data
Marketing
Transactional data
Sales
Transactional data
Operations management
Production data
Business Decisions
baL76892_ch01_001-041.indd 12baL76892_ch01_001-041.indd 12 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
13Business Driven MIS Module 1
are tasks performed by people that customers will buy to satisfy a want or need. Waiting
tables, teaching, and cutting hair are all examples of services that people pay for to fulfill
their needs (see Figure 1.8 ).
Production is the process where a business takes raw materials and processes them
or converts them into a finished product for its goods or services. Just think about mak-
ing a hamburger (see Figure 1.9 ). First, you must gather all of the inputs or raw mate-
rials such as the bun, patty, lettuce, tomato, and ketchup. Second, you process the raw
materials, so in this example you would need to cook the patty, wash and chop the let-
tuce and tomato, and place all of the items in the bun. Finally, you would have your out-
put or finished product—your hamburger! Productivity is the rate at which goods and
services are produced based upon total output given total inputs. Given our previous
example, if a business could produce the same hamburger with less expensive inputs
Cars
Groceries
Clothing
Teaching
Waiting
tables
Cutting hair
GOODS
Material items or products
that customers will buy to
satisfy a want or need.
SERVICES
Tasks performed by people
that customers will buy
to satisfy a want or need.
FIGURE 1.8
Different Types of Goods
and Services
Input OutputProcess
Lettuce,
tomatoes, patty,
bun, ketchup
Cook the patty, put
the ingredients
together
Hamburger
FIGURE 1.9
Input, Process, Output Example
baL76892_ch01_001-041.indd 13baL76892_ch01_001-041.indd 13 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
14 Chapter 1 Management Information Systems: Business Driven MIS
or more hamburgers with the same inputs it would see a rise in productivity and possi-
bly an increase in profits. Ensuring the input, process, and output of goods and services
work across all of the departments of a company is where systems add tremendous value
to overall business productivity.
Systems thinking is a way of monitoring the entire system by viewing multiple inputs
being processed or transformed to produce outputs while continuously gathering feed-
back on each part (see Figure 1.10 ). Feedback is information that returns to its original
transmitter (input, transform, or output) and modifies the transmitter’s actions. Feed-
back helps the system maintain stability. For example, a car’s system continuously moni-
tors the fuel level and turns on a warning light if the gas level is too low. Systems thinking
provides an end-to-end view of how operations work together to create a product or
service. Business students who understand systems thinking are valuable resources
because they can implement solutions that consider the entire process, not just a single
component.
Management information systems (MIS) is a business function, like accounting
and human resources, which moves information about people, products, and processes
across the company to facilitate decision making and problem solving. MIS incorporates
systems thinking to help companies operate cross-functionally. For example, to fulfill
product orders, an MIS for sales moves a single customer order across all functional
areas including sales, order fulfillment, shipping, billing, and finally customer service.
Although different functional areas handle different parts of the sale, thanks to MIS, to
the customer the sale is one continuous process. If one part of the company is experienc-
ing problems, however, then, like the car without a steering wheel, the entire system fails.
If order fulfillment packages the wrong product, it will not matter that shipping, billing,
and customer service did their jobs right, since the customer will not be satisfied when
he or she opens the package.
MIS can be an important enabler of business success and innovation. This is not to
say that MIS equals business success and innovation, or that MIS represents business
success and innovation. MIS is a tool that is most valuable when it leverages the talents
of people who know how to use and manage it effectively. To perform the MIS func-
tion effectively, almost all companies, particularly large and medium-sized ones, have
an internal MIS department, often called information technology (IT), information sys-
tems (IS), or management information systems (MIS). For the purpose of this text, we
will refer to it as MIS.
MIS Department Roles and Responsibilities
MIS as a department is a relatively new functional area, having been around formally for
about 40 years. Job titles, roles, and responsibilities often differ from company to com-
pany, but the most common are displayed in Figure 1.11 .
While many companies may not have a different individual for each of these posi-
tions, they must have top managers who take responsibility for all these areas.
FIGURE 1.10
Overview of Systems Thinking
Input Process Output
Feedback
baL76892_ch01_001-041.indd 14baL76892_ch01_001-041.indd 14 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
15Business Driven MIS Module 1
section 1.2 Business Strategy
L E A R N I N G O U T C O M E S
1.4 Explain why competitive advantages are temporary.
1.5 Describe Porter’s Five Forces Model and explain each of the five forces.
1.6 Compare Porter’s three generic strategies.
1.7 Demonstrate how a company can add value by using Porter’s value chain analysis.
IDENTIFYING COMPETITIVE ADVANTAGES
Running a company today is similar to leading an army; the top manager or leader
ensures all participants are heading in the right direction and completing their goals and
objectives. Companies lacking leadership quickly implode as employees head in differ-
ent directions attempting to achieve conflicting goals. To combat these challenges, lead-
ers communicate and execute business strategies (from the Greek word stratus for army
and ago for leading). A business strategy is a leadership plan that achieves a specific set
of goals or objectives as displayed in Figure 1.12 .
Good leaders also anticipate unexpected misfortunes, from strikes and economic
recessions to natural disasters. Their business strategies build in buffers or slack,
LO 1.4: Explain why competitive
advantages are temporary.
FIGURE 1.11
The Roles and Responsibilities
of MIS
MIS Department Roles
and Responsibilities
Chief information officer (CIO)
Chief knowledge officer (CKO)
Responsible for collecting,
maintaining, and distributing
company knowledge.
Chief privacy officer (CPO)
Responsible for ensuring the ethical and
legal use of information within a
company.
Chief security officer (CSO)
Responsible for ensuring the security
of business systems and developing
strategies and safeguards against
attacks by hackers and viruses.
Chief technology officer (CTO)
Responsible for ensuring the
speed, accuracy, availability,
and reliability of the MIS.
Responsible for (1) overseeing all uses of
MIS and (2) ensuring that MIS strategically
aligns with business goals and objectives.
baL76892_ch01_001-041.indd 15baL76892_ch01_001-041.indd 15 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
16 Chapter 1 Management Information Systems: Business Driven MIS
allowing the company the ability to ride out any storm and defend against competitive
or environmental threats. Of course, updating business strategies is a continuous under-
taking as internal and external environments rapidly change. Business strategies that
match core company competencies to opportunities result in competitive advantages,
a key to success!
A competitive advantage is a feature of a product or service on which customers
place a greater value than they do on similar offerings from competitors. Competitive
advantages provide the same product or service either at a lower price or with additional
value that can fetch premium prices. Unfortunately, competitive advantages are typi-
cally temporary, because competitors often quickly seek ways to duplicate them. In turn,
organizations must develop a strategy based on a new competitive advantage. Ways that
companies duplicate competitive advantages include acquiring the new technology,
copying the business operations, and hiring away key employees. The introduction of
Apple’s iPod and iTunes, a brilliant merger of technology, business, and entertainment,
offers an excellent example.
In early 2000, Steve Jobs was fixated on developing video editing software when he sud-
denly realized that millions of people were using computers to listen to music, a new trend
in the industry catapulted by illegal online services such as Napster. Jobs was worried that
he was looking in the wrong direction and had missed the opportunity to jump on the
online music bandwagon. He moved fast, however, and within four months he had devel-
oped the first version of iTunes for the Mac. Jobs’ next challenge was to make a portable
iTunes player that could hold thousands of songs and be completely transportable. Within
nine months the iPod was born. With the combination of iTunes and iPod, Apple created a
significant competitive advantage in the marketplace. Many firms began following Apple’s
lead by creating portable music players to compete with the iPod. In addition, Apple con-
tinues to create new and exciting products to gain competitive advantages, such as its
iPad, a larger version of the iPod that functions more as a computer than a music player. 6
Decreasing
costs
Attracting
new
customers
Increasing
sales
Increasing
customer
loyalty
Business strategies
Leadership plans
that achieve a
specific set of goals
or objectives
Entering
new
markets
Developing
new
products
or services
FIGURE 1.12
Examples of Business
Strategies
baL76892_ch01_001-041.indd 16baL76892_ch01_001-041.indd 16 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
BUSINESS DRIVEN GLOBALIZATION
According to the Economic Policy Institute, over the past decade the United
States has lost an estimated 2.4 million factory jobs to China. Factories in South
Korea, Taiwan, and China are producing toys, toothpaste, running shoes, com-
puters, appliances, and cars. For a long time U.S. firms did not recognize these
products as competition; they regarded Asia’s high-tech products as second-
rate knockoffs and believed Asian countries maintained a “factory culture”—
they could imitate but not innovate.
In hindsight, it is obvious that once these countries did begin designing and
creating high-end products, they would have obvious competitive advantages,
with high-value research and development coupled with low-cost manufac-
turing of unbeatable goods and services. Asia is now on the rise in all indus-
tries from wind turbines to high-speed bullet trains. According to Bloomberg
Businessweek ’s ranking of the most innovative companies, 15 of the top 50 are
Asian, up from just 5 in 2006. In fact, for the first time, the majority of the top 25
are based outside the United States.
How do you, as a business student, view these statistics? What type of
global business climate will you be competing in when you graduate? If you
wanted to gather competitive intelligence about the job market, where would
you look and what types of data would you want to analyze? What can you
do to create personal competitive advantages to differentiate yourself when
searching for a job? 7
The Competitive
Landscape for
Students
APPLY YOUR KNOWLEDGE
17Business Driven MIS Module 1
When a company is the first to market with a competitive advantage, it gains a par-
ticular benefit, such as Apple did with its iPod. This first-mover advantage occurs when
a company can significantly increase its market share by being first with a new competi-
tive advantage. FedEx created a first-mover advantage by developing its customer self-
service software, which allows people to request parcel pickups, print mailing slips, and
track parcels online. Other parcel delivery companies quickly began creating their own
online services. Today, customer self-service on the Internet is a standard feature of the
parcel delivery business.
Competitive intelligence is the process of gathering information about the competi-
tive environment, including competitors’ plans, activities, and products, to improve a
company’s ability to succeed. It means understanding and learning as much as possible
as soon as possible about what is occurring outside the company to remain competitive.
Frito-Lay, a premier provider of snack foods such as Cracker Jacks and Cheetos, does not
send its sales representatives into grocery stores just to stock shelves; they carry hand-
held computers and record the product offerings, inventory, and even product locations
of competitors. Frito-Lay uses this information to gain competitive intelligence on every-
thing from how well competing products are selling to the strategic placement of its own
products. 8
Managers use three common tools to analyze competitive intelligence and develop
competitive advantages including:
1. The Five Forces Model (for evaluating industry attractiveness).
2. The three generic strategies (for choosing a business focus).
3. Value chain analysis (for executing business strategies).
baL76892_ch01_001-041.indd 17baL76892_ch01_001-041.indd 17 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
Threat of Substitute
Products or Services
The power of customers
to purchase alternatives
Rivalry among
Existing Competitors
The power of
competitors
Buyer Power
The power of customers
to drive down prices
Threat of New Entrants
The power of competitors to
enter a market
Supplier Power
The power of suppliers
to drive up prices of materials
FIGURE 1.13
Porter’s Five Forces Model 
18 Chapter 1 Management Information Systems: Business Driven MIS
THE FIVE FORCES MODEL—EVALUATING
INDUSTRY ATTRACTIVENESS
Michael Porter, a university professor at Harvard Business School, identified the follow-
ing pressures that can hurt potential sales:
■ Knowledgeable customers can force down prices by pitting rivals against each other.
■ Influential suppliers can drive down profits by charging higher prices for supplies.
■ Competition can steal customers.
■ New market entrants can steal potential investment capital.
■ Substitute products can steal customers.
Formally defined, Porter’s Five Forces Model analyzes the competitive forces within
the environment in which a company operates to assess the potential for profitability
in an industry. Its purpose is to combat these competitive forces by identifying oppor-
tunities, competitive advantages, and competitive intelligence. If the forces are strong,
they increase competition; if the forces are weak, they decrease competition. This sec-
tion details each of the forces and its associated MIS business strategy (see Figure 1.13 ). 9
Buyer Power
Buyer power is the ability of buyers to affect the price they must pay for an item. Fac-
tors used to assess buyer power include number of customers, their sensitivity to price,
size of orders, differences between competitors, and availability of substitute products. If
buyer power is high, customers can force a company and its competitors to compete on
price, which typically drives prices down.
One way to reduce buyer power is by manipulating switching costs , costs that make
customers reluctant to switch to another product or service. Switching costs include
financial as well as intangible values. The cost of switching doctors, for instance, includes
the powerful intangible components of having to build relationships with the new doctor
and nurses, as well as transferring all your medical history. With MIS, however, patients
can store their medical records on DVDs or thumb drives, allowing easy transferability.
The Internet also lets patients review websites for physician referrals, which takes some
of the fear out of trying someone new. 10
LO 1.5: Describe Porter’s Five Forces
Model and explain each of the five
forces.
baL76892_ch01_001-041.indd 18baL76892_ch01_001-041.indd 18 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
19Business Driven MIS Module 1
Companies can also reduce buyer power with loyalty programs , which reward custom-
ers based on their spending. The airline industry is famous for its frequent-flyer programs,
for instance. Because of the rewards travelers receive (free airline tickets, upgrades, or hotel
stays), they are more likely to be loyal to or give most of their business to a single company.
Keeping track of the activities and accounts of many thousands or millions of customers
covered by loyalty programs is not practical without large-scale business systems, however.
Loyalty programs are thus a good example of using MIS to reduce buyer power. 11
Supplier Power
A supply chain consists of all parties involved, directly or indirectly, in obtaining raw
materials or a product. In a typical supply chain, a company will be both a supplier (to
customers) and a customer (of other suppliers), as illustrated in Figure 1.14 . Supplier
power is the suppliers’ ability to influence the prices they charge for supplies (including
materials, labor, and services). Factors used to appraise supplier power include number
of suppliers, size of suppliers, uniqueness of services, and availability of substitute prod-
ucts. If supplier power is high, the supplier can influence the industry by:
■ Charging higher prices.
■ Limiting quality or services.
■ Shifting costs to industry participants. 12
Typically, when a supplier raises prices, the buyers will pass on the increase to their
customers by raising prices on the end product. When supplier power is high, buyers lose
revenue because they cannot pass on the raw material price increase to their customers.
Some powerful suppliers, such as pharmaceutical companies, can exert a threat over
an entire industry when substitutes are limited and the product is critical to the buyers.
Patient who need to purchase cancer-fighting drugs have no power over price and must
pay whatever the drug company asks because there are few available alternatives.
Using MIS to find alternative products is one way of decreasing supplier power. Can-
cer patients can now use the Internet to research alternative medications and practices,
something that was next to impossible just a few decades ago. Buyers can also use MIS
to form groups or collaborate with other buyers, increasing the size of the buyer group
and reducing supplier power. For a hypothetical example, the collective group of 30,000
students from a university has far more power over price when purchasing laptops than
a single student. 13
Threat of Substitute Products or Services
The threat of substitute products or services is high when there are many alternatives
to a product or service and low when there are few alternatives from which to choose.
For example, travelers have numerous substitutes for airline transportation including
automobiles, trains, and boats. Technology even makes videoconferencing and virtual
meetings possible, eliminating the need for some business travel. Ideally, a company
would like to be in a market in which there are few substitutes for the products or ser-
vices it offers.
Polaroid had this unique competitive advantage for many years until it forgot to
observe competitive intelligence. Then the firm went bankrupt when people began tak-
ing digital pictures with everything from video cameras to cell phones.
A company can reduce the threat of substitutes by offering additional value through
wider product distribution. Soft-drink manufacturers distribute their products through
FIGURE 1.14
Traditional Supply Chain
Suppliers Company Customers
baL76892_ch01_001-041.indd 19baL76892_ch01_001-041.indd 19 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
20 Chapter 1 Management Information Systems: Business Driven MIS
vending machines, gas stations, and convenience stores, increasing the availability of
soft drinks relative to other beverages. Companies can also offer various add-on services,
making the substitute product less of a threat. For example, iPhones include capabilities
for games, videos, and music, making a traditional cell phone less of a substitute. 14
Threat of New Entrants
The threat of new entrants is high when it is easy for new competitors to enter a market
and low when there are significant entry barriers to joining a market. An entry barrier is a
feature of a product or service that customers have come to expect and entering competi-
tors must offer the same for survival. For example, a new bank must offer its customers
an array of MIS-enabled services, including ATMs, online bill paying, and online account
monitoring. These are significant barriers to new firms entering the banking market. At
one time, the first bank to offer such services gained a valuable first-mover advantage,
but only temporarily, as other banking competitors developed their own MIS services. 15
Rivalry among Existing Competitors
Rivalry among existing competitors is high when competition is fierce in a market
and low when competitors are more complacent. Although competition is always more
intense in some industries than in others, the overall trend is toward increased com-
petition in almost every industry. The retail grocery industry is intensively competitive.
Kroger, Safeway, and Albertsons in the United States compete in many different ways,
essentially trying to beat or match each other on price. Most supermarket chains have
implemented loyalty programs to provide customers special discounts while gathering
valuable information about their purchasing habits. In the future, expect to see grocery
stores using wireless technologies that track customer movements throughout the store
to determine purchasing sequences.
Product differentiation occurs when a company develops unique differences in its
products or services with the intent to influence demand. Companies can use differenti-
ation to reduce rivalry. For example, while many companies sell books and videos on the
Internet, Amazon differentiates itself by using customer profiling. When a customer vis-
its Amazon.com repeatedly, Amazon begins to offer products tailored to that particular
customer based on his or her profile. In this way, Amazon has reduced its rivals’ power
by offering its customers a differentiated service.
To review, the Five Forces Model helps managers set business strategy by identify-
ing the competitive structure and economic environment of an industry. If the forces
are strong, they increase competition; if the forces are weak, they decrease it (see
Figure 1.15 ). 16
Analyzing the Airline Industry
Let us bring Porter’s five forces together to look at the competitive forces shaping an
industry and highlight business strategies to help it remain competitive. Assume
a shipping company is deciding whether to enter the commercial airline industry. If
FIGURE 1.15
Strong and Weak Examples of
Porter’s Five Forces
Weak Force: Decreases
Competition or Few Competitors
Strong Force: Increases
Competition or Lots of Competitors
Buyer Power An international hotel chain
purchasing milk
A single consumer purchasing milk
Supplier Power A company that makes airline
engines
A company that makes pencils
Threat of Substitute
Products or Services
Cancer drugs from a
pharmaceutical company
Coffee from McDonald’s
Threat of New Entrants A professional hockey team A dog walking business
Rivalry among Existing
Competitors
Department of Motor Vehicles A coffee shop
baL76892_ch01_001-041.indd 20baL76892_ch01_001-041.indd 20 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
BUSINESS DRIVEN INNOVATION
Is there anything more frustrating than waiting in line at the post office? Not
only are those lines frustrating, but they are also unprofitable. The U.S. Postal
Service has faced multibillion-dollar losses every year for the past few years,
making for one of the greatest challenges in its history.
What is killing the post office? Perhaps it is Stamps.com , a website that allows
you to customize and print your own stamps 24 hours a day. Getting married?
Place a photo of the happy couple right on the stamp for the invitations. Starting
a business? Place your business logo on your stamps. Stamps.com even keeps
track of a customer’s postal spending and can recommend optimal delivery
methods. Plus, Stamps.com gives you postage discounts you can’t get at the
post office or with a postage meter.
Evaluate the U.S. Postal Service using Porter’s Five Forces Model. How could
the Postal Service create new products and services to help grow its business?
What types of competitive advantages can you identify for the Postal Service? 18
Fixing the
Post Office
APPLY YOUR KNOWLEDGE
21Business Driven MIS Module 1
performed correctly, an analysis of the five forces should determine that this is a highly
risky business strategy because all five forces are strong. It will thus be difficult to gener-
ate a profit.
■ Buyer power: Buyer power is high because customers have many airlines to choose
from and typically make purchases based on price, not carrier.
■ Supplier power: Supplier power is high since there are limited plane and engine
manufacturers to choose from, and unionized workforces (suppliers of labor) restrict
airline profits.
■ Threat of substitute products or services: The threat of substitute products is high
from many transportation alternatives including automobiles, trains, and boats, and
from transportation substitutes such as videoconferencing and virtual meetings.
■ Threat of new entrants: The threat of new entrants is high because new airlines are
continuously entering the market, including sky taxies offering low-cost on-demand
air taxi service.
■ Rivalry among existing competitors: Rivalry in the airline industry is high, and
websites such as Travelocity.com force them to compete on price (see Figure 1.16 ). 17
FIGURE 1.16
Five Forces Model in the Airline
Industry
Strong (High) Force: Increases
Competition or Lots of Competitors
Buyer Power Many airlines for buyers to choose from forcing competition
based on price
Supplier Power Limited number of plane and engine manufacturers to choose
from along with unionized workers
Threat of Substitute Products
or Services
Many substitutes including cars, trains, and busses.
Even substitutes to travel such as video conferencing and virtual
meetings.
Threat of New Entrants Many new airlines entering the market all the time including the
latest sky taxis.
Rivalry among Existing Competitors Intense competition–many rivals.
baL76892_ch01_001-041.indd 21baL76892_ch01_001-041.indd 21 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
22 Chapter 1 Management Information Systems: Business Driven MIS
THE THREE GENERIC STRATEGIES—CHOOSING
A BUSINESS FOCUS
Once top management has determined the relative attractiveness of an industry and
decided to enter it, the firm must formulate a strategy for doing so. If our sample com-
pany decided to join the airline industry, it could compete as a low-cost, no-frills airline
or as a luxury airline providing outstanding service and first-class comfort. Both options
offer different ways of achieving competitive advantages in a crowded marketplace. The
low-cost operator saves on expenses and passes the savings along to customers in the
form of low prices. The luxury airline spends on high-end service and first-class com-
forts and passes the costs on to the customer in the form of high prices.
Porter has identified three generic business strategies for entering a new market: (1)
broad cost leadership, (2) broad differentiation, and (3) focused strategy. Broad strat-
egies reach a large market segment, while focused strategies target a niche or unique
market with either cost leadership or differentiation. Trying to be all things to all people
is a recipe for disaster, since doing so makes it difficult to project a consistent image to
the entire marketplace. For this reason, Porter suggests adopting only one of the three
generic strategies illustrated in Figure 1.17 . 19
Figure 1.18 applies the three strategies to real companies, demonstrating the relation-
ships among strategies (cost leadership versus differentiation) and market segmentation
(broad versus focused).
■ Broad market and low cost: Walmart competes by offering a broad range of prod-
ucts at low prices. Its business strategy is to be the low-cost provider of goods for the
cost-conscious consumer.
■ Broad market and high cost: Neiman Marcus competes by offering a broad range of
differentiated products at high prices. Its business strategy offers a variety of specialty
and upscale products to affluent consumers.
LO 1.6: Compare Porter’s three
generic strategies.
FIGURE 1.18
Examples of Porter’s Three
Generic Strategies
Walmart Neiman Marcus
Payless Shoes Tiffany & Co.
Low Cost High Cost
Cost Strategy
Broad
Market
Narrow
Market
Competitive
Scope
FIGURE 1.17
Porter’s Three Generic
Strategies
Cost Leadership Differentiation
Focused Strategy
Low Cost High Cost
Cost Strategy
Broad
Market
Narrow
Market
Competitive
Scope
baL76892_ch01_001-041.indd 22baL76892_ch01_001-041.indd 22 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
BUSINESS DRIVEN DEBATE
Apple sold 300,000 units of its highly anticipated iPad in the first 15 hours it was
available for sale. Hundreds of thousands of Apple devotees flocked to stores
during Passover and Easter to be the first to obtain the new device, even though
it is neither a phone nor a laptop computer and many people are still wonder-
ing what it’s for.
The controversy over the usefulness of Apple’s portable tablet began as soon
as Apple announced the device was heading to market. At first glance, the iPad
is little more than a touch screen the size of a slim book, with a few control but-
tons along the edges and a home button at the bottom. Shrink it, and it would
look like an iPod Touch. What is the value of this device? That’s the question
everyone wants to answer.
The iPad’s modest features might represent an entirely new way of con-
suming media—video, web pages, music, pictures, and even books. Break into
groups and review the current value of the iPad for business. Find three exam-
ples of the ways businesses are using, or could use, the iPad. Do you consider it
the next revolutionary device or just an overpriced music player? 20
The iPad—
Greatest Product
in History or Just
Another Gadget?
APPLY YOUR KNOWLEDGE
23Business Driven MIS Module 1
■ Narrow market and low cost: Payless competes by offering a specific product,
shoes, at low prices. Its business strategy is to be the low-cost provider of shoes.
Payless competes with Walmart, which also sells low-cost shoes, by offering a far big-
ger selection of sizes and styles.
■ Narrow market and high cost: Tiffany & Co. competes by offering a differentiated
product, jewelry, at high prices. Its business strategy allows it to be a high-cost pro-
vider of premier designer jewelry to affluent consumers.
VALUE CHAIN ANALYSIS—EXECUTING
BUSINESS STRATEGIES
Firms make profits by taking raw inputs and applying a business process to turn them
into a product or service that customers find valuable. A business process is a standard-
ized set of activities that accomplish a specific task, such as processing a customer’s
order. Once a firm identifies the industry it wants to enter and the generic strategy it
will focus on, it must then choose the business processes required to create its products
or services. Of course, the firm will want to ensure the processes add value and create
competitive advantages. To identify these competitive advantages, Michael Porter cre-
ated value chain analysis , which views a firm as a series of business processes that each
add value to the product or service.
Value chain analysis is a useful tool for determining how to create the greatest pos-
sible value for customers (see Figure 1.19 ). The goal of value chain analysis is to identify
processes in which the firm can add value for the customer and create a competitive
advantage for itself, with a cost advantage or product differentiation.
The value chain groups a firm’s activities into two categories, primary value activities,
and support value activities. Primary value activities , shown at the bottom of the value
chain in Figure 1.19 , acquire raw materials and manufacture, deliver, market, sell, and
provide after-sales services.
1. Inbound logistics: acquires raw materials and resources and distributes to manufac-
turing as required.
2. Operations: transforms raw materials or inputs into goods and services.
3. Outbound logistics: distributes goods and services to customers.
LO 1.7 Demonstrate how a company
can add value by using Porter’s value
chain analysis.
baL76892_ch01_001-041.indd 23baL76892_ch01_001-041.indd 23 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
FIGURE 1.19
The Value Chain
Support
Value
Activities
Primary
Value
Activities
Firm infrastructure (3.1%)
Human resource management (7.1%)
Technology development (and R&D) (4.2%)
Procurement (27%)
Receive
and
store raw
materials
(5.2%)
Make the
product or
service
(40.3%)
Deliver the
product or
service
(6.6%)
Market and
sell the
product or
service
(4.3%)
Service
after
the sale
(2.2%)
Value Added
24 Chapter 1 Management Information Systems: Business Driven MIS
4. Marketing and sales: promotes, prices, and sells products to customers.
5. Service: Provides customer support after the sale of goods and services. 21
Support value activities , along the top of the value chain in Figure 1.19 , include firm
infrastructure, human resource management, technology development, and procure-
ment. Not surprisingly, these support the primary value activities.
■ Firm infrastructure: includes the company format or departmental structures, envi-
ronment, and systems.
■ Human resource management: provides employee training, hiring, and
compensation.
■ Technology development: applies MIS to processes to add value.
■ Procurement: purchases inputs such as raw materials, resources, equipment, and
supplies.
It is easy to understand how a typical manufacturing firm takes raw materials such
as wood pulp and transforms it into paper. Adding value in this example might include
using high-quality raw materials or offering next-day free shipping on any order. How,
though, might a typical service firm take raw inputs such as time, knowledge, and MIS
and transform them into valuable customer service knowledge? A hotel might use MIS
to track customer reservations and then inform front-desk employees when a loyal cus-
tomer is checking in so the employee can call the guest by name and offer additional
services, gift baskets, or upgraded rooms. Examining the firm as a value chain allows
managers to identify the important business processes that add value for customers and
then find MIS solutions that support them.
When performing a value chain analysis, a firm could survey customers about the
extent to which they believe each activity adds value to the product or service. This
step generates responses the firm can measure, shown as percentages in Figure  1.20 ,
to describe how each activity adds (or reduces) value. Then the competitive advan-
tage decision for the firm is whether to (1) target high value-adding activities to further
enhance their value, (2) target low value-adding activities to increase their value, or (3)
perform some combination of the two.
MIS adds value to both primary and support value activities. One example of a
primary value activity facilitated by MIS is the development of a marketing campaign
management system that could target marketing campaigns more efficiently, thereby
reducing marketing costs. The system would also help the firm better pinpoint tar-
get market needs, thereby increasing sales. One example of a support value activity
facilitated by MIS is the development of a human resources system that could more
efficiently reward employees based on performance. The system could also identify
baL76892_ch01_001-041.indd 24baL76892_ch01_001-041.indd 24 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
Firm infrastructure (3.1%)
Human resource management (7.1%)
Technology development (and R&D) (4.2%)
Procurement (27%)
Receive
and
store raw
materials
(5.2%)
Make the
product or
service
(40.3%)
Deliver the
product or
service
(6.6%)
Market and
sell the
product or
service
(4.3%)
Service
after
the sale
(2.2%)
Value Added
Threat of New
Entrants
The power of competitors
to enter a market
Buyer Power
The power of
customers to drive
down prices
Supplier Power
The power of
suppliers to drive up
prices of materials
Threat of Substitute
Products or Services
The power of customers
to purchase alternatives
FIGURE 1.20
The Value Chain and Porter’s
Five Forces Model
BUSINESS DRIVEN START-UP
Derek Johnson, a student at the University of Houston, was having lunch with
his friend who happened to be the communications director for her sorority.
During lunch Derek’s friend was telling him how hard it was to communicate
with all of her sisters in the sorority. She had to send out important announce-
ments about meetings, charitable events, and even dues. She had tried every-
thing including Facebook, email, and message boards, but so far nothing was
working. As Derek pondered his friend’s dilemma, he came up with a solution:
mass text messaging.
Johnson began researching mass text messaging products and was surprised
to find that none existed for the average consumer. Spotting an entrepreneurial
opportunity, Derek quickly began working on a product. Within a few months
he launched his website, Tatango, and began offering group text messaging at a
reasonable price. Now, a few years later, Tatango offers customers subscription
plans starting under $20 a month that allows groups to send text messages to all
members at once—whether 10 or 10,000—from any device.
In a group, brainstorm a list of problems you are currently experiencing.
Decide whether any present potential new business opportunities, and if so,
analyze the potential using the tools introduced in this chapter. Be prepared to
present your new business to the class. 22
Want to Start
Your Own
Business? Just
Find a Problem
to Solve
APPLY YOUR KNOWLEDGE
25Business Driven MIS Module 1
employees who are at risk of quitting, allowing manager’s time to find additional
challenges or opportunities that would help retain these employees and thus reduce
turnover costs.
baL76892_ch01_001-041.indd 25baL76892_ch01_001-041.indd 25 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
26 Chapter 1 Management Information Systems: Business Driven MIS
FIGURE 1.21
Overview of Business Driven
Information Systems
Data
Information
Business Intelligence
Knowledge
Systems Thinking
Porter’s Business Strategies
Business Strategy MIS Topics
MODULE 1:
BUSINESS DRIVEN MIS
Transaction Processing Systems
Decision Support Systems
Executive Information Systems
Artificial Intelligence
Business Process Reengineering
eBusiness
eBusiness Models
Social Networking
Knowledge Management
Collaboration
Chapter 1: Management
Information Systems
Chapter 2: Decisions and
Processes
Chapter 3: Ebusiness
Chapter 4: Ethics and
Information Security
Understanding Business
Driven MIS
Creating Value Driven
Businesses
Finding Electronic Business
Value
Identifying MIS Business
Concerns
Information Security Policies
Authentication and Authorization
Prevention and Resistance
Detection and Response
Chapter 5: Infrastructures Deploying Organizational MIS
Grid Computing
Cloud Computing
Virtualization
Sustainable MIS Infrastructures
Business Strategy MIS Topics
MODULE 2:
TECHNICAL FOUNDATIONS OF MIS
Chapter 6: Data Uncovering BusinessIntelligence
Database
Data Management Systems
Data Warehousing
Data Mining
Chapter 7: Networks Supporting Mobile Business
Business Networks
Web 1.0, Web 2.0, Web 3.0
Mobile MIS
Wireless MIS
GPS, GIS, and LBS
Chapter 8: Enterprise
Applications
Enhancing Business
Communications
Customer Relationship Management
Supply Chain Management
Enterprise Resource Planning
Business Strategy MIS Topics
MODULE 3:
ENTERPRISE MIS
Chapter 9: Systems
Development and Project
Management
Leading MIS Projects
MIS Development Methodologies
Project Management
Outsourcing
baL76892_ch01_001-041.indd 26baL76892_ch01_001-041.indd 26 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
27Business Driven MIS Module 1
Value chain analysis is a highly useful tool that provides hard and fast numbers for
evaluating the activities that add value to products and services. Managers can find
additional value by analyzing and constructing the value chain in terms of Porter’s Five
Forces Model (see Figure  1.20 ). For example, if the goal is to decrease buyer power, a
company can construct its value chain activity of “service after the sale” by offering high
levels of customer service. This will increase customers’ switching costs and reduce their
power. Analyzing and constructing support value activities can help decrease the threat
of new entrants. Analyzing and constructing primary value activities can help decrease
the threat of substitute products or services. 23
Revising Porter’s three business strategies is critical. Firms must continually adapt
to their competitive environments, which can cause business strategy to shift. In
the remainder of this text we discuss how managers can formulate business strate-
gies using MIS to create competitive advantages. Figure 1.21 gives an overview of the
remaining chapters, along with the relevant business strategy and associated MIS
topics.
Learning Outcome 1.1: Describe the information age and the differences among data,
information, business intelligence, and knowledge.
We live in the information age, when infinite quantities of facts are widely available to anyone who
can use a computer. The core drivers of the information age include data, information, business
intelligence, and knowledge. Data are raw facts that describe the characteristics of an event or
object. Information is data converted into a meaningful and useful context. Business intelligence
(BI) is information collected from multiple sources such as suppliers, customers, competitors, part-
ners, and industries that analyzes patterns, trends, and relationships for strategic decision making.
Knowledge includes the skills, experience, and expertise, coupled with information and intelligence,
that creates a person’s intellectual resources. As you move from data to knowledge you include
more and more variables for analysis resulting in better, more precise support for decision making
and problem solving.
Learning Outcome 1.2: Identify the different departments in a company and why they
must work together to achieve success.
Companies are typically organized by department or functional area such as accounting, finance,
human resources, marketing, operations management, and sales. Although each department has its
own focus and its own data, none can work independently if the company is to operate as a whole.
It is easy to see how a business decision made by one department can affect other departments.
Functional areas are anything but independent in a business. In fact, functional areas are interdepen-
dent. Sales must rely on information from operations to understand inventory, place orders, calculate
transportation costs, and gain insight into product availability based on production schedules. For an
organization to succeed, every department or functional area must work together sharing common
information and not be a “silo.” Information technology can enable departments to more efficiently
and effectively perform their business operations.
Learning Outcome 1.3: Explain systems thinking and how management information
systems enable business communications.
A system is a collection of parts that link to achieve a common purpose. Systems thinking is a
way of monitoring the entire system by viewing multiple inputs being processed or transformed
to produce outputs while continuously gathering feedback on each part. Feedback is information
L E A R N I N G O U T C O M E R E V I E W
baL76892_ch01_001-041.indd 27baL76892_ch01_001-041.indd 27 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
28 Chapter 1 Management Information Systems: Business Driven MIS
that returns to its original transmitter (input, transform, or output) and modifies the transmitter’s
actions. Feedback helps the system maintain stability. Management information systems (MIS) is a
business function, like accounting and human resources, which moves information about people,
products, and processes across the company to facilitate decision making and problem solving.
MIS incorporates systems thinking to help companies operate cross-functionally. For example, to
fulfill product orders, an MIS for sales moves a single customer order across all functional areas
including sales, order fulfillment, shipping, billing, and finally customer service. Although different
functional areas handle different parts of the sale, thanks to MIS, to the customer the sale is one
continuous process.
Learning Outcome 1.4: Explain why competitive advantages are temporary.
A competitive advantage is a feature of a product or service on which customers place a greater value
than they do on similar offerings from competitors. Competitive advantages provide the same product
or service either at a lower price or with additional value that can fetch premium prices. Unfortunately,
competitive advantages are typically temporary, because competitors often quickly seek ways to
duplicate them. In turn, organizations must develop a strategy based on a new competitive advan-
tage. Ways that companies duplicate competitive advantages include acquiring the new technology,
copying business processes, and hiring away employees.
Learning Outcome 1.5: Describe Porter’s Five Forces Model and explain each of the five
forces.
Porter’s Five Forces Model analyzes the competitive forces within the environment in which a com-
pany operates, to assess the potential for profitability in an industry.
■ Buyer power is the ability of buyers to affect the price they must pay for an item.
■ Supplier power is the suppliers’ ability to influence the prices they charge for supplies (including
materials, labor, and services).
■ Threat of substitute products or services is high when there are many alternatives to a product or
service and low when there are few alternatives from which to choose.
■ Threat of new entrants is high when it is easy for new competitors to enter a market and low
when there are significant entry barriers to entering a market.
■ Rivalry among existing competitors is high when competition is fierce in a market and low when
competition is more complacent.
Learning Outcome 1.6: Compare Porter’s three generic strategies.
Organizations typically follow one of Porter’s three generic strategies when entering a new market:
(1) broad cost leadership, (2) broad differentiation, (3) focused strategy. Broad strategies reach a large
market segment. Focused strategies target a niche market. Focused strategies concentrate on either
cost leadership or differentiation.
Learning Outcome 1.7: Demonstrate how a company can add value by using Porter’s
value chain analysis.
To identify competitive advantages, Michael Porter created value chain analysis, which views a firm
as a series of business processes that each add value to the product or service. The goal of value
chain analysis is to identify processes in which the firm can add value for the customer and create
a competitive advantage for itself, with a cost advantage or product differentiation. The value chain
groups a firm’s activities into two categories—primary value activities and support value activities.
Primary value activities acquire raw materials and manufacture, deliver, market, sell, and provide
after-sales services. Support value activities, along the top of the value chain in the figure, include
firm infrastructure, human resource management, technology development, and procurement. Not
surprisingly, these support the primary value activities.
baL76892_ch01_001-041.indd 28baL76892_ch01_001-041.indd 28 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
29Business Driven MIS Module 1
1. Knowledge: Define Globalization 1.0, 2.0, and 3.0 and provide a sample of the type of business
data managers collected during each era.
2. Comprehension: Explain Friedman’s flat world and the reasons it is important for all businesses,
small or large, to understand.
3. Application: Demonstrate how students competing for jobs in a “flat world” can create competi-
tive advantages to differentiate themselves in the marketplace.
4. Analysis: Analyze the current business environment and identify a new flattener not mentioned
on Friedman’s list.
5. Synthesis: Propose a plan for how a start-up company can use any of Porter’s strategies to com-
bat competition in a global world.
6. Evaluate: Argue for or against the following statement: “The world is not flat (in Friedman’s sense
of the term) because many undeveloped countries are not connected electronically.”
O P E N I N G C A S E Q U E S T I O N S
Business intelligence (BI), 8
Business process, 23
Business strategy, 15
Buyer power, 18
Chief information officer
(CIO), 15
Chief knowledge officer
(CKO), 15
Chief privacy officer (CPO), 15
Chief security officer (CSO), 15
Chief technology officer (CTO), 15
Competitive advantage, 16
Competitive intelligence, 17
Data, 6
Entry barrier, 20
Fact, 5
Feedback, 14
First-mover advantage, 17
Goods, 12
Information, 7
Information age, 5
Knowledge, 10
Knowledge worker, 10
Loyalty program, 19
Management information systems
(MIS), 14
Porter’s Five Forces Model, 18
Primary value activities, 23
Production, 13
Productivity, 13
Product differentiation, 20
Rivalry among existing
competitors, 20
Services, 12
Supplier power, 19
Supply chain, 19
Support value activities, 24
Switching costs, 18
System, 12
Systems thinking, 14
Threat of new entrants, 20
Threat of substitute products or
services, 19
Value chain analysis, 23
Variable, 7
K E Y T E R M S
1. What is data and why is it important to a business?
2. How can a manager turn data into information?
3. What is the relationship between data, information, business intelligence, and knowledge?
4. Why is it important for a company to operate cross-functionally?
5. Why would a company want to have a CIO, CPO, and CSO?
6. Explain MIS and the role it plays in a company and global business.
7. Do you agree that MIS is essential for businesses operating in the information age? Why or why not?
8. Why is it important for a business major to understand MIS?
9. What type of career are you planning to pursue? How will your specific career use data, informa-
tion, business intelligence, and knowledge?
R E V I E W Q U E S T I O N S
baL76892_ch01_001-041.indd 29baL76892_ch01_001-041.indd 29 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
30 Chapter 1 Management Information Systems: Business Driven MIS
10. Explain systems thinking and how it supports business operations.
11. What business strategies would you use if you were developing a competitive advantage for a
company?
12. Explain Porter’s Five Forces Model and the role it plays in decision making.
13. How could a company use loyalty programs to influence buyer power? How could a company
use switching costs to lock in customers and suppliers?
14. What are Porter’s three generic strategies and why would a company want to follow only one?
15. How can a company use Porter’s value chain analysis to measure customer satisfaction?
C L O S I N G C A S E O N E
Apple—Merging Technology, Business,
and Entertainment
This might sound hard to believe, but a bit more than a decade ago, Apple was on the brink of
bankruptcy. Apple Computer Inc., now back from near oblivion, is blazing a trail through the digital
world with innovation and creativity that has been missing from the company for the past 20 years.
The unique feature of Apple’s competitive advantages is that they come from customers and users,
not Apple employees. That’s right; the company welcomes products created by consumers to sell to
consumers, a trend new to business.
Capitalizing on the iPod
With millions of iPods in the hands of consumers, many people are finding ways to capitalize on
the product. John Lin created a prototype of a remote control for the iPod and took his prototype to
Macworld, where he found success. A few months later, Lin’s company had Apple’s blessing and a
commitment for shelf space in its retail stores. “This is how Apple supports the iPod economy,” Lin
said.
In the iPod-dominated market, hundreds of companies have been inspired to develop more than
500 accessories—everything from rechargers for the car to $1,500 Fendi bags. Eric Tong, vice presi-
dent at Belkin, a cable and peripheral manufacturer, believes that 75 percent of all iPod owners pur-
chase at least one accessory—selling over 30 million accessories to date. With most of the products
priced between $10 and $200, that puts the iPod economy well over $300 million and perhaps as
high as $6 billion. Popular iPod accessories include:
■ Altec Lansing Technologies—iPod speakers and recharger dock ($150).
■ Belkin—TuneCast mobile FM transmitter ($40).
■ Etymotic Research—high-end earphones ($150).
■ Griffin Technology—iTrip FM transmitter ($35).
■ Kate Spade—Geneva faux-croc mini iPod holder ($55).
■ Apple—socks set in six colors: green, purple, blue, orange, pink, and gray ($29).
■ Apple—digital camera connector ($29).
Capitalizing on the iPhone
Looking at someone using an iPhone is an interesting experience because there is a good chance they
are not making a phone call. They could be doing a number of things from playing a game to trading
stocks, watching a TV show, or even conducting business with a mobile version of salesforce.com ’s
customer-management software. In a brilliant strategic move, Apple let outsiders offer software for
baL76892_ch01_001-041.indd 30baL76892_ch01_001-041.indd 30 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
31Business Driven MIS Module 1
the iPhone and in less than six months, more than 10,000 applications had been created. In fact, more
than 15,000 applications are available at its app store section of iTunes, and they have been down-
loaded a total of 500 million times. Now, many of the iPhone apps are available for the iPad.
The iPhone and iPad app store market is getting so huge relative to other smartphone markets
that some developers argue there is little point adapting applications for Google’s Android or any other
iPhone competitor. According to Jeff Holden, CEO of Pelago Inc., when he created his social networking
company he fully intended to follow the conventional wisdom for how to build a sizable, fast-growing
software company: Get your programs on as many platforms and devices as possible. But when he
crunched the numbers he came to an interesting business conclusion: The 13 million iPhone owners had
already downloaded more applications than the 1.1 billion other cell phone owners! To entrepreneurs,
developing a program for the iPhone automatically provides a significantly larger market—almost 94
times larger than its competitors. “Why would I ever build for anything but the iPhone?” Holden asked.
Capitalizing on the iPad
Apple’s latest release, the iPad, is a lightweight, portable, tablet computer, similar to the iPhone, that
allows customers to download applications, check email, and play music all at the touch of a button.
Both the iPhone and the iPad can multitask, allowing customers to read a web page while download-
ing email in the background over wireless networks. The arrival of the iPad brought a simultaneous
expansion of the network of accessories. Because the iPad was designed with an exposed screen and
without a camera, separate keyboard, memory card slots, or expansion ports, one might say it was
specifically built for accessories. Many owners will modify it in some way, whether for mere decora-
tion or hard-core protection. A few of the new accessories include:
■ iPad Clear Armor screen protector—$35.
■ iPad Antique book case cover—$40.
■ iPad wireless keyboard—$99.
■ iPad overcoat sleeve—$35.
■ iPad Joule luxury stand—$130.
Apple has consistently outperformed its key rivals through the development of its MP3 player, the
iPod, and continues to make its products smaller and less expensive, while providing complementary
features such as games and applications. For the iPhone, Apple developed a unique application called
Siri, a voice-activation system that is capable of recognizing voice commands. Siri can perform all
kinds of functions from dialing a contact and creating an email to location services such as “Find my
Phone,” ensuring lost phones are found quickly.
Apple’s latest offering is a new service called the iCloud. The iCloud has the ability to collect all
of the content, including videos, photos, songs, books, etc., from customer devices such as iPods,
iPads, and iPhones in one secure location in “the cloud.” Apple customers no longer have to worry
about backing up their applications or data because everything is automatically uploaded and stored
in the iCloud when using an Apple device. In a fast-paced, technology-driven sector, with com-
petitors quickly following suit, Apple is constantly pressured to develop new products and product
extensions. Luckily Apple stays ahead of the pack by focusing on the following key competitive
advantages:
■ Customer focus: Apple is driven by customer satisfaction and ensures customers are deeply
involved in product development and application development.
■ Resources and capabilities: Apple continues to invest heavily in research and development to
take advantage of new technologies, improved facilities, and cloud infrastructures.
■ Strategic vision: Apple has a clear alignment of its vision, mission, and business leadership and
goals.
■ Branding: Apple is the leader in brand loyalty as it has achieved cult status with its authentic
product image.
■ Quality focus: Apple has an outstanding commitment to quality.24
baL76892_ch01_001-041.indd 31baL76892_ch01_001-041.indd 31 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
32 Chapter 1 Management Information Systems: Business Driven MIS
Customer
Focus
Strategic
Vision
Resources
and
Capabilities
Branding Quality
Focus
Questions
1. Do you agree or disagree that Apple’s iTunes, iPhone apps, and iPad apps give the company a
competitive advantage? Be sure to justify your answer.
2. Why are data, information, business intelligence, and knowledge important to Apple? Give an
example of each type in relation to the iPad.
3. Analyze Apple using Porter’s Five Forces Model.
4. Which of the three generic strategies is Apple following?
5. Which of Porter’s five forces did Apple address through its introduction of the iPhone?
6. Which of Porter’s five forces did Apple address through its customer-developed applications?
Best of the Best of the Best—Under 25
Bloomberg Businessweek runs a yearly article featuring the top five American entrepreneurs under
25 years old. With between 200 and 300 applications each year, choosing 5 is difficult. To help ensure
fair competition, the magazine narrows it down to 25 and then asks its readers to decide which 5
have the greatest potential. Below are the top five winners from 2011.
1: SCOREASCORE
Founder: Jordan Passman, 24
Revenue: $250,000
Growing up in Los Angeles, Jordan Passman knew the ins and outs of the music business where his
father worked as a high-profile music attorney. Passman, wanting to follow in his father’s footsteps, was
working for the American Society of Composers when he noticed an unmet need in the marketplace–
music buyers in the film, commercial, and television market looking for music composers. An idea
was born and Passman began working on a website that connected music buyers with music
composers. “People were still scrounging Craigslist for composers, and I knew there were so many
composers out there that didn’t have representation,” says Passman. ScoreAscore links music buyers
who are looking for scores for film, commercials, video games, or other productions with 100 select
C L O S I N G C A S E T W O
baL76892_ch01_001-041.indd 32baL76892_ch01_001-041.indd 32 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
33Business Driven MIS Module 1
professional music composers represented by Passman, who charges 20 to 40 percent as a fee for
each transaction. Passman aspires to be the go-to for YouTube filmmakers!
2: THINKLITE
Founders: Dinesh Wadhwani, 21; Enrico Palmerino, 22
Revenue: $3,500,000
In 2009, Babson College students Dinesh Wadhwani and Enrico Palmerino were reading an article about
energy-efficient lightbulbs when their own lightbulbs went off! The roommates began collaborating on
how they could build a business with the primary competitive advantage of saving money with energy-
efficient lights, instead of focusing solely on saving the environment as most of the current manufac-
turers in the market were focusing on as their product niche. ThinkLite’s mission is to help companies
reduce electric bills through energy-efficient lighting. The pair began ThinkLite by licensing technolo-
gies from private companies in Germany, coupled with parts from Korea, and designs from Boston,
with final production occurring in China. Clients, such as AT&T and Kodak, boast lighting bill reductions
ranging from 50 percent to 80 percent, a significant savings for big business! ThinkLite now has over
100 clients and is looking to expand into smaller markets such as restaurants and stores.
3: DELTA PRODUCE
Founders: Kosta Dionisopoulos, 24; Christos Marafatsos, 24
Revenue: $2,600,000
The supply chain of food distribution is a tough business, and getting the right perishable goods
to the correct location at the perfect time is more an art form than analytics and logistics. Kosta
Dionisopoulos was driving a van delivering produce while attending the University of Maryland when
Christos Marafatsos saw an opportunity to start a unique produce delivery business. Delta Produce
not only delivers food, but also provides online marketing, allowing customers to reduce costs by buy-
ing in bulk or in groups. Delta Produce now has 18 employees and its customers include restaurants,
grocery stores, and wholesalers. “Both my partner and I are young, so interacting online is something
we’re accustomed to doing,” says Marafatsos.
4: APPLETON LEARNING
Founder: Glenn Clayton, 25
Revenue: $4,200,000
Glenn Clayton found himself looking for ways to earn extra money while attending the University of
Alabama, so he began tutoring local high school students. Clayton soon recognized a need in the mar-
ket and launched Appleton Learning, which matches college tutors with high school students. Clayton
began hiring friends to help meet the tutoring needs, and by the end of his sophomore year he was
spending over 60 hours each week managing Appleton Learning. “I realized if people were leaving
big name tutoring companies to come to some college kid working out of a broom closet, there was a
need in the market not being met,” Clayton says. Appleton Learning has found sales doubling yearly,
and Clayton has built a unique website that matches students with tutors based on their individual
learning needs and styles. Appleton Learning has over 1,000 tutors, including college students, profes-
sionals, and retirees, serving over 6,000 high school students. Appleton Learning is looking to expand
opening 20 new branches across the Southeast over the next few years.
5: DESMOS
Founder: Eli Luberoff, 24
Revenue: $200,000
While taking a year off from Yale, Eli Luberoff noticed a problem in the education arena—software
compatibility issues. Luberoff decided to create software that would overcome these issues and allow
teachers and students to collaborate regardless of the systems they were using or their location.
Luberoff launched his company, Desmos, by testing software from several large publishers, including
McGraw-Hill, Houghton Mifflin Harcourt, and Pearson just to name a few. Luberoff’s strategy for mak-
ing money is to provide the software for free while charging licensing fees to publishers. 25
baL76892_ch01_001-041.indd 33baL76892_ch01_001-041.indd 33 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
34 Chapter 1 Management Information Systems: Business Driven MIS
Questions
1. If you had $1 million to invest in one of the five above-mentioned start-ups, which one would
you choose and why? Be sure to justify your answer using Porter’s Five Forces Model and three
generic strategies analysis.
2. Choose one of the above businesses and explain why data, information, business intelligence, and
knowledge are important to successfully running the business over the next few years. Be sure to
list examples of the different types of data, information, business intelligence, and knowledge you
might find in this company.
3. Review Bloomberg Businessweek ’s most current top five under 25. Choose one of the companies
and perform a detailed analysis of the company using the strategies discussed in this chapter.
Determine a few ways the company can improve its business by creating competitive advantages
using the ideas and methods discussed throughout this chapter.
1. Focusing on Friedman
Thomas Friedman’s newest book is titled Hot, Flat, and Crowded: Why We Need a Green Revolution—
And How It Can Renew America. Research the Internet to find out as much information as you can
about this text. Why would a business manager be interested in reading this text? How will this text
impact global business? Do you think Hot, Flat, and Crowded will have as great an impact on society
as The World Is Flat had on business? Why or why not? 26
2. Pursuing Porter
There is no doubt that Michael Porter is one of the more influential business strategists of the 21st
century. Research Michael Porter on the Internet for interviews, additional articles, and new or
updated business strategies. Create a summary of your findings to share with your class. How can
learning about people such as Thomas Friedman and Michael Porter help prepare you for a career
in business? Name three additional business professionals you should follow to help prepare for
your career in business.
3. Renting Movies
The video rental industry is fiercely competitive. Customers have their choice of renting a movie by
driving to a store (Blockbuster), ordering through the mail (Netflix), or watching directly from their
television (pay-per-view or Netflix). Using Porter’s Five Forces Model (buyer power, supplier power,
threat of new entrants, threat of substitute products, and competition), evaluate the attractiveness
of entering the movie rental business. Be sure to include product differentiation, switching costs,
and loyalty programs in your analysis.
4. Working for the Best
Each year, Fortune magazine creates a list of the top 100 companies to work for. Find the most
recent list. What types of data do you think Fortune analyzed to determine the company ranking?
What issues could occur if the analysis of the data was inaccurate? What types of information
can you gain by analyzing the list? Create five questions a student performing a job search could
answer by analyzing this list.
5. Salary Surveys
Salary surveys offer great tools for highlighting the opportunities associated with an MIS major.
The starting annual salaries in the MIS field range from $50,000 to $85,000 and many are rising.
Figure 1.22 displays a Computerworld salary survey. Research the Internet for a current MIS salary
survey. Which types of jobs are on the rise? If there are any jobs you are unfamiliar with, research
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch01_001-041.indd 34baL76892_ch01_001-041.indd 34 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
35Business Driven MIS Module 1
the Internet to determine the job characteristics. List the top three jobs you would want if you were
to pursue a career in MIS. What do you find interesting about these jobs? What skills can you build
to help you prepare for these jobs? 27
6. Starting your own Business
Josh James recently sold his web analytics company, Omniture, to Adobe for $1.8 billion. Yes,
James started Omniture from his dorm room! Have you begun to recognize the unbelievable
opportunities available to those students who understand the power of MIS, regardless of their
major? Answer the following questions. 28
a. Why is it so easy today for students to create start-ups while still in college?
b. What would it take for you to start a business from your dorm room?
c. How will this course help you prepare to start your own business?
d. Research the Internet and find three examples of college student start-ups.
e. What’s stopping you from starting your own business today? You are living in the information
age and with the power of MIS, it is easier than ever to jump into the business game with
very little capital investment. Why not start your own business today?
7. The Five Forces Model at Work
Your team is working for a small investment company that specializes in technology invest-
ments. A new company, Geyser, has just released an operating system that plans to compete
with Microsoft’s operating systems. Your company has a significant amount of capital invested in
Microsoft. Your boss, Kellee Lazarus, has asked you to compile a Porter’s Five Forces analysis for
Microsoft to ensure that your company’s Microsoft investment is not at risk.
8. Competitive Analysis
Cheryl O’Connell is the owner of a small, high-end retailer of women’s clothing called Excelus.
Excelus’s business has been successful for many years, largely because of O’Connell’s ability to antic-
ipate the needs and wants of her loyal customer base and provide them with personalized service.
O’Connell does not see any value in IT and does not want to invest any capital in something that will
not directly affect her bottom line. Develop a proposal describing the potential IT-enabled competitive
opportunities or threats O’Connell might be missing by not embracing IT. Be sure to include a Porter’s
Five Forces analysis and discuss which one of the three generic strategies O’Connell should pursue.
Job Description Compensation
Business intelligence analyst $ 81,866
Communications specialist $ 85,938
Database architect $ 98,995
Ebusiness specialist $ 71,717
Information security specialist $ 83,693
IT / IS technology / business systems analyst $ 78,305
Network architect $ 96,302
Programmer / analyst $ 75,995
Project leader $ 87,922
Senior systems analyst $ 89,987
Software developer $ 85,684
Software engineer $ 93,726
Storage architect / engineer $111,077
Systems programmer $ 89,472
Web developer $ 66,347
FIGURE 1.22
Computerworld Salary Survey
baL76892_ch01_001-041.indd 35baL76892_ch01_001-041.indd 35 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
36 Chapter 1 Management Information Systems: Business Driven MIS
9. Applying the Three Generic Strategies
This chapter discussed several examples of companies that pursue differentiated strategies so
that they are not forced into positions where they must compete solely based on price. In a team,
choose an industry and find and compare two companies, one that is competing based on price
and another that is pursuing a differentiated strategy enabled by the creative use of IT. Some
industries you may want to consider are clothing retailers, grocery stores, airlines, and personal
computers. Prepare a presentation for the class on the ways that the company is using IT to help
it differentiate and compete against the low-cost provider. Before you begin, spend some class
time to make sure each team selects a different industry.
10. 10 Best Things You Will Say to Your Grandchildren
Wired magazine recently posted the top 10 things you will say to your grandchildren. For each
expression below try to identify what it is referring to and why it will be considered outdated. 29
1. Back in my day, we only needed 140 characters.
2. There used to be so much snow up here, you could strap a board to your feet and slide all
the way down.
3. Televised contests gave cash prizes to whoever could store the most data in their head.
4. Well, the screens were bigger, but they only showed the movies at certain times of day.
5. We all had one, but nobody actually used it. Come to think of it, I bet my LinkedIn profile is
still out there on the web somewhere.
6. Translation: “English used to be the dominant language. Crazy, huh?”
7. Our bodies were made of meat and supported by little sticks of calcium.
8. You used to keep files right on your computer, and you had to go back to that same computer
to access them!
9. Is that the new iPhone 27G? Got multitasking yet?
10. I just can’t get used to this darn vat-grown steak. Texture ain’t right.
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
You have recently inherited your grandfather’s business, which is conveniently located in your city’s
downtown. The business offers many different kinds of specialized products and services and was
first opened in 1952 and was a local hot spot for many years. Unfortunately, business has been
steadily declining over the past few years. The business runs without any computers and all order-
ing takes place manually. Your grandfather had a terrific memory and knew all of his customers and
suppliers by name, but unfortunately, none of this information is located anywhere in the store. The
operational information required to run the business, such as sales trends, vendor information, pro-
motional information, and so on, is all located in your grandfather’s memory. Inventory is tracked in a
notepad, along with employee payroll, and marketing coupons. The business does not have a website,
uses very little marketing except word of mouth, and essentially still operates the same as it did in
1952.
Throughout this course you will own and operate your grandfather’s business, and by taking
advantage of business practices discussed in this text, you will attempt to increase profits, decrease
expenses, and bring the business into the 21st century. For the purpose of this case, please choose
the business you wish to operate and create a name for the business. For example, the business could
be a coffee shop called The Broadway Café, an extreme sports store called Cutting Edge Sports, or
baL76892_ch01_001-041.indd 36baL76892_ch01_001-041.indd 36 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
37Business Driven MIS Module 1
even a movie store called The Silver Screen. Try to pick a business you are genuinely interested in
running and that aligns with your overall career goals.
Pro ject Focus: Compet i t ive Advantage
1. Identify the business you are going to build throughout this course and choose a name for your
business.
2. Write an analysis of buyer power and supplier power for your business using Porter’s Five Forces
Model. Be sure to discuss how you could combat the competition with strategies such as switch-
ing costs and loyalty programs.
3. Write an analysis of rivalry, entry barriers, and the threat of substitute products for your business
using Porter’s Five Forces Model. Be sure to discuss how you could combat the competition with
strategies such as product differentiation.
4. Describe which of Porter’s three generic strategies you would use for your business. Be sure to
describe the details of how you will implement this strategy and how it will help you create a
competitive advantage in your industry.
PROJECT I Capitalizing on Your Career
Business leaders need to be comfortable with management information systems (MIS) for the follow-
ing (primary) reasons:
■ The sheer magnitude of the dollars spent on MIS must be managed to ensure business value.
■ Research has consistently shown that when top managers are active in supporting MIS, they
realize a number of benefits, such as gaining a competitive advantage, streamlining business
processes, and even transforming entire industries.
■ When business leaders are not involved in MIS, systems fail, revenue is lost, and entire compa-
nies can even fail because of poorly managed systems.
How do companies get managers involved in MIS? One of the biggest positive factors is managers’
personal experience with MIS and MIS education, including university classes and executive semi-
nars. Once managers understand MIS through experience and education, they are more likely to lead
their companies in achieving business success through MIS.
1. Search the Internet for examples of the types of technologies currently used in the field or indus-
try that you plan to pursue. For example, if you are planning a career in accounting or finance,
you should become familiar with financial systems such as Oracle Financials. For a career in
logistics or distribution, research supply chain management systems. If marketing appeals
to you, research customer relationship management systems, blogs, emarketing, and social
networking.
2. As a competitive tool, MIS can differentiate products, services, and prices from competitors’
offerings by improving product quality, shortening product development or delivery time, creating
new MIS-based products and services, and improving customer service before, during, and after
a transaction. Search the Internet for examples of companies in the industry where you plan to
work that have achieved a competitive advantage through MIS.
3. Create a brief report of your findings; include an overview of the type of technologies you found
and how companies are using them to achieve a competitive advantage.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch01_001-041.indd 37baL76892_ch01_001-041.indd 37 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
38 Chapter 1 Management Information Systems: Business Driven MIS
PROJECT I I Achieving Alignment
Most companies would like to be in the market-leading position of JetBlue, Dell, or Walmart, all of
which have used management information systems to secure their respective spots in the market-
place. These companies are relentless about keeping the cost of technology down by combining the
best of MIS and business leadership.
The future belongs to those organizations perceptive enough to grasp the significance of MIS and
resourceful enough to coordinate their business and management information systems.
1. Use any resource to answer the question, “Why is it challenging for businesses to align MIS and
their other operations?” Use the following questions to begin your analysis:
a. How do companies monitor competitive intelligence and create competitive advantages?
b. What are some of the greatest MIS challenges for most firms?
c. What drives MIS decisions?
d. Who or what is the moving force behind MIS decisions for most companies?
PROJECT I I I Market Dissection
To illustrate the use of the three generic strategies, consider Figure 1.23 . The matrix shown demon-
strates the relationships among strategies (cost leadership versus differentiation) and market seg-
mentation (broad versus focused).
■ Hyundai is following a broad cost leadership strategy. It offers low-cost vehicles, in each particu-
lar model stratification, that appeal to a large audience.
■ Audi is pursuing a broad differentiation strategy with its Quattro models available at several price
points. Audi’s differentiation is safety, and it prices its models higher than Hyundai’s to reach a
large, stratified audience.
■ Kia has a more focused cost leadership strategy. Kia mainly offers low-cost vehicles in the lower
levels of model stratification.
■ Hummer offers the most focused differentiation strategy of any in the industry (including
Mercedes-Benz).
FIGURE 1.23
Porter’s Three Generic
Strategies
Broad market
Cost leadership strategy Differentiation strategy
Hyundai Audi
Focused market
Kia Hummer
baL76892_ch01_001-041.indd 38baL76892_ch01_001-041.indd 38 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
39Business Driven MIS Module 1
Create a similar graph displaying each strategy for a product of your choice. The strategy must
include an example of the product in each of the following markets: (1) cost leadership, broad market;
(2) differentiation, broad market; (3) cost leadership, focused market; and (4) differentiation, focused
market. Potential products include cereal, dog food, soft drinks, computers, shampoo, snack foods,
jeans, sneakers, sandals, mountain bikes, TV shows, movies.
PROJECT IV Porter’s Five Forces
Setting strategic direction for a business is a challenge for even seasoned professionals. The good
news is there are many tools available you can use to help you find competitive advantages, including
Porter’s Five Forces. Porter’s Five Forces Model analyzes the competitive forces within the environment
in which a company operates to assess the potential for profitability in an industry. Its purpose is to
combat these competitive forces by identifying opportunities, competitive advantages, and competitive
intelligence. If the forces are strong, they increase competition; if the forces are weak, they decrease
competition.
Porter’s Five Forces Model is a good framework for understanding market forces. Break into groups
and choose a comparison from the list below to perform a Porter’s Five Forces analysis.
■ Notebook computer and laptop computer.
■ PDA and laptop computer.
■ iPhone and cell phone.
■ iPod and CD player.
■ GPS device and a road atlas.
■ Digital books and printed books.
PROJECT V Adding Value
To identify these competitive advantages, Michael Porter created value chain analysis, which views
a firm as a series of business processes that each add value to the product or service. Value chain
analysis is a useful tool for determining how to create the greatest possible value for customers. The
goal of value chain analysis is to identify processes in which the firm can add value for the customer
and create a competitive advantage for itself, with a cost advantage or product differentiation.
Starbucks has hired you after your graduation for a temporary position that could turn into a full-
time opportunity. With new cafés and juice shops popping up on every corner, coupled with the global
recession, Starbucks is worried about losing market share to competitors. Your boss, Heather Sweitzer,
is out of ideas for ways to improve the company’s profitability. You decide that one of the most useful
tools for identifying competitive advantages is Porter’s value chain analysis. Of course, you do not yet
have the detailed knowledge to complete all of the elements required, but you know enough to get
started and plan to take your draft to Sweitzer next week. Using your knowledge of Starbucks, create a
value chain analysis. Feel free to make assumptions about operations; just be sure to list any that you
make. Also, be sure to write an overview of the tool and its potential value so Sweitzer can understand
how it works.
PROJECT VI Flat Competition
“When I was growing up in Minneapolis, my parents always said, ‘Tom, finish your dinner. There are
people starving in China and India.’ Today I tell my girls, ‘Finish your homework, because people in
China and India are starving for your jobs.’ And in a flat world, they can have them, because there’s no
such thing as an American job anymore.” Thomas Friedman.
In his book, The World Is Flat, Thomas Friedman describes the unplanned cascade of techno-
logical and social shifts that effectively leveled the economic world, and “accidentally made Beijing,
Bangalore, and Bethesda next-door neighbors.” The video of Thomas Friedman’s lecture at MIT
baL76892_ch01_001-041.indd 39baL76892_ch01_001-041.indd 39 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
40 Chapter 1 Management Information Systems: Business Driven MIS
discussing the flat world is available at http://mitworld.mit.edu/video/266 . If you want to be prepared
to compete in a flat world you must watch this video and answer the following questions:
■ Do you agree or disagree with Friedman’s assessment that the world is flat?
■ What are the potential impacts of a flat world for a student performing a job search?
■ What can students do to prepare themselves for competing in a flat world? 30
PROJECT VI I Wikiblunders
According to PC World these false facts all appeared on Wikipedia:
1. Robbie Williams eats domestic pets in pubs for money.
2. David Beckham was a Chinese goalkeeper in the 18th century.
3. Paul Reiser’s dead. (Reiser is an actor).
4. Sinbad’s dead. (Sinbad is an actor) .
5. Sergey Brin’s sexy, dating Jimmy Wales, and dead. (Brin founded Google and Wales founded
Wikipedia).
6. Tony Blair worships Hitler. (Blair was the former prime minister of the United Kingdom).
7. The Duchess of Cornwall’s Christian name is Cow-miller.
8. Robert Byrd’s dead. (Byrd is a U.S. senator from West Virginia).
9. John Seigenthaler helped assassinate John and Robert Kennedy. (Seigenthaler is a journalist).
10. Conan O’Brien assaults sea turtles while canoeing. 31
We know that people use information technology to work with information. Knowing this, how
could these types of errors occur? What could happen if you decided to use Wikipedia to collect busi-
ness intelligence for a research paper? What could Wikipedia do to help prevent these types of errors?
PROJECT VI I I What’s Wrong with This Bathroom?
If you were the CEO of a global financial company that was experiencing a financial crisis, would you
invest $1 million to renovate your office? Probably not and you are possibly wondering if this is a
fabricated story from The Onion. Guess what, this is a true story! John Thain, the former CEO of Merrill
Lynch, decided to spend $1.2 million refurbishing his office—well after Merrill Lynch posted huge
financial losses. Thain personally signed off on all of the following:
■ Area rug: $87,784
■ Mahogany pedestal table: $25,713
■ 19th century credenza: $68,179
■ Pendant light furniture: $19,751
■ 4 pairs of curtains: $28,091
■ Pair of guest chairs: $87,784
■ George IV chair: $18,468
■ 6 wall sconces: $2,741
■ Parchment waste can: $1,405 (yes, for a trash can!!)
■ Roman shade fabric: $10,967
■ Roman shades: $7,315
■ Coffee table: $5,852
■ Commode on legs: $35,115 32
It takes years of education and work experience for people to build the skills necessary to take
on the role of CEO. Obviously, a company like Merril Lynch would only hire a highly qualified person
for the job. What do you think happened to John Thain? Why would he spend an obscene amount
baL76892_ch01_001-041.indd 40baL76892_ch01_001-041.indd 40 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
41Business Driven MIS Module 1
of money redecorating his office when his company was having financial trouble? What happens
to a company whose executives are not aligned with company goals? How can you ensure that
your company’s executives are not making monumental mistakes, such as million dollar bathroom
renovations?
PROJECT IX I Love TED!
A small nonprofit started in 1984, TED (Technology, Entertainment, Design) hosts conferences for
Ideas Worth Spreading. TED brings people from all over the globe to share award-winning talks cover-
ing the most innovative, informative, and exciting speeches ever given in 20 minutes. You can find
TED talks by Al Gore, Bill Gates, Steve Jobs, Douglas Adams, Steven Levitt, Seth Godin, Malcolm
Gladwell, and so on. 33
Visit www.ted.com and peruse the thousands of videos that are available then answer the
following:
■ Review the TED website and find three talks you would want to watch. Why did you pick these
three and will you make time outside of class to watch them?
■ How can you gain a competitive advantage by watching TED?
■ How can you find innovative ideas for a start-up by watching TED?
■ How can you find competitive intelligence by watching TED?
Project
Number Project Name
Project
Type
Plug-In
Focus Area Project Level Skill Set
Page
Number
1 Financial
Destiny
Excel T2 Personal
Budget
Introductory
Formulas
AYK.4
2 Cash Flow Excel T2 Cash Flow Introductory
Formulas
AYK.4
3 Technology
Budget
Excel T1, T2 Hardware
and Software
Introductory
Formulas
AYK.4
4 Tracking
Donations
Excel T2 Employee
Relationships
Introductory
Formulas
AYK.4
5 Convert
Currency
Excel T2 Global
Commerce
Introductory
Formulas
AYK.5
6 Cost
Comparison
Excel T2 Total Cost of
Ownership
Introductory
Formulas
AYK.5
7 Time
Management
Excel or
Project
T12 Project
Management
Introductory Gantt Charts AYK.6
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
baL76892_ch01_001-041.indd 41baL76892_ch01_001-041.indd 41 26/11/12 1:45 PM26/11/12 1:45 PM

Rev. Confirming Pages
What’s in IT for me?
Working faster and smarter has become a necessity for companies. A firm’s value chain is directly affected by how well
it designs and coordinates its business processes. Business processes offer competitive advantages if they enable a firm
to lower operating costs, differentiate, or compete in a niche market. They can also be huge burdens if they are outdated,
which impedes operations, efficiency, and effectiveness. Thus, the ability of management information systems to improve
business processes is a key advantage.
The goal of Chapter 2 is to provide an overview of specific MIS tools managers can use to support the strategies
discussed in Chapter 1. After reading this chapter, you, the business student, should have detailed knowledge of the
types of information systems that exist to support decision making and business process reengineering, which in
turn can improve organization efficiency and effectiveness and help an organization create and maintain competitive
advantages.
■ M a k i n g B u s i n e s s D e c i s i o n s
■ M e t r i c s : M e a s u r i n g S u c c e s s
■ S u p p o r t : E n h a n c i n g D e c i s i o n
M a k i n g w i t h M I S
■ T h e F u t u re : A r t i f i c i a l
I n t e l l i g e n c e
SECTION 2.2
Business Processes
SECTION 2.1
Decision Support Systems
■ E v a l u a t i n g B u s i n e s s P ro c e s s e s
■ M o d e l s : M e a s u r i n g
P e r f o r m a n c e
■ S u p p o r t : E n h a n c i n g B u s i n e s s
P ro c e s s e s w i t h M I S
■ T h e F u t u re : B u s i n e s s P ro c e s s
M a n a g e m e n t
C H A P T E R
C
H
A
P
T
E
R
O
U
T
L
IN
E

Decisions and Processes:
Value Driven Business 2
baL76892_ch02_042-089.indd 42baL76892_ch02_042-089.indd 42 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
43Business Driven MIS Module 1
opening case study
Action Finally—Actionly
Data are all over the Internet! Tons and tons and tons of data! For example, over 152 million
blogs are created each year, along with 100 million Twitter accounts resulting in 25 billion
Tweets, 107 trillion emails are sent, and 730 billion hours of YouTube videos are watched.
Known as the social media sector, this arena is by far one of the fastest growing and
most influential sectors in business. Companies are struggling to understand how the social
media sector impacts it both financially and strategically.
Data are valuable to any company and the data on the Internet are unique because the
information comes directly from customers, suppliers, competitors, and even employees.
As the social media sector takes off, companies are finding themselves at a disadvantage
when attempting to keep up with all of the “online chatter” about their goods and services
on the many different social media websites, including Facebook, Twitter, MySpace, Flickr,
LinkedIn, Yelp, Google, blogs, etc.
Any time there is a problem there is a potential business solution, and Actionly.com
chooses to capitalize on the data glut problem. Actionly monitors multiple social media
channels through one tracking service looking for specific keywords for industries, brands,
companies, and trends. Actionly customers choose a keyword to monitor—such as a brand,
product names, industry terms, or competitors—and then Actionly constantly collects the
data from these social channels and pulls that data into a cohesive digital dashboard. The
digital dashboard tracks the desired information, such as marketplace trends, specific com-
panies, competitive brands, entire industries (for example, clean technology), by simulta-
neously searching Twitter, Facebook, Google, YouTube, Flickr, and blogs. After completing
a search, Actionly.com uses Google Analytics to create graphs and charts indicating how
frequently each keyword was found throughout the various channels. Additionally, it links
each respective channel to the dashboard and filters them with “positive” and “negative”
connections, allowing users to respond to any comments.
Actionly.com’s business model sets it up for success in this emerging industry. Actionly
has a first-mover advantage because it was the first online brand management company
offering this service to customers. And the company benefits by using its own services
to ensure its brand stays number one on all social media websites. Actionly uses Google
Analytics to help transform the data it collects from the various social media websites into
valuable business intelligence. Its digital dashboard monitors several key metrics, including:
■ Reputation Management: Actionly’s easy to use digital dashboard allows customers to
observe and analyze trends and track mentions about brands based on historical data
as well as continuously updated data. For example, a customer can view graphs that
highlight key trends across 30 days for specific brands, products, or companies.
baL76892_ch02_042-089.indd 43baL76892_ch02_042-089.indd 43 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
44 Chapter 2 Decisions and Processes: Value Driven Business
■ Social ROI: By connecting to Google Analytics from Actionly, a customer can analyze its
campaign performance for individual tweets or Facebook posts to determine which are
successful and which are failing. Actionly analyzes every post and click to track page
views, visitor information, goal completions, and so on, through its digital dashboard,
allowing users to customize reports tracking the performance of daily posts.
■ Twitter Analytics: After adding Twitter accounts to the dashboard, a user can drill down
into the data to view graphs of followers, mentions, and retweets. This eliminates the
need to manually track a number of Twitter accounts, and a user can view the data in
graphs or export the data in Excel for further analysis.
■ Marketing Campaign Tracking: If a company is launching a big promotion or contest,
it can post messages across multiple Facebook or Twitter accounts; all the user has to
do is select which Twitter or Facebook accounts it wants to use and when. Actionly’s
Campaign Tracking helps a user view which posts are resonating well with customers
and measure metrics such as page views, signups, conversions, and revenue by post.
Actionly even segments the data by post, account, campaign, or channel, allowing users
to measure performance over time.
■ Click Performance: Actionly tracks performance by hour and day of week, allowing
customers to view which clicks are getting the most attention. Actionly’s algorithm auto-
matically assigns a sentiment to tweets, allowing the customer to immediately filter
positive or negative or neutral posts to react to information quickly.
■ Sentiment Analysis: Reviewing positive and negative feedback helps gauge how a
brand is doing over time, allowing the client to try to increase the positive sentiment.
However, no sentiment scoring is 100 percent accurate due to the complexities of inter-
pretation, culture, sarcasm, and other language nuances. For example, if Actionly is
incorrectly tracking a metric, it can change it, allowing users to assign their unique senti-
ments directly to their tweets. A user can also select to have positive or negative alerts
for keywords emailed as soon as the keyword is posted to help manage online brand
and company reputations.
■ Competitive Analysis: Actionly tracks competitor intelligence by watching new-product
releases, acquisitions, or customer feedback, allowing a company to stay on top of mar-
ket entrants, market-related blogs, news, or industry-related seminars/webinars.
■ Find Influencers: Actionly’s digital dashboard allows a user to engage directly with
key influencers or people who are driving the online chatter about goods and services.
Actionly identifies influencers and determines their relevance to the company, brand, or
product. It then compiles a list of influencers based on users with the most followers and
who have been most active for the specific searches in the past 30 days. 1
baL76892_ch02_042-089.indd 44baL76892_ch02_042-089.indd 44 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
45Business Driven MIS Module 1
1. Managers need to analyze large amounts of information:
Innovations in communication and globalization have resulted in a
dramatic increase in the variables and dimensions people need to consider
when making a decision, solving a problem, or appraising an opportunity.
2. Managers must make decisions quickly:
Time is of the essence and people simply do not have time to sift through
all the information manually.
3. Managers must apply sophisticated analysis techniques, such as
Porter’s strategies or forecasting, to make strategic decisions:
Due to the intensely competitive global business environment, companies
must offer far more than just a great product to succeed.
MANAGERIAL
DECISION-MAKING
CHALLENGES
section 2.1 Decision Support Systems
L E A R N I N G O U T C O M E S
2.1 Explain the importance of decision making for managers at each of the three primary organization
levels along with the associated decision characteristics.
2.2 Define critical success factors (CSFs) and key performance indicators (KPIs), and explain how
managers use them to measure the success of MIS projects.
2.3 Classify the different operational support systems, managerial support systems, and strategic
support systems, and explain how managers can use these systems to make decisions and gain
competitive advantages.
2.4 Describe artificial intelligence, and identify its five main types.
MAKING BUSINESS DECISIONS
Porter’s strategies outlined in Chapter 1 suggest entering markets with a competitive
advantage in either overall cost leadership, differentiation, or focus. To achieve these
results, managers must be able to make decisions and forecast future business needs and
requirements. The most important and most challenging question confronting manag-
ers today is how to lay the foundation for tomorrow’s success while competing to win
in today’s business environment. A company will not have a future if it is not cultivat-
ing strategies for tomorrow. The goal of this section is to expand on Porter’s Five Forces
Model, three generic strategies, and value chain analysis to demonstrate how managers
can learn the concepts and practices of business decision making to add value. It will also
highlight how companies heading into the 21st century are taking advantage of advanced
MIS capable of generating significant competitive advantages across the value chain.
As we discussed in Chapter 1, decision making is one of the most important and
challenging aspects of management. Decisions range from routine choices, such as
how many items to order or how many people to hire, to unexpected ones such as what
to do if a key employee suddenly quits or needed materials do not arrive. Today, with
massive volumes of information available, managers are challenged to make highly
complex decisions—some involving far more information than the human brain can
comprehend—in increasingly shorter time frames. Figure  2.1 displays the three pri-
mary challenges managers face when making decisions.
LO. 2.1: Explain the importance of
decision making for managers at
each of the three primary organiza-
tion levels along with the associated
decision characteristics.
FIGURE 2.1
Managerial Decision-Making
Challenges
baL76892_ch02_042-089.indd 45baL76892_ch02_042-089.indd 45 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
46 Chapter 2 Decisions and Processes: Value Driven Business
The Decision-Making Process
The process of making decisions plays a crucial role in communication and leadership
for operational, managerial, and strategic projects. Analytics is the science of fact-based
decision making. There are numerous academic decision-making models; Figure  2.2
presents just one example. 2
Decision-Making Essentials
A few key concepts about organizational structure will help our discussion of MIS deci-
sion-making tools. The structure of a typical organization is similar to a pyramid, and
the different levels require different types of information to assist in decision making,
problem solving, and opportunity capturing (see Figure 2.3 ).
Operational At the operational level , employees develop, control, and maintain
core business activities required to run the day-to-day operations. Operational decisions
are considered structured decisions , which arise in situations where established pro-
cesses offer potential solutions. Structured decisions are made frequently and are almost
repetitive in nature; they affect short-term business strategies. Reordering inventory and
creating the employee staffing and weekly production schedules are examples of rou-
tine structured decisions. Figure 2.4 highlights the essential elements required for opera-
tional decision making. All the elements in the figure should be familiar, except metrics
which are discussed in detail below.
Managerial At the managerial level , employees are continuously evaluating com-
pany operations to hone the firm’s abilities to identify, adapt to, and leverage change.
A company that has a competitive advantage needs to constantly adjust and revise its
strategy to remain ahead of fast-following competitors. Managerial decisions cover
FIGURE 2.2
The Six-Step Decision-Making
Process
DECISION-MAKING
PROCESS
Problem Identification: Define the problem as clearly and precisely
as possible.
Data Collection: Gather problem-related data, including who, what,
where, when, why, and how. Be sure to gather facts, not rumors or
opinions about the problem.
Solution Generation: Detail every solution possible, including ideas
that seem farfetched.
Solution Test: Evaluate solutions in terms of feasibility (can it be
completed?), suitability (is it a permanent or a temporary fix?), and
acceptability (can all participants form a consensus?).
Solution Selection: Select the solution that best solves the problem
and meets the needs of the business.
Solution Implementation: If the solution solves the problem, then
the decisions made were correct. If not, then the decisions were
incorrect and the process begins again.
1
2
3
4
5
6
baL76892_ch02_042-089.indd 46baL76892_ch02_042-089.indd 46 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
47Business Driven MIS Module 1
FIGURE 2.3
Common Company Structure
STRATEGIC
MANAGERIAL
OPERATIONAL
FIGURE 2.4
Overview of Operational
Decision Making
STRATEGIC
MANAGERIAL
OPERATIONAL
Employee Types: Lower management, department managers, analysts,
staff
Focus: Internal, functional
Time Frame: Short term, day-to-day operations
Decision Types: Structured, recurring, repetitive
MIS Type: Information
Metrics: Key performance indicators focusing on efficiency
Examples:
• How many employees are out sick?
• What are next week’s production requirements?
• How much inventory is in the warehouse?
• How many problems occurred when running payroll?
• Which employees are on vacation next week?
• How many products need to be made today?
baL76892_ch02_042-089.indd 47baL76892_ch02_042-089.indd 47 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
48 Chapter 2 Decisions and Processes: Value Driven Business
short- and medium-range plans, schedules, and budgets along with policies, proce-
dures, and business objectives for the firm. They also allocate resources and monitor
the performance of organizational subunits, including departments, divisions, process
teams, project teams, and other work groups. These types of decisions are considered
semistructured decisions; they occur in situations in which a few established processes
help to evaluate potential solutions, but not enough to lead to a definite recommended
decision. For example, decisions about producing new products or changing employee
benefits range from unstructured to semistructured. Figure 2.5 highlights the essential
elements required for managerial decision making.
Strategic At the strategic level , managers develop overall business strategies, goals,
and objectives as part of the company’s strategic plan. They also monitor the strategic per-
formance of the organization and its overall direction in the political, economic, and com-
petitive business environment. Strategic decisions are highly unstructured decisions ,
occurring in situations in which no procedures or rules exist to guide decision makers
toward the correct choice. They are infrequent, extremely important, and typically related
to long-term business strategy. Examples include the decision to enter a new market or
even a new industry over, say, the next three years. In these types of decisions, managers
rely on many sources of information, along with personal knowledge, to find solutions.
Figure 2.6 highlights the essential elements required for strategic decision making.
METRICS: MEASURING SUCCESS
A project is a temporary activity a company undertakes to create a unique product,
service, or result. For example, the construction of a new subway station is a project,
as is a movie theater chain’s adoption of a software program to allow online ticketing.
Peter Drucker, a famous management writer, once said that if you cannot measure
LO 2.2: Define critical success
factors (CSFs) and key performance
indicators (KPIs), and explain how
managers use them to measure the
success of MIS projects.
FIGURE 2.5
Overview of Managerial
Decision Making
STRATEGIC
Employee Types: Middle management, managers, directors
Focus: Internal, cross-functional, (sometimes external)
Time Frame: Short term, daily, monthly, yearly
Decision Types: Semistructured, ad hoc (unplanned) reporting
MIS Requirement: Business intelligence
Metrics: Key performance indicators focusing on efficiency, and critical
success factors focusing on effectiveness
Examples:
• Who are our best customers by region, by sales representative, by product?
• What are the sales forecasts for next month? How do they compare to
actual sales for last year?
• What was the difference between expected sales and actual sales for
each month?
• What was the impact of last month’s marketing campaign on sales?
• What types of ad hoc or unplanned reports might the company require
next month?
OPERATIONAL
MANAGERIAL
baL76892_ch02_042-089.indd 48baL76892_ch02_042-089.indd 48 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
49Business Driven MIS Module 1
FIGURE 2.6
Overview of Strategic
Decision Making
Employee Types: Senior management, presidents, leaders, executives
Focus: External, industry, cross company
Time Frame: Long term—yearly, multi-year
Decision Types: Unstructured, nonrecurring, one time
MIS Requirement: Knowledge
Metrics: Critical success factors focusing on effectiveness
Examples:
• How will changes in employment levels over the next 3 years impact the company?
• What industry trends are worth analyzing?
• What new products and new markets does the company need to create competitive
advantages?
• How will a recession over the next years impact business?
• What measures will the company need to prepare for due to new tax laws?
MANAGERIAL
OPERATIONAL
STRATEGIC
something, you cannot manage it. How do managers measure the progress of a com-
plex business project?
Metrics are measurements that evaluate results to determine whether a project is
meeting its goals. Two core metrics are critical success factors and key performance
indicators. Critical success factors (CSFs) are the crucial steps companies perform to
achieve their goals and objectives and implement their strategies (see Figure 2.7 ). Key
performance indicators (KPIs) are the quantifiable metrics a company uses to evaluate
progress toward critical success factors. KPIs are far more specific than CSFs.
It is important to understand the relationship between critical success factors and
key performance indicators. CSFs are elements crucial for a business strategy’s success.
KPIs measure the progress of CSFs with quantifiable measurements, and one CSF can
have several KPIs. Of course, both categories will vary by company and industry. Imag-
ine improve graduation rates as a CSF for a college. The KPIs to measure this CSF can
include:
■ Average grades by course and gender.
■ Student dropout rates by gender and major.
■ Average graduation rate by gender and major.
■ Time spent in tutoring by gender and major.
KPIs can focus on external and internal measurements. A common external KPI is
market share , or the proportion of the market that a firm captures. We calculate it by
dividing the firm’s sales by the total market sales for the entire industry. Market share
measures a firm’s external performance relative to that of its competitors. For example, if
a firm’s total sales (revenues) are $2 million and sales for the entire industry are $10 mil-
lion, the firm has captured 20 percent of the total market (2/10  5  20%) or a 20 percent
market share.
baL76892_ch02_042-089.indd 49baL76892_ch02_042-089.indd 49 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
50 Chapter 2 Decisions and Processes: Value Driven Business
A common internal KPI is return on investment (ROI) , which indicates the earning
power of a project. We measure it by dividing the profitability of a project by the costs.
This sounds easy, and for many departments where the projects are tangible and self-
contained it is; however, for projects that are intangible and cross departmental lines
(such as MIS projects), ROI is challenging to measure. Imagine attempting to calculate
the ROI of a fire extinguisher. If the fire extinguisher is never used, its ROI is low. If the
fire extinguisher puts out a fire that could have destroyed the entire building, its ROI is
astronomically high.
Creating KPIs to measure the success of an MIS project offers similar challenges.
Think about a firm’s email system. How could managers track departmental costs and
profits associated with company email? Measuring by volume does not account for
profitability, because one sales email could land a million-dollar deal while 300 others
might not generate any revenue. Non-revenue-generating departments such as human
resources and legal require email but will not be using it to generate profits. For this rea-
son, many managers turn to higher-level metrics, such as efficiency and effectiveness,
to measure MIS projects. Best practices are the most successful solutions or problem-
solving methods that have been developed by a specific organization or industry. Mea-
suring MIS projects helps determine the best practices for an industry.
Efficiency and Effectiveness Metrics
Efficiency MIS metrics measure the performance of MIS itself, such as throughput, trans-
action speed, and system availability. Effectiveness MIS metrics measure the impact MIS
has on business processes and activities, including customer satisfaction and customer
conversion rates. Efficiency focuses on the extent to which a firm is using its resources
in an optimal way, while effectiveness focuses on how well a firm is achieving its goals
and objectives. Peter Drucker offers a helpful distinction between efficiency and effec-
tiveness: Doing things right addresses efficiency—getting the most from each resource.
FIGURE 2.7
CSF and KPI Metrics
Crucial steps companies
perform to achieve their
goals and objectives and
implement their strategies
• Create high-quality
products
• Retain competitive
advantages
• Reduce product costs
• Increase customer
satisfaction
• Hire and retain the best
business professionals
Critical
Success
Factors
Quantifiable metrics a
company uses to evaluate
progress toward critical
success factors
• Turnover rates of
employees
• Percentage of help desk
calls answered in the first
minute
• Number of product
returns
• Number of new
customers
• Average customer
spending
Key
Performance
Indicators
baL76892_ch02_042-089.indd 50baL76892_ch02_042-089.indd 50 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
51Business Driven MIS Module 1
Doing the right things addresses effectiveness—setting the right goals and objectives and
ensuring they are accomplished. Figure 2.8 describes a few of the common types of effi-
ciency and effectiveness MIS metrics. KPIs that measure MIS projects include both effi-
ciency and effectiveness metrics. Of course, these metrics are not as concrete as market
share or ROI, but they do offer valuable insight into project performance. 4
Large increases in productivity typically result from increases in effectiveness, which
focus on CSFs. Efficiency MIS metrics are far easier to measure, however, so most manag-
ers tend to focus on them, often incorrectly, to measure the success of MIS projects. Con-
sider measuring the success of automated teller machines (ATMs). Thinking in terms
of MIS efficiency metrics, a manager would measure the number of daily transactions,
the average amount per transaction, and the average speed per transaction to determine
the success of the ATM. Although these offer solid metrics on how well the system is
performing, they miss many of the intangible or value-added benefits associated with
ATM effectiveness. Effectiveness MIS metrics might measure how many new customers
joined the bank due to its ATM locations or the ATMs’ ease of use. They can also measure
increases in customer satisfaction due to reduced ATM fees or additional ATM services
such as the sale of stamps and movie tickets, significant time savers and value-added
features for customers. Being a great manager means taking the added viewpoint offered
by effectiveness MIS metrics to analyze all benefits associated with an MIS project.
The Interrelationship Between Efficiency
and Effectiveness MIS Metrics
Efficiency and effectiveness are definitely related. However, success in one area does
not necessarily imply success in the other. Efficiency MIS metrics focus on the tech-
nology itself. While these efficiency MIS metrics are important to monitor, they do not
always guarantee effectiveness. Effectiveness MIS metrics are determined according
BUSINESS DRIVEN DISCUSSION
How do people make decisions? Almost daily you can read about someone
who makes a decision most people would find mind-boggling. Here are a few
examples:
■ A woman in Ohio was charged with child endangerment after police said
she admitted to breast-feeding her child and talking on a cell phone while
driving her other children to school.
■ A woman in South Florida was caught driving while talking on a cell phone
on her left shoulder and eating from a cup of soup in her left hand. The
woman would take her right hand off the wheel to spoon soup, driving with
no hands while she continued to talk on the phone.
■ A man in California was cited for driving while carrying a swimming pool.
He drove with one hand while he held his new swimming pool on the roof
of his car with the other. His three children were leaning out of the car win-
dows, not wearing seat belts, to help hold onto the pool.
■ A woman in Baltimore was charged with diapering her child in the front
seat of the car while driving at 65 miles per hour down the highway. 3
Find an example of a company that found itself in trouble because its
employees made bad decisions. What could the company have done to protect
itself from these types of employee blunders?
Driving
Decisions
APPLY YOUR KNOWLEDGE
baL76892_ch02_042-089.indd 51baL76892_ch02_042-089.indd 51 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
52 Chapter 2 Decisions and Processes: Value Driven Business
to an organization’s goals, strategies, and objectives. Here, it becomes important to
consider a company’s CSFs, such as a broad cost leadership strategy (Walmart, for
example), as well as KPIs such as increasing new customers by 10 percent or reduc-
ing new-product development cycle times to six months. In the private sector, eBay
continuously benchmarks its MIS projects for efficiency and effectiveness. Maintaining
constant website availability and optimal throughput performance are CSFs for eBay.
Figure 2.9 depicts the interrelationships between efficiency and effectiveness. Ideally,
a firm wants to operate in the upper right-hand corner of the graph, realizing both signif-
icant increases in efficiency and effectiveness. However, operating in the upper left-hand
corner (minimal effectiveness with increased efficiency) or the lower right-hand corner
(significant effectiveness with minimal efficiency) may be in line with an organization’s
particular strategies. In general, operating in the lower left-hand corner (minimal effi-
ciency and minimal effectiveness) is not ideal for the operation of any organization.
Benchmarks Regardless of what process is measured, how it is measured, and
whether it is performed for the sake of efficiency or effectiveness, managers must set
benchmarks , or baseline values the system seeks to attain. Benchmarking is a process
of continuously measuring system results, comparing those results to optimal system
FIGURE 2.8
Common Types of Efficiency
and Effectiveness Metrics
Throughput—The amount of information
that can travel through a system at any
point in time.
Efficiency Metrics EffectivenessMetrics
Usability—The ease with which people perform
transactions and/or find information.
Customer satisfaction—Measured by
satisfaction surveys, percentage of existing
customers retained, and increases in revenue
dollars per customer.
Conversion rates—The number of customers
an organization “touches” for the first time and
persuades to purchase its products or services.
This is a popular metric for evaluating the
effectiveness of banner, pop-up, and pop-under
ads on the Internet.
Financial—Such as return on investment (the
earning power of an organization’s assets), cost-
benefit analysis (the comparison of projected
revenues and costs including development,
maintenance, fixed, and variable), and break-
even analysis (the point at which constant
revenues equal ongoing costs).
Transaction speed—The amount of time
a system takes to perform a transaction.
System availability—The number of
hours a system is available for users.
Information accuracy—The extent to
which a system generates the correct
results when executing the same
transaction numerous times.
Response time—The time it takes to
respond to user interactions such as a
mouse click.
baL76892_ch02_042-089.indd 52baL76892_ch02_042-089.indd 52 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
53Business Driven MIS Module 1
performance (benchmark values), and identifying steps and procedures to improve sys-
tem performance. Benchmarks help assess how an MIS project performs over time. For
instance, if a system held a benchmark for response time of 15 seconds, the manager
would want to ensure response time continued to decrease until it reached that point. If
response time suddenly increased to 1 minute, the manager would know the system was
not functioning correctly and could start looking into potential problems. Continuously
measuring MIS projects against benchmarks provides feedback so managers can control
the system.
SUPPORT: ENHANCING DECISION MAKING WITH MIS
Now that we’ve reviewed the essentials of decision making, we are ready to under-
stand the powerful benefits associated with using MIS to support managers making
decisions.
LO 2.3: Classify the different opera-
tional support systems, managerial
support systems, and strategic support
systems, and explain how managers
can use these systems to make deci-
sions and gain competitive advantages.
FIGURE 2.9
The Interrelationships Between
Efficiency and Effectiveness
High
Ef
fic
ie
nc
y
Low
Low HighEffectiveness
Optimal area
in which to
operate
BUSINESS DRIVEN GLOBALIZATION
It is late at night and you are working on your final exam when your computer
crashes. As your blood pressure climbs and your stress level skyrockets, you call
your computer manufacturer’s technical support number. Of course that per-
son tells you the problem has nothing to do with the computer and must have a
different source. What are you going to do?
iYogi.net is a 24/7 online support service that allows technicians to take
remote control of your computer from Gurgaon, India, and try to fix what ails it.
iYogi provides technical support for all Walmart computer customers and sells
its services through Walmart.com and Amazon.com. If the thought of turning
control over to someone you never met half a world away fills you with terror,
it shouldn’t. All iYogi technicians are Microsoft, Cisco, and Hewlett-Packard
certified. 5
Describe the types of decisions iYogi technicians are required to make when
helping a customer with a computer problem. What would potential CSFs and
KPIs for iYogi be? What types of metrics would managers track so they could
control operations?
iYogi Help
Desk Support
APPLY YOUR KNOWLEDGE
baL76892_ch02_042-089.indd 53baL76892_ch02_042-089.indd 53 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
54 Chapter 2 Decisions and Processes: Value Driven Business
A model is a simplified representation or abstraction of reality. Models help man-
agers calculate risks, understand uncertainty, change variables, and manipulate
time to make decisions. MIS support systems rely on models for computational and
analytical routines that mathematically express relationships among variables. For
example, a spreadsheet program, such as Microsoft Office Excel, might contain mod-
els that calculate market share or ROI. MIS have the capability and functionality to
express far more complex modeling relationships that provide information, business
intelligence, and knowledge. Figure 2.10 highlights the three primary types of man-
agement information systems available to support decision making across the com-
pany levels.
Operational Support Systems
Transactional information encompasses all the information contained within a sin-
gle business process or unit of work, and its primary purpose is to support the perfor-
mance of daily operational or structured decisions. Transactional information is created,
for example, when customers are purchasing stocks, making an airline reservation, or
withdrawing cash from an ATM. Managers use transactional information when making
structured decisions at the operational level, such as when analyzing daily sales reports
to determine how much inventory to carry.
Online transaction processing (OLTP) is the capture of transaction and event infor-
mation using technology to (1) process the information according to defined business
rules, (2) store the information, and (3) update existing information to reflect the new
information. During OLTP, the organization must capture every detail of transactions
and events. A transaction processing system (TPS) is the basic business system that
serves the operational level (analysts) and assists in making structured decisions. The
most common example of a TPS is an operational accounting system such as a payroll
system or an order-entry system.
FIGURE 2.10
Primary Types of MIS Systems
for Decision Making
Operational Managerial Strategic
Unstructured
Semistructured
Structured
Transaction
Processing
System
Decision
Support
Systems
Executive
Information
Systems
baL76892_ch02_042-089.indd 54baL76892_ch02_042-089.indd 54 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
55Business Driven MIS Module 1
Using systems thinking, we can see that the inputs for a TPS are source documents ,
the original transaction record. Source documents for a payroll system can include time
sheets, wage rates, and employee benefit reports. Transformation includes common
procedures such as creating, reading, updating, and deleting (commonly referred to as
CRUD) employee records, along with calculating the payroll and summarizing benefits.
The output includes cutting the paychecks and generating payroll reports. Figure 2.11
demonstrates the systems thinking view of a TPS. 6
Managerial Support Systems
Analytical information encompasses all organizational information, and its primary
purpose is to support the performance of managerial analysis or semistructured deci-
sions. Analytical information includes transactional information along with other
information such as market and industry information. Examples of analytical infor-
mation are trends, sales, product statistics, and future growth projections. Managers
use analytical information when making important semistructured decisions, such as
whether the organization should build a new manufacturing plant or hire additional
sales reps.
Online analytical processing (OLAP) is the manipulation of information to cre-
ate business intelligence in support of strategic decision making. Decision support
systems (DSSs) model information using OLAP, which provides assistance in evalu-
ating and choosing among different courses of action. DSSs enable high-level man-
agers to examine and manipulate large amounts of detailed data from different
internal and external sources. Analyzing complex relationships among thousands or
even millions of data items to discover patterns, trends, and exception conditions
is one of the key uses associated with a DSS. For example, doctors may enter symp-
toms into a decision support system so it can help diagnose and treat patients. Insur-
ance companies also use a DSS to gauge the risk of providing insurance to drivers
who have imperfect driving records. One company found that married women who
are homeowners with one speeding ticket are rarely cited for speeding again. Armed
with this business intelligence, the company achieved a cost advantage by lowering
insurance rates to this specific group of customers. The following are common DSS
analysis techniques.
What-If Analysis What-if analysis checks the impact of a change in a variable or
assumption on the model. For example, “What will happen to the supply chain if a hur-
ricane in South Carolina reduces holding inventory from 30 percent to 10 percent?” A
user would be able to observe and evaluate any changes that occurred to the values in
FIGURE 2.11
Systems Thinking Example
of a TPS
Input Process Output
• CRUD
• Calculate
• Summarize
• Reports• Source Documents
Feedback
baL76892_ch02_042-089.indd 55baL76892_ch02_042-089.indd 55 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
56 Chapter 2 Decisions and Processes: Value Driven Business
the model, especially to a variable such as profits. Users repeat this analysis with differ-
ent variables until they understand all the effects of various situations.
Sensitivity Analysis Sensitivity analysis , a special case of what-if analysis, is the
study of the impact on other variables when one variable is changed repeatedly. Sensitiv-
ity analysis is useful when users are uncertain about the assumptions made in estimat-
ing the value of certain key variables. For example, repeatedly changing revenue in small
increments to determine its effects on other variables would help a manager understand
the impact of various revenue levels on other decision factors.
Goal-Seeking Analysis Goal-seeking analysis finds the inputs necessary to
achieve a goal such as a desired level of output. It is the reverse of what-if and sensitiv-
ity analysis. Instead of observing how changes in a variable affect other variables, goal-
seeking analysis sets a target value (a goal) for a variable and then repeatedly changes
other variables until the target value is achieved. For example, goal-seeking analysis
could determine how many customers must purchase a new product to increase gross
profits to $5 million.
Optimization Analysis Optimization analysis , an extension of goal-seeking analy-
sis, finds the optimum value for a target variable by repeatedly changing other variables,
subject to specified constraints. By changing revenue and cost variables in an optimiza-
tion analysis, managers can calculate the highest potential profits. Constraints on rev-
enue and cost variables can be taken into consideration, such as limits on the amount of
raw materials the company can afford to purchase and limits on employees available to
meet production needs.
Figure 2.12 shows the common systems view of a DSS. Figure 2.13 shows how TPSs
supply transactional data to a DSS. The DSS then summarizes and aggregates the
information from the different TPSs, which assist managers in making semistructured
decision.
Strategic Support Systems
Decision making at the strategic level requires both business intelligence and knowl-
edge to support the uncertainty and complexity associated with business strategies. An
executive information system (EIS) is a specialized DSS that supports senior-level exec-
utives and unstructured, long-term, nonroutine decisions requiring judgment, evalua-
tion, and insight. These decisions do not have a right or wrong answer, only efficient and
FIGURE 2.12
Systems Thinking Example
of a DSS
Input Process Output
Feedback
• What-if
• Sensitivity
• Goal seeking
• Optimization
• Forecasts
• Simulations
• Ad hoc reports
• TPS
baL76892_ch02_042-089.indd 56baL76892_ch02_042-089.indd 56 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
57Business Driven MIS Module 1
FIGURE 2.13
Interaction Between
TPS and DSS to Support
Semistructured Decisions
Transaction Processing
Systems Decision Support Systems
Order
Entry Order Processing System
Inventory Tracking System
Distribution System
Decision Support System
Inventory
Data
Shipping
Data
Sales
Data
Manufacturing
Data
Transportation
Data
Managerial
Reports
BUSINESS DRIVEN ETHICS AND SECURITY
What if the person sitting in the cubicle next to you was running a scam that
cost your company $7 billion? An employee at a French bank allegedly used
his inside knowledge of business processes to bypass the system and place
roughly $73 billion in bogus trades that cost the bank more than $7 billion to
unwind.
Findings from the U.S. Secret Service’s examination of 23 incidents con-
ducted by 26 insiders determined that 70 percent of the time, insiders took
advantage of failures in business process rules and authorization mechanisms
to steal from their company. These insiders were authorized and active com-
puter users 78 percent of the time, and a surprising 43 percent used their own
user name and passwords to commit their crimes. 7
This is a daunting reminder that every employee has the potential to become
a knowledgeable insider and, if started on a criminal path, to do tremendous
damage to your company. Many DSSs and EISs contain the business intelli-
gence your company needs to operate effectively, and you need to protect these
assets. What types of sensitive information is housed in a company’s TPS, DSS,
and EIS? What problems could you encounter if one of your employees decided
to steal the information housed in your DSS? How could you protect your EIS
from unethical users? What would you do if you thought the person sharing
your cube was a rogue insider?
The Criminal in
the Cube Next
Door
APPLY YOUR KNOWLEDGE
effective answers. Moving up through the organizational pyramid, managers deal less
with the details (“finer” information) and more with meaningful aggregations of infor-
mation (“coarser” information). Granularity refers to the level of detail in the model or
the decision-making process. The greater the granularity, the deeper the level of detail or
fineness of data (see Figure 2.14 ).
baL76892_ch02_042-089.indd 57baL76892_ch02_042-089.indd 57 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
58 Chapter 2 Decisions and Processes: Value Driven Business
BUSINESS DRIVEN START-UP
Do you enjoy kidnapping your rivals’ team mascots or toilet-papering their frat
houses? If so, you might find your ideal career at College Hunks Hauling Junk.
The company hires college students and recent grads to pick up junk and take it
away. The founder, Nick Friedman, had a goal of capturing that friendly rivalry
so often associated with college life and turning it into profits. When the com-
pany launched in 2005, the haulers from Virginia found their truck had been
lathered in shaving cream and draped with a University of Maryland flag. The
Virginia haulers retaliated, and soon after dead fish were found on the seats of
Maryland’s truck. Friedman decided to use this energy as an incentive instead
of condemning the unorthodox behavior. “We wanted to harness that competi-
tive, prankster enthusiasm and channel it for good,” he says.
Freidman made a bold move and decided that instead of tracking typical key
performance indicators such as revenue, average job size, and customer loyalty, he
would set up his dashboard to track volume of junk collected and amount donated or
recycled. The winning team gains such things as bragging rights and banners, mod-
est monetary prizes, and the right to eat first at the annual company meeting. Most
employees check the dashboard daily to view their own and rivals’ latest standings. 8
Why do you think competition is helping College Hunks Hauling Junk exceed
its revenue goals? If you were to build a team competition dashboard for your
school or your work, what types of metrics would you track? What types of moti-
vators would you use to ensure your team is always in the green? What types
of external information would you want tracked in your dashboard? Could an
unethical person use the information from your dashboard to hurt your team or
your organization? What can you do to mitigate these risks?
Digital
Dashboard for
Tracking Junk
APPLY YOUR KNOWLEDGE
FIGURE 2.14
Information Levels Throughout
an Organization
STRATEGIC
MANAGERIAL
OPERATIONAL
Fine
Coarse
G
ra
nu
la
ri
ty
OLTP
OLAP
Pr
oc
es
si
ng
Transactional
Analytical
Pr
oc
es
se
s
baL76892_ch02_042-089.indd 58baL76892_ch02_042-089.indd 58 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
59Business Driven MIS Module 1
FIGURE 2.15
Interaction Between
a TPS and EIS
Transaction Processing
Systems
Executive
Reports
EIS
Order
Entry Order Processing
System
Inventory Data
Inventory Tracking
System
Shipping Data
Distribution System
Sales
Data
Manufacturing
Data
Transportation
Data
Industry
Outlook
Market
Outlook
Executive Information
Systems
Industry
Information
Stock Market
Information
External Sources of
Information
A DSS differs from an EIS in that an EIS requires data from external sources to sup-
port unstructured decisions (see Figure  2.15 ). This is not to say that DSSs never use
data from external sources, but typically DSS semistructured decisions rely on internal
data only.
Visualization produces graphical displays of patterns and complex relationships in
large amounts of data. Executive information systems use visualization to deliver spe-
cific key information to top managers at a glance, with little or no interaction with the
system. A common tool that supports visualization is a digital dashboard , which tracks
KPIs and CSFs by compiling information from multiple sources and tailoring it to meet
user needs. Following is a list of potential features included in a dashboard designed for
a manufacturing team:
■ A hot list of key performance indicators, refreshed every 15 minutes.
■ A running line graph of planned versus actual production for the past 24 hours.
■ A table showing actual versus forecasted product prices and inventories.
■ A list of outstanding alerts and their resolution status.
■ A graph of stock market prices.
Digital dashboards, whether basic or comprehensive, deliver results quickly. As they
become easier to use, more employees can perform their own analyses without inun-
dating MIS staff with questions and requests for reports. Digital dashboards enable
baL76892_ch02_042-089.indd 59baL76892_ch02_042-089.indd 59 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
60 Chapter 2 Decisions and Processes: Value Driven Business
employees to move beyond reporting to using information to directly increase business
performance. With them, employees can react to information as soon as it becomes
available and make decisions, solve problems, and change strategies daily instead of
monthly. Digital dashboards offer the following capabilities:
Consolidation Consolidation is the aggregation of data from simple roll-ups to
complex groupings of interrelated information. For example, data for different sales rep-
resentatives can then be rolled up to an office level, then a state level, then a regional
sales level.
Drill-Down Drill-down enables users to view details, and details of details, of infor-
mation. This is the reverse of consolidation; a user can view regional sales data and then
drill down all the way to each sales representative’s data at each office. Drill-down capa-
bility lets managers view monthly, weekly, daily, or even hourly information.
Slice-and-Dice Slice-and-dice is the ability to look at information from different
perspectives. One slice of information could display all product sales during a given pro-
motion. Another slice could display a single product’s sales for all promotions. Slicing
and dicing is often performed along a time axis to analyze trends and find time-based
patterns in the information.
One thing to remember when making decisions is the old saying, “Garbage in, gar-
bage out.” If the transactional data used in the support system are wrong, then the man-
agerial analysis will be wrong and the DSS will simply assist in making a wrong decision
faster. Managers should also ask, “What is the DSS not telling me before I make my final
decision?”
THE FUTURE: ARTIFICIAL INTELLIGENCE
Executive information systems are starting to take advantage of artificial intelligence to
facilitate unstructured strategic decision making. Artificial intelligence (AI) simulates
human thinking and behavior, such as the ability to reason and learn. Its ultimate goal is
to build a system that can mimic human intelligence.
Intelligent systems are various commercial applications of artificial intelligence.
They include sensors, software, and devices that emulate and enhance human capabili-
ties, learn or understand from experience, make sense of ambiguous or contradictory
information, and even use reasoning to solve problems and make decisions effectively.
Intelligent systems perform such tasks as boosting productivity in factories by monitor-
ing equipment and signaling when preventive maintenance is required. They are begin-
ning to show up everywhere:
■ At Manchester Airport in England, the Hefner AI Robot Cleaner alerts passen-
gers to security and nonsmoking rules while it scrubs up to 65,600 square feet of
floor per day. Laser scanners and ultrasonic detectors keep it from colliding with
passengers.
■ Shell Oil’s SmartPump keeps drivers in their cars on cold, wet winter days. It can ser-
vice any automobile built after 1987 that has been fitted with a special gas cap and a
windshield-mounted transponder that tells the robot where to insert the pump.
■ Matsushita’s courier robot navigates hospital hallways, delivering patient files, X-ray
films, and medical supplies.
■ The FireFighter AI Robot can extinguish flames at chemical plants and nuclear reac-
tors with water, foam, powder, or inert gas. The robot puts distance between human
operators and the fire. 9
AI systems increase the speed and consistency of decision making, solve problems
with incomplete information, and resolve complicated issues that cannot be solved
by conventional computing. There are many categories of AI systems; five of the most
familiar are (1) expert systems, (2) neural networks, (3) genetic algorithms, (4) intelligent
agents, and (5) virtual reality (see Figure 2.16 ).
LO 2.4: Describe artificial
intelligence, and identify its
five main types.
baL76892_ch02_042-089.indd 60baL76892_ch02_042-089.indd 60 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
61Business Driven MIS Module 1
Expert Systems
Expert systems are computerized advisory programs that imitate the reasoning pro-
cesses of experts in solving difficult problems. Typically, they include a knowledge base
containing various accumulated experience and a set of rules for applying the knowledge
base to each particular situation. Expert systems are the most common form of AI in the
business arena because they fill the gap when human experts are difficult to find or retain
or are too expensive. The best-known systems play chess and assist in medical diagnosis.
Neural Networks
A neural network , also called an artificial neural network, is a category of AI that
attempts to emulate the way the human brain works. Neural networks analyze large
quantities of information to establish patterns and characteristics in situations where
the logic or rules are unknown. Neural networks’ many features include:
■ Learning and adjusting to new circumstances on their own.
■ Lending themselves to massive parallel processing.
■ Functioning without complete or well-structured information.
■ Coping with huge volumes of information with many dependent variables.
■ Analyzing nonlinear relationships in information (they have been called fancy
regression analysis systems).
The finance industry is a veteran in the use of neural network technology and has been
relying on various forms for over two decades. It uses neural networks to review loan
applications and create patterns or profiles of applications that fall into two categories—
approved or denied. Here are some examples of neural networks in finance:
■ Citibank uses neural networks to find opportunities in financial markets. By carefully
examining historical stock market data with neural network software, Citibank finan-
cial managers learn of interesting coincidences or small anomalies (called market
inefficiencies). For example, it could be that whenever IBM stock goes up, so does
Unisys stock, or that a U.S. Treasury note is selling for 1 cent less in Japan than in the
United States. These snippets of information can make a big difference to Citibank’s
bottom line in a very competitive financial market.
■ Visa, MasterCard, and many other credit card companies use a neural network
to spot peculiarities in individual accounts and follow up by checking for fraud.
MasterCard estimates neural networks save it $50 million annually.
FIGURE 2.16
Examples of Artificial
Intelligence
Artificial Intelligence
Expert Systems
Example:
Playing chess.
Neural Networks
Example: Credit
card companies
checking for
fraud.
Genetic Algorithms
Example:
Investment
companies in
trading decisions.
Intelligent Agents
Example:
Environmental
scanning and
competitive
intelligence.
Virtual Reality
Example:
Working virtually
around the globe.
baL76892_ch02_042-089.indd 61baL76892_ch02_042-089.indd 61 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
62 Chapter 2 Decisions and Processes: Value Driven Business
■ Insurance companies along with state compensation funds and other carriers use
neural network software to identify fraud. The system searches for patterns in billing
charges, laboratory tests, and frequency of office visits. A claim for which the diag-
nosis was a sprained ankle but treatment included an electrocardiogram would be
flagged for the account manager. 10
Fuzzy logic is a mathematical method of handling imprecise or subjective informa-
tion. The basic approach is to assign values between 0 and 1 to vague or ambiguous
information. Zero represents information not included, while 1 represents inclusion or
membership. For example, fuzzy logic is used in washing machines that determine by
themselves how much water to use or how long to wash (they continue washing until the
water is clean). In accounting and finance, fuzzy logic allows people to analyze informa-
tion with subjective financial values (intangibles such as goodwill) that are very impor-
tant considerations in economic analysis. Fuzzy logic and neural networks are often
combined to express complicated and subjective concepts in a form that makes it pos-
sible to simplify the problem and apply rules that are executed with a level of certainty.
Genetic Algorithms
A genetic algorithm is an artificial intelligence system that mimics the evolutionary,
survival-of-the-fittest process to generate increasingly better solutions to a problem. A
genetic algorithm is essentially an optimizing system: It finds the combination of inputs
that gives the best outputs. Mutation is the process within a genetic algorithm of ran-
domly trying combinations and evaluating the success (or failure) of the outcome.
Genetic algorithms are best suited to decision-making environments in which thou-
sands, or perhaps millions, of solutions are possible. Genetic algorithms can find and
evaluate solutions with many more possibilities, faster and more thoroughly than a
human. Organizations face decision-making environments for all types of problems that
require optimization techniques, such as the following:
■ Business executives use genetic algorithms to help them decide which combina-
tion of projects a firm should invest in, taking complicated tax considerations into
account.
■ Investment companies use genetic algorithms to help in trading decisions.
■ Telecommunication companies use genetic algorithms to determine the optimal
configuration of fiber-optic cable in a network that may include as many as 100,000
connection points. The genetic algorithm evaluates millions of cable configurations
and selects the one that uses the least amount of cable.
Intelligent Agents
An intelligent agent is a special-purpose knowledge-based information system that
accomplishes specific tasks on behalf of its users. Intelligent agents usually have a graph-
ical representation, such as “Sherlock Holmes” for an information search agent.
One of the simplest examples of an intelligent agent is a shopping bot. A shopping
bot is software that will search several retailer websites and provide a comparison of
each retailer’s offerings including price and availability. Increasingly, intelligent agents
handle the majority of a company’s Internet buying and selling and complete such pro-
cesses as finding products, bargaining over prices, and executing transactions. Intelli-
gent agents also have the capability to handle all supply chain buying and selling.
Another application for intelligent agents is in environmental scanning and com-
petitive intelligence. For instance, an intelligent agent can learn the types of competitor
information users want to track, continuously scan the web for it, and alert users when a
significant event occurs.
Multiagent Systems and Agent-Based Modeling What do cargo transport
systems, book distribution centers, the video game market, and a flu epidemic have in
common with an ant colony? They are all complex adaptive systems. By observing parts
of Earth’s ecosystem, like ant colonies, artificial intelligence scientists can use hardware
and software models that incorporate insect characteristics and behavior to (1) learn
baL76892_ch02_042-089.indd 62baL76892_ch02_042-089.indd 62 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
63Business Driven MIS Module 1
how people-based systems behave, (2) predict how they will behave under a given set
of circumstances, and (3) improve human systems to make them more efficient and
effective. This process of learning from ecosystems and adapting their characteristics to
human and organizational situations is called biomimicry.
In the past few years, AI research has made much progress in modeling complex orga-
nizations as a whole with the help of multiagent systems. In a multiagent system, groups
of intelligent agents have the ability to work independently and to interact with each
other. Agent-based modeling is a way of simulating human organizations using multiple
intelligent agents, each of which follows a set of simple rules and can adapt to changing
conditions.
Agent-based modeling systems are being used to model stock market fluctuations,
predict the escape routes people seek in a burning building, estimate the effects of inter-
est rates on consumers with different types of debt, and anticipate how changes in con-
ditions will affect the supply chain, to name just a few.
Virtual Reality
Virtual reality is a computer-simulated environment that can be a simulation of the
real world or an imaginary world. Virtual reality is a fast-growing area of artificial intelli-
gence that had its origins in efforts to build more natural, realistic, multisensory human-
computer interfaces. Virtual reality enables telepresence where users can be anywhere
in the world and use virtual reality systems to work alone or together at a remote site.
Typically, this involves using a virtual reality system to enhance the sight and touch of a
human who is remotely manipulating equipment to accomplish a task. Examples range
from virtual surgery, where surgeon and patient may be on opposite sides of the globe,
to the remote use of equipment in hazardous environments such as chemical plants and
nuclear reactors. Augmented reality is the viewing of the physical world with computer-
generated layers of information added to it.
Virtual Workforce At Microsoft’s headquarters in Redmond, Washington, traffic
congestion occurs daily for the 35,000 commuters. To alleviate the congestion Microsoft
is offering its employees the ability to work virtually from home. Over 42 percent of IBM’s
BUSINESS DRIVEN INNOVATION
Humans are not permitted inside Staples’ Denver distribution center. Who is
filling all the orders, you ask? Robots! This 100,000-square-foot space belongs
to 150 orange robots that resemble overstuffed ottomans and race around with
uncanny accuracy. They’re making Staples employees more than twice as pro-
ductive. The robots, or bots, are built by Kiva Systems, a company with a single
critical success factor: Replace the labyrinth of conveyor belts and humans
that most distributors rely on to pack items in the online mail-order business.
Companies using Kiva bots include Walgreens, Zappos, The Gap, and Amazon.
Robots have captured people’s attention for years. From the quirky droids
in Star Wars to the powerful fighting machines in Transformers, they seem
to fascinate everyone. Assume your professor has asked you to participate in
The Robot Challenge, and you must design a robot that will enhance business
operations. It must contain a digital dashboard and provide decision support
capabilities for its owners. Be sure to describe your robot, its functions, how
the digital dashboard works and supports users, and why customers would
purchase your robot. Feel free to include a picture or diagram of how your
robot works. 11
Building Robots
APPLY YOUR KNOWLEDGE
baL76892_ch02_042-089.indd 63baL76892_ch02_042-089.indd 63 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
64 Chapter 2 Decisions and Processes: Value Driven Business
330,000 employees work virtually, saving over $100 million per year in real estate-related
expenses. Working virtually offers several advantages such as fewer cars on the road,
increases in worker productive, and decreased real estate expenses. Drawbacks include
the fear among workers that they will jeopardize their careers by working from home,
and some workers need a busy environment to stay productive. Virtual workers also tend
to feel alone, secluded, and deprived of vital training and mentoring.
section 2.2 Business Processes
L E A R N I N G O U T C O M E S
2.5 Explain the value of business processes for a company, and differentiate between customer-facing
and business-facing processes.
2.6 Demonstrate the value of business process modeling, and compare As-Is and To-Be models.
2.7 Differentiate among automation, streamlining, and reengineering.
2.8 Describe business process management and its value to an organization.
EVALUATING BUSINESS PROCESSES
Most companies pride themselves on providing breakthrough products and services for
customers. But if customers do not receive what they want quickly, accurately, and has-
sle-free, even fantastic offerings will not prevent a company from annoying customers
and ultimately eroding its own financial performance. To avoid this pitfall and protect its
competitive advantage, a company must continually evaluate all the business processes
in its value chain. Recall from Chapter 1 that a business process is a standardized set of
activities that accomplish a specific task, such as processing a customer’s order. Business
processes transform a set of inputs into a set of outputs—goods or services—for another
person or process by using people and tools. Understanding business processes helps a
manager envision how the entire company operates.
Improving the efficiency and effectiveness of its business processes will improve the
firm’s value chain. The goal of this section is to expand on Porter’s value chain analysis
by detailing the powerful value-adding relationships between business strategies and
core business processes. Figure 2.17 illustrates several common business processes.
The processes outlined in Figure  2.17 reflect functional thinking. Some processes,
such as a programming process, may be contained wholly within a single department.
However, most, such as ordering a product, are cross-functional or cross-departmental
processes and span the entire organization. The process of “order to delivery” focuses
on the entire customer order process across functional departments (see Figure 2.18 ).
Another example is “product realization,” which includes not only the way a product is
developed, but also the way it is marketed and serviced. Some other cross-functional
business processes are taking a product from concept to market, acquiring custom-
ers, loan processing, providing post-sales service, claim processing, and reservation
handling.
Customer-facing processes , also called front-office processes, result in a product or
service received by an organization’s external customer. They include fulfilling orders,
communicating with customers, and sending out bills and marketing information.
Business-facing processes , also called back-office processes, are invisible to the external
customer but essential to the effective management of the business; they include goal
setting, day-to-day planning, giving performance feedback and rewards, and allocating
resources. Figure 2.19 displays the different categories of customer-facing and business-
facing processes along with an example of each. 12
A company’s strategic vision should provide guidance on which business processes
are core, that is, which are directly linked to the firm’s critical success factors. Mapping
these core business processes to the value chain reveals where the processes touch the
customers and affect their perceptions of value. This type of map conceptualizes the
LO 2.5: Explain the value of business
processes for a company, and differ-
entiate between customer-facing
and business-facing processes.
baL76892_ch02_042-089.indd 64baL76892_ch02_042-089.indd 64 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
65Business Driven MIS Module 1
FIGURE 2.18
Five Steps in the Order-to-
Delivery Business Process
Marketing Sales OperationsManagement
Accounting and
Finance
Customer
Service
• Create campaign
• Check inventory
Step One • Place order
• Notify production
• Check credit
Step Two
• Manufacture goods
Step Three • Deliver goods
• Bill customer
Step Four
• Support sale
Step Five
FIGURE 2.17
Sample Business Processes
Human Resources
• Hiring employees
• Enrolling employees in health care
• Tracking vacation and sick time
Operations Management
• Ordering inventory
• Creating production schedules
• Manufacturing goods
Marketing and Sales
• Promoting of discounts
• Communicating marketing campaigns
• Attracting customers
• Processing sales
Accounting and Finance
• Creating financial statements
• Paying of Accounts Payable
• Collecting of Accounts Receivable
baL76892_ch02_042-089.indd 65baL76892_ch02_042-089.indd 65 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
66 Chapter 2 Decisions and Processes: Value Driven Business
business as a value delivery system, allowing managers to ensure all core business pro-
cesses are operating as efficiently and effectively as possible.
A business process patent is a patent that protects a specific set of procedures for
conducting a particular business activity. A firm can create a value chain map of the
entire industry to extend critical success factors and business process views beyond its
boundaries. Core processes are business processes, such as manufacturing goods, sell-
ing products, and providing service, that make up the primary activities in a value chain.
Evaluating core processes allowed National Semiconductor to identify the core business
processes required to move assembly plants to Southeast Asia. The map identified logis-
tics and distribution as critical to the success of the move. Thus, to ensure reliable deliv-
ery of its products, National Semiconductor contracted with Federal Express, combining
its outstanding manufacturing process and Federal Express’s exceptional distribution
processes. The move allowed National Semiconductor to save money by closing nine
warehouses while maintaining excellence in logistics and distribution. As this example
demonstrates, changing business processes can generate significant competitive advan-
tages across the value chain. 13
MODELS: MEASURING PERFORMANCE
Business process modeling , or mapping , is the activity of creating a detailed flowchart
or process map of a work process that shows its inputs, tasks, and activities in a struc-
tured sequence. A business process model is a graphic description of a process, show-
ing the sequence of process tasks, which is developed for a specific purpose and from a
selected viewpoint. A set of one or more process models details the many functions of a
system or subject area with graphics and text, and its purpose is to:
■ Expose process detail gradually and in a controlled manner.
■ Encourage conciseness and accuracy in describing the process model.
■ Focus attention on the process model interfaces.
■ Provide a powerful process analysis and consistent design vocabulary. ( Figures 2.20
through Figure  2.23 provide examples of business process modeling.) 14
Business process modeling usually begins with a functional process representation of
what the process problem is, or an As-Is process model. As-Is process models represent
the current state of the operation that has been mapped, without any specific improve-
ments or changes to existing processes. The next step is to build a To-Be process model
that displays how the process problem will be solved or implemented. To-Be process
models show the results of applying change improvement opportunities to the cur-
rent (As-Is) process model. This approach ensures that the process is fully and clearly
understood before the details of a process solution are decided upon. The To-Be process
model shows how the what is to be realized. Figure 2.24 displays the As-Is and To-Be
process models for ordering a hamburger.
LO 2.6: Demonstrate the value of
business process modeling, and
compare As-Is and To-Be models.
FIGURE 2.19
Customer-Facing, Industry-
Specific, and Business-Facing
Processes
Order processing
Customer service
Sales process
Customer billing
Order shipping
Customer-Facing
Processes
Banking—Loan processing
Insurance—Claims processing
Government—Grant allocation
Hotel—Reservation handling
Airline—Baggage handling
Industry-Specific Customer
Facing Processes
Strategic planning
Tactical planning
Budget forecasting
Training
Purchasing raw materials
Business-Facing
Processes
baL76892_ch02_042-089.indd 66baL76892_ch02_042-089.indd 66 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
67Business Driven MIS Module 1
FIGURE 2.20
Online Sales Process Model
Customer
Website Credit Card
Transaction
Customer Information
in Database
WarehouseQuality AssuranceShipping
Customer Service Quality Assurance
FIGURE 2.21
Online Banking Process Model
Automatic
Deposit
Withdraw from Account
Electronic Payment
Paper Check
baL76892_ch02_042-089.indd 67baL76892_ch02_042-089.indd 67 29/11/12 4:21 PM29/11/12 4:21 PM

Rev. Confirming Pages
68 Chapter 2 Decisions and Processes: Value Driven Business
FIGURE 2.22
Order Fulfillment Process Model
CustomerCall Center
Online Order
Inventory Check
Item in
stock
Item Packed
Customer Notified
of Back Order
Process Payment
Item Shipped
Yes
No
As-Is and To-Be process models are both integral in business process reengineering
projects, since these diagrams are very powerful in visualizing the activities, processes,
and data flow of an organization. Figure 2.25 illustrates an As-Is process model of the
order to delivery process using swim lanes to represent the relevant departments. The
swim lane layout arranges the steps of a business process into a set of rows depicting
the various elements.
You need to be careful not to become inundated in excessive detail when creating an
As-Is process model. The primary goal is to simplify, eliminate, and improve the To-Be
processes. Process improvement efforts focus on defining the most efficient and effec-
tive process identifying all of the illogical, missing, or irrelevant processes.
Investigating business processes can help an organization find bottlenecks, remove
redundant tasks, and recognize smooth-running processes. For example, a florist might
have a key success factor of reducing delivery time. A florist that has an inefficient order-
ing process or a difficult distribution process will be unable to achieve this goal. Tak-
ing down inaccurate orders, incorrect addresses, or shipping delays can cause errors in
the delivery process. Improving order entry, production, or scheduling processes can
improve the delivery process.
Business processes should drive MIS choices and should be based on business strat-
egies and goals (see Figure  2.26 ). Only after determining the most efficient and effec-
tive business process should an organization choose the MIS that supports that business
process. Of course, this does not always happen, and managers may find themselves in
the difficult position of changing a business process because the system cannot sup-
port the ideal solution (see Figure 2.26 ). Managers who make MIS choices and only then
determine how their business processes should perform typically fail.
baL76892_ch02_042-089.indd 68baL76892_ch02_042-089.indd 68 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
69Business Driven MIS Module 1
FIGURE 2.23
Purchasing an Item on eBay
and Selling an Item on eBay
Process Model Decides to Purchase Item
Reviews Auction Listing
Places Bid
Wins Bid
Receives Invoice
Pays Invoice
Receives Item
Rates Seller
Ends Sale
Decides to Sell Item
Lists Item on eBay
Sets Initial Price
Sets Auction Length
Invoices Winning Bid
Receives Payment
Ships Item
Rates Buyer
Ends Sale
baL76892_ch02_042-089.indd 69baL76892_ch02_042-089.indd 69 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
70 Chapter 2 Decisions and Processes: Value Driven Business
FIGURE 2.24
As-Is and To-Be Process
Model for Ordering
a Hamburger
Order
Combo
Meal
Customer
Approaches
Cashier
Customer
Pays
Cashier
To-Be Burger Order ProcessAs-Is Burger Order Process
Order
FriesWant Fries?
Customer
Pays
Cashier
Order
Drink
No
Yes
Yes
No
Order
Burger
Customer
Approaches
Cashier
Want Drink?
FIGURE 2.25
As-Is Process Model for Order
Fulfillment
As-Is Order Fulfillment Process
Cu
st
om
er
Order
Submitted
Order
Generated
Order
Received
Credit
Checked
Credit
OK?
Credit
OK?
Invoice
Prepared
Credit
Issues
Assessed
Order
Canceled
Credit
Approved
Order
Entered
Inventory
Available?
Inventory
Ordered
Order
Shipped
Order
Picked and
Packaged
Process
Payment
Shipped
Order?
Invoice
SentBi
lli
ng
In
ve
nt
or
y
Sh
ip
pi
ng
Sa
le
s
Yes
Yes
No
No
Yes
No
baL76892_ch02_042-089.indd 70baL76892_ch02_042-089.indd 70 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
71Business Driven MIS Module 1
FIGURE 2.26
For Best Results, Business
Processes Should Drive MIS
Choices
SUPPORT: ENHANCING BUSINESS PROCESSES WITH MIS
Workflow includes the tasks, activities, and responsibilities required to execute each
step in a business process. Understanding workflow, customers’ expectations, and the
competitive environment provides managers with the necessary ingredients to design
and evaluate alternative business processes in order to maintain competitive advantages
when internal or external circumstances change.
Alternative business process should be effective (they deliver the intended results) and
efficient (they consume the least amount of resources for the intended value). They should
also be adaptable or flexible and support change as customers, market forces, and tech-
nology shift. Figure 2.27 shows the three primary types of business process change avail-
able to firms and the business areas in which they are most often effective. How does a
company know whether it needs to undertake the giant step of changing core business
processes? Three conditions indicate the time is right to initiate a business process change:
1. There has been a pronounced shift in the market the process was designed to serve.
2. The company is markedly below industry benchmarks on its core processes.
3. To regain competitive advantage, the company must leapfrog competition on key
dimensions. 15
LO 2.7: Differentiate among
automation, streamlining,
and reengineering.
Order to Delivery
Product Realization
Customer
Acquisition
Order to Delivery
Product Realization
Customer
Acquisition
A)
B)
baL76892_ch02_042-089.indd 71baL76892_ch02_042-089.indd 71 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
72 Chapter 2 Decisions and Processes: Value Driven Business
Improving Operational Business Processes—Automation
Improving business processes is critical to staying competitive in today’s electronic
marketplace. Organizations must improve their business processes because custom-
ers are demanding better products and services; if customers do not receive what they
want from one supplier, often they can simply click a mouse to find many other choices.
Business process improvement attempts to understand and measure the current pro-
cess and make performance improvements accordingly. Figure 2.28 displays a typical
business process improvement model. 16
Early adopters of MIS recognized that they could enhance their value chain through
automation, which reduces costs and increases the speed of performing activities. Auto-
mation is the process of computerizing manual tasks, making them more efficient and
effective and dramatically lowering operational costs. Payroll offers an excellent example.
Calculating and tracking payroll for 5,000 employees is a highly labor-intensive process
requiring 30 full-time employees. Every two weeks accounting employees must gather
everyone’s hours worked, cross-check with wage rates, and then calculate the amount
due, minus taxes and other withholding such as pension contributions and insurance
premiums, to create the paychecks. They also track benefits, sick time, and vacation
time. If the payroll process is automated, however, one employee can easily calculate
payroll, track withholding and deductions, and create paychecks for 5,000 people in a
few hours, since everything is performed by the system. Automation improves efficiency
and effectiveness and reduces head count, lowering overall operational costs. Transac-
tion processing systems (TPS) are primarily used to automate business processes.
Figure  2.29 illustrates the basic steps for business process improvement. Organiza-
tions begin by documenting what they currently do, then they establish a way to measure
the process, follow the process, measure the performance, and finally identify improve-
ment opportunities based on the collected information. The next step is to implement
process improvements and measure the performance of the new improved process. The
loop repeats over and over again as it is continuously improved. 17
This method of improving business processes is effective for obtaining gradual, incre-
mental improvement. However, several factors have accelerated the need to radically
improve business processes. The most obvious is technology. New technologies (such as
wireless Internet access) rapidly bring new capabilities to businesses, thereby raising the
FIGURE 2.27
Primary Types of Business
Process Change
Operational Managerial Strategic
Streamlining
Reengineering
Automation
baL76892_ch02_042-089.indd 72baL76892_ch02_042-089.indd 72 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
73Business Driven MIS Module 1
FIGURE 2.29
Steps in Business
Process Improvement
Document As-Is
Process
Establish
Measures Follow Process
Measure
Performance
Identify and
Implement
Improvements
FIGURE 2.28
Business Process
Improvement Model
Identify one
of the steps
in the process
Is the step
necessary?
Can the step be
improved?
Are resources
available to
implement the
change?
Identify
a Process
Remove the
step
Is there an
additional
step?
Keep the
step
Document
improved
step
Model
improved
process
Yes
No
Yes
No
Implement New
Process
Process Improvement Model
No
No
Yes
Yes
competitive bar and the need to improve business processes dramatically. For example,
Amazon.com reinvented the supply chain for selling books online. After gaining from
automation, companies began to look for new ways to use MIS to improve operations,
and managers recognized the benefits of pairing MIS with business processes by stream-
lining. We look at this improvement method next.
Improving Managerial Business Processes—Streamlining
Streamlining improves business process efficiencies by simplifying or eliminating
unnecessary steps. Bottlenecks occur when resources reach full capacity and cannot
handle any additional demands; they limit throughput and impede operations. A com-
puter working at its maximum capacity will be unable to handle increased demand and
will become a bottleneck in the process. Streamlining removes bottlenecks, an important
step if the efficiency and capacity of a business process are being increased. It also elimi-
nates redundancy. Redundancy occurs when a task or activity is unnecessarily repeated,
for example, if both the sales department and the accounting department check cus-
tomer credit.
baL76892_ch02_042-089.indd 73baL76892_ch02_042-089.indd 73 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
74 Chapter 2 Decisions and Processes: Value Driven Business
BUSINESS DRIVEN MIS
The biggest problem with email is that it interferes with workflow. Many
employees stop what they are working on and begin checking new email as
soon as it arrives. If they do not have the time or capacity to answer it imme-
diately, however, they leave it in the in-box, creating a bottleneck. This process
continues all day, and eventually the in-box is overflowing with hundreds of
emails, most of which require a response or action. Employees begin dreading
email and feel stressed because their workflow process is off track, and they do
not know which tasks need to be completed and when.
To streamline workflow, you can designate certain times for email process-
ing (at the top of the hour, or for 30 minutes at three set times a day, for exam-
ple). Turning off email notification also ensures you are not interrupted during
your workflow. When you do begin to check your emails, review them one at a
time from top to bottom, and deal with each one immediately. Either reply, put
a note on your to-do list, forward the email, or delete it. Now you are working far
more efficiently and effectively, and you are less stressed because your in-box
is empty. 18
Choose a process in your life that is inefficient or ineffective and causing you
stress. Using the principles of streamlining, remove the bottlenecks and reduce
redundancies. Be sure to diagram the As-Is process and your newly created
To-Be process.
Streamlining
Your Email
APPLY YOUR KNOWLEDGE
Automating a business process that contains bottlenecks or redundancies will mag-
nify or amplify these problems if they are not corrected first. Here’s an example based on
a common source of tension in an organization. Increasing orders is a standard KPI for
most marketing/sales departments. To meet this KPI, the sales department tends to say
yes to any customer request, such as for rush or custom orders. Reducing cycle time , the
time required to process an order, is a common KPI for operations management. Rush
and custom orders tend to create bottlenecks, causing operations to fall below its bench-
marked cycle time. Removing these bottlenecks, however, can create master streamlined
business processes that deliver both standard and custom orders reliably and profitably.
The goal of streamlining is not only to automate but also to improve by monitoring, con-
trolling, and changing the business process.
FedEx streamlined every business process to provide a CSF of speedy and reliable
delivery of packages. It created one central hub in Memphis, Tennessee, that processed
all its orders. It purchased its own planes to be sure it could achieve the desired level
of service. FedEx combined MIS and traditional distribution and logistics processes to
create a competitive advantage. FedEx soon identified another market segment of cus-
tomers who cared a little less about speed and were willing to trade off early-morning
delivery for delivery any time within the next day at a significantly lower price. The firm
had to reevaluate its strategy and realign its business processes to capture this market
segment. Had Federal Express focused only on improving its traditional delivery process
to handle increased volume faster and more reliably, it could have missed an entire cus-
tomer segment. 19
Improving Strategic Business Processes—Reengineering
The flat world (see Chapter 1) is bringing more companies and more customers into
the marketplace, greatly increasing competition. Wine wholesalers in the United States
must now compete globally, for instance, because customers can just as easily order a
bottle of wine from a winery in France as from them. Companies need breakthrough
baL76892_ch02_042-089.indd 74baL76892_ch02_042-089.indd 74 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
75Business Driven MIS Module 1
performance and business process changes just to stay in the game. As the rate of
change increases, companies looking for rapid change and dramatic improvement are
turning to business process reengineering (BPR) , the analysis and redesign of workflow
within and between enterprises. Figure 2.30 highlights an analogy to process improve-
ment by explaining the different means of traveling along the same route. A company
could improve the way it travels by changing from foot to horse and then from horse to
car. With a BPR mind-set, however, it would look beyond automating and streamlining
to find a completely different approach. It would ignore the road and travel by air to get
from point A to point B. Companies often follow the same indirect path for doing busi-
ness, not realizing there might be a different, faster, and more direct way.
An organization can reengineer its cross-departmental business processes or an indi-
vidual department’s business processes to help meet its CSFs and KPIs. When selecting
a business process to reengineer, wise managers focus on those core processes that are
critical to performance, rather than marginal processes that have little impact. The effort
to reengineer a business process as a strategic activity requires a different mind-set than
that required in continuous business process improvement programs. Because compa-
nies have tended to overlook the powerful contribution that processes can make to strat-
egy, they often undertake process improvement efforts using their current processes as
the starting point. Managers focusing on reengineering can instead use several criteria
to identify opportunities:
■ Is the process broken?
■ Is it feasible that reengineering of this process will succeed?
■ Does it have a high impact on the agency’s strategic direction?
■ Does it significantly impact customer satisfaction?
■ Is it antiquated?
■ Does it fall far below best-in-class?
■ Is it crucial for productivity improvement?
■ Will savings from automation be clearly visible?
■ Is the return on investment from implementation high and preferably immediate?
BPR relies on a different school of thought than business process improvement. In
the extreme, BPR assumes the current process is irrelevant, does not work, or is broken
and must be overhauled from scratch. Starting from such a clean slate enables business
process designers to disassociate themselves from today’s process and focus on a new
process. It is as if they are projecting themselves into the future and asking: What should
the process look like? What do customers want it to look like? What do other employees
want it to look like? How do best-in-class companies do it? How can new technology
facilitate the process?
Figure  2.31 displays the basic steps in a business process reengineering effort. It
begins with defining the scope and objectives of the reengineering project and then
takes the process designers through a learning process with customers, employees, com-
petitors, and new technology. Given this knowledge base, the designers can create a plan
of action based on the gap between current processes, technologies, and structures and
FIGURE 2.30
Different Ways to Travel the
Same Route
Better, Faster, Cheaper
baL76892_ch02_042-089.indd 75baL76892_ch02_042-089.indd 75 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
76 Chapter 2 Decisions and Processes: Value Driven Business
their vision of the processes of the future. It is then top management’s job to implement
the chosen solution. 20
System thinking plays a big role in BPR. Automation and streamlining operate depart-
mentally, whereas BPR occurs at the systems level or companywide level and the end-to-
end view of a process.
Creating value for the customer is the leading reason for instituting BPR, and MIS
often plays an important enabling role. Fundamentally new business processes enabled
Progressive Insurance to slash its claims settlement time from 31 days to four hours, for
instance. Typically, car insurance companies follow this standard claims resolution pro-
cess: The customer gets into an accident, has the car towed, and finds a ride home. The
customer then calls the insurance company to begin the claims process, which includes
an evaluation of the damage, assignment of fault, and an estimate of the cost of repairs,
and which usually takes about a month (see Figure 2.32 ). Progressive Insurance’s inno-
vation was to offer a mobile claims process. When a customer has a car accident, he or
she calls in the claim on the spot. The Progressive claims adjuster comes to the accident
site, surveying the scene and taking digital photographs. The adjuster then offers the cus-
tomer on-site payment, towing services, and a ride home. A true BPR effort does more
for a company than simply improve a process by performing it better, faster, and cheaper.
Progressive Insurance’s BPR effort redefined best practices for an entire industry. 21
The Business Process Systems View Leveraging business processes has enor-
mous implications for the business system as a whole. It requires recognition that any
meaningful change within the organization affects the entire organization. Without a
systems view, the identification of business process flaws and implementation of pro-
posed solutions will often fix only symptoms. Many times what can make one process
effective is what makes another process ineffective. Therefore, the redesign of any pro-
cess within an integrated system requires appreciating the impact of the redesign on
other processes. For example, operations management often wants to wait until a truck
is full before sending it out for deliveries because the department’s KPI measures cost-
per-mile-transported. Conversely, the customer satisfaction KPIs measure the ability to
make the order-to-delivery cycle time as short as possible, requiring the truck to leave as
soon as the product is available, whether it is full or not. Changing business processes to
FIGURE 2.31
Business Process
Reengineering Model
Set Project
Scope
Study
Competition
Create New
Processes
Implement
Solution
FIGURE 2.32
Auto Insurance Claims
Processes
Progressive Insurance: Claims Resolution Process
Resolution Cycle Time: 30 minutes–3 hours
Company A: Claims Resolution Process
Resolution Cycle Time: 3–8 weeks
baL76892_ch02_042-089.indd 76baL76892_ch02_042-089.indd 76 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
77Business Driven MIS Module 1
meet operations management KPIs will thus reduce customer satisfaction KPIs. Chang-
ing business processes to meet customer satisfaction KPIs will lower operations man-
agement KPIs. A systems view, on the other hand, will allow managers to understand the
impact business processes have across the entire organization, so both can be improved.
THE FUTURE: BUSINESS PROCESS MANAGEMENT
Creating a company that can quickly adapt to market, industry, and economic changes to
create a competitive advantage requires a new set of operating rules based on achieving
speed, performance, and improved delivery. Until recently, business process improve-
ment initiatives focused on improving workflow or document-based processes that were
completed by hand. Now, however, business process management (BPM) systems
focus on evaluating and improving processes that include both person-to-person work-
flow and system-to-system communications. BPM systems include advanced features
such as enhanced process modeling, simulation, execution, and monitoring, providing a
high level of flexibility while reducing costs. Think of BPM as a way to build, implement,
and monitor automated processes that span organizational boundaries—a kind of next-
generation workflow. BPM not only allows a business process to be executed more effi-
ciently, but it also provides the tools to measure performance and identify opportunities
for improvement, as well as to easily capture opportunities such as:
■ Bringing processes, people, and information together.
■ Breaking down the barriers between business areas and finding “owners” for the
processes.
■ Managing front-office and back-office business processes.
BPM uniquely offers two types of systems: (1) Customer-facing or front-office BPM
focuses on person-to-person workflow and (2) business-facing or back-office BPM
focuses on system-to-system workflow. With BPM the two systems function as one,
allowing continual improvements to many business processes simultaneously and in
real time. BPM’s unified environment encourages people to observe, think, and provide
feedback, harnessing the power of ideas and insight and promoting systems thinking
throughout the organization. Providing the flexibility for quick BPM change drives effi-
ciency and effectiveness, creating optimal business processes. This ability is the founda-
tion for creating an operation that gives a company competitive advantage.
LO 2.8: Describe business process
management and its value to an
organization.
BUSINESS DRIVEN DEBATE
Trina Thompson, a New York City resident, is filing a lawsuit against Monroe
College stating that she is unable to find employment after graduating with
her bachelor’s degree. Thompson is seeking tuition reimbursement of $70,000
and states that she has been unable to find gainful employment since gradu-
ating because the school’s Office of Career Advancement failed to provide her
with the leads and career advice it promised. Monroe College spokesman Gary
Axelbank says Thompson’s lawsuit is completely without merit and insists it
helps its graduates find jobs. 22
Do you agree that students should be allowed to hold their academic institu-
tions liable for their inability to find a job after graduation? Design the current
(As-Is) business process at your school from the time a student begins his or
her program until graduation. How could your school reengineer the process to
ensure it does not end up in litigation over an individual’s expectation of auto-
matically receiving a job after graduation?
Education
Processes
APPLY YOUR KNOWLEDGE
baL76892_ch02_042-089.indd 77baL76892_ch02_042-089.indd 77 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
78 Chapter 2 Decisions and Processes: Value Driven Business
Learning Outcome 2.1:  Explain the importance of decision making for managers at
each of the three primary organization levels along with the associated decision
characteristics.
Decision-making skills are essential for all business professionals, at every company level, who make
decisions that run the business. At the operational level, employees develop, control, and maintain
core business activities required to run the day-to-day operations. Operational decisions are con-
sidered structured decisions, which arise in situations where established processes offer potential
solutions. Structured decisions are made frequently and are almost repetitive in nature; they affect
short-term business strategies.
At the managerial level, employees are continuously evaluating company operations to hone
the firm’s abilities to identify, adapt to, and leverage change. Managerial decisions cover short- and
medium-range plans, schedules, and budgets along with policies, procedures, and business objec-
tives for the firm. These types of decisions are considered semistructured decisions; they occur in
situations in which a few established processes help to evaluate potential solutions, but not enough to
lead to a definite recommended decision.
At the strategic level, managers develop overall business strategies, goals, and objectives as part
of the company’s strategic plan. They also monitor the strategic performance of the organization and
its overall direction in the political, economic, and competitive business environment. Strategic deci-
sions are highly unstructured decisions, occurring in situations in which no procedures or rules exist
to guide decision makers toward the correct choice. They are infrequent, extremely important, and
typically related to long-term business strategy.
Learning Outcome 2.2:  Define critical success factors (CSFs) and key performance
indicators (KPIs), and explain how managers use them to measure the success of MIS
projects.
Metrics are measurements that evaluate results to determine whether a project is meeting its goals.
Two core metrics are critical success factors and key performance indicators. CSFs are the crucial
steps companies perform to achieve their goals and objectives and implement their strategies and
include creating high-quality products, retaining competitive advantages, and reducing product costs.
KPIs are the quantifiable metrics a company uses to evaluate progress toward critical success factors.
KPIs are far more specific than CSFs; examples include turnover rates of employees, percentage of
help-desk calls answered in the first minute, and number of products returned.
It is important to understand the relationship between critical success factors and key performance
indicators. CSFs are elements crucial for a business strategy’s success. KPIs measure the progress of
CSFs with quantifiable measurements, and one CSF can have several KPIs. Of course, both categories
will vary by company and industry. Imagine improved graduation rates as a CSF for a college.
Learning Outcome 2.3:  Classify the different operational support systems, managerial
support systems, and strategic support systems, and explain how managers can use
these systems to make decisions and gain competitive advantages.
Being able to sort, calculate, analyze, and slice-and-dice information is critical to an organization’s
success. Without knowing what is occurring throughout the organization there is no way that man-
agers and executives can make solid decisions to support the business. The different operational,
managerial, and strategic support systems include:
■ Operational: A transaction processing system (TPS) is the basic business system that serves the
operational level (analysts) in an organization. The most common example of a TPS is an opera-
tional accounting system such as a payroll system or an order-entry system.
L E A R N I N G O U T C O M E R E V I E W
baL76892_ch02_042-089.indd 78baL76892_ch02_042-089.indd 78 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
79Business Driven MIS Module 1
■ Managerial: A decision support system (DSS) models information to support managers and busi-
ness professionals during the decision-making process.
■ Strategic: An executive information system (EIS) is a specialized DSS that supports senior-level
executives within the organization.
Learning Outcome 2.4:  Describe artificial intelligence, and identify its five main types.
Artificial intelligence (AI) simulates human thinking and behavior, such as the ability to reason and
learn. The five most common categories of AI are:
1. Expert systems—computerized advisory programs that imitate the reasoning processes of experts
in solving difficult problems.
2. Neural networks—attempts to emulate the way the human brain works.
3. Genetic algorithm—a system that mimics the evolutionary, survival-of-the-fittest process to gen-
erate increasingly better solutions to a problem.
4. Intelligent agents—a special-purpose knowledge-based information system that accomplishes
specific tasks on behalf of its users.
5. Virtual reality—a computer-simulated environment that can be a simulation of the real world or an
imaginary world.
Learning Outcome 2.5:  Explain the value of business processes for a company,
and differentiate between customer-facing and business-facing process.
A business process is a standardized set of activities that accomplish a specific task, such as pro-
cessing a customer’s order. Business processes transform a set of inputs into a set of outputs (goods
or services) for another person or process by using people and tools. Without processes, organizations
would not be able to complete activities. Customer-facing processes result in a product or service
that is received by an organization’s external customer. Business-facing processes are invisible to the
external customer but essential to the effective management of the business.
Learning Outcome 2.6:  Demonstrate the value of business process modeling,
and compare As-Is and To-Be models.
Business process modeling (or mapping) is the activity of creating a detailed flowchart or process
map of a work process showing its inputs, tasks, and activities, in a structured sequence. A business
process model is a graphic description of a process, showing the sequence of process tasks, which is
developed for a specific purpose and from a selected viewpoint.
Business process modeling usually begins with a functional process representation of what the
process problem is, or an As-Is process model. As-Is process models represent the current state of
the operation that has been mapped, without any specific improvements or changes to existing pro-
cesses. The next step is to build a To-Be process model that displays how the process problem will
be solved or implemented. To-Be process models show the results of applying change improvement
opportunities to the current (As-Is) process model. This approach ensures that the process is fully and
clearly understood before the details of a process solution are decided upon.
Learning Outcome 2.7:  Differentiate among automation, streamlining, and reengineering.
Business process improvement attempts to understand and measure the current process and make
performance improvements accordingly. Automation is the process of computerizing manual tasks,
making them more efficient and effective and dramatically lowering operational costs. Streamlining
improves business process efficiencies by simplifying or eliminating unnecessary steps. Bottlenecks
occur when resources reach full capacity and cannot handle any additional demands; they limit
throughput and impede operations. Streamlining removes bottlenecks, an important step if the effi-
ciency and capacity of a business process are being increased. Business process reengineering (BPR)
is the analysis and redesign of workflow within and between enterprises and occurs at the systems
level or companywide level and the end-to-end view of a process.
baL76892_ch02_042-089.indd 79baL76892_ch02_042-089.indd 79 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
80 Chapter 2 Decisions and Processes: Value Driven Business
Learning Outcome 2.8:  Describe business process management and its value to an
organization.
Business process management (BPM) systems focus on evaluating and improving processes that
include both person-to-person workflow and system-to-system communications. BPM systems include
advanced features such as enhanced process modeling, simulation, execution, and monitoring, provid-
ing a high level of flexibility while reducing costs.
1. Knowledge: Define the three primary types of decision-making systems, and explain how a cus-
tomer of Actionly might use them to find business intelligence.
2. Comprehension: Describe the difference between transactional and analytical information, and
determine which types Actionly uses to create a customer’s digital dashboard.
3. Application: Illustrate the business process model used by a customer of Actionly following
Twitter tweets.
4. Analysis: Explain business process reengineering and how Actionly used it to create its unique
business model.
5. Synthesis: Formulate different metrics Actionly uses to measure the success of a customer’s
marketing campaign.
6. Evaluation: Argue for or against the following statement: Actionly invades consumer privacy by
taking data from different websites such as Twitter and Flickr without the consent of the customer
that posted the information.
O P E N I N G C A S E Q U E S T I O N S
Analytical information, 55
Analytics, 46
Artificial intelligence (AI), 60
As-Is process model, 66
Augmented reality, 63
Automation, 72
Benchmarking, 52
Benchmarks, 52
Best practices, 50
Bottlenecks, 73
Business-facing process, 64
Business process
improvement, 72
Business process management
(BPM) system, 77
Business process model, 66
Business process modeling
(or mapping), 66
Business process patent, 66
Business process reengineering
(BPR), 75
Consolidation, 60
Core processes, 66
Critical success factors (CSFs), 49
Customer-facing process, 64
Cycle time, 74
Decision support system (DSS), 55
Digital dashboard, 59
Drill-down, 60
Effectiveness MIS metrics, 50
Efficiency MIS metrics, 50
Executive information system
(EIS), 56
Expert system, 61
Fuzzy logic, 62
Genetic algorithm, 62
Goal-seeking analysis, 56
Granularity, 57
Intelligent agent, 62
Intelligent system, 60
Key performance indicators
(KPIs), 49
Managerial level, 46
Market share, 49
Metrics, 49
Model, 54
Mutation, 62
Neural network, 61
Online analytical processing
(OLAP), 55
Online transaction processing
(OLTP), 54
Operational level, 46
Optimization analysis, 56
Project, 48
Redundancy, 73
Return on investment (ROI), 50
Semistructured decision, 48
Sensitivity analysis, 56
Shopping bot, 62
Slice-and-dice, 60
Source document, 55
Strategic level, 48
Streamlining, 73
Structured decision, 46
Swim lane, 68
To-Be process model, 66
Transaction processing system
(TPS), 54
Transactional information, 54
Unstructured decision, 48
Virtual reality, 63
Visualization, 59
What-if analysis, 55
Workflow, 71
K E Y T E R M S
baL76892_ch02_042-089.indd 80baL76892_ch02_042-089.indd 80 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
81Business Driven MIS Module 1
1. Why must business professionals understand how MIS supports decision making and problem
solving?
2. What is the relationship between critical success factors and key performance indicators? How
can a manager use them to understand business operations?
3. What are the three different levels found in a company? What types of decisions are made at
each level?
4. Define transaction processing systems and describe the role they play in a business.
5. Define decision support systems and describe the role they play in a business.
6. Define expert systems and describe the role they play in a business.
7. What are the capabilities associated with digital dashboards?
8. What are the common DSS analysis techniques?
9. How does an electronic spreadsheet program, such as Excel, provide decision support
capabilities?
10. What is the difference between the ability of a manager to retrieve information instantly on
demand using an MIS and the capabilities provided by a DSS?
11. What is artificial intelligence? What are the five types of AI systems? What applications of AI
offer the greatest business value?
12. What is a business process and what role does it play in an organization?
13. Why do managers need to understand business processes? Can you make a correlation
between systems thinking and business processes?
14. Why would a manager need to review an As-Is and To-Be process model?
15. How can a manager use automation, streamlining, and business process reengineering to gain
operational efficiency and effectiveness?
16. Explain the difference between customer-facing processes and business-facing processes.
Which one is more important to an organization?
17. Explain how finding different ways to travel the same road relates to automation, streamlining,
and business process reengineering.
R E V I E W Q U E S T I O N S
C L O S I N G C A S E O N E
Political Micro-Targeting: What Decision Support
Systems Did for Barack Obama
On the day he took the oath of office in 2009, President Barack Obama spoke a word rarely heard
in inaugural addresses— data— referencing indicators of economic and other crises. His use of the
word is perhaps not so surprising. Capturing and analyzing data were crucial to Obama’s rise to
power. Throughout his historic campaign he not only used the Internet for networking and fund-
raising, but he also relied on decision support systems to identify potential swing voters. Obama’s
team carefully monitored contested states and congressional districts, where as few as 2,000 voters
could prove decisive—a tiny fraction of the voting public. Both presidential candidates hired technol-
ogy wizards to help sift through mountains of consumer and demographic details to recognize these
important voters.
baL76892_ch02_042-089.indd 81baL76892_ch02_042-089.indd 81 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
82 Chapter 2 Decisions and Processes: Value Driven Business
10 “Tribes”
Spotlight Analysis, a Democratic consultancy, used political micro-targeting to analyze neighbor-
hood details, family sizes, and spending patterns to categorize every person of voting age—all
175 million—into 10 “values” tribes. Individual tribe members do not necessarily share the same
race, religion, or income bracket, but they have common mind-sets about political issues: God, com-
munity, responsibility, and opportunity. Spotlight Analysis predicted the influence of a particular mor-
ally guided (but not necessarily religious) tribe of some 14 million voters, dubbed Barn Raisers. Barn
Raisers are of many races, religions, and ethnicities; about 40 percent favor Democrats and 27 per-
cent Republicans. Barn Raisers are slightly less likely to have a college education than Spotlight’s
other swing groups. They are active in community organizations, ambivalent about government, and
deeply concerned about “playing by the rules” and “keeping promises,” to use Spotlight’s definitions.
Spotlight believed the Barn Raisers held the key to the race between Obama and his Republican chal-
lenger, Arizona Senator John McCain.
Political micro-targeting, which depends on MIS to support decision making, is turning govern-
ment segments into sophisticated, intelligent, methodical political machines. In nanoseconds, deci-
sion support systems sort 175 million voters into segments and quickly calculate the potential for
each individual voter to swing from red or purple to blue.
For some, political micro-targeting signals the dehumanization of politics. For others, this type
of sophisticated analysis is a highly efficient way of pinpointing potential voters. For example, the
analysis of a voter in Richmond, Virginia, simply identifies the number of his or her school-age chil-
dren, type of car, zip code, magazine subscriptions, and mortgage balance. Data could even indi-
cate whether the voter has dogs or cats. (Cat owners lean slightly for Democrats, dog owners trend
Republican.) After the analysis, the voter is placed into a political tribe, and analysts can draw conclu-
sions about the issues that matter to him or her and make campaign decisions accordingly. Is this a
bad thing?
Behavioral Grouping
For generations, governments lacked the means to study individual behaviors and simply placed
all citizens into enormous groupings such as Hispanics, Catholics, union members, hunters, soccer
moms, and so on. With the use of sophisticated MIS analysis techniques, companies such as Spotlight
Analysis can group individuals based more on specific behavior and choices, and less on the names,
colors, and clans that mark us from birth.
When Spotlight first embarked on its research, it interviewed thousands of voters the old-fash-
ioned way. The Barn Raisers did not seem significant; the tribe represented about 9 percent of the
electorate. However, when Spotlight’s analysts drilled down or dug deeper, they discovered that Barn
Raisers stood at the epicenter of a political swing. In 2004, 90 percent of them voted for President
Bush, but then the group’s political leanings shifted, with 64 percent saying they voted for Democrats
in the 2006 election. Spotlight surveys showed that Republican political scandals, tax-funded boon-
doggles such as Alaska’s “bridge to nowhere,” and the botched recovery job after Hurricane Katrina
sent them packing.
Suddenly, Spotlight had identified millions of potential swing voters. The challenge then was to
locate them by state. For this, the company analyzed the demographics and buying patterns of the
Barn Raisers it had surveyed personally. Then it began correlating its data with commercially available
data to match profiles. By Spotlight’s count, this approach nailed Barn Raisers three times out of four.
So Democrats could bet that at least three-quarters of them would be likely to welcome an election
appeal stressing honesty and fair play.
Still Swing Voters
Spotlight has not correlated the Barn Raisers to their actual votes, so it’s not clear how well the
company’s strategy worked. However, it is reasonable to presume that amid that sea of humanity
stretched out before the newly inaugurated Obama on the National Mall, at least some were moved
by micro-targeted appeals. And if Obama and his team fail to honor their mathematically honed vows,
the Barn Raisers may abandon them in droves. They are swing voters, after all. 23
baL76892_ch02_042-089.indd 82baL76892_ch02_042-089.indd 82 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
83Business Driven MIS Module 1
Questions
1. Define the three primary types of decision-making systems, and explain how Obama’s campaign
team used them to win votes.
2. Describe the difference between transactional and analytical information, and determine which
types Spotlight Analysis used to identify its 10 tribes.
3. Illustrate the business process model used to identify the 10 tribes.
4. Explain business process reengineering and how Obama’s team used it to develop political
micro-targeting.
5. Formulate different metrics the Obama team used to measure the success of political
micro-targeting.
6. Argue for or against the following statement: Political micro-targeting signals the dehumanization
of politics.
C L O S I N G C A S E T W O
Second Life: Succeeding in Virtual Times
Second Life is a virtual world built and owned by its residents. It is inhabited by millions of residents
from around the world. The three main parts to Second Life are:
■ The World: The world of Second Life is constantly changing and growing. It is filled with hundreds
of games, from multiplayer role-playing games to puzzles and grid-wide contests. There are also
dance clubs, shopping malls, space stations, vampire castles, and movie theaters. To find some-
thing to do at any time of the day or night, residents simply open the Search menu and click on
Events for a listing of discussions, sports, entertainment, games, pageants, education, arts and
culture, and charity/support groups.
■ The Creations: Second Life is dedicated to creativity. Everything in Second Life is resident-cre-
ated, from the strobe lights in the nightclubs to the cars (or spaceships) in driveways. Imagine
tinkering with the steering and handling program of a motorcycle while a friend tweaks the shape
of the fuel tank and gives it a wicked flame paint job, in-world and in real-time, before taking it for
a spin down a newly created road to look for land to buy. Have you ever wondered what it would
be like to have a pair of black leather wings? Build them and give it a go.
■ The Marketplace: The Marketplace currently supports millions of U.S. dollars in monthly transac-
tions. This commerce is transacted with the in-world unit of trade, the Linden dollar, which can
be converted to U.S. dollars at several thriving online Linden dollar exchanges or at LindeX, the
official exchange. Users can make real money in a virtual world because Second Life has a fully
integrated economy designed to reward risk, innovation, and craftsmanship. Residents create
their own virtual goods and services, retain the intellectual property rights of their creations, and
sell them at various in-world venues. Businesses succeed on the ingenuity, artistic ability, entre-
preneurial acumen, and good reputation of their owners.
Businesses on Second Life
Second Life is an exciting venue for collaboration, business ventures, distance learning, new media
studies, and marketing. Business possibilities there are endless; a few examples include:
■ Holding a virtual meeting with sales managers located in Europe and Asia.
■ Presenting new sales initiatives and discussing them with the team real-time.
■ Allowing Second Life residents to interact with company products or services and test new
designs and concepts before they are introduced to the real world.
baL76892_ch02_042-089.indd 83baL76892_ch02_042-089.indd 83 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
84 Chapter 2 Decisions and Processes: Value Driven Business
■ Selling products and services in Second Life by creating an event to promote the product: a con-
cert, a class, a famous speaker, a party, a contest. Many companies are excited about the numer-
ous ways they can use Second Life to support their business. 24 A few companies paving the way
on Second Life include the following:
1-800-flowers.com
Adidas
Amazon
American Apparel
American Cancer Society
BBC Radio 1
Best Buy Co. Inc.
BMW
Calvin Klein
Circuit City
Cisco
Coca-Cola
Coldwell Banker
Comcast
Crayola
Dell
H&R Block
IBM
Intel
Kraft Food
Lacoste
Major League Baseball
Mazda
Mercedes-Benz
Microsoft
MTV
NASA
National Basketball
Association
NBC
Nissan
NPR
Sony
Sprint
Student Travel Association
Starwood Hotels
Sundance Channel
Toyota
Universal Motown Records
Visa
Warner Bros. Music
Weather Channel
Wired magazine
Xerox
Yahoo
Yankee Stadium
Questions
1. How could financial companies use neural networks in Second Life to help their businesses?
2. How could a company such as Nike use decision support systems on Second Life to help its
business?
3. How could an apparel company use Second Life to build a digital dashboard to monitor virtual
operations?
4. How could a company use Second Life to revamp its customer service process?
5. How could a company use Second Life to revamp its order-entry process?
6. How could a company use Second Life to reinvent its relationships with customers, partners, and
employees?
1. Modeling a Business Process
Do you hate waiting in line at the grocery store? Do you find it frustrating when you go to the video
rental store and cannot find the movie you wanted? Do you get annoyed when the pizza delivery
person brings you the wrong order? This is your chance to reengineer the process that drives you
crazy. Choose a problem you are currently experiencing and reengineer the process to make it
more efficient. Be sure to provide an As-Is and To-Be process model.
2. Revamping Accounts
The accounting department at your company deals with the processing of critical documents that
include invoices, purchase orders, statements, purchase requisitions, financial statements, sales
orders, and price quotes. These documents must arrive at their intended destination in a secure
and efficient manner.
Processing is currently done manually, which causes a negative ripple effect. Documents tend
to be misplaced or delayed, becoming vulnerable to unauthorized changes or exposure of con-
fidential information. In addition, the accounting department incurs costs such as for preprinted
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch02_042-089.indd 84baL76892_ch02_042-089.indd 84 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
85Business Driven MIS Module 1
forms, inefficient distribution, and storage. Explain automation, streamlining, and business process
reengineering and how they can be used to revamp the accounting department.
3. What Type of System Would You Use?
You have been assigned as senior director for a large manufacturing company. Your first assign-
ment is to decide which type of MIS can best support your decision-making needs. For all of the
following, determine which type of system you would use to help solve the business problem or
make a business decision.
a. You need to analyze daily sales transactions for each region.
b. You need to analyze staffing requirements for each plant.
c. You need to determine which customers are at risk of defaulting on their bills.
d. You need to analyze your competition including prices, discounts, goods, and services.
e. You need to analyze critical success factors and key performance indicators for status on
operations.
f. You need to produce a graphical display of patterns and complex relationships for large
amounts of data.
4. Unstructured Communications
You have just received a job as a business analyst for a large sports marketing company. Your
boss, Sandy Fiero, wants you to evaluate and improve the current corporate communication pro-
cess. With the current process, employees receive a great deal of unstructured information in
the form of emails, including corporate policies, corporate announcements, and human resource
information. You quickly realize that using an email system for communication is causing a great
deal of issues including inaccessible information for any new hires, lost productivity as employees
search through hundreds of emails to find information, and miscommunication as global divisions
of your organization send out regional human resource policies.
To begin analyzing the processes, create a list of issues you might encounter by using email
as a primary communication tool for corporate information. What are the redundancies associated
with an email communication process? What are the bottlenecks with an email communication
process? Document the As-Is process for sending email communications to employees. Then,
reengineer the process and document your suggestions for improving the process and the To-Be
communication process.
5. IGoogle Digital Dashboard
Executives find information from a variety of sources coming across their computers every day.
The digital dashboard containing this information might include their calendar, email, issues such
as production delays or accounts past due, and even financial and industry information. Although
it would be impossible to fit all of an organization’s information into a single screen, it can sum-
marize the data in ways tailored to meet the executive’s needs.
IGoogle is a type of digital dashboard you can create for your own personal view of the world
through Google. IGoogle allows users to create personalized home pages containing Google search
along with a number of Google gadgets that provide access to activities and information from all
over the Internet. If you want one location where you can view Gmail messages, peruse Google
news, review weather forecasts, stock quotes, and movie showtimes, iGoogle is for you. Visit
iGoogle and determine how you could customize your Google home page as a digital dashboard
for your computer.
6. Bot Shopping
For those of us who love (or hate) shopping, a shopping bot can become your best friend.
Regardless of whether you are shopping in a store or online you still have to research products,
compare prices, select a seller, and find the safest way to pay. Shopping in the information age is
easier than ever, especially with the help of a shopping bot. Shopping bots are price comparison
baL76892_ch02_042-089.indd 85baL76892_ch02_042-089.indd 85 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
86 Chapter 2 Decisions and Processes: Value Driven Business
websites that automatically search the inventory of different vendors to find the lowest possible
price, saving you time and money. Shopping bots will rank the product you are looking for by price
and link you directly to the vendor’s website. Popular shopping bots include mysimon.com , Gomez.
com , Bizrate.com , shopzilla.com , and Google’s shopping bot at www.google.com/products .
Choose a product you are interested in purchasing and use three of the different shopping
bots to compare prices. Did the different shopping bots return the same information and prices?
Which shopping bot was the easiest to use? Will you continue using shopping bots? What are the
advantages and disadvantages for a company using shopping bots to purchase office supplies or
raw materials?
7. Networking Neural
Neural networks are a category of AI that attempts to emulate the way the human brain works. A
neural network could be a great asset for any college student. If a neural network could scan each
brain for all of the students in your course, what types of information would it acquire? How could
you use the student neural network to improve your grades? How could you use the student neural
network to identify trends and new market segments? What would be the risks of using this neural
network for academic improvement? What types of confidentiality and privacy issues would be
encountered with this neural network?
8. Driving Your Business
You have recently opened your own business—choose the business of your dreams and assume
you have it up and running. What types of decision will you need to make to operate your busi-
ness? How can you use MIS to support your decision-making efforts? What types of processes will
you find throughout your business? How can you use MIS to revamp your business process for
efficiency and effectiveness? Overall, how dependent will your business be on MIS? Do you think
you could be just as successful running your business without MIS? Can you name a business that
can operate efficiently and effectively without MIS?
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. You realize that you need a digital dashboard to help you operate your business. Create a list of
all of the components you would want to track in your digital dashboard that would help you run
your business. Be sure to justify how each component would help you gain insight into the opera-
tions of your business and flag potential issues that could ruin your business. (Be sure to identify
your business and the name of your company as you defined it in Chapter 1.)
2. Explain three customer-facing processes and three business-facing process associated with your
business. Be sure to detail why the process is customer facing or business facing.
3. Your friends have asked you to review the customer ordering process for their restaurant, The
Broadway Café. To make the café as efficient and effective as possible, you want to redesign
processes to remove bottlenecks, reduce redundancies, and streamline workflow. Review The
Broadway Café’s customer ordering process highlighted in the accompanying image and reen-
gineer it for improvements in efficiency and effectiveness. If you are looking for a real challenge,
create your As-Is and To-Be process diagrams using PowerPoint or Visio.
After revamping the ordering process for your friends, you decide to create a To-Be process model
of the most important business processes required for your startup to find success. Create the To-Be
process model for your most critical business process to ensure you know how to operate your startup
in the most efficient and effective manner.
baL76892_ch02_042-089.indd 86baL76892_ch02_042-089.indd 86 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
87Business Driven MIS Module 1
A
B
CD
A Counter A — Food is ordered
Broadway
Café
Process Flow:
Counter B — Beverages are ordered and food is picked up
Counter C — Beverages are picked up
Counter D — Pay for food and beverages
Counter E — Cream, sugar, lids
B
C
D
E
E
PROJECT I Making Business Decisions
You are the vice president of human resources for a large consulting company. You are compiling a
list of questions that you want each job interviewee to answer. The first question on your list is, “How
can MIS enhance your ability to make decisions at our organization?” Prepare a one-page report to
answer this question.
PROJECT I I DSS and EIS
Dr. Rosen runs a large dental conglomerate—Teeth Doctors—that employs more than 700 dentists
in six states. Dr. Rosen is interested in purchasing a competitor called Dentix that has 150 dentists in
three additional states. Before deciding whether to purchase Dentix, Dr. Rosen must consider several
issues:
■ The cost of purchasing Dentix.
■ The location of the Dentix offices.
■ The current number of customers per dentist, per office, and per state.
■ The merger between the two companies.
■ The professional reputation of Dentix.
■ Other competitors.
Explain how Dr. Rosen and Teeth Doctors can benefit from the use of information systems to make
an accurate business decision about whether to purchase Dentix.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch02_042-089.indd 87baL76892_ch02_042-089.indd 87 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
88 Chapter 2 Decisions and Processes: Value Driven Business
PROJECT I I I Finding Information on Decision Support Systems
You are working on the sales team for a small catering company that maintains 75 employees and
generates $1 million in revenues per year. The owner, Pam Hetz, wants to understand how she can use
decision support systems to help expand her business. Hetz has an initial understanding of DSS and is
interested in learning more about what types are available, how they can be used in a small business, and
the costs associated. In a group, research the website www.dssresources.com and compile a presenta-
tion that discusses DSSs in detail. Be sure to answer all Hetz’s questions on DSS in your presentation.
PROJECT IV Discovering Reengineering Opportunities
In an effort to increase efficiency, your college has hired you to analyze its current business processes
for registering for classes. Analyze the current process and determine which steps are:
■ Broken
■ Redundant
■ Antiquated
Be sure to define how you would reengineer the processes for efficiency.
PROJECT V Dashboard Design
Digital dashboards offer an effective and efficient way to view enterprisewide information at near real
time. According to Nucleus Research, there is a direct correlation between use of digital dashboards
and a company’s return on investment (ROI); hence, all executives should be using or pushing the
development of digital dashboards to monitor and analyze organizational operations.
Design a digital dashboard for a customer tracking and enterprise operations system. Be sure to
address at least four of the following indicators by showing how you would measure it, such as red,
yellow, green status; percentage complete status; and so on.

Customer Tracking System Enterprise Operations
Customers Accounting
Marketing Finance
Order entry Logistics
Collections Production
Sales Distribution
Customer service Manufacturing
Billing Human resources
Credit limits Sales
Transportation Total profit
PROJECT VI Defense Advanced Research Projects Agency (DARPA)
Grand Challenge
The goal of the DARPA Grand Challenge is to save lives by making one-third of ground military
forces autonomous or driverless vehicles by 2015. Created in response to a congressional and U.S.
Department of Defense (DoD) mandate, the DARPA Grand Challenge brings together individuals and
organizations from industry, the research and development (R&D) community, government, the armed
services, and academia and includes students, backyard inventors, and automotive enthusiasts.
The DARPA Grand Challenge 2004 field test of autonomous ground vehicles ran from Barstow,
California, to Primm, Nevada, and offered a $1 million prize. From the qualifying round at the California
Speedway, 15 finalists emerged to attempt the Grand Challenge. However, the prize went unclaimed
when no vehicles were able to complete the difficult desert route.
baL76892_ch02_042-089.indd 88baL76892_ch02_042-089.indd 88 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
89Business Driven MIS Module 1
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
The DARPA Grand Challenge 2005 was held in the Mojave Desert and offered a $2 million prize
to the team that completed the 132-mile course in the shortest time under 10 hours. The race, over
desert terrain, included narrow tunnels, sharp turns, and a winding mountain pass with a sheer drop-
off on one side and a rock face on the other. Five teams completed the course, and “Stanley,” the
Stanford Racing Team’s car, won the $2 million prize with a time of 6 hours, 53 minutes.
The third DARPA Grand Challenge was an urban challenge on the site of the now-closed George Air
Force Base in Victorville, California. It offered a $2 million prize to the autonomous vehicle that could
cover the 60-mile course in less than 6 hours. The vehicles had to obey stop lights, navigate around
other vehicles, and even merge into heavy traffic. Tartan Racing, a collaborative effort by Carnegie
Mellon University and General Motors Corporation, won the prize with “Boss,” a Chevy Tahoe. The
Stanford Racing Team’s “Junior,” a 2006 Volkswagen Passat, won second prize of $1 million. “Victor
Tango,” a 2005 Ford Escape hybrid from Virginia Tech, won third place along with a $500,000 prize. 25
1. How is the DoD using AI to improve its operations and save lives?
2. Why would the DoD use an event like the DARPA Grand Challenge to further technological innovation?
3. Describe how autonomous vehicles could be used by organizations around the world to improve
business efficiency and effectiveness.
4. The Ansari X is another technological innovation competition focusing on spacecraft. To win the
$10 million Ansari X Prize, a private spacecraft had to be the first to carry the weight equivalent
of three people to an altitude of 62.14 miles twice within two weeks. SpaceShipOne, a privately
built spacecraft, won on October 4, 2004. Describe the potential business impacts of the Ansari X
competition.

Project
Number Project Name Project Type
Plug-In
Focus Area Project Focus Project Skill Set
Page
Number
1 Financial Destiny Excel T2 Personal Budget Introductory Formulas AYK.4
2 Cash Flow Excel T2 Cash Flow Introductory Formulas AYK.4
3 Technology Budget Excel T1, T2 Hardware and
Software
Introductory Formulas AYK.4
4 Tracking Donations Excel T2 Employee
Relationships
Introductory Formulas AYK.4
5 Convert Currency Excel T2 Global Commerce Introductory Formulas AYK.5
6 Cost Comparison Excel T2 Total Cost of
Ownership
Introductory Formulas AYK.5
7 Time Management Excel or
Project
T2 or T12 Project Management Introductory Gantt Charts AYK.6
8 Maximize Profit Excel T2, T4 Strategic Analysis Intermediate Formulas or
Solver
AYK.6
9 Security Analysis Excel T3 Filtering Data Intermediate Conditional
Formatting, Autofilter, Subtotal
AYK.7
10 Gathering Data Excel T3 Data Analysis Intermediate Conditional
Formatting, PivotTable
AYK.8
11 Scanner System Excel T2 Strategic Analysis Intermediate AYK.8
12 Competitive Pricing Excel T2 Profit Maximization Intermediate AYK.9
13 Adequate Acquisitions Excel T2 Break-Even Analysis Intermediate AYK.9
baL76892_ch02_042-089.indd 89baL76892_ch02_042-089.indd 89 29/11/12 4:22 PM29/11/12 4:22 PM

Rev. Confirming Pages
What’s in IT for Me?
Internet and communication technologies have revolutionized the way business operates, improving upon traditional meth-
ods and even introducing new opportunities and ventures that were simply not possible before. More than just giving orga-
nizations another means of conducting transactions, online business provides the ability to develop and maintain customer
relationships, supplier relationships, and even employee relationships between and within enterprises.
As future managers and organizational knowledge workers, you need to understand the benefits ebusiness can offer an
organization and your career, the challenges that accompany web technologies and their impact on organizational com-
munication and collaboration. You need to be aware of the strategies organizations can use to deploy ebusiness and the
methods of measuring ebusiness success. This chapter will give you this knowledge and help prepare you for success in
tomorrow’s electronic global marketplace.
■ D i s r u p t i v e Te c h n o l o g i e s a n d
We b 1 . 0
■ A d v a n t a g e s o f E b u s i n e s s
■ T h e F o u r E b u s i n e s s M o d e l s
■ E b u s i n e s s To o l s
f o r C o n n e c t i n g a n d
C o m m u n i c a t i n g
■ T h e C h a l l e n g e s o f E b u s i n e s s
SECTION 3.2
WEB 2.0: Business 2.0
SECTION 3.1
WEB 1.0: Ebusiness
■ We b 2 . 0 : A d v a n t a g e s o f
B u s i n e s s 2 . 0
■ N e t w o r k i n g C o m m u n i t i e s w i t h
B u s i n e s s 2 . 0
■ B u s i n e s s 2 . 0 To o l s f o r
C o l l a b o r a t i n g
■ T h e C h a l l e n g e s o f B u s i n e s s 2 . 0
■ We b 3 . 0 : D e f i n i n g t h e N e x t
G e n e r a t i o n o f O n l i n e B u s i n e s s
O p p o r t u n i t i e s
C H A P T E R
C
H
A
P
T
E
R
O
U
T
L
IN
E

Ebusiness: Electronic
Business Value 3
baL76892_ch03_090-135.indd 90baL76892_ch03_090-135.indd 90 26/11/12 1:47 PM26/11/12 1:47 PM

Rev. Confirming Pages
91Business Driven MIS Module 1
opening case study
Pinterest—Billboards for the Internet
Pinterest has been called the latest addiction for millions of people around the world.
Pinterest, a visual social media network, allows users to create “interest boards” where
they “pin” items of interests found on the web. Terms you need to understand to use
Pinterest include:
■ Pin: A link to an image from a computer or a website. Pins can include captions for other
users. Users upload, or “pin,” photos or videos to boards.
■ Board: Pins live on boards and users can maintain separate boards, which can be cat-
egorized by activity or interests, such as cooking, do-it-yourself activities, fitness, music,
movies, etc.
■ Repin: After pinning an item, it can be repinned by other Pinterest users, spreading the
content virally. Repinning allows users to share items they like with friends and family.
“Pinning” is simply done by clicking on a photo or video that captures the attention of a
user, whether it be by uploading personal photos or repinning a photo or video from a fellow
user. Started in 2010, Pinterest has already attracted over 10 million users with the majority
being women between the ages of 25 and 54. Millions of people visit the website each day
to find what new items will spark their interest as there are always more and more things
to see.
Pinterest is considered a social network, but unlike other social networks, such as
Twitter and Facebook, Pinterest is open to invited users only; meaning it is an invitation-only
website and users must “ask” for an invitation before gaining access. Upon accepting the
invitation, users can gain access to the website and begin inviting their own “friends” with
whom they have connections on Facebook or Twitter. Pinterest’s primary mission is to:
connect everyone in the world through the ‘things’ they find interesting. We think that
a favorite book, toy, or recipe can reveal a common link between two people. With
millions of new pins added every week, Pinterest is connecting people all over the
world based on shared tastes and interests.
Just like on other social networks, Pinterest users can compile a list of people they want
to follow. A user can link a Pinterest board to a Facebook account, allowing instant access
to quickly see which of his or her Facebook friends are on the social network. Adding book-
marks allows the user to pin images to other websites such as a book at Barnes & Noble or
a set of mugs at Pier 1 Imports. The image is automatically linked to the retailer’s website,
and if another users clicks on the image, that user receives additional information on the
product or service. If users pin a specific image of a plate or sweater, they can add the
baL76892_ch03_090-135.indd 91baL76892_ch03_090-135.indd 91 26/11/12 1:47 PM26/11/12 1:47 PM

Rev. Confirming Pages
92 Chapter 3 Ebusiness: Electronic Business Value
item’s price in the description, which will automatically place a banner ad on the image and
show the listed price. If users are unsure of what they are looking for, they can search for
a specific event or theme such as “twenty-first birthday party” for a whole array of ideas.
Essentially, Pinterest allows users to paint a visual picture. Just imagine a wedding plan-
ner talking to a bride about her upcoming event, and the bride mentions she would like a
“classic modernism” wedding. If the wedding planner was confused on what exactly the
bride meant by classic modernism, she could quickly visit Pinterest to find an entire suite of
photos and videos to spark ideas of how to coordinate the event.
The Business Value of Pinterest
Visual Communication
Pinterest is by far one of the hottest social media spaces available today. Offering all kinds
of valuable information from useful cleaning tips to fantastic recipes to beautiful photos and
videos, the website is extremely valuable for sharing anything visual. Pinterest is in no way
simply a passing fad as companies begin to use the website for social marketing.
One of the best business uses of Pinterest is allowing employees to visually commu-
nicate and brainstorm. Visual communication is a new experience for many employees
and the phrase “A picture is worth a thousand words” can help a company perform many
tasks from generating new products to transforming business processes. In fact, many
companies are using Pinterest to solicit feedback directly from employees, customers, and
suppliers to ensure the company is operating efficiently and effectively. Soliciting feedback
directly from customers allows companies to have a customer service support team handle
problems before they become mainstream issues. Providing customers with a new channel
to post their thoughts and concerns about products or services can provide valuable feed-
back for any company. Companies typically state that they may not respond to every ques-
tion or comment, but that they take each and every concern into account, demonstrating
that they are devoted to creating a bond between themselves and their customers.
Driving Traffic
Pinterest drives traffic—it is that simple! Even though the website operates under an
invitation-only model, it has attracted more than 10 million users in less than two years. That
number might seem small compared to powerhouses such as Facebook, Twitter, or Google,
but it demonstrates there is enough of an audience to send a decent amount of traffic to
any business. The images a business pins up should be linked to the relevant page of its
website. If users are attracted by it, they may click on it to find out more.
Pinterest also drives traffic by providing higher rankings on search engine optimi-
zation as companies appear higher and higher on search lists the more users are pin-
ning to their boards. Linking is one of the key factors search engines consider, and with
Pinterest gaining in popularity, it is also growing as a trustworthy domain. The number of
Pinterest users combined with its ability to increase search rankings will play an important
role when a company is looking to increase visibility and drive traffic to its website. Data
from Shareholic found that Pinterest sent more referral traffic to bloggers than Google 1 ,
YouTube, and LinkedIn combined, falling just behind Twitter.
baL76892_ch03_090-135.indd 92baL76892_ch03_090-135.indd 92 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
93Business Driven MIS Module 1
Product Branding
Pinterest is an extraordinary branding tool, offering a place where companies can create a
presence and community around a product, idea, event, or company. Just like other social
networking websites, Pinterest allows a company to reach out and engage its customers,
vendors, suppliers, and even employees to communicate about its products and services.
Recently the National Football League’s Minnesota Vikings began using Pinterest to create
a following of favorite photos, statistics, and even game-day recipes!
Pinterest recently deployed an iPhone application that allows users to pin photos and
video from their cameras instantly on their boards. Pinterest’s unique competitive advan-
tage is its ability to host billions of images and redirect users to the appropriate sources in
a user-friendly interface.
Pinterest’s Dilemma
Since its inception, Pinterest has been under fire from sites such as Flikr, Photobucket, and
Instagram over attributing credit to those who own the images that are pinned. Many users
are concerned that they may one day be sued for the improper use of an image they pinned.
The Pinterest Terms of Use state, “If you are a copyright owner, or are authorized to act
on behalf of one, or authorized to act under any exclusive right under copyright, please
report alleged copyright infringements taking place on or through the Site by completing the
following DMCA Notice of Alleged Infringement and delivering it to Pinterest’s Designated
Copyright Agent.”
To protect Pinterest from third-party litigation claims (such as those from authors claim-
ing copyright infringement), Pinterest has incorporated the following statement into its
indemnity clause: “You agree to indemnify and hold harmless Pinterest and its officers,
directors, employees and agents, from and against any claims, suits, proceedings, disputes,
demands, liabilities, damages, losses, costs and expenses, including, without limitation,
reasonable legal and accounting fees (including costs of defense of claims, suits or pro-
ceedings brought by third parties), arising out of or in any way related to (i) your access to
or use of the Services or Pinterest Content, (ii) your User Content, or (iii) your breach of any
of these Terms.”
Pinterest is well-aware of the probability that many of the pinned images might be vio-
lating copyright infringement and is attempting to protect itself against any litigation claims
resulting from users intentionally or unintentionally breaking the law through its site. 1
baL76892_ch03_090-135.indd 93baL76892_ch03_090-135.indd 93 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
94 Chapter 3 Ebusiness: Electronic Business Value
section 3.1 Web 1.0: Ebusiness
L E A R N I N G O U T C O M E S
3.1 Compare disruptive and sustaining technologies, and explain how the Internet and WWW caused
business disruption.
3.2 Describe ebusiness and its associated advantages.
3.3 Compare the four ebusiness models.
3.4 Describe the six ebusiness tools for connecting and communicating.
3.5 Identify the four challenges associated with ebusiness.
DISRUPTIVE TECHNOLOGIES AND WEB 1.0
Polaroid, founded in 1937, produced the first instant camera in the late 1940s. The Pola-
roid camera, whose pictures developed themselves, was one of the most exciting techno-
logical advances the photography industry had ever seen. The company eventually went
public, becoming one of Wall Street’s most prominent enterprises, with its stock trading
above $60 per share in 1997. In 2002, the stock dropped to 8 cents and the company
declared bankruptcy. 2
How could a company such as Polaroid, which had innovative technology and a cap-
tive customer base, go bankrupt? Perhaps company executives failed to use Porter’s Five
Forces Model to analyze the threat of substitute products or services. If they had, would
they have noticed the two threats—one-hour film processing and digital cameras—which
eventually stole Polaroid’s market share? Would they have understood that their custom-
ers, people who want instant access to their pictures, would be the first to try these alter-
natives? Could the company have found a way to compete with one-hour film processing
and the digital camera to save Polaroid?
Many organizations face the same dilemma as Polaroid—what’s best for the current
business might not be what’s best for it in the long term. Some observers of our business
environment have an ominous vision of the future—digital Darwinism. Digital Darwinism
implies that organizations that cannot adapt to the new demands placed on them for sur-
viving in the information age are doomed to extinction.
Disruptive versus Sustaining Technology
A disruptive technology is a new way of doing things that initially does not meet the needs
of existing customers. Disruptive technologies tend to open new markets and destroy old
ones. A sustaining technology, on the other hand, produces an improved product cus-
tomers are eager to buy, such as a faster car or larger hard drive. Sustaining technolo-
gies tend to provide us with better, faster, and cheaper products in established markets.
Incumbent companies most often lead sustaining technology to market, but they virtually
never lead in markets opened by disruptive technologies. Figure 3.1 positions companies
expecting future growth from new investments (disruptive technology) and companies
expecting future growth from existing investments (sustaining technology). 3
Disruptive technologies typically enter the low end of the marketplace and eventually
evolve to displace high-end competitors and their reigning technologies. Sony is a perfect
example. Sony started as a tiny company that built portable, battery-powered transistor
radios. The sound quality was poor, but customers were willing to overlook that for the
convenience of portability. With the experience and revenue stream from the portables,
Sony improved its technology to produce cheap, low-end transistor amplifiers that were
suitable for home use and invested those revenues in improving the technology further,
which produced still-better radios. 4
The Innovator’s Dilemma, a book by Clayton M. Christensen, discusses how estab-
lished companies can take advantage of disruptive technologies without hindering
LO 3.1: Compare disruptive and
sustaining technologies, and explain
how the Internet and WWW caused
business disruption.
baL76892_ch03_090-135.indd 94baL76892_ch03_090-135.indd 94 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
95Business Driven MIS Module 1
existing relationships with customers, partners, and stakeholders. Xerox, IBM, Sears,
and DEC all listened to existing customers, invested aggressively in technology, had their
competitive antennae up, and still lost their market-dominant positions. They may have
placed too much emphasis on satisfying customers’ current needs, while neglecting new
disruptive technology to meet customers’ future needs and thus losing market share.
Figure 3.2 highlights several companies that launched new businesses by capitalizing on
disruptive technologies. 5
The Internet and World Wide Web—The Ultimate
Business Disruptors
The Internet is a massive network that connects computers all over the world and allows
them to communicate with one another. Computers connected via the Internet can send
and receive information including text, graphics, voice, video, and software. Originally
the Internet was essentially an emergency military communications system operated
by the U.S. Department of Defense Advanced Research Project Agency (DARPA), which
Ex
pe
ct
ed
R
et
ur
ns
o
n
N
ew
In
ve
st
m
en
ts
Expected Returns on Existing Investments
100
80
60
40
20
10080604020
Dell
Johnson & Johnson
Procter & Gamble
Walmart
Phillips Petroleum
General Motors
Sears
Home Depot
Cisco
FIGURE 3.1
Disruptive and Sustaining
Technologies
FIGURE 3.2
Companies That Capitalized
on Disruptive Technologies
Company Disruptive Technology
Apple iPod, iPhone, iPad
Charles Schwab Online brokerage
Hewlett-Packard Microprocessor-based computers, ink-jet printers
IBM Minicomputers; personal computers
Intel Low-end microprocessors
Intuit QuickBooks software; TurboTax software; Quicken software
Microsoft Internet-based computing; operating system software; SQL and
Access database software
Oracle Database software
Quantum 3.5-inch disks
Sony Transistor-based consumer electronics
baL76892_ch03_090-135.indd 95baL76892_ch03_090-135.indd 95 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
96 Chapter 3 Ebusiness: Electronic Business Value
called the network ARPANET. No one foresaw the dramatic impact it would have on both
business and personal communications. In time, all U.S. universities that had defense-
related funding installed ARPANET computers, forming the first official Internet network.
As users began to notice the value of electronic communications, the purpose of the net-
work started shifting from a military pipeline to a communications tool for scientists.
Millions of corporate, educational, and research networks now connect billions of
computer systems and users in more than 200 countries. Internet users are expected to
top the 2 billion mark, about one-third of the world’s population. 6
Although the Internet was an excellent communication tool for scientists and govern-
ment officials, it was technically challenging for everyday people to operate. This changed
with the inventions of the World Wide Web and web browsers. The World Wide Web (WWW)
provides access to Internet information through documents including text, graphics, audio,
and video files that use a special formatting language called HTML. Hypertext markup
language (HTML) links documents, allowing users to move from one to another simply by
clicking on a hot spot or link. Web browsers, such as Internet Explorer or Mozilla’s Firefox,
allow users to access the WWW. Hypertext transport protocol (HTTP) is the Internet pro-
tocol web browsers use to request and display web pages using universal resource locators.
A universal resource locator (URL) is the address of a file or resource on the web such
as www.apple.com. A domain name identifies a URL address and in the previous example
apple.com is the domain name. URLs use domain names to identify particular websites.
Domain name hosting (web hosting) is a service that allows the owner of a domain name
to maintain a simple website and provide email capacity. An applet is a program that runs
within another application such as a website.
Notice that the Internet and the World Wide Web are not synonymous. The WWW is
just one part of the Internet, and its primary use is to correlate and disseminate informa-
tion. The Internet includes the WWW and also other forms of communication systems
such as email. Figure 3.3 lists the reasons for the massive growth of the WWW. 7
Web 1.0: The Catalyst for Ebusiness
As people began learning about the WWW and the Internet, they understood that it
enabled a company to communicate with anyone, anywhere, at anytime, creating a
new way to participate in business. The competitive advantages for first movers would
be enormous, thus spurring the beginning of the Web 1.0 Internet boom. Web 1.0 (or
Business 1.0) is a term to refer to the World Wide Web during its first few years of
operation between 1991 and 2003. Ecommerce is the buying and selling of goods and
services over the Internet. Ecommerce refers only to online transactions. Ebusiness
includes ecommerce along with all activities related to internal and external busi-
ness operations such as servicing customer accounts, collaborating with partners, and
exchanging real-time information. During Web 1.0, entrepreneurs began creating the
first forms of ebusiness.
Ebusiness opened up a new marketplace for any company willing to move its busi-
ness operations online. A paradigm shift occurs when a new radical form of business
enters the market that reshapes the way companies and organizations behave. Ebusi-
ness created a paradigm shift, transforming entire industries and changing enterprise-
wide business processes that fundamentally rewrote traditional business rules. Deciding
not to make the shift to ebusiness proved fatal for many companies (see Figure 3.4 for an
overview of industries revamped by the disruption of ebusiness.) 8
FIGURE 3.3
Reasons for Growth of the World
Wide Web
The microcomputer revolution made it possible for an average person to own a computer.
Advancements in networking hardware, software, and media made it possible for business computers to be
connected to larger networks at a minimal cost.
Browser software such as Microsoft’s Internet Explorer and Netscape Navigator gave computer users an
easy-to-use graphical interface to find, download, and display web pages.
The speed, convenience, and low cost of email have made it an incredibly popular tool for business and personal
communications.
Basic web pages are easy to create and extremely flexible.
baL76892_ch03_090-135.indd 96baL76892_ch03_090-135.indd 96 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
97Business Driven MIS Module 1
BUSINESS DRIVEN ETHICS AND SECURITY
Did you know you can make a living naming things? Eli Altman has been nam-
ing things since he was six years old and has named more than 400 companies
and brands while working for A Hundred Monkeys, a branding consulting com-
pany. Altman recently noticed an unfamiliar trend in the industry: nonsensical
names such as Flickr, Socializr, Zoomr, Rowdii, Yuuguu, and Oooooc. Why are
names like this becoming popular?
The reason is “domain squatting” or “cyber squatting,” the practice of buy-
ing a domain to profit from a trademarked name. For example, if you wanted to
start a business called Drink, chances are a domain squatter has already pur-
chased drink.com and is just waiting for you to pay big bucks for the right to buy
it. Domain squatting is illegal and outlawed under the 1999 Anticybersquatting
Consumer Protection Act. 9
Do you agree that domain squatting should be illegal? Why or why not? If
you were starting a business and someone were squatting on your domain,
what would you do?
Unethical
Disruption
APPLY YOUR KNOWLEDGE
FIGURE 3.4
Ebusiness Disruption of
Traditional Industries
Industry Business Changes Due to Technology
Auto AutoTrader.com is the world’s largest used-car marketplace, listing millions
of cars from both private owners and dealers. AutoTrader.com actually helps
to increase used-car dealer’s business as it drives millions of qualified leads
(potential used-car buyers) to participating automotive dealers and private
sellers.
Publishing With the Internet, anyone can publish online content. Traditionally, publishers
screened many authors and manuscripts and selected those that had the
best chances of succeeding. Lulu.com turned this model around by providing
self-publishing along with print-on-demand capabilities.
Education and Training Continuing medical education is costly, and just keeping up-to-date with
advances often requires taking training courses and traveling to conferences.
Now continuing education in many fields is moving online, and by 2016 over
50 percent of doctors will be building their skills through online learning.
Companies such as Cisco save millions by moving training to the Internet.
Entertainment The music industry was hit hard by ebusiness, and online music traders such
as iTunes average billions of annual downloads. Unable to compete with
online music, the majority of record stores closed. The next big entertainment
industry to feel the effects of ebusiness will be the multibillion-dollar movie
business. Video rental stores are closing their doors as they fail to compete
with online streaming and home rental delivery companies such as Netflix.
Financial Services Nearly every public efinance company makes money, with online mortgage
service Lending Tree leading the pack. Processing online mortgage applica-
tions is over 50 percent cheaper for customers.
Retail Forrester Research predicts ebusiness retail sales will grow at a 10 percent
annual growth rate through 2014. It forecasts U.S. online retail sales will be
nearly $250 billion, up from $155 billion in 2009. Online retail sales were
recently up 11 percent, compared to 2.5 percent for all retail sales.
Travel Travel site Expedia.com is now the biggest leisure-travel agency, with higher
profit margins than even American Express. The majority of travel agencies
closed as a direct result of ebusiness.
baL76892_ch03_090-135.indd 97baL76892_ch03_090-135.indd 97 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
98 Chapter 3 Ebusiness: Electronic Business Value
ADVANTAGES OF EBUSINESS
Both individuals and organizations have embraced ebusiness to enhance productiv-
ity, maximize convenience, and improve communications. Companies today need to
deploy a comprehensive ebusiness strategy, and business students need to understand
its advantages, outlined in Figure 3.5 . Let’s look at each.
Expanding Global Reach
Easy access to real-time information is a primary benefit of ebusiness. Information
richness refers to the depth and breadth of details contained in a piece of textual,
graphic, audio, or video information. Information reach measures the number of peo-
ple a firm can communicate with all over the world. Buyers need information richness
to make informed purchases, and sellers need information reach to properly market
and differentiate themselves from the competition.
Ebusinesses operate 24 hours a day, 7 days a week. This availability directly reduces
transaction costs, since consumers no longer have to spend a lot of time researching
purchases or traveling great distances to make them. The faster delivery cycle for online
sales helps strengthen customer relationships, improving customer satisfaction and ulti-
mately sales.
A firm’s website can be the focal point of a cost-effective communications and mar-
keting strategy. Promoting products online allows the company to precisely target its
customers whether they are local or around the globe. A physical location is restricted by
size and limited to those customers who can get there, while an online store has a global
marketplace with customers and information seekers already waiting in line.
Opening New Markets
Ebusiness is perfect for increasing niche-product sales. Mass customization is the abil-
ity of an organization to tailor its products or services to the customers’ specifications.
For example, customers can order M&M’s in special colors or with customized sayings
such as “Marry Me.” Personalization occurs when a company knows enough about a
customer’s likes and dislikes that it can fashion offers more likely to appeal to that per-
son, say by tailoring its website to individuals or groups based on profile information,
demographics, or prior transactions. Amazon uses personalization to create a unique
portal for each of its customers.
Chris Anderson, editor-in-chief of Wired magazine, describes niche-market ebusi-
ness strategies as capturing the long tail, referring to the tail of a typical sales curve.
This strategy demonstrates how niche products can have viable and profitable business
models when selling via ebusiness. In traditional sales models, a store is limited by shelf
space when selecting products to sell. For this reason, store owners typically purchase
products that will be wanted or needed by masses, and the store is stocked with broad
products as there is not room on the shelf for niche products that only a few custom-
ers might purchase. Ebusinesses such as Amazon and eBay eliminated the shelf-space
dilemma and were able to offer infinite products.
LO 3.2: Describe ebusiness and its
associated advantages.
FIGURE 3.5
Ebusiness Advantages
• Expanding global reach
• Opening new markets
• Reducing costs
• Improving operations
• Improving effectiveness
Ebusiness
Advantages
baL76892_ch03_090-135.indd 98baL76892_ch03_090-135.indd 98 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
99Business Driven MIS Module 1
Netflix offers an excellent example of the long tail. Let’s assume that an average Block-
buster store maintains 3,000 movies in its inventory, whereas Netflix, without physical
shelf limitations, can maintain 100,000 movies in its inventory. Looking at sales data,
the majority of Blockbuster’s revenue comes from new releases that are rented daily,
whereas older selections are rented only a few times a month and don’t repay the cost
of keeping them in stock. Thus Blockbuster’s sales tail ends at title 3,000 (see Figure 3.6 )
However, Netflix, with no physical limitations, can extend its tail beyond 100,000 (and
with streaming video perhaps 200,000). By extending its tail, Netflix increases sales, even
if a title is rented only a few times. 10
Intermediaries are agents, software, or businesses that provide a trading infrastruc-
ture to bring buyers and sellers together. The introduction of ebusiness brought about
disintermediation, which occurs when a business sells directly to the customer online
and cuts out the intermediary (see Figure 3.7 ). This business strategy lets the company
shorten the order process and add value with reduced costs or a more responsive and
efficient service. The disintermediation of the travel agent occurred as people began
to book their own vacations online, often at a cheaper rate. At Lulu.com anyone can
FIGURE 3.7
Business Value of
Disintermediation
Manufacturer
IBM
Distributor Retailer Customer
Dell
Direct
Dell
Walmart
$1,200
$1,000
$800
FIGURE 3.6
The Long Tail
Products
Long tail
Head
Po
pu
la
rit
y
The more intermediaries
that are cut from the
distribution chain, the
lower the product price.
When Dell decided to sell
its PCs through Walmart
many were surprised,
because Dell’s direct-
to-customer sales model
was the competitive
advantage that had kept
Dell the market leader
for years.
baL76892_ch03_090-135.indd 99baL76892_ch03_090-135.indd 99 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
100 Chapter 3 Ebusiness: Electronic Business Value
publish and sell print-on-demand books, online music, and custom calendars, making
the publisher obsolete. 11
In reintermediation, steps are added to the value chain as new players find ways to
add value to the business process. Levi Strauss originally thought it was a good business
strategy to limit all online sales to its own website. A few years later, the company real-
ized it could gain a far larger market share by allowing all retailers to sell its products
directly to customers. As ebusiness matures it has become evident that to serve certain
markets in volume, some reintermediation may be desirable. Cybermediation refers to
the creation of new kinds of intermediaries that simply could not have existed before
the advent of ebusiness, including comparison-shopping sites such as Kelkoo and bank
account aggregation services such as Citibank. 12
Reducing Costs
Operational benefits of ebusiness include business processes that require less time and
human effort or can be eliminated. Compare the cost of sending out 100 direct mail-
ings (paper, postage, labor) to the cost of a bulk email campaign. Think about the cost of
renting a physical location and operating phone lines versus the cost of maintaining an
online site. Switching to an ebusiness model can eliminate many traditional costs asso-
ciated with communicating by substituting systems, such as Live Help, that let custom-
ers chat live with support or sales staff.
Online air travel reservations cost less than those booked over the telephone. Online
ordering also offers the possibility of merging a sales order system with order fulfillment
and delivery so customers can check the progress of their orders at all times. Ebusinesses
can also inexpensively attract new customers with innovative marketing and retain pres-
ent customers with improved service and support. 13
One of the most exciting benefits of ebusiness is its low start-up costs. Today, anyone
can start an ebusiness with just a website and a great product or service. Even a dog-
walking operation can benefit from being an ebusiness.
Improving Operations
Ebusiness has had some of its biggest impacts on customer service. Communication is
often faster, more available, and more effective, encouraging customers to learn more
about the product. Customers can often help themselves, using the content richness
only a website can provide, and they can both shop and pay online without having to
leave the house. Companies can also use email, special messages, and private password
access to special areas for top customers.
Improving Effectiveness
Just putting up a simple website does not create an ebusiness. Ebusiness websites must
create buzz, be innovative, add value, and provide useful information. In short, they
must build a sense of community and collaboration.
MIS measures of efficiency, such as the amount of traffic on a site, don’t tell the whole
story. They do not necessarily indicate large sales volumes, for instance. Many websites
with lots of traffic have minimal sales. The best way to measure ebusiness success is to
use effectiveness MIS metrics, such as the revenue generated by web traffic, number of
new customers acquired by web traffic, and reductions in customer service calls result-
ing from web traffic.
Interactivity measures advertising effectiveness by counting visitor interactions with
the target ad, including time spent viewing the ad, number of pages viewed, and num-
ber of repeat visits to the advertisement. Interactivity measures are a giant step forward
for advertisers, since traditional advertising methods—newspapers, magazines, radio,
and television—provide few ways to track effectiveness. Figure  3.8 displays the ebusi-
ness marketing initiatives allowing companies to expand their reach while measuring
effectiveness. 14
The ultimate outcome of any advertisement is a purchase. Organizations use met-
rics to tie revenue amounts and number of new customers created directly back to the
baL76892_ch03_090-135.indd 100baL76892_ch03_090-135.indd 100 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
101Business Driven MIS Module 1
websites or banner ads. Through clickstream data they can observe the exact pattern of
a consumer’s navigation through a site. Figure 3.9 displays different types of clickstream
metrics, and Figure 3.10 provides definitions of common metrics based on clickstream
data. To interpret such data properly, managers try to benchmark against other com-
panies. For instance, consumers seem to visit their preferred websites regularly, even
checking back multiple times during a given session. 15
THE FOUR EBUSINESS MODELS
A business model is a plan that details how a company creates, delivers, and generates
revenues. Some models are quite simple: A company produces a good or service and sells
it to customers. If the company is successful, sales exceed costs and the company gener-
ates a profit. Other models are less straightforward, and sometimes it’s not immediately
clear who makes money and how much. Radio and network television are broadcast free
to anyone with a receiver, for instance; advertisers pay the costs of programming.
The majority of online business activities consist of the exchange of products and services
either between businesses or between businesses and consumers. An ebusiness model is a
plan that details how a company creates, delivers, and generates revenues on the Internet.
LO 3.3: Compare the four ebusiness
models.
Marketing via Ebusiness
An associate (affiliate) program allows a business to generate commissions or referral fees when a customer visiting its website clicks on a link to
another merchant’s website. For example, if a customer to a company website clicks on a banner ad to another vendor’s website, the company will
receive a referral fee or commission when the customer performs the desired action, typically making a purchase or completing a form.
A banner ad is a box running across a website that advertises the products and services of another business, usually another ebusiness. The banner
generally contains a link to the advertiser’s website. Advertisers can track how often customers click on a banner ad resulting in a click-through to
their website. Often the cost of the banner ad depends on the number of customers who click on the banner ad. Web-based advertising services can
track the number of times users click the banner, generating statistics that enable advertisers to judge whether the advertising fees are worth pay-
ing. Banner ads are like living, breathing classified ads. Tracking the number of banner ad clicks is an excellent way to understand the effectiveness
of the ad on the website.
A click-through is a count of the number of people who visit one site and click on an advertisement that takes them to the site of the advertiser.
Tracking effectiveness based on click-throughs guarantees exposure to target ads; however, it does not guarantee that the visitor liked the ad, spent
any substantial time viewing the ad, or was satisfied with the information contained in the ad.
A cookie is a small file deposited on a hard drive by a website containing information about customers and their browsing activities. Cookies allow
websites to record the comings and goings of customers, usually without their knowledge or consent.
A pop-up ad is a small web page containing an advertisement that appears outside of the current website loaded in the browser. A pop-under ad is
a form of a pop-up ad that users do not see until they close the current web browser screen.
Viral marketing is a technique that induces websites or users to pass on a marketing message to other websites or users, creating exponential
growth in the message’s visibility and effect. One example of successful viral marketing is Hotmail, which promotes its service and its own advertis-
ers’ messages in every user’s email notes. Viral marketing encourages users of a product or service supplied by an ebusiness to encourage friends
to join. Viral marketing is a word-of-mouth type advertising program.
FIGURE 3.8
Marketing Received Tremendous
Benefits from Ebusiness
FIGURE 3.9
Clickstream Data Metrics Types of Clickstream Data Metrics
The number of page views (i.e., the number of times a particular page has been presented to a visitor).
The pattern of websites visited, including most frequent exit page and most frequent prior website.
Length of stay on the website.
Dates and times of visits.
Number of registrations filled out per 100 visitors.
Number of abandoned registrations.
Demographics of registered visitors.
Number of customers with shopping carts.
Number of abandoned shopping carts.
baL76892_ch03_090-135.indd 101baL76892_ch03_090-135.indd 101 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
102 Chapter 3 Ebusiness: Electronic Business Value
Dot-com was the original term for a company operating on the Internet. Ebusiness mod-
els fall into one of the four categories: (1) business-to-business, (2) business-to-consumer,
(3) consumer-to-business, and (4) consumer-to-consumer (see Figure 3.11 ).
Business-to-Business (B2B)
Business-to-business (B2B) applies to businesses buying from and selling to each other
over the Internet. Examples include medical billing service, software sales and licens-
ing, and virtual assistant businesses. B2B relationships represent 80 percent of all online
business and are more complex with greater security needs than the other types. B2B
examples include Oracle and SAP.
Electronic marketplaces, or emarketplaces, are interactive business communities
providing a central market where multiple buyers and sellers can engage in ebusiness
activities. By tightening and automating the relationship between the two parties, they
create structures for conducting commercial exchange, consolidating supply chains,
and creating new sales channels.
Business-to-Consumer (B2C)
Business-to-consumer (B2C) applies to any business that sells its products or services
directly to consumers online. Carfax offers car buyers detailed histories of used vehicles
for a fee. An eshop, sometimes referred to as an estore or etailer, is an online version
METRICS MEASURING WEBSITE SUCCESS
Website Visit Metrics
Stickiness (visit duration time) The length of time a visitor spends on a website.
Raw visit depth (total web pages
exposure per session)
The total number of pages a visitor is exposed to during a single visit to a website.
Visit depth (total unique web pages
exposure per session)
The total number of unique pages a visitor is exposed to during a single visit to a website.
Website Visitor Metrics
Unidentified visitor A visitor is an individual who visits a website. An “unidentified visitor” means that no information about
that visitor is available.
Unique visitor A unique visitor is one who can be recognized and counted only once within a given period of time.
Identified visitor An ID is available that allows a user to be tracked across multiple visits to a website.
Website Hit Metrics
Hits When visitors reach a website, their computer sends a request to the site’s computer server to begin dis-
playing pages. Each element of a requested page is recorded by the website’s server log file as a “hit.”
FIGURE 3.10
Website Metrics
FIGURE 3.11
Ebusiness Models
Ebusiness Term Definition
Business-to-
business (B2B)
Business-to-
consumer (B2C)
Consumer-to-
business (C2B)
Consumer-to-
consumer (C2C)
Applies to businesses buying from and selling
to each other over the Internet.
Applies to any business that sells its products
or services to consumers over the Internet.
Applies to any consumer that sells a product or
service to a business over the Internet.
Applies to sites primarily offering goods and
services to assist consumers interacting with
each other over the Internet.
Business
Business Consumer
Consumer
B2B
C2B
B2C
C2C
baL76892_ch03_090-135.indd 102baL76892_ch03_090-135.indd 102 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
103Business Driven MIS Module 1
of a retail store where customers can shop at any hour. It can be an extension of an
existing store such as The Gap or operate only online such as Amazon.com. There are
three ways to operate as a B2C: brick-and-mortar, click-and-mortar, and pure play (see
Figure 3.12 ).
Consumer-to-Business (C2B)
Consumer-to-business (C2B) applies to any consumer who sells a product or service
to a business on the Internet. One example is customers of Priceline.com, who set their
own prices for items such as airline tickets or hotel rooms and wait for a seller to decide
whether to supply them. The demand for C2B ebusiness will increase over the next few
years due to customers’ desire for greater convenience and lower prices.
Consumer-to-Consumer (C2C)
Consumer-to-consumer (C2C) applies to customers offering goods and services to each
other on the Internet. A good example of a C2C is an auction where buyers and sellers
solicit consecutive bids from each other and prices are determined dynamically. Craigslist
and eBay are two examples of successful C2C websites, linking like-minded buyers with
sellers. Other types of online auctions include forward auctions where sellers market to
many buyers and the highest bid wins, and reverse auctions where buyers select goods
and services from the seller with the lowest bid.
Ebusiness Forms and Revenue-Generating Strategies
As more and more companies began jumping on the ebusiness bandwagon new forms
of ebusiness began to emerge (see Figure 3.13 ). Many of the new forms of ebusiness went
to market without clear strategies on how they were going to generate revenue. Google
is an excellent example of an ebusiness that did not figure out a way to generate profits
until many years after its launch. 16
Google’s primary line of business is its search engine; however, the company does
not generate revenue from people using its site to search the Internet. It generates
revenue from the marketers and advertisers that pay to place their ads on the site.
About 200 million times each day, people from all over the world access Google to
perform searches. AdWords, a part of the Google site, allows advertisers to bid on
common search terms. The advertisers simply enter in the keywords they want to bid
FIGURE 3.12
Forms of Business-to-Consumer
Operations
Brick-and-Mortar Business
A business that operates in
a physical store without an
Internet presence.
Example: T.J. Maxx
Pure-Play (Virtual) Business
A business that operates on
the Internet only without a
physical store.
Example: Google
Click-and-Mortar Business
A business that operates
in a physical store and on
the Internet.
Example: Barnes & Noble
baL76892_ch03_090-135.indd 103baL76892_ch03_090-135.indd 103 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
104 Chapter 3 Ebusiness: Electronic Business Value
on and the maximum amounts they want to pay per click per day. Google then deter-
mines a price and a search ranking for those keywords based on how much other
advertisers are willing to pay for the same terms. Pricing for keywords can range from
5 cents to $10 a click. Paid search is the ultimate in targeted advertising because con-
sumers type in exactly what they want. A general search term such as tropical vaca-
tion costs less than a more specific term such as Hawaiian vacation. Whoever bids
FIGURE 3.13
Ebusiness Forms Form Description Examples
Content providers Generate revenues by providing digital
content such as news, music, photos,
or videos.
Netflix.com , iTunes.com , CNN.com
Infomediaries Provide specialized information on
behalf of producers of goods and
services and their potential customers
Edmunds.com , BizRate.com ,
Bloomberg.com , Zillow.com
Online marketplaces Bring together buyers and sellers of
products and services.
Amazon.com , eBay.com , Priceline.com
Portals Operate central website for users to
access specialized content and other
services.
Google.com , Yahoo.com , MSN.com
Service providers Provide services such as photo shar-
ing, video sharing, online backup and
storage.
Flickr.com , Mapquest.com ,
YouTube.com
Transaction brokers Process online sales transactions. Etrade.com , Charlesschwab.com ,
Fidelity.com
FIGURE 3.14
Different Forms of Searching
Search Engine
Search Engine
Ranking
Search
Optimization
Pay Per Click
Pay Per Call
Pay Per
Conversion
baL76892_ch03_090-135.indd 104baL76892_ch03_090-135.indd 104 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
105Business Driven MIS Module 1
the most for a term appears in a sponsored advertisement link either at the top or
along the side of the search-results page. 17
A search engine is website software that finds other pages based on keyword matching
similar to Google. Search engine ranking evaluates variables that search engines use to
determine where a URL appears on the list of search results. Search engine optimization
(SEO) combines art along with science to determine how to make URLs more attractive
to search engines resulting in higher search engine ranking (see Figure 3.14 ). The bet-
ter the SEO, the higher the ranking for a website in the list of search engine results. SEO
is critical because most people only view the first few pages of a search result. After that
a person is more inclined to begin a new search than review pages and pages of search
results. Websites can generate revenue through:
■ Pay-per-click : generates revenue each time a user clicks on a link to a retailer’s
website.
■ Pay-per-call : generates revenue each time a user clicks on a link that takes the user
directly to an online agent waiting for a call.
■ Pay-per-conversion : generates revenue each time a website visitor is converted to a
customer.
Ebusinesses must have a revenue model, or a model for making money. For instance,
will it accept advertising, or sell subscriptions or licensing rights? Figure 3.15 lists the dif-
ferent benefits and challenges of various ebusiness revenue models. 18
BUSINESS DRIVEN STARTUP
Rich Aberman and Bill Clerico found themselves in the difficult position of
deciding whether to graduate from college and pursue their dreams of build-
ing their own company or heading off to graduate school and entry-level jobs.
Aberman choose to head off to law school while Clerico choose an entry-level
job as an investment banker. After several months they both decided that it was
now or never if they truly wanted to build their dream business as they were
both becoming more and more comfortable with their new lifestyles. Obviously,
it would become harder and harder to leave their comfortable positions for the
uncertainty of being an entrepreneur.
Aberman left law school and Clerico quit his job and the pair cofounded
WePay, an online funds management company. WePay allows individuals and
groups all over the world to establish an account and collect money in a vari-
ety of ways—from paper checks to credit cards—and then use a debit card to
spend the money in the account. WePay collects transaction fees ranging from
50 cents to 3 percent of credit card payments. Luckily, their decision paid off
and a little over a year after founding the company, Aberman and Clerico had
raised nearly $2 million from high-profile Internet investors. WePay boasts sev-
eral thousand customers ranging from sports teams to fraternities to groups of
roommates managing rent and utilities. 19
Have you thought of starting your own business? What are the advantages
and challenges associated with building your own business early in your
career? Research the Internet and find three examples of highly successful col-
lege start-ups. What do you think were the primary reasons the start-ups found
success? What are the advantages of starting your own business while you are
still in college? What are a few of the challenges you might face if you choose to
start your own business today?
Go for It!
APPLY YOUR KNOWLEDGE
baL76892_ch03_090-135.indd 105baL76892_ch03_090-135.indd 105 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
106 Chapter 3 Ebusiness: Electronic Business Value
EBUSINESS TOOLS FOR CONNECTING
AND COMMUNICATING
As firms began to move online, more MIS tools were created to support ebusiness pro-
cesses and requirements. The tools supporting and driving ebusiness are highlighted in
Figure 3.16 and covered below in detail.
Email
Email, short for electronic mail, is the exchange of digital messages over the Internet.
No longer do business professionals have to wait for the mail to receive important docu-
ments as email single-handedly increased the speed of business by allowing the transfer
of documents with the same speed as the telephone. Its chief business advantage is the
ability to inform and communicate with many people simultaneously, immediately, and
with ease. There are no time or place constraints, and users can check, send, and view
emails whenever they require.
An Internet service provider (ISP) is a company that provides access to the Internet
for a monthly fee. Major ISPs in the United States include AOL, AT&T, Comcast, Earthlink,
and Netzero, as well as thousands of local ISPs including regional telephone companies.
Instant Messaging
Real-time communication occurs when a system updates information at the same rate it
receives it. Email was a great advancement over traditional communication methods such
as the U.S. mail, but it did not operate in real time. Instant messaging (IMing) is a service
that enables instant or real-time communication between people. Businesses immedi-
ately saw what they could do:
■ Answer simple questions quickly and easily.
■ Resolve questions or problems immediately.
LO 3.4: Describe the six ebusiness
tools for connecting and
communicating.
FIGURE 3.15
Ebusiness Revenue Models Ebusiness
Revenue Model Benefits Challenges
Advertising fees ■ Well-targeted advertisements can be
perceived as value-added content by
trading participants.
■ Easy to implement
■ Limited revenue potential
■ Overdone or poorly targeted adver-
tisements can be disturbing ele-
ments on the website.
License fees ■ Creates incentives to do many
transactions
■ Customization and back-end integra-
tion lead to lock-in of participants.
■ Up-front fee is a barrier to entry for
participants.
■ Price differentiation is complicated.
Subscription fees ■ Creates incentives to do transactions
■ Price can be differentiated.
■ Possibility to build additional revenue
from new user groups
■ Fixed fee is a barrier to entry for
participants.
Transaction fees ■ Can be directly tied to savings (both
process and price savings)
■ Important revenue source when high
level of liquidity (transaction volume)
is reached
■ If process savings are not completely
visible, use of the system is discour-
aged (incentive to move transactions
offline).
■ Transaction fees likely to decrease
with time
Value-added
services fees
■ Service offering can be
differentiated.
■ Price can be differentiated
■ Possibility to build additional revenue
from established and new user
groups (third parties)
■ Cumbersome process for customers
to continually evaluate new services
baL76892_ch03_090-135.indd 106baL76892_ch03_090-135.indd 106 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
107Business Driven MIS Module 1
■ Transmit messages as fast as naturally flowing conversation.
■ Easily hold simultaneous IM sessions with multiple people.
■ Eliminate long-distance phone charges.
■ Quickly identifying which employees are at their computers.
Podcasting
Podcasting converts an audio broadcast to a digital music player. Podcasts can increase
marketing reach and build customer loyalty. Companies use podcasts as marketing
communication channels discussing everything from corporate strategies to detailed
product overviews. The senior executive team can share weekly or monthly pod-
casts featuring important issues or expert briefings on new technical or marketing
developments.
Videoconferencing
A videoconference allows people at two or more locations to interact via two-way video
and audio transmissions simultaneously as well as share documents, data, computer
displays, and whiteboards. Point-to-point videoconferences connect two people, and
multipoint conferences connect more than two people at multiple locations.
Videoconferences can increase productivity because users participate without leav-
ing their offices. It can improve communication and relationships, because partici-
pants see each other’s facial expressions and body language, both important aspects of
communication that are lost with a basic telephone call or email. It also reduces travel
expenses, a big win for firms facing economic challenges. Of course, nothing can replace
meeting someone face-to-face and shaking hands, but videoconferencing offers a viable
and cost-effective alternative.
FIGURE 3.16
Ebusiness Tools
Content
Management
System
Email
Podcasting
Videoconferencing
Instant
Messaging
Web
Conferencing
baL76892_ch03_090-135.indd 107baL76892_ch03_090-135.indd 107 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
108 Chapter 3 Ebusiness: Electronic Business Value
Web Conferencing
Web conferencing, or a webinar, blends videoconferencing with document sharing
and allows the user to deliver a presentation over the web to a group of geographically
dispersed participants. Regardless of the type of hardware or software the attendees are
running, every participant can see what is on anyone else’s screen. Schools use web con-
ferencing tools such as Illuminate Live to deliver lectures to students, and businesses use
tools such as WebEx to demonstrate products. Web conferencing is not quite like being
there, but professionals can accomplish more sitting at their desks than in an airport
waiting to make travel connections.
Content Management Systems
In the fourth century BC Aristotle catalogued the natural world according to a systematic
organization, and the ancient library at Alexandria was reportedly organized by subject,
connecting like information with like. Today content management systems (CMS) help
companies manage the creation, storage, editing, and publication of their website con-
tent. CMSs are user-friendly; most include web-based publishing, search, navigation,
and indexing to organize information; and they let users with little or no technical exper-
tise make website changes.
A search is typically carried out by entering a keyword or phrase (query) into a text
field and clicking a button or a hyperlink. Navigation facilitates movement from one web
page to another. Content management systems play a crucial role in getting site visitors
to view more than just the home page. If navigation choices are unclear, visitors may hit
the “Back” button on their first (and final) visit to a website. One rule of thumb to remem-
ber is that each time a user has to click to find search information, there is a 50 percent
chance the user will leave the website instead. A key principle of good website design,
therefore, is to keep the number of clicks to a minimum.
Taxonomy is the scientific classification of organisms into groups based on similari-
ties of structure or origin. Taxonomies are also used for indexing the content on the web-
site into categories and subcategories of topics. For example, car is a subtype of vehicle.
Every car is a vehicle, but not every vehicle is a car; some vehicles are vans, buses, and
trucks. Taxonomy terms are arranged so that narrower/more specific/“child” terms
fall under broader/more generic/“parent” terms. Information architecture is the set
of ideas about how all information in a given context should be organized. Many com-
panies hire information architects to create their website taxonomies. A well-planned
taxonomy ensures search and navigation are easy and user-friendly. If the taxonomy is
confusing, the site will soon fail.
THE CHALLENGES OF EBUSINESS
Although the benefits of ebusiness are enticing, developing, deploying, and man-
aging ebusiness systems is not always easy. Figure  3.17 lists the challenges facing
ebusiness. 20
LO 3.5: Identify the four challenges
associated with ebusiness.
FIGURE 3.17
Challenges Facing Ebusiness
Identifying
Limited Market
Segments
Managing
Consumer Trust
Ensuring
Consumer
Protection
Adhering to
Taxation Rules
baL76892_ch03_090-135.indd 108baL76892_ch03_090-135.indd 108 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
109Business Driven MIS Module 1
Identifying Limited Market Segments
The main challenge of ebusiness is the lack of growth in some sectors due to product
or service limitations. The online food sector has not grown in sales, in part because
food products are perishable and consumers prefer to buy them at the supermarket
as needed. Other sectors with limited ebusiness appeal include fragile or consumable
goods and highly sensitive or confidential businesses such as government agencies.
Managing Consumer Trust
Trust in the ebusiness exchange deserves special attention. The physical separation of
buyer and seller, the physical separation of buyer and merchandise, and customer per-
ceptions about the risk of doing business online provide unique challenges. Internet
marketers must develop a trustworthy relationship to make that initial sale and generate
customer loyalty. A few ways to build trust when working online include being accessible
and available to communicate in person with your customers; using customers’ testimo-
nials that link to your client website or to provide their contact information; accepting
legitimate forms of payment such as credit cards.
Ensuring Consumer Protection
An organization that wants to dominate with superior customer service as a competi-
tive advantage must not only serve but also protect its customers, guarding them against
unsolicited goods and communication, illegal or harmful goods, insufficient informa-
tion about goods and suppliers, invasion of privacy and misuse of personal information,
and online fraud. System security, however, must not make ebusiness websites inflexible
or difficult to use.
Adhering to Taxation Rules
Many believe that U.S. tax policy should provide a level playing field for traditional retail
businesses, mail-order companies, and online merchants. Yet the Internet marketplace
remains mostly free of traditional forms of sales tax, partly because ecommerce law is
vaguely defined and differs from state to state. For now, companies that operate online
must obey a patchwork of rules about which customers are subject to sales tax on their
purchases and which are not.
section 3.2 Web 2.0: Business 2.0
L E A R N I N G O U T C O M E S
3.6 Explain Web 2.0, and identify its four characteristics.
3.7 Explain how Business 2.0 is helping communities network and collaborate.
3.8 Describe the three Business 2.0 tools for collaborating.
3.9 Explain the three challenges associated with Business 2.0.
3.10 Describe Web 3.0 and the next generation of online business.
WEB 2.0: ADVANTAGES OF BUSINESS 2.0
In the mid-1990s the stock market reached an all-time high as companies took advan-
tage of ebusiness and Web 1.0, and many believed the Internet was the wave of the
future. When new online businesses began failing to meet earning expectations, how-
ever, the bubble burst. Some then believed the ebusiness boom was over, but they could
not have been more wrong.
Web 2.0 (or Business 2.0 ) is the next generation of Internet use—a more mature, dis-
tinctive communications platform characterized by new qualities such as collaboration,
LO 3.6: Explain Web 2.0, and identify
its four characteristics.
baL76892_ch03_090-135.indd 109baL76892_ch03_090-135.indd 109 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
110 Chapter 3 Ebusiness: Electronic Business Value
sharing, and free. Business 2.0 encourages user participation and the formation of
communities that contribute to the content. In Business 2.0, technical skills are no lon-
ger required to use and publish information to the World Wide Web, eliminating entry
barriers for online business.
Traditional companies tended to view technology as a tool required to perform a pro-
cess or activity, and employees picked up information by walking through the office or
hanging out around the water cooler. Business 2.0 technologies provide a virtual envi-
ronment that, for many new employees, is just as vibrant and important as the physical
environment. Figure 3.18 highlights the common characteristics of Web 2.0. 22
BUSINESS DRIVEN GLOBALIZATION
Kiva’s mission is to connect people through lending for the sake of alleviating
poverty. Kiva is a micro-lending online nonprofit organization that enables
individuals to lend directly to entrepreneurs throughout the world. If you want
to participate in Kiva you simply browse the website ( www.kiva.org ) and choose
an entrepreneur that interests you, make a loan, then track your entrepreneur
for the next 6 to 12 months while he or she builds the business and makes the
funds to repay the loan. When the loan is up you can relend the money to some-
one else who is in need. 21
Kiva is an excellent example of blending ethics and information technology.
How is Kiva operating differently than traditional nonprofits? What are the risks
associated with investing in Kiva? When you invest in Kiva you run three pri-
mary risks: entrepreneur risk, local field partner risk, and country risk. Analyze
each of these risks for potential unethical issues that might arise when donating
to Kiva.
Collaborating for
Nonprofits—Kiva
APPLY YOUR KNOWLEDGE
Web 2.0 Characteristics
Content
Sharing
Through Open
Sourcing
Collaboration
Inside the
Organization
User-
Contributed
Content
Collaboration
Outside the
Organization
FIGURE 3.18
Four Characteristics of Web 2.0
baL76892_ch03_090-135.indd 110baL76892_ch03_090-135.indd 110 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
111Business Driven MIS Module 1
Content Sharing Through Open Sourcing
An open system consists of nonproprietary hardware and software based on publicly
known standards that allows third parties to create add-on products to plug into or
interoperate with the system. Thousands of hardware devices and software applications
created and sold by third-party vendors interoperate with computers, such as iPods,
drawing software, and mice.
Source code contains instructions written by a programmer specifying the actions to
be performed by computer software. Open source refers to any software whose source
code is made available free (not on a fee or licensing basis as in ebusiness) for any third
party to review and modify. Business 2.0 is capitalizing on open source software. Mozilla,
for example, offers its Firefox web browser and Thunderbird email software free. Mozilla
believes the Internet is a public resource that must remain open and accessible to all; it
continuously develops free products by bringing together thousands of dedicated volun-
teers from around the world. Mozilla’s Firefox now holds over 20 percent of the browser
market and is quickly becoming a threat to Microsoft’s Internet Explorer. How do open
source software companies generate revenues? Many people are still awaiting an answer
to this very important question. 23
User-Contributed Content
Ebusiness was characterized by a few companies or users posting content for the
masses. Business 2.0 is characterized by the masses posting content for the masses.
User-contributed content (or user-generated content ) is created and updated by many
users for many users. Websites such as Flickr, Wikipedia, and YouTube, for example,
move control of online media from the hands of leaders to the hands of users. Netflix
and Amazon both use user-generated content to drive their recommendation tools, and
websites such as Yelp use customer reviews to express opinions on products and ser-
vices. Companies are embracing user-generated content to help with everything from
marketing to product development and quality assurance.
One of the most popular forms of user-generated content is a reputation system,
where buyers post feedback on sellers. EBay buyers voluntarily comment on the qual-
ity of service, their satisfaction with the item traded, and promptness of shipping. Sell-
ers comment about prompt payment from buyers or respond to comments left by the
buyer. Companies ranging from Amazon to restaurants are using reputation systems to
improve quality and enhance customer satisfaction.
Collaboration Inside the Organization
A collaboration system is a set of tools that supports the work of teams or groups by
facilitating the sharing and flow of information. Business 2.0’s collaborative mind-set
generates more information faster from a wider audience. Collective intelligence is
collaborating and tapping into the core knowledge of all employees, partners, and cus-
tomers. Knowledge can be a real competitive advantage for an organization. The most
common form of collective intelligence found inside the organization is knowledge
management (KM), which involves capturing, classifying, evaluating, retrieving, and
sharing information assets in a way that provides context for effective decisions and
actions. The primary objective of knowledge management is to be sure that a compa-
ny’s knowledge of facts, sources of information, and solutions are readily available to all
employees whenever it is needed. A knowledge management system (KMS) supports
the capturing, organization, and dissemination of knowledge (i.e., know-how) through-
out an organization. KMS can distribute an organization’s knowledge base by intercon-
necting people and digitally gathering their expertise.
A great example of a knowledge worker is a golf caddie. Golf caddies give advice such
as, “The rain makes the third hole play 10 yards shorter.” If a golf caddie is good and
gives accurate advice it can lead to big tips. Collaborating with other golf caddies can
provide bigger tips for all. How can knowledge management make this happen? Caddies
could be rewarded for sharing course knowledge by receiving prizes for sharing knowl-
edge. The course manager could compile all of the tips and publish a course notebook
baL76892_ch03_090-135.indd 111baL76892_ch03_090-135.indd 111 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
112 Chapter 3 Ebusiness: Electronic Business Value
for distribution to all caddies. The goal of a knowledge management system is that every-
one wins. Here the caddies make bigger tips and golfers improve their play by benefiting
from the collaborative experiences of the caddies, and the course owners win as busi-
ness increases.
KM has assumed greater urgency in American business over the past few years as mil-
lions of baby boomers prepare to retire. When they punch out for the last time, the knowl-
edge they gleaned about their jobs, companies, and industries during their long careers
will walk out with them—unless companies take measures to retain their insights.
Explicit and Tacit Knowledge Not all information is valuable. Individuals must
determine what information qualifies as intellectual and knowledge-based assets.
In general, intellectual and knowledge-based assets fall into one of two categories:
explicit or tacit. As a rule, explicit knowledge consists of anything that can be doc-
umented, archived, and codified, often with the help of MIS. Examples of explicit
knowledge are assets such as patents, trademarks, business plans, marketing research,
and customer lists. Tacit knowledge is the knowledge contained in people’s heads.
The challenge inherent in tacit knowledge is figuring out how to recognize, gener-
ate, share, and manage knowledge that resides in people’s heads. While information
technology in the form of email, instant messaging, and related technologies can help
facilitate the dissemination of tacit knowledge, identifying it in the first place can be a
major obstacle.
Collaboration Outside the Organization
The most common form of collective intelligence found outside the organization is
crowdsourcing, which refers to the wisdom of the crowd. The idea that collective intel-
ligence is greater than the sum of its individual parts has been around for a long time
(see Figure 3.19 ). With Business 2.0 the ability to efficiently tap into its power is emerg-
ing. For many years organizations believed that good ideas came from the top. CEOs
collaborated only with the heads of sales and marketing, the quality assurance expert,
or the road warrior salesman. The organization chart governed who should work with
whom and how far up the chain of command a suggestion or idea would travel. With
Business 2.0 this belief is being challenged, as firms capitalize on crowdsourcing by
opening up a task or problem to a wider group to find better or cheaper results from
outside the box.
With Business 2.0, people can be continuously connected, a driving force behind
collaboration. Traditional ebusiness communications were limited to face-to-face
FIGURE 3.19
Crowdsourcing: The Crowd Is
Smarter Than the Individual
baL76892_ch03_090-135.indd 112baL76892_ch03_090-135.indd 112 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
113Business Driven MIS Module 1
conversations and one-way technologies that used asynchronous communications, or
communication such as email in which the message and the response do not occur at
the same time. Business 2.0 brought synchronous communication, or communications
that occur at the same time such as IM or chat. Ask a group of college students when they
last spoke to their parents. For most the answer is less than hour ago, as opposed to the
traditional response of a few days ago. In business too, continuous connections are now
expected in today’s collaborative world.
NETWORKING COMMUNITIES WITH BUSINESS 2.0
Social media refers to websites that rely on user participation and user-contributed
content, such as Facebook, YouTube, and Digg. A social network is an application that
connects people by matching profile information. Providing individuals with the ability
to network is by far one of the greatest advantages of Business 2.0. Social networking is
the practice of expanding your business and/or social contacts by constructing a per-
sonal network (see Figure 3.20 ). Social networking sites provide two basic functions. The
first is the ability to create and maintain a profile that serves as an online identity within
the environment. The second is the ability to create connections between other people
within the network. Social networking analysis (SNA) maps group contacts (personal
and professional) identifying who knows each other and who works together. In a com-
pany it can provide a vision of how employees work together. It can also identify key
experts with specific knowledge such as how to solve a complicated programming prob-
lem or launch a new product.
Business 2.0 simplifies access to information and improves the ability to share it. Instead
of spending $1,000 and two days at a conference to meet professional peers, business
LO 3.7: Explain how Business 2.0 is
helping communities network and
collaborate.
BUSINESS DRIVEN INNOVATION
Deciding whether a given site is Web 1.0 or Web 2.0 is not as straightforward
as it appears. Websites do not have version numbers and many are dynamic
enough to be in “permanent beta testing.” Facebook and MySpace are good
Web 2.0 examples, primarily due to their social networking functions and their
reliance on user-generated content. Some sites are easy to identify as Web 1.0
in their approach: Craigslist, for example, emulates an email list server and has
no public user profiles or dynamic pages. Many other sites are hard to catego-
rize. Amazon.com launched in the mid-1990s and has gradually added features
over time. The principal content (product descriptions) is not user-created, but
much of the site’s value is added by user reviews and ratings. Profiles of users do
exist, but social features such as friend links, although present, are not widely
adopted. 24
Review the following websites and categorize them as Web 1.0, Web 2.0, or
both. Be sure to justify your answer with the characteristics that classify the
website as 1.0, 2.0, or both. Why would certain types of businesses choose to
remain Web 1.0 and not offer collaboration or open source capabilities?
■ www.ebay.com ; www.amazon.com ; www.facebook.com ; www.foursquare.
com ; www.paypal.com ; www.vatican.va ; www.twitter.com ; www.irs.gov ;
www.google.com ; www.youtube.com .
■ For the following be sure to use your personal websites as references. www
.Your college’s website.com ; www.Your Visa Card.com ; www.Your Bank.com
Is It Web 1.0 or
Web 2.0?
APPLY YOUR KNOWLEDGE
baL76892_ch03_090-135.indd 113baL76892_ch03_090-135.indd 113 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
114 Chapter 3 Ebusiness: Electronic Business Value
people can now use social networks such as LinkedIn to meet new contacts for recruiting,
prospecting, and identifying experts on a topic. With executive members from all the For-
tune 500 companies, LinkedIn has become one of the more useful recruiting tools on the
web.
Social networking sites can be especially useful to employers trying to find job can-
didates with unique or highly specialized skill sets that may be harder to locate in larger
communities. Many employers also search social networking sites to find “dirt” and
character references for potential employees. Keep in mind that what you post on the
Internet stays on the Internet. 26
Social Tagging
Tags are specific keywords or phrases incorporated into website content for means of
classification or taxonomy. An item can have one or more tags associated with it, to allow
for multiple browseable paths through the items, and tags can be changed with minimal
effort (see Figure  3.21 ). Social tagging describes the collaborative activity of marking
shared online content with keywords or tags as a way to organize it for future naviga-
tion, filtering, or search. The entire user community is invited to tag, and thus essentially
defines, the content. Flickr allows users to upload images and tag them with appropriate
keywords. After enough people have done so, the resulting tag collection will identify
images correctly and without bias.
Folksonomy is similar to taxonomy except that crowdsourcing determines the tags
or keyword-based classification system. Using the collective power of a community to
identify and classify content significantly lowers content categorization costs, because
there is no complicated nomenclature to learn. Users simply create and apply tags as
they wish. For example, while cell phone manufacturers often refer to their products as
mobile devices, the folksonomy could include mobile phone, wireless phone, smart-
phone, iPhone, BlackBerry, and so on. All these keywords, if searched, should take a user
to the same site. Folksonomies reveal what people truly call things (see Figure 3.22 ). They
have been a point of discussion on the web because the whole point of having a website
is for your customers to find it. The majority of websites are found through search terms
that match the content. 27
A website bookmark is a locally stored URL or the address of a file or Internet page
saved as a shortcut. Social bookmarking allows users to share, organize, search, and
manage bookmarks. Del.icio.us, a website dedicated to social bookmarking, provides
users with a place to store, categorize, annotate, and share favorites. StumbleUpon is
another popular social bookmarking website that allows users to locate interesting
FIGURE 3.20
Social Network Example 25
baL76892_ch03_090-135.indd 114baL76892_ch03_090-135.indd 114 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
115Business Driven MIS Module 1
websites based on their favorite subjects. The more you use the service, the more the
system “learns” about your interests and the better it can show you websites that inter-
est you. StumbleUpon represents a new social networking model in which content finds
the users instead of the other way around. StumbleUpon is all about the users and the
content they enjoy. 28
FIGURE 3.22
Folksonomy Example: The User-
Generated Names for Cellular
Phones Cellular
Phone
Mobile
Phone
BlackBerry
iPhone
Cell
FIGURE 3.21
Social Tagging Occurs When
Many Individuals Categorize
Content
baL76892_ch03_090-135.indd 115baL76892_ch03_090-135.indd 115 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
116 Chapter 3 Ebusiness: Electronic Business Value
BUSINESS 2.0 TOOLS FOR COLLABORATING
Social networking and collaborating are leading businesses in new directions, and
Figure 3.23 provides an overview of the tools that harness the “power of the people,”
allowing users to share ideas, discuss business problems, and collaborate on solutions.
Blogs
A blog, or Web log, is an online journal that allows users to post their own comments,
graphics, and video. Unlike traditional HTML web pages, blog websites let writers
communicate—and reader’s respond—on a regular basis through a simple yet customizable
interface that does not require any programming.
From a business perspective, blogs are no different from marketing channels such as
video, print, audio, or presentations. They all deliver results of varying kinds. Consider
Sun Microsystem’s Jonathan Schwartz and GM’s Bob Lutz, who use their blogs for mar-
keting, sharing ideas, gathering feedback, press response, and image shaping. Starbucks
has developed a blog called My Starbucks Idea, allowing customers to share ideas, tell
Starbucks what they think of other people’s ideas, and join discussions. Blogs are an ideal
mechanism for many businesses since they can focus on topic areas more easily than
traditional media, with no limits on page size, word count, or publication deadline. 29
LO 3.8: Describe the three Business
2.0 tools for collaborating.
BUSINESS DRIVEN DEBATE
Before the Internet, angry customers could write letters or make phone calls,
but their individual power to find satisfaction or bring about change was rela-
tive weak. Now, disgruntled consumers can create a website or upload a video
bashing a product or service, and their efforts can be instantly seen by millions
of people. Though many companies monitor the Internet and try to respond
to such postings quickly, power has clearly shifted to the consumer. Create an
argument for or against the following statement: “Social networking has given
power to the consumer that benefits society and creates socially responsible
corporations.”
Anti-Social
Networking
APPLY YOUR KNOWLEDGE
FIGURE 3.23
Business 2.0 Communication
and Collaboration Tools

• An online journal
that allows users to
post their own
comments, graphics,
and videos

• Popular business
examples include
Sweet Leaf Tea,
Stoneyfield Farm,
Nuts about
Southwest, Disney
Parks
• Collaborative
website that allows
users to add,
remove, and change
content

• Popular business
examples include
Wikipedia, National
Institute of Health,
Intelopedia,
LexisNexis, Wiki for
Higher Education
• Content from
more than one
source to create a
new product or
service
• Examples include
Zillow, Infopedia,
Trendsmap,
SongDNA,
ThisWeKnow
BLOG WIKI MASHUP
baL76892_ch03_090-135.indd 116baL76892_ch03_090-135.indd 116 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
117Business Driven MIS Module 1
Microblogs Microblogging is the practice of sending brief posts (140 to 200 charac-
ters) to a personal blog, either publicly or to a private group of subscribers who can read
the posts as IMs or as text messages. The main advantage of microblogging is that posts
can be submitted by a variety of means, such as instant messaging, email, or the web. By
far the most popular microblogging tool is Twitter, which allows users to send microblog
entries called tweets to anyone who has registered to “follow” them. Senders can restrict
delivery to people they want to follow them or, by default, allow open access. Microblog-
ging is covered in detail in Chapter 7. 30
Real Simple Syndication (RSS) Real Simple Syndication (RSS) is a web format
used to publish frequently updated works, such as blogs, news headlines, audio, and
video, in a standardized format. An RSS document or feed includes full or summarized
text, plus other information such as publication date and authorship. News websites,
blogs, and podcasts use RSS, constantly feeding news to consumers instead of having
them search for it. In addition to facilitating syndication, RSS allows a website’s frequent
readers to track updates on the site.
Wikis
A wiki (the word is Hawaiian for quick) is a type of collaborative web page that allows
users to add, remove, and change content, which can be easily organized and reorga-
nized as required. While blogs have largely drawn on the creative and personal goals
of individual authors, wikis are based on open collaboration with any and everybody.
Wikipedia, the open encyclopedia that launched in 2001, has become one of the 10
most popular web destinations, reaching an estimated 217 million unique visitors a
month. 31
A wiki user can generally alter the original content of any article, while the blog user
can only add information in the form of comments. Large wikis, such as Wikipedia, pro-
tect the quality and accuracy of their information by assigning users roles such as reader,
editor, administrator, patroller, policy maker, subject matter expert, content maintainer,
software developer, and system operator. Access to some important or sensitive Wikipe-
dia material is limited to users in these authorized roles. 32
The network effect describes how products in a network increase in value to users
as the number of users increases. The more users and content managers on a wiki, the
greater the network affect because more users attract more contributors, whose work
attracts more users, and so on. For example, Wikipedia becomes more valuable to users
as the number of its contributors increases.
Wikis internal to firms can be vital tools for collecting and disseminating knowl-
edge throughout an organization, across geographic distances, and between functional
business areas. For example, what U.S. employees call a “sale” may be called “an order
booked” in the United Kingdom, an “order scheduled” in Germany, and an “order pro-
duced” in France. The corporate wiki can answer any questions about a business process
or definition. Companies are also using wikis for documentation, reporting, project man-
agement, online dictionaries, and discussion groups. Of course, the more employees who
use the corporate wiki, the greater the network effect and valued added for the company.
Mashups
A mashup is a website or web application that uses content from more than one source
to create a completely new product or service. The term is typically used in the context
of music; putting Jay-Z lyrics over a Radiohead song makes something old new. The
web version of a mashup allows users to mix map data, photos, video, news feeds, blog
entries, and so on to create content with a new purpose. Content used in mashups is
typically sourced from an application programming interface (API), which is a set of
routines, protocols, and tools for building software applications. A programmer then
puts these building blocks together.
Most operating environments, such as Microsoft Windows, provide an API so that
programmers can write applications consistent with them. Many people experiment-
ing with mashups are using Microsoft, Google, eBay, Amazon, Flickr, and Yahoo APIs,
leading to the creation of mashup editors. Mashup editors are WYSIWYG, or What You
baL76892_ch03_090-135.indd 117baL76892_ch03_090-135.indd 117 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
118 Chapter 3 Ebusiness: Electronic Business Value
See Is What You Get tools. They provide a visual interface to build a mashup, often allow-
ing the user to drag and drop data points into a web application.
Whoever thought technology could help sell bananas? Dole Organic now places
three-digit farm codes on each banana and creates a mashup using Google Earth and
its banana database. Socially and environmentally conscious buyers can plug the num-
bers into Dole’s website and look at a bio of the farm where the bananas were raised.
The site tells the story of the farm and its surrounding community, lists its organic
certifications, posts some photos, and offers a link to satellite images of the farm in
Google Earth. Customers can personally monitor the production and treatment of their
fruit from the tree to the grocer. The process assures customers that their bananas have
been raised to proper organic standards on an environmentally friendly, holistically
minded plantation. 34
THE CHALLENGES OF BUSINESS 2.0
As much as Business 2.0 has positively changed the global landscape of business, a few
challenges remain in open source software, user-contributed content systems, and col-
laboration systems, all highlighted in Figure 3.24 . We’ll briefly describe each one.
Technology Dependence
Many people today expect to be continuously connected, and their dependence on tech-
nology glues them to their web connections for everything from web conferencing for a
university class or work project to making plans with friends for dinner. If a connection
is down, how will they function? How long can people go without checking email, text
messaging, or listening to free music on Pandora or watching on-demand television? As
society becomes more technology-dependent, outages hold the potential to cause ever-
greater havoc for people, businesses, and educational institutions.
LO 3.9: Explain the three challenges
associated with Business 2.0.
BUSINESS DRIVEN MIS
It’s a common, if not a little morbid, practice for news organizations to pre-
pare obituaries well in advance of celebrities’ actual death. So Bloomberg had a
17-page obituary for Apple’s Steve Jobs ready to run on his death; unfortunately,
the obit was accidently published in 2008 on Bloomberg ’s financial website. The
error occurred despite the markers on the story saying “Hold for Release” and
“Do Not Use.”
In addition to publishing the obituary, Bloomberg also accidentally pub-
lished the list of people its reporters should contact when Steve Jobs does
die. That list includes Microsoft founder Bill Gates, former Vice President Al
Gore (a member of Apple’s board of directors), and Google CEO Eric Schmidt.
Bloomberg caught the mistake and pulled the obituary within minutes, but in
today’s instant information culture, the damage was already done. 33
While Jobs was very much alive in 2008, few stockholders may have gone into
cardiac arrest after reading the obituary. What kind of financial impact could a
story like this have on Apple? With so many different forms of collaboration, how
does a company monitor and track each one to ensure the content is error-free?
Once erroneous content is posted to the Internet or written in a text message,
what can a company do to rectify the situation? What types of safeguards can a
company implement to ensure false information is not posted to a wiki or blog?
When Did Steve
Jobs Actually
Pass Away?
APPLY YOUR KNOWLEDGE
baL76892_ch03_090-135.indd 118baL76892_ch03_090-135.indd 118 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
119Business Driven MIS Module 1
Information Vandalism
Open source and sharing are both major advantages of Business 2.0, and ironically they
are major challenges as well. Allowing anyone to edit anything opens the door for indi-
viduals to purposely damage, destroy, or vandalize website content. One of the most
famous examples of wiki vandalism occurred when a false biography entry read that
John Seigenthaler Sr. was assistant to Attorney General Robert F. Kennedy in the early
1960s and was thought to have been directly involved in the assassinations of both Ken-
nedy and his brother, President John F. Kennedy. Seigenthaler did work as an assistant to
Robert Kennedy, but he was never involved in the assassinations. Wiki vandalism is a hot
issue and for this reason wiki software can now store all versions of a web page, track-
ing updates and changes and ensuring the site can be restored to its original form if the
site is vandalized. It can also color-code the background ensuring the user understands
which areas have been validated and which areas have not. The real trick to wiki soft-
ware is to determine which statements are true and which are false, a huge issue when
considering how easy and frequently wiki software is updated and changed. 35
Violations of Copyright and Plagiarism
Online collaboration makes plagiarism as easy as clicking a mouse. Unfortunately a great
deal of copyrighted material tends to find its ways to blogs and wikis where many times
blame cannot be traced to a single person. Clearly stated copyright and plagiarism policies
are a must for all corporate blogs and wikis. These topics are discussed in detail in Chapter 4.
WEB 3.0: DEFINING THE NEXT GENERATION
OF ONLINE BUSINESS OPPORTUNITIES
While Web 1.0 refers to static text-based information websites and Web 2.0 is about user-
contributed content, Web 3.0 is based on “intelligent” web applications using natural lan-
guage processing, machine-based learning and reasoning, and intelligent applications.
Web 3.0 is the next step in the evolution of the Internet and web applications. Business
leaders who explore its opportunities will be the first to market with competitive
advantages.
Web 3.0 offers a way for people to describe information such that computers can start
to understand the relationships among concepts and topics. To demonstrate the power
of Web 3.0, let’s look at a few sample relationships, such as Adam Sandler is a come-
dian, Lady Gaga is a singer, and Hannah is friends with Sophie. These are all examples
of descriptions that can be added to web pages allowing computers to learn about rela-
tionships while displaying the information to humans. With this kind of information in
place, there will be a far richer interaction between people and machines with Web 3.0.
Applying this type of advanced relationship knowledge to a company can create new
opportunities. After all, businesses run on information. Where Web 2.0 brings peo-
ple closer together with information using machines, Web 3.0 brings machines closer
together using information. These new relationships unite people, machines, and infor-
mation so a business can be smarter, quicker, more agile, and more successful.
LO 3.10: Describe Web 3.0 and the
next generation of online business.
FIGURE 3.24
Challenges of Business 2.0
Technology Dependence
Information Vandalism
Violations of Copyright
and Plagiarism
baL76892_ch03_090-135.indd 119baL76892_ch03_090-135.indd 119 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
120 Chapter 3 Ebusiness: Electronic Business Value
One goal of Web 3.0 is to tailor online searches and requests specifically to users’ pref-
erences and needs. For example, instead of making multiple searches, the user might
type a complex sentence or two in a Web 3.0 browser, such as “I want to see a funny
movie and then eat at a good Mexican restaurant. What are my options?” The Web 3.0
browser will analyze the request, search the web for all possible answers, organize the
results, and present them to the user.
Tim Berners-Lee, one of the founders of the Internet, has described the semantic
web as a component of Web 3.0 that describes things in a way that computers can
understand. The semantic web is not about links between web pages; rather it
describes the relationships between things (such as A is a part of B and Y is a member
of Z) and the properties of things (size, weight, age, price). If information about
music, cars, concert tickets, and so on is stored in a way that describes the informa-
tion and associated resource files, semantic web applications can collect information
from many different sources, combine it, and present it to users in a meaningful way.
Although Web 3.0 is still a bit speculative, some topics and features are certain to be
included in it, such as: 36
■ Integration of legacy devices: the ability to use current devices such as iPhones, lap-
tops, and so on, as credit cards, tickets, and reservations tools.
■ Intelligent applications: the use of agents, machine learning, and semantic web con-
cepts to complete intelligent tasks for users.
■ Open ID: the provision of an online identity that can be easily carried to a variety of
devices (cell phones, PCs) allowing for easy authentication across different websites.
■ Open technologies: the design of websites and other software so they can be easily
integrated and work together.
■ A worldwide database: the ability for databases to be distributed and accessed from
anywhere.
Egovernment: The Government Moves Online
Recent business models that have arisen to enable organizations to take advantage of
the Internet and create value are within egovernment. Egovernment involves the use
of strategies and technologies to transform government(s) by improving the delivery of
services and enhancing the quality of interaction between the citizen-consumer within
all branches of government.
One example of an egovernment portal, FirstGov.gov , the official U.S. gateway to
all government information, is the catalyst for a growing electronic government. Its
BUSINESS DRIVEN DISCUSSION
When you are considering connectivity services for your business, you need to
take continuous access and connectivity seriously. What if one of your employ-
ees is about to close a huge multimillion-dollar deal and loses the Internet
connection, jeopardizing the deal? What if a disgruntled employee decides to
post your business’s collective intelligence on an open-source blog or wiki?
What if your patient scheduling software crashes and you have no idea which
patients are scheduled to which operating rooms with which doctors? These
are far worse scenarios than a teenage boy not gaining access to his email or
Facebook page. What management and technical challenges do you foresee as
people and businesses become increasingly dependent on connectivity? What
can managers do to meet these challenges and prevent problems?
Connectivity
Break-Down
APPLY YOUR KNOWLEDGE
baL76892_ch03_090-135.indd 120baL76892_ch03_090-135.indd 120 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
121Business Driven MIS Module 1
powerful search engine and ever-growing collection of topical and customer-focused
links connect users to millions of web pages, from the federal government, to local and
tribal governments, to foreign nations around the world. Figure 3.25 highlights specific
egovernment models.
Mbusiness: Supporting Anywhere Business
Internet-enabled mobile devices are quickly outnumbering personal computers. Mobile
business (or mbusiness, mcommerce ) is the ability to purchase goods and services through
a wireless Internet-enabled device. The emerging technology behind mbusiness is a mobile
device equipped with a web-ready micro-browser that can perform the following services:
■ Mobile entertainment—downloads for music, videos, games, voting, ring tones, as
well as text-based messaging services.
■ Mobile sales/marketing—advertising, campaigns, discounts, promotions, and coupons.
■ Mobile banking—manage accounts, pay bills, receive alerts, and transfer funds.
■ Mobile ticketing—purchase tickets for entertainment, transportation, and parking
including the ability to automatically feed parking meters.
■ Mobile payments—pay for goods and services including in-store purchases, home
delivery, vending machines, taxis, gas, and so on.
Organizations face changes more extensive and far reaching in their implications
than anything since the modern industrial revolution occurred in the early 1900s. Tech-
nology is a primary force driving these changes. Organizations that want to survive must
recognize the immense power of technology, carry out required organizational changes
in the face of it, and learn to operate in an entirely different way.
FIGURE 3.25
Extended Ebusiness Models
Business
Business Consumer
Consumer
B2B
conisint.com
C2B
priceline.com
B2C
dell.com
C2C
ebay.com
Government G2Bexport.gov
G2C
medicare.gov
Government
B2G
lockheedmartin.com
C2G
egov.com
G2G
disasterhelp.gov
Learning Outcome 3.1: Compare disruptive and sustaining technologies, and explain how
the Internet and WWW caused business disruption.
Disruptive technologies offer a new way of doing things that initially does not meet the needs of
existing customers. Disruptive technologies redefine the competitive playing fields of their respective
L E A R N I N G O U T C O M E R E V I E W
baL76892_ch03_090-135.indd 121baL76892_ch03_090-135.indd 121 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
122 Chapter 3 Ebusiness: Electronic Business Value
markets, open new markets and destroy old ones, and cut into the low end of the marketplace and
eventually evolve to displace high-end competitors and their reigning technologies.
Sustaining technologies produce improved products customers are eager to buy, such as a faster
car or larger hard drive. Sustaining technologies tend to provide us with better, faster, and cheaper
products in established markets and virtually never lead in markets opened by new and disruptive
technologies.
The Internet and WWW caused business disruption by allowing people to communicate and
collaborate in ways that were not possible before the information age. The Internet and WWW
completely disrupted the way businesses operate, employees communicate, and products are
developed and sold.
Learning Outcome 3.2: Describe ebusiness and its associated advantages.
Web 1.0 is a term to refer to the World Wide Web during its first few years of operation between 1991
and 2003. Ebusiness includes ecommerce along with all activities related to internal and external
business operations such as servicing customer accounts, collaborating with partners, and exchang-
ing real-time information. During Web 1.0, entrepreneurs began creating the first forms of ebusiness.
Ebusiness advantages include expanding global reach, opening new markets, reducing costs, and
improving operations and effectiveness.
Learning Outcome 3.3: Compare the four ebusiness models.
■ Business-to-business (B2B) applies to businesses buying from and selling to each other over the
Internet.
■ Business-to-consumer (B2C) applies to any business that sells its products or services to con-
sumers over the Internet.
■ Consumer-to-business (C2B) applies to any consumer that sells a product or service to a busi-
ness over the Internet.
■ Consumer-to-consumer (C2C) applies to sites primarily offering goods and services to assist con-
sumers interacting with each other over the Internet.
The primary difference between B2B and B2C are the customers; B2B customers are other busi-
nesses while B2C markets to consumers. Overall, B2B relations are more complex and have higher
security needs; plus B2B is the dominant ebusiness force, representing 80 percent of all online
business.
Learning Outcome 3.4: Describe the six ebusiness tools for connecting
and communicating.
As firms began to move online, more MIS tools were created to support ebusiness processes and
requirements. The ebusiness tools used to connect and communicate include email, instant messag-
ing, podcasting, content management systems, videoconferencing, and web conferencing.
Learning Outcome 3.5: Identify the four challenges associated with ebusiness.
Although the benefits of ebusiness are enticing, developing, deploying, and managing ebusiness
systems is not always easy. The challenges associated with ebusiness include identifying limited
market segments, managing consumer trust, ensuring consumer protection, and adhering to taxa-
tion rules.
Learning Outcome 3.6: Explain Web 2.0, and identify its four characteristics.
Web 2.0, or Business 2.0, is the next generation of Internet use—a more mature, distinctive
communications platform characterized by new qualities such as collaboration, sharing, and free.
Web 2.0 encourages user participation and the formation of communities that contribute to the
content. In Web 2.0, technical skills are no longer required to use and publish information to
baL76892_ch03_090-135.indd 122baL76892_ch03_090-135.indd 122 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
123Business Driven MIS Module 1
the World Wide Web, eliminating entry barriers for online business. The four characteristics of
Web 2.0 include:
■ Content sharing through open sourcing.
■ User-contributed content.
■ Collaboration inside the organization.
■ Collaboration outside the organization.
Learning Outcome 3.7: Explain how Business 2.0 is helping communities network
and collaborate.
A social network is an application that connects people by matching profile information. Providing
individuals with the ability to network is by far one of the greatest advantages of Business 2.0. Social
networking is the practice of expanding your business and/or social contacts by constructing a per-
sonal network. Business 2.0 simplifies the way individuals communicate, network, find employment,
and search for information.
Learning Outcome 3.8: Describe the three Business 2.0 tools for collaborating.
The three tools that harness the “power of the people” for Business 2.0 include blogs, wikis, and
mashups. A blog, or web log, is an online journal that allows users to post their own comments,
graphics, and video. Blog websites let writers communicate—and reader’s respond—on a regular
basis through a simple yet customizable interface that does not require any programming. A wiki is
a type of collaborative web page that allows users to add, remove, and change content, which can
be easily organized and reorganized as required. While blogs have largely drawn on the creative and
personal goals of individual authors, wikis are based on open collaboration with any and everybody.
A mashup is a website or web application that uses content from more than one source to create
a completely new product or service. A mashup allows users to mix map data, photos, video, news
feeds, blog entries, and so on to create content with a new purpose.
Learning Outcome 3.9: Explain the three challenges associated with Business 2.0.
As much as Business 2.0 has positively changed the global landscape of business, a few challenges
remain in open source software, user-contributed content systems, and collaboration systems. These
challenges include individuals forming unrealistic dependencies on technology, vandalism of informa-
tion on blogs and wikis, and the violation of copyrights and plagiarism.
Learning Outcome 3.10: Describe Web 3.0 and the next generation of online business.
Web 3.0 is based on “intelligent” web applications using natural language processing, machine-
based learning and reasoning, and intelligent applications. Web 3.0 is the next step in the evolution of
the Internet and web applications. Business leaders who explore its opportunities will be the first to
market with competitive advantages.
Web 3.0 offers a way for people to describe information such that computers can start to under-
stand the relationships among concepts and topics.
1. Knowledge: Do you consider Pinterest a form of disruptive or sustaining technology?
2. Comprehension: Categorize Pinterest as an example of Web 1.0 (ebusiness) or Web 2.0
(Business 2.0).
3. Application: Describe the ebusiness model and revenue model for Pinterest.
4. Analysis: What is open source software and how could Pinterest take advantage of it?
O P E N I N G C A S E Q U E S T I O N S
baL76892_ch03_090-135.indd 123baL76892_ch03_090-135.indd 123 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
124 Chapter 3 Ebusiness: Electronic Business Value
5. Synthesis: Create a plan for how a start-up company could take advantage of Web 3.0 and gen-
erate the idea for the next great website that is similar to Pinterest.
6. Evaluation: Evaluate the challenges facing Pinterest and identify ways the company can prepare
to face these issues.
Applet, 96
Application programming interface
(API), 117
Asynchronous communication, 113
Blog, or Web log, 116
Business model, 101
Business-to-business (B2B), 102
Business-to-consumer (B2C), 102
Clickstream data, 101
Collaboration system, 111
Collective intelligence, 111
Consumer-to-business (C2B), 103
Consumer-to-consumer (C2C), 103
Content management system
(CMS), 108
Crowdsourcing, 112
Cybermediation, 100
Digital Darwinism, 94
Disintermediation, 99
Disruptive technology, 94
Domain name hosting (web
hosting), 96
Dot-com, 102
Ebusiness, 96
Ebusiness model, 101
Ecommerce, 96
Egovernment, 120
Eshop (estore or etailer), 102
Explicit knowledge, 112
Folksonomy, 114
Hypertext markup language
(HTML), 96
Hypertext transport protocol
(HTTP), 96
Information architecture, 108
Information reach, 98
Information richness, 98
Instant messaging (sometimes
called IM or IMing), 106
Interactivity, 100
Intermediaries, 99
Internet, 95
Internet service provider (ISP), 106
Knowledge management (KM), 111
Knowledge management system
(KMS), 111
Long tail, 98
Mashup, 117
Mashup editor, 117
Mass customization, 98
Microblogging, 117
Mobile business (mcommerce,
mbusiness), 121
Network effect, 117
Open source, 111
Open system, 111
Paradigm shift, 96
Pay-per-call, 105
Pay-per-click, 105
Pay-per-conversion, 105
Personalization, 98
Podcasting, 107
Real Simple Syndication (RSS), 117
Real-time communication, 106
Reintermediation, 100
Reputation system, 111
Search engine, 105
Search engine optimization
(SEO), 105
Search engine ranking, 105
Semantic web, 120
Social bookmarking, 114
Social media, 113
Social network, 113
Social networking, 113
Social networking analysis
(SNA), 113
Social tagging, 114
Source code, 111
Sustaining technology, 94
Synchronous communication, 113
Tacit knowledge, 112
Tags, 114
Taxonomy, 108
Universal resource locator (URL), 96
User-contributed content (also
referred to as user-generated
content), 111
Videoconference, 107
Web 1.0 (or Business 1.0), 96
Web 2.0 (or Business 2.0), 109
Web browser, 96
Web conferencing (webinar), 109
Website bookmark, 114
Wiki, 117
World Wide Web (WWW), 96
K E Y T E R M S
1. What is the different between sustaining and disruptive technology?
2. Do you consider the Internet and WWW forms of sustaining or disruptive technology?
3. How has the Internet and WWW created a global platform for business?
4. What is the difference between ebusiness and ecommerce?
5. What are the benefits and challenges associated with ebusiness?
6. What are the benefits and challenges associated with Business 2.0?
7. Explain business models and their role in a company. How did ebusiness change traditional busi-
ness models?
R E V I E W Q U E S T I O N S
baL76892_ch03_090-135.indd 124baL76892_ch03_090-135.indd 124 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
125Business Driven MIS Module 1
8. How can a company use mass customization and personalization to decrease buyer power?
9. How does ebusiness differ from Business 2.0?
10. What are the differences among collective intelligence, knowledge management, and
crowdsourcing?
11. Why is knowledge management critical to a business?
12. What are the benefits and challenges associated with wikis?
13. How do disintermediation, reintermediation, and cybermediation differ?
14. What is the semantic web?
15. How does mbusiness different from ebusiness?
C L O S I N G C A S E O N E
Social Media and Ashton Kutcher
Where celebrities go, fans follow. The truism applies as much in social media as in the real world,
David Karp noticed after famous artists began using his blogging service Tumblr. As a result, encour-
aging celebrities to set up accounts on the site has become “absolutely part of our road map and our
business plan,” Karp says. In fact, he recently hired a full-time employee to help high-profile users
design and manage their blogs.
It’s no secret that well-recognized players in a host of fields—from acting to athletics, music to
politics—are using social media sites to connect with fans and promote their brands. Celebrities
used to seek out promotion “in People magazine or Vogue,” says Robert Passikoff, president of Brand
Keys, a researcher that tracks the value of celebrity brands. “It’s now become a necessity to have a
Facebook page.”
But the benefits go both ways. Sites benefit greatly from the online cavalcade of stars. Oprah
Winfrey’s debut on microblogging service Twitter sent visits to the site skyrocketing 43 percent over
the previous week, according to analytics firm Hitwise. Facebook, Google’s YouTube, Ning, and other
Web 2.0 destinations have also seen swarms of activity around the profile pages of their famous
members. And like Tumblr, social sites are going out of their way to keep the celebrities happy and
coming back.
Obama on MySpace, Facebook, and Twitter
The Obama administration created profile pages on MySpace, Facebook, and Twitter. To accommodate
1600 Pennsylvania Avenue, News Corp.’s MySpace agreed to build ad-free pages and equipped the
profile to get automatic updates from the White House’s official blog. In some cases social networks
give VIPs a heads-up on changes. Facebook worked with the handlers of select celebrity members
to get feedback on the new design of the site before it was opened to the public. “We don’t have a
formalized support program for public figures, but we do offer some support,” says Facebook spokes-
woman Brandee Barker.
Some privileged members of Facebook have also been assigned “vanity URLs,” or short, simple,
personalized web addresses such as www.facebook.com/KatieCouric . Elsewhere the perks of fame
are offered up more casually. Twitter co-founder Biz Stone credits high-profile users like actor Ashton
Kutcher and basketball professional Shaquille O’Neal for bringing attention to the site of 140-character
messages but says the company doesn’t reserve any “special resources” for them. “Sometimes celeb-
rities who love Twitter stop by and say hello,” Stone says. “It’s usually just a quiet tour and a lunchtime
chat but it’s really fun for us.”
baL76892_ch03_090-135.indd 125baL76892_ch03_090-135.indd 125 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
126 Chapter 3 Ebusiness: Electronic Business Value
John Legend Taps Tumblr
In addition to their promotional value, social networking celebrities represent a potential revenue
source for these young start-ups. Tumblr helped musician John Legend design a professional-looking
blog that matches the look of his promotional site, created by Sony Music Entertainment. Tumblr’s
Karp says he took that project on at no charge—in part to bring in Legend’s fans but also to explore
whether it makes sense to offer similar services at a cost. “For people who want the reach on our
network, who want to be able to take advantage of our platform, at some point this does turn into a
premium service,” he says.
Ning already collects monthly fees from some of its users, many of whom are celebrities. The site
is free for anyone who wants to build their own social network but charges as much as $55 a month
to users who prefer to keep their pages clear of ads or who want to collect revenue generated by ads
on their pages. Although the service is not exclusive to stars, many of the most successful networks
on Ning draw on the fame of their operators, including hip-hop artists 50 Cent and Q-Tip, rock band
Good Charlotte, and Ultimate Fighting Championship titleholder BJ Penn. “The next generation of
celebrities and social networks is in much richer and deeper collaborations [with fans] than what you
see today on the more general social networks out there,” says Ning CEO Gina Bianchini.
Many big names in business, including Dell CEO Michael Dell, use professional networking site
LinkedIn more as a business tool than to amass legions of followers. Whatever their reasons for being
on the site, LinkedIn uses the fact that executives from all of the 500 biggest companies are among
its members to encourage other businesspeople to join the site, too. 37
Questions
1. Do you consider Facebook, MySpace, and LinkedIn forms of disruptive or sustaining technology?
2. Create a list of the online businesses discussed in the case and determine if they are examples of
Web 1.0 (ebusiness) or Web 2.0 (Business 2.0).
3. Describe the ebusiness model and revenue model for Linked In, MySpace, or Facebook.
4. What is open source software and can a business use it for a social networking platforms?
5. Create a plan for how a start-up company could take advantage of Web 3.0 and generate the idea
for the next great website.
6. Evaluate the challenges facing social networking websites and identify ways companies can pre-
pare to face these issues.
Amazon.com—Not Your Average Bookstore
Jeffrey Bezos, CEO and founder of Amazon.com, is running what some people refer to as the “world’s
biggest bookstore.” The story of Bezos’ virtual bookstore teaches many lessons about online busi-
ness. Out of nowhere, this digital bookstore turned an industry upside down. What happened here
was more than just creating a website. Bezos conceived and implemented an intelligent, global digital
business. Its business is its technology; its technology is its business. Shocking traditional value
chains in the bookselling industry, Amazon opened thousands of virtual bookstores in its first few
months of operation.
Bezos graduated from Princeton and was the youngest vice president at Banker’s Trust in New
York. He had to decide if he would stay and receive his 1994 Wall Street bonus or leave and start
a business on the Internet. “I tried to imagine being 80 years old, looking back on my life. I knew
that I would hardly regret having missed the 1994 Wall Street bonus. But having missed being part
of the Internet boom—that would have really hurt,” stated Bezos. One evening he compiled a list
C L O S I N G C A S E T W O
baL76892_ch03_090-135.indd 126baL76892_ch03_090-135.indd 126 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
127Business Driven MIS Module 1
of 20 products he believed would sell on the Internet. Books, being small-ticket items that are easy
and inexpensive to ship, were on the top of the list. It was also apparent that no bookstore could
conceivably stock more than a fraction of the 5 million books published annually. Bezos, who had
never sold a book in his life, developed a strategic plan for selling books on the Internet. Amazon
launched three years later. In the fall of 1994, Amazon filled its first book order—personally pack-
aged by Bezos and his wife.
Amazon’s Ebusiness Strategy
Amazon is a pure-play business and does not operate any physical stores. All of its sales occur
through its website. It is consistently pushing the technological envelope in its search to provide a
satisfying, personalized experience for its customers. What started as a human-edited list of product
suggestions morphed into a sophisticated computer-generated recommendation engine. The com-
pany captures the comments and recommendations of buyers for site visitors to read—similar to the
friendly salesperson in a store offering advice on which books to buy. The website tracks customer
traffic, the number of visitors who access the site, how long they stay, what pages they click on, and
so forth. The company uses the information to evaluate buying and selling patterns and the success
of promotions. Amazon has quickly become a model success story for ebusinesses around the globe.
Amazon retains customers with website features such as personalized recommendations, online
customer reviews, and “1-click ordering”—the creation of a true one-stop shopping establishment
where customers can find anything they want to buy online. Through the Amazon.com Auctions,
zShops (independent third-party sellers), and more recently the Amazon.com Marketplace (where
customers can sell used items), the company is able to offer its customers almost everything.
Shaping Amazon’s Future
Amazon released a free web service that enables its business partners (whom Amazon calls “associ-
ates”) to interact with its website. More specifically, this service allows its partners to access catalog
data, to create and populate an Amazon.com shopping cart, and even to initiate the checkout process.
In 16 months, the company has inspired 30,000 associates to invent new ways to extend Amazon’s
visibility on the Internet. With over 30 million customers, Amazon has become a household brand.
Amazon is always looking for new ways to take advantage of ebusiness. Here are a few of its creations:
■ Amazon S3: Amazon launched an online storage service called Amazon Simple Storage Service
(Amazon S3). Any type of data, from 1 byte to 5 gigabytes in size, can be stored on the service and
the customer is charged monthly fees for data stored and transferred.
■ Amazon MP3: The online music store sells downloadable MP3s. Amazon MP3 is selling music
from the top four record labels—EMI, Universal, Warner Music, and Sony BMG—as well as many
independents.
■ Vine: Amazon launched Amazon Vine, which rewards top product reviewers by providing them
with free access to products from vendors participating in the program.
■ Kindle: Amazon launched Amazon Kindle, an ebook reader that downloads content over
“Whispernet,” a free wireless service on the Sprint Nextel network. Initial offerings included
approximately 90,000 books, newspapers, magazines, and blogs. The screen uses E Ink technol-
ogy to reduce battery consumption.
Mobile Amazon
Amazon.com has collaborated with Nokia to pioneer a new territory. With the launch of its Amazon.
com Any-where service, it has become one of the first major online retailers to recognize and do
something about the potential of Internet-enabled wireless devices. As content delivery over wire-
less devices becomes faster, more secure, and scalable, mcommerce will surpass landline ebusiness
(traditional telephony) as the method of choice for digital commerce transactions. According to the
research firm Strategy Analytics, the global mcommerce market was expected to be worth more than
$200 billion by 2005, with some 350 million customers generating almost 14 billion transactions
baL76892_ch03_090-135.indd 127baL76892_ch03_090-135.indd 127 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
128 Chapter 3 Ebusiness: Electronic Business Value
annually. Additionally, information activities such as email, news, and stock quotes will progress to
personalized transactions, “one-click” travel reservations, online auctions, and videoconferencing. 38
Questions
1. How has Amazon used technology to revamp the bookselling industry?
2. Is Amazon using disruptive or sustaining technology to run its business?
3. How is Amazon using personalization to keep customers loyal?
4. What is Amazon’s ebusiness model?
5. How can Amazon use mbusiness to increase sales?
6. What are the Web 1.0 characteristics of Amazon.com?
7. What are the Web 2.0 characteristics of Amazon.com?
8. How can Amazon.com use Web 3.0 to create the future bookstore?
1. Anything but Online
Your best friend, Susan Stewart, has started a highly successful custom T-shirt business from your dorm
room. Susan is art major, and each week she creates a limited edition T-shirt focusing on the lyrics from
up-and-coming indie bands. Being an MIS major, you see the advantages Susan could reap by porting
her business to the Internet. Susan, being an art major, does not like technology and does not believe
she needs it to grow her business. Do you agree or disagree that Susan needs to compete online?
How can creating an ebusiness benefit Susan? What are the challenges Susan will face as she moves
her business to the Internet? How could Susan use Web 2.0 to build loyalty among her followers?
2. The Future of Wikipedia
Wikipedia is a multilingual, web-based, free-content encyclopedia project written collaboratively
by volunteers around the world. Since its creation in 2001, it has grown rapidly into one of the
largest reference websites. Some people believe Wikipedia will eventually fail under an assault
by marketers and self-promoting users. Eric Goldman, a professor at the Santa Clara University
School of Law, argues that Wikipedia will see increasingly vigorous efforts to subvert its editorial
process, including the use of automated marketing tools to alter Wikipedia entries to generate
online traffic. The site’s editors will burn out trying to maintain it, he projects, or Wikipedia will
change its open-access architecture and its mission. Do you agree or disagree with Professor
Goldman’s argument? What can Wikipedia do to combat the challenges of information vandalism
and copyright/plagiarism issues? 39
3. Is Facebook Becoming the Whole World’s Social Network?
Facebook’s growth, which we already know is massive, is truly a global phenomenon. Nations
with the fastest membership growth rate are in South America and Asia. Is Facebook becoming
the global phone book? If you review InsideFacebook.com, you’ll find a detailed analysis of the
numerical growth rate of members per nation and the penetration Facebook is achieving among
each nation’s population. Particularly interesting was the monthly growth rate for Indonesia, the
Philippines, Mexico, Argentina, and Malaysia—each of which showed about a 10 percent jump in
Facebook membership in a single month. In a group answer the following: 40
■ What potential business opportunities could be created by a worldwide social media network
or phone book?
■ Facebook, which contains personal data on each member, is becoming the world’s phone
book. What are the implications of a world phone book for social change?
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch03_090-135.indd 128baL76892_ch03_090-135.indd 128 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
129Business Driven MIS Module 1
■ What do you think would be the benefits and challenges of global social networking?
■ How would tags and crowdsourcing be impacted by a global social network?
4. The Toughest College Test You’ll Ever Take
If your professor asked you today to kick your social networking habits, do you think you could do
it? Can you go without Facebook, cell phones, or the Internet for a week? For a day? A University of
Minnesota professor challenged her public relations class to go five days without media or gadgets
that didn’t exist before 1984. Out of the 43 students in the class, just a handful made it even three
days without new technology. Among those who didn’t, one student said, “My mother thought I
died.” How long could you go without any social media? What types of issues might you encounter
without constant connections to your friends? How has social media impacted society? How has
social media impacted businesses? 41
5. Competing with the Big Boys
Provenzo’s Rentals is a small privately owned business that rents sports equipment in Denver,
Colorado. The company specializes in winter rentals including ski, snowboard, and snowmobile
equipment. Provenzo’s has been in business for 20 years and, for the first time, it is experiencing
a decline in rentals. Greg Provenzo, the company’s owner, is puzzled by the recent decreases.
The snowfall for the past two years has been outstanding, and the ski resorts have opened earlier
and closed later than most previous years. Reports say tourism in the Colorado area is up, and
the invention of loyalty programs has significantly increased the number of local skiers. Overall,
business should be booming. The only reason for the decrease in sales might be the fact that big
retailers such as Walmart and Gart’s Sports are now renting winter sports equipment. Provenzo
would like your team’s help in determining how he can use ebusiness and Business 2.0 to help his
company increase sales, decrease costs, and compete with these big retailers.
6. Book’em
You are the CIO of Book’em, a company that creates and sells custom book bags. Book’em cur-
rently holds 28 percent of market share with over 3,000 employees operating in six countries.
You have just finished reading The Long Tail by Chris Andersen and The Innovator’s Dilemma by
Clayton Christensen, and you are interested in determining how you can grow your business while
reducing costs. Summarize each book and explain how Book’em could implement the strategies
explained in each book to create competitive advantages and increase sales.
7. Five Ways Google Docs Speeds Up Collaboration
Google Docs wants you to skip Microsoft Office and collaborate with your group in your browser
for free, especially when you’re not in the same physical space. Visit Google Docs and answer the
following questions.
■ What are five ways the new Google Docs can help your team accomplish work more efficiently,
even when you’re not in the same room together.
■ Is Google Docs open source software? What revenue model is Google Docs following?
■ Why would putting Google Docs and Microsoft Office on your résumé help differentiate your
skills?
■ What other applications does Google create that you are interested in learning to help collaborate
and communicate with peers and co-workers?
8. Secure Collaboration
As the methods and modes of communication continue to evolve, challenges will mount for busi-
nesses trying to secure their data and for law enforcement agencies looking to monitor communi-
cations as part of their investigations. That was the theme of the keynote that Sun Microsystems
chief security officer and renowned cryptographer Whitfield Diffie delivered at the AT&T Cyber
Security Conference.
baL76892_ch03_090-135.indd 129baL76892_ch03_090-135.indd 129 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
130 Chapter 3 Ebusiness: Electronic Business Value
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. To build a sense of community, you have provided a mechanism on your business website where
customers can communicate and post feedback. You review the communication daily to help
understand customer issues and concerns. You log in and find the following anonymous posting:
“I do not recommend visiting this business on Thursdays at 2:00 p.m. because the Children’s
Story Hour is taking place. I hate children, especially in a business. I’m not sure why this busi-
ness encourages people to bring their children. In fact, I recommend that children should be
banned from this business altogether.” How would you respond to the above post? Is the cus-
tomer’s viewpoint ethical? How do you encourage an open line of communication with your cus-
tomers and still maintain an open forum on your website?
Diffie believes that with millions of people joining Second Life and companies building facili-
ties there, it may be that virtual communities will become the preferred communication method
for humans as virtual communities become a growing source of collective intelligence that can
be easily watched and monitored. 42
Who would be interested in monitoring and spying on the collective intelligence of virtual
communities? What is your answer to the following question: As we create new and better ways
to collaborate, what happens to information security?
9. City Council Member Fired for Playing Farmville Game at Work
More than 80 million Facebook users are obsessed with Farmville, and one of the more
devoted players is Bulgaria’s Plovidv City Council member Dimitar Kerin. During council meet-
ings, Kerin would take advantage of the city hall’s laptops and wireless connection to tend
to his farm. This caught the attention of the council chair, who many times scolded Kerin for
his virtual farming, warning him that the game was not allowed during meetings. Kerin kept
on, arguing that he had to catch up with other council members, who achieved higher levels
on the game. Kerin pointed out logically that many other members used city hall for their
Farmville pleasures, and he cited the fact that one councilman had reached level 46, whereas
Kerin was stuck at level 40. Shockingly, council members voted Kerin off the board in a split
20–19 decision, suggesting that perhaps half the council members in Bulgaria’s second-
largest city are committed to the Facebook application. Do you agree with the firing of Dimitar
Kerin? Do you agree that it is inappropriate to use social networking applications at work?
If Dimitar Kerin was fired for playing Farmville, should all other council members who use
social networking applications at work be fired? Have you ever been reprimanded for playing
a game while at school or at work? What could you do differently to ensure this situation does
not happen to you? 43
10. 48 Hour Magazine
That sound you hear, of thousands of writers, designers, and photographers banging their
heads against the wall to the beat of a ticking clock? That’s the sound of 48 Hour Magazine,
an innovative publication that aims to go from inspiration to execution in 48 hours and
begins .  .  . now. 48 Hour is available to the eager public as a real, printed magazine and as
a website too. What are the limitations of “old media”? How are the editors of the 48 Hour
Magazine using Web 2.0 to overcome these limitations? What are the advantages and disad-
vantages of 48 Hour Magazine’s model? What type of revenue model would you recommend
48 Hour Magazine implement? If you had $50,000 would you invest in the 48 Hour Magazine?
Why or why not? 44
baL76892_ch03_090-135.indd 130baL76892_ch03_090-135.indd 130 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
131Business Driven MIS Module 1
2. Your business needs to take advantage of ebusiness and Business 2.0 strategies if it wants to remain
competitive. Detail how your business could use Web 1.0 and Web 2.0 to increase sales and decrease
costs. Be sure to focus on the different areas of business such as marketing, finance, accounting,
sales, customer service, and human resources. You would like to build a collaboration tool for all of
your customers and events. Answer the questions below as they pertain to your business.
■ What type of collaboration tool would you build?
■ How could you use the tool to facilitate planning, product development, product testing, feed-
back, and so on.
■ What additional benefits could a customer collaboration tool provide that could help you run
your business?
3. The Yankee Group reports that 66 percent of companies determine website success solely by
measuring the amount of traffic. Unfortunately, large amounts of website traffic do not necessar-
ily indicate large sales. Many websites with lots of traffic have minimal sales. The best way to
measure a website’s success is to measure such things as the revenue generated by web traffic,
the number of new customers acquired by web traffic, any reductions in customer service calls
resulting from web traffic. As you deploy your Business 2.0 strategy, you want to build a website
that creates stickiness and a sense of community for your customers. Explain why measuring
web traffic is not a good indicator of web sales or website success. How would you implement
Business 2.0 characteristics to create a sense of community for your customers? How could a
wiki help grow your business? Could you use blogs to create a marketing buzz? What else can
you do to ensure your website finds financial success? 45
PROJECT I Analyzing Websites
Stars Inc. is a large clothing corporation that specializes in reselling clothes worn by celebrities. The
company’s four websites generate 75 percent of its sales. The remaining 25 percent of sales occur
directly through the company’s warehouse. You have recently been hired as the director of sales. The
only information you can find about the success of the four websites follows:
You decide that maintaining four separate websites is expensive and adds little business value. You
want to propose consolidating to one site. Create a report detailing the business value gained by con-
solidating to a single website, along with your recommendation for consolidation. Be sure to include
your website profitability analysis. Assume that at a minimum 10 percent of hits result in a sale, at an
average 30 percent of hits result in a sale, and at a maximum 60 percent of hits result in a sale.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
Website Classic Contemporary New Age Traditional
Traffic analysis 5,000 hits/day 200 hits/day 10,000 hits/day 1,000 hits/day
Stickiness (average) 20 minutes 1 hour 20 minutes 50 minutes
Number of abandoned
shopping carts
400/day 0/day 5,000/day 200/day
Number of unique visitors 2,000/day 100/day 8,000/day 200/day
Number of identified
visitors
3,000/day 100/day 2,000/day 800/day
Average revenue
per sale
$1,000 $ 1,000 $50 $1,300
baL76892_ch03_090-135.indd 131baL76892_ch03_090-135.indd 131 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
132 Chapter 3 Ebusiness: Electronic Business Value
PROJECT I I Wiki Your Way
Wikis are web-based tools that make it easy for users to add, remove, and change online content.
Employees at companies such as Intel, Motorola, IBM, and Sony use them for a host of tasks, from
setting internal meeting agendas to posting documents related to new products.
Many companies rely on wikis to engage customers in ongoing discussions about products. Wikis
for Motorola and T-Mobile handsets serve as continually updated user guides. TV networks, including
ABC and CBS, created fan wikis that let viewers interact with each other as they unraveled mysteries
from such shows as Lost and CSI: Crime Scene Investigation. You would like to implement wikis at
your new company, The Consulting Edge, a small computer consulting company catering to mid- and
large-sized businesses. Answer the following questions:
■ How can a wiki help you attract customers and grow your business?
■ How can a wiki help your partners and employees?
■ What ethical and security concerns would you have with the wiki?
■ What could you do to minimize these concerns?
PROJECT I I I Blogging for Dollars
You have purchased a financial investment company, The Financial Level, that caters to individuals
and families. You would like to develop a few blogs for your customers, employees, and partners. The
goals for your customer blog are to gather honest feedback, provide a place for customers to interact,
and help find new opportunities for your businesses. The goals for the employee blog are to gather
knowledge, collect employment feedback, and offer a place where employees can post anonymous
feedback for issues and concerns so you can better manage your staff.
a. Research the Internet and find several customer blogs and employee blogs.
b. Determine the top three blogs for customers and for employees, and critique the blogs for
content, ease of use, and overall value.
c. Design a prototype customer blog and a prototype employee blog for The Financial Level using
Word, PowerPoint, or a tool of your choice.
PROJECT IV 14th Annual Webby Awards Nominees
Who needs the Academy Awards when you can witness the Webby Awards? The Webby Awards
are the leading international awards honoring excellence in interactive design, creativity, usability,
and functionality on the Internet. With nearly 70 categories, website entries make up the major-
ity of Webby winners, nominees, and honorees. Some are beautiful to look at and interact with.
Others are a testament to usability and functionality. And a handful excel across the board. To
be selected among the best is an incredible achievement worthy of praise and perhaps a little
bragging. 46
Visit the latest edition of the Webby Awards at www.webbyawards.com and answer the following
questions:
■ Which nominations were the most surprising?
■ Which nominations were you unfamiliar with but will now use?
■ Were there any examples of Web 1.0 winners?
■ Were there any examples of Web 3.0 winners?
■ List the top five websites you think deserve to win a Webby.
baL76892_ch03_090-135.indd 132baL76892_ch03_090-135.indd 132 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
133Business Driven MIS Module 1
PROJECT V Creating a Podcast
Podcasting is a form of audio broadcasting on the Internet. The reason it became linked with the iPod
in name was because people download podcasts (audio shows) to listen to on their iPods. However,
you don’t have to listen to podcasts only on iPods; you can use your computer with some music
software such as Windows built-in Media Player or Winamp, or other portable music players (iPod
competitors) such as Creative Zen or iRiver. As long as you have some way to play music on your
computer, you will be able to listen to podcasts.
a. Download Audacity from audacity.sourceforge.net . It is open source, is cross-platform, is free,
and lets you mix multiple audio files. Windows, Mac OS, and Linux/Unix versions are available.
You will also have to download the LAME MP3 encoder, which allows Audacity to export MP3
files. You will see the download link for that on the same page as the Audacity download. Once
you download the LAME MP3 encoder, place it in the Audacity program folder (C:Program\
Files\Audacity\Plug-Ins\). Then, open a .WAV file in Audacity, and select the menu option “File”
then choose “Export As MP3.” When you do, you will see this message: At this Point, browse
to where you placed the “ lame_enc.dll ” file (such as C:Program\Files\Audacity\Plug-Ins). Click
on the “ lame_enc.dll ” file. Once finished, you can now effectively use the Export As MP3 menu
option to create MP3 files.
b. Open Audacity and check the preferences. Make sure your playback and recording device are
set. If you are going to record a stereo signal, set the number of channels to record to 2 (Stereo)
on the Audio I/O preferences. When picking a device to record from, make sure you have set up
all the connections properly, such as plugging a microphone into the Mic Input, and any other
device into the Line In of your sound card.
c. Click on the red “Record” button to begin recording. You can also click on the blue “Pause”
button to pause the recording. Press it again to continue. Click on the yellow “Stop” button
to cease recording. The cursor will return to its previous position, before the recording was
started.
d. MP3 is the standard format for podcasts. When saving, use the minimum bit rate that provides
good results. Here are some suggested settings:
■ 48–56k Mono—sermons, audio books, talk radio.
■ 64k Stereo—music, music and talk combinations.
■ 128k Stereo—good-quality music.
e. Create a two-to-three-minute podcast that you can share with your class about a success-
ful Business 2.0 entrepreneurial company. A few examples include Digg.com, karmaloop.
com, Foursquare.com, Flickr.com. Figure out what will be said (or not said) during the
show. There are almost no limits to what content can be included in podcasts. Podcasting
allows you to create shows, dramatizations, vignettes, commentaries, documentaries, and
any other content imaginable. However, you need to script out your content before you start
to record.
PROJECT VI Photo Story 3—Creating a Video Résumé
Microsoft Photo Story 3 for Windows helps create exciting video stories from pictures. For example,
you could create a video story that features narrated photographs from a family vacation or a video
story that includes pictures and sounds of an athletic race or game. In a few simple steps, you can
import and edit your pictures, add titles, record narration, add background music, and save your story
using the optimal quality settings (profile) for the way your story will be played.
baL76892_ch03_090-135.indd 133baL76892_ch03_090-135.indd 133 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
134 Chapter 3 Ebusiness: Electronic Business Value
Download Photo Story 3 from www.microsoft.com/windowsxp/using/digitalphotography/photostory/
default.mspx . Review the requirements section to make sure your computer is able to run this
application. Click the “Continue” button in the Validation Required section to begin the short valida-
tion process. Once validated, you will be sent to a page with specific instructions for obtaining the
download.
When you run Photo Story 3, with the view to making a new project, the first option is to select
“Begin a new story.” After clicking this option, your first task is to “import” pictures. You can import
pictures from your computer, a network folder, or a website. For each story, you can import up to 300
pictures, which can be files with .bmp, .dib, .eps, .gif, .jhif, .jpe, , , .pcd, .pcx, , .psd, .rle,
.tga, and .tif file name extensions.
Your pictures appear in the filmstrip at the bottom of the page. If you import more pictures,
Microsoft Photo Story 3 adds them at the end of the filmstrip.
By clicking on a series of buttons or options, you can remove black borders, add titles to your pic-
ture, add narration and custom motion, and add background music to your story.
Develop a 30-second professional commercial. This is a short description of who you are, what
job you are looking for, and the skills that make you suited for the job. Building a quality 30-second
commercial can be tougher than it sounds. The goal is to be able to contact a stranger and let him or
her know who you are, what your skills are, and why you are approaching the person. Create a list of
words describing your skills and interests. Begin broadly and then narrow your list to skills related to
your current job search.
PROJECT VI I Sticky Wiki
Wiki (Hawaiian for “quick”) is software that allows users to freely create and edit web page content
using any web browser. The most common wiki is Wikipedia. Wikis offer a powerful yet flexible col-
laborative communication tool for developing websites. The best part of a wiki is that it grows and
evolves by the collaborative community adding content—the owner of the wiki does not have to add
all of the content as is typical in a standard web page.
Many sites offer free wiki software such as Socialtext, a group-editable website. As one of the
first wiki companies, Socialtext wikis are designed for anyone that wants to accelerate team com-
munications, better enable knowledge sharing, foster collaboration, and build online communities.
Socialtext also offers WikiWidgets, which make it easy for nontechnical business users to create rich,
dynamic wiki content. Today, more than 3,000 organizations use Socialtext, including Symantec,
Nokia, IKEA, Conde Nast, Ziff-Davis, Kodak, University of Southern California, Boston College, and
numerous others.
Create your own wiki. Wikis can address a variety of needs from student involvement, fraternities
and sororities, group activities, sport team updates, local band highlights, and so on. Choose a free
wiki software vendor from the list below and create a wiki for something you are involved in or excited
about and want to share with others. This could include a student organization, fraternity or sorority,
academic organization, favorite author, book, movie, band, musician, or sports team.
■ www.socialtext.com —easy-to-use, business-grade wikis proven by Fortune 500 companies.
■ www.wetpaint.com —a free easy-to-use wiki building site.
■ www.CentralDesktop.com —Easy-to-use, a wiki for non-techies.
■ www.xwiki.com —Open source and free hosting with professional services.
If you have different wiki software you prefer, feel free to use it to create your wiki.
baL76892_ch03_090-135.indd 134baL76892_ch03_090-135.indd 134 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
135Business Driven MIS Module 1
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
Project
Number
Project
Name
Project
Type
Plug-In
Focus Area Project Focus
Project
Skill Set
Page
Number
1 Financial
Destiny
Excel T2 Personal
Budget
Introductory
Formulas
AYK.4
2 Cash Flow Excel T2 Cash Flow Introductory
Formulas
AYK.4
3 Technology
Budget
Excel T1, T2 Hardware and
Software
Introductory
Formulas
AYK.4
4 Tracking
Donations
Excel T2 Employee
Relationships
Introductory
Formulas
AYK.4
5 Convert
Currency
Excel T2 Global
Commerce
Introductory
Formulas
AYK.5
6 Cost
Comparison
Excel T2 Total Cost of
Ownership
Introductory
Formulas
AYK.5
7 Time
Management
Excel or
Project
T2 or T12 Project
Management
Introductory
Gantt Charts
AYK.6
8 Maximize
Profit
Excel T2, T4 Strategic
Analysis
Intermediate
Formulas or
Solver
AYK.6
9 Security
Analysis
Excel T3 Filtering Data Intermediate
Conditional
Formatting,
Autofilter,
Subtotal
AYK.7
10 Gathering
Data
Excel T3 Data Analysis Intermediate
Conditional
Formatting,
PivotTable
AYK.8
11 Scanner
System
Excel T2 Strategic
Analysis
Intermediate AYK.8
12 Competitive
Pricing
Excel T2 Profit
Maximization
Intermediate AYK.9
13 Adequate
Acquisitions
Excel T2 Break-Even
Analysis
Intermediate AYK.9
24 Electronic
Resumes
HTML T9, T10, T11 Electronic
Personal
Marketing
Introductory
Structural Tags
AYK.16
25 Gathering
Feedback
Dreamweaver T9, T10, T11 Data Collection Intermediate
Organization of
Information
AYK.16
baL76892_ch03_090-135.indd 135baL76892_ch03_090-135.indd 135 26/11/12 1:49 PM26/11/12 1:49 PM

Rev. Confirming Pages
What’s in IT for me?
This chapter concerns itself with protecting information from potential misuse. Organizations must ensure they collect,
capture, store, and use information in an ethical manner. This means any type of information they collect and utilize, includ-
ing about customers, partners, and employees. Companies must ensure that personal information collected about someone
remains private. This is not just a nice thing to do. The law requires it. Perhaps more important, information must be kept
physically secure to prevent access and possible dissemination and use by unauthorized sources.
You, the business student, must understand ethics and security because they are the top concerns voiced by custom-
ers today. The way they are handled directly influences a customer’s likelihood of embracing electronic technologies and
conducting business over the web–and thus the company’s bottom line. You can find evidence in recent news reports about
how the stock price of organizations falls dramatically when information privacy and security breaches are made known.
Further, organizations face potential litigation if they fail to meet their ethical, privacy, and security obligations in the handling
of information.
■ I n f o r m a t i o n E t h i c s
■ D e v e l o p i n g I n f o r m a t i o n
M a n a g e m e n t P o l i c i e s
SECTION 4.2
Information Security
SECTION 4.1
Ethics
■ P ro t e c t i n g I n t e l l e c t u a l A s s e t s
■ T h e F i r s t L i n e o f
D e f e n s e — P e o p l e
■ T h e S e c o n d L i n e o f
D e f e n s e — Te c h n o l o g y
C H A P T E R
C
H
A
P
T
E
R
O
U
T
L
IN
E

Ethics and Information Security:
MIS Business Concerns 4
baL76892_ch04_136-171.indd 136baL76892_ch04_136-171.indd 136 26/11/12 1:16 PM26/11/12 1:16 PM

Rev. Confirming Pages
137Business Driven MIS Module 1
opening case study
To Share—Or Not to Share
People love social networks! Social networks are everywhere and a perfect way to share
vacation photos, family events, and birthday parties with family, friends, and co-workers.
About 40 percent of adults use at least one social media website, and 51 percent of those
use more than one website. The majority of users are between the ages of 18 and 24. The
Pew Research Center found that 89 percent of social network users primarily use the web-
sites to update friends and family, while 57 percent use the websites to make plans with
friends, and 49 percent use the websites to make new friends.
Facebook, MySpace, LinkedIn, Friendster, Urban Chat, and Black Planet are just a few
of more than 100 websites connecting people around the world who are eager to share
everything from photos to thoughts and feelings. But we need to remember that sometimes
you can share too much; there can be too much information. Choosing who you share with
and what you share is something you want to think about for your personal social networks
and corporate social networks. According to Pew Research, more than 40 percent of users
allow open access to their social networking profiles, which allows anyone from anywhere
to view all of their personal information. The remaining 60 percent restrict access to friends,
family, and co-workers. The following are the top 10 things you should consider before
posting information to your social networks.
1: If You Don’t Want to Share It – Don’t Post It
You can select all the privacy settings you want on social networking sites, but the fact is,
if you post it, it has the potential to be seen by someone you don’t want seeing it. You know
all those fun Facebook applications, quizzes, and polls you can’t help but fill out? A study
performed by the University of Virginia found that of the top 150 applications on Facebook,
90 percent were given access to information they didn’t need in order for the application
to function. So when you sign up to find out what sitcom star you most identify with, the
makers of that poll now have access to your personal information. It’s anybody’s guess
where it goes from there. Social networking is all about sharing, so something you think is
in confidence can easily be shared and then shared again, and before you know it, someone
you don’t even know has access to something private. “When in doubt, leave it out” is a
good motto to follow. And always remember that anything you share has the potential to be
leaked in some way.
2: Never Give Out Your Password Hints
Most websites that contain secure personal information require a password and also have
at least one password hint in case you forget. It typically goes like this: You sign up for
something such as online banking and you get a log-in and password and then choose
baL76892_ch04_136-171.indd 137baL76892_ch04_136-171.indd 137 26/11/12 1:16 PM26/11/12 1:16 PM

Rev. Confirming Pages
138 Chapter 4 Ethics and Information Security: MIS Business Concerns
a security question for when you forget your password. What’s the name of your first
pet? What’s your mother’s maiden name? What was your high school mascot? What’s the
name of the first street you lived on? Including any of these details on a Facebook wall
or status update may not seem like a big deal, but it could provide an identity thief with
the last piece of the puzzle needed to hack into your bank account. Think before you post
anything that could compromise this information.
3: Never Give Out Your Password
This one really seems like a no-brainer, but if it didn’t happen, then Facebook probably
wouldn’t feel the need to list it in the No. 1 slot on its list of things you shouldn’t share.
Even sharing the password with a friend so he or she can log on and check something for
you can be a risk. This is especially true with couples who feel like there’s enough trust to
share these kinds of things. Here’s another scenario for you: You give your boyfriend your
Facebook password because he wants to help you upload some vacation photos. A couple
of months later, the relationship sours, he turns into a not-so-nice guy, and then there’s a
person out there who doesn’t like you and has your log-in information. Time to cancel your
account and get a new one. If you’d kept that information private, you could simply move on
with your life. Now you have a compromised profile, and if you link to other sites or profiles,
all that information is at risk as well. Keep your password to yourself, no matter what, and
you never have to worry about it.
4: Never Provide Personal Financial Information
You would think that nobody would share things like where they do their banking or what
their stock portfolio looks like, but it happens. It’s easy for an innocent Facebook comment
to reveal too much about your personal finances. Consider this scenario: You’re posting to
a long thread on a friend’s wall about the bank crisis. You say something along the lines of,
“We don’t need to worry because we bank with a teacher’s credit union,” or even, “We put all
our money into blue chip stocks and plan to ride it out.” Again, if you’re one of the 40 percent
who allow open access to your profile, then suddenly identity thieves know where you bank
and where you have the bulk of your investments. It’s easy to forget that what may seem
like a harmless comment on a Facebook wall could reveal a great deal about your personal
finances. It’s best to avoid that kind of talk.
5: Never Give Out Your Address or Phone Numbers
File this one under security risk. If you share your address and phone number on a social
networking site, you open yourself up to threats of identity theft and other personal dangers
such as burglaries. If you post that you’re going on vacation and you have your address
posted, then everyone knows you have an empty house. Identity thieves could pay a visit
to your mailbox and open up a credit card in your name. Burglars could rid your home of
anything of value. Even just posting your phone number gives people with Internet savvy
easy access to your address. Reverse lookup services can supply anyone with your home
address in possession of your phone number.
baL76892_ch04_136-171.indd 138baL76892_ch04_136-171.indd 138 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
139Business Driven MIS Module 1
6: Never Share Photos of Your Children
Social networking sites are a common place for people to share pictures of their families,
but if you’re one of the 40 percent of users who don’t restrict access to your profile, then
those pictures are there for everyone to see. It’s a sad fact, but a lot of predators use the
Internet to stalk their prey. If you post pictures of your family and combine that with infor-
mation like, “My husband is out of town this weekend” or “Little Johnny is old enough to
stay at home by himself now,” then your children’s safety could be at risk. Nobody ever
thinks it will happen to them until it does, so safety first is a good default mode when using
social networking sites. Just like with other private matters, send family photos only to a
select group of trusted friends and colleagues who you know won’t share them.
7: Never Provide Company Information
You may be dying to tell the world about your new work promotion, but if it’s news that
could be advantageous to one of your company’s competitors, then it’s not something you
should share. News of a planned expansion or a big project role and anything else about
your workplace should be kept private. Sophos, a security software company, found that 63
percent of companies were afraid of what their employees were choosing to share on social
networking sites. If you want to message it out, be selective and send private emails. Many
companies are so serious about not being included in social networking sites that they for-
bid employees from using sites like Facebook at work. Some IT departments even filter the
URLs and block access to these sites so employees aren’t tempted to log on.
8: Never Give Links to Websites
With 51 percent of social network users taking advantage of more than one site, there’s
bound to be some crossover, especially if you have the sites linked. You may post some-
thing you find innocuous on Facebook, but then it’s linked to your LinkedIn work profile
and you’ve put your job at risk. If you link your various profiles, be aware that what you
post in one world is available to the others. In 2009, a case of an employee caught lying on
Facebook hit the news. The employee asked off for a weekend shift because he was ill and
then posted pictures on his Facebook profile of himself at a party that same weekend. The
news got back to his employer easily enough and he was fired. So if you choose to link your
profiles, it’s no longer a “personal life” and “work life” scenario.
9: Keep Your Social Plans to Yourself
Sharing your social plans for everybody to see isn’t a good idea. Unless you’re planning a big
party and inviting all the users you’re connected to, it will only make your other friends feel
left out. There are also some security issues at stake here. Imagine a scenario where a jeal-
ous ex-boyfriend knows that you’re meeting a new date out that night. What’s to keep the ex
from showing up and causing a scene or even potentially getting upset or violent? Nothing.
If you’re planning a party or an outing with a group of friends, send a personal “e-vite” for
their eyes only and nobody is the wiser. If you’re trying to cast a wide net by throwing out an
idea for a social outing, just remember that anyone who has access to your profile sees it.
baL76892_ch04_136-171.indd 139baL76892_ch04_136-171.indd 139 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
140 Chapter 4 Ethics and Information Security: MIS Business Concerns
10. Do Not Share Personal Conversations
On Facebook, users can send personal messages or post notes, images, or videos to
another user’s wall. The wall is there for all to see, while messages are between the sender
and the receiver, just like an email. Personal and private matters should never be shared
on your wall. You wouldn’t go around with a bullhorn announcing a private issue to the
world, and the same thing goes on the Internet. This falls under the nebulous world of
social networking etiquette. There is no official handbook for this sort of thing, but use your
best judgment. If it’s not something you’d feel comfortable sharing in person with extended
family, acquaintances, work colleagues, or strangers, then you shouldn’t share it on your
Facebook wall. 1
baL76892_ch04_136-171.indd 140baL76892_ch04_136-171.indd 140 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
141Business Driven MIS Module 1
section 4.1 Ethics
L E A R N I N G O U T C O M E S
4.1 Explain the ethical issues in the use of information technology.
4.2 Identify the six epolicies organizations should implement to protect themselves.
INFORMATION ETHICS
Ethics and security are two fundamental building blocks for all organizations. In recent
years, enormous business scandals along with 9/11 have shed new light on the meaning
of ethics and security. When the behavior of a few individuals can destroy billion-dollar
organizations, the value of ethics and security should be evident.
Copyright is the legal protection afforded an expression of an idea, such as a song,
book, or video game. Intellectual property is intangible creative work that is embod-
ied in physical form and includes copyrights, trademarks, and patents. A patent is an
exclusive right to make, use, and sell an invention and is granted by a government to
the inventor. As it becomes easier for people to copy everything from words and data to
music and video, the ethical issues surrounding copyright infringement and the viola-
tion of intellectual property rights are consuming the ebusiness world. Technology poses
new challenges for our ethics — the principles and standards that guide our behavior
toward other people.
The protection of customers’ privacy is one of the largest, and murkiest, ethical issues
facing organizations today. Privacy is the right to be left alone when you want to be,
to have control over your personal possessions, and not to be observed without your
consent. Privacy is related to confidentiality, which is the assurance that messages and
information remain available only to those authorized to view them. Each time employ-
ees make a decision about a privacy issue, the outcome could sink the company.
Trust among companies, customers, partners, and suppliers is the support structure
of ebusiness. Privacy is one of its main ingredients. Consumers’ concerns that their pri-
vacy will be violated because of their interactions on the web continue to be one of the
primary barriers to the growth of ebusiness.
Information ethics govern the ethical and moral issues arising from the development
and use of information technologies, as well as the creation, collection, duplication, distri-
bution, and processing of information itself (with or without the aid of computer technolo-
gies). Ethical dilemmas in this area usually arise not as simple, clear-cut situations but as
clashes among competing goals, responsibilities, and loyalties. Inevitably, there will be more
than one socially acceptable or “correct” decision. The two primary areas concerning soft-
ware include pirated software and counterfeit software. Pirated software is the unauthor-
ized use, duplication, distribution, or sale of copyrighted software. Counterfeit software
is software that is manufactured to look like the real thing and sold as such. Digital rights
management is a technological solution that allows publishers to control their digital
media to discourage, limit, or prevent illegal copying and distribution. Figure 4.1 contains
examples of ethically questionable or unacceptable uses of information technology. 2
LO 4.1: Explain the ethical issues in
the use of information technology.
FIGURE 4.1
Ethically Questionable or
Unacceptable Information
Technology Use
Individuals copy, use, and distribute software.
Employees search organizational databases for sensitive corporate and personal information.
Organizations collect, buy, and use information without checking the validity or accuracy of the information.
Individuals create and spread viruses that cause trouble for those using and maintaining IT systems.
Individuals hack into computer systems to steal proprietary information.
Employees destroy or steal proprietary organization information such as schematics, sketches, customer
lists, and reports.
baL76892_ch04_136-171.indd 141baL76892_ch04_136-171.indd 141 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
BUSINESS DRIVEN DISCUSSION
A high school principal decided it was a good idea to hold a confidential con-
versation about teachers, salaries, and student test scores on his cellular phone
in a local Starbucks. Not realizing that one of the student’s parents was sitting
next to him, the principal accidentally divulged sensitive information about his
employees and students. The irate parent soon notified the school board about
the principal’s inappropriate behavior and a committee was formed to decide
how to handle the situation. 3
With the new wave of collaboration tools, electronic business, and the
Internet, employees are finding themselves working outside the office and
beyond traditional office hours. Advantages associated with remote workers
include increased productivity, decreased expenses, and boosts in morale as
employees are given greater flexibility to choose their work location and hours.
Unfortunately, disadvantages associated with remote workers include new
forms of ethical challenges and information security risks.
In a group, discuss the following statement: Information does not have any
ethics. If you were elected to the committee to investigate the principal’s inap-
propriate Starbucks phone conversation, what types of questions would you
want answered? What type of punishment, if any, would you enforce on the
principal? What types of policies would you implement across the school dis-
trict to ensure this scenario is never repeated? Be sure to highlight how remote
workers impact business along with any potential ethical challenges and infor-
mation security issues.
Information—
Does It Have
Ethics?
APPLY YOUR KNOWLEDGE
142 Chapter 4 Ethics and Information Security: MIS Business Concerns
Unfortunately, few hard and fast rules exist for always determining what is ethical.
Many people can either justify or condemn the actions in Figure 4.1 , for example. Know-
ing the law is important but that knowledge will not always help, because what is legal
might not always be ethical, and what might be ethical is not always legal. For example,
Joe Reidenberg received an offer for AT&T cell phone service. AT&T used Equifax, a
credit reporting agency, to identify potential customers such as Joe Reidenberg. Over-
all, this seemed like a good business opportunity between Equifax and AT&T wireless.
Unfortunately, the Fair Credit Reporting Act (FCRA) forbids repurposing credit informa-
tion except when the information is used for “a firm offer of credit or insurance.” In other
words, the only product that can be sold based on credit information is credit. A repre-
sentative for Equifax stated, “As long as AT&T Wireless (or any company for that matter)
is offering the cell phone service on a credit basis, such as allowing the use of the service
before the consumer has to pay, it is in compliance with the FCRA.” However, the ques-
tion remains—is it ethical? 4
Figure 4.2 shows the four quadrants where ethical and legal behaviors intersect. The
goal for most businesses is to make decisions within quadrant I that are both legal and
ethical. There are times when a business will find itself in the position of making a deci-
sion in quadrant III, such as hiring child labor in foreign countries, or in quadrant II
where a business might pay a foreigner who is in the process of getting her immigration
status approved because the company is in the process of hiring the person. A business
should never find itself operating in quadrant IV. Ethics are critical to operating a suc-
cessful business today.
baL76892_ch04_136-171.indd 142baL76892_ch04_136-171.indd 142 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
FIGURE 4.2
Acting Ethically and Acting
Legally Are Not Always the
Same Thing
UNETHICAL
ETHICAL
LEGAL ILLEGAL
Quadrant III
Legal but Unethical
Quadrant IV
Illegal and Unethical
Quadrant I
Legal and Ethical
Quadrant II
Illegal but Ethical
BUSINESS DRIVEN ETHICS AND SECURITY
Ethics. It’s just one tiny word, but it has monumental impact on every area of
business. From the magazines, blogs, and newspapers you read to the courses
you take, you will encounter ethics as it is a hot topic in today’s electronic world.
Technology has provided so many incredible opportunities, but it has also pro-
vided those same opportunities to unethical people. Discuss the ethical issues
surrounding each of the following situations (yes, these are true stories):
■ A student raises her hand in class and states, “I can legally copy any DVD I
get from Netflix because Netflix purchased the DVD and the copyright only
applies to the company who purchased the product.”
■ A student stands up the first day of class before the professor arrives and
announces that his fraternity scans textbooks and he has the textbook for
this course on his thumb drive, which he will gladly sell for $20. Several
students pay on the spot and upload the scanned textbook to their PCs. One
student takes down the student information and contacts the publisher
about the incident.
■ A senior marketing manager is asked to monitor his employee’s email
because there is a rumor that the employee is looking for another job.
■ A vice president of sales asks her employee to burn all of the customer data
onto an external hard drive because she made a deal to provide customer
information to a strategic partner.
■ A senior manager is asked to monitor his employee’s email to discover if she
is sexually harassing another employee.
■ An employee is looking at the shared network drive and discovers his boss’s
entire hard drive, including his email backup, has been copied to the net-
work and is visible to all.
■ An employee is accidently copied on an email listing the targets for the next
round of layoffs.
Is IT Really
Worth the Risk?
APPLY YOUR KNOWLEDGE
143Business Driven MIS Module 1
baL76892_ch04_136-171.indd 143baL76892_ch04_136-171.indd 143 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
Established Information-Related Laws
Privacy Act—1974 Restricts what information the federal government can collect; allows people to access and correct infor-
mation on themselves; requires procedures to protect the security of personal information; and forbids
the disclosure of name-linked information without permission.
Family Education Rights and
Privacy Act—1974
Regulates access to personal education records by government agencies and other third parties and
ensures the right of students to see their own records.
Cable Communications Act—1984 Requires written or electronic consent from viewers before cable TV providers can release viewing
choices or other personally identifiable information.
Electronic Communications
Privacy Act—1986
Allows the reading of communications by a firm and says that employees have no right to privacy when
using their companies’ computers.
Computer Fraud and Abuse
Act—1986
Prohibits unauthorized access to computers used for financial institutions, the U.S. government, or inter-
state and international trade.
The Bork Bill (officially known as the
Video Privacy Protection Act, 1988)
Prohibits the use of video rental information on customers for any purpose other than that of marketing
goods and services directly to the customer.
Communications Assistance for Law
Enforcement Act—1994
Requires that telecommunications equipment be designed so that authorized government agents are able
to intercept all wired and wireless communications being sent or received by any subscriber. The act also
requires that subscriber call-identifying information be transmitted to a government when and if required.
Freedom of Information Act—1967,
1975, 1994, and 1998
Allows any person to examine government records unless it would cause an invasion of privacy. It was
amended in 1974 to apply to the FBI, and again in 1994 to allow citizens to monitor government activities
and information gathering, and once again in 1998 to access government information on the Internet.
Health Insurance Portability and
Accountability Act (HIPAA)—1996
Requires that the health care industry formulate and implement regulations to keep patient information
confidential.
Identity Theft and Assumption
Deterrence Act—1998
Strengthened the criminal laws governing identity theft making it a federal crime to use or transfer identi-
fication belonging to another. It also established a central federal service for victims.
USA Patriot Act—2001 and 2003 Allows law enforcement to get access to almost any information, including library records, video rentals,
bookstore purchases, and business records when investigating any act of terrorist or clandestine intel-
ligence activities. In 2003, Patriot II broadened the original law.
Homeland Security Act—2002 Provided new authority to government agencies to mine data on individuals and groups including emails
and website visits; put limits on the information available under the Freedom of Information Act; and gave
new powers to government agencies to declare national health emergencies.
Sarbanes-Oxley Act—2002 Sought to protect investors by improving the accuracy and reliability of corporate disclosures and requires
companies to (1) implement extensive and detailed policies to prevent illegal activity within the company,
and (2) to respond in a timely manner to investigate illegal activity.
Fair and Accurate Credit
Transactions Act—2003
Included provisions for the prevention of identity theft including consumers’ right to get a credit report
free each year, requiring merchants to leave all but the last five digits of a credit card number off a
receipt, and requiring lenders and credit agencies to take action even before a victim knows a crime has
occurred when they notice any circumstances that might indicate identity theft.
CAN-Spam Act—2003 Sought to regulate interstate commerce by imposing limitations and penalties on businesses sending
unsolicited email to consumers. The law forbids deceptive subject lines, headers, return addresses, etc.,
as well as the harvesting of email addresses from websites. It requires businesses that send spam to
maintain a do-not-spam list and to include a postal mailing address in the message.
144 Chapter 4 Ethics and Information Security: MIS Business Concerns
Information Does Not Have Ethics, People Do
Information itself has no ethics. It does not care how it is used. It will not stop itself from
spamming customers, sharing itself if it is sensitive or personal, or revealing details to
third parties. Information cannot delete or preserve itself. Therefore, it falls to those who
own the information to develop ethical guidelines about how to manage it. Information
management examines the organizational resource of information and regulates its defini-
tions, uses, value, and distribution ensuring it has the types of data/information required
to function and grow effectively. Information governance is a method or system of gov-
ernment for information management or control. Information compliance is the act of
conforming, acquiescing, or yielding information. Information property is an ethical issue
that focuses on who owns information about individuals and how information can be sold
and exchanged. A few years ago the ideas of information management, governance, and
FIGURE 4.3
Established Information-
Related Laws
baL76892_ch04_136-171.indd 144baL76892_ch04_136-171.indd 144 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
145Business Driven MIS Module 1
compliance were relatively obscure. Today, these concepts are a must for virtually every
company, both domestic and global, primarily due to the role digital information plays
in corporate legal proceedings or litigation. Frequently, digital information serves as key
evidence in legal proceedings and it is far easier to search, organize, and filter than paper
documents. Digital information is also extremely difficult to destroy, especially if it is on a
corporate network or sent via email. In fact, the only reliable way to truly obliterate digital
information is to destroy the hard drives where the file was stored. Ediscovery (or electronic
discovery ) refers to the ability of a company to identify, search, gather, seize, or export digital
information in responding to a litigation, audit, investigation, or information inquiry. As the
importance of ediscovery grows, so does information governance and information compli-
ance. The Child Online Protection Act (COPA) was passed to protect minors from access-
ing inappropriate material on the Internet. Figure 4.3 provides an overview of some of the
important laws individuals and firms must follow in managing and protecting information. 5
DEVELOPING INFORMATION MANAGEMENT POLICIES
Treating sensitive corporate information as a valuable resource is good management.
Building a corporate culture based on ethical principles that employees can understand
and implement is responsible management. Organizations should develop written poli-
cies establishing employee guidelines, employee procedures, and organizational rules
for information. These policies set employee expectations about the organization’s prac-
tices and standards and protect the organization from misuse of computer systems and
IT resources. If an organization’s employees use computers at work, the organization
should, at a minimum, implement epolicies. Epolicies are policies and procedures that
address information management along with the ethical use of computers and the Inter-
net in the business environment. Figure 4.4 displays the epolicies a firm should imple-
ment to set employee expectations.
Ethical Computer Use Policy
In a case that illustrates the perils of online betting, a leading Internet poker site reported
that a hacker exploited a security flaw to gain an insurmountable edge in high-stakes,
no-limit Texas hold-’em tournaments—the ability to see his opponents’ hole cards. The
cheater, whose illegitimate winnings were estimated at between $400,000 and $700,000
by one victim, was an employee of AbsolutePoker.com and hacked the system to show
that it could be done. Regardless of what business a company operates—even one that
many view as unethical—the company must protect itself from unethical employee
behavior. 6 Cyberbulling includes threats, negative remarks, or defamatory comments
transmitted via the Internet or posted on the website. A threat is an act or object that
poses a danger to assets. Click-fraud is the abuse of pay-per-click, pay-per-call, and pay-
per-conversion revenue models by repeatedly clicking on a link to increase charges or
costs for the advertiser. Competitive click-fraud is a computer crime where a competi-
tor or disgruntled employee increases a company’s search advertising costs by repeat-
edly clicking on the advertiser’s link.
LO 4.2: Identify the six epolicies
organizations should implement to
protect themselves.
FIGURE 4.4
Overview of Epolicies
Ethical
Computer Use
Policy
Email Privacy
Policy
Social Media
Policy
Workplace
Monitoring
Policy
Information
Privacy Policy
Acceptable
Use Policy
baL76892_ch04_136-171.indd 145baL76892_ch04_136-171.indd 145 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
146 Chapter 4 Ethics and Information Security: MIS Business Concerns
Cyberbullying and click-fraud are just a few examples of the many types of unethical
computer use found today.
One essential step in creating an ethical corporate culture is establishing an ethical
computer use policy. An ethical computer use policy contains general principles to
guide computer user behavior. For example, it might explicitly state that users should
refrain from playing computer games during working hours. This policy ensures the
users know how to behave at work and the organization has a published standard to deal
with infractions. For example, after appropriate warnings, the company may terminate
an employee who spends significant amounts of time playing computer games at work.
Organizations can legitimately vary in how they expect employees to use computers,
but in any approach to controlling such use, the overriding principle should be informed
consent. The users should be informed of the rules and, by agreeing to use the system on
that basis, consent to abide by them.
Managers should make a conscientious effort to ensure all users are aware of the pol-
icy through formal training and other means. If an organization were to have only one
epolicy, it should be an ethical computer use policy because that is the starting point and
the umbrella for any other policies the organization might establish.
Information Privacy Policy
An organization that wants to protect its information should develop an information
privacy policy, which contains general principles regarding information privacy. Visa cre-
ated Inovant to handle all its information systems including its coveted customer informa-
tion, which details how people are spending their money, in which stores, on which days,
and even at what time of day. Just imagine what a sales and marketing department could
do if it gained access to this information. For this reason, Inovant bans the use of Visa’s
customer information for anything outside its intended purpose—billing. Innovant’s pri-
vacy specialists developed a strict credit card information privacy policy, which it follows.
Now Inovant is being asked if it can guarantee that unethical use of credit card infor-
mation will never occur. In a large majority of cases, the unethical use of information
happens not through the malicious scheming of a rogue marketer, but rather uninten-
tionally. For instance, information is collected and stored for some purpose, such as
record keeping or billing. Then, a sales or marketing professional figures out another
way to use it internally, share it with partners, or sell it to a trusted third party. The infor-
mation is “unintentionally” used for new purposes. The classic example of this type of
unintentional information reuse is the Social Security number, which started simply as a
way to identify government retirement benefits and then was used as a sort of universal
personal ID, found on everything from drivers’ licenses to savings accounts.
Acceptable Use Policy
An acceptable use policy (AUP) requires a user to agree to follow it to be provided access
to corporate email, information systems, and the Internet. Nonrepudiation is a contrac-
tual stipulation to ensure that ebusiness participants do not deny (repudiate) their online
actions. A nonrepudiation clause is typically contained in an acceptable use policy. Many
businesses and educational facilities require employees or students to sign an acceptable
use policy before gaining network access. When signing up with an email provider, each
customer is typically presented with an AUP, which states the user agrees to adhere to
certain stipulations. Users agree to the following in a typical acceptable use policy:
■ Not using the service as part of violating any law.
■ Not attempting to break the security of any computer network or user.
■ Not posting commercial messages to groups without prior permission.
■ Not performing any nonrepudiation.
Some organizations go so far as to create a unique information management policy focus-
ing solely on Internet use. An Internet use policy contains general principles to guide the
proper use of the Internet. Because of the large amounts of computing resources that Inter-
net users can expend, it is essential that such use be legitimate. In addition, the Internet
contains numerous materials that some believe are offensive, making regulation in the
baL76892_ch04_136-171.indd 146baL76892_ch04_136-171.indd 146 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
147Business Driven MIS Module 1
workplace a requirement. Cybervandalism is the electronic defacing of an existing web-
site. Typosquatting is a problem that occurs when someone registers purposely misspelled
variations of well-known domain names. These variants sometimes lure consumers who
make typographical errors when entering a URL. Website name stealing is the theft of a
website’s name that occurs when someone, posing as a site’s administrator, changes the
ownership of the domain name assigned to the website to another website owner. These
are all examples of unacceptable Internet use. Internet censorship is government attempts
to control Internet traffic, thus preventing some material from being viewed by a country’s
citizens. Generally, an Internet use policy:
■ Describes the Internet services available to users.
■ Defines the organization’s position on the purpose of Internet access and what
restrictions, if any, are placed on that access.
■ Describes user responsibility for citing sources, properly handling offensive material,
and protecting the organization’s good name.
■ States the ramifications if the policy is violated.
Email Privacy Policy
An email privacy policy details the extent to which email messages may be read by oth-
ers. Email is so pervasive in organizations that it requires its own specific policy. Most
working professionals use email as their preferred means of corporate communications.
While email and instant messaging are common business communication tools, there
are risks associated with using them. For instance, a sent email is stored on at least three
or four computers (see Figure 4.5 ). Simply deleting an email from one computer does
not delete it from the others. Companies can mitigate many of the risks of using elec-
tronic messaging systems by implementing and adhering to an email privacy policy.
One major problem with email is the user’s expectations of privacy. To a large extent,
this expectation is based on the false assumption that email privacy protection exists
somehow analogous to that of U.S. first-class mail. Generally, the organization that owns
the email system can operate the system as openly or as privately as it wishes. Surveys
indicate that the majority of large firms regularly read and analyze employees’ email
looking for confidential data leaks such as unannounced financial results or the sharing
BUSINESS DRIVEN GLOBALIZATION
The Google debate over operations in China is an excellent example of types
of global ethical and security issues U.S. companies face as they expand opera-
tions around the world. Google’s systems were targeted by highly sophisticated
hacker attacks aimed at obtaining proprietary information including personal
data belonging to Chinese human rights activists who use Google’s Gmail ser-
vice. Google, which originally agreed to filter search results based on Chinese
government censorship rules, decided to unfilter search results after what
it called an infiltration of its technology and the email accounts of Chinese
human-rights activists. China called Google’s plan to defy government censor-
ship rules unfriendly and irresponsible and demanded Google shut down all
operations in China.
Why would China want to filer search results? Do you agree or disagree with
China’s censorship rules? Do you think Google was acting ethically when it agreed
to implement China’s censorship rules? Why do companies operating abroad
need to be aware of the different ethical perspective found in other cultures? 7
Censoring Google
APPLY YOUR KNOWLEDGE
baL76892_ch04_136-171.indd 147baL76892_ch04_136-171.indd 147 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
148 Chapter 4 Ethics and Information Security: MIS Business Concerns
of trade secrets that result in the violation of an email privacy policy and eventual ter-
mination of the employee. That means that if the organization wants to read everyone’s
email, it can do so. Basically, using work email for anything other than work is not a good
idea. A typical email privacy policy:
■ Defines legitimate email users and explains what happens to accounts after a person
leaves the organization.
■ Explains backup procedure so users will know that at some point, even if a message
is deleted from their computer, it is still stored by the company.
■ Describes the legitimate grounds for reading email and the process required before
such action is performed.
■ Discourages sending junk email or spam to anyone who does not want to receive it.
■ Prohibits attempting to mail bomb a site. A mail bomb sends a massive amount of
email to a specific person or system that can cause that user’s server to stop functioning.
■ Informs users that the organization has no control over email once it has been trans-
mitted outside the organization.
Spam is unsolicited email. It plagues employees at all levels within an organization,
from receptionist to CEO, and clogs email systems and siphons MIS resources away from
legitimate business projects. An anti-spam policy simply states that email users will not
send unsolicited emails (or spam). It is difficult to write anti-spam policies, laws, or soft-
ware because there is no such thing as a universal litmus test for spam. One person’s
spam is another person’s newsletter. End users have to decide what spam is, because it
can vary widely not just from one company to the next, but from one person to the next. A
user can opt out of receiving emails by choosing to deny permission to incoming emails.
Teergrubing is an antispamming approach where the receiving computer launches
a return attack against the spammer, sending email messages back to the computer that
originated the suspected spam.
Social Media Policy
Did you see the YouTube video showing two Domino’s Pizza employees violating health
codes while preparing food by passing gas on sandwiches? Millions of people did and
the company took notice when disgusted customers began posting negative comments
all over Twitter. Not having a Twitter account, corporate executives at Domino’s did
not know about the damaging tweets until it was too late. The use of social media can
FIGURE 4.5
Email Is Stored on Multiple
Computers
Sender’s
Computer Sender’s Email
Provider’s Server
Recipient’s
ComputerRecipient’s Email
Provider’s Server
Email Message
Email Message Email Message
Email Message
baL76892_ch04_136-171.indd 148baL76892_ch04_136-171.indd 148 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
BUSINESS DRIVEN MIS
The Canadian Broadcasting Company (CBC) has issued a social networking
policy directing journalists to avoid adding sources or contacts as friends on
social networking sites such as Facebook or LinkedIn. Basic rules state that
reporters never allow one source to view what another source says and report-
ers want to ensure private conversations with sources remain private. Adding
sources as “friends” can compromise a journalist’s work by allowing friends
to view other friends in the network. It may also not be in a journalist’s best
interest to become a “friend” in a source’s network. The CBC also discourages
posting any political preferences in personal profiles, commenting on bulletin
boards or people’s “Facebook wall.”
This might seem like common sense, but for employees who do not spend
countless hours on the Internet, using social networking sites can be confusing
and overwhelming. Why is it critical for any new hire to research and review all
policies, especially social media policies? Research three companies you would
like to work for upon graduation, and detail the types of social media policies
that the company currently has or should implement. 9
Sources Are
Not Friends
APPLY YOUR KNOWLEDGE
149Business Driven MIS Module 1
contribute many benefits to an organization, and implemented correctly it can become
a huge opportunity for employees to build brands. But there are also tremendous risks as
a few employees representing an entire company can cause tremendous brand damage.
Defining a set of guidelines implemented in a social media policy can help mitigate that
risk. Companies can protect themselves by implementing a social media policy outlin-
ing the corporate guidelines or principles governing employee online communications.
Having a single social media policy might not be enough to ensure the company’s online
reputation is protected. Additional, more specific, social media policies a company
might choose to implement include: 8
■ Employee online communication policy detailing brand communication.
■ Employee blog and personal blog policies.
■ Employee social network and personal social network policies.
■ Employee Twitter, corporate Twitter, and personal Twitter policies.
■ Employee LinkedIn policy.
■ Employee Facebook usage and brand usage policy.
■ Corporate YouTube policy.
Organizations must protect their online reputations and continuously monitor blogs,
message boards, social networking sites, and media sharing sites. However, monitor-
ing the hundreds of different social media sites can quickly become overwhelming. To
combat these issues, a number of companies specialize in online social media moni-
toring; for example, Trackur.com creates digital dashboards allowing executives to view
at a glance the date published, source, title, and summary of every item tracked. The
dashboard not only highlights what’s being said, but also the influence of the particular
person, blog, or social media site.
Workplace Monitoring Policy
Increasingly, employee monitoring is not a choice; it is a risk-management obliga-
tion. Michael Soden, CEO of the Bank of Ireland, issued a mandate stating that com-
pany employees could not surf illicit websites with company equipment. Next, he hired
baL76892_ch04_136-171.indd 149baL76892_ch04_136-171.indd 149 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
150 Chapter 4 Ethics and Information Security: MIS Business Concerns
Hewlett-Packard to run the MIS department and illicit websites were discovered on
Soden’s own computer, forcing Soden to resign. Monitoring employees is one of the big-
gest challenges CIOs face when developing information management policies. 10
Physical security is tangible protection such as alarms, guards, fireproof doors,
fences, and vaults. New technologies make it possible for employers to monitor many
aspects of their employees’ jobs, especially on telephones, computer terminals, through
electronic and voice mail, and when employees are using the Internet. Such monitor-
ing is virtually unregulated. Therefore, unless company policy specifically states other-
wise (and even this is not assured), your employer may listen, watch, and read most of
your workplace communications. Workplace MIS monitoring tracks people’s activi-
ties by such measures as number of keystrokes, error rate, and number of transactions
processed (see Figure 4.6 for an overview). The best path for an organization planning
to engage in employee monitoring is open communication including an employee
monitoring policy stating explicitly how, when, and where the company monitors its
employees. Several common stipulations an organization can follow when creating an
employee monitoring policy include:
■ Be as specific as possible stating when and what (email, IM, Internet, network activ-
ity, etc.) will be monitored.
■ Expressly communicate that the company reserves the right to monitor all
employees.
■ State the consequences of violating the policy.
■ Always enforce the policy the same for everyone.
Many employees use their company’s high-speed Internet access to shop, browse,
and surf the web. Most managers do not want their employees conducting personal
business during working hours, and they implement a Big Brother approach to
employee monitoring. Many management gurus advocate that organizations whose
corporate cultures are based on trust are more successful than those whose corporate
cultures are based on mistrust. Before an organization implements monitoring tech-
nology, it should ask itself, “What does this say about how we feel about our employ-
ees?” If the organization really does not trust its employees, then perhaps it should
find new ones. If an organization does trust its employees, then it might want to treat
them accordingly. An organization that follows its employees’ every keystroke might
be unwittingly undermining the relationships with its employees, and it might find the
effects of employee monitoring are often worse than lost productivity from employee
web surfing.
FIGURE 4.6
Internet Monitoring Technologies Common Internet Monitoring Technologies
Key logger, or
key trapper, software
A program that records every keystroke and mouse click.
Hardware key logger A hardware device that captures keystrokes on their journey from the keyboard
to the motherboard.
Cookie A small file deposited on a hard drive by a website containing information about
customers and their web activities. Cookies allow websites to record the comings
and goings of customers, usually without their knowledge or consent.
Adware Software that generates ads that install themselves on a computer when a person
downloads some other program from the Internet.
Spyware (sneakware
or stealthware)
Software that comes hidden in free downloadable software and tracks online
movements, mines the information stored on a computer, or uses a computer’s
CPU and storage for some task the user knows nothing about.
Web log Consists of one line of information for every visitor to a website and is usually
stored on a web server.
Clickstream Records information about a customer during a web surfing session such as
what websites were visited, how long the visit was, what ads were viewed, and
what was purchased.
baL76892_ch04_136-171.indd 150baL76892_ch04_136-171.indd 150 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
151Business Driven MIS Module 1
section 4.2 Information Security
L E A R N I N G O U T C O M E S
4.3 Describe the relationships and differences between hackers and viruses.
4.4 Describe the relationship between information security policies and an information security plan.
4.5 Provide an example of each of the three primary information security areas: (1) authentication and
authorization, (2) prevention and resistance, and (3) detection and response.
PROTECTING INTELLECTUAL ASSETS
To accurately reflect the crucial interdependence between MIS and business processes,
we should update the old business axiom “Time is money” to say “Uptime is money.”
Downtime refers to a period of time when a system is unavailable. Unplanned downtime
can strike at any time for any number of reasons, from tornadoes to sink overflows to net-
work failures to power outages (see Figure 4.7 ). Although natural disasters may appear to
be the most devastating causes of MIS outages, they are hardly the most frequent or most
expensive. Figure 4.8 demonstrates that the costs of downtime are not only associated
LO 4.3: Describe the relationships
and differences between hackers
and viruses.
BUSINESS DRIVEN DEBATE
New technologies make it possible for employers to monitor many aspects of
their employees’ jobs, especially on telephones, computer terminals, through
electronic and voice mail, and when employees are using the Internet. Such
monitoring is virtually unregulated. Therefore, unless company policy specifi-
cally states otherwise (and even this is not assured), your employer may listen,
watch, and read most of your workplace communications.
Employers are taking monitoring activity a step further and monitoring
employees, and employees’ spouses, at home and on weekends. Yes, you read
that correctly. Numerous employees have been fired for smoking cigarettes on
the weekend in the privacy of their own home. As health care costs escalate,
employers are increasingly seeking to regulate employee behavior—at home
as well as in the workplace. Weyco, an insurance benefits administrator in
Michigan, initiated a program requiring mandatory breath tests to detect for
nicotine, and any employee testing positive would be sent home without pay
for one month. If the employee failed the nicotine test a second time, that per-
son would be fired—no matter how long the employee had been with the com-
pany. Weyco’s smoking prohibition does not stop with employees but extends
to spouses also who must pass monthly nicotine tests. A positive test means
the employee must pay a monthly fee of $80 until the spouse takes a smoking-
cessation program and tests nicotine-free. 11
Do you agree that companies have the right to hold employees accountable
for actions they perform on weekends in the privacy of their own homes? If you
were the CEO of Weyco, what would be your argument supporting its smoking
prohibition policies? Do you think Weyco’s monitoring practices are ethical?
Do you think Weyco’s monitoring practices are legal?
Fired for Smoking
on the Weekend
APPLY YOUR KNOWLEDGE
baL76892_ch04_136-171.indd 151baL76892_ch04_136-171.indd 151 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
152 Chapter 4 Ethics and Information Security: MIS Business Concerns
Sources of Unplanned Downtime
Bomb threat Frozen pipe Snowstorm
Burst pipe Hacker Sprinkler malfunction
Chemical spill Hail Static electricity
Construction Hurricane Strike
Corrupted data Ice storm Terrorism
Earthquake Insects Theft
Electrical short Lightning Tornado
Epidemic Network failure Train derailment
Equipment failure Plane crash Smoke damage
Evacuation Power outage Vandalism
Explosion Power surge Vehicle crash
Fire Rodents Virus
Flood Sabotage Water damage (various)
Fraud Shredded data Wind
FIGURE 4.7
Sources of Unplanned
Downtime
Financial Performance
Revenue recognition
Cash flow
Payment guarantees
Credit rating
Stock price
Revenue
Direct loss
Compensatory payments
Lost future revenue
Billing losses
Investment losses
Lost productivity
Damaged Reputation
Customers
Suppliers
Financial markets
Banks
Business partners
Other Expenses
Temporary employees
Equipment rentals
Overtime costs
Extra shipping charges
Travel expenses
Legal obligations
Know your cost of
downtime per hour,
per day, per week.
FIGURE 4.8
The Cost of Downtime
baL76892_ch04_136-171.indd 152baL76892_ch04_136-171.indd 152 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
153Business Driven MIS Module 1
with lost revenues, but also with financial performance, damage to reputations, and
even travel or legal expenses. A few questions managers should ask when determining
the cost of downtime are: 12
■ How many transactions can the company afford to lose without significantly harm-
ing business?
■ Does the company depend upon one or more mission-critical applications to con-
duct business?
■ How much revenue will the company lose for every hour a critical application is
unavailable?
■ What is the productivity cost associated with each hour of downtime?
■ How will collaborative business processes with partners, suppliers, and customers
be affected by an unexpected IT outage?
■ What is the total cost of lost productivity and lost revenue during unplanned
downtime?
The reliability and resilience of IT systems have never been more essential for suc-
cess as businesses cope with the forces of globalization, 24/7 operations, government
and trade regulations, global recession, and overextended IT budgets and resources. Any
unexpected downtime in today’s business environment has the potential to cause both
short- and long-term costs with far-reaching consequences.
Information security is a broad term encompassing the protection of information
from accidental or intentional misuse by persons inside or outside an organization.
Information security is the primary tool an organization can use to combat the threats
associated with downtime. Understanding how to secure information systems is critical
to keeping downtime to a minimum and uptime to a maximum. Hackers and viruses are
two of the hottest issues currently facing information security.
Security Threats Caused by Hackers and Viruses
Hackers are experts in technology who use their knowledge to break into computers
and computer networks, either for profit or just motivated by the challenge. Smoking is
not just bad for a person’s health; it seems it is also bad for company security as hack-
ers regularly use smoking entrances to gain building access. Once inside they pose as
employees from the MIS department and either ask for permission to use an employee’s
computer to access the corporate network, or find a conference room where they sim-
ply plug-in their own laptop. Drive-by hacking is a computer attack where an attacker
accesses a wireless computer network, intercepts data, uses network services, and/or
sends attack instructions without entering the office or organization that owns the net-
work. Figure 4.9 lists the various types of hackers for organizations to be aware of, and
Figure 4.10 shows how a virus is spread.
One of the most common forms of computer vulnerabilities is a virus. A virus is soft-
ware written with malicious intent to cause annoyance or damage. Some hackers create
and leave viruses causing massive computer damage. Figure 4.11 provides an overview
of the most common types of viruses. Two additional computer vulnerabilities include
adware and spyware. Adware is software that, while purporting to serve some useful
Common Types of Hackers
■ Black-hat hackers break into other people’s computer systems and may just look around or may steal and destroy information.
■ Crackers have criminal intent when hacking.
■ Cyberterrorists seek to cause harm to people or to destroy critical systems or information and use the Internet as a weapon of mass destruction.
■ Hactivists have philosophical and political reasons for breaking into systems and will often deface the website as a protest.
■ Script kiddies or script bunnies find hacking code on the Internet and click-and-point their way into systems to cause damage or spread viruses.
■ White-hat hackers work at the request of the system owners to find system vulnerabilities and plug the holes.
FIGURE 4.9
Types of Hackers
baL76892_ch04_136-171.indd 153baL76892_ch04_136-171.indd 153 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
154 Chapter 4 Ethics and Information Security: MIS Business Concerns
function and often fulfilling that function, also allows Internet advertisers to display
advertisements without the consent of the computer user. Spyware is a special class
of adware that collects data about the user and transmits it over the Internet without
the user’s knowledge or permission. Spyware programs collect specific data about the
user, ranging from general demographics such as name, address, and browsing habits to
credit card numbers, Social Security numbers, and user names and passwords. Not all
adware programs are spyware and used correctly it can generate revenue for a company
allowing users to receive free products. Spyware is a clear threat to privacy. Figure 4.12
displays a few additional weapons hackers use for launching attacks. 13
Organizational information is intellectual capital. Just as organizations protect their
tangible assets—keeping their money in an insured bank or providing a safe working
environment for employees—they must also protect their intellectual capital, everything
from patents to transactional and analytical information. With security breaches and
viruses on the rise and computer hackers everywhere, an organization must put in place
strong security measures to survive.
Backdoor programs open a way into the network for future attacks.
Denial-of-service attack (DoS) floods a website with so many requests for service that it slows down or
crashes the site.
Distributed denial-of-service attack (DDoS) attacks from multiple computers that flood a website with so
many requests for service that it slows down or crashes. A common type is the Ping of Death, in which thou-
sands of computers try to access a website at the same time, overloading it and shutting it down.
Polymorphic viruses and worms change their form as they propagate.
Trojan-horse virus hides inside other software, usually as an attachment or a downloadable file.
Worm spreads itself, not only from file to file, but also from computer to computer. The primary difference
between a virus and a worm is that a virus must attach to something, such as an executable file, to spread.
Worms do not need to attach to anything to spread and can tunnel themselves into computers.
FIGURE 4.11
Common Forms of Viruses
FIGURE 4.10
How Computer Viruses Spread
A hacker creates a
virus and attaches
it to a program,
document, or
website.
Thinking the file is legitimate,
the user downloads it and the
virus infects other files and
programs on the computer.
Quickly the virus spreads in
email attachments and shared
files to co-workers and friends.
baL76892_ch04_136-171.indd 154baL76892_ch04_136-171.indd 154 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
155Business Driven MIS Module 1
THE FIRST LINE OF DEFENSE—PEOPLE
Organizations today are able to mine valuable information such as the identity of the top
20 percent of their customers, who usually produce 80 percent of revenues. Most organi-
zations view this type of information as intellectual capital and implement security mea-
sures to prevent it from walking out the door or falling into the wrong hands. At the same
time, they must enable employees, customers, and partners to access needed information
electronically. Organizations address security risks through two lines of defense; the first
is people, the second technology.
Surprisingly, the biggest problem is people as the majority of information security
breaches result from people misusing organizational information. Insiders are legiti-
mate users who purposely or accidentally misuse their access to the environment and
cause some kind of business-affecting incident. For example, many individuals freely
give up their passwords or write them on sticky notes next to their computers, leaving the
door wide open for hackers. Through social engineering, hackers use their social skills
to trick people into revealing access credentials or other valuable information. Dumpster
diving, or looking through people’s trash, is another way hackers obtain information.
Information security policies identify the rules required to maintain information
security, such as requiring users to log off before leaving for lunch or meetings, never
sharing passwords with anyone, and changing passwords every 30 days. An information
security plan details how an organization will implement the information security poli-
cies. The best way a company can safeguard itself from people is by implementing and
communicating its information security plan. This becomes even more important with
Web 2.0 and as the use of mobile devices, remote workforce, and contractors are growing.
A few details managers should consider surrounding people and information security
policies include defining the best practices for 14
■ Applications allowed to be placed on the corporate network, especially various file
sharing applications (Kazaz), IM software, and entertainment or freeware created by
unknown sources (iPhone applications).
■ Corporate computer equipment used for personal reason on personal networks.
■ Password creation and maintenance including minimum password length, charac-
ters to be included while choosing passwords, and frequency for password changes.
■ Personal computer equipment allowed to connect to the corporate network.
LO 4.4: Describe the relationship
between information security policies
and an information security plan.
FIGURE 4.12
Hacker Weapons
Elevation of privilege is a process by which a user misleads a system into granting unauthorized rights, usually for the purpose of compromising or
destroying the system. For example, an attacker might log onto a network by using a guest account and then exploit a weakness in the software that
lets the attacker change the guest privileges to administrative privileges.
Hoaxes attack computer systems by transmitting a virus hoax, with a real virus attached. By masking the attack in a seemingly legitimate message,
unsuspecting users more readily distribute the message and send the attack on to their co-workers and friends, infecting many users along the way.
Malicious code includes a variety of threats such as viruses, worms, and Trojan horses.
Packet tampering consists of altering the contents of packets as they travel over the Internet or altering data on computer disks after penetrating a
network. For example, an attacker might place a tap on a network line to intercept packets as they leave the computer. The attacker could eavesdrop
or alter the information as it leaves the network.
A sniffer is a program or device that can monitor data traveling over a network. Sniffers can show all the data being transmitted over a network,
including passwords and sensitive information. Sniffers tend to be a favorite weapon in the hacker’s arsenal.
Spoofing is the forging of the return address on an email so that the message appears to come from someone other than the actual sender. This is
not a virus but rather a way by which virus authors conceal their identities as they send out viruses.
Splogs (spam blogs) are fake blogs created solely to raise the search engine rank of affiliated websites. Even blogs that are legitimate are plagued
by spam, with spammers taking advantage of the Comment feature of most blogs to comments with links to spam sites.
Spyware is software that comes hidden in free downloadable software and tracks online movements, mines the information stored on a computer,
or uses a computer’s CPU and storage for some task the user knows nothing about.
baL76892_ch04_136-171.indd 155baL76892_ch04_136-171.indd 155 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
156 Chapter 4 Ethics and Information Security: MIS Business Concerns
■ Virus protection including how often the system should be scanned and how fre-
quently the software should be updated. This could also include if downloading
attachments is allowed and practices for safe downloading from trusted and untrust-
worthy sources.
THE SECOND LINE OF DEFENSE—TECHNOLOGY
Once an organization has protected its intellectual capital by arming its people with
a detailed information security plan, it can begin to focus on deploying technology to
help combat attackers. Destructive agents are malicious agents designed by spammers
and other Internet attackers to farm email addresses off websites or deposit spyware on
machines. Figure 4.13 displays the three areas where technology can aid in the defense
against attacks.
People: Authentication and Authorization
Identity theft is the forging of someone’s identity for the purpose of fraud. The
fraud is often financial, because thieves apply for and use credit cards or loans in
the victim’s name. Two means of stealing an identity are phishing and pharming.
Information secrecy is the category of computer security that addresses the protec-
tion of data from unauthorized disclosure and confirmation of data source authentic-
ity. Phishing is a technique to gain personal information for the purpose of identity
theft, usually by means of fraudulent emails that look as though they came from legit-
imate businesses. The messages appear to be genuine, with official-looking formats
and logos, and typically ask for verification of important information such as pass-
words and account numbers, ostensibly for accounting or auditing purposes. Since
the emails look authentic, up to one in five recipients responds with the information
and subsequently becomes a victim of identity theft and other fraud. Figure 4.14 dis-
plays a phishing scam attempting to gain information for Bank of America; you should
never click on emails asking you to verify your identity as companies will never contact
you directly asking for your user name or password. 15 Phishing expedition is a mas-
querading attack that combines spam with spoofing. The perpetrator sends millions
of spam emails that appear to be from a respectable company. The emails contain a
link to a website that is designed to look exactly like the company’s website. The vic-
tim is encouraged to enter his or her username, password, and sometimes credit card
information. Spear phishing is a phishing expedition in which the emails are carefully
designed to target a particular person or organization. Vishing (or voice phishing) is a
LO 4.5: Provide an example of each
of the three primary information
security areas: (1) authentication
and authorization, (2) prevention and
resistance, and (3) detection and
response.
Attacks
Data
Authentication
and
Authorization
Prevention and
Resistance
Detection
and
Response
People
FIGURE 4.13
Three Areas of Information
Security
baL76892_ch04_136-171.indd 156baL76892_ch04_136-171.indd 156 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
157Business Driven MIS Module 1
phone scam that attempts to defraud people by asking them to call a bogus telephone
number to “confirm” their account information.
Pharming reroutes requests for legitimate websites to false websites. For example, if
you were to type in the URL to your bank, pharming could redirect to a fake site that col-
lects your information. A zombie is a program that secretly takes over another computer
for the purpose of launching attacks on other computers. Zombie attacks are almost
impossible to trace back to the attacker. A zombie farm is a group of computers on which
a hacker has planted zombie programs. A pharming attack uses a zombie farm, often by
an organized crime association, to launch a massive phishing attack.
Authentication and authorization technologies can prevent identity theft, phishing,
and pharming scams. Authentication is a method for confirming users’ identities. Once
a system determines the authentication of a user, it can then determine the access privi-
leges (or authorization) for that user. Authorization is the process of providing a user
with permission including access levels and abilities such as file access, hours of access,
and amount of allocated storage space. Authentication and authorization techniques fall
into three categories; the most secure procedures combine all three:
1. Something the user knows, such as a user ID and password.
2. Something the user has, such as a smart card or token.
3. Something that is part of the user, such as a fingerprint or voice signature.
FIGURE 4.14
Bank of America Phishing Scam
baL76892_ch04_136-171.indd 157baL76892_ch04_136-171.indd 157 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
158 Chapter 4 Ethics and Information Security: MIS Business Concerns
Something the User Knows Such as a User ID and Password The first
type of authentication, using something the user knows, is the most common way to
identify individual users and typically consists of a unique user ID and password. How-
ever, this is actually one of the most ineffective ways for determining authentication
because passwords are not secure. All it typically takes to crack one is enough time.
More than 50 percent of help-desk calls are password related, which can cost an orga-
nization significant money, and a social engineer can coax a password from almost
anybody.
Something the User Has Such as a Smart Card or Token The second type of
authentication, using something the user has, offers a much more effective way to identify
individuals than a user ID and password. Tokens and smart cards are two of the primary
forms of this type of authentication. Tokens are small electronic devices that change user
passwords automatically. The user enters his or her user ID and token-displayed pass-
word to gain access to the network. A smart card is a device about the size of a credit
card, containing embedded technologies that can store information and small amounts
of software to perform some limited processing. Smart cards can act as identification
instruments, a form of digital cash, or a data storage device with the ability to store an
entire medical record.
BUSINESS DRIVEN INNOVATION
As our online world continues to explode, people are finding the number of user
names and passwords they need to remember growing exponentially. For this
reason many users will assign the same password for every log-on, choose easy
to remember names and dates, or simply write down their passwords on sticky
notes and attach them to their computers. Great for the person who needs to
remember 72 different passwords, but not so great for system security.
Of course the obvious answer is to deploy biometrics across the board, but
once you start reviewing the costs associated with biometrics you quickly realize
that this is not feasible. What is coming to the rescue to help with the password
nightmare we have created? The doodle. Background Draw-a-Secret (BDAS) is
a new program created by scientists at Newcastle University in England. BDAS
begins by recording the number of strokes it takes a user to draw a doodle and
when the user wants to gain access to the system he simply redraws the doo-
dle on a touchpad and it is matched against the stored prototype. If the doodle
matches, the user is granted access. Doodles are even described as being far
more anonymous, therefore offering greater security, than biometrics.
You are probably thinking that you’ll end up right back in the same posi-
tion having to remember all 72 of your password doodles. The good news is
that with doodle passwords you don’t have to remember a thing. The doodle
password can be displayed to users, and they simply have to redraw it since the
system analyzes how the user draws or the user’s unique hand strokes, not the
actual doodle (similar to handwriting recognition technologies). 16
If you were going to deploy doodle passwords to your organization, what
issues and concerns do you think might occur? Do you agree that doodles are
easier to remember than text passwords? Do you agree that doodles offer the
most effective way to manage authentication and authorization, even greater
than biometrics? What types of unethical issues do you think you might
encounter with doodle passwords?
Doodling
Passwords
APPLY YOUR KNOWLEDGE
baL76892_ch04_136-171.indd 158baL76892_ch04_136-171.indd 158 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
159Business Driven MIS Module 1
Something That Is Part of the User Such as a Fingerprint or Voice
Signature The third kind of authentication, something that is part of the user, is by
far the best and most effective way to manage authentication. Biometrics (narrowly
defined) is the identification of a user based on a physical characteristic, such as a fin-
gerprint, iris, face, voice, or handwriting. Unfortunately, biometric authentication can be
costly and intrusive.
Data: Prevention and Resistance
Prevention and resistance technologies stop intruders from accessing and reading data
by means of content filtering, encryption, and firewalls. Time bombs are computer
viruses that wait for a specific date before executing their instructions. Content filtering
occurs when organizations use software that filters content, such as emails, to prevent
the accidental or malicious transmission of unauthorized information. Organizations
can use content filtering technologies to filter email and prevent emails containing sen-
sitive information from transmitting, whether the transmission was malicious or acci-
dental. It can also filter emails and prevent any suspicious files from transmitting such
as potential virus-infected files. Email content filtering can also filter for spam, a form of
unsolicited email.
Encryption scrambles information into an alternative form that requires a key or
password to decrypt. If there were a security breach and the stolen information were
encrypted, the thief would be unable to read it. Encryption can switch the order of char-
acters, replace characters with other characters, insert or remove characters, or use a
mathematical formula to convert the information into a code. Companies that transmit
sensitive customer information over the Internet, such as credit card numbers, frequently
use encryption. To decrypt information is to decode it and is the opposite of encrypt.
Cryptography is the science that studies encryption, which is the hiding of messages so
that only the sender and receiver can read them. The National Institute of Standards and
Technology (NIST) introduced an advanced encryption standard (AES) designed to
keep government information secure.
Some encryption technologies use multiple keys. Public key encryption (PKE) uses
two keys: a public key that everyone can have and a private key for only the recipient
(see Figure 4.15 ). The organization provides the public key to all customers, whether end
consumers or other businesses, who use that key to encrypt their information and send
it via the Internet. When it arrives at its destination, the organization uses the private key
to unscramble it.
Public keys are becoming popular to use for authentication techniques consisting
of digital objects in which a trusted third party confirms correlation between the user
and the public key. A certificate authority is a trusted third party, such as VeriSign,
that validates user identities by means of digital certificates. A digital certificate is a
FIGURE 4.15
Public Key Encryption (PKE)
Public Key
Encrypted Information
Public Key
Encrypted Information
Public Key
Encrypted Information
Originating Business
Sends the same
public key to all
customers
Uses a private key
to decrypt the
information received
•
•
baL76892_ch04_136-171.indd 159baL76892_ch04_136-171.indd 159 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
160 Chapter 4 Ethics and Information Security: MIS Business Concerns
data file that identifies individuals or organizations online and is comparable to a digi-
tal signature.
A firewall is hardware and/or software that guard a private network by analyzing
incoming and outgoing information for the correct markings. If they are missing, the
firewall prevents the information from entering the network. Firewalls can even detect
computers communicating with the Internet without approval. As Figure 4.16 illustrates,
organizations typically place a firewall between a server and the Internet. Think of a
firewall as a gatekeeper that protects computer networks from intrusion by providing a
filter and safe transfer points for access to and from the Internet and other networks. It
screens all network traffic for proper passwords or other security codes and allows only
authorized transmissions in and out of the network.
Firewalls do not guarantee complete protection, and users should enlist additional
security technologies such as antivirus software and antispyware software. Antivirus
software scans and searches hard drives to prevent, detect, and remove known viruses,
adware, and spyware. Antivirus software must be frequently updated to protect against
newly created viruses.
Attack: Detection and Response
Cyberwar is an organized attempt by a country’s military to disrupt or destroy infor-
mation and communication systems for another country. Cyberterrorism is the use
of computer and networking technologies against persons or property to intimidate or
coerce governments, individuals, or any segment of society to attain political, religious,
or ideological goals. With so many intruders planning computer attacks, it is critical
that all computer systems are protected. The presence of an intruder can be detected
by watching for suspicious network events such as bad passwords, the removal of highly
classified data files, or unauthorized user attempts. Intrusion detection software (IDS)
features full-time monitoring tools that search for patterns in network traffic to identify
intruders. IDS protects against suspicious network traffic and attempts to access files
and data. If a suspicious event or unauthorized traffic is identified, the IDS will gen-
erate an alarm and can even be customized to shut down a particularly sensitive part
of a network. After identifying an attack, an MIS department can implement response
tactics to mitigate the damage. Response tactics outline procedures such as how long
a system under attack will remain plugged in and connected to the corporate network,
FIGURE 4.16
Sample Firewall Architecture
Connecting Systems Located in
Chicago, New York, and Boston
Server Firewall
Chicago
InternetDatabase
Firewall Server
New York
Firewall Server
Boston
Database
Database
baL76892_ch04_136-171.indd 160baL76892_ch04_136-171.indd 160 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
161Business Driven MIS Module 1
BUSINESS DRIVEN START-UP
Have you ever seen a LifeLock advertisement? If so, you know the Social Security
number of LifeLock CEO Todd Davis because he posts it in all ads daring hack-
ers to try to steal his identity. Davis has been a victim of identity theft at least 13
times. The first theft occurred when someone used his identity to secure a $500
loan from a check-cashing company. Davis discovered the crime only after the
company called his wife’s cell phone to recover the unpaid debt. 17
If you were starting an identity theft prevention company, do you think it
would be a good idea to post your Social Security number in advertisements?
Why or why not? What do you think happened that caused Davis’ identity to
be stolen? What types of information security measure should LifeLock imple-
ment to ensure Davis’ Social Security number is not stolen again? If you were
LifeLock’s CEO, what type of marketing campaign would you launch next?
LifeLock:
Keeping Your
Identity Safe
APPLY YOUR KNOWLEDGE
Learning Outcome 4.1: Explain the ethical issues in the use of information technology.
Information ethics govern the ethical and moral issues arising from the development and use of
information technologies, as well as the creation, collection, duplication, distribution, and processing
of information itself (with or without the aid of computer technologies). Ethical dilemmas in this area
usually arise not as simple, clear-cut situations but as clashes between competing goals, responsibili-
ties, and loyalties. Inevitably, there will be more than one socially acceptable or “correct” decision. For
this reason, acting ethically and legally are not always the same.
Learning Outcome 4.2: Identify the six epolicies organizations should implement
to protect themselves.
1. An ethical computer use policy contains general principles to guide computer user behavior. For
example, it might explicitly state that users should refrain from playing computer games during
working hours.
2. An information privacy policy contains general principles regarding information privacy.
3. An acceptable use policy (AUP) is a policy that a user must agree to follow in order to be provided
access to corporate email, information systems, and to the Internet.
4. An email privacy policy details the extent to which email messages may be read by others.
L E A R N I N G O U T C O M E R E V I E W
when to shut down a compromised system, and how quickly a backup system will be up
and running.
Guaranteeing the safety of organization information is achieved by implementing
the two lines of defense: people and technology. To protect information through people,
firms should develop information security policies and plans that provide employees
with specific precautions they should take in creating, working with, and transmitting the
organization’s information assets. Technology-based lines of defense fall into three cat-
egories: authentication and authorization; prevention and resistance; and detection and
response.
baL76892_ch04_136-171.indd 161baL76892_ch04_136-171.indd 161 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
162 Chapter 4 Ethics and Information Security: MIS Business Concerns
5. A social media policy outlines the corporate guidelines or principles governing employee online
communications.
6. An employee monitoring policy states explicitly how, when, and where the company monitors its
employees.
Learning Outcome 4.3: Describe the relationships and differences between hackers
and viruses.
Hackers are experts in technology who use their knowledge to break into computers and computer net-
works, either for profit or just motivated by the challenge. A virus is software written with malicious intent to
cause annoyance or damage. Some hackers create and leave viruses causing massive computer damage.
Learning Outcome 4.4: Describe the relationship between information security policies
and an information security plan.
Information security policies identify the rules required to maintain information security, such as
requiring users to log off before leaving for lunch or meetings, never sharing passwords with anyone,
and changing passwords every 30 days. An information security plan details how an organization
will implement the information security policies. The best way a company can safeguard itself from
people is by implementing and communicating its information security plan.
Learning Outcome 4.5: Provide an example of each of the three primary information
security areas: (1) authentication and authorization, (2) prevention and resistance, and
(3) detection and response.
Authentication and authorization: Authentication is a method for confirming users’ identities. Once
a system determines the authentication of a user, it can then determine the access privileges (or
authorization) for that user. Authorization is the process of providing a user with permission including
access levels and abilities such as file access, hours of access, and amount of allocated storage space.
Prevention and resistance: Content filtering occurs when organizations use software that filters
content, such as emails, to prevent the accidental or malicious transmission of unauthorized infor-
mation. Encryption scrambles information into an alternative form that requires a key or password
to decrypt. In a security breach, a thief is unable to read encrypted information. A firewall is hard-
ware and/or software that guard a private network by analyzing incoming and outgoing informa-
tion for the correct markings.
Detection and response: Intrusion detection software (IDS) features full-time monitoring tools
that search for patterns in network traffic to identify intruders.
1. Knowledge: Define information ethics and information security and explain why each is critical to
any business.
2. Comprehension: Identify two epolicies that a business could implement to ensure the protection
of sensitive corporate data.
3. Application: Demonstrate how a business can use authentication and authorization technologies
to prevent information theft.
4. Analysis: Analyze how a business can use prevention and resistance technologies to safeguard
its employees from hackers and viruses.
5. Synthesis: Propose a plan to implement information security plans to ensure your critical infor-
mation is safe and protected.
6. Evaluate: Evaluate the information security issues facing a business and identify its three biggest
concerns.
O P E N I N G C A S E Q U E S T I O N S
baL76892_ch04_136-171.indd 162baL76892_ch04_136-171.indd 162 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
163Business Driven MIS Module 1
1. What are ethics and why are they important to a company?
2. What is the relationship between information management, governance, and compliance?
3. Why are epolicies important to a company?
4. What is the correlation between privacy and confidentiality?
5. What is the relationship between adware and spyware?
6. What are the positive and negative effects associated with monitoring employees?
7. What is the relationship between hackers and viruses?
8. Why is security a business issue, not just a technology issue?
9. What are the growing issues related to employee communication methods and what can a
company do to protect itself?
10. How can a company participating in ebusiness keep its information secure?
11. What technologies can a company use to safeguard information?
12. Why is ediscovery important to a company?
13. What are the reasons a company experiences downtime?
14. What are the costs associated with downtime?
R E V I E W Q U E S T I O N S
Acceptable use policy (AUP), 146
Adware, 153
Advanced encryption standard
(AES), 159
Anti-spam policy, 148
Antivirus software, 160
Authentication, 157
Authorization, 157
Biometrics, 159
Black-hat hackers, 153
Certificate authority, 159
Child Online Protection Act
(COPA), 145
Click-fraud, 145
Competitive click-fraud, 145
Confidentiality, 141
Content filtering, 159
Copyright, 141
Counterfeit software, 141
Cracker, 153
Cryptography, 159
Cyberterrorists, 153
Cyberbullying, 145
Cybervandalism, 147
Cyberterrorism, 160
Cyberwar, 160
Decrypt, 159
Destructive agents, 157
Digital certificate, 159
Digital rights management, 141
Downtime, 151
Drive-by hacking, 153
Dumpster diving, 155
Ediscovery (or electronic
discovery), 145
Email privacy policy, 147
Employee monitoring policy, 150
Encryption, 159
Epolicies, 145
Ethical computer use policy, 146
Ethics, 141
Firewall, 160
Hackers, 153
Hactivists, 153
Identity theft, 156
Information compliance, 144
Information ethics, 141
Information governance, 144
Information management, 144
Information property, 144
Information secrecy, 156
Information privacy policy, 146
Information security, 153
Information security plan, 155
Information security policies, 155
Insiders, 155
Intellectual property, 141
Internet censorship, 147
Internet use policy, 146
Intrusion detection software
(IDS), 160
Mail bomb, 148
Nonrepudiation, 146
Opt out, 148
Patent, 141
Pharming, 157
Pharming attack, 157
Phishing, 156
Phishing expedition, 156
Physical security, 150
Pirated software, 141
Privacy, 141
Public key encryption (PKE), 159
Script kiddies or script
bunnies, 153
Smart card, 158
Spear phishing, 156
Social engineering, 155
Social media policy, 149
Spam, 148
Spyware, 154
Teergrubing, 148
Threat, 142
Time bomb, 159
Tokens, 158
Typosquatting, 147
Virus, 153
Vishing (voice phishing), 156
Website name stealing, 147
White-hat hackers, 153
Workplace MIS monitoring, 150
Zombie, 157
Zombie farm, 157
K E Y T E R M S
baL76892_ch04_136-171.indd 163baL76892_ch04_136-171.indd 163 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
164 Chapter 4 Ethics and Information Security: MIS Business Concerns
C L O S I N G C A S E O N E
E-Espionage
BusinessWeek magazine probed the rising attacks on America’s most sensitive computer networks,
uncovering startling security gaps. The email message addressed to a Booz Allen Hamilton executive
from the Pentagon was mundane—a shopping list of weaponry India wanted to buy. But the missive was
a brilliant fake. Lurking beneath the description of aircraft, engines, and radar equipment was an insidi-
ous piece of computer code, known as Poison Ivy, designed to suck sensitive data out of the $4 billion
consulting firm’s computer network.
The Pentagon had not sent the email. Its origin is unknown, but the message traveled through
Korea on its way to Booz Allen. Its authors knew enough about the “sender” and “recipient” to craft
a message unlikely to arouse suspicion. Had the Booz Allen executive clicked on the attachment, his
every keystroke would have been reported back to a mysterious master at the Internet address cyber-
syndrome.3322.org, which is registered through an obscure company headquartered on the banks of
China’s Yangtze River.
The email aimed at Booz Allen paints a vivid picture of the alarming new capabilities of America’s
cyberenemies. The email message was sent to John F. “Jack” Mulhern, vice president for international
military assistance programs at Booz Allen. In the high-tech world of weapons sales, Mulhern’s spe-
cialty, the email looked authentic enough. “Integrate U.S., Russian, and Indian weapons and avionics,”
the email noted, describing the Indian government’s expectations for its fighter jets. “Source code
given to India for indigenous computer upgrade capability.” Such lingo could easily be understood
by Mulhern. The 62-year-old former U.S. Naval officer and 33-year veteran of Booz Allen’s military
consulting business is an expert in helping to sell U.S. weapons to foreign governments.
The email was more convincing because of its apparent sender: Stephen J. Moree, a civilian who
worked for a group that reported to the office of then-Air Force Secretary Michael W. Wynne. Among
its duties, Moree’s unit evaluated the security of selling U.S. military aircraft to other countries. There
would be little reason to suspect anything seriously amiss in Moree passing along the highly technical
document with “India MRCA Request for Proposal” in the subject line. The Indian government had just
released the request a week earlier, on August 28, and the language in the email closely tracked the
request. Making the message appear more credible still, it referred to upcoming Air Force communi-
qués and a “Team Meeting” to discuss the deal.
But the correspondence from Moree to Jack Mulhern was a fake. An analysis of the email’s path
and attachment, conducted for BusinessWeek by three cybersecurity specialists, shows it was sent
by an unknown attacker, bounced through an Internet address in South Korea, relayed through a
Yahoo! server in New York, and finally made its way to Mulhern’s Booz Allen in-box. The analysis also
shows the code—known as malware, for malicious software—tracks keystrokes on the computers
of people who open it. A separate program disables security measures such as password protection
on Microsoft Access database files, a program often used by large organizations such as the U.S.
defense industry to manage big batches of data.
Global Threats
The U.S. government and its sprawl of defense contractors have been the victims of an unprec-
edented rash of similar attacks, say current and former U.S. government officials. “It’s espionage
on a massive scale,” said Paul B. Kurtz, a former high-ranking national security official. Government
agencies reported 12,986 cybersecurity incidents to the U.S. Homeland Security Department in one
fiscal year, triple the number from two years earlier. Incursions on the military’s networks were up
55 percent, said Lieutenant General Charles E. Croom, head of the Pentagon’s Joint Task Force for
Global Network Operations. Private targets such as Booz Allen are just as vulnerable and pose just
as much potential security risk. “They have our information on their networks. They’re building our
baL76892_ch04_136-171.indd 164baL76892_ch04_136-171.indd 164 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
165Business Driven MIS Module 1
weapon systems. You wouldn’t want that in enemy hands,” Croom said. Cyber attackers “are not deny-
ing, disrupting, or destroying operations—yet. But that doesn’t mean they don’t have the capability.”
Poison Ivy
Commercial computer security firms have dubbed the malicious code hidden inside the email attachment
Poison Ivy, and it has a devious—and worrisome—capability known as a RAT, a remote administration
tool. RAT gives the attacker control over the host PC, capturing screen shots and perusing files. It lurks in
the background of Microsoft Internet Explorer browsers while users surf the web. Then it phones home to
its “master” at an Internet address currently registered under the name cybersyndrome.3322.org .
The digital trail to cybersyndrome.3322.org , followed by analysts at BusinessWeek ’s request, leads
to one of China’s largest free domain-name-registration and email services. Called 3322.org, it is reg-
istered to a company called Bentium in the city of Changzhou, an industrial hub outside Shanghai. A
range of security experts say that 3322.org provides names for computers and servers that act as the
command and control centers for more than 10,000 pieces of malicious code launched at government
and corporate networks in recent years. Many of those PCs are in China; the rest could be anywhere.
The founder of 3322.org, a 37-year-old technology entrepreneur named Peng Yong, says his com-
pany merely allows users to register domain names. “As for what our users do, we cannot completely
control it,” Peng said. The bottom line: If Poison Ivy infected Jack Mulhern’s computer at Booz Allen,
any secrets inside could be seen in China. And if it spread to other computers, as malware often does,
the infection opens windows on potentially sensitive information there, too.
Many security experts worry the Internet has become too unwieldy to be tamed. New threats
appear every day, each seemingly more sophisticated than the previous one. The Defense Department,
whose Advanced Research Projects Agency (DARPA) developed the Internet in the 1960s, is beginning
to think it created a monster. “You don’t need an Army, a Navy, an Air Force to beat the U.S.,” said
General William T. Lord, commander of the Air Force Cyber Command, a unit formed to upgrade Air
Force computer defenses. “You can be a peer force for the price of the PC on my desk.” 18
Questions
1. Define information ethics and information security and explain why each is critical to any govern-
ment operation.
2. Identify two epolicies the government should implement to help combat cyberterrorism.
3. Demonstrate how the government can use authentication and authorization technologies to pre-
vent information theft.
4. Analyze how the government can use prevention and resistance technologies to safeguard its
employees from hackers and viruses.
5. Propose a plan for how the government can implement information security plans to ensure its
critical information is safe and protects.
6. Evaluate the information security issues facing the government and identify its three biggest
concerns.
Hacker Hunters
Hacker hunters are the new breed of crime fighter. They employ the same methodology used to fight
organized crime in the 1980s—informants and the cyberworld equivalent of wiretaps. Daniel Larking,
a 20-year veteran who runs the FBI’s Internet Crime Complaint Center, taps online service providers to
help track down criminal hackers. Leads supplied by the FBI and eBay helped Romanian police round
C L O S I N G C A S E T W O
baL76892_ch04_136-171.indd 165baL76892_ch04_136-171.indd 165 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
166 Chapter 4 Ethics and Information Security: MIS Business Concerns
up 11 members of a gang that set up fake eBay accounts and auctioned off cell phones, laptops, and
cameras they never intended to deliver.
The FBI unleashed Operation Firewall, targeting the ShadowCrew, a gang whose members were
schooled in identity theft, bank account pillage, and selling illegal goods on the Internet. ShadowCrew’s
4,000 gang members lived in a dozen countries and across the United States. For months, agents
had been watching their every move through a clandestine gateway into their website, shadowcrew.
com. One member turned informant and called a group meeting, ensuring the members would be at
home on their computers during a certain time, when the Secret Service issued orders to move in
on the gang. The move was synchronized around the globe to prevent gang members from warning
each other via instant messages. Twenty-eight gang members in eight states and six countries were
arrested, most still at their computers. Authorities seized dozens of computers and found 1.7 million
credit card numbers and more than 18 million email accounts.
ShadowCrew’s Operations
The alleged ringleaders of ShadowCrew included Andres Mantovani, 23, a part-time community col-
lege student in Arizona, and David Appleyard, 45, a former New Jersey mortgage broker. Mantovani
and Appleyard allegedly were administrators in charge of running the website and recruiting mem-
bers. The site created a marketplace for more than 4,000 gang members who bought and sold hot
information and merchandise. The website was open for business 24 hours a day, but since most of
the members held jobs, the busiest time was from 10 p.m. to 2 a.m. on Sundays. Hundreds of gang
members would meet online to trade credit card information, passports, and even equipment to make
fake identity documents. Platinum credit cards cost more than gold ones, and discounts were offered
for package deals. One member known as “Scarface” sold 115,695 stolen credit card numbers in a
single trade. Overall, the gang made more than $4 million in credit card purchases over two years.
ShadowCrew was equivalent to an eBay for the underworld. The site even posted crime tips on how
to use stolen credit cards and fake IDs at big retailers.
The gang stole credit card numbers and other valuable information through clever tricks. One of
the favorites was sending millions of phishing emails—messages that appeared to be from legitimate
companies such as Yahoo!—designed to steal passwords and credit card numbers. The gang also
hacked into corporate databases to steal account data. According to sources familiar with the inves-
tigation, the gang cracked the networks of 12 unidentified companies that were not even aware their
systems had been breached.
Police Operations
Brian Nagel, an assistant director at the Secret Service, coordinated the effort to track the ShadowCrew.
Allies included Britain’s national high-tech crimes unit, the Royal Canadian Mounted Police, and the
Bulgarian Interior Ministry. Authorities turned one of the high-ranking members of the gang into a
snitch and had the man help the Secret Service set up a new electronic doorway for ShadowCrew
members to enter their website. The snitch spread the word that the new gateway was a more secure
way to the website. It was the first-ever tap of a private computer network. “We became shadowcrew.
com ,” Nagel said. Mantovani and Appleyard were slated for trial. Authorities anticipated making addi-
tional arrests. 19
Questions
1. What types of technology could big retailers use to prevent identity thieves from purchasing
merchandise?
2. What can organizations do to protect themselves from hackers looking to steal account data?
3. Authorities frequently tap online service providers to track down hackers. Do you think it is ethical
for authorities to tap an online service provider and read people’s email? Why or why not?
4. Do you think it was ethical for authorities to use one of the high-ranking officials to trap other gang
members? Why or why not?
5. In a team, research the Internet and find the best ways to protect yourself from identity theft.
baL76892_ch04_136-171.indd 166baL76892_ch04_136-171.indd 166 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
167Business Driven MIS Module 1
1. Cheerleader Charged $27,750 for File Sharing 37 Songs
A federal appeals court is ordering a university student to pay the Recording Industry Association
of America $27,750—$750 a track—for file sharing 37 songs when she was a high school cheer-
leader. Have you ever illegally copied or downloaded a song or movie? If you have and you were
forced to pay $750 per track, how much would you owe? What is the difference between file shar-
ing and Internet radio streaming? Do you agree or disagree with the federal appeals decision? Why
or why not? Why is claiming a lack of copyright knowledge not a good defense against illegally
sharing movies or music? If you do not have a good understanding of information laws, what can
you do to ensure you are never placed in a federal lawsuit for violating information laws? 20
2. Police Records Found in Old Copy Machine
Copy machines made after 2002 all contain a hard drive that stores a copy of every document the
machine has ever scanned, printed, copied, or faxed. If the hard drive is not erased or scrubbed
when the copy machine is resold, all of that digital information is still maintained inside the
machine. The Buffalo, New York, Police Sex Crimes Division recently sold several copy machines
without scrubbing the hard drives. The hard drives yielded detailed domestic violence complaints
and a list of wanted sex offenders. A machine from the Buffalo Police Narcotics Unit contained
targets in a major drug raid, and a copier once used by a New York construction company stored
95 pages of pay stubs with names, addresses, and Social Security numbers. 21
Who do you think should be held responsible for the information issues caused at the Buffalo
police department? What types of ethical issues and information security issues are being vio-
lated? What types of epolicies could a company implement to ensure these situations do not
occur? What forms of information security could a company implement to ensure these situations
do not occur? How does this case support the primary reason why ediscovery is so important to
litigation?
3. Firewall Decisions
You are the CEO of Inverness Investments, a medium-size venture capital firm that specializes in
investing in high-tech companies. The company receives more than 30,000 email messages per
year. On average, there are two viruses and three successful hackings against the company each
year, which result in losses to the company of about $250,000. Currently, the company has antivi-
rus software installed but does not have any firewalls.
Your CIO is suggesting implementing 10 firewalls for a total cost of $80,000. The estimated life
of each firewall is about three years. The chances of hackers breaking into the system with the
firewalls installed are about 3 percent. Annual maintenance costs on the firewalls are estimated
around $15,000. Create an argument for or against supporting your CIO’s recommendation to
purchase the firewalls. Are there any considerations in addition to finances?
4. Preventing Identity Theft
The FBI states that identity theft is one of the fastest-growing crimes. If you are a victim of iden-
tity theft, your financial reputation can be ruined, making it impossible for you to cash a check
or receive a bank loan. Learning how to avoid identity theft can be a valuable activity. Using the
Internet, research the most current ways the government recommends for you to to prevent iden-
tity theft.
5. Discussing the Three Areas of Information Security
Great Granola Inc. is a small business operating out of northern California. The company spe-
cializes in selling homemade granola, and its primary sales vehicle is through its website. The
company is growing exponentially and expects its revenues to triple this year to $12 million.
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch04_136-171.indd 167baL76892_ch04_136-171.indd 167 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
168 Chapter 4 Ethics and Information Security: MIS Business Concerns
The company also expects to hire 60 additional employees to support its growth. Joan Martin,
the CEO, is aware that if her competitors discover the recipe for her granola, or who her primary
customers are, it could easily ruin her business. Martin has hired you to draft a document discuss-
ing the different areas of information security, along with your recommendations for providing a
secure ebusiness environment.
6. Spying on Email
Technology advances now allow individuals to monitor computers that they do not even have
physical access to. New types of software can capture an individual’s incoming and outgoing email
and then immediately forward that email to another person. For example, if you are at work and
your child is home from school and she receives an email from John at 3:00 p.m., at 3:01 p.m. you
can receive a copy of that email sent to your email address. If she replies to John’s email, within
seconds you will again receive a copy of what she sent to John. Describe two scenarios (other than
those described here) for the use of this type of software: one in which the use would be ethical
and one in which it would be unethical.
7. Stealing Software
The software industry fights against pirated software on a daily basis. The major centers of soft-
ware piracy are in places such as Russia and China where salaries and disposable income are
comparatively low. People in developing and economically depressed countries will fall behind the
industrialized world technologically if they cannot afford access to new generations of software.
Considering this, is it reasonable to blame someone for using pirated software when it could cost
him or her two months’ salary to purchase a legal copy? Create an argument for or against the
following statement: Individuals who are economically less fortunate should be allowed access
to software free of charge in order to ensure that they are provided with an equal technological
advantage.
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. Providing employees with computer access is one of the perks offered by your business.
Employees enjoy checking their personal email and surfing the Internet on their breaks. So far,
computer access has been a cherished employee benefit. When you came into work this morning
you found the following anonymous letter from one of your employees on your desk. “I received a
highly inappropriate joke from a fellow employee that I found extremely offensive. The employee
who sent the joke was Debbie Fernandez and I believe she should be reprimanded for her inap-
propriate actions. Signed—a disturbed employee.” What would you do? What could you have
done to ensure situations such as these would be easily handled if they did arise? What could
you do to ensure such situations do not happen in the future and if they do all employees are
aware of the ramifications of inappropriate emails? (Be sure to identify your business and the
name of your company.)
2. The local community has always been a big part of your grandfather’s business and he knew
almost everyone in the community. Your grandfather attended all types of community events and
would spend hours talking with friends and neighbors soliciting feedback and ideas on his busi-
ness. As you know, data are important to any business. In fact, data are an essential business
asset. You have decided to start tracking detailed customer information for all business events
from fund-raising to promotions. Since you took over the business you have been collecting more
and more event data to help you run marketing campaigns across events and optimize the event
schedules. One day, a sophisticated businessman walks into your business and asks to speak
baL76892_ch04_136-171.indd 168baL76892_ch04_136-171.indd 168 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
169Business Driven MIS Module 1
to the owner. He introduces himself as Lance Smith and says that he would like to talk to you in
private. Smith is retiring and is closing his business that was located just down the street, and
he wants to sell you his detailed customer information. Smith would like a large sum of money to
sell you his confidential customer contact information and sales reports for the past 20 years. He
says he has more than 10,000 customers in his unique database. What do you do?
3. Yesterday you had an interesting conversation with one of your loyal customers, Dan Martello.
He asked you the following question: “If I find a digital camera on the street is it OK to look at the
contents, or am I invading the owner’s privacy?” You have a lengthy debate and decided that in
some scenarios it is an invasion of privacy to be looking at someone else’s photos and is similar to
looking in their windows. In other scenarios, it is not an invasion of privacy if you do not know the
person and it is the primary way to identify the owner to return the camera, similar to looking in a
wallet. As you are cleaning your business, you find a 30 gigabyte thumb drive and you know that it
probably belongs to one of your valuable customers and contains their sensitive information. What
do you do? What security concerns are associated with the thumb drive? How could information
security policies or an information security plan help your business with this type of situation?
PROJECT I Grading Security
Making The Grade is a nonprofit organization that helps students learn how to achieve better grades
in school. The organization has 40 offices in 25 states and more than 2,000 employees. The company
wants to build a website to offer its services online. Making The Grade’s online services will pro-
vide parents seven key pieces of advice for communicating with their children to help them achieve
academic success. The website will offer information on how to maintain open lines of communica-
tion, set goals, organize academics, regularly track progress, identify trouble spots, get to know their
child’s teacher, and celebrate their children’s successes.
You and your team work for the director of information security. Your team’s assignment is to
develop a document discussing the importance of creating information security polices and an infor-
mation security plan. Be sure to include the following:
■ The importance of educating employees on information security.
■ A few samples of employee information security policies specifically for Making The Grade.
■ Other major areas the information security plan should address.
■ Signs the company should look for to determine if the website is being hacked.
■ The major types of attacks the company should expect to experience.
PROJECT I I Eyes Everywhere
The movie Minority Report chronicled a futuristic world where people are uniquely identifiable by their
eyes. A scan of each person’s eyes gives or denies them access to rooms, computers, and anything
else with restrictions. The movie portrayed a black market in new eyeballs to help people hide from
the authorities. (Why did they not just change the database entry instead? That would have been
much easier, but a lot less dramatic.)
The idea of using a biological signature is entirely plausible because biometrics is currently being
used and is expected to gain wider acceptance in the near future because forging documents has
become much easier with the advances in computer graphics programs and color printers. The next
time you get a new passport, it may incorporate a chip that has your biometric information encoded
on it. Office of Special Investigations agents with fake documents found that it was relatively easy to
enter the United States from Canada, Mexico, and Jamaica, by land, sea, and air.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch04_136-171.indd 169baL76892_ch04_136-171.indd 169 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
170 Chapter 4 Ethics and Information Security: MIS Business Concerns
The task of policing the borders is daunting. Some 500 million foreigners enter the country every
year and go through identity checkpoints. More than 13 million permanent-resident and border-cross-
ing cards have been issued by the U.S. government. Also, citizens of 27 countries do not need visas to
enter this country. They are expected to have passports that comply with U.S. specifications that will
also be readable at the border.
In the post-9/11 atmosphere of tightened security, unrestricted border crossing is not acceptable.
The Department of Homeland Security is charged with securing the nation’s borders, and as part of
this plan, new entry/exit procedures were instituted at the beginning of 2003. An integrated system,
using biometrics, will be used to identify foreign visitors to the United States and reduce the likelihood
of terrorists entering the country.
Early in 2003, after 6 million biometric border-crossing cards had been issued, a pilot test con-
ducted at the Canadian border detected more than 250 imposters. The testing started with two bio-
metric identifiers: photographs for facial recognition and fingerprint scans. As people enter and leave
the country, their actual fingerprints and facial features are compared to the data on the biometric
chip in the passport.
In a group, discuss the following:
a. How do you feel about having your fingerprints, facial features, and perhaps more of your
biometric features encoded in documents such as your passport? Explain your answer.
b. Would you feel the same way about having biometric information on your driver’s license as on
your passport? Why or why not?
c. Is it reasonable to have different biometric identification requirements for visitors from differ-
ent nations? Explain your answer. What would you recommend as criteria for deciding which
countries fall into what categories?
d. The checkpoints U.S. citizens pass through upon returning to the country vary greatly in the
depth of the checks and the time spent. The simplest involves simply walking past the border
guards who may or may not ask you your citizenship. The other end of the spectrum requires
that you put up with long waits in airports where you have to line up with hundreds of other
passengers while each person is questioned and must produce a passport to be scanned.
Would you welcome biometric information on passports if it would speed the process, or do
you think that the disadvantages of the reduction in privacy, caused by biometric information,
outweigh the advantages of better security and faster border processing? Explain your answer.
PROJECT I I I Setting Boundaries
Even the most ethical people sometimes face difficult choices. Acting ethically means behaving in a
principled fashion and treating other people with respect and dignity. It is simple to say, but not so
simple to do since some situations are complex or ambiguous. The important role of ethics in our lives
has long been recognized. As far back as 44 B.C., Cicero said that ethics are indispensable to anyone
who wants to have a good career. Having said that, Cicero, along with some of the greatest minds
over the centuries, struggled with what the rules of ethics should be.
Our ethics are rooted in our history, culture, and religion, and our sense of ethics may shift over time.
The electronic age brings with it a new dimension in the ethics debate—the amount of personal informa-
tion that we can collect and store, and the speed with which we can access and process that information.
In a group, discuss how you would react to the following situations:
a. A senior marketing manager informs you that one of her employees is looking for another job
and she wants you to give her access to look through her email.
b. A vice president of sales informs you that he has made a deal to provide customer information
to a strategic partner, and he wants you to copy all of the customer information to a thumb drive.
c. You are asked to monitor your employee’s email to discover whether he is sexually harassing
another employee.
d. You are asked to install a video surveillance system in your office to find out whether employ-
ees are taking office supplies home with them.
baL76892_ch04_136-171.indd 170baL76892_ch04_136-171.indd 170 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
171Business Driven MIS Module 1
e. You are looking on the shared network drive and discover that your boss’s entire hard drive has
been copied to the network for everyone to view. What do you do?
f. You have been accidentally copied on an email from the CEO, which details who will be the
targets of the next round of layoffs. What do you do?
PROJECT IV Contemplating Sharing
Bram Cohen created BitTorrent which allows users to upload and download large amounts of data.
Cohen demonstrated his program at the world hacker conference, as a free, open source project
aimed at computer users who need a cheap way to swap software online. Soon many TV and movie
fanatics began using the program to download copyrighted materials. As a result of the hacker con-
ference, more than 20 million people downloaded the BitTorrent program and began sharing movies
and television shows across the Internet.
There is much debate surrounding the ethics of peer-to-peer networking. Do you believe BitTorrent
is ethical or unethical? Justify your answer.
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
Project
Number
Project
Name
Project
Type
Plug-In
Focus Area
Project
Focus
Project
Skill Set
Page
Number
1 Financial Destiny Excel T2 Personal Budget Introductory Formulas AYK.4
2 Cash Flow Excel T2 Cash Flow Introductory Formulas AYK.4
3 Technology Budget Excel T1, T2 Hardware and Software Introductory Formulas AYK.4
4 Tracking Donations Excel T2 Employee Relationships Introductory Formulas AYK.4
5 Convert Currency Excel T2 Global Commerce Introductory Formulas AYK.5
6 Cost Comparison Excel T2 Total Cost of Ownership Introductory Formulas AYK.5
7 Time Management Excel or Project T2 or T12 Project Management Introductory Gantt Charts AYK.6
8 Maximize Profit Excel T2, T4 Strategic Analysis Intermediate Formulas or
Solver
AYK.6
9 Security Analysis Excel T3 Filtering Data Intermediate Conditional
Formatting, Autofilter,
Subtotal
AYK.7
10 Gathering Data Excel T3 Data Analysis Intermediate Conditional
Formatting, PivotTable
AYK.8
11 Scanner System Excel T2 Strategic Analysis Intermediate AYK.8
12 Competitive Pricing Excel T2 Profit Maximization Intermediate AYK.9
13 Adequate Acquisitions Excel T2 Break-Even Analysis Intermediate AYK.9
24 Electronic Resumes HTML T9, T10, T11 Electronic Personal
Marketing
Introductory Structural Tags AYK.16
25 Gathering Feedback Dreamweaver T9, T10, T11 Data Collection Intermediate Organization
of Information
AYK.16
baL76892_ch04_136-171.indd 171baL76892_ch04_136-171.indd 171 26/11/12 1:17 PM26/11/12 1:17 PM

Rev. Confirming Pages
1 3
2
module 2 Technical Foundations of MIS
MODULE ONE:
Business Driven MIS
MODULE TWO:
Technical Foundations
of MIS
MODULE THREE:
Enterprise MIS
MODULE 2 CONCENTRATES on the technical foundations of MIS. The power of
MIS comes from its ability to carry, house, and support information. And information is power to
an organization. This module highlights this point and raises awareness of the significance of
information to organizational success. Understanding how the MIS infrastructure supports busi-
ness operations, how business professionals access and analyze information to make business
decisions, and how wireless and mobile technologies can make information continuously and
instantaneously available are important for strategically managing any company, large or small.
Thus, these are the primary learning outcomes of Module 2.
The module begins by reviewing the role of MIS in supporting business growth, operations,
and performance. We quickly turn to the need for MIS to be sustainable given today’s focus
on being “green,” and then dive into databases, data warehousing, networking, and wireless
technologies—all fundamental components of MIS infrastructures. A theme throughout the
module is the need to leverage and yet safeguard the use of information as key to the survival of
any company. Information must be protected from misuse and harm, especially with the contin-
ued use, development, and exploitation of the Internet and the web.
Module 2: TECHNICAL FOUNDATIONS OF MIS
CHAPTER 5:  Infrastructures: Sustainable Technologies
CHAPTER 6:  Data: Business Intelligence
CHAPTER 7:  Networks: Mobile Business
baL76892_ch05_172-209.indd 172baL76892_ch05_172-209.indd 172 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
What’s in IT for me?
Why do you, as a business student, need to understand the underlying technology of any company? Most people think “that
technical stuff” is something they will never personally encounter and for that reason do not need to know anything about
MIS infrastructures. Well, those people will be challenged in the business world. When your database fails and you lose all
of your sales history, you will personally feel the impact when you are unable to receive your bonus. When your computer
crashes and you lose all of your confidential information, not to mention your emails, calendars, and messages, then you
will understand why everyone needs to learn about MIS infrastructures. You never want to leave the critical task of backing
up your data to your MIS department. You want to personally ensure that your information is not only backed up, but also
safeguarded and recoverable. For these reasons, business professionals in the 21st century need to acquire a base-level
appreciation of what MIS can and cannot do for their company. Understanding how MIS supports growth, operations, profit-
ability, and most recently sustainability, is crucial whether one is new to the workforce or a seasoned Fortune 500 employee.
One of the primary goals of this chapter is to create a more level playing field between you as a business professional and
the MIS specialists with whom you will work. After reading it you should have many of the skills you need to assist in analyz-
ing current and even some future MIS infrastructures; in recommending needed changes in processes; and in evaluating
alternatives that support a company’s growth, operations, and profits.
■ M I S a n d t h e E n v i ro n m e n t
■ S u p p o r t i n g t h e E n v i ro n m e n t :
S u s t a i n a b l e M I S I n f r a s t r u c t u re
SECTION 5.2
Building Sustainable MIS
Infrastructures
■ T h e B u s i n e s s B e n e f i t s o f a
S o l i d M I S I n f r a s t r u c t u re
■ S u p p o r t i n g O p e r a t i o n s :
I n f o r m a t i o n M I S I n f r a s t r u c t u re
■ S u p p o r t i n g C h a n g e : A g i l e M I S
I n f r a s t r u c t u re
SECTION 5.1
MIS Infrastructures
Infrastructures:
Sustainable Technologies
C H A P T E R
5
C
H
A
P
T
E
R
O
U
T
L
IN
E

baL76892_ch05_172-209.indd 173baL76892_ch05_172-209.indd 173 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
174 Chapter 5 Infrastructures: Sustainable Technologies
opening case study
Pandora’s Music Box
Napster was one of the first service providers for sharing online music. Many other
companies have attempted to legally jump into the online music business, and most found
little success. However, Pandora, the Internet radio site, is becoming the exception. Pandora
provides users with the ability to choose specific artists or categories of music and then
creates individualized playlists. Based on user feedback to Pandora’s suggestions of similar
tracks, the site “learns” what selections each listener prefers for his or her playlist and uses
that information to generate a unique customized listening experience for each.
At the heart of Pandora’s business is the Music Genome Project (MGP), a computerized
jukebox of more than 700,000 works by 80,000 artists, with new ones added every day.
Each selection within the MGP is categorized by hundreds of characteristics, including art-
ist and genre and covering the qualities of melody, harmony, rhythm, form, composition,
and lyrics. For example, if someone is looking for a song with a certain tempo or wants to
know what the lyrics are about, Pandora can supply that information. The company has 50
employees whose sole job is to listen to and analyze music along with assigning more than
400 characteristics to each track.
Computing Merges with Connectivity
Pandora is a perfect example of cloud computing as a result of three major trends:
1. The marriage of computing and connectivity can now occur without having to be teth-
ered to a single location. It’s among the biggest disruptive forces of modern times; one
that will redefine business models for decades to come.
2. The mobile Internet is now pervasive.
3. The availability of low-cost, always-on computers—smartphones—that allow sophisti-
cated software to conduct complex tasks on the go.
Pandora is strategically planning to reach a broad, global market by embedding itself in all
sorts of Internet-enabled electronic devices that can access its services directly through the
cloud. Pandora’s music offerings are now being embedded in everything from thin LED tele-
visions to Blu-ray players to digital frames. Customers are listening to Pandora through their
Blu-ray players, iPods, iPhones, and BlackBerrys, and soon cars will come with Pandora
preinstalled.
The Pandora team envisions Pandora playing everywhere, allowing users to create as
many as 100 stations, allowing for a nearly infinite list of musical opportunities. Since its
founding in 2000, Pandora has registered more than 50 million listeners and adds thou-
sands more every day.
baL76892_ch05_172-209.indd 174baL76892_ch05_172-209.indd 174 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
175Technical Foundations of MIS Module 2
A basic membership, which includes an occasional advertisement or two, is free.
Members are allowed 40 hours a month to listen to their personal stations. If users want
more than 40 hours, they can purchase unlimited playing time for 99 cents per month.
Users can upgrade even further to a Pandora One account for $36 a year that includes
unlimited playing time, no advertisements, and a higher-quality sound.
What drives Pandora’s business? Other than its valued customer base, it is the com-
pany’s solid MIS infrastructure that supports its growth, operations, and profits. So far,
Pandora’s investment in MIS infrastructure has delivered wonderful results as well as future
opportunities. The company can now develop new applications that support its core func-
tions more rapidly than ever. And since Pandora is located in the cloud, the company has
created an MIS infrastructure that is accessible, available, flexible, scalable, reliable, and
usable and that performs to meet the needs of its growing customer community. 1
baL76892_ch05_172-209.indd 175baL76892_ch05_172-209.indd 175 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
176 Chapter 5 Infrastructures: Sustainable Technologies
section 5.1 MIS Infrastructures
L E A R N I N G O U T C O M E S
5.1 Explain MIS infrastructure and its three primary types.
5.2 Identify the three primary areas associated with an information MIS infrastructure.
5.3 Describe the characteristics of an agile MIS infrastructure.
THE BUSINESS BENEFITS OF A SOLID
MIS INFRASTRUCTURE
Management information systems have played a significant role in business strategies,
affected business decisions and processes, and even changed the way companies oper-
ate. What is the foundation supporting all of these systems that enable business growth,
operations, and profits? What supports the volume and complexity of today’s user and
application requirements? What protects systems from failures and crashes? It is the
MIS infrastructure , which includes the plans for how a firm will build, deploy, use, and
share its data, processes, and MIS assets. A solid MIS infrastructure can reduce costs,
improve productivity, optimize business operations, generate growth, and increase
profitability.
Briefly defined, hardware consists of the physical devices associated with a com-
puter system, and software is the set of instructions the hardware executes to carry
out specific tasks. In today’s business environment, most hardware and software is run
via a network. A network is a communications system created by linking two or more
devices and establishing a standard methodology in which they can communicate. As
more companies need to share more information, the network takes on greater impor-
tance in the infrastructure. Most companies use a specific form of network infrastruc-
ture called a client and server network. A client is a computer designed to request
information from a server. A server is a computer dedicated to providing informa-
tion in response to requests. A good way to understand this is when someone uses a
web browser (this would be the client) to access a website (this would be a server that
would respond with the web page being requested by the client). Anyone not familiar
with the basics of hardware, software, or networks should review Appendix A, “Hard-
ware and Software,” and Appendix B, “Networks and Telecommunications,” for more
information.
In the physical world, a detailed blueprint would show how public utilities, such as
water, electricity, and gas support the foundation of a building. MIS infrastructure is
similar as it shows in detail how the hardware, software, and network connectivity sup-
port the firm’s processes. Every company, regardless of size, relies on some form of MIS
infrastructure, whether it is a few personal computers networked together sharing an
Excel file or a large multinational company with thousands of employees interconnected
around the world.
An MIS infrastructure is dynamic; it continually changes as the business needs
change. Each time a new form of Internet-enabled device, such as an iPhone or Black-
Berry, is created and made available to the public, a firm’s MIS infrastructure must
be revised to support the device. This moves beyond just innovations in hardware to
include new types of software and network connectivity. An enterprise architect is
a person grounded in technology, fluent in business, and able to provide the impor-
tant bridge between MIS and the business. Firms employ enterprise architects to help
manage change and dynamically update MIS infrastructure. Figure  5.1 displays the
three primary areas where enterprise architects focus when maintaining a firm’s MIS
infrastructure.
LO 5.1: Explain MIS infrastructure
and its three primary types.
baL76892_ch05_172-209.indd 176baL76892_ch05_172-209.indd 176 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
177Technical Foundations of MIS Module 2
■ Supporting operations: Information MIS infrastructure identifies where and how
important information, such as customer records, is maintained and secured.
■ Supporting change: Agile MIS Infrastructure includes the hardware, software,
and telecommunications equipment that, when combined, provides the underlying
foundation to support the organization’s goals.
■ Supporting the environment: Sustainable MIS infrastructure identifies ways that
a company can grow in terms of computing resources while simultaneously becom-
ing less dependent on hardware and energy consumption.
SUPPORTING OPERATIONS: INFORMATION MIS
INFRASTRUCTURE
Imagine taking a quick trip to the printer on the other side of the room, and when you
turn around you find that your laptop has been stolen. How painful would you find this
experience? What types of information would you lose? How much time would it take
you to recover all of that information? A few things you might lose include music, mov-
ies, emails, assignments, saved passwords, not to mention that all-important 40-page
paper that took you more than a month to complete. If this sounds painful then you want
to pay particular attention to this section and learn how to eliminate this pain.
An information MIS infrastructure identifies where and how important information
is maintained and secured. An information infrastructure supports day-to-day business
operations and plans for emergencies such as power outages, floods, earthquakes, mali-
cious attacks via the Internet, theft, and security breaches to name just a few. Managers
must take every precaution to make sure their systems are operational and protected
LO 5.2: Identify the three primary
areas associated with an information
MIS infrastructure.
FIGURE 5.1
MIS Infrastructures
MIS Infrastructure
Information MIS
Infrastructure
Supports
Operations
Agile MIS
Infrastructure
Supports
Change
Sustainable MIS
Infrastructure
Supports
Sustainability
Backup
Recovery
Disaster Recovery
Business Continuity
Planning
Accessibility
Availability
Maintainability
Portability
Reliability
Scalability
Usability
Grid Computing
Cloud Computing
Virtualization
baL76892_ch05_172-209.indd 177baL76892_ch05_172-209.indd 177 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
178 Chapter 5 Infrastructures: Sustainable Technologies
around the clock every day of the year. Losing a laptop or experiencing bad weather in
one part of the country simply cannot take down systems required to operate core busi-
ness processes. In the past, someone stealing company information would have to carry
out boxes upon boxes of paper. Today, as data storage technologies grow in capabilities
while shrinking in size, a person can simply walk out the front door of the building with
the company’s data files stored on a thumb drive or external hard drive. Today’s man-
agers must act responsibly to protect one of their most valued assets, information. To
support continuous business operations, an information infrastructure provides three
primary elements:
■ Backup and recovery plan.
■ Disaster recovery plan.
■ Business continuity plan (see Figure 5.2 ).
Backup and Recovery Plan
Each year businesses lose time and money because of system crashes and failures. One
way to minimize the damage of a system crash is to have a backup and recovery strategy
in place. A backup is an exact copy of a system’s information. Recovery is the ability to
get a system up and running in the event of a system crash or failure that includes restor-
ing the information backup. Many different types of backup and recovery media are
available, including maintaining an identical replica or redundant of the storage server,
external hard drives, thumb drives, and even DVDs. The primary differences between
them are speed and cost.
Fault tolerance is the ability for a system to respond to unexpected failures or system
crashes as the backup system immediately and automatically takes over with no loss of
service. For example, fault tolerance enables a business to support continuous business
operations if there is a power failure or flood. Fault tolerance is an expensive form of
backup, and only mission-critical applications and operations use it. Failover , a specific
type of fault tolerance, occurs when a redundant storage server offers an exact replica of
the real-time data, and if the primary server crashes, the users are automatically directed
to the secondary server or backup server. This is a high-speed and high-cost method of
backup and recovery. Failback occurs when the primary machine recovers and resumes
operations, taking over from the secondary server.
FIGURE 5.2
Areas of Support Provided by
Information Infrastructure
Able to recover information
or systems in the event of a
catastrophic disaster such
as a fire or flood
•
Creates a way for a company
to recover and restore
partially or completely
interrupted critical functions
within a predetermined time
after a disaster or extended
disruption
•
Business Continuity
Planning
Backup: Provides an exact
copy of a system’s
information
•
Recovery: Able to get a
system up and running after
a crash
•
Backup and
Recovery
Disaster Recovery
baL76892_ch05_172-209.indd 178baL76892_ch05_172-209.indd 178 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
179Technical Foundations of MIS Module 2
Using DVDs or thumb drives to store your data offers a low-speed and low-cost
backup method. It is a good business practice to back up data at least once a week using
a low-cost method. This will alleviate the pain of having your laptop stolen or your sys-
tem crash as you will still have access to your data, and it will only be a few days old.
Deciding how often to back up information and what media to use is a critical deci-
sion. Companies should choose a backup and recovery strategy in line with their goals
and operational needs. If the company deals with large volumes of critical informa-
tion, it will require daily, perhaps hourly, backups to storage servers. If it relies on small
amounts of noncritical information, then it might require only weekly backups to exter-
nal hard drives or thumb drives. A company that backs up on a weekly basis is taking
the risk that, if a system crash occurs, it could lose a week’s worth of work. If this risk is
acceptable, a weekly backup strategy will work. If it is unacceptable, the company needs
more frequent backup.
Disaster Recovery Plan
Disasters such as power outages, fires, floods, hurricanes, and even malicious activities
such as hackers and viruses strike companies every day. Disasters can have the following
effects on companies and their business operations.
■ Disrupting communications: Most companies depend on voice and data communi-
cations for daily operational needs. Widespread communications outages, from either
direct damage to the infrastructure or sudden spikes in usage related to an outside
disaster, can be as devastating to some firms as shutting down the whole business.
■ Damaging physical infrastructures: Fire and flood can directly damage buildings,
equipment, and systems, making structures unsafe and systems unusable. Law
enforcement officers and firefighters may prohibit business professionals from enter-
ing a building, thereby restricting access to retrieve documents or equipment.
■ Halting transportation: Disasters such as floods and hurricanes can have a deep
effect on transportation. Disruption to major highways, roads, bridges, railroads, and
airports can prevent business professionals from reporting to work or going home,
slow the delivery of supplies, and stop the shipment of products.
■ Blocking utilities: Public utilities, such as the supply of electric power, water, and
natural gas, can be interrupted for hours or days even in incidents that cause no
direct damage to the physical infrastructure. Buildings are often uninhabitable and
systems unable to function without public utilities.
BUSINESS DRIVEN START-UP
Think how horrible it would be to finish your term paper at 4 a.m. and find out
that your computer has a virus and you just lost your entire document. Or per-
haps you submit your final paper, which is worth 50 percent of your grade, and
then head off to Colorado for winter break. You return to find that you failed the
course, and you frantically check email to find out what happened. A message
from your professor informs you that your document was corrupt and couldn’t
be opened and that you had 24 hours to resend the file, which you missed
because you were skiing down the slopes.
Have you ever experienced having a file corrupted? If so, what could you
have done to recover from this situation? Do you think your instructor ever
receives corrupted files? How did the file become corrupted? Do you think your
instructor would be suspicious if you submitted a corrupted file? How could an
instructor prove that your file was purchased from this site?
I Don’t Have a
Temperature,
but I’m Positive
I Have a Virus
APPLY YOUR KNOWLEDGE
baL76892_ch05_172-209.indd 179baL76892_ch05_172-209.indd 179 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
180 Chapter 5 Infrastructures: Sustainable Technologies
These effects can devastate companies by causing them to cease operations for hours,
days, or longer and risk losing customers whom they cannot then supply. Therefore,
to combat these disasters a company can create a disaster recovery plan , which is a
detailed process for recovering information or a system in the event of a catastrophic
disaster. This plan includes such factors as which files and systems need to have back-
ups and their corresponding frequency and methods along with the strategic location
of the storage in a separate physical site that is geographically dispersed. A company
might strategically maintain operations in New York and San Francisco, ensuring that
a natural disaster would not impact both locations. A disaster recovery plan also fore-
sees the possibility that not only the computer equipment but also the building where
employees work may be destroyed. A hot site is a separate and fully equipped facil-
ity where the company can move immediately after a disaster and resume business. A
cold site is a separate facility that does not have any computer equipment but is a place
where employees can move after a disaster. A warm site is a separate facility with com-
puter equipment that requires installation and configuration. Figure 5.3 outlines these
resources that support disaster recovery.
A disaster recovery plan usually has a disaster recovery cost curve to support it. A
disaster recovery cost curve charts (1) the cost to the company of the unavailability of
information and technology and (2) the cost to the company of recovering from a disas-
ter over time. Figure 5.4 displays a disaster recovery cost curve and shows that the best
recovery plan in terms of cost and time is where the two lines intersect. Creating such a
curve is no small task. Managers must consider the cost of losing information and tech-
nology within each department or functional area, and across the whole company. Dur-
ing the first few hours of a disaster, those costs may be low, but they rise over time. With
those costs in hand, a company must then determine the costs of recovery.
FIGURE 5.3
Sites to Support Disaster
Recovery
A separate and fully
equipped facility where
the company can move
immediately after a
disaster and resume
business.
Hot Site
A separate facility that
does not have any
computer equipment,
but is a place where
employees can move
after a disaster.
Cold Site
A separate facility
with computer
equipment that
requires installation and
configuration.
Warm Site
FIGURE 5.4
Disaster Recovery Cost Curve
D
ol
la
rs
Time from Disaster to Recovery
The optimal disaster
recovery plan in terms
of cost and time
The cost to your organization of
the unavailability of information
and technology
The cost to your organization
to recover from a disaster
baL76892_ch05_172-209.indd 180baL76892_ch05_172-209.indd 180 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
181Technical Foundations of MIS Module 2
On April 18, 1906, San Francisco was rocked by an earthquake that destroyed large
sections of the city and claimed the lives of more than 3,000 inhabitants. More than a
century later, a rebuilt and more durable San Francisco serves as a central location for
major MIS corporations as well as a major world financial center. Managers of these cor-
porations are well aware of the potential disasters that exist along the San Andreas Fault
and actively update their business continuity plans anticipating such issues as earth-
quakes and floods. The Union Bank of California is located in the heart of downtown
San Francisco and maintains a highly detailed and well-developed business continuity
plan. The company employs hundreds of business professionals scattered around the
world that coordinate plans for addressing the potential loss of a facility, business pro-
fessionals, or critical systems so that the company can continue to operate if a disaster
happens. Its disaster recovery plan includes hot sites where staff can walk in and start
working exactly as if they were in their normal location. It would be a matter of minutes,
not hours, for the Union Bank of California to be up and running again in the event of a
disaster. 2
Business Continuity Plan
An emergency is a sudden, unexpected event requiring immediate action due to poten-
tial threat to health and safety, the environment, or property. Emergency preparedness
ensures a company is ready to respond to an emergency in an organized, timely, and
effective manner. Natural disasters and terrorist attacks are on the minds of business
professionals who take safeguarding their information assets seriously. Disaster recov-
ery plans typically focus on systems and data, ignoring cross-functional and intraorgani-
zational business processes that can be destroyed during an emergency. For this reason
many companies are turning to a more comprehensive and all-encompassing emer-
gency preparedness plan known as business continuity planning (BCP) , which details
how a company recovers and restores critical business operations and systems after a
disaster or extended disruption. BCP includes such factors as identifying critical sys-
tems, business processes, departments, and the maximum amount of time the business
can continue to operate without functioning systems. BCP contains disaster recovery
plans along with many additional plans, including prioritizing business impact analysis,
emergency notification plans, and technology recovery strategies (see Figure 5.5 ).
FIGURE 5.5
Business Continuity Planning
Focus Areas
Disaster
Recovery
Plan
Technology
Recovery
Strategies
Emergency
Notification
Services
Business
Impact
Analysis
Business
Continuity
Planning
baL76892_ch05_172-209.indd 181baL76892_ch05_172-209.indd 181 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
182 Chapter 5 Infrastructures: Sustainable Technologies
Business Impact Analysis A business impact analysis identifies all critical
business functions and the effect that a specific disaster may have upon them. A busi-
ness impact analysis is primarily used to ensure a company has made the right deci-
sions about the order of recovery priorities and strategies. For example, should the
accounting department have its systems up and running before the sales and market-
ing departments? Will email be the first system for recovery to ensure employees can
communicate with each other and outside stakeholders such as customers, suppli-
ers, and partners? The business impact analysis is a key part of BCP as it details the
order in which functional areas should be restored, ensuring the most critical are
focused on first.
Emergency Notification Services A business continuity plan typically includes
an emergency notification service , that is, an infrastructure built for notifying people in
the event of an emergency. Radio stations’ occasional tests of the national Emergency
Alert System are an example of a very large-scale emergency notification system. A firm
will implement an emergency notification service to warn employees of unexpected
events and provide them with instructions about how to handle the situation. Emer-
gency notification services can be deployed through the firm’s own infrastructure,
supplied by an outside service provider on company premises, or hosted remotely by
an outside service provider. All three methods provide notification using a variety of
methods such as email, voice notification to a cell phone, and text messaging. The noti-
fications can be sent to all the devices selected, providing multiple means in which to
get critical information to those who need it.
Technology Recovery Strategies Companies create massive amounts of data
vital to their survival and continued operations. A technology failure occurs when the
ability of a company to operate is impaired because of a hardware, software, or data out-
age. Technology failures can destroy large amounts of vital data, often causing incidents ,
unplanned interruption of a service. An incident record contains all of the details of an
incident. Incident management is the process responsible for managing how incidents
are identified and corrected. Technology recovery strategies focus specifically on priori-
tizing the order for restoring hardware, software, and data across the organization that
best meets business recovery requirements. A technology recovery strategy details the
order of importance for recovering hardware, software, data centers, and networking (or
connectivity). If one of these four vital components is not functioning, the entire system
will be unavailable, shutting down cross-functional business processes such as order
management and payroll. Figure 5.6 displays the key areas a company should focus on
when developing technology recovery strategies.
FIGURE 5.6
Key Areas of Technology
Recovery Strategies
Technology
Recovery
Strategies
NETWORKING
(Wireless, LAN,
Fiber, Cable)
SOFTWARE
(Applications
such as Email,
Payroll, Instant
Messaging)
DATA CENTER
(Climate Control,
Power Supply,
Security)
HARDWARE
(Servers,
Computers,
Wireless
Devices)
baL76892_ch05_172-209.indd 182baL76892_ch05_172-209.indd 182 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
183Technical Foundations of MIS Module 2
SUPPORTING CHANGE: AGILE MIS INFRASTRUCTURE
Agile MIS infrastructure includes the hardware, software, and telecommunications
equipment that, when combined, provides the underlying foundation to support the
organization’s goals. If a company grows by 50 percent in a single year, its infrastructure
and systems must be able to handle a 50 percent growth rate. If they cannot, they can
severely hinder the company’s ability not only to grow but also to function.
The future of a company depends on its ability to meet its partners, suppliers, and cus-
tomers any time of the day in any geographic location. Imagine owning an ebusiness and
everyone on the Internet is tweeting and collaborating about how great your business
idea is and how successful your company is going to be. Suddenly, you have 5 million
global customers interested in your website. Unfortunately, you did not anticipate this
many customers so quickly, and the system crashes. Users typing in your URL find a
blank message stating the website is unavailable and to try back soon. Or even worse,
they can get to your website but it takes three minutes to reload each time they click on
a button. The buzz soon dies about your business idea as some innovative web-savvy
fast follower quickly copies your idea and creates a website that can handle the massive
number of customers. The characteristics of agile MIS infrastructures can help ensure
your systems can meet and perform under any unexpected or unplanned changes.
Figure 5.7 lists the seven abilities of an agile infrastructure.
Accessibility
Accessibility refers to the varying levels that define what a user can access, view, or per-
form when operating a system. Imagine the people at your college accessing the main
student information system. Each person that accesses the system will have different
needs and requirements; for example, a payroll employee will need to access vacation
information and salary information, or a student will need to access course information
and billing information. Each system user is provided with an access level that details
which parts of the system the user can and cannot access and what the user can do
when in the system. For example, you would not want your students to be able to view
payroll information or professor’s personal information; also, some users can only view
LO 5.3: Describe the characteristics
of an agile MIS infrastructure.
BUSINESS DRIVEN MIS
Backup and recovery are essential for any computer system. How painful would
it be if someone stole your laptop right now? How much critical information
would you lose? How many hours would it take you to re-create your data?
Perhaps that will motivate you to implement a backup procedure. How many
of you have a disaster recovery plan? Disaster recovery is needed when your
best friend dumps a grande latte on your computer or you accidently wash your
thumb drive.
Disaster recovery plans are crucial for any business, and you should ensure
that your company has everything it needs to continue operations if there is
ever a disaster, such as 9/11. You need to decide which disasters are worth wor-
rying about and which ones are probably never going to occur. For example,
if you live in Colorado, chances are good you don’t have to worry about hur-
ricanes, but avalanches are another story.
How often does a company need to back up its data? Where should the
backup be stored? What types of disasters should companies in your state pre-
pare for in case of an emergency? Why is it important to test the backup? What
could happen to a company if it failed to create a disaster recovery plan?
Disaster
Recovery
APPLY YOUR KNOWLEDGE
baL76892_ch05_172-209.indd 183baL76892_ch05_172-209.indd 183 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
184 Chapter 5 Infrastructures: Sustainable Technologies
information and are not allowed to create or delete information. Top-level MIS employ-
ees require administrator access , or unrestricted access to the entire system. Adminis-
trator access can perform functions such as resetting passwords, deleting accounts, and
shutting down entire systems.
Tim Berners-Lee, W3C director and inventor of the World Wide Web, stated, “the
power of the web is in its universality. Access by everyone regardless of disability is an
essential aspect.” Web accessibility means that people with disabilities, including visual,
auditory, physical, speech, cognitive, and neurological disabilities, can use the web. The
web accessibility initiative (WAI) brings together people from industry, disability orga-
nizations, government, and research labs from around the world to develop guidelines
and resources to help make the web accessible to people with disabilities, including
auditory, cognitive, neurological, physical, speech, and visual disabilities. The goal of
WAI is to allow people to access the full potential of the web, enabling people with dis-
abilities to participate equally. For example, Apple includes screen magnification and
VoiceOver on its iPhone, iPad, and iPod, which allows the blind and visually impaired to
use the devices.
Availability
In a 24/7/365 ebusiness environment, business professionals need to use their systems
whenever they want from wherever they want. Availability refers to the time frames
when the system is operational. A system is called unavailable when it is not operat-
ing and cannot be used. High availability occurs when a system is continuously opera-
tional at all times. Availability is typically measured relative to “100 percent operational”
or “never failing.” A widely held but difficult-to-achieve standard of availability for a
system is known as “five 9s” (99.999 percent) availability. Some companies have sys-
tems available around the clock to support ebusiness operations, global customers, and
online suppliers.
FIGURE 5.7
Agile MIS Infrastructure
Characteristics
• The system is operational during different time frames.
• The system functions correctly and provides accurate
information.
• The system can “scale up” or adapt to the increased
demands of growth.
• The system is easy to learn and efficient and satisfying
to use.
• Varying levels allow system users to access,
view, or perform operational functions.AccessibilityAccessibilityAcAccecessssibibililitityyAcAccecessssibibililitityyAccessibility
Availability
Reliability
Scalability
Usability
Maintainability
• The system is available to operate on different devices
or software platforms.
• The system quickly transforms to support environmental
changes.
Portability
baL76892_ch05_172-209.indd 184baL76892_ch05_172-209.indd 184 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
185Technical Foundations of MIS Module 2
Sometimes systems must be taken down for maintenance, upgrades, and fixes, which
are completed during downtime . One challenge with availability is determining when to
schedule system downtime if the system is expected to operate continuously. Performing
maintenance during the evening might seem like a great idea, but evening in one city is
morning somewhere else in the world, and business professionals scattered around the
globe may not be able to perform specific job functions if the systems they need are unavail-
able. This is where companies deploy failover systems so they can take the primary system
down for maintenance and activate the secondary system to ensure continuous operations.
Maintainability
Companies must watch today’s needs, as well as tomorrow’s, when designing and building
systems that support agile infrastructures. Systems must be flexible enough to meet all types
of company changes, environmental changes, and business changes. Maintainability
(or flexibility) refers to how quickly a system can transform to support environmental
changes. Maintainability helps to measure how quickly and effectively a system can be
changed or repaired after a failure. For example, when starting a small business you might
not consider that you will have global customers, a common mistake. When building
your systems, you might not design them to handle multiple currencies and different lan-
guages, which might make sense if the company is not currently performing international
business. Unfortunately, when the first international order arrives, which happens easily
with ebusiness, the system will be unable to handle the request because it does not have
the flexibility to be easily reconfigured for a new language or currency. When the company
does start growing and operating overseas, the system will need to be redeveloped, which
is not an easy or cheap task, to handle multiple currencies and different languages.
Building and deploying flexible systems allow easy updates, changes, and reconfigu-
rations for unexpected business or environmental changes. Just think what might have
happened if Facebook had to overhaul its entire system to handle multiple languages.
Another social networking business could easily have stepped in and become the pro-
vider of choice. That certainly would not be efficient or effective for business operations.
Portability
Portability refers to the ability of an application to operate on different devices or soft-
ware platforms, such as different operating systems. Apple’s iTunes is readily available to
users of Mac computers and also users of PC computers, smartphones, iPods, iPhones,
iPads, and so on. It is also a portable application. Because Apple insists on compatibil-
ity across its products, both software and hardware, Apple can easily add to its product,
device, and service offerings without sacrificing portability. Many software develop-
ers are creating programs that are portable to all three devices—the iPhone, iPod, and
iPad—which increases their target market and they hope their revenue.
Reliability
Reliability (or accuracy) ensures a system is functioning correctly and providing accu-
rate information. Inaccuracy can occur for many reasons, from the incorrect entry of
information to the corruption of information during transmissions. Many argue that the
information contained in Wikipedia is unreliable. Because the Wikipedia entries can be
edited by any user, there are examples of rogue users inaccurately updating information.
Many users skip over Google search findings that correlate to Wikipedia for this reason.
Housing unreliable information on a website can put a company at risk of losing custom-
ers, placing inaccurate supplier orders, or even making unreliable business decisions. A
vulnerability is a system weakness, such as a password that is never changed or a sys-
tem left on while an employee goes to lunch, that can be exploited by a threat. Reliable
systems ensure that vulnerabilities are kept at a minimum to reduce risk.
Scalability
Estimating company growth is a challenging task, in part because growth can occur in
a number of different forms—the firm can acquire new customers, new product lines,
baL76892_ch05_172-209.indd 185baL76892_ch05_172-209.indd 185 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
186 Chapter 5 Infrastructures: Sustainable Technologies
or new markets. Scalability describes how well a system can scale up, or adapt to the
increased demands of growth. If a company grows faster than anticipated, it might expe-
rience a variety of problems, from running out of storage space to taking more time to
complete transactions. Anticipating expected, and unexpected, growth is key to building
scalable systems that can support that development.
Performance measures how quickly a system performs a process or transaction. Per-
formance is a key component of scalability as systems that can’t scale suffer from perfor-
mance issues. Just imagine your college’s content management system suddenly taking
five minutes to return a page after a button is pushed. Now imagine if this occurs during
your midterm exam and you miss the two-hour deadline because the system is so slow.
Performance issues experienced by firms can have disastrous business impacts causing
loss of customers, loss of suppliers, and even loss of help-desk employees. Most users
will wait only a few seconds for a website to return a request before growing frustrated
and either calling the support desk or giving up and moving on to another website.
Capacity represents the maximum throughput a system can deliver; for example,
the capacity of a hard drive represents its size or volume. Capacity planning deter-
mines future environmental infrastructure requirements to ensure high-quality system
performance. If a company purchases connectivity software that is outdated or too
slow to meet demand, its employees will waste a great deal of time waiting for systems
to respond to user requests. It is cheaper for a company to design and implement agile
infrastructure that envisions growth requirements than to update all the equipment after
the system is already operational. If a company with 100 workers merges with another
company and suddenly there are 400 people using the system, performance time could
suffer. Planning for increases in capacity can ensure systems perform as expected. Wait-
ing for a system to respond to requests is not productive.
Web 2.0 is a big driver for capacity planning to ensure agile infrastructures can meet
the business’s operational needs. Delivering videos over the Internet requires enough
bandwidth to satisfy millions of users during peak periods such as Friday and Saturday
evenings. Video transmissions over the Internet cannot tolerate packet loss (blocks of
data loss), and allowing one additional user to access the system could degrade the
video quality for every user.
BUSINESS DRIVEN MIS
Do you know how Google makes so much money? Unlike traditional busi-
nesses, Google does not make money from the users of its service. Google
makes money by charging the companies that want to appear in the sponsored
section of a search result. After performing a Google search, you will notice
three sections on the resulting page. Along the top and side are the sponsored
search results, and the middle lists the organic search results. Google’s innova-
tive marketing program, called AdWords, allows companies to bid on common
search terms, and the highest bidder is posted first in the sponsored search
results. Every time a user clicks on a sponsored link, the company that owns the
link has to pay Google. This is also called pay-per-click and can cost anywhere
from a few cents to a few dollars for each click. A general search term such as
“tropical vacation” costs less than a more specific search term like “Hawaiian
vacation.” Whichever company bids the most for the search term appears at the
top of the sponsored section. Clicking on the links in the organic search results
does not incur any charges for the company that owns the link.
Rank the agile infrastructure ab-“ilities” for Google from most important to
least important in terms of supporting Google’s MIS infrastructure and busi-
ness operations. Be sure to provide the justification behind your ranking.
Ranking the
Ab-“ilities”
APPLY YOUR KNOWLEDGE
baL76892_ch05_172-209.indd 186baL76892_ch05_172-209.indd 186 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
187Technical Foundations of MIS Module 2
Usability
Usability is the degree to which a system is easy to learn and efficient and satisfying to
use. Providing hints, tips, shortcuts, and instructions for any system, regardless of its ease
of use, is recommended. Apple understood the importance of usability when it designed
the first iPod. One of the iPod’s initial attractions was the usability of the click wheel.
One simple and efficient button operates the iPod, making it usable for all ages. And to
ensure ease of use, Apple also made the corresponding iTunes software intuitive and
easy to use. Serviceability is how quickly a third party can change a system to ensure it
meets user needs and the terms of any contracts, including agreed levels of reliability,
maintainability, or availability. When using a system from a third party, it is important to
ensure the right level of serviceability for all users, including remote employees.
section 5.2 Building Sustainable MIS Infrastructures
L E A R N I N G O U T C O M E S
5.4 Identify the environmental impacts associated with MIS.
5.5 Explain the three components of a sustainable MIS infrastructure along with their business benefits.
MIS AND THE ENVIRONMENT
The general trend in MIS is toward smaller, faster, and cheaper devices. Gordon Moore,
co-founder of Intel, the world’s largest producer of computer chips or microprocessors,
observed in 1965 that continued advances in technological innovation made it possible
to reduce the size of a computer chip (the brains of a computer, or even a cell phone
now) while doubling its capacity every two years. His prediction that this trend would
continue has come to be known as Moore’s Law , which refers to the computer chip per-
formance per dollar doubles every 18 months. Although Moore originally assumed a
two-year period, many sources today refer to the 18-month figure.
Moore’s Law is great for many companies as they can acquire large amounts of MIS
equipment for cheaper and cheaper costs. As ebusinesses continue to grow, companies
equip their employees with multiple forms of electronic devices ranging from laptops
to cell phones to iPads. This is great for supporting a connected corporation, significant
unintended side effects include our dependence upon fossil fuels and increased need
for safe disposal of outdated computing equipment. Concern about these side effects
has led many companies to turn to an ecological practice known as sustainable MIS.
Sustainable, or green, MIS describes the production, management, use, and disposal
of technology in a way that minimizes damage to the environment. Sustainable MIS
LO 5.4: Identify the environmental
impacts associated with MIS.
BUSINESS DRIVEN DEBATE
Thanks to Moore’s Law, computing devices are getting smaller, cheaper, and
faster every year, allowing innovative companies to create new devices that are
smaller and more powerful than current devices. Just look at desktop, laptop,
notebook, and tablet computers. These are all different devices allowing users
to connect and compute around the globe. Moore’s Law has been accurate
about computing power roughly doubling every 18 months. Do you agree or
disagree that Moore’s Law will continue to apply for the next 20 years? Why or
why not?
Laptop?
Notebook?
Netbook?
Tablet?
APPLY YOUR KNOWLEDGE
baL76892_ch05_172-209.indd 187baL76892_ch05_172-209.indd 187 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
188 Chapter 5 Infrastructures: Sustainable Technologies
BUSINESS DRIVEN ETHICS AND SECURITY
By some estimates, there may be as many as 1 billion surplus or obsolete com-
puters and monitors in the world. Consider California, where 6,000 computers
become surplus every day. If not disposed of properly, this enormous ewaste
stream, which can contain more than 1,000 different toxic substances, is harm-
ful to human beings and the environment. Beryllium is found in computer
motherboards, chromium in floppy disks, lead in batteries and computer mon-
itors, and mercury in alkaline batteries. One of the most toxic chemicals known
is cadmium, found in many old laptops and computer chips.
In poorer countries, where the United States and Europe export some of
their ewaste, the full impact of the environmental damage is quickly being
realized. These areas have little use for obsolete electronic equipment so local
recyclers resell some parts and burn the rest in illegal dumps, often near resi-
dential areas, releasing toxic and carcinogenic substances into the air, land,
and water. 3
Have you ever participated in ewaste? What can you do to ensure you are
safely disposing of electronic equipment including batteries? What can gov-
ernments do to encourage companies to safely dispose of ewaste? What can be
done to protect poorer countries from receiving ewaste? Create a list of the ways
you can safely dispose of cell phones, computers, printers, ink cartridges, MP3
players, and batteries. What could you do to inform citizens of the issues associ-
ated with ewaste and educate them on safe disposal practices?
Ewaste and the
Environment
APPLY YOUR KNOWLEDGE
is a critical part of corporate social responsibility , that is, companies’ acknowledged
responsibility to society. Building sustainable MIS infrastructures is a core initiative and
critical success factor for socially responsible corporations. Figure 5.8 displays the three
primary side effects of businesses’ expanded use of technology.
Increased Electronic Waste
Moore’s Law has made technological devices smaller, cheaper, and faster, allowing
more people from all income levels to purchase computing equipment. This increased
demand is causing numerous environmental issues. Ewaste refers to discarded, obso-
lete, or broken electronic devices. Ewaste includes CDs, DVDs, thumb drives, printer
cartridges, cell phones, iPods, external hard drives, TVs, VCRs, DVD players, micro-
waves, and so on. Some say one human year is equivalent to seven years of technological
advancements. A personal computer has a life expectancy of only three to five years and
a cell phone is less than two years.
Sustainable MIS disposal refers to the safe disposal of MIS assets at the end of their
life cycle. It ensures that ewaste does not end up in landfills causing environmental
issues. A single computer contains more than 700 chemicals; some are toxic, such as
mercury, lead, and cadmium. If a computer ends up in a landfill, the toxic substances
it contains can leach into our land, water, and air. Recycling costs from $15 to $50 for a
monitor or computer. Many companies, including public schools and universities, sim-
ply can’t afford the recycling costs. 4
Ewaste also occurs when unused equipment stored in attics, basements, and stor-
age facilities never reaches a recycling center. Retrieving the silver, gold, and other valu-
able metals from these devices is more efficient and less environmentally harmful than
removing it from its natural environment.
Currently, less than 20 percent of ewaste in the United States is recycled; however,
even recycling does not guarantee the equipment is disposed of safely. While some
recyclers process the material ethically, others ship it to countries such as China and
baL76892_ch05_172-209.indd 188baL76892_ch05_172-209.indd 188 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
189Technical Foundations of MIS Module 2
India, where environmental enforcement is weak. This action poses its own global
environmental problems.
Increased Energy Consumption
Energy consumption is the amount of energy consumed by business processes and
systems. Huge increases in technology use have greatly amplified energy consumption.
The energy consumed by a computer is estimated to produce as much as 10 percent
of the amount of carbon dioxide produced by an automobile. Computer servers in the
United States account for about 1 percent of the total energy needs of the country. Put
in perspective, this is roughly equivalent to the energy consumption of Mississippi.
Computers consume energy even when they are not being used. For convenience and
to allow for automatic updates and backup, the majority of computer equipment is never
completely shut down. It draws energy 24 hours a day.
Increased Carbon Emissions
The major human-generated greenhouse gases, such as carbon emissions from energy
use, are very likely responsible for the increases in climatic temperature over the past half a
century. Additional temperature increases are projected over the next hundred years, with
serious consequences for Earth’s environment, if carbon emissions , including the carbon
dioxide and carbon monoxide produced by business processes and systems, are not reduced.
In the United States, coal provides more than 50 percent of electrical power. When left
on continuously, a single desktop computer and monitor can consume at least 100 watts
of power per hour. To generate that much energy 24 hours a day for a year would require
approximately 714 pounds of coal. When that coal is burned, it releases on average
5 pounds of sulfur dioxide, 5 pounds of nitrogen oxides, and 1,852 pounds (that is almost
a ton) of carbon dioxide. 5
SUPPORTING THE ENVIRONMENT: SUSTAINABLE
MIS INFRASTRUCTURE
Combating ewaste, energy consumption, and carbon emissions requires a firm to focus
on creating sustainable MIS infrastructures. A sustainable MIS infrastructure identifies
ways that a company can grow in terms of computing resources while simultaneously
becoming less dependent on hardware and energy consumption. The components of a
sustainable MIS infrastructure are displayed in Figure 5.9 .
Grid Computing
When a light is turned on, the power grid delivers exactly what is needed, instantly.
Computers and networks can now work that way using grid computing. Grid computing
is a collection of computers, often geographically dispersed, that are coordinated to
LO 5.5: Explain the three
components of a sustainable MIS
infrastructure along with their
business benefits.
FIGURE 5.8
Three Pressures Driving
Sustainable MIS Infrastructures
Increased
Energy
Consumption
Increased
Carbon
Emissions
Increased
Electronic
Waste
baL76892_ch05_172-209.indd 189baL76892_ch05_172-209.indd 189 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
190 Chapter 5 Infrastructures: Sustainable Technologies
solve a common problem. With grid computing a problem is broken into pieces and
distributed to many machines, allowing faster processing than could occur with a single
system. Computers typically use less than 25 percent of their processing power, leav-
ing more than 75 percent available for other tasks. Innovatively, grid computing takes
advantage of this unused processing power by linking thousands of individual com-
puters around the world to create a “virtual supercomputer” that can process intensive
tasks. Grid computing makes better use of MIS resources, allowing greater scalability
as systems can easily grow to handle peaks and valleys in demand, become more cost
efficient, and solve problems that would be impossible to tackle with a single computer
(see Figure 5.10 ). 6
BUSINESS DRIVEN DISCUSSION
Cheap electricity is great for keeping business costs down, but it often means
relying on coal for power. Facebook recently commissioned a new comput-
ing facility in Oregon and is using power from PacifiCorp, a utility that gets
the majority of its energy from coal-fired power stations, which are major con-
tributors of greenhouse gas emissions. As more and more people subscribe to
Facebook, its energy needs are increasing almost exponentially.
Do you agree that Facebook made a wise business decision in selecting a
utility provider that uses coal-fired power stations? What alternative sources
of energy could Facebook have used to power its computing facility? Do you
think Facebook’s core customers care about the environment? What types of
business challenges might Facebook encounter if it continues using coal-fired
power stations?
Facebook’s
Energy Use
APPLY YOUR KNOWLEDGE
FIGURE 5.9
Sustainable MIS Infrastructure
Components
Grid
Computing
Virtualized
Computing
Cloud
Computing
baL76892_ch05_172-209.indd 190baL76892_ch05_172-209.indd 190 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
191Technical Foundations of MIS Module 2
The uses of grid computing are numerous, including the creative environment of
animated movies. DreamWorks Animation used grid computing to complete many of
its hit films including Antz, Shrek, Madagascar, and How to Train Your Dragon. The
third Shrek film required more than 20 million computer hours to make (compared to
5 million for the first Shrek and 10 million for the second). At peak production times,
DreamWorks dedicated more than 4,000 computers to its Shrek grid, allowing it to
complete scenes in days and hours instead of months. With the increased grid com-
puting power, the DreamWork’s animators were able to add more realistic movement
to water, fire, and magic scenes (see Figure 5.11 ). With grid computing a company can
work faster or more efficiently, providing a potential competitive advantage and addi-
tional cost savings. 7
FIGURE 5.10
Grid Computing Example
FIGURE 5.11
Making Shrek 2 with Grid
Computing
baL76892_ch05_172-209.indd 191baL76892_ch05_172-209.indd 191 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
192 Chapter 5 Infrastructures: Sustainable Technologies
Solving the Energy Issue with Smart Grids A smart grid delivers electricity
using two-way digital technology. It is meant to solve the problem of the world’s outdated
electrical grid, making it more efficient and reliable by adding the ability to remotely mon-
itor, analyze, and control the transmission of power. The current U.S. power grid is said to
have outlived its life expectancy by as much as 30 years. Smart grids provide users with
real-time usage monitoring, allowing them to choose off-peak times for noncritical or less
urgent applications or processes. Residents of Boulder, Colorado, can monitor their use of
electricity and control appliances remotely due to the city’s large-scale smart grid system.
Xcel Energy has installed 21,000 smart grid meters since the $100 million program started
several years ago. Energy use by early adopters is down as much as 45 percent. 8
Virtualized Computing
Most computers and even servers typically run only one operating system, such as Win-
dows or Mac OS, and only one application. When a company invests in a large system such
as inventory management, it dedicates a single server to house the system. This ensures the
system has enough capacity to run during peak times and to scale to meet demand. Also,
many systems have specific hardware requirements along with detailed software require-
ments, making it difficult to find two systems with the same requirements that could share
the same machine. Through the use of virtualization, computers can run multiple operat-
ing systems along with multiple software applications—all at the same time. Virtualization
creates multiple “virtual” machines on a single computing device. A good analogy is a
computer printer. In the past you had to purchase a fax machine, copy machine, answering
machine, and computer printer separately. This was expensive, required enough energy to
run four separate machines, not to mention created additional amounts of ewaste. Today,
you can buy a virtualized computer printer that functions as a fax machine, answering
machine, and copy machine all on one physical machine, thereby reducing costs, power
requirements, and ewaste. Virtualization is essentially a form of consolidation that can
benefit sustainable MIS infrastructures in a variety of ways, for example:
■ By increasing availability of applications that can give a higher level of performance
depending on the hardware used.
■ By increasing energy efficiency by requiring less hardware to run multiple systems
or applications.
■ By increasing hardware usability by running multiple operating systems on a single
computer.
Originally, computers were designed to run a single application on a single operating
system. This left most computers vastly underutilized (as mentioned earlier, 75 percent of
most computing power is available for other tasks). Virtualization allows multiple virtual
computers to exist on a single machine, which allows it to share its resources, such as mem-
ory and hard disk space, to run different applications and even different operating systems.
Mac computers have the ability to run both the Apple operating system and the Windows
PC operating system, with the use of virtualization software (see Figure  5.12 ). Unfortu-
nately, virtualization, at least at the moment, is not available for a PC to run Mac software.
Virtualization is also one of the easiest and quickest ways to achieve a sustainable MIS
infrastructure because it reduces power consumption and requires less equipment that
needs to be manufactured, maintained, and later disposed of safely. Managers no lon-
ger have to assign servers, storage, or network capacity permanently to single applica-
tions. Instead, they can assign the hardware resources when and where they are needed,
achieving the availability, flexibility, and scalability a company needs to thrive and grow.
Also, by virtually separating the operating system and applications from the hardware,
if there is a disaster or hardware failure, it is easy to port the virtual machine to a new
physical machine allowing a company to recovery quickly from disasters. One of the
primary uses of virtualization is for performing backup, recovery, and disaster recovery.
Using virtual servers or a virtualization service provider, such as Google, Microsoft, or
Amazon, to host disaster recovery is more sustainable than a single company incurring
the expense of having redundant physical systems. Also, these providers’ data centers
are built to withstand natural disasters and are typically located far away from big cities.
baL76892_ch05_172-209.indd 192baL76892_ch05_172-209.indd 192 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
193Technical Foundations of MIS Module 2
BUSINESS DRIVEN INNOVATION
Virtualization is a challenging concept to understand. The formal definition is
that it creates multiple “virtual” machines on a single computing device. OK,
let’s try that again in English. Imagine you have three cell phones, one for the
company you work for, one for a company you are starting on the side, and one
for personal calls. For the most part the phones are idle and they seldom ever
ring at the same time. Since the phones are idle the majority of the time, you
notice that it is a waste of time and resources to support idle time, especially
when you are paying for cell service on each phone. You decide to use virtual-
ization to help your situation.
Essentially, this would put three virtual cell phones on one device. The indi-
vidual services and application for each phone would be independently stored
on the one device. From the device’s perspective, it sees three separate virtual
phones. This saves time and money in expenses and maintenance. You could
even use virtualization to turn your cell phone into a scanner. Visit ScanR.com
and for just $5 a month you can use the camera on your phone to scan docu-
ments. Take a photo of any document, business card, or whiteboard and upload
it to ScanR’s website and in minutes it is returned to you in a digital file. Could
be helpful if your friend has to miss class and you want to copy your lecture
notes. 9
Virtualization is a hot topic these days as more and more businesses are
focusing on social responsibility and attempting to find ways to reduce their
carbon footprints. Create an analogy similar to the cell phone that demon-
strates virtualization. What are the potential environmental impacts associated
with virtualization? What are the business advantages of virtualization? What
are the business risks associated with virtualization?
Virtualization for
Your Cell Phone
APPLY YOUR KNOWLEDGE
FIGURE 5.12
Virtualization Allows an Apple
Macintosh Computer to Run OS
X and Windows 7
MAC OS X
Running
Mac
software
Sharing memory and hard disk
space
WINDOWS 7
Running
Windows 7
software
Apple Macintosh Computer
Virtual Data Centers A data center is a facility used to house management infor-
mation systems and associated components, such as telecommunications and stor-
age systems. Data centers, sometimes referred to as server farms, consume power and
require cooling and floor space while working to support business growth without
baL76892_ch05_172-209.indd 193baL76892_ch05_172-209.indd 193 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
194 Chapter 5 Infrastructures: Sustainable Technologies
disrupting normal business operations and the quality of service. The amount of data a
data center stores has grown exponentially over the years as our reliance on information
increases. Backups, graphics, documents, presentations, photos, audio and video files
all contribute to the ever-expanding information footprint that requires storage. One of
the most effective ways to limit the power consumption and cooling requirements of a
data center is to consolidate parts of the physical infrastructure, particularly by reduc-
ing the number of physical servers through virtualization. For this reason, virtualization
is having a profound impact on data centers as the sheer number of servers a company
requires to operate decreases, thereby boosting growth and performance while reducing
environmental impact, as shown in Figure 5.13 . Google, Microsoft, Amazon, and Yahoo!
have all created data centers along the Columbia River in the northwestern United States.
In this area, each company can benefit from affordable land, high-speed Internet access,
plentiful water for cooling, and even more important, inexpensive electricity. These fac-
tors are critical to today’s large-scale data centers, whose sheer size and power needs far
surpass those of the previous generation. Microsoft’s data center in Quincy, Washington,
is larger than 10 football fields and is powered entirely by hydroelectricity, power gener-
ated from flowing water rather than from the burning of coal or other fossil fuel. 11
If we take a holistic and integrated approach to overall company growth, the benefits
of integrating information MIS infrastructures, environmental MIS infrastructures, and
sustainable MIS infrastructures become obvious. For example, a company could easily
create a backup of its software and important information in one or more geographically
FIGURE 5.13
Ways for Data Centers to
Become Sustainable
Stores greater
amounts of
information in
less space
Reduce energy
consumption
Resources are
inexpensive,
clean, and
available
Carbon
Emissions
Floor
Space
Geographic
Location
BUSINESS DRIVEN GLOBALIZATION
Google is considering constructing a floating data center three to seven miles
offshore that could be both powered and cooled by the ocean. It would consist
of containers stacked with servers, data storage systems, and networking equip-
ment on barges or other platforms and could be located close to users wherever
it is not feasible, cost-effective, or efficient to build on land. Bringing the data
closer to the user allows the data to arrive quicker. And since the ocean is a rent-
free space, data centers can be as large as 100,000 square feet without real estate
fees. The ocean can provide two critical factors that support a sustainable MIS
infrastructure—water for cooling and power. 10
What are the advantages and disadvantages of housing data centers in the
ocean? Do you foresee any issues for these data centers with natural disas-
ters? What types of security issues would Google encounter with a floating data
center? Do you agree that it is good business sense to house a data center on a
barge in the ocean? Why or why not?
Data Centers on
the High Seas
APPLY YOUR KNOWLEDGE
baL76892_ch05_172-209.indd 194baL76892_ch05_172-209.indd 194 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
195Technical Foundations of MIS Module 2
dispersed locations using cloud computing. This would be far cheaper than building its
own hot and cold sites in different areas of the country. In the case of a security breach,
failover can be deployed as a virtual machine in one location of the cloud can be shut
down as another virtual machine in a different location on the cloud comes online.
Cloud Computing
Imagine a cyclical business that specializes in Halloween decorations and how its sales
trends and orders vary depending on the time of year. The majority of sales occur in
September and October, and the remaining 10 months have relatively small sales and
small system usage. The company does not want to invest in massive expensive serv-
ers that sit idle 10 months of the year just to meet its capacity spikes in September and
October. The perfect solution for this company is cloud computing, which makes it
easier to gain access to the computing power that was once reserved for large corpora-
tions. Small to medium-size companies no longer have to make big capital investments
to access the same powerful systems that large companies run.
According to the National Institute of Standards and Technology (NIST) cloud
computing is a model for enabling ubiquitous, convenient, on-demand network
access to a shared pool of configurable computing resources (e.g., networks, servers,
storage, applications, and services) that can be rapidly provisioned and released with
minimal management effort or service provider interaction. Cloud computing offers
new ways to store, access, process, and analyze information and connect people and
resources from any location in the world where an Internet connection is available.
As shown in Figure 5.14 , users connect to the cloud from their personal computers or
portable devices using a client, such as a web browser. To these individual users, the
cloud appears as their personal application, device, or document. It is like storing all
of your software and documents “in the cloud,” and all you need is a device to access
the cloud. No more hard drives, software, or processing power—that is all located in
the cloud, transparent to the users. Users are not physically bound to a single com-
puter or network; they can access their programs and documents from wherever they
are, whenever they need to. Just think of having your hard drive located in the sky and
you can access your information and programs using any device from wherever you
are. The best part is that even if your machine crashes, is lost, or is stolen, the informa-
tion hosted in the cloud is safe and always available.
FIGURE 5.14
Cloud Computing Example
Amazon EC2 Windows Live
MozyFacebook
Gmail
baL76892_ch05_172-209.indd 195baL76892_ch05_172-209.indd 195 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
196 Chapter 5 Infrastructures: Sustainable Technologies
Multi-tenancy in the cloud means that a single instance of a system serves multi-
ple customers. In the cloud, each customer is called a tenant and multiple tenants can
access the same system. Multi-tenancy helps to reduce operational costs associated with
implementing large systems as the costs are dispersed across many tenants as opposed to
single-tenancy , in which each customer or tenant must purchase and maintain an indi-
vidual system. With a multi-tenancy cloud approach, the service provider only has one
place to update its system. With a single-tenancy cloud approach, the service provider
would have to update its system in every company where the software was running. The
cloud fabric is the software that makes possible the benefits of cloud computing, such
as multi-tenancy. A cloud fabric controller is an individual who monitors and provi-
sions cloud resources, similar to a server administrator at an individual company. Cloud
fabric controllers provision resources, balance loads, manage servers, update systems,
and ensure all environments are available and operating correctly. Cloud fabric is the
primary reason cloud computing promotes all of the seven abilities, allowing a business
to make its data and applications accessible, available, maintainable, portable, reliable,
scalable, and usable. Figure 5.15 displays the benefits of cloud computing.
The cloud offers a company higher availability, greater reliability, and improved
accessibility—all with affordable high-speed access. For flexibility, scalability, and cost
efficiency, cloud computing is quickly becoming a viable option for companies of all
sizes. With the cloud, you could simply purchase a single license for software such as
Microsoft Office or Outlook at a far discounted rate and not worry about the hassle of
installing and upgrading the software on your computer. No more worries that you don’t
have enough memory to run a new program because the hardware is provided in the
cloud, along with the software. You simply pay to access the program. Think of this the
same way you do your telephone service. You simply pay to access a vendor’s service,
and you do not have to pay for the equipment required to carry the call around the globe.
You also don’t have to worry about scalability because the system automatically handles
peak loads, which can be spread out among the systems in the cloud.
Because additional cloud resources are always available, companies no longer have
to purchase systems for infrequent computing tasks that need intense processing power,
such as preparing tax returns during tax season or increased sales transactions during
certain holiday seasons. If a company needs more processing power, it is always there in
the cloud—and available on a cost-efficient basis.
With cloud computing, individuals or businesses pay only for the services they need,
when they need them, and where, much as we use and pay for electricity. In the past,
a company would have to pay millions of dollars for the hardware, software, and net-
working equipment required to implement a large system such as payroll or sales man-
agement. A cloud computing user can simply access the cloud and request a single
license to a payroll application. The user does not have to incur any hardware, software,
FIGURE 5.15
Benefits of Cloud Computing
ON-DEMAND SELF-SERVICE
Users can increase storage
and processing power as
needed
RAPID ELASTICITY
Storage, network bandwidth,
and computing capacity can
be increased or decreased
immediately, allowing for
optimal scalability
MEASURED SERVICE
Clients can monitor and
measure transactions and
use of resources
BROAD NETWORK ACCESS
All devices can access
data and applications
MULTI-TENANCY
Customers share pooled
computing resources
baL76892_ch05_172-209.indd 196baL76892_ch05_172-209.indd 196 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
197Technical Foundations of MIS Module 2
or networking expenses. As the business grows and the user requires more employees
to have access to the system, the business simply purchases additional licenses. Rather
than running software on a local computer or server, companies can now reach to the
cloud to combine software applications, data storage, and considerable computing
power. Utility computing offers a pay-per-use revenue model similar to a metered ser-
vice such as gas or electricity. Many cloud computing service providers use utility com-
puting cloud infrastructures, which are detailed in Figure 5.16 .
Infrastructure as a Service (IaaS) Infrastructure as a Service (IaaS) delivers
hardware networking capabilities, including the use of servers, networking, and stor-
age, over the cloud using a pay-per-use revenue model. With IaaS the customer rents the
hardware and provides its own custom applications or programs. IaaS customers save
money by not having to spend a large amount of capital purchasing expensive servers,
which is a great business advantage considering some servers cost more than $100,000.
The service is typically paid for on a usage basis, much like a basic utility service such
as electricity or gas. IaaS offers a cost-effective solution for companies that need their
computing resources to grow and shrink as business demand changes. This is known as
dynamic scaling , which means the MIS infrastructure can be automatically scaled up or
down based on needed requirements.
Currently the most popular IaaS operation is Amazon’s Elastic Compute Cloud, gener-
ally known as Amazon EC2, or simply EC2. EC2 provides a web interface through which
customers can load and run their own applications on Amazon’s computers. Customers
control their own operating environment, so they can create, run, and stop services as
needed, which is why Amazon describes EC2 as elastic. IaaS is a perfect fit for compa-
nies with research-intensive projects that need to process large amounts of information
at irregular intervals, such as those in the scientific or medical fields. Cloud computing
services offer these companies considerable cost savings where they can perform testing
and analysis at levels that are not possible without access to additional and very costly
computing infrastructure.
Software as a Service (SaaS) Software as a Service (SaaS) delivers applica-
tions over the cloud using a pay-per-use revenue model. Before its introduction, com-
panies often spent huge amounts of money implementing and customizing specialized
applications to satisfy their business requirements. Many of these applications were
difficult to implement, expensive to maintain, and challenging to use. Usability was
one of the biggest drivers for creating interest in and success for cloud computing
service providers.
FIGURE 5.16
Cloud Service Delivery Models
• Example: Amazon EC2
• Offers computer hardware and networking
equipment on a pay-per-use basisInfrastructureas a Service
Software as a
Service
Platform as a
Service
• Example: Salesforce.com
• Offers applications on a pay-per-use basis
• Example: Google Application Engine
• Offers hardware, networking, and
applications on a pay-per-use basis.
baL76892_ch05_172-209.indd 197baL76892_ch05_172-209.indd 197 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
198 Chapter 5 Infrastructures: Sustainable Technologies
SaaS offers a number of advantages; the most obvious is tremendous cost savings.
The software is priced on a per-use basis with no up-front costs, so companies get the
immediate benefit of reducing capital expenditures. They also get the added benefits of
scalability and flexibility to test new software on a rental basis.
Salesforce.com is one of the most popular SaaS providers. Salesforce.com built and
delivered a sales automation application, suitable for the typical salesperson, that auto-
mates functions such as tracking sales leads and prospects and forecasting. Tapping the
power of SaaS can provide access to a large-scale, secure infrastructure, along with any
needed support, which is especially valuable for a start-up or small company with few
financial resources.
Platform as a Service (PaaS) Platform as a Service (PaaS) supports the deploy-
ment of entire systems including hardware, networking, and applications using a
pay-per-use revenue model. PaaS is a perfect solution for a business as it passes on to
the service provider the headache and challenges of buying, managing, and maintaining
web development software. With PaaS the development, deployment, management, and
maintenance is based entirely in the cloud and performed by the PaaS provider, allow-
ing the company to focus resources on its core initiatives. Every aspect of development,
including the software needed to create it and the hardware to run it, lives in the cloud.
PaaS helps companies minimize operational costs and increase productivity by provid-
ing all the following without up-front investment:
■ Increased security.
■ Access to information anywhere and anytime.
■ Centralized information management.
■ Easy collaboration with partners, suppliers, and customers.
■ Increased speed to market with significantly less cost .
One of the most popular PaaS services is Google’s Application Engine, which builds
and deploys web applications for a company. Google’s Application Engine is easy to build,
easy to maintain, and easy to scale as a company’s web-based application needs grow.
Google’s Application Engine is free and offers a standard storage limit and enough pro-
cessing power and network usage to support a web application serving about 5 million
page views a month. When a customer scales beyond these initial limits, it can pay a fee
to increase capacity and performance. This can turn into some huge costs savings for a
small business that does not have enough initial capital to buy expensive hardware and
software for its web applications. Just think, a two-person company can access the same
computing resources as Google. That makes good business sense. Regardless of which
cloud model a business chooses, it can select from four different cloud computing envi-
ronments—public, private, community, and hybrid (see Figure 5.17 ).
FIGURE 5.17
Cloud Computing Environments
PUBLIC CLOUD
Amazon Web Services
(AWS), Windows Azure, and
Google Cloud Connect
PRIVATE CLOUD
Bank or sensitive
information
COMMUNITY CLOUD
All Colorado State
government organizations
HYBRID CLOUD
Cloud bursting
baL76892_ch05_172-209.indd 198baL76892_ch05_172-209.indd 198 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
199Technical Foundations of MIS Module 2
Public Cloud Public cloud promotes massive, global, and industrywide applications
offered to the general public. In a public cloud, customers are never required to provision,
manage, upgrade, or replace hardware or software. Pricing is utility-style and custom-
ers pay only for the resources they use. A few great examples of public cloud computing
include Amazon Web Services (AWS), Windows Azure, and Google Cloud Connect.
Private Cloud Private cloud serves only one customer or organization and can be
located on the customer’s premises or off the customer’s premises. A private cloud is the
optimal solution for an organization such as the government that has high data secu-
rity concerns and values information privacy. Private clouds are far more expensive than
public clouds because costs are not shared across multiple customers.
Community Cloud Community cloud serves a specific community with common
business models, security requirements, and compliance considerations. Community
clouds are emerging in highly regulated industries such as financial services and phar-
maceutical companies.
Hybrid Cloud Hybrid cloud includes two or more private, public, or community
clouds, but each cloud remains separate and is only linked by technology that enables data
and application portability. For example, a company might use a private cloud for critical
applications that maintain sensitive data and a public cloud for nonsensitive data appli-
cations. The usage of both private and public clouds together is an example of a hybrid
cloud. Cloud bursting is when a company uses its own computing infrastructure for
normal usage and accesses the cloud when it needs to scale for peak load requirements,
ensuring a sudden spike in usage does not result in poor performance or system crashes.
Deploying an MIS infrastructure in the cloud forever changes the way an organiza-
tion’s MIS systems are developed, deployed, maintained, and managed. Moving to the
cloud is a fundamental shift from moving from a physical world to a logical world, mak-
ing irrelevant the notion of which individual server applications or data reside on. As a
result, organizations and MIS departments need to change the way they view systems
and the new opportunities to find competitive advantages.
Learning Outcome 5.1: Explain MIS infrastructure and its three primary types.
The three primary areas where enterprise architects focus when maintaining a firm’s MIS
infrastructure are:
■ Supporting operations: Information MIS infrastructure identifies where and how important
information, such as customer records, is maintained and secured.
■ Supporting change: Agile MIS infrastructure includes the hardware, software, and telecommu-
nications equipment that, when combined, provides the underlying foundation to support the
organization’s goals.
■ Supporting the environment: Sustainable MIS infrastructure identifies ways that a company
can grow in terms of computing resources while simultaneously becoming less dependent on
hardware and energy consumption.
Learning Outcome 5.2: Identify the three primary areas associated with an information
MIS infrastructure.
The three primary areas an information infrastructure provides to support continuous business
operations are:
■ Backup and recovery: A backup is an exact copy of a system’s information. Recovery is the ability
to get a system up and running in the event of a system crash or failure that includes restoring the
information backup.
L E A R N I N G O U T C O M E R E V I E W
baL76892_ch05_172-209.indd 199baL76892_ch05_172-209.indd 199 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
200 Chapter 5 Infrastructures: Sustainable Technologies
■ Disaster recovery plan: This plan provides a detailed process for recovering information or a
system in the event of a catastrophic disaster.
■ Business continuity plan: This details how a company recovers and restores critical business
operations and systems after a disaster or extended disruption.
Learning Outcome 5.3: Describe the characteristics of an agile MIS infrastructure.
■ Accessibility refers to the varying levels that define what a user can access, view, or perform
when operating a system.
■ Availability refers to the time frames when the system is operational.
■ Maintainability (or flexibility) refers to how quickly a system can transform to support environ-
mental changes.
■ Portability refers to the ability of an application to operate on different devices or software plat-
forms, such as different operating systems.
■ Reliability (or accuracy) ensures a system is functioning correctly and providing accurate
information.
■ Scalability describes how well a system can “scale up” or adapt to the increased demands of
growth.
■ Usability is the degree to which a system is easy to learn and efficient and satisfying to use.
Learning Outcome 5.4: Identify the environmental impacts associated with MIS.
Increased energy consumption, increased electronic waste, and increased carbon emissions are all
associated with MIS. Ewaste refers to discarded, obsolete, or broken electronic devices. Sustainable
MIS disposal refers to the safe disposal of MIS assets at the end of their life cycle.
Learning Outcome 5.5: Explain the three components of a sustainable MIS infrastructure
along with their business benefits.
The components of a sustainable MIS infrastructure include:
■ Grid computing: A collection of computers, often geographically dispersed, that are coordinated to
solve a common problem.
■ Cloud computing: The use of resources and applications hosted remotely on the Internet. The
term comes (at least in part) from the image of a cloud to represent the Internet or some large
networked environment.
■ Virtualized computing: The creation of multiple “virtual” machines on a single computing
device.
1. Knowledge: List the ways that an agile MIS infrastructure supports Pandora’s business.
2. Comprehension: Describe the reasons Pandora would create a disaster recovery plan and a
business continuity plan.
3. Application: Apply the concepts of cloud computing to Pandora’s business model.
4. Analysis: Analyze how Pandora is using sustainable MIS infrastructures.
5. Synthesis: Develop a way that Pandora could benefit from grid computing.
6. Evaluate: Assess the use of virtualization to support Pandora’s business growth while helping the
environment.
O P E N I N G C A S E Q U E S T I O N S
baL76892_ch05_172-209.indd 200baL76892_ch05_172-209.indd 200 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
201Technical Foundations of MIS Module 2
Accessibility, 183
Administrator access, 184
Agile MIS infrastructure, 177
Availability, 184
Backup, 178
Business continuity planning
(BCP), 181
Business impact analysis, 182
Capacity, 186
Capacity planning, 186
Carbon emissions, 189
Client, 177
Cloud bursting, 199
Cloud computing, 195
Cloud fabric, 196
Cloud fabric controller, 196
Cold site, 180
Community cloud, 199
Corporate social
responsibility, 188
Data center, 193
Disaster recovery cost curve, 180
Disaster recovery plan, 180
Dynamic scaling, 197
Emergency, 181
Emergency notification service, 182
Emergency preparedness, 181
Energy consumption, 189
Enterprise architect, 176
Ewaste, 188
Failback, 178
Failover, 178
Fault tolerance, 178
Grid computing, 189
Hardware, 176
High availability, 184
Hot site, 180
Hybrid cloud, 199
Incident, 182
Incident management, 182
Incident record, 182
Information MIS
infrastructure, 177
Infrastructure as a Service (IaaS), 197
Maintainability (or flexibility), 185
MIS infrastructure, 176
Moore’s Law, 187
Multi-tenancy, 196
Network, 176
Performance, 186
Platform as a Service (PaaS), 198
Portability, 185
Private cloud, 199
Public cloud, 199
Recovery, 178
Reliability (or accuracy), 185
Scalability, 186
Server, 176
Serviceability, 187
Single-tenancy, 196
Smart grid, 192
Software, 176
Software as a Service (SaaS), 197
Sustainable MIS disposal, 188
Sustainable MIS
infrastructure, 177
Sustainable, or green, MIS, 187
Technology failure, 182
Technology recovery strategy, 182
Unavailable, 184
Usability, 187
Utility computing, 197
Virtualization, 192
Vulnerability, 185
Warm site, 180
Web accessibility, 184
Web accessibility initiative
(WAI), 184
K E Y T E R M S
1. How often should a business back up its data?
2. Why is it important to ensure backups are working and can be restored?
3. What is the difference between a disaster recovery plan and a business continuity plan?
4. What are the three forms of MIS infrastructures and what do they support?
5. List the characteristics of an agile MIS infrastructure and explain why they are all critical for
supporting change.
6. Explain what capacity planning is and how it can help a business prepare for growth.
7. Explain the difference between fault tolerance and failover.
8. Compare the differences among a hot, cold, and warm site.
9. What is Moore’s Law and how does it affect companies?
10. List the business benefits of using grid computing.
11. Identify the benefits and challenges of cloud computing
12. What is a data center and why would a business develop one.
13. List and describe the three most popular cloud computing delivery models.
14. Why would a company want to use virtualization?
15. Explain why a business today would want to follow sustainable MIS practices.
16. Explain why ebusiness is contributing to the three pressures driving sustainable MIS
infrastructures.
R E V I E W Q U E S T I O N S
baL76892_ch05_172-209.indd 201baL76892_ch05_172-209.indd 201 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
202 Chapter 5 Infrastructures: Sustainable Technologies
UPS Invests $1 Billion to Go Green
United Parcel Service (UPS) will make about $1 billion in technology investments to improve the effi-
ciency of its operations, with the goal of cutting billions more from its costs over the long term. One of
its main goals is to improve the speed and efficiency of its delivery operations. To achieve that, UPS
is equipping its vans with sensors that allow it to collect data about things such as fuel consumption,
chosen routes, and how much time its engines spend idling. Reducing fuel consumption will help UPS
not only to cut costs, but also to be more environmentally responsible. A big portion of the company’s
costs comes from transporting packages by air. In fact, UPS is the world’s ninth-largest airline, so it is
trying to conserve aircraft fuel as well by lowering flight speeds and better planning to avoid duplica-
tion of routes. But a lot of fuel is also burned by its trucks, and the sensors being implemented there
could save the company millions of dollars.
UPS is installing about 200 sensors in its vehicles—in the brakes, engine box, and on the
exterior—to collect data and pinpoint opportunities where drivers can adjust their driving to maximize
fuel efficiency. The company wants to reduce idle time of its delivery trucks, as each hour spent idling
burns about a gallon of fuel.
The company is also installing equipment to track the routes drivers take to deliver packages.
Every morning the drivers are briefed on the data captured by the sensors and how they could drive
differently to save fuel. UPS wants to optimize the number of times a vehicle has to start, stop,
reverse, turn, or back up.
Green Data Center
The company is also investing in more efficient cooling technologies at its two data centers, which
are in Mahwah, New Jersey, and Alpharetta, Georgia. During the winter, the company can shut off its
chiller equipment and use outside air for cooling.
The Alpharetta data center has a 650,000-gallon water tank outside for cooling and a heat
exchanger to faster dissipate the heat captured in the fluid. The water flows in a circular motion
around the data center, cooling the equipment, and the heat exchanger helps lower the temperature
of the hot exhaust water more quickly.
UPS is also investing in faster server processors, allowing it to consolidate existing servers through
virtualization. That helps lower energy costs and also reduces the physical footprint of its servers.
And the company has been consolidating smaller server rooms that were scattered around the world.
These changes are saving UPS around $400,000 each year. 12
Questions
1. Why do you think UPS is embracing sustainable technologies?
2. How is UPS developing a sustainable MIS infrastructure?
3. What business benefits will UPS gain from virtualization?
4. What role does each characteristics of an agile MIS infrastructure play in helping UPS to operate
its business?
5. How could UPS benefit from cloud or grid computing?
6. What types of ethical issues might UPS encounter with the tracking technology it has placed in
its trucks?
7. What types of security issues might UPS encounter with the tracking technology it has placed in
its trucks?
C L O S I N G C A S E O N E
baL76892_ch05_172-209.indd 202baL76892_ch05_172-209.indd 202 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
203Technical Foundations of MIS Module 2
Turning Ewaste into Gold
During the 2010 Winter Olympic Games in Vancouver, champions were not just taking home gold,
silver, or bronze medals—they were also playing a role in reducing electronic waste. For the first time
in Olympic history, each medal, more than 1,000 of them, was made with a tiny bit of the more than
140,000 tons of ewaste that otherwise would have been sent to landfills. The medals are the first
containing metal salvaged from televisions, circuit boards, computer monitors, and electronic waste.
The so-called urban ore was supplied by Teck Resources Ltd., Canada’s largest base-metals pro-
ducer, which provided gold, silver, and copper used to make the medals. Historically, Olympic medals
have been made from mined mineral deposits; this is the first time that recycled materials have been
added to them. First-place winners get gold-plated medals that are 92.5 percent silver. The second-
place prizes are also 92.5 percent silver, while the third-place bronze medals are mostly copper.
All the medals have some ewaste materials from Teck’s electronic recycling program located in
Trail, British Columbia. Teck mixed gold, silver, and copper from the program with metals mined from
the ground. The company said it couldn’t provide the exact percentage of mined versus recycled
material in the finished medals. Each gold medal contained a little more than 1.5 percent of ewaste
materials, while each copper medal contained just over 1 percent, and the silver medals contained
only small pieces. The ewaste came from old computer monitor’s glass, various computer parts, and
other surplus or discarded technologies.
Several different processing methods were used to extract the materials. First, the company
shredded the equipment to separate out the various metals, glass, and other usable parts. To remove
the metals that could not be recovered by the shredding process, the parts were fed into a furnace
operating at a temperature greater than 2,000 degrees (Fahrenheit). The materials were then com-
bined with other metals to create the medals. Each medal was hand-cropped, ensuring no two are
alike, another first in Olympic history. The medals, designed by Canadian artist Corrine Hunt, were
also the first nonflat medals made for the Games, with a wavy form to represent the ocean and
mountain snowdrifts, both characteristic of Vancouver’s environment. In addition to representing the
athletes’ outstanding achievements, the 2010 Olympic medals gave new life to the precious metals
recoverable from ewaste. 13
Questions
1. Why would the Olympics benefit from creating a strong environmental MIS infrastructure?
2. How can the Olympics help support ethical ewaste initiatives?
3. Why would a sporting event like the Olympics be concerned with reducing its carbon footprint?
4. What could the Olympics do to help shed light on global environmental MIS issues?
5. How could Moore’s Law enable future Olympic medals to be made from more ewaste?
C L O S I N G C A S E T W O
1. Universities Are Switching to Gmail
Schools around the world are moving to cloud computing applications such as Google Docs &
Spreadsheets and Google Calendar. Yale had planned to move from its own email system to Google
Mail, but at the last minute decided to cancel the project. The reason was because school admin-
istrators and faculty members did not believe the move could support their business requirements.
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch05_172-209.indd 203baL76892_ch05_172-209.indd 203 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
204 Chapter 5 Infrastructures: Sustainable Technologies
Do you agree or disagree that Google Gmail would be unable to replace a university’s private email
system? What are the advantages and disadvantages of a private email system? What are the
advantages and disadvantages of using a cloud application such as Google Gmail? What choice
would you make if you were the primary decision maker for choosing your school’s email system? 14
2. Desktop Virtualization
Every day users are becoming more comfortable with accessing and storing information in the cloud.
This creates increased demand on MIS personnel to help manage, control, and provide access to that
information—not just on company-issued computers, but on any number of devices, including per-
sonal ones. More and more employees want to be able to utilize their own computing devices—cell
phones, netbooks, laptops—instead of company-issued ones. For instance, many students graduat-
ing from college have been exposed to Macs and may even own one, yet they are finding PCs as the
standard computer of choice for most companies. Do you think it is a good business practice to allow
your employees to use their personal devices for work-related business? What are the challenges
of allowing users to port business applications to their personal devices? What are the challenges of
allowing users to connect to corporate systems with personal devices?
3. iTunes in the Cloud
Apple is considering a cloud version of its iTunes software that could possibly provide a host of
new services for its users as they would no longer be required to save iTunes to their computers as
it would reside in the cloud. With cloud computing, the software for iTunes would reside in central-
ized servers in data centers, rather than on a specific user computer. What would be the benefits
to customers if they could host iTunes in the clouds and access it using a variety of devices? What
would be your fears if you were to use iTunes in the cloud?
4. Sustainable Departments
Energy prices and global warming are discussed daily in the news as the environmental impact of
ewaste is just beginning to be recognized. Sustainability and corporate social responsibility need
to be taken seriously by all managers as everyone should take an active role in helping to preserve
the environment. List the different departments in a business and the types of environmental
issues they typically encounter. Which department do you think creates the most ewaste? Which
department uses the greatest amount of electricity or has the largest carbon footprint? What can
each department do to help combat its environmental issues? Why do all managers, and for that
matter all employees, need to be aware of environmental issues and ways they can create sus-
tainable MIS infrastructures?
5. Making the Smart Grid Smart
ISO, a regional electricity company in New England, has launched an $18 million project in part
because of an $8 million three-year federal grant. The project is designed to speed up the instal-
lation of 30 smart-grid devices covering every state in New England. The smart-grid devices will
provide control room operators at ISO with enhanced tools to monitor and measure performance of
the region’s electrical grid, allowing the company to improve its ability to detect and address prob-
lems on the system. System status information coming into ISO will increase from once every four
seconds to 30 times per second. Would you invest in ISO if you had the chance? Why or why not?
If you were awarded an $8 million three-year federal grant, what type of sustainable infrastructure
would you create? 15
6. Planning for Disaster Recovery
You are the new senior analyst in the MIS department at Beltz, a large snack food manufactur-
ing company. The company is located on the beautiful shoreline in Charleston, North Carolina.
The company’s location is one of its best and worst features. The weather and surroundings are
beautiful, but the threat of hurricanes and other natural disasters is high. What types of information
should be contained in Beltz’s disaster recovery plan that will minimize any risks involved with a
natural disaster?
baL76892_ch05_172-209.indd 204baL76892_ch05_172-209.indd 204 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
205Technical Foundations of MIS Module 2
7. Comparing Backup and Recovery Systems
Research the Internet to find three different vendors of backup and recovery systems. Compare
and contrast the three systems and determine which one you would recommend if you were
installing a backup and recovery system for a medium-sized business, with 3,500 employees,
that maintains information on the stock market. Compile your findings in a presentation that you
can give to your class that details the three systems’ strengths and weaknesses, along with your
recommendation.
8. Cool Schools
Very large computers and data centers incur huge energy costs keeping electronic components
cooled. Where is your school’s data center located? How big is it? What security measures does
the facility enforce? Can you get a tour of it? If it is on campus, how is the facility cooled? How
is the power supplied? Heating and cooling computer systems are certainly a big issue. Think of
ways you could reuse the heat from a data center, such as sending it to a college dorm. Could
alternative resources, such as a nearby river or a lake, provide added cooling? What unanticipated
environmental issues could this create?
9. Box.net in the Cloud
Box.net was started by two college students, Aaron Levie and Dylan Smith, who needed a secure
place to collaborate on group projects. The two immediately understood the value of cloud com-
puting, and they created Box.net to allow them to share ideas and collaborate on documents
in a virtual work space located in the cloud. They knew the cloud would allow them to access
their documents from anywhere and on any device and that there was no chance of their papers
being stolen or accidently destroyed. Levie and Smith recognized the business opportunity of
their site and jumped at turning Box.net into a real business. Explain how Box.net could help
you if you were working on a project with four other students. What would be the challenges of
using Box.net? 16
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. On your way to work this morning, you stopped for gas. When you were inside paying, some-
one broke into your car and stole your computer bag. You did not notice until you arrived at
your business and began looking for your bag. As you begin to realize all of the data you just
lost—customer lists, profit and loss analysis, tax returns, email, sales information, payroll
files, and so on—you begin to wonder when you last backed up your hard drive. Now that
you have been stung by a painful data loss experience, you realize the importance of having
a backup strategy. Create a detailed backup strategy and disaster recovery plan for your
business. Be sure to include details such as the types of backup you will perform, frequency
of backups, and location of backups. (Be sure to identify your business and the name of your
company.)
2. Rank the characteristics of an agile MIS infrastructure in order of importance to your business
and be sure to provide detailed information on each characteristic and your justification for its
ranking.
3. Cloud computing is a business driven MIS infrastructure that supports growth, operations, and
profits. It helps today’s businesses innovate by using resources and applications hosted remotely
as a shared service on the Internet. You have decided to research the different types of cloud
computing services. Create a report listing the types of services your business should implement
and the advantages and disadvantages of each.
baL76892_ch05_172-209.indd 205baL76892_ch05_172-209.indd 205 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
206 Chapter 5 Infrastructures: Sustainable Technologies
PROJECT I Ranking MIS characteristics
In a group, review the list of MIS infrastructure characteristics that support growth and rank them in
order of their impact on a company’s success, using 1 to indicate the biggest impact and 7 the least.
PROJECT I I Designing a Company Infrastructure
Components of an MIS infrastructure include everything from documentation to business concepts
to software and hardware. Deciding which components to implement and how to implement them
can be a challenge. New MIS components are released daily, and business needs continually change.
An MIS infrastructure that meets your company’s needs today may not meet those needs tomorrow.
Building an MIS infrastructure that is accessible, available, flexible, reliable, scalable, usable, and
performs well is key to your company’s growth, operations, and profitability.
You are the manager for a large clothing company called Xedous. You are responsible for develop-
ing the initial MIS infrastructure. Create a list of questions you will need answered to develop it. Here
are examples of a few of the questions you might ask:
■ What are the company’s growth expectations?
■ Will systems be able to handle additional users?
■ How long will information be stored in the systems?
■ How much customer history must be stored?
■ What are the company’s business hours?
■ What are the company’s backup requirements?
PROJECT I I I Recycle Your Cell Phone
For all those excited to get a new iPhone with its numerous applications and cool games, what are
you going to do with your old cell phone? You can help the environment and recycle your phone, PDA,
charger, and batteries. Recycling cell phones helps to save energy and keep reusable materials out of
landfills. Cell phones are made of plastic, copper, and precious metals, which require energy to extract
and manufacture. If you decide to recycle your cell phone be sure to terminate the service, delete any
contacts or stored information, and take out the SIM card.
If your old cell phone is still working, you might also want to consider donating it to charity. Many
programs will accept working cell phones that they donate to people in need, such as survivors of
domestic violence, because old cell phones can still dial 911 even after the service is disconnected. To
find local agencies where you can donate your cell phone, visit ncadv.org. Cell phones are only a small
percentage of the total computer equipment organizations replace each year. What happens to all of
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
MIS Infrastructure Characteristics Business Impact
Accessibility
Availability
Maintainability
Portability
Reliability
Scalability
Usability
baL76892_ch05_172-209.indd 206baL76892_ch05_172-209.indd 206 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
207Technical Foundations of MIS Module 2
those old laptops, notebooks, servers, and monitors? What is the environmental impact of throwing a
computer system into a landfill? What can companies do to recycle their computer equipment? What
can the government do to help motivate companies and individuals to recycle?
PROJECT IV Back on Your Feet
You are working for GetSmart, a document creation company for legal professionals. Due to the highly
sensitive nature of their work, employees must store all information on the network drive and are not
allowed to back up the data to a CD, flash drive, or any other type of external storage, including home
computers. The company has been following this policy for the past three years without any problems.
You return to work Monday morning after a long weekend to find that the building was struck by light-
ning, destroying several servers. Unfortunately, the backup network also failed, so all the data from
your department have been lost.
Because of this loss, the MIS manager and four colleagues who developed the company backup
policy were fired.
You have been placed on a committee with several of your peers to revamp the backup and
recovery policies and create a new disaster recovery plan. You must create policies and procedures
that will preserve the sensitive nature of the documents, while ensuring the company is safe from
disasters. Be sure to address a worst-case scenario where the entire building is lost.
PROJECT V Growing, Growing, Gone
You are the founder of Black Pearl, a small comic book start-up. The good news is Black Pearl is tre-
mendously successful, with 34 employees in a functional and creative office in downtown Chicago.
The comics you produce are of extremely high quality. The artwork is unmatched, and fans find the
story lines compelling. Black Pearl comics are quickly becoming classics with extremely loyal cus-
tomers. You produce all the comics and sell them in your store and via the Internet to individuals all
over the United States.
You had a vision when you started Black Pearl. You knew the potential of your business model to
revamp the comic industry. You purchased high-end computers and customizable software to support
your operations. Now, you are faced with a new dilemma. You have a large international following
and you have decided to pursue international opportunities. You would like to open stores in Japan,
France, and Brazil over the next year. To determine whether this is possible you need to evaluate if
your MIS infrastructure is agile enough to support international requirements. Brainstorm all of the
business nuances that will be different when working with international companies and customers.
Create a list of questions your MIS department will need to answer to determine if your system is agile
enough to support international business.
PROJECT VI Excuses, Excuses, Excuses
Here are a few examples of the strangest and most unusual excuses employees use when
missing work.
■ I have a sunburn.
■ I’m not sure why but I woke up in Canada.
■ I was caught selling an alligator.
■ I was locked in the trunk of an abandoned car.
■ I have a note from my mom that I could not go to work yesterday.
■ I’m just not into it today.
■ I was riding my motorcycle and I accidentally hit a nun.
■ Some person threw poison ivy at me and now I have a rash on my face.
■ I need to stay home as I am convinced I can catch my spouse having an affair.
baL76892_ch05_172-209.indd 207baL76892_ch05_172-209.indd 207 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
208 Chapter 5 Infrastructures: Sustainable Technologies
■ I was chasing a seagull and fell down and had to go to the hospital.
■ I have a migraine from eating too many jalapeño peppers.
This chapter focuses on MIS infrastructures, the main building blocks that function together to con-
trol the entire organization’s systems. If your systems cannot operate, then your organization cannot
work, similar to how your health controls your ability to work. Attempting to do business with an
organization when its systems have crashed, Internet access is down, or wireless network is malfunc-
tioning is very frustrating. When these types of issues occur, companies do not want to broadcast that
they are experiencing technical difficulties because of hackers, an unpaid utility bill, or squirrels got
into the data center and ate through all of the wires (yes, that has really happened).
How many times have you called a company and the customer service representative has stated
that the system is down or that the system is really slow today? How many times have you missed
submitting an assignment because your Internet service was down? Why is it important for an organi-
zation to have its systems available 24 hours a day, 7 days a week, and 365 days a year? Why would
a company hide the real reason that its systems are malfunctioning? What could happen if customers
were informed that the systems were down due to hackers? How can an organization safeguard its
systems?
PROJECT VI I Ewaste Not, Want Not
On Earth Day every year many people, including corporate citizens, devote themselves to recycling
and reducing, along with identifying items they can repurpose. Companies, such as Dell and Microsoft,
two producers of materials that eventually become ewaste, have joined forces with an electronics
recycling program run by Goodwill Industries International. Goodwill reports that the program has
diverted about 96 million pounds in electronics from landfills. 17
Assisting in a similar effort are office supply stores Office Depot and Staples that offer their own
sorting and recycling services for used electronics. Apple has even jumped on this bandwagon, allow-
ing customers to turn their old products in to retail locations when they buy something new.
There are so many opportunities to reduce ewaste. Make a list of how the popular technology
manufacturers are already trying to reduce ewaste. Would starting a company that helped people
locate used computers or other technologies for reuse be a worthwhile venture? Why or why not?
Create a list of new alternatives any company could adopt to reuse, recycle, and reduce ewaste.
PROJECT VI I I One Laptop Per Child
The One Laptop Per Child (OLPC) project intends to create a $100 laptop for distribution to the world’s
poorest children. The machine, called the OLPC or XO laptop, has a rubberized keyboard and an ultra-
bright screen readable in daylight; when flipped, it converts to an electronic book reader. To keep the
cost as low as possible (at $175 it is currently a bit more than the target), the computer has a host of
free software and other tools to support learning opportunities. A special type of networking allows
machines within a hundred feet or so to communicate with each other and relays a single Internet
connection for them to use (where the Internet is available). The XO is targeted at communities where
power generation is unreliable or nonexistent; it gets its power via a hand crank, pull cord, or foot
pedal. 18
Do you agree that the One Laptop Per Child project will help educate children around the world?
How does the XO computer provide learning opportunities for children in poor regions of the world?
What issues could these children encounter if they have an XO laptop? How will cloud computing play
an important role in the XO laptop, especially in terms of keeping costs low and data safe? What do
you think the typical environment will be like where the XO laptop will be used? What issues will users
of the XO laptop encounter that are not common in the United States? What can the creators of the XO
laptop do to ensure its functionality even in the most extreme environments?
baL76892_ch05_172-209.indd 208baL76892_ch05_172-209.indd 208 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
209Technical Foundations of MIS Module 2
Project
Number Project Name Project Type Plug-In Focus Area Project Level Skill Set Page Number
8 Book Boxes Excel T2, T4 Strategic Analysis Intermediate Formulas or Solver AYK.6
9 Security Analysis Excel T3 Filtering Data Intermediate Conditional
Formatting,
Autofilter, Subtotal
AYK.7
10 Gathering Data Excel T3 Data Analysis Intermediate Conditional
Formatting
AYK.8
11 Splashem Excel T2 Strategic Analysis Intermediate Formulas AYK.8
12 Bill’s Boots Excel T2 Profit
Maximization
Intermediate Formulas AYK.9
13 Adequate
Acquisitions
Excel T2 Break Even
Analysis
Intermediate Formulas AYK.9
15 Assessing
the Value of
Information
Excel T3 Data Analysis Intermediate PivotTable AYK.10
16 Growth, Trends,
and Forecasts
Excel T2, T3 Data Forecasting Advanced Average, Trend,
Growth
AYK.11
18 Formatting Grades Excel T3 Data Analysis Advanced If, LookUp AYK.12
22 Gizmo Turnover Excel T3 Data Mining Advanced PivotTable AYK.15
24 Mountain Cycle Excel T4 Business Analysis Advanced Goal Seek AYK.16
25 Lutz Motors Excel T4 Sales Analysis Advanced Scenario Manager AYK.16
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
baL76892_ch05_172-209.indd 209baL76892_ch05_172-209.indd 209 26/11/12 1:50 PM26/11/12 1:50 PM

Rev. Confirming Pages
What’s in IT for me?
This chapter introduces the concepts of information and data and their relative importance to business professionals and
firms. It distinguishes between data stored in transactional databases and powerful business intelligence gleaned from data
warehouses. Students who understand how to access, manipulate, summarize, sort, and analyze data to support decision
making find success. Information has power, and understanding that power will help you compete in the global marketplace.
This chapter will provide you with an overview of database fundamentals and the characteristics associated with high-
quality information. It will also explain how the various bits of data stored across multiple, operational databases can be
transformed in a centralized repository of summarized information in a data warehouse, which can be used for discovering
business intelligence.
You, as a business student, need to understand the differences between transactional data and summarized information
and the different types of questions you could use a transactional database to answer versus a data warehouse. You need
to be aware of the complexity of storing data in databases and the level of effort required to transform operational data
into meaningful, summarized information. You need to realize the power of information and the competitive advantage a
data warehouse brings an organization in terms of facilitating business intelligence. Armed with the power of information,
business students will make smart, informed, and data-supported managerial decisions.
■ T h e B u s i n e s s B e n e f i t s o f
H i g h – Q u a l i t y I n f o r m a t i o n
■ S t o r i n g I n f o r m a t i o n U s i n g
a R e l a t i o n a l D a t a b a s e
M a n a g e m e n t S y s t e m
■ U s i n g a R e l a t i o n a l D a t a b a s e
f o r B u s i n e s s A d v a n t a g e s
■ D r i v i n g We b s i t e s w i t h D a t a
SECTION 6.2
Business Intelligence
SECTION 6.1
Data, Information,
and Databases
■ T h e B u s i n e s s B e n e f i t s o f
D a t a Wa re h o u s i n g
■ P e r f o r m i n g B u s i n e s s A n a l y s i s
w i t h D a t a M a r t s
■ U n c o v e r i n g Tre n d s a n d
P a t t e r n s w i t h D a t a M i n i n g
■ S u p p o r t i n g D e c i s i o n s w i t h
B u s i n e s s I n t e l l i g e n c e

C H A P T E R
C
H
A
P
T
E
R
O
U
T
L
IN
E

Data: Business Intelligence 6
baL76892_ch06_210-249.indd 210baL76892_ch06_210-249.indd 210 26/11/12 1:51 PM26/11/12 1:51 PM

Rev. Confirming Pages
211Technical Foundations of MIS Module 2
opening case study
Informing Information
Since the beginning of time, man has been using pictures and images to communicate,
moving from caveman drawings to hieroglyphics to the Internet. Today, it is easier than ever
to paint a picture worth 100,000 words, thanks to technological advances. The primary
advantages are databases and data warehouses that capture enormous amounts of data.
Informing means accessing large amounts of data from different management informa-
tion systems. According to a recent analysis of press releases by PR Newswire, an article
or advertisement that uses visual images can significantly improve the number of views a
message generates. This can be a true competitive advantage in the digital age.
An infographic (or information graphic) displays information graphically so it can be
more easily understood. Infographics cut straight to the point by taking complex information
and presenting it in a simple visual format. Infographics can present the results of large
data analysis, looking for patterns and relationships that monitor changes in variables over
time. Because infographics can easily become overwhelming, users need to be careful to
not display too much data or the resulting infographics can result in information overload.
Effective infographics can achieve outstanding results for marketing, advertising, and public
relations. According to PR Newswire, infographics gain the greatest competitive advantage
when they have the following:
■ Survey results that are too hard to understand in text format.
■ Statistical data that are not interesting for readers.
■ Comparison research where the impact can be far more dramatic when presented
visually.
■ Messages for multilingual audiences.
■ Any information that can use a visual element to make it more interesting (see
Figures 6.1 , 6.2 , and 6.3 for examples). 1
baL76892_ch06_210-249.indd 211baL76892_ch06_210-249.indd 211 26/11/12 1:51 PM26/11/12 1:51 PM

Rev. Confirming Pages
212 Chapter 6 Data: Business Intelligence
FIGURE 6.1
Hotels.com Travel Infographic
baL76892_ch06_210-249.indd 212baL76892_ch06_210-249.indd 212 26/11/12 1:52 PM26/11/12 1:52 PM

Rev. Confirming Pages
213Technical Foundations of MIS Module 2
FIGURE 6.2
Emerson’s Food Waste
Infographic
FIGURE 6.3
SC Johnson Consumer
Environmental Behaviors
Infographic
baL76892_ch06_210-249.indd 213baL76892_ch06_210-249.indd 213 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
214 Chapter 6 Data: Business Intelligence
section 6.1 Data, Information, and Databases
L E A R N I N G O U T C O M E S
6.1 Explain the four primary traits that determine the value of information.
6.2 Describe a database, a database management system, and the relational database model.
6.3 Identify the business advantages of a relational database.
6.4 Explain the business benefits of a data-driven website.
THE BUSINESS BENEFITS OF HIGH-QUALITY
INFORMATION
Information is powerful. Information can tell an organization how its current opera-
tions are performing and help it estimate and strategize about how future operations
might perform. The ability to understand, digest, analyze, and filter information is key to
growth and success for any professional in any industry. Remember that new perspec-
tives and opportunities can open up when you have the right data that you can turn into
information and ultimately business intelligence.
Information is everywhere in an organization. Managers in sales, marketing, human
resources, and management need information to run their departments and make
daily decisions. When addressing a significant business issue, employees must be able
to obtain and analyze all the relevant information so they can make the best decision
possible. Information comes at different levels, formats, and granularities. Information
granularity refers to the extent of detail within the information (fine and detailed or
coarse and abstract). Employees must be able to correlate the different levels, formats,
and granularities of information when making decisions. For example, a company might
be collecting information from various suppliers to make needed decisions, only to find
that the information is in different levels, formats, and granularities. One supplier might
send detailed information in a spreadsheet, while another supplier might send summary
information in a Word document, and still another might send a collection of informa-
tion from emails. Employees will need to compare these different types of information
for what they commonly reveal to make strategic decisions. Figure 6.4 displays the vari-
ous levels, formats, and granularities of organizational information.
Successfully collecting, compiling, sorting, and finally analyzing information from
multiple levels, in varied formats, and exhibiting different granularities can provide
tremendous insight into how an organization is performing. Exciting and unexpected
results can include potential new markets, new ways of reaching customers, and even
new methods of doing business. After understanding the different levels, formats, and
granularities of information, managers next want to look at the four primary traits that
help determine the value of information (see Figure 6.5 ).
Information Type: Transactional and Analytical
As discussed previously in the text, the two primary types of information are transac-
tional and analytical. Transactional information encompasses all of the information
contained within a single business process or unit of work, and its primary purpose is to
support daily operational tasks. Organizations need to capture and store transactional
information to perform operational tasks and repetitive decisions such as analyzing daily
sales reports and production schedules to determine how much inventory to carry. Con-
sider Walmart, which handles more than 1 million customer transactions every hour,
and Facebook, which keeps track of 400 million active users (along with their photos,
friends, and web links). In addition, every time a cash register rings up a sale, a deposit
or withdrawal is made from an ATM, or a receipt is given at the gas pump, capturing and
storing of the transactional information are required.
LO 6.1: Explain the four primary
traits that determine the value of
information.
baL76892_ch06_210-249.indd 214baL76892_ch06_210-249.indd 214 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
215Technical Foundations of MIS Module 2
Analytical information encompasses all organizational information, and its primary
purpose is to support the performing of managerial analysis tasks. Analytical informa-
tion is useful when making important decisions such as whether the organization should
build a new manufacturing plant or hire additional sales personnel. Analytical informa-
tion makes it possible to do many things that previously were difficult to accomplish,
such as spot business trends, prevent diseases, and fight crime. For example, credit card
companies crunch through billions of transactional purchase records to identify fraudu-
lent activity. Indicators such as charges in a foreign country or consecutive purchases of
gasoline send a red flag highlighting potential fraudulent activity.
Walmart was able to use its massive amount of analytical information to identify
many unusual trends, such as a correlation between storms and Pop-Tarts. Yes, Walmart
FIGURE 6.4
Levels, Formats, and
Granularities of Organizational
Information
Information Granularities
Detail (Fine), Summary, Aggregate
(Coarse)
• Individual knowledge,
goals, and strategies
Departmental goals,
revenues, expenses,
processes, and strategies
Enterprise revenues,
expenses, processes, and
strategies
Letters, memos, faxes, emails, reports,
marketing materials, and training materials
•
Product, strategy, process, financial,
customer, and competitor
•
Sales, marketing, industry, financial,
competitor, customer, and order
spreadsheets
•
Customer, employee, sales, order,
supplier, and manufacturer databases
•
Reports for each salesperson, product, and part
Reports for all sales personnel, all products, and
all parts
Reports across departments, organizations, and
companies
•
•
•
•
•
Information Levels
Individual, Department, Enterprise
Information Formats
Document, Presentation, Spreadsheet,
Database
FIGURE 6.5
The Four Primary Traits of the
Value of Information Information Type
Information Timeliness
Information Quality
Information Governance
baL76892_ch06_210-249.indd 215baL76892_ch06_210-249.indd 215 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
216 Chapter 6 Data: Business Intelligence
discovered an increase in the demand for Pop-Tarts during the storm season. Armed
with the valuable information the retail chain was able to stock up on Pop-Tarts that
were ready for purchase when customers arrived. Figure 6.6 displays different types of
transactional and analytical information.
Information Timeliness
Timeliness is an aspect of information that depends on the situation. In some firms or
industries, information that is a few days or weeks old can be relevant, while in others
information that is a few minutes old can be almost worthless. Some organizations, such
as 911 response centers, stock traders, and banks, require up-to-the-second informa-
tion. Other organizations, such as insurance and construction companies, require only
daily or even weekly information.
Real-time information means immediate, up-to-date information. Real-time systems
provide real-time information in response to requests. Many organizations use real-time
systems to uncover key corporate transactional information. The growing demand for
real-time information stems from organizations’ need to make faster and more effective
decisions, keep smaller inventories, operate more efficiently, and track performance more
carefully. Information also needs to be timely in the sense that it meets employees’ needs,
but no more. If employees can absorb information only on an hourly or daily basis, there
is no need to gather real-time information in smaller increments.
Most people request real-time information without understanding one of the biggest
pitfalls associated with real-time information—continual change. Imagine the following
scenario: Three managers meet at the end of the day to discuss a business problem. Each
manager has gathered information at different times during the day to create a picture of
the situation. Each manager’s picture may be different because of the time differences.
Their views on the business problem may not match because the information they are
basing their analysis on is continually changing. This approach may not speed up deci-
sion making, and it may actually slow it down. Business decision makers must evaluate
the timeliness for the information for every decision. Organizations do not want to find
themselves using real-time information to make a bad decision faster.
Information Quality
Business decisions are only as good as the quality of the information used to make them.
Information inconsistency occurs when the same data element has different values.
Take for example the amount of work that needs to occur to update a customer who had
changed her last name due to marriage. Changing this information in only a few organi-
zational systems will lead to data inconsistencies causing customer 123456 to be associ-
ated with two last names. Information integrity issues occur when a system produces
FIGURE 6.6
Transactional versus Analytical
Information
Packing Slip
Airline Ticket
Sales
Receipt
Database
Transactional Information
Trends
Sales
Projections
Analytical Information
Future
Growth
Product
Statistics
baL76892_ch06_210-249.indd 216baL76892_ch06_210-249.indd 216 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
217Technical Foundations of MIS Module 2
incorrect, inconsistent, or duplicate data. Data integrity issues can cause managers to
consider the system reports invalid and will make decisions based on other sources.
To ensure your systems do not suffer from data integrity issues, review Figure 6.7 for
the five characteristics common to high-quality information: accuracy, completeness,
consistency, timeliness, and uniqueness. Figure  6.8 provides an example of several
problems associated with using low-quality information including:
1. Completeness. The customer’s first name is missing.
2. Another issue with completeness. The street address contains only a number and not a
street name.
3. Consistency. There may be a duplication of information since there is a slight dif-
ference between the two customers in the spelling of the last name. Similar street
addresses and phone numbers make this likely.
FIGURE 6.7
Five Common Characteristics of
High-Quality Information
Accurate
Complete
Consistent
Timely
Unique
• Is there an incorrect value in the information?
• Example: Is the name spelled correctly? Is the dollar amount
recorded properly?
• Is a value missing from the information?
• Example: Is the address complete including street, city, state,
and zip code?
• Is aggregate or summary information in agreement with detailed
information?
• Example: Do all total columns equal the true total of the individual item?
• Is the information current with respect to business needs?
• Example: Is information updated weekly, daily, or hourly?
• Is each transaction and event represented only once in the
information?
• Example: Are there any duplicate customers?
FIGURE 6.8
Example of Low-Quality
Information
113
114
115
116
Smith
Jones
Roberts
Robert
First
Name City
Jeff
Jenny
Jenny
1. Missing information
(no first name)
3. Probable duplicate information
(similar names, same
address, phone number)
4. Potential wrong information
(are the phone and fax numbers
the same or is this an error?)
5. Inaccurate information
(invalid email)
6. Incomplete information
(missing area codes)
Street
123 S. Main
12A
1244 Colfax
1244 Colfax
Denver
Denver
Denver
Denver
State
CO
CO
CO
CO
Zip
80210
80224
85231
85231
Phone
(303) 777-1258
(303) 666-6868
759-5654
759-5654
Fax
(303) 777-5544
(303) 666-6868
853-6584
853-6584
Email
ssmith@aol.com
(303) 666-6868
jr@msn.com
jr@msn.com
ID
Last
Name
2. Incomplete information
(no street)
baL76892_ch06_210-249.indd 217baL76892_ch06_210-249.indd 217 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
BUSINESS DRIVEN MIS
Real People magazine is geared toward working individuals and provides arti-
cles and advice on everything from car maintenance to family planning. The
magazine is currently experiencing problems with its distribution list. More
than 30 percent of the magazines mailed are returned because of incorrect
address information, and each month it receives numerous calls from angry
customers complaining that they have not yet received their magazines. Below
is a sample of Real People ’s customer information. Create a report detailing all
the issues with the information, potential causes of the information issues, and
solutions the company can follow to correct the situation.
Determining
Information
Quality Issues
APPLY YOUR KNOWLEDGE
ID First Name Middle Initial Last Name Street City State Zip Code
433 M J Jones 13 Denver Denver CO 87654
434 Margaret J Jones 13 First Ave. Denver CO 87654
434 Brian F Hoover Lake Ave. Columbus OH 87654
435 Nick H Schweitzer 65 Apple Lane San Francisco OH 65664
436 Richard A 567 55th St. New York CA 98763
437 Alana B Smith 121 Tenny Dr. Buffalo NY 142234
438 Trevor D Darrian 90 Fresrdestil Dallas TX 74532
218 Chapter 6 Data: Business Intelligence
4. Accuracy. This may be inaccurate information because the customer’s phone and fax
numbers are the same. Some customers might have the same number for phone and
fax, but the fact that the customer also has this number in the email address field is
suspicious.
5. Another issue with accuracy. There is inaccurate information because a phone num-
ber is located in the email address field.
6. Another issue with completeness. The information is incomplete because there is not
a valid area code for the phone and fax numbers.
Nestlé uses 550,000 suppliers to sell more than 100,000 products in 200 countries.
However, due to poor information, the company was unable to evaluate its business effec-
tively. After some analysis, it found that it had 9 million records of vendors, customers, and
materials, half of which were duplicated, obsolete, inaccurate, or incomplete. The analy-
sis discovered that some records abbreviated vendor names while other records spelled
out the vendor names. This created multiple accounts for the same customer, making it
impossible to determine the true value of Nestlé’s customers. Without being able to iden-
tify customer profitability, a company runs the risk of alienating its best customers. 2
Knowing how low-quality information issues typically occur can help a company
correct them. Addressing these errors will significantly improve the quality of company
information and the value to be extracted from it. The four primary reasons for low-quality
information are:
1. Online customers intentionally enter inaccurate information to protect their privacy.
2. Different systems have different information entry standards and formats.
3. Data-entry personnel enter abbreviated information to save time or erroneous infor-
mation by accident.
4. Third-party and external information contains inconsistencies, inaccuracies, and errors.
baL76892_ch06_210-249.indd 218baL76892_ch06_210-249.indd 218 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
219Technical Foundations of MIS Module 2
Understanding the Costs of Using Low-Quality Information Using the
wrong information can lead managers to make erroneous decisions. Erroneous decisions
in turn can cost time, money, reputations, and even jobs. Some of the serious business
consequences that occur due to using low-quality information to make decisions are:
■ Inability to accurately track customers.
■ Difficulty identifying the organization’s most valuable customers.
■ Inability to identify selling opportunities.
■ Lost revenue opportunities from marketing to nonexistent customers.
■ The cost of sending nondeliverable mail.
■ Difficulty tracking revenue because of inaccurate invoices.
■ Inability to build strong relationships with customers.
Understanding the Benefits of Using High-Quality Information High-
quality information can significantly improve the chances of making a good decision
and directly increase an organization’s bottom line. One company discovered that even
with its large number of golf courses, Phoenix, Arizona, is not a good place to sell golf
clubs. An analysis revealed that typical golfers in Phoenix are tourists and convention-
eers who usually bring their clubs with them. The analysis further revealed that two
of the best places to sell golf clubs in the United States are Rochester, New York, and
Detroit, Michigan. Equipped with this valuable information, the company was able to
strategically place its stores and launch its marketing campaigns.
High-quality information does not automatically guarantee that every decision made
is going to be a good one, because people ultimately make decisions and no one is per-
fect. However, such information ensures that the basis of the decisions is accurate. The
success of the organization depends on appreciating and leveraging the true value of
timely and high-quality information.
Information Governance
Information is a vital resource and users need to be educated on what they can and can-
not do with it. To ensure a firm manages its information correctly, it will need special pol-
icies and procedures establishing rules on how the information is organized, updated,
maintained, and accessed. Every firm, large and small, should create an information
policy concerning data governance. Data governance refers to the overall management
of the availability, usability, integrity, and security of company data. A company that sup-
ports a data governance program has a defined a policy that specifies who is accountable
for various portions or aspects of the data, including its accuracy, accessibility, consis-
tency, timeliness, and completeness. The policy should clearly define the processes con-
cerning how to store, archive, back up, and secure the data. In addition, the company
should create a set of procedures identifying accessibility levels for employees. Then, the
firm should deploy controls and procedures that enforce government regulations and
compliance with mandates such as Sarbanes-Oxley.
STORING INFORMATION USING A RELATIONAL
DATABASE MANAGEMENT SYSTEM
The core component of any system, regardless of size, is a database and a database
management system. Broadly defined, a database maintains information about vari-
ous types of objects (inventory), events (transactions), people (employees), and places
(warehouses). A database management system (DBMS) creates, reads, updates, and
deletes data in a database while controlling access and security. Managers send requests
to the DBMS, and the DBMS performs the actual manipulation of the data in the data-
base. Companies store their information in databases, and managers access these sys-
tems to answer operational questions such as how many customers purchased Product
A in December or what were the average sales by region. There are two primary tools
available for retrieving information from a DBMS. First is a query-by-example (QBE)
LO 6.2: Describe a database, a
database management system,
and the relational database model.
baL76892_ch06_210-249.indd 219baL76892_ch06_210-249.indd 219 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
220 Chapter 6 Data: Business Intelligence
tool that helps users graphically design the answer to a question against a database.
Second is a structured query language (SQL) that asks users to write lines of code to
answer questions against a database. Managers typically interact with QBE tools, and
MIS professionals have the skills required to code SQL. Figure 6.9 displays the relation-
ship between a database, a DBMS, and a user. Some of the more popular examples of
DBMS include MySQL, Microsoft Access, SQL Server, FileMaker, Oracle, and FoxPro.
A data element (or data field) is the smallest or basic unit of information. Data ele-
ments can include a customer’s name, address, email, discount rate, preferred shipping
method, product name, quantity ordered, and so on. Data models are logical data struc-
tures that detail the relationships among data elements using graphics or pictures.
Metadata provides details about data. For example, metadata for an image could
include its size, resolution, and date created. Metadata about a text document could con-
tain document length, data created, author’s name, and summary. Each data element is
given a description, such as Customer Name; metadata is provided for the type of data
(text, numeric, alphanumeric, date, image, binary value) and descriptions of potential
predefined values such as a certain area code; and finally the relationship is defined. A
data dictionary compiles all of the metadata about the data elements in the data model.
Looking at a data model along with reviewing the data dictionary provides tremendous
insight into the database’s functions, purpose, and business rules.
DBMS use three primary data models for organizing information—hierarchical, net-
work, and the relational database, the most prevalent. A relational database model
stores information in the form of logically related two-dimensional tables. A relational
BUSINESS DRIVEN DEBATE
Without a data governance policy, a company might be leaving its data vulner-
able to hackers and theft. Consider TJX Co., the parent company of T.J. Maxx,
which had 45 million credit and debit card numbers stolen from its data sys-
tems. The credit card industry provides security rules that mandate vendors
encrypt credit card data and limit storage of credit card numbers from point-
of-sale terminals. T.J. Maxx did not have a data governance policy adhering to
these stipulations and was actively storing the customer information and credit
card numbers for years. 3
Who do you think is to blame for the T.J. Maxx credit card data theft—the
company for not implementing the proper data governance policies or the
hackers?
Securing Credit
Card Data
APPLY YOUR KNOWLEDGE
FIGURE 6.9
Relationship of Database,
DBMS, and User
Customers
Orders
Products
Distributors
DBMSDatabase
1. Enter New
Customer
2. Find Customer
Order
3. Enter New
Products
User
baL76892_ch06_210-249.indd 220baL76892_ch06_210-249.indd 220 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
221Technical Foundations of MIS Module 2
database management system allows users to create, read, update, and delete data in
a relational database. Although the hierarchical and network models are important, this
text focuses only on the relational database model.
Storing Data Elements in Entities and Attributes
For flexibility in supporting business operations, managers need to query or search for
the answers to business questions such as which artist sold the most albums during a
certain month. The relationships in the relational database model help managers extract
this information. Figure 6.10 illustrates the primary concepts of the relational database
model—entities, attributes, keys, and relationships. An entity (also referred to as a table)
stores information about a person, place, thing, transaction, or event. The entities, or
tables, of interest in Figure 6.10 are TRACKS, RECORDINGS, MUSICIANS, and CATEGO-
RIES. Notice that each entity is stored in a different two-dimensional table (with rows
and columns).
Attributes ( also called columns or fields) are the data elements associated with an
entity. In Figure  6.10 the attributes for the entity TRACKS are TrackNumber, TrackTitle,
TrackLength, and RecordingID. Attributes for the entity MUSICIANS are MusicianID, Musi-
cianName, MusicianPhoto, and MusicianNotes. A record is a collection of related data ele-
ments (in the MUSICIANS table these include “3, Lady Gaga, gag , Do not bring young
kids to live shows”). Each record in an entity occupies one row in its respective table.
Creating Relationships Through Keys
To manage and organize various entities within the relational database model, you use
primary keys and foreign keys to create logical relationships. A primary key is a field (or
group of fields) that uniquely identifies a given record in a table. In the table RECORD-
INGS, the primary key is the field RecordingID that uniquely identifies each record in the
table. Primary keys are a critical piece of a relational database because they provide a way
of distinguishing each record in a table; for instance, imagine you need to find information
FIGURE 6.10
Primary Concepts of the
Relational Database Model
Attributes
1
2
3
4
5
6
Pop
R&B
Rock
Country
Blues
Classical
Entities Foreign keys
TRACKS
TrackNumber TrackTitle TrackLength RecordingID
1 I Won’t 3:45 1
RECORDINGS
RecordingID RecordingTitle MuscianID CategoryID
1 Breakthrough 1 1Primary
keys
3 You Got Me 4:00 1
4 Fallin For you 3:35 1
1 I Gotta Feelin 4:49 2
2 Imma Be 4:17 2
2 The E.N.D. 2 1
3
4
5
3 Boom Boom Pow 4:11 2
4 Meet Me Halfway 4:44 2
6
Monkey Business
Elephunk
The Fame Monster
Raymond v. Raymond
2
2
3
4
1
1
1
2
MUSICIANS
MusicianID MusicianName MusicianPhoto MusicianNotes
1 Colby Caillat Colby Next concert in Boston 7/1/2011
CategoryID CategoryName
2 Black Eyed Peas BYP.bmp New album due 12/25/2011
3 Lady Gaga Gaga Do not bring young kids to live shows
4 Usher Usher.bmp Current album #1 on Billboard
Records
2 Begin Again 4:14 1
CATEGORIES
baL76892_ch06_210-249.indd 221baL76892_ch06_210-249.indd 221 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
BUSINESS DRIVEN START-UP
Living in a cramped dorm room is a common college occurrence. This was the
experience of Ryan Dickerson, a Syracuse University student, who found him-
self wedged into a tiny dorm room with only enough room to fit a bed, desk, and
chair. Spotting an entrepreneurial opportunity, Dickerson innovatively created
a hybrid bed and couch, calling his new product the Rylaxer. During the day the
Rylaxer functioned as a couch and during the night it transformed into a bed,
solving his limited space issue. The Rylaxer is made of environmentally friendly
foam and is available in two sizes and a variety of colors. Of course, you can
pay extra for a custom cover with your school’s name, Greek letters, or favorite
sports team’s logo. 4
Why would a spreadsheet be ineffective for running Dickerson’s business?
Why would he want to create a database to support his business needs? If you
were building the Rylaxer database, what are a few of the entities and associated
attributes you might create? Why would you want to create primary and foreign
keys? How will you use these keys to turn data into information?
The Rylaxer
APPLY YOUR KNOWLEDGE
222 Chapter 6 Data: Business Intelligence
on a customer named Steve Smith. Simply searching the customer name would not be an
ideal way to find the information because there might be 20 customers with the name Steve
Smith. This is the reason the relational database model uses primary keys to uniquely iden-
tify each record. Using Steve Smith’s unique ID allows a manager to search the database to
identify all information associated with this customer.
A foreign key is a primary key of one table that appears as an attribute in another table
and acts to provide a logical relationship between the two tables. For instance, Black Eyed
Peas in Figure 6.10 is one of the musicians appearing in the MUSICIANS table. Its pri-
mary key, MusicianID, is “2.” Notice that MusicianID also appears as an attribute in the
RECORDINGS table. By matching these attributes, you create a relationship between the
MUSICIANS and RECORDINGS tables that states the Black Eyed Peas (MusicianID 2)
have several recordings including The E.N.D., Monkey Business, and Elepunk. In essence,
MusicianID in the RECORDINGS table creates a logical relationship (who was the musi-
cian that made the recording) to the MUSICIANS table . Creating the logical relationship
between the tables allows managers to search the data and turn it into useful information.
USING A RELATIONAL DATABASE FOR BUSINESS
ADVANTAGES
Many business managers are familiar with Excel and other spreadsheet programs they
can use to store business data. Although spreadsheets are excellent for supporting some
data analysis, they offer limited functionality in terms of security, accessibility, and flex-
ibility and can rarely scale to support business growth. From a business perspective,
relational databases offer many advantages over using a text document or a spreadsheet,
as displayed in Figure 6.11 .
Increased Flexibility
Databases tend to mirror business structures, and a database needs to handle changes
quickly and easily, just as any business needs to be able to do. Equally important, data-
bases need to provide flexibility in allowing each user to access the information in
whatever way best suits his or her needs. The distinction between logical and physical
views is important in understanding flexible database user views. The physical view of
information deals with the physical storage of information on a storage device.
LO 6.3: Identify the business
advantages of a relational database.
baL76892_ch06_210-249.indd 222baL76892_ch06_210-249.indd 222 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
223Technical Foundations of MIS Module 2
The logical view of information focuses on how individual users logically access infor-
mation to meet their own particular business needs.
In the database illustration from Figure  6.10 , for example, one user could perform
a query to determine which recordings had a track length of four minutes or more. At
the same time, another user could perform an analysis to determine the distribution of
recordings as they relate to the different categories. For example, are there more R&B
recordings than rock, or are they evenly distributed? This example demonstrates that
while a database has only one physical view, it can easily support multiple logical views
that provides for flexibility.
Consider another example—a mail-order business. One user might want a report pre-
sented in alphabetical format, in which case last name should appear before first name.
Another user, working with a catalog mailing system, would want customer names
appearing as first name and then last name. Both are easily achievable, but different logi-
cal views of the same physical information.
Increased Scalability and Performance
In its first year of operation, the official website of the American Family Immigration
History Center, www.ellisisland.org , generated more than 2.5 billion hits. The site offers
immigration information about people who entered America through the Port of New
York and Ellis Island between 1892 and 1924. The database contains more than 25 mil-
lion passenger names that are correlated to 3.5 million images of ships’ manifests. 5
The database had to be scalable to handle the massive volumes of information and
the large numbers of users expected for the launch of the website. In addition, the data-
base needed to perform quickly under heavy use. Some organizations must be able to
support hundreds or thousands of users including employees, partners, customers, and
suppliers, who all want to access and share the same information. Databases today scale
to exceptional levels, allowing all types of users and programs to perform information-
processing and information-searching tasks.
Reduced Information Redundancy
Information redundancy is the duplication of data, or the storage of the same data
in multiple places. Redundant data can cause storage issues along with data integrity
issues, making it difficult to determine which values are the most current or most accu-
rate. Employees become confused and frustrated when faced with incorrect informa-
tion causing disruptions to business processes and procedures. One primary goal of a
database is to eliminate information redundancy by recording each piece of information
in only one place in the database. This saves disk space, makes performing information
updates easier, and improves information quality.
FIGURE 6.11
Business Advantages of a
Relational Database
Increased
Flexibility
Increased
Scalability
and
Performance
Increased
Information
Security
Increased
Information
Integrity
Reduced
Information
Redundance
baL76892_ch06_210-249.indd 223baL76892_ch06_210-249.indd 223 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
224 Chapter 6 Data: Business Intelligence
Increased Information Integrity (Quality)
Information integrity is a measure of the quality of information. Integrity constraints
are rules that help ensure the quality of information. The database design needs to con-
sider integrity constraints. The database and the DBMS ensures that users can never vio-
late these constraints. There are two types of integrity constraints: (1) relational and (2)
business critical.
Relational integrity constraints are rules that enforce basic and fundamental infor-
mation-based constraints. For example, a relational integrity constraint would not allow
someone to create an order for a nonexistent customer, provide a markup percentage
that was negative, or order zero pounds of raw materials from a supplier. A business rule
defines how a company performs certain aspects of its business and typically results
in either a yes/no or true/false answer. Stating that merchandise returns are allowed
within 10 days of purchase is an example of a business rule. Business-critical integrity
constraints enforce business rules vital to an organization’s success and often require
more insight and knowledge than relational integrity constraints. Consider a supplier
of fresh produce to large grocery chains such as Kroger. The supplier might implement
a business-critical integrity constraint stating that no product returns are accepted after
15 days past delivery. That would make sense because of the chance of spoilage of the
produce. Business-critical integrity constraints tend to mirror the very rules by which an
organization achieves success.
The specification and enforcement of integrity constraints produce higher-quality infor-
mation that will provide better support for business decisions. Organizations that establish
specific procedures for developing integrity constraints typically see an increase in accu-
racy that then increases the use of organizational information by business professionals.
Increased Information Security
Managers must protect information, like any asset, from unauthorized users or misuse.
As systems become increasingly complex and highly available over the Internet on many
different devices, security becomes an even bigger issue. Databases offer many security
features including passwords to provide authentication, access levels to determine who
can access the data, and access controls to determine what type of access they have to
the information.
For example, customer service representatives might need read-only access to cus-
tomer order information so they can answer customer order inquiries; they might not
have or need the authority to change or delete order information. Managers might
require access to employee files, but they should have access only to their own employ-
ees’ files, not the employee files for the entire company. Various security features of
databases can ensure that individuals have only certain types of access to certain types
of information.
Security risks are increasing as more and more databases and DBMS systems are
moving to data centers run in the cloud. The biggest risks when using cloud computing
are ensuring the security and privacy of the information in the database. Implement-
ing data governance policies and procedures that outline the data management require-
ments can ensure safe and secure cloud computing.
DRIVING WEBSITES WITH DATA
A content creator is the person responsible for creating the original website content. A
content editor is the person responsible for updating and maintaining website content.
Static information includes fixed data incapable of change in the event of a user action.
Dynamic information includes data that change based on user actions. For example,
static websites supply only information that will not change until the content editor
changes the information. Dynamic information changes when a user requests infor-
mation. A dynamic website changes information based on user requests such as movie
ticket availability, airline prices, or restaurant reservations. Dynamic website informa-
tion is stored in a dynamic catalog , or an area of a website that stores information about
products in a database.
LO 6.4: Explain the business benefits
of a data-driven website.
baL76892_ch06_210-249.indd 224baL76892_ch06_210-249.indd 224 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
225Technical Foundations of MIS Module 2
Websites change for site visitors depending on the type of information they request.
Consider, for example, an automobile dealer. The dealer would create a database con-
taining data elements for each car it has available for sale including make, model, color,
year, miles per gallon, a photograph, and so on. Website visitors might click on Porsche
and then enter their specific requests such as price range or year made. Once the user hits
“go” the website automatically provides a custom view of the requested information. The
dealer must create, update, and delete automobile information as the inventory changes.
A data-driven website is an interactive website kept constantly updated and relevant
to the needs of its customers using a database. Data-driven capabilities are especially
useful when a firm needs to offer large amounts of information, products, or services.
Visitors can become quickly annoyed if they find themselves buried under an avalanche
of information when searching a website. A data-driven website can help limit the
amount of information displayed to customers based on unique search requirements.
Companies even use data-driven websites to make information in their internal data-
bases available to customers and business partners.
There are a number of advantages to using the web to access company databases. First,
web browsers are much easier to use than directly accessing the database using a custom-
query tool. Second, the web interface requires few or no changes to the database model.
Finally, it costs less to add a web interface in front of a DBMS than to redesign and rebuild
the system to support changes. Additional data-driven website advantages include:
■ Easy to manage content: Website owners can make changes without relying on MIS
professionals; users can update a data-driven website with little or no training.
■ Easy to store large amounts of data: Data-driven websites can keep large volumes
of information organized. Website owners can use templates to implement changes
for layouts, navigation, or website structure. This improves website reliability, scal-
ability, and performance.
■ Easy to eliminate human errors: Data-driven websites trap data-entry errors, elimi-
nating inconsistencies while ensuring all information is entered correctly.
BUSINESS DRIVEN ETHICS AND SECURITY
Peter Warden is not your typical Facebook user. He is a young entrepreneur
from Boulder, Colorado, who used the online social networking site’s data
to illustrate people’s interests and common names across the United States.
Warden collected data from more than 200 million Facebook profiles, and then
he created a visualization map showing connections between locations that
share friends.
Warden gathered the data from public profiles using “crawling” software
similar to what search engines use to find content. Analyzing these data could
provide useful information, such as displaying links between people with simi-
lar income, employment, and social connections. When Facebook learned
what Warden was doing, the company threatened to sue him unless he deleted
the data immediately. Warden did not have the funds required to fight the law-
suit and was forced to comply with Facebook’s request and deleted the data. 6
Do you agree or disagree that Warden’s use of the information was unethi-
cal? Do you agree with Facebook’s decision to have Warden delete all the data
he collected? What other social networking sites could Warden use to collect
public information? How much of your personal information do you think is
available to the public for data collection efforts such as Warden’s?
Facebook
Fiasco
APPLY YOUR KNOWLEDGE
baL76892_ch06_210-249.indd 225baL76892_ch06_210-249.indd 225 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
226 Chapter 6 Data: Business Intelligence
FIGURE 6.13
BI in a Data-Driven Website
Web Page
Database
1
2
PivotTable3
FIGURE 6.12
Zappos.com —A Data-Driven
Website
Search
query
Zappos Web Server
Results
Database
baL76892_ch06_210-249.indd 226baL76892_ch06_210-249.indd 226 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
227Technical Foundations of MIS Module 2
Zappos credits its success as an online shoe retailer to its vast inventory of nearly 3
million products available through its dynamic data-driven website. The company built
its data-driven website catering to a specific niche market: consumers who were tired
of finding that their most-desired items were always out of stock at traditional retailers.
Zappos’ highly flexible, scalable, and secure database helped it rank as the most-available
Internet retailer. Figure 6.12 displays Zappos data-driven website illustrating a user que-
rying the database and receiving information that satisfies the user’s request. 7
Companies can gain valuable business knowledge by viewing the data accessed and
analyzed from their website. Figure  6.13 displays how running queries or using ana-
lytical tools, such as a PivotTable, on the database that is attached to the website can
offer insight into the business, such as items browsed, frequent requests, items bought
together, and so on.
section 6.2 Business Intelligence
L E A R N I N G O U T C O M E S
6.5 Define a data warehouse, and provide a few reasons it can make a manager more effective.
6.6 Explain ETL and the role of a data mart in business.
6.7 Define data mining, and explain the three common forms for mining structured and unstructured data.
6.8 Identify the advantages of using business intelligence to support managerial decision making.
THE BUSINESS BENEFITS OF DATA WAREHOUSING
In the 1990s as organizations began to need more timely information about their busi-
ness, they found that traditional management information systems were too cumber-
some to provide relevant information efficiently and efficiently. Most of the systems were
in the form of operational databases that were designed for specific business functions,
such as accounting, order entry, customer service, and sales, and were not appropriate
for business analysis for the reasons shown in Figure 6.14 .
During the latter half of the 20th century, the numbers and types of operational
databases increased. Many large businesses found themselves with information scat-
tered across multiple systems with different file types (such as spreadsheets, databases,
and even word processing files), making it almost impossible for anyone to use the
information from multiple sources. Completing reporting requests across operational
systems could take days or weeks using antiquated reporting tools that were ineffective
for running a business. From this idea, the data warehouse was born as a place where
relevant information could be stored and accessed for making strategic queries and
reports.
A data warehouse is a logical collection of information, gathered from many different
operational databases, that supports business analysis activities and decision-making
tasks. The primary purpose of a data warehouse is to combine information, more specifi-
cally, strategic information, throughout an organization into a single repository in such a
way that the people who need that information can make decisions and undertake busi-
ness analysis. A key idea within data warehousing is to collect information from multiple
systems in a common location that uses a universal querying tool. This allows opera-
tional databases to run where they are most efficient for the business, while providing
a common location using a familiar format for the strategic or enterprisewide reporting
information.
Data warehouses go even a step further by standardizing information. Gender, for
instance can be referred to in many ways (Male, Female, M/F, 1/0), but it should be
standardized on a data warehouse with one common way of referring to each data ele-
ment that stores gender (M/F). Standardizing of data elements allows for greater accu-
racy, completeness, and consistency as well as increases the quality of the information
LO 6.5: Define a data warehouse,
and provide a few reasons it can
make a manager more effective.
baL76892_ch06_210-249.indd 227baL76892_ch06_210-249.indd 227 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
228 Chapter 6 Data: Business Intelligence
in making strategic business decisions. The data warehouse then is simply a tool that
enables business users, typically managers, to be more effective in many ways, including:
■ Developing customer profiles.
■ Identifying new-product opportunities.
■ Improving business operations.
■ Identifying financial issues.
■ Analyzing trends.
■ Understanding competitors.
■ Understanding product performance.
PERFORMING BUSINESS ANALYSIS WITH DATA MARTS
Businesses collect a tremendous amount of transactional information as part of their
routine operations. Marketing, sales, and other departments would like to analyze these
data to understand their operations better. While databases store the details of all trans-
actions (for instance, the sale of a product) and events (hiring a new employee), data
warehouses store that same information but in an aggregated form more suited to sup-
porting decision-making tasks. Aggregation, in this instance, can include totals, counts,
averages, and the like.
The data warehouse modeled in Figure  6.15 compiles information from internal
databases (or transactional and operational databases) and external databases through
extraction, transformation, and loading. Extraction, transformation, and loading
(ETL) is a process that extracts information from internal and external databases, trans-
forms it using a common set of enterprise definitions, and loads it into a data warehouse.
The data warehouse then sends portions (or subsets) of the information to data marts.
A data mart contains a subset of data warehouse information. To distinguish between
LO 6.6: Explain ETL and the role of a
data mart in business.
FIGURE 6.14
Reasons Business Analysis
Is Difficult from Operational
Databases
Every department had its own method for recording
data so when trying to share information, data did
not match and users did not get the data they really
needed.
Inconsistent
Data Definitions
•
Managers need to perform cross-functional analysis
using data from all departments, which differed in
granularities, formats, and levels.
Lack of Data
Standards
•

The data, if available, were often incorrect or
incomplete. Therefore, users could not rely on the
data to make decisions.
Poor Data
Quality
•
Users could not get the data they needed; what was
collected was not always useful for intended
purposes.
Inadequate Data
Usefulness
•
Most data stored in operational databases did not
allow users direct access; users had to wait to have
their queries or questions answered by MIS
professionals who could code SQL.
Ineffective
Direct Data
Access
•
baL76892_ch06_210-249.indd 228baL76892_ch06_210-249.indd 228 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
229Technical Foundations of MIS Module 2
data warehouses and data marts, think of data warehouses as having a more organiza-
tional focus and data marts as having a functional focus. Figure 6.15 provides an illustra-
tion of a data warehouse and its relationship to internal and external databases, ETL,
and data marts.
Multidimensional Analysis
A relational database contains information in a series of two-dimensional tables. In a
data warehouse and data mart, information contains layers of columns and rows. For this
reason, most data warehouses and data marts are multidimensional databases. A dimen-
sion is a particular attribute of information. Each layer in a data warehouse or data mart
represents information according to an additional dimension. An information cube is
the common term for the representation of multidimensional information. Figure 6.16
displays a cube (cube a) that represents store information (the layers), product informa-
tion (the rows), and promotion information (the columns).
After creating a cube of information, users can begin to slice-and-dice the cube to drill
down into the information. The second cube (cube b) in Figure 6.16 displays a slice rep-
resenting promotion II information for all products at all stores. The third cube (cube c)
in Figure 6.16 displays only information for promotion III, product B, at store 2. By using
multidimensional analysis, users can analyze information in a number of ways and with
any number of dimensions. Users might want to add dimensions of information to a
current analysis including product category, region, and even forecasted versus actual
weather. The true value of a data warehouse is its ability to provide multidimensional
analysis that allows users to gain insights into their information.
Data warehouses and data marts are ideal for off-loading some of the querying against
a database. For example, querying a database to obtain an average of sales for Product
B at Store 2 while Promotion III is under way might create a considerable processing
FIGURE 6.15
Data Warehouse Model
Marketing Sales
Inventory Billing
• Marketing information
• Inventory information
• Sales information
• Billing information
• Competitor information
• Industry information
• Mailing list information
• Stock market analysis
Internal Databases
Data Warehouse
Industry
information
Stock
market
analysis
External Databases
Marketing
data mart
Inventory
data mart
Sales
data mart
Competitor
information
Mailing
lists
ETL
ETL
ETL
ETL
ETL
baL76892_ch06_210-249.indd 229baL76892_ch06_210-249.indd 229 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
230 Chapter 6 Data: Business Intelligence
burden for a database, increasing the time it takes another person to enter a new sale
into the same database. If an organization performs numerous queries against a data-
base (or multiple databases), aggregating that information into a data warehouse will be
beneficial.
Information Cleansing or Scrubbing
Maintaining quality information in a data warehouse or data mart is extremely impor-
tant. To increase the quality of organizational information and thus the effectiveness of
decision making, businesses must formulate a strategy to keep information clean. Infor-
mation cleansing or scrubbing is a process that weeds out and fixes or discards incon-
sistent, incorrect, or incomplete information.
Specialized software tools exist that use sophisticated procedures to analyze, stan-
dardize, correct, match, and consolidate data warehouse information. This step is vitally
important because data warehouses often contain information from several different
databases, some of which can be external to the organization. In a data warehouse,
information cleansing occurs first during the ETL process and again once the informa-
tion is in the data warehouse. Companies can choose information cleansing software
from several different vendors including Oracle, SAS, Ascential Software, and Group 1
Software. Ideally, scrubbed information is accurate and consistent.
Looking at customer information highlights why information cleansing is neces-
sary. Customer information exists in several operational systems. In each system, all the
details could change—from the customer ID to contact information—depending on the
business process the user is performing (see Figure 6.17 ).
Figure 6.18 displays a customer name entered differently in multiple operational sys-
tems. Information cleansing allows an organization to fix these types of inconsistencies
in the data warehouse. Figure 6.19 displays the typical events that occur during informa-
tion cleansing.
Achieving perfect information is almost impossible. The more complete and accu-
rate a company wants its information to be, the more it costs (see Figure 6.20 ). Compa-
nies may also trade accuracy for completeness. Accurate information is correct, while
complete information has no blanks. A birth date of 2/31/10 is an example of complete
but inaccurate information (February 31 does not exist). An address containing Denver,
Colorado, without a zip code is an example of accurate information that is incomplete.
Many firms complete data quality audits to determine the accuracy and completeness
of its data. Most organizations determine a percentage of accuracy and completeness
high enough to make good decisions at a reasonable cost, such as 85 percent accurate
and 65 percent complete.
FIGURE 6.16
A Cube of Information for
Performing a Multidimensional
Analysis on Three Stores
for Five Products and Four
Promotions
Pr
om
o
I
Product A
Store 1
Store 2
Store 3
Cube a
Product B
Product C
Product D
Product E
Pr
om
o
II
Pr
om
o
III
Pr
om
o
IV
Pr
om
o
I
Product A
Store 1
Store 2
Store 3
Cube b
Product B
Product C
Product D
Product E
Pr
om
o
II
Pr
om
o
III
Pr
om
o
IV
Pr
om
o
I
Product A
Store 1
Store 2
Store 3
Cube c
Product B
Product C
Product D
Product E
Pr
om
o
II
Pr
om
o
III
Pr
om
o
IV
baL76892_ch06_210-249.indd 230baL76892_ch06_210-249.indd 230 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
231Technical Foundations of MIS Module 2
UNCOVERING TRENDS AND PATTERNS WITH DATA MINING
Companies are collecting more data than ever. Historically, data were housed function-
ally in systems that were unable to talk to each other, such as customer service, finance,
and human resources. Data mining is the process of analyzing data to extract informa-
tion not offered by the raw data alone. Data mining can also begin at a summary infor-
mation level (coarse granularity) and progress through increasing levels of detail (drilling
down), or the reverse (drilling up). Companies use data-mining techniques to compile
LO 6.7: Define data mining, and
explain the three common forms for
mining structured and unstructured
data.
FIGURE 6.17
Contact Information in
Operational Systems
Billing
Contact: Hans Hultgren 555-1211
Customer Service
Contact: Anne Logan 555-1288
Contact: Deborah Walbridge 555-6543
The billing system has “accounts
payable” customer contact information
The customer service system has the
“product user” customer contact information
Marketing
Contact: Paul Bauer 555-2211
Contact: Don McCubbrey 555-3434
Sales
Contact: Paul Bauer 555-2211
Contact: Don McCubbrey 555-3434
The marketing and sales system has “decision maker”customer contact information.
FIGURE 6.18
Standardizing a Customer Name
in Operational Systems
Customers:
JD0021 Jane Doe
BL0557 Bob Lake
JS0288 Judy Smith
PB0092 Pat Burton
Customers:
10622FA Susan Brown
10472FB Judie R Smithe
10772FA Patti Burten
10922MC Larry Trump
Customers:
000980 Burton, Tricia
02670 Smith, Judie
000466 Burton, Patricia
006777 Lake, RobertP.
Sales
Customer Service
Billing
Customers:
10001 Jane Doe
10002 Robert P.Lake
10003 Judie R.Smith
10004 Patricia Burton
Customer Information
baL76892_ch06_210-249.indd 231baL76892_ch06_210-249.indd 231 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
232 Chapter 6 Data: Business Intelligence
a complete picture of their operations, all within a single view, allowing them to identify
trends and improve forecasts. Consider Best Buy, which used data-mining tools to iden-
tify that 7 percent of its customers accounted for 43 percent of its sales, so the company
reorganized its stores to accommodate those customers. 8
To perform data mining, users need data-mining tools. Data-mining tools use a
variety of techniques to find patterns and relationships in large volumes of information
that predict future behavior and guide decision making. Data mining uncovers trends
and patterns, which analysts use to build models that, when exposed to new informa-
tion sets, perform a variety of information analysis functions. Data-mining tools for data
warehouses help users uncover business intelligence in their data. Some of the key areas
where businesses are using data mining include:
■ Analyzing customer buying patterns to predict future marketing and promotion
campaigns.
■ Building budgets and other financial information.
FIGURE 6.19
Information Cleansing Activities
Missing records or attributes
Cleansing
Missing keys or other required data
Redundant records
Erroneous relationships or references
Inaccurate or incomplete data
FIGURE 6.20
The Cost of Accurate and
Complete Information
C
om
pl
et
en
es
s
100%Accuracy
Complete but
with known
errors
Not very useful
May be a proto-
type only
Perfect
information
Pricey
Very incomplete
but accurate
Quality Management
10
0%
baL76892_ch06_210-249.indd 232baL76892_ch06_210-249.indd 232 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
233Technical Foundations of MIS Module 2
BUSINESS DRIVEN GLOBALIZATION
Congratulations! You have just been hired as a consultant for Integrity
Information Inc., a start-up business intelligence consulting company. Your
first job is to help work with the sales department in securing a new client, The
Warehouse. The Warehouse has been operating in the United States for more
than a decade, and its primary business is to sell wholesale low-cost products.
The Warehouse is interested in hiring Integrity Information Inc. to clean up the
data that are stored in its U.S. database. To determine how good your work is,
the client would like your analysis of the following spreadsheet. The Warehouse
is also interested in expanding globally and wants to purchase several inde-
pendent wholesale stores located in Australia, Thailand, China, Japan, and
the United Kingdom. Before the company moves forward with the venture, it
wants to understand what types of data issues it might encounter as it begins to
transfer data from each global entity to the data warehouse. Please create a list
detailing the potential issues The Warehouse can anticipate encountering as it
consolidates the global databases into a single data warehouse. 9

Integrity
Information Inc.
APPLY YOUR KNOWLEDGE
CUST ID First Name Last Name Address City State Zip Phone
Last Order
Date
233620 Christopher Lee 12421 W Olympic Blvd Los Angeles CA 75080-1100 (972)680-7848 4/18/2014
233621 Bruce Brandwen 268 W 44th St New York PA 10036-3906 (212)471-6077 5/3/2014
233622 Glr Johnson 4100 E Dry Creek Rd Littleton CO 80122-3729 (303)712-5461 5/6/2014
233623 Dave Owens 466 Commerce Rd Staunton VA 24401-4432 (540)851-0362 3/19/2014
233624 John Coulbourn 124 Action St Maynard MA 1754 (978)987-0100 4/24/2014
233629 Dan Gagliardo 2875 Union Rd Cheektowaga NY 14227-1461 (716)558-8191 5/4/2014
23362 Damanceee Allen 1633 Broadway New York NY 10019-6708 (212)708-1576
233630 Michael Peretz 235 E 45th St New York NY 10017-3305 (212)210-1340 4/30/2014
233631 Jody Veeder 440 Science Dr Madison WI 53711-1064 (608)238-9690
X227
3/27/2014
233632 Michael Kehrer 3015 SSE Loop 323 Tyler TX 75701 (903)579-3229 4/28/2014
233633 Erin Yoon 3500 Carillon Pt Kirkland WA 98033-7354 (425)897-7221 3/25/2014
233634 Madeline Shefferly 4100 E Dry Creek Rd Littleton CO 80122-3729 (303)486-3949 3/33/2014
233635 Steven Conduit 1332 Enterprise Dr West Chester PA 19380-5970 (610)692-5900 4/27/2014
233636 Joseph Kovach 1332 Enterprise Dr West Chester PA 19380-5970 (610)692-5900 4/28/2014
233637 Richard Jordan 1700 N Philadelphia PA 19131-4728 (215)581-6770 3/19/2014
233638 Scott Mikolajczyk 1655 Crofton Blvd Crofton MD 21114-1387 (410)729-8155 4/28/2014
233639 Susan Shragg 1875 Century Park E Los Angeles CA 90067-2501 (310)785-0511 4/29/2014
233640 Rob Ponto 29777 Telegraph Rd Southfield MI 48034-1303 (810)204-4724 5/5/2014
233642 Lauren Butler 1211 Avenue Of The
Americas
New York NY 10036-8701 (212)852-7494 4/22/2014
233643 Christopher Lee 12421 W Olympic Blvd Los Angeles CA 90064-1022 (310)689-2577 3/25/2014
233644 Michelle Decker 6922 Hollywood Blvd Hollywood CA 90028-6117 (323)817-4655 5/8/2014
233647 Natalia Galeano 1211 Avenue Of
The Americas
New York NY 10036-8701 (646)728-6911 4/23/2014
233648 Bobbie Orchard 4201 Congress St Charlotte NC 28209-4617 (704)557-2444 5/11/2014
233650 Ben Konfino 1111 Stewart Ave Bethpage NY 11714-3533 (516)803-1406 3/19/2014
233651 Lenee Santana 1050 Techwood Dr NW Atlanta GA 30318-KKRR (404)885-2000 3/22/2014
233652 Lauren Monks 7700 Wisconsin Ave Bethesda MD 20814-3578 (301)771-4772 3/19/2005
233653 Mark Woolley 10950 Washington Blvd Culver City CA 90232-4026 (310)202-2900 4/20/2014
baL76892_ch06_210-249.indd 233baL76892_ch06_210-249.indd 233 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
234 Chapter 6 Data: Business Intelligence
■ Detecting fraud by identifying deceptive spending patterns.
■ Finding the best customers who spend the most money.
■ Keeping customers from leaving or migrating to competitors.
■ Promoting and hiring employees to ensure success for both the company and the
individual.
Data mining enables these companies to determine relationships among such inter-
nal factors as price, product positioning, or staff skills, and external factors such as eco-
nomic indicators, competition, and customer demographics. In addition, it enables
companies to determine the impact on sales, customer satisfaction, and corporate prof-
its and to drill down into summary information to view detailed transactional data. With
data mining, a retailer could use point-of-sale records of customer purchases to send
targeted promotions based on an individual’s purchase history. By mining demographic
data from comment or warranty cards, the retailer could develop products and promo-
tions to appeal to specific customer segments.
Netflix uses data mining to analyze each customer’s film-viewing habits to provide
recommendations for other customers with Cinematch, its movie recommendation
system. Using Cinematch, Netflix can present customers with a number of additional
movies they might want to watch based on the customer’s current preferences. Netflix’s
innovative use of data mining provides its competitive advantage in the movie rental
industry. 10
Data mining uses specialized technologies and functionalities such as query tools,
reporting tools, multidimensional analysis tools, statistical tools, and intelligent agents.
Data mining approaches decision making with a few different activities in mind including:
■ Classification—assigns records to one of a predefined set of classes.
■ Estimation—determines values for an unknown continuous variable behavior or
estimated future value.
■ Affinity grouping—determines which things go together.
■ Clustering—segments a heterogeneous population of records into a number of more
homogeneous subgroups.
Data mining occurs on structured data that are already in a database or a spread-
sheet. Unstructured data do not exist in a fixed location and can include text docu-
ments, PDFs, voice messages, emails, and so on. Text mining analyzes unstructured data
to find trends and patterns in words and sentences. Text mining a firm’s customer sup-
port email might identify which customer service representative is best able to handle
the question, allowing the system to forward it to the right person. Web mining analyzes
unstructured data associated with websites to identify consumer behavior and website
navigation. Three common forms for mining structured and unstructured data are:
■ Cluster analysis
■ Association detection
■ Statistical analysis.
Cluster Analysis
Cluster analysis is a technique used to divide information sets into mutually exclusive
groups such that the members of each group are as close together as possible to one
another and the different groups are as far apart as possible. Cluster analysis segments
customer information to help organizations identify customers with similar behavioral
traits, such as clusters of best customers or onetime customers. Cluster analysis also has
the ability to uncover naturally occurring patterns in information (see Figure 6.21 ).
A great example of using cluster analysis in business is to create target-marketing
strategies based on zip codes. Evaluating customer segments by zip code allows a busi-
ness to assign a level of importance to each segment. Zip codes offer valuable insight
into such things as income levels, demographics, lifestyles, and spending habits. With
target marketing, a business can decrease its costs while increasing the success rate of
the marketing campaign.
baL76892_ch06_210-249.indd 234baL76892_ch06_210-249.indd 234 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
235Technical Foundations of MIS Module 2
Association Detection
Association detection reveals the relationship between variables along with the nature
and frequency of the relationships. Many people refer to association detection algo-
rithms as association rule generators because they create rules to determine the likeli-
hood of events occurring together at a particular time or following each other in a logical
progression. Percentages usually reflect the patterns of these events; for example, “55
percent of the time, events A and B occurred together,” or “80 percent of the time that
items A and B occurred together, they were followed by item C within three days.”
BUSINESS DRIVEN DISCUSSION
Often criticized for accruing large amounts of data about people, Google is now
giving users an easy way to find out what information it stores about them. The
company provides a service called Google Dashboard that summarizes the
data that it collects in users’ accounts on their products such as Gmail, Picasa
Reader, and YouTube. Using the Dashboard, users can then adjust their privacy
settings for the various Google applications, even allowing users to review and
delete recent Google searches. 11
Google Dashboard is giving users what they want—control over their own
data. How is Google using data mining to collect information on users? What
privacy issues does Google create by the massive amounts of personal data it
stores? Will the Dashboard prevent Google from tracking users across the web
if it wants to?
Google
Dashboard
APPLY YOUR KNOWLEDGE
FIGURE 6.21
Example of Cluster Analysis
−3
−2
−1
0
1
2
−2 −1 0 1 2 3
baL76892_ch06_210-249.indd 235baL76892_ch06_210-249.indd 235 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
236 Chapter 6 Data: Business Intelligence
One of the most common forms of association detection analysis is market basket
analysis. Market basket analysis analyzes such items as websites and checkout scanner
information to detect customers’ buying behavior and predict future behavior by iden-
tifying affinities among customers’ choices of products and services (see Figure  6.22 ).
Market basket analysis is frequently used to develop marketing campaigns for cross-sell-
ing products and services (especially in banking, insurance, and finance) and for inven-
tory control, shelf-product placement, and other retail and marketing applications.
Statistical Analysis
Statistical analysis performs such functions as information correlations, distributions,
calculations, and variance analysis. Data-mining tools offer knowledge workers a wide
range of powerful statistical capabilities so they can quickly build a variety of statistical
models, examine the models’ assumptions and validity, and compare and contrast the
various models to determine the best one for a particular business issue.
Forecasting is a common form of statistical analysis. Time-series information is time-
stamped information collected at a particular frequency. Formally defined, forecasts
are predictions based on time-series information. Examples of time-series information
include web visits per hour, sales per month, and calls per day. Forecasting data-mining
tools allow users to manipulate the time series for forecasting activities.
When discovering trends and seasonal variations in transactional information, use
a time-series forecast to change the transactional information by units of time, such as
transforming weekly information into monthly or seasonal information or hourly infor-
mation into daily information. Companies base production, investment, and staffing
decisions on a host of economic and market indicators in this manner. Forecasting mod-
els allow organizations to consider all sorts of variables when making decisions.
SUPPORTING DECISIONS WITH BUSINESS
INTELLIGENCE
Many organizations today find it next to impossible to understand their own strengths
and weaknesses, let alone their biggest competitors, because the enormous volume of
organizational data is inaccessible to all but the MIS department. Organization data
include far more than simple structured data elements in a database; the set of data also
includes unstructured data such as voice mail, customer phone calls, text messages,
video clips, along with numerous new forms of data, such as tweets from Twitter.
LO 6.8: Identify the advantages
of using business intelligence to
support managerial decision making.
FIGURE 6.22
Market Basket Analysis
baL76892_ch06_210-249.indd 236baL76892_ch06_210-249.indd 236 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
237Technical Foundations of MIS Module 2
The Problem: Data Rich, Information Poor
An ideal business scenario would be as follows: As a business manager on his way to
meet with a client reviews historical customer data, he realizes that the client’s order-
ing volume has substantially decreased. As he drills down into the data, he notices the
client had a support issue with a particular product. He quickly calls the support team
to find out all of the information and learns that a replacement for the defective part
can be shipped in 24 hours. In addition, he learns that the client has visited the website
and requested information on a new product line. Armed with all this information, the
business manager is prepared for a productive meeting with his client. He now under-
stands the client’s needs and issues, and he can address new sales opportunities with
confidence.
For many companies the above example is simply a pipe dream. Attempting to gather
all of the client information would actually take hours or even days to compile. With
so much data available, it is surprisingly hard for managers to get information, such as
inventory levels, past order history, or shipping details. Managers send their information
requests to the MIS department where a dedicated person compiles the various reports.
In some situations, responses can take days, by which time the information may be out-
dated and opportunities lost. Many organizations find themselves in the position of
being data rich and information poor. Even in today’s electronic world, managers strug-
gle with the challenge of turning their business data into business intelligence.
The Solution: Business Intelligence
Employee decisions are numerous and they include providing service information,
offering new products, and supporting frustrated customers. Employees can base their
decisions on data, experience, or knowledge and preferably a combination of all three.
BUSINESS DRIVEN INNOVATION
Gone are the days of staring at boring spreadsheets and trying to understand
how the data correlate. With innovative data visualization tools, managers can
arrange different ways to view the data, providing new forms of pattern rec-
ognition not offered by simply looking at numbers. Slate, a news publication,
developed a new data visualization tool called News Dots that offers readers a
different way of viewing the daily news through trends and patterns. The News
Dots tool scans about 500 stories a day from major publications and then tags
the content with important keywords such as people, places, companies, and
topics. Surprisingly, the majority of daily news overlaps as the people, places,
and stories are frequently connected. Using News Dots you can visualize how
the news fits together, almost similar to a giant social network. News Dots uses
circles (or dots) to represent the tagged content and arranges them according
to size. The more frequently a certain topic is tagged, the larger the dot and its
relationship to other dots. The tool is interactive and users simply click on a
dot to view which stories mention that topic and which other topics it connects
to in the network such as a correlation among the U.S. government, Federal
Reserve, Senate, bank, and Barack Obama. 12
How can data visualization help identify trends? What types of business intel-
ligence could you identify if your college used a data visualization tool to analyze
student information? What types of business intelligence could you identify if you
used a data visualization tool to analyze the industry where you plan to compete?
News Dots
APPLY YOUR KNOWLEDGE
baL76892_ch06_210-249.indd 237baL76892_ch06_210-249.indd 237 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
238 Chapter 6 Data: Business Intelligence
Business intelligence can provide managers with the ability to make better decisions. A
few examples of how different industries use business intelligence include:
■ Airlines: Analyze popular vacation locations with current flight listings.
■ Banking: Understand customer credit card usage and nonpayment rates.
■ Health care: Compare the demographics of patients with critical illnesses.
■ Insurance: Predict claim amounts and medical coverage costs.
■ Law enforcement: Track crime patterns, locations, and criminal behavior.
■ Marketing: Analyze customer demographics.
■ Retail: Predict sales, inventory levels, and distribution.
■ Technology: Predict hardware failures.
Figure 6.23 displays how organizations using BI can find the cause to many issues and
problems simply by asking “Why?” The process starts by analyzing a report such as sales
amounts by quarter. Managers will drill down into the report looking for why sales are
up or why sales are down. Once they understand why a certain location or product is
experiencing an increase in sales, they can share the information in an effort to raise
enterprisewide sales. Once they understand the cause for a decrease in sales, they can
take effective action to resolve the issue. Here are a few examples of how managers can
use BI to answer tough business questions:
■ Where has the business been? Historical perspective offers important variables for
determining trends and patterns.
■ Where is the business now? Looking at the current business situation allows man-
agers to take effective action to solve issues before they grow out of control.
■ Where is the business going? Setting strategic direction is critical for planning and
creating solid business strategies.
Ask a simple question—such as who is my best customer or what is my worst-sell-
ing product—and you might get as many answers as you have employees. Databases,
data warehouses, and data marts can provide a single source of “trusted” data that can
answer questions about customers, products, suppliers, production, finances, fraud, and
even employees. They can also alert managers to inconsistencies or help determine the
cause and effects of enterprisewide business decisions. All business aspects can benefit
from the added insights provided by business intelligence, and you, as a business stu-
dent, will benefit from understanding how MIS can help you make intelligent decisions.
Visual Business Intelligence
Informing is accessing large amounts of data from different management information
systems. Infographics (information graphics) displays information graphically so
FIGURE 6.23
How BI Can Answer Tough
Customer Questions
Why are sales below target?
Why did we sell less in the West?
Why did X sales drop?
Why did customer
complaints increase?
Because we sold less
in the Western region.
Because sales of product X
dropped.
Because customer
complaints increased.
Because late deliveries went up
60 percent.
AnswerQuestion
baL76892_ch06_210-249.indd 238baL76892_ch06_210-249.indd 238 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
239Technical Foundations of MIS Module 2
it can be easily understood. Infographics can present the results of large data analysis
looking for patterns and relationships that monitor changes in variables over time. Data
visualization describes technologies that allow users to “see” or visualize data to trans-
form information into a business perspective. Data visualization tools move beyond
Excel graphs and charts into sophisticated analysis techniques such as pie charts, con-
trols, instruments, maps, time-series graphs, and more. Data visualization tools can help
uncover correlations and trends in data that would otherwise go unrecognized. Business
intelligence dashboards track corporate metrics such as critical success factors and key
performance indicators and include advanced capabilities such as interactive controls
allowing users to manipulate data for analysis. The majority of business intelligence soft-
ware vendors offer a number of different data visualization tools and business intelli-
gence dashboards.
Learning Outcome 6.1: Explain the four primary traits that determine the value of
information.
Information is data converted into a meaningful and useful context. Information can tell an organiza-
tion how its current operations are performing and help it estimate and strategize about how future
operations might perform. It is important to understand the different levels, formats, and granularities
of information along with the four primary traits that help determine the value of information, which
include (1) information type: transactional and analytical; (2) information timeliness; (3) information
quality; (4) information governance.
Learning Outcome 6.2: Describe a database, a database management system, and the
relational database model.
A database maintains information about various types of objects (inventory), events (transactions),
people (employees), and places (warehouses). A database management system (DBMS) creates,
reads, updates, and deletes data in a database while controlling access and security. A DBMS pro-
vides methodologies for creating, updating, storing, and retrieving data in a database. In addition, a
DBMS provides facilities for controlling data access and security, allowing data sharing, and enforcing
data integrity. The relational database model allows users to create, read, update, and delete data in
a relational database.
Learning Outcome 6.3: Identify the business advantages of a relational database.
Many business managers are familiar with Excel and other spreadsheet programs they can use to
store business data. Although spreadsheets are excellent for supporting some data analysis, they
offer limited functionality in terms of security, accessibility, and flexibility and can rarely scale to sup-
port business growth. From a business perspective, relational databases offer many advantages over
using a text document or a spreadsheet, including increased flexibility, increased scalability and per-
formance, reduced information redundancy, increased information integrity (quality), and increased
information security.
Learning Outcome 6.4: Explain the business benefits of a data-driven website.
A data-driven website is an interactive website kept constantly updated and relevant to the needs of
its customers using a database. Data-driven capabilities are especially useful when the website offers
a great deal of information, products, or services because visitors are frequently annoyed if they are
buried under an avalanche of information when searching a website. Many companies use the web to
make some of the information in their internal databases available to customers and business partners.
L E A R N I N G O U T C O M E R E V I E W
baL76892_ch06_210-249.indd 239baL76892_ch06_210-249.indd 239 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
240 Chapter 6 Data: Business Intelligence
Learning Outcome 6.5: Define a data warehouse, and provide a few reasons it can make
a manager more effective.
A data warehouse is a logical collection of information, gathered from many different operational
databases, that supports business analysis and decision making. The primary value of a data ware-
house is to combine information, more specifically, strategic information, throughout an organization
into a single repository in such a way that the people who need that information can make decisions
and undertake business analysis.
Learning Outcome 6.6: Explain ETL and the role of a data mart in business.
Extraction, transformation, and loading (ETL) is a process that extracts information from internal and
external databases, transforms it using a common set of enterprise definitions, and loads it into a data
warehouse. The data warehouse then sends portions (or subsets) of the information to data marts. A
data mart contains a subset of data warehouse information. To distinguish between data warehouses
and data marts, think of data warehouses as having a more organizational focus and data marts as
having a functional focus.
Learning Outcome 6.7: Define data mining, and explain the three common forms for
mining structured and unstructured data.
Data mining is the process of analyzing data to extract information not offered by the raw data alone.
Data mining can also begin at a summary information level (coarse granularity) and progress through
increasing levels of detail (drilling down), or the reverse (drilling up). Data mining occurs on structured
data that are already in a database or a spreadsheet. Unstructured data do not exist in a fixed location
and can include text documents, PDFs, voice messages, emails, and so on. Three common forms for min-
ing structured and unstructured data are cluster analysis, association detection, and statistical analysis.
Learning Outcome 6.8: Identify the advantages of using business intelligence to support
managerial decision making.
Many organizations today find it next to impossible to understand their own strengths and weak-
nesses, let alone their biggest competitors, due to enormous volumes of organizational data being
inaccessible to all but the MIS department. Organization data include far more than simple structured
data elements in a database; the set of data also includes unstructured data such as voice mail,
customer phone calls, text messages, video clips, along with numerous new forms of data, such as
tweets from Twitter. Managers today find themselves in the position of being data rich and information
poor, and they need to implement business intelligence systems to solve this challenge.
1. Knowledge: List the reasons a business would want to display information in a graphic or visual
format.
2. Comprehension: Describe how a business could use a business intelligence digital dashboard to
gain an understanding of how the business is operating.
3. Application: Explain how a marketing department could use data visualization tools to help with
the release of a new product.
4. Analysis: Categorize the five common characteristics of high-quality information and rank them
in order of importance for Hotels.com .
5. Synthesis: Develop a list of some possible entities and attributes located in the Hotels.com database.
6. Evaluate: Assess how Hotels.com is using BI to identify trends and change associated business
processes.
O P E N I N G C A S E Q U E S T I O N S
baL76892_ch06_210-249.indd 240baL76892_ch06_210-249.indd 240 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
241Technical Foundations of MIS Module 2
Association detection, 235
Attribute 221
Business-critical integrity
constraint, 224
Business rule, 224
Business intelligence
dashboard 239
Cluster analysis, 234
Content creator, 224
Content editor, 224
Data dictionary, 220
Data element (or data
field), 220
Data governance, 219
Data mart, 228
Data mining, 231
Data model, 220
Data quality audit, 230
Data visualization, 239
Data visualization tools, 239
Data warehouse, 227
Database, 219
Database management system
(DBMS), 219
Data-driven website, 225
Data-mining tool, 232
Dynamic catalog, 224
Dynamic information, 224
Entity, 221
Extraction, transformation, and
loading (ETL), 228
Forecasts, 236
Foreign key, 222
Infographic (or information
graphic), 238
Information cleansing or
scrubbing, 230
Information cube, 229
Information granularity, 214
Information inconsistency, 216
Information integrity, 224
Information integrity
issues, 216
Information redundancy, 223
Informing, 238
Integrity constraint, 224
Logical view of
information, 223
Market basket analysis, 236
Metadata, 220
Physical view of
information, 222
Primary key, 221
Query-by-example (QBE)
tool, 219
Real-time information, 216
Real-time system, 216
Record, 221
Relational database management
system, 220–221
Relational database model, 220
Relational integrity
constraint, 224
Static information, 224
Statistical analysis, 236
Structured data, 234
Structured query language
(SQL), 220
Text mining, 234
Time-series information, 236
Unstructured data, 234
Web mining, 234
K E Y T E R M S
1. How does a database turn data elements into information?
2. Why does a business need to be concerned with the quality of its data?
3. How can data governance help protect a business from hackers?
4. Why would a company care about the timeliness of its data?
5. What are the five characteristics common to high-quality information?
6. What is data governance and its importance to a company?
7. What are the four primary traits that help determine the value of information?
8. What is the difference between an entity and an attribute?
9. What are the advantages of a relational database?
10. What are the advantages of a data-driven website?
11. What is a data warehouse and why would a business want to implement one?
12. Why would you need to use multidimensional analysis?
13. What is the purpose of information cleansing (or scrubbing)?
14. Why would a department want a data mart instead of just accessing the entire data
warehouse?
15. Why would a business be data rich, but information poor?
R E V I E W Q U E S T I O N S
baL76892_ch06_210-249.indd 241baL76892_ch06_210-249.indd 241 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
242 Chapter 6 Data: Business Intelligence
C L O S I N G C A S E O N E
Data Visualization: Stories for the Information Age
At the intersection of art and algorithm, data visualization schematically abstracts information to bring
about a deeper understanding of the data, wrapping it in an element of awe. While the practice of
visually representing information is arguably the foundation of all design, a newfound fascination with
data visualization has been emerging. After The New York Times and The Guardian recently opened
their online archives to the public, artists rushed to dissect nearly two centuries worth of information,
elevating this art form to new prominence.
For artists and designers, data visualization is a new frontier of self-expression, powered by the
proliferation of information and the evolution of available tools. For enterprise, it is a platform for dis-
playing products and services in the context of the cultural interaction that surrounds them, reflecting
consumers’ increasing demand for corporate transparency.
“Looking at something ordinary in a new way makes it extraordinary,” says Aaron Koblin, one
of the more recent pioneers of the discipline. As technology lead of Google’s Creative Labs in San
Francisco, he spearheaded the search giant’s Chrome Experiments series designed to show off the
speed and reliability of the Chrome browser.
Forget Pie Charts and Bar Graphs
Data visualization has nothing to do with pie charts and bar graphs. And it’s only marginally related to
“infographics,” information design that tends to be about objectivity and clarification. Such represen-
tations simply offer another iteration of the data—restating it visually and making it easier to digest.
Data visualization, on the other hand, is an interpretation, a different way to look at and think about
data that often exposes complex patterns or correlations.
Data visualization is a way to make sense of the ever-increasing stream of information with which
we’re bombarded and provides a creative antidote to the analysis paralysis that can result from the
burden of processing such a large volume of information. “It’s not about clarifying data,” says Koblin.
“It’s about contextualizing it.”
Today algorithmically inspired artists are reimagining the art-science continuum through work that
frames the left-brain analysis of data in a right-brain creative story. Some use data visualization as a
bridge between alienating information and its emotional impact—see Chris Jordan’s portraits of global
mass culture. Others take a more technological angle and focus on cultural utility—the Zoetrope proj-
ect offers a temporal and historical visualization of the ephemeral web. Still others are pure artistic
indulgence—like Koblin’s own Flight Patterns project, a visualization of air traffic over North America.
How Business Can Benefit
There are real implications for business here. Most cell phone providers, for instance, offer a statement
of a user’s monthly activity. Most often it’s an overwhelming table of various numerical measures of
how much you talked, when, with whom, and how much it cost. A visual representation of this data
might help certain patterns emerge, revealing calling habits and perhaps helping users save money.
Companies can also use data visualization to gain new insight into consumer behavior. By observ-
ing and understanding what people do with the data—what they find useful and what they dismiss as
worthless—executives can make the valuable distinction between what consumers say versus what
they do. Even now, this can be a tricky call to make from behind the two-way mirror of a traditional
qualitative research setting.
It’s essential to understand the importance of creative vision along with the technical mastery of
software. Data visualization isn’t about using all the data available, but about deciding which patterns
and elements to focus on, building a narrative, and telling the story of the raw data in a different,
compelling way.
baL76892_ch06_210-249.indd 242baL76892_ch06_210-249.indd 242 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
243Technical Foundations of MIS Module 2
Ultimately, data visualization is more than complex software or the prettying up of spreadsheets.
It’s not innovation for the sake of innovation. It’s about the most ancient of social rituals: storytelling.
It’s about telling the story locked in the data differently, more engagingly, in a way that draws us in,
makes our eyes open a little wider and our jaw drop ever so slightly. And as we process it, it can
sometimes change our perspective altogether. 13
Questions
1. Identify the effects poor information might have on a data visualization project.
2. How does data visualization use database technologies?
3. How could a business use data visualization to identify new trends?
4. What is the correlation between data mining and data visualization?
5. Is data visualization a form of business intelligence? Why or why not?
6. What security issues are associated with data visualization?
7. What might happen to a data visualization project if it failed to cleanse or scrub its data?
Zillow
Zillow.com is an online web-based real estate site helping homeowners, buyers, sellers, renters,
real estate agents, mortgage professionals, property owners, and property managers find and share
information about real estate and mortgages. Zillow allows users to access, anonymously and free of
charge, the kinds of tools and information previously reserved for real estate professionals. Zillow’s
databases cover more than 90 million homes, which represents 95 percent of the homes in the United
States. Adding to the sheer size of its databases, Zillow recalculates home valuations for each prop-
erty every day, so it can provide historical graphs on home valuations over time. In some areas, Zillow
is able to display 10 years of valuation history, a value-added benefit for many of its customers. This
collection of data represents an operational data warehouse for anyone visiting the website.
As soon as Zillow launched its website, it immediately generated a massive amount of traffic. As
the company expanded its services, the founders knew the key to its success would be the site’s abil-
ity to quickly process and manage massive amounts of data, in real time. The company identified a
need for accessible, scalable, reliable, secure databases that would enable it to continue to increase
the capacity of its infrastructure indefinitely without sacrificing performance. Zillow’s traffic continues
to grow despite the weakened real estate market; the company is experiencing annual traffic growth
of 30 percent and about a third of all U.S. mortgage professionals visit the site in a given month.
Data Mining and Business Intelligence
Zestimate values on Zillow use data-mining features for spotting trends across property valuations.
Data mining also allows the company to see how accurate Zestimate values are over time. Zillow has
also built the industry’s first search by monthly payment, allowing users to find homes that are for
sale and rent based on a monthly payment they can afford. Along with the monthly payment search,
users can also enter search criteria such as the number of bedrooms or bathrooms.
Zillow also launched a new service aimed at changing the way Americans shop for mortgages.
Borrowers can use Zillow’s new Mortgage Marketplace to get custom loan quotes from lenders
without having to give their names, addresses, phone numbers, or Social Security numbers, or field
unwanted telephone calls from brokers competing for their business. Borrowers reveal their identi-
ties only after contacting the lender of their choice. The company is entering a field of established
mortgage sites such as LendingTree.com and Experian Group’s Lowermybills.com , which charge
C L O S I N G C A S E T W O
baL76892_ch06_210-249.indd 243baL76892_ch06_210-249.indd 243 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
244 Chapter 6 Data: Business Intelligence
mortgage companies for borrower information. Zillow, which has an advertising model, says it does
not plan to charge for leads.
For mortgage companies, the anonymous leads come free; they can make a bid based on infor-
mation provided by the borrower, such as salary, assets, credit score, and the type of loan. Lenders
can browse borrower requests and see competing quotes from other brokers before making a bid. 14
Questions
1. List the reasons Zillow would need to use a database to run its business.
2. Describe how Zillow uses business intelligence to create a unique product for its customers.
3. How could the marketing department at Zillow use a data mart to help with the release of a new
product launch?
4. Categorize the five common characteristics of high-quality information and rank them in order of
importance to Zillow.
5. Develop a list of some possible entities and attributes of Zillow’s mortgage database.
6. Assess how Zillow uses a data-driven website to run its business.
1. Information—Business Intelligence or a Diversion from the Truth?
President Obama used part of his commencement address at Virginia’s Hampton University to
criticize the flood of incomplete information or downright incorrect information that flows in the
24-hour news cycle. The president said, “You’re coming of age in a 24/7 media environment
that bombards us with all kinds of content and exposes us to all kinds of arguments, some of
which don’t always rank all that high on the truth meter. With iPods and iPads and Xboxes and
PlayStations—none of which I know how to work—information becomes a distraction, a diver-
sion, a form of entertainment, rather than a tool of empowerment, rather than the means of
emancipation.” 15
Do you agree or disagree with President Obama’s statement? Who is responsible for verifying
the accuracy of online information? What should happen to companies that post inaccurate infor-
mation? What should happen to individuals who post inaccurate information? What should you
remember when reading or citing sources for online information?
2. Illegal Database Access
Goldman Sachs has been hit with a $3 million lawsuit by a company that alleges the brokerage
firm stole intellectual property from its database that had market intelligence facts. The U.S. District
Court for the Southern District of New York filed the lawsuit in 2010 claiming Goldman Sachs
employees used other people’s access credentials to log into Ipreo’s proprietary database, dubbed
Bigdough. Offered on a subscription basis, Bigdough provides detailed information on more than
80,000 contacts within the financial industry. Ipreo complained to the court that Goldman Sachs
employees illegally accessed Bigdough at least 264 times in 2008 and 2009. 16
Do you agree or disagree with the lawsuit? Should Goldman Sachs be held responsible for
rogue employees’ behavior? What types of policies should Goldman Sachs implement to ensure
this does not occur again?
3. Data Storage
Information is one of the most important assets of any business. Businesses must ensure information
accuracy, completeness, consistency, timeliness, and uniqueness. In addition, business must have a
reliable backup service. In part thanks to cloud computing, there are many data hosting services on
the Internet. These sites offer storage of information that can be accessed from anywhere in the world.
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch06_210-249.indd 244baL76892_ch06_210-249.indd 244 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
245Technical Foundations of MIS Module 2
These data hosting services include Hosting ( www.hosting.com ), Mozy ( www.mozy.com ), My
Docs Online ( www.mydocsonline.com ), and Box ( www.box.net ). Visit a few of these sites along
with a several others you find through research. Which sites are free? Are there limits to how much
you can store? If so, what is the limit? What type of information can you store (video, text, photos,
etc.)? Can you allow multiple users with different passwords to access your storage area? Are you
contractually bound for a certain duration (annual, etc.)? Are different levels of services provided
such as personal, enterprise, work group? Does it make good business sense to store business
data on the Internet? What about personal data?
4. Gathering Business Intelligence
When considering new business opportunities, you need knowledge about the competition. One of
the things many new business owners fail to do is to gather business intelligence on their com-
petitors, such as how many there are and what differentiates each of them. You may find there are
too many and that they would be tough competition for you. Or, you may find that there are few
competitors and the ones who are out there offer very little value.
Generate a new business idea you could launch on the Internet. Research the Internet to find
similar business in the area you have chosen. How many sites did you find that are offering the
same products or services you are planning to offer? Did you come across any sites from another
country that have a unique approach that you did not see on any of the sites in your own country?
How would you use this information in pursuing your business idea?
5. Free Data!
The U.S. Bureau of Labor Statistics states that its role is as the “principal fact-finding agency for
the federal government in the broad field of labor economics and statistics.” And the data that the
bureau provides via its website are available to anyone, free. This can represent a treasure trove of
business intelligence and data mining for those who take advantage of this resource. Visit the web-
site www.bls.gov . What type of information does the site provide? What information do you find most
useful? What sort of information concerning employment and wages is available? How is this infor-
mation categorized? How would this type of information be helpful to a business manager? What
type of demographic information is available? How could this benefit a new start-up business? 17
6. Explaining Relational Databases
You have been hired by Vision, a start-up clothing company. Your manager, Holly Henningson,
is unfamiliar with databases and their associated business value. Henningson has asked you to
create a report detailing the basics of databases. She would also like you to provide a detailed
explanation of relational databases along with their associated business advantages.
7. Entities and Attributes
Martex Inc. is a manufacturer of athletic equipment, and its primary lines of business include
running, tennis, golf, swimming, basketball, and aerobics equipment. Martex currently supplies
four primary vendors including Sam’s Sports, Total Effort, The Underline, and Maximum Workout.
Martex wants to build a database to help it organize its products. In a group, identify the different
types of entities, attributes, keys, and relationships Martex will want to consider when designing
its relational database.
8. Compiling Information
You are currently working for the Public Transportation Department of Chatfield. The department
controls all forms of public transportation, including buses, subways, and trains. Each depart-
ment has about 300 employees and maintains its own accounting, inventory, purchasing, and
human resource systems. Generating reports across departments is a difficult task and usually
involves gathering and correlating the information from the many different databases. It typically
takes about two weeks to generate the quarterly balance sheets and profit and loss statements.
Your team has been asked to compile a report recommending what the Public Transportation
Department of Chatfield can do to alleviate its information and system issues. Be sure that your
baL76892_ch06_210-249.indd 245baL76892_ch06_210-249.indd 245 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
246 Chapter 6 Data: Business Intelligence
report addresses the various reasons departmental reports are presently difficult to obtain as well
as how you plan to solve this problem. 18
9. Information Timeliness
Information timeliness is a major consideration for all organizations. Organizations need to
decide the frequency of backups and the frequency of updates to a data warehouse. In a team,
describe the timeliness requirements for backups and updates to a data warehouse for each of
the following:
■ Weather tracking systems.
■ Car dealership inventories.
■ Vehicle tire sales forecasts.
■ Interest rates.
■ Restaurant inventories.
■ Grocery store inventories.
10. Improving Information Quality
HangUps Corporation designs and distributes closet organization structures. The company oper-
ates five systems—order entry, sales, inventory management, shipping, and billing. The company
has severe information quality issues including missing, inaccurate, redundant, and incomplete
information. The company wants to implement a data warehouse containing information from the
five different systems to help maintain a single customer view, drive business decisions, and per-
form multidimensional analysis. Identify how the organization can improve its information quality
when it begins designing and building its data warehouse.
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. Provide an example of your business data that fits each of the five common characteristics of
high-quality information. Explain why each characteristic is important to your business data and
what might happen if your business data were of low quality. (Be sure to identify your business
and the name of your company.)
2. Identify the different entities and their associated attributes that would be found in your potential
relational database model for your sales database.
3. Identify the benefits of having a data warehouse for your business. What types of data marts
would you want to extract from your data warehouse to help you run your business and make
strategic decisions.
PROJECT I Mining the Data Warehouse
Alana Smith is a senior buyer for a large wholesaler that sells different types of arts and crafts to
greeting card stores such as Hallmark. Smith’s latest marketing strategy is to send all of her custom-
ers a new line of handmade picture frames from Russia. All of her information supports her decision
for the new line. Her analysis predicts that the frames should sell an average of 10 to 15 per store, per
day. Smith is excited about the new line and is positive it will be a success.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch06_210-249.indd 246baL76892_ch06_210-249.indd 246 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
247Technical Foundations of MIS Module 2
One month later Smith learns the frames are selling 50 percent below expectations and averag-
ing between five and eight frames sold daily in each store. She decides to access the company’s
data warehouse information to determine why sales are below expectations. Identify several differ-
ent dimensions of information that Smith will want to analyze to help her decide what is causing the
problems with the picture frame sales.
PROJECT I I Different Dimensions
The focus of data warehousing is to extend the transformation of data into information. Data ware-
houses offer strategic level, external, integrated, and historical information so businesses can make
projections, identify trends, and make key business decisions. The data warehouse collects and stores
integrated sets of historical information from multiple operational systems and feeds them to one or
more data marts. It may also provide end user access to support enterprisewide views of information.
You are currently working on a marketing team for a large corporation that sells jewelry around the
world. Your boss has asked you to look at the following dimensions of data to determine which ones
you want in your data mart for performing sales and market analysis (see Figure AYK.1 ). As a team,
categorize the different dimensions ranking them from 1 to 5, with 1 indicating that the dimension
offers the highest value and must be in your data mart and 5 indicating that the dimension offers the
lowest value and does not need to be in your data mart.
PROJECT I I I Understanding Search
Pretend that you are a search engine. Choose a topic to query. It can be anything such as your favorite
book, movie, band, or sports team. Search your topic on Google, pick three or four pages from the
results, and print them out. On each printout, find the individual words from your query (such as
Dimension Value (1–5) Dimension Value (1–5)
Product number Season
Store location Promotion
Customer net worth Payment method
Number of sales personnel Commission policy
Customer eating habits Manufacturer
Store hours Traffic report
Salesperson ID Customer language
Product style Weather
Order date Customer gender
Product quantity Local tax information
Ship date Local cultural demographics
Current interest rate Stock market closing
Product cost Customer religious affiliation
Customer’s political affiliation Reason for purchase
Local market analysis Employee dress code policy
Order time Customer age
Customer spending habits Employee vacation policy
Product price Employee benefits
Exchange rates Current tariff information
Product gross margin
FIGURE AYK.1
Data Warehouse Data
baL76892_ch06_210-249.indd 247baL76892_ch06_210-249.indd 247 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
248 Chapter 6 Data: Business Intelligence
“Boston Red Sox” or “The Godfather”) and use a highlighter to mark each word with color. Do that for
each of the documents that you print out. Now tape those documents on a wall, step back a few feet,
and review your documents.
If you did not know what the rest of a page said and could judge only by the colored words, which
document do you think would be most relevant? Is there anything that would make a document
look more relevant? Is it better to have the words be in a large heading or to occur several times in
a smaller font? Do you prefer it if the words are at the top or the bottom of the page? How often do
the words need to appear? Come up with two or three things you would look for to see if a document
matched a query well. This exercise mimics search engine processes and should help you understand
why a search engine returns certain results over others.
PROJECT IV Predicting Netflix
Netflix Inc., the largest online movie rental service, provides more than 12 million subscribers access
to more than 100,000 unique DVD titles along with a growing on-demand library in excess of 10,000
choices. Data and information are so important to Netflix that it created The Netflix Prize, an open
competition for anyone who could improve the data used in prediction ratings for films (an increase of
10 percent), based on previous ratings. The winner would receive a $1 million prize.
The ability to search, analyze, and comprehend information is vital for any organization’s success. It
certainly was for Netflix, as it was happy to pay anyone $1 million to improve the quality of its information.
In a group, explain how Netflix might use databases, data warehouses, and data marts to predict customer
movie recommendations. Here are a few characteristics you might want to analyze to get you started:
■ Customer demographics.
■ Movie genre, rating, year, producer, type.
■ Actor information.
■ Internet access.
■ Location for mail pickup.
PROJECT V The Crunch Factory
The Crunch Factory is one of the fourth-largest gyms operating in Australia, and each gym operates its
own system with its own database. Unfortunately, the company failed to develop any data-capturing
standards and now faces the challenges associated with low-quality enterprisewide information. For
example, one system has a field to capture email addresses while another system does not. Duplicate
customer information among the different systems is another major issue, and the company con-
tinually finds itself sending conflicting or competing messages to customers from different gyms. A
customer could also have multiple accounts within the company, one representing a membership,
another representing additional classes, and yet another for a personal trainer. The Crunch Factory
has no way to identify that the different customer accounts are actually for the same customer.
To remain competitive and be able to generate business intelligence The Crunch Factory has to
resolve these challenges. The Crunch Factory has just hired you as its data quality expert. Your first
task is to determine how the company can turn its low-quality information into high-quality business
intelligence. Create a plan that The Crunch Factory can implement that details the following:
■ Challenges associated with low-quality information.
■ Benefits associated with high-quality information.
■ Recommendations on how the company can clean up its data.
PROJECT VI Too Much of a Good Thing
The Castle, a premium retailer of clothes and accessories, created an enterprisewide data warehouse
so all its employees could access information for decision making. The Castle soon discovered that
baL76892_ch06_210-249.indd 248baL76892_ch06_210-249.indd 248 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
249Technical Foundations of MIS Module 2
it is possible to have too much of a good thing. The Castle employees found themselves inundated
with data and unable to make any decisions, a common occurrence called analysis paralysis. When
sales representatives queried the data warehouse to determine if a certain product in the size, color,
and category was available, they would get hundreds of results showing everything from production
orders to supplier contracts. It became easier for the sales representatives to look in the warehouse
themselves than to check the system. Employees found the data warehouse was simply too big, too
complicated, and contained too much irrelevant information.
The Castle is committed to making its data warehouse system a success and has come to you for
help. Create a plan that details the value of the data warehouse to the business, how it can be easier
for all employees to use, along with the potential business benefits the company can derive from its
data warehouse.
PROJECT VI I Twitter Buzz
Technology tools that can predict sales for the coming week, decide when to increase inventory, and
determine when additional staff is required are extremely valuable. Twitter is not just for tweeting your
whereabouts anymore. Twitter and other social-media sites have become great tools for gathering
business intelligence on customers, including what they like, dislike, need, and want. Twitter is easy
to use, and businesses can track every single time a customer makes a statement about a particular
product or service. Good businesses turn this valuable information into intelligence spotting trends
and patterns in customer opinion.
Do you agree that a business can use Twitter to gain business intelligence? How many com-
panies do you think are aware of Twitter and exactly how they can use it to gain BI? How do you
think Twitter uses a data warehouse? How do you think companies store Twitter information?
How would a company use Twitter in a data mart? How would a company use cubes to analyze
Twitter data?
Project
Number
Project
Name
Project
Type Plug-In
Focus
Area Project Level
Skill
Set
Page
Number
28 Daily Invoice Access T5, T6, T7, T8 Business
Analysis
Introductory Entities,
Relationships, and
Databases
AYK.17
29 Billing Data Access T5, T6, T7, T8 Business
Intelligence
Introductory Entities,
Relationships, and
Databases
AYK.19
30 Inventory Data Access T5, T6, T7, T8 SCM Intermediate Entities,
Relationships, and
Databases
AYK.20
31 Call Center Access T5, T6, T7, T8 CRM Intermediate Entities,
Relationships, and
Databases
AYK.21
32 Sales Pipeline Access T5, T6, T7, T8 Business
Intelligence
Advanced Entities,
Relationships, and
Databases
AYK.23
33 Online Classified
Ads
Access T5, T6, T7, T8 Ecommerce Advanced Entities,
Relationships, and
Databases
AYK.23
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Access projects to incorporate into your class, try any of the following after
reading this chapter.
baL76892_ch06_210-249.indd 249baL76892_ch06_210-249.indd 249 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
What’s in IT for me?
The pace of technological change never ceases to amaze as kindergarten classes are now learning PowerPoint and many
elementary school children have their own cell phones. What used to take hours to download over a dial-up modem connec-
tion can now transfer in a matter of seconds through an invisible, wireless network connection from a computer thousands
of miles away. We are living in an increasingly wireless present and hurtling ever faster toward a wireless future. The tipping
point of ubiquitous, wireless, handheld, mobile computing is approaching quickly.
As a business student, understanding network infrastructures and wireless technologies allows you to take advantage of
mobile workforces. Understanding the benefits and challenges of mobility is a critical skill for business executives, regard-
less if you are a novice or a seasoned Fortune 500 employee. By learning about the various concepts discussed in this
chapter, you will develop a better understanding of how business can leverage networking technologies to analyze network
types, improve wireless and mobile business processes, and evaluate alternative networking options.
■ O v e r v i e w o f a C o n n e c t e d
Wo r l d
■ B e n e f i t s o f a C o n n e c t e d Wo r l d
■ C h a l l e n g e s o f a C o n n e c t e d
Wo r l d
SECTION 7.2
Mobility: The Business
Value of a Wireless World
SECTION 7.1
Connectivity: The Business
Value of a Networked World
■ W i re l e s s N e t w o r k C a t e g o r i e s
■ B u s i n e s s A p p l i c a t i o n s o f
W i re l e s s N e t w o r k s
■ B e n e f i t s o f B u s i n e s s M o b i l i t y
■ C h a l l e n g e s o f B u s i n e s s
M o b i l i t y

C H A P T E R
C
H
A
P
T
E
R
O
U
T
L
IN
E

Networks: Mobile Business 7
baL76892_ch07_250-295.indd 250baL76892_ch07_250-295.indd 250 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
251Technical Foundations of MIS Module 2
opening case study
The Ironman
Florida-based World Triathlon Corporation (WTC), owner of the Ironman Triathlon World
Championship, is in the business of fulfilling the dreams of endurance athletes in one of the
world’s most grueling events. The Ironman Triathlon World Championship brings more than
1,700 of the world’s top athletes to rugged Kailua-Kona, Hawaii, for a world championship
race every fall. Athletes attempt to swim 2.4 miles, cycle 112 miles, and run a full 26.2-mile
marathon—all in a single day. The event features a remote course that threads around the
side of an active volcano and offers breathtaking views but also rough terrain, intense heat,
and shifting trade winds.
In the past, it was not easy for family and friends to know how a particular athlete was
faring in the contest. “As a spectator, you’d see the start, and then the athletes would disap-
pear, and that was pretty much it until the finish line,” recalls Dave Scott, who ran his first
triathlon in 1976. Now, however, Ironman is transforming the way audiences and athletes
experience the race. By using WiMAX networks to enable remote cameras, the company
also raised the bar for professional sports broadcasting and spotlighted a technology many
say will help bring the next billion users into the Internet community.
Fans worldwide now can find any athlete’s speed and location thanks to high-speed
WiMAX broadband connections in various places along the 140-mile course. The company
uses radio-frequency identification (RFID) ankle bracelets to track the athletes’ progress
and high-bandwidth communications to transmit professional-quality video and other data,
making the information accessible on the Ironmanlive.com website.
Networking the course was a challenge due to the same factors that make it challeng-
ing for athletes. “We’re on a very rough, rugged course on an island with an active vol-
cano,” explains Dan Gerson, Ironmanlive.com production manager. “It’s hot, it’s windy, and
there’s no infrastructure. If you can deploy WiMAX here, you can probably deploy it pretty
much anywhere.” Airspan Networks provided the WiMAX infrastructure, using its high-
performance base stations and subscriber stations to create a high-performance network
backbone capable of transmitting data rates required for top-quality video. The team set up
its base station atop the hotel that served as the events’ starting point and finish line, one of
the lowest geographical points of the course.
The team was operating in a non-line-of-sight environment, and highly porous volca-
nic rock absorbed the wireless signals more than other types of rock would. Airspan set
up relays on the ridge sides of the volcano, the side of the road, and the sides of build-
ings to keep signal fidelity. Cameras in locations without power used generators. This was
a wireless deployment in every sense of the word, demonstrating the viability of WiMAX
technology. Footage of the athletes could be incorporated into the live webcast, along with
baL76892_ch07_250-295.indd 251baL76892_ch07_250-295.indd 251 26/11/12 1:53 PM26/11/12 1:53 PM

Rev. Confirming Pages
252 Chapter 7 Networks: Mobile Business
pre-event interviews, commentary, and film from cameras on motorcycles and helicopters.
WTC produced the broadcast in a live production studio on-site that streamed the video data
to the global servers that run the Ironmanlive.com website.
WTC also set up eight wireless hotspots, including five along the event course and at the
finish line. An Internet café was stocked with laptops, providing convenient wireless access
to event information and the Ironmanlive.com site. Two giant-screen displays showed the live
program coverage from Ironmanlive.com . Staff used additional mobile devices to manage the
race and monitor each athlete’s progress. For example, if athletes needed medical care, the
health care team used a PDA to scan their RFID tags and instantly access medical records and
local contact information.
Ironman’s transformative use of wireless computing makes sound business sense.
It draws larger audiences and higher advertising revenues for WTC and NBC, which uses
WTC’s Ironman Triathlon programming in its own broadcast of the event a month or two later.
Larger audiences and better experiences for athletes and their families ultimately lead to
greater participation in the Ironman Triathlon and its more than two dozen qualifying races,
and to increased popularity for the sport. 1
baL76892_ch07_250-295.indd 252baL76892_ch07_250-295.indd 252 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
253Technical Foundations of MIS Module 2
section 7.1 Connectivity: The Business Value of a Networked World
L E A R N I N G O U T C O M E S
7.1 Explain the five different networking elements creating a connected world.
7.2 Identify the benefits and challenges of a connected world.
OVERVIEW OF A CONNECTED WORLD
Computer networks are continuously operating all over the globe supporting our
24/7/365 always on and always connected lifestyles. You are probably using several dif-
ferent networks right now without even realizing it. You might be using a school’s net-
work to communicate with teachers, a phone network to communicate with friends, and
a cable network to watch TV or listen to the radio. Networks enable telecommunications
or the exchange of information (voice, text, data, audio, video). The telecommunication
industry has morphed from a government-regulated monopoly to a deregulated market
where many suppliers ferociously compete. Competing telecommunication companies
offer local and global telephony services, satellite service, mobile radio, cable television,
cellular phone services, and Internet access (all of which are detailed in this chapter).
Businesses everywhere are increasingly using networks to communicate and collaborate
with customers, partners, suppliers, and employees. As a manager, you will face many
different communication alternatives, and the focus of this chapter is to provide you with
an initial understanding of the different networking elements you will someday need to
select (see Figure 7.1 ).
LO 7.1: Explain the five different
networking elements creating a con-
nected world.
FIGURE 7.1
Networking Elements Creating a
Connected World
NETWORK CATEGORIES
LAN, WAN, MAN
NETWORK PROVIDERS
ISP, NSP, RSP
NETWORK ACCESS
TECHNOLOGIES
DSL, Cable Modem,
Broadband
NETWORK PROTOCOLS
TCP/IP, DNS, DHCP
NETWORK CONVERGENCE
VolP, UC, IPTV
baL76892_ch07_250-295.indd 253baL76892_ch07_250-295.indd 253 30/11/12 7:51 AM30/11/12 7:51 AM

Rev. Confirming Pages
254 Chapter 7 Networks: Mobile Business
Network Categories
The general idea of a network is to allow multiple devices to communicate at the highest
achievable speeds and, very importantly, to reduce the cost of connecting. How a par-
ticular network achieves these goals depends in part on how it is physically constructed
and connected. Networks are categorized based on geographic span: local area net-
works, wide area networks, and metropolitan area networks. Today’s business networks
include a combination of all three.
A local area network (LAN) connects a group of computers in close proximity, such
as in an office building, school, or home. LANs allow sharing of files, printers, games, and
other resources. A LAN also often connects to other LANs, and to wide area networks.
A wide area network (WAN) spans a large geographic area such as a state, province, or
country. Perhaps the best example is the Internet. WANs are essential for carrying out the
day-to-day activities of many companies and government organizations, allowing them
to transmit and receive information among their employees, customers, suppliers, busi-
ness partners, and other organizations across cities, regions, and countries and around
the world. In networking, attenuation represents the loss of a network signal strength
measured in decibels (dB) and occurs because the transmissions gradually dissipate in
strength over longer distances or because of radio interference or physical obstructions
such as walls. A repeater receives and repeats a signal to extend its attenuation or range.
WANs often connect multiple smaller networks, such as local area networks or met-
ropolitan area networks. A metropolitan area network (MAN) is a large computer net-
work usually spanning a city. Most colleges, universities, and large companies that span
a campus use an infrastructure supported by a MAN. Figure 7.2 shows the relationships
and a few differences between a LAN, WAN, and MAN. A cloud image often represents
the Internet or some large network environment.
While LANs, WANs, and MANs all provide users with an accessible and reliable net-
work infrastructure, they differ in many dimensions; two of the most important are cost
and performance. It is easy to establish a network between two computers in the same
room or building, but much more difficult if they are in different states or even countries.
This means someone looking to build or support a WAN either pays more or gets less per-
formance, or both. Ethernet is the most common connection type for wired networking
and is available in speeds from 10 mbps all the way up to 10,000 Mbps (10 Gbit). The most
common wire used for Ethernet networking is Cat5 (Category 5) and the connectors used
are RJ45, slightly larger than the RJ11 connectors used by phones, but the same shape.
Network Providers
The largest and most important network, the Internet has evolved into a global informa-
tion superhighway. Think of it as a network made up of millions of smaller networks,
each with the ability to operate independently of, or in harmony with, the others. Keep-
ing the Internet operational is no simple task. No one owns or runs it, but it does have
an organized network topology. The Internet is a hierarchical structure linking different
levels of service providers, whose millions of devices, LANs, WANs, and MANs supply all
the interconnections. At the top of the hierarchy are national service providers (NSPs),
private companies that own and maintain the worldwide backbone that supports the
Internet. These include Sprint, Verizon, MCI (previously UUNet/WorldCom), AT&T,
NTT, Level3, Century Link, and Cable & Wireless Worldwide. Network access points
(NAPs) are traffic exchange points in the routing hierarchy of the Internet that connects
NSPs. They typically have regional or national coverage and connect to only a few NSPs.
Thus, to reach a large portion of the global Internet, a NAP needs to route traffic through
one of the NSPs to which it is connected. 2
One step down in the hierarchy is the regional service provider. Regional service pro-
viders (RSPs) offer Internet service by connecting to NSPs, but they also can connect
directly to each other. Another level down is an Internet service provider (ISP), which
specializes in providing management, support, and maintenance to a network. ISPs vary
services provided and available bandwidth rates. ISPs link to RSPs and, if they are geo-
graphically close, to other ISPs. Some also connect directly to NSPs, thereby sidestepping
the hierarchy. Individuals and companies use local ISPs to connect to the Internet, and
baL76892_ch07_250-295.indd 254baL76892_ch07_250-295.indd 254 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
255Technical Foundations of MIS Module 2
large companies tend to connect directly using an RSP. Major ISPs in the United States
include AOL, AT&T, Comcast, Earthlink, and NetZero. The further up the hierarchy, the
faster the connections and the greater the bandwidth. The backbone shown in Figure 7.3
is greatly simplified, but it illustrates the concept that basic global interconnections are
provided by the NSPs, RSPs and ISPs. 3
Network Access Technologies
Performance is the ultimate goal of any computer, computer system, or network. Perfor-
mance is directly related to the network’s speed of data transfer and capacity to handle
transmission. A network that does not offer adequate performance simply will not get
the job done for those who rely on it. Luckily, networks can be upgraded and expanded
if performance is inadequate.
We measure network performance in terms of bandwidth, the maximum amount of
data that can pass from one point to another in a unit of time. Bandwidth is similar to
water traveling through a hose. If the hose is large, water can flow through it quickly.
Data differs from a hose in that it must travel great distances, especially on a WAN, and
not all areas of the network have the same bandwidth. A network essentially has many
different hoses of unequal capacity connected together, which will restrict the flow of
data when one is smaller than the others. Therefore, the speed of transmission of a net-
work is determined by the speed of its smallest bandwidth.
FIGURE 7.2
Network Categories: LAN,
WAN, and MAN
Network Network
Local Area Network (LAN)
Example : City Library
Metropolitan Area Network (MAN)
Example: University Campus
West Campus East Campus
MAN
Network
Wide Area Network (WAN)
Example: Internet
Sydney, Australia London, England
Network
Denver, Colorado Boston, Massachusetts
WAN
Network
Network
Network
baL76892_ch07_250-295.indd 255baL76892_ch07_250-295.indd 255 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
256 Chapter 7 Networks: Mobile Business
A bit (short for binary digit) is the smallest element of data and has a value of either 0 or
1. Bandwidth is measured in terms of bit rate (or data rate ), the number of bits transferred
or received per unit of time. Figure 7.4 represents bandwidth speeds in terms of bit rates.
Bandwidth is typically given in bits per second (abbreviated as bps) and bytes per second
(abbreviated as Bps). It is important to note that these two terms are not interchangeable.
A modem is a device that enables a computer to transmit and receive data. A connec-
tion with a traditional telephone line and a modem, which most residential users had in
the 1990s, is called dial-up access. Today, many users in underdeveloped countries and in
rural areas in developed countries still use dial-up. It has two drawbacks. First, it is slow,
providing a maximum rate of 56 Kbps. (At 56 Kbps, it takes eight minutes to download a
three-minute song and more than a day to download a two-hour movie.) Second, dial-up
modem access ties up the telephone line so the user cannot receive and make phone calls
while online. The good news is this is not as big an issue as it once was as many people
have cell phones and no longer require using the telephone line for making phone calls. 4
Once the most common connection method worldwide, dial-up is quickly being
replaced by broadband. Broadband is a high-speed Internet connection that is always
connected. High-speed in this case refers to any bandwidth greater than 2 Mbps. Not
long ago, broadband speeds were available only at a premium price to support large
companies’ high-traffic networks. Today, inexpensive access is available for home use
and small companies.
The two most prevalent types of broadband access are digital subscriber lines and
high-speed Internet cable connections. Digital subscriber line (DSL) provides high-
speed digital data transmission over standard telephone lines using broadband modem
technology, allowing both Internet and telephone services to work over the same
FIGURE 7.3
Internet Topology
NSP
International
Connection
International
Connection
ISP
RSP
NAP
NSP
NAP
NSP
RSP
ISP
ISP
RSP RSP
ISPISP
ISP
ISP
ISP ISP
ISP
ISP
ISP
ISP
ISP
Bandwidth Abbreviation Bits per Second (bps) Example
Kilobits Kbps 1 Kbps  5  1,000 bps Traditional modem  5  56 Kbps
Megabits Mbps 1 Mbps  5  1,000 Kbps Traditional Ethernet  5  10 MbpsFast
Ethernet  5  100 Mbps
Gigabits Gbps 1 Gbps  5  1,000 Mbps Gigabit Ethernet  5  1,000 Mbps
FIGURE 7.4
Bandwidth Speeds
baL76892_ch07_250-295.indd 256baL76892_ch07_250-295.indd 256 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
257Technical Foundations of MIS Module 2
phone lines. Consumers typically obtain DSL Internet access from the same company
that provides their wired local telephone access, such as AT&T or Century Link. Thus,
a customer’s telephone provider is also its ISP, and the telephone line carries both data
and telephone signals using a DSL modem. DSL Internet services are used primarily in
homes and small businesses.
DSL has two major advantages over dial-up. First, it can transmit and receive data much
faster—in the 1 to 2 Mbps range for downloading and 128 Kbps to 1 Mbps for upload-
ing. (Most high-speed connections are designed to download faster than they upload,
because most users download more—including viewing web pages—than they upload.)
The second major advantage is that because they have an “always on” connection to their
ISP, users can simultaneously talk on the phone and access the Internet. DSL’s disadvan-
tages are that it works over a limited physical distance and remains unavailable in many
areas where the local telephone infrastructure does not support DSL technology. 5
While dial-up and DSL use local telephone infrastructure, high-speed Internet cable
connections provide Internet access using a cable television company’s infrastructure
and a special cable modem. A cable modem (or broadband modem) is a type of digital
modem used with high-speed cable Internet service. Cable modems connect a home
computer (or network of home computers) to residential cable TV service, while DSL
modems connect to residential public telephone service. The ISP typically supplies
the cable and DSL modems. Cisco Systems is one of the largest companies producing
computer networking products and services, including the Linksys brand of network-
ing components. Typically, broadband or high-speed Internet service has an average
transfer rate 10 times faster than conventional dial-up service. Telecommuting (virtual
workforce) allows users to work from remote locations, such as home or a hotel, using
high-speed Internet to access business applications and data.
Unlike DSL, high-speed Internet cable is a shared service, which means everyone in
a certain radius, such as a neighborhood, shares the available bandwidth. Therefore, if
several users are simultaneously downloading a video file, the actual transfer rate for
each will be significantly lower than if only one person were doing so. On average, the
available bandwidth using cable can range from 512 Kbps to 50 Mbps for downloading
and 786 Kbps for uploading. 6
Another alternative to DSL or high-speed Internet cable is dedicated communica-
tions lines leased from AT&T or another provider. The most common are T1 lines, a type
of data connection able to transmit a digital signal at 1.544 Mpbs. Although this speed
might not seem impressive, and T1 lines are more expensive than DSL or cable, they
offer far greater reliability because each is composed of 24 channels, creating 24 separate
connections through one line. If a company has three separate plants that experience a
high volume of data traffic, it might make sense to lease lines for reliability of service. 7
A company must match its needs with Internet access methods. If it always needs high
bandwidth access to communicate with customers, partners, or suppliers, a T1 line may
be the most cost-effective method. Figure 7.5 provides an overview of the main meth-
ods for Internet access. The bandwidths in the figure represent average speeds; actual
speeds vary depending upon the service provider and other factors such as the type of
cabling and speed of the computer. 8
Broadband over power line (BPL) technology makes possible high-speed Internet
access over ordinary residential electrical lines and offers an alternative to DSL or high-speed
Access Technology Description Bandwidth Comments
Dial-up On-demand access using a modem and
regular telephone line.
Up to 56 Kbps Cheap but slow compared with other
technologies.
DSL Always-on connection. Special modem
needed.
Download: 1 Mbps to 2 Mbps Upload:
128 Kbps to 1 Mbps
Makes use of the existing local tele-
phone infrastructure.
Cable Always-on connection. Special cable
modem and cable line required.
Download: 512 Kbps to 50 Mbps
Upload: 786 Kbps
It is a shared resource with other users
in the area.
T1 Leased lines for high bandwidth. 1.544 Mbps More expensive than dial-up, DSL, or
cable.
FIGURE 7.5
Types of Internet Access
baL76892_ch07_250-295.indd 257baL76892_ch07_250-295.indd 257 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
258 Chapter 7 Networks: Mobile Business
cable modems. BPL works by transmitting data over electrical lines using signaling frequen-
cies higher than the electrical (or voice in the case of DSL) signals. BPL allows computer
data to be sent back and forth across the network with no disruption to power output in the
home. Many homeowners are surprised to learn that their electrical system can serve as a
home network running speeds between 1 and 3 Mbps with full Internet access. Unfortu-
nately, limitations such as interference and availability have affected BPL’s popularity.
Network Protocols
A packet is a single unit of binary data routed through a network. Packets directly impact
network performance and reliability by subdividing an electronic message into smaller
more manageable packets. Standard packet formats include a packet header, packet body
containing the original message, and packet footer. The packet header lists the destination
(for example, in IP packets the destination is the IP address) along with the length of the
message data. The packet footer represents the end of the packet or transmission end. The
packet header and packet footer contain error-checking information to ensure the entire
message is sent and received. The receiving device reassembles the individual packets into
the original by stripping off the headers and footers and then piecing together the packets
in the correct sequence. Traceroute is a utility application that monitors the network path
of packet data sent to a remote computer. Traceroute programs send a series of test mes-
sages over the network (using the name or IP address) until the last message finally reaches
its destination. When finished, traceroute displays the path from the initial computer to the
destination computer. A proxy is software that prevents direct communication between a
sending and receiving computer and is used to monitor packets for security reasons.
A protocol is a standard that specifies the format of data as well as the rules to be
followed during transmission. Computers using the same protocol can communicate
easily, providing accessibility, scalability, and connectability between networks. File
transfer protocol (FTP) is a simple network protocol that allows the transfer of files
between two computers on the Internet. To transfer files with FTP, the FTP client pro-
gram initiates a connection to a remote computer running FTP “server” software. After
completing the connection the client can choose to send and/or receive files electroni-
cally. Network access technologies use a standard Internet protocol called transmission
control protocol/Internet protocol (TCP/IP), which provides the technical foundation
for the public Internet as well as for large numbers of private networks. One of the pri-
mary reasons for developing TCP/IP was to allow diverse or differing networks to con-
nect and communicate with each other, essentially allowing LANs, WANs, and MANs to
grow with each new connection. An IP address is a unique number that identifies where
computers are located on the network. IP addresses appear in the form of xxx.xxx.xxx.
xxx, though each grouping can be as short as a single digit.
TCP (the TCP part of TCP/IP) verifies the correct delivery of data because data can
become corrupt when traveling over a network. TCP ensures the size of the data packet is
the same throughout its transmission and can even retransmit data until delivered cor-
rectly. IP (the IP part of TCP/IP) verifies the data are sent to the correct IP address, num-
bers represented by four strings of numbers ranging from 0 to 255 separated by periods.
For example, the IP address of www.apple.com is 97.17.237.15.
Here is another way to understand TCP/IP. Consider a letter that needs to go from the
University of Denver to Apple’s headquarters in Cupertino, California. TCP makes sure the
envelope is delivered and does not get lost along the way. IP acts as the sending and receiv-
ing labels, telling the letter carrier where to deliver the envelope and who it was from. The
Postal Service mainly uses street addresses and zip codes to get letters to their destinations,
which is really what IP does with its addressing method. Figure 7.6 illustrates this example.
However, unlike the Postal Service, which allows multiple people to share the same physi-
cal address, each device using an IP address to connect to the Internet must have a unique
address or else it could not detect which individual device a request should be sent to.
One of the most valuable characteristics of TCP/IP is how scalable its protocols have
proven to be as the Internet has grown from a small network with just a few machines to
a huge internetwork with millions of devices. While some changes have been required
periodically to support this growth, the core of TCP/IP is the same as it was more than
25 years ago. 9 Dynamic host configuration protocol (DHCP) allows dynamic IP address
baL76892_ch07_250-295.indd 258baL76892_ch07_250-295.indd 258 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
259Technical Foundations of MIS Module 2
allocation so users do not have to have a preconfigured IP address to use the network.
DHCP allows a computer to access and locate information about a computer on the
server, enabling users to locate and renew their IP address. ISPs usually use DHCP to allow
customers to join the Internet with minimum effort. DHCP assigns unique IP addresses
to devices, then releases and renews these addresses as devices leave and return to the
network.
If there is one flaw in TCP/IP, it is the complexity of IP addresses. This is why we use a
domain name system (DNS) to convert IP addresses into domains, or identifying labels
BUSINESS DRIVEN DISCUSSION
Net Neutrality—the great debate has been raging for some time now, with the
battle lines clearly drawn. Net neutrality is about ensuring that everyone has
equal access to the Internet. It is the founding principle that all consumers
should be able to use the Internet and be free to access its resources without
any form of discrimination. However, regulation on net neutrality is currently
in flux. The Federal Communications Commission (FCC) recently required
Comcast to stop slowing down or blocking subscriber access to many peer-to-
peer file-sharing sites such as BitTorrent. Users of many peer-to-peer networks
often transfer large files, which can be legitimate in nature (such as download-
ing open source applications) or pirated (such as illegal copies of the latest
Hollywood video). Shortly after the FCC ruling, a federal appeals court over-
turned that decision, unanimously ruling that the agency did not have the legal
authority to tell Comcast what to do.
On one side of the debate are the ISPs, such as Comcast, that are building
the Internet infrastructure and want to charge customers relative to their use,
namely, the amount of bandwidth they consume. The ISPs argue more and
more users accessing bandwidth-intense resources provided by the likes of
YouTube and Hulu place huge demands on their networks. They want Internet
access to move from a flat-rate pricing structure to a metered service. The con-
tent providers, such as Google, support the counterargument that if ISPs move
toward metered schemes, this may limit the usage of many resources on the
Internet such as iTunes and Netflix. A metered service may also stifle the inno-
vative opportunities the “open” Internet provides.
Do you agree that the government should control the Internet? Should web-
site owners be legally forced to receive or transmit information from competi-
tors or other websites they find objectionable? Provide examples of when net
neutrality might be good for a business and when net neutrality might be bad
for a business. Overall, is net neutrality good or bad for business? 10
Net Neutrality:
The Great
Debate
APPLY YOUR KNOWLEDGE
FIGURE 7.6
Example of TCP/IP
FROM: 130.253.2.7
TO: 97.17.237.15
INTERNET
FROM: 130.253.2.7
TO: 97.17.237.15
IP
University of Denver
Send Receive
Apple
——————
——————
——————
——————
TCP: Message sent TCP: Message received
Apple
University of Denver
baL76892_ch07_250-295.indd 259baL76892_ch07_250-295.indd 259 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
260 Chapter 7 Networks: Mobile Business
that use a variety of recognizable naming conventions. Therefore, instead of trying
to remember 97.17.237.15, users can simply specify a domain name to access a com-
puter or website, such as www.apple.com . Figure  7.7 lists the most common Internet
domains. 11
The list of domain names is expected to expand in the coming years to include enti-
ties such as .pro (for accountants, lawyers, and physicians), .aero (for the air-transport
industry), and .museum (for museums). The creation of an .xxx domain was recently
approved for pornographic content. Countries also have domain names such as .au
(Australia), .fr (France), and .sp (Spain).
Websites with heavy traffic often have several computers working together to share
the load of requests. This offers load balancing and fault tolerance, so when requests
are made to a popular site such as www.facebook.com , they will not overload a single
computer and the site does not go down if one computer fails. A single computer can
also have several host names—for instance, if a company is hosting several websites on a
single server, much as an ISP works with hosting.
Domain names are essentially rented, with renewable rights, from a domain name
registrar, such as godaddy.com . Some registrars only register domain names, while oth-
ers provide hosting services for a fee. ICANN (Internet Corporation for Assigning Names
and Numbers) is a nonprofit governance and standards organization that certifies all
domain name registrars throughout the world. With the certification, each registrar is
authorized to register domain names, such as .com , .edu , or .org . 12
Network Convergence
In part due to the explosive use of the Internet and connectivity of TCP/IP, there is a con-
vergence of network devices, applications, and services. Consumers, companies, educa-
tional institutions, and government agencies extensively engage in texting, web surfing,
videoconference applications, online gaming, and ebusiness. Network convergence is
the efficient coexistence of telephone, video, and data communication within a single
network, offering convenience and flexibility not possible with separate infrastructures.
Almost any type of information can be converted into digital form and exchanged over
a network. Network convergence then allows the weaving together of voice, data, and
video. The benefits of network convergence allow for multiple services, multiple devices,
but one network, one vendor, and one bill, as suggested by Figure 7.8 .
One of the challenges associated with network convergence is using the many dif-
ferent tools efficiently and productively. Knowing which communication channel—PC,
text message, videoconference—to use with each business participant can be a chal-
lenge. Unified communications (UC) is the integration of communication channels
into a single service. UC integrates communication channels allowing participants to
communicate using the method that is most convenient for them. UC merges instant
messaging, videoconferencing, email, voice mail, and VoIP. This can decrease the FIGURE 7.7
Internet Domains
.biz
.com
.edu
.gov
.info
.mil
.net
.org
Reserved for businesses
Reserved for commercial organizations and businesses
Reserved for accredited postsecondary institutions
Reserved for U.S. government agencies
Open to any person or entity, but intended for information providers
Reserved for U.S. military
Open to any person or entity
Reserved for nonprofit organizations
Domain Name Use
baL76892_ch07_250-295.indd 260baL76892_ch07_250-295.indd 260 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
261Technical Foundations of MIS Module 2
communication costs for a business while enhancing the way individuals communicate
and collaborate.
One area experiencing huge growth in network convergence is the use of the Internet
for voice transmission. Voice over IP (VoIP) uses IP technology to transmit telephone
calls. For the first time in more than 100 years, VoIP is providing an opportunity to bring
about significant change in the way people communicate using the telephone. VoIP ser-
vice providers—specialists as well as traditional telephone and cable companies and
some ISPs—allow users to call anyone with a telephone number, whether local, long dis-
tance, cellular, or international.
Two ways to use VoIP for telephone calls are through a web interface that allows
users to make calls from their computer and through a phone attached to a VoIP
adapter that links directly to the Internet through a broadband modem. Figure 7.9 illus-
trates these two ways along with the use of VoIP-enabled phones, bypassing the need
for an adapter.
VoIP services include fixed-price unlimited local and long-distance calling plans
(at least within the United States and Canada), plus a range of interesting features,
such as:
■ The ability to have more than one phone number, including numbers with different
area codes.
■ Integrating email and voice mail so users can listen to their voice mail using their
computer.
■ The ability to receive personal or business calls via computer, no matter where the
user is physically located. 13
FIGURE 7.8
The Benefits of Network
Convergence
Network Convergence
Multiple Services One Provider
• Internet Access • One bill
• One point of contact
• One customer support center
• VolP
• IPTV
FIGURE 7.9
VoIP Connectivity
VoIP
Phone
Adaptor
INTERNET
Broadband
Modem
Broadband
Modem
Standard
Phone
VoIP Phone
PC
PC
baL76892_ch07_250-295.indd 261baL76892_ch07_250-295.indd 261 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
262 Chapter 7 Networks: Mobile Business
The biggest benefit of VoIP is its low cost. Because it relies on the Internet connection,
however, service can be affected if the bandwidth is not appropriate or Internet access is
not available.
Skype is a perfect example of IP applied to telephone use. Unlike typical VoIP sys-
tems that use a client and server infrastructure, Skype uses a peer-to-peer network.
Peer-to-peer (P2P) is a computer network that relies on the computing power and
bandwidth of the participants in the network rather than a centralized server. Skype’s
user directory is distributed among the users in its network, allowing scalability with-
out a complex and expensive centralized infrastructure. Peer-to-peer networks became
an overnight sensation years ago through a service called Napster that distributed digi-
tal music illegally . Skype has found a way to use this resource to provide value to its
users. 14
As the popularity of VoIP grows, governments are becoming more interested in reg-
ulating it as they do traditional telephone services. In the United States, the Federal
Communications Commission requires compliance among VoIP service providers com-
parable to those for traditional telephone providers such as support for local number
portability, services for the disabled, and law enforcement for surveillance, along with
regulatory and other fees.
An exciting and new convergence is occurring in the area of television with Inter-
net Protocol TV (IPTV), which distributes digital video content using IP across the
Internet and private IP networks. Comcast provides an example of a private IP net-
work that also acts as a cable TV provider. Traditional television sends all program
signals simultaneously to the television, allowing the user to select the program by
selecting a channel. With IPTV, the user selects a channel and the service provider
sends only that single program to the television. Like cable TV, IPTV uses a box that
acts like a modem to send and receive the content (see Figure 7.10 ). A few IPTV fea-
tures include:
■ Support of multiple devices: PCs and televisions can access IPTV services.
■ Interactivity with users: Interactive applications and programs are supported by
IPTV’s two-way communication path.
■ Low bandwidth: IPTV conserves bandwidth because the provider sends only a
single channel.
■ Personalization: Users can choose not only what they want to watch, but also when
they want to watch it. 15 FIGURE 7.10
IPTV Components
INTERNET
HDTV
IPTV Set-Top Box
IPTV Service Provider
World TV Broadcasts
baL76892_ch07_250-295.indd 262baL76892_ch07_250-295.indd 262 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
263Technical Foundations of MIS Module 2
BENEFITS OF A CONNECTED WORLD
Before networks, transferring data between computers was time-consuming and labor-
intensive. People had to physically copy data from machine to machine using a disk.
Networks offer many advantages for a business including:
■ Sharing resources
■ Providing opportunities
■ Reducing travel
Sharing Resources
Resource sharing makes all applications, equipment (such as a high-volume printer),
and data available to anyone on the network, without regard to the physical location
of the resource or the user. Sharing physical resources also supports a sustainable MIS
infrastructure, allowing companies to be agile, efficient, and responsible at the same
time. Cloud computing (see Chapter 5) and virtualization consolidate information as
well as systems that enhance the use of shared resources. By using shared resources,
cloud computing and virtualization allow for collective computing power, storage, and
software, in an on-demand basis.
Perhaps even more important than sharing physical resources is sharing data. Most
companies, regardless of size, depend not just on their customer records, inventories,
accounts receivable, financial statements, and tax information, but also on their ability
to share these, especially with operations in remote locations. Networking with a LAN,
WAN, or MAN allows employees to share data quickly and easily and to use applications
such as databases and collaboration tools that rely on sharing. By sharing data, networks
have made business processes more efficient. For example, as soon as an order is placed,
anyone in the company who needs to view it—whether in marketing, purchasing, manu-
facturing, shipping, or billing—can do so.
Intranets and extranets let firms share their corporate information securely. An
intranet is a restricted network that relies on Internet technologies to provide an
LO 7.2: Identify the benefits and
challenges of a connected world.
BUSINESS DRIVEN DEBATE
As more Internet-related services move beyond delivering content just to the
computer, Google wants to bring that content into the living room. In a joint
venture, Google is teaming with Sony and Intel to introduce IPTV services either
through new Internet accessible TVs or a new set-top box allowing consumers
to search for content, browse the web, view photo albums, and more. Google
would provide the needed software, along with advertisement opportunities;
Sony would manufacture the new TVs; and Intel would supply the processors
that make it all happen. While consumers can already watch TV shows on their
computers as well as on a TV, porting Internet content to a HDTV screen seems
like the next logical step, which is the magic of IPTV.
However, this is a very crowded playing field with many firms competing
for the living room space. Google is competing with the likes of VUDU, TiVo,
Yahoo! Connected TV, Netflix, Roku, Rovi, DivX, Apple TV, Xbox 360, Boxee,
CinemaNow, Popbox, and many others, with no clear winner, at least not at the
moment.
Brainstorm the advantages and disadvantages of associated with IPTV. Do
you think Google TV will be successful? Why or why not? 16
Google TV
APPLY YOUR KNOWLEDGE
baL76892_ch07_250-295.indd 263baL76892_ch07_250-295.indd 263 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
264 Chapter 7 Networks: Mobile Business
Internet-like environment within the company for information sharing, communications,
collaboration, web publishing, and the support of business processes, as suggested
in Figure  7.11 . This network is protected by security measures such as passwords,
encryption, and firewalls, and thus only authorized users can access it. Intranets provide
a central location for all kinds of company-related information such as benefits, sched-
ules, strategic directions, and employee directories. 17
An extranet is an extension of an intranet that is available only to authorized out-
siders, such as customers, partners, and suppliers. Having a common area where these
parties can share information with employees about, for instance, order and invoice
processing can be a major competitive advantage in product development, cost control,
marketing, distribution, and supplier relations. Companies can establish direct private
network links among themselves or create private, secure Internet access, in effect a
“private tunnel” within the Internet, called a virtual private network (VPN). Figure 7.12
illustrates using a VPN to connect to a corporate server.
Extranets enable customers, suppliers, consultants, subcontractors, business pros-
pects, and others to access selected intranet websites and other company network
resources that allow the sharing of information. Consultants and contractors can
facilitate the design of new products or services. Suppliers can ensure that the raw
materials necessary for the company to function are in stock and can be delivered in a
FIGURE 7.11
Intranet Uses
Intranets
Business Operations
and Management
Example: Developing custom
applications like order
processing, inventory control,
and sales management.
Employees within the
company can access and run
such applications using web
browsers from anywhere on
the network whenever
needed.
Communications and
Collaboration
Example: Using a browser to
send and receive email, voice
mail, documents, and web
pages to communicate with
others within the organization,
as well as externally through
the Internet.
Web Publishing
Example:
Newsletters, technical
documentations, and product
catalogs can be published in a
variety of ways, including web
pages, email, and as part of
organizational business
applications.
FIGURE 7.12
Using a VPN
INTERNET
Company Server
Supplier using a VPN
Customer using a VPN
A VPN acts like a “tunnel”
baL76892_ch07_250-295.indd 264baL76892_ch07_250-295.indd 264 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
265Technical Foundations of MIS Module 2
timely fashion. Customers can access ordering and payment functions and check order
status. The extranet links the company to the outside world in a way that improves its
operations.
Extranets provide business value in several ways. First, by relying on web browsers
they make customer and supplier access to company resources easy and fast. Second,
they enable a company to customize interactive web-enabled services for the intended
audience, to build and strengthen strategic relationships with customers and suppliers.
Finally, extranets can allow and improve collaboration with customers and other busi-
ness partners.
Providing Opportunities
Ebusiness can enhance the opportunities of manufacturers that buy parts from a variety
of suppliers. Using networks, they can order parts electronically when needed, reducing
the need for large inventories and enhancing efficiency.
Networks allow companies to sell to consumers via the Internet too, offering books,
clothing, airline tickets, and more. Most midsize and larger companies also have a
marketing presence on the web and provide extensive online information about their
products and services. The Internet has lowered entry barriers for start-ups and small
companies, which can now immediately tap potential customers online without hiring
an expensive marketing company.
Reducing Travel
Networks provide the means for videoconferencing. Using this technology, employees
at distant locations can meet without spending time and money on travel, while seeing
and hearing each other as if they were in the same location. Nor do all employees have to
come to the office; some can telecommute using Internet connections for both data and
voice and, thanks to intranets and extranets, maintain the same access to information as
they do at work. Telecommuting has been greatly enhanced by VPNs, videoconferenc-
ing, and VoIP.
BUSINESS DRIVEN STARTUP
ViVu is transforming the way people interact using videoconferencing. The
company has several useful services, including VuRoom, which uses a Skype
plug-in that allows remote users to collaborate with presentation and desk-
top sharing functionalities. The company uses a Software-as-a-Service (SaaS)
model, allowing consumers to purchase a license to host an event of varying
size. Teleconference members can participate from any platform (PC or Mac)
using a web browser without having to download any proprietary viewer or
needing any special hardware. Attendees only need a regular broadband
Internet connection to receive the service. VuRoom can be used for both small
videoconferences and big corporate web-based training sessions. The compa-
ny’s flagship service, VuCast, enables meeting organizers to create, publish, and
manage large-scale, high-quality video events that can accommodate more
than 10,000 participants.
What are the advantages of using videoconferencing? What are the disad-
vantages of using videoconferencing? Would you participate in a teleconfer-
ence with 10,000 users? Why or why not? What types of events does ViVu best
serve? 18
ViVu Video-
conferencing
APPLY YOUR KNOWLEDGE
baL76892_ch07_250-295.indd 265baL76892_ch07_250-295.indd 265 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
266 Chapter 7 Networks: Mobile Business
CHALLENGES OF A CONNECTED WORLD
Networks have created a diverse, yet globally connected world. By eliminating time and
distance, networks make it possible to communicate in ways not previously imaginable.
Even though networks provide many business advantages, they also create increased
challenges in (1) security and (2) social, ethical, and political issues.
Security
Networks are a tempting target for mischief and fraud. A company first has to ensure
proper identification of users and authorization of network access. Outside suppliers
might be allowed to access production plans via the company’s extranet, for example,
but they must not be able to see other information such as financial records. The com-
pany should also preserve the integrity of its data; only qualified users should be allowed
to change and update data, and only well-specified data. Security problems intensify on
the Internet where companies need to guard against fraud, invalid purchases, and mis-
appropriation of credit card information.
Two methods for encrypting network traffic on the web are secure sockets layer
and secure hypertext transfer protocol. Secure sockets layer (SSL) is a standard secu-
rity technology for establishing an encrypted link between a web server and a browser,
ensuring that all data passed between them remain private. Millions of websites use SSL
to protect their online transactions with their customers.
To create an SSL connection, a web server requires an SSL Certificate, an electronic
document that confirms the identity of a website or server and verifies that a public key
belongs to a trustworthy individual or company. (Public key is described in Chapter 4.)
Typically, an SSL Certificate will contain a domain name, the company name and
address, and the expiration date of the certificate and other details. Verisign is the leading
Internet Certification Authority that issues SSL Certificates. When a browser connects
to a secure site, it retrieves the site’s SSL Certificate, makes sure it has not expired, and
confirms a Certification Authority has issued it. If the certificate fails on any one of these
validation measures, the browser will display a warning to the end user that the site is
not secure. If a website is using SSL, a lock icon appears in the lower right-hand corner
of the user’s web browser.
Secure hypertext transfer protocol (SHTTP or HTTPS) is a combination of HTTP
and SSL to provide encryption and secure identification of an Internet server. HTTPS
protects against interception of communications, transferring credit card informa-
tion safely and securely with special encryption techniques. When a user enters a web
address using https:// the browser will encrypt the message. However, the server receiv-
ing the message must be configured to receive HTTPS messages.
In summary, each company needs to create a network security policy that specifies
aspects of data integrity availability and confidentiality or privacy as well as account-
ability and authorization. With a variety of security methods, such as SSL and SHTTP, a
company can protect its most important asset, its data.
Social, Ethical, and Political Issues
Only a small fraction of the world’s population has access to the Internet, and some
people who have had access in the past have lost it due to changes in their circum-
stances such as unemployment or poverty. Providing network access to those who want
or need it helps to level the playing field and removes the digital divide, a worldwide
gap giving advantage to those with access to technology. Organizations trying to bridge
the divide include the Boston Digital Bridge Foundation, which concentrates on local
schoolchildren and their parents, helping to make them knowledgeable about comput-
ers, programs, and the Internet. Other organizations provide inexpensive laptops and
Internet access in low-income areas in developing countries. 19
Another social issue with networking occurs with newsgroups or blogs where like-
minded people can exchange messages. If the topics are technical in nature or sports
related such as cycling, few issues arise. Problems can begin when social media feature
topics people can be sensitive about, such as politics, religion, or sex, or when someone
baL76892_ch07_250-295.indd 266baL76892_ch07_250-295.indd 266 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
267Technical Foundations of MIS Module 2
posts an offensive message to someone else. Different countries have different and even
conflicting laws about Internet use, but because the Internet knows no physical bound-
aries, communication is hard to regulate, even if anyone could. Some people believe net-
work operators should be responsible for the content they carry, just as newspapers and
magazines are. Operators, however, feel that like the post office or phone companies,
they cannot be expected to police what users say. If they censored messages, how would
they avoid violating users’ rights to free speech?
Many employers read and censor employee emails and limit employee access to dis-
tracting entertainment such as YouTube and social networks such as Facebook. Spend-
ing company time “playing” is not a good use of resources, they believe.
Social issues can even affect the government and its use of networks to snoop on citi-
zens. The FBI has installed a system at many ISPs to scan all incoming and outgoing
email for nuggets of interest. The system was originally called Carnivore but bad public-
ity caused it to be renamed DCS1000. While the name is much more generic, its goal
is the same—locate information on illegal activities by spying on millions of people.
A common conception associated with networking technologies is “Big Brother is watch-
ing!” People are wary of how much information is available on the Internet and how eas-
ily it can fall into the wrong hands. 20
section 7.2 Mobility: The Business Value of a Wireless World
L E A R N I N G O U T C O M E S
7.3 Describe the different wireless network categories.
7.4 Explain the different wireless network business applications.
7.5 Identify the benefits and challenges of business mobility.
WIRELESS NETWORK CATEGORIES
As far back as 1896, Italian inventor Guglielmo Marconi demonstrated a wireless
telegraph, and in 1927, the first radiotelephone system began operating between the
United States and Great Britain. Automobile-based mobile telephones were offered in
1947. In 1964, the first communications satellite, Telstar, was launched, and soon after,
satellite-relayed telephone service and television broadcasts became available. Wireless
networks have exploded since then, and newer technologies are now maturing that allow
companies and home users alike to take advantage of both wired and wireless networks. 21
Before delving into a discussion of wireless networks, we should distinguish between
mobile and wireless, terms that are often used synonymously but actually have dif-
ferent meanings. Mobile means the technology can travel with the user, for instance,
users can download software, email messages, and web pages onto a laptop or other
mobile device for portable reading or reference. Information collected while on the
road can be synchronized with a PC or company server. Wireless, on the other hand,
refers to any type of operation accomplished without the use of a hard-wired connec-
tion. There are many environments in which the network devices are wireless but not
mobile, such as wireless home or office networks with stationary PCs and printers. Some
forms of mobility do not require a wireless connection; for instance, a worker can use a
wired laptop at home, shut down the laptop, drive to work, and attach the laptop to the
company’s wired network.
In many networked environments today, users are both wireless and mobile; for
example, a mobile user commuting to work on a train can maintain a VoIP call and
multiple TCP/IP connections at the same time. Figure 7.13 categorizes wireless networks
by type.
LO 7.3: Describe the different
wireless network categories .
baL76892_ch07_250-295.indd 267baL76892_ch07_250-295.indd 267 30/11/12 7:52 AM30/11/12 7:52 AM

Rev. Confirming Pages
268 Chapter 7 Networks: Mobile Business
Personal Area Networks
A personal area network (PAN) provides communication for devices owned by a sin-
gle user that work over a short distance. PANs are used to transfer files, including email,
calendar appointments, digital photos, and music. A PAN can provide communication
between a wireless headset and a cell phone or between a computer and a wireless
mouse or keyboard. Personal area networks generally cover a range of less than 10 meters
(about 30 feet). Bluetooth is a wireless PAN technology that transmits signals over short
distances among cell phones, computers, and other devices. The name is borrowed from
Harald Bluetooth, a king in Denmark more than 1,000 years ago. Bluetooth eliminates
the need for wires, docking stations, or cradles, as well as all the special attachments that
typically accompany personal computing devices. Bluetooth operates at speeds up to
1 Mbps within a range of 33 feet or less. Devices that are Bluetooth-enabled communicate
directly with each other in pairs, like a handshake. Up to eight can be paired simultane-
ously. And Bluetooth is not just for technology devices. An array of Bluetooth-equipped
appliances, such as a television set, a stove, and a thermostat, can be controlled from a
cell phone—all from a remote location. 22
Wireless LANs
A wireless LAN (WLAN ) is a local area network that uses radio signals to transmit and
receive data over distances of a few hundred feet. An access point (AP) is the computer
or network device that serves as an interface between devices and the network. Each
computer initially connects to the access point and then to other computers on the
network. A wireless access point (WAP) enables devices to connect to a wireless net-
work to communicate with each other. WAPs with multiple-in/multiple-out (MIMO)
technology have multiple transmitters and receivers, allowing them to send and receive
greater amounts of data than traditional networking devices. Wireless fidelity (Wi-Fi) is
a means by which portable devices can connect wirelessly to a local area network, using
access points that send and receive data via radio waves. Wi-Fi has a maximum range of
about 1,000 feet in open areas such as a city park and 250 to 400 feet in closed areas such
as an office building. Wi-Fi infrastructure includes the inner workings of a Wi-Fi ser-
vice or utility, including the signal transmitters, towers, or poles, along with additional
equipment required to send out a Wi-Fi signal. Most WLANs use a Wi-Fi infrastructure in
which a wireless device, often a laptop, communicates through an access point or base
station by means of, for instance, wireless fidelity.
Areas around access points where users can connect to the Internet are often called
hotspots. Hotspots are designated locations where Wi-Fi access points are publically
available. Hotspots are found in places such as restaurants, airports, and hotels—places
where business professionals tend to gather. Hotspots are extremely valuable for those
business professionals who travel extensively and need access to business applications.
By positioning hotspots at strategic locations throughout a building, campus, or city,
network administrators can keep Wi-Fi users continuously connected to a network or
the Internet, no matter where they roam. 23
In a Wi-Fi network, the user’s laptop or other Wi-Fi-enabled device has a wireless
adapter that translates data into a radio signal and transmits it to the wireless access
point. The wireless access point, which consists of a transmitter with an antenna that is
FIGURE 7.13
Wireless Communication
Network Categories
Wireless Wide Area
Networks (WWANs)
Wireless
Metropolitan Area
Networks (WMANs)
Wireless Local Area
Networks (WLANs)
Wireless Networks
Personal Area
Networks (PANs)
baL76892_ch07_250-295.indd 268baL76892_ch07_250-295.indd 268 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
269Technical Foundations of MIS Module 2
often built into the hardware, receives the signal and decodes it. The access point then
sends the information to the Internet over a wired broadband connection, as illustrated
in Figure  7.14 . When receiving data, the wireless access point takes the information
from the Internet, translates it into a radio signal, and sends it to the computer’s wireless
adapter. If too many people try to use the Wi-Fi network at one time, they can experience
interference or dropped connections. Most laptop computers come with built-in wire-
less transmitters and software to enable computers to automatically discover the exis-
tence of a Wi-Fi network.
Wi-Fi operates at considerably higher frequencies than cell phones use, which allows
greater bandwidth. The bandwidths associated with Wi-Fi are separated according to sev-
eral wireless networking standards, known as 802.11, for carrying out wireless local area
network communication. The Institute of Electrical and Electronics Engineers (IEEE)
researches and institutes electrical standards for communication and other technologies.
IEEE 802.11n (or Wireless-N) is the newest standard for wireless networking. Compared
with earlier standards such as 802.11b, Wireless-N offers faster speeds, more flexibility, and
greater range. The organization denotes different versions of the standard—for example,
Wireless-G and Wireless-N—by a lowercase letter at the end of this number. Figure 7.15
outlines the bandwidths associated with a few of these standards. 24
An increasing number of digital devices, including most laptops, netbooks, tablets
such as the iPad, and even printers are incorporating Wi-Fi technology into their design.
Cell phones are incorporating Wi-Fi so they can automatically switch from the cell net-
work to a faster Wi-Fi network where available for data communications. BlackBerrys
and iPhones can connect to an access point for data communications such as email and
web browsing, but not for voice unless they use the services of Skype or another VoIP.
Wireless MANs
A wireless MAN (WMAN) is a metropolitan area network that uses radio signals to
transmit and receive data. WMAN technologies have not been highly successful to date,
mainly because they are not widely available, at least in the United States. One with the
FIGURE 7.14
Wi-Fi Networks
Access
Point
INTERNET
Wireless Network
Broadband
Modem
Wi-Fi Standard Bandwidth
802.11a 54 Mbps
802.11b 11 Mbps
802.11g 54 Mbps
802.11n 140 Mbps
FIGURE 7.15
Wi-Fi Standards and
Bandwidths
baL76892_ch07_250-295.indd 269baL76892_ch07_250-295.indd 269 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
270 Chapter 7 Networks: Mobile Business
potential for success is Worldwide Interoperability for Microwave Access (WiMAX), a
communications technology aimed at providing high-speed wireless data over metro-
politan area networks. In many respects, WiMAX operates like Wi-Fi, only over greater
distances and with higher bandwidths. A WiMAX tower serves as an access point and
can connect to the Internet or another tower. A single tower can provide up to 3,000
square miles of coverage, so only a few are needed to cover an entire city. WiMAX can
support data communications at a rate of 70 Mbps. In New York City, for example, one or
two WiMAX access points around the city might meet the heavy demand more cheaply
than hundreds of Wi-Fi access points. WiMAX can also cover remote or rural areas where
cabling is limited or nonexistent, and where it is too expensive or physically difficult to
install wires for the relatively few users. 26
WiMAX can provide both line-of-sight and non-line-of-sight service. A non-line-of-
sight service uses a small antenna on a mobile device that connects to a WiMAX tower
less than six miles away where transmissions are disrupted by physical obstructions.
This form of service is similar to Wi-Fi but has much broader coverage area and higher
bandwidths. A line-of-sight option offers a fixed antenna that points at the WiMAX tower
from a rooftop or pole. This option is much faster than non-line-of-sight service, and the
distance between the WiMAX tower and antenna can be as great as 30 miles. Figure 7.16
illustrates the WiMAX infrastructure. 27
Some cellular companies are evaluating WiMAX as a means of increasing bandwidth
for a variety of data-intensive applications such as those used by smartphones. Sprint
Nextel and Clearwire are building a nationwide WiMAX network in the United States.
WiMAX-capable gaming devices, laptops, cameras, and even cell phones are being
manufactured by companies including Intel, Motorola, Nokia, and Samsung. 28
Wireless WAN—Cellular Communication System
A wireless WAN (WWAN) is a wide area network that uses radio signals to transmit and
receive data. WWAN technologies can be divided into two categories: cellular communi-
cation systems and satellite communication systems.
Although mobile communications have been around for generations, including the
walkie-talkies of the 1940s and mobile radiophones of the 1950s, it was not until 1983 that
cellular telephony became available commercially. A cell phone is a device for voice and
BUSINESS DRIVEN MIS
Who would have thought that a car could be hacked? But that is exactly what
happened in Austin, Texas. About a hundred cars were broken into, not by the
usual method of either picking the lock or smashing a window but instead via
a Wi-Fi connection. A local dealership, where all the cars were purchased, had
installed a Wi-Fi-enabled black box under the dashboard that could disable
the car and set off the horn if the owner did not make payments. However, in
this case, the owners were not in arrears, but the victims of a recently laid-off
employee at the dealership who was seeking revenge by going into the web-
based system to disable the cars one by one. After someone at the dealership
figured out the cars had been hacked, the password that allowed authorization
to the black boxes was quickly changed.
Is the black box a good idea? Do you consider this an ethical business prac-
tice? If you had bought a car with a black box, would you have it removed?
How many customers do you think will consider buying another car from that
dealership? 25
Cars Hacked
APPLY YOUR KNOWLEDGE
baL76892_ch07_250-295.indd 270baL76892_ch07_250-295.indd 270 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
271Technical Foundations of MIS Module 2
FIGURE 7.16
WiMAX Infrastructure
Line-of-Sight
Transmission
ISP WiMAX
Tower
Non-Line-of-Sight
Transmission
INTERNET
data, communicating wirelessly through a collection of stationary ground-based sites
called base stations, each of which is linked to its nearest neighbor stations. Base station
coverage areas are about 10 square miles and are called cells, as Figure 7.17 illustrates. 29
The first cell phone was demonstrated in 1973 by Motorola (it weighed almost
2 pounds), but it took 10 years for the technology to become commercially available.
The Motorola DynaTAC, marketed in 1983, weighed one pound and cost about $4,000.
Cellular technology has come a long way since then. 30
Cellular systems were originally designed to provide voice services to mobile cus-
tomers and thus were designed to interconnect cells to the public telephone network.
Increasingly, they provide data services and Internet connectivity. There are more cell
phones than landline phones in many countries today, and it is no longer uncommon
for cell phones to be the only phones people have.
Cell phones have morphed into smartphones that offer more advanced computing
ability and connectivity than basic cell phones. They allow for web browsing, emailing,
listening to music, watching video, computing, keeping track of contacts, sending text
messages, and taking and sending photos. The Apple iPhone and RIM BlackBerry are
examples of smartphones.
Cell phones and smartphones, or mobile phones as they are collectively called,
need a provider to offer services, much as computer users need an ISP to connect to
the Internet. The most popular mobile phone providers in the United States are AT&T,
Sprint, T-Mobile, and Verizon. They offer different cell phones, features, coverage areas,
and services. One of the newer services is third-generation, or 3G, services that bring
wireless broadband to mobile phones. Figure  7.18 lists the cell phone generations.
The 3G networks let users surf web pages, enjoy streaming music, watch video-on-
demand programming, download and play 3-D games, and participate in social media
baL76892_ch07_250-295.indd 271baL76892_ch07_250-295.indd 271 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
272 Chapter 7 Networks: Mobile Business
and teleconferencing. Streaming is a method of sending audio and video files over
the Internet in such a way that the user can view the file while it is being transferred.
Streaming is not limited to cellular usage; all wireless and even wired networks can take
advantage of this method. The most obvious advantage is speed, a direct benefit for
mobile and wireless devices since they are still not as fast as their wired counterparts. 31
Wireless WAN—Satellite Communication System
The other wireless WAN technology is a satellite communication system. A satellite is a
space station that orbits the Earth receiving and transmitting signals from Earth-based
stations over a wide area. When satellite systems first came into consideration in the
FIGURE 7.18
Cell Phone Generations
The original analog cell phone network.
Digital cell phone service.
Broadband Internet services over cellular
network.
Very high-speed access, anywhere, anytime,
to anything digital—audio, video, text.
Speed 5 9.6 Kbps
Speed 5 10 Kbps2144 Kbps
Speed 5 144 Kbps211 Mbps
Speed 5 22300 Mbps
1G
2G – 2.5G
3G – 3.5G
4G
FIGURE 7.17
Cell Phone Communication
System Overview
Each cell is typically sized
at about 10 square miles
Each cell has a base
station that
consists of an
antennae or tower
to relay signals
Cell
baL76892_ch07_250-295.indd 272baL76892_ch07_250-295.indd 272 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
273Technical Foundations of MIS Module 2
1990s, the goal was to provide wireless voice and data coverage for the entire planet,
without the need for mobile phones to roam between many different provider networks.
But by the time satellite networks were ready for commercial use, they had already been
overtaken by cellular systems.
The devices used for satellite communication range from handheld units to mobile
base stations to fixed satellite dish receivers. The peak data transmission speeds range
from 2.4 Kbps to 2 Mbps. For the everyday mobile professional, satellite communi-
cation may not provide a compelling benefit, but for people requiring voice and data
access from remote locations or guaranteed coverage in nonremote locations, satellite
technology is a viable solution.
Conventional communication satellites move in stationary orbits approximately
22,000 miles above Earth. A newer satellite medium, the low-orbit satellite, travels much
closer to Earth and is able to pick up signals from weak transmitters. Low-orbit satel-
lites also consume less power and cost less to launch than conventional satellites. With
satellite networks, businesspeople almost anywhere in the world have access to full
communication capabilities, including voice, videoconferencing, and Internet access.
Figure 7.19 briefly illustrates the satellite communication system. 33
BUSINESS DRIVEN GLOBALIZATION
The mobile phone is helping to fight poverty and increase world economic
development. It can dramatically improve living standards for people living on
a few dollars a day by helping them find work, providing information about crop
prices, or calling for medical help. By using mobile phones to find the best local
marketplace prices for sardines, a group of poor fishermen in Kerala, India,
increased their profits by an average of 8 percent. The fishermen were able to
call ahead to a port to identify a buyer. In Muruguru, Kenya, Grace Wachira runs
a small knitting company. Before using a mobile phone, she would walk hours
to the nearest town to buy her supplies or meet customers. Using her mobile
phone, she can now call for her supplies to be delivered and to communicate
with her customers.
What type of mobile phones are these people buying? What other uses can a
mobile phone provide for people living in poor, rural regions? How can people
in rural areas turn owning a mobile phone into a small-scale business? 32
Fighting Poverty
with Mobile
Phones
APPLY YOUR KNOWLEDGE
FIGURE 7.19
Satellite Communication System
22,000 miles above
Earth
Fixed Locations Portable Communications Vehicles
baL76892_ch07_250-295.indd 273baL76892_ch07_250-295.indd 273 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
274 Chapter 7 Networks: Mobile Business
BUSINESS APPLICATIONS OF WIRELESS NETWORKS
Companies of all types and sizes have relied on wireless technology for years. Shipping
and trucking companies developed some of the earliest wireless applications to help track
vehicles and valuable cargo, optimize the logistics of their global operations, perfect their
delivery capabilities, and reduce theft and damage. Government agencies such as the
National Aeronautics and Space Administration and the Department of Defense have
relied on satellite technologies for decades to track the movement of troops, weaponry, and
military assets; to receive and broadcast data; and to communicate over great distances.
Wireless technologies have also aided the creation of new applications. Some build
upon and improve existing capabilities. UPS, for example, is combining several types of
wireless network technologies from Bluetooth to WWANs and deploying scanners and
wearable data-collection terminals to automate and standardize package management
and tracking across all its delivery centers. Figure 7.20 displays the three business appli-
cations taking advantage of wireless technologies.
Radio-Frequency Identification (RFID)
Radio-frequency identification (RFID) uses electronic tags and labels to identify
objects wirelessly over short distances. It holds the promise of replacing existing iden-
tification technologies such as the bar code. RFID wirelessly exchanges information
between a tagged object and a reader/writer. An RFID tag is an electronic identification
device that is made up of a chip and antenna. An RFID reader (RFID interrogator) is
a transmitter/receiver that reads the contents of RFID tags in the area. A RFID system is
comprised of one or more RFID tags, one or more RFID readers, two or more antennas
(one on the tag and one on each reader), RFID application software, and a computer
system or server, as Figure 7.21 illustrates. Tags, often smaller than a grain of rice, can be
applied to books or clothing items as part of an adhesive bar-code label, or included in
LO 7.4: Explain the different wireless
network business applications.
FIGURE 7.20
Wireless Business Applications
Global
Positioning
Systems (GPS)
Geographic
Information
Systems (GIS)
Radio-Frequency
Identification
(RFID)
FIGURE 7.21
Elements of an RFID system
Tagged
Products
RFID
Reader/
Writer
Computer
System or
Server
Network
baL76892_ch07_250-295.indd 274baL76892_ch07_250-295.indd 274 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
275Technical Foundations of MIS Module 2
items such as ID cards or packing labels. Readers can be stand-alone devices, such as for
self-checkout in a grocery store, integrated with a mobile device for portable use, or built
in as in printers. The reader sends a wireless request that is received by all tags in the area
that have been programmed to listen to wireless signals. Tags receive the signal via their
antennas and respond by transmitting their stored data. The tag can hold many types of
data, including a product number, installation instructions, and history of activity (such
as the date the item was shipped). The reader receives a signal from the tag using its
antenna, interprets the information sent, and transfers the data to the associated com-
puter system or server.
Passive RFID tags do not have a power source, whereas active RFID tags have their
own transmitter and a power source (typically a battery). The power source runs the
microchip’s circuitry and broadcasts a signal to the reader (similar to the way a cell phone
transmits signals to a base station). Passive RFID tags draw power from the RFID reader,
which sends out electromagnetic waves that induce a current in the tag’s antenna. Semi-
passive RFID tags use a battery to run the microchip’s circuitry, but communicate by
drawing power from the RFID reader. Asset tracking occurs when a company places
active or semi-passive RFID tags on expensive products or assets to gather data on the
items’ location with little or no manual intervention. Asset tracking allows a company to
focus on its supply chain, reduce theft, identify the last known user of assets, and auto-
mate maintenance routines. Active and semi-passive tags are useful for tracking high-
value goods that need to be scanned over long ranges, such as railway cars on a track.
The cost of active and semi-passive RFID tags is significant; hence, low-cost items typi-
cally use passive RFID tags.
The RFID accelerometer is a device that measures the acceleration (the rate of change
of velocity) of an item and is used to track truck speeds or taxi cab speeds. Chipless RFID
tags use plastic or conductive polymers instead of silicon-based microchips, allowing
them to be washed or exposed to water without damaging the chip. Examples of the
innovative uses of RFID include:
■ RFID chips injected under the skin of animals using a syringe can help ranchers
meet regulations, track wild animals for ecological studies, and return lost pets to
their owners.
■ Retail stores use RFID to track and monitor inventory. Hospitals and pharmaceutical
companies meet government regulations and standards with RFID. Even local
libraries are using RFID to control theft and speed up the checkout process.
■ Car manufacturers install RFID antitheft systems. Toll roads use RFID to collect
payments from passing cars.
■ Hospitals track patients’, doctors’, and nurses’ locations to facilitate emergency
situations and ensure safety. RFID also tracks equipment location to ensure quick
response times during an emergency.
■ American Express and MasterCard use RFID for automatic payments.
■ Walmart and other large retailers use RFID to maintain inventory, stop shoplifting,
and speed customer checkout processes. 34
Global Positioning System (GPS)
A global positioning system (GPS) is a satellite-based navigation system providing
extremely accurate position, time, and speed information. The U.S. Department of
Defense developed the technology in the early 1970s and later made it available to the
public. GPS uses 24 global satellites that orbit Earth, sending signals to a receiver that
can communicate with three or four satellites at a time. A GPS receiver can be a separate
unit connected to a mobile device using cable or wireless technology such as Bluetooth,
or it can be included in devices such as mobile phones or vehicle navigation systems.
Automatic vehicle location (AVL) uses GPS tracking to track vehicles. AVL systems use
a GPS receiver in the vehicle that links to a control center. Garmin is one of the more
popular manufacturers of GPS tracking systems, offering vehicle tracking, phone and
laptop integration, and hiker navigation for water and air.
baL76892_ch07_250-295.indd 275baL76892_ch07_250-295.indd 275 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
276 Chapter 7 Networks: Mobile Business
The satellites broadcast signals constantly, while the receiver measures the time it
takes for the signals to reach it. This measurement, which uses the speed of the sig-
nal to determine the distance, is taken from three distinct satellites to provide precise
location information. The time measurements depend on high-powered clocks on
each satellite and must be precise, because an error of one-thousandth of a second can
result in a location variation of more than 200 miles. GPS can produce very accurate
results, typically within 5 to 50 feet of the actual location (military versions have higher
accuracy) . GPS also provides latitude, longitude, and elevation information. 35 Latitude
represents a north/south measurement of position. Longitude represents an east/west
measurement of position. Geocache is a GPS technology adventure game that posts
the longitude and latitude location for an item on the Internet for users to find. GPS
users find the geocache and typically sign a guest book or take an item and leave an
item for the next adventure players to find. Caches are often placed in locations that are
interesting or challenging for people to discover. A geocoin, a round coin-sized object,
is uniquely numbered and hidden in geocache. Geocoins can also be shaped to match
a theme such as the state of Colorado or a birthday party hat. Geocoins are often deco-
rative or commemorative, making them collectible and highly valuable for technology
adventures.
GPS applications are in every kind of company vehicle these days—from police cars to
bulldozers, from dump trucks to mayoral limousines. Emergency response systems use
GPS to track each of their vehicles and so dispatch those closest to the scene of an acci-
dent. If a vehicle is missing, its GPS locator can help locate it. Estimated time of arrival
(ETA) is the time of day of an expected arrival at a certain destination and is typically
used for navigation applications. Estimated time enroute (ETE) is the time remaining
before reaching a destination using the present speed and is typically used for navigation
applications.
Geographic Information Systems (GIS)
GPS provides the foundation for geographic information systems. A geographic
information system (GIS) stores, views, and analyzes geographic data creating,
multidimensional charts or maps. For example, GIs are monitoring global warming
by measuring the speed of glaciers melting in Canada, Greenland, and Antarctica.
Cartography is the science and art of making an illustrated map or chart. GIS allows
users to interpret, analyze, and visualize data in different ways that reveal patterns
and trends in the form of reports, charts, and maps. Edge matching (warping, rubber
sheeting) occurs when paper maps are laid edge to edge and items that run across maps
but do not match are reconfigured to match. Edge matching is a critical component of
creating a GIS database because map misalignments occur frequently for many reasons,
including survey error and cartographic errors. GIS map automation links business
assets to a centralized system where they can be tracked and monitored over time.
Spatial data (geospatial data or geographic information) identifies the geographic
location of features and boundaries on Earth, such as natural or constructed features,
oceans, and more. Spatial data can be mapped and is stored as coordinates and topology.
A GIS accesses, manipulates, and analyzes spatial data. Geocoding in spatial databases
is a coding process that assigns a digital map feature to an attribute that serves as a
unique ID (tract number, node number) or classification (soil type, zoning category).
GIS professionals are certified in geocoding practices to ensure industry standards are
met when classifying spatial data.
Companies that deal in transportation combine GISs with database and GPS technol-
ogy. Airlines and shipping companies can plot routes with up-to-the-second informa-
tion about the location of all their transport vehicles. Hospitals can locate their medical
staff with GIS and sensors that pick up transmissions from ID badges. Automobiles have
GPSs linked to GIS maps that display the car’s location and driving directions on a dash-
board screen. GM offers the OnStar system, which sends a continuous stream of infor-
mation to the OnStar center about the car’s exact location.
Some mobile phone providers combine GPS and GIS capabilities so they can locate
users within a geographical area about the size of a tennis court to assist emergency
baL76892_ch07_250-295.indd 276baL76892_ch07_250-295.indd 276 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
277Technical Foundations of MIS Module 2
services such as 911. Farmers can use GIS to map and analyze fields, telling them where
to apply the proper amounts of seed, fertilizer, and herbicides.
A GIS can find the closest gas station or bank or determine the best way to get to a par-
ticular location. But it is also good at finding patterns, such as finding the most feasible
location to hold a conference according to where the majority of a company’s customers
live and work. GIS can present this information in a visually effective way.
Some common GIS uses include:
■ Finding what is nearby. Given a specific location, the GIS finds sources within a
defined radius. These might be entertainment venues, medical facilities, restaurants,
or gas stations. Users can also use GIS to locate vendors that sell a specific item they
want and get the results as a map of the surrounding area or an address.
■ Routing information. Once users have an idea where they want to go, GIS can
provide directions to get there using either a map or step-by-step instructions.
Routing information can be especially helpful when combined with search services.
■ Sending information alerts. Users may want to be notified when information
relevant to them becomes available near their location. A commuter might want to
know that a section of the highway has traffic congestion, or a shopper might want to
be notified when a favorite store is having a sale on a certain item.
■ Mapping densities. GIS can map population and event densities based on a
standard area unit, such as square miles, making it easy to see distributions and
concentrations. Police can map crime incidents to determine where additional
patrolling is required, and stores can map customer orders to identify ideal delivery
routes.
■ Mapping quantities. Users can map quantities to find out where the most or least
of a feature may be. For example, someone interested in opening a specialty coffee
shop can determine how many others are already in the area, and city planners can
determine where to build more parks. 36
A GIS can provide information and insight to both mobile users and people at fixed
locations. Google Earth combines satellite imagery, geographic data, and Google’s
search capabilities to create a virtual globe that users can download to a computer or
mobile device. Not only does this provide useful business benefits, but it also allows for
many educational opportunities. Instead of just talking about the Grand Canyon, an
instructor can use Google Earth to view that region.
GPS and GIS both utilize location-based services (LBS), applications that use loca-
tion information to provide a service. LBS is designed to give mobile users instant access
to personalized local content and range from 911 applications to buddy finders (“Let
me know when my friend is within 1,000 feet”) to games (treasure hunts) to location-
based advertising (“Visit the Starbucks on the corner and get $1.00 off a latte”). Many
LBS applications complement GPS and GIS, such as:
■ Emergency services
■ Field service management
■ Find-it services
■ Mapping
■ Navigation
■ Tracking assets
■ Traffic information
■ Vehicle location
■ Weather information
■ Wireless advertising 37
Just as Facebook and Twitter helped fuel the Web 2.0 revolution, applications such
as Foursquare, Gowalla, and Loopt are bringing attention to LBS. Each application is a
mobile phone service that helps social media users find their friends’ location. Facebook
and Twitter have added location-based services to complement their applications.
baL76892_ch07_250-295.indd 277baL76892_ch07_250-295.indd 277 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
278 Chapter 7 Networks: Mobile Business
BENEFITS OF BUSINESS MOBILITY
Mobile and wireless development has come a long way. Consider Dr Pepper/Seven-
Up Inc., of Plano, Texas, which monitors the operation of its antenna-equipped
vending machines via wireless technology. The company collects inventory, sales, and
“machine-health” data and polls the machines daily; managers and salespeople can
access the stored information via its intranet. Dr Pepper/Seven-Up Inc. understands the
business value of the data, both for daily operations and for data-mining purposes. The
information collected is helpful for deciding where to place new vending machines, such
as in front of a Target store or a high-traffic supermarket. Figure 7.22 lists many of the
advantages of wireless networks. 38
Enhances Mobility
Enhancing mobility is one of the greatest advantages provided by wireless networks. It
allows activities that were formerly tied to physical locations to be performed almost
anywhere. Companies can bring employees, information, and computing resources to
a job location instead of forcing the job to be located at the company’s site. Consider
how mobile phones alone have changed the way most companies operate. Executives
and sales professionals can conduct business wherever they are, eliminating downtime
during travel and speeding their response to customers. Mobility means more face-to-
face contact with customers and business partners. Even people with internal jobs, such
as custodians, floor salespeople, production supervisors, and emergency room doctors,
keep moving throughout the day. Instead of returning periodically to their offices or
other fixed location for information access or doing without, they can rely on wireless
technology to bring that access to them, where and when they need it.
LO 7.5: Identify the benefits and
challenges of business mobility.
FIGURE 7.22
Advantages of Wireless
Networks
Enhances
Mobility
Provides
Alternative to
Wiring
Provides
Mobile
Business
Opportunities
Provides
Immediate
Data Access
Increases
Location and
Monitoring
Capability
Improves
Workflow
Advantages of
Using Wireless
Networks
baL76892_ch07_250-295.indd 278baL76892_ch07_250-295.indd 278 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
279Technical Foundations of MIS Module 2
Mobility gives a company the power to place the right resources in the right place at
the right time. It allows for the redistribution of operations to gain efficiencies or react to
changing conditions. For example, a mobile checkout stand allows additional checkouts
to be set up during holiday rushes and store sales events.
Provides Immediate Data Access
Mobility allows activities to be performed where needed; however, providing immediate
data access offers the value. Wireless networks can support a wide variety of immediate
data access options, from collecting usage data using Wi-Fi or RFID technologies when
driving past a water meter to having full Internet access on a laptop or other mobile device.
A mobile worker can submit a status report or credit card scan or be notified about a new
assignment. When up-to-the-second data are required, such as for stock transactions
and credit card authorizations, wireless technology is the only mobile option. Employees
can “pull” data by linking to the source and requesting the desired information, or “push”
it by sending an alert to a user’s device or automatically refreshing data.
Whether through voice, email, or text messaging, the quality and frequency of infor-
mation exchange increases with wireless access. An emergency room doctor can be noti-
fied of lab test results immediately upon completion. A service worker and appropriate
information can be rerouted to a higher-priority assignment. A salesperson can submit
updates right after a sales call.
Instant access to customer profiles, account history, and current order status sig-
nificantly improves the quality of interactions with customers, suppliers, and business
partners. A salesperson can check inventories, generate quotes, take orders, and resolve
problems all at the customer’s site. Field workers can identify problems with online
manuals and diagnostic tools. Decision making is always improved by access to accurate
and current information.
Increases Location and Monitoring Capability
The ability to locate and monitor assets reduces losses from theft and damage, gathers
information from remote or difficult-to-reach locations, enhances safety, and makes
possible a new wave of personalized services. RFID tags permit the tracking of assets
from cattle to container shipments. LBS devices send storm data from buoys far at sea.
LBS in cars provide driving directions and enable rescuers to locate the vehicle in case
of an accident.
Through a combination of LBS devices and applications, companies can trace
shipments from point of origin to final destination. More advanced applications can
monitor their condition (e.g., ensuring that refrigeration equipment is operating) and
notify users of tampering or attempted theft. Wireless applications can collect billing
data, monitor operating conditions, gather scientific measurements, and relay requests
for service from locations that are too dangerous, difficult, or costly to access by other
means. Oil companies use wireless technology to monitor offshore oil rig equipment. We
have seen that other wireless applications can tailor information to the needs of the user,
such as listing resources near a given location or offering local traffic reports and driving
directions.
Improves Work Flow
Many work flows and job responsibilities are constrained by paper or wired processes.
Wireless technology offers the opportunity to redesign and simplify those processes to
be faster, cheaper, and more responsive, and to eliminate redundant activities, integrate
activities and services, and redistribute tasks. For example, when mobile workers capture
data on paper forms and clerical workers enter it into computer systems, the process is
costly, time-consuming, and error-prone. Using a wireless device for the original data
capture eliminates the need to reenter the data, increases data accuracy, and provides
immediate access to results. Rental car staff members now use wireless devices to
quickly and easily check and enter mileage, fuel levels, and damage for returning cars.
Drivers receive faster service and staff can focus on providing value-added services.
baL76892_ch07_250-295.indd 279baL76892_ch07_250-295.indd 279 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
280 Chapter 7 Networks: Mobile Business
Provides Mobile Business Opportunities
Unlike ebusiness, which normally requires desktop or laptop computers to connect
to the Internet, mbusiness offers the advantages of making a purchase via the Inter-
net an anywhere, anytime experience. It provides consumers with the ability to obtain
information and order goods and services quickly and easily using a mobile device.
The growing popularity of iPhones along with iPhone apps have helped fuel the growth
of mbusiness.
A few mbusiness offerings include:
■ Digital purchases. The most suitable purchase for a mobile user is for products that
can be downloaded and used immediately such as music and (electronic) books.
■ Location-based services. The ability for merchants to capture and react to a user’s
current location and requirements can be a powerful tool for selling products and
services.
■ Mobile banking and payments. Using a mobile device can provide access to per-
sonal bank accounts to view account history and execute transactions. In addition,
a mobile device can be used for making payments, essentially acting as digital cash.
For example, someone can order and pay for a Starbucks latte using a mobile device
and app.
■ Mobile shopping. Most forms of shopping may be impractical using mobile devices;
however, some forms of purchases lend themselves to mbusiness. For example, hav-
ing the ability to purchase movie tickets for a show playing the same evening can be
quite valuable. Mobile devices can also be used for comparison shopping. Before
making a purchase, a shopper in a retail store may want to first see what the current
price of a product is from another vendor to ensure he is getting a good price. 39
Provides Alternative to Wiring
Wireless networks provide an attractive alternative where physical constraints or conve-
nience make wired solutions costly or impractical. Many office buildings already have a
maze of wires in their ceilings, floors, and walls representing many generations of net-
work technologies. Tracing existing wires or adding new lines becomes increasingly
cumbersome and difficult. In other cases, building design or aesthetic considerations
make wired networks unattractive. In manufacturing facilities or production lines with
moving equipment or complex setups, wireless connections are simpler to implement
and safer for workers. The higher per unit cost of a wireless solution may be more than
offset by its advantages over physical lines.
WLANs allow MIS employees to relocate equipment at will, attractive for trade shows,
temporary offices, and seasonal selling areas. In conference rooms, WLANs enable
attendees to bring laptops or other Wi-Fi-enabled devices for Internet access.
Finally, wireless technology allows voice and data connections with ships at sea, pas-
sengers in airliners, and travelers in remote locations. In developing countries, it is a
means to bypass the effort and expense of installing and maintaining telephone lines
across inhospitable terrain.
CHALLENGES OF BUSINESS MOBILITY
The mobile employee has become the norm rather than the exception, driven by lifestyle
choices, productivity gains, and technology improvements. Although the advantages
of using wireless networks are significant, added challenges exist such as protecting
against theft, protecting wireless connections, preventing viruses on mobile devices, and
addressing privacy concerns with RFID and LBS (see Figure 7.23 ).
Protecting Against Theft
Any mobile device is vulnerable to loss no matter how big or small it is. The company may
face significant exposure from stolen IDs, passwords, encryption keys, and confidential
information if the device falls into the wrong hands, especially if the theft is not discov-
ered or reported immediately and the company does not have time to revoke access.
baL76892_ch07_250-295.indd 280baL76892_ch07_250-295.indd 280 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
281Technical Foundations of MIS Module 2
Power-on passwords—passwords implemented at the hardware level that must
be entered before gaining access to the computer—are the first line of defense against
unauthorized use. Companies should activate these passwords before giving their
workforce the devices. They should also prohibit storing passwords on devices and
periodically monitor compliance with the policy. Companies need to consider encrypting
and password-protecting data stored on the device, including any flash drives or other
mobile storage devices. In addition, some device management tools can send messages
to a device to lock it or destroy its contents, which can be an attractive security feature.
FIGURE 7.23
Challenges of Using Wireless
Networks
CHALLENGES OF WIRELESS NETWORKS
Protecting
Against Theft
Example: Mobile
devices are more
vulnerable to theft
due to their small
size.
Protecting
Wireless
Connections
Example: Wi-Fi
connections need to
enforce data
encryption.
Preventing
Viruses on
Mobile Devices
Example: Mobile
devices are not
immune to viruses
and need to be
protected.
Addressing
Privacy Concerns
with RFID and
LBS
Example: Both RFID
and LBS have the
ability to share where
someone is, which
can cause privacy
concerns.
BUSINESS DRIVEN INNOVATION
Many National Football League teams use wireless devices for communicating
between players and coaches, and now new devices can be used to communi-
cate just how hard players are being hit in the head. The Chicago Bears, Dallas
Cowboys, and Jacksonville Jaguars tucked Wi-Fi sensors into helmets that send
data to the sidelines every time a player is hit or tackled. The sensors have been
programmed to detect hard hits, triggering a warning to pull the player for fur-
ther assessment.
The sensors look like marshmallows that are stuffed between the helmet’s
padding and the outside shell. Each sensor can measure the acceleration of a
player’s head during a hit, determine the direction, duration, location on the
head, magnitude, and time of impact. Once a player’s helmet is hit, the sensors
immediately transmit the data to staff on the sideline using mobile devices to
receive the information. If the data sent determine that the hit exceeds a cer-
tain threshold, a mobile device lights up, alerting staff that a player’s condition
needs to be assessed. The NFL’s new injury-related rules state that if a player
exhibits any signs of a concussion, he must leave the field for the day.
How else can wireless devices be used to prevent injury? Should all football
teams, including professional, academic, and recreational, use wireless sensors
in helmets? Why or why not? Should other sports such as hockey and cycling
start using this technology? Why or why not? 40
Crash Pad
APPLY YOUR KNOWLEDGE
baL76892_ch07_250-295.indd 281baL76892_ch07_250-295.indd 281 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
282 Chapter 7 Networks: Mobile Business
Protecting Wireless Connections
Network intrusions can occur if access codes or passwords are stored on a device that is
lost or stolen. However, any time a wireless network connects to a wired one, the wireless
network can serve as a conduit for a hacker to gain entry into an otherwise secure wired
network. This risk is especially high if the wireless network is not sufficiently secured in
its own right.
Before the emergence of the Internet, hackers generally had to be physically present
within the corporate complex to gain access to a wired network. The thousands, if not
millions, of access points enabled by the Internet now allow hackers to work from a dis-
tance. This threat has spawned a variety of different security techniques from firewalls to
VPNs to SSL and HTTPS.
Several techniques can secure wireless networks from unauthorized access whether
used separately or in combination. One method is authenticating Wi-Fi access points.
Because Wi-Fi communications are broadcast, anyone within listening distance can
intercept communications. Every time someone uses an unsecured website via a public
Wi-Fi access point, his or her log-on name and password are sent over the open airwaves,
with a high risk that someone might “eavesdrop” or capture log-on names, passwords,
credit card numbers, and other vital information. Wired equivalent privacy (WEP) is
an encryption algorithm designed to protect wireless transmission data. If using a Wi-Fi
connection, WEP encrypts the data using a key that converts the data into a non-human
readable form. The purpose of WEP was to provide wireless networks with the equiva-
lent level of security as wired networks. Unfortunately, the underlying technology behind
WEP has been demonstrated to be relatively insecure compared to newer protocols such
as WPA. WLANs that use Wi-Fi have a built-in security mechanism called Wi-Fi Protected
Access (WPA), a wireless security protocol to protect Wi-Fi networks. It is an improve-
ment on the original Wi-Fi security standard, Wired Equivalent Privacy (WEP), and pro-
vides more sophisticated data encryption and user authentication. Anyone who wants to
use an access point must know the WPA encryption key to access the Wi-Fi connection.
War chalking is the practice of tagging pavement with codes displaying where Wi-Fi
access is available. The codes for war chalking tell other users the kind of access avail-
able, the speed of the network, and if the network is secured. War driving is deliberately
searching for Wi-Fi signals while driving by in a vehicle. Many individuals who partici-
pate in war driving simply map where Wi-Fi networks are available. Other individuals
BUSINESS DRIVEN ETHICS AND SECURITY
Jane Goodall loved Tarzan and Dr. Dolittle when she was a young girl and
dreamed of living in Africa among the wild chimpanzees. The Jane Goodall
Institute continues Dr. Goodall’s pioneering chimpanzee research that funda-
mentally changed the way many humans view these wild animals. Using Google
Earth, you can now zoom right into the Gombe National Park in Tanzania to
watch for yourself the amazing interaction among chimpanzees. New inno-
vative blogs such as Google Earth’s geoblog allows users to simply click on an
entry, which causes the globe image to spin toward eastern Africa and then
slowly zooms in on the park, allowing users to view satellite images of the ani-
mals. The Jane Goodall Institute was the first to create such a Google geoblog.
Now just imagine what you could do with Google Earth if you added GPS.
What other types of research could be accomplished using GPS? How could
other nonprofits use geoblogs and GPS to help their cause? How could a busi-
ness user Google Earth and GPS to create a competitive advantage? Are there
any ethical or security concerns with this type of geoblog? 41
Geoblogging for
Chimpanzees
APPLY YOUR KNOWLEDGE
baL76892_ch07_250-295.indd 282baL76892_ch07_250-295.indd 282 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
283Technical Foundations of MIS Module 2
have a more malicious intent and use war driving to hack or break into these networks.
War driving has been a controversial practice since its inception and has raised the
awareness of the importance of wireless network security.
Preventing Viruses on a Mobile Device
The potential for contracting viruses on mobile devices is becoming a reality. The need
for virus protection at the device level is critical. Any device that can access the Internet
or receive email is at risk of catching a virus and passing it on to other devices. Because
of the memory limitations of most mobile devices, antivirus software has typically been
hosted on a PC or laptop, with the mobile device physically connecting to a PC or laptop
to perform virus scanning. The first known mobile phone virus, named Cabir, appeared
several years ago and infected only a small number of Bluetooth-enabled phones that
carried out no malicious action; the virus was created by a group of malware developers
to prove it could be done. The developers sent Cabir to anti-virus researchers, so they
could begin to develop a solution to a problem that promises to get a lot worse. At pres-
ent, mobile phone viruses do not do much damage, but if protective measures are not
taken, they could be as devastating as their computer counterparts. 42
The best way to protect against mobile phone viruses is the same way users protect
themselves from computer viruses—never open anything that seems suspicious. Another
method is to turn Bluetooth discoverable mode off. By setting the Bluetooth option to
“hidden,” other devices cannot detect it and send it the virus. In addition, install some type
of security software on the mobile device. Many of the mobile phone manufacturers, such
as Nokia and Samsung, have developed security software for their mobile phones that
detect and remove a virus as well as protect it from getting certain viruses in the first place.
Addressing Privacy Concerns with RFID and LBS
As technology advances, the potential for privacy infringement does as well. RFID
already has the capability to determine the distance of a tag from the reader location.
It is not difficult to imagine that retailers could determine the location of individuals
within the store and target specific advertisements to them based upon past purchases
and shopping and behavior patterns. Many consumers would consider gathering such
information intrusive enough, but the possibility that it could be sold to other retailers
might lead consumers to refuse to give retailers any information.
Several steps are being taken to address these privacy concerns. For example, one
proposal would require all RFID-tagged products to be clearly labeled. This would act
as an alert mechanism to which items are being tracked. Another measure being con-
sidered is “Kill Codes,” which would turn off all RFID tags when someone comes into
contact with them. Another measure is “RSA Blocker Tags,” which try to address privacy
concerns while maintaining the integrity of the product. Only that store’s authorized
reader can track items with these tags; customers cannot be tracked outside the store in
which they made a purchase. 43
LBS can track and monitor objects much like RFID. Tracking vulnerable individuals
and company assets is beneficial. But the dark side of LBS risks the invasion of privacy
and security caused by indiscreet location tracking. For example, if a company is using
LBS to know where each employee is on duty, it must not observe their positions when
they are off duty. Advertising at random to users in a specific area may violate privacy if
mobile users in the area do not want to receive these advertisements. Criminals might
also take advantage of illegal location tracking. And because LBS are based on message
exchange in a wireless network, there are always security risks because location informa-
tion could be stolen, lost, or modified.
Security mechanisms must eliminate or minimize the potential for attacks against LBS
entities and reduce exposure of the user’s identity and location. One way to solve the loca-
tion privacy problem is to provide strong privacy practices that counterbalance the invis-
ible nature of location collection in the wireless world. LBS policies should specify that:
■ Direct marketing purposes are permitted only with the business or service a user has
a contract with.
■ Electronic messages cannot hide the identity of the sender.
baL76892_ch07_250-295.indd 283baL76892_ch07_250-295.indd 283 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
284 Chapter 7 Networks: Mobile Business
■ Solicitation is allowed only if the user has given prior consent.
■ The location service must tell the user about the type, duration, and purpose of the
data they are collecting.
■ The user must be given the opportunity to reject any direct marketing
opportunities. 44
For mobile service providers, an unwelcome push can lead to increased customer
care cost. When a user has issues with her PC, she tries to fix it herself. However, when a
user’s mobile phone is not working, she usually contacts the service provider. As a result,
subscribers receiving unsolicited messages through LBS would contact their mobile ser-
vice providers with complaints.
With the power of a network, business professionals can share data and resources
around the globe. With the power of a wireless network, business professionals can take
advantage of mobility allowing them to work from anywhere, at any time, using many
different devices.
Watching people work in airports, restaurants, stores, trains, planes, and automobiles
is common, and soon even remote villages in Africa, South America, and Asia will have
access to the Internet along with all the power that comes with wireless networking.
Learning Outcome 7.1: Explain the five different networking elements creating a
connected world.
■ Network categories:
Networks are categorized based on geographic span: local area networks, wide area networks,
and metropolitan area networks.
■ Network providers:
At the top of the hierarchy are national service providers (NSPs), private companies that own and
maintain the worldwide backbone that supports the Internet. Regional service providers (RSPs)
offer Internet service by connecting to NSPs, but they also can connect directly to each other.
Another level down are the Internet service providers (ISPs); recall from Chapter 3 that an ISP
provides access to the Internet for a monthly fee.
■ Network access technologies:
A modem is a device that enables a computer to transmit and receive data. Broadband is a high-
speed Internet connection that is always connected. Digital subscriber line (DSL) allows high-
speed digital data transmission over standard telephone lines. Internet cable connections provide
Internet access using a cable television company’s infrastructure and a special cable modem. A
T1 line is a type of data connection able to transmit a digital signal at 1.544 Mpbs.
■ Network protocols:
A protocol is a standard that specifies the format of data as well as the rules to be followed dur-
ing transmission. Network access technologies use a standard Internet protocol called transmis-
sion control protocol/Internet protocol (TCP/IP); it provides the technical foundation for the public
Internet as well as for large numbers of private networks.
■ Network convergence:
Network convergence is the efficient coexistence of telephone, video, and data communication
within a single network, offering convenience and flexibility not possible with separate
infrastructures. Voice over IP (VoIP) uses IP technology to transmit telephone calls. Internet protocol
TV (IPTV) distributes digital video content using IP across the Internet and private IP networks.
L E A R N I N G O U T C O M E R E V I E W
baL76892_ch07_250-295.indd 284baL76892_ch07_250-295.indd 284 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
285Technical Foundations of MIS Module 2
Learning Outcome 7.2: Identify the benefits and challenges of a connected world.
Before networks, transferring data between computers was time-consuming and labor-intensive.
People had to physically copy data from machine to machine using a disk. Networks offer many
advantages for a business including:
■ Sharing resources
■ Providing opportunities
■ Reducing travel
Networks have created a diverse, yet globally connected world. By eliminating time and distance,
networks make it possible to communicate in ways not previously imaginable. Even though networks
provide many business advantages, they also create increased challenges in (1) security and (2)
social, ethical, and political issues.
Learning Outcome 7.3: Describe the different wireless network categories.
There are four types of wireless networks—PAN, WLAN, WMAN, and WWAN. A PAN provides com-
munication over a short distance that is intended for use with devices that are owned and operated
by a single user. A WLAN is a local area network that uses radio signals to transmit and receive data
over distances of a few hundred feet. A WMAN is a metropolitan area network that uses radio signals
to transmit and receive data, and a WWAN is a wide area network that uses radio signals to transmit
and receive data.
Learning Outcome 7.4: Explain the different wireless network business applications.
Mobile and wireless business applications and services are using satellite technologies. These
technologies are GPS, GIS, and LBS. GPS is a satellite-based navigation system providing extremely
accurate position, time, and speed information. GIS is location information that can be shown on
a map. LBS are applications that use location information to provide a service used by both GPS
and GIS.
Learning Outcome 7.5: Identify the benefits and challenges of business mobility.
A wireless network can enhance mobility, provide immediate data access, increase location and
monitoring capabilities, provide mobile commerce opportunities, improve work flow, and provide an
alternative to wiring.
There are several challenges of wireless networks including protecting against theft, protecting
wireless connections, preventing viruses on mobile devices, and addressing privacy concerns with
RFID and LBS.
Any mobile device is vulnerable to loss no matter how big or small it is. The company may face
significant exposure from stolen IDs, passwords, encryption keys, and confidential information if the
device falls into the wrong hands, especially if the theft is not discovered or reported immediately and
the company does not have time to revoke access.
Network intrusions can occur if access codes or passwords are stored on a device that is lost or
stolen. However, any time a wireless network connects to a wired one, the wireless network can serve
as a conduit for a hacker to gain entry into an otherwise secure wired network.
The potential for contracting viruses on mobile devices is becoming a reality. The need for virus
protection at the device level is critical. Any device that can access the Internet or receive email is at
risk of catching a virus and passing it on to other devices.
As technology advances, the potential for privacy infringement does as well. RFID already
has the capability to determine the distance of a tag from the reader location. LBS can track and
monitor objects much like RFID. LBS risks the invasion of privacy and security caused by indiscreet
location tracking.
baL76892_ch07_250-295.indd 285baL76892_ch07_250-295.indd 285 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
286 Chapter 7 Networks: Mobile Business
1. Knowledge: List the ways WTC is using networks to improve its competitive advantage in the
professional sports broadcasting industry.
2. Comprehension: Describe the different types of networks WTC is using.
3. Application: Apply the concepts of TCP/IP to how the Ironman World Championships are broad-
cast from Ironmanlive.com .
4. Analysis: Analyze the various wireless technologies that WTC could use in promoting the Ironman
World Championships.
5. Synthesis: Develop a use for LBS that the WTC could benefit from.
6. Evaluate: Assess the security dilemmas that WTC faces in using the various forms of wireless
technology.
O P E N I N G C A S E Q U E S T I O N S
3G, 271
Access point (AP), 268
Active RFID tag, 275
Asset tracking, 275
Attenuation, 254
Automatic vehicle location
(AVL), 275
Bandwidth, 255
Bit, 256
Bit rate/data rate, 256
Bluetooth, 268
Broadband, 256
Broadband over power line
(BPL), 257
Cable modem (or broadband
modem), 257
Cartography, 276
Chipless RFID tag, 275
Digital divide, 266
Digital subscriber line (DSL), 256
Domain name system (DNS), 259
Dynamic Host Configuration
Protocol (DHCP), 258
Edge matching (warping, rubber
sheeting), 276
Estimated-time-enroute
(ETE), 276
Estimated-time-of-arrival (ETA), 276
Extranet, 264
File transfer protocol (FTP), 258
Geocache, 276
Geocoding, 276
Geocoin, 276
Geographic information system
(GIS), 276
GIS map automation, 276
Global positioning system
(GPS), 275
High-speed Internet cable
connection, 257
Hotspot, 268
IEEE 802.11n (or Wireless-N), 269
Institute of Electrical and
Electronics Engineers
(IEEE), 269
Internet Protocol TV (IPTV), 262
Intranet, 263
IP address, 258
Latitude, 276
Longitude, 276
Local area network (LAN), 254
Location-based service (LBS), 277
Metropolitan area network
(MAN), 254
Modem, 256
Multiple-in/multiple-out (MIMO)
technology, 268
National service provider
(NSP), 254
Network convergence, 260
Packet, 258
Packet footer, 258
Packet header, 258
Passive RFID tag, 275
Peer-to-peer (P2P), 262
Personal area network (PAN), 268
Protocol, 258
Proxy, 258
Radio-frequency identification
(RFID), 274
Regional service provider
(RSP), 254
Repeater, 254
RFID accelerometer, 275
RFID reader (RFID
interrogator), 274
RFID tag, 274
Satellite, 272
Secure hypertext transfer
protocol (SHTTP or
HTTPS), 266
Secure sockets layer (SSL), 266
Semi-passive RFID tag, 275
Smartphones, 271
Spatial data (geospatial data or
geographic information), 276
SSL Certificate, 266
Standard packet format, 258
Streaming, 272
Telecommuting (virtual
workforce), 257
Traceroute, 258
Transmission control protocol/
Internet protocol (TCP/IP), 258
Unified communications (UC), 260
Virtual private network (VPN), 264
Voice over IP (VoIP), 261
War chalking, 282
War driving, 282
Wide area network (WAN), 254
Wi-Fi infrastructure, 268
Wi-Fi protected access
(WPA), 282
Wired equivalent privacy
(WEP), 282
Wireless access point
(WAP), 268
Wireless fidelity (Wi-Fi), 268
Wireless LAN (WLAN), 268
Wireless MAN (WMAN), 269
Wireless WAN (WWAN), 270
Worldwide Interoperability
for Microwave Access
(WiMAX), 270
K E Y T E R M S
baL76892_ch07_250-295.indd 286baL76892_ch07_250-295.indd 286 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
287Technical Foundations of MIS Module 2
1. Why would a manager be concerned with bandwidth? How is bandwidth measured?
2. How have networks contributed to the digital divide?
3. What are the different levels of service providers that supply the interconnections to the
Internet?
4. What are the different Internet access technologies you can use to connect to the Internet?
5. What is network convergence and why is it important to a business?
6. What is VoIP and how can it benefit a business?
7. What is the difference between an intranet and extranet?
8. How do SSL and SHTTP provide security for networks?
9. What is a personal area network?
10. How does Wi-Fi work?
11. What are GIS, GPS, and LBS? How are businesses using these applications to compete?
12. What is RFID and how could it help a large retailer track inventory?
13. What are the advantages of mobile business?
14. How does a domain name system work?
15. What is the difference between VoIP and IPTV?
R E V I E W Q U E S T I O N S
C L O S I N G C A S E O N E
Wireless Bikes
Bike-sharing programs have been a popular trend in many foreign countries for years but have just
started in the United States, driven mainly by the desire to provide zero-emissions transportation for
commuters and tourist in urban areas. A new Denver, Colorado, company, Denver B-cycle, offers one
of the largest bike-sharing programs in the United States. The company has more than 500 bikes, all
made by Trek, that are available through more than 50 bike stations, or B-stations as they are called, in
the Denver metropolitan area. Each B-station is fully operated by using a variety of wireless technolo-
gies, such as RFID, GPS, and Wi-Fi, which have a number of locking docks that hold as few as 5 bikes
or as many as 25. The number of bikes at each location is dependent upon the amount of use expected.
There are several methods in which a user can access a bike. One method is to use the B-station
kiosk machine that allows users to unlock bikes with a credit card. This method is preferred for those
who seek infrequent usage for short-term rentals. Here, the user receives a day pass that is good for a
24-hour rental. Another option is to purchase a 7-day, 30-day, or annual membership online or at the
B-station kiosk for those planning to use bikes on a regular basis. Members receive an RFID-enabled
card that allows them to retrieve any of the available bikes from the B-stations located around the
city. Members can also download an iPhone app with the added convenience of using the device to
unlock and locate bikes.
Once a user selects a bike by using the day pass, RFID-enabled membership card, or iPhone appli-
cation, the transaction must be validated before the bike is unlocked. This is all done using RFID readers
and Wi-Fi-enabled devices that validate the transaction with the company’s main database. An RFID
reader collects the ID number encoded to an RFID tag attached to the bike. The device then forwards the
ID number using Wi-Fi to the company’s central database, so that the system knows which particular
baL76892_ch07_250-295.indd 287baL76892_ch07_250-295.indd 287 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
288 Chapter 7 Networks: Mobile Business
bike to associate with which user. Once validated, the user is then alerted with a beep and a green light,
indicating the selected bike is unlocked and available for use. When a user wants to return a bicycle,
he or she only needs to find an empty dock at any B-station to roll the bike into the locking position.
A beep and green light will signal that the bike has been securely locked, and the RFID reader records the
tag ID from the bike and sends this information to the company database to complete the transaction.
In addition to having an RFID tag on each bike, embedded GPS units record the routes that a user
travels. When a user returns the bike, the GPS information is uploaded to the company database,
along with that bike’s tag ID number. These data help Denver B-cycle understand the most common
routes that its users take in addition to allowing the company to collaborate with Denver merchants
to target product or service offerings to members, based on their daily routes. For example, a coffee
shop might email a coupon to a user who rides by each day. The GPS units also help to protect the
company in case a user does not return a bike, or a bike is stolen. B-cycle can use LBS to help find
the “missing” bike. 45
Questions
1. What advantages does a wireless network provide Denver B-cycle?
2. What challenges does a wireless network create for Denver B-cycle?
3. What information not described in the case can Denver B-cycle use with RFID and LBS data?
4. How could Denver B-cycle use other wired or wireless network technologies to gain a competitive
advantage?
C L O S I N G C A S E T W O
Google Latitude . . . Without an Attitude?
Google is at it again, creating applications that have the potential for disruption. Google Latitude is an
upgrade to Google Maps, specifically developed for mobile users that allows people to track the loca-
tion of friends or family using their mobile phone or PC. Latitude is integrated with a variety of other
Google applications, such as Google Talk or Gmail, which allows someone to send a message to the
person whom they are tracking.
Latitude can use Wi-Fi access points, cell towers, or GPS to find someone’s location. And if all three
are active and available, they each can be used collectively to validate location. The Latitude software
is written for a location-based service that allows any mobile device with Wi-Fi, cellular, or GPS to
determine its position with an accuracy of 30 to 60 feet.
Certainly, there are some real benefits to having this information, such as parents being able to
easily track their children or companies knowing exactly where a delivery truck is located. Latitude
is an opt-in service for those who are worried about privacy issues. Users can access a simple inter-
face to allow only specific friends or family members to follow them. Once the opt-in agreement is
activated, users can see their friends’ or family members’ profile pictures appear on a map using
their mobile phone or PC. Latitude has many customized settings that can be changed on a person-
by-person basis. For example, someone can choose to share his or her best available location or city-
level location, or even hide their location.
Latitude even lets users lie about their location; for instance, if a user is in Rome, instead of having
the approximate location detected and shared automatically, a manual location can be set for else-
where—perhaps Washington, D.C.
Latitude is primarily developed for two broad classes of people: (1) a small circle of friends and
family with whom users are willing to share their exact location and (2) a larger group with whom a
user is happy to share city-level detail, convenient for finding out when somebody’s in town, but not
much more. 46
baL76892_ch07_250-295.indd 288baL76892_ch07_250-295.indd 288 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
289Technical Foundations of MIS Module 2
1. Building Nationwide Broadband
The Federal Communications Commission is proposing a nationwide broadband plan, a sweeping
initiative to provide—among other things—100 megabit per second Internet access to 100 million
people by 2020. The FCC also proposes to deliver 1 gigabit per second access to places such
as schools, libraries, and government buildings. “The national broadband plan is a 21st-century
roadmap to spur economic growth and investment, create jobs, educate our children, protect our
citizens, and engage in our democracy,” said FCC Chairman Julius Genachowski. 47
How will implementing nationwide broadband create technology jobs? Identify three new prod-
ucts or services you could create based on nationwide broadband. Will a nationwide broadband
plan eliminate the digital divide in the United States?
2. Foursquare Cheating
Foursquare is one of the latest social networking sites that use location-based services. Users
check in to places they visit, such as a bar, restaurant, or library. The main goal in using Foursquare
is to earn badges and “Mayor” titles for favorite establishments by checking in more than friends
or other Foursquare users. However, users were found to be cheating, recording check-ins to
places they had not been. In an effort to make it more difficult to cheat, the company introduced
a new “cheater code,” which uses a smartphones GPS—where available—to validate the users’
true location. 48
Why is GPS important to Foursquare? How could individuals cheat on providing locations? Why
would individuals cheat about their locations? What did Foursquare implement to halt cheating?
Do you think Foursquare users will still find ways to cheat?
3. Pandora Makes Users’ Music Public
Pandora, the online music company, lets users create personalized music stations that they can
stream online, but it also makes those stations viewable to anyone on the Internet who knows
someone’s email address. For example, someone with the email address sergey@google.com
likes a band called Rise Against. Using the email address of Steve Jobs implies he likes country
music legend Willie Nelson and jazz trumpeter Chris Botti. 49
Do you view your music selection as private or public information? How could someone use
this information unethically? Do you see this as a threat for Pandora? Do you think customers will
stop using the service? What can Pandora do to ensure customer privacy?
4. Wireless Network Vulnerability
Empty cans of Pringles could be helping malicious hackers spot wireless networks that are
open to attack. Security companies have demonstrated that by using a simple Pringles can to
create a homemade antenna, someone can easily identify wireless networks. Known as the
“PringlesCantenna,” these networks are rapidly becoming popular because they are cheap (under
$10) and easy to set up.
Wireless network security is a big concern of network managers. As companies and home users
have increasingly adopted wireless technology, security precautions need to be enforced. After all,
C R I T I C A L B U S I N E S S T H I N K I N G
Questions
1. What are the privacy and security issues with using Google Latitude?
2. If users can lie about the location, is this a very effective tool?
3. What are the advantages of using LBS?
4. If you wanted to use Google Latitude, what could you do to protect your privacy from someone you
do not want to be able to locate you?
baL76892_ch07_250-295.indd 289baL76892_ch07_250-295.indd 289 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
290 Chapter 7 Networks: Mobile Business
the very nature of using wireless technology deliberately puts information on the airwaves, and
anyone within range and equipped with an appropriate receiver (e.g., PringlesCantenna) can grab
this information. This is why many wireless networks should apply authentication and encryption
mechanisms to provide a trusted level of security. 50
Create a report based on Internet research that discusses the tips, techniques, and best prac-
tices to protect against this type of amateur hacking. Include a summary on the types of detection
and prevention technology available, specifically the use of firewalls and built-in wireless security
mechanisms.
5. Selecting an ISP
You have been hired by Front Range Car Rental, a new company in Colorado, to research com-
panies that can host its website. Because all ISPs are not created equal, you have been pro-
vided with some questions to help you identify their strengths, weaknesses, capabilities, and core
competencies.
Does the ISP offer full life cycle services, including 24/7 accessibility, data storage, 24/7 cus-
tomer support? What is the ISP’s depth and breadth of technical expertise? What are its special-
ties? Does the ISP have actual customers online and if so, what results have they achieved? Can
the ISP provide development expertise to customize the applications? How does the ISP handle
updates? Adding product modules? Specifically, does the ISP’s infrastructure deliver:
■ High availability (uptime)?
■ Assured data integrity?
■ Scalability?
■ Reliability?
■ High performance?
■ Security and access control?
Develop a detailed report answering the questions presented here along with your ISP recom-
mendation.
6. Wireless Fitness
Sandifer’s Fitness Club is located in central South Carolina. Rosie Sandifer has owned and oper-
ated the club for 20 years. The club has three outdoor pools, two indoor pools, 10 racquetball
courts, 10 tennis courts, an indoor and outdoor track, along with a two-story exercise equipment
and massage therapy building. Sandifer has hired you as a summer intern specializing in MIS. The
extent of Sandifer’s current technology includes a few PCs in the accounting department and two
PCs with Internet access for the rest of the staff. Your first assignment is to create a report detailing
networks and wireless technologies. The report should explain how the club could gain a business
advantage by implementing a wireless network. If Sandifer likes your report, she will hire you as
the full-time employee in charge of MIS. Be sure to include all of the different uses for wireless
devices the club could implement to improve its operations.
7. The End of the All-You-Can-Eat Wireless Data Plan
AT&T, along with other wireless service providers such as Verizon, are switching from an all-
you-can-eat data plan to tiered pricing. The move comes as landline revenues are shrinking and
mobile usage, especially on smartphones that require higher bandwidths, is greatly expanding.
Subscribers who consume modest levels of data will pay slightly less every month than they do
now, while heavy users will see extra fees.
AT&T is said to be offering two new plans: one will cost $25 per month and offer 2 gigabytes of
data per month, and a second plan will cost $15 per month for 200 megabytes of data. If users on
the second plan go over, they will pay another $15 for 200 megabytes. 51
Does this make good business sense? Will these fees disappear when service providers start
offering 4G or WiMAX services? How scalable do you think AT&T’s network is?
baL76892_ch07_250-295.indd 290baL76892_ch07_250-295.indd 290 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
291Technical Foundations of MIS Module 2
8. Could the Domain Name System Be Hacked?
Is it possible for someone to hack the DNS? If so, it would be a disaster! By hacking the DNS,
someone could change a website’s IP address, thereby redirecting someone to a fictitious or
look-alike site that could collect passwords and even credit card information. This scenario really
happened. A Brazilian ISP, NET Virtua, was hacked using a method called DNS cache poisoning,
which takes advantage of a hole in DNS software that redirects users to websites they did not
request. The NET Virtua users were trying to access Bradesco, a bank in Brazil, but were sent to a
fraudulent website that tried to install malware and steal users’ passwords. Luckily, the hack was
detected before too much damage was done. 52
How can the DNS be protected from cache poisoning? Because every ISP maintains its own
DNS, is this impossible?
9. Shipment Routes
Mary Conzachi works in the logistics department for Loadstar, a large trucking company and barge
operator in the Midwest. She has looked into a variety of systems to keep track of the location of
trucks and barges so that the company can route shipments better and answer customer inquiries
faster. Conzachi’s major concern is with the trucks; the barges have commodities and take weeks
to move something. She states that it is much harder to keep up with trucking. She needs to know
the exact location of the truck at any given time. You have been hired to assist her in recommend-
ing a solution. What solution would you recommend? Why?
10. Google Collected Public Wi-Fi Data . . . By Mistake
Google has admitted to mistakenly collecting data sent over unsecured Wi-Fi networks using its
Street View cars. Google photographs homes from public streets, using a fleet of company cars.
Google said it was trying to gather information about the location, strength, and configuration
of Wi-Fi networks so it could improve the accuracy of location-based services such as Google
Maps and driving directions. However, in the process, the cars were also collecting snippets of
emails and other Internet activity from wireless networks in the homes, provided they had not
been secured by passwords. Google blamed this on a programming error, temporarily halted the
Street View data collection, and announced it would stop collecting all Wi-Fi data. 53 Do you believe
this was a mistake by Google? If home users do not protect their wireless networks, what is to stop
a neighbor from collecting the same information? Who is really at fault here?
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
Pro ject Focus
1. In an effort to better connect with younger consumers, McDonald’s restaurants in Southern
California are enticing customers through their mobile phones, offering mobile coupons for a
free McFlurry. Under the promotion, customer’s text the message “McFlurry” to a five-digit short
code promotional phone line. An electronic coupon for the free dessert is then downloaded to
their mobile phones; when consumers bring those phones to participating restaurants, they can
redeem the coupon electronically. Mobile coupons (mcoupons) that are stored and carried in a
mobile phone have higher redemption rates than paper or ecoupons because they are not for-
gotten, or left at home. Mcoupons can drastically reduce delivery and redemption cost, trigger
impulse buys, and send offers to customers in real time that are location based. Your customers
are mobile, and you want your business to take advantage of mobile technology, so you have
decided to create an innovative system for mcoupons, allowing customers to capitalize on instant
redemption coupons. As customers walk past your business (or within a 25-foot radius) a cou-
pon will be pushed to their mobile device. As you prepare to deploy this new mobile marketing
baL76892_ch07_250-295.indd 291baL76892_ch07_250-295.indd 291 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
292 Chapter 7 Networks: Mobile Business
campaign, you need to create a detailed analysis of mcoupons, including all of the potential risks
and benefits. In your analysis, be sure to discuss the types of coupons you would offer to your
mobile customers along with all of the potential risks and benefits.
2. Radio-frequency identification technologies use active or passive tags in the form of chips or
smart labels that can store unique identifiers and relay this information to readers. RFID tags
represent the next big step forward from bar codes, and retailers are using RFID to control theft,
increase efficiency, and improve demand planning. Businesses are using RFID for everything,
including preventing toilets from overflowing, refilling customer’s drinks, identifying human
remains, and combating counterfeit drugs. Develop two new products using RFID that can help
you reduce expenses, increase profits, and create a competitive advantage for your business.
PROJECT I GoGo Gadgets
Now that Wi-Fi and other types of high-speed wireless networks are becoming common, devices using
that technology are multiplying rapidly. Wireless gadgets run the gamut from cell phones to kitchen
appliances and digital cameras. Here are some of the hottest new wireless broadband gadgets.
■ Samsung’s $2,100 Zipel refrigerator features a touch screen with Wi-Fi to browse the Internet,
stream media, take notes, and even pull up nutritional information for more than 500 different
types of food. It will also show Google Calendar entries and weather reports, as well as news
alerts and other articles.
■ Toshiba’s UX600 LED TV is a Wi-Fi-enabled HDTV that can stream content straight to its display
without network cables.
■ HTC EVO 4G mobile phone has the ultrafast WiMAX technology letting users surf the web and
download beyond broadband speeds with increased reliability. Users can enjoy VoD and IPTV, plus
download music or electronic books all delivered on a 3.8-inch WVGA screen.
■ Sony’s Cybershot is a digital camera with Wi-Fi capabilities, allowing users to share their snap-
shots wirelessly using a built-in web browser. 54
New wireless technologies promise to make today’s wireless fidelity networks seem like slow modem
dial-up connections. New technologies will provide greater reach geographically of wireless networks
along with new personal and business uses. Search the Internet and discover new wireless devices
that entrepreneurs and established companies can use to improve their business.
■ Explain how companies can use these devices to create competitive advantages, streamline pro-
duction, and improve productivity.
PROJECT I I WAP
Wireless Internet access is quickly gaining popularity among people seeking high-speed Internet con-
nections when they are away from their home or office. The signal from a typical wireless access
point (WAP) extends only about 300 feet in any direction, so the user must find a hotspot to be able
to access the Internet while on the road. Sometimes hotspots are available for free or for a small fee.
You work for a sales company, SalesTek, which has a sales force of 25 representatives and customers
concentrated in Denver, Colorado; Salt Lake City, Utah; and Santa Fe, New Mexico. Your sales repre-
sentatives are constantly on the road and they require 24/7 Internet access.
You have been asked to find hotspots for your colleagues to connect while they are on the road.
It is critical that your sales force can access the Internet 24/7 to connect with customers, suppliers,
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch07_250-295.indd 292baL76892_ch07_250-295.indd 292 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
293Technical Foundations of MIS Module 2
and the corporate office. Create a document detailing how your mobile workforce will be able to stay
connected to the Internet while traveling. Here are a few tips to get you started:
■ Use websites such as www.wifinder.com and www.jiwire.com to determine which commercial
hotspots would be the most appropriate for your sales force and the commercial network service
that these hotspots use.
■ Search the websites of two or three commercial networks that seem most appropriate to discover
more about pricing and services. (Hint: T-Mobile is one example.)
■ Use www.wifinder.com and www.wififreespot.com to determine how many free public hotspots
are available in these cities. Are there enough for your company to rely on them or should you use
a commercial Wi-Fi system. If so, which one?
■ You might also research www.fon.com to see alternative methods of using home broadband
connections.
PROJECT I I I Securing Your Home Wireless Network
Wireless networks are so ubiquitous and inexpensive that anyone can easily build one with less than
$100 worth of equipment. However, wireless networks are exactly that—wireless—they do not stop
at walls. Living in an apartment, dorm, or house means that your neighbors can access your network.
It is one thing to let neighbors borrow sugar or a cup of coffee, but problems occur when you allow
them to borrow your wireless network. There are several good reasons for not sharing a home wire-
less network including:
■ Slowing of Internet performance.
■ Potential for others to view files on your computers and spread dangerous software such as viruses.
■ Possibility for others to monitor the websites you visit, read your email and instant messages as
they travel across the network, and copy your usernames and passwords.
■ Availability for others to send spam or perform illegal activities with your Internet connection.
Securing a home wireless network makes it difficult for uninvited guests to connect through your
wireless network. Create a document detailing how you can secure a home wireless network.
PROJECT IV Weather Bots
Warren Jackson designed a GPS-equipped robot when he was a graduate student at the University of
Pennsylvania. The robot was created to bring weather balloons back down to Earth, allowing them to
land in a predetermined location. The National Weather Service has collected most of its information
using weather balloons that carry a device to measure items such as pressure, wind, and humidity.
When the balloon reaches about 100,000 feet and pressure causes it to pop, the device falls and
lands a substantial distance from its launch point. The weather service and researchers sometimes
look for the $200 device, but of the 80,000 sent up annually, they write off many as lost.
Jackson’s idea was so inventive that Penn’s Weiss Tech House—a university organization that
encourages students to innovate and bring their ideas to market—awarded Jackson and some fellow
graduate engineering students first prize in its third annual PennVention Contest. Jackson won $5,000
and access to expert advice on prototyping, legal matters, and branding. 55
GPS and GIS can be used in all sorts of devices, in many different industries, for multiple purposes.
You want to compete, and win first prize, in the PennVention next year. Create a product, using a GPS
or GIS, that is not currently in the market today that you will present at the next PennVention.
PROJECT V Free Wi-Fi in Africa
Covering Africa with free and low-cost Wi-Fi may not seem like a smart thing, but that is exactly what
Paul English, the cofounder of travel search engine Kayak.com , plans to do. English has created a
hybrid nonprofit/for-profit company, JoinAfrica, to explore the creation of two tiers of Wi-Fi access
in Africa. The first tier will be free and offer basic email service (from Gmail, Yahoo!, etc.) and web
baL76892_ch07_250-295.indd 293baL76892_ch07_250-295.indd 293 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
294 Chapter 7 Networks: Mobile Business
browsing (Wikipedia, BBC, etc.). The second tier will be fee-based and offer additional capabilities,
including audio, video, and high-quality images. 56
Although many countries in Africa struggle to have proper drinking water or even efficient electri-
cal power, English and the JoinAfrica initiative believe having access to the Internet is just as impor-
tant. JoinAfrica will work with for-profit telecommunication companies in Africa to first branch out
with existing connections in villages, providing residents with the first-tier services, and residents
can pay money to upgrade to the second tier. More bandwidth-intensive services such as streaming
video and pornography will be throttled to ensure a basic level of service for all as the networks grow.
■ List 10 ways wireless access might help remote villages in Africa.
■ List 10 ways wireless access could hurt remote villages in Africa.
■ What other infrastructure requirements will JoinAfrica need to implement to ensure the project’s
success?
■ How will changes in technology over the next decade affect the JoinAfrica project?
■ What types of security and ethical issues will JoinAfrica face?
■ If you were given $1 million, would you invest it in JoinAfrica?
PROJECT VI Never Run with Your iPod
Jennifer Goebel was disqualified from her first-place spot in the Lakefront Marathon in Milwaukee
after race officials spotted her using an iPod. A controversial 2007 rule banned portable music
devices by all U.S. Track and Field participants because music could give a runner a competitive
advantage and cause safety issues if the runner can’t hear announcements. The officials for the
Lakefront Marathon took action after viewing online photos of Goebel using her iPod; ironically, the
photos were posted by Goeble herself on her own website. 57
Do you agree with the USTAF’s decision to disqualify Jennifer Goebel? How could an iPod give a run-
ner a competitive advantage? With so many wireless devices entering the market, it is almost impos-
sible to keep up with the surrounding laws. Do you think Goebel was aware of the headphone ban? In
your state, what are the rules for using wireless devices while driving? Do you agree with these rules?
How does a business keep up with the numerous, ever-changing rules surrounding wireless devices?
What could happen to a company that fails to understand the laws surrounding wireless devices?
PROJECT VI I Ding-a-Ling Took My $400!
A satellite television customer requested her service be disconnected due to poor reception. Soon
after disconnecting the service, the customer noticed a direct bank withdrawal for a $430 early-
termination fee from the satellite provider. To make matters worse, the unplanned charge caused
hundreds of dollars in overdraft charges. To top it all off, a customer service representative apparently
named Ding-A-Ling called the customer to see if she would consider reconnecting the service. 58
Never give any company your checking account number or direct access to your bank account.
If you want to establish a good relationship with a company, give it your credit card number. When
a relationship with a supplier turns sour, the last thing you want is for that company to have direct
access to your checking account.
Do you think what the satellite provider did was ethical? What could the customer do when discon-
necting her service to avoid this type of issue? Can credit card companies enter your bank account
and take out as much money as you owe at any time they want? Why is it important to never give a
supplier direct access to your business checking account?
PROJECT VI I I 911 McNuggets
Cellular technologies have changed the way we do business, and it is hard to imagine life without
them. There are many wonderful advantages of using wireless technologies in business, but there are
also some serious disadvantages, like the ability to make a bad decision faster.
baL76892_ch07_250-295.indd 294baL76892_ch07_250-295.indd 294 26/11/12 1:54 PM26/11/12 1:54 PM

Rev. Confirming Pages
295Technical Foundations of MIS Module 2
A woman in Florida called 911 three times after a McDonald’s employees told her they were out of
Chicken McNuggets. The woman stated that this is an emergency and if she had known they didn’t have
any McNuggets, then she would not have given them any money. The woman said McDonald’s offered
her a McDouble, but that she didn’t want one. The woman was cited on a misuse of 911 charge. 59
It is so easy to pick up the phone, from anywhere, at any time, and make a bad call. How many times
do you see people making calls on their cell phones from inappropriate locations? If this woman had to
wait in line to use a pay phone, do you think it would have given her time to calm down and rethink her
decision? With technology and the ability to communicate at our fingertips, do you agree that it is easier
than ever to make a bad decision? What can you do to ensure you think before you communicate?
PROJECT IX Wireless Networks and Streetlights
Researchers at Harvard University and BBN Technologies are designing CitySense, a wireless net-
work attached to streetlights that can report real-time data across the entire city of Cambridge,
Massachusetts. The CitySense network mounts each node on a municipal streetlight, where it draws
power from city electricity. Each node includes a Wi-Fi interface, weather sensors, along with down-
load and uploading data capabilities. 60
You are responsible for deploying a CitySense network around your city. What goals would you
have for the system besides monitoring urban weather and pollution? What other benefits could a
CitySense network provide? How could local businesses and citizens benefit from the network? What
legal and ethical concerns should you understand before deploying the network? What can you do to
protect your network and your city from these issues?
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
Project
Number Project Name Project Type Plug-In Focus Area Project Level Skill Set Page Number
9 Security Analysis Excel T3 Filtering Data Intermediate Conditional
Formatting,
Autofilter, Subtotal
AYK.7
10 Gathering Data Excel T3 Data Analysis Intermediate Conditional
Formatting
AYK.8
11 Scanner System Excel T2 Strategic Analysis Intermediate Formulas AYK.8
12 Competitive Pricing Excel T2 Profit
Maximization
Intermediate Formulas AYK.9
13 Adequate
Acquisitions
Excel T2 Break Even
Analysis
Intermediate Formulas AYK.9
15 Assessing the Value
of Information
Excel T3 Data Analysis Intermediate PivotTable AYK.10
16 Growth, Trends,
and Forecasts
Excel T2, T3 Data Forecasting Advanced Average, Trend,
Growth
AYK.11
18 Formatting Grades Excel T3 Data Analysis Advanced If, LookUp AYK.12
22 Turnover Rates Excel T3 Data Mining Advanced PivotTable AYK.15
23 Vital Information Excel T3 Data Mining Advanced PivotTable AYK.15
24 Breaking Even Excel T4 Business Analysis Advanced Goal Seek AYK.16
25 Profit Scenario Excel T4 Sales Analysis Advanced Scenario Manager AYK.16
baL76892_ch07_250-295.indd 295baL76892_ch07_250-295.indd 295 26/11/12 1:54 PM26/11/12 1:54 PM

Confirming Pages
12
3
module 3 Enterprise MIS
Organizations use various types of information systems to help run their daily operations. These
primarily transactional systems concentrate on the management and flow of low-level data
items for basic business processes such as purchasing and order delivery. The data are often
rolled up and summarized into higher-level decision support systems to help firms understand
what is happening in their organizations and how best to respond. To achieve seamless and
efficient handling of data and informed decision making, organizations must ensure that their
enterprise systems are tightly integrated, providing an end-to-end view of operations.
This module introduces various types of enterprise information systems and their role in
helping firms reach their strategic goals, including supply chain management, customer rela-
tionship management, and enterprise resource planning. Organizations that can correlate and
summarize enterprisewide information are prepared to meet their strategic business goals and
outperform their competitors.
This module then dives into how enterprise systems can be built to support global businesses,
the challenges in that process, and how well things turn out if systems are built according to
good design principles, sound management practices, and flexibility to support ever-changing
business needs. Making this happen requires not only extensive planning, but also well-honed
people skills.
Module 3: Enterprise MIS
CHAPTER 8:  Enterprise Applications: Business Communications
CHAPTER 9:   Systems Development and Project Management: Corporate
Responsibility
MODULE THREE:
Enterprise MIS
MODULE TWO:
Technical Foundations of MIS
MODULE ONE:
Business Driven MIS
baL76892_ch08_296-340.indd 296baL76892_ch08_296-340.indd 296 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
C
H
A
P
T
E
R
O
U
T
L
IN
E

C H A P T E R
8 Enterprise Applications: Business Communications
■ B u i l d i n g a C o n n e c t e d
C o r p o r a t i o n t h ro u g h
I n t e g r a t i o n s
■ S u p p l y C h a i n M a n a g e m e n t
■ T h e B e n e f i t s o f S C M
■ T h e C h a l l e n g e s o f S C M
■ T h e F u t u re o f S C M
SECTION 8.2
Customer Relationship
Management and Enterprise
Resource Planning
SECTION 8.1
Supply Chain Management
■ C u s t o m e r R e l a t i o n s h i p
M a n a g e m e n t
■ T h e B e n e f i t s o f C R M
■ T h e C h a l l e n g e s o f C R M
■ T h e F u t u re o f C R M
■ E n t e r p r i s e R e s o u rc e P l a n n i n g
■ T h e B e n e f i t s o f E R P
■ T h e C h a l l e n g e s o f E R P
■ T h e F u t u re o f E n t e r p r i s e
S y s t e m s : I n t e g r a t i n g S C M ,
C R M , a n d E R P
What’s in IT for me?
This chapter introduces high-profile strategic initiatives an organization can undertake to help it gain competitive
advantages and business efficiencies—supply chain management, customer relationship management, and enterprise
resource planning. At the simplest level, organizations implement enterprise systems to gain efficiency in business pro-
cesses, effectiveness in supply chains, and an overall understanding of customer needs and behaviors. Successful organiza-
tions recognize the competitive advantage of maintaining healthy relationships with employees, customers, suppliers, and
partners. Doing so has a direct and positive effect on revenue and greatly adds to a company’s profitability.
You, as a business student, must understand the critical relationship your business will have with its employees, custom-
ers, suppliers, and partners. You must also understand how to analyze your organizational data to ensure you are not just
meeting but exceeding expectations. Enterprises are technologically empowered as never before to reach their goals of
integrating, analyzing, and making intelligent business decisions.
baL76892_ch08_296-340.indd 297baL76892_ch08_296-340.indd 297 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
298 Chapter 8 Enterprise Applications: Business Communications
opening case study
Zappos Is Passionate for Customers
Tony Hsieh’s first entrepreneurial effort began at the age of 12 when he started his own
custom button business. Realizing the importance of advertising, Hsieh began marketing
his business to other kids through directories, and soon his profits soared to a few hundred
dollars a month. Throughout his adolescence, Hsieh started several businesses, and by the
time he was in college he was making money selling pizzas out of his Harvard dorm room.
Another entrepreneurial student, Alfred Lin, bought pizzas from Hsieh and resold them by
the slice, making a nice profit. Hsieh and Lin quickly became friends.
After Harvard, Hsieh founded LinkExchange in 1996, a company that helped small busi-
nesses exchange banner ads. A mere two years later, Hsieh sold LinkExchange to Microsoft
for $265 million. Using the profits from the sale, Hsieh and Lin formed a venture capital
company that invested in start-up businesses. One investment that caught their attention
was Zappos, an online etailer of shoes. Both entrepreneurs viewed the $40 billion shoe
market as an opportunity they could not miss, and in 2000 Hsieh took over as Zappos’ CEO
with Lin as his chief financial officer.
Today, Zappos is leading its market and offering an enormous selection of more than
90,000 styles of handbags, clothing, and accessories for more than 500 brands. One reason
for Zappos’ incredible success was Hsieh’s decision to use the advertising and market-
ing budget for customer service, a tactic that would not have worked before the Internet.
Zappos’ passionate customer service strategy encourages customers to order as many
sizes and styles of products as they want, ships them for free, and offers free return ship-
ping. Zappos encourages customer communication, and its call center receives more than
5,000 calls a day with the longest call to date lasting more than four hours.
Zappos’ extensive inventory is stored in a warehouse in Kentucky right next to a UPS
shipping center. Only available stock is listed on the website, and orders as late as 11 P.M.
are still guaranteed next-day delivery. To facilitate supplier and partner relationships,
Zappos built an extranet that provides its vendors with all kinds of product information, such
as items sold, times sold, price, customer, and so on. Armed with these kinds of details,
suppliers can quickly change manufacturing schedules to meet demand.
Zappos Culture
Along with valuing its partners and suppliers, Zappos also places a great deal of value on
its employee relationships. Zappos employees have fun, and walking through the offices
you will see all kinds of things not normally seen in business environments—bottle-cap
pyramids, cotton-candy machines, and bouncing balls. Building loyal employee relation-
ships is a critical success factor at Zappos, and to facilitate this relationship the corporate
baL76892_ch08_296-340.indd 298baL76892_ch08_296-340.indd 298 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
299Enterprise MIS Module 3
headquarters are located in the same building as the call center (where most employees
work) in Las Vegas. All employees receive 100 percent company-paid health insurance along
with a daily free lunch.
Of course, the Zappos culture does not work for everyone, and the company pays to find
the right employees through “The Offer,” which extends to new employees the option of quit-
ting and receiving payment for time worked plus an additional $1,000 bonus. Why the $1,000
bonus for quitting? Zappos management believes that is a small price to pay to find those
employees who do not have the sense of commitment Zappos requires. Less than 10 percent
of new hires take The Offer.
Zappos’ unique culture stresses the following:
1. Delivering WOW through service.
2. Embracing and driving change.
3. Creating fun and a little weirdness.
4. Being adventurous, creative, and open-minded.
5. Pursuing growth and learning.
6. Building open and honest relationships with communication.
7. Building a positive team and family spirit.
8. Doing more with less.
9. Being passionate and determined.
10. Being humble.
Zappos’ Sale to Amazon
Amazon.com purchased Zappos for $880 million. Zappos employees shared $40 million in
cash and stock, and the Zappos management team remained in place. Having access to
Amazon’s world-class warehouses and supply chain is sure to catapult Zappos’ revenues,
though many wonder whether the Zappos culture will remain. It’ll be interesting to watch! 1
baL76892_ch08_296-340.indd 299baL76892_ch08_296-340.indd 299 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
300 Chapter 8 Enterprise Applications: Business Communications
section 8.1 Supply Chain Management
L E A R N I N G O U T C O M E S
8.1 Explain integrations and the role they play in connecting a corporation.
8.2 Describe supply chain management along with its associated benefits and challenges.
BUILDING A CONNECTED CORPORATION
THROUGH INTEGRATIONS
Until the 1990s, each department in the United Kingdom’s Ministry of Defense and Army
headquarters had its own information system, and each system had its own database.
Sharing information was difficult, requiring employees to manually input the same infor-
mation into different systems multiple times. Often, management could not even com-
pile the information it needed to answer questions, solve problems, and make decisions.
To combat this challenge the ministry integrated its systems, or built connections
among its many databases. These connections or integrations allow separate sys-
tems to communicate directly with each other, eliminating the need for manual entry
into multiple systems. Building integrations allows the sharing of information across
databases along with dramatically increasing its quality. The army can now generate
reports detailing its state of readiness and other essential intelligence, tasks that were
nearly impossible before the integrations. Eintegration is the use of the Internet to pro-
vide customers with the ability to gain personalized information by querying corporate
databases and their information sources. Application integration is the integration of a
company’s existing management information systems. Data integration is the integra-
tion of data from multiple sources, which provides a unified view of all data.
Two common methods are used for integrating databases. The first is to create for-
ward and backward integrations that link processes (and their underlying databases) in
the value chain. A forward integration takes information entered into a given system
and sends it automatically to all downstream systems and processes. A backward inte-
gration takes information entered into a given system and sends it automatically to all
upstream systems and processes. Figure 8.1 demonstrates how this method works across
the systems or processes of sales, order entry, order fulfillment, and billing. In the order
entry system, for example, an employee can update the customer’s information. Via the
integrations, that information is sent upstream to the sales system and downstream to the
order fulfillment and billing systems. Ideally, an organization wants to build both forward
LO 8.1: Explain integrations
and the role they play in connecting
a corporation.
FIGURE 8.1
A Forward and Backward
Customer Information
Integration Example
Forward integration of
customer information
Backward integration of
customer information
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
Sales System
Order Entry
System
Order Fulfillment
System Billing System
baL76892_ch08_296-340.indd 300baL76892_ch08_296-340.indd 300 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
301Enterprise MIS Module 3
and backward integrations, which provide the flexibility to create, update, and delete
information in any of the systems. However, integrations are expensive and difficult to
build and maintain, causing most organizations to invest in forward integrations only.
The second integration method builds a central repository for a particular type of
information. Figure  8.2 provides an example of customer information integrated using
this method across four different systems in an organization. Users can create, update,
and delete customer information only in the central customer database. As users perform
these tasks, integrations automatically send the new and/or updated customer informa-
tion to the other systems. The other systems limit users to read-only access of the customer
information stored in them. Both integration methods do not entirely eliminate informa-
tion redundancy, but they do ensure information consistency among multiple systems.
Integration Tools
Enterprise systems provide enterprisewide support and data access for a firm’s opera-
tions and business processes. These systems can manage customer information across
the enterprise, letting you view everything your customer has experienced from sales to
support. Enterprise systems are often available as a generic, but highly customizable,
group of programs for business functions such as accounting, manufacturing, and mar-
keting. Generally, the development tools for customization are complex programming
tools that require specialist capabilities.
Enterprise application integration (EAI) connects the plans, methods, and tools
aimed at integrating separate enterprise systems. A legacy system is a current or existing
system that will become the base for upgrading or integrating with a new system. EAI
reviews how legacy systems fit into the new shape of the firm’s business processes and
devises ways to efficiently reuse what already exists while adding new systems and data.
Integrations are achieved using middleware —several different types of software that
sit between and provide connectivity for two or more software applications. Middleware
translates information between disparate systems. Enterprise application integration
(EAI) middleware takes a new approach to middleware by packaging commonly used
applications together, reducing the time needed to integrate applications from multiple
vendors. The remainder of this chapter covers the three enterprise systems most organi-
zations use to integrate their disparate departments and separate operational systems:
supply chain management (SCM), customer relationship management, and enterprise
resource planning (see Figure 8.3 ).
FIGURE 8.2
Integrating Customer
Information among Databases
Sales System
Order Entry
System
Order Fulfillment
System
Customer Information
System
Billing System
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
PB0092
Craig Schultz
baL76892_ch08_296-340.indd 301baL76892_ch08_296-340.indd 301 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
302 Chapter 8 Enterprise Applications: Business Communications
SUPPLY CHAIN MANAGEMENT
The average company spends nearly half of every dollar it earns on suppliers and raw
materials to manufacture products. It is not uncommon to hear of critical success fac-
tors focusing on getting the right products, to the right place, at the right time, at the
right cost. For this reason, tools that can help a company source raw materials, man-
ufacture products, and deliver finished goods to retailers and customers are in high
demand. A supply chain consists of all parties involved, directly or indirectly, in obtain-
ing raw materials or a product. Figure 8.4 highlights the five basic supply chain activities
a company undertakes to manufacture and distribute products. To automate and enable
sophisticated decision making in these critical areas, companies are turning to systems
that provide demand forecasting, inventory control, and information flows between sup-
pliers and customers.
Supply chain management (SCM) is the management of information flows between
and among activities in a supply chain to maximize total supply chain effectiveness and
corporate profitability. In the past, manufacturing efforts focused primarily on quality
improvement efforts within the company; today these efforts reach across the entire
supply chain, including customers, customers’ customers, suppliers, and suppliers’ sup-
pliers. Today’s supply chain is an intricate network of business partners linked through
communication channels and relationships. Supply chain management systems man-
age and enhance these relationships with the primary goal of creating a fast, efficient,
and low-cost network of business relationships that take products from concept to
market. SCM systems create the integrations or tight process and information linkages
between all participants in the supply chain. Supply chain management performs three
main business processes (see Figure 8.5 ):
1. Materials flow from suppliers and their upstream suppliers at all levels.
2. Materials are transformed into semifinished and finished products—the organiza-
tion’s own production processes.
3. Products are distributed to customers and their downstream customers at all levels.
Consider a customer purchasing a mountain bike from a dealer. Dozens of steps are
required to complete this transaction from beginning to end. The customer places an
order with the dealer. The dealer purchases the bike from the manufacturer. The manu-
facturer purchases the raw materials required to make the bike such as aluminum, rub-
ber tires, brakes, accessories, and packaging from different suppliers. The raw materials
are stored in the manufacturer’s warehouse until a production order requires the bike
to be built, at which time the finished product is sent to the dealer or, in some cases,
directly to the customer. The supply chain for a bike manufacturer includes all processes
and people required to fulfill the customer’s order (see Figure 8.6 ).
LO 8.2: Describe supply chain man-
agement along with its associated
benefits and challenges.
FIGURE 8.3
The Three Primary Enterprise
Systems
Supply Chain
Management
Customer
Relationship
Management Enterprise
Resource
Planning
baL76892_ch08_296-340.indd 302baL76892_ch08_296-340.indd 302 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
303Enterprise MIS Module 3
Walmart and Procter & Gamble (P&G) have implemented a successful SCM system
that links Walmart’s distribution centers directly to P&G’s manufacturing centers (see
Figure  8.7 ). The customer generates order information by purchasing a product from
Walmart. Walmart supplies the order information to its warehouse or distributor. The
warehouse or distributor transfers the order information to P&G, which provides pricing
and availability information to the store and replenishes the product to the distributor.
Payment is transferred electronically. Effective and efficient supply chain management
systems can enable an organization to have these impacts on Porter’s Five Forces Model 2 :
■ Decrease the power of its buyers.
■ Increase its supplier power.
■ Increase buyers’ switching costs to reduce the threat of substitute products or services.
■ Create entry barriers to reduce the threat of new entrants.
■ Increase efficiencies while seeking a competitive advantage through cost leadership
(see Figure 8.8 ).
THE BENEFITS OF SCM
Better forecasts for tomorrow result in better preparedness today. Technology advances
have significantly improved the ability to perform the five basic supply chain activi-
ties such as access to advanced modeling and simulation tools that can combine
FIGURE 8.4
The Five Basic Supply Chain
Activities
PLAN
SOURCE
MAKE
DELIVER
RETURN
Prepare to manage
all resources required
to meet demand
Build relationships
with suppliers to
procure raw materials
Manufacture
products and create
production schedules
Plan for
transportation of
goods to customers
Support
customers and
product returns
baL76892_ch08_296-340.indd 303baL76892_ch08_296-340.indd 303 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
304 Chapter 8 Enterprise Applications: Business Communications
FIGURE 8.5
A Typical Supply Chain
Suppliers’
Supplier Supplier
Upstream
Manufacturer Distributor Retailer Customer Customers’Customer
Suppliers’
Supplier
Customers’
Customer
Suppliers’
Supplier
Customers’
Customer
Downstream
FIGURE 8.6
Supply Chain for a Bike
Manufacturer
Distribution of
Finished Bikes
to Retailers
Bike
Production
Aluminum Manufacturer
Tire Manufacturer
Brake Manufacturer
Packaging Manufacturer
Bike Accessory
Manufacturers
CustomerRaw Materials
Storage
Retailer
information from multiple sources to build forecasts that look days, weeks, and months
ahead. It is now common, for instance, for suppliers to participate in product develop-
ment and for retailers to contribute to marketing campaigns. Considerable evidence
shows that supply chain integration results in superior supply chain capabilities, which
drives a firm’s profitability. Although firms have dreamed of integrating their sup-
ply chains for a long time, it is only recently that advances in MIS have brought these
dreams to life. Improved visibility across the supply chain and increased profitability
for the firm are the primary business benefits received when implementing supply
chain management systems.
baL76892_ch08_296-340.indd 304baL76892_ch08_296-340.indd 304 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
305Enterprise MIS Module 3
Improved Visibility
Supply chain visibility is the ability to view all areas up and down the supply chain in
real time. To react to demand, an organization needs to know all customer events trig-
gered upstream and downstream and so must their suppliers and their suppliers’ sup-
pliers. Without this information, supply chain participants are blind to the supply and
demand needs occurring in the marketplace, a factor required to implement successful
business strategies. To improve visibility across the supply chain, firms can use supply
chain planning systems and supply chain execution systems. Supply chain planning
systems use advanced mathematical algorithms to improve the flow and efficiency of the
supply chain while reducing inventory. To yield accurate results, however, supply chain
planning systems require information inputs that are correct and up-to-date regarding
customers, orders, sales, manufacturing, and distribution capabilities.
Ideally, the supply chain consists of multiple firms that function as efficiently and
effectively as a single firm, with full information visibility. Supply chain execution sys-
tems ensure supply chain cohesion by automating the different activities of the supply
chain. For example, a supply chain execution system might electronically route orders
from a manufacturer to a supplier using electronic data interchange (EDI) , a standard
format for the electronic exchange of information between supply chain participants.
Figure 8.9 details how supply chain planning and supply chain execution systems inter-
act with the supply chain.
A good example of inventory issues that occur when a company does not have a clear
vision of its entire supply chain is the bullwhip effect. The bullwhip effect occurs when
FIGURE 8.7
Supply Chain for a Product
Purchased from Walmart
Procter &
Gamble
Walmart
Warehouse
or Distributor
Indicates information flows for products,
pricing, scheduling, and availability
Paper
Manufacturer
Packaging
Supplier
Scented Oil
Manufacturer
Cocoa Oil
Manufacturer
Walmart
Store Customer
FIGURE 8.8
Effective and Efficient Supply
Chain Management’s Effect on
Porter’s Five Forces
Decrease
Increase
Organization’s
Supply Chain
• Supplier power
• Buyer power
• Threat of substitute
products or services
• Threat of new
entrants
baL76892_ch08_296-340.indd 305baL76892_ch08_296-340.indd 305 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
306 Chapter 8 Enterprise Applications: Business Communications
distorted product-demand information ripples from one partner to the next throughout
the supply chain. The misinformation regarding a slight rise in demand for a product
could cause different members in the supply chain to stockpile inventory. These changes
ripple throughout the supply chain, magnifying the issue and creating excess inventory
and costs for all. For example, if a car dealership is having a hard time moving a particu-
lar brand of car, it might offer significant discounts to try to move the inventory. Without
this critical information, the car manufacturer might see a rise in demand for this par-
ticular brand of car and increase production orders, not realizing that the dealerships are
actually challenged with selling the inventory. Today, integrated supply chains provide
managers with the visibility to see their suppliers’ and customers’ supply chains, ensur-
ing that supply always meets demand.
Increased Profitability
Supply chain management systems can increase profitability across an organization.
For example, a manufacturing plant manager might focus on keeping the inventory of
Product A as low as possible, which will directly reduce the manufacturing costs and
make the plant manager look great. However, the plant manager and the business might
not realize that these savings are causing increased costs in other areas, such as having
to pay more to procure raw materials for immediate production needs or increasing
costs due to expedited shipping services. Only an end-to-end view or an integrated sup-
ply chain would uncover these issues, allowing a firm to adjust business strategies to
increase profitability across the enterprise.
Customers are also more demanding than ever before. Because information is so
readily available, they know exactly what they want, when they want it, and how they
want it delivered. If your company can’t meet their demand, the competition is simply a
mouse-click away. Couple supply chain complexity with today’s demanding customers
and a firm’s costs can easily escalate out of control. Demand planning systems generate
demand forecasts using statistical tools and forecasting techniques, so companies
can respond faster and more effectively to consumer demands through supply chain
enhancements. Firms are implementing demand planning systems to understand
customer demand and production capabilities so they can estimate supply chain costs
that ultimately impact the firm’s performance and business strategies. Innovative
wireless technologies, such as radio-frequency identification (RFID), are also enabling
companies to operate with improved speed and accuracy, ensuring that they can satisfy
continuously changing customer demands.
FIGURE 8.9
Supply Chain Planning’s and
Supply Chain Execution’s Roles
in the Supply Chain
Supply Chain Planning
Information Flows
Payment Flows
Supply Chain Execution
Supplier Manufacturer Distributor Retailer Customer
baL76892_ch08_296-340.indd 306baL76892_ch08_296-340.indd 306 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
307Enterprise MIS Module 3
A supply chain is only as strong as its weakest link. Companies use supply chain man-
agement metrics to measure the performance of supply chains to quickly identify weak
links. A few of the common supply chain management metrics include:
■ Back order: An unfilled customer order for a product that is out of stock.
■ Inventory cycle time: The time it takes to manufacture a product and deliver it to
the retailer.
■ Customer order cycle time: The agreed upon time between the purchase of a prod-
uct and the delivery of the product.
■ Inventory turnover: The frequency of inventory replacement.
THE CHALLENGES OF SCM
The primary challenges associated with supply chain management include costs and
complexity. Supply chain management systems can cost millions of dollars for the soft-
ware and millions of dollars more for help with the implementation. Just walk into any
manufacturing plant, distribution center, or factory floor and you will witness the com-
plexity and costs associated with supply chain management. Supply chains cross entire
organizations touching multiple departments and spanning organizationwide busi-
ness processes. Revamping just a single business process can be difficult for a company.
Revamping all business processes that touch the supply chain is an incredibly difficult
and complex task but is typically required for the SCM system to become effective. And,
to top it all off, the supply chain reaches beyond the borders of the organization into
partner, supplier, and customer domains, adding another layer of complexity for SCM.
A lack of adequate collaboration among marketing, sales, and manufacturing within a
company and suppliers, partners, and distributors outside of a company can easily sabo-
tage SCM efforts sending the multimillion-dollar investment down the drain.
The move toward globalization is also increasing supply chain complexity. As supply
chains span geographical locations, issues such as time zone differences, transportation
fees, cultural and language barriers, and exchange rates all add additional layers to the
already complex supply chain. Government relationships, taxes, and local laws also tend
to differ across global regions, creating more confusion and issues in supplier relation-
ships. The bottom line is that SCM systems are complex and costly and implementing
them correctly can be challenging even for the most sophisticated organization.
BUSINESS DRIVEN ETHICS AND SECURITY
Zappos, Staples, and Amazon are just a few of the companies taking advantage
of the latest innovation in warehouse management by replacing traditional
order fulfillment technologies such as conveyor belts with little orange robots.
The Kiva Mobile Fulfillment System (Kiva MFS) takes advantage of a unique
order fulfillment system that improves productivity, speed, accuracy, and flex-
ibility. Watching an order fulfillment center equipped with Kiva MFS robots is
amazing; the operators stand still while the products come to them. Inventory
pods store the products that are carried and transferred by a small army of little
orange robots, eliminating the need for traditional systems such as conveyors
and sorters. 3
What impact could Kiva MFS have on visibility and profitability of the supply
chain? How would your warehouse employees react if you told them you were
looking at implementing Kiva robots? What ethical issues arise in the replace-
ment of human labor with robots? What security concerns could a company
face when implementing Kiva MFS robots?
Kiva’s Robots
APPLY YOUR KNOWLEDGE
baL76892_ch08_296-340.indd 307baL76892_ch08_296-340.indd 307 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
308 Chapter 8 Enterprise Applications: Business Communications
THE FUTURE OF SCM
There is a great commercial that depicts the future of supply chain management. A man
wearing a uniform is walking through a home and quietly replaces an empty cereal box
with a full one just as the child opens the kitchen cabinet. He then produces a new bag of
dog food as soon as the hungry dog’s bowl is empty and finally reaches into the shower
to hand a new bottle of shampoo to the man in the shower who had just run out. The
next wave in supply chain management will be home-based supply chain fulfillment. No
more running to the store to replace your products as your store will come to you as soon
as you need a new product.
Walgreens is differentiating itself from other national chains as the family’s just-in-
time supplier, developing custom websites for each household that allow families to order
electronically and then pick up their goods at a self-service counter or drive-through win-
dow at their convenience. Walgreens even calls its customers to let them know their pre-
scription medications are soon going to run out and offers to fulfill the new prescription.
As the supply chain management market matures, it is becoming even more
sophisticated and incorporating additional functionality such as marketing, cus-
tomer service, and even product development to its extended supply chain. Advanced
communications tools, easy-to-use decision support systems, and building trust among
participants when sharing information are all making the home-based supply chain
possible. A few of the fastest-growing SCM components include:
■ Collaborative demand planning —reduces inventory investments, while improving
customer satisfaction.
■ Collaborative engineering —reduces product development costs.
■ Selling chain management —automates order processes from initial customer
inquiry to final product delivery.
■ Supply chain event management (SCEM) —increases real-time information
sharing among supply chain partners focusing on reducing response time to
unexpected events.
BUSINESS DRIVEN DEBATE
Lines at the post office are frustrating, and they are also becoming unprofitable
as the U.S. Postal Service faces billion-dollar losses for the first time in its his-
tory. What is causing this failure? It could be any number of things, but ebusi-
ness competition is one of the primary challengers stealing the Postal Service’s
market share. Stamps.com allows you to customize and print your own stamps
24 hours a day. If you are getting married, you can place your engagement
picture on the stamp for the invitations. If you are starting your own business,
you can purchase stamps showing your business logo. And, Stamps.com goes
beyond simply delivering a product by tracking customer spending and recom-
mending optimal delivery methods along with postage discounts. Now that is
something you can’t get at the post office. Talk about a competitive advantage! 4
Why do you think the U.S. Postal Service is losing its market share and becom-
ing unprofitable? What does the Postal Service’s supply chain look like? Who
are its partners, suppliers, distributors, and customers? What can the Postal
Service do to revamp its supply chain so it can become profitable? Many people
believe the Postal Service should not be supported by the government, and that
if it can’t operate efficiently it should fail. Do you agree? Why or why not?
Fixing the
Post Office
APPLY YOUR KNOWLEDGE
baL76892_ch08_296-340.indd 308baL76892_ch08_296-340.indd 308 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
309Enterprise MIS Module 3
section 8.2 Customer Relationship Management and Enterprise Resource Planning
L E A R N I N G O U T C O M E S
8.3 Describe customer relationship management along with its associated benefits and challenges.
8.4 Describe enterprise resource planning along with its associated benefits and challenges.
CUSTOMER RELATIONSHIP MANAGEMENT
Today, most competitors are simply a mouse-click away, and this intense competition is
forcing firms to switch from sales-focused business strategies to customer-focused busi-
ness strategies. Customers are one of a firm’s most valuable assets, and building strong
loyal customer relationships is a key competitive advantage. Harley-Davidson offers an
excellent example of a company that knows the value of customer loyalty, and it finds
itself in the coveted position of demand outweighing its supply. No other motorcycle
in the world has the look, feel, and sound of a Harley-Davidson. Demand for Harley-
Davidson motorcycles outweighs supply and some models have up to a two-year waiting
list. Knowing the value of its customers, Harley-Davidson started the Harley’s Owners
Group (HOG), which is the largest motorcycle club in the world with more than 600,000
members. HOG offers a wide array of events, rides, and benefits to its members and is a
key competitive advantage as it helps to build a strong sense of community among Har-
ley-Davidson owners. Harley-Davidson has built a customer following that is extremely
loyal, a difficult task to accomplish in any industry. 5
Customer relationship management (CRM) is a means of managing all aspects of
a customer’s relationship with an organization to increase customer loyalty and reten-
tion and an organization’s profitability. CRM allows an organization to gain insights into
customers’ shopping and buying behaviors. Every time a customer communicates with
a company, the firm has the chance to build a trusting relationship with that particu-
lar customer. Harley-Davidson realizes that it takes more than just building and selling
motorcycles to fulfill the dreams of its loyal customers. For this reason, the company
strives to deliver unforgettable experiences along with its top-quality products. When
the company began selling products online it found itself facing a dilemma—its online
strategy for selling accessories directly to consumers would bypass Harley-Davidson’s
dealers, who depend on the higha-margin accessories for store revenues. The solution
was to deploy Harley-Davidson.com , which prompts customers to select a participating
Harley-Davidson dealership before placing any online orders. The selected dealership is
then responsible for fulfilling the order. This strategy ensured that the dealers remained
the focus point of each customer’s buying experiences. To guarantee that every customer
has a highly satisfying online buying experience, the company asks the dealers to agree
to a number of standards including:
■ Checking online orders twice daily.
■ Shipping online orders within 24 hours.
■ Responding to customer inquiries within 24 hours. 6
Harley-Davidson still monitors online customer metrics such as time taken to process
orders, number of returned orders, and number of incorrect orders, guaranteeing that
the company delivers on its critical success factor of providing prompt, excellent cus-
tomer service consistently to all its loyal customers.
A primary component of managing a customer relationship is knowing when and
why the customer is communicating with the company. Imagine an irate customer that
has just spent an hour on the phone with your call center complaining about a defec-
tive product. While the customer is on the phone, your sales representative decides to
LO 8.3: Describe customer relation-
ship management along with its
associated benefits and challenges.
baL76892_ch08_296-340.indd 309baL76892_ch08_296-340.indd 309 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
310 Chapter 8 Enterprise Applications: Business Communications
FIGURE 8.10
Customer Relationship
Management Overview
Customer
Service
System
Inventory
System
Order
Fulfillment
System
Accounting
System
Customer Relationship Management System
Customer information flows
are represented by arrows.
drop by the customer’s office in an attempt to sell additional products. Obviously, this
is not the ideal time to try to up-sell or cross-sell products to this particular customer.
A customer relationship management system would inform the sales representative that
the customer was on the phone with customer service and even provide details of the
call. Then your sales representative could stop by and offer assistance in resolving the
product issue, which might help restore the relationship with the customer and provide
opportunities for future sales.
The complicated piece of this puzzle is that customers have many communication
channels they can use to contact a company including call centers, websites, email,
faxes, and telephones. To make matters even more complex, a single customer can
communicate with a firm using all of the different communication channels multiple
times. Keeping track of customer communications is important if the firm wants to con-
tinue to build and manage that relationship. A CRM system can track every form of cus-
tomer communication providing this information to all employees (see Figure  8.10 ).
The firm can then implement strategies for the best ways to communicate effectively
with each and every customer. With a CRM system a firm can obtain an overview of
the customer’s products, preferences, account information, communications, and
purchasing history, allowing it to send customized product offers, expedite shipping,
ensure satisfaction, and other marketing and sales techniques that can greatly add to
sales and profits.
baL76892_ch08_296-340.indd 310baL76892_ch08_296-340.indd 310 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
311Enterprise MIS Module 3
THE BENEFITS OF CRM
Companies that understand individual customer needs are best positioned to achieve
success. Of course, building successful customer relationships is not a new business prac-
tice; however, implementing CRM systems allows a company to operate more efficiently
and effectively in the area of supporting customer needs. CRM moves far beyond technol-
ogy by identifying customer needs and designing specific marketing campaigns tailored
to each. This enables a firm to treat customers as individuals, gaining important insights
into their buying preferences and shopping behaviors. Firms that treat their customers
well reap the rewards and generally see higher profits and highly loyal customers. Iden-
tifying the most valuable customers allows a firm to ensure that these customers receive
the highest levels of customer service and are offered the first opportunity to purchase
new products. Firms can find their most valuable customers by using the RFM formula—
recency, frequency, and monetary value. In other words, an organization must track:
■ How r ecently a customer purchased items.
■ How frequently a customer purchases items.
■ The monetary value of each customer purchase.
After gathering this initial CRM information, the firm can analyze it to identify pat-
terns and create marketing campaigns and sales promotions for different customer seg-
ments. For example, if a customer buys only at the height of the season, the firm should
send a special offer during the off-season. If a certain customer segment purchases shoes
but never accessories, the firm can offer discounted accessories with the purchase of a
new pair of shoes. If the firm determines that its top 20 percent of customers are respon-
sible for 80 percent of the revenue, it can focus on ensuring these customers are always
satisfied and receive the highest levels of customer service.
Evolution of CRM
There are three phases in the evolution of CRM: (1) reporting, (2) analyzing, and (3) pre-
dicting. CRM reporting technologies help organizations identify their customers across
other applications. CRM analysis technologies help organizations segment their cus-
tomers into categories such as best and worst customers. CRM predicting technologies
help organizations predict customer behavior, such as which customers are at risk of
leaving. Figure  8.11 highlights a few of the important questions an organization can
answer in these areas by using CRM technologies.
FIGURE 8.11
Evolution of CRM
ANALYZING
Customer Segmentation:
Asking Why It Happened
• Why did sales not meet
forecasts?
• Why was production so
low?
• Why did we not sell as
many units as previous
years?
• Who are our customers?
• Why was revenue
so high?
• Why are inventory
levels low?
PREDICTING
Customer Prediction:
Asking What Will Happen
• What customers are at
risk of leaving?
• Which products will our
customers buy?
• Who are the best
customers for a
marketing campaign?
• How do we reach our
customers?
• What will sales be this
year?
• How much inventory do
we need to preorder?
REPORTING
Customer Identification:
Asking What Happened
• What is the total
revenue by customer?
• How many units did we
make?
• What were total sales
by product?
• How many customers
do we have?
• What are the current
inventory levels?
baL76892_ch08_296-340.indd 311baL76892_ch08_296-340.indd 311 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
312 Chapter 8 Enterprise Applications: Business Communications
Operational and Analytical CRM
The two primary components of a CRM strategy are operational CRM and analytical
CRM. Operational CRM supports traditional transactional processing for day-to-day
front-office operations or systems that deal directly with the customers. Analytical CRM
supports back-office operations and strategic analysis and includes all systems that do
not deal directly with the customers. Figure 8.12 provides an overview of the two.
BUSINESS DRIVEN GLOBALIZATION
Barclays Bank, a leader in the global financial markets, maintains business
operations in more than 70 countries. Barclays chose to invest in CRM
technologies to help it gain valuable insights into its personal and business
customers, many of which carry credit cards. The purpose of the CRM system
was to predict the financial behavior of individual customers and assess
whether a customer is likely to pay back a loan in full within the agreed-upon
time period and interest rate. Surprisingly, Barclays’ CRM system quickly
identified that about 50 percent of its customers were nonprofitable, and that
90 percent of its profits were generated by fewer than 30 percent of its customers.
This valuable information allowed Barclays to revamp its offerings and
charge customers an interest rate based on risk assessment. Barclays also iden-
tifies groups of profitable customers, both on a corporate and personal level,
which it can then target for new financial products. 7
How can a business like Barclays use RFM (recency, frequency, and mone-
tary value) to improve customer relations? Provide three examples of questions
a bank would ask in each of the following categories: CRM reporting technolo-
gies, CRM analysis technologies, and CRM predicting technologies.
Banking on
Customer
Relationships
APPLY YOUR KNOWLEDGE
FIGURE 8.12
Operational CRM and Analytical
CRM
Sales
Systems
Marketing
Systems
Customer
Service
Systems
Front Office–Operational CRM
Collaborative
CRM
System
Data
Warehouse
Data
Mining
Back Office–Analytical CRM
baL76892_ch08_296-340.indd 312baL76892_ch08_296-340.indd 312 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
313Enterprise MIS Module 3
Figure 8.13 shows the different technologies marketing, sales, and customer service
departments can use to perform operational CRM.
Marketing and Operational CRM
Companies are no longer trying to sell one product to as many customers as possible;
instead, they are trying to sell one customer as many products as possible. Marketing
departments switch to this new way of doing business by using CRM technologies that
allow them to gather and analyze customer information to tailor successful market-
ing campaigns. In fact, a marketing campaign’s success is directly proportional to the
organization’s ability to gather and analyze the right customer information. The three
primary operational CRM technologies a marketing department can implement to
increase customer satisfaction are:
1. List generator.
2. Campaign management.
3. Cross-selling and up-selling.
List Generator List generators compile customer information from a variety
of sources and segment it for different marketing campaigns. These sources include
website visits, questionnaires, surveys, marketing mailers, and so on. After compiling
the customer list, it can be filtered based on criteria such as household income, gender,
education level, political facilitation, age, or other factors. List generators provide the
marketing department with valuable information on the type of customer it must target
to find success for a marketing campaign.
FIGURE 8.13
Operational CRM Technologies
Marketing
Operational CRM Technology
Sales
Operational CRM Technology
Customer Service
Operational CRM Technology
List Generator
Campaign Management
Cross-Selling and Up-Selling
Sales Management
Contact Management
Opportunity Management
Contact Center
Web-Based Self-Service
Call Scripting
baL76892_ch08_296-340.indd 313baL76892_ch08_296-340.indd 313 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
314 Chapter 8 Enterprise Applications: Business Communications
FIGURE 8.14
A Typical Sales Process
Campaign Management Campaign management systems guide users through
marketing campaigns by performing such tasks as campaign definition, planning,
scheduling, segmentation, and success analysis. These advanced systems can even cal-
culate the profitability and track the results for each marketing campaign.
Cross-Selling and Up-Selling Two key sales strategies a marketing campaign
can deploy are cross-selling and up-selling. Cross-selling is selling additional products
or services to an existing customer. For example, if you were to purchase Tim Burton’s
movie Alice in Wonderland on Amazon, you would also be asked if you want to purchase
the movie’s soundtrack or the original book. Amazon is taking advantage of cross-selling
by offering customers goods across its book, movie, and music product lines. Up-selling
is increasing the value of the sale. McDonald’s performs up-selling by asking customers
whether they would like to super-size their meals for an extra cost. CRM systems offer
marketing departments all kinds of information about customers and products, which
can help identify up-selling and cross-selling opportunities to increase revenues.
Sales and Operational CRM
Sales departments were the first to begin developing CRM systems. They had two pri-
mary motivations to track customer sales information electronically. First, sales rep-
resentatives were struggling with the overwhelming amount of customer account
information they were required to maintain and track. Second, managers found them-
selves hindered because much of their vital customer and sales information remained in
the heads of their sales representatives, even if the sales representative left the company.
Finding a way to track customer information became a critical success factor for many
sales departments. Customer service and support (CSS) is a part of operational CRM
that automates service requests, complaints, product returns, and information requests.
Figure 8.14 depicts the typical sales process, which begins with an opportunity and
ends with billing the customer for the sale. Leads and potential customers are the life-
blood of all sales organizations, whether they sell computers, clothing, consulting, or cars.
How leads are handled can make the difference between revenue growth and decline.
Sales force automation (SFA) automatically tracks all the steps in the sales process.
SFA products focus on increasing customer satisfaction, building customer relationships,
Lead sent
to salesperson
Potential
customer
contacted
Sales Process
Potential
customer
meeting
Problems and
solutions
identified
Order
fulfilled
Customer
billed
Sales order
placed
Customer
sales quote
generated
Opportunity
generated
baL76892_ch08_296-340.indd 314baL76892_ch08_296-340.indd 314 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
315Enterprise MIS Module 3
and improving product sales. The three primary operational CRM technologies a sales
department can adopt are:
1. Sales management CRM systems.
2. Contact management CRM systems.
3. Opportunity management CRM systems.
Sales Management CRM Systems Sales management CRM systems automate
each phase of the sales process, helping individual sales representatives coordinate and
organize all their accounts. Features include calendars, reminders for important tasks,
multimedia presentations, and document generation. These systems can even provide
an analysis of the sales cycle and calculate how each individual sales representative is
performing during the sales process.
Contact Management CRM Systems A contact management CRM system
maintains customer contact information and identifies prospective customers for future
sales, using tools such as organizational charts, detailed customer notes, and supple-
mental sales information. For example, a contact management system can take an
incoming telephone number and automatically display the person’s name along with a
comprehensive history including all communications with the company. This allows the
sales representative to personalize the phone conversation and ask such things as, “How
is your new laptop working, Sue?” or “How was your family vacation to Colorado?” The
customer feels valued since the sales associate knows her name and even remembers
details of their last conversation.
Opportunity Management CRM Systems Opportunity management CRM sys-
tems target sales opportunities by finding new customers or companies for future sales.
They determine potential customers and competitors and define selling efforts includ-
ing budgets and schedules. Advanced systems can even calculate the probability of a
sale, which can save sales representatives significant time and money when qualifying
new customers. The primary difference between contact management and opportunity
management is that contact management deals with existing customers and opportu-
nity management with new or potential customers.
Customer Service and Operational CRM
Most companies recognize the importance of building strong customer relationships
during the marketing and sales efforts, but they must continue this effort by build-
ing strong post-sale relationships also. A primary reason firms lose customers is due
to negative customer service experiences. Providing outstanding customer service is
challenging, and many CRM technologies can assist organizations with this important
activity. The three primary ones are:
1. Contact center.
2. Web-based self-service.
3. Call scripting.
Contact Center A contact center or call center is where customer service
representatives answer customer inquiries and solve problems, usually by email, chat,
or phone. It is one of the best assets a customer-driven organization can have because
maintaining a high level of customer support is critical to obtaining and retaining cus-
tomers. Figure  8.15 highlights a few of the services contact center systems offer.
Contact centers also track customer communication histories along with problem
resolutions—information critical for providing a comprehensive customer view to the
service representative. Representatives who can quickly comprehend the customer’s
concerns provide tremendous value to the customer and to the company. Nothing
makes frustrated customers happier than not having to explain their problems all over
again to yet another customer service representative.
baL76892_ch08_296-340.indd 315baL76892_ch08_296-340.indd 315 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
316 Chapter 8 Enterprise Applications: Business Communications
Web-Based Self-Service Web-based self-service systems allow customers to use
the web to find answers to their questions or solutions to their problems. FedEx uses
web-based self-service systems to let customers electronically track packages without
having to talk to a customer service representative. Another feature of web-based self-
service is click-to-talk functions, which allow customers to click on a button and talk
with a representative via the Internet. Powerful customer-driven features such as these
add value to any organization by providing customers with real-time information that
helps resolve their concerns.
Call Scripting Companies that market and sell highly technical products have a dif-
ficult time finding competent customer service representatives. Call scripting systems
gather product details and issue resolution information that can be automatically gener-
ated into a script for the representative to read to the customer. These systems even pro-
vide questions the representative can ask the customer to troubleshoot the problem and
find a resolution. This feature not only helps reps answer difficult questions quickly but
also presents a uniform response so customers don’t receive different answers.
Analytical CRM
Analytical CRM provides information about customers and products that was once
impossible to locate, such as which type of marketing and sales campaign to launch and
which customers to target and when. Unlike operational CRM, which automates call cen-
ters and sales forces with the aim of enhancing customer service, analytical CRM works
by using business intelligence to identify patterns in product sales and customer behav-
iors. Analytical CRM tools can slice-and-dice vast amounts of information to create cus-
tom views of customers, products, and market segments highlighting opportunities for
cross-selling and up-selling. Website personalization occurs when a website has stored
enough data about a person’s likes and dislikes to fashion offers more likely to appeal to
that person. Many marketers use CRM to personalize customer communications and
BUSINESS DRIVEN INNOVATION
New emotion-detection software called Perform, created by Nice Systems,
helps firms improve customer service by identifying callers who are displeased
or upset. Perform determines a baseline of emotion and can detect emotional
issues during the first few seconds of a call; any variation from the baseline acti-
vates an alert. When an elderly person who was highly distressed over medical
costs hung up during a phone call to the insurance company, Perform iden-
tified the customer’s frustration and automatically emailed a supervisor. The
supervisor was able to review a recording of the conversation and immediately
called the customer back suggesting ways to lower the costs. 8
How do you think emotion-detection software will affect customer relation-
ships? What other departments or business processes could benefit from its
use? Create a new product that uses emotion-detection software. What business
problem would your product solve and who would be your primary customers?
Nice Emotions
APPLY YOUR KNOWLEDGE
FIGURE 8.15
Common Services Provided by
Contact Centers
Automatic call distribution: Routes inbound calls to available agents.
Interactive voice response (IVR): Directs customers to use touch-tone phones or keywords to navigate or
provide information.
Predictive dialing: Automatically dials outbound calls and forwards answered calls to an available agent.
baL76892_ch08_296-340.indd 316baL76892_ch08_296-340.indd 316 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
317Enterprise MIS Module 3
decide which customers are worth pursuing. Here are a few examples of the information
insights analytical CRM can help an organization gain.
■ Find new profitable customers: Analytical CRM could highlight that the most prof-
itable market segment consists of women between 35 and 45 years old who drive
SUVs and live within 30 miles of the city limits. The firm could then find a way to
locate these customers for mailings and other opportunities.
■ Exceed customer expectations: Analytical CRM helps a firm move past the typical
“Dear Mr. Smith” greeting by personalizing communications. For example, if the firm
knows the customer’s favorite brand and size of shoe it can notify the customer that a
pair of size 12 Nike cross trainers are available for him to try on the next time he visits
the store.
■ Discover the activities the firm performs the best: Analytical CRM can determine
what an organization does better than its competitors. If a restaurant caters more
lunches to midsized companies than its competition does, it can purchase a special-
ized mailing targeting these customers for future mailings.
■ Eliminate competition: Analytical CRM can determine sales trends allowing the
company to provide customers with special deals outsmarting its competition.
A sports store might identify its best customers for outdoor apparel and invite them
to a private sale right before the competition runs its sale.
■ Care about customers: Analytical CRM can determine what customers want and
need, so a firm can contact them with an invitation to a private sale, reminder that a
product needs a tune-up, or send them a personalized letter along with a discount
coupon to help spark a renewed relationship.
Measuring CRM Success
Using CRM metrics to track and monitor performance is a best practice for many com-
panies. Figure 8.16 displays a few common CRM metrics a manager can use to track the
success of the system. Just remember that you only want to track between five and seven
of the hundreds of CRM metrics available.
THE CHALLENGES OF CRM
A standard rule of business states that the customer is always right. Although most
businesses use this as their motto, they do not actually mean it. Ebusiness firms must
adhere to this rule as the power of the customer grows exponentially in the information
age. Various websites and videos on YouTube reveal the power of the individual con-
sumer (see Figure   8.17 ). A decade ago if you had a complaint against a company you
could make a phone call or write a letter. Now you can contact hundreds or thousands of
people around the globe and voice your complaint or anger with a company or product.
You—the customer—can now take your power directly to millions of people and compa-
nies have to listen.
Sales Metrics Customer Service Metrics Marketing Metrics
Number of prospective customers Cases closed same day Number of marketing campaigns
Number of new customers Number of cases handled by agent New customer retention rates
Number of retained customers Number of service calls Number of responses by marketing campaign
Number of open leads Average number of service requests by type Number of purchases by marketing campaign
Number of sales calls Average time to resolution Revenue generated by marketing campaign
Number of sales calls per lead Average number of service calls per day Cost per interaction by marketing campaign
Amount of new revenue Percentage compliance with service-level
agreement
Number of new customers acquired by marketing
campaign
Amount of recurring revenue Percentage of service renewals Customer retention rate
Number of proposals given Customer satisfaction level Number of new leads by product
FIGURE 8.16
CRM Metrics
baL76892_ch08_296-340.indd 317baL76892_ch08_296-340.indd 317 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
318 Chapter 8 Enterprise Applications: Business Communications
FIGURE 8.17
The Power of the Customer
baL76892_ch08_296-340.indd 318baL76892_ch08_296-340.indd 318 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
319Enterprise MIS Module 3
BUSINESS DRIVEN START-UP
You might not want to put the fact that you won the Straightjacket Award on
your résumé unless you worked for Rackspace, a Texas company that special-
izes in hosting websites. At Rackspace, the coveted Straightjacket Award is
won by the employee who best delivers “fanatical customer support,” one of
the firm’s critical success factors. The company motivates its customer service
representatives by dividing them into teams, each responsible for its own prof-
itability. The company then measures such things as customer turnover, up-
selling, cross-selling, and referrals. The team with the highest scores wins the
Straightjacket Award and each member receives a 20 percent bonus. 9
Assume your professor has hired you as the employee relationship manager
for your class. What type of award would you create to help increase class par-
ticipation? What type of award would you create to help increase the overall
average on exams? What type of award would you create to help increase stu-
dent collaboration? Be sure to name your awards and describe their details.
Also, what type of metrics would you create to measure your awards? How
could a CRM system help you implement your awards?
Straightjacket
Customer
Service
APPLY YOUR KNOWLEDGE
THE FUTURE OF CRM
Organizations are discovering a wave of other key business areas where it is beneficial to
build strong relationships beyond customers. These include supplier relationship man-
agement (SRM), partner relationship management (PRM), and employee relationship
management (ERM).
Supplier relationship management (SRM) focuses on keeping suppliers satisfied by
evaluating and categorizing suppliers for different projects. SRM applications help com-
panies analyze suppliers based on a number of key variables including prices, inven-
tory availability, and business focus or strategies. It can then determine the best supplier
to collaborate with and develop strong relationships with to streamline processes, out-
source services, and provide products the firm could not offer alone.
Partner relationship management (PRM) discovers optimal sales channels by
selecting the right partners and identifying mutual customers. A PRM system offers real-
time sales channel information about such things as inventory availability, pricing strat-
egies, and shipping information, allowing a company to expand its market by offering
specialized products and services.
Employee relationship management (ERM) provides web-based self-service tools
that streamline and automate the human resource department. Employees are the
backbone of an enterprise and the communication channel to customers, partners, and
suppliers. Their relationship with the company is far more complex and long-lasting
than the relationship with customers, thus many enterprises are turning to ERM systems
to help retain key employees.
ENTERPRISE RESOURCE PLANNING
Today’s managers require real-time views into their businesses so they can make deci-
sions when they need to. Enterprise resource planning (ERP) integrates all depart-
ments and functions throughout an organization into a single IT system (or integrated
set of IT systems) so employees can make decisions by viewing enterprisewide informa-
tion about all business operations.
LO 8.4: Describe enterprise resource
planning along with its associated
benefits and challenges.
baL76892_ch08_296-340.indd 319baL76892_ch08_296-340.indd 319 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
320 Chapter 8 Enterprise Applications: Business Communications
Many organizations fail to maintain consistency across business operations. If a single
department, such as sales, decides to implement a new system without considering other
departments, like marketing and accounting, inconsistencies can occur throughout the
company, and operations can become discontinuous, like silos. Enterprise resource plan-
ning systems provide organizations with consistency. They allow for the effective plan-
ning and controlling of all the resources required to plan, source, make, and deliver goods
and services. Figure 8.18 shows how an ERP system takes data from across the enterprise,
consolidates and correlates it, and generates enterprisewide organizational reports.
The key word in enterprise resource planning is enterprise. At the core of an ERP sys-
tem is a central database that gathers transactional data from operational systems across
the company. Each time information is altered, it is automatically updated throughout
the entire system. For example, sales representatives can access the ERP system to view
all necessary information to process orders such as credit rating, order history, inventory
levels, and delivery schedules. Once the order is complete, the ERP system automatically
routes it to the next department in the order process, as illustrated in Figure 8.19 . ERP sys-
tems facilitate the order process, ensuring customers receive their purchases faster and
with fewer errors. ERP systems can support numerous business processes far beyond
order processing, such as employee benefits and financial reporting. An ERP system can
also support supplier and customer business processes infiltrating the entire value chain
and helping the organization achieve greater operational efficiency (see Figure 8.20 ).
THE BENEFITS OF ERP
The first generation of ERP systems focused on improving the manufacturing process
through automation, primarily addressing back-office business processes such as inven-
tory ordering and product distribution. The second generation of ERP systems extended
its reach into the front office and primarily addressed customer issues including mar-
keting and sales. The third generation of ERP systems, known as ERP-II, allows a com-
pany to compete on a functional level by adopting an enterprisewide approach using the
Internet to connect all participants in the value chain. Figure 8.21 shows how ERP has
grown to accommodate the needs of the entire organization.
The current generation of ERP, ERP-II is composed of two primary components—core
and extended. Core ERP components are the traditional components included in most
ERP systems and primarily focus on internal operations. Extended ERP components are
FIGURE 8.18
Enterprise Resource Planning
System Overview
A B C D E F
Corporate Data
Employees
Orders
Customers
Sales
Inventory
Global Shipping Report
Global Manufacturing Report
Global Sales Report
1
2
3
4
5
6
7
8
9
A B C D E FERP
baL76892_ch08_296-340.indd 320baL76892_ch08_296-340.indd 320 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
321Enterprise MIS Module 3
FIGURE 8.19
ERP Process Flow
SALES
Information
Sales
Quote
Sales
Order
WAREHOUSE
Pack and
Ship
RECEIVING
Returns
ACCOUNTING
1
2
3
Payment
Billing
BUSINESS DRIVEN MIS
Classic Cars Inc. operates high-end automotive dealerships that offer luxury
cars along with luxury service. The company is proud of its extensive inven-
tory, top-of-the-line mechanics, and especially its exceptional service, which
includes operating a cappuccino bar at each dealership.
The company currently has 40 sales representatives at four locations. Each
location maintains its own computer systems, and all sales representatives have
their own contact management systems. This splintered approach to opera-
tions causes numerous problems in customer communication, pricing strategy,
and inventory control, such as:
■ A customer can get different quotes at different dealerships for the same car.
■ Sales representatives frequently steal each other’s customers and
commissions.
■ Sales representatives send their customers to other dealerships to see
specific cars that turn out not to be on the lot.
■ Marketing campaigns are typically generic and not designed to target
specific customers.
■ If a sales representative quits, all his or her customer information is lost.
You work for Customer One, a small consulting company that specializes in
enterprisewide strategies. The owner of Classic Cars Inc. has hired you to help
him formulate a strategy to put his company back on track. Develop a proposal
detailing how an ERP system can alleviate the company’s problems and create
new sales opportunities.
Classic Cars
APPLY YOUR KNOWLEDGE
baL76892_ch08_296-340.indd 321baL76892_ch08_296-340.indd 321 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
322 Chapter 8 Enterprise Applications: Business Communications
FIGURE 8.20
The Organization Before
and After ERP
Document Management
Work Flow
ERP Logistics
Sales
Financials
HR
Portal and Website
Project Management
ERP
Financials
Project Management
Portal and Website
Work Flow
Document Management
Sales
HR
Logistics
the extra components that meet organizational needs not covered by the core compo-
nents and primarily focus on external operations. Figure 8.22 provides an example of an
ERP system with its core and extended components.
Core ERP Components
The three most common core ERP components focusing on internal operations are:
1. Accounting and finance.
2. Production and materials management.
3. Human resources.
baL76892_ch08_296-340.indd 322baL76892_ch08_296-340.indd 322 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
323Enterprise MIS Module 3
FIGURE 8.21
The Evolution of ERP
• Materials Planning
• Order Entry
• Distribution
• General Ledger
• Accounting
• Shop Floor Control
• Project Management
• Knowledge Management
• Work Flow Management
• Customer Relationship Management
• Human Resource Management
• Portal Capability
• Integrated Financials
ERP
• Scheduling
• Forecasting
• Capacity Planning
• Ecommerce
• Warehousing
• Logistics
Extended ERP ERP-II
1990 2000 Present
FIGURE 8.22
Core ERP Components and
Extended ERP Components
Accounting
and
Finance
Production
and Materials
Management
Human
Resources
Core ERP Components
Customer
Relationship
Management
Supply Chain
Management
Business
Intelligence Ebusiness
Extended ERP Components
Enterprise
Resource Planning
Software
Accounting and Finance ERP Components Accounting and finance ERP com-
ponents manage accounting data and financial processes within the enterprise with func-
tions such as general ledger, accounts payable, accounts receivable, budgeting, and asset
management. One of the most useful features of an ERP accounting/finance component
is credit management. Most organizations manage their relationships with customers by
setting credit limits, or limits on how much a customer can owe at any one time. ERP finan-
cial systems correlate customers’ orders with their account balances to determine credit
availability. They also perform all types of advanced profitability modeling techniques.
baL76892_ch08_296-340.indd 323baL76892_ch08_296-340.indd 323 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
324 Chapter 8 Enterprise Applications: Business Communications
Production and Materials Management ERP Components Production
and materials management ERP components handle production planning and execu-
tion tasks such as demand forecasting, production scheduling, job cost accounting, and
quality control. Demand forecasting helps determine production schedules and materials
purchasing. A company that makes its own product prepares a detailed production sched-
ule, and a company that buys products for resale develops a materials requirement plan.
Human Resources ERP Components Human resources ERP components
track employee information including payroll, benefits, compensation, and performance
assessment and ensure compliance with all laws. They even allow the organization to
perform detailed employee analysis, such as identifying who is likely to leave the com-
pany unless additional compensation or benefits are provided, and whether the most
talented people are working in areas where they can have the greatest impact. Human
resource components can also identify which employees are using which resources,
such as online training and long-distance telephone services.
Extended ERP Components
Extended ERP components meet the organizational needs not covered by the core com-
ponents and primarily focus on external operations. Many are Internet-enabled and
require interaction with customers, suppliers, and business partners outside the organi-
zation. The four most common extended ERP components are:
1. Business intelligence.
2. Customer relationship management.
3. Supply chain management.
4. Ebusiness.
Business Intelligence ERP Components Many organizations have found that
ERP tools can provide even greater value with the addition of powerful business intel-
ligence systems. The business intelligence components of ERP systems typically collect
information used throughout the organization (including data used in many other ERP
components), organize it, and apply analytical tools to assist managers with decisions.
Data warehouses are one of the most popular extensions to ERP systems.
Customer Relationship Management ERP Components ERP vendors now
include additional functionality that provides services formerly found only in CRM
systems. The CRM components in ERP systems include contact centers, sales force
automation, and advanced marketing functions. The goal is to provide an integrated
view of customer data, enabling a firm to effectively manage customer relationships by
responding to customer needs and demands while identifying the most (and least) valu-
able customers so the firm can better allocate its marketing resources.
Supply Chain Management ERP Components ERP vendors are expanding
their systems to include SCM functions that manage the information flows between and
among supply chain stages, maximizing total supply chain effectiveness and profitabil-
ity. SCM components allow a firm to monitor and control all stages in the supply chain
from the acquisition of raw materials to the receipt of finished goods by customers.
Ebusiness ERP Components The newest extended ERP components are the
ebusiness components that allow companies to establish an Internet presence and
fulfill online orders. Two of the primary features of ebusiness components are elogis-
tics and eprocurement. Elogistics manages the transportation and storage of goods.
Eprocurement is the business-to-business (B2B) online purchase and sale of supplies
and services. A common mistake many businesses make is jumping into online business
without properly integrating the entire organization on the ERP system. One large toy
baL76892_ch08_296-340.indd 324baL76892_ch08_296-340.indd 324 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
325Enterprise MIS Module 3
manufacturer announced less than a week before Christmas that it would be unable
to fulfill any of its online orders. The company had all the toys in the warehouse, but it
could not organize the basic order processing function to get the toys delivered to con-
sumers on time.
Measuring ERP Success
One of the best methods of measuring ERP success is the balanced scorecard, created
by Dr. Robert Kaplan and Dr. David Norton, both from the Harvard Business School. The
balanced scorecard is a management system, as well as a measurement system, that
a firm uses to translate business strategies into executable tasks. It provides feedback
for both internal and external business processes, allowing continuous improvement.
Kaplan and Norton describe the balanced scorecard as follows: “The balanced score-
card retains traditional financial measures. But financial measures tell the story of
past events, an adequate story for industrial age companies for which investments in
long-term capabilities and customer relationships were not critical for success. These
financial measures are inadequate, however, for guiding and evaluating the journey that
information age companies must make to create future value through investment in cus-
tomers, suppliers, employees, processes, technology, and innovation.” 10 The balanced
scorecard uses four perspectives to monitor an organization:
1. The learning and growth perspective.
2. The internal business process perspective.
3. The customer perspective.
4. The financial perspective (see Figure 8.23 ).
FIGURE 8.23
The Four Primary Perspectives
of the Balanced Scorecard Financial
O
bj
ec
tiv
es
M
ea
su
re
s
Ta
rg
et
s
In
iti
at
iv
es
“To succeed
financially, how
should we
appear to our
shareholders?”
Learning and
Growth
O
bj
ec
tiv
es
M
ea
su
re
s
Ta
rg
et
s
In
iti
at
iv
es“To achieve our
vision, how will
we sustain our
ability to
change and
improve?”
Customer
O
bj
ec
tiv
es
M
ea
su
re
s
Ta
rg
et
s
In
iti
at
iv
es
“To achieve our
vision, how
should we
appear to our
customers?”
Internal Business
Processes
O
bj
ec
tiv
es
M
ea
su
re
s
Ta
rg
et
s
In
iti
at
iv
es“To satisfy our
shareholders
and customers,
what business
processes must
we excel at?”
Vision
and
Strategy
baL76892_ch08_296-340.indd 325baL76892_ch08_296-340.indd 325 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
326 Chapter 8 Enterprise Applications: Business Communications
BUSINESS DRIVEN DISCUSSION
At Flavors, a premium coffee shop, customers receive more than just a great
cup of coffee—they also get exposure to music, art, literature, and town events.
Flavors offers the following:
■ Music center—information about all live music events occurring in the area
and an open microphone two nights a week for local musicians.
■ Art gallery—a space in the store filled with great pieces from local artists.
■ Book clubs—a way for customers to meet to discuss current and classic
literature.
■ Coffee sampler—free tastings in which experts showcase coffees from
around the world.
■ Community calendar—weekly meetings to help customers find ways to
become more involved in their community.
■ Brewing courses—lessons in the finer details of the brewing, grinding, and
blending equipment for sale in Flavor stores, from the traditional press to a
digital espresso machine. Also includes a trouble-shooting guide developed
by brewing specialists.
Flavors’ sales are great and profits are soaring; however, operations need an
overhaul. The following is a quick look at Flavors’ current nonfood offerings.
■ Flavors does not receive any information about how many customers attend
live events in the music center. Musicians typically maintain a fan email list
and CD sales records for the event; however, they don’t always provide this
information to the store.
■ The art gallery is run by several local artists who pay Flavors a small com-
mission on each sale. Flavors has no input on the art displayed in the store
or information about who purchases it.
■ Book club events are booked and run through the local bookstore, Pages
Up, which runs a tab during the meetings and pays Flavor with a check at
the end of each month. Flavors has no access to book club customer infor-
mation or sales information.
■ Coffee sampler events are run through Flavors’ primary operations.
■ Community event information is open to all members of the community.
Each event is run by a separate organization, which provides monthly event
feedback to Flavors in a variety of formats from Word to Access files.
■ Brewing and machine resource courses are run by the equipment manu-
facturers, and all customer and sales information is provided to Flavors in a
Word document at the end of each year.
Flavors’ owners want to revamp the way the company operates so they can
take advantage of enterprise systems, and they have hired you as an integra-
tion expert. They also want to gain a better understanding of how the different
events they host affect the different areas of their business. For example, should
they have more open-microphone nights and fewer book clubs? The other way
around? Currently, they have no way to tell which events result in higher sales.
Create an integration strategy so Flavors can take advantage of CRM, SCM, and
ERP across the company.
Bean
Integration
APPLY YOUR KNOWLEDGE
baL76892_ch08_296-340.indd 326baL76892_ch08_296-340.indd 326 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
327Enterprise MIS Module 3
FIGURE 8.24
Primary Uses and Business
Benefits of Strategic Initiatives
Sales, Marketing,
Customer Service
Sales Forecasts,
Sales Strategies,
Marketing CampaignsCRM
Customers, Resellers,
Partners, Suppliers,
Distributors
Market Demand,
Resource and
Capacity Constraints,
Real-Time Scheduling
SCM
Accounting, Finance,
Logistics, Production
Forecasting, Planning,
Purchasing,
Material Management,
Warehousing,
Inventory, Distribution
ERP
Primary Users Primary Business BenefitEnterprise Application
THE CHALLENGES OF ERP
One of the biggest challenges of an ERP system is cost. ERP systems contain multiple
complex components that are not only expensive to purchase, but also expensive to
implement. Costs can include the software itself, plus consulting charges, hardware
expenses, and training fees. A large firm can easily spend millions of dollars and many
years completing an ERP implementation. The biggest issue facing an ERP implemen-
tation is that it fundamentally changes the way the entire organization operates, caus-
ing employees to learn and adjust to new business processes. Many ERP failures occur
because the business managers and MIS professionals underestimate the complexity
of the planning, development, and training required with an ERP implementation. As a
manager, you must carefully assess your company’s needs and choose the right ERP sys-
tem and ensure proper support for all new processes, while avoiding too much change
too fast.
THE FUTURE OF ENTERPRISE SYSTEMS:
INTEGRATING SCM, CRM, AND ERP
Applications such as SCM, CRM, and ERP are the backbone of ebusiness, yet most
organizations today have to piece together these systems. A firm might choose its CRM
components from Siebel, SCM components from i2, and financial components and
HR management components from Oracle. Figure 8.24 identifies the general audience
and purpose for each of these applications, and Figure 8.25 shows where they are inte-
grated and the underlying premise of an integrated organization. Integrating all of these
enterprise systems allows an organization to function as a single unit meeting customer,
partner , and supplier needs.
If one application performs poorly, the entire customer value delivery system is
affected. For example, no matter how great a company is at CRM, if its SCM system does
not work and the customer never receives the finished product, the company will lose
that customer. The world-class enterprises of tomorrow must be built on world-class
applications implemented today.
baL76892_ch08_296-340.indd 327baL76892_ch08_296-340.indd 327 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
328 Chapter 8 Enterprise Applications: Business Communications
Learning Outcome 8.1: Explain integrations and the role they play in connecting a
corporation.
Integrations allow separate systems to communicate directly with each other, eliminating the need
for manual entry into multiple systems. Building integrations allows the sharing of information across
databases along with dramatically increasing its quality.
Learning Outcome 8.2: Describe supply chain management along with its associated
benefits and challenges.
A supply chain consists of all parties involved, directly or indirectly, in obtaining raw materials or a
product. To automate and enable sophisticated decision making in these critical areas, companies are
turning to systems that provide demand forecasting, inventory control, and information flows between
suppliers and customers. Supply chain management (SCM) is the management of information flows
between and among activities in a supply chain to maximize total supply chain effectiveness and
corporate profitability. In the past, manufacturing efforts focused primarily on quality improve-
ment efforts within the company; today these efforts reach across the entire supply chain, includ-
ing customers, customers’ customers, suppliers, and suppliers’ suppliers. Today’s supply chain is
an intricate network of business partners linked through communication channels and relationships.
Improved visibility across the supply chain and increased profitability for the firm are the pri-
mary business benefits received when implementing supply chain management systems. Supply
chain visibility is the ability to view all areas up and down the supply chain in real time. The primary
challenges associated with supply chain management include costs and complexity. The next wave in
supply chain management will be home-based supply chain fulfillment. No more running to the store
to replace your products as your store will come to you as soon as you need a new product.
Learning Outcome 8.3: Describe customer relationship management along with its
associated benefits and challenges.
Customer relationship management (CRM) is a means of managing all aspects of a customer’s rela-
tionship with an organization to increase customer loyalty and retention and an organization’s profit-
ability. CRM allows an organization to gain insights into customers’ shopping and buying behaviors.
L E A R N I N G O U T C O M E R E V I E W
FIGURE 8.25
Integrations between SCM,
CRM, and ERP
Accounting, Finance, Human Resources,
Purchasing, Management, Auditing,
Employees
Customers
SCM
Business
Partners,
Suppliers,
Distributors,
Resellers
ERP
Logistics,
Production,
Distribution
CRM
Marketing,
Sales,
Customer
Service
SCM
baL76892_ch08_296-340.indd 328baL76892_ch08_296-340.indd 328 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
329Enterprise MIS Module 3
Every time a customer communicates with a company, the firm has the chance to build a trusting
relationship with that particular customer.
Companies that understand individual customer needs are best positioned to achieve success.
Building successful customer relationships is not a new business practice; however, implementing
CRM systems allows a company to operate more efficiently and effectively in the area of supporting
customer needs. CRM moves far beyond technology by identifying customer needs and designing
specific marketing campaigns tailored to each.
A decade ago if you had a complaint against a company you could make a phone call or write a
letter. Now you can contact people around the globe and voice your complaint or anger with a company
or product. Companies have to listen, making CRM the primary challenge facing organizations.
Organizations are discovering a wave of other key business areas where it is beneficial to build
strong relationships beyond customers. These include supplier relationship management (SRM), part-
ner relationship management (PRM), and employee relationship management (ERM).
Learning Outcome 8.4: Describe enterprise resource planning along with its associated
benefits and challenges.
Enterprise resource planning (ERP) integrates all departments and functions throughout an organiza-
tion into a single IT system (or integrated set of IT systems) so employees can make decisions by
viewing enterprisewide information about all business operations. Enterprise resource planning sys-
tems provide organizations with consistency. They allow for the effective planning and controlling of
all the resources required to plan, source, make, and deliver goods and services.
The first generation of ERP systems focused on improving the manufacturing process through
automation, primarily addressing back-office business processes such as inventory ordering and
product distribution. The second generation of ERP systems extended its reach into the front office
and primarily addressed customer issues including marketing and sales. The third generation of ERP
systems, known as ERP-II, allows a company to compete on a functional level, adopting an enter-
prisewide approach using the Internet to connect all participants in the value chain
One of the biggest challenges of an ERP system is cost. ERP systems contain multiple complex
components that are not only expensive to purchase, but also expensive to implement. Costs can
include the software itself, plus consulting charges, hardware expenses, and training fees.
Applications such as SCM, CRM, and ERP are the backbone of ebusiness, yet most organizations
today have to piece together these systems. A firm might choose its CRM components from Siebel,
SCM components from i2, and financial components and HR management components from Oracle.
Integrating all of these enterprise systems allows an organization to function as a single unit meeting
customer, partner, and supplier needs.
1. Knowledge: Define SCM and how it can benefit Zappos.
2. Comprehension: Explain CRM and why Zappos would benefit from the implementation of a CRM
system.
3. Application: Demonstrate why Zappos would need to implement SCM, CRM, and ERP for a con-
nected corporation.
4. Analysis: Analyze the merger between Zappos and Amazon and assess potential issues for
Zappos customers.
5. Synthesis: Propose a plan for how Zappos can use Amazon’s supply chain to increase sales and
customer satisfaction.
6. Evaluate: Argue for or against the following statement: “In the electronic age customer relation-
ships are more important than ever and Zappos provides the new benchmark that all corporations
should follow.”
O P E N I N G C A S E Q U E S T I O N S
baL76892_ch08_296-340.indd 329baL76892_ch08_296-340.indd 329 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
330 Chapter 8 Enterprise Applications: Business Communications
Accounting and finance ERP
component, 323
Analytical CRM, 312
Application integration, 300
Backward integration, 300
Balanced scorecard, 325
Bullwhip effect, 305
Call scripting system, 316
Campaign management
system, 314
Click-to-talk, 316
Contact center or call center, 315
Contact management CRM
system, 315
Core ERP component, 320
CRM analysis technologies, 311
CRM predicting technologies, 311
CRM reporting technologies, 311
Cross-selling, 314
Customer relationship manage-
ment (CRM), 309
Customer service and support
(CSS), 314
Data integration, 300
Demand planning system, 306
Eintegration, 300
Electronic data interchange
(EDI), 305
Elogistics, 324
Employee relationship manage-
ment (ERM), 319
Enterprise application
integration (EAI), 301
Enterprise application
integration (EAI)
middleware, 301
Enterprise resource planning
(ERP), 319
Enterprise system, 301
Eprocurement, 324
Extended ERP component, 320
Forward integration, 300
Human resources ERP
component, 324
Integration, 300
List generator, 313
Middleware, 301
Operational CRM, 312
Opportunity management CRM
system, 315
Partner relationship management
(PRM), 319
Production and materials
management ERP
component, 324
Sales force automation (SFA), 314
Sales management CRM
system, 315
Supplier relationship management
(SRM), 319
Supply chain, 302
Supply chain execution
system, 305
Supply chain management
(SCM), 302
Supply chain planning
system, 305
Supply chain visibility, 305
Up-selling, 314
Web-based self-service
system, 316
Website personalization, 316
K E Y T E R M S
R E V I E W Q U E S T I O N S
1. How do integrations connect a corporation?
2. What is the difference between forward and backward integrations?
3. What are the five primary activities in a supply chain?
4. What is the bullwhip effect and how can it impact a supply chain and a firm’s profitability?
5. What are supply chain planning systems, supply chain execution systems, and demand plan-
ning systems?
6. What are the challenges associated with SCM systems?
7. Why are customer relationships important to an organization? Do you agree that every business
needs to focus on customers to survive in the information age?
8. What is the difference between operational and analytical CRM?
9. How can a sales department use CRM to improve operations?
10. How can a marketing department use CRM to improve operations?
11. What is the difference between customer relationship management, supplier relationship man-
agement, and employee relationship management?
12. What is an enterprise resource planning system?
13. What are the components in a core ERP system?
14. What are the components in an extended ERP system?
15. What does a company need to integrate to become connected?
baL76892_ch08_296-340.indd 330baL76892_ch08_296-340.indd 330 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
331Enterprise MIS Module 3
C L O S I N G C A S E O N E
Can Customer Loyalty Be a Bad Thing?
What happens when you find out that your business’s most faithful customers aren’t necessar-
ily the most profitable ones? The economic crisis has jolted companies into the need to redouble
efforts to foster customer loyalty. Numerous articles now tout the increased importance of giving
customers premium service in troubled times to ensure customer retention. The underlying reasoning
is simple —through their continued patronage, loyal customers help a company to weather the storm.
Without question, there is some truth to this logic. No firm can survive for long without loyal cus-
tomers. The problem, however, is that success through loyalty isn’t nearly so simple. Like most big
ideas, there are conditions where it is unarguably correct, and less popular but equally true conditions
where it is wrong.
Loyalty is a big idea. At its most basic level, it is a feeling of attachment that causes someone to
be willing to continue a relationship. And while exclusive loyalty has been replaced in customers’
hearts and minds with multiple loyalties for many if not most product categories, often greater than
50 percent of a company’s customers would classify themselves as holding some level of loyalty to
a particular company. Even if we narrow our classification of loyalty to customers who feel loyal and
give the majority of their purchases in a category to the firm, typically we find this to represent one-
third of a firm’s customers.
The fly in the ointment is that typically only 20 percent of a firm’s customers are actually profitable.
And many—often most—of a company’s profitable customers are not loyal. This presents managers
with a loyalty problem, although not one that they expect. If typically most loyal customers in a firm
aren’t profitable, how does a customer loyalty strategy ever generate a positive return on investment?
Instead of asking whether you have enough loyal customers in your customer base, you need to ask
yourself three more complex questions: (1) which loyal customers are good for the business, (2) how
do we hang onto them, and (3) how do we get more customers like them.
In this slow economy, customers in both B2B and B2C settings are naturally much more sensi-
tive to economic issues. Furthermore, companies in B2B relationships are often more reliant on their
vendor partners to help them shoulder this burden. There is nothing inherently wrong with this, and
managers need to recognize that their job is to meet customers’ needs to deserve their loyalty.
But the simple solution to improving customer loyalty in a down market is to offer price deals.
Firms that track their customer loyalty can be guaranteed that loyalty scores will increase with each
substantial decrease in price.
But that’s a bad loyalty strategy. This doesn’t mean businesses shouldn’t find ways to be more
efficient so they can pass cost savings on to customers. But price-driven loyalty is always the lowest
form of loyalty. It means the firm isn’t offering differentiated value to its customers.
The place to begin any loyalty strategy is to determine which loyal customers are profitable and
which are not. A closer examination of these two types of customers always reveals very different
reasons for their loyalty. Unprofitable loyal customers tend to be loyal for one of two reasons: (1) they
are driven by unprofitable pricing or exchange policies, or (2) they demand an excessive amount of
service that they are not willing to pay fairly to receive.
Profitable loyal customers, on the other hand, are almost always driven by differentiating aspects
of the product or service offering. The key to a successful loyalty strategy is to become clear as to
what these differentiating aspects are, and to focus on tangibly improving these elements. It is also
imperative to actively tell customers and prospective customers that these are the things the com-
pany stands for and that the firm is committed to being best at. By doing this, the best customers will
have the necessary information to clearly articulate why an organization deserves their loyalty in good
times and in bad. 11
baL76892_ch08_296-340.indd 331baL76892_ch08_296-340.indd 331 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
332 Chapter 8 Enterprise Applications: Business Communications
Questions
1. Why are customer relationships important to an organization? Do you agree that every business
needs to focus on customers to survive in the information age?
2. How can a company find its most loyal customers?
3. Choose a business (maybe Starbucks, Disney, or Nissan). Answer each of the following questions
based on your business choice.
a. Which loyal customers are good for the business?
b. How do we hang onto them?
c. How do we get more customers like them?
4. Do you agree or disagree with the following statement: “The fly in the ointment is that typically only
20 percent of a firm’s customers are actually profitable. And many—often most—of a company’s
profitable customers are not loyal.”
Got Milk? It’s Good for You—Unless It’s Contaminated!
Dong Lizhong bet that being a dairy farmer was his golden ticket out of a factory job in China.
Unfortunately, a contamination crisis in 2008 shattered his dairy business when babies mysteriously
started developing kidney stones from contaminated baby formula. A chemical called melamine, an
additive used to make plastic, was discovered in the milk supply of one of China’s third-largest dairy
producers. Four infants died from the contamination and at least 53,000 fell ill. According to the official
Xinhua news agency, officials knew about problems with the milk for months before informing the public.
China’s four largest dairy organizations, accounting for nearly half the country’s milk market, pulled
their goods off shelves. More than 20 countries, including France, India, and South Korea, banned not
only dairy products from China, but also candies, cookies, and chocolates. “This is a disastrous set-
back. I estimate that it will take one or two years to rebuild confidence in dairy products,” says Luo
Yunbo, dean of the College of Food Science & Nutritional Engineering at China Agricultural University.
The local milk-collection station in Dong Lizhong’s village discontinued purchasing milk. Farmers con-
tinued to milk their cows, but they drank the milk themselves or poured the milk into their cabbage fields.
Cutting Corners
Chinese do not traditionally drink milk. However, as the country has grown more affluent over the past
few decades, the domestic dairy industry has skyrocketed. China’s two largest dairy companies have
greatly benefited from this new trend: China Mengniu Dairy and Inner Mongolia Yili Industrial Group.
Simultaneously, numerous entrepreneurs—from dairy farmers to milk-collection station owners to
milk distributors—have jumped into the supply chain of dairy products to make their fortunes. Due to
the fierce competition within China’s dairy industry, a few companies decided to cut corners to reduce
costs, regardless of the consequences.
As Mengniu and Yili expanded at breathtaking speed, they found themselves in the unique position
where supply could not keep up with demand. According to KPMG, China consumes 25 million tons of
milk yearly, putting its dairy market ahead of France and Germany. In their quest for more raw milk,
Mengniu and Yili have expanded outside their base in the northern province of Inner Mongolia and set up
production facilities in other parts of China. Most of the quality problems in milk were found in dairy farms
in Hebei and Inner Mongolia provinces, where the competition for raw milk supplies has been the fiercest.
Most dairy farmers in Hebei province traditionally sold their milk to milk-collection stations estab-
lished by local heavyweight Sanlu. In recent years, new privately owned milk-collection stations to
buy raw milk for Mengniu and Yili started popping up next to existing stations. These new entrants
C L O S I N G C A S E T W O
baL76892_ch08_296-340.indd 332baL76892_ch08_296-340.indd 332 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
333Enterprise MIS Module 3
captured raw milk supplies by offering dairy farmers slightly higher prices. “This competition broke
the rules. As milk buyers fought over milk supplies, their standards for quality fell,” says Roger Liu,
vice chairman of American Dairy Inc., a Heilongjiang province-based powdered milk company.
Additives to Boost Protein
Many of the milking stations do not have the equipment to test milk for additives. At the Nanxincheng
station, 16 households bring their dairy cows in the area to be milked in the red brick farmhouse. The
farmers hook up the cows to a milking machine, which pumps the milk directly into a big vat. “They
didn’t test the milk here. They sent it to Sanlu for testing,” says Du Yanjun, a government inspector
who was posted to monitor the Nanxincheng station after the contamination crisis broke.
The milk is collected from the stations and shipped by middlemen to big dairy companies such
as Sanlu, which would do their own testing and grading. It now appears that unscrupulous middle-
men added melamine to the raw milk to increase protein levels in their milk samples, so their milk
would be graded higher. However, ingesting melamine can also cause kidney stones or kidney failure,
especially in infants.
Matthew Estes, president and CEO of BabyCare, had looked into switching from Australian and New
Zealand sources of milk for the company’s infant-formula business in China. BabyCare tested possible
Chinese suppliers and realized it could not locate a suitable supplier in China. “We couldn’t the find
quality that met our standards. We chose to not sell in China rather than take the risk,” he says.
Stiff Sentences
A Chinese court sentenced two of the middlemen to death and a dairy boss to life in prison for their
roles in the milk contamination scandal. The swift trial and harsh sentences show Beijing’s resolve in
tackling the country’s stubborn food safety problems and an eagerness by the communist leadership
to move past the embarrassing scandal. 12
Questions
1. List 10 products that could possibly be affected by a problem in the U.S. milk supply chain. What
would be the damages to an ice cream business that used contaminated milk in its manufacturing
process? Who do you think should be held liable for such an issue?
2. Do you think a CRM system could have helped communicate issues in the milk production supply
chain? How could a company use a CRM system to perform damage control after finding out about
contaminated milk in the supply chain?
3. Do you agree with the Chinese court in sentencing of the middlemen to death and a dairy boss
to life in prison for their roles in the milk contamination scandal? Do you think the United States
should implement similar laws for unethical corporate behavior?
4. Many companies in the United States use Chinese suppliers in the sourcing of raw materials and
manufacturing of products. Research the Internet and find three examples of recent issues for
U.S. companies because of Chinese products. What will happen in the long run as companies use
Chinese suppliers?
1. Political Supply Chains
The U.S. government brokered a deal with the United Arab Emirates (UAE) allowing the UAE
government -owned firm Dubai Ports World (DPW) to operate six major U.S. ports (New York, New
Jersey, Baltimore, New Orleans, Miami, Philadelphia) after DPW purchased the current United
Kingdom-based port operator, P&O, the fourth largest port company in the world.
Some citizens are worried that the federal government may be outsourcing U.S. port operations
to a company prone to terrorist infiltration by allowing a firm from the United Arab Emirates to
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch08_296-340.indd 333baL76892_ch08_296-340.indd 333 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
334 Chapter 8 Enterprise Applications: Business Communications
run port operations within the United States. The United Arab Emirates has had people involved in
terrorism. Some of its financial institutions laundered the money for the 9/11 terrorists. You have
been called in on an investigation to determine the potential effects on U.S. businesses’ supply
chains if these ports were shut down due to terrorist activities. Create an argument for or against
outsourcing these ports to the UAE. Be sure to detail the effect on U.S. businesses’ supply chains
if these ports are subjected to terrorist acts. 13
2. Analyzing Dell’s Supply Chain Management System
Dell’s supply chain strategy is legendary. If you want to build a successful SCM system, your best
bet is to model your SCM system after Dell’s. In a team, research Dell’s supply chain manage-
ment strategy on the web and create a report discussing any new SCM updates and strategies
the company is currently using that were not discussed in this text. Be sure to include a graphical
presentation of Dell’s current supply chain model.
3. Total Recall
The Firestone Tire Company issued a recall for all tires issued on a certain brand of Ford’s sport-
utility vehicles. The tire treads on some SUVs separated during use, which could cause a fatal
accident as the defect caused vehicles to roll over. In the beginning Firestone denied it had a tire
problem, stating that Ford had incorrectly matched its SUVs with the wrong brand of tires. It also
suggested that the shock absorbers might have been rubbing against the tires, causing the defect.
Firestone soon recalled the tires as the company received more and more pressure from govern-
ment and consumer advocacy groups. Interestingly, all of the defective tires were manufactured at
the same tire factory and the company soon shut down that facility. Information was soon found
that Firestone had recalled the identical type of tire in South America and had already settled a
lawsuit for an accident caused by the tread defect. Discuss each of the following factors in relation
to this case: quality, inventory, ethics, supply chain visibility, profitability, customer loyalty. 14
4. Finding Shelf Space at Walmart
Walmart’s business strategy of being a low-cost provider by managing its supply chain down to
the minutia has paid off greatly. Each week, approximately 100 million customers, or one-third of
the U.S. population, visit Walmart’s U.S. stores. Walmart is currently the world’s largest retailer and
the second-largest corporation behind ExxonMobil. It was founded by Sam Walton in 1962 and is
the largest private employer in the United States and Mexico. Walmart is also the largest grocery
retailer in the United States, with an estimated 20 percent of the retail grocery and consumables
business, and the largest toy seller in the United States, with an estimated 45 percent of the retail
toy business, having surpassed Toys “R” Us in the late 1990s.
Walmart’s business model is based on selling a wide variety of general merchandise at “always
low prices.” The reason Walmart can offer such low prices is due to its innovative use of informa-
tion technology tools to create its highly sophisticated supply chain. Walmart has famously invited
its major suppliers to jointly develop powerful supply chain partnerships. These are designed to
increase product flow efficiency and, consequently, Walmart’s profitability. 15
You are the owner of a high-end collectible toy company. You create everything from authen-
tic sports figure replicas to famous musicians and movie characters including Babe Ruth, Hulk
Hogan, Mick Jagger, Ozzy Osbourne, Alien, and the Terminator. It would be a huge win for your
company if you could get your collectibles into Walmart. Compile a strategic plan highlighting the
steps required to approach Walmart as your supply chain partner. Be sure to address the pros and
cons of partnering with the chain, including the cost to revamp your current supply chain to meet
Walmart’s tough supply chain requirements.
5. Customer Relationship Management Strategies
On average, it costs an organization six times more to sell to a new customer than to sell to an
existing customer. As the co-owner of a medium-sized sports equipment distributor, you have
recently been notified that sales for the past three months have decreased by an average of
20 percent. The reasons for the decline in sales are numerous, including a poor economy and
some negative publicity your company received regarding a defective product line. In a group,
baL76892_ch08_296-340.indd 334baL76892_ch08_296-340.indd 334 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
335Enterprise MIS Module 3
explain how implementing a CRM system can help you understand and combat the decline in
sales. Be sure to justify why a CRM system is important to your business and its future growth.
Also, search the Internet for at least one recent and authoritative article that compares or ranks
customer relationship management systems. Select two packages from the list and compare their
functions and features as described in the article(s) you found as well as on each company’s website.
Find references in the literature where companies that are using each package have reported their
experiences, both good and bad. Draw on any other comparisons you can find. Prepare a presentation
for delivery in class on the strengths and weaknesses of each package, which one you favor, and why.
6. Searching for Employee Loyalty
You are the CEO of Razz, a start-up web-based search company, which is planning to compete
directly with Google. The company had an exceptional first year and is currently receiving over
500,000 hits a day from customers all over the world. You have hired 250 people in the past four
months, doubling the size of your organization. With so many new employees starting so quickly
you are concerned about how your company’s culture will evolve and whether your employees are
receiving enough attention. You are already familiar with customer relationship management and
how CRM systems can help an organization create strong customer relationships. However, you
are unfamiliar with employee relationship management and you are wondering what ERM systems
might be able to offer your employees and your company. Research the web, create a report
detailing features and functions of ERM systems, and determine what value will be added to your
organization if you decide to implement an ERM solution.
7. Driving Up Profits with Loyalty (or Driving Down?)
The Butterfly Café is located in downtown San Francisco and offers specialty coffee, teas, and
organic fruits and vegetables. The café holds a number of events to attract customers such as
live music, poetry readings, book clubs, charity events, and local artist’s night. A listing of all
participants attending each event is tracked in the café’s database. The café uses the information
for marketing campaigns and offers customers who attend multiple events additional discounts.
A marketing database company, InTheKnow.com , has offered to pay the Butterfly Café a substan-
tial amount of money for access to its customer database, which it will then sell to other local busi-
nesses. The owner of the Butterfly Café, Penny Dirks, has come to you for advice. She is not sure
if her customers would appreciate her selling their personal information and how it might affect
her business. However, the amount of money InTheKnow.com is offering is enough to finance her
much-needed new patio for the back of the café. InTheKnow.com has promised that the sale will
be completely confidential. What should Dirks do?
8. Supporting Customers
Creative.com is an ebusiness that sells craft materials and supplies over the Internet. You have just
started as the vice president of customer service, and you have a team of 45 customer service rep-
resentatives. Currently, the only form of customer service is the toll-free number and the company
is receiving a tremendous number of calls regarding products, orders, and shipping information. The
average wait time for a customer to speak to a customer service representative is 35 minutes. Orders
are being cancelled and Creative.com is losing business due to its lack of customer service. Create a
strategy to revamp the customer service center and get the company back on track.
9. Implementing an ERP System
Blue Dog Inc. is a leading manufacturer in the high-end sunglasses industry, reaching record
revenue levels of more than $250 million last year. Blue Dog is currently deciding on the possibility
of implementing an ERP system to help decrease production costs and increase inventory control.
Many of the executives are nervous about making such a large investment in an ERP system due
to its low success rates. As a senior manager at Blue Dog Inc., you have been asked to compile a
list of the potential benefits and risks associated with implementing an ERP system along with your
recommendations for the steps the company can take to ensure a successful implementation. Be
sure to also explain why ERP systems include CRM and SCM components, and the advantages the
company can gain by implementing all of the components for a connected corporation.
baL76892_ch08_296-340.indd 335baL76892_ch08_296-340.indd 335 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
336 Chapter 8 Enterprise Applications: Business Communications
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. Netflix reinvented the video rental business using supply chain technology. Netflix is the largest
online DVD rental service, offering flat-rate rental by mail and over the Internet to customers.
Customers can create their own personal list of movie favorites and the DVDs are delivered by
the U.S. Postal Service from one of Netflix’s warehouses. Customers can keep the DVD for as
long as they want and simply return it by mail to receive their next selection. Netflix’s business
is video rental, but it used technology to revamp its supply chain to completely disrupt the entire
video rental industry. Define a way that you can revamp or reinvent your business using supply
chain technologies.
2. Business is booming, and you have achieved your goal of driving operating costs down, which
helps to drive revenues up. One of your best new products is from China, and it is accounting
for a 20 percent increase in your profits. Yesterday, a dockworkers union strike began and shut
down all of the West Coast shipping docks from San Francisco to Canada. Work will resume when
the union agrees to new labor contracts, which could take months. You need to quickly assess
the impact of the shutdown on your business. How will you keep business running if you cannot
receive your shipments? What strategies do you recommend to help the business continue work-
ing while the supply chain is disrupted by the strike?
3. The web contains numerous examples of customer power. Examples include www.ihatedell
.net and www.donotbuydodge.ca . Customers are using YouTube, MySpace, blogs, and a
number of other web tools to slam or praise companies. Do you believe that the most
influential person in your business is the customer? How could customers hurt or help
your business? Will your employees agree that customers are the most important part of
the business?
PROJECT I Shipping Problems
Entrepreneurship is in Alyssa Stuart’s blood. Stuart has been starting businesses since she was
10 years old, and she finally has the perfect business of custom-made furniture. Customers who visit
her shop can choose from a number of different fabrics and 50 different styles of couch and chair
designs to create their custom-made furniture. Once the customer decides on a fabric pattern and
furniture design, the information is sent to China where the furniture is built and shipped to the cus-
tomer via the West Coast. Stuart is excited about her business; all of her hard work has finally paid off
as she has more than 17,000 customers and 875 orders currently in the pipe.
Stuart’s business is booming. Her high-quality products and outstanding customer service have
created an excellent reputation for her business. But the business is at risk of losing everything and
she has come to you for help solving her supply chain issues. The parcel delivery companies such
as FedEx and UPS are on strike and Alyssa is not sure how she is going to get her raw materials or
finished products delivered. What strategies do you recommend for Alyssa’s business to continue
working to overcome the strike?
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch08_296-340.indd 336baL76892_ch08_296-340.indd 336 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
337Enterprise MIS Module 3
PROJECT I I Great Stories
When customers have an unpleasant customer experience, the company no longer has to worry about
them telling a few friends and family; the company now has to worry about them telling everyone.
Internet service providers are giving frustrated consumers another means of fighting back. Free or
low-cost computer space for Internet websites is empowering consumers to tell not only their friends,
but also the world about the way they have been treated. A few examples of disgruntled customer
stories from the Internet include:
■ A bike-riding tourist requires stitches after being bitten on the leg by a dog. The tourism company
is banned from renting bikes and in turn bars the tourist from taking any future tours.
■ A customer leaving Best Buy refuses to voluntarily show the receipt to the guard at the door.
The Best Buy employees try to seize the customer’s cart and then decide to park a car behind the
customer’s vehicle.
■ Enterprise Rent-A-Car operates a high-stress business, and frequently its customers find that the
company did not honor reservations, did not have cars ready for reservations, rented cars with
empty tanks of gas, and charged higher rates to corporate account holders.
The pervasive nature of the Internet is increasing customer power and changing business from
product-focused to a customer-focused. Explain the difference between product-focused business
and customer-focused business and why CRM is more important than ever before?
PROJECT I I I JetBlue on YouTube
JetBlue took an unusual and interesting CRM approach by using YouTube to apologize to its custom-
ers. JetBlue’s founder and former CEO, David Neeleman, apologized to customers via YouTube after
a very bad week for the airline: 1,100 flights were canceled due to snowstorms, causing thousands
of passengers to be stranded at airports around the country. Neeleman’s unrehearsed, unrefined, and
sincere YouTube apology made customers understand the issues and accept the company’s apology.
You are the founder and CEO of GoodDog, a large pet food manufacturing company. Recently, at
least 16 pet deaths have been tied to tainted pet food, fortunately not manufactured by your company.
A recall of potentially deadly pet food has dog and cat owners studying their animals for even the
slightest hint of illness and swamping veterinarians nationwide with calls about symptoms. Create
a strategy for using YouTube as a vehicle to communicate with your customers as they fear for their
pets’ lives. Be sure to highlight the pros and cons of using YouTube as a customer communication
vehicle. Are there any other new technologies you could use as a customer communication vehicle
that would be more effective than YouTube? With all the new advances in technology and the many
ways to reach customers, do you think using YouTube is a smart approach? What else could you do to
help gain back customers’ trust?
PROJECT IV Gaining Business Intelligence from Strategic Initiatives
You are a new employee in the customer service department at Premier One, a large office supply
distributor. The company has been in business for three years and focuses on providing top of the line
office supplies at a low cost. The company currently has 90 employees and operates in seven states.
Sales over the past three years have tripled, and the manual systems currently in place are no
longer sufficient to run the business. Your first task is to meet with your new team and create a
presentation for the president and chief executive officer describing supply chain management, cus-
tomer relationship management, and enterprise resource planning. The presentation should highlight
the main benefits Premier One can receive from these enterprise systems along with any additional
added business value that can be gained from the systems.
baL76892_ch08_296-340.indd 337baL76892_ch08_296-340.indd 337 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
338 Chapter 8 Enterprise Applications: Business Communications
PROJECT V Second Life CRM
New virtual worlds such as Second Life are becoming the first point of contact between many firms
and customers. To say the least, virtual relationships are far different from traditional relationships.
Firms such as Adidas, Dell, Reuters, and Toyota are all embracing Second Life; however, beyond
opening a virtual office in a virtual world, they are struggling with how to build virtual customer
relationships.
PA Consulting quickly learned that building a virtual office to answer customer queries is not
nearly good enough to find and attract loyal customers. The company realized that real people behind
the avatars need to be housed in a real office similar to having a call center to answer questions for
online shopping. When a potential customer wants to speak to a human, one must appear or else the
customer will leave the website.
You are the executive director of CRM at StormPeak, an advanced technological company that
develops robots. You are in charge of overseeing the first virtual site being built in Second Life. Create
a CRM strategy for doing business in a virtual world. Here are a few questions to get you started:
■ How will customer relationships be different in a virtual world?
■ What is your strategy for managing customer relationships in this new virtual environment?
■ How will supporting Second Life customers differ from supporting traditional customers?
■ How will supporting Second Life customers differ from supporting website customers?
■ What customer security issues might you encounter in Second Life?
■ What customer ethical issues might you encounter in Second Life?
PROJECT VI Searching Telephone Calls
Imagine being able to search a database of customer phone calls to find specific requests or to be
able to sort through digital customer complaints to detect the exact moment when the interaction
between the customer service representative and the customer went wrong. A new tool called
Find It allows the sorting of digital voice records as easily as using Google to sift through docu-
ments. Find It is opening limitless business opportunities as organizations begin to understand
how they can use this technology to help employees search voice mails or recorded calls for
keywords and phrases.
You have recently started your own marketing firm and you want to use the power of Find It to
help your customers query all of their unique data records, including digital voice recordings. Now all
you need is to prepare your marketing materials to send to potential customers. Create a marketing
pitch that you will deliver to customers detailing the business opportunities they could uncover if
they purchase Find It. Your marketing pitch can be a one-page document, a catchy tune, a video, or a
PowerPoint presentation.
PROJECT VI I Sharptooth Incorporated
Stephen Kern is the founder and CEO of Sharptooth, a small business that buys and sells comic strips
to magazines and newspapers around the country. Some of Sharptooth’s artists have made it big
and are syndicated in hundreds of magazines and newspapers, while others are new to the industry.
Kern started in the business as an artist and began contracting other artists when he realized he had
a knack for promoting and marketing comic materials. His artistic background is great for spotting
talented young artists, but not so great for running the business.
Kern recently began selling comics to new forms of media such as blogs, websites, and other
online tools. He has hired you to build him a new system to track all online comic sales. You quickly
notice that Kern has a separate system for each of his different lines of business including newspaper
baL76892_ch08_296-340.indd 338baL76892_ch08_296-340.indd 338 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
339Enterprise MIS Module 3
sources, magazine sources, billboard sources, and now online sources. You notice that each system
works independently to perform its job of creating, updating, and maintaining sales information, but
you are wondering how he operates his business as a whole. Create a list of issues Kern will encoun-
ter if he continues to run his business with four separate systems performing the same operations.
What could happen to the business if he cannot correlate the details of each? Be sure to highlight at
least 10 issues where separate systems could cause problems.
PROJECT VI I I Eating In
Having been employed by the same company for more than 20 years, Mary Lou Smith was shocked
when she was suddenly terminated along with about 900 of her co-workers. It took Smith a few
weeks to recover from the shock, then she finally began focusing her efforts on searching for a new
job. Smith was sure her loyal employment history and strong skill set would land her a new job in no
time; however, after several months of searching she wasn’t having any luck. With her emergency
funds quickly being depleted, Smith knew she had to find a new job soon or else she’d need to start
selling her assets or cashing in her retirement.
The one positive aspect of having so much free time was that she could focus on her true passion,
cooking. She began making a little money by catering lunches and dinners for local businesses and
neighbors. Smith overheard a neighbor remark that she was hosting a large party and didn’t have
enough time to prepare the meal. Almost jokingly, Smith asked her how much she’d be willing to pay
for a catered event. Soon Smith was catering for numerous neighbors and small businesses and she
knew she had to make a decision if she would go into business for herself or continue searching for
other employment.
After a year in the catering business, Smith was earning a good living and building a stellar reputa-
tion. She began catering for all types of events, including weddings, and business was so good that
she hired several employees to help grow her business. As Smith begins to plan her expansion, she
has asked for you help in answering the following questions:
1. How important is customer loyalty for Smith’s business? What can she do to ensure her
customers remain loyal? How could one disgruntled customer hurt business? What can she do to
combat this challenge?
2. Research the business Yelp.com . What service does Yelp.com perform? Would a small business
see Yelp.com as an opportunity or a threat? What are the pros and cons a customer should be
aware of when using yelp.com ?
3. Smith’s responsibilities include forecasting, inventory control, scheduling, and ensuring high-
quality products. What types of forecasts would she require to run her business? What types of
inventory would she want to track? What might happen if her inventory tracking tool was off by
50 percent? What types of schedules does Smith need to generate? What things might occur to
disrupt schedules and cause her to reschedule? How can a supply chain management system
help run the business?
4. Smith wants to create a business based on loyal customers and loyal employees. She offers her
employees bonuses for new ideas, recipes, or business referrals. What risks is Smith encounter-
ing by offering these bonuses? One employee idea that she has implemented is turning out to be
a competitive advantage for her business; however, the employee has quit and is now working
for a competitor. Should Smith still pay the employee the bonus? What should she do to ensure
she is building strong employee relationships?
5. Smith overheard one of her customers talking about enterprise systems such as CRM,
SCM, and ERP. However, she is sure they are available only to big companies that have lots
of capital. Research the Internet and find examples of enterprise systems for small business.
Do you think she should invest in these types of systems to run her business? Why or
why not?
baL76892_ch08_296-340.indd 339baL76892_ch08_296-340.indd 339 10/26/12 4:24 PM10/26/12 4:24 PM

Confirming Pages
340 Chapter 8 Enterprise Applications: Business Communications
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
Project
Number
Project
Name
Project
Type Plug-In
Focus
Area
Project
Level
Skill
Set
Page
Number
9 Security Analysis Excel T3 Filtering Data Intermediate Conditional
Formatting,
Autofilter, Subtotal
AYK.7
10 Gathering Data Excel T3 Data Analysis Intermediate Conditional
Formatting
AYK.8
11 Scanner System Excel T2 Strategic Analysis Intermediate Formulas AYK.8
12 Competitive Pricing Excel T2 Profit
Maximization
Intermediate Formulas AYK.9
13 Adequate
Acquisitions
Excel T2 Break Even
Analysis
Intermediate Formulas AYK.9
15 Assessing the Value
of Information
Excel T3 Data Analysis Intermediate PivotTable AYK.10
16 Growth, Trends,
and Forecasts
Excel T2, T3 Data Forecasting Advanced Average, Trend,
Growth
AYK.11
18 Formatting Grades Excel T3 Data Analysis Advanced If, LookUp AYK.12
22 Turnover Rates Excel T3 Data Mining Advanced PivotTable AYK.15
23 Vital Information Excel T3 Data Mining Advanced PivotTable AYK.15
24 Breaking Even Excel T4 Business Analysis Advanced Goal Seek AYK.16
25 Profit Scenario Excel T4 Sales Analysis Advanced Scenario Manager AYK.16
baL76892_ch08_296-340.indd 340baL76892_ch08_296-340.indd 340 10/26/12 4:24 PM10/26/12 4:24 PM

Rev. Confirming Pages
9
C H A P T E R
Systems Development and
Project Management:
Corporate Responsibility
■ T h e S y s t e m s D e v e l o p m e n t L i f e
C y c l e ( S D L C )
■ S o f t w a re D e v e l o p m e n t
M e t h o d o l o g y : Wa t e r f a l l
■ A g i l e S o f t w a re D e v e l o p m e n t
M e t h o d o l o g i e s
SECTION 9.2
Project Management
SECTION 9.1
Developing Enterprise
Applications
■ U s i n g P ro j e c t M a n a g e m e n t t o
D e l i v e r S u c c e s s f u l P ro j e c t s
■ T h e E l e m e n t s o f P ro j e c t
P l a n n i n g
■ P r i m a r y P ro j e c t P l a n n i n g
D i a g r a m s
■ O u t s o u rc i n g P ro j e c t s
What’s in IT for me?
This chapter provides an overview of how organizations build information systems. As a business student, you need to
understand this process because information systems are the underlying foundations of company operations. Your under-
standing of the principles of building information systems will make you a more valuable employee. You will be able to
identify trouble spots early and make suggestions during the design process that will result in a better information systems
project—one that satisfies both you and your business.
Building an information system is like constructing a house. You could sit back and let the developers do all the design
work, construction, and testing and hope the finished product will satisfy your needs. However, participating in the process
helps to guarantee that your needs are not only heard, but also met. It is good business practice to have direct user input
steering the development of the finished product. Your knowledge of the systems development process will allow you to
participate and ensure you are building flexible enterprise architectures that support not only current business needs, but
also future ones.
C
H
A
P
T
E
R
O
U
T
L
IN
E

baL76892_ch09_341-378.indd 341baL76892_ch09_341-378.indd 341 26/11/12 1:55 PM26/11/12 1:55 PM

Rev. Confirming Pages
342 Chapter 9 Systems Development and Project Management: Corporate Responsibility
opening case study
Getting Your Project on Track
June is the perfect time of year to reflect on the current state of all the key projects that
were approved in January. At this stage, you and your management team should have
enough data to know if each initiative will successfully meet its objectives. You may already
know there are projects in your organization that are not positioned to succeed, yet they still
receive funding and staff. When you assess the current state of your projects, do you see
any of the following signs:
■ Critical issues keep opening up, but they’re not getting resolved.
■ Project scope is constantly changing.
■ The project is consistently behind its plan, despite efforts to get it back on schedule.
■ Competing deliverables are distracting your attention.
If all of these signs appear, it may be time to cut your losses and cut the project—or
at least radically restructure it. You know better than anyone that throwing good money
after the bad will not save the project because it doesn’t address the root cause of the
project’s woes. To determine a course of action, ask yourself the following questions about
the project:
■ What can be salvaged?
■ What can be delivered with the time and budget that are left?
■ Do you have the right leadership in place to complete the project successfully?
■ Is the plan for the initiative sound and realistic?
■ Am I and my management team doing everything we can to support the initiative?
If part of or the entire project can be salvaged and delivered on time and with the remain-
ing budget, if the right leaders are present to steer the project, if the new plan is solid, and
if management will continue to support the project, the following four steps will help you
regain control and deliver the revised project successfully. These steps are basic blocking
and tackling, but the detail behind the plan—and more importantly, the execution and focus
the project team brings to the effort—will determine whether the project recovery effort will
succeed.
Step One: Assess the Situation
Get as much information about the current state of the project as possible. Use that data to
make informed decisions about what needs to happen next. Don’t be afraid if, at this stage,
there are more questions than answers; that is normal. The key is to ask the right question
baL76892_ch09_341-378.indd 342baL76892_ch09_341-378.indd 342 26/11/12 1:55 PM26/11/12 1:55 PM

Rev. Confirming Pages
343Enterprise MIS Module 3
to obtain as accurate a picture of the project’s status as possible. The following questions
address key data points you need to collect:
■ How critical is the delivery date?
■ What functionality is exactly required by the delivery date?
■ What has been completed and what is still outstanding?
■ How willing will people be to change scope, dates, and budget?
The last question about change is critical because it touches on the people and political issues
that are present in any project and any organization. Even when faced with sure failure, people
find it hard to change unless there is a direct benefit to them and their team. For recovery to
have a chance, expectations need to change, especially those of the key stakeholders.
When gathering data about the current state of the project, remember to ask the current
team for their opinions on what went wrong. It can be easy to ignore their input since they’re
associated with the current failure. In fact, each individual can provide great insight into why
the project arrived in its current state. Reach out to key team members and get their sugges-
tions for correcting the situation.
Step Two: Prepare the Team for Recovery
Everyone involved in the project—from executive management to stakeholders to project
team members—needs to accept that the current project is broken and needs to be fixed.
They also need to accept that the existing project plan and approach to delivering the project
is flawed and needs to be restructured. If they don’t accept these facts, they will likely resist
the steps needed for recovery.
Once everyone has accepted the need to change course, define realistic expectations for
what can be delivered given the current state and time frame. Also establish metrics for success
and control of the recovery. If you had metrics at the outset of the project, you may need to
establish new ones, or you may simply need to hold yourself and others accountable to them.
Both management and the project manager in charge of the recovery need to develop a
supportive environment for team members. Giving them realistic goals and providing them
with the needed space, equipment, and training will position them for success.
Finally, take advantage of the new momentum associated with the recovery and involve all
the key parties in the status of the project. This involvement will keep everyone focused and
engaged. It will assure project team members and stakeholders that they’re needed for more
than just executing tasks.
Step Three: Develop a Game Plan for Recovery
Think of the recovery as a new project, separate from the old one. This new project requires
its own scope of work to make the expectations around what is being delivered and the new
criteria for judging success crystal clear. The new scope may require you to determine if you
have the right resources on the project team or if you need to re-staff some team members.
Based on the new project scope, the project manager and project team should lay out a
clear and realistic road map to achieve the objectives. The main difference in the plan this
time is that it must not fail. It will also be under much greater scrutiny by management.
baL76892_ch09_341-378.indd 343baL76892_ch09_341-378.indd 343 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
344 Chapter 9 Systems Development and Project Management: Corporate Responsibility
Consequently, it will be critical to make sure the milestones are shorter in duration to dem-
onstrate success and to allow for course correction if needed. The shorter milestones will
provide valuable data points to determine the health of the project early.
Step Four: Execute the Game Plan
With the new plan in hand, it’s time to get down to business. Remember that during execution,
it is not just the project team members who are accountable. Everyone from management
on down is on the hook. All facets of the project, from environment to support, need to be in
sync at all times, and everyone needs to know they are accountable for the project recovery
to succeed.
To make sure everyone is on the same page during the recovery, the project communica-
tion needs to be clear, informative, and frequent. Clearly define in your communication plan
how information will be disseminated, how urgent items will be addressed, and how key
decisions will be made.
Given the added level of scrutiny on the plan and the project, being able to provide the lat-
est on the metrics to show the improved control over the project will be key. The data will also
allow you to quickly make corrections when any sign of trouble surfaces.
Getting a flailing project back on track is not easy. It requires sustained effort, focus, com-
mitment, and objectivity. During the project recovery there is no time for personal agendas.
The ability to see and do what is best for the project is required from every team member.
It is also important to not lose sight of the pressure that everyone is under. Make sure
there is a positive focus on people. The team needs to have the ability to bond, release a little
steam, and be focused on the task at hand.
When the project has been successfully delivered, celebrate and recognize the effort of
each and every team member. Finally, learn from this successful project recovery so that you
and your organization can avoid having to recover a project again. Pay attention to the warn-
ing signs and act swiftly and decisively to make corrections early in the project’s life cycle so
that successful delivery is ensured the first time. 1
baL76892_ch09_341-378.indd 344baL76892_ch09_341-378.indd 344 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
345Enterprise MIS Module 3
section 9.1 Developing Enterprise Applications
L E A R N I N G O U T C O M E S
9.1 Describe the seven phases of the systems development life cycle.
9.2 Summarize the different software development methodologies.
THE SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC)
The multimillion-dollar Nike SCM system failure is legendary as Nike CEO Philip Knight
famously stated, “This is what we get for our $400 million?” Nike partnered with i2 to
implement an SCM system that never came to fruition. i2 blamed the failed implemen-
tation on the fact that Nike failed to use the vendor’s implementation methodology and
templates. Nike blamed the failure on faulty software. 2
It is difficult to get an organization to work if its systems do not work. In the infor-
mation age, software success, or failure, can lead directly to business success, or fail-
ure. Companies rely on software to drive business operations and ensure work flows
throughout the company. As more and more companies rely on software to operate, so
do the business-related consequences of software successes and failures.
The potential advantages of successful software implementations provide firms with
significant incentives to manage software development risks. However, an alarmingly
high number of software development projects come in late or over budget, and suc-
cessful projects tend to maintain fewer features and functions than originally specified.
Understanding the basics of software development, or the systems development life
cycle, will help organizations avoid potential software development pitfalls and ensure
that software development efforts are successful.
Before jumping into software development, it is important to understand a few key
terms. A legacy system is an old system that is fast approaching or beyond the end of
its useful life within an organization. Conversion is the process of transferring informa-
tion from a legacy system to a new system. Software customization modifies software
to meet specific user or business requirements. Off-the-shelf application software sup-
ports general business processes and does not require any specific software customiza-
tion to meet the organization’s needs.
The systems development life cycle (SDLC) is the overall process for developing
information systems, from planning and analysis through implementation and mainte-
nance. The SDLC is the foundation for all systems development methods, and hundreds of
different activities are associated with each phase. These activities typically include deter-
mining budgets, gathering system requirements, and writing detailed user documentation.
The SDLC begins with a business need, proceeds to an assessment of the functions a
system must have to satisfy the need, and ends when the benefits of the system no lon-
ger outweigh its maintenance costs. This is why it is referred to as a life cycle. The SDLC
is comprised of seven distinct phases: planning, analysis, design, development, testing,
implementation, and maintenance (see Figure 9.1 ).
Phase 1: Planning
The planning phase establishes a high-level plan of the intended project and deter-
mines project goals. Planning is the first and most critical phase of any systems develop-
ment effort, regardless of whether the effort is to develop a system that allows customers
to order products online, determine the best logistical structure for warehouses around
the world, or develop a strategic information alliance with another organization. Orga-
nizations must carefully plan the activities (and determine why they are necessary) to
be successful. A change agent is a person or event that is the catalyst for implementing
major changes for a system to meet business changes. Brainstorming is a technique for
LO 9.1: Describe the seven phases
of the systems development life cycle.
baL76892_ch09_341-378.indd 345baL76892_ch09_341-378.indd 345 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
346 Chapter 9 Systems Development and Project Management: Corporate Responsibility
generating ideas by encouraging participants to offer as many ideas as possible in a short
period without any analysis until all the ideas have been exhausted. Many times, new
business opportunities are found as the result of a brainstorming session.
The Project Management Institute (PMI) develops procedures and concepts neces-
sary to support the profession of project management ( www.pmi.org ). PMI defines a
project as a temporary activity a company undertakes to create a unique product, ser-
vice, or result. Project management is the application of knowledge, skills, tools, and
techniques to project activities to meet project requirements. A project manager is an
individual who is an expert in project planning and management, defines and develops
the project plan, and tracks the plan to ensure the project is completed on time and on
budget. The project manager is the person responsible for executing the entire project
and defining the project scope that links the project to the organization’s overall business
goals. The project scope describes the business need (the problem the project will solve)
and the justification, requirements, and current boundaries for the project. The project
plan is a formal, approved document that manages and controls the entire project.
Phase 2: Analysis
In the analysis phase the firm analyzes its end-user business requirements and refines
project goals into defined functions and operations of the intended system. Business
requirements are the specific business requests the system must meet to be successful,
so the analysis phase is critical because business requirements drive the entire systems
development effort. A sample business requirement might state, “The CRM system must
track all customer inquiries by product, region, and sales representative.” The business
requirement will state what the system must accomplish to be considered successful.
BUSINESS DRIVEN START-UP
You’ll remember this day because it is the day you were introduced to Ted
( www.ted.com ). TED is a nonprofit devoted to “ideas worth spreading.” The
company hosts a yearly conference focusing on technology, entertainment,
and design (TED). TED gathers the world’s innovative minds who are chal-
lenged to give the talk of their lives in just 18 minutes. Each talk is posted to the
Ted website and includes such famous speakers as:
■ Chris Anderson, editor of Wired and author of The Long Tail: Why the
Future of Business Is Selling Less of More.
■ Tim Berners-Lee, inventor of the World Wide Web.
■ Jeff Bezos, founder of Amazon.com .
■ Richard Branson, founder of Virgin.
■ Bill Clinton, former president of the United States.
■ Peter Diamandis, chairman of the X Prize Foundation.
■ Sergey Brin and Larry Page, co-founders of Google.
■ Malcolm Gladwell, author of Blink and The Tipping Point.
■ Bill Gates, founder of Microsoft.
■ Seth Godin, a marketing guru.
■ Steven Levitt, author of Freakonomics. 3
As you brainstorm your future start-up, hoping to become the next Bill Gates
or Steve Jobs, how can you use TED to generate ideas? Review the TED website
and choose three talks that could help lead to the next great business idea.
Just Ask TED
APPLY YOUR KNOWLEDGE
baL76892_ch09_341-378.indd 346baL76892_ch09_341-378.indd 346 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
347Enterprise MIS Module 3
Planning
AnalysisMaintenance
Implementation
Testing Development
Design
FIGURE 9.1
The SDLC and Its Associated
Activities
Phase Associated Activity
Planning ■ Brainstorm issues and identify opportunities for the organization
■ Prioritize and choose projects for development
■ Set the project scope
■ Develop the project plan
Analysis ■ Gather the business requirement for the system
■ Define any constraints associated with the system
Design ■ Design the technical architecture required to support the system
■ Design the system models
Development ■ Build the technical architecture
■ Build the database
■ Build the applications
Testing ■ Write the test conditions
■ Perform system testing
Implementation ■ Write detailed user documentation
■ Provide training for the system users
Maintenance ■ Build a help desk to support the system users
■ Provide an environment to support system changes
If a system does not meet the business requirements, it will be deemed a failed project.
For this reason, the organization must spend as much time, energy, and resources as
necessary to gather accurate and detailed business requirements.
baL76892_ch09_341-378.indd 347baL76892_ch09_341-378.indd 347 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
348 Chapter 9 Systems Development and Project Management: Corporate Responsibility
Requirements management is the process of managing changes to the business
requirements throughout the project. Projects are typically dynamic in nature,
and change should be expected and anticipated for successful project completion.
A requirements definition document prioritizes all of the business requirements by
order of importance to the company. Sign-off is the users’ actual signatures indicating
they approve all of the business requirements.
Phase 3: Design
The design phase establishes descriptions of the desired features and operations of the
system, including screen layouts, business rules, process diagrams, pseudo code, and
other documentation. During the analysis phase, end users and MIS specialists work
together to gather the detailed business requirements for the proposed project from a
logical point of view. That is, during analysis, business requirements are documented
without respect to technology or the technical infrastructure that will support the sys-
tem. Moving into the design phase turns the project focus to the physical or technical
point of view, defining the technical architecture that will support the system, including
data models, screen designs, report layouts, and database models.
Phase 4: Development
The development phase takes all the detailed design documents from the design phase
and transforms them into the actual system. In this phase, the project transitions from
preliminary designs to actual physical implementation. During development, the com-
pany purchases and implements the equipment necessary to support the architecture.
Software engineering is a disciplined approach for constructing information systems
through the use of common methods, techniques, or tools. Software engineers use
computer-aided software engineering (CASE) tools, which provide automated sup-
port for the development of the system. Control objects for information and related
technology (COBIT) is a set of best practices that helps an organization to maximize the
benefits of an information system, while at the same time establishing appropriate con-
trols to ensure minimum errors.
BUSINESS DRIVEN DEBATE
Data must be secure! A computer programming course would teach you
that security is a critical component that must be included in every system.
Apparently, the employees that developed the new system for the state of
Oklahoma were out sick during this important class. The new system mistak-
enly posted confidential data, including Social Security numbers, for thousands
of Oklahoma residents on the state’s website. The really unfortunate part of this
systems blunder is that the error went unnoticed for more than three years.
A programmer found the error when he realized that by changing his web
browser he could redirect his page to the entire database for the state of
Oklahoma. To make matters even worse, due to development issues, a hacker
could have easily changed all of the data in the database or added false data to
elements such as the state’s Sexual and Violent Offender Registry. 4
Why is it important to secure data? What can happen if someone accesses
your customer database? What could happen if someone changes the informa-
tion in your customer database and adds fictitious data? What phases in the
systems development life cycle should have found these errors? How could
these errors go unnoticed for over three years? Who should be held responsible
for the system issues?
Flawed
Development
APPLY YOUR KNOWLEDGE
baL76892_ch09_341-378.indd 348baL76892_ch09_341-378.indd 348 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
349Enterprise MIS Module 3
During development, the team defines the programming language it will use to build
the system. A scripting language is a programming method that provides for interactive
modules to a website. Object-oriented languages group data and corresponding pro-
cesses into objects. Fourth-generation languages (4GL) are programming languages
that look similar to human languages. For example, a typical 4GL command might state,
“FIND ALL RECORDS WHERE NAME IS “SMITH”. ” Programming languages include the
following order:
1. First generation: Machine language difficult for businesspeople to understand.
2. Second generation: Assembly language difficult for businesspeople to understand.
3. Third generation: High-level programming languages, such as C, C 1 1 , and Java.
4. Fourth generation: Programming languages that look similar to human languages.
5. Fifth generation: Programming languages for artificial intelligence and neural networks.
Phase 5: Testing
The testing phase brings all the project pieces together into a special testing environ-
ment to eliminate errors and bugs and verify that the system meets all the business
requirements defined in the analysis phase. Bugs are defects in the code of an informa-
tion system. Test conditions detail the steps the system must perform along with the
expected result of each step. Testers execute test conditions and compare the expected
results with the actual results to verify the system functions correctly. Each time the
actual result is different from the expected result, a “bug” is generated and the system
must be fixed in development. A typical systems development effort has hundreds or
thousands of test conditions that must be verified against the business requirements to
ensure the system is operating as expected. Figure 9.2 displays the different types of tests
typically included in a systems development effort.
Phase 6: Implementation
In the implementation phase, the organization places the system into production so
users can begin to perform actual business operations with it. In this phase, the detailed
user documentation is created that highlights how to use the system and how to trouble-
shoot issues or problems. Training is also provided for the system users and can take
place online or in a classroom. Online training runs over the Internet or on a CD or
DVD, and employees complete the training on their own time at their own pace. Work-
shop training is held in a classroom environment and led by an instructor. One of the
best ways to support users is to create a help desk or a group of people who respond to
FIGURE 9.2
Different Forms of System
Testing
Alpha Testing
Assess if the entire
system meets the design
requirements
of the users
Development Testing
Test the system to ensure
it is bug-free
Integration Testing
Verify that separate
systems can work together,
passing data back and
forth correctly
System Testing
Verify that the units
or pieces of code function
correctly when
integrated
User Acceptance
Testing (UAT)
Determine if the system
satisfies the user and
business requirements
Unit Testing
Test individual units or
pieces of code for a
system
baL76892_ch09_341-378.indd 349baL76892_ch09_341-378.indd 349 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
350 Chapter 9 Systems Development and Project Management: Corporate Responsibility
users’ questions. Figure 9.3 displays the different implementation methods an organiza-
tion can choose to ensure success.
Phase 7: Maintenance
Maintaining the system is the final sequential phase of any systems development effort.
In the maintenance phase, the organization performs changes, corrections, additions,
and upgrades to ensure the system continues to meet business goals. This phase contin-
ues for the life of the system because the system must change as the business evolves and
its needs change, which means conducting constant monitoring, supporting the new sys-
tem with frequent minor changes (for example, new reports or information capturing),
and reviewing the system to be sure it is moving the organization toward its strategic goals.
Corrective maintenance makes system changes to repair design flaws, coding errors, or
implementation issues. Preventive maintenance makes system changes to reduce the
chance of future system failure. During the maintenance phase, the system will generate
reports to help users and MIS specialists ensure it is functioning correctly (see Figure 9.4 ).
FIGURE 9.3
System Implementation
Methods
Report Examples
Internal report Presents data that are distributed inside the organization and intended for employees within an organiza-
tion. Internal reports typically support day-to-day operations monitoring that supports managerial decision
making.
Detailed internal report Presents information with little or no filtering or restrictions of the data.
Summary internal report Organizes and categorizes data for managerial perusal. A report that summarizes total sales by product for
each month is an example of a summary internal report. The data for a summary report are typically catego-
rized and summarized to indicate trends and potential problems.
Exception reporting Highlights situations occurring outside of the normal operating range for a condition or standard. These
internal reports include only exceptions and might highlight accounts that are unpaid or delinquent or identify
items that are low in stock.
Information system control report Ensures the reliability of information, consisting of policies and their physical implementation, access restric-
tions, or record keeping of actions and transactions.
Information systems audit report Assesses a company’s information system to determine necessary changes and to help ensure the informa-
tion systems’ availability, confidentiality, and integrity.
Post-implementation report Presents a formal report or audit of a project after it is up and running.
FIGURE 9.4
Examples of System Reports
Parallel Implementation
Uses both the legacy system
and new system until all
users verify that the new
system functions correctly
Plunge Implementation
Discards the legacy system
and immediately migrates
all users to the new system
Pilot Implementation
Assigns a small group of people
to use the new system until it is
verified that it works correctly;
then the remaining users
migrate to the new system
Phased Implementation
Installs the new system in
phases (for example, by
department) until it is verified
that it works correctly
baL76892_ch09_341-378.indd 350baL76892_ch09_341-378.indd 350 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
351Enterprise MIS Module 3
SOFTWARE DEVELOPMENT METHODOLOGY:
THE WATERFALL
Today, systems are so large and complex that teams of architects, analysts, developers,
testers, and users must work together to create the millions of lines of custom-written
code that drive enterprises. For this reason, developers have created a number of differ-
ent systems development life cycle methodologies. A methodology is a set of policies,
procedures, standards, processes, practices, tools, techniques, and tasks that people
apply to technical and management challenges. Firms use a methodology to manage the
deployment of technology with work plans, requirements documents, and test plans, for
instance. A formal methodology can include coding standards, code libraries, develop-
ment practices, and much more.
The oldest and the best known is the waterfall methodology, a sequence of phases
in which the output of each phase becomes the input for the next (see Figure 9.5 ). In
the SDLC, this means the steps are performed one at a time, in order, from planning
through implementation and maintenance. The traditional waterfall method no longer
serves most of today’s development efforts, however; it is inflexible and expensive, and
it requires rigid adherence to the sequence of steps. Its success rate is only about 1 in 10.
Figure 9.6 explains some issues related to the waterfall methodology. 5
LO 9.2: Summarize the different
software development methodologies.
FIGURE 9.5
The Traditional Waterfall
Methodology
Ph
as
e
Planning
Analysis
Design
Development
Testing
Implementation
Maintenance
Time
Issues Related to the Waterfall Methodology
The business problem Any flaws in accurately defining and articulating the business problem in terms
of what the business users actually require flow onward to the next phase.
The plan Managing costs, resources, and time constraints is difficult in the waterfall
sequence. What happens to the schedule if a programmer quits? How will
a schedule delay in a specific phase impact the total cost of the project?
Unexpected contingencies may sabotage the plan.
The solution The waterfall methodology is problematic in that it assumes users can specify
all business requirements in advance. Defining the appropriate IT infrastructure
that is flexible, scalable, and reliable is a challenge. The final IT infrastructure
solution must meet not only current but also future needs in terms of time, cost,
feasibility, and flexibility. Vision is inevitably limited at the head of the waterfall.
FIGURE 9.6
Disadvantages of the Waterfall
Methodology
baL76892_ch09_341-378.indd 351baL76892_ch09_341-378.indd 351 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
352 Chapter 9 Systems Development and Project Management: Corporate Responsibility
Today’s business environment is fierce. The desire and need to outsmart and outplay
competitors remains intense. Given this drive for success, leaders push internal devel-
opment teams and external vendors to deliver agreed-upon systems faster and cheaper
so they can realize benefits as early as possible. Even so, systems remain large and com-
plex. The traditional waterfall methodology no longer serves as an adequate systems
development methodology in most cases. Because this development environment is the
norm and not the exception anymore, development teams use a new breed of alternative
development methods to achieve their business objectives.
Prototyping is a modern design approach where the designers and system users use
an iterative approach to building the system. Discovery prototyping builds a small-scale
representation or working model of the system to ensure it meets the user and business
requirements. The advantages of prototyping include:
■ Prototyping encourages user participation.
■ Prototypes evolve through iteration, which better supports change.
■ Prototypes have a physical quality allowing users to see, touch, and experience the
system as it is developed.
■ Prototypes tend to detect errors earlier.
■ Prototyping accelerates the phases of the SDLC, helping to ensure success.
AGILE SOFTWARE DEVELOPMENT METHODOLOGIES
It is common knowledge that the smaller the project, the greater the success rate.
The iterative development style is the ultimate in small projects. Basically, iterative
development consists of a series of tiny projects. It has become the foundation of mul-
tiple agile methodologies. Figure 9.7 displays an iterative approach.
An agile methodology aims for customer satisfaction through early and continuous
delivery of useful software components developed by an iterative process using the bare
minimum requirements. Agile methodology is what it sounds like: fast and efficient,
with lower costs and fewer features. Using agile methods helps refine feasibility and sup-
ports the process for getting rapid feedback as functionality is introduced. Developers
can adjust as they move along and better clarify unclear requirements. 6
FIGURE 9.7
The Iterative Approach
Ph
as
e
Planning
Analysis
Design
Development
Testing
Implementation
Maintenance
ITERATION 2ITERATION 1
Time
Planning
Analysis
Design
Development
Testing
Implementation
Maintenance
baL76892_ch09_341-378.indd 352baL76892_ch09_341-378.indd 352 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
353Enterprise MIS Module 3
One key to delivering a successful product or system is to deliver value to users as soon
as possible—give them something they want and like early to create buy-in, generate
enthusiasm, and, ultimately, reduce scope. Using agile methodologies helps maintain
accountability and helps to establish a barometer for the satisfaction of end users. It does
no good to accomplish something on time and on budget if it does not satisfy the end
user. The primary forms of agile methodologies include:
■ Rapid prototyping or rapid application development methodology.
■ Extreme programming methodology.
■ Rational unified process (RUP) methodology.
■ Scrum methodology.
It is important not to get hung up on the names of the methodologies—some are pro-
prietary brand names, others are generally accepted names. It is more important to know
how these alternative methodologies are used in today’s business environment and the
benefits they can deliver.
Rapid Application Development (RAD) Methodology
In response to the faster pace of business, rapid application development has become a
popular route for accelerating systems development. Rapid application development
(RAD) methodology (also called rapid prototyping ) emphasizes extensive user
involvement in the rapid and evolutionary construction of working prototypes of a sys-
tem, to accelerate the systems development process. Figure 9.8 displays the fundamen-
tals of RAD.
Extreme Programming Methodology
Extreme programming (XP) methodology , like other agile methods, breaks a project
into four phases, and developers cannot continue to the next phase until the previous
phase is complete. The delivery strategy supporting XP is that the quicker the feedback
the more improved the results. XP has four basic phases: planning, designing, coding,
and testing. Planning can include user interviews, meetings, and small releases. During
design, functionality is not added until it is required or needed. During coding, the devel-
opers work together soliciting continuous feedback from users, eliminating the commu-
nication gap that generally exists between developers and customers. During testing, the
test requirements are generated before any code is developed. Extreme programming
saves time and produces successful projects by continuously reviewing and revamping
needed and unneeded requirements. 7
Customer satisfaction is the primary reason XP finds success as developers quickly
respond to changing business requirements, even late in the life cycle. XP encourages
managers, customers, and developers to work together as a team to ensure the delivery
of high-quality systems. XP is similar to a puzzle; there are many small pieces and indi-
vidually the pieces make no sense, but when they are pieced together they can create a
new system.
Rational Unified Process (RUP) Methodology
The rational unified process (RUP) methodology, owned by IBM, provides a frame-
work for breaking down the development of software into four “gates.” Each gate consists
of executable iterations of the software in development. A project stays in a gate waiting
Fundamentals of RAD
Focus initially on creating a prototype that looks and acts like the desired system.
Actively involve system users in the analysis, design, and development phases.
Accelerate collecting the business requirements through an interactive and iterative construction approach.
FIGURE 9.8
Fundamentals of RAD
baL76892_ch09_341-378.indd 353baL76892_ch09_341-378.indd 353 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
354 Chapter 9 Systems Development and Project Management: Corporate Responsibility
for the stakeholder’s analysis, and then it either moves to the next gate or is cancelled.
The gates include: 8
■ Gate one: inception. This phase ensures all stakeholders have a shared understand-
ing of the proposed system and what it will do.
■ Gate two: elaboration. This phase expands on the agreed-upon details of the sys-
tem, including the ability to provide an architecture to support and build it.
■ Gate three: construction. This phase includes building and developing the product.
■ Gate four: transition. Primary questions answered in this phase address ownership
of the system and training of key personnel.
Because RUP is an iterative methodology, the user can reject the product and force
the developers to go back to gate one. RUP helps developers avoid reinventing the wheel
and focuses on rapidly adding or removing reusable chunks of processes addressing
common problems.
Scrum Methodology
Another agile methodology, scrum methodology, uses small teams to produce small
pieces of software using a series of “sprints,” or 30-day intervals, to achieve an appointed
goal. In rugby, a scrum is a team pack and everyone in the pack works together to move
the ball down the field. In scrum methodology, each day ends or begins with a stand-up
meeting to monitor and control the development effort.
section 9.2 Project Management
L E A R N I N G O U T C O M E S
9.3 Explain project management and identify the primary reasons projects fail.
9.4 Identify the primary project planning diagrams.
9.5 Identify the three different types of outsourcing along with their benefits and challenges.
BUSINESS DRIVEN ETHICS AND SECURITY
Unexpected situations happen all the time, and the more you plan for them
the better prepared you’ll be when developing software. Your employees will
get into accidents, contract viruses and diseases, and other life issues. All of
these scenarios lead to unplanned absenteeism, which can throw your proj-
ect plan into a tailspin. What can happen to a project when a key employee
suddenly quits or is forced to go on short-term disability? When reviewing all
the different SDLC methodologies, which one offers the greatest flexibility for
unplanned employee downtime? If you could choose when your employee was
absent, which phase in the SDLC would be the safest for your project to still
continue and achieve success? What can you do to ensure you are preparing for
unplanned absenteeism on your project plan?
Planning for the
Unexpected
APPLY YOUR KNOWLEDGE
baL76892_ch09_341-378.indd 354baL76892_ch09_341-378.indd 354 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
355Enterprise MIS Module 3
USING PROJECT MANAGEMENT TO DELIVER
SUCCESSFUL PROJECTS
No one would think of building an office complex by turning loose 100 different construc-
tion teams to build 100 different rooms with no single blueprint or agreed-upon vision of
the completed structure. Yet this is precisely the situation in which many large organiza-
tions find themselves when managing information technology projects. Organizations rou-
tinely overschedule their resources (human and otherwise), develop redundant projects,
and damage profitability by investing in nonstrategic efforts that do not contribute to the
organization’s bottom line. Business leaders face a rapidly moving and unforgiving global
marketplace that will force them to use every possible tool to sustain competitiveness;
project management is one of those tools. For this reason, business personnel must antici-
pate being involved in some form of project management during their career. Figure  9.9
displays a few examples of the different types of projects organizations encounter.
Tangible benefits are easy to quantify and typically measured to determine the
success or failure of a project. Intangible benefits are difficult to quantify or measure
(see Figure   9.10 for examples). One of the most difficult decisions managers make is
identifying the projects in which to invest time, energy, and resources. An organiza-
tion must choose what it wants to do—justifying it, defining it, and listing expected
results—and how to do it, including project budget, schedule, and analysis of project
risks. Feasibility is the measure of the tangible and intangible benefits of an information
system. Figure 9.11 displays several types of feasibility studies business analysts can use
to determine the projects that best fit business goals.
With today’s volatile economic environment, many businesses are being forced
to do more with less. Businesses today must respond quickly to a rapidly changing
business environment by continually innovating goods and services. Effective project
management provides a controlled way to respond to changing market conditions, to
foster global communications, and to provide key metrics to enable managerial decision
making. Developing projects within budget and on time is challenging, and with the help
of solid project management skills, managers can avoid the primary reasons projects
fail, including:
■ Unclear or missing business requirements.
■ Skipped SDLC phases.
LO 9.3: Explain project management
and identify the primary reasons
projects fail.
FIGURE 9.9
Types of Organizational Projects
Sales
Deploying a
new service to
help up-sell a
current
product
Marketing
Creating a
new TV or
radio show
Finance
Requesting a
new report
summarizing
revenue
across
departments
Accounting
Adding
system
functionality
to adhere to
new rules or
regulations
MIS
Upgrading a
payroll system
or adding a
new sales
force
management
system
baL76892_ch09_341-378.indd 355baL76892_ch09_341-378.indd 355 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
356 Chapter 9 Systems Development and Project Management: Corporate Responsibility
■ Changing technology.
■ The cost of finding errors.
■ Balance of the triple constraints.
Unclear or Missing Business Requirements
The most common reason systems fail is because the business requirements are either
missing or incorrectly gathered during the analysis phase. The business requirements drive
the entire system. If they are not accurate or complete, the system will not be successful.
Skipped Phases
The first thing individuals tend to do when a project falls behind schedule is to start skip-
ping phases in the SDLC. For example, if a project is three weeks behind in the devel-
opment phase, the project manager might decide to cut testing from six weeks to three
weeks. Obviously, it is impossible to perform all the testing in half the time. Failing to test
the system will lead to unfound errors, and chances are high that the system will fail. It is
critical that an organization perform all phases in the SDLC during every project. Skip-
ping any of the phases is sure to lead to system failure.
Changing Technology
Many real-world projects have hundreds of business requirements, take years to com-
plete, and cost millions of dollars. As Moore’s Law states, technology changes at an
incredibly fast pace; therefore, it is possible that an entire project plan will need to be
revised in the middle of a project as a result of a change in technology. Technology
changes so fast that it is almost impossible to deliver an information system without feel-
ing the pain of updates.
The Cost of Finding Errors in the SDLC
It is important to discuss the relationship between the SDLC and the cost for the orga-
nization to fix errors. An error found during the analysis and design phase is relatively
inexpensive to fix. All that is typically required is a change to a Word document. However,
FIGURE 9.10
Examples of Tangible and
Intangible Benefits
Decreased expenses
Decreased processing
errors
Decreased response
time
Increased quantity or
sales
Increased quality
Tangible
Benefits
Improved decision
making
Improved community
service
Improved goodwill
Improved morale
Intangible
Benefits
baL76892_ch09_341-378.indd 356baL76892_ch09_341-378.indd 356 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
357Enterprise MIS Module 3
exactly the same error found during the testing or implementation phase is going to cost
the organization an enormous amount to fix because it has to change the actual system.
Figure 9.12 displays how the cost to fix an error grows exponentially the later the error is
found in the SDLC.
Balance of the Triple Constraint
Figure 9.13 displays the relationships among the three primary and interdependent vari-
ables in any project—time, cost, and scope. All projects are limited in some way by these
three constraints. The Project Management Institute calls the framework for evaluating
these competing demands the triple constraint.
The relationship among these variables is such that if any one changes, at least one
other is likely to be affected. For example, moving up a project’s finish date could mean
either increasing costs to hire more staff or decreasing the scope to eliminate features
or functions. Increasing a project’s scope to include additional customer requests could
FIGURE 9.11
Types of Feasibility Studies
Measures how well a solution meets
the identified system requirements to
solve the problems and take advantage
of opportunites
Operational Feasibility
Measures the cost-effectiveness of
a projectEconmic Feasibility
Measures the project time frame to
ensure it can be completed on timeSchedule Feasibility
Measures the practicality of a technical
solution and the availability of
technical resources and expertise
Technical Feasibility
Measures how well the solution will
be accepted in a given organizationPolitical Feasibility
Measures how well a solution can be
implemented within existing legal and
contractual obligations
Legal Feasibility
baL76892_ch09_341-378.indd 357baL76892_ch09_341-378.indd 357 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
358 Chapter 9 Systems Development and Project Management: Corporate Responsibility
extend the project’s time to completion or increase the project’s cost—or both—to
accommodate the changes. Project quality is affected by the project manager’s ability
to balance these competing demands. High-quality projects deliver the agreed upon
product or service on time and on budget. Project management is the science of mak-
ing intelligent trade-offs between time, cost, and scope. Benjamin Franklin’s timeless
advice— by failing to prepare, you prepare to fail— applies to many of today’s software
development projects.
The Project Management Institute created the Project Management Body of Knowl-
edge (PMBOK) for the education and certification of project managers. Figure 9.14 sum-
marizes the key elements of project planning according to PMBOK.
FIGURE 9.12
The Cost of Fixing Errors
Co
st
$
Planning Analysis Design Development Testing Implementation Maintenance
Systems Development Life Cycle Phases
FIGURE 9.13
The Triple Constraint: Changing
One Changes All
MANAGING
EXPECTATIONS
Resources
Tim
e
Scope
baL76892_ch09_341-378.indd 358baL76892_ch09_341-378.indd 358 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
359Enterprise MIS Module 3
PRIMARY PROJECT PLANNING DIAGRAMS
Project planning is the process of detailed planning that generates answers to common
operational questions such as why are we doing this project or what is the project going
to accomplish for the business? Some of the key questions project planning can help
answer include:
■ How are deliverables being produced?
■ What activities or tasks need to be accomplished to produce the deliverables?
■ Who is responsible for performing the tasks?
■ What resources are required to perform the tasks?
■ When will the tasks be performed?
■ How long will it take to perform each task?
■ Are any tasks dependent upon other tasks being completed before they can begin?
■ How much does each task cost?
■ What skills and experience are required to perform each task?
■ How is the performance of the task being measured including quality?
■ How are issues being tracked?
■ How is change being addressed?
■ How is communication occurring and when?
■ What risks are associated with each task?
LO 9.4: Identify the primary project
planning diagrams.
Tool Description
Communication plan Defines the how, what, when, and who regarding the flow of project information to stakeholders and is key
for managing expectations.
Executive sponsor The person or group who provides the financial resources for the project.
Project assumption Factors considered to be true, real, or certain without proof or demonstration. Examples include hours in a
workweek or time of year the work will be performed.
Project constraint Specific factors that can limit options, including budget, delivery dates, available skilled resources, and
organizational policies.
Project deliverable Any measurable, tangible, verifiable outcome, result, or item that is produced to complete a project or part
of a project. Examples of project deliverables include design documents, testing scripts, and requirements
documents.
Project management office (PMO) An internal department that oversees all organizational projects. This group must formalize and professional-
ize project management expertise and leadership. One of the primary initiatives of the PMO is to educate the
organization on techniques and procedures necessary to run successful projects.
Project milestone Represents key dates when a certain group of activities must be performed. For example, completing the
planning phase might be a project milestone. If a project milestone is missed, then chances are the project is
experiencing problems.
Project objectives Quantifiable criteria that must be met for the project to be considered a success.
Project requirements document Defines the specifications for product/output of the project and is key for managing expectations, controlling
scope, and completing other planning efforts.
Project scope statement Links the project to the organization’s overall business goals. It describes the business need (the problem
the project will solve) and the justification, requirements, and current boundaries for the project. It defines
the work that must be completed to deliver the product with the specified features and functions, and it
includes constraints, assumptions, and requirements—all components necessary for developing accurate
cost estimates.
Project stakeholder Individuals and organizations actively involved in the project or whose interests might be affected as a result
of project execution or project completion.
Responsibility matrix Defines all project roles and indicates what responsibilities are associated with each role.
Status report Periodic reviews of actual performance versus expected performance.
FIGURE 9.14
PMBOK Elements of Project
Management
baL76892_ch09_341-378.indd 359baL76892_ch09_341-378.indd 359 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
360 Chapter 9 Systems Development and Project Management: Corporate Responsibility
The project objectives are among the most important areas to define because they are
essentially the major elements of the project. When an organization achieves the proj-
ect objectives, it has accomplished the major goals of the project and the project scope
is satisfied. Project objectives must include metrics so that the project’s success can
be measured. The metrics can include cost, schedule, and quality metrics. Figure 9.15
lists the SMART criteria—useful reminders about how to ensure the project has created
understandable and measurable objectives.
The project plan is a formal, approved document that manages and controls project
execution. The project plan should include a description of the project scope, a list of
activities, a schedule, time estimates, cost estimates, risk factors, resources, assignments,
and responsibilities. In addition to these basic components, most project profession-
als also include contingency plans, review and communications strategies, and a kill
switch —a trigger that enables a project manager to close the project before completion.
A good project plan should include estimates for revenue and strategic necessities.
It also should include measurement and reporting methods and details as to how top
leadership will engage in the project. It also informs stakeholders of the benefits of the
project and justifies the investment, commitment, and risk of the project as it relates to
the overall mission of the organization.
Managers need to continuously monitor projects to measure their success. If a project
is failing, the manager must cancel the project and save the company any further project
costs. Canceling a project is not necessarily a failure as much as it is successful resource
management as it frees resources that can be used on other projects that are more valu-
able to the firm.
The most important part of the plan is communication. The project manager must
communicate the plan to every member of the project team and to any key stakehold-
ers and executives. The project plan must also include any project assumptions and be
detailed enough to guide the execution of the project. A key to achieving project success
is earning consensus and buy-in from all key stakeholders. By including key stakehold-
ers in project plan development, the project manager allows them to have ownership of
the plan. This often translates to greater commitment, which in turn results in enhanced
motivation and productivity. The two primary diagrams most frequently used in project
planning are PERT and Gantt charts.
A PERT (Program Evaluation and Review Technique) chart is a graphical net-
work model that depicts a project’s tasks and the relationships between them.
FIGURE 9.15
SMART Criteria for Successful
Objective Creation
S
• Specific
M
• Measurable
• Agreed Upon
• Realistic
R
• Time Frame
T
A
baL76892_ch09_341-378.indd 360baL76892_ch09_341-378.indd 360 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
361Enterprise MIS Module 3
A dependency is a logical relationship that exists between the project tasks, or between
a project task and a milestone. PERT charts define dependency between project tasks
before those tasks are scheduled (see Figure 9.16 ). The boxes in Figure 9.16 represent
project tasks, and the project manager can adjust the contents of the boxes to dis-
play various project attributes such as schedule and actual start and finish times. The
arrows indicate that a task depends on the start or the completion of a different task.
The critical path estimates the shortest path through the project ensuring all critical
tasks are completed from start to finish. The red line in Figure 9.16 displays the critical
path for the project.
A Gantt chart is a simple bar chart that lists project tasks vertically against the proj-
ect’s time frame, listed horizontally. A Gantt chart works well for representing the project
schedule. It also shows actual progress of tasks against the planned duration. Figure 9.17
displays a software development project using a Gantt chart.
OUTSOURCING PROJECTS
In the high-speed global business environment, an organization needs to increase
profits, grow market share, and reduce costs. Two basic options are available to orga-
nizations wishing to develop and maintain their information systems—in-sourcing or
outsourcing.
In-sourcing (in-house development) uses the professional expertise within an orga-
nization to develop and maintain its information technology systems. In-sourcing has
been instrumental in creating a viable supply of IT professionals and in creating a better
quality workforce combining both technical and business skills.
Outsourcing is an arrangement by which one organization provides a service or
services for another organization that chooses not to perform them in-house. In some
cases, the entire MIS department is outsourced, including planning and business anal-
ysis as well as the design, development, and maintenance of equipment and projects.
Outsourcing can range from a large contract under which an organization such as IBM
LO 9.5: Identify the three different
types of outsourcing along with their
benefits and challenges.
BUSINESS DRIVEN MIS
Google is scanning all or parts of the book collections of the University of
Michigan, Harvard University, Stanford University, the New York Public Library,
and Oxford University as part of its Google Print Library Project with the intent
of making all of the copyrighted material free and searchable on Google.
Of course many authors and publishers are furious with Google, claiming
copyright infringement. According to Google, scanning books will help make
out-of-print books accessible as customers can find, read, and print books
directly from the website and will actually generate sales by giving customers
the ability to buy books online.
Do you view Google’s Print Library Project as a violation of copyright laws?
Of all the projects Google can afford to tackle, why would the company choose
one that directly violates copyright laws? If all books were available for free on
Google, what would happen to the publishing industry? As you prioritize proj-
ects for your business, what types of competitive information will you want to
view before choosing projects? What do you think the future of the book pub-
lishing industry will look like based on Google’s radical new website? If you
owned a publishing business, what could you do to combat Google’s book
project? 9
Google Books
Project
APPLY YOUR KNOWLEDGE
baL76892_ch09_341-378.indd 361baL76892_ch09_341-378.indd 361 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
362 Chapter 9 Systems Development and Project Management: Corporate Responsibility
FIGURE 9.16
PERT Chart Expert, a PERT Chart
Example
FIGURE 9.17
Microsoft Project, a Gantt Chart
Example
baL76892_ch09_341-378.indd 362baL76892_ch09_341-378.indd 362 26/11/12 1:57 PM26/11/12 1:57 PM

Rev. Confirming Pages
363Enterprise MIS Module 3
manages all MIS services for another company, to hiring contractors and temporary staff
on an individual basis. Common reasons companies outsource include:
■ Core competencies. Many companies have recently begun to consider outsourcing
as a way to acquire best-practices and the business process expertise of highly skilled
technology resources for a low cost. Technology is advancing at such an accelerated
rate that companies often lack the technical resources required to keep current.
■ Financial savings. It is far cheaper to hire people in China and India than pay the
required salaries for similar labor in the United States.
■ Rapid growth. Firms must get their products to market quickly and still be able to
react to market changes. By taking advantage of outsourcing, an organization can
acquire the resources required to speed up operations or scale to new demand levels.
■ The Internet and globalization. The pervasive nature of the Internet has made
more people comfortable with outsourcing abroad as India, China, and the United
States become virtual neighbors.
Outsourcing MIS enables organizations to keep up with market and technology
advances—with less strain on human and financial resources and more assurance that
the IT infrastructure will keep pace with evolving business priorities (see Figure 9.18 ).
The three forms of outsourcing options available for a project are:
1. Onshore outsourcing —engaging another company within the same country for
services.
2. Nearshore outsourcing —contracting an outsourcing arrangement with a company
in a nearby country. Often this country will share a border with the native country.
3. Offshore outsourcing —using organizations from developing countries to write code
and develop systems. In offshore outsourcing the country is geographically far away.
BUSINESS DRIVEN INNOVATION
The next time one of your employees submits an expense report, you might
want to think twice as a number of websites offer phony documentation indi-
viduals can use to help cheat on their taxes, expense reports, or even spouses.
Here are a few you should be aware of:
■ Customreceipts.com : This website can print a fake ATM receipt. Why would
people want a fake ATM receipt? To impress others with their massive bal-
ances of course!
■ Alibi Network: This website can create you a customized excuse, such as an
emergency phone call giving you a reason to leave that boring meeting, or a
false invitation to a corporate or business event so an unfaithful partner can
give physical proof of a false destination and location.
■ The Restaurant Maloney & Porcelli’s: This innovative, yet highly unethical,
restaurant started a website that allows its customers to enter an amount for
a meal and it generates fake receipts adding up to the cost of the meal. 10
All these systems were created by software developers. If you were asked to par-
ticipate in one of these website development efforts, what would you do? Who do
you think should be held liable for unethical websites—the employee or the host
of the website? Now that you know about the existence of these types of web-
sites, how will you manage your employees? What would you do to an employee
who was using one of these services? How can a project manager combat these
types of issues without wasting enormous amounts of time and energy?
$7,500 Steak
Dinner
APPLY YOUR KNOWLEDGE
baL76892_ch09_341-378.indd 363baL76892_ch09_341-378.indd 363 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
364 Chapter 9 Systems Development and Project Management: Corporate Responsibility
Since the mid-1990s, major U.S. companies have been sending significant portions of their
software development work offshore—primarily to vendors in India, but also to vendors in
China, eastern Europe (including Russia), Ireland, Israel, and the Philippines. The big selling
point for offshore outsourcing is inexpensive but good work. The overseas counterpart to an
American programmer who earns as much as $63,000 per year is paid as little as $5,000 per
year (see Figure 9.19 ). Developing countries in Asia and South Africa offer some outsourc-
ing services but are challenged by language difference, inadequate telecommunication
equipment, and regulatory obstacles. India is the largest offshore marketplace because
it promotes English along with a technologically advanced population. Infosys, NIIT,
Mahindra Satyam, Tata Consultancy Services, and Wipro are among the biggest Indian out-
sourcing service providers, each of which has a large presence in the United States. 11
Outsourcing Benefits
The many benefits associated with outsourcing include:
■ Increased quality and efficiency of business processes.
■ Reduced operating expenses for head count and exposure to risk for large capital
investments.
■ Access to outsourcing service provider’s expertise, economies of scale, best practices,
and advanced technologies.
■ Increased flexibility for faster response to market changes and less time to market for
new products or services.
Outsourcing Challenges
Outsourcing comes with several challenges. These arguments are valid and should be
considered when a company is thinking about outsourcing. Many challenges can be
avoided with proper research. The challenges include:
FIGURE 9.18
Outsourcing Models Indirect
Cu
st
om
er
C
on
tr
ol
Direct
Close Remote
Locations of Outsourcing
Onshore
Nearshore
Offshore
Country Salary Range Per Year
China $5,000–$9,000
India 6,000–10,000
Philippines 6,500–11,000
Russia 7,000–13,000
Ireland 21,000–28,000
Canada 25,000–50,000
United States 60,000–90,000
FIGURE 9.19
Typical Salary Ranges for
Computer Programmers
Source: From Edward Yourdon, Death
March, 2nd edition, © 2004. Reproduced
by permission of Pearson Education, Inc.,
Upper Saddle River, New Jersey.
baL76892_ch09_341-378.indd 364baL76892_ch09_341-378.indd 364 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
365Enterprise MIS Module 3
■ Length of contract. Most companies look at outsourcing as a long-term solution
with a time period of several years. Training and transferring resources around the
globe is difficult and expensive, hence most companies pursuing offshore outsourc-
ing contract for multiple years of service. A few of the challenges facing the length of
the contract include:
1. It can be difficult to break the contract.
2. Forecasting business needs for the next several years is challenging and the con-
tract might not meet future business needs.
3. Re-creating an internal MIS department if the outsource provider fails is costly and
challenging.
■ Threat to competitive advantage. Many businesses view MIS as a competitive
advantage and view outsourcing as a threat because the outsourcer could share the
company’s trade secrets.
■ Loss of confidentiality. Information on pricing, products, sales, and customers can
be a competitive asset and often critical for business success. Outsourcing could
place confidential information in the wrong hands. Although confidentiality clauses
contained in the contracts are supposed to protect the company, the potential risk
and costs of a breach must be analyzed.
Every type of organization in business today relies on software to operate and solve
complex problems or create exciting opportunities. Software built correctly can support
nimble organizations and transform with them as they and their businesses transform.
Software that effectively meets employee needs will help an organization become more
productive and enhance decision making. Software that does not meet employee needs
might have a damaging effect on productivity and can even cause a business to fail.
Employee involvement in software development, along with the right implementation,
is critical to the success of an organization.
BUSINESS DRIVEN GLOBALIZATION
Swedish police stopped Bill Murray and charged him with drunk driving when
he attempted to drive his golf cart around the city. A golf cart hits top speed at
three miles per hour and although it might seem odd that you can be issued a
DUI for driving one, many countries have laws against such practices. A few
other culture blunders you want to avoid include:
■ One American company learned that the name of the cooking oil they were
marketing translated into “jackass oil” in Spanish.
■ A deodorant marketing campaign displayed images of a strong courageous
man washing his dog. The campaign failed in Islamic countries where dogs
are considered unclean.
■ A sports equipment company packaged golf balls in groups of four for sales
throughout Japan. Sales plummeted because the word four pronounced in
Japanese sounds the same as the word death and items packaged in fours
are considered unlucky. 12
Companies that are expanding globally are looking for opportunities, not
problems. Yet local laws and procedures that come into play when setting up
shop abroad—everything from hiring and firing to tax filings—can be a mine-
field. What types of culture, language, and legal issues should a company expect
to encounter when dealing with outsourcing to another country? What can a
company do to mitigate these risks?
DUI in a Golf
Cart
APPLY YOUR KNOWLEDGE
baL76892_ch09_341-378.indd 365baL76892_ch09_341-378.indd 365 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
366 Chapter 9 Systems Development and Project Management: Corporate Responsibility
BUSINESS DRIVEN DISCUSSION
Edward Yourdon’s book Death March describes the complete software devel-
oper’s guide to surviving “mission impossible” projects. MIS projects are
challenging, and project managers are expected to achieve the impossible by
pulling off a successful project even when pitted against impossible challenges.
In Death March, infamous software developer Edward Yourdon presents his
project classification displayed here. Yourdon measures projects based on the
level of pain and chances for success.
■ Mission Impossible Project: This project has a great chance of success and
your hard work will pay off as you find happiness and joy in the work. For
example, this is the type of project where you work all day and night for a
year and become the project hero as you complete the mission impossible
and reap a giant promotion as your reward.
■ Ugly Project: This project has a high chance of success but is very painful
and offers little happiness. For example, you work day and night to install a
new accounting system and although successful, you hate accounting and
dislike the company and its products.
■ Kamikaze Project: This is a project that has little chance of success but you
are so passionate about the content that you find great happiness working
on the project. For example, you are asked to build a website to support a
cancer foundation, a cause near to your heart, but the company is nonprofit
and doesn’t have any funds to help buy the software you need to get every-
thing working. You patch the system together and implement many manual
work-arounds just to keep the system functioning.
■ Suicide Project: This project has no chance of success and offers you noth-
ing but pain. This is the equivalent of your worst nightmare project. Word of
caution, avoid suicide projects! 13
Analyze your school and work projects and find a project that would fit in
each box. What could you have done differently on your suicide project to
ensure its success? What can you do to avoid being placed on a suicide project?
Given the choice, which type of project would you choose to work on and why?
Death March
APPLY YOUR KNOWLEDGE
Kamikaze
Suicide Ugly
Chance of Success
Mission
Impossible
Le
ve
l o
f H
ap
pi
ne
ss
baL76892_ch09_341-378.indd 366baL76892_ch09_341-378.indd 366 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
367Enterprise MIS Module 3
Learning Outcome 9.1: Describe the seven phases of the systems development life cycle.
The seven phases in the SDLC are:
■ Planning—involves establishing a high-level plan of the intended project and determining project
goals.
■ Analysis—involves analyzing end-user business requirements and refining project goals into
defined functions and operations of the intended system.
■ Design—involves describing the desired features and operations of the system including screen
layouts, business rules, process diagrams, pseudo code, and other documentation.
■ Development—involves taking all of the detailed design documents from the design phase and
transforming them into the actual system.
■ Testing—involves bringing all the project pieces together into a special testing environment to
test for errors, bugs, and interoperability and verify that the system meets all of the business
requirements defined in the analysis phase.
■ Implementation—involves placing the system into production so users can begin to perform
actual business operations with the system.
■ Maintenance—involves performing changes, corrections, additions, and upgrades to ensure the
system continues to meet the business goals.
Learning Outcome 9.2: Summarize the different software development methodologies.
The oldest and the best known project management methodology is the waterfall methodology, a
sequence of phases in which the output of each phase becomes the input for the next. In the SDLC,
this means the steps are performed one at a time, in order, from planning through implementation and
maintenance. The traditional waterfall method no longer serves most of today’s development efforts,
however; it is inflexible and expensive, and it requires rigid adherence to the sequence of steps. Its
success rate is only about 1 in 10.
There are a number of different software development methodologies including:
■ Agile methodology aims for customer satisfaction through early and continuous delivery of useful
software components developed by an iterative process with a design point that uses the bare
minimum requirements.
■ Waterfall methodology follows an activity-based process in which each phase in the SDLC is
performed sequentially from planning through implementation and maintenance.
■ Rapid application development methodology (RAD) emphasizes extensive user involvement in the
rapid and evolutionary construction of working prototypes of a system to accelerate the systems
development process.
■ Extreme programming (XP) methodology breaks a project into tiny phases, and developers cannot
continue on to the next phase until the first phase is complete.
■ Rational unified process (RUP) provides a framework for breaking down the development of soft-
ware into four gates.
■ Scrum uses small teams to produce small pieces of deliverable software using sprints, or 30-day
intervals, to achieve an appointed goal.
Learning Outcome 9.3: Explain project management and identify the primary reasons
projects fail.
A project is a temporary or short-term endeavor undertaken to create a unique product, service, or
result, such as developing a custom ecommerce site or merging databases. Project management is the
L E A R N I N G O U T C O M E R E V I E W
baL76892_ch09_341-378.indd 367baL76892_ch09_341-378.indd 367 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
368 Chapter 9 Systems Development and Project Management: Corporate Responsibility
application of knowledge, skills, tools, and techniques to project activities to meet project requirements.
A project manager is an individual who is an expert in project planning and management, defines and
develops the project plan, and tracks the plan to ensure the project is completed on time and on budget.
The primary reasons projects fail include unclear or missing business requirements, skipped phases,
changing technology, the cost of finding errors in the SDLC, and balance of the triple constraints.
Learning Outcome 9.4: Identify the primary project planning diagrams.
A PERT (Program Evaluation and Review Technique) chart is a graphical network model that depicts a
project’s tasks and the relationships between those tasks. A dependency is a logical relationship that
exists between the project tasks, or between a project task and a milestone. A Gantt chart is a simple
bar chart that depicts project tasks against a calendar. In a Gantt chart, tasks are listed vertically and
the project’s time frame is listed horizontally. A Gantt chart works well for representing the project
schedule. It also shows actual progress of tasks against the planned duration.
Learning Outcome 9.5: Identify the three different types of outsourcing along with their
benefits and challenges.
■ Onshore outsourcing—engaging another company within the same country for services.
■ Nearshore outsourcing—contracting an outsourcing arrangement with a company in a nearby
country.
■ Offshore outsourcing—using organizations from developing countries to write code and develop
systems.
The many benefits associated with outsourcing include increased quality and efficiency of a pro-
cess, service, or function; reduction of operating expenses and exposure to risks involved with large
capital investments; and access to outsourcing service provider’s expertise, economies of scale, best
practices, and advanced technologies. Outsourcing comes with several challenges, including length
of contracts, losing competitive advantages, and risking a breach of confidential information.
1. Knowledge: List the signs for assessing if a current project is experiencing issues.
2. Comprehension: Identify the options a project manager can follow if a project is not meeting its
success criteria.
3. Application: Illustrate the triple constraints role in a project.
4. Analysis: Analyze the four steps to recovering a project and determine which one is the most
critical.
5. Synthesis: Propose how you would develop a game plan to recover a project.
6. Evaluate: Argue for or against the following statement: “Throwing good money after bad will not
save a project.”
O P E N I N G C A S E Q U E S T I O N S
Agile methodology, 352
Alpha testing, 349
Analysis phase, 346
Brainstorming, 345
Bug, 349
Business requirement, 346
Change agent, 345
Communication plan, 359
Computer-aided software
engineering (CASE), 348
Control objects for informa-
tion and related technology
(COBIT), 348
Conversion, 345
Corrective maintenance, 350
K E Y T E R M S
baL76892_ch09_341-378.indd 368baL76892_ch09_341-378.indd 368 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
369Enterprise MIS Module 3
1. What role does project management play in the systems development effort?
2. What role does the project manager play in determining a project’s success?
3. Why would a project require an executive sponsor?
4. Which phase in the systems development life cycle is the most important?
5. If you had to skip a phase during the development of a system, which phase would it be and why?
6. Which phase in the systems development life cycle contains the most risk? Be sure to explain
your answer.
7. Which project management methodology would you choose to run your software development
project?
8. If you started on a new software development project and the project plan was using the water-
fall methodology, would you remain on the project? What could you do to better prepare your
project for success?
9. Explain the different types of feasibility studies a project manager can use to prioritize project
importance.
10. Why should end users be involved in the systems development effort?
11. Why would a project manager use Gantt and PERT charts?
12. Why is gathering business requirements a challenge for most projects?
13. What are the different types of outsourcing available for a project?
14. What are the risks associated with outsourcing?
15. Explain the goals of the Project Management Institute and identify three key terms associated
with PMBOK.
R E V I E W Q U E S T I O N S
Critical path, 361
Dependency, 361
Design phase, 348
Development phase, 348
Development testing, 349
Discovery prototyping, 352
Executive sponsor, 359
Extreme programming (XP)
methodology, 353
Feasibility, 355
Fourth-generation languages
(4GL), 349
Gantt chart, 361
Help desk, 349
Implementation phase, 349
In-sourcing (in-house
development), 361
Intangible benefits, 355
Integration testing, 349
Iterative development, 352
Kill switch, 360
Legacy system, 345
Maintenance phase, 350
Methodology, 351
Nearshore outsourcing, 363
Object-oriented languages, 349
Offshore outsourcing, 363
Off-the-shelf application
software, 345
Online training, 349
Onshore outsourcing, 363
Outsourcing, 361
Parallel implementation, 350
PERT (Program Evaluation
and Review Technique)
chart, 360
Phased implementation, 350
Pilot implementation, 350
Planning phase, 345
Plunge implementation, 350
Preventive maintenance, 350
Project, 346
Project assumption, 359
Project constraint, 359
Project deliverable, 359
Project management, 346
Project management office
(PMO), 359
Project manager, 346
Project milestones, 359
Project objective, 359
Project plan, 346
Project requirements
document, 359
Project scope, 346
Project scope statement, 359
Project stakeholder, 359
Prototyping, 352
Rapid application development
(RAD) methodology (also called
rapid prototyping), 353
Rational unified process (RUP)
methodology, 353
Requirements
management, 348
Requirements definition
document, 348
Responsibility matrix, 359
Scripting language, 349
Scrum methodology, 354
Sign-off, 348
Software customization, 345
Software engineering, 348
Status report, 359
Systems development life
cycle (SDLC), 345
System testing, 349
Tangible benefits, 355
Test conditions, 349
Testing phase, 349
Unit testing, 349
User acceptance testing
(UAT), 349
User documentation, 349
Waterfall methodology, 351
Workshop training, 349
baL76892_ch09_341-378.indd 369baL76892_ch09_341-378.indd 369 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
370 Chapter 9 Systems Development and Project Management: Corporate Responsibility
C L O S I N G C A S E O N E
Disaster at Denver International Airport
One good way to learn how to develop successful systems is to review past failures. One of the most
infamous system failures is Denver International Airport’s (DIA) baggage system. When the automated
baggage system design for DIA was introduced, it was hailed as the savior of modern airport design.
The design relied on a network of 300 computers to route bags and 4,000 cars to carry luggage
across 21 miles of track. Laser scanners were to read bar-coded luggage tags, while advanced scan-
ners tracked the movement of toboggan-like baggage carts.
When DIA finally opened its doors for reporters to witness its revolutionary baggage handling sys-
tem, the scene was rather unpleasant. Bags were chewed up, lost, and misrouted in what has since
become a legendary systems nightmare.
One of the biggest mistakes made in the baggage handling system fiasco was that not enough
time was allowed to properly develop the system. In the beginning of the project, DIA assumed it was
the responsibility of individual airlines to find their own way of moving the baggage from the plane to
the baggage claim area. The automated baggage system was not involved in the initial planning of the
DIA project. By the time the DIA developers decided to create an integrated baggage system, the time
frame for designing and implementing such a complex and huge system was not possible.
Another common mistake that occurred during the project was that the airlines kept changing
their business requirements. This caused numerous issues, including the implementation of power
supplies that were not properly updated for the revised system design, which caused overloaded
motors and mechanical failures. Besides the power supply design problem, the optical sensors did not
read the bar codes correctly, causing issues with baggage routing.
Finally, BAE, the company that designed and implemented the automated baggage system for
DIA, had never created a baggage system of this size before. BAE had created a similar system in an
airport in Munich, Germany, where the scope was much smaller. Essentially, the baggage system had
an inadequate IT infrastructure because it was designed for a much smaller system.
DIA simply could not open without a functional baggage system so the city had no choice but to
delay the opening date for more than 16 months, costing taxpayers roughly $1 million per day, which
totaled around $500 million. 14
Questions
1. One problem with DIA’s baggage system was inadequate testing. Why is testing important to a
project’s success? Why do so many projects decide to skip testing?
2. Evaluate the different systems development methodologies. Which one would have most
significantly increased the chances of the project’s success?
3. How could more time spent in the analysis and design phase have saved Colorado taxpayers
hundreds of millions of dollars?
4. Why could BAE not take an existing IT infrastructure and simply increase its scale and expect it to work?
Reducing Ambiguity in Business Requirements
The main reason projects fail is bad business requirements. Business requirements are considered
“bad” because of ambiguity or insufficient involvement of end users during analysis and design.
C L O S I N G C A S E T W O
baL76892_ch09_341-378.indd 370baL76892_ch09_341-378.indd 370 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
371Enterprise MIS Module 3
A requirement is unambiguous if it has the same interpretation for all parties. Different interpre-
tations by different participants will usually result in unmet expectations. Here is an example of an
ambiguous requirement and an example of an unambiguous requirement:
Ambiguous requirement: The financial report must show profits in local and U.S. currencies.
Unambiguous requirement: The financial report must show profits in local and U.S. currencies using
the exchange rate printed in The Wall Street Journal for the last business day of the period being reported.
Ambiguity is impossible to prevent completely because it is introduced into requirements in natural
ways. For example:
■ Requirements can contain technical implications that are obvious to the IT developers but not to
the customers.
■ Requirements can contain business implications that are obvious to the customer but not to the IT
developers.
■ Requirements may contain everyday words whose meanings are “obvious” to everyone, yet
different for everyone.
■ Requirements are reflections of detailed explanations that may have included multiple events,
multiple perspectives, verbal rephrasing, emotion, iterative refinement, selective emphasis, and
body language—none of which are captured in the written statements.
Tips for Reviewing Business Requirements
When reviewing business requirements always look for the following words to help dramatically
reduce ambiguity:
■ And and or have well-defined meanings and ought to be completely unambiguous, yet they are often
understood only informally and interpreted inconsistently. For example, consider the statement “The
alarm must ring if button T is pressed and if button F is pressed.” This statement may be intended to
mean that to ring the alarm, both buttons must be pressed or it may be intended to mean that either one
can be pressed. A statement like this should never appear in a requirement because the potential for mis-
interpretation is too great. A preferable approach is to be very explicit, for example, “The alarm must ring
if both buttons T and F are pressed simultaneously. The alarm should not ring in any other circumstance.”
■ Always might really mean “most of the time,” in which case it should be made more explicit. For
example, the statement “We always run reports A and B together” could be challenged with “In
other words, there is never any circumstance where you would run A without B and B without A?”
If you build a system with an “always” requirement, then you are actually building the system to
never run report A without report B. If a user suddenly wants report B without report A, you will
need to make significant system changes.
■ Never might mean rarely, in which case it should be made more explicit. For example, the state-
ment “We never run reports A and B in the same month” could be challenged with, “So that
means that if I see that A has been run, I can be absolutely certain that no one will want to run B.”
Again, if you build a system that supports a “never” requirement, then the system users can never
perform that requirement. For example, the system would never allow a user to run reports A and
B in the same month, no matter what the circumstances.
■ Boundary conditions are statements about the line between true and false and do and do not.
These statements may or may not be meant to include end points. For example, “We want to
use method X when there are up to 10 pages, but method Y otherwise.” If you were building this
system, would you include page 10 in method X or in method Y? The answer to this question will
vary causing an ambiguous business requirement. 15
Questions
1. Why are ambiguous business requirements the leading cause of system development failures?
2. Why do the words and and or tend to lead to ambiguous requirements?
3. Research the web and determine other reasons for “bad” business requirements.
4. What is wrong with the following business requirement: “The system must support employee
birthdays because every employee always has a birthday every year.”
baL76892_ch09_341-378.indd 371baL76892_ch09_341-378.indd 371 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
372 Chapter 9 Systems Development and Project Management: Corporate Responsibility
1. Selecting a Systems Development Methodology
Exus Incorporated is an international billing outsourcing company. Exus currently has revenues
of $5 billion, more than 3,500 employees, and operations on every continent. You have recently
been hired as the CIO. Your first task is to increase the software development project success rate,
which is currently at 20 percent. To ensure that future software development projects are success-
ful, you want to standardize the systems development methodology across the entire enterprise.
Currently, each project determines which methodology it uses to develop software.
Create a report detailing three system development methodologies that were covered in this text.
Compare each of these methodologies to the traditional waterfall approach. Finally, recommend
which methodology you want to implement as your organizational standard. Be sure to highlight
any potential roadblocks you might encounter when implementing the new standard methodology.
2. Understanding Project Failure
You are the director of project management for Stello, a global manufacturer of high-end writing
instruments. The company sells to primarily high-end customers, and the average price for one of
its fine writing instruments is about $350. You are currently implementing a new customer relation-
ship management system, and you want to do everything you can to ensure a successful systems
development effort. Create a document summarizing the primary reasons this project could fail,
along with your strategy to eliminate the possibility of system development failure on your project.
3. Missing Phases in the Systems Development Life Cycle
Hello Inc. is a large concierge service for executives operating in Chicago, San Francisco, and New
York. The company performs all kinds of services from dog walking to airport transportation. Your
manager, Dan Martello, wants to skip the testing phase during the company’s financial ERP imple-
mentation. He feels that because the system came from a vendor, it should work correctly. Draft a
memo explaining the importance of following the SDLC and the ramifications to the business if the
financial system is not tested.
4. Refusing to Sign Off
You are the primary client on a large extranet development project. After carefully reviewing the
requirements definition document, you are positive that there are missing, ambiguous, inaccurate,
and unclear requirements. The project manager is pressuring you for your sign-off because he has
already received sign-off from five of your co-workers. If you fail to sign off on the requirements,
you are going to put the entire project at risk because the time frame is nonnegotiable. What would
you do? Why?
5. Saving Failing Systems
Crik Candle Company manufactures low-end candles for restaurants. The company generates
more than $40 million in annual revenues and has more than 300 employees. You are in the
middle of a large multimillion-dollar supply chain management implementation. Your project man-
ager has just come to you with the information that the project might fail for the following reasons:
■ Several business requirements were incorrect and the scope has to be doubled.
■ Three developers recently quit.
■ The deadline has been moved up a month.
Develop a list of options that your company can follow to ensure the project remains on schedule
and within budget.
C R I T I C A L B U S I N E S S T H I N K I N G
baL76892_ch09_341-378.indd 372baL76892_ch09_341-378.indd 372 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
373Enterprise MIS Module 3
6. Explaining Project Management
Prime Time Inc. is a large consulting company that specializes in outsourcing people with project
management capabilities and skills. You are in the middle of an interview for a job with Prime
Time. The manager performing the interview asks you to explain why managing a project plan
is critical to a project’s success. The manager also wants you to explain scope creep and feature
creep and your tactics for managing them on a project. Finally, the manager wants you to elabo-
rate on your strategies for delivering successful projects and reducing risks.
7. Applying Project Management Techniques
You have been hired by a medium-sized airline company, Sun Best. Sun Best currently flies more
than 300 routes in the East. The company is experiencing tremendous issues coordinating its
3,500 pilots, 7,000 flight attendants, and 2,000 daily flights. Determine how Sun Best could use
a Gantt chart to help it coordinate pilots, flight attendants, and daily flights. Using Excel, create a
sample Gantt chart highlighting the different types of activities and resources Sun Best could track
with the tool.
E N T R E P R E N E U R I A L C H A L L E N G E
BUILD YOUR OWN BUSINESS
1. Your business is undertaking many new and exciting initiatives to boost growth, including
employee blogs, customer wikis, and implementation of a new time and attendance system.
Time and attendance software is critical to the business because it can ensure you have the
right employees, at the right place, at the right time, which can increase sales. You never want to
find yourself understaffed during busy times and overstaffed during slow times. Also, accurately
accounting for employees’ time is crucial to effectively analyzing labor expenses, which are
the largest operating expense your business incurs. Conveniently, time and attendance solution
providers, time clock manufacturers, and software development companies are developing high-
quality affordable products. You have decided to replace the manual employee tracking system
your grandfather implemented in the 1950s. You have a highly technical employee, Nick Zele,
who has offered to build the system for you and ensures you it is a simple build. You could also
purchase one of the many off-the-shelf applications and have an outsourcing firm customize the
application for your business. What are the pros and cons of using an employee to build you a
custom system? What are the pros and cons of purchasing an off-the-shelf time and attendance
application and outsourcing custom development? How will your older employees feel about the
new system and what can you do to ensure a smooth transition?
2. You have decided to implement a new payroll system for your business. Review the following
business requirements and highlight any potential issues.
■ All employees must have a unique employee ID.
■ The system must track employee hours worked based on employee’s last name.
■ Employees must be scheduled to work a minimum of eight hours per day.
■ Employee payroll is calculated by multiplying the employee’s hours worked by $7.25.
■ Managers must be scheduled to work morning shifts.
■ Employees cannot be scheduled to work more than eight hours per day.
■ Servers cannot be scheduled to work morning, afternoon, or evening shifts.
■ The system must allow managers to change and delete employees from the system.
baL76892_ch09_341-378.indd 373baL76892_ch09_341-378.indd 373 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
374 Chapter 9 Systems Development and Project Management: Corporate Responsibility
3. You are in the middle of implementing a new system at your business. Your project team is failing
for the following three reasons: (1) The project is using the traditional waterfall methodology; (2)
the SDLC was not followed and the developers decided to skip the testing phase; (3) a project
plan was developed during the analysis phase, but the old project manager never updated or
followed the plan and never updated the business requirements. Detail your strategy for getting
your project back on track.
PROJECT I Methods Behind Methodologies
Signatures Inc. specializes in producing personalized products such as coffee mugs and pens with
company logos. The company generates more than $40 million in annual revenues and has more than
300 employees. The company is in the middle of a large multimillion-dollar SCM implementation, and it
has just hired your project management outsourcing firm to take over the project management efforts.
On your first day, your team is told that the project is failing for the following reasons:
■ The project is using the traditional waterfall methodology.
■ The SDLC was not followed and the developers decided to skip the testing phase.
■ A project plan was developed during the analysis phase, but the old project manager never
updated or followed the plan.
Determine what your first steps would be to get this project back on track.
PROJECT I I The Travel Store
The Travel Store is facing a dilemma as it tripled in size over the past three years and finds its online
sales escalating beyond a billion dollars. The company is having a hard time continuing with opera-
tions as its business processes can’t scale to meet the new demand. In the past six months, sales
and profits have dropped and the stock price is plummeting.
The Travel Store is determined to take quick and decisive action to restore profitability and
improve its credibility in the marketplace. One of its top priorities is to overhaul its inventory
management system in an effort to create optimal levels of inventory to support sales demand.
This would prevent higher-volume stores from running out of key sale items while also ensuring
that lower-sales stores would not be burdened with excess inventory that could be moved only
at closeout prices. The company would like to outsource this function but is worried about the
challenges of transferring the responsibility of this important business function, as well as the
issues surrounding confidentiality, and scope definition. List the competitive advantages outsourc-
ing could give to The Travel Store, along with recommendations for addressing the company’s
outsourcing concerns.
PROJECT I I I GEM Athletic Center
First Information Corporation is a large consulting company that specializes in systems analysis
and design. The company has more than 2,000 employees, and first-quarter revenues reached $15
million. The company prides itself on maintaining an 85 percent success rate for all project imple-
mentations. The primary reason attributed to the unusually high project success rate is the company’s
ability to define accurate, complete, and high-quality business requirements.
The GEM Athletic Center located in Cleveland, Ohio, is interested in implementing a new payroll
system. The current payroll process is manual and takes three employees two days each month to
complete. The GEM Athletic Center does not have an IT department and is outsourcing the entire pro-
curement, customization, and installation of the new payroll system to First Information Corporation.
A P P LY Y O U R K N O W L E D G E B U S I N E S S P R O J E C T S
baL76892_ch09_341-378.indd 374baL76892_ch09_341-378.indd 374 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
375Enterprise MIS Module 3
You have been working for First Information for a little over one month. Your team has just been
assigned the GEM Athletic Center project, and your first task is to define the initial business require-
ments for the development of the new payroll system.
a. Review the testimony of three current GEM Athletic Center accounting employees who detail
the current payroll process along with their wish list for the new system. Figure 9.20 presents
the testimonies of Maggie Cleaver, Anne Logan, and Jim Poulos.
b. Review Closing Case Two, “Reducing Ambiguity in Business Requirements,” and highlight
several techniques you can use to develop solid business requirements.
c. After careful analysis, create a report detailing the business requirements for the new system.
Be sure to list any assumptions, issues, or questions in your document.
PROJECT IV Confusing Coffee
Business requirements are the detailed set of business requests that any new system must meet to
be successful. A sample business requirement might state, “The system must track all customer sales
by product, region, and sales representative.” This requirement states what the system must do from
the business perspective, giving no details or information on how the system is going to meet this
requirement.
You have been hired to build an employee payroll system for a new coffee shop. Review the follow-
ing business requirements and highlight any potential issues.
■ All employees must have a unique employee ID.
■ The system must track employee hours worked based on employee’s last name.
■ Employees must be scheduled to work a minimum of eight hours per day.
■ Employee payroll is calculated by multiplying the employee’s hours worked by $7.25.
■ Managers must be scheduled to work morning shifts.
■ Employees cannot be scheduled to work more than eight hours per day.
■ Servers cannot be scheduled to work morning, afternoon, or evening shifts.
■ The system must allow managers to change and delete employees from the system.
PROJECT V Picking Projects
You are a project management contractor attempting to contract work at a large telecommunications
company, Hex Incorporated. Your interview with Debbie Fernandez, the senior vice president of IT,
went smoothly. The last thing she wants to see from you before she makes her final hiring decision
is a prioritized list of the following projects. You are sure to land the job if Fernandez is satisfied with
your prioritization.
Create a report prioritizing the following projects and be sure to include the business justifications
for your prioritization.
■ Upgrade accounting system.
■ Develop employee vacation tracking system.
■ Enhance employee intranet.
■ Cleanse and scrub data warehouse information.
■ Performance-test all hardware to ensure 20 percent growth scalability.
■ Implement changes to employee benefits system.
■ Develop backup and recovery strategy.
■ Implement supply chain management system.
■ Upgrade customer relationship management system.
■ Build executive information system for CEO.
baL76892_ch09_341-378.indd 375baL76892_ch09_341-378.indd 375 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
376 Chapter 9 Systems Development and Project Management: Corporate Responsibility
FIGURE 9.20
Employee Testimonies
Jim Poulos, Director of Sales
Each week I have to review all of the new memberships sold in our club. Each of my seven sales
representatives receives $50 from a new sale for the initiation fee. They also receive 10 percent of the type of
membership sold. Membership types include:
■ Adult, $450/month
■ Youth, $300/month
■ Family, $750/month
■ Senior, $300/month
Each sales representative is also paid $4.50/hour and receives a 25 percent bonus for working overtime
and holidays. If the sales representative sells over 200 percent of expected sales they receive an additional
25 percent bonus on their commissions. If the membership is sold during a promotion, the commission rate
decreases. The payroll department uses time sheets to track my sales representatives’ hourly pay. I have to
sign all time sheets once they are completed by the payroll department. I check my sales representatives’
schedule to validate the times on the employee time sheets. I then have to submit a separate listing of each
employee and their corresponding commissions for initiation fees and memberships sold. I track all of my
sales representatives’ vacation and sick time. If they are over their vacation or sick time, I have them sign a
form stating that if they quit they will pay back all negative vacation or sick time.
I would like a system that can automatically calculate commissions and be able to handle sales forecast-
ing and “what if” analysis on my sales representatives’ commission rates. I would like to be able to walk up
to my sales representatives and tell them that if they sell four more family memberships and one adult they
will receive their bonus. I would also like to be able to design promotions for our best customers. These types
of things would really help boost sales at our club.
Maggie Cleaver, Payroll Manager
The first thing I do each week is collect the time sheets. I review each time sheet to ensure the employee
punched in and out correctly. If the employee forgot to clock out, I contact that person’s director to find the
time that the employee should have clocked out. I then calculate all regular hours, overtime hours, and
holiday hours and total these on the time sheet. I also track sick time and vacation time and total these on
the time sheet. Once completed, I send the time sheet to the directors of each department for approval.
When I receive the signed time sheets back, I begin to calculate payments. First, I calculate regular pay,
then overtime pay, and finally holiday pay. I then add in the sales representatives’ commissions, which I
receive from the director of sales. I then calculate payment amounts for aerobics instructors because they
are paid by class, not by hour. I receive the aerobics class schedule from the fitness coordinator. I then total
the entire pay and send a sheet with payment amounts to my co-worker Anne, who calculates taxes. I then
calculate all sick time and vacation time and track this in a separate document. I then print labels that state
each employee’s name, department, and the pay period. I place the labels on a new time sheet, which is
returned to the employee punch clock.
I would like a system that automatically tracks employee sick time and vacation time. I would also like a
system that can automatically calculate regular pay, overtime pay, and holiday pay. I don’t know if there is a
system that can validate employee time sheets, but if there is that would be great.
Anne Logan, Tax Manager
I receive the payment amounts from Maggie. I then calculate all city, state, and federal taxes. I also deduct
health benefits and retirement plan benefits. I then cut the check to the employee and the corresponding
checks for the taxes to the government. I manually calculate W2s and all quarterly taxes. I’m also responsible
for correcting personal information such as a change of address. I’m also responsible for cutting checks if an
incorrect amount was issued. I also track amounts owed by employees that have gone over their sick time or
vacation time. I also generate checks for all salaried employees.
The part of my job that takes the longest is correlating the total cash debit for all checks and the total
amount calculated for all checks. It’s amazing how many times these two figures do not match, which
indicates that a check was written for the wrong amount.
I would like a system that determines taxes automatically, along with quarterly tax filing statements.
I would also like a system that can perform audits.
baL76892_ch09_341-378.indd 376baL76892_ch09_341-378.indd 376 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
377Enterprise MIS Module 3
PROJECT VI Keeping Time
Time Keepers Inc. is a small firm that specializes in project management consulting. You are a senior
project manager, and you have recently been assigned to the Tahiti Tanning Lotion account. The Tahiti
Tanning Lotion company is currently experiencing a 10 percent success rate (90 percent failure rate)
on all internal IT projects. Your first assignment is to analyze one of the current project plans being
used to develop a new CRM system (see Figure 9.21 ).
Review the project plan and create a document listing the numerous errors in the plan. Be sure to
also provide suggestions on how to fix the errors.
FIGURE 9.21
CRM Project Plan
baL76892_ch09_341-378.indd 377baL76892_ch09_341-378.indd 377 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
378 Chapter 9 Systems Development and Project Management: Corporate Responsibility
AY K A P P L I C AT I O N P R O J E C T S
If you are looking for Excel projects to incorporate into your class, try any of the following after reading
this chapter.
Project
Number
Project
Name
Project
Type Plug-In
Focus
Area
Project
Level Skill Set
Page
Number
9 Security Analysis Excel T3 Filtering Data Intermediate Conditional
Formatting,
Autofilter, Subtotal
AYK.7
10 Gathering Data Excel T3 Data Analysis Intermediate Conditional
Formatting
AYK.8
11 Scanner System Excel T2 Strategic Analysis Intermediate Formulas AYK.8
12 Competitive Pricing Excel T2 Profit
Maximization
Intermediate Formulas AYK.9
13 Adequate
Acquisitions
Excel T2 Break Even
Analysis
Intermediate Formulas AYK.9
15 Assessing the Value
of Information
Excel T3 Data Analysis Intermediate PivotTable AYK.10
16 Growth, Trends,
and Forecasts
Excel T2, T3 Data Forecasting Advanced Average, Trend,
Growth
AYK.11
18 Formatting Grades Excel T3 Data Analysis Advanced If, LookUp AYK.12
22 Turnover Rates Excel T3 Data Mining Advanced PivotTable AYK.12
23 Vital Information Excel T3 Data Mining Advanced PivotTable AYK.15
24 Breaking Even Excel T4 Business Analysis Advanced Goal Seek AYK.16
25 Profit Scenario Excel T4 Sales Analysis Advanced Scenario Manager AYK.16
baL76892_ch09_341-378.indd 378baL76892_ch09_341-378.indd 378 26/11/12 1:58 PM26/11/12 1:58 PM

Rev. Confirming Pages
A
LEARNING OUTCOMES
A.1 Describe the six major categories of hardware, and provide an example of each.
A.2 Identify the different computer categories, and explain their potential business uses.
A.3 Identify the two main types of software.
INTRODUCTION
Managers need to determine what types of hardware and software will satisfy their cur-
rent and future business needs, the right time to buy the equipment, and how to protect
their investments. This does not imply that managers need to be experts in all areas of
technology; however, building a basic understanding of hardware and software can help
them make the right investment choices.
Information technology can be an important enabler of business success and innova-
tion. Information technology can be composed of the Internet, a personal computer, a
cell phone that can access the web, a personal digital assistant, or presentation software.
All of these technologies help to perform specific information processing tasks. There
are two basic categories of information technology: hardware and software. Hardware
consists of the physical devices associated with a computer system. Software is the set of
instructions the hardware executes to carry out specific tasks. Software, such as Micro-
soft Excel, and various hardware devices, such as a keyboard and a monitor, interact to
create a spreadsheet or a graph. This appendix covers the basics of computer hardware
and software including terminology, characteristics, and the associated managerial
responsibilities for building a solid enterprise architecture.
HARDWARE BASICS
In many industries, exploiting computer hardware is key to gaining a competitive advan-
tage. Frito-Lay gained a competitive advantage by using handheld devices to track the
strategic placement and sale of items in convenience stores. Sales representatives could
track sale price, competitor information, the number of items sold, and item location in
the store all from their handheld device. 1
LO A.1: Describe the six major cat-
egories of hardware and provide an
example of each.
A P P E N D I X
Hardware and Software Basics
A.1
baL76892_appA_A1-A16.indd A1baL76892_appA_A1-A16.indd A1 26/11/12 1:39 PM26/11/12 1:39 PM

Rev. Confirming Pages
Appendix A Hardware and Software BasicsA.2
A computer is an electronic device operating under the control of instructions stored
in its own memory that can accept, manipulate, and store data. Figure A.1 displays the
two primary components of a computer—hardware and software. A computer system
consists of six hardware components (see Figure  A.2 ). Figure  A.3 displays how these
components work together to form a computer system.
Central Processing Unit
The dominant manufacturers of CPUs today include Intel (with its Celeron and Pen-
tium lines for personal computers) and Advanced Micro Devices (AMD) (with its Athlon
series). 2
The central processing unit (CPU) (or microprocessor ) is the actual hardware that
interprets and executes the program (software) instructions and coordinates how all the
other hardware devices work together. The CPU is built on a small flake of silicon and
can contain the equivalent of several million transistors. CPUs are unquestionably one
of the 20th century’s greatest technological advances.
A CPU contains two primary parts: control unit and arithmetic/logic unit. The control
unit interprets software instructions and literally tells the other hardware devices what
to do, based on the software instructions. The arithmetic-logic unit (ALU) performs all
arithmetic operations (for example, addition and subtraction) and all logic operations
(such as sorting and comparing numbers). The control unit and ALU perform different
functions. The control unit obtains instructions from the software. It then interprets the
instructions, decides which tasks other devices perform, and finally tells each device to
perform the task. The ALU responds to the control unit and does whatever it dictates,
performing either arithmetic or logic operations.
FIGURE A.1
Hardware and Software
Overview
CENTRAL PROCES
SING UNIT
HARDWARE
OUTPUT DEVICE
STORAGE DEVICE
COMMUNICATION DEVICE
CONNECTING DEVICE
INPUT DEVICE
• Keyboard; mouse; scanner
The physical
devices
associated
with a
computer
system
• Monitor; printer; headphones
• DVD; memory stick; hard drive
• Modem; wireless card
• Cables; USB port
CPU: The computer´
s “brains”
RAM: Integrated circuits
; works with the CPU
SYSTEM SOFTWA
RE
SOFTWARE
UTILITY SOFTWARE
APPLICATION SOFTWARE
WORD PROCESSING SOFTWARE
SPREADSHEET SOFTWARE
OPERATING SYSTEM SOFT
WARE
• Windows; Mac OS; Linux
• Antivirus; screen savers; data
recovery
Performs specific information processing
needs
• Microsoft Word
• Microsoft Excel
Controls how the vario
us tools work
together along with ap
plication software
The set of
instructions
the hardware
executes to
carry out
specific
tasks
baL76892_appA_A1-A16.indd A2baL76892_appA_A1-A16.indd A2 29/11/12 11:03 AM29/11/12 11:03 AM

Rev. Confirming Pages
Hardware and Software Basics Appendix A A.3
The number of CPU cycles per second determines how fast a CPU carries out the
software instructions; more cycles per second means faster processing, and faster CPUs
cost more than their slower counterparts. CPU speed is usually quoted in megahertz
and gigahertz. Megahertz (MHz) is the number of millions of CPU cycles per second.
Gigahertz (GHz) is the number of billions of CPU cycles per second. Figure A.4 displays
the factors that determine CPU speed.
Advances in CPU Design Chip makers are pressing more functionality into CPU
technology. Most CPUs are complex instruction set computer (CISC) chips, which is a
type of CPU that can recognize as many as 100 or more instructions, enough to carry out
most computations directly. Reduced instruction set computer (RISC) chips limit the
number of instructions the CPU can execute to increase processing speed. The idea of
RISC is to reduce the instruction set to the bare minimum, emphasizing the instructions
used most of the time and optimizing them for the fastest possible execution. An RISC
processor runs faster than a CISC processor.
Primary Storage
Primary storage is the com-
puter’s main memory, which
consists of the random access
memory (RAM), cache mem-
ory, and read-only memory
(ROM) that is directly acces-
sible to the CPU.
FIGURE A.2
Hardware Components of a
Computer System
baL76892_appA_A1-A16.indd A3baL76892_appA_A1-A16.indd A3 26/11/12 1:39 PM26/11/12 1:39 PM

Rev. Confirming Pages
Appendix A Hardware and Software BasicsA.4
Random Access Memory Random access memory (RAM) is the computer’s pri-
mary working memory, in which program instructions and data are stored so that they can
be accessed directly by the CPU via the processor’s high-speed external data bus.
RAM is often called read/write memory. In RAM, the CPU can write and read data. Most
programs set aside a portion of RAM as a temporary workspace for data so that one can
modify (rewrite) as needed until the data are ready for printing or storage on secondary
Central Processing Unit (CPU)
Control Unit Arithmetic-Logic Unit
Input Device
Output Device
Secondary Storage Device Communication Device
Primary Storage Device
FIGURE A.3
How the Hardware Components
Work Together
FIGURE A.4
Factors That Determine CPU
Speed
CPU Speed Factors
Clock speed—the speed of the internal clock of a CPU that sets the pace at which operations proceed within
the computer’s internal processing circuitry.
Word length—number of bits (0s and 1s) that can be processed by the CPU at any one time. Computers work
in terms of bits and bytes using electrical pulses that have two states: on and off.
Bus width—the size of the internal electrical pathway along which signals are sent from one part of the
computer to another. A wider bus can move more data, hence faster processing.
Chip line width—the distance between transistors on a chip. The shorter the chip line width the faster the
chip since more transistors can be placed on a chip and the data and instructions travel short distances dur-
ing processing.
baL76892_appA_A1-A16.indd A4baL76892_appA_A1-A16.indd A4 26/11/12 1:40 PM26/11/12 1:40 PM

Rev. Confirming Pages
Hardware and Software Basics Appendix A A.5
storage media, such as a hard drive or memory key.
RAM does not retain its contents when the power
to the computer is switched off, hence individuals
should save their work frequently. When the com-
puter is turned off, everything in RAM is wiped clean.
Volatility refers to a device’s ability to function with
or without power. RAM is volatile, meaning it must
have constant power to function; its contents are lost
when the computer’s electric supply fails.
Cache Memory Cache memory is a small unit
of ultra-fast memory that is used to store recently
accessed or frequently accessed data so that the
CPU does not have to retrieve this data from slower
memory circuits such as RAM. Cache memory that
is built directly into the CPU’s circuits is called pri-
mary cache. Cache memory contained on an exter-
nal circuit is called secondary cache.
Read-Only Memory (ROM) Read-only memory (ROM) is the portion of a comput-
er’s primary storage that does not lose its contents when one switches off the power.
ROM is nonvolatile, meaning it does not require constant power to function. ROM
contains essential system programs that neither the user nor the computer can erase.
Since the computer’s internal memory is blank during start-up, the computer cannot
perform any functions unless given start-up instructions. These instructions are stored
in ROM.
Flash memory is a special type of rewritable read-only memory (ROM) that is com-
pact and portable. Memory cards contain high-capacity storage that holds data such as
captured images, music, or text files. Memory cards are removable; when one is full the
user can insert an additional card. Subsequently, the data can be downloaded from the
card to a computer. The card can then be erased and used again. Memory cards are typi-
cally used in digital devices such as cameras, cellular phones, and personal digital assis-
tants (PDA). Memory sticks provide nonvolatile memory for a range of portable devices
including computers, digital cameras, MP3 players, and PDAs.
Secondary Storage
Storage is a hot area in the business arena as organizations struggle to make sense of
exploding volumes of data. Secondary storage consists of equipment designed to store
large volumes of data for long-term storage. Secondary storage devices are nonvolatile
and do not lose their contents when the computer is turned off. Some storage devices,
such as a hard disk, offer easy update capabilities and a large storage capacity. Others,
such as CD-ROMs, offer limited update capabilities but possess large storage capacities.
Storage capacity is expressed in bytes, with megabytes being the most common.
A  megabyte (MB or M or Meg) is roughly 1 million bytes.
Therefore, a computer with 256 MB of RAM translates into
the RAM being able to hold roughly 256 million charac-
ters of data and software instructions. A gigabyte (GB) is
roughly 1 billion bytes. A terabyte (TB) is roughly 1 trillion
bytes (refer to Figure A.5 ). 3
A typical double-spaced page of pure text is roughly
2,000 characters. Therefore, a 40 GB (40 gigabyte or 40 bil-
lion characters) hard drive can hold approximately 20 mil-
lion pages of text.
Common storage devices include:
■ Magnetic medium
■ Optical medium
baL76892_appA_A1-A16.indd A5baL76892_appA_A1-A16.indd A5 26/11/12 1:40 PM26/11/12 1:40 PM

Rev. Confirming Pages
Appendix A Hardware and Software BasicsA.6
FIGURE A.5
Binary Terms
Magnetic medium Magnetic medium is a secondary storage medium that uses
magnetic techniques to store and retrieve data on disks or tapes coated with magneti-
cally sensitive materials. Like iron filings on a sheet of waxed paper, these materials are
reoriented when a magnetic field passes over them. During write operations, the read/
write heads emit a magnetic field that orients the magnetic materials on the disk or
tape to represent encoded data. During read operations, the read/write heads sense the
encoded data on the medium.
One of the first forms of magnetic medium developed was magnetic tape. Magnetic
tape is an older secondary storage medium that uses a strip of thin plastic coated with a
magnetically sensitive recording medium. The most popular type of magnetic medium
is a hard drive. A hard drive is a secondary storage medium that uses several rigid disks
coated with a magnetically sensitive material and housed together with the recording
heads in a hermetically sealed mechanism. Hard drive performance is measured in
terms of access time, seek time, rotational speed, and data transfer rate.
Optical Medium Optical medium is a secondary storage medium for computers on
which information is stored at extremely high density in the form of tiny pits. The pres-
ence or absence of pits is read by a tightly focused laser beam. Optical medium types
include:
■ Compact disk-read-only memory (CD-ROM) drive—
an optical drive designed to read the data encoded on
CD-ROMs and to transfer this data to a computer.
■ Compact disk-read-write (CD-RW) drive— an opti-
cal drive that enables users to erase existing data and to
write new data repeatedly to a CD-RW.
■ Digital video disk (DVD)— a CD-ROM format capable
of storing up to a maximum of 17 GB of data; enough for
a full-length feature movie.
■ DVD-ROM drive— a read-only drive designed to read the data encoded on a DVD
and transfer the data to a computer.
■ Digital video disk-read/write (DVD-RW)— a standard for DVD discs and player/
recorder mechanisms that enables users to record in the DVD format.
CD-ROMs and DVDs offer an increasingly economical medium for storing data and
programs. The overall trend in secondary storage is toward more direct-access methods,
higher capacity with lower costs, and increased portability.
Term Size
Kilobyte (KB) 1,024 Bytes
Megabyte (MB) 1,024 KB
1,048,576 Bytes
Gigabyte (GB) 1,024 MB (109 bytes)
Terabyte (TB) 1,024 GB (1012 bytes)
1 TB 5 Printing of 1 TB would require 50,000 trees to be made into paper
and printed
Petabyte (PB) 1,024 TB (1015 bytes)
200 PB 5 All production of digital magnetic tape in 1995
Exabyte (EB) 1,024 PB (1018 bytes)
2 EB 5 Total volume of information generated worldwide annually
5 EB 5 All words ever spoken by human beings
baL76892_appA_A1-A16.indd A6baL76892_appA_A1-A16.indd A6 26/11/12 1:41 PM26/11/12 1:41 PM

Rev. Confirming Pages
Hardware and Software Basics Appendix A A.7
Input Devices
An input device is equipment used to capture information and commands. A keyboard is
used to type in information, and a mouse is used to point and click on buttons and icons. A
stylus is used as a pen-like device
that taps the screen to enter com-
mands. Numerous input devices
are available in many different
environments, some of which
have applications that are more
suitable in a personal setting
than a business setting. A key-
board, mouse, and scanner are
the most common forms of input
devices (see Figure A.6 ).
New forms of input devices allow people to exercise and play video games at the same
time. The Kilowatt Sport from Powergrid Fitness lets people combine strength training
with their favorite video games. Players can choose any PlayStation or Xbox game that
uses a joystick to run the elliptical trainer. After loading the game, participants stand
FIGURE A.6
Input Devices
MANUAL INPUT DEVICES AUTOMATED INPUT DEVICES
baL76892_appA_A1-A16.indd A7baL76892_appA_A1-A16.indd A7 26/11/12 1:41 PM26/11/12 1:41 PM

Rev. Confirming Pages
Appendix A Hardware and Software BasicsA.8
on a platform while pushing and pulling a resistance rod in all directions to control
what happens in the game. The varied movement targets muscle groups on the chest,
arms, shoulders, abdomen, and back. The machine’s display shows information such as
pounds lifted and current resistance level, and players can use one-touch adjustment to
vary the degree of difficulty. 4 Adaptive computer devices are input devices designed for
special applications for use by people with different types of special needs. An example
is a keyboard with tactile surfaces, which can be used by the visually impaired.
Another new input device is a stationary bicycle. A computer design team of graduate
and undergraduate students at MIT built the Cyclescore, an integrated video game and
bicycle. The MIT students tested current games on the market but found users would
stop pedaling to concentrate on the game. To engage users, the team is designing games
that interact with the experience of exercise itself, for example, monitoring heart rate
and adjusting the difficulty of the game according to the user’s bicycling capabilities. In
one game, the player must pedal to make a hot-air balloon float over mountains, while
collecting coins and shooting at random targets. 5
Output Devices
An output device is equipment used to see, hear, or otherwise accept the results of infor-
mation processing requests. Among output devices, printers and monitors are the most
common; however, speakers and plotters (special printers that draw output on a page)
are widely used (see Figure A.7 ). In addition, output devices are responsible for convert-
ing computer-stored information into a form that can be understood.
FIGURE A.7
Output Devices
MONITORS PRINTERS
baL76892_appA_A1-A16.indd A8baL76892_appA_A1-A16.indd A8 26/11/12 1:42 PM26/11/12 1:42 PM

Rev. Confirming Pages
Hardware and Software Basics Appendix A A.9
A new output device based on sensor technology aims to translate American Sign
Language (ASL) into speech, enabling the millions of people who use ASL to better com-
municate with those who do not know the rapid gesturing system. The AcceleGlove is a
glove lined on the inside with sensors embedded in rings. The sensors, called acceler-
ometers, measure acceleration and can categorize and translate finger and hand move-
ments. Additional, interconnected attachments for the elbow and shoulder capture
ASL signs that are made with full arm motion. When users wear the glove while sign-
ing ASL, algorithms in the glove’s software translate the hand gestures into words. The
translations can be relayed through speech synthesizers or read on a PDA-size computer
screen. Inventor Jose L. Hernandez-Rebollar started with a single glove that could trans-
late only the ASL alphabet. Now, the device employs two gloves that contain a 1,000-
word vocabulary. 6
Other new output devices are being developed every day. Needapresent.com , a Brit-
ish company, has developed a vibrating USB massage ball, which plugs into a comput-
er’s USB port to generate a warm massage for sore body parts during those long evenings
spent coding software or writing papers. Needapresent.com also makes a coffee cup
warmer that plugs into the USB port. 7
Communication Devices
A communication device is equipment used to send
information and receive it from one location to another.
A telephone modem connects a computer to a phone line
in order to access another computer. The computer works
in terms of digital signals, while a standard telephone line
works with analog signals. Each digital signal represents
a bit (either 0 or 1). The modem must convert the digital
signals of a computer into analog signals so they can be
sent across the telephone line. At the other end, another
modem translates the analog signals into digital signals,
which can then be used by the other computer. Figure A.8
displays the different types of modems.
COMPUTER CATEGORIES
Supercomputers today can hit processing capabilities of well over 200 teraflops—
the equivalent of everyone on Earth performing 35,000 calculations per second (see
Figure A.9 ). For the past 20 years, federally funded supercomputing research has given
birth to some of the computer industry’s most significant technology breakthroughs
including:
■ Clustering, which allows companies to chain together thousands of PCs to build
mass-market systems.
■ Parallel processing, which provides the ability to run two or more tasks simultane-
ously and is viewed as the chip industry’s future.
■ Mosaic browser, which morphed into Netscape and made the web a household
name.
Federally funded supercomputers have also advanced some of the country’s most
dynamic industries, including advanced manufacturing, gene research in the life sci-
ences, and real-time financial-market modeling. 8
Computers come in different shapes, sizes, and colors. And they meet a variety of
needs. An appliance is a computer dedicated to a single function, such as a calcula-
tor or computer game. An ebook is an electronic book that can be read on a computer
or special reading device. Some are small enough to carry around, while others are the
LO A.2: Identify the different
computer categories and explain
their potential business uses.
baL76892_appA_A1-A16.indd A9baL76892_appA_A1-A16.indd A9 26/11/12 1:42 PM26/11/12 1:42 PM

Rev. Confirming Pages
Appendix A Hardware and Software BasicsA.10
size of a telephone booth. Size does not always correlate to power, speed, and price (see
Figure A.10 ).
MIT’s Media Lab is developing a laptop that it will sell for $100 each to government
agencies around the world for distribution to millions of underprivileged schoolchil-
dren. Using a simplified sales model and reengineering the device helped MIT reach
the $100 price point. Almost half the price of a current laptop comprises marketing,
FIGURE A.8
Comparing Modems
FIGURE A.9
Supercomputer
Carrier Technology Description Speed Comments
Dial-up access On demand access
using a modem and regu-
lar telephone
line (POT).
2400 bps to 56 Kbps ■ Cheap but slow.
Cable Special cable modem and
cable line required.
512 Kbps to 20 Mbps ■ Must have existing cable
access in area.
■ Bandwidth is shared.
DSL
Digital Subscriber
Line
This technology uses
the unused digital por-
tion of a regular copper
telephone line to transmit
and receive information.
A special modem and
adapter card are required.
128 Kbps to 8 Mbps ■ Doesn’t interfere with
normal tele phone use.
■ Bandwidth is
dedicated.
■ Must be within 5 km
(3.1 miles) of telephone
company switch.
Wireless (LMCS) Access is gained by con-
nection to a high-speed
cellular-like
local multipoint commu-
nications system (LMCS)
network via wireless
transmitter/receiver.
30 Mbps or more ■ Can be used for high-
speed data, broadcast TV,
and wireless telephone
service.
Satellite Newer versions have two-
way satellite
access, removing need for
phone line.
6 Mbps or more ■ Bandwidth is not shared.
■ Some connections require
an existing Internet service
account.
■ Setup fees can range from
$500–$1,000.
baL76892_appA_A1-A16.indd A10baL76892_appA_A1-A16.indd A10 26/11/12 1:42 PM26/11/12 1:42 PM

Rev. Confirming Pages
Hardware and Software Basics Appendix A A.11
FIGURE A.10
Computer Categories
Smartphone/Personal Digital Assistant (PDA)
Handheld/Ultra Portable/Pocket Computer
Laptop/Notebook/Portable Computer/Netbook
Tablet Computer
Personal/Desktop Computer
Workstation/Minicomputer
Mainframe Computer
Supercomputer
Computer Category Description
Smartphone A cellular telephone with a keypad that runs programs, music, photos, and email and includes many features of a PDA.
Personal digital
assistant (PDA)
A small handheld computer that performs simple tasks such as taking notes, scheduling appointments, and main-
taining an address book and a calendar. The PDA screen is touch-sensitive, allowing a user to write directly on the
screen, capturing what is written.
Handheld (ultra portable,
pocket) computer
Computer portable enough to fit in a purse or pocket and has its own power source or battery.
Laptop (portable,
notebook) computer
Computer portable enough to fit on a lap or in a bag and has its own power source or battery. Laptops come
equipped with all of the technology that a personal desktop computer has, yet weigh as little as two pounds.
Tablet computer Computer with a flat screen that uses a mouse or fingertip for input instead of a keyboard. Similar to PDAs, tablet PCs
use a writing pen or stylus to write notes on the screen and touch the screen to perform functions such as clicking on
a link while visiting a website.
Personal computer
(microcomputer)
Computer that is operated by a single user who can customize the functions to match personal preferences.
Desktop computer Computer that sits on, next to, or under a user’s desk and is too large to carry around. The computer box is where
the CPU, RAM, and storage devices are held with a monitor on top, or a vertical system box (called a tower) usually
placed on the floor within a work area.
Workstation computer Similar to a desktop but has more powerful mathematical and graphics processing capabilities and can perform
more complicated tasks in less time. Typically used for software development, web development, engineering, and
ebusiness tools.
Minicomputer (server) Designed to meet the computing needs of several people simultaneously in a small to medium-size business
environment. A common type of minicomputer is a server and is used for managing internal company applications,
networks, and websites.
Mainframe computer Designed to meet the computing needs of hundreds of people in a large business environment. Mainframe computers
are a step up in size, power, capability, and cost from minicomputers.
Supercomputer The fastest, most powerful, and most expensive type of computer. Organizations such as NASA that are heavily
involved in research and number crunching employ supercomputers because of the speed with which they
can process information. Other large, customer-oriented businesses such as General Motors and AT&T employ
supercomputers just to handle customer information and transaction processing.
baL76892_appA_A1-A16.indd A11baL76892_appA_A1-A16.indd A11 26/11/12 1:43 PM26/11/12 1:43 PM

Rev. Confirming Pages
Appendix A Hardware and Software BasicsA.12
sales, distribution, and profit. Of the remaining costs, the display panel and back-
light account for roughly half while the rest covers the operating system. The low-cost
laptop will use a display system that costs less than $25, a 500 MHz processor from
AMD, a wireless LAN connection, 1 GB of storage, and the Linux operating system. The
machine will automatically connect with others. China and Brazil have already ordered
3 million and 1 million laptops, respectively. MIT’s goal is to produce around 150 million
laptops per year. 9
SOFTWARE BASICS
Hardware is only as good as the software that runs it. Over the years, the cost of hardware
has decreased while the complexity and cost of software have increased. Some large
software applications, such as customer relationship management systems, contain mil-
lions of lines of code, take years to develop, and cost millions of dollars. The two main
types of software are system software and application software.
SYSTEM SOFTWARE
System software controls how the various technology tools work together along with the
application software. System software includes both operating system software and util-
ity software.
Operating System Software Linus Torvalds, a Finnish programmer, may seem an
unlikely choice to be one of the world’s top managers. However, Linux, the software proj-
ect he created while a university student, is now one of the most powerful influences on
the computer world. Linux is an operating system built by volunteers and distributed for
free and has become one of the primary competitors to Microsoft. Torvalds coordinates
Linux development with a few dozen volunteer assistants and more than 1,000 program-
mers scattered around the globe. They contribute code for the kernel—or core piece—
of Linux. He also sets the rules for dozens of technology companies that have lined up
behind Linux, including IBM, Dell, Hewlett-Packard, and Intel.
While basic versions of Linux are available for free, Linux is having a considerable
financial impact. 10
Operating system software controls the application software and manages how the
hardware devices work together. When using Excel to create and print a graph, the oper-
ating system software controls the process, ensures that a printer is attached and has
paper, and sends the graph to the printer along with instructions on how to print it. Some
computers are configured with two operating systems so they can dual boot— provide
the user with the option of choosing the operating system when the computer is turned
on. An embedded operating system is used in computer appliances and special-purpose
applications, such as an automobile, ATM, or media player and are used for a single pur-
pose. An iPod has a single-purpose embedded operating system.
Operating system software also supports a variety of useful features, one of which is
multitasking. Multitasking allows more than one piece of software to be used at a time.
Multitasking is used when creating a graph in Excel and simultaneously printing a word
processing document. With multitasking, both pieces of application software are operat-
ing at the same time. There are different types of operating system software for personal
environments and for organizational environments (see Figure A.11 ).
Utility Software Utility software provides additional functionality to the operating
system. Utility software includes antivirus software, screen savers, and anti-spam soft-
ware. Operating systems are customized by using the control panel, which is a Windows
feature that provides options that set default values for the Windows operating system.
For example, the system clock works like a wristwatch and uses a battery mounted on
the motherboard to provide power when the computer is turned off. If the user moves
to a different time zone, the system clock can be adjusted in the control panel. Safe
mode occurs if the system is failing and will load only the most essential parts of the
LO A.3: Identify the two main types
of software.
baL76892_appA_A1-A16.indd A12baL76892_appA_A1-A16.indd A12 26/11/12 1:43 PM26/11/12 1:43 PM

Rev. Confirming Pages
Hardware and Software Basics Appendix A A.13
FIGURE A.11
Operating System Software Operating System Software
Linux An open source operating system that provides a rich environment for high-end
workstations and network servers. Open source refers to any program whose
source code is made available for use or modification as users or other developers
see fit.
Mac OS X The operating system of Macintosh computers.
Microsoft Windows Generic name for the various operating systems in the Microsoft Windows fam-
ily, including Microsoft Windows CE, Microsoft Windows, Microsoft Windows ME,
Microsoft Windows, Microsoft Windows XP, Microsoft Windows NT, and Microsoft
Windows Server.
MS-DOS The standard, single-user operating system of IBM and IBM-compatible computers,
introduced in 1981. MS-DOS is a command-line operating system that requires the
user to enter commands, arguments, and syntax.
UNIX A 32-bit multitasking and multiuser operating system that originated at AT&T’s Bell
Laboratories and is now used on a wide variety of computers, from mainframes to
PDAs.
FIGURE A.12
Utility Software Types of Utility Software
Crash-proof Helps save information if a computer crashes.
Disk image for
data recovery
Relieves the burden of reinstalling applications if a hard drive crashes or
becomes irretrievably corrupted.
Disk optimization Organizes information on a hard disk in the most efficient way.
Encrypt data Protects confidential information from unauthorized eyes.
File and data recovery Retrieves accidental deletion of photos or documents.
Text protect In Microsoft Word, prevents users from typing over existing text after
accidentally hitting the Insert key. Launch the Insert Toggle Key program, and the
PC will beep whenever a user presses the Insert key.
Preventive security Through programs such as Window Washer, erases file histories, browser
cookies, cache contents, and other crumbs that applications and Windows leave
on a hard drive.
Spyware Removes any software that employs a user’s Internet connection in the back-
ground without the user’s knowledge or explicit permission.
Uninstaller Can remove software that is no longer needed.
operating system and will not run many of the background operating utilities. System
restore enables a user to return to the previous operating system. Figure A.12 displays a
few types of available utility software.
APPLICATION SOFTWARE
Application software is used for specific information processing needs, including pay-
roll, customer relationship management, project management, training, and many oth-
ers. Application software is used to solve specific problems or perform specific tasks.
From an organizational perspective, payroll software, collaborative software such as
videoconferencing (within groupware), and inventory management software are all
baL76892_appA_A1-A16.indd A13baL76892_appA_A1-A16.indd A13 26/11/12 1:43 PM26/11/12 1:43 PM

Rev. Confirming Pages
Appendix A Hardware and Software BasicsA.14
FIGURE A.13
Application Software Types of Application Software
Browser Enables the user to navigate the World Wide Web. The two leading browsers are
Netscape Navigator and Microsoft Internet Explorer.
Communication Turns a computer into a terminal for transmitting data to and receiving data from
distant computers through the telephone system.
Data management Provides the tools for data retrieval, modification, deletion, and insertion; for exam-
ple, Access, MySQL, and Oracle.
Desktop publishing Transforms a computer into a desktop publishing workstation. Leading packages
include Adobe FrameMaker, Adobe PageMaker, and QuarkXpress.
Email Provides email services for computer users, including receiving mail, sending mail,
and storing messages. Leading email software includes Microsoft Outlook, Microsoft
Outlook Express, and Eudora.
Groupware Increases the cooperation and joint productivity of small groups of co-workers.
Presentation
graphics
Creates and enhances charts and graphs so that they are visually appealing and
easily understood by an audience. A full-features presentation graphics package
such as Lotus Freelance Graphics or Microsoft PowerPoint includes facilities for
making a wide variety of charts and graphs and for adding titles, legends, and
explanatory text anywhere in the chart or graph.
Programming Possesses an artificial language consisting of a fixed vocabulary and a set of rules
(called syntax) that programmers use to write computer programs. Leading pro-
gramming languages include Java, C ++, C#, and .NET.
Spreadsheet Simulates an accountant’s worksheet on-screen and lets users embed hidden for-
mulas that perform calculations on the visible data. Many spreadsheet programs
also include powerful graphics and presentation capabilities to create attractive
products. The leading spreadsheet application is Microsoft Excel.
Word processing Transforms a computer into a tool for creating, editing, proofreading, formatting, and
printing documents. Leading word processing applications include Microsoft Word
and WordPerfect.
examples of application software (see Figure A.13 ). Personal information management
(PIM) software handles contact information, appointments, task lists, and email.
Course management software contains course information such as a syllabus and
assignments and offers drop boxes for quizzes and homework along with a grade book.
Distributing Application Software
After software has been deployed to its users, it is not uncommon to find bugs or addi-
tional errors that require fixing. Software updates (software patch) occur when the soft-
ware vendor releases updates to software to fix problems or enhance features. Software
upgrade occurs when the software vendor releases a new version of the software, mak-
ing significant changes to the program. Application software can be distributed using
one of the following methods:
■ Single user license —restricts the use of the software to one user at a time.
■ Network user license —enables anyone on the network to install and use the
software.
■ Site license —enables any qualified users within the organization to install the soft-
ware, regardless of whether the computer is on a network. Some employees might
install the software on a home computer for working remotely.
■ Application service provider license —specialty software paid for on a license basis
or per-use basis or usage-based licensing.
baL76892_appA_A1-A16.indd A14baL76892_appA_A1-A16.indd A14 26/11/12 1:43 PM26/11/12 1:43 PM

Rev. Confirming Pages
Hardware and Software Basics Appendix A A.15
Adaptive computer device, A.8
Appliance, A.9
Application service provider
license, A.14
Application software A.13
Arithmetic-logic unit (ALU) A.2
Cache memory A.5
Central processing unit (CPU)
(or microprocessor) A.2
Communication device A.9
Complex instruction set computer
(CISC) chip A.3
Computer A.2
Control panel, A.12
Control unit A.2
Course management
software, A.14
Dual boot, A.12
Ebook, A.9
Embedded operating
system, A.12
Flash memory A.5
Gigabyte (GB) A.5
Gigahertz (GHz) A.3
Hard drive A.6
Hardware A.1
Input device A.7
Magnetic medium A.6
Magnetic tape A.6
Megabyte (MB, M, or Meg) A.5
Megahertz (MHz) A.3
Memory card A.5
Memory stick A.5
Multitasking A.12
Network user license, A.14
Nonvolatile, A.5
Operating system software A.12
Output device A.8
Personal information
management (PIM)
software, A.14
Primary storage A.4
Random access memory
(RAM) A.4
Read-only memory (ROM) A.5
Reduced instruction set computer
(RISC) chip A.3
Safe mode, A.12
Single-user license, A.14
Site license, A.14
Secondary storage A.5
Software A.1
Software updates
(software patch), A.14
Software upgrade, A.14
Stylus, A.7
System clock, A.12
System restore, A.13
System software A.12
Terabyte (TB) A.5
Utility software A.12
Volatile, A.5
Volatility A.5
K E Y T E R M S
■ CPU
■ Memory
■ Hard drive
■ Optical drive
■ Operating system
■ Utility software
■ Application software
■ Support plan
Determine which computer you would recommend for a small business looking for an inexpensive
laptop. Determine which computer you would recommend for a small business looking for an expen-
sive laptop.
1. A Computer
Dell is considered the fastest company on Earth and specializes in computer customization. Connect
to Dell’s website at www.dell.com . Go to the portion of Dell’s site that allows you to customize either
a laptop or a desktop computer. First, choose an already prepared system and note its price and
capability in terms of CPU speed, RAM size, monitor quality, and storage capacity. Now, customize
that system to increase CPU speed, add more RAM, increase monitor size and quality, and add more
storage capacity. What is the difference in price between the two? Which system is more in your price
range? Which system has the speed and capacity you need?
2. Small Business Computers
Many different types of computers are available for small businesses. Use the Internet to find three
different vendors of laptops or notebooks that are good for small businesses. Find the most expensive
and the least expensive that the vendor offers and create a table comparing the different computers
based on the following:
A P P LY Y O U R K N O W L E D G E
baL76892_appA_A1-A16.indd A15baL76892_appA_A1-A16.indd A15 26/11/12 1:43 PM26/11/12 1:43 PM

Rev. Confirming Pages
baL76892_appA_A1-A16.indd A16baL76892_appA_A1-A16.indd A16 26/11/12 1:43 PM26/11/12 1:43 PM

Confirming Pages
B
LEARNING OUTCOMES
B.1 Compare LANs, WANs, and MANs.
B.2 Compare the two types of network architectures.
B.3 Explain topology and the different types found in networks.
B.4 Describe protocols and the importance of TCP/IP.
B.5 Identify the different media types found in networks.
INTRODUCTION
Change is everywhere in the information technology domain, but nowhere is change
more evident and more dramatic than the realm of networks and telecommunications.
Most management information systems today rely on digital networks to communicate
information in the form of data, graphics, video, and voice. Companies large and small
from all over the world are using networks and the Internet to locate suppliers and buy-
ers, to negotiate contracts with them, and to provide bigger, better, and faster services
than ever before. Telecommunication systems enable the transmission of data over
public or private networks. A network is a communications system created by linking
two or more devices and establishing a standard methodology by which they can com-
municate. The world’s largest and most widely used network is the Internet. The Inter-
net is a global “network of networks” that uses universal standards to connect millions
of different networks around the world. Telecommunication systems and networks are
traditionally complicated and historically inefficient. However, businesses can benefit
from today’s network infrastructures that provide reliable global reach to employees and
customers.
NETWORK BASICS
Networks range from small two-computer networks to the biggest network of all, the
Internet. A network provides two principle benefits: the ability to communicate and the
ability to share.
LO B.1: Compare LANs, WANs, and
MANs.
A P P E N D I X
Networks and Telecommunications
B.1
baL76892_appB_B1-B12.indd B1baL76892_appB_B1-B12.indd B1 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Appendix B Networks and TelecommunicationsB.2
Today’s corporate digital networks include a combination of local area networks, wide
area networks, and metropolitan area networks. A local area network (LAN) is designed
to connect a group of computers in proximity to each other such as in an office building,
a school, or a home. A LAN is useful for sharing resources such as files, printers, games,
or other applications. A LAN in turn often connects to other LANs, and to the Internet or
wide area networks. A wide area network (WAN) spans a large geographic area, such
as a state, province, or country. WANs often connect multiple smaller networks, such as
local area networks or metropolitan area networks. The world’s most popular WAN is
the Internet. A metropolitan area network (MAN) is a large computer network usually
spanning a city. Figure B.1 highlights the three different types of networks, and Figure B.2
illustrates each network type.
Direct data communication links between a company and its suppliers or customers, or
both, have been successfully used to give the company a strategic advantage. The SABRE
airline reservation system is a classic example of a strategic management information
system that depends upon communication provided through a network. SABRE Airline
Solutions pioneered technological advances for the industry in areas such as revenue
management, pricing, flight scheduling, cargo, flight operations, and crew scheduling. In
addition, not only did SABRE help invent ecommerce for the travel industry, the company
holds claim to progressive solutions that defined—and continue to revolutionize—the
travel and transportation marketplace.
A network typically includes four things (besides the computers themselves):
1. Protocol —a set of communication rules to make sure that everyone speaks the same
language.
2. Network interface card (NIC) —card that plugs into the back (or side) of your com-
puters and lets them send and receive messages from other computers.
3. Cable —the medium to connect all of the computers.
4. Hub (switch or router) —hardware to perform traffic control.
We will continue to define many of these terms and concepts in the sections that follow.
Networks are differentiated by the following:
■ Architecture—peer-to-peer, client/server.
■ Topology—bus, star, ring, hybrid, wireless.
■ Protocols—Ethernet, transmission control protocol/Internet protocol (TCP/IP).
■ Media—coaxial, twisted-pair, fiber-optic.
FIGURE B.1
Network Types Network Types
Local area network (LAN) Designed to connect a group of computers in proximity to each
other such as in an office building, a school, or such as a home.
A LAN is useful for sharing resources such as files, printers,
games, or other applications. A LAN in turn often connects to
other LANs, and to the Internet or wide area networks.
Wide area network (WAN) Spans a large geographic area, such as a state, province, or
country. WANs often connect multiple smaller networks, such
as local area networks (LANs) or metropolitan area networks
(MANs).
Metropolitan area network (MAN) A large computer network usually spanning a city. Most colleges,
universities, and large companies that span a campus use an
infrastructure supported by a MAN.
baL76892_appB_B1-B12.indd B2baL76892_appB_B1-B12.indd B2 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Networks and Telecommunications Appendix B B.3
ARCHITECTURE
The two primary types of network architectures are peer-to-peer networks and client/
server networks.
Peer-to-Peer Networks
A peer-to-peer (P2P) network is a computer network that relies on the computing
power and bandwidth of the participants in the network rather than a centralized server,
as illustrated in Figure  B.3 . Each networked computer can allow other computers to
access its files and use connected printers while it is in use as a workstation without the
aid of a server.
While Napster may be the most widely known example of a P2P implementation, it
may also be one of the most narrowly focused since the Napster model takes advantage
of only one of the many capabilities of P2P computing: file sharing. The technology has
far broader capabilities, including the sharing of processing, memory, and storage, and
the supporting of collaboration among vast numbers of distributed computers such as
grid computing described in Chapter 5. Peer-to-peer computing enables immediate
interaction among people and computer systems. 1
LO B.2: Compare the two types of
network architectures.
FIGURE B.2
LAN, WAN, and MAN
Network Network
Local Area Network (LAN)
Example : City Library
Metropolitan Area Network (MAN)
Example: University Campus
West Campus East Campus
MAN
Network
Wide Area Network (WAN)
Example: Internet
Sydney, Australia London, England
Network
Denver, Colorado Boston, Massachusetts
WAN
Network
Network
Network
baL76892_appB_B1-B12.indd B3baL76892_appB_B1-B12.indd B3 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Appendix B Networks and TelecommunicationsB.4
Client/Server Networks
A client is a computer designed to request information from a server. A server is a com-
puter dedicated to providing information in response to requests. A client/server network
is a model for applications in which the bulk of the back-end processing, such as perform-
ing a physical search of a database, takes place on a server, while the front-end processing,
which involves communicating with the users, is handled by the clients (see Figure B.4 ).
A network operating system (NOS) is the operating system that runs a network, steer-
ing information between computers and managing security and users. The client/server
model has become one of the central ideas of network computing. Most business applica-
tions written today use the client/server model.
A fundamental part of client/server architecture is packet-switching. Packet-switching
occurs when the sending computer divides a message into a number of efficiently
sized units of data called packets, each of which contains the address of the destination
computer. Each packet is sent on the network and intercepted by routers. A router is
an intelligent connecting device that examines each packet of data it receives and then
decides which way to send it onward toward its destination. The packets arrive at their
intended destination, although some may have actually traveled by different physical
paths, and the receiving computer assembles the packets and delivers the message to the
appropriate application.
FIGURE B.3
Peer-to-Peer Networks
Connection such
as Internet or Cables
LAN/MAN/WANNetwork
LAN LAN
Network
Client
Client Server Client Server
Client Client Client Client Client
FIGURE B.4
Client/Server Network
baL76892_appB_B1-B12.indd B4baL76892_appB_B1-B12.indd B4 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Networks and Telecommunications Appendix B B.5
TOPOLOGY
Networks are assembled according to certain rules. Cables, for example, have to be a
certain length; each cable strand can support only a certain amount of network traffic.
A network topology refers to the geometric arrangement of the actual physical orga-
nization of the computers (and other network devices) in a network. Topologies vary
depending on cost and functionality. Figure B.5 highlights the five common topologies
used in networks, and Figure B.6 displays each topology.
LO B.3: Explain topology and the
different types found in networks.
FIGURE B.6
Network Topologies
Network Topologies
Bus All devices are connected to a central cable, called the bus or backbone. Bus
networks are relatively inexpensive and easy to install for small networks.
Star All devices are connected to a central device, called a hub. Star networks are relatively easy
to install and manage, but bottlenecks can occur because all data must pass through a hub.
Ring All devices are connected to one another in the shape of a closed loop, so that each device is
connected directly to two other devices, one on either side of it. Ring topologies are relatively
expensive and difficult to install, but they offer high speed and can span large distances.
Hybrid Groups of star-configured workstations are connected to a linear bus backbone cable, com-
bining the characteristics of the bus and star topologies.
Wireless Devices are connected by signals between access points and wireless transmitters within a
limited range.
FIGURE B.5
Five Network Topologies
Ring Topology
Star Topology
Bus Topology Hybrid Topology
Wireless Topology
Access
Point
Access
Point
Wireless
LAN/WAN/MAN
baL76892_appB_B1-B12.indd B5baL76892_appB_B1-B12.indd B5 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Appendix B Networks and TelecommunicationsB.6
PROTOCOLS
A protocol is a standard that specifies the format of data as well as the rules to be fol-
lowed during transmission. Simply put, for one computer (or computer program) to talk
to another computer (or computer program) they must both be talking the same lan-
guage, and this language is called a protocol.
A protocol is based on an agreed-upon and established standard, and this way all
manufacturers of hardware and software that are using the protocol do so in a similar
fashion to allow for interoperability. Interoperability is the capability of two or more
computer systems to share data and resources, even though they are made by different
manufacturers. The most popular network protocols used are Ethernet and transmission
control protocol/Internet protocol (TCP/IP).
Ethernet
Ethernet is a physical and data layer technology for LAN networking (see Figure B.7 ).
Ethernet is the most widely installed LAN access method, originally developed by Xerox
and then developed further by Xerox, Digital Equipment Corporation, and Intel. When
it first began to be widely deployed in the 1980s, Ethernet supported a maximum theo-
retical data transfer rate of 10 megabits per second (Mbps). More recently, Fast Ethernet
has extended traditional Ethernet technology to 100 Mbps peak, and Gigabit Ethernet
technology extends performance up to 1,000 Mbps.
Ethernet is one of the most popular LAN technologies for the following reasons:
■ Is easy to implement, manage, and maintain.
■ Allows low-cost network implementations.
■ Provides extensive flexibility for network installation.
■ Guarantees interoperability of standards-compliant products, regardless of
manufacturer. 2
LO B.4: Describe protocols and the
importance of TCP/IP.
FIGURE B.7
Ethernet Protocols
Ethernet
HR DepartmentSales Department
Department Server
Finance Department
Ethernet LAN Diagram
Printers
Router-Firewall
Internet
baL76892_appB_B1-B12.indd B6baL76892_appB_B1-B12.indd B6 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Networks and Telecommunications Appendix B B.7
Transmission Control Protocol/ Internet Protocol
The most common telecommunication protocol is transmission control protocol/
Internet protocol (TCP/IP), which was originally developed by the Department of
Defense to connect a system of computer networks that became known as the Internet.
Transmission control protocol/Internet protocol (TCP/IP) provides the technical
foundation for the public Internet as well as for large numbers of private networks. The
key achievement of TCP/IP is its flexibility with respect to lower-level protocols. TCP/IP
uses a special transmission method that maximizes data transfer and automatically
adjusts to slower devices and other delays encountered on a network. Although more
than 100 protocols make up the entire TCP/IP protocol suite, the two most important of
these are TCP and IP. TCP provides transport functions, ensuring, among other things,
that the amount of data received is the same as the amount transmitted. IP provides
the addressing and routing mechanism that acts as a postmaster. Figure B.8 displays
TCP/IP’s four-layer reference model:
■ Application layer—serves as the window for users and application processes to
access network services.
■ Transport layer—handles end-to-end packet transportation.
■ Internet layer—formats the data into packets, adds a header containing the packet
sequence and the address of the receiving device, and specifies the services required
from the network.
■ Network interface layer—places data packets on the network for transmission. 3
For a computer to communicate with other computers and web servers on the Inter-
net, it must have a unique numeric IP address. IP provides the addressing and routing
mechanism that acts as a postmaster. An IP address is a unique 32-bit number that iden-
tifies the location of a computer on a network. It works like a street address—as a way to
find out exactly where to deliver information.
When IP addressing first came out, everyone thought that there were plenty of
addresses to cover any need. Theoretically, you could have 4,294,967,296 unique
addresses. The actual number of available addresses is smaller (somewhere between 3.2
and 3.3 billion) due to the way that the addresses are separated into classes, and some
addresses are set aside for multicasting, testing, or other special uses. 4
With the explosion of the Internet and the increase in home networks and business
networks, the number of available IP addresses is simply not enough. The obvious solu-
tion is to redesign the address format to allow for more possible addresses. Internet
protocol version 6 (IPv6) is the “next generation” protocol designed to replace the cur-
rent version Internet protocol, IP version 4 (IPv4). However, IPv6 will take several years
FIGURE B.8
TCP/IP Four-Layer Reference
Model
Applications
Transport TCP
FTP, SMTP, Telnet, HTTP, SNTP
IP
Ethernet, Token Ring, FDDI
Internet
Network Interface
baL76892_appB_B1-B12.indd B7baL76892_appB_B1-B12.indd B7 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Appendix B Networks and TelecommunicationsB.8
to implement because it requires modification of the entire infrastructure of the Inter-
net. The main change brought by IPv6 is a much larger address space that allows greater
flexibility in assigning addresses. IPv6 uses a 128-bit addressing scheme that produces
3.4  3  10 38 addresses. 5
The TCP/IP suite of applications includes five protocols—file transfer, simple mail
transfer, telnet, hypertext transfer, and simple network management (see Figures B.9
and B.10 ). 6
MEDIA
Network transmission media refers to the various types of media used to carry the sig-
nal between computers. When information is sent across the network, it is converted into
electrical signals. These signals are generated as electromagnetic waves (analog signal-
ing) or as a sequence of voltage pulses (digital signaling). To be sent from one location to
another, a signal must travel along a physical path. The physical path that is used to carry
a signal between a signal transmitter and a signal receiver is called the transmission
media. The two types of transmission media are wire (guided) and wireless (unguided).
Wire Media
Wire media are transmission material manufactured so that signals will be confined
to a narrow path and will behave predictably. The three most commonly used types of
guided media are (see Figure B.11 ):
■ Twisted-pair cable
■ Coaxial cable
■ Fiber-optic cable
LO B.5: Identify the different media
types found in networks.
TCP/IP Applications
File Transfer Protocol (FTP) Allows files containing text, programs, graphics, numerical data, and so
on to be downloaded off or uploaded onto a
network.
Simple Mail Transfer Protocol
(SMTP)
TCP/IP’s own messaging system for email.
Telnet Protocol Provides terminal emulation that allows a personal computer or work-
station to act as a terminal, or access device, for a server.
Hypertext Transfer Protocol
(HTTP)
Allows web browsers and servers to send and receive web pages.
Simple Network Management
Protocol (SNMP)
Allows networked nodes to be managed from a single point.
FIGURE B.9
TCP/IP Applications
OSI Model
7. Application
6. Presentation
5. Session
4. Transport
3. Network
2. Data Link
1. Physical
FIGURE B.10
Open System Interconnection
Model
baL76892_appB_B1-B12.indd B8baL76892_appB_B1-B12.indd B8 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Networks and Telecommunications Appendix B B.9
Twisted-Pair Cable Twisted-pair cable refers to a type of cable composed of four
(or more) copper wires twisted around each other within a plastic sheath. The wires are
twisted to reduce outside electrical interference. Twisted-pair cables come in shielded
and unshielded varieties. Shielded cables have a metal shield encasing the wires that
acts as a ground for electromagnetic interference. Unshielded twisted-pair (UTP) is the
most popular and is generally the best option for LAN networks. The quality of UTP may
vary from telephone-grade wire to high-speed cable. The cable has four pairs of wires
inside the jacket. Each pair is twisted with a different number of twists per inch to help
eliminate interference from adjacent pairs and other electrical devices. The connectors
(called RF-45) on twisted-pair cables resemble large telephone connectors. 7
Coaxial Cable Coaxial cable is cable that can carry a wide range of frequencies with
low signal loss. It consists of a metallic shield with a single wire placed along the center
of a shield and isolated from the shield by an insulator. Coaxial cable is similar to that
used for cable television. This type of cable is referred to as coaxial because it contains
one copper wire (or physical data channel) that carries the signal and is surrounded by
another concentric physical channel consisting of a wire mesh. The outer channel serves
as a ground for electrical interference. Because of this grounding feature, several coaxial
cables can be placed within a single conduit or sheath without significant loss of data
integrity. 8
Fiber-Optic Cable Fiber optic (or optical fiber ) refers to the technology associ-
ated with the transmission of information as light impulses along a glass wire or fiber.
Fiber-optic cable is the same type used by most telephone companies for long-distance
service. Fiber-optic cable can transmit data over long distances with little loss in data
integrity. In addition, because data are transferred as a pulse of light, fiber optical is not
subject to interference. The light pulses travel through a glass wire or fiber encased in an
insulating sheath. 9
Fiber optic’s increased maximum effective distance comes at a price. Optical fiber is
more fragile than wire, difficult to split, and labor intensive to install. For these reasons,
fiber optics is used primarily to transmit data over extended distances where the hard-
ware required to relay the data signal on less expensive media would exceed the cost of
fiber-optic installation. It is also used where large amounts of data need to be transmit-
ted on a regular basis.
Wireless Media
Wireless media are natural parts of the Earth’s environment that can be used as physi-
cal paths to carry electrical signals. The atmosphere and outer space are examples of
Twisted-Pair Cabling
(10Base-T)
Coaxial Cable
Fiber-Optic Cable
Protective outside cover
Jacket
Cladding
Glass fiber core
Protective outside cover
Copper/aluminum mesh
Insulator
Copper center conductorInner, single-wire cover
Copper wire
FIGURE B.11
Twisted-Pair, Coaxial Cable,
and Fiber-Optic
baL76892_appB_B1-B12.indd B9baL76892_appB_B1-B12.indd B9 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Appendix B Networks and TelecommunicationsB.10
wireless media that are commonly used to carry these signals. Today, technologies for
wireless data transmission include microwave transmission, communication satellites,
(see Figure B.12 ) mobile phones, personal digital assistants (PDAs), personal computers
(e.g., laptops), and mobile data networks.
Network signals are transmitted through all media as a type of waveform. When trans-
mitted through wire and cable, the signal is an electrical waveform. When transmitted
through fiber-optic cable, the signal is a light wave, either visible or infrared light. When
transmitted through the Earth’s atmosphere, the signal can take the form of waves in the
radio spectrum, including microwaves, infrared, or visible light.
FIGURE B.12
Communication Satellite
Example
22,000 miles above
Earth
Fixed Locations
Satellite Satellite
Portable Communications Vehicles
Client, B.4
Client/server network, B.4
Coaxial cable, B.9
Ethernet, B.6
Fiber optic (or optical fiber), B.9
Internet protocol version 6
(IPv6), B.7
Interoperability, B.6
Local area network
(LAN), B.2
Metropolitan area network
(MAN), B.2
Network, B.1
Network operating system
(NOS), B.4
Network topology, B.5
Network transmission
media, B.8
Packet-switching, B.4
Peer-to-peer (P2P) network, B.3
Protocol, B.6
Router, B.4
Server, B.4
Telecommunication system, B.1
Transmission control protocol/
Internet protocol (TCP/IP), B.7
Twisted-pair cable, B.9
Wide area network (WAN), B.2
Wire media, B.8
Wireless media, B.9
K E Y T E R M S
1. Network Analysis
Global Manufacturing is considering a new technology application. The company wants to process
orders in a central location and then assign production to different plants. Each plant will operate
its own production scheduling and control system. Data on work in process and completed assem-
blies will be transmitted back to the central location that processes orders. At each plant, Global
uses personal computers that perform routine tasks such as payroll and accounting. The production
A P P LY Y O U R K N O W L E D G E
baL76892_appB_B1-B12.indd B10baL76892_appB_B1-B12.indd B10 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
Networks and Telecommunications Appendix B B.11
scheduling and control systems will be a package program running on a new computer dedicated to
this application.
The MIS personnel at Global have retained you as a consultant to help with further analysis. What
kind of network configuration seems most appropriate? How much bandwidth is needed? What data
should be collected? Prepare a plan showing the information Global must develop to establish this
network system. Should Global use a private network or can it accomplish its objectives through the
Internet?
2. Secure Access
Organizations that have traditionally maintained private, closed systems have begun to look at the
potential of the Internet as a ready-made network resource. The Internet is inexpensive and glob-
ally pervasive: Every phone jack is a potential connection. However, the Internet lacks security. What
obstacles must organizations overcome to allow secure network connections?
3. Telecommunications Options
Research the telecommunications options that currently exist for you to link to the Internet from
where you live. Prepare a list of criteria on which to compare the different technologies, such as price
(is there tiered pricing depending on speed and amount you can download?), start-up cost (do you
need to buy a special modem, or is there an installation fee), maximum data transfer rate, and so
on. Compare your responses with several classmates, and then develop a summary of all telecom-
munications options that you identified, including the criteria and your group comparison based on
the criteria.
4. Frying Your Brains?
Radio waves, microwaves, and infrared all belong to the electromagnetic radiation spectrum used.
These terms reference ranges of radiation frequencies we use every day in our wireless network-
ing environments. However, the very word radiation strikes fear in many people. Cell towers have
sprouted from fields all along highways. Tall rooftops harbor many more cell stations in cities. Millions
of cell phone users place microwave transmitters/receivers next to their heads each time they make
a call. With all this radiation zapping around, should we be concerned? Research the Internet to find
out what the World Health Organization (WHO) has had to say about this.
5. Home Network Experience
If you maintain a home computer network (or have set one up in the past), create a document that
describes the benefits that the network provides along with the difficulties that you have experienced.
Include in your document a network topology, a detailed description of the type of network you have
and the equipment you use. If you have no experience with home networking, interview someone
who does, and write up his or her comments. Compare this with several classmates, and discuss the
benefits and challenges.
baL76892_appB_B1-B12.indd B11baL76892_appB_B1-B12.indd B11 09/11/12 1:37 PM09/11/12 1:37 PM

Confirming Pages
baL76892_appB_B1-B12.indd B12baL76892_appB_B1-B12.indd B12 09/11/12 1:37 PM09/11/12 1:37 PM

Rev. Confirming Pages
C.1
C
LEARNING OUTCOMES
C.1 Identify the relational database model’s basic components.
C.2 Explain the importance of documenting entity relationship diagrams.
C.3 Explain the need for an entity-relationship diagram in a database management system.
INTRODUCTION
Businesses rely on databases for accurate, up-to-date information. Without access to
mission critical data, most businesses are unable to perform their normal daily func-
tions, much less create queries and reports that help make strategic decisions. For those
decisions to be useful, the database must have data that are accurate, complete, con-
sistent, timely, and unique. However, without a good underlying database design, deci-
sions will be inaccurate and inconstant.
A database maintains information about various types of objects (inventory), events
(transactions), people (employees), and places (warehouses). A database management
system (DBMS) creates, reads, updates, and deletes data in a database while controlling
access and security. A DBMS provides a way to create, update, delete, store, and retrieve
data in the database.
Using a data model offers a method for designing a database correctly that will help in
meeting the needs of the users in a DBMS environment.
THE RELATIONAL DATABASE MODEL
Numerous elements in a business environment need to store data, and those elements
are related to one another in a variety of ways. In fact, a database must contain not only
the data but also information about the relationships between those data. Designing a
database properly is fundamental to establishing a solid foundation in which to base
business decisions. This is done by using a data model, or the logical data structures that
detail the relationships among data elements using graphics or pictures. A relational
database model stores information in the form of logically related two-dimensional
tables. Tables, or entities as they are formally referred to, will be discussed later.
LO C.1: Identify the relational data-
base model’s basic components.
A P P E N D I X
Designing Databases
baL76892_appC_C1-C12.indd C1baL76892_appC_C1-C12.indd C1 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
Appendix C Designing DatabasesC.2
In developing the relational database model to design a database, an entity-relation-
ship diagram is used. An entity-relationship diagram (ERD) is a technique for docu-
menting the entities and relationships in a database environment. Before describing the
notation used for developing an ERD, it is important to understand what entities and
attributes are.
Entities and Attributes
An entity stores information about a person, place, thing, transaction, or event. A cus-
tomer is an entity, as is a product and an appointment. An attribute is the data elements
associated with an entity. For example, consider Mega-Video, a physical and online
retail store that sells movie DVDs. The company would need to store information on
its customers (especially for online purchases) by creating an entity called CUSTOMER
that contained many attributes such as Customer Number, First Name, Last Name, Street,
City, State, Zip Code, Phone Number, and Email (refer to Figure C.1 ).
Type of Attributes There are several types of attributes, including:
■ Simple versus composite. A simple attribute cannot be broken down into a smaller
component. For example, a customer’s first name and last name are simple. A com-
posite attribute can be divided into smaller components, which represent more
basic attributes that have their own meanings. A common example of a composite
attribute is Address (see Figure C.2 ). Address can be broken down into a number of
subparts, such as Street, City, State, Zip Code.
■ Single-valued versus multi-valued. When creating a relational database, the attributes
in the data model must be single-valued. Single-valued attribute means having only a
single value of each attribute of an entity. A person’s age is an example of a single-valued
attribute because a person cannot have more than one age. Multi-valued attribute
means having the potential to contain more than one value for an attribute . For exam-
ple, an educational degree of a person is a multi-valued attribute because a person can
have more than one degree. An entity in a relational database cannot have multi-valued
attributes; those attributes must be handled by creating another entity to hold them.
Therefore, in the example given previously, in designing the database there would be
two entities, one called PERSON (or something similar) and one called DEGREE. If a
multi-valued attribute has been identified, it typically is a clue that another entity is
needed.
ENTITIES
Attributes
DISTRIBUTOR
Distributor Number
Name
Street
City
State
Zip Code
Phone
Contact Name
Contact Phone
ITEM
Item Number
Title
Distributor Number
Price
Release Date
Genre
ORDER
Order Number
Customer Number
Order Date
Order Filled
CUSTOMER
Customer Number
First Name
Last Name
Street
City
State
Zip Code
Phone
Email
FIGURE C.1
Entities and Attributes Examples
baL76892_appC_C1-C12.indd C2baL76892_appC_C1-C12.indd C2 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
C.3Designing Databases Appendix C
■ Stored versus derived. If an attribute can be calculated using the value of another
attribute, it is called a derived attribute. The attribute that is used to derive the attri-
bute is called a stored attribute. Derived attributes are not stored in the file, but can
be derived when needed from the stored attributes. One example of a derived and
stored attribute is a person’s age. If the database has a stored attribute such as the
person’s Date of Birth, then a derived attribute called Age can be created from taking
the Current Date (this is retrieved from the DBMS) and subtracting the Date of Birth
to get the age.
■ Null-valued. There are cases where an attribute does not have an applicable value
for an attribute. For these situations, the null-valued attribute is created. Null-valued
attribute is assigned to an attribute when no other value applies or when a value is
unknown. A person who does not have a mobile phone would have null stored for
the value for the Mobile Phone Number attribute. Null can also be used in situations
where the attribute value is unknown such as Hair Color. Every person has a hair
color, but the information may be missing.
Business Rules
The “correct” design for a specific business depends on the business rules; what is
correct for one organization may not be correct for another. A business rule is a state-
ment that defines an aspect of a business. It is intended to convey the behavior and
rules of a business. The following statements are examples of possible business rules for
Mega-Video:
■ A customer can purchase many DVDs.
■ DVDs can be purchased by many customers.
■ A DVD title can have many copies.
A typical business may have hundreds of business rules. Each business rule will
have entities and sometimes even attributes in the statements. For instance, in the first
example above, CUSTOMER and DVD would be entities according to this business rule.
Identifying the business rules will help to create a more accurate and complete database
design. In addition, the business rules also assist with identifying relationships between
entities. This is very useful in creating ERDs.
DOCUMENTING ENTITY RELATIONSHIP DIAGRAMS
Once entities, attributes, and business rules have been identified, the ERD can be
documented. The two most commonly used models of ERD documentation are
Chen, named after the originator of entity-relationship modeling, Dr. Peter Chen,
and information engineering, which grew out of work by James Martin and Clive
LO C.2: Explain the importance of
documenting entity relationship
diagrams.
FIGURE C.2
Composite Attributes
Address A Composite Attribute
City State Zip CodeStreet
baL76892_appC_C1-C12.indd C3baL76892_appC_C1-C12.indd C3 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
Appendix C Designing DatabasesC.4
FIGURE C.3
Chen Model with Attributes
First Name Last Name
Street
CityStateZip Code
Email
Customer Number
CUSTOMER
Finkelstein. It does not matter which is used, as long as everyone who is using the
diagram understands the notation. For purposes of simplicity, only the Chen model
will be described here.
The Chen model notation uses very specific symbols in representing entities and
attributes. Rectangles are used to represent entities. Each entity’s name appears in the
rectangle, is expressed in the singular, and is capitalized, as in CUSTOMER. Originally,
attributes were not part of the Chen model; however, many database designers have
extended it to include the attributes in ovals as illustrated in Figure C.3 .
Basic Entity Relationships
One of the main reasons for creating an ERD is to identify and represent the relationships
between entities. If the business rules for Mega-Video state that a customer can order
many videos (in this case, an item), then a relationship needs to be created between
CUSTOMER, ORDER, and ITEM. This is a purely conceptual representation of what the
database will look like and is completely unrelated to the physical storage of the data.
Again, what the ERD is doing is creating a model in which to design the database.
The Chen model uses diamonds for relationships and lines to connect relationships
between entities. Figure  C.4 displays the relationship between a Mega-Video CUS-
TOMER and ORDER using this notation. The word within the relationship gives some
indication of the meaning of the relationship.
Once the basic entities and their attributes have been defined, the next task is to iden-
tify the relationships among those entities. There are three basic types of relationships:
(1) one-to-one, (2) one-to-many, and (3) many-to-many.
One-to-One Relationship A one-to-one relationship (1:1) is between two entities
in which an instance of one entity can be related to only one instance of a related entity.
Consider Mega-Video, which has many different stores with several employees and one
manager. According to the company’s business rules, the manager, who is an employee,
can manage only one store. The relationship then becomes 1:1 between EMPLOYEE
and STORE. Using the Chen model notation, as shown in Figure C.5 , the relationships
FIGURE C.4
Chen Method with Relationship
HasCUSTOMER ORDER
baL76892_appC_C1-C12.indd C4baL76892_appC_C1-C12.indd C4 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
C.5Designing Databases Appendix C
between the two instances can then be expressed as “An employee can manage one store
and one store has one manager.” The number “1” next to the EMPLOYEE and STORE
entities indicates that only one EMPLOYEE manages one STORE.
One-to-Many Relationship Most relational databases are constructed from one-
to-many relationships. A one-to-many relationship (1:M) is between two entities in
which an instance of one entity can be related to many instances of a related entity. For
example, Mega-Video receives many ITEM (s) from one DISTRIBUTOR and each DIS-
TRIBUTOR supplies many ITEM (s) as Figure C.6 illustrates. Similarly, a CUSTOMER can
have many ORDER (s), but an ORDER has only one CUSTOMER. These are both exam-
ples of a one-to-many relationship. The “M” next to the ORDER entity indicates that a
CUSTOMER can place one or more ORDER (s). That notation is also used with ITEM, as
an ORDER can contain one or more ITEM (s).
Many-to-Many Relationship Identifying and removing many-to-many relationships
will help to create an accurate and consistent database. A many-to-many relationship
(M:N) is between two entities in which an instance of one entity is related to many instances
of another and one instance of the other can be related to many instances of the first entity.
There is a many-to-many relationship between a Mega-Video ORDER and ITEM (refer
back to Figure C.6 ). An ORDER can contain many ITEM (s) and each ITEM can be on many
ORDER (s). The letter “N” next to ITEM in Figure C.6 indicates the many-to-many relation-
ship between ORDER and ITEM.
However, there are problems with many-to-many relationships. First, the relational
data model was not designed to handle many-to-many relationships. This means they
need to be replaced with a one-to-many relationship to be used in a relational DBMS.
Second, many-to-many relationships will create redundancy in the data that are stored.
This then has a negative impact on the accuracy and consistency that a database
needs. To better understand this problem, consider the relationship between ITEM
and ORDER. There is a many-to-many relationship between the ORDER and the ITEM
because each ORDER can contain many ITEM (s) and, over time, each ITEM will be on
many ORDER (s). Whenever a CUSTOMER places an ORDER for an ITEM, the number
of ITEM (s) varies, depending on how many DVDs the CUSTOMER is buying. To break
the many-to-many relationship, a composite entity is needed.
FIGURE C.5
A One-to-One Relationship
ManagesEMPLOYEE STORE
1 1
Has Contains
Supplied
CUSTOMER ORDER ITEM
DISTRIBUTOR
M1 M N
M
1
FIGURE C.6
A One-to-Many Relationship
baL76892_appC_C1-C12.indd C5baL76892_appC_C1-C12.indd C5 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
Appendix C Designing DatabasesC.6
Entities that exist to represent the relationship between two other entities are known
as composite entities. Our above example needs another entity that breaks up the
many-to-many relationship between ORDER and ITEM. Figure  C.7 displays the new
relationship.
Creating a composite entity called LINE ITEM (think of it as a line item on an invoice
slip) breaks up the many-to-many relationship between ORDER and ITEM, which then
eliminates redundancy and other anomalies when deleting or updating information.
Using the Chen model, composite entities are documented with a combination of a rect-
angle and a diamond.
Given the new ERD in Figure C.7 , each ORDER can contain many LINE ITEM (s), but a
LINE ITEM can belong to only one ORDER. As a result, the relationship between ORDER
and LINE ITEM is one-to-many (one order has one or more line items) and the rela-
tionship between LINE ITEM and ITEM is one-to-many (one item can be in many line
items). The composite entity has removed the original many-to-many relationship and
turned it into two one-to-many relationships.
Relationship Cardinality
Cardinality expresses the specific number of instances in an entity. In the Chen model,
the cardinality is indicated by placing numbers beside the entities in the format of (x, y).
The first number in the cardinality represents the minimum value and the second num-
ber is for the maximum value.
Mega-Video can store data about a CUSTOMER in its database before the CUSTOMER
places an ORDER. An instance of the CUSTOMER entity does not have to be related to
any instance of the ORDER entity, meaning there is an optional cardinality.
However, the reverse is not true for the Mega-Video database, an ORDER must be
related to a CUSTOMER. Without a CUSTOMER, an ORDER cannot exist. An instance
of the CUSTOMER entity can be related to zero, one, or more ORDER (s) using the cardi-
nality notation (0,N). An instance of the ORDER entity must be related to one and only
one CUSTOMER, having a cardinality of (1,1). The relationship between an instance
of ORDER and CUSTOMER is a mandatory relationship. Figure  C.8 illustrates these
cardinalities.
FIGURE C.7
A Composite Entity
HasCUSTOMER
M1
ContainsORDER
1
DISTRIBUTOR
1 M
M
M
1
LINE ITEM
Has
ITEMSupplied
FIGURE C.8
Example of Cardinalities
HasCUSTOMER
M
ORDER
1
(1,1) (0,N)
baL76892_appC_C1-C12.indd C6baL76892_appC_C1-C12.indd C6 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
C.7Designing Databases Appendix C
RELATIONAL DATA MODEL AND THE DATABASE
Once the ERD is completed, it can be translated from a conceptual logical model into
the formal data model required by the DBMS. The relational data model is the result of
the work of Edgar (E. F.) Codd, a mathematician. During the 1960s, Dr. Codd was work-
ing with existing data models when he noticed that data relationships were very inef-
ficient. Using his experience and knowledge in mathematics, he created the relational
data model. Most databases, such as Access 2010 and SQL Server 2010, are based on the
relational data model.
From Entities to Tables
In creating an ERD for the conceptual model, the focus was on identifying entities and
attributes. For the logical relational data model, the attention is on tables and fields.
Using the ERD the entities become tables and attributes turn into fields. A table is com-
posed of rows and columns that represent an entity. A field is a characteristic of a table.
A record is a collection of related data elements. The columns in the table definition
represent the field, while a row is a record.
At first glance, a table along with the fields and records looks much like information in
a spreadsheet, such as that displayed in Figure C.9 of a CUSTOMER table.
Fields Figure C.9 has four fields, Customer Number, First Name, Last Name, and Phone
Number. Two or more tables within the same relational data model may have fields with
the same names, but a single table must have unique field names. Using the relational
data model notation, the table names are capitalized (e.g., CUSTOMER ) and all columns
are in title case (e.g., Customer Number), as in:
CUSTOMER (Customer Number, First Name, Last Name, Phone Number)
Records A record in a table has the following properties:
■ A table cannot have multi-valued attributes (as mentioned previously); therefore,
only one value is allowed at the intersection of a field and record.
■ Each record needs to be unique; there are no duplicate records in a table.
■ A record must have an entity identifier, or primary key, which is a field (or group of
fields), that uniquely identifies a given record in a table.
Primary Key A primary key makes it possible to uniquely identify every record in a
table. The primary key is important to retrieve data accurately from the database.
Using a Customer Number as a primary key states that no two customers will ever
have the same number. The primary key will be used to identify records associated with
it. For example, if someone was searching the Mega-Video database for all the ITEMS
that a CUSTOMER with a Customer Number of “112299” bought, he would retrieve only
those records and not those associated with another customer.
Along with being unique, a primary key must not contain the value null. Recall that
null is a special value meaning unknown; however, it is not the same as a field being
LO C.3: Explain the need for an
entity-relationship diagram in a
database management systems.
CUSTOMER
Customer Number First Name Last Name Phone Number
0001 Bill Miller 777-777-7777
0505 Jane Cook 444-444-4444
1111 Sam Smith 555-555-5555
1212 John Doe 666-666-6666
FIGURE C.9
A Sample Customer Table
baL76892_appC_C1-C12.indd C7baL76892_appC_C1-C12.indd C7 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
Appendix C Designing DatabasesC.8
blank or set to the value of zero. If one record has a null primary key, then the data struc-
ture is not in violation. But once a second null value for another record is introduced, the
uniqueness of the primary key is lost. Therefore, nulls are forbidden when establishing
primary keys.
The proper notation to use when documenting the primary key is to underline it,
such as:
CUSTOMER ( Customer Number, First Name, Last Name, Phone Number)
Logically Relating Tables
Once the primary key has been defined, tables can be logically related. Each table in
Figure C.10 is directly analogous to the entities of the same name in the Mega-Video ERD
presented in Figure  C.8 , excluding the DISTRIBUTOR. The CUSTOMER table is iden-
tified by a Customer Number, a randomly generated unique primary key. The ORDER
table is identified by an Order Number, another arbitrary unique primary key assigned
by Mega-Video. The table ORDER LINE tells the company which ITEM (s) are part of
which ORDER. This table requires a concatenated primary key (that is to say, joining
two fields that act as one primary key) because multiple ITEM (s) can appear on multiple
ORDER (s). The selection of this primary key, however, has more significance than simply FIGURE C.10
Logically Relating Tables
CUSTOMER
1111 Sam
Jane0505
Foreign key
Foreign key
9244
Primary
key
Primary
key
Primary
key
Foreign
key
ORDER
1000
9250
9255
9244
LINE ITEM
ITEM
Twilight Zone
Iron Man 2
Avatar
Item Number Title Distributor Number Price
4.95
4.95
5.95
002
002
004
Item NumberOrder Number Shipped?Quantity
1
92441001 1
92501002 1
92551002 1 Y
Y
Y
Y
Customer NumberOrder Number Order Date
11111000 11/1/2011
11111001 11/10/2011
05051002 12/11/2011
Customer Number First Name PhoneLast Name
555-555-5555Smith
444-444-4444Cook
baL76892_appC_C1-C12.indd C8baL76892_appC_C1-C12.indd C8 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
C.9Designing Databases Appendix C
identifying each record; it also represents a relationship between the ORDER LINES, the
ORDER on which they appear, and the ITEM (s) being ordered. The primary key for the
ITEM table is identified by the Item Number.
The Item Number field in the ORDER LINE table is the same as the primary key in the
ITEM table. This indicates a one-to-many relationship between the two tables. Similarly,
there is also a one-to-many relationship between the ORDER and ORDER LINE tables
because the Order Number column in the ORDER LINE table is the same as the primary
key of the ORDER table.
When a table contains a field that is the same as the primary key of another table, it is
called a foreign key. A foreign key is a primary key of one table that appears as an attribute in
another table and acts to provide a logical relationship between the two tables. The match-
ing of foreign keys to primary keys represents data relationships in a relational database.
Foreign keys may be a part of a concatenated primary key, as is the case in the LINE
ITEM table in Figure  C.10 . By concatenating, or combining, both Order Number and
Item Number in the LINE ITEM table as foreign keys, they then become primary keys.
However, most foreign keys are not part of the table’s primary key. Consider the relation
between Mega-Video’s CUSTOMER and ORDER in Figure C.10 . The Customer Number
field in the ORDER table is a foreign key that matches the primary key of the CUSTOMER
table. It represents the one-to-many relationship between CUSTOMER and ORDER.
However, the Customer Number is not part of the primary key of the ORDER table; it is
simply used to create a relationship between the two tables, CUSTOMER and ORDER.
A relational database uses the relationships indicated by matching data between pri-
mary and foreign keys. Assume that a Mega-Video employee wanted to see what Titles
had been ordered with Order Number 1002. First, the database identifies the records in
the LINE ITEM table that contain an Order Number of 1002. Then, it matches them to
the Item Number (s) in the ITEM table. The results are those that match the records from
each table.
Attributes, C.2
Business rule, C.2
Cardinality, C.3
Composite entity, C.6
Data model, C.2
Database, C.1
Database management system
(DBMS), C.1
Entity, C.2
Entity-relationship diagram
(ERD), C.2
Field, C.7
Foreign key, C.9
Many-to-many relationship
(M:N), C.5
Multi-valued attribute, C.2
Null-valued attribute, C.3
One-to-many relationship
(1:M), C.5
One-to-one relationship (1:1), C.4
Primary key, C.7
Record, C.7
Relational database model, C.2
Single-valued attribute, C.2
Table, C.7
K E Y T E R M S
1. SportTech Events
SportTech Events puts on athletic events for local high school athletes. The company needs a data-
base designed to keep track of the sponsor for the event and where the event is located. Each event
needs a description, date, and cost. Separate costs are negotiated for each event. The company would
also like to have a list of potential sponsors that includes each sponsor’s contact information, such as
the name, phone number, and address.
A P P LY Y O U R K N O W L E D G E
baL76892_appC_C1-C12.indd C9baL76892_appC_C1-C12.indd C9 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
Appendix C Designing DatabasesC.10
Each event will have a single sponsor, but a particular sponsor may sponsor more than one event.
Each location will need an ID, contact person, and phone number. A particular event will use only one
location, but a location may be used for multiple events. SportTech asks you to create an ERD from
the information described here.
2. Course and Student Schedules
Paul Bauer, the chair for the information technology (IT) department at the University of Denver, needs
to create a database to keep track of all the courses offered by the department. In addition to the
course information, Bauer would like the database to include each instructor’s basic contact infor-
mation, such as ID number, name, office location, and phone number. Currently, the department has
nine instructors (seven full-time faculty and two adjuncts). For each course, Bauer would like to keep
track of the course ID, title, and number of credit hours. When courses are offered, the section of the
course receives an ID number, and with that number, the department keeps track of which instructor
is teaching the course. There is only one instructor per course.
Finally, Bauer needs to be able to keep track of the IT students and to know which courses each
student has taken. The information he would like to know about each student includes ID number,
name, and phone number. He also needs to know what grade the student receives in each course.
He has asked you to create an ERD from the information described here using the Chen model.
3. Foothills Athletics
Foothills Athletics is an athletic facility offering services in Highlands Ranch, Colorado. All property
owners living in Highlands Ranch are members of the Highlands Ranch Community Association
(HRCA), which has partnered with Foothills Athletics to provide recreation facilities for its residents.
Foothills Athletics has been using a spreadsheet to keep track of its personnel, facilities, equipment,
and the HRCA members. The spreadsheet has created many redundancies along with several anoma-
lies in adding, modifying, and deleting information. One of the HRCA members has suggested that the
athletic facility should create a database to improve data collection that will also remove many of the
difficulties that the spreadsheet is creating.
Foothills Athletics primary business operations are based on the following:
■ Personnel: Foothills Athletics has a number of employees, primarily fitness instructors and
administrative personnel. Records are kept on each employee, detailing employee name, address,
phone number, data of hire, position, and status as either a current or former employee. Employees
are assigned a unique four-digit employee ID number when they are hired.
■ Members: When joining Foothills Athletics, HRCA members are assigned a unique four-digit
member ID number. This information along with their name, address, phone number, gender, birth
date, and date of membership are recorded. At the time of enrollment, each member decides on
one of three available membership types along with a fixed membership fee: Platinum ($400),
Gold ($300), and Silver ($200). This is a one-time fee that establishes a lifetime membership.
■ Facilities and equipment: Foothills Athletics has a variety of facilities and equipment choices.
Each facility has a unique room number and a size limitation associated with it. Some of the
rooms contain a variety of exercise equipment; all have a serial number that is used for inventory
and maintenance purposes. In addition, for each piece of equipment, the purchase date and the
date of its last maintenance are recorded. Each piece of equipment belongs to a specific equip-
ment type, such as elliptical machine, and is assigned a unique three-digit identification number.
The description, the manufacturer’s model number, and the recommended maintenance interval
for that model of equipment are also kept on file. Each equipment type is associated with a single
manufacturer that is referenced by a unique two-digit manufacturer ID number.
You have been hired to assist Foothills Athletics to create an ERD from the information described
here using the Chen model.
baL76892_appC_C1-C12.indd C10baL76892_appC_C1-C12.indd C10 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
C.11Designing Databases Appendix C
4. Slopeside Ski Rentals
Vail Resort in Vail, Colorado, is internationally known as one of the best places in North America for
skiing. Since 1973, Slopeside Ski Rentals has been a tradition in the area. At Slopeside Ski Rentals,
customers will find the largest selection of skis, boots, snowboards, clothing, helmets, eyewear, and a
variety of other accessories needed for the slopes.
You have been employed for the past three winters by the company. Recently, there has been a
surge in business, and the owners need a more accurate way to manage the rental business. You
have decided to create a database to help the owners keep track of the ski rentals, who the custom-
ers are, amount paid, and any damage to the skis when they are rented. The skis and snowboards
vary in type, size, and bindings. When customers rent equipment, they are required to leave their
driver’s license number and to give a home address, phone number, and credit card number.
A few business rules that you are aware of include:
■ A customer can rent one or more skis or snowboards at one time.
■ Skis and snowboards can be rented by many customers.
■ A ski or snowboard need not be assigned to any customer.
Your job is to develop an ERD from the business rules mentioned here.
baL76892_appC_C1-C12.indd C11baL76892_appC_C1-C12.indd C11 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
baL76892_appC_C1-C12.indd C12baL76892_appC_C1-C12.indd C12 26/11/12 1:44 PM26/11/12 1:44 PM

Rev. Confirming Pages
The Technology Plug-Ins T.1
The overall goal of the Technology Plug-Ins is to provide additional information
not covered in the text such as personal productivity using information technology,
problem solving using Excel, and decision making using Access. These plug-ins also
offer an all-in-one text to faculty, avoiding need to purchase an extra book to sup-
port Microsoft Office. These plug-ins offer integration with the core chapters and pro-
vide critical knowledge using essential business applications, such as Microsoft Excel,
Microsoft Access, and Microsoft Project with hands-on tutorials for comprehension
and mastery. Plug-Ins T1 to T12 are located on this textbook’s website at www.mhhe
.com/baltzan.
T H E T E C H N O L OG Y P L U G – I N S
Plug-In Description
T1. Personal Productivity Using IT This plug-in covers a number of things to do to keep a personal computer running effectively
and efficiently. The 12 topics covered in this plug-in are:
■ Creating strong passwords.
■ Performing good fi le management.
■ Implementing effective backup and recovery strategies.
■ Using Zip fi les.
■ Writing professional emails.
■ Stopping spam.
■ Preventing phishing.
■ Detecting spyware.
■ Threads to instant messaging.
■ Increasing PC performance.
■ Using anti-virus software.
■ Installing a personal fi rewall.
T2. Basic Skills Using Excel This plug-in introduces the basics of using Microsoft Excel, a spreadsheet program for data
analysis, along with a few fancy features. The six topics covered in this plug-in are:
■ Workbooks and worksheets.
■ Working with cells and cell data.
■ Printing worksheets.
■ Formatting worksheets.
■ Formulas.
■ Working with charts and graphics.
T3. Problem Solving Using Excel This plug-in provides a comprehensive tutorial on how to use a variety of Microsoft Excel
functions and features for problem solving. The five areas covered in this plug-in are:
■ Lists
■ Conditional Formatting
■ AutoFilter
■ Subtotals
■ PivotTables
T4. Decision Making Using Excel This plug-in examines a few of the advanced business analysis tools used in Microsoft Excel
that have the capability to identify patterns, trends, and rules, and create “what-if” models.
The four topics covered in this plug-in are:
■ IF
■ Goal Seek
■ Solver
■ Scenario Manager
(continued)
baL76892_plugins_T1-T4.indd 1baL76892_plugins_T1-T4.indd 1 27/11/12 8:31 AM27/11/12 8:31 AM

Rev. Confirming Pages
T.2 The Technology Plug-Ins
T5. Designing Database
Applications
This plug-in provides specific details on how to design relational database applications. One of
the most efficient and powerful information management computer-based applications is the
relational database. The four topics covered in this plug-in are:
■ Entities and data relationships.
■ Documenting logical data relationships.
■ The relational data model.
■ Normalization.
T6. Basic Skills Using
Access
This plug-in focuses on creating a Microsoft Access database file. One of the most efficient
information management computer-based applications is Microsoft Access. Access provides a
powerful set of tools for creating and maintaining a relational database. The two topics covered
in this plug-in are:
■ Create a new database fi le.
■ Create and modify tables.
T7. Problem Solving Using
Access
This plug-in provides a comprehensive tutorial on how to query a database in Microsoft Access.
Queries are essential for problem solving, allowing a user to sort information, summarize data
(display totals, averages, counts, and so on), display the results of calculations on data, and
choose exactly which fields are shown. The three topics in this plug-in are:
■ Create simple queries using the simple query wizard.
■ Create advanced queries using calculated fi elds.
■ Format results displayed in calculated fi elds.
T8. Decision Making Using
Access
This plug-in provides a comprehensive tutorial on entering data in a well-designed form and
creating functional reports using Microsoft Access. A form is essential to use for data entry
and a report is an effective way to present data in a printed format. The two topics in this
plug-in are:
■ Creating, modifying, and running forms.
■ Creating, modifying, and running reports.
T9. Designing Web Pages This plug-in provides a comprehensive assessment into the functional aspects of web design.
Websites are beginning to look more alike and to employ the same metaphors and conventions.
The web has now become an everyday thing whose design should not make users think. The six
topics in this plug-in are:
■ The World Wide Web.
■ The unknown(s).
■ The process of web design.
■ HTML basics.
■ Web fonts.
■ Web graphics.
T10. Creating Web Pages
Using HTML
This plug-in provides an overview of creating web pages using the HTML language.
HTML is a system of codes that you use to create interactive web pages. It provides
a means to describe the structure of text-based information in a document—by
denoting certain text as headings, paragraphs, lists, and so on. The five topics in this
plug-in are:
■ HTML (an introduction).
■ Creating, saving, and viewing HTML documents.
■ Applying style tags and attributes.
■ Using fancier formatting.
■ Creating hyperlinks.
■ Displaying graphics.
Plug-In Description
(continued)
baL76892_plugins_T1-T4.indd 2baL76892_plugins_T1-T4.indd 2 27/11/12 8:31 AM27/11/12 8:31 AM

Rev. Confirming Pages
The Technology Plug-Ins T.3
Plug-In Description
T11. Creating Web Pages
Using Dreamweaver
This plug-in provides a tour of using Dreamweaver to create web pages. Dreamweaver allows
anyone with limited web page design experience to create, modify, and maintain full-featured,
professional-looking pages without having to learn how to code all the functions and features
from scratch. The five topics in this plug-in are:
■ Navigation in Dreamweaver.
■ Adding content.
■ Formatting content.
■ Developing style sheets.
■ Creating tables.
T12. Creating Gantt Charts
with Excel and Microsoft
Project
This plug-in offers a quick and efficient way to manage projects. Excel and Microsoft Project
are great for managing all phases of a project, creating templates, collaborating on planning
processes, tracking project progress, and sharing information with all interested parties. The
two topics in this plug-in are:
■ Creating Gantt Charts with Excel.
■ Creating Gantt Charts with Microsoft Project.
baL76892_plugins_T1-T4.indd 3baL76892_plugins_T1-T4.indd 3 27/11/12 8:31 AM27/11/12 8:31 AM

Rev. Confirming Pages
baL76892_plugins_T1-T4.indd 4baL76892_plugins_T1-T4.indd 4 27/11/12 8:31 AM27/11/12 8:31 AM

Rev. Confirming Pages
Apply Your Knowledge AYK.1
Project
Number Project Name Project Type Plug-In Focus Area Project Level Skill Set
Page
Number
1 Financial
Destiny
Excel T2 Personal
Budget
Introductory Formulas AYK.4
2 Cash Flow Excel T2 Cash Flow Introductory Formulas AYK.4
3 Technology
Budget
Excel T1, T2 Hardware
and Software
Introductory Formulas AYK.4
4 Tracking
Donations
Excel T2 Employee
Relationships
Introductory Formulas AYK.4
5 Convert
Currency
Excel T2 Global
Commerce
Introductory Formulas AYK.5
6 Cost
Comparison
Excel T2 Total Cost of
Ownership
Introductory Formulas AYK.5
7 Time
Management
Excel or Project T12 Project
Management
Introductory Gantt Charts AYK.6
8 Maximize
Profit
Excel T2, T4 Strategic
Analysis
Intermediate Formulas or
Solver
AYK.6
9 Security
Analysis
Excel T3 Filtering Data Intermediate Conditional
Formatting,
Autofilter,
Subtotal
AYK.7
10 Gathering
Data
Excel T3 Data
Analysis
Intermediate Conditional
Formatting
AYK.8
11 Scanner
System
Excel T2 Strategic
Analysis
Intermediate Formulas AYK.8
12 Competitive
Pricing
Excel T2 Profit
Maximization
Intermediate Formulas AYK.9
13 Adequate
Acquisitions
Excel T2 Break-Even
Analysis
Intermediate Formulas AYK.9
14 Customer
Relations
Excel T3 CRM Intermediate PivotTable AYK.9
15 Assessing
the Value of
Information
Excel T3 Data
Analysis
Intermediate PivotTable AYK.10
16 Growth,
Trends, and
Forecasts
Excel T2, T3 Data
Forecasting
Advanced Average,
Trend, Growth
AYK.11
17 Shipping Costs Excel T4 SCM Advanced Solver AYK.12
18 Formatting
Grades
Excel T3 Data
Analysis
Advanced If, LookUp AYK.12
(Continued)
Apply Your Knowledge Project Overview
A P P LY YOU R K N OW L E D G E
baL76892_AYK_AYK.1-AYK.24.indd 1baL76892_AYK_AYK.1-AYK.24.indd 1 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.2 Apply Your Knowledge
NOTE: Many of the Excel projects support multiple data files. Therefore the naming convention that
you see in the text may not be the same as what you see in a data folder. As an example, in the text we
reference data files as AYK1_Data.xlsx; however, you may see a file named AYK1_Data_Version_1.xlsx,
or AYK1_Data_Version_2.xlsx.
Project
Number Project Name Project Type Plug-In Focus Area Project Level Skill Set
Page
Number
19 Moving
Dilemma
Excel T2, T3 SCM Advanced Absolute
vs. Relative
Values
AYK.13
20 Operational
Efficiencies
Excel T3 SCM Advanced PivotTable AYK.14
21 Too Much
Information
Excel T3 CRM Advanced PivotTable AYK.14
22 Turnover Rates Excel T3 Data Mining Advanced PivotTable AYK.15
23 Vital
Information
Excel T3 Data Mining Advanced PivotTable AYK.15
24 Breaking Even Excel T4 Business
Analysis
Advanced Goal Seek AYK.16
25 Profit Scenario Excel T4 Sales
Analysis
Advanced Scenario
Manager
AYK.16
26 Electronic
Résumés
HTML T9, T10,
T11
Electronic
Personal
Marketing
Introductory Structural
Tags
AYK.17
27 Gathering
Feedback
Dreamweaver T9, T10,
T11
Data
Collection
Intermediate Organization
of Information
AYK.17
28 Daily Invoice Access T5, T6,
T7, T8
Business
Analysis
Introductory Entities,
Relationships,
and
Databases
AYK.17
29 Billing Data Access T5, T6,
T7, T8
Business
Intelligence
Introductory Entities,
Relationships,
and
Databases
AYK.19
30 Inventory Data Access T5, T6,
T7, T8
SCM Intermediate Entities,
Relationships,
and
Databases
AYK.20
31 Call Center Access T5, T6,
T7, T8
CRM Intermediate Entities,
Relationships,
and
Databases
AYK.21
32 Sales Pipeline Access T5, T6,
T7, T8
Business
Intelligence
Advanced Entities,
Relationships,
and
Databases
AYK.23
33 Online
Classified Ads
Access T5, T6,
T7, T8
Ecommerce Advanced Entities,
Relationships,
and
Databases
AYK.23
baL76892_AYK_AYK.1-AYK.24.indd 2baL76892_AYK_AYK.1-AYK.24.indd 2 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.3
Project 1 :
Financial Destiny
You have been introduced to Microsoft Excel and are ready to begin using it to help track
your monthly expenses and take charge of your financial destiny. The first step is to cre-
ate a personal budget so you can see where you are spending money and if you need to
decrease your monthly expenses or increase your monthly income.
Create a template for a monthly budget of your income and expenditures, with some
money set aside for savings (or you can use the data file, AYK1_Data.xlsx, we created).
Create variations of this budget to show how much you could save if you cut back on cer-
tain expenses, found a roommate, or got a part-time job. Compare the costs of a meal plan
to costs of groceries. Consider how much interest would be earned if you saved $100 a
month, or how much debt paid on student loans or credit card bills. To expand your data
set, make a fantasy budget for 10 years from now, when you might own a home, have stu-
dent loan payments, and have a good salary.
Data File: AYK1_Data.xlsx
Project 2 :
Cash Flow
Gears is a five-year-old company that specializes in bike components. The company is hav-
ing trouble paying for its monthly supplies and would like to perform a cash flow analysis
so it can understand its financial position. Cash flow represents the money an investment
produces after subtracting cash expenses from income. The statement of cash flows sum-
marizes sources and uses of cash, indicates whether enough cash is available to carry on
routine operations, and offers an analysis of all business transactions, reporting where
the firm obtained its cash and how it chose to allocate the cash. The cash flow statement
shows where money comes from, how the company is going to spend it, and when the
company will require additional cash. Gears would like to project a cash flow statement for
the next month.
Using the data file AYK2_Data.xlsx complete the cash flow statement for Gears using
Excel. Be sure to create formulas so the company can simply input numbers in the future
to determine cash flow.
Data File: AYK2_Data.xlsx
Project 3 :
Technology Budget
Tally is a start-up website development company located in Seattle, Washington. The com-
pany currently has seven employees and is looking to hire six new employees in the next
month.
You are in charge of purchasing for Tally. Your first task is to purchase computers for
the new employees. Your budget is $250,000 to buy the best computer systems with a
scanner, three color printers, and business software. Use the web to research various
products and calculate the costs of different systems using Excel. Use a variety of Excel
formulas as you analyze costs and compare prices. Use the data file AYK3_Data.xlsx as
a template.
Data File: AYK3_Data.xlsx
Project 4 :
Tracking Donations
Lazarus Consulting is a large computer consulting company in New York. Pete Lazarus,
the CEO and founder, is well known for his philanthropic efforts. Pete knows that most of
his employees contribute to nonprofit organizations and wants to reward them for their
baL76892_AYK_AYK.1-AYK.24.indd 3baL76892_AYK_AYK.1-AYK.24.indd 3 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.4 Apply Your Knowledge
efforts while encouraging others to contribute to charities. Pete began a program that
matches 50 percent of each employee donation. The only stipulations are that the charity
must be a nonprofit organization and the company will match only up to $2,000 per year
per employee.
Open the data file AYK4_Data.xlsx and determine the following:
■ What was the total donation amount per organization?
■ What were the average donations per organization?
Data File: AYK4_Data.xlsx
Project 5 :
Convert Currency
You have decided to spend the summer traveling abroad with your friends. Your trip is going
to take you to France, England, Italy, Switzerland, Germany, Norway, and Ireland. You want
to use Excel to convert currencies as you travel around the world.
Locate one of the exchange rate calculators on the Internet ( www.xe.com or www
.x-rates.com ). Find the exchange rates for each of the countries listed above and create
formulas in Excel to convert $100, $500, and $1,000. Use the data file AYK5_Data.xlsx as a
template.
Data File: AYK5_Data.xls
Project 6 :
Cost Comparison
You are thinking about purchasing a new computer since the machine you are using now is
four years old, slow, not always reliable, and does not support the latest operating system.
Your needs for the new computer are simple: anti-virus software, email, web browsing,
word processing, spreadsheet, database, iTunes, and some lightweight graphical tools.
Your concern is what the total cost of ownership will be for the next three years. You
have to factor in a few added costs beyond just the initial purchase price for the com-
puter itself, such as: added hardware (this could include a new printer, docking station, or
scanner), software (purchase of a new operating system), training (you’re thinking about
pursuing web training to get an internship next term), subsequent software upgrades, and
maintenance.
■ It is useful to think about costs over time—both direct as well as indirect costs. Part of
the reason this distinction is important is that a decision should rest not on the nominal
sum of the purchase, but rather on the present value of the purchase.
■ A dollar today is worth more than a dollar one year from now.
FIGURE AYK.1
Sample Layout of New
Computer Spreadsheet

baL76892_AYK_AYK.1-AYK.24.indd 4baL76892_AYK_AYK.1-AYK.24.indd 4 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.5
■ The relevant discount rate (interest rate) is your marginal cost of capital corresponding
to a level of risk equal with the purchase.
■ Use the data file AYK6_Data.xlsx as a template.
Data File: AYK6_Data.xlsx
Project 7 :
Time Management
You have just been hired as a business analyst by a new start-up company called Multi-
Media. Multi-Media is an interactive agency that constructs phased and affordable web-
site marketing, providing its clients with real and measurable solutions that are supported
by easy-to-use tools. Since the company is very new to the business arena, it needs help
in creating a project management plan for developing its own website. The major tasks for
the development team have been identified but you need to create the timeline.
1. The task names, durations, and any prerequisites are:
■ Analyze and plan—two weeks. Cannot start anything else until done.
■ Create and organize content—four weeks. Can start to develop “look and feel”
before this is done.
■ Develop the “look and feel”—four weeks. Start working on graphics and HTML at
the same time.
■ Produce graphics and HTML documents—two weeks. Create working prototype
after the first week.
■ Create a working prototype—two weeks. Give to test team when complete.
■ Test, test, test—four weeks.
■ Upload to a web server and test again—one week.
■ Maintain.
2. Using Microsoft Excel or Microsoft Project, create a Gantt chart using the information
provided above.
Project 8 :
Maximize Profi t
Books, Books, Books is a wholesale distributor of popular books. The business buys
overstocked books and sells them for a discount of more than 50 percent to local area
bookstores. The owner of the company, BK Kane, would like to determine the best
approach to boxing books so he can make the most profit possible. The local book-
stores accept all shipments from Books, Books, Books because of BK’s incredibly
low prices. BK can order as many overstocked books as he requires, and this week’s
options include:
Title Weight Cost Sale Price
Harry Potter and the Deathly Hallows, J. K. Rowling 5 lb $9 $17
The Children of Húrin, J. R. R. Tolkien 4 lb $8 $13
The Time Traveler’s Wife, Audrey Niffenegger 3.5 lb $7 $11
The Dark River, John Twelve Hawks 3 lb $6 $ 9
The Road, Cormac McCarthy 2.5 lb $5 $ 7
Slaughterhouse-Five, Kurt Vonnegut 1 lb $4 $ 5
baL76892_AYK_AYK.1-AYK.24.indd 5baL76892_AYK_AYK.1-AYK.24.indd 5 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.6 Apply Your Knowledge
When packing a single box, BK must adhere to the following:
■ 20 books or less.
■ Books by three different authors.
■ Between four and eight books from each author.
■ Weight equal to or less than 50 pounds.
BK has come to you to help him determine which books he should order to maximize his
profit based on the above information. Using the data file AYK8_Data.xlsx, determine the
optimal book order for a single box of books.
Data File: AYK8_Data.xlsx
Project 9 :
Security Analysis
SecureWorks, Inc., is a small computer security contractor that provides computer
security analysis, design, and software implementation for the U.S. government and
commercial clients. SecureWorks competes for both private and U.S. government com-
puter security contract work by submitting detailed bids outlining the work the com-
pany will perform if awarded the contracts. Because all of the work involves computer
security, a highly sensitive area, almost all of SecureWorks tasks require access to
classified material or company confidential documents. Consequently, all of the secu-
rity engineers (simply known as “engineers” within the company) have U.S. govern-
ment clearances of either Secret or Top Secret. Some have even higher clearances
for the 2 percent of SecureWorks work that involves so-called “black box” security
work. Most of the employees also hold clearances because they must handle classified
documents.
Leslie Mamalis is SecureWorks’ human resources (HR) manager. She maintains all
employee records and is responsible for semiannual review reports, payroll process-
ing, personnel records, recruiting data, employee training, and pension option informa-
tion. At the heart of an HR system are personnel records. Personnel record maintenance
includes activities such as maintaining employee records, tracking cost center data,
recording and maintaining pension information, and absence and sick leave record
keeping. While most of this information resides in sophisticated database systems, Leslie
maintains a basic employee worksheet for quick calculations and ad hoc report genera-
tion. Because SecureWorks is a small company, Leslie can take advantage of Excel’s
excellent list management capabilities to satisfy many of her personnel information man-
agement needs.
Leslie has asked you to assist with a number of functions (she has provided you with a
copy of her “trusted” personnel data file, AYK9_Data.xlsx):
1. Copy the worksheet Data to a new worksheet called Sort. Sort the employee list in
ascending order by department, then by last name, then by first name.
2. Copy the worksheet Data to a new worksheet called Autofilter. Using the Autofilter fea-
ture, create a custom filter that will display employees whose birth date is greater than
or equal to 1/1/1965 and less than or equal to 12/31/1975.
3. Copy the worksheet Data to a new worksheet called Subtotal. Using the subtotal feature
create a sum of the salary for each department.
4. Copy the worksheet Data to a new worksheet called Formatting. Using the salary col-
umn, change the font color to red if the cell value is greater than or equal to 55000. You
must use the conditional formatting feature to complete this step.
Data File: AYK9_Data.xlsx
baL76892_AYK_AYK.1-AYK.24.indd 6baL76892_AYK_AYK.1-AYK.24.indd 6 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.7
Project 10 :
Gathering Data
You have just accepted a new job offer from a firm that has offices in San Diego, Los
Angeles, and San Francisco. You need to decide which location to move to. Because you
have not visited any of these three cities and want to get in a lot of golf time, you determine
that the main factor that will affect your decision is weather.
Go to www.weather.com and locate the box in which you can enter the city or zip code
for which you want information. Enter San Diego, CA, and when the data appear, click
the Averages and Records tab. Print this page and repeat this for Los Angeles and San
Francisco. You will want to focus on the Monthly Average and Records section on the top
of the page.
1. Create a spreadsheet to summarize the information you find.
2. Record the temperature and rainfall in columns, and group the cities into four groups of
rows labeled Average High, Average Low, Mean, and Average Precipitation.
3. Fill in the appropriate data for each city and month.
4. Because rain is your greatest concern, use conditional formatting to display the months
with an average precipitation below 2.5 inches in blue and apply boldface.
5. You also want to be in the warmest weather possible while in California. Use conditional
formatting to display the months with average high temperatures above 65 degrees in
green and apply an italic font face.
6. Looking at the average high temperatures above 65 degrees and average precipi-
tation below two inches, to which city do you think you should relocate? Explain
your answer.
Project 11 :
Scanner System
FunTown is a popular amusement park filled with roller coasters, games, and water
features. Boasting 24 roller coasters, 10 of which exceed 200 feet and 70 miles per
hour, and five water parks, the park’s attendance remains steady throughout the sea-
son. Due to the park’s popularity, it is not uncommon for entrance lines to exceed one
hour on busy days. FunTown would like your help to find a solution to decrease park
entrance lines.
FunTown would like to implement a handheld scanner system that can allow employees
to walk around the front gates and accept credit card purchases and print tickets on the
spot. The park anticipates an overall increase in sales of 4 percent per year with online
ticketing, with an expense of 6 percent of total sales for the scanning equipment. FunTown
has created a data file for you to use, AYK11_Data.xlsx, that compares scanning sales
and traditional sales. You will need to create the necessary formulas to calculate all the
assumptions including:
■ Tickets sold at the booth.
■ Tickets sold by the scanner.
■ Revenues generated by booth sales.
■ Revenues generated by scanner sales.
■ Scanner ticket expense.
■ Revenue with and without scanner sales.
■ Three year row totals.
Data File: AYK11_Data.xlsx
baL76892_AYK_AYK.1-AYK.24.indd 7baL76892_AYK_AYK.1-AYK.24.indd 7 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.8 Apply Your Knowledge
Project 12 :
Competitive Pricing
Bill Schultz is thinking of starting a store that specializes in handmade cowboy boots. Bill
is a longtime rancher in the town of Taos, New Mexico. Bill’s reputation for honesty and
integrity is well-known around town, and he is positive that his new store will be highly
successful.
Before opening his store, Bill is curious about how his profit, revenue, and variable
costs will change depending on the amount he charges for his boots. Bill would like you
to perform the work required for this analysis and has given you the data file AYK12_Data.
xlsx. Here are a few things to consider while you perform your analysis:
■ Current competitive prices for custom cowboy boots are between $225 and $275
a pair.
■ Variable costs will be either $100 or $150 a pair depending on the types of material Bill
chooses to use.
■ Fixed costs are $10,000 a month.
Data File: AYK12_Data.xlsx
Project 13 :
Adequate Acquisitions
XMark.com is a major Internet company specializing in organic food. XMark.com is thinking
of purchasing GoodGrow, another organic food Internet company. GoodGrow has current
revenues of $100 million, with expenses of $150 million. Current projections indicate that
GoodGrow’s revenues are increasing at 35 percent per year and its expenses are increas-
ing by 10 percent per year. XMark.com understands that projections can be erroneous,
however; the company must determine the number of years before GoodGrow will return
a profit.
You need to help XMark.com determine the number of years required to break even,
using annual growth rates in revenue between 20 percent and 60 percent and annual
expense growth rates between 10 percent and 30 percent. You have been provided with a
template, AYK13_Data.xlsx, to assist with your analysis.
Data File: AYK13_Data.xlsx
Project 14 :
Customer Relations
Schweizer Distribution specializes in distributing fresh produce to local restaurants in the
Chicago area. The company currently sells 12 different products through the efforts of
three sales representatives to 10 restaurants. The company, like all small businesses, is
always interested in finding ways to increase revenues and decrease expenses.
The company’s founder, Bob Schweizer, has recently hired you as a new business ana-
lyst. You have just graduated from college with a degree in marketing and a specialization
in customer relationship management. Bob is eager to hear your thoughts and ideas on
how to improve the business and help the company build strong lasting relationships with
its customers.
Bob has provided you with last year’s sales information in the data file AYK14_Data.
xlsx. Help Bob analyze his distribution company by using a PivotTable to determine the
following:
1. Who is Bob’s best customer by total sales?
2. Who is Bob’s worst customer by total sales?
3. Who is Bob’s best customer by total profit?
4. Who is Bob’s worst customer by total profit?
baL76892_AYK_AYK.1-AYK.24.indd 8baL76892_AYK_AYK.1-AYK.24.indd 8 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.9
5. What is Bob’s best-selling product by total sales?
6. What is Bob’s worst-selling product by total sales?
7. What is Bob’s best-selling product by total profit?
8. What is Bob’s worst-selling product by total profit?
9. Who is Bob’s best sales representative by total profit?
10. Who is Bob’s worst sales representative by total profit?
11. What is the best sales representative’s best-selling product (by total profit)?
12. Who is the best sales representative’s best customer (by total profit)?
13. What is the best sales representative’s worst-selling product (by total profit)?
14. Who is the best sales representative’s worst customer (by total profit)?
Data File: AYK14_Data.xlsx
Project 15 :
Assessing the Value of Information
Recently Santa Fe, New Mexico, was named one of the safest places to live in the United
States. Since then housing development projects have been springing up all around Santa
Fe. Six housing development projects are currently dominating the local market—Pinon
Pine, Rancho Hondo, Creek Side, Vista Del Monte, Forest View, and Santa Fe South.
These six projects each started with 100 homes, have sold all of them, and are currently
developing phase two.
As one of the three partners and real estate agents of Affordable Homes Real Estate, it
is your responsibility to analyze the information concerning the past 600 home sales and
choose which development project to focus on for selling homes in phase two. Because
your real estate firm is so small, you and your partners have decided that the firm should
focus on selling homes in only one of the development projects.
From the New Mexico Real Estate Association you have obtained a spreadsheet file that
contains information concerning each of the sales for the first 600 homes. It contains the
following fields:
Column Name Description
A LOT # The number assigned to a specific home within each
project.
B PROJECT # A unique number assigned to each of the six housing
development projects (see table on the next page).
C ASK PRICE The initial posted asking price for the home.
D SELL PRICE The actual price for which the home was sold.
E LIST DATE The date the home was listed for sale.
F SALE DATE The date on which the final contract closed and the
home was sold.
G SQ. FT. The total square footage for the home.
H # BATH. The number of bathrooms in the home.
I # BDRMS The numb er of bedrooms in the home.
baL76892_AYK_AYK.1-AYK.24.indd 9baL76892_AYK_AYK.1-AYK.24.indd 9 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.10 Apply Your Knowledge
The following numbers have been assigned to each of the housing development
projects:
It is your responsibility to analyze the sales list and prepare a report that details which
housing development project your real estate firm should focus on. Your analysis should be
from as many angles as possible.
1. You do not know how many other real estate firms will also be competing for sales in
each of the housing development projects.
2. Phase two for each housing development project will develop homes similar in style,
price, and square footage to their respective first phases.
3. As you consider the information provided to you, think in terms of what information is
important and what information is not important. Be prepared to justify how you went
about your analysis.
4. Upon completing your analysis, please provide concise, yet detailed and thorough,
documentation (in narrative, numeric, and graphic forms) that justifies your decision.
Data fi le: AYK15_Data.xlsx
Project 16 :
Growth, Trends, and Forecasts
Founded in 2002, Analytics Software provides innovative search software, website acces-
sibility testing software, and usability testing software. All serve as part of its desktop
and enterprise content management solutions for government, corporate, educational,
and consumer markets. The company’s solutions are used by website publishers, digital
media publishers, content managers, document managers, business users, consumers,
software companies, and consulting services companies. Analytics Software solutions
help organizations develop long-term strategies to achieve web content accessibil-
ity, enhance usability, and comply with U.S. and international accessibility and search
standards.
You manage the customer service group for the company and have just received an
email from CIO Sue Downs that the number of phone calls from customers having problems
with one of your newer applications is on the increase. This company has a 10-year history
of approximately 1 percent in turnover a year, and its focus had always been on customer
service. With the informal motto of ”Grow big, but stay small,” it takes pride in 100 percent
callbacks in customer care, knowing that its personal service was one thing that made it
outstanding.
The rapid growth to six times its original customer-base size has forced the company
to deal with difficult questions for the first time, such as, ”How do we serve this many
customers?”
Project Number Project Name
23 Pinon Pine
47 Rancho Hondo
61 Creek Side
78 Vista Del Monte
92 Forest View
97 Santa Fe South
baL76892_AYK_AYK.1-AYK.24.indd 10baL76892_AYK_AYK.1-AYK.24.indd 10 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.11
One option might be for the company to outsource its customer service department.
Before deciding to do that, Analytics Software needs to create a growth, trend, forecast
analysis for future predictions.
1. Create a weekly analysis from the data provided in AYK16_Data.xlsx.
2. The price of the products, the actual product type, and any warrantee information is
irrelevant.
3. Develop a growth, trend, and forecast analysis. You should use a three-day moving
average; a shorter moving average might not display the trend well, and a much longer
moving average would shorten the trend too much.
4. Upon completing your analysis, please provide concise yet detailed and thorough docu-
mentation (in narrative, numeric, and graphic forms) that justifies your recommendations.
Data File: AYK16_Data.xlsx
Project 17 :
Shipping Costs
One of the main products of the Fairway Woods Company is custom-made golf clubs. The
clubs are manufactured at three plants (Denver, Colorado; Phoenix, Arizona; and Dallas,
Texas) and are then shipped by truck to five distribution warehouses in Sacramento,
California; Salt Lake City, Utah; Chicago, Illinois; Albuquerque, New Mexico; and New York
City, New York. Since shipping costs are a major expense, management has begun an anal-
ysis to determine ways to reduce them. For the upcoming golf season, the output from each
manufacturing plant and how much each warehouse will require to satisfy its customers
have been estimated.
The CIO from Fairway Woods Company has created a data file for you, AYK17_Data.
xlsx, of the shipping costs from each manufacturing plant to each warehouse as a baseline
analysis. Some business rules and requirements you should be aware of include:
■ The problem presented involves the shipment of goods from three plants to five regional
warehouses.
■ Goods can be shipped from any plant to any warehouse, but it costs more to ship goods
over long distances than over short distances.
1. Your goal is to minimize the costs of shipping goods from production plants to ware-
houses, thereby meeting the demand from each metropolitan area while not exceeding
the supply available from each plant. To complete this project it is recommended that
you use the Solver function in Excel to assist with the analysis.
2. Specifically you want to focus on:
■ Minimizing the total shipping costs.
■ Total shipped must be less than or equal to supply at a plant.
■ Total shipped to warehouses must be greater than or equal to the warehouse
demand.
■ Number to ship must be greater than or equal to 0.
Data File: AYK17_Data.xlsx
Project 18 :
Formatting Grades
Professor Streterstein is a bit absentminded. His instructor’s grade book is a mess, and he
would like your help cleaning it up and making it easier to use. In Professor Streterstein’s
baL76892_AYK_AYK.1-AYK.24.indd 11baL76892_AYK_AYK.1-AYK.24.indd 11 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.12 Apply Your Knowledge
course, the maximum possible points a student can earn is 750. The following table dis-
plays the grade equivalent to total points for the course.
Total Points Calculated Grade
675 A
635 A–
600 B
560 B–
535 C
490 C–
450 D
0 F
Help Professor Streterstein rework his grade book. Open the data file AYK18_Data.xlsx
and perform the following:
1. Reformat the workbook so it is readable, understandable, and consistent. Replace col-
umn labels, format and align the headings, add borders and shading as appropriate.
2. Add a column in the grade book for final grade next to the total points earned column.
3. Use the VLookup Function to automatically assess final grades based on the total points
column.
4. Using the If Function, format the workbook so each student’s grade shows a pass or
fail—P for pass, F for fail—based on the total points.
Data File: AYK18_Data.xlsx
Project 19 :
Moving Dilemma
Pony Espresso is a small business that sells specialty coffee drinks at office buildings. Each
morning and afternoon, trucks arrive at offices’ front entrances, and the office employees
purchase various beverages such as Java du Jour and Café de Colombia. The business is
profitable. Pony Espresso offices, however, are located north of town, where lease rates
are less expensive, and the principal sales area is south of town. This means the trucks
must drive across town four times each day.
The cost of transportation to and from the sales area plus the power demands of the
trucks’ coffee brewing equipment are a significant portion of variable costs. Pony Espresso
could reduce the amount of driving and, therefore, the variable costs, if it moved the offices
closer to the sales area.
Pony Espresso presently has fixed costs of $10,000 per month. The lease of a new office,
closer to the sales area, would cost an additional $2,200 per month. This would increase
the fixed costs to $12,200 per month.
Although the lease of new offices would increase the fixed costs, a careful estimate of
the potential savings in gasoline and vehicle maintenance indicates that Pony Espresso
could reduce the variable costs from $0.60 per unit to $0.35 per unit. Total sales are unlikely
to increase as a result of the move, but the savings in variable costs should increase the
annual profit.
Consider the information provided to you from the owner in the data file AYK19_Data.
xlsx. Especially look at the change in the variability of the profit from month to month. From
baL76892_AYK_AYK.1-AYK.24.indd 12baL76892_AYK_AYK.1-AYK.24.indd 12 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.13
November through January, when it is much more difficult to lure office workers out into
the cold to purchase coffee, Pony Espresso barely breaks even. In fact, in December, the
business lost money.
1. Develop the cost analysis on the existing lease information using the monthly sales
figures provided to you in the data file.
2. Develop the cost analysis from the new lease information provided above.
3. Calculate the variability that is reflected in the month-to-month standard deviation of
earnings for the current cost structure and the projected cost structure.
4. Do not consider any association with downsizing such as overhead—simply focus on
the information provided to you.
5. You will need to calculate the EBIT (earnings before interest and taxes).
Data File: AYK19_Data.xlsx
Project 20 :
Operational Effi ciencies
Hoover Transportation, Inc., is a large distribution company located in Denver, Colorado.
The company is currently seeking to gain operational efficiencies in its supply chain by
reducing the number of transportation carriers that it is using to outsource. Operational
efficiencies for Hoover Transportation, Inc., suggest that reducing the number of carri-
ers from the Denver distribution center to warehouses in the selected states will lead to
reduced costs. Brian Hoover, the CEO of Hoover Transportation, requests that the num-
ber of carriers transporting products from its Denver distribution center to wholesalers
in Arizona, Arkansas, Iowa, Missouri, Montana, Oklahoma, Oregon, and Washington be
reduced from the current five carriers to two carriers.
Carrier selection should be based on the assumptions that all environmental factors
are equal and historical cost trends will continue. Review the historical data from the past
several years to determine your recommendation for the top two carriers that Hoover
Transportation should continue to use.
1. Analyze the last 24 months of Hoover’s Transportation carrier transactions found in the
data file AYK20_Data.xlsx.
2. Create a report detailing your recommendation for the top two carriers with which
Hoover Transportation should continue to do business. Be sure to use PivotTables and
PivotCharts in your report. A few questions to get you started include:
■ Calculate the average cost per carrier.
■ Calculate the total shipping costs per state.
■ Calculate the total shipping weights per state.
■ Calculate the average shipping costs per pound.
■ Calculate the average cost per carrier.
Data File: AYK20_Data.xlsx
Project 21 :
Too Much Information
You have just landed the job of vice president of operations for The Pitt Stop Restaurants, a
national chain of full-service, casual-themed restaurants. During your first week on the job,
Suzanne Graham, your boss and CEO of the company, has asked you to provide an analysis
of how well the company’s restaurants are performing. Specifically, she would like to know
which units and regions are performing extremely well, which are performing moderately
baL76892_AYK_AYK.1-AYK.24.indd 13baL76892_AYK_AYK.1-AYK.24.indd 13 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.14 Apply Your Knowledge
well, and which are underperforming. Her goal is to identify where to spend time and focus
efforts to improve the overall health of the company.
Review the data file AYK21_Data.xlsx and determine how best to analyze and inter-
pret the data. Create a formal presentation of your findings. A few things to consider
include:
■ Should underperforming restaurants be closed or sold?
■ Should high-performing restaurants be expanded to accommodate more seats?
■ Should the company spend more or less on advertising?
■ In which markets should the advertising budget be adjusted?
■ How are The Pitt Stop Restaurants performing compared to the competition?
■ How are units of like size performing relative to each other?
Data File: AYK21_Data.xlsx
Project 22 :
Turnover Rates
Employee turnover rates are at an all-time high at Gizmo’s Manufacturing plants. The com-
pany is experiencing severe worker retention issues, which are leading to productivity and
quality control problems. The majority of the company’s workers perform a variety of tasks
and are paid by the hour. The company currently tests potential applicants to ensure they
have the skills necessary for the intense mental concentration and dexterity required to
fill the positions. Since significant costs are associated with employee turnover, Gizmo
Manufacturing wants to find a way to predict which applicants have the characteristics of
being a short-term versus a long-term employee.
1. Review the information that Gizmo Manufacturing has collected from two of its differ-
ent data sources. The first data file, AYK22_Data_A.xlsx, contains information regard-
ing employee wages. The second data file, AYK22_Data_B.xlsx, contains information
regarding employee retention.
2. Using Excel analysis functions, determine the employee characteristics that you would
recommend Gizmo Manufacturing look for when hiring new personnel. It is highly rec-
ommended that you use PivotTables as part of your analysis.
3. Prepare a report based on your findings (which should include several forms of graphi-
cal representation) for your recommendations.
Data Files: AYK22_Data_A.xlsx and AYK22_Data_B.xlsx
Project 23 :
Vital Information
Martin Resorts, Inc., owns and operates four Spa and Golf resorts in Colorado. The com-
pany has five traditional lines of business: (1) golf sales; (2) golf lessons; (3) restaurants; (4)
retail and rentals; and (5) hotels. David Logan, director of marketing technology at Martin
Resorts, Inc., and Donald Mayer, the lead strategic analyst for Martin Resorts, are soliciting
your input for their CRM strategic initiative.
Martin Resorts’ IT infrastructure is pieced together with various systems and applica-
tions. Currently, the company has a difficult time with CRM because its systems are not
integrated. The company cannot determine vital information such as which customers are
golfing and staying at the hotel or which customers are staying at the hotel and not golfing.
For example, the three details that the customer Diego Titus (1) stayed four nights at a
Martin Resorts’ managed hotel, (2) golfed three days, and (3) took an all-day spa treatment
baL76892_AYK_AYK.1-AYK.24.indd 14baL76892_AYK_AYK.1-AYK.24.indd 14 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.15
the first day are discrete facts housed in separate systems. Martin Resorts hopes that by
using data warehousing technology to integrate its data, the next time Diego reserves lodg-
ing for another trip, sales associates may ask him if he would like to book a spa treatment
as well, and even if he would like the same masseuse that he had on his prior trip.
Martin Resorts is excited about the possibility of taking advantage of customer segmen-
tation and CRM strategies to help increase its business.
The company wants to use CRM and data warehouse technologies to improve service
and personalization at each customer touch point. Using a data warehousing tool, impor-
tant customer information can be accessed from all of its systems either daily, weekly,
monthly, or once or twice per year. Analyze the sample data in AYK23_Data.xlsx for the
following:
1. Currently, the quality of the data within the above disparate systems is low. Develop a
report for David and Donald discussing the importance of high-quality information and
how low-quality information can affect Martin Resorts’ business.
2. Review the data that David and Donald are working with from the data warehouse in the
data file AYK23_Data.xlsx.
a. Give examples from the data showing the kind of information Martin Resorts might
be able to use to gain a better understanding of its customers. Include the types of
data quality issues the company can anticipate and the strategies it can use to help
avoid such issues.
b. Determine who are Martin Resorts’ best customers, and provide examples of
the types of marketing campaigns the company should offer these valuable
customers.
c. Prepare a report that summarizes the benefits Martin Resorts can receive from using
business intelligence to mine the data warehouse. Include a financial analysis of the
costs and benefits.
Data File: AYK23_Data.xlsx
Project 24 :
Breaking Even
Mountain Cycle specializes in making custom mountain bikes. The company founder,
PJ Steffan, is having a hard time making the business profitable. Knowing that you have
great business knowledge and solid financial sense, PJ has come to you for advice.
PJ would like you to determine how many bikes Mountain Cycle needs to sell per year to
break even. Using Goal Seek in Excel solve using the following:
■ Fixed cost equals $65,000
■ Variable cost equals $1,575
■ Bike price equals $2,500
Project 25 :
Profi t Scenario
Murry Lutz owns a small shop, Lutz Motors, that sells and services vintage motorcycles.
Murry is curious how his profit will be affected by his sales over the next year.
Murry would like your help creating best, worst, and most-likely scenarios for his motor-
cycle sales over the next year. Using Scenario Manager, help Murry analyze the informa-
tion in the data file AYK25_Data.xlsx.
Data File: AYK25_Data.xlsx
baL76892_AYK_AYK.1-AYK.24.indd 15baL76892_AYK_AYK.1-AYK.24.indd 15 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.16 Apply Your Knowledge
Project 26 :
Electronic Résumés
Résumés are the currency of the recruitment industry. They are the cornerstone of com-
munication between candidates, recruiters, and employers. Technology is automating ele-
ments of the recruitment process, but a complete solution requires proper handling of the
actual development of all the pieces and parts that comprise not just a résumé, but also an
erésumé. Electronic résumés, or erésumés, have moved into the mainstream of today’s job
market at lightning speed. Erésumés have stepped up the efficiency of job placement to such
a point that you could get a call from a recruiter just hours after submitting your erésumé.
With this kind of opportunity, you cannot afford to be left in the dark ages of using only a
paper résumé.
In the text or HTML editor of your choice, write your erésumé as though you were really
putting it online and inviting prospective employers to see it. We recommend typing in
all the text and then later adding the HTML tags (rather than trying to type in the tags as
you go).
Use the following checklist to make sure you’re covering the basics. You do not need to
match it exactly; it just shows what can be done.
■ Add structural tags.
■ Add paragraphs and headings.
■ Find an opportunity to include a list.
■ Add inline styles.
■ Play with the alignment of elements.
■ Add appropriate font selection, font size, and color.
Project 27 :
Gathering Feedback
Gathering feedback from website’s visitors can be a valuable way of assessing a site’s
success, and it can help build a customer or subscriber database. For example, a business
could collect the addresses of people who are interested in receiving product samples,
email newsletters, or notifications of special offers.
Adding form elements to a web page is simple: They are created using a set of HTML
form tags that define menus, text fields, buttons, and so on. Form elements are generally
used to collect information from a web page.
In the text or HTML editor of your choice, create a web page form that would collect
information for a customer ordering a customized bicycle. Use proper web page design
and HTML tools to understand the process and function of form elements. Be sure to pay
attention to:
■ Form layout and design.
■ Visual elements, including labels, alignment, font selection, font size, color.
■ Required versus nonrequired fields.
■ Drop-down boxes, text fields, and radio buttons.
Project 28 :
Daily Invoice
Foothills Animal Hospital is a full-service small animal veterinary hospital located in
Morrison, Colorado, specializing in routine medical care, vaccinations, laboratory testing,
and surgery. The hospital has experienced tremendous growth over the past six months
due to customer referrals. While Foothills Animal Hospital has typically kept its daily
service records in a workbook format, it feels the need to expand its reporting capabilities
to develop a relational database as a more functional structure.
baL76892_AYK_AYK.1-AYK.24.indd 16baL76892_AYK_AYK.1-AYK.24.indd 16 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.17
Foothills Animal Hospital needs help developing a database, specifically:
■ Create a customer table—name, address, phone, and date of entrance.
■ Create a pet table—pet name, type of animal, breed, gender, color, neutered/spayed,
weight, and comments.
■ Create a medications table—medication code, name of medication, and cost of medication.
■ Create a visit table—details of treatments performed, medications dispensed, and date
of the visit.
■ Produce a daily invoice report.
Figure AYK.2 displays a sample daily invoice report that the Foothills Animal Hospital
accountants have requested. Foothills Animal Hospital organizes its treatments using the
codes displayed in Figure AYK.3 . The entities and primary keys for the database have been
identified in Figure AYK.4 .
The following business rules have been identified:
1. A customer can have many pets but must have at least one.
2. A pet must be assigned to one and only one customer.
3. A pet can have one or more treatments per visit but must have at least one.
4. A pet can have one or more medications but need not have any.
Your job is to complete the following tasks:
1. Develop and describe the entity-relationship diagram.
2. Use normalization to assure the correctness of the tables (relations).
FIGURE AYK.2
Foothills Animal Hospital
Daily Invoice Report
baL76892_AYK_AYK.1-AYK.24.indd 17baL76892_AYK_AYK.1-AYK.24.indd 17 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.18 Apply Your Knowledge
3. Create the database using a personal DBMS package (preferably Microsoft Access).
4. Use the data in Figure AYK.3 to populate your tables. Feel free to enter your own per-
sonal information.
5. Use the DBMS package to create the basic report in Figure AYK.2 .
Project 29 :
Billing Data
On-The-Level Construction Company is a Denver-based construction company that spe-
cializes in subcontracting the development of single-family homes. In business since 1998,
On-The-Level Construction has maintained a talented pool of certified staff and indepen-
dent consultants providing the flexibility and combined experience required to meet the
needs of its nearly 300 completed projects in the Denver metropolitan area. The field of
operation methods that On-The-Level Construction is responsible for includes structural
development, heating and cooling, plumbing, and electricity.
The company charges its clients by billing the hours spent on each contract. The hourly
billing rate is dependent on the employee’s position according to the field of operations (as
noted above). Figure AYK.5 shows a basic report that On-The-Level Construction foremen
would like to see every week concerning what projects are being assigned, the overall
assignment hours, and the charges for the assignment. On-The-Level Construction orga-
nizes its internal structure in four different operations—Structure (500), Plumbing (501),
Electrical (502), and Heating and Ventilation (503). Each of these operational departments
can and should have many subcontractors who specialize in that area. On-The-Level
Construction has decided to implement a relational database model to track project details
according to project name, hours assigned, and charges per hour for each job descrip-
tion. Originally, On-The-Level Construction decided to let one of its employees handle the
construction of the database. However, that employee has not had the time to completely
implement the project. On-The-Level Construction has asked you to take over and com-
plete the development of the database.
The entities and primary keys for the database have been identified in Figure AYK.6 .
The following business rules have been identified:
1. A job can have many employees assigned but must have at least one.
2. An employee must be assigned to one and only one job number.
FIGURE AYK.3
Treatment Codes, Treatments,
and Price Descriptions
Treatment Code Treatment Price
0100 Tetrinious Shot $10.00
0201 Rabonius Shot $20.00
0300 General Exam $50.00
0303 Eye/Ear Examination $20.00
0400 Spay/Neuter $225.00
0405 Reset Dislocation $165.00
0406 Amputation of Limb $450.00
0407 Wrap Affected Area $15.00
0408 Cast Affected Area $120.00
1000 Lab Work—Blood $50.00
1003 Lab Work—Misc $35.00
2003 Flea Spray $25.00
9999 Other Not Listed $10.00
FIGURE AYK.4
Entity Names and Primary
Keys Foothills Animal Hospital
Entity Primary Key
CUSTOMER Customer Number
PET Pet Number
VISIT Visit Number
VISIT DETAIL Visit Number and Line
Number (a composite key)
TREATMENT Treatment Code
MEDICATION Medication Code
baL76892_AYK_AYK.1-AYK.24.indd 18baL76892_AYK_AYK.1-AYK.24.indd 18 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.19
3. An employee can be assigned to work on one or more projects.
4. A project can be assigned to only one employee but need not be assigned to
any employee.
Your job is to complete the following tasks:
1. Develop and describe the entity relationship diagram.
2. Use normalization to assure the correctness of the tables (relations).
3. Create the database using a personal DBMS package (preferably Microsoft Access).
4. Use the DBMS package to create the basic report in Figure AYK.5 .
5. You may not be able to develop a report that looks exactly like the one in Figure AYK.5 .
However, your report should include the same information.
6. Complete personnel information is tracked by another database. For this application,
include only the minimum: employee number, last name, and first name.
7. Information concerning all projects, employees, and jobs is not readily available. You
should create information for several fictitious projects, employees, and jobs to include
in your database.
Project 30 :
Inventory Data
An independent retailer of mobile entertainment and wireless phones, iToys.com has built
its business on offering the widest selection, expert advice, and outstanding customer
service. However, iToys.com does not use a formal, consistent inventory tracking sys-
tem. Periodically, an iToys.com employee visually checks to see what items are in stock.
Although iToys.com does try to keep a certain level of each “top seller” in stock, the lack
of a formal inventory tracking system has led to the overstocking of some items and under-
stocking of other items. On occasion, a customer will request a hot item, and it is only then
that iToys.com realizes that the item is out of stock. If an item is not available, iToys.com
risks losing a customer to a competitor.
Lately, iToys.com has become concerned with its inventory management methods.
The owner of iToys.com , Dan Connolly, wants to better manage his inventory. The com-
pany receives orders by mail, by telephone, or through its website. Regardless of how
FIGURE AYK.6
Entity Classes and Primary
Keys for On-The-Level
Construction
Entity Primary Key
PROJECT Project Number
EMPLOYEE Employee Number
JOB Job Number
ASSIGNMENT Assignment Number
FIGURE AYK.5
On-The-Level-Construction
Detail Report
baL76892_AYK_AYK.1-AYK.24.indd 19baL76892_AYK_AYK.1-AYK.24.indd 19 27/11/12 1:30 PM27/11/12 1:30 PM

Rev. Confirming Pages
AYK.20 Apply Your Knowledge
the orders are received, Dan needs a database to automate the inventory checking and
ordering process.
Dan has provided you with a simplified version of the company’s current system (an Excel
workbook) for recording inventory and orders in an Excel spreadsheet data file AYK30_
Data.xlsx.
1. Develop an ERD diagram before you begin to create the database. You will need to use
the information provided here as well as the data given in the Excel workbook.
2. Create the database using a personal DBMS package (preferably Microsoft Access)
that will track items (i.e., products), orders, order details, categories, suppliers, and
shipping methods.
3. In addition to what is mentioned above, the database needs to track the inventory levels
for each product, according to a reorder level and lead time.
4. At this time, Dan does not need information stored about the customer; he simply needs
you to focus on the inventory structure.
5. Develop a query that will display the products that need to be ordered from their supplier. To
complete this, you will want to compare a reorder level with how many units are in stock.
6. Develop several reports that display:
a. Each product ordered by its supplier. The report should include the product name,
quantity on hand, and reorder level.
b. Each supplier ordered by shipping method.
c. Each product that requires more than five days lead time. (Hint: You will want to cre-
ate a query for this first).
d. Each product ordered by category.
7. Here are some additional business rules to assist you in completing this task:
a. An order must have at least one product, but can contain more than one product.
b. A product can have one or more orders, but need not have any orders.
c. A product must belong to one and only one category, but a category may contain
many different products.
d. A product can only be stocked by one supplier, but a supplier can provide more than
one product.
e. A supplier will use one type of shipping method, but shipping methods can be used
by more than one supplier.
Data File: AYK30_Data.xlsx
Project 31 :
Call Center
A manufacturing company, Teleworks, has been a market leader in the wireless telephone
business for the past 10 years. Other firms have imitated its product with some degree of
success, but Teleworks occupies a dominant position in the marketplace because it has a
first-mover advantage with a quality product.
Recently Teleworks began selling a new, enhanced wireless phone. This new phone
does not replace its current product, but offers additional features, greater durability, and
better performance for a somewhat higher price. Offering this enhanced phone has estab-
lished a new revenue stream for the company.
Many sales executives at Teleworks seem to subscribe to the-more-you-have, the-
more-you-want theory of managing customer data. That is, they believe they can never
accumulate too much information about their customers, and that they can do their jobs
more effectively by collecting infinite amounts of customer details. Having a firm grasp on
a wide range of customer-focused details—specifically reports summarizing call center
baL76892_AYK_AYK.1-AYK.24.indd 20baL76892_AYK_AYK.1-AYK.24.indd 20 27/11/12 1:31 PM27/11/12 1:31 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.21
information—can be critical in enabling your company to successfully manage a customer
relationship management (CRM) solution that creates a positive impact.
To continue to provide excellent customer support, and in anticipation of increased calls
due to the release of its new product, Teleworks needs a database that it can use to record,
track, and query call center information. Teleworks CIO KED Davisson has hired you to
develop this database.
1. Teleworks has provided you with a data file AYK31_Data.xlsx; its current approach for
recording cell center information is a spreadsheet file.
2. Develop an ERD diagram before you begin to create the database.
3. Create the database using a personal DBMS package (preferably Microsoft Access)
that will allow data analysts to enter call center data according to the type of issue and
the customer, assign each call to a consultant, and prioritize the call.
4. Develop a query that will display all issues that are “open.”
5. Develop a screen form to browse all issues.
6. Develop several reports that display:
a. All closed issues.
b. Each issue in detail ordered by issue ID.
c. Each issue in detail ordered by consultant.
d. Each issue in detail ordered by category.
e. Each issue in detail ordered by status.
7. Here are some additional business rules to assist you in completing this task:
a. An issue must have at least one customer.
b. A customer can have more than one issue.
c. Each issue must be assigned to one consultant.
d. Each consultant can be assigned to more than one issue.
e. An issue can only belong to one category.
f. An issue must be assigned only one status code.
g. An issue must be assigned a priority code.
8. Priorities are assigned accordingly:
Priority Level
Critical
High
Moderate
Standard
Low
9. Status is recorded as either open or closed.
10. The categories of each issue need to be recorded as:
Category
Hardware/Phone
Software/Voice mail
Internet/Web
Data File: AYK31_Data.xlsx
baL76892_AYK_AYK.1-AYK.24.indd 21baL76892_AYK_AYK.1-AYK.24.indd 21 27/11/12 1:31 PM27/11/12 1:31 PM

Rev. Confirming Pages
AYK.22 Apply Your Knowledge
Project 32 :
Sales Pipeline
Sales drive any organization. This is true for every for-profit business irrespective of size
or industry type. If customers are not buying your goods or services, you run the risk of not
having a business. This is when tough decisions have to be made like whether to slash
budgets, lay off staff, or seek additional financing.
Unfortunately, you do not wield ultimate power over your customers’ buying habits.
While you can attempt to influence buying behavior through strategic marketing, smart
businesses remain one step ahead by collecting and analyzing historical and current cus-
tomer information from a range of internal and external sources to forecast future sales. In
other words, managing the sales pipeline is an essential ingredient to business success.
You have recently been hired by RealTime Solutions, a new company that collects infor-
mation to understand, manage, and predict specific sales cycle (including the supply chain
and lead times) in the automobile business. Having an accurate forecast of future sales will
allow the company to increase or decrease the production cycle as required and manage
personnel levels, inventory, and cash flow.
Using a personal DBMS package (preferably Microsoft Access) create a sales pipeline
database that will:
1. Track opportunities from employees to customers.
■ Opportunities should have a ranking, category, source of opportunity, open date,
closed date, description.
2. Create a form for inputting customer, employee, and opportunity data.
3. Create a few reports that display:
■ All open opportunities, including relevant customer and employee information.
■ Closed opportunities, including relevant customer and employee information.
■ All customers.
4. Create your own data to test the integrity of the relationships. Use approximately 10
records per table.
Project 33 :
Online Classifi ed Ads
With the emergence of the Internet as a worldwide standard for communicating informa-
tion, The Morrison Post, a medium-size community newspaper in central Colorado, is cre-
ating an electronic version of its paper-based classified ads.
Advertisers can place a small ad that lists items that they wish to sell and provide a
means (e.g., telephone number and email) by which prospective buyers can contact them.
The nature of a sale via the newspaper’s classified system goes as follows:
■ During the course of the sale, the information flows in different directions at different
stages.
■ First, there is a downstream flow of information (from seller to buyer): the listing in print
in the newspaper. (Thus, the classified ad listing is just a way of bringing a buyer and
seller together.)
■ When a potential purchaser’s interest has been raised, then that interest must be
relayed upstream, usually by telephone or by email.
■ Finally, a meeting should result that uses face-to-face negotiation to finalize the sale, if
the sale can be agreed.
By placing the entire system on the Internet, the upstream and downstream commu-
nications are accomplished using a web browser. The sale becomes more of an auction,
baL76892_AYK_AYK.1-AYK.24.indd 22baL76892_AYK_AYK.1-AYK.24.indd 22 27/11/12 1:31 PM27/11/12 1:31 PM

Rev. Confirming Pages
Apply Your Knowledge AYK.23
because many potential buyers, all with equal status, can bid for the same item. So it is
fairer for all purchasers and gets a better deal for the seller.
Any user who is trying to buy an item can:
■ View items for sale.
■ Bid on an item they wish to purchase.
Any user who is trying to sell an item can:
■ Place a new item for sale.
■ Browse a list of the items that he or she is trying to sell, and examine the bids that have
been made on each of those items.
■ Accept a bid on an item that he or she is selling.
Your job is to complete the following:
1. Develop and describe the entity-relationship diagram for the database that will support
the listed activities.
2. Use normalization to ensure the correctness of the tables.
3. Create the database using a personal DBMS package.
4. Use Figure AYK.7 as a baseline for your database design.
Data File: AYK33_Data.xlsx
FIGURE AYK.7
baL76892_AYK_AYK.1-AYK.24.indd 23baL76892_AYK_AYK.1-AYK.24.indd 23 27/11/12 1:31 PM27/11/12 1:31 PM

Rev. Confirming Pages
baL76892_AYK_AYK.1-AYK.24.indd 24baL76892_AYK_AYK.1-AYK.24.indd 24 27/11/12 1:31 PM27/11/12 1:31 PM

Rev. Confirming Pages
G.1Glossary
3G A service that brings wireless broadband to mobile phones.
A
acceptable use policy (AUP) A policy that a user must agree to follow to
be provided access to corporate email, information systems, and the Internet.
access point (AP) The computer or network device that serves as an
interface between devices and the network.
accessibility Refers to the varying levels that define what a user can
access, view, or perform when operating a system.
accounting and finance ERP component Manages accounting data
and financial processes within the enterprise with functions such as
general ledger, accounts payable, accounts receivable, budgeting,
and asset management.
active RFID tags Have their own transmitter and a power source
(typically a battery).
adaptive computer devices Input devices designed for special
applications for use by people with different types of special needs.
administrator access Unrestricted access to the entire system.
advanced encryption standard (AES) Introduced by the National
Institute of Standards and Technology (NIST), AES is an encryption
standard designed to keep government information secure.
adware Software, while purporting to serve some useful function and
often fulfilling that function, also allows Internet advertisers to display
advertisements without the consent of the computer user.
agile methodology Aims for customer satisfaction through early and
continuous delivery of useful software components developed by an
iterative process using the bare minimum requirements.
agile MIS infrastructure Includes the hardware, software, and
telecommunications equipment that, when combined, provides the
underlying foundation to support the organization’s goals.
alpha testing Assess if the entire system meets the design requirements
of the users.
analysis phase The firm analyzes its end-user business requirements
and refines project goals into defined functions and operations of the
intended system.
analytical CRM Supports back-office operations and strategic analysis
and includes all systems that do not deal directly with the customers.
analytical information Encompasses all organizational information,
and its primary purpose is to support the performing of managerial
analysis or semistructured decisions.
analytics The science of fact-based decision making.
anti-spam policy Simply states that email users will not send
unsolicited emails (or spam).
antivirus software Scans and searches hard drives to prevent, detect,
and remove known viruses, adware, and spyware.
applet A program that runs within another application such as a website.
appliance A computer dedicated to a single function, such as a
calculator or computer game.
application integration The integration of a company’s existing
management information systems to each other.
application programming interface (API) A set of routines, protocols,
and tools for building software applications.
application service provider license Specialty software paid for on a
license basis or per-use basis or usage-based licensing.
application software Used for specific information processing
needs, including payroll, customer relationship management, project
management, training, and many others.
arithmetic-logic unit (ALU) Performs all arithmetic operations (for
example, addition and subtraction) and all logic operations (such as
sorting and comparing numbers).
artificial intelligence (AI) Simulates human thinking and behavior
such as the ability to reason and learn.
As-Is process model Represents the current state of the operation
that has been mapped, without any specific improvements or changes to
existing processes.
asset tracking Occurs when a company places active or semi-passive
RFID tags on expensive products or assets to gather data on the items’
location with little or no manual intervention.
association detection Reveals the relationship between variables
along with the nature and frequency of the relationships.
asynchronous communication Communication such as email in
which the message and the response do not occur at the same time.
attenuation Represents the loss of a network signal strength measured
in decibels (dB) and occurs because the transmissions gradually dissipate
in strength over longer distances or because of radio interference or
physical obstructions such as walls.
attribute The data elements associated with an entity.
augmented reality The viewing of the physical world with computer-
generated layers of information added to it.
authentication A method for confirming users’ identities.
authorization The process of providing a user with permission
including access levels and abilities such as file access, hours of access,
and amount of allocated storage space.
automatic vehicle location (AVL) Uses GPS tracking to track vehicles.
automation Involves computerizing manual tasks making them more
efficient and effective and dramatically lowering operational costs.
availability Refers to the time frames when the system is operational.
B
backup An exact copy of a system’s information.
backward integration Takes information entered into a given system
and sends it automatically to all upstream systems and processes.
balanced scorecard A management system, as well as a
measurement system, that a firm uses to translate business strategies
into executable tasks.
bandwidth The maximum amount of data that can pass from one point
to another in a unit of time.
benchmark Baseline values the system seeks to attain.
benchmarking A process of continuously measuring system results,
comparing those results to optimal system performance (benchmark
values), and identifying steps and procedures to improve system
performance.
best practice The most successful solutions or problem-solving
methods that have been developed by a specific organization or industry.
G L O S S A RY
baL76892_glo_G1-G14.indd 1baL76892_glo_G1-G14.indd 1 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
GlossaryG.2
business requirement The specific business requests the system
must meet to be successful.
business rule Defines how a company performs a certain aspect of its
business and typically results in either a yes/no or true/false answer.
business strategy A leadership plan that achieves a specific set of
goals or objectives.
business-critical integrity constraint Enforces business rules vital to
an organization’s success and often requires more insight and knowledge
than relational integrity constraints.
business-to-business (B2B) Applies to businesses buying from and
selling to each other over the Internet.
business-to-consumer (B2C) Applies to any business that sells its
products or services directly to consumers online.
buyer power One of Porter’s five forces; measures the ability of buyers
to directly affect the price they are willing to pay for an item.
C
cable modem (or broadband modem) A type of digital modem used
with high-speed cable Internet service.
cache memory A small unit of ultra-fast memory that is used to store
recently accessed or frequently accessed data so that the CPU does not
have to retrieve this data from slower memory circuits such as RAM.
call scripting system Gathers product details and issue resolution
information that can be automatically generated into a script for the
representative to read to the customer.
campaign management system Guides users through marketing
campaigns by performing such tasks as campaign definition, planning,
scheduling, segmentation, and success analysis
capacity Represents the maximum throughput a system can deliver;
for example, the capacity of a hard drive represents the size or volume.
capacity planning Determines future environmental infrastructure
requirements to ensure high-quality system performance.
carbon emissions Includes the carbon dioxide and carbon monoxide in
the atmosphere, produced by business processes and systems.
cardinality Expresses the specific number of instances in an entity.
cartography The science and art of making an illustrated map or chart.
central processing unit (CPU ) (or microprocessor) The actual
hardware that interprets and executes the program (software) instructions
and coordinates how all the other hardware devices work together.
certificate authority A trusted third party, such as VeriSign, that
validates user identities by means of digital certificates.
change agent A person or event that is the catalyst for implementing
major changes for a system to meet business changes.
chief information officer (CIO) Responsible for (1) overseeing all uses
of MIS and (2) ensuring that MIS strategically aligns with business goals
and objectives.
chief knowledge officer (CKO) Responsible for collecting, maintaining,
and distributing company knowledge.
chief privacy officer (CPO) Responsible for ensuring the ethical and
legal use of information within a company.
chief security officer (CSO) Responsible for ensuring the security
of business systems and developing strategies and safeguards against
attacks from hackers and viruses.
chief technology officer (CTO) Responsible for ensuring the speed,
accuracy, availability, and reliability for MIS.
Child Online Protection Act (COPA) A law that protects minors from
accessing inappropriate material on the Internet.
biometrics The identification of a user based on a physical
characteristic, such as a fingerprint, iris, face, voice, or handwriting.
bit The smallest element of data and has a value of either 0 or 1.
bit rate The number of bits transferred or received per unit of time.
black-hat hacker Breaks into other people’s computer systems and
may just look around or may steal and destroy information.
blog, or web log An online journal that allows users to post their own
comments, graphics, and video.
bluetooth Wireless PAN technology that transmits signals over short
distances between cell phones, computers, and other devices.
bottleneck Occurs when resources reach full capacity and cannot handle
any additional demands; they limit throughput and impede operations.
brainstorming A technique for generating ideas by encouraging
participants to offer as many ideas as possible in a short period of time
without any analysis until all the ideas have been exhausted
broadband A high-speed Internet connection that is always connected.
broadband over power line (BPL) Technology makes possible high-
speed Internet access over ordinary residential electrical lines and offers
an alternative to DSL or high-speed cable modems.
bugs Defects in the code of an information system.
bullwhip effect Occurs when distorted product-demand information
ripples from one partner to the next throughout the supply chain.
business continuity planning (BCP) Details how a company recovers
and restores critical business operations and systems after a disaster or
extended disruption.
business facing process Invisible to the external customer but
essential to the effective management of the business; they include goal
setting, day-to-day planning, giving performance feedback and rewards,
and allocating resources.
business impact analysis A process that identifies all critical business
functions and the effect that a specific disaster may have upon them.
business intelligence (BI) Information collected from multiple sources
such as suppliers, customers, competitors, partners, and industries that
analyze patterns, trends, and relationships for strategic decision making.
business intelligence dashboards Track corporate metrics such
as critical success factors and key performance indicators and include
advanced capabilities such as interactive controls, allowing users to
manipulate data for analysis.
business model A plan that details how a company creates, delivers,
and generates revenues.
business process Standardized set of activities that accomplish a
specific task.
business process improvement Attempts to understand and measure
the current process and make performance improvements accordingly.
business process management (BPM) system Focus on evaluating
and improving processes that include both person-to-person workflow
and system-to-system communications.
business process model A graphic description of a process, showing
the sequence of process tasks, which is developed for a specific purpose
and from a selected viewpoint.
business process modeling (or mapping) The activity of creating
a detailed flowchart or process map of a work process that shows its
inputs, tasks, and activities in a structured sequence.
business process patent A patent that protects a specific set of
procedures for conducting a particular business activity.
business process reengineering (BPR) The analysis and redesign of
workflow within and between enterprises.
baL76892_glo_G1-G14.indd 2baL76892_glo_G1-G14.indd 2 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
G.3Glossary
computer An electronic device operating under the control of instructions
stored in its own memory that can accept, manipulate, and store data.
computer-aided software engineering (CASE) Software tools provide
automated support for the development of the system.
confidentiality The assurance that messages and information remain
available only to those authorized to view them.
consolidation The aggregation of data from simple roll-ups to complex
groupings of interrelated information.
consumer-to-business (C2B) Applies to any consumer who sells a
product or service to a business on the Internet.
consumer-to-consumer (C2C) Applies to customers offering goods
and services to each other on the Internet.
contact center or call center Where customer service representatives
answer customer inquiries and solve problems, usually by email, chat, or phone.
contact management CRM system Maintains customer contact
information and identifies prospective customers for future sales,
using tools such as organizational charts, detailed customer notes, and
supplemental sales information.
content creator The person responsible for creating the original
website content.
content editor The person responsible for updating and maintaining
website content.
content filtering Occurs when organizations use software that
filters content, such as emails, to prevent the accidental or malicious
transmission of unauthorized information.
content management system (CMS) Helps companies manage the
creation, storage, editing, and publication of their website content.
control objectives for information and related technologies (COBIT)
A set of best practices that helps an organization to maximize the benefits
of an information system, while at the same time establishing appropriate
controls to ensure minimum errors.
control panel A Windows feature that provides a group of options that
sets default values for the Windows operating system.
control unit Interprets software instructions and literally tells the other
hardware devices what to do, based on the software instructions.
conversion The process of transferring information from a legacy
system to a new system.
copyright The legal protection afforded an expression of an idea, such
as a song, book, or video game.
core ERP component The traditional components included in most ERP
systems and primarily focus on internal operations.
core process Business processes, such as manufacturing goods,
selling products, and providing service that make up the primary activities
in a value chain.
corporate social responsibility Companies’ acknowledged
responsibility to society.
corrective maintenance Makes system changes to repair design
flaws, coding errors, or implementation issues.
counterfeit software Software that is manufactured to look like the
real thing and sold as such.
course management software Contains course information such
as a syllabus and assignments and offers drop boxes for quizzes and
homework along with a grade book.
cracker A hacker with criminal intent.
critical path Estimates the shortest path through the project ensuring
all critical tasks are completed from start to finish.
critical success factors (CSFs) Crucial steps companies perform to
achieve their goals and objectives and implement their strategies.
chipless RFID tags Use plastic or conductive polymers instead of
silicon-based microchips, allowing them to be washed or exposed to
water without damaging the chip.
clickstream data Exact pattern of a consumer’s navigation through a site.
click-fraud The abuse of pay-per-click, pay-per-call, and pay-per-
conversion revenue models by repeatedly clicking on a link to increase
charges or costs for the advertiser.
click-to-talk Allows customers to click on a button and talk with a
representative via the Internet.
client A computer designed to request information from a server.
client/server network A model for applications in which the bulk
of the back-end processing, such as performing a physical search of a
database, takes place on a server, while the front-end processing, which
involves communicating with the users, is handled by the clients.
cloud bursting When a company uses its own computing infrastructure
for normal usage and accesses the cloud when it needs to scale for high/
peak load requirements, ensuring a sudden spike in usage does not result
in poor performance or system crashes.
cloud computing A model for enabling ubiquitous, convenient,
on-demand network access to a shared pool of configurable computing
resources (e.g., networks, servers, storage, applications, and services)
that can be rapidly provisioned and released with minimal management
effort or service provider interaction .
cloud fabric The software that makes the benefits of cloud computing
possible, such as multi-tenancy.
cloud fabric controller An individual who monitors and provisions cloud
resources similar to a server administrator at an individual company.
cluster analysis A technique used to divide information sets into mutually
exclusive groups such that the members of each group are as close together
as possible to one another and the different groups are as far apart as possible.
coaxial cable Cable that can carry a wide range of frequencies with
low signal loss.
cold site A separate facility that does not have any computer
equipment but is a place where employees can move after a disaster.
collaboration system A set of tools that supports the work of teams or
groups by facilitating the sharing and flow of information.
collective intelligence Collaborating and tapping into the core
knowledge of all employees, partners, and customers.
communication device Equipment used to send information and
receive it from one location to another.
communication plan Defines the how, what, when, and who regarding
the flow of project information to stakeholders and is key for managing
expectations.
community cloud Serves a specific community with common business
models, security requirements, and compliance considerations .
competitive advantage A feature of a product or service on which
customers place a greater value than on similar offerings from competitors.
competitive click-fraud A computer crime where a competitor or
disgruntled employee increases a company’s search advertising costs by
repeatedly clicking on the advertiser’s link.
competitive intelligence The process of gathering information about
the competitive environment, including competitors’ plans, activities, and
products, to improve a company’s ability to succeed.
complex instruction set computer (CISC) chips Type of CPU that can
recognize as many as 100 or more instructions, enough to carry out most
computations directly.
composite entities Entities that exist to represent the relationship
between two other entities.
baL76892_glo_G1-G14.indd 3baL76892_glo_G1-G14.indd 3 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
GlossaryG.4
data warehouse A logical collection of information, gathered from
many different operational databases, that supports business analysis
activities and decision-making tasks.
database Maintains information about various types of objects (inventory),
events (transactions), people (employees), and places (warehouses).
database management system (DBMS) Creates, reads, updates, and
deletes data in a database while controlling access and security.
data-driven website An interactive website kept constantly updated
and relevant to the needs of its customers using a database.
decision support system (DSS) Model information using OLAP, which
provides assistance in evaluating and choosing among different courses
of action.
decrypt Decodes information and is the opposite of encrypted.
demand planning system Generates demand forecasts using statistical
tools and forecasting techniques, so companies can respond faster and
more effectively to consumer demands through supply chain enhancements.
dependency A logical relationship that exists between the project
tasks, or between a project task and a milestone.
design phase Establishes descriptions of the desired features and
operations of the system including screen layouts, business rules, process
diagrams, pseudo code, and other documentation.
destructive agents Malicious agents designed by spammers and
other Internet attackers to farm email addresses off websites or deposit
spyware on machines.
development phase Takes all the detailed design documents from the
design phase and transforms them into the actual system.
development testing Programmers test the system to ensure it is bug-free.
digital certificate A data file that identifies individuals or organizations
online and is comparable to a digital signature.
digital Darwinism Implies that organizations that cannot adapt to the
new demands placed on them for surviving in the information age are
doomed to extinction.
digital dashboard Tracks KPIs and CSFs by compiling information from
multiple sources and tailoring it to meet user needs.
digital divide A worldwide gap giving advantage to those with access
to technology.
digital rights management A technological solution that allows
publishers to control their digital media to discourage, limit, or prevent
illegal copying and distribution.
digital subscriber line (DSL) Provides high-speed digital data
transmission over standard telephone lines using broadband modem
technology allowing both Internet and telephone services to work over the
same phone lines.
disaster recovery cost curve Charts (1) the cost to the company of
the unavailability of information and technology and (2) the cost to the
company of recovering from a disaster over time.
disaster recovery plan A detailed process for recovering information
or a system in the event of a catastrophic disaster.
discovery prototyping Builds a small-scale representation or working
model of the system to ensure it meets the user and business requirements.
disintermediation Occurs when a business sells direct to the customer
online and cuts out the intermediary.
disruptive technology A new way of doing things that initially does not
meet the needs of existing customers.
domain name hosting (web hosting) A service that allows the
owner of a domain name to maintain a simple website and provide
email capacity.
CRM analysis technologies Help organizations segment their
customers into categories such as best and worst customers.
CRM predicting technologies Help organizations predict customer
behavior, such as which customers are at risk of leaving.
CRM reporting technologies Help organizations identify their
customers across other applications.
cross-selling Selling additional products or services to an existing customer.
crowdsourcing Refers to the wisdom of the crowd.
cryptography The science that studies encryption, which is the hiding
of messages so that only the sender and receiver can read them.
customer-facing process Results in a product or service that is
received by an organization’s external customer.
customer relationship management (CRM) A means of managing
all aspects of a customer’s relationship with an organization to increase
customer loyalty and retention and an organization’s profitability.
customer service and support (CSS) A part of operational CRM that
automates service requests, complaints, product returns, and information
requests.
cyberbulling Threats, negative remarks, or defamatory comments
transmitted via the Internet or posted on a website.
cybermediation Refers to the creation of new kinds of intermediaries
that simply could not have existed before the advent of ebusiness.
cyberterrorism The use of computer and networking technologies
against persons or property to intimidate or coerce governments, individuals,
or any segment of society to attain political, religious, or ideological goals.
cyberterrorists Seek to cause harm to people or to destroy critical systems
or information and use the Internet as a weapon of mass destruction.
cybervandalism The electronic defacing of an existing website.
cyberwar An organized attempt by a country’s military to disrupt or
destroy information and communication systems for another country.
cycle time The time required to process an order.
D
data Raw facts that describe the characteristics of an event or object.
data center A facility used to house management information systems
and associated components, such as telecommunications and storage
systems.
data dictionary Compiles all of the metadata about the data elements
in the data model.
data element (or data field) The smallest or basic unit of information.
data integration The integration of data from multiple sources, which
provides a unified view of all data.
data mart Contains a subset of data warehouse information.
data mining The process of analyzing data to extract information not
offered by the raw data alone.
data-mining tool Uses a variety of techniques to find patterns and
relationships in large volumes of information that predict future behavior
and guide decision making.
data model Logical data structures that detail the relationships among
data elements using graphics or pictures.
data quality audit Determines the accuracy and completeness of its data.
data visualization Describes technologies that allow users to “see” or
visualize data to transform information into a business perspective.
data visualization tools Moves beyond Excel graphs and charts
into sophisticated analysis techniques such as pie charts, controls,
instruments, maps, time-series graphs, etc.
baL76892_glo_G1-G14.indd 4baL76892_glo_G1-G14.indd 4 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
G.5Glossary
embedded operating system Used for a single purpose in computer
appliances and special-purpose applications, such as an automobile,
ATM, or media player.
emergency A sudden, unexpected event requiring immediate action
due to potential threat to health and safety, the environment, or property.
emergency notification service An infrastructure built for notifying
people in the event of an emergency.
emergency preparedness Ensures a company is ready to respond to
an emergency in an organized, timely, and effective manner.
employee monitoring policy States explicitly how, when, and where
the company monitors its employees.
employee relationship management (ERM) Provides web-based self-
service tools that streamline and automate the human resource department.
encryption Scrambles information into an alternative form that requires
a key or password to decrypt.
energy consumption The amount of energy consumed by business
processes and systems.
enterprise application integration (EAI) Connects the plans, methods,
and tools aimed at integrating separate enterprise systems.
enterprise application integration (EAI) middleware Takes a new
approach to middleware by packaging commonly used applications
together, reducing the time needed to integrate applications from
multiple vendors.
enterprise architect A person grounded in technology, fluent in business,
and able to provide the important bridge between MIS and the business.
enterprise resource planning (ERP) Integrates all departments and
functions throughout an organization into a single IT system (or integrated
set of IT systems) so employees can make decisions by viewing
enterprisewide information about all business operations.
enterprise system Provides enterprisewide support and data access
for a firm’s operations and business processes.
entity Stores information about a person, place, thing, transaction, or event.
entity-relationship diagram (ERD) A technique for documenting the
entities and relationships in a database environment.
entry barrier A feature of a product or service that customers have
come to expect and entering competitors must offer the same for survival.
epolicies Policies and procedures that address information
management along with the ethical use of computers and the Internet in
the business environment.
eprocurement The business-to-business (B2B) online purchase and
sale of supplies and services.
eshop (estore or etailer) An online version of a retail store where
customers can shop at any hour.
estimated-time-enroute (ETE) The time remaining before reaching
a destination using the present speed; typically used for navigation
applications.
estimated-time-of-arrival (ETA) The time of day of an expected arrival
at a certain destination; typically used for navigation applications.
ethernet A physical and data layer technology for LAN networking.
ethical computer use policy Contains general principles to guide
computer user behavior.
ethics The principles and standards that guide our behavior toward
other people.
ewaste Refers to discarded, obsolete, or broken electronic devices.
executive information system (EIS) A specialized DSS that supports
senior-level executives and unstructured, long-term, nonroutine decisions
requiring judgment, evaluation, and insight.
domain name system (DNS) Converts IP address into domains, or
identifying labels that use a variety of recognizable naming conventions.
dot-com The original term for a company operating on the Internet.
downtime Refers to a period of time when a system is unavailable.
drill-down Enables users to view details, and details of details, of
information.
drive-by hacking A computer attack where an attacker accesses a
wireless computer network, intercepts data, uses network services, and/
or sends attack instructions without entering the office or organization
that owns the network.
dual boot Provides the user with the option of choosing the operating
system when the computer is turned on.
dumpster diving Looking through people’s trash, another way hackers
obtain information.
dynamic catalog An area of a website that stores information about
products in a database.
dynamic host configuration protocol (DHCP) Allows dynamic IP
address allocation so users do not have to have a preconfigured IP
address to use the network.
dynamic information Includes data that change based on user actions.
For example, static websites supply only information that will not change
until the content editor changes the information.
dynamic scaling Means that the MIS infrastructure can be
automatically scaled up or down based on needed requirements.
E
ebook An electronic book that can be read on a computer or special
reading device.
ebusiness Includes ecommerce along with all activities related to internal
and external business operations such as servicing customer accounts,
collaborating with partners, and exchanging real-time information.
ebusiness model A plan that details how a company creates, delivers,
and generates revenues on the Internet.
ecommerce The buying and selling of goods and services over the Internet.
edge matching (warping, rubber sheeting) Occurs when paper maps
are laid edge to edge, and items that run across maps but do not match
are reconfigured to match.
ediscovery (or electronic discovery) Refers to the ability of a
company to identify, search, gather, seize, or export digital information in
responding to a litigation, audit, investigation, or information inquiry.
effectiveness MIS metrics Measure the impact MIS has on business
processes and activities including customer satisfaction and customer
conversion rates.
efficiency MIS metrics Measure the performance of MIS itself such as
throughput, transaction speed, and system availability.
egovernment Involves the use of strategies and technologies to
transform government(s) by improving the delivery of services and
enhancing the quality of interaction between the citizen-consumer within
all branches of government.
eintegration The use of the Internet to provide customers with the
ability to gain personalized information by querying corporate databases
and their information sources.
electronic data interchange (EDI) A standard format for the electronic
exchange of information between supply chain participants.
elogistics Manages the transportation and storage of goods.
email privacy policy Details the extent to which email messages may
be read by others.
baL76892_glo_G1-G14.indd 5baL76892_glo_G1-G14.indd 5 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
GlossaryG.6
G
Gantt chart A simple bar chart that lists project tasks vertically against
the project’s time frame, listed horizontally.
genetic algorithm An artificial intelligence system that mimics the
evolutionary, survival-of-the-fittest process to generate increasingly
better solutions to a problem.
geocache A GPS technology adventure game that posts on the Internet
the longitude and latitude location of an item for users to find.
geocoding Spatial databases is a coding process that takes a
digital map feature and assigns it an attribute that serves as a unique
ID (tract number, node number) or classification (soil type, zoning
category).
geocoin A round coin-sized object that is uniquely numbered and
hidden in geocache.
geographic information system (GIS) Stores, views, and analyzes
geographic data, creating multidimensional charts or maps.
gigabyte (GB) Roughly 1 billion bytes.
gigahertz (GHz) The number of billions of CPU cycles per second.
GIS map automation Links business assets to a centralized system
where they can be tracked and monitored over time.
global positioning system (GPS) A satellite-based navigation system
providing extremely accurate position, time, and speed information.
goal-seeking analysis Finds the inputs necessary to achieve a goal
such as a desired level of output.
goods Material items or products that customers will buy to satisfy a
want or need. Clothing, groceries, cell phones, and cars are all examples
of goods that people buy to fulfill their needs.
granularity Refers to the level of detail in the model or the decision-
making process.
grid computing A collection of computers, often geographically
dispersed, that are coordinated to solve a common problem.
H
hackers Experts in technology who use their knowledge to break
into computers and computer networks, either for profit or motivated by
the challenge.
hactivists Have philosophical and political reasons for breaking into
systems and will often deface the website as a protest.
hard drive A secondary storage medium that uses several rigid disks
coated with a magnetically sensitive material and housed together with
the recording heads in a hermetically sealed mechanism.
hardware Consists of the physical devices associated with a
computer system
help desk A group of people who respond to users’ questions.
high availability Occurs when a system is continuously operational at
all times.
high-speed Internet cable connection Provides Internet access using
a cable television company’s infrastructure and a special cable modem.
hot site A separate and fully equipped facility where the company can
move immediately after a disaster and resume business.
human resources ERP component Tracks employee information
including payroll, benefits, compensation, and performance assessment
and ensures compliance with all laws.
hybrid cloud Includes two or more private, public, or community
clouds, but each cloud remains separate and is only linked by technology
that enables data and application portability.
executive sponsor The person or group who provides the financial
resources for the project.
expert system Computerized advisory programs that imitate the
reasoning processes of experts in solving difficult problems.
explicit knowledge Consists of anything that can be documented,
archived, and codified, often with the help of IT.
extended ERP component The extra components that meet
organizational needs not covered by the core components and primarily
focus on external operations.
extraction, transformation, and loading (ETL) A process that extracts
information from internal and external databases, transforms it using a
common set of enterprise definitions, and loads it into a data warehouse.
extranet An extension of an intranet that is only available to authorized
outsiders, such as customers, partners, and suppliers.
extreme programming (XP) methodology Breaks a project into
four phases, and developers cannot continue to the next phase until the
previous phase is complete.
F
fact The confirmation or validation of an event or object.
failback Occurs when the primary machine recovers and resumes
operations, taking over from the secondary server.
failover A specific type of fault tolerance, occurs when a redundant
storage server offers an exact replica of the real-time data, and if the
primary server crashes the users are automatically directed to the
secondary server or backup server.
fault tolerance A general concept that a system has the ability to
respond to unexpected failures or system crashes as the backup system
immediately and automatically takes over with no loss of service.
feasibility The measure of the tangible and intangible benefits of an
information system.
feedback Information that returns to its original transmitter (input,
transform, or output) and modifies the transmitter’s actions.
fiber optic (or optical fiber) Refers to the technology associated with
the transmission of information as light impulses along a glass wire or fiber.
field A characteristic of a table.
file transfer protocol (FTP) A simple network protocol that allows the
transfer of files between two computers on the Internet.
firewall Hardware and/or software that guard a private network by
analyzing incoming and outgoing information for the correct markings.
first-mover advantage An advantage that occurs when a company
can significantly increase its market share by being first to market with a
competitive advantage.
flash memory A special type of rewritable read-only memory (ROM)
that is compact and portable.
folksonomy Similar to taxonomy except that crowdsourcing
determines the tags or keyword-based classification system.
forecasts Predictions based on time-series information.
foreign key A primary key of one table that appears as an attribute in
another table and acts to provide a logical relationship between the two tables.
forward integration Takes information entered into a given system and
sends it automatically to all downstream systems and processes.
fourth-generation languages (4GL) Programming languages that look
similar to human languages.
fuzzy logic A mathematical method of handling imprecise or subjective
information.
baL76892_glo_G1-G14.indd 6baL76892_glo_G1-G14.indd 6 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
G.7Glossary
information redundancy The duplication of data, or the storage of the
same data in multiple places.
information richness Refers to the depth and breadth of details
contained in a piece of textual, graphic, audio, or video information.
information secrecy The category of computer security that addresses
the protection of data from unauthorized disclosure and confirmation of
data source authenticity.
information security plan Details how an organization will implement
the information security policies.
information security policies Identify the rules required to maintain
information security, such as requiring users to log off before leaving for
lunch or meetings, never sharing passwords with anyone, and changing
passwords every 30 days.
informing Accessing large amounts of data from different management
information systems.
Infrastructure as a Service (IaaS) The delivery of computer hardware
capability, including the use of servers, networking, and storage, as a service.
input device Equipment used to capture information and commands.
insiders Legitimate users who purposely or accidentally misuse their
access to the environment and cause some kind of business-affecting
incident.
in-sourcing (in-house development) Uses the professional expertise
within an organization to develop and maintain its information
technology systems.
instant messaging (sometimes called IM or IMing) A service that
enables “instant” or real-time communication between people.
Institute of Electrical and Electronics Engineers (IEEE) An
organization that researches and institutes electrical standards for
communication and other technologies.
intangible benefits Difficult to quantify or measure.
integration Allows separate systems to communicate directly with
each other, eliminating the need for manual entry into multiple systems.
integration testing Verifies that separate systems can work together
passing data back and forth correctly.
integrity constraint Rules that help ensure the quality of information.
intellectual property Intangible creative work that is embodied in
physical form and includes copyrights, trademarks, and patents.
intelligent agent A special-purpose knowledge-based information
system that accomplishes specific tasks on behalf of its users.
intelligent system Various commercial applications of artificial intelligence.
interactivity Measures advertising effectiveness by counting visitor
interactions with the target ad, including time spent viewing the ad,
number of pages viewed, and number of repeat visits to the advertisement.
intermediaries Agents, software, or businesses that provide a trading
infrastructure to bring buyers and sellers together.
Internet A massive network that connects computers all over the world
and allows them to communicate with one another.
Internet censorship Government attempts to control Internet traffic,
thus preventing some material from being viewed by a country’s citizens.
Internet protocol TV (IPTV) Distributes digital video content using IP
across the Internet and private IP networks.
Internet protocol version 6 (IPv6) The “next generation” protocol
designed to replace the current version Internet protocol, IP version 4 (IPv4)
Internet service provider (ISP) A company that provides access to the
Internet for a monthly fee.
Internet use policy Contains general principles to guide the proper use
of the Internet.
hypertext markup language (HTML) Links documents allowing users
to move from one to another simply by clicking on a hot spot or link.
hypertext transport protocol (HTTP) The Internet protocol web
browsers use to request and display web pages using universal
resource locators.
I
identity theft The forging of someone’s identity for the purpose of
fraud.
IEEE 802.11n (or Wireless-N) The newest standard for wireless
networking.
implementation phase The organization places the system into
production so users can begin to perform actual business operations
with it.
incident Unplanned interruption of a service.
incident management The process responsible for managing how
incidents are identified and corrected.
incident record Contains all of the details of an incident.
infographics (information graphics) Displays information graphically
so it can be easily understood.
information Data converted into a meaningful and useful context.
information age The present time, during which infinite quantities of
facts are widely available to anyone who can use a computer.
information architecture The set of ideas about how all information in
a given context should be organized.
information cleansing or scrubbing A process that weeds out and
fixes or discards inconsistent, incorrect, or incomplete information.
information compliance The act of conforming, acquiescing, or
yielding information.
information cube The common term for the representation of
multidimensional information.
information ethics Govern the ethical and moral issues arising
from the development and use of information technologies, as well
as the creation, collection, duplication, distribution, and processing of
information itself (with or without the aid of computer technologies).
information governance Refers to the overall management of the
availability, usability, integrity, and security of company data.
information granularity The extent of detail within the information
(fine and detailed or coarse and abstract).
information inconsistency Occurs when the same data element has
different values.
information integrity A measure of the quality of information.
information integrity issue Occurs when a system produces incorrect,
inconsistent, or duplicate data.
information management Examines the organizational resource of
information and regulates its definitions, uses, value, and distribution
ensuring it has the types of data/information required to function and
grow effectively.
information MIS infrastructure Identifies where and how important
information, such as customer records, is maintained and secured.
information privacy policy Contains general principles regarding
information privacy.
information property An ethical issue that focuses on who owns
information about individuals and how information can be sold and exchanged.
information reach Measures the number of people a firm can
communicate with all over the world.
baL76892_glo_G1-G14.indd 7baL76892_glo_G1-G14.indd 7 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
GlossaryG.8
maintenance phase The organization performs changes, corrections,
additions, and upgrades to ensure the system continues to meet its
business goals.
management information systems A business function, like
accounting and human resources, which moves information about people,
products, and processes across the company to facilitate decision making
and problem solving.
managerial level Employees are continuously evaluating company
operations to hone the firm’s abilities to identify, adapt to, and
leverage change.
many-to-many relationship (M:N) Between two entities in which an
instance of one entity is related to many instances of another and one
instance of the other can be related to many instances of the first entity.
market basket analysis Analyzes such items as websites and
checkout scanner information to detect customers’ buying behavior and
predict future behavior by identifying affinities among customers’ choices
of products and services.
market share The proportion of the market that a firm captures.
mashup A website or web application that uses content from more
than one source to create a completely new product or service.
mashup editor WYSIWYGs or What You See Is What You Get tools.
mass customization The ability of an organization to tailor its products
or services to the customers’ specifications.
megabyte (MB or M or Meg) Roughly 1 million bytes.
megahertz (MHz) The number of millions of CPU cycles per second.
memory cards Contain high-capacity storage that holds data such as
captured images, music, or text files.
memory sticks Provide nonvolatile memory for a range of portable
devices including computers, digital cameras, MP3 players, and PDAs.
metadata Details about data.
Metcalfe’s Law The value of a network increases as its number of
users grows.
methodology A set of policies, procedures, standards, processes,
practices, tools, techniques, and tasks that people apply to technical and
management challenges.
metrics Measurements that evaluate results to determine whether a
project is meeting its goals.
metropolitan area network (MAN) A large computer network usually
spanning a city.
microblogging The practice of sending brief posts (140 to 200
characters) to a personal blog, either publicly or to a private group of
subscribers who can read the posts as IMs or as text messages.
middleware Several different types of software that sit between and
provide connectivity for two or more software applications.
MIS infrastructure Includes the plans for how a firm will build, deploy,
use, and share its data, processes, and MIS assets.
mobile business (or mbusiness, mcommerce) The ability to
purchase goods and services through a wireless Internet-enabled device.
model A simplified representation or abstraction of reality.
modem A device that enables a computer to transmit and receive data.
Moore’s Law Refers to the computer chip performance per dollar
doubling every 18 months.
multiple-in/multiple-out (MIMO) technology Multiple transmitters
and receivers allow sending and receiving greater amounts of data than
traditional networking devices.
multitasking Allows more than one piece of software to be used
at a time.
interoperability The capability of two or more computer systems
to share data and resources, even though they are made by different
manufacturers.
intranet A restricted network that relies on Internet technologies to
provide an Internet-like environment within the company for information
sharing, communications, collaboration, web publishing, and the support
of business process.
intrusion detection software (IDS) Features full-time monitoring tools
that search for patterns in network traffic to identify intruders.
IP address A unique number that identifies where computers are
located on the network.
iterative development Consists of a series of tiny projects.
K
key performance indicators (KPIs) Quantifiable metrics a company
uses to evaluate progress towards critical success factors.
kill switch A trigger that enables a project manager to close the project
before completion.
knowledge Skills, experience, and expertise coupled with information
and intelligence that creates a person’s intellectual resources.
knowledge management (KM) Involves capturing, classifying,
evaluating, retrieving, and sharing information assets in a way that
provides context for effective decisions and actions.
knowledge management system (KMS) Supports the capturing,
organization, and dissemination of knowledge (i.e., know-how)
throughout an organization.
knowledge worker Individuals valued for their ability to interpret and
analyze information.
L
latitude Represents a north/south measurement of position.
legacy system An old system that is fast approaching or beyond the
end of its useful life within an organization.
list generator Compiles customer information from a variety of sources
and segments it for different marketing campaigns.
local area network (LAN) Connects a group of computers in proximity,
such as in an office building, school, or home.
location-based services (LBS) Applications that use location
information to provide a service.
logical view of information Shows how individual users logically
access information to meet their own particular business needs.
longitude Represents an east/west measurement of position.
long tail Referring to the tail of a typical sales curve.
loyalty program A program to reward customers based on spending.
M
magnetic medium A secondary storage medium that uses magnetic
techniques to store and retrieve data on disks or tapes coated with
magnetically sensitive materials.
magnetic tape An older secondary storage medium that uses a
strip of thin plastic coated with a magnetically sensitive recording
medium.
mail bomb Sends a massive amount of email to a specific person or
system that can cause that user’s server to stop functioning.
maintainability (or flexibility) Refers to how quickly a system can
transform to support environmental changes.
baL76892_glo_G1-G14.indd 8baL76892_glo_G1-G14.indd 8 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
G.9Glossary
online transaction processing (OLTP) The capturing of transaction
and event information using technology to (1) process the information
according to defined business rules, (2) store the information, and
(3) update existing information to reflect the new information.
onshore outsourcing Engaging another company within the same
country for services.
open source Refers to any software whose source code is made
available free for any third party to review and modify.
open system Consists of non-proprietary hardware and software based
on publicly known standards that allows third parties to create add-on
products to plug into or interoperate with the system.
operating system software Controls the application software and
manages how the hardware devices work together.
operational CRM Supports traditional transactional processing for day-to-
day front-office operations or systems that deal directly with the customers.
operational level Employees develop, control, and maintain core
business activities required to run the day-to-day operations.
opportunity management CRM system Targets sales opportunities by
finding new customers or companies for future sales.
optimization analysis An extension of goal-seeking analysis, finds
the optimum value for a target variable by repeatedly changing other
variables, subject to specified constraints.
opt out Customer specifically chooses to deny permission of
receiving emails.
output device Equipment used to see, hear, or otherwise accept the
results of information processing requests
outsourcing An arrangement by which one organization provides a service
or services for another organization that chooses not to perform them in-house.
P
packet A single unit of binary data routed through a network.
packet footer Represents the end of the packet or transmission end.
packet header Lists the destination (for example, in IP packets the
destination is the IP address) along with the length of the message data.
packet-switching Occurs when the sending computer divides a
message into a number of efficiently sized units of data called packets,
each of which contains the address of the destination computer.
paradigm shift Occurs when a new radical form of business enters the
market that reshapes the way companies and organizations behave.
parallel implementation Uses both the legacy system and new system
until all users verify that the new system functions correctly.
partner relationship management (PRM) Discovers optimal sales
channels by selecting the right partners and identifying mutual customers.
passive RFID tags Do not have a power source.
patent An exclusive right to make, use, and sell an invention granted by
a government to the inventor.
pay-per-call Generates revenue each time users click on a link that
takes them directly to an online agent waiting for a call.
pay-per-click Generates revenue each time a user clicks on a link to a
retailer’s website.
pay-per-conversion Generates revenue each time a website visitor is
converted to a customer.
peer-to-peer (P2P) network A computer network that relies on the
computing power and bandwidth of the participants in the network rather
than a centralized server.
performance Measures how quickly a system performs a process
or transaction.
multi-tenancy A single instance of a system serves multiple customers.
multi-valued attribute Having the potential to contain more than one
value for an attribute.
mutation The process within a genetic algorithm of randomly trying
combinations and evaluating the success (or failure) of the outcome.
N
national service providers (NSPs) Private companies that own and
maintain the worldwide backbone that supports the Internet.
nearshore outsourcing Contracting an outsourcing arrangement with
a company in a nearby country.
network A communications system created by linking two or more
devices and establishing a standard methodology in which they can
communicate.
network access points (NAPs) Traffic exchange points in the routing
hierarchy of the Internet that connects NSPs.
network convergence The efficient coexistence of telephone, video,
and data communication within a single network, offering convenience
and flexibility not possible with separate infrastructures.
network effect Describes how products in a network increase in value
to users as the number of users increases.
network operating system (NOS) Operating system that runs a network,
steering information between computers and managing security and users.
network topology Refers to the geometric arrangement of the actual
physical organization of the computers (and other network devices) in
a network.
network transmission media Refers to the various types of media
used to carry the signal between computers.
network user license Enables anyone on the network to install and
use the software.
neural network A category of AI that attempts to emulate the way the
human brain works.
nonrepudiation A contractual stipulation to ensure that ebusiness
participants do not deny (repudiate) their online actions.
nonvolatile Does not require constant power to function.
null-valued attribute Assigned to an attribute when no other value
applies or when a value is unknown.
O
object-oriented language Languages group data and corresponding
processes into objects.
offshore outsourcing Using organizations from developing countries to
write code and develop systems.
off-the-shelf application software Supports general business
processes and does not require any specific software customization to
meet the organization’s needs.
one-to-many relationship (1:M) A relationship between two entities
in which an instance of one entity can be related to many instances of a
related entity.
one-to-one relationship (1:1) A relationship between two entities in
which an instance of one entity can be related to only one instance of a
related entity.
online analytical processing (OLAP) The manipulation of information
to create business intelligence in support of strategic decision making.
online training Runs over the Internet or on a CD or DVD, and
employees complete the training on their own time at their own pace.
baL76892_glo_G1-G14.indd 9baL76892_glo_G1-G14.indd 9 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
GlossaryG.10
private cloud Serves only one customer or organization and can be
located on the customers’ premises or off the customer’s premises.
product differentiation An advantage that occurs when a company
develops unique differences in its products with the intent to influence
demand.
production The process where a business takes raw materials and
processes them or converts them into a finished product for its goods or
services.
production and materials management ERP component Handles
production planning and execution tasks such as demand forecasting,
production scheduling, job cost accounting, and quality control.
productivity The rate at which goods and services are produced based
upon total output given total inputs.
project Temporary activity a company undertakes to create a unique
product, service, or result.
project assumption Factors considered to be true, real, or certain
without proof or demonstration.
project constraint Specific factors that can limit options including
budget, delivery dates, available skilled resources, and organizational
policies.
project deliverable Any measurable, tangible, verifiable outcome,
result, or item that is produced to complete a project or part of a project.
project management The application of knowledge, skills, tools, and
techniques to project activities to meet project requirements.
project management office (PMO) An internal department that
oversees all organizational projects.
project manager An individual who is an expert in project planning and
management, defines and develops the project plan, and tracks the plan
to ensure the project is completed on time and on budget.
project milestones Represent key dates when a certain group of
activities must be performed.
project objective Quantifiable criteria that must be met for the project
to be considered a success.
project plan A formal, approved document that manages and controls
project execution.
project requirements document Defines the specifications for
product/output of the project and is key for managing expectations,
controlling scope, and completing other planning efforts.
project scope Describes the business needs and the justification,
requirements, and current boundaries for the project.
project scope statement Links the project to the organization’s overall
business goals.
project stakeholder Individuals and organizations actively involved
in the project or whose interests might be affected as a result of project
execution or project completion.
protocol A standard that specifies the format of data as well as the
rules to be followed during transmission.
prototyping A modern design approach where the designers and
system users use an iterative approach to building the system.
proxy Software that prevents direct communication between a sending
and receiving computer and is used to monitor packets for security
reasons.
public cloud Promotes massive, global, industrywide applications
offered to the general public.
public key encryption (PKE) Uses two keys: a public key that
everyone can have and a private key for only the recipient.
personal area networks (PAN) Provide communication over a short
distance that is intended for use with devices that are owned and
operated by a single user.
personal information management (PIM) Software handles contact
information, appointments, task lists, and email.
personalization Occurs when a company knows enough about a
customer’s likes and dislikes that it can fashion offers more likely to
appeal to that person, say by tailoring its website to individuals or groups
based on profile information, demographics, or prior transactions.
PERT (Program Evaluation and Review Technique) chart A graphical
network model that depicts a project’s tasks and the relationships
between them.
pharming Reroutes requests for legitimate websites to false websites.
pharming attack Uses a zombie farm, often by an organized crime
association, to launch a massive phishing attack.
phased implementation Installs the new system in phases (for
example, by department) until it is verified that it works correctly.
phishing A technique to gain personal information for the purpose of
identity theft, usually by means of fraudulent emails that look as though
they came from legitimate sources.
phishing expedition A masquerading attack that combines spam
with spoofing.
physical security Tangible protection such as alarms, guards, fireproof
doors, fences, and vaults.
physical view of information The physical storage of information on a
storage device.
pilot implementation A small group uses the new system until it is
verified that it works correctly, then the remaining users migrate to the
new system.
pirated software The unauthorized use, duplication, distribution, or
sale of copyrighted software.
planning phase Establishes a high-level plan of the intended project
and determines project goals.
Platform as a Service (PaaS) Supports the deployment of entire
systems including hardware, networking, and applications using a
pay-per-use revenue model.
plunge implementation Discards the legacy system and immediately
migrates all users to the new system.
podcasting Converts an audio broadcast to a digital music player.
portability Refers to the ability of an application to operate on
different devices or software platforms, such as different operating
systems.
Porter’s Five Forces Model A model for analyzing the competitive
forces within the environment in which a company operates, to assess
the potential for profitability in an industry.
preventive maintenance Makes system changes to reduce the chance
of future system failure.
primary key A field (or group of fields) that uniquely identifies a given
record in a table.
primary storage Computer’s main memory, which consists of the
random access memory (RAM), cache memory, and read-only memory
(ROM) that is directly accessible to the CPU.
primary value activities Found at the bottom of the value chain, these
include business processes that acquire raw materials and manufacture,
deliver, market, sell, and provide after-sales services.
privacy The right to be left alone when you want to be, to have control over
your personal possessions, and not to be observed without your consent.
baL76892_glo_G1-G14.indd 10baL76892_glo_G1-G14.indd 10 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
G.11Glossary
RFID reader (RFID interrogator) A transmitter/receiver that reads the
contents of RFID tags in the area.
RFID tag An electronic identification device that is made up of a chip
and antenna.
rivalry among existing competitors One of Porter’s five forces; high
when competition is fierce in a market and low when competitors are
more complacent.
router An intelligent connecting device that examines each packet of data
it receives and then decides which way to send it toward its destination.
S
safe mode Occurs if the system is failing and will load only the most
essential parts of the operating system and will not run many of the
background operating utilities.
sales force automation (SFA) Automatically tracks all the steps in the
sales process.
sales management CRM system Automates each phase of the sales
process, helping individual sales representatives coordinate and organize
all their accounts.
satellite A space station that orbits the Earth receiving and transmitting
signals from Earth-based stations over a wide area.
scalability Describes how well a system can scale up or adapt to the
increased demands of growth.
script kiddies or script bunnies Find hacking code on the Internet and
click-and-point their way into systems to cause damage or spread viruses.
scripting language A programming method that provides for
interactive modules to a website.
scrum methodology Uses small teams to produce small pieces of software
using a series of “sprints,” or 30-day intervals, to achieve an appointed goal.
search engine Website software that finds other pages based on
keyword matching.
search engine optimization (SEO) Combines art along with science to
determine how to make URLs more attractive to search engines, resulting
in higher search engine ranking.
search engine ranking Evaluates variables that search engines use to
determine where a URL appears on the list of search results.
secondary storage Consists of equipment designed to store large
volumes of data for long-term storage.
secure hypertext transfer protocol (SHTTP or HTTPS) A combination
of HTTP and SSL to provide encryption and secure identification of an
Internet server.
secure sockets layer (SSL) A standard security technology for
establishing an encrypted link between a web server and a browser,
ensuring that all data passed between them remains private.
semantic web A component of Web 3.0 that describes things in a way
that computers can understand.
semi-passive RFID tags Include a battery to run the microchip’s
circuitry, but communicate by drawing power from the RFID reader.
semistructured decision Occurs in situations in which a few
established processes help to evaluate potential solutions, but not enough
to lead to a definite recommended decision.
sensitivity analysis A special case of what-if analysis, is the study of
the impact on other variables when one variable is changed repeatedly.
server A computer dedicated to providing information in response to requests.
serviceability How quickly a third party or vendor can change a system
to ensure it meets user needs and the terms of any contracts, including
agreed levels of reliability, maintainability or availability.
services Tasks that customers will buy to satisfy a want or need.
Q
query-by-example (QBE) tool Helps users graphically design the
answer to a question against a database.
R
radio-frequency identification (RFID) Uses electronic tags and labels
to identify objects wirelessly over short distances.
random access memory (RAM) The computer’s primary working
memory, in which program instructions and data are stored so that they
can be accessed directly by the CPU via the processor’s high-speed
external data bus.
rapid application development (RAD) methodology (also called rapid
prototyping) Emphasizes extensive user involvement in the rapid and
evolutionary construction of working prototypes of a system, to accelerate
the systems development process.
rational unified process (RUP) methodology Provides a framework
for breaking down the development of software into four “gates.”
read-only memory (ROM) The portion of a computer’s primary storage
that does not lose its contents when one switches off the power.
real simple syndication (RSS) A web format used to publish
frequently updated works, such as blogs, news headlines, audio, and
video in a standardized format.
real-time communication Occurs when a system updates information
at the same rate it receives it.
real-time information Immediate, up-to-date information.
real-time system Provides real-time information in response
to requests.
record A collection of related data elements.
recovery The ability to get a system up and running in the event of a
system crash or failure that includes restoring the information backup.
reduced instruction set computer (RISC) chips Limits the number of
instructions the CPU can execute to increase processing speed.
redundancy Occurs when a task or activity is unnecessarily repeated.
regional service providers (RSPs) Offer Internet service by connecting
to NSPs, but they also can connect directly to each other.
reintermediation Steps are added to the value chain as new players
find ways to add value to the business process.
relational database management system Allows users to create,
read, update, and delete data in a relational database.
relational database model Stores information in the form of logically
related two-dimensional tables.
relational integrity constraint Rules that enforce basic and
fundamental information-based constraints.
reliability (or accuracy) Ensures a system is functioning correctly and
providing accurate information.
reputation system Where buyers post feedback on sellers.
requirements definition document Prioritizes all of the business
requirements by order of importance to the company.
requirements management The process of managing changes to the
business requirements throughout the project.
responsibility matrix Defines all project roles and indicates what
responsibilities are associated with each role.
return on investment (ROI) Indicates the earning power of a project.
RFID accelerometer A device that measures the acceleration (the rate
of change of velocity) of an item and is used to track truck speeds or taxi
cab speeds.
baL76892_glo_G1-G14.indd 11baL76892_glo_G1-G14.indd 11 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
GlossaryG.12
spear phishing A phishing expedition in which the emails are carefully
designed to target a particular person or organization.
spyware A special class of adware that collects data about the user
and transmits it over the Internet without the user’s knowledge or
permission.
SSL Certificate An electronic document that confirms the identity of a
website or server and verifies that a public key belongs to a trustworthy
individual or company.
standard packet format Includes a packet header, packet body
containing the original message, and packet footer.
static information Includes fixed data that are not capable of change
in the event of a user action.
statistical analysis Performs such functions as information
correlations, distributions, calculations, and variance analysis.
status report Periodic reviews of actual performance versus expected
performance.
strategic level Managers develop overall business strategies, goals,
and objectives as part of the company’s strategic plan.
streaming A method of sending audio and video files over the Internet
in such a way that the user can view the file while it is being transferred.
streamlining Improves business process efficiencies simplifying or
eliminating unnecessary steps.
structured data Data already in a database or a spreadsheet.
structured decision Involves situations where established processes
offer potential solutions.
structured query language (SQL) Users write lines of code to answer
questions against a database.
stylus A pen-like device used to tap the screen to enter commands.
supplier power One of Porter’s five forces; measures the suppliers’
ability to influence the prices they charge for supplies (including
materials, labor, and services).
supplier relationship management (SRM) Focuses on keeping suppliers
satisfied by evaluating and categorizing suppliers for different projects.
supply chain All parties involved, directly or indirectly, in obtaining raw
materials or a product.
supply chain execution system Ensures supply chain cohesion by
automating the different activities of the supply chain.
supply chain management (SCM) The management of information
flows between and among activities in a supply chain to maximize total
supply chain effectiveness and corporate profitability.
supply chain planning system Uses advanced mathematical
algorithms to improve the flow and efficiency of the supply chain while
reducing inventory.
supply chain visibility The ability to view all areas up and down the
supply chain in real time.
support value activities Found along the top of the value chain and
includes business processes, such as firm infrastructure, human resource
management, technology development, and procurement, that support
the primary value activities.
sustainable MIS disposal Refers to the safe disposal of MIS assets at
the end of their life cycle.
sustainable MIS infrastructure Identifies ways that a company can
grow in terms of computing resources while simultaneously becoming
less dependent on hardware and energy consumption.
sustainable, or “green,” MIS Describes the production, management,
use, and disposal of technology in a way that minimizes damage to the
environment.
shopping bot Software that will search several retailer websites and
provide a comparison of each retailer’s offerings including price and availability.
sign-off Users’ actual signatures, indicating they approve all of the
business requirements.
single-tenancy Each customer or tenant must purchase and maintain
an individual system.
single-user license Restricts the use of the software to one user at a time.
single-valued attribute Having only a single value of each attribute of
an entity.
site license Enables any qualified users within the organization to
install the software, regardless of whether the computer is on a network.
Some employees might install the software on a home computer for
working remotely.
slice-and-dice The ability to look at information from different perspectives.
smart card A device about the size of a credit card, containing
embedded technologies that can store information and small amounts of
software to perform some limited processing.
smart grid Delivers electricity using two-way digital technology.
smartphones Offer more advanced computing ability and connectivity
than basic cell phones.
social bookmarking Allows users to share, organize, search, and
manage bookmarks.
social engineering Hackers use their social skills to trick people into
revealing access credentials or other valuable information.
social media Refers to websites that rely on user participation and
user-contributed content.
social media policy Outlines the corporate guidelines or principles
governing employee online communications.
social network An application that connects people by matching
profile information
social networking The practice of expanding your business and/or
social contacts by constructing a personal network.
social networking analysis (SNA) Maps group contacts identifying
who knows each other and who works together.
social tagging Describes the collaborative activity of marking shared
online content with keywords or tags as a way to organize it for future
navigation, filtering, or search.
software The set of instructions the hardware executes to carry out
specific tasks.
Software as a Service (SaaS) Delivers applications over the cloud
using a pay-per-use revenue model.
software customization Modifies software to meet specific user or
business requirements.
software engineering A disciplined approach for constructing information
systems through the use of common methods, techniques, or tools.
software updates (software patch) Occurs when the software vendor
releases updates to software to fix problems or enhance features.
software upgrade Occurs when the software vendor releases a new
version of the software, making significant changes to the program.
source code Contains instructions written by a programmer specifying
the actions to be performed by computer software.
source document The original transaction record.
spam Unsolicited email.
spatial data (geospatial data or geographic information) Identifies
the geographic location of features and boundaries on Earth, such as
natural or constructed features, oceans, and more.
baL76892_glo_G1-G14.indd 12baL76892_glo_G1-G14.indd 12 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
G.13Glossary
threat of substitute products or services One of Porter’s five forces,
high when there are many alternatives to a product or service and low
when there are few alternatives from which to choose.
time bombs Computer viruses that wait for a specific date before
executing instructions.
time-series information Time-stamped information collected at a
particular frequency.
To-Be process model Shows the results of applying change
improvement opportunities to the current (As-Is) process model.
tokens Small electronic devices that change user passwords automatically.
traceroute A utility application that monitors the network path of
packet data sent to a remote computer.
transaction processing system (TPS) The basic business system that
serves the operational level (analysts) and assists in making structured
decisions.
transactional information Encompasses all of the information
contained within a single business process or unit of work, and its
primary purpose is to support the performing of daily operational or
structured decisions.
transmission control protocol/Internet protocol (TCP/IP) Provides
the technical foundation for the public Internet as well as for large
numbers of private networks.
twisted-pair cable Refers to a type of cable composed of four (or
more) copper wires twisted around each other within a plastic sheath.
typosquatting A problem that occurs when someone registers
purposely misspelled variations of well-known domain names.
U
unavailable When a system is not operating or cannot be used.
unified communications (UC) The integration of communication
channels into a single service.
unit testing Testing individual units or pieces of code for a system.
universal resource locator (URL) The address of a file or resource on
the web such as www.apple.com .
unstructured data Data that do not exist in a fixed location and can
include text documents, PDFs, voice messages, emails, etc.
unstructured decision Occurs in situations in which no procedures or
rules exist to guide decision makers toward the correct choice.
up-selling Increasing the value of the sale.
usability The degree to which a system is easy to learn and efficient
and satisfying to use.
user acceptance testing (UAT) Determines if the system satisfies the
user and business requirements.
user-contributed content (also referred to as user-generated
content) Content created and updated by many users for many users.
user documentation Highlights how to use the system and how to
troubleshoot issues or problems.
utility computing Offers a pay-per-use revenue model similar to a
metered service such as gas or electricity.
utility software Provides additional functionality to the operating system.
V
value chain analysis Views a firm as a series of business processes
that each add value to the product or service.
variable A data characteristic that stands for a value that changes or
varies over time.
sustaining technology Produces an improved product customers are
eager to buy, such as a faster car or larger hard drive.
swim lane Layout arranges the steps of a business process into a set
of rows depicting the various elements.
switching costs Costs that make customers reluctant to switch to
another product or service.
synchronous communication Communications that occur at the same
time such as IM or chat.
system A collection of parts that link to achieve a common purpose.
system clock Works like a wristwatch and uses a battery mounted on
the motherboard to provide power when the computer is turned off.
system restore Enables a user to return to the previous operating system.
system software Controls how the various technology tools work
together along with the application software.
system testing Verifies that the units or pieces of code function
correctly when integrated.
systems development life cycle (SDLC) The overall process for
developing information systems, from planning and analysis through
implementation and maintenance.
systems thinking A way of monitoring the entire system by viewing
multiple inputs being processed or transformed to produce outputs while
continuously gathering feedback on each part.
T
table Composed of rows and columns that represent an entity.
tacit knowledge The knowledge contained in people’s heads.
tag Specific keywords or phrases incorporated into website content for
means of classification or taxonomy.
tangible benefits Easy to quantify and typically measured to determine
the success or failure of a project.
taxonomy The scientific classification of organisms into groups based
on similarities of structure or origin.
technology failure Occurs when the ability of a company to operate is
impaired because of a hardware, software, or data outage.
technology recovery strategies Focus specifically on prioritizing the
order for restoring hardware, software, and data across the organization
that best meets business recovery requirements.
teergrubing Anti-spamming approach where the receiving computer
launches a return attack against the spammer, sending email messages
back to the computer that originated the suspected spam.
telecommunication system Enables the transmission of data over
public or private networks.
telecommuting (virtual workforce) Allows users to work from remote
locations such as a home or hotel, using high-speed Internet to access
business applications and data.
terabyte (TB) Roughly 1 trillion bytes.
test condition Details the steps the system must perform along with
the expected result of each step.
testing phase Brings all the project pieces together into a special
testing environment to eliminate errors and bugs and verify that the
system meets all the business requirements defined in the analysis phase.
text mining Analyzes unstructured data to find trends and patterns in
words and sentences.
threat An act or object that poses a danger to assets.
threat of new entrants One of Porter’s five forces, high when it is easy
for new competitors to enter a market and low when there are significant
entry barriers to joining a market.
baL76892_glo_G1-G14.indd 13baL76892_glo_G1-G14.indd 13 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
GlossaryG.14
website name stealing The theft of a website’s name that occurs
when someone, posing as a site’s administrator, changes the ownership
of the domain name assigned to the website to another website owner.
website personalization Occurs when a website has stored enough
data about a person’s likes and dislikes to fashion offers more likely to
appeal to that person.
what-if analysis Checks the impact of a change in a variable or
assumption on the model.
white-hat hackers Work at the request of the system owners to find
system vulnerabilities and plug the holes.
wide area network (WAN) Spans a large geographic area such as a
state, province, or country.
Wi-Fi infrastructure Includes the inner workings of a Wi-Fi service
or utility, including the signal transmitters, towers, or poles, along with
additional equipment required to send a Wi-Fi signal.
Wi-Fi protected access (WPA) A wireless security protocol to protect
Wi-Fi networks.
wiki A type of collaborative web page that allows users to add, remove,
and change content, which can be easily organized and reorganized as
required.
wire media Transmission material manufactured so that signals will be
confined to a narrow path and will behave predictably.
wired equivalent privacy (WEP) An encryption algorithm designed to
protect wireless transmission data.
wireless access point (WAP) Enables devices to connect to a wireless
network to communicate with each other.
wireless fidelity (Wi-Fi) A means by which portable devices can
connect wirelessly to a local area network, using access points that send
and receive data via radio waves.
wireless LAN (WLAN) A local area network that uses radio signals to
transmit and receive data over distances of a few hundred feet.
wireless MAN (WMAN) A metropolitan area network that uses radio
signals to transmit and receive data.
wireless media Natural parts of the Earth’s environment that can be
used as physical paths to carry electrical signals.
wireless WAN (WWAN) A wide area network that uses radio signals to
transmit and receive data.
workflow Includes the tasks, activities, and responsibilities required to
execute each step in a business process.
workplace MIS monitoring Tracks people’s activities by such
measures as number of keystrokes, error rate, and number of
transactions processed.
workshop training Held in a classroom environment and led by an
instructor.
World Wide Web (WWW) Provides access to Internet information
through documents including text, graphics, audio, and video files that
use a special formatting language called HTML.
Worldwide Interoperability for Microwave Access (WiMAX) A
communications technology aimed at providing high-speed wireless data
over metropolitan area networks.
Z
zombie A program that secretly takes over another computer for the
purpose of launching attacks on other computers.
zombie farm A group of computers on which a hacker has planted
zombie programs.
videoconference Allows people at two or more locations to interact via
two-way video and audio transmissions simultaneously as well as share
documents, data, computer displays, and whiteboards.
virtual private network (VPN) Companies can establish direct private
network links among themselves or create private, secure Internet
access, in effect a “private tunnel” within the Internet.
virtual reality A computer-simulated environment that can be a
simulation of the real world or an imaginary world.
virtualization Creates multiple “virtual” machines on a single
computing device.
vishing (or voice phishing) A phone scam that attempts to defraud
people by asking them to call a bogus telephone number to “confirm”
their account information.
visualization Produces graphical displays of patterns and complex
relationships in large amounts of data.
virus Software written with malicious intent to cause annoyance or damage.
voice over IP (VoIP) Uses IP technology to transmit telephone calls.
volatile Must have constant power to function; contents are lost when
the computer’s electric supply fails.
volatility Refers to a device’s ability to function with or without power.
vulnerability A system weakness that can be exploited by a threat; for
example, a password that is never changed or a system left on while an
employee goes to lunch.
W
war chalking The practice of tagging pavement with codes displaying
where Wi-Fi access is available.
war driving Deliberately searching for Wi-Fi signals from a vehicle.
warm site A separate facility with computer equipment that requires
installation and configuration.
waterfall methodology A sequence of phases in which the output of
each phase becomes the input for the next.
Web 1.0 (or Business 1.0) Refers to the World Wide Web during its first
few years of operation between 1991 and 2003.
Web 2.0 (or Business 2.0) The next generation of Internet use—a
more mature, distinctive communications platform characterized by new
qualities such as collaboration, sharing, and free.
web accessibility Means that people with disabilities—including visual,
auditory, physical, speech, cognitive, and neurological disabilities—can
use the web.
web accessibility initiative (WAI) Brings together people from
industry, disability organizations, government, and research labs from
around the world to develop guidelines and resources to help make the
web accessible to people with disabilities, including auditory, cognitive,
neurological, physical, speech, and visual disabilities.
web browser Allows users to access the WWW.
web conferencing (webinar) Blends videoconferencing with
document-sharing and allows the user to deliver a presentation over the
web to a group of geographically dispersed participants.
web mining Analyzes unstructured data associated with websites to
identify consumer behavior and website navigation.
web-based self-service system Allows customers to use the web to
find answers to their questions or solutions to their problems.
website bookmark A locally stored URL or the address of a file or
Internet page saved as a shortcut.
baL76892_glo_G1-G14.indd 14baL76892_glo_G1-G14.indd 14 26/11/12 1:59 PM26/11/12 1:59 PM

Rev. Confirming Pages
N.1
Chapter 1
1. Thomas L. Friedman, The World Is Flat (New York: Farrar, Straus
and Giroux, 2005); Thomas Friedman, “The World Is Flat,” www
.thomaslfriedman.com , accessed June 2010; Thomas L. Friedman,
“The Opinion Pages,” The New York Times, topics.nytimes.com/
top/opinion/editorialsandoped/oped/columnists/thomaslfriedman,
accessed June 2010.
2. Interesting Facts, www.interestingfacts.org , accessed June 15, 2010.
3. Robert Lenzer, “Bernie Madoff’s $50 Billion Ponzi Scheme,” Forbes,
December, 12, 2008, http://www.forbes.com/2008/12/12/madoff-
ponzi-hedge-pf-ii-in_rl_1212croesus_inl.html .
4. Clive Thompson, “Do You Speak Statistics?” Wired, May 2010, p. 36.
5. “Identity Theft Risk: BGSU Notifies Past, Current Students about
Loss of Personal Information,” The Toledo Blade, June 27, 2007,
http://toledoblade.com/apps/pbcs.dll/article?AID 5 /20070627/
NEWS08/70627020 , accessed June 26, 2010.
6. Ina Fried, “Apple Earnings Top Estimates,” CNET News, October 11,
2005, http://news.cnet.com/Apple-earnings-topestimates/2100-
1041_3-5893289.html?tag 5 lia;rcol , accessed January 18, 2010.
7. Michael Arndt and Bruce Einhorn, “The 50 Most Innovative Companies,”
Bloomberg Businessweek, April 15, 2010, http://www.businessweek
.com/magazine/content/10_17/b4175034779697.htm .
8. Jon Surmacz, “By the Numbers,” CIO Magazine, October 2009.
9. Michael E. Porter, “The Five Competitive Forces That Shape Strategy,”
The Harvard Business Review Book Series, Harvard Business Review,
January 2008; Michael E. Porter, “Competitive Strategy: Techniques
for Analyzing Industries and Competitors,” Harvard Business Review,
January 2002; Michael E. Porter, On Competition, The Harvard
Business Review Book Series (Boston: Harvard Business School
Publishing, 1985); Harvard Institute for Strategy and Competitiveness,
http://www.isc.hbs.edu/ , accessed June 10, 2010.
10.–17. Ibid.
18. The Associated Press, “Postal Service Facing Losses of Historic
Proportion,” USA Today, March 25, 2009, http://www.usatoday.com/
news/washington/2009-03-25-postal-woes_N.htm .
19. Porter, “The Five Competitive Forces That Shape Strategy”; Porter,
“Competitive Strategy: Techniques for Analyzing Industries and
Competitors”; Porter, On Competition; Harvard Institute for Strategy
and Competitiveness.
20. Yukari Iwatani Kane, “First-Day Sales of Apple’s iPad Fall Short of
Sky-High Hopes,” The Wall Street Journal, April 6, 2010, http://online
.wsj.com/article/SB10001424052702304017404575165621713345
324.html .
21. Porter, “The Five Competitive Forces That Shape Strategy”; Porter,
“Competitive Strategy: Techniques for Analyzing Industries and
Competitors”; Porter, On Competition; Harvard Institute for Strategy
and Competitiveness.
22. Joel Holland, “What’s Your Problem?” Entrepreneur, May 2010, http://
www.entrepreneur.com/magazine/entrepreneur/2010/may/206150.html .
23. Porter, “The Five Competitive Forces That Shape Strategy”; Porter,
“Competitive Strategy: Techniques for Analyzing Industries and
Competitors”; Porter, On Competition; Harvard Institute for Strategy
and Competitiveness.
24. “Apple Profit Surges 95 Percent on iPod Sales,” Yahoo! News, http://
news.yahoo.com/s/afp/20060118/bs_afp/uscompanyearningsit_
060118225009 , accessed January 18, 2005; “Apple’s IPod Success
Isn’t Sweet Music for Record Company Sales,” Bloomberg.com,
http://quote.bloomberg.com/apps/news?pid 5 nifea&&sid 5 aHP5Ko1
pozM0 , accessed November 2, 2005; Peter Burrows, “How Apple
Could Mess Up Again,” BusinessWeek online, http://yahoo
.businessweek.com/technology/content/jan2006/tc20060109_
432937.htm , accessed January 9, 2006; www.apple.com/iphone ,
accessed June 7, 2007; news.com.com/NikeiPod 1 raises
1 RFID 1 privacy 1 concerns/2100-1029_3-6143606.html ,
accessed June 7, 2007.
25. Nick Leiber, Sommer Saadi, Victoria Stilwell, Joel Stonington, John
Tozzi, and Venessa Wong, “2011 Finalists: America’s Best Young
Entrepreneurs,” Bloomberg Businessweek, September 20, 2011.
26. Thomas L. Friedman, Hot, Flat, and Crowded: Why We Need a Green
Revolution—and How It Can Renew America (New York: Farrar,
Straus and Giroux, 2008).
27. “Special Report Salary Survey 2009: Staff and Entry-Level Positions,”
ComputerWorld Magazine, http://www.computer world.com/s/salary-
survey/breakdown/2009/job_level/3 ; accessed June 27, 2010.
28. Ina Fried, “Adobe to Buy Omniture for $1.8 Billion,” CNET News,
September 15, 2009, http://news.cnet.com/8301-13860_3-
10353733-56.html .
29. Seidell, Streeter, “10 Best Things We’ll Say to Our Grandkids,”
Wired Magazine, September, 21, 2009, www.wired.com/culture/
culturereviews/magazine/17-10/st_best#ixzz0s65fFq1t .
30. Friedman, The World Is Flat; Friedman, “The World Is Flat”; Friedman,
“The Opinion Pages.”
31. J. R. Raphel, “The 15 Biggest Wiki Blunders,” PC World, August 26,
2009, http://www.pcworld.com/article/170874/the_15_biggest_
wikipedia_blunders.html .
32. Peter S. Green, “Merrill’s Thain Said to Pay $1.2 Million to Decorator,”
Bloomberg Businessweek, January 23, 2009, http://www.bloomberg
.com/apps/news?sid 5 aFcrG8er4FRw&pid 5 newsarchive , accessed
April 17, 2010.
33. “TED: Ideas Worth Spreading,” http://www.ted.com/pages/view/id/5 ,
accessed June 21, 2010.
Chapter 2
1. www.actionaly.com , accessed April 2012; www.socialmedia
.biz/2011/01/12/top-20-social-media-monitoring-vendors-for-
business , accessed April 2012; www.radian6.com , accessed April
2012; www.collectiveintellect.com , accessed April 2012.
2. Tom Davenport, “Tom Davenport: Back to Decision-Making Basics,”
BusinessWeek, March 11, 2008, http://www.businessweek.com/
managing/content/mar2008/ca20080311_211319.htm .
3. Jeff Voth, “Texting and Other Bad Driving Decisions,” http://
ca.autos.yahoo.com/p/1960/texting-and-other-bad-driving-
decisions ; “Breastfeeding While Driving,” The New York Times,
March 2, 2009, http://parenting.blogs.nytimes.com/2009/03/02/
breastfeeding-while-driving/.
4. Ken Blanchard, “Effectiveness vs. Efficiency,” Wachovia Small
Business, www.wachovia.com , accessed October 14, 2009.
N O T E S
baL76892_notes_N1-N6.indd 1baL76892_notes_N1-N6.indd 1 28/11/12 8:23 AM28/11/12 8:23 AM

Rev. Confirming Pages
NotesN.2
Chapter 3
1. Ingrid Lunden, “Pinterest Updates Terms of Service as It Preps an API
and Private Pinboards: More Copyright Friendly,” Tech Crunch, April
2012; Chad McCloud, “What Pinterest Teaches Us About Innovation
in Business,” Bloomberg Businessweek, May 2012; Courteney Palis,
“Pinterest Traffic Growth Soars to New Heights: Experian Report,”
The Huffington Post, April 6, 2012.
2. Adam Lashinsky, “Kodak’s Developing Situation,” Fortune, January
20, 2003, p. 176.
3. Clayton Christensen, The Innovator’s Dilemma (Boston: Harvard
Business School, 1997).
4. Ibid.
5. Ibid.
6. Internet World Statistics, www.internetworldstats.com , January 2010.
7. info.cern.ch , accessed March 1, 2005.
8. Brier Dudley “Changes in Technology Almost Too Fast to Follow,” The
Seattle Times, October 13, 2005.
9. Max Chafkin, “Good Domain Names Grow Scarce,” Inc., July 1, 2009,
http://www.inc.com/magazine/20090701/good-domain-names-
grow-scarce.html .
10. Chris Anderson, “The Long Tail: Why the Future of Business Is Selling
Less of More,” http://www.longtail.com/2006 .
11. “Disintermediation,” TechTarget, http://whatis.techtarget.com/
definition/0,,sid9_gci211962,00.html , accessed April 4, 2010.
12. “Reintermediation,” www.pcmag.com , http://www.pcmag.com/
encyclopedia_term/0,2542,t 5 reintermediation&i 5 50364,00.asp ,
accessed April 4, 2010.
13. Scott McCartney, “You Paid What for That Flight?” The Wall Street
Journal, August 26, 2010, http://online.wsj.com/article/SB100014240
52748704540904575451653489562606.html .
14. “The Complete Web 2.0 Directory,” www.go2web20.net/ , accessed
June 24, 2007; “Web 2.0 for CIOs,” CIO Magazine, accessed June 24,
2007, www.cio.com/article/16807 ; www.emarketer.com , accessed
January 2006.
15. Ibid.
16. Tim O’Reilly, “What Is Web 2.0: Design Patterns and Business Models
for the Next Generation of Software,” www.oreillynet.com/pub/a/
oreilly/tim/news/2005/09/30/what-is-web-20.html , accessed June
25, 2007; “Web 2.0 for CIOs.”
17. Ibid.
18. Ibid.
19. Joel Holland, “Risk It When You Are Young,” Entrepreneur Magazine,
July 2010, http://www.entrepreneur.com/magazine/
entrepreneur/2010/july/207174.html .
20. O’Reilly, “What Is Web 2.0: Design Patterns and Business Models for
the Next Generation of Software”; “Web 2.0 for CIOs.”
21. “Kiva—Loans that Change Lives,” www.kiva.org , accessed April 10,
2010.
22. O’Reilly, “What Is Web 2.0: Design Patterns and Business Models for
the Next Generation of Software”; “Web 2.0 for CIOs.”
23. Tony Bradley, “Firefox 3.6 Becomes Number Two Browser as IE6
Declines,” PCWorld, September 1, 2010, http://www.pcworld.com/
businesscenter/article/204698/firefox_36_becomes_number_two_
browser_as_ie6_declines.html .
24. O’Reilly, “What Is Web 2.0: Design Patterns and Business Models for
the Next Generation of Software”; “Web 2.0 for CIOs.”
25. Google Images, http://www.google.com/images?hl 5 en&q 5
social 1 network 1 image&wrapid 5 tlif12858857906612&um
5 1&ie 5 UTF-8&source 5 univ&ei 5 Yg-lTJyNJYn6sAP0l9H-Dg&sa
5. Rich Jaroslovsky, “Your Own Private Help Desk,” Bloomberg
Businessweek, March 11, 2010.
6. “What Is Systems Thinking,” SearchCIO.com , http://searchcio
.techtarget.com/definition/systems-thinking , accessed March 13, 2010.
7. “French Trader in Scandal Ordered behind Bars,” MSNBC, February 8,
2008, http://www.msnbc.msn.com/id/23065812/ .
8. Leigh Buchanan, “Letting Employees Battle It Out,” Inc., October 1,
2009, http://www.inc.com/magazine/20091001/letting-employees-
battle-it-out.html .
9. “Put Better, Faster Decision-Making in Your Sights,” www.teradata
.com ; “Neural Network Examples and Definitions,” ece-www.colorado
.edu/~ecen4831/lectures/NNdemo.html , accessed June 24, 2007.
10. Sharon Begley, “Software au Naturel,” Newsweek, May 7, 1995; Neil
McManus, “Robots at Your Service,” Wired, January 2003; Santa Fe
Institute; Michael A. Arbib, ed., The Handbook of Brain Theory and
Neural Networks (Cambridge, MA: MIT Press, 2003); L. Biacino and
G. Gerla, “Fuzzy Logic, Continuity and Effectiveness,” Archive for
Mathematical Logic 41, no. 7.
11. Rachel King, “Soon That Nearby Worker Might Be a Robot,”
Bloomberg Businessweek, June 1, 2010, http://www.business week.
com/ technology/content/jun2010/tc2010061_798891.htm .
12. “Business Process Reengineering Six Sigma,” www.isixsigma.com/
me/bpr/ , accessed May 10, 2010.
13. Michael Hammer, Beyond Reengineering: How the Process-
Centered Organization Is Changing Our Work and Our Lives (New
York: HarperCollins Publishers, 1996); Richard Chang, Process
Reengineering in Action: A Practical Guide to Achieving Breakthrough
Results, Quality Improvement Series (San Francisco: Pfeiffer, 1996).
14. Ibid.
15. Ibid.
16. “Business Process Reengineering Six Sigma”; SmartDraw.com ,
www.smartdraw.com , accessed May 11, 2010.
17. H. James Harrington, Business Process Improvement Workbook:
Documentation, Analysis, Design, and Management of Business
Process Improvement (New York: McGraw-Hill, 1997); Hammer,
Beyond Reengineering; Michael Hammer and James Champy,
Reengineering the Corporation: A Manifesto for Business Revolution
(New York: HarperCollins Publishers, 1993).
18. Ibid.
19. Stever Robbins, “Tips for Mastering E-mail Overload,” Harvard
Business School, October 25, 2009, http://hbswk.hbs.edu/
archive/4438.html .
20. Harrington, Business Process Improvement Workbook; Hammer, Beyond
Reengineering; Hammer and Champy, Reengineering the Corporation.
21. Ibid.
22. Phil Mansfield, “Bronx Graduate Trina Thompson Sues Monroe
College for $70,000 over Unemployment,” Daily News, August 3,
2009, http://www.nydailynews.com/ny_local/2009/08/03/2009-08-
03_student_.html#ixzz1174LU5KS .
23. Stephen Baker, “What Data Crunchers Did for Obama,” Bloomberg
Businessweek, January 23, 2009, http://www.businessweek
.com/technology/content/jan2009/tc20090123_026100.htm ?
chan 5 top 1 news_top 1 news 1 index 1 [-] 1 temp_top 1 story.
24. Secondlife.com, accessed May 28, 2007; “Linden Lab to Open
Source Second Life Software,” Linden Lab, January 8, 2007, sec-
ondlife.com/community/land-islands.php , accessed May 22, 2010;
Irene Sege, “Leading a Double Life,” The Boston Globe, October 25,
2006, accessed June 22, 2010; James Harkin, “Get a (Second) Life,”
Financial Times, November, 17 2006, accessed June 15, 2010.
25. www.darpa.mil accessed June 15, 2010.
baL76892_notes_N1-N6.indd 2baL76892_notes_N1-N6.indd 2 26/11/12 2:01 PM26/11/12 2:01 PM

Rev. Confirming Pages
N.3Notes
46. Gita Chandra, “14th Annual Webby Awards,” http://www.webbyawards
.com/press/press-release.php?id 5 189 , accessed July 15, 2007.
Chapter 4
1. Charles Bryant, “Top 10 Things You Should Not Share on Social
Networks,” Howstuffworks, howstuffworks.com, accessed May 2012.
2. Michael Schrage, “Build the Business Case,” CIO Magazine, March 15,
2003, http://www.cio.com/article/31780/Build_the_Business_Case_
Extracting_Value_from_the_Customer , accessed April 17, 2010.
3. Scott Berinato, “The CIO Code of Ethical Data Management,” CIO
Magazine, July 1, 2002, www.cio.com , accessed April 17, 2010.
4. Peter S. Green, “Take the Data Pledge,” Bloomberg Businessweek,
April 23, 2009.
5. Richard Mason, “Four Ethical Issues of the Information Age,”
Management Information Systems Quarterly 10, no. 1 (March 1986),
http://www.misq.org/archivist/vol/no10/issue1/vol10no1mason.html ,
accessed April 15, 2010.
6. Mike Brunker, “Online Poker Cheating Blamed on Employee,” MSNBC
.com, October 19, 2007, http://www.msnbc.msn.com/id/21381022/ ,
accessed April 15, 2010.
7. Brian Womack, “Google Ends Self-Censorship, Defies China
Government (Update4),” Bloomberg Businessweek, March 23, 2010,
http://www.bloomberg.com/apps/news?pid 5 newsarchive &sid 5
aaE9Owm3d5Bg .
8. Raymund Flandez, “Domino’s Response Offers Lessons in Crisis
Management,” The Wall Street Journal, April 20, 2009,
http://blogs.wsj.com/independentstreet/2009/04/20/
dominos-response-offers-lessons-in-crisis-management/ .
9. “CBC Tells Journalists How to Behave on Facebook,” ReportR
. net, August 3, 2007, http://www.reportr.net/2007/08/03/
cbc-tells-journalists-how-to-behave-on-facebook/ .
10. Andy McCue, “Bank Boss Quits after Porn Found on PC,” www
.businessweek.com , accessed June 2004.
11. Daniel Schorn “Whose Life Is It Anyway?” CBS News 60 Minutes,
July 16, 2006, http://www.cbsnews.com/stories/2005/10/28/
60minutes/main990617.shtml .
12. “Planned and Unplanned Downtime,” SAP, http://help.sap.com/
saphelp_nw72/helpdata/en/45/17396792ef5d79e10000000a11466f/
content.htm .
13. AMA Research, “Workplace Monitoring and Surveillance,” www
.amanet.org , accessed March 1, 2004; “2005 CSI/FBI Computer Crime
and Security Survey,” www.gocsi.com , accessed February 20, 2006.
14. Thomas Claburn, “Web 2.0. Internet Too Dangerous for Normal People,”
InformationWeek, April 1, 2009, http://www.informationweek.com/news/
internet/web2.0/showArticle.jhtml?articleID 5 2 16402352&queryText
5 web%202.0%20security%20concerns .
15. Paige Baltzan, email received May 21, 2010.
16. Newcastle University, “Improving Password Protection with Easy to
Remember Drawings,” ScienceDaily, November 1, 2007, http://www
.sciencedaily.com-/releases/2007/10/071030091438.htm , accessed
April 15, 2010.
17. Kim Zetter, “Lifelock’s CEO Identity Stolen 13 Times,” Wired,
May 28, 2010, http://www.wired.com/threatlevel/2010/05/
lifelock-identity-theft .
18. Brian Grow, Keith Epstein, and Chi-Chu Tschang, “The New
E-spionage Threat,” BusinessWeek, April 10, 2008, http://www.busi-
nessweek.com/magazine/content/08_16/b4080032218430.htm .
19. Brian Grow, “Hacker Hunters,” BusinessWeek, May 30, 2005, http://
www.businessweek.com/magazine/content/05_22/b3935001_
mz001.htm .
5 X&oi 5 image_result_group&ct 5 title&resnum 5 1&ved
5 0CCIQsAQwAA &biw 5 1362&bih 5 530 .
26. “About Us,” LinkedIn, http://press.linkedin.com/ , accessed April 3, 2010.
27. Daniel Pink, “Folksonomy,” The New York Times, December 11, 2005,
http://www.nytimes.com/2005/12/11/magazine/11ideas1-21.html .
28. Daniel Nations, “What Is Social Bookmarking,” About.com : Web
Trends, http://webtrends.about.com/od/socialbookmarking101/p/
aboutsocialtags.htm , accessed April 5, 2010.
29. Gary Matuszak, “Enterprise 2.0: Fad or Future,” KPMG International,
www.kpmg.com/Global/en/…/Enterprise…/Enterprise-2-Fad-or-
Future , accessed April 10, 2010.
30. Rachel Metz, “Changing at the Push of a Button,” Wired, September
27, 2004.
31. Wikipedia Statistics, http://en.wikipedia.org/wiki/Statistics , accessed
April 15, 2010.
32. Wikipedia: The Free Encyclopedia, http://en.wikipedia.org/wiki/
Wikipedia:About , accessed April 15, 2010.
33. “Banana Code Connects Consumers and Farm,” DoleOrganic.com ,
http://www.dole.com/NutritionInstituteLanding/NI_Articles/NI_
DoleDiet/NI_DoleDiet_Detail/tabid/1058/Default.aspx?contentid 5
6328 , accessed April 19, 2010.
34. Caroline McCarthy, “Bloomberg Mistakenly Publishes Steve Jobs
Obituary,” CNET News, August 28, 2008, http://news.cnet.com/8301-
13579_3-10027886-37.html , accessed April 19, 2010.
35. John Seigenthaler, “A False Wikipedia Biography,” USA Today,
November 29, 2005, http://www.usatoday.com/news/opinion/
editorials/2005-11-29-wikipedia-edit_x.htm .
36. Tim Berners-Lee, “Semantic Web Road Map,” October 14, 1998, http://
www.w3.org/DesignIssues/Semantic.html , accessed April 12, 2010.
37. Douglas MacMillan “Social Media: The Ashton Kutcher Effect,”
Bloomberg Businessweek, May 3, 2009, http://www.businessweek
.com/technology/content/may2009/tc2009053_934757.htm .
38. Beth Bacheldor, “From Scratch: Amazon Keeps Moving,” Information
Week, March 5, 2004; Gary Wolf, “The Great Library of Amazonia,”
Wired, October 23, 2003; “Amazon Company Information,” Forbes,
www.forbes.com , September 2005; Rob Hof, “Amazon’s Newest
Product: Storage,” BusinessWeek, March 13, 2006.
39. Eric Goldman, “Technology & Marketing Law Blog,” December 5,
2005, http://blog.ericgoldman.org/archives/2005/12/wikipedia_will
.htm , accessed April 15, 2010.
40. Kit Eaton, “Is Facebook Becoming the Whole World’s Social
Network?” Fast Company, April 7, 2010, http://www.fast company
.com/1609312/facebook-global-expansion-social-networking-
privacy-world-phone-book-users .
41. Jenna Ross, “Toughest College Test: No Cell Phone, No Facebook,”
StarTribune, March 13, 2010, http://www.startribune.com/
entertainment/tv/87598062.html .
42. Larry Greenemeier, “Sun’s Diffie: Second Life to Become Prime Source
of Intelligence,” InformationWeek, May 17, 2007, http://www.informa
tionweek.com/news/internet/showArticle.jhtml?articleID 5 199601513 .
43. Neil Vidyarthi, “City Council Member Booted for Playing Farmville,”
Social Times, March 30, 2010, http://www.socialtimes.com/2010/03/
fired-playing-farmville/ .
44. Alissa Walker, “Theme Announced for 48 Hour Magazine, Over 6,000
Contributors Have Two Days to Hustle,” Fast Company, May 7, 2010,
http://www.fastcompany.com/1640042/theme-is-announced-for-48-
hour-magazine?partner 5 rss .
45. Brian Eisenberg, “What Is Bubblegum Marketing?” Beneath the
Cover, May 15, 2007, http://www.beneaththecover.com/2007/05/15/
what-is-bubblegum-marketing/ .
baL76892_notes_N1-N6.indd 3baL76892_notes_N1-N6.indd 3 29/11/12 10:57 AM29/11/12 10:57 AM

Rev. Confirming Pages
NotesN.4
Chapter 6
1. www.webdesignerdepot.com , accessed April 2012; flowingdata
.com/2011/12/21/the-best-data-visualization-projects-of-2011/ ,
accessed April 2012.
2. Julia Kiling, “OLAP Gains Fans among Data-Hungry Firms,”
ComputerWorld, January 8, 2001, p. 54.
3. Allan Homes, “The TJX Security Breach. This One’s Different.
Way Different,” CIO Magazine, February 1, 2007, advice.cio.com/
the-tjx-security-breach-this-ones-different-way-different .
4. “America’s College Startups: 2010,” Inc. Magazine, 2010, http://
www.inc.com/ss/cool-college-start-ups-2010 .
5. Mitch Betts, “Unexpected Insights,” ComputerWorld, April 14, 2003,
www.computerworld.com , accessed September 4, 2003.
6. Jim Giles, “Data Sifted from Facebook Wiped after Legal Threats,”
NewScientist, March 31, 2010, www.newscientist.com/article/
dn18721-data-sifted-from-facebook-wiped-after-legal-threats.html .
7. www.zappos.com , accessed April 9, 2010.
8. “Data, Data Everywhere,” The Economist, www.economist.com/
specialreports/displayStory.cfm?story_id 5 15557443 .
9. Kiling, “OLAP Gains Fans among Data-Hungry Firms.”
10. Timothy Mullaney, “Netflix,” BusinessWeek, May 25, 2006, www.
businessweek.com/smallbiz/content/may2006/sb20060525_268860.
htm .
11. www.google.com , accessed September 13, 2003.
12. Chris Wilson, “News Dots: The Day’s Events as a Social Network,” http://
labs.slate.com/articles/slate-news-dots/ , accessed March 29, 2010.
13. Maria Popova, “Data Visualization: Stories for the Information Age,”
Bloomberg Businessweek, August 12, 2009, http://www.businessweek
.com/innovate/content/aug2009/id20090811_137179.htm .
14. Prashant Gopal, “Zillow Opens Online Mortgage Marketplace,”
BusinessWeek, April 3, 2008, http://www.businessweek.com/lifestyle/
content/apr2008/bw2008043_948040.htm .
15. Katie Cassidy “Barack Obama: “iPad Distracts from the Message,”
Sky News, May 10, 2010.
16. Ericka Chickowski, “Goldman Sachs Sued for Illegal Database
Access,” Darkreading.com , May 11, 2010, http://www.darkreading
.com/database_security/security/attacks/show Article.jhtml?articleID
5 224701564&cid 5 nl_DR_DAILY_2010-05-12_htm .
17. www.bls.gov accessed June 15, 2010.
18. 222.rtd-denver.com accessed June 15, 2010.
Chapter 7
1. www.ironman.com , accessed January 14, 2008.
2. “Top 23 U.S. ISPs by Subscriber: Q3 2010,” ISP Planet, http://www
.isp-planet.com/research/rankings/usa.html .
3. Ibid.
4. “Bandwidth Meter Online Speed Test,” CNET Reviews, http://reviews
.cnet.com/internet-speed-test/, accessed June 2010; “Broadband
Technology Overview,” www.corning.com/docs/opticalfiber/wp6321
, accessed February 1, 2008.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. http://www.savetheinternet.com/ , accessed May 15, 2010.
10. Ibid.
11. http://www.networksolutions.com/ , accessed May 16, 2010.
12. www.godaddy.com , accessed May 16, 2010.
20. David Kravets, “Former Teen Cheerleader Dinged
$27,750 for File Sharing 37 Songs,” Wired, February
26, 2010, http://www.wired.com/threatlevel/2010/02/
former-teen-cheerleader-dinged-27750-for-infringing-37-songs/ .
21. Armen Keteyian “Digital Photocopier Loaded with Secrets,” CBSnews
.com , April 15, 2010, http://www.cbsnews.com/stories/2010/04/19/
eveningnews/main6412439.shtml .
Chapter 5
1. Om Malik, “Pandora: Streaming Everywhere on Everything,” Bloomberg
Businessweek, January 12, 2010, http://www.businessweek.com/
technology/content/jan2010/tc20100112_584610.htm .
2. “The Great 1906 San Francisco Earthquake,” USGS, http://earthquake.
usgs.gov/regional/nca/1906/18april/index.php , accessed July 14,
2010.
3. “Moore’s Law,” www.intel.com/technology/mooreslaw , accessed
April 2, 2010; Electronics TakeBack Coalition, “Facts and Figures
on E-Waste and Recycling,” www.electronicstakeback.com ,
accessed April 3, 2010; “EPA Report to Congress on Server and Data
Center Energy Efficiency,” www.energystar.gov/ia/partners/prod_
development/downloads/EPA_Report_Exec_Summary_Final ,
accessed January 23, 2008.
4. Ibid.
5. Ibid.
6. “Switch on the Benefits of Grid Computing,” h20338.www2.hp.com/
enterprise/downloads/7_Benefits%20of%20grid%20computing ,
accessed April 2, 2010; “Talking to the Grid,” www. technologyreview
.com/energy/23706/ , accessed April 3, 2010; “Tech Update: What’s
All the Smart Grid Buzz About?” www.fieldtechnologiesonline
.com/download.mvc/Whats-All-The-Smart-Grid-Buzz-About-0001 ,
accessed April 3, 2010.
7. Ibid.
8. Ibid.
9. “VMware-History of Virtualization.” www.virtualizationworks.com/
Virtualization-History.asp , accessed January 23, 2008.
10. Rich Miller, “Google Data Center FAQ,” www.datacenterknowledge
.com/archives/2008/03/27/google-data-center-faq/ , accessed
April 1, 2010.
11. Ibid.
12. Agam Shah, “UPS Invests $1 Billion in Technology to Cut Costs,”
www.businessweek.com/idg/2010-03-25/ups-invests-1-billion-in-
technology-to-cut-costs.html , accessed April 4, 2010.
13. “Olympic Medals Made from E-Waste,” news.discovery.com/tech/
olympic-medals-made-from-e-waste.html, accessed April 4, 2010;
Rob Delaney, “Olympic Champs Wear Old Trinitrons as Teck Turns
Junk to Medals,” Bloomberg Businessweek, February 3, 2010,
http://www.bloomberg.com/apps/news?pid 5 newsarchive&sid 5
az0yJ8scpCqQ .
14. Google Docs, docs.google.com , accessed June 4, 2010.
15. Martin LaMonica, “The Journey of Juice, Inside the Electric Grid,”
CNET News, August 24, 2010, http://news.cnet.com/8301-11128_
3-20014393-54.html .
16. www.box.net , accessed April 2, 2010.
17. Goodwill Industries International, “Dell and Goodwill Expand Free
Recycling Program to Include Microsoft Product,” April 21, 2010,
http://www.goodwill.org/press-releases/dell-goodwill-expand-
free-consumer-recycling-program-to-include-microsoft-products/ ,
accessed June 3, 2010.
18. One Laptop Per Child, http://laptop.org/en/ , accessed June 5, 2010.
baL76892_notes_N1-N6.indd 4baL76892_notes_N1-N6.indd 4 26/11/12 2:01 PM26/11/12 2:01 PM

Rev. Confirming Pages
N.5Notes
38. Chris Silva, Benjamin Gray, “Key Wireless Trends That Will Shape
Enterprise Mobility in 2008,” www.forrester.com , accessed
February 12, 2008.
39. Julia Layton, “How Cell Phone Viruses Work,” How Stuff Works, http://
electronics.howstuffworks.com/cell-phone-virus.htm/printable .
40. Michael Copeland, “Let the Helmet Make the Call,” Fortune, February
4, 2010, http://money.cnn.com/galleries/2010/technology/1002/
gallery.football_helmets_sensors.fortune/index.html .
41. Google Earth, “Jane Goodall Institute-Gombe Chimpanzee Blog,” http://
earth.google.com/outreach/cs_jgi_blog.html , accessed April 3, 2010.
42. RFID Security Alliance, http://www.rfidsa.com/ , accessed June 15, 2010.
43. Ibid.
44. Ibid.
45. Alissa Walker, “The Technology Driving Denver’s B-cycle Bike Sharing
System,” Fast Company, June 3, 2010, http://www.fastcompany
.com/1656160/the-technology-driving-denvers-new-b-cycle-bike-
sharing-system?partner 5 rss .
46. Noam Cohen, “In Allowing Ad Blockers, a Test for Google,” The New
York Times, January 3, 2010, http://www.nytimes.com/2010/01/04/
business/media/04link.html .
47. Julius Genachowski, “America’s 2020 Broadband Vision,” The Official
Blog of The Federal Communication Commission, February 17, 2010,
http://reboot.fcc.gov/blog/?entryId 5 172819 .
48. Al Sacco, “Foursquare Addresses Cheating Issue, Frustrates Legit Users,”
CIO Magazine, April 8, 2010, http://advice.cio.com/al_sacco/10000/
foursquare_addresses_cheating_issue_frustrates_legit_users .
49. Ryan Singel, “FYI, Pandora Makes Your Music Public,” Wired
Magazine, May 14, 2010, http://www.wired.com/epicenter/2010/05/
pandora-privacy/#ixzz118uMDaUa .
50. Rob Flickenger, “Antenna On the Cheap,” O’reilly Wireless DevCenter,
July 2001, http://www.oreillynet.com/cs/weblog/view/wlg/448 .
51. Hugo Miller, “AT&T Sparks User Backlash with End to Unlimited
Plans,” Bloomberg Businessweek, June 4, 2010, http://www
.businessweek.com/news/2010-06-04/at-t-sparks-user-backlash-
with-end-to-unlimited-plans-update2-.html .
52. Robert McMillian, “Domain Name Record Altered to Hack Comcast
.net,” PC World, May 28, 2009, http://www.pcworld.com/
businesscenter/article/146461/domain_name_record_altered_to_
hack_comcastnet.html .
53. Clint Boulton, “Google Street View Accidentally Collected User Data
via WiFi,” eWeek, May 16, 2010, http://www.eweek.com/c/a/Search-
Engines/Google-Street-View-Accidentally-Violates-User-Privacy-Via-
WiFi-290159/ .
54. http://top10.com/broadband/news/2010/02/top_10_broadband_
gadgets/ , accessed June 2010.
55. C. G. Lynch, “GPS Innovation Gives Weather Bots a New Ride,”
CIO Magazine, May 9, 2007, http://www.cio.com/article/108500/
GPS_Innovation_Gives_Weather_Bots_a_New_Ride .
56. Austin Carr, “ Kayak.com Cofounder Paul English Plans to Blanket
Africa in Free Wireless Internet,” Fast Company, May 12, 2010, http://
www.fastcompany.com/1645485/kayak-cofounder-starting-initative-
to-blanket-africa-in-free-wirelessinternet .
57. Chris Matyszczyk “Marathon Winner Disqualified for Wearing
iPod,” CNET News, October 11, 2009, http://news.cnet.com/8301-
17852_3-10372586-71.html .
58. Bob Sullivan, “Ding A Ling Took My $400,” MSNBC.com , October 2,
2009, http://redtape.msnbc.com/2009/10/mary-coxs- consumer-
nightmare-began-with-poor-satellite-television-reception-
but-ended-up-costing-her-a-430-early-terminatio/comments/
page/2/ .
13. “IP Telephony/Voice over IP (VoIP): An Introduction,” Cisco, http://
www.cisco.com/en/US/tech/tk652/tk701/tsd_technology_ support_
protocol_home.html , accessed April 24, 2010; “VoIP Business
Solutions,” www.vocalocity.com , accessed January 21, 2008.
14. Ibid.
15. Ibid.
16. http://www.google.com/tv/ , accessed April 30, 2010.
17. Internet 101, http://www.internet101.org/ , accessed April 5, 2010.
18. ViVu: Better Than Being There, http://vivu.tv/vivuweb/ , accessed May
4, 2010.
19. Boston Digital Bridge Foundation, http://www.digitalbridgefoundation
.org/ , accessed May 18, 2010.
20. The Liberty Coalition, “Carnivore—DCS 1000,” July 27, 2006, http://
www.libertycoalition.net/node/247 .
21. “A Science Odyssey,” PBS, http://www.pbs.org/wgbh/aso/databank/
entries/btmarc.html .
22. “Rip Curl Turns to Skype for Global Communications,” www
.voipinbusiness.co.uk/rip_curl_turns_to_skype_for_gl.asp July 07,
2006, accessed January 21, 2008; “Navigating the Mobility Wave,”
www.busmanagement.com , accessed February 2, 2008; “Sprint Plans
Launch of Commercial WiMAX Service in Q2 2008,” www. intomobile.
com , accessed February 10, 2008; Deepak Pareek, WiMAX: Taking
Wireless to the MAX (Boca Raton, FL: CRC Press, 2006), wimax.com ,
accessed February 9, 2008.
23. Ibid.
24. Ibid.
25. http://www.computer.org/portal/web/computingnow/news/could-
hackers-take-your-car-for-a-ride, accessed June 25, 2010.
26. “Rip Curl Turns to Skype for Global Communications,” www
.voipinbusiness.co.uk/rip_curl_turns_to_skype_for_gl.asp July 07,
2006, accessed January 21, 2008; “Navigating the Mobility Wave,”
www.busmanagement.com, accessed February 2, 2008; “Sprint Plans
Launch of Commercial WiMAX Service in Q2 2008,” www. intomobile
.com, accessed February 10, 2008; Deepak Pareek, WiMAX: Taking
Wireless to the MAX (Boca Raton, FL: CRC Press, 2006), wimax.com,
accessed February 9, 2008.
27. Ibid.
28. Ibid.
29. Ibid.
30. Ibid.
31. Ibid.
32. “Upward Mobility in Africa,” BusinessWeek, September 24, 2007,
http://www.businessweek.com/magazine/content/07_39/b4051054.
htm .
33. V. C. Gungor, F. C. Lambert, “A Survey on Communication
Networks for Electric System Automation, Computer Networks,”
The International Journal of Computer and Telecommunications
Networking, May 15, 2006, pp. 877–97.
34. Mohsen Attaran, “RFID: an Enabler of Supply Chain Operations,”
Supply Chain Management: An International Journal 12 (2007),
pp. 249–57; Michael Dortch, “Winning RFID Strategies for 2008,”
Benchmark Report, December 31, 2007.
35. Damian Joseph, “The GPS Revolution,” Bloomberg BusinessWeek,
May 27, 2009, http://www.businessweek.com/innovate/content/
may2009/id20090526_735316.htm .
36. Natasha Lomas, “Location Based Services to Boom in 2008,”
Bloomberg Businessweek, February 11, 2008, http://www.business-
week.com/globalbiz/content/feb2008/gb20080211_420894.htm .
37. Ibid.
baL76892_notes_N1-N6.indd 5baL76892_notes_N1-N6.indd 5 28/11/12 8:23 AM28/11/12 8:23 AM

Rev. Confirming Pages
NotesN.6
Quality Management, April 2003, www.sqmmagazine.com , accessed
November 14, 2003.
6. Agile Alliance Manifesto, www.agile.com , accessed November 1, 2003.
7. “Software Costs,” CIO Magazine, www.cio.com , accessed December
5, 2003.
8. IBM Rational Unified Process, http://www-01.ibm.com/software/
awdtools/rup/ , accessed January 2010.
9. http://books.google.com/googlebooks/library.html , accessed March
15, 2010.
10. Jose Martinez, “Lesson in Fraud: NYU Employee Submitted $409K in
Fake Expenses Using Receipts from Garbage,” Daily News, December
23, 2009.
11. CIO Magazine, June 1, 2006; “The Project Manager in the IT
Industry,” www.standishgroup.com ; Johnson, My Life Is Failure;
McGraw, “Making Essential Software Work.”
12. Karl Ritter, “Bill Murray Faces DUI after Golf-Cart Escapade in
Sweden,” The Seattle Times, August 22, 2007, http://seattletimes
.nwsource.com/html/entertainment/2003848077_webmurray22.html .
13. Edward Yourdon, Death March: The Complete Software Developer’s
Guide to Surviving “Mission Impossible” Projects (Upper Saddle River,
NJ: Prentice Hall PTR, 1999).
14. “Baggage Handling System Errors,” www.flavors.com , accessed
November 16, 2003.
15. “Overcoming Software Development Problems,” www.samspublishing
.com , accessed October 2005.
Appendix A
1. “Electronic Breaking Points,” PC World, August 2005.
2. Tom Davenport, “Playing Catch-Up,” CIO Magazine, May 1, 2001.
3. “Hector Ruiz, Advanced Micro Devices,” BusinessWeek, January 10,
2005.
4. www.powergridfitness.com , accessed October 2005.
5. Denise Brehm, “Sloan Students Pedal Exercise,” www.mit.edu ,
accessed May 5, 2003.
6. Margaret Locher, “Hands That Speak,” CIO Magazine, June 1, 2005.
7. www.needapresent.com , accessed October 2005.
8. Aaron Ricadela, “Seismic Shift,” Information Week, March 14, 2005.
9. www.mit.com , accessed October 2005.
10. “The Linux Counter,” counter.li.org , accessed October 2005.
Appendix B
1. Andy Patrizio, “Peer-to-Peer Goes Beyond Napster,” Wired,
February, 14, 2001, http://www.wired.com/science/discoveries/
news/2001/02/41768 , accessed January 2009.
2. Intel in Communications, “10 Gigabit Ethernet Technology Overview,”
http://www.intel.com/network/connectivity/resources/doc_library/
white_papers/pro10gbe_lr_sa_wp , accessed January 2009.
3. Cisco, “TCP/IP Overview,” http://www.cisco.com/en/US/tech/tk365/
technologies_white_paper09186a008014f8a9.shtml , accessed
January 2009.
4. Ibid.
5. “IPv6,” www.ipv6.org , accessed January 2009.
6. Cisco, “TCP/IP Overview.”
7. Cisco, “Network Media Types,” http://www.ciscopress.com/articles/
article.asp?p 5 31276 , accessed January 2009.
8. Ibid.
9. Ibid.
59. Associated Press, “Woman Has 911 Meltdown over McNuggets,”
MSNBC.com, March 4, 2009, http://www.msnbc.msn.com/
id/29498350/ .
60. http://www.citysense.net/ , accessed June 2010.
Chapter 8
1. Carmine Gallo, “Delivering Happiness the Zappos Way,” Bloomberg
Businessweek, May 12, 2009, http://www.business week.com/
smallbiz/content/may2009/sb20090512_831040.htm .
2. James P. Womack, Daniel Jones, and Daniel Roos, The Machine That
Changed the World (New York: Harper Perennial, 1991).
3. www.kiva.com , accessed April 10, 2010.
4. “Post Office Losses Reach $4.7B for Year,” CBS News, August 5,
2009, http://www.cbsnews.com/stories/2009/08/05/national/
main5216012.shtml .
5. “Harley-Davidson on the Path to Success,” www.peoplesoft.com/
media/success , accessed October 12, 2003.
6. “Integrated Solutions—The ABCs of CRM,” www
.integratedsolutionsmag.com , accessed November 12, 2003.
7. “Barclays, Giving Voice to Customer-Centricity,” crm.insightexec.com ,
accessed July 15, 2003.
8. “Nice Emotions,” http://www.nice.com/smartcenter-suite xs ,
accessed March 10, 2010.
9. “Customer Success,” www.rackspace.com , accessed June 2005.
10. The Balanced Scorecard, www.balancedscorecard.org , accessed
February 2008.
11. Timothy Keiningham and Lerzan Aksoy “When Customer Loyalty
Is a Bad Thing,” Bloomberg Businessweek, May 8, 2009,
http://www.businessweek.com/managing/content/may2009/
ca2009058_567988.htm ; “Sprint Plans Launch of Commercial
WiMAX Service in Q2 2008,” www.intomobile.com , accessed
February 10, 2008.
12. Chi-Chu Tschang, “Contaminated Milk Sours China’s Dairy Business,”
BusinessWeek, September 26, 2008, http://www.businessweek.com/
globalbiz/content/sep2008/gb20080926_543133.htm .
13. Frank Quinn, “The Payoff Potential in Supply Chain Management,”;
William Copacino and Jonathan Byrnes, “How to Become a Supply
Chain Master,” Supply Chain Management Review, September/
October, 2001; www.manufacturing.net , accessed June 12, 2003.
14. “Bridgestone/Firestone Tire Recall,” About.com , August 9, 2000,
http://usgovinfo.about.com/blfirestone.htm .
15. http://www.walmart.com/cp/An-Introduction-to-Walmart
.com/542413 , accessed May 2010.
Chapter 9
1. “Four Steps to Getting Things on Track,” Bloomberg Businessweek,
July 7, 2010, http://www.businessweek.com/idg/2010-07-07/
project-management-4-steps-to-getting-things-on-track.html .
2. “Overcoming Software Development Problems,” www.samspublishing
.com , accessed October 2005.
3. www.ted.com , accessed June 15, 2010.
4. Antony Savvas, “Oklahoma Department of Corrections Leaks Personal
Data from Website,” ComputerWeekly.com, April 2008, http://www
.computerweekly.com/Articles/2008/04/18/230353/Oklahoma-
Department-of-Corrections-leaks-personal-data-from.htm .
5. CIO Magazine, June 1, 2006; “The Project Manager in the IT
Industry,” www.si2.com , accessed December 15, 2003; Jim Johnson,
My Life Is Failure (Boston: Standish Group International, 2006),
p. 46; Gary McGraw, “Making Essential Software Work,” Software
baL76892_notes_N1-N6.indd 6baL76892_notes_N1-N6.indd 6 26/11/12 2:01 PM26/11/12 2:01 PM

Rev. Confirming Pages
C-1Photo Credits
Chapter 7
Page 251 (left): © Corbis—All Rights Reserved RF; p. 251 (middle):
© Corbis—All Rights Reserved RF; p. 251 (right): © Corbis—All Rights
Reserved RF.
Chapter 8
Page 298 (left): © Ethan Miller / Getty Images; p. 298 (middle):
© BananaStock / PunchStock RF; p. 298 (right): © Noah
Berger / Bloomberg via Getty Images; p. 318 (top): www.
dontbuydodgechryslervehicles .com; p. 318 (bottom): Courtesy of
www.jetbluehostage.com.
Chapter 9
Page 342 (left): ©Jason Reed / Ryan McVay / Getty Images RF;
p. 342 (middle): © BananaStock / Jupiterimages RF; p. 342 (right):
© Janis Christie / Getty Images RF; p. 362 (bottom), p. 377: Used with
permission from Microsoft.
Appendix A
Page A.3 (left): © Royalty-Free / Corbis; p. A.3 (right): © Stockbyte /
PunchStock Images RF; p. A.4, A.5 (RAM): © Nick Rowe / Getty Images
RF; p. A.4, A.8 (TV): © Digital Vision / Getty Images RF; p. A.4, A.8 (printer):
© Image Club RF; p. A.4, A.9 (cords): © Royalty-Free / Corbis RF; p. A.4
(composite): © Getty Images / Photodisc RF; p. A.4, A.6 (CD ROM):
© Daisuke Morita / Getty Images RF; p. A.4, A.5 (disc composite): © Don
Bishop / Getty Images RF; p. A.4, A.7 (mouse): © Stockbyte / PunchStock
Images RF; p. A.4, A.7 (keyboard): © Stockbyte / PunchStock Images RF;
p. A.10: © Digital Vision / Getty Images RF.
Chapter 1
Page 3 (left): © Digital Vision / Getty Images RF; p. 3 (middle): © Digital
Vision / Getty Images RF; p. 3 (right): © John Lund / Sam Diephuis / Blend
Images LLC RF.
Chapter 2
Page 43 (left): © JGI/Blend Images/Getty Images RF; p. 43 (middle): ©
Steve Cole/Getty Images RF; p. 43 (right): © Steve Cole / Getty Images RF.
Chapter 3
Page 91 (left): © John Lund / Marc Romanelli / Blend Images LLC RF;
p. 91 (middle): Courtesy of Pinterest.com; p. 91 (right): AFP / Getty
Images; p. 112: © Punchstock / Digital Vision RF; p. 115 (top): © Radius
Images / Corbis RF; p. 115 (bottom): Fotosearch / Getty Images RF.
Chapter 4
Page 137 (left): Bernhard Lang / Getty Images; p. 137 (middle): Comstock
/ Jupiterimages RF; p. 137 (right): altrendo images / Getty Images RF.
Chapter 5
Page 174 (left): © AP Photo / Jeff Chiu; p. 174 (middle): © Mike Margol /
PhotoEdit; p. 174 (right): Courtesy of Pandora Media, Inc.; p. 191:
Reproduced with permission of Bloomberg Businessweek Magazine.
Chapter 6
Page 211 (left): Image Source / Getty Images RF; p. 211 (middle): Maciej
Frolow / Getty Images RF; p. 211 (right): C. Zachariasen / PhotoAlto; p. 212:
Courtesy of Hotels.com; p. 213 (top): © 2012 InSinkErator, InSinkErator®
is a division of Emerson Electric Co. All rights reserved.; p. 213 (bottom):
Courtesy of SC Johnson; p. 236: Courtesy of NCR.
P H O T O C R E D I T S
baL76892_photocredits_C1-C2.indd C-1baL76892_photocredits_C1-C2.indd C-1 29/11/12 10:53 AM29/11/12 10:53 AM

Rev. Confirming Pages
baL76892_photocredits_C1-C2.indd C-2baL76892_photocredits_C1-C2.indd C-2 29/11/12 10:53 AM29/11/12 10:53 AM

Confirming Pages
I.1Index
A
ABC, 132
Aberman, Rich, 105
AbsolutePoker.com, 145
Acceptable use policy (AUP), 146, 147
Access, A.14
Accessibility, 183–184
Accounting, 10–12
Accounting and finance ERP components, 323
Accuracy, 185
Actionly.com, 43–44
Active RFID tags, 275
Adams, Douglas, 41
Adaptive computer devices, A.8
Adidas, 338
Administrator access, 184
Adobe, 35, A.14
Advanced encryption standard (AES), 159
Advanced Micro Devices (AMD), A.2
Adware, 150, 153–154
AdWords, 186
AES (advanced encryption standard), 159
Affiliate programs, 101
Africa, 293–294
Agent-based modeling, 62–63
Agile methodologies (software development),
352–353
Agile MIS infrastructure, 177, 183–185
AI (artificial intelligence), 60–64
Air Force Cyber Command, 165
Airspan Networks, 251
Albertson’s, 20
Alibi Network, 363
Altec Lansing Technologies, 30
Altman, Eli, 97
ALU (arithmetic-logic unit), A.2–A.3
Amazon EC2 (Elastic Compute Cloud), 197
Amazon Web Services (AWS), 199
Amazon.com, 5, 20, 53, 63, 73, 98, 103, 104, 111,
113, 117, 126–127, 192, 194, 299, 307, 314
AMD (Advanced Micro Devices), A.2
American Dairy Inc., 333
American Express, 97, 275
American Family Immigration History Center, 223
Analysis phase (SDLC), 346
Analytical CRM, 312
Analytical information, 55, 214–216
Analytics, 40
Anderson, Chris, 98, 346
Anderson, Tom, 5
Ansari X, 89
Anti-spam policy, 148
Anticybersquatting Consumer Protection Act
(1999), 97
Antivirus software, 160
AOL, 106, 255
API (application programming interface), 117
Apple Computer Inc., 16–17, 23, 30–32, 95,
118, 185, 187, 193, 204, 271
Apple TV, 263
Appleton Learning, 33
Applets, 96
Appleyard, David, 166
Appliance, A.9
Application programming interface (API), 117
Application service provider license, A.14
Application software, A.13–A.14
Aristotle, 108
Arithmetic-logic unit (ALU), A.2–A.3
ARPANET, 95–96
Artificial intelligence (AI), 60–64
As-Is process models, 66, 68, 70
Asia, 364
Asset tracking, 275
Associate programs, 101
Association detection, 235–236
Asynchronous communications, 113
AT&T, 106, 142, 254, 255, 257, 271, 290, A.11
AT&T Wireless, 142
Attributes, 221, C.2–C.3
Audacity, 133
Audi, 38
Augmented reality, 63
AUP (acceptable use policy), 146, 147
Authentication, 157
Authorization, 157
Automatic vehicle location (AVL), 275–276
Automation, 72–73
AutoTrader.com, 97
Availability, 184–185
Avatar (film), 5
AVL (automatic vehicle location), 275–276
AWS (Amazon Web Services), 199
Axelbank, Gary, 77
B
BabyCare, 333
Back-office processes, 64
Back orders, 307
Backdoor programs, 154
Background Draw-a-Secret (BDAS), 158
Backup, 178
Backup and recovery plan, 178, 179, 183
Backward integration, 300, 301
Balanced scorecard, 325
Bandwidth, 255–256
Banner ad, 101
Bar code scanner, A.7
Barclays Bank, 312
Barker, Brandee, 125
Barn Raisers, 82
Barnes & Noble, 103
BBN Technologies, 295
BCP (business continuity planning), 181
BDAS (Background Draw-a-Secret), 158
BEA, 370
Beckham, David, 40
Behavioral grouping, 82
Belkin, 30
Benchmarking, 52–53
Benchmarks, 52–53
Bentium, 165
Berlin Wall, 4
Berners-Lee, Tim, 120, 346
Best Buy, 232, 337
Bezos, Jeffrey, 5, 126–127, 346
BI; see Business intelligence
Bianchini, Gina, 126
Bike-sharing programs, 287–288
Binary digit, 256
Biometrics, 159
Bit, 256
Bit rate, 256
BitTorrent, 171, 259
Bizrate.com, 86, 104
Black-hat hackers, 153
BlackBerrys, 269, 271
Blair, Tony, 40
Blockbuster, 34, 99
Blogs and blogging, 116–117, 132
Bloomberg, 17 , 118
Bloomberg Businessweek, 164
Bloomberg.com, 104
Bluetooth, 268
Bookmarking, 114, 115
Booz Allen Hamilton, 164
The Bork Bill, 144
Boston College, 134
Boston Digital Bridge Foundation, 266
Botti, Chris, 289
Bottlenecks, 73
Boxee, 263
Box.net, 205, 245
BPL (broadband over power line), 257, 258
BPM (business process management)
systems, 77
BPR (business process reengineering), 75–76
Bradesco, 291
Brainstorming, 345–346
Brand Keys, 125
Branson, Richard, 346
Brazil, 291, A.12
Brick-and-mortar business, 103
Brin, Sergey, 40, 346
Broad business strategies, 22
Broadband, 256, 289
Broadband modem, 257
Broadband over power line (BPL), 257, 258
Browser software, A.14
B2B (business-to-business), 102
B2C (business-to-consumer), 102
Buffalo, New York, Police Dept., 167
I N D E X
baL76892_idx_I1-I12.indd I.1baL76892_idx_I1-I12.indd I.1 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
IndexI.2
Cisco, 53, 95, 97
Citibank, 61, 100
CitySense, 295
CKO (chief knowledge officer), 15
Clayton, Glenn, 33
Clearwire, 270
Clerico, Bill, 105
Click-and-mortar business, 103
Click-fraud, 145
Click performance, 44
Click-through, 101
Click-to-talk, 316
Clickstream data, 101–102, 150
Client, 176, B.4
Client/server networks, B.4
Climate change, 9
Clinton, Bill, 346
Clock speed, A.4
Cloud bursting, 199
Cloud computing, 174–175, 195–199, 263
Cloud fabric, 196
Cloud fabric controller, 196
Cluster analysis, 234–235
CMS (content management systems), 108
CNN.com, 104
Coaxial cable, B.8–B.9
COBIT (control objects for information and
related technology), 348
Codd, Edgar (E. F.), C.7
Cohen, Bram, 171
Cold sites, 180
Collaboration, 111–113
Collaboration systems, 111
Collaborative demand planning, 308
Collaborative engineering, 308
Collective intelligence, 111–112
College Hunks Hauling Junk, 58
Columbus, Christopher, 3
Comcast, 106, 255, 259, 262
Communication devices, A.3, A.9
Communication software, A.14
Communications, asynchronous vs.
synchronous , 113
Communications Assistance for Law
Enforcement Act (1994), 144
Community cloud, 199
Compact disk-read-only memory (CD-ROM)
drives, A.6–A.7
Compact disk-read-write (CD-RW) drives, A.6
Competitive advantages, 15–17, 365
Competitive analysis, 44
Competitive click-fraud, 145
Competitive intelligence, 17
Complex instruction set computer (CISC)
chips, A.3
Composite entities, C.6
Computer-aided software engineering (CASE), 348
Computer Fraud and Abuse Act (1986), 144
Computers, 187
categories of, A.9–A.12
defined, A.2
Computerworld, 34
Conde Nast, 134
Business strategy, 15–27
choosing business focus, 22–23
generic, 22–23
identifying competitive advantages, 15–17
Porter’s Five Forces Model, 18–21
value chain analysis, 23–27
Business-to-business (B2B), 102
Business-to-consumer (B2C), 102
BusinessWeek, 17 , 164, 165
Buyer power, 18–19, 21
Byrd, Robert, 40
C
Cable, 257, A.10, B.3, B.8–B.9
Cable & Wireless Worldwide, 255
Cable Communications Act (1984), 144
Cable modems, 257
Cache memory, A.5
Call centers, 315
Call scripting systems, 316
Campaign management systems, 314
CAN-Spam Act (2003), 144
Canada, 261
Canadian Broadcasting Company (CBC), 149
Capacity, 186
Capacity planning, 186
Carbon emissions, 189
Cardinalities, C.6, C.7
Carfax, 102
Carnegie Mellon University, 89
Carnivore, 267
Cartography, 276
CASE (computer-aided software engineering), 348
CBC (Canadian Broadcasting Company), 149
CBS, 132
CD-ROM (compact disk-read-only memory)
drives, A.6–A.7
CD-RW (compact disk-read-write) drives, A.6
Celebrities, social media used by, 125
Cell phones, 206, A.14
Cellular communication systems, 271–272
Center for American Progress, 9
Central processing unit (CPU), A.2–A.4
Certificate authority, 159
Change agent, 345
Charles Schwab, 95
Charlesschwab.com, 104
Chen, Peter, C.4
Chief information officer (CIO), 15
Chief knowledge officer (CKO), 15
Chief privacy officer (CPO), 15
Chief security officer (CSO), 15
Chief technology officer (CTO), 15
China, 4, 6, 17, 39, 40, 147, 165, 168, 332–334,
363, 364, A.12
China Mengniu Dairy, 333
Chip line width, A.4
Chipless RFID tags, 275
Christensen, Clayton M., 94
Cicero, 170
CinemaNow, 263
CIO (chief information officer), 15
CISC (complex instruction set computer) chips, A.3
Bugs, 349
Bullwhip effect, 305–306
Burton, Tim, 314
Bus topology, B.5
Bus width, A.4
Bush, George W., 82
Business 2.0; see Web 2.0 (Business 2.0)
Business continuity planning (BCP), 181
Business-critical integrity constraints, 224
Business driven ethics and security, 143;
see also Ethics; Information security
domain squatting/cyber squatting, 97
employee information theft, 57
ewaste, 188–189
at Facebook, 225
geoblogging, 282
inappropriate data handling, 10
planning for the unexpected, 354
Business driven MIS, 5–15
at Apple, 30–31
business intelligence, 8, 10
car black box hacking, 270
classic car company, 321
data, 6–8
data manipulation, 9
and departmental companies, 11–12
disaster recovery, 184
at Google, 186
Google Print Library Project, 361
information, 8
and information age, 5–10
and Jobs’ obituary, 118
knowledge, 10
at Real People magazine, 218
streamlining email, 74
Business-facing processes, 64
Business focus, choosing, 22–23
Business impact analysis, 182
Business intelligence (BI), 6, 8, 10, 227–229
data marts, 228–231
data mining, 231–232, 234–235
data warehousing, 227–228
ERP components for, 324
supporting decisions with, 237–238
visual, 238–239
Business intelligence dashboards, 239
Business models:
defined, 101
for ebusiness, 101–105
Business process improvement, 72–73
Business process management (BPM)
systems, 77
Business process model, 66
Business process modeling, 66–71
Business process reengineering (BPR),
75–76
Business processes, 23, 64–77
evaluating, 64–66
leveraging, 76, 77
MIS for improving, 71–77
models, 66–71
Business requirements, 346, 356, 371–372
Business rules, C.3
baL76892_idx_I1-I12.indd I.2baL76892_idx_I1-I12.indd I.2 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
I.3Index
operational, 54–56
strategic, 56–60
Decision support systems (DSSs), 55–60
Decryption, 159
Defense Advanced Research Projects Agency
(DARPA), 95, 165
Defense Advanced Research Projects Agency
(DARPA) Grand Challenge, 88–89
Dell, Michael, 5, 126
Dell Computers, 5, 38, 95, 99, 208, 334, 338,
A.12, A.14
Delta Produce, 33
Demand planning systems, 306
Denial-of-service attack (DoS), 154
Denver B-cycle, 287–288
Denver International Airport (DIA), 370
Departmental companies, 11–12
Dependency, 361
Design phase (SDLC), 348
Desktop computers, A.11
Desktop publishing software, A.14
Desmos, 33
Development phase (SDLC), 348
DeWolfe, Chris, 5
DIA (Denver International Airport), 370
Dial-up access, 257, A.10
Diamandis, Peter, 346
Dickerson, Ryan, 222
Differentiation, 22
Diffie, Whitfield, 129–130
Digg, 113, 133
Digital certificates, 159–160
Digital Darwinism, 94
Digital dashboards, 59–60
designing, 88
iGoogle, 85
Digital divide, 266
Digital Equipment Corporation (DEC), 95, B.6
Digital rights management, 141
Digital subscriber line (DSL), 256–257, A.10
Digital video disk (DVD), A.6–A.7
Digital video disk-read/write (DVD-RW), A.6
Ding-A-Ling, 294
Dionisopoulos, Kosta, 33
Disaster recovery cost curve, 180
Disaster recovery plans, 179–180, 183
Discovery prototyping, 352
Disintermediation, 99
Disk image software for data recovery, A.13
Disk optimization software, A.13
Disruptive technologies, 94–97
Distributed denial-of-service attack (DDoS), 154
DivX, 263
DNS (domain name system), 259–260, 291
DNS cache poisoning, 291
DoD; see U.S. Department of Defense
Dole Organic, 118
Domain name hosting (web hosting), 96
Domain name system (DNS), 259–260, 291
Domain squatting, 97
Domino’s Pizza, 148
Dong Lizhong, 332–333
DoS (denial-of-service attack), 154
Customer satisfaction, 50, 52
Customreceipts.com, 363
Cyber squatting, 97
Cyberbullying, 145
Cybermediation, 100
Cybersyndrome.3322.org, 164–165
Cyberterrorism, 160
Cyberterrorists, 153
Cyberwar, 160
Cycle time, 74
D
DARPA (Defense Advanced Research Projects
Agency), 95, 165
DARPA Grand Challenge, 88–89
Data, 6–7
for business driven MIS, 6–8
for departments, 12
inappropriate data handling, 10
manipulating, 9
for political micro-targeting, 81–82
in social media sector, 43
Data centers, 193–195
Data dictionary, 220
Data-driven websites, 224–227
Data element, 220
Data field, 220
Data governance, 219
Data hosting services, 245
Data inconsistency, 216
Data integrity issues, 216–217
Data management software, A.14
Data marts, 228–231
Data mining, 231–232, 234–235, 243–244,
246–247
Data-mining tools, 232
Data models, 220, C.2
Data quality audits, 230
Data rate, 256
Data redundancy, 223
Data visualization, 239, 242–243
Data warehouses, 227–229, 247
Database management system (DBMS),
219, C.1; see also Relational database
management systems
Databases, 219
defined, C.1
designing, C.1–C.9
illegal access to, 244
relational, C.1–C.3
Davis, Todd, 161
DBMS (database management system), 219, C.1
DCS1000, 267
DDoS (distributed denial-of-service attack), 154
Death March (Edward Yourdon), 366
DEC (Digital Equipment Corporation), 95, B.6
Decision making, 43–64
analytics for, 40
and artificial intelligence, 60–64
business intelligence support for, 236–238
challenges in, 45–48
managerial, 55–56
metrics for, 48–53
Confidentiality, 141, 365
Connectivity services, 120; see also Networks
Consolidation, 60
Consumer protection, with ebusiness, 108, 109
Consumer-to-business (C2B), 102, 103
Consumer-to-consumer (C2C), 102, 103
Contact centers, 315, 316
Contact management CRM systems, 315
Content creator, 224
Content editor, 224
Content filtering, 159
Content management systems (CMS), 108
Content providers, 104
Contracts, outsourcing, 365
Control objects for information and related
technology (COBIT), 348
Control panel, A.12
Control unit, A.2–A.3
Convergence, network, 260–262
Conversion, 345
Conversion rates, 52
Cookies, 101, 150
Copyright, 119, 141, 361
Core business processes, 64, 66
Core ERP components, 320, 322–324
Cornwall, Duchess of, 40
Corporate social responsibility, 188
Corrective maintenance, 350
Cost leadership, 22
Counterfeit software, 141
Couric, Katie, 125
Course management software, A.14
CPO (chief privacy officer), 15
CPU (central processing unit), A.2–A.4
Crackers, 153
Craigslist, 113
Crash-proof software, A.13
Credit card data, 220
Critical path, 361
Critical success factors (CSFs), 49–50
CRM; see Customer relationship management
CRM analysis technologies, 311
CRM predicting technologies, 311
CRM reporting technologies, 311
Croom, Charles E., 164–165
Cross-selling, 314
Crowdsourcing, 112–113
Cryptography, 159
CSFs (critical success factors), 49–50
CSO (chief security officer), 15
CTO (chief technology officer), 15
C2B (consumer-to-business), 102, 103
C2C (consumer-to-consumer), 102, 103
Cubes (data), 229–230
Customer-facing processes, 64
Customer loyalty, 331–332
Customer order cycle time, 307
Customer relationship management (CRM),
309–317
benefits of, 311–317
challenges of, 317–318
ERP components for, 324
future of, 319, 327–328
baL76892_idx_I1-I12.indd I.3baL76892_idx_I1-I12.indd I.3 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
IndexI.4
Etymotic Research, 30
Eudora, A.14
Europe, 364
Ewaste, 188–189, 203, 208
Exabyte (EB), A.6
Executive information system (EIS), 56–57, 59
Expedia.com, 97
Expert systems, 61
Explicit knowledge, 112
Extended ERP components, 320, 322, 324–325
Extraction, transformation, and loading (ETL),
228–229
Extranets, 264, 265
Extreme programming (XP) methodology, 353
ExxonMobil, 335
F
Facebook, 6, 25, 113, 125, 128–129, 149, 190,
214, 225, 267, 277
Facts, 5
Failback, 178
Failover, 178
Fair and Accurate Credit Transactions
Act (2003), 144
Fair Credit Reporting Act (FCRA), 142
Family Education Rights and Privacy
Act (1974), 144
FastEthernet, B.6
Fault tolerance, 178
FBI (Federal Bureau of Investigation),
165–166, 267
FCC; see Federal Communications Commission
FCRA (Fair Credit Reporting Act), 142
Feasibility, 355
Federal Bureau of Investigation (FBI),
165–166, 267
Federal Communications Commission (FCC),
259, 262, 289
FedEx (Federal Express), 17, 66, 74, 316
Feedback, 14
Fiber-optic cable, B.8–B.9
Fidelity, 104
Fields, C.7
50 Cent, 126
File and data recovery software, A.13
File Transfer Protocol (FTP), B.8
Finance, 11–12
Financial metrics, 52
Finkelstein, Clive, C.4
Firestone Tire Company, 334
Firewalls, 160
Firm infrastructure, 24
First-mover advantage, 17
FirstGov.gov, 120, 121
Five Forces Model; see Porter’s Five Forces
Model
Flash memory, A.5
Flexibility, 185
Flickr, 97, 104, 111, 114, 117, 133
Focused business strategies, 22–23
Folksonomy, 114, 115
Ford, 334
Forecasts, 236
Embedded operating system, A.12
Emergency, 181
Emergency Alert System, 182
Emergency notification services, 182
Emergency preparedness, 181
Emerson, 213
Emotion-detection software, 316
Employee monitoring policy, 149–151
Employee relationship management (ERM), 319
Encrypt data software, A.13
Encryption, 159
Energy consumption, 189–190
English, Paul, 293–294
Enterprise application integration (EAI), 301
Enterprise application integration (EAI)
middleware , 301
Enterprise architect, 176
Enterprise MIS, 298–328, 341–365
customer relationship management,
309–317
developing software, 345–361
enterprise resource planning, 319–329
future of, 327–328
outsourcing projects, 361–365
project planning, 360–361
supply chain management, 302–308
and systems development life cycle,
345–350
Enterprise Rent-A-Car, 337
Enterprise resource planning (ERP), 319–329
benefits of, 320, 322–324
challenges of, 327
future of, 327–328
Enterprise systems, 301
Entities, 221, C.2
Entity-relationship diagrams (ERDs), C.2, C.4–C.7
Entry barriers, 20
Epolicies, 145
Eprocurement, 324–325
Equifax, 142
ERDs (entity-relationship diagrams), C.2, C.4–C.7
ERM (employee relationship management), 319
ERP; see Enterprise resource planning
Eshops, 102, 103
Estes, Matthew, 333
Estimated time enroute (ETE), 276
Estimated time of arrival (ETA), 276
Estores, 102, 103
ETA (estimated time of arrival), 276
Etailers, 102, 103
ETE (estimated time enroute), 276
Ethernet, B.6
Ethical computer use policy, 145, 146
Ethics, 141–150; see also Business driven
ethics and security
developing information management policies ,
145–150
information ethics, 141–145
setting boundaries, 170–171
unethical websites, 363
ETL (extraction, transformation, and loading),
228–229
Etrade, 104
Dot-com, 102
Downtime, 151–153
DPW (Dubai Ports World), 334
Dr Pepper/ Seven-Up Inc., 278
DreamWorks Animation, 191
Drill-down, 60
Drucker, Peter, 48, 50
DSL (digital subscriber line), 256–257, A.10
DSSs (decision support systems), 55–60
Du Yanjun, 333
Dual boot, A.12
Dubai Ports World (DPW), 334
Dumpster diving, 155
DVD (digital video disk), A.6–A.7
DVD-ROM drives, A.6
DVD-RW (digital video disk-read/write), A.6
Dynamic catalog, 224
Dynamic information, 224
Dynamic scaling, 197
E
E-espionage, 164–165
E-Pass, 275
EAI (enterprise application integration), 301
EAI (enterprise application integration)
middleware , 301
Earthlink, 106, 255
EB (exabyte), A.6
eBay, 52, 98, 103, 104, 111, 117, 166
Ebooks, A.9–A.10
Ebusiness, 94–109
advantages of, 98–101
business models for, 101–105
challenges of, 108–109
disruptive technologies and, 94–97
ERP components for, 324–325
MIS tools for, 106–108
Ebusiness model, 101–105
EC2 (Elastic Compute Cloud), 197
Ecommerce, 96
Economic Policy Institute, 17
Edge matching, 276
EDI (electronic data interchange), 305
Ediscovery, 145
Edmunds, 104
Effectiveness:
with ebusiness, 100–102
MIS metrics, 50–53
Efficiency MIS metrics, 50–53
Egovernment, 120, 121
802.11 (Wi-Fi standard), 269
EIS (executive information system), 56–57, 59
Elastic Compute Cloud (Amazon EC2), 197
Electronic Communications Privacy
Act (1986), 144
Electronic data interchange (EDI), 305
Electronic discovery, 145
Electronic waste; see Ewaste
Elevation of privilege, 155
Elogistics, 324
Email, 106
Email privacy policy, 147–148
Email software, A.14
baL76892_idx_I1-I12.indd I.4baL76892_idx_I1-I12.indd I.4 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
I.5Index
Hotmail, 101
Hotspots, 268
Hsieh, Tony, 298
HTC EVO 4G phones, 292
HTML (hypertext markup language), 96
HTPPS (secure hypertext transfer protocol), 266
HTTP (hypertext transfer protocol), 96, B.8
Hub (switch or router), B.3
Hulu, 259
Human resource management, 24
Human resources, 11–12
Human resources ERP components, 324
Hummer, 38
A Hundred Monkeys, 97
Hunt, Corrine, 203
Hybrid cloud, 199
Hybrid topology, B.5
Hypertext markup language (HTML), 96
Hypertext transfer protocol (HTTP), 96, B.8
Hyundai, 38
I
IaaS (Infrastructure as a Service), 197
IBM, 63–64, 95, 99, 132, 353, 362, A.12
ICANN (Internet Corporation for
Assigning), 260
Identified visitors, 102
Identity theft, 156–157, 167
Identity Theft and Assumption Deterrence
Act (1998), 144
IDS (intrusion detection software), 160–161
iGoogle, 85
IKEA, 134
IMing (instant messaging), 106–107
Implementation phase (SDLC), 349
Inbound logistics, 23
Incident management, 182
Incident records, 182
Incidents, 182
India, 3, 4, 39, 164, 332, 363–364
Influencers, finding, 44
Infographics (information graphics), 211–212,
238–239
Infomediaries, 104
Information, 6–8
analytical, 55
for business driven MIS, 7–8
quality of, 214–219
transactional, 54
Information accuracy, 52
Information age, 5–10
Information architecture, 108
Information cleansing, 230–232
Information compliance, 144–145
Information ethics, 141–145
Information governance, 144, 219
Information granularity, 214, 215
Information graphics (infographics), 211–212,
238–239
Information inconsistency, 216
Information integrity, 224
Information integrity issues, 216, 217
Information management, 144
Goodall, Jane, 282
Goods, 12, 13
Goodwill Industries International, 208
Google, 31, 40, 85, 86, 103–104, 117, 125,
147, 185, 186, 192–194, 198, 203–204,
235, 259, 263, 288, 291, 361
Google Analytics, 43, 44
Google Cloud Connect, 199
Google Dashboard, 235
Google Earth, 277, 282
Google Latitude, 288
Google Maps, 288, 291
Google Print Library Project, 361
Gore, Al, 41, 118
Gowalla, 277
GPS (global positioning systems), 275–276
Granularity, 57
Great Britain, 267
Green MIS, 187
Grid computing, 189–192
Griffin Technology, 30
Groupware, A.14
The Guardian, 242
H
Hackers, 153, 165–166
Hactivists, 153
Handheld computers, A.11
Hard drives, A.6
Hardware, 176, A.1–A.12
central processing unit, A.2–A.4
communication devices, A.9
computer categories, A.9–A.12
input devices, A.7–A.8
output devices, A.8–A.9
primary storage, A.4–A.5
secondary storage, A.5–A.7
Hardware key logger, 150
Harley-Davidson, 309
Harley’s Owners Group (HOG), 309
Harvard Business School, 325
Harvard University, 295, 361
Health Insurance Portability and Accountability
Act (HIPAA, 1996), 144
Help desk, 349
Hernandez-Rebollar, Jose L., A.9
Hewlett-Packard, 53, 95, 150, A.12
High availability, 184
High-speed Internet cable connections, 257
HIPAA (Health Insurance Portability and
Accountability Act, 1996), 144
Hitler, 40
Hits, 102
Hoaxes, 155
HOG (Harley’s Owners Group), 309
Hogan, Hulk, 335
Holden, Jeff, 31
Home Depot, 95
Homeland Security Act (2002), 144
Hosting, 244
Hot, Flat, and Crowded (Friedman), 34
Hot sites, 180
Hotels.com, 212
Foreign key, 222, C.9
Forrester Research, 97
Fortune magazine, 34
48 Hour Magazine, 130
Forward integration, 300, 301
Foursquare, 133, 277, 289
Fourth-generation languages (4GL), 349
France, 332
Freedom of Information Act (1967, 1975, 1994,
1998), 144
Friedman, Nick, 58
Friedman, Thomas, 3–4, 34, 39–40
Frito-Lay, 17, A.2
Front-office processes, 64
FTP (File Transfer Protocol), B.8
Fuzzy logic, 62
G
Gantt chart, 361, 362
The Gap, 63, 103
Gates, Bill, 5, 6, 41, 118, 346
GB (gigabyte), A.5, A.6
Genachowski, Julius, 289
General Motors Corporation, 89, 95, 276, A.11
Generic business strategies, 22–23
Genetic algorithms, 62
Geoblogging, 282
Geocache, 276
Geocoding, 276
Geocoin, 276
Geographic information, 276
Geographic information system (GIS), 276–277
George Air Force Base (California), 89
Geospatial data, 276
Germanotta, Stefani Joanne Angelina, 5
Germany, 333, 368
Gerson, Dan, 251
GHz (gigahertz), A.3
Gigabit Ethernet, B.6
Gigabyte (GB), A.5, A.6
Gigahertz (GHz), A.3
GIS (geographic information system), 276–277
GIS map automation, 276
Gladwell, Malcolm, 41, 346
Global positioning systems (GPS), 275–276
Globalization, 3–4
Barclays Bank, 312
competitive landscape, 17
cultural blunders, 365
floating data centers, 194
global databases, 233
Google’s China operations, 147
iYogi.net help desk, 53
mobile phones, 273
nonprofits, 110
Goal-seeking analysis, 56
Godin, Seth, 41, 346
Goebel, Jennifer, 294
Goldman, Eric, 128
Goldman Sachs, 244
Gombe National Park, 282
Gomez.com, 86
Good Charlotte, 126
baL76892_idx_I1-I12.indd I.5baL76892_idx_I1-I12.indd I.5 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
IndexI.6
Kiva, 110
Kiva Mobile Fulfillment System (Kiva MFS), 307
Kiva Systems, 63
KM (knowledge management), 111
KMS (knowledge management system), 111
Knight, Philip, 345
Knowledge, 6, 10
for business driven MIS, 10
explicit and tacit, 112
Knowledge management (KM), 111
Knowledge management system (KMS), 111
Knowledge workers, 10, 112
Koblin, Aaron, 242
Kodak, 134
KPIs (key performance indicators), 49–51
KPMG, 333
Kroger, 20
Kurtz, Paul B., 164
Kutcher, Ashton, 125
L
Lady Gaga, 5
LANs; see Local area networks
Laptop computers, A.11
Larking, Daniel, 165
Latitude, 276
LBS; see Location-based services
Legacy systems, 301, 345
Legend, John, 126
Lending Tree, 97, 243
Level3, 254
Levi Strauss, 100
Levie, Aaron, 205
Levitt, Steven, 41, 346
LifeLock, 161
Lin, Alfred, 298
Lin, John, 30
LindeX, 83
LinkedIn, 114, 126, 149
LinkExchange, 298
Linux, A.12, A.13
List generators, 313
Liu, Roger, 333
Live Help, 100
Local area networks (LANs), 254, 255, B.2, B.3
Location-based services (LBS), 277, 279, 283–284
Logical view (databases), 223
Logistics, inbound and outbound, 23
Long tail, 98, 99
Longitude, 276
Loopt, 277
Lord, William T., 165
Lotus, A.14
Lowermybills.com, 243
Loyalty programs, 19
Luberoff, Eli, 33
Lulu.com, 97, 99–100
Luo Yunbo, 332
Lutz, Bob, 116
M
M (megabyte), A.5, A.6
Mac OS X, A.13
Internet Corporation for Assigning Names and
Numbers (ICANN), 260
Internet Crime Complaint Center, 165
Internet protocol (IP), B.7
Internet Protocol TV (IPTV), 262, 263
Internet protocol version 6 (IPv6), B.7–B.8
Internet service providers (ISPs), 106, 290
Internet use policy, 146–147
Interoperability, B.6
Intranets, 263–264
Intrusion detection software (IDS), 160–161
Intuit, 95
Inventory cycle time, 307
Inventory turnover, 307
IP (Internet protocol), B.7
iPad, 23, 31, 269
iPhones, 31, 269, 271, 280
iPods, 30–31, 187, 294
Ipreo, 244
IPTV (Internet Protocol TV), 262, 263
IPv6 (Internet protocol version 6), B.7–B.8
Ireland, 364
Ironman Triathlon World Championship, 251–252
ISO, 204
ISPs (Internet service providers), 106, 290
Israel, 364
Iterative development, 352–353
iTunes, 204, 259
i2, 327, 329, 345
iYogi.net, 53
J
Jackson, Warren, 293
Jagger, Mick, 335
James, Josh, 35
Jane Goodall Institute, 282
JetBlue Airways, 3, 38, 337
Jobs, Steve, 16, 41, 118, 289
Johnson, Derek, 25
Johnson & Johnson, 95
JoinAfrica, 293–294
Jordan, Chris, 242
Joystick, A.7
K
Kaplan, Robert, 325
Karmaloop.com, 133
Karp, David, 125, 126
Kate Spade, 30
Kayak.com, 293
KB (kilobyte), A.6
Kelkoo, 100
Kennedy, John F., 40, 119
Kennedy, Robert F., 40, 119
Kerin, Dimitar, 130
Key logger software, 150
Key performance indicators (KPIs), 49–51
Key trapper software, 150
Keyboard, A.7
Kia, 38
Kill switch, 360
Kilobyte (KB), A.6
Kilowatt Sport input device, A.7, A.8
Information management policies, 145–150
acceptable use, 146, 147
email privacy, 147–148
ethical computer use, 145–146
information privacy, 146
social media, 148–149
workplace monitoring, 149–150
Information MIS infrastructure, 177–182
Information privacy policy, 146
Information property, 144
Information reach, 98
Information richness, 98
Information secrecy, 156
Information security, 151–161; see also
Business driven ethics and security
databases, 224
e-espionage, 164–165
for networks, 266–267
and Oklahoma state database, 347
people for, 155
protecting intellectual assets, 151–154
technology for, 156–160
Information security plan, 155
Information security policies, 155
Information technology monitoring, 150
Information theft, 57, 280; see also
Identity theft
Information vandalism, 119
Informing, 238
Infosys, 364
Infrastructure:
firm, 24
MIS; see MIS infrastructure
Infrastructure as a Service (IaaS), 197
In-house development, 4, 361
Inner Mongolia Yili Industrial Group, 333
Innovation:
emotion-detection software, 316
News Dots, 237
NFL crash pads, 281
password doodling, 158
robots, 63
Stamps.com, 21
unethical websites, 363
virtualization, 193
and Web 1.0 vs. 2.0, 113
The Innovator’s Dilemma (Christensen), 94
Inovant, 146
Input devices, A.3, A.7–A.8
Insiders, 155
In-sourcing, 4, 361
Instant messaging (IMing), 106–107
Intangible benefits, 355
Integrations, 300, 327–328
Integrity constraints, 224
Intel, 95, 132, 187, 263, 270, A.2, A.12, B.6
Intellectual assets, protecting, 151–154
Intellectual property, 141
Intelligent agents, 62
Intelligent systems, 60
Interactivity, 100
Intermediaries, 99
Internet, 95, 96
Internet cable connections, 257
baL76892_idx_I1-I12.indd I.6baL76892_idx_I1-I12.indd I.6 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
I.7Index
Nelson, Willie, 289
Nestlé, 218
Net neutrality, 259
NET Virtua, 291
Netflix Inc., 5, 34, 97, 99, 104, 111, 143, 234,
248, 259, 263, 336
Netscape, 4, 96, A.9, A.14
Network access points (NAPs), 254
Network access technologies, 255–257
Network convergence, 260–262
Network effect, 117
Network interface card (NIC), B.3
Network operating system (NOS), B.4
Network protocols, 258–260
Network providers, 254–255
Network topologies, B.5
Network transmission media, B.9–B.10
Network user license, A.14
Networking, with Business 2.0, 113–115;
see also Social networking
Networks, 176, 253–267, B.1–B.5
access technologies, 255–257
architecture, B.3–B.4
benefits of, 263–265
categories of, 254
challenges with, 266–267
convergence, 260–262
Ethernet, B.6
network providers, 254–255
neural, 61–62, 86
protocols, 258–260, B.6
topology, B.5
wireless, 267–280
NetZero, 106, 255
Neural networks, 61–62, 86
New England, 204
New York Public Library, 361
The New York Times, 242
News Corp., 125
News Dots, 237
Nextel, 270
NFL (National Football League), 281
NIC (network interface card), B.3
Nice Systems, 316
Niche markets, 98
NIIT, 364
Nike, 345
Ning, 125, 126
NIST (National Institute of Standards and
Technology), 195
Nokia, 127, 134, 270, 283
Nonrepudiation, 146
Norton, David, 325
NOS (network operating system), B.4
NSPs (national service providers), 254
NTT, 254
Nucleus Research, 88
Null-valued attributes, C.3
O
Obama, Barack, 81–82, 125, 244
Obama administration, 125
Object-oriented languages, 349
Microblogging, 117
Microcomputers, A.11
Microprocessors, A.2
Microsoft, 5, 53, 63, 95, 96, 111, 117, 133–134,
164, 192, 194, 208, 298, A.12, A.14
Microsoft Windows, A.13
Middleware, 301
Milk contamination (China), 332–334
Minicomputers, A.11
Minority Report (film), 169
MIS; see Management information systems
MIS infrastructure, 173–195
agile, 177, 183–185
and the environment, 187–189
information, 177–182
sustainable, 177, 189–199
M:N (many-to-many relationship), C.5–C.6
Mobile business, 121
benefits of, 278–280
challenges of, 280–284
Mobile technologies, 267, 282, 283
Model, 54
Modem, 256
Monroe College, 77
Moore, Gordon, 187–188
Moore’s Law, 187
Moree, Stephen J., 164
Mosaic, A.9
Motorola, 132, 270, 271
Mouse, A.7
Mozilla, 111
Mozy, 245
MS-DOS, A.13
MSN.com, 104
Mulhern, John F. “Jack,” 164–165
Multi-tenancy, 196
Multi-valued attribute, C.2–C.3
Multiagent systems, 62–63
Multitasking, A.12
Murray, Bill, 365
Music Genome Project (MGP), 174
My Docs Online, 245
Mysimon.com, 86
MySpace, 5, 113, 125, 336
MySQL, A.14
N
Nagel, Brian, 166
NAPs (network access points), 254
Napster, 16, 174, B.3
NASA, A.11
National Aeronautics and Space
Administration, 274
National Football League (NFL), 281
National Institute of Standards and Technology
(NIST), 195
National Semiconductor, 66
National service providers (NSPs), 254
National Weather Service, 293
Nearshore outsourcing, 363
Needapresent.com, A.9
Neeleman, David, 337
Neiman Marcus, 22
Macworld, 30
Magnetic medium, A.6
Magnetic tape, A.6
Mail bombs, 148
Mainframe computers, A.11
Maintainability, 184, 185
Maintenance phase (SDLC), 350
Malicious code, 155, 165
Management information systems (MIS), 1, 12–14
business driven; see Business driven MIS
as a department, 14
efficiency and effectiveness metrics, 50–53
to enhance DSS, 53–60
enterprise; see Enterprise MIS
green, 187
to improve business processes, 71–77
sustainable, 187; see also Sustainable MIS
infrastructure
in value chain, 24
Managerial decisions, 46–49
Managerial level, 46
Managerial support systems, 55–56
Manchester Airport (England), 60
MANs; see Metropolitan area networks
Mantovani, Andres, 166
Many-to-many relationship (M:N), C.5–C.6
Mapping, 66; see also Business process
modeling
Mapquest, 104
Marafatsos, Christos, 33
Marconi, Guglielmo, 267
Market basket analysis, 236
Market share, 49
Marketing, 11–12, 23, 313–315
Marketing campaign tracking, 44
Martin, James, C.4
Mashup editors, 117–118
Mashups, 117–118
Mass customization, 98
Mass text messaging, 25
MasterCard, 61, 275
Matsushita, 60
MB (megabyte), A.5, A.6
Mbusiness, 121
McCain, John, 82
McDonald’s, 291–292, 294–295, 314
MCI, 254
Mcommerce, 121
Megabyte (MB, M, Meg), A.5, A.6
Megahertz (MHz), A.3
Memory cards, A.5
Memory sticks, A.5
Mercedes-Benz, 38
Merrill Lynch, 40
Metadata, 220
Methodology, 351
Metrics, 48–53
critical success factors, 49–50
efficiency and effectiveness, 50–53
key performance indicators, 49–51
Metropolitan area networks (MANs), 255, B.2, B.3
Mexico, 335
MGP (Music Genome Project), 174
MHz (megahertz), A.3
baL76892_idx_I1-I12.indd I.7baL76892_idx_I1-I12.indd I.7 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
IndexI.8
threat of substitute products/services in,
18–21
in value chain analysis, 25, 27
POS (point-of-sale), A.7
Powergrid Fitness, A.7
Presentation graphics software, A.14
Preventive maintenance, 350
Preventive security software, A.13
Priceline.com, 104
Primary key, 221–222, C.7–C.8
Primary storage, A.3, A.4–A.5
Primary value activities, 23, 24
Privacy, 15, 141, 144, 147–148, 281–284
Privacy Act (1974), 144
Private cloud, 199
PRM (partner relationship management), 319
Procter & Gamble (P&G), 95, 303
Procurement, 24
Product differentiation, 20
Production, 13
Production and materials management ERP
components, 324
Productivity, 13, 14
Program Evaluation and Review Technique
(PERT) chart, 361
Programming software, A.14
Progressive Insurance, 76
Project, 48, 346
Project management, 346, 355–359
Project Management Institute, 346
Project manager, 346
Project plan, 346, 360
Project planning, 359–361
Project planning diagrams, 359–361
Project scope, 346
Project stakeholders, 361
Protocols, 258, B.3, B.6
Prototypes, 353
Prototyping, 352
Proxy, 258
P2P (peer-to-peer) networks, 262, B.3
Public cloud, 199
Public key encryption (PKE), 159
Pure-play businesses, 103
Q
Q-Tip, 126
QBE (query-by-example) tool, 219–220
Quantum, 95
QuarkXpress, A.14
Query-by-example (QBE) tool, 219–220
Qwest, 254, 257
R
Rackspace, 319
RAD (rapid application development)
methodology , 353
Radio-frequency identification (RFID), 274, 275,
283–284
Random access memory (RAM), A.4–A.5
Rapid application development (RAD)
methodology , 353
Passwords, 158, 281
Pay-per-call, 105
Pay-per-click, 105
Pay-per-conversion, 105
Payless, 23
PayPal, 4
PB (petabyte), A.6
PC World, 40
PDA (personal digital assistant), A.11
Peer-to-peer (P2P) networks, 262, B.3
Pelago Inc., 31
Peng Yong, 165
Penn, BJ, 126
Pentagon, 164
People magazine, 125
Perform, 316
Performance, 186
Personal area networks (PANs), 268
Personal computers, A.11
Personal digital assistant (PDA), A.11
Personal information management (PIM)
software , A.14
Personalization, 98, 316–317
PERT (Program Evaluation and Review
Technique) chart, 360
Petabyte (PB), A.6
P&G (Procter & Gamble), 95, 303
Pharming, 157
Pharming attacks, 157
Philippines, 364
Philips Petroleum, 95
Phishing, 156–159
Phishing expeditions, 156
Physical security, 150
Physical view (databases), 222
PIM (personal information management)
software , A.14
Pinterest, 91–93
Pirated software, 141, 168
PKE (public key encryption), 159
Plagiarism, 119
Planning phase (SDLC), 345
Platform as a Service (PaaS), 198
P&O, 334
Podcasting, 107, 133
Point-of-sale (POS), A.7
Poison Ivy, 165
Polaroid, 19, 94
Political micro-targeting, 81–82
Polymorphic viruses and worms, 154
Pop-up ads, 101
Popbox, 263
Portability, 184, 185
Portals, 104
Porter, Michael, 18, 22, 28, 34, 39
Porter’s Five Forces Model, 18–21, 39
in airline industry, 20–21
buyer power in, 18–21
rivalry among existing competitors in,
18, 20, 21
supplier power in, 18–21
and supply chain management, 303, 305
threat of new entrants in, 18–21
O’Brien, Conan, 40
Off-the-shelf application software, 345
Office Depot, 208
Offshore outsourcing (offshoring), 4, 363
Oklahoma state database, 347
OLAP (online analytical processing), 55
OLPC (One Laptop Per Child), 208
OLTP (online transaction processing), 54
Olympic Games, Winter 2010, 203
Omniture, 35
OMR (optical-mark reader), A.7
One Laptop Per Child (OLPC), 208
One-to-many relationship (1:M), C.5
One-to-one relationship (1:1), C.4
O’Neal, Shaquille, 125
Online analytical processing (OLAP), 55
Online marketplaces, 104
Online training, 349
Online transaction processing (OLTP), 54
Onshore outsourcing, 363
Oooooc, 97
Open source, 111
Open sourcing, 4, 111
Open system, 111
Operating system software, A.12, A.13
Operational CRM, 312–316
Operational decisions, 46–49
Operational level, 46
Operational support systems, 54–56
Operations, 23, 100
Operations management, 11–12
Opportunity management CRM systems, 315
Optical-character reader, A.7
Optical fiber, B.9
Optical-mark reader (OMR), A.7
Optical medium, A.6–A.7
Optimization analysis, 56
Oracle, 95, 102, 327, 329, A.14
Oracle Financials, 37
Osbourne, Ozzy, 335
Outbound logistics, 23
Output devices, A.2, A.8–A.9
Outsourcing, 3, 4, 361–365
Oxford University, 361
P
PA Consulting, 338
PaaS (Platform as a Service), 198
PacifiCorp, 190
Packet, 258
Packet footers, 258
Packet headers, 258
Packet-switching, B.4
Packet tampering, 155
Page, Larry, 346
Palmerino, Enrico, 33
Pandora, 174–175, 289
PANs (personal area networks), 268
Paradigm shift, 96
Partner relationship management (PRM), 319
Passikoff, Robert, 125
Passive RFID tags, 275
Passman, Jordan, 32–33
baL76892_idx_I1-I12.indd I.8baL76892_idx_I1-I12.indd I.8 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
I.9Index
Shopzilla.com, 86
Shrek films, 191
SHTPP (secure hypertext transfer protocol), 266
Siebel, 327, 329
Sign-off, 348
Simple Mail Transfer Protocol (SMTP), B.8
Simple Network Management Protocol
(SNMP), B.8
Sinbad (actor), 40
Single tenancy, 196
Single user license, A.14
Single-valued attribute, C.2–C.3
Site license, A.14
Skype, 262, 265, 269
Slate, 237
Slice-and-dice, 60
Smart cards, 158
Smart grids, 192
Smartphones, 271, A.11
Smith, Dylan, 205
SMTP (Simple Mail Transfer Protocol), B.8
SNA (social networking analysis), 113
Sneakware, 150
Sniffer, 155
SNMP (Simple Network Management
Protocol), B.8
Social bookmarking, 114
Social engineering, 155
Social media, 113–114
Social media policy, 148–149
Social media sector, 43
Social networking, 113–114, 116; see also
specific networking sites
by celebrities, 125–126
safety tips for using, 137–140
Social networking analysis (SNA), 113
Social networks, 113
Social ROI, 44
Social tagging, 114–115
Socializr, 97
Soden, Michael, 149–150
Software, 176, A.1, A.12–A.13
application, A.13–A.14
developing, 345–361
pirated, 141
system, A.12–A.13
Software as a Service (SaaS), 197–198
Software customization, 345
Software engineering, 348
Software patches, A.14
Software updates, A.14
Software upgrades, A.14
Sony, 94, 95, 132, 263, 292
Sony Music Entertainment, 126
Source code, 111
Source documents, 55
South Africa, 364
South Korea, 17, 332
Soviet Union, 4
Spam, 148
Spam blogs, 155
Spatial data, 276
Spear phishing, 156
S
SaaS (Software as a Service), 197–198
SABRE Airline Solutions, B.3
Safe mode, A.12–A.13
Safeway, 20
Salary surveys, 35
Sales, 11–12, 24
Sales force automation (SFA), 314–315
Sales management CRM systems, 315
Salesforce.com, 198
Samsung, 270, 283, 292
Sanlu, 333
SAP, 102
Sarbanes-Oxley Act (2002), 144
Sarkozy, Nicolas, 125
Satellite access, A.10
Satellite communication systems, 272–273, B.10
Satellites, 272–273
Satyam, 364
SC Johnson, 213
Scalability, 184–186
ScanR, 193
SCEM (supply chain event management), 308
Schmidt, Eric, 118
Schwartz, Jonathan, 116
SCM; see Supply chain management
ScorAscore, 32–33
Scott, Dave, 251
Script kiddies (script bunnies), 153
Scripting language, 349
Scrubbing, information, 230
Scrum methodology, 354
SDLC (systems development life cycle),
345–350, 357
Search engine optimization (SEO), 105
Search engine ranking, 105
Search engines, 105
Searches, 247–248
Sears, 95
Second Life, 83–84, 129–130, 338
Secondary storage, A.3, A.5–A.7
Secure hypertext transfer protocol (SHTPP,
HTTPS), 266
Secure sockets layer (SSL), 266–267
Security; see Information security
Seigenthaler, John, 40
Seigenthaler, John, Sr., 119
Selling chain management, 308
Semantic Web, 120
Semipassive RFID tags, 275
Semistructured decisions, 48
Sensitivity analysis, 56
Sentiment analysis, 44
SEO (search engine optimization), 105
Servers, 176, A.11, B.4
Service, 24
Service providers, 104, 254–255
Serviceabilty, 187
Services, 13
SFA (sales force automation), 314–315
ShadowCrew, 166
Shell Oil, 60
Shopping bots, 62, 85–86
Rapid prototyping, 353
Rational unified process (RUP) methodology,
353–354
Raw visit depth, 102
Read-only memory (ROM), A.5
Real People magazine, 218
Real Simple Syndication (RSS), 117
Real-time communication, 106–107
Real-time information, 216
Real-time systems, 216
Recording Industry Association of America, 167
Records, 221, C.7
Recovery, 178
backup and recovery plan, 178, 179
disaster recovery plan, 179–180
project, 342–344
Reduced instruction set computer (RISC)
chips, A.3
Redundancy, 73
Reengineering, 74–76
Regional service providers (RSPs), 254
Reidenberg, Joe, 142
Reintermediation, 100
Reiser, Paul, 40
Relational database management systems,
219–224
Relational database model, 220, C.1–C.2,
C.7–C.9
Relational integrity constraints, 224
Reliability, 184, 185
Reputation system, 111
Requirements definition document, 348
Requirements management, 348
Resource sharing, 263–264
Response time, 52
The Restaurant Maloney & Porcelli’s, 363
Return on investment (ROI), 50
Reuters, 338
RFID; see Radio-frequency identification
RFID accelerometer, 275
RFID reader/RFID interrogator, 274
RFID tags, 274–275
RIM, 271
Ring topology, B.5
RISC (reduced instruction set computer)
chips, A.3
Rivalry among existing competitors, 18, 21
Robots, 63, 85–86, 293, 307
ROI (return on investment), 50
Roku, 263
ROM (read-only memory), A.5
Romm, Joseph, 9
Routers, B.4
Rovi, 263
Rowdii, 97
Royal Canadian Mounted Police, 166
RSPs (regional service providers), 254
RSS (Real Simple Syndication), 117
Rubber Sheeting, 276
RUP (rational unified process) methodology,
353–354
Russia, 168, 364
Ruth, Babe, 335
baL76892_idx_I1-I12.indd I.9baL76892_idx_I1-I12.indd I.9 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
IndexI.10
ThinkLite, 33
Third-generation (3G), 272
Thompson, Trina, 77
Threat of new entrants, 18–21
Threat of substitute products or services, 18–21
3G (third-generation), 272
Throughput, 52
Tiffany & Co., 23
Time-series information, 236
Timeliness of information, 216
TiVo, 263
T.J. Maxx, 103, 220
TJX Co., 220
To-Be process models, 66, 68, 70
Tokens, 158
T1 lines, 257
Tong, Eric, 30
Torvalds, Linus, A.12
Toshiba, 292
Touch pad, A.7
Touch screen, A.7
Toyota, 338
Toys “R” Us, 335
TPS (transaction processing system), 54–57, 59
Traceroute, 258
Trackur.com, 149
Transaction brokers, 104
Transaction processing system (TPS), 54–57, 59
Transaction speed, 52
Transactional information, 54, 214–216
Transmission control protocol (TCP), B.7
Transmission control protocol/Internet protocol
(TCP/IP), 258, 259, B.7–B.8
Trek, 287
Triple constraint, 357, 358
Trojan-horse virus, 154
Trust, consumer, 108, 109
Tumblr, 125, 126
Twisted-pair cable, B.9
Twitter, 117, 125, 148, 149, 249, 277
Twitter analytics, 44
U
UAE (United Arab Emirates), 334
UC (unified communications), 260
Ultimate Fighting Championship, 126
Unavailable systems, 184
Unidentified visitor, 102
Unified communications (UC), 260
Uninstaller software, A.13
Union Bank of California, 181
Unique visitor, 102
United Arab Emirates (UAE), 334
United Kingdom Ministry of Defense and
Army, 300
United Parcel Service (UPS), 202
United States, 261, 267, 270, 287, 335, 363, 364
U.S. Bureau of Labor Statistics, 245
U.S. Department of Defense (DoD), 88, 274,
275, B.7
U.S. Department of Homeland Security, 170
U.S. Postal Service, 21, 308
U.S. Secret Service, 57, 166
Support value activities, 24
Sustainable MIS, 187
Sustainable MIS disposal, 188
Sustainable MIS infrastructure, 177, 189–199
cloud computing, 195–199
grid computing, 189–192
virtualized computing, 192–193
Sustaining technologies, 94
Swim lane, 68
Switching costs, 18
Symantec, 134
Synchronous communications, 113
System availability, 52
System clock, A.12
System restore, A.13
System software, A.12–A.13
Systems, 12–14; see also specific systems
Systems development life cycle (SDLC),
345–350, 357
Systems software, A.12–A.13
Systems thinking, 14
T
T-Mobile, 132, 261
Tables, C.7–C.9
Tablet computers, A.11
Tacit knowledge, 112
Tags, 114
Taiwan, 17
Tangible benefits, 355
Tanzania, 282
Tartan Racing, 89
Tatango, 25
Tax policies, 108, 109
Taxonomies, 108
TB (terabyte), A.5, A.6
TCP (transmission control protocol), B.7
TCP/IP; see Transmission control protocol/
Internet protocol
TCS, 364
Technology:
dependence on, 118
for information security, 156–160
Technology, Entertainment, Design (TED), 41, 346
Technology development, 24
Technology failures, 182
Technology recovery strategies, 182
Teck Resources Ltd., 203
TED (Technology, Entertainment, Design), 41, 346
Telecommunication protocols, B.6–B.8
Telecommunication systems, B.1
media for, B.9–B.10
protocols for, B.6–B.8
Telecommuting, 257
Telnet Protocol, B.8
Telstar, 267
Terabyte (TB), A.5, A.6
Test conditions, 349
Testing phase (SDLC), 349
Text messaging, 25
Text mining, 234
Text protect software, A.13
Thain, John, 40
Splogs (spam blogs), 155
Spoofing, 155
Spotlight Analysis, 82
Spreadsheet software, A.14
Sprint, 254, 270, 271
Sprint Nextel, 127
Spyware, 150, 153–154, A.13
SQL (structured query language), 220
SRM (supplier relationship management), 319
SSL (secure sockets layer), 266–267
SSL Certificate, 266
Stamps.com, 21, 308
Standard packet formats, 258
Stanford Racing Team, 9
Stanford University, 361
Staples, 63, 208, 307
Star topology, B.5
Starbucks, 39, 116
Start-ups:
College Hunks Hauling Junk, 58
Rackspace, 319
Rylaxer, 222
Tatango, 25
TED, 346
viruses, 179
ViVu, 265
WePay, 105
Static information, 224
Statistical analysis, 236
Stealthware, 150
Stickiness, 102
Stone, Biz, 125
Storage:
primary, A.3–A.5
secondary, A.3, A.5–A.7
Strategic decisions, 47–49
Strategic level, 46
Strategic support systems, 56–60
Strategy Analytics, 127
Streaming, 272
Streamlining, 73–74
Structured data, 234
Structured decisions, 46
Structured query language (SQL), 220
StumbleUpon, 114–115
Stylus, A.7
Success metrics, 48–53
SunPass, 275
Super Bowl advertising, 5
Supercomputers, A.11
Supplier power, 18–21
Supplier relationship management (SRM), 319
Supply chain, 19, 302–305
Supply chain event management (SCEM), 308
Supply chain execution systems, 305
Supply chain management (SCM), 302–308
benefits of, 303–307
challenges of, 307
ERP components for, 324
future of, 308, 327–328
Supply chain planning systems, 305
Supply chain visibility, 305–306
Supply chaining, 4
baL76892_idx_I1-I12.indd I.10baL76892_idx_I1-I12.indd I.10 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
I.11Index
Wireless MANs (WMANs), 269–271
Wireless media, B.9–B.10
Wireless networking standard 802.11, 269
Wireless networks, 267–280, 293, B.5
benefits of, 278–280
business applications of, 274–277
categories of, 267–273
security of, 289–290
Wireless technologies, 4, 267
Wireless WANs (WWANs), 270–271
WLANs (wireless LANs), 268–269
WMANs (wireless MANs), 269–271
Word length, A.4
Word processing software, A.14
WordPerfect, A.14
Workflow, 71
Workplace MIS monitoring, 150
Workplace monitoring policy, 149–150
Workshop training, 349
Workstation computers, A.11
Workstations, A.11
World Health Organization (WHO), B.11
The World Is Flat (Friedman), 3–4, 39
World Triathlon Corporation (WTC), 251–252, 286
World Wide Web (WWW), 96
Worldwide Interoperability for Microwave
Access (WiMAX), 251, 270–271
Worms, 154
WPA (Wi-Fi Protected Access), 282
WTC (World Triathlon Corporation), 251–252, 286
WWANs (wireless WANs), 270–271
WWW (World Wide Web), 96
Wynne, Michael W., 164
X
Xbox 360, 263
Xcel Energy, 192
Xerox, 95, B.6
XP (extreme programming) methodology, 353
Y
Yahoo!, 104, 117, 194
Yahoo! Connected TV, 263
Yale University, 203
Yankee Group, 131
Yourdon, Edward, 366
YouTube, 111, 113, 148, 259, 267, 317, 336
Yuuguu, 97
Z
Zappos, 5, 63, 227, 298–299, 307
Ziff-Davis, 134
Zillow.com, 104, 243–244
Zombie farms, 157
Zombies, 157
Zoomr, 97
Zuckerberg, Mark, 5
The Wall Street Journal, 371
Walmart, 23, 38, 52, 95, 99, 215–216, 275,
303, 334–335
Walton, Sam, 335
WANs; see Wide area networks
WAPs (wireless access points), 292–293
War chalking, 282
War driving, 282
Warden, Peter, 225
Warm sites, 180
Warping, 276
Waterfall methodology, 351
Web 1.0, 96; see also Ebusiness
Web 2.0 (Business 2.0), 109–113
advantages of, 109–113
for capacity planning, 186
challenges of, 118–119
collaboration tools with, 116–118
networking communities with, 113–115
Web 3.0, 119–121
Web-based self-service systems, 316
Web browsers, 96
Web conferencing, 108
Web logs, 116, 150
Web mining, 234
Webby Awards, 132
Webinars, 108
Website bookmarks, 114
Website personalization, 316–317
Websites:
data-driven, 224–227
unethical, 361
WEP (wired equivalent privacy), 282
WePay, 105
Weyco, 151
What-if analysis, 55–56
White-hat hackers, 153
WHO (World Health Organization), B.11
Wi-Fi (wireless fidelity), 268–269
Wi-Fi networks, 268–269, 293–294
Wi-Fi Protected Access (WPA), 282
Wide area networks (WANs), 254, 255, B.2, B.3
Wikipedia, 40, 111, 117, 128, 134, 185
Wikis, 117, 132, 134
Williams, Robbie, 40
WiMAX (Worldwide Interoperability for
Microwave Access), 251, 270–271
WiMAX technology, 251, 270, 271
Windows Azure, 199
Winfrey, Oprah, 125
Wipro, 364
Wire media, B.8–B.9
Wired equivalent privacy (WEP), 282
Wired magazine, 36
Wireless (LMCS), A.10
Wireless access points (WAPs), 292–293
Wireless fidelity (Wi-Fi), 268–269
Wireless LANs (WLANs), 268–269
Universal resource locators (URLs), 96
University of Michigan, 361
University of Pennsylvania, 293
University of Southern California, 134
UNIX, A.13
Unstructured data, 234
Unstructured decisions, 48
Up-selling, 314
UPS (United Parcel Service), 202
URLs (universal resource locators), 96
USA Patriot Act (2001, 2003), 144
Usability, 52, 184, 187
User-contributed (-generated) content, 111
User documentation, 349
Utility software, A.12–A.13
UUNet/WorldCom, 254
V
Value chain, 24, 27
Value chain analysis, 23–27, 39
“Vanity URLs,” 125
Variable, 7–8
Verisign, 266
Verizon, 254, 272, 290
Video Privacy Protection Act (1988), 144
Video résumés, 133–134
Videoconferencing, 107, 265
Viral marketing, 101
Virtual businesses, 103
Virtual data centers, 193–195
Virtual private networks (VPNs), 264
Virtual reality, 63, 64
Virtual teams, 83
Virtual workforces, 63–64, 257
Virtualization, 192–193, 204, 263, 264
Viruses, 153–154, 281, 283
Visa, 61, 146
Vishing (voice phishing), 156
Visit depth, 102
Visual business intelligence, 238–239
Visual images, 211
Visualization, 59, 239, 242–243
Visualization tools, 239
ViVu, 265
Vogue, 125
Voice over IP (VoIP), 261–262
Voice phishing, 156
Volatility, A.5
VPNs (virtual private networks), 264
VUDU, 263
VuRoom, 265
W
Wachira, Grace, 273
Wadhwani, Dinesh, 33
Wales, Jimmy, 40
Walgreens, 63, 308
baL76892_idx_I1-I12.indd I.11baL76892_idx_I1-I12.indd I.11 27/11/12 8:10 AM27/11/12 8:10 AM

Confirming Pages
baL76892_idx_I1-I12.indd I.12baL76892_idx_I1-I12.indd I.12 27/11/12 8:10 AM27/11/12 8:10 AM

f o u r t h e d i t i o n
4e
Pa i g e B a lt z a n
B
usiness D
riven Inform
ation System
s
www.mhhe.com
ISBN 978-0-07-337689-9
MHID 0-07-337689-2
www.domorenow.com
www.mhhe.com/baltzan
B
a
lt
z
a
n
Business
Driven
Information
Systems
M
D
D
A
L
IM
#1216453 11/28/12 C
Y
A
N
M
A
G
Y
E
L
O
B
L
K

~StormRG~

Cover Page
Connect
Less managing. More teaching. Greater learning.
Half Title Page
Title Page
Copyright Page
Dedication
BRIEF CONTENTS
Table of Content
PREFACE
WALKTHROUGH
ACKNOWLEDGMENTS
About the Author
module 1 Business Driven MIS
CHAPTER 1 Management Information Systems: Business Driven MIS
Opening Case Study: The World Is Flat: Thomas Friedman
Section 1.1 Business Driven MIS
COMPETING IN THE INFORMATION AGE
Data
Information
Business Intelligence
Knowledge
THE CHALLENGE: DEPARTMENTAL COMPANIES
THE SOLUTION: MANAGEMENT INFORMATION SYSTEMS
MIS Department Roles and Responsibilities

Section 1.2 Business Strategy
IDENTIFYING COMPETITIVE ADVANTAGES
THE FIVE FORCES MODEL—EVALUATING INDUSTRY ATTRACTIVENESS
Buyer Power
Supplier Power
Threat of Substitute Products or Services
Threat of New Entrants
Rivalry among Existing Competitors
Analyzing the Airline Industry
THE THREE GENERIC STRATEGIES—CHOOSING A BUSINESS FOCUS
VALUE CHAIN ANALYSIS—EXECUTING BUSINESS STRATEGIES
Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: Apple—Merging Technology, Business, and Entertainment
Closing Case Two: Best of the Best of the Best—Under 25
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects
CHAPTER 2 Decisions and Processes: Value Driven Business
Opening Case Study: Action Finally—Actionly
Section 2.1 Decision Support Systems
MAKING BUSINESS DECISIONS
The Decision-Making Process
Decision-Making Essentials
METRICS: MEASURING SUCCESS
Efficiency and Effectiveness Metrics
The Interrelationship Between Efficiency and Effectiveness MIS Metrics
SUPPORT: ENHANCING DECISION MAKING WITH MIS
Operational Support Systems
Managerial Support Systems
Strategic Support Systems
THE FUTURE: ARTIFICIAL INTELLIGENCE
Expert Systems
Neural Networks
Genetic Algorithms
Intelligent Agents
Virtual Reality

Section 2.2 Business Processes
EVALUATING BUSINESS PROCESSES
MODELS: MEASURING PERFORMANCE
SUPPORT: ENHANCING BUSINESS PROCESSES WITH MIS
Improving Operational Business Processes—Automation
Improving Managerial Business Processes—Streamlining
Improving Strategic Business Processes—Reengineering
THE FUTURE: BUSINESS PROCESS MANAGEMENT
Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: Political Micro-Targeting: What Decision Support Systems Did for Barack Obama
Closing Case Two: Second Life: Succeeding in Virtual Times
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects
CHAPTER 3 Ebusiness: Electronic Business Value
Opening Case Study: Pinterest— Billboards for the Internet
Section 3.1 WEB 1.0: Ebusiness
DISRUPTIVE TECHNOLOGIES AND WEB 1.0
Disruptive versus Sustaining Technology
The Internet and World Wide Web—The Ultimate Business Disruptors
Web 1.0: The Catalyst for Ebusiness
ADVANTAGES OF EBUSINESS
Expanding Global Reach
Opening New Markets
Reducing Costs
Improving Operations
Improving Effectiveness
THE FOUR EBUSINESS MODELS
Business-to-Business (B2B)
Business-to-Consumer (B2C)
Consumer-to-Business (C2B)
Consumer-to-Consumer (C2C)
Ebusiness Forms and Revenue-Generating Strategies
EBUSINESS TOOLS FOR CONNECTING AND COMMUNICATING
Email
Instant Messaging
Podcasting
Videoconferencing
Web Conferencing
Content Management Systems
THE CHALLENGES OF EBUSINESS
Identifying Limited Market Segments
Managing Consumer Trust
Ensuring Consumer Protection
Adhering to Taxation Rules

Section 3.2 WEB 2.0: Business 2.0
WEB 2.0: ADVANTAGES OF BUSINESS 2.0
Content Sharing Through Open Sourcing
User-Contributed Content
Collaboration Inside the Organization
Collaboration Outside the Organization
NETWORKING COMMUNITIES WITH BUSINESS 2.0
Social Tagging
BUSINESS 2.0 TOOLS FOR COLLABORATING
Blogs
Wikis
Mashups
THE CHALLENGES OF BUSINESS 2.0
Technology Dependence
Information Vandalism
Violations of Copyright and Plagiarism
WEB 3.0: DEFINING THE NEXT GENERATION OF ONLINE BUSINESS OPPORTUNITIES
Egovernment: The Government Moves Online
Mbusiness: Supporting Anywhere Business

Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: Social Media and Ashton Kutcher
Closing Case Two: Amazon.com—Not Your Average Bookstore
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects
CHAPTER 4 Ethics and Information Security: MIS Business Concerns
Opening Case Study: To Share—Or Not to Share
Section 4.1 Ethics
INFORMATION ETHICS
Information Does Not Have Ethics, People Do
DEVELOPING INFORMATION MANAGEMENT POLICIES
Ethical Computer Use Policy
Information Privacy Policy
Acceptable Use Policy
Email Privacy Policy
Social Media Policy
Workplace Monitoring Policy

Section 4.2 Information Security
PROTECTING INTELLECTUAL ASSETS
Security Threats Caused by Hackers and Viruses
THE FIRST LINE OF DEFENSE—PEOPLE
THE SECOND LINE OF DEFENSE—TECHNOLOGY
People: Authentication and Authorization
Data: Prevention and Resistance
Attack: Detection and Response

Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: E-Espionage
Closing Case Two: Hacker Hunters
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects

module 2 Technical Foundations of MIS
CHAPTER 5 Infrastructures: Sustainable Technologies
Opening Case Study: Pandora’s Music Box
Section 5.1 MIS Infrastructures
THE BUSINESS BENEFITS OF A SOLID MIS INFRASTRUCTURE
SUPPORTING OPERATIONS: INFORMATION MIS INFRASTRUCTURE
Backup and Recovery Plan
Disaster Recovery Plan
Business Continuity Plan
SUPPORTING CHANGE: AGILE MIS INFRASTRUCTURE
Accessibility
Availability
Maintainability
Portability
Reliability
Scalability
Usability

Section 5.2 Building Sustainable MIS Infrastructures
MIS AND THE ENVIRONMENT
Increased Electronic Waste
Increased Energy Consumption
Increased Carbon Emissions
SUPPORTING THE ENVIRONMENT: SUSTAINABLE MIS INFRASTRUCTURE
Grid Computing
Virtualized Computing
Cloud Computing

Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: UPS Invests $1 Billion to Go Green
Closing Case Two: Turning Ewaste into Gold
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects
CHAPTER 6 Data: Business Intelligence
Opening Case Study: Informing Information
Section 6.1 Data, Information, and Databases
THE BUSINESS BENEFITS OF HIGH-QUALITY INFORMATION
Information Type: Transactional and Analytical
Information Timeliness
Information Quality
Information Governance
STORING INFORMATION USING A RELATIONAL DATABASE MANAGEMENT SYSTEM
Storing Data Elements in Entities and Attributes
Creating Relationships Through Keys
USING A RELATIONAL DATABASE FOR BUSINESS ADVANTAGES
Increased Flexibility
Increased Scalability and Performance
Reduced Information Redundancy
Increased Information Integrity (Quality)
Increased Information Security
DRIVING WEBSITES WITH DATA
Section 6.2 Business Intelligence
THE BUSINESS BENEFITS OF DATA WAREHOUSING
PERFORMING BUSINESS ANALYSIS WITH DATA MARTS
Multidimensional Analysis
Information Cleansing or Scrubbing
UNCOVERING TRENDS AND PATTERNS WITH DATA MINING
Cluster Analysis
Association Detection
Statistical Analysis
SUPPORTING DECISIONS WITH BUSINESS INTELLIGENCE
The Problem: Data Rich, Information Poor
The Solution: Business Intelligence
Visual Business Intelligence

Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: Data Visualization: Stories for the Information Age
Closing Case Two: Zillow
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects
CHAPTER 7 Networks: Mobile Business
Opening Case Study: The Ironman
Section 7.1 Connectivity: The Business Value of a Neworked World
OVERVIEW OF A CONNECTED WORLD
Network Categories
Network Providers
Network Access Technologies
Network Protocols
Network Convergence
BENEFITS OF A CONNECTED WORLD
Sharing Resources
Providing Opportunities
Reducing Travel
CHALLENGES OF A CONNECTED WORLD
Security
Social, Ethical, and Political Issues

Section 7.2 Mobility: The Business Value of a Wireless World
WIRELESS NETWORK CATEGORIES
Personal Area Networks
Wireless LANs
Wireless MANs
Wireless WAN—Cellular Communication System
Wireless WAN—Satellite Communication System
BUSINESS APPLICATIONS OF WIRELESS NETWORKS
Radio-Frequency Identification (RFID)
Global Positioning System (GPS)
Geographic Information Systems (GIS)
BENEFITS OF BUSINESS MOBILITY
Enhances Mobility
Provides Immediate Data Access
Increases Location and Monitoring Capability
Improves Work Flow
Provides Mobile Business Opportunities
Provides Alternative to Wiring
CHALLENGES OF BUSINESS MOBILITY
Protecting Against Theft
Protecting Wireless Connections
Preventing Viruses on a Mobile Device
Addressing Privacy Concerns with RFID and LBS

Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: Wireless Bikes
Closing Case Two: Google Latitude . . . Without an Attitude?
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects

module 3 Enterprise MIS
CHAPTER 8 Enterprise Applications: Business Communications
Opening Case Study: Zappos Is Passionate for Customers
Section 8.1 Supply Chain Management
BUILDING A CONNECTED CORPORATION THROUGH INTEGRATIONS
Integration Tools
SUPPLY CHAIN MANAGEMENT
THE BENEFITS OF SCM
Improved Visibility
Increased Profitability
THE CHALLENGES OF SCM
THE FUTURE OF SCM
Section 8.2 Customer Relationship Management and Enterprise Resource Planning
CUSTOMER RELATIONSHIP MANAGEMENT
THE BENEFITS OF CRM
Evolution of CRM
Operational and Analytical CRM
Marketing and Operational CRM
Sales and Operational CRM
Customer Service and Operational CRM
Analytical CRM
Measuring CRM Success
THE CHALLENGES OF CRM
THE FUTURE OF CRM
ENTERPRISE RESOURCE PLANNING
THE BENEFITS OF ERP
Core ERP Components
Extended ERP Components
Measuring ERP Success
THE CHALLENGES OF ERP
THE FUTURE OF ENTERPRISE SYSTEMS: INTEGRATING SCM, CRM, AND ERP
Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: Can Customer Loyalty Be a Bad Thing?
Closing Case Two: Got Milk? It’s Good for You—Unless It’s Contaminated!
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects
CHAPTER 9 Systems Development and Project Management: Corporate Responsibility
Opening Case Study: Getting Your Project On Track
Section 9.1 Developing Enterprise Applications
THE SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC)
Phase 1: Planning
Phase 2: Analysis
Phase 3: Design
Phase 4: Development
Phase 5: Testing
Phase 6: Implementation
Phase 7: Maintenance
SOFTWARE DEVELOPMENT METHODOLOGY: THE WATERFALL
AGILE SOFTWARE DEVELOPMENT METHODOLOGIES
Rapid Application Development (RAD) Methodology
Extreme Programming Methodology
Rational Unified Process (RUP) Methodology
Scrum Methodology

Section 9.2 Project Management
USING PROJECT MANAGEMENT TO DELIVER SUCCESSFUL PROJECTS
Unclear or Missing Business Requirements
Skipped Phases
Changing Technology
The Cost of Finding Errors in the SDLC
Balance of the Triple Constraint
PRIMARY PROJECT PLANNING DIAGRAMS
OUTSOURCING PROJECTS
Outsourcing Benefits
Outsourcing Challenges

Learning Outcome Review
Opening Case Questions
Key Terms
Review Questions
Closing Case One: Disaster at Denver International Airport
Closing Case Two: Reducing Ambiguity in Business Requirements
Critical Business Thinking
Entrepreneurial Challenge
Apply Your Knowledge Business Projects
AYK Application Projects

appendices
APPENDIX A Hardware and Software Basics
INTRODUCTION
HARDWARE BASICS
Central Processing Unit
Primary Storage
Secondary Storage
Input Devices
Output Devices
Communication Devices
COMPUTER CATEGORIES
SOFTWARE BASICS
System Software
Application Software
Distributing Application Software
Key Terms
Apply Your Knowledge
APPENDIX B Networks and Telecommunications
INTRODUCTION
NETWORK BASICS
ARCHITECTURE
Peer-to-Peer Networks
Client/Server Networks
TOPOLOGY
PROTOCOLS
Ethernet
Transmission Control Protocol/Internet Protocol
MEDIA
Wire Media
Wireless Media
Key Terms
Apply Your Knowledge
APPENDIX C Designing Databases
INTRODUCTION
THE RELATIONAL DATABASE MODEL
Entities and Attributes
BUSINESS RULES
DOCUMENTING ENTITY RELATIONSHIP DIAGRAMS
Basic Entity Relationships
Relationship Cardinality
RELATIONAL DATA MODEL AND THE DATABASE
From Entities to Tables
Logically Relating Tables
Key Terms
Apply Your Knowledge

The Technology Plug-Ins
Apply Your Knowledge
Glossary
Notes
Credits
Index

This is an electronic version of the print textbook. Due to electronic rights restrictions,
some third party content may be suppressed. Editorial review has deemed that any suppressed
content does not materially affect the overall learning experience. The publisher reserves the right
to remove content from this title at any time if subsequent rights restrictions require it. For
valuable information on pricing, previous editions, changes to current editions, and alternate
formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for
materials in your areas of interest.

www.cengage.com/highered

Gary B. Shelly
Harry J. Rosenblatt
A u s t r a l i a • B r a z i l • J a p a n • K o r e a • M e x i c o • S i n g a p o r e • S p a i n • U n i t e d K i n g d o m • U n i t e d S t a t e s
Shelly Cashman Series®
An imprint of Course Technology, Cengage Learning
Systems Analysis
and Design Ninth Edition

Printed in the United States of America
1 2 3 4 5 6 7 16 15 14 13 12 11
© 2012 Course Technology, Cengage Learning
ALL RIGHTS RESERVED. No part of this work covered by the copyright herein
may be reproduced, transmitted, stored or used in any form or by any means
graphic, electronic, or mechanical, including but not limited to photocopying,
recording, scanning, digitizing, taping, Web distribution, information networks,
or information storage and retrieval systems, except as permitted under
Section 107 or 108 of the 1976 United States Copyright Act, without the prior
written permission of the publisher.
Library of Congress Control Number: 2010943248
ISBN-13: 978-0-538-48161-8
ISBN-10: 0-538-48161-7
Course Technology
20 Channel Center Street
Boston, MA 02210
USA
Cengage Learning is a leading provider of customized learning solutions with
offi ce locations around the globe, including Singapore, the United Kingdom,
Australia, Mexico, Brazil, and Japan. Locate your local offi ce at:
international.cengage.com/region
Cengage Learning products are represented in Canada by Nelson Education, Ltd.
Visit our Web site www.cengage.com/ct/shellycashman to share and gain
ideas on our textbooks!
To learn more about Course Technology,
visit www.cengage.com/coursetechnology
Purchase any of our products at your local college bookstore or at our
preferred online store at www.cengagebrain.com
Systems Analysis and Design, Ninth Edition
Gary B. Shelly
Harry J. Rosenblatt
Vice President, Publisher: Nicole Pinard
Executive Editor: Kathleen McMahon
Associate Acquisitions Editor: Reed Curry
Associate Product Manager: Aimee Poirier
Editorial Assistant: Angela Giannopoulos
Director of Marketing: Elisa Roberts
Marketing Manager: Tristen Kendall
Marketing Coordinator: Adrienne Fung
Print Buyer: Julio Esperas
Director of Production: Patty Stephan
Content Project Manager: Matthew Hutchinson
Development Editor: Deb Kaufmann
Proofreader: Kim Kosmatka
Art Director: Marissa Falco
Interior and Text Design: Joel Sadagursky
Cover Design: Curio Press
Cover Photos: Tom Kates Photography
Compositor: PreMedialGlobal
Indexer: Liz Cunningham
For product information and technology assistance, contact us at
Cengage Learning Customer & Sales Support, 1-800-354-9706
For permission to use material from this text or product,
submit all requests online at cengage.com/permissions
Further permissions questions can be emailed to
permissionrequest@cengage.com

www.cengage.com/ct/shellycashman

www.cengage.com/coursetechnology

www.cengagebrain.com

iii
BRIEF CONTENTS
PHASE 1: SYSTEMS PLANNING 1
Chapter 1 Introduction to Systems Analysis and Design 2
Chapter 2 Analyzing the Business Case 52
Chapter 3 Managing Systems Projects 100
PHASE 2: SYSTEMS ANALYSIS 139
Chapter 4 Requirements Modeling 140
Chapter 5 Data and Process Modeling 198
Chapter 6 Object Modeling 248
Chapter 7 Development Strategies 284
PHASE 3: SYSTEMS DESIGN 333
Chapter 8 User Interface Design 334
Chapter 9 Data Design 390
Chapter 10 System Architecture 452
PHASE 4: SYSTEMS IMPLEMENTATION 505
Chapter 11 Managing Systems Implementation 506
PHASE 5: SYSTEMS SUPPORT AND SECURITY 569
Chapter 12 Managing Systems Support and Security 570
THE SYSTEMS ANALYST’S TOOLKIT 629
Toolkit Part A Communication Tools 630
Toolkit Part B CASE Tools 648
Toolkit Part C Financial Analysis Tools 668
Toolkit Part D Internet Resource Tools 688
Glossary/Index 715
Photo Credits 739

iv
PHASE 1: SYSTEMS PLANNING
Chapter 1
Introduction to Systems Analysis
and Design
Objectives 2
Introduction 2
Chapter Introduction Case: Mountain View College
Bookstore 3
The Impact of Information Technology 4
The Future 4
Systems Development 6
Systems Analysis and Design 7
Who Develops Information Systems? 7
Information System Components 7
Hardware 8
Software 8
Data 9
Processes 9
People 10
Understand the Business 10
Business Profile 10
Business Process 10
New Kinds of Companies 11
Case in Point 1.1: Cloud Nine Financial Advisors 12
Impact of the Internet 13
B2C (Business-to-Consumer) 13
B2B (Business-to-Business) 14
Business Information Systems 15
Enterprise Computing 15
Transaction Processing 15
Business Support 16
Knowledge Management 16
User Productivity 17
Information Systems Integration 17
What Information Do Users Need? 18
Top Managers 18
Middle Managers and Knowledge Workers 18
Supervisors and Team Leaders 19
Operational Employees 19
Systems Development Tools 19
Modeling 19
Prototyping 20
Computer-Aided Systems Engineering (CASE) Tools 20
Systems Development Methods 21
Structured Analysis 22
Object-Oriented Analysis 24
Agile Methods 25
Other Development Methods 26
Systems Development Guidelines 27
The Information Technology Department 28
Application Development 28
Case in Point 1.2: Global Hotels and
Momma’s Motels 28
Systems Support and Security 29
User Support 29
Database Administration 29
Network Administration 29
Web Support 29
Quality Assurance (QA) 29
Case in Point 1.3: What Should Lisa Do? 30
The Systems Analyst 30
Responsibilities 30
Knowledge, Skills, and Education 30
Certification 32
Career Opportunities 32
Case in Point 1.4: Just-in-Time Airfreight, Inc. 33
A Question of Ethics 34
Chapter Summary 34
Key Terms and Phrases 36
Learn It Online 37
SCR Associates Case Simulation Session 1:
Introduction 38
Chapter Exercises 40
Apply Your Knowledge 41
Case Studies 43
New Century Health Clinic 43
Personal Trainer, Inc. 44
Original Kayak Adventures 45
Chapter Capstone Case: SoftWear, Limited 47
Chapter 2
Analyzing the Business Case
Objectives 52
Introduction 52
Chapter Introduction Case: Mountain View
College Bookstore 53
Strategic Planning — A Framework for IT Systems
Development 54
Strategic Planning Overview 54
Case in Point 2.1: Lo Carb Meals 56
A CASE Tool Example 57
The Role of the IT Department in Project Evaluation 58
The Future 58
Case in Point 2.2: Attaway Airlines, Part One 58
What Is a Business Case? 58
Information Systems Projects 59
Main Reasons for Systems Projects 59
Case in Point 2.3: Trent College 61
Factors that Affect Systems Projects 61
Internal Factors 62
External Factors 62
Project Management 64
Evaluation of Systems Requests 65
Systems Request Forms 65
Systems Review Committee 66
Overview of Feasibility 66
Operational Feasibility 67
Technical Feasibility 67
Economic Feasibility 68
Schedule Feasibility 69
TABLE OF CONTENTS

v Table of Contents
Evaluating Feasibility 69
Setting Priorities 69
Factors that Affect Priority 70
Discretionary and Nondiscretionary Projects 70
Case in Point 2.4: Attaway Airlines, Part Two 71
Preliminary Investigation Overview 71
Interaction with Managers and Users 71
Planning the Preliminary Investigation 72
Step 1: Understand the Problem or Opportunity 73
Step 2: Define the Project Scope and Constraints 74
Step 3: Perform Fact-Finding 75
Step 4: Analyze Project Usability, Cost, Benefit, and
Schedule Data 80
Step 5: Evaluate Feasibility 80
Step 6: Present Results and Recommendations to
Management 81
A Question of Ethics 82
Chapter Summary 82
Key Terms and Phrases 83
Learn It Online 84
SCR Associates Case Simulation Session 2:
Analyzing the Business Case 85
Chapter Exercises 86
Apply Your Knowledge 87
Case Studies 89
New Century Health Clinic 89
Personal Trainer, Inc. 89
Original Kayak Adventures 90
Town of Eden Bay 91
Chapter Capstone Case: SoftWear, Limited 93
Chapter 3
Managing Systems Projects
Objectives 100
Introduction 100
Chapter Introduction Case: Mountain View
College Bookstore 101
Overview of Project Management 102
What Shapes a Project? 102
What Does a Project Manager Do? 103
Case in Point 3.1: Spring Forward Products 103
Project Activities and Planning Steps 103
Step 1: Create a Work Breakdown Structure 104
What Is a Gantt Chart? 104
What Is a PERT/CPM Chart? 105
Which Type of Chart Is Better? 105
Identifying Tasks in a Work Breakdown Structure 106
Case in Point 3.2: Parallel Services 107
Factors Affecting Duration 107
Case in Point 3.3: Sunrise Software 108
Displaying the Work Breakdown Structure 109
Step 2: Identify Task Patterns 110
What Are Task Patterns? 110
How Do I Use Task Boxes to Create a Model? 110
What Are the Main Types of Task Patterns? 110
How Do I Identify Task Patterns? 111
How Do I Work With Complex Task Patterns? 112
Step 3: Calculate the Critical Path 113
What Is a Critical Path? 113
How Do I Calculate the Critical Path? 113
Project Monitoring and Control 114
Monitoring and Control Techniques 114
Maintaining a Schedule 115
Reporting 115
Project Status Meetings 115
Project Status Reports 115
Project Management Examples 116
PERT/CPM Example 116
Software-Driven Example 118
Case in Point 3.4: Census 2010 121
Risk Management 121
Steps in Risk Management 121
Risk Management Software 122
Managing for Success 123
Business Issues 123
Budget Issues 123
Schedule Issues 123
The Bottom Line 124
A Question of Ethics 125
Chapter Summary 125
Key Terms and Phrases 127
Learn It Online 128
SCR Associates Case Simulation Session 3:
Managing Systems Projects 129
Chapter Exercises 130
Apply Your Knowledge 131
Case Studies 133
New Century Health Clinic 133
Personal Trainer, Inc. 133
Chapter Capstone Case: SoftWear, Limited 135
PHASE 2: SYSTEMS ANALYSIS
Chapter 4
Requirements Modeling
Objectives 140
Introduction 140
Chapter Introduction Case: Mountain View
College Bookstore 141
Systems Analysis Phase Overview 142
Systems Analysis Activities 142
Systems Analysis Skills 143
Team-Based Techniques: JAD, RAD, and Agile Methods 143
Joint Application Development 143
User Involvement 144
JAD Participants and Roles 144
JAD Advantages and Disadvantages 145
Rapid Application Development 145
RAD Phases and Activities 146
RAD Objectives 147
RAD Advantages and Disadvantages 147
Agile Methods 147
Agile Method Advantages and Disadvantages 149
Case in Point 4.1: North Hills College 149

vi Table of Contents
Modeling Tools and Techniques 149
Functional Decomposition Diagrams 150
Business Process Modeling 150
Data Flow Diagrams 151
Unified Modeling Language 151
System Requirements Checklist 153
Output Examples 153
Input Examples 154
Process Examples 154
Performance Examples 154
Control Examples 154
Future Growth, Costs, and Benefits 155
Scalability 155
Total Cost of Ownership 155
Fact-Finding 156
Fact-Finding Overview 156
Who, What, Where, When, How, and Why? 157
The Zachman Framework 158
Interviews 159
Step 1: Determine the People to Interview 159
Step 2: Establish Objectives for the Interview 159
Step 3: Develop Interview Questions 160
Step 4: Prepare for the Interview 161
Step 5: Conduct the Interview 162
Step 6: Document the Interview 162
Step 7: Evaluate the Interview 163
Case in Point 4.2: Deep River College 163
Unsuccessful Interviews 163
Case in Point 4.3: FastPak Overnight Package System 164
Other Fact-Finding Techniques 164
Document Review 164
Observation 164
Questionnaires and Surveys 166
Sampling 167
Research 168
Interviews versus Questionnaires 169
Case in Point 4.4: CyberStuff 170
Documentation 170
The Need for Recording the Facts 170
Software Tools 170
Preview of Logical Modeling 175
A Question of Ethics 175
Chapter Summary 175
Key Terms and Phrases 177
Learn It Online 178
SCR Associates Case Simulation Session 4:
Requirements Modeling 179
Chapter Exercises 180
Apply Your Knowledge 181
Case Studies 183
New Century Health Clinic 183
Personal Trainer, Inc. 184
Baxter Community College 185
Town of Eden Bay 185
Chapter Capstone Case: SoftWear, Limited 186
Chapter 5
Data and Process Modeling
Objectives 198
Introduction 198
Chapter Introduction Case: Mountain View
College Bookstore 199
Overview of Data and Process Modeling Tools 200
Data Flow Diagrams 200
DFD Symbols 200
Creating a Set of DFDs 206
Guidelines for Drawing DFDs 206
Step 1: Draw a Context Diagram 208
Step 2: Draw a Diagram 0 DFD 209
Step 3: Draw the Lower-Level Diagrams 212
Case in Point 5.1: Big Ten University 217
Data Dictionary 217
Using CASE Tools for Documentation 218
Documenting the Data Elements 218
Documenting the Data Flows 220
Documenting the Data Stores 221
Documenting the Processes 222
Documenting the Entities 223
Documenting the Records 223
Data Dictionary Reports 223
Process Description Tools 224
Modular Design 224
Structured English 225
Decision Tables 226
Case in Point 5.2: Rock Solid Outfitters (Part 1) 230
Decision Trees 230
Case in Point 5.3: Rock Solid Outfitters (Part 2) 230
Logical Versus Physical Models 231
Sequence of Models 231
Four-Model Approach 231
Case in Point 5.4: Tip Top Staffing 231
A Question of Ethics 232
Chapter Summary 232
Key Terms and Phrases 233
Learn It Online 234
SCR Associates Case Simulation Session 5:
Data and Process Modeling 235
Chapter Exercises 236
Apply Your Knowledge 237
Case Studies 239
New Century Health Clinic 239
Personal Trainer, Inc. 240
Chapter Capstone Case: SoftWear, Limited 241
Chapter 6
Object Modeling
Objectives 248
Introduction 248
Chapter Introduction Case: Mountain View
College Bookstore 249
Overview of Object-Oriented Analysis 250
Object-Oriented Terms and Concepts 250
Objects 251
Attributes 254
Methods 254
Messages 255
Classes 256

vii Table of Contents
Relationships Among Objects and Classes 258
Object Relationship Diagram 258
Object Modeling with the Unified
Modeling Language 259
Use Case Modeling 259
Case in Point 6.1: Hilltop Motors 261
Use Case Diagrams 261
Class Diagrams 262
Case in Point 6.2: Train the Trainer, Inc. 264
Sequence Diagrams 264
State Transition Diagrams 265
Activity Diagrams 266
Case in Point 6.3: TravelBiz 266
CASE Tools 266
Organizing the Object Model 267
Case in Point 6.4: Cyber Associates 267
A Question of Ethics 267
Chapter Summary 268
Key Terms and Phrases 269
Learn It Online 270
SCR Associates Case Simulation Session 6:
Object Modeling 271
Chapter Exercises 272
Apply Your Knowledge 273
Case Studies 275
New Century Health Clinic 275
Personal Trainer, Inc. 275
Chapter Capstone Case: SoftWear, Limited 276
Chapter 7
Development Strategies
Objectives 284
Introduction 284
Chapter Introduction Case: Mountain View
College Bookstore 285
Development Strategies Overview 286
The Impact of the Internet 286
Software as a Service 286
Traditional vs. Web-Based Systems Development 287
Looking to the Future: Web 2.0 and Cloud Computing 289
Outsourcing 290
The Growth of Outsourcing 290
Outsourcing Fees 291
Outsourcing Issues and Concerns 291
Offshore Outsourcing 292
Case in Point 7.1: Turnkey Services 293
In-House Software Development Options 293
Make or Buy Decision 293
Developing Software In-House 294
Purchasing a Software Package 295
Customizing a Software Package 296
Creating User Applications 297
Role of the Systems Analyst 298
Analyzing Cost and Benefits 299
Financial Analysis Tools 299
Case in Point 7.2: Sterling Associates 299
Cost-Benefit Analysis Checklist 300
The Software Acquisition Process 301
Step 1: Evaluate the Information System Requirements 301
Step 2: Identify Potential Vendors or Outsourcing Options 304
Step 3: Evaluate the Alternatives 306
Step 4: Perform Cost-Benefit Analysis 307
Step 5: Prepare a Recommendation 307
Step 6: Implement the Solution 308
Case in Point 7.3: Doug’s Sporting Goods 308
Completion of Systems Analysis Tasks 309
System Requirements Document 309
Presentation to Management 309
Transition to Systems Design 310
Preparing for Systems Design 311
Logical and Physical Design 311
Systems Design Guidelines 311
Overview 312
Case in Point 7.4: Downtown! 313
Design Trade-Offs 314
Prototyping 315
Prototyping Methods 315
Prototyping Tools 316
Limitations of Prototypes 317
Software Development Trends 317
Views from the IT Community 317
A Question of Ethics 318
Chapter Summary 319
Key Terms and Phrases 321
Learn It Online 322
SCR Associates Case Simulation Session 7:
Development Strategies 323
Chapter Exercises 324
Apply Your Knowledge 325
Case Studies 327
New Century Health Clinic 327
Personal Trainer, Inc. 328
Chapter Capstone Case: SoftWear, Limited 330
PHASE 3: SYSTEMS DESIGN
Chapter 8
User Interface Design
Objectives 334
Introduction 334
Chapter Introduction Case: Mountain View
College Bookstore 335
What Is a User Interface? 336
Evolution of the User Interface 336
Human-Computer Interaction 338
Case in Point 8.1: Casual Observer Software 340
Principles of User-Centered Design 341
Understand the Business 341
Maximize Graphical Effectiveness 341
Think Like a User 341

viii Table of Contents
Use Models and Prototypes 342
Focus on Usability 342
Invite Feedback 342
Document Everything 342
Designing the User Interface 342
Design a Transparent Interface 343
Create an Interface that Is Easy to Learn and Use 344
Enhance User Productivity 344
Make It Easy for Users to Obtain Help or Correct Errors 345
Minimize Input Data Problems 346
Provide Feedback to Users 346
Create an Attractive Layout and Design 347
Use Familiar Terms and Images 347
Add Control Features 347
Case in Point 8.2: Boolean Toys 349
Output Design 350
Overview of Report Design 350
Types of Reports 352
User Involvement in Report Design 353
Report Design Principles 354
Case in Point 8.3: Lazy Eddie 357
Output Technology 357
Input Design 360
Source Documents and Forms 360
Case in Point 8.4: Trustworthy Insurance Company 362
Data Entry Screens 363
Input Masks 365
Validation Rules 366
Input Technology 368
Input Volume Reduction 370
Security and Control Issues 370
Output Security and Control 370
Input Security and Control 371
A Question of Ethics 372
Chapter Summary 372
Key Terms and Phrases 374
Learn It Online 375
SCR Associates Case Simulation Session 8:
User Interface Design 376
Chapter Exercises 377
Apply Your Knowledge 378
Case Studies 380
New Century Health Clinic 380
Personal Trainer, Inc. 380
Video Superstore 381
Chapter Capstone Case: SoftWear, Limited 382
Chapter 9
Data Design
Objectives 390
Introduction 390
Chapter Introduction Case: Mountain View College
Bookstore 391
Data Design Concepts 392
Data Structures 392
Overview of File Processing 392
The Evolution from File Systems to Database Systems 395
DBMS Components 396
Interfaces for Users, Database Administrators, and
Related Systems 396
Data Manipulation Language 398
Schema 398
Physical Data Repository 398
Web-Based Database Design 398
Characteristics of Web-Based Design 398
Internet Terminology 399
Connecting a Database to the Web 400
Data Security 401
Data Design Terminology 401
Definitions 401
Key Fields 402
Referential Integrity 404
Entity-Relationship Diagrams 405
Drawing an ERD 406
Types of Relationships 406
Cardinality 408
Case in Point 9.1: TopText Publishing 410
Normalization 410
Standard Notation Format 411
Repeating Groups and Unnormalized Designs 411
First Normal Form 412
Second Normal Form 413
Third Normal Form 416
A Normalization Example 417
Case in Point 9.2: CyberToys 419
Using Codes During Data Design 422
Overview of Codes 422
Types of Codes 423
Developing a Code 424
Case in Point 9.3: DotCom Tools 425
Database Design: One Step At a Time 426
Database Models 427
A Real-World Business Example 427
Working with a Relational Database 428
Data Storage and Access 430
Strategic Tools for Data Storage and Access 430
Logical and Physical Storage 432
Data Coding and Storage 433
Data Control 435
Case in Point 9.4: SoccerMom 436
A Question of Ethics 436
Chapter Summary 437
Key Terms and Phrases 439
Learn It Online 440
SCR Associates Case Simulation Session 9:
Data Design 441
Chapter Exercises 442
Apply Your Knowledge 443
Case Studies 445
New Century Health Clinic 445
Personal Trainer, Inc. 445
FastFlight Airlines 446
Chapter Capstone Case: SoftWear, Limited 447

ix Table of Contents
Chapter 10
System Architecture
Objectives 452
Introduction 452
Chapter Introduction Case: Mountain View
College Bookstore 453
System Architecture Checklist 454
Enterprise Resource Planning (ERP) 454
Case in Point 10.1: ABC Systems 455
Initial Cost and TCO 455
Scalability 456
Web Integration 456
Legacy System Interface Requirements 457
Processing Options 458
Security Issues 458
Planning the Architecture 458
Servers 458
Clients 459
Client/Server Architecture 461
Overview 461
Client/Server Design Styles 463
Fat and Thin Clients 464
Client/Server Tiers 464
Middleware 465
Cost-Benefit Issues 465
Client/Server Performance Issues 466
Internet-Based Architecture 467
Developing E-Commerce Solutions In-House 468
Case in Point 10.2: Small Potatoes, Inc. 469
Packaged Solutions and E-Commerce Service Providers 469
Corporate Portals 470
Cloud Computing 470
Web 2.0 472
Processing Methods 474
Online Processing 474
Batch Processing 475
Case in Point 10.3: R/Way Trucking Company 475
Combined Online and Batch Processing 475
Network Models 476
The OSI Reference Model 476
Network Protocols 477
Network Topology 477
Routers 481
Network Modeling Tools 481
Network Licensing Issues 482
Wireless Networks 482
Wireless Network Standards 482
Wireless Network Topologies 483
Wireless Trends 484
Case in Point 10.4: Spider IT Services 485
Systems Design Completion 485
System Design Specification 486
User Approval 487
Presentations 487
A Question of Ethics 488
Chapter Summary 488
Key Terms and Phrases 491
Learn It Online 492
SCR Associates Case Simulation Session 10:
Systems Architecture 493
Chapter Exercises 494
Apply Your Knowledge 495
Case Studies 497
New Century Health Clinic 497
Personal Trainer, Inc. 497
Chapter Capstone Case: SoftWear, Limited 499
PHASE 4: SYSTEMS
IMPLEMENTATION
Chapter 11
Managing Systems Implementation
Objectives 506
Introduction 506
Chapter Introduction Case: Mountain View
College Bookstore 507
Software Quality Assurance 508
Software Engineering 508
International Organization for Standardization (ISO) 509
Overview of Application Development 511
Review the System Design 511
Application Development Tasks 511
Systems Development Tools 512
Project Management 514
Structured Application Development 514
Structure Charts 514
Cohesion and Coupling 516
Drawing a Structure Chart 517
Object-Oriented Application Development 518
Characteristics of Object-Oriented Application Development 519
Implementation of Object-Oriented Designs 520
Object-Oriented Cohesion and Coupling 520
Agile Application Development 520
An Extreme Programming (XP) Example 520
The Future of Agile Development 523
Coding 523
Programming Environments 523
Generating Code 523
Testing the System 525
Unit Testing 525
Case in Point 11.1: Your Move, Inc. 526
Integration Testing 526
System Testing 527
Case in Point 11.2: WebTest, Inc. 528
Documentation 528
Program Documentation 529
System Documentation 529
Operations Documentation 529
User Documentation 530
Management Approval 533
System Installation and Evaluation 534
Operational and Test Environments 534
Training 535
Training Plan 535
Vendor Training 536

x Table of Contents
Webinars, Podcasts, and Tutorials 537
Outside Training Resources 537
Training Tips 537
Interactive Training 539
Data Conversion 543
Data Conversion Strategies 544
Data Conversion Security and Controls 544
System Changeover 544
Direct Cutover 544
Parallel Operation 545
Pilot Operation 546
Phased Operation 546
Case in Point 11.3: Global Cooling 547
Post-Implementation Tasks 547
Post-Implementation Evaluation 547
Case in Point 11.4: Yorktown Industries 549
Final Report to Management 549
A Question of Ethics 550
Chapter Summary 550
Key Terms and Phrases 552
Learn It Online 553
SCR Associates Case Simulation Session 1I:
Systems Implementation 554
Chapter Exercises 555
Apply Your Knowledge 556
Case Studies 558
New Century Health Clinic 558
Personal Trainer, Inc. 558
Fanciful Crystal 559
Chapter Capstone Case: SoftWear, Limited 560
PHASE 5: SYSTEMS SUPPORT
AND SECURITY
Chapter 12
Managing Systems Support
and Security
Objectives 570
Introduction 570
Chapter Introduction Case: Mountain View
College Bookstore 571
Overview 572
User Support 572
User Training 572
Help Desks 572
Outsourcing Issues 574
Maintenance Tasks 574
Corrective Maintenance 575
Adaptive Maintenance 576
Perfective Maintenance 577
Preventive Maintenance 577
Case in Point 12.1: Outback Outsourcing, Inc. 578
Maintenance Management 578
The Maintenance Team 578
Case in Point 12.2: Brightside Insurance, Inc. 580
Maintenance Requests 580
Establishing Priorities 582
Configuration Management 582
Maintenance Releases 583
Version Control 583
Baselines 584
System Performance Management 584
Fault Management 585
Performance and Workload Measurement 585
Capacity Planning 587
System Maintenance Tools 588
System Security Overview 589
System Security Concepts 589
Risk Management 590
Attacker Profiles and Attacks 592
Security Levels 594
Physical Security 594
Case in Point 12.3: Outer Banks County 597
Network Security 597
Application Security 601
File Security 603
User Security 603
Procedural Security 606
Case in Point 12.4: Chain Link Consulting, Inc. 606
Backup and Recovery 607
Backup Policies 607
Business Continuity Issues 608
System Obsolescence 609
Future Challenges and Opportunities 610
Predictions 610
Strategic Planning for IT Professionals 611
IT Credentials and Certification 611
Critical Thinking Skills 611
A Question of Ethics 613
Chapter Summary 613
Key Terms and Phrases 615
Learn It Online 616
SCR Associates Case Simulation Session 12:
Managing Systems Support and Security 617
Chapter Exercises 618
Apply Your Knowledge 619
Case Studies 621
New Century Health Clinic 621
Personal Trainer, Inc. 621
Tarheel Industries 622
Mills Imports 623
Chapter Capstone Case: SoftWear, Limited 624
THE SYSTEMS ANALYST’S
TOOLKIT
Toolkit Part A
Communication Tools
Objectives 630
Introduction 630
Toolkit Introduction Case: Mountain View
College Bookstore 631
Successful Communication Strategies 632
Why, Who, What, When, and How 632
Cultural Context 632
Know Your Subject 633

xi
Written Communications 633
Writing Style and Readability 633
E-Mail, Memos, and Letters 634
Netiquette 635
Workgroup Software 637
Reports 637
Oral Communications 639
Define the Audience 639
Define the Objectives 639
Organize the Presentation 640
Define Any Technical Terms 640
Prepare Presentation Aids 640
Practice 641
The Presentation 642
Online Presentations 643
Managing Your Communication Skills 644
Toolkit Summary 645
Key Terms and Phrases 646
Toolkit Exercises 647
Toolkit Part B
CASE Tools
Objectives 648
Introduction 648
Toolkit Introduction Case: Mountain View
College Bookstore 649
Overview of CASE Tools 650
CASE Tools History 651
The Marketplace for CASE Tools 651
CASE Terms and Concepts 653
Repository 653
Individual Tools 653
Integrated Development Environments 656
Examples of Integrated Development Environments 656
Pros and Cons of Integrated Development Tools 658
CASE Tool Examples 658
Visible Analyst 658
Rational Software 658
CASE Tool Trends 661
New Products and Features 661
Method-Specific CASE Tools 662
Toolkit Summary 664
Key Terms and Phrases 665
Toolkit Exercises 666
Toolkit Part C
Financial Analysis Tools
Objectives 668
Introduction 668
Toolkit Introduction Case: Mountain View
College Bookstore 669
Describing Costs and Benefits 670
Cost Classifications 672
Managing Information Systems Costs and Charges 673
Benefit Classifications 674
Cost-Benefit Analysis 674
Payback Analysis 675
Using a Spreadsheet to Compute Payback Analysis 677
Return on Investment Analysis 678
Using a Spreadsheet to Compute ROI 680
Present Value Analysis 680
Using a Spreadsheet to Calculate Present Value 683
Toolkit Summary 684
Key Terms and Phrases 686
Toolkit Exercises 687
Toolkit Part D
Internet Resource Tools
Objectives 688
Introduction 688
Toolkit Introduction Case: Mountain View
College Bookstore 689
Overview 690
Planning an Internet Research Strategy 690
Step 1. Review Your Information Requirements 690
Step 2. Use the Proper Search Tools and Techniques 691
Step 3. Evaluate the Results 691
Step 4. Consider Copyright and Data Integrity Issues 691
Search Basics 692
Search Engines 693
Search Engine Concepts 693
Search Techniques 694
Advanced Search Techniques 695
Search Checklist 697
Subject Directories 698
A Subject Directory Example 698
Advantages and Disadvantages of Subject Directories 699
The Invisible Web 699
Invisible Web Examples 700
Navigation Tools for the Invisible Web 700
Internet Communication Channels 702
Social Networking 702
Newsgroups 702
Newsletters, Blogs, Podcasts, and Webcasts 703
RSS Feeds 704
Webinars 704
Mailing Lists 704
Web-Based Discussion Groups 705
Chat Rooms 705
Instant Messaging and Text Messaging 706
Information Technology Community Resources 708
Corporate Resources 708
Government Resources 709
Personal and Professional Resources 709
Online Learning Resources 709
Toolkit Summary 712
Key Terms and Phrases 713
Toolkit Exercises 714
Glossary/Index 715
Photo Credits 739
Table of Contents

xii Preface
PREFACE
The Shelly Cashman Series® offers the finest textbooks in computer education. We are
proud that our previous editions of Systems Analysis and Design have been so well
received by instructors and students. Systems Analysis and Design, Ninth Edition
continues with the innovation, quality, and reliability you have come to expect from
the Shelly Cashman Series.
Overview
Systems Analysis and Design, Ninth Edition includes exciting Video Learning Sessions,
developed to maximize the learning experience. The Video Learning Sessions combined with
the text offer an interactive, multimedia approach to information systems development.
Many two- and four-year colleges and schools use this book in information systems, com-
puter science, and e-commerce curriculums. The textbook emphasizes the role of the sys-
tems analyst in a dynamic, business-related environment.
Facing a challenging global marketplace, companies need strong IT resources to sur-
vive and compete effectively. Many of today’s students will become the systems analysts,
managers, and IT professionals of tomorrow. This textbook will help prepare them for
those roles.
Using this book, students learn how to translate business requirements into informa-
tion systems that support a company’s short- and long-term objectives. Case studies and
assignments teach analytical and problem-solving skills. Students learn about traditional
structured analysis, object-oriented concepts, and agile methods. Extensive end-of-chapter
exercises emphasize critical-thinking skills.
The Ninth Edition introduces several major new features, including four new Video
Learning Sessions and a new end-of-chapter assignment called Ready for a Challenge,
which stresses critical thinking skills. This edition also includes significant updates on
topics such as agile development, IT security, and Web 2.0 trends.
Objectives of This Textbook
Systems Analysis and Design, Ninth Edition is intended for a three credit-hour introduc-
tory systems analysis and design course. This textbook is designed to:
• Enhance critical thinking skills with the new Ready for a Challenge feature at the
end of each chapter. The scenario-based tasks and sample answers help students
develop perception, organization, analysis, problem-solving, and decision-making
skills that they can take to the workplace.
• Explain systems analysis and design using an appealing full-color format, numerous
screen shots and illustrations, and an easy-to-read style that invites students to learn.
• Introduce project management concepts early in the systems development process,
with a new chapter that explains project management tools and techniques.
• Challenge students with a Question of Ethics mini-case in each chapter that asks
them to respond to real-life ethical issues in an IT environment.
• Provide multi-method coverage, including a comparison of structured, object-
oriented, and agile systems development methods.
• Emphasize the importance of planning, implementing, and managing an effective
IT security program.
• Explain how IT supports business requirements in today’s intensely competitive
environment, and describe major IT developments and trends.

xiii
• Describe a systems analyst’s job in a typical business organization, and show stu-
dents how to use various tools and techniques to improve their skills and manage
their careers.
• Provide students with a comprehensive Systems Analyst’s Toolkit that highlights
four major cross-functional tools, including: Communications Tools, CASE Tools,
Financial Analysis Tools, and Internet Resource Tools.
Video Learning Sessions
Eighteen multimedia Video Learning Sessions describe key systems analysis skills and
concepts and provide students with a self-paced, interactive learning tool that reinforces
the text. The sessions provide step-by-step explanations that are easy to follow and
understand.
Each session includes practice tasks, sample answers, and challenge tasks to keep stu-
dents interested and engaged as they learn.
• Topics include DFDs, object-oriented analysis, functional decomposition dia-
grams, structure charts, data normalization, entity-relationship diagrams, decision
tables, financial tools, and project management.
• A Your Turn feature in every Video Learning Session challenges students to apply
their skills and check their work against sample answers. This hands-on practice
can help students better handle actual assignments and tasks.
• The Video Learning Sessions offer a self-paced multimedia format that students
can review at their convenience.
• Instructors may use the Video Learning Sessions as classroom presentations,
distance-education support, student review tools, and exam preparation.
Other New and Updated Features in This Text
Systems Analysis and Design, Ninth Edition offers these exciting new and expanded fea-
tures:
• New Ready for a Challenge end-of-chapter assignment allows students to practice
critical thinking skills, first by trying Practice Tasks and viewing sample answers,
and then by completing the Challenge Tasks. These tasks can help students
develop perception, organization, analysis, problem-solving, and decision-making
skills that they can take to the workplace.
• Increased emphasis on project management skills and techniques, with one or
more Gantt charts in each chapter, work breakdown structures, and realistic proj-
ect examples. A link to Open Workbench connects students to open-source proj-
ect management software that they can download and install.
• Question of Ethics mini-case in each chapter challenges students with real-life
ethical issues in an IT environment.
• Multi-method coverage provides comparison of structured, object-oriented, and agile
development methods, starting in Chapter 1. New material on agile methods includes
examples of extreme programming, scrum, spiral models, and related topics.
• New coverage of risk management, both in a project management context and as
a key element of IT security planning.
• Extensive update of networking coverage, including new material on switches,
routers, and multistation access units. New coverage of wireless networks, includ-
ing wireless standards, topologies, and trends.
• Expansion of IT security material, including risk management, fault management,
backup and recovery, wireless security issues, and a six-level security framework.
Preface

xiv Preface
• Expanded coverage of IT trends, including cloud computing, Web 2.0, social net-
working, RFID, wireless networks, mobile computing, offshore outsourcing,
e-business, ERP, Web hosting, client/server architecture, network concepts,
Webinars, podcasts, RSS feeds, Web-based applications, and others.
• Updated Systems Analyst’s Toolkit teaches students IT support skills in four cross-
functional areas, including Communication Tools, CASE Tools, Financial Analysis
Tools, and Internet Resource Tools.
• New Management Information Systems CourseMate Web site for Systems
Analysis and Design, Ninth Edition available for a fully digital course solution.
CourseMate provides one location for all interactive activities, Video Learning
Sessions, and an interactive e-book. EngagementTracker provides the ability to
assess student understanding of concepts through the interactive activities.
Organization of This Textbook
Systems Analysis and Design, Ninth Edition, contains 16 learning units in twelve chap-
ters and a four-part Systems Analyst’s Toolkit that teaches valuable cross-functional skills.
Chapter 1 – Introduction to Systems Analysis and Design Chapter 1 provides an up-
to-date overview of IT issues, major trends, and various systems development approaches,
including structured, object-oriented, and agile methods. The chapter emphasizes the
important role of systems analysis and design in supporting business objectives.
Chapter 2 – Analyzing the Business Case Chapter 2 offers a business-related starting
point for successful systems analysis. Topics include strategic planning, review of
systems requests, how to conduct a feasibility study, and the steps in a preliminary
investigation.
Chapter 3 – Managing Systems Projects Chapter 3 explains project management,
cost estimating, and change control for information systems. This chapter includes
hands-on skills that systems analysts can use to create Gantt charts and PERT charts.
Chapter 4 – Requirements Modeling Chapter 4 describes fact-finding techniques and
team-based modeling methods, including JAD and RAD, that systems analysts use to
model and document a new system.
Chapter 5 – Data and Process Modeling Chapter 5 explains how systems analysts
create a logical model for the new system by using data flow diagrams and process
description tools, including structured English, decision tables, and decision trees.
Chapter 6 – Object Modeling Chapter 6 explains object-oriented tools and techniques,
including use case diagrams, class diagrams, sequence diagrams, state-transition diagrams,
activity diagrams, and the Unified Modeling Language.
Chapter 7 – Development Strategies Chapter 7 focuses on software acquisition
options, including outsourcing and offshore outsourcing options, application service
providers, and other trends that view software as a service rather than a product.
Chapter 8 – User Interface Design Chapter 8 highlights output and report design, the
interaction between humans and computers, including usability issues, graphical screen
design, input issues, and data entry guidelines.
Chapter 9 – Data Design Chapter 9 describes data design terms, concepts, and skills
including entity-relationship diagrams, cardinality, data normalization rules, data warehous-
ing, data mining, a comparison of logical and physical records, and data control measures.
Chapter 10 – System Architecture Chapter 10 explains the elements of system architec-
ture, with emphasis on RFID, ERP, supply chain management, client/server architecture,
and network topology, including wireless networking standards and trends.
Chapter 11 – Managing Systems Implementation Chapter 11 includes coverage of
application development and implementation topics, including structure charts,
documentation techniques, system testing, user training, data conversion, changeover
methods, and post-implementation evaluation.

Preface
Chapter 12 – Managing Systems Support and Security Chapter 12 describes user sup-
port, maintenance techniques, and factors that indicate the end of a system’s useful life. This
chapter explains IT security concepts, techniques, and tools, and specifically addresses six
security levels: physical, network, application, file, user, and procedural security. Chapter 12
also describes risk management, data backup and disaster recovery, and explains future chal-
lenges and opportunities that IT professionals will face in a dynamic workplace.
Toolkit Part A – Communication Tools Part A of the Toolkit describes oral and writ-
ten communication tools that can make a systems analyst more effective. Topics include
guidelines for successful communications, tips for better readability, how to organize and
plan a presentation, effective speaking techniques, and managing communication skills.
Toolkit Part B – CASE Tools Part B of the Toolkit focuses on computer-aided soft-
ware engineering (CASE) tools that systems analysts use to document, model, and
develop information systems. Examples of several popular CASE tools are provided,
along with sample screens that show CASE tool features.
Toolkit Part C – Financial Analysis Tools Part C of the Toolkit explains various tools
that systems analysts use to determine feasibility and evaluate the costs and benefits of
an information system. Specific tools include payback analysis, return on investment
(ROI), and net present value (NPV).
Toolkit Part D – Internet Resource Tools Part D of the Toolkit explains Internet-
based information gathering strategies. Topics include search engines, subject directories,
the invisible Web, advanced search techniques, Boolean logic and Venn diagrams. This
Toolkit Part also discusses social networking, newsgroups, newsletters, blogs, podcasts,
RSS feeds, Webinars, mailing lists, Web-based discussion groups, chat rooms, instant
messaging, and online learning opportunities.
FOR THE STUDENT
The Shelly Cashman Series wants you to have a
valuable learning experience that will provide the
knowledge and skills you need to be successful.
With that goal in mind, we have included many
activities, games, and learning tools, that we hope
you will find interesting, challenging, and enjoyable. For exam-
ple, because a picture is worth a thousand words, each systems
development phase begins with an eye-catching Dilbert© car-
toon and a multi-color Gantt chart that provides a “You are
Here” roadmap.
Chapter Opening Features
Each chapter contains the following features to help you get
started:
• Chapter Introduction Read the Chapter Introduction for a brief overview of the
chapter.
• Chapter Objectives The Chapter Objectives lists the main skills and knowledge
you will have when you finish the chapter.
• Chapter Introduction Case: Mountain View College Bookstore The Mountain
View College Bookstore case is a continuing case study that provides a real-world
overview of the topics that will be covered in each chapter. As you work through
the textbook, you will see how the Mountain View IT team discusses the issues,
identifies the key points, and creates specific task lists.
xv

Preface
Learning Tools within the Chapter
As you work through each chapter, you will find these helpful tools and features:
• Video Learning Sessions An online library of 18 self-paced multimedia sessions is
available to you and the text includes reminders about them. Depending on your
personal learning style, you might use the videos in various ways. For example,
one approach might be to review the chapter, watch the VLS, try the Your Turn
tasks, and then check your answers.
• A Question of Ethics A mini-case in each chapter will chal-
lenge you with real-life ethical issues in an IT environment.
• Case in Point This exciting feature provides four embedded
mini-case opportunities for you to analyze and apply the skills
and concepts you are learning in the chapter.
• Toolkit Time The Systems Analyst’s Toolkit explains skills that
you can apply at any point in the textbook. Toolkit Time mar-
ginal notes remind you about the Toolkit, where to find it, and
how it might help you address the issues or material in the chapter.
• On the Web Learn more about a topic by visiting the sug-
gested Web sites and exploring the links we have provided.
End-of-Chapter Exercises
The following exercises are in every text chapter:
• Learn It Online Each chapter features a Learn It Online page that includes six
exercises. These exercises utilize the Web to offer chapter-related reinforcement
activities that will help you gain confidence in systems analysis and design. These
exercises include True/False, Multiple Choice, Short Answer, Flash Cards, Practice
Test, and several learning games.
• CASE SIM: SCR Associates This is an interactive Web-based case study, with a
work session at the end of each chapter. Visit SCR’s Web site and log on to the
company’s intranet to read e-mail messages addressed to you, listen to voice mail
messages, and perform assigned tasks in a realistic corporate setting. In this simu-
lation you report to Jesse Baker, but you e-mail your completed assignments to
your instructor. Detailed instructions on how to use this case are available in the
Management Information Systems CourseMate Web site for Systems Analysis and
Design, Ninth Edition at www.cengagebrain.com. To log on to the SCR intranet,
you must use the password sad9. When you log on to the SCR intranet, you also
will be asked to enter your first and last name so your e-mail can be addressed
to you correctly.
• Chapter Exercises In this section, you will find 10 Review Questions, four Discussion
Topics, and four Projects. These exercises allow you to apply your understanding of
the material and will help to prepare you for tests and assessments.
• Apply Your Knowledge This section includes four mini-cases per chapter. Each
mini-case requires you to use the knowledge and skills you learned in the chapter.
• Case Studies Case studies provide practical experience and allow you to practice
specific skills learned in the chapter. Each chapter contains several case studies,
two of which (New Century Health Clinic and Personal Trainer, Inc.) continue
throughout the textbook. You can complete your assignments using Microsoft
Word and Excel forms, available in the Management Information Systems
CourseMate Web site for Systems Analysis and Design, Ninth Edition at
www.cengagebrain.com.
TOOLKIT TIME
xvi

www.cengagebrain.com

www.cengagebrain.com

• Chapter Capstone Case: SoftWear, Limited SoftWear, Limited (SWL) is a continuing
case study where students act as members of the SWL systems development team
and perform various assignments in each chapter, including a set of project man-
agement tasks and a sample Gantt chart.
• Ready for a Challenge This new end-of-chapter assignment stresses critical
thinking skills, which many educators and employers believe are very important
in the workplace. Perform the Practice Tasks first, view the sample answers, and
apply your knowledge and skill to the Challenge Tasks. Ready for a Challenge
can help you develop perception, organization, analysis, problem-solving, and
decision-making skills that you can take to the workplace.
Additional Support Tools
These additional tools can enhance your learning experience:
GLOSSARY/INDEX This edition of the textbook includes a glossary/index feature to
assist your understanding of key terms and phrases, or to use as a quick reference tool.
STUDENT STUDY TOOL This interactive study tool, accessible via the Management
Information Systems CourseMate Web site for Systems Analysis and Design, Ninth
Edition provides:
• Detailed outlines of every chapter that highlight key topics covered and can be used
as a guide when reviewing for an exam
• Chapter glossaries that allow you to look up all key terms in one place, and provide
page references where key terms can be found if you need more information
• Figures and Test Yourself questions that provide additional reinforcement of
chapter concepts
• User guide for Open Workbench (a free, open-source project management pro-
gram), and links to download and install a trial version of Microsoft Project and
a full version of Open Workbench
MANAGEMENT INFORMATION SYSTEMS COURSEMATE Broaden your learning
experience and enhance your understanding of the material in each chapter with the
Management Information Systems CourseMate Web site. Visit www.cengagebrain.com
for access to:
• Full, interactive digital e-book
• Video Learning Sessions and Your Turn exercises
• Ready for a Challenge Practice Tasks and Challenge Tasks
• On the Web links
• Learn It Online exercises, including True/False, Multiple Choice, Short Answer,
Flash Cards, Practice Test, and several learning games
• SCR Associates Internet and intranet sites
• Forms Library
• Project Management Resources
FOR THE INSTRUCTOR
The Shelly Cashman Series is dedicated to providing you all of the tools you need to
make your class a success. Information on all supplementary materials is available
through your Course Technology representative or by calling one of the following
xvii Preface

www.cengagebrain.com

Preface
telephone numbers: Colleges, Universities, Continuing Education Departments, Post-
Secondary Vocational Schools, Career Colleges, Business, Industry, Government, Trade,
Retailer, Wholesaler, Library, and Resellers, call Cengage Learning at 800-354-9706;
K-12 Schools, Secondary and Vocational Schools, Adult Education, and School Districts,
call Cengage Learning at 800-354-9706. In Canada, call Nelson Cengage Learning at
800-268-2222.
Instructor Resources Disc
The Instructor Resources disc (0-538-48163-3) for this textbook includes both teaching
and testing aids. The contents of the disc are listed below:
• Instructor’s Manual Includes lecture notes summarizing the chapter sections, fig-
ures and boxed elements found in every chapter, teacher tips, classroom activities,
lab activities, and quick quizzes in Microsoft Word files.
• Syllabus Easily customizable sample syllabus that covers policies, assignments,
exams, and other course information. Also included is a Microsoft Project file used
to create the five Phase Opener Gantt charts. An instructor can use this project file
to create a visual syllabus that could include additional tasks, quizzes, and projects.
The project file also can be used to track class progress through the course.
Instructors are welcome to distribute this file to students, and show them how to
manage tasks, resources, and deadlines for team projects that might be assigned.
• PowerPoint Presentations A multimedia lecture presentation system provides
slides for each chapter, based on chapter objectives.
• Figure Files Illustrations for every figure in the textbook in electronic form.
• Solutions to Exercises Includes solutions for end-of-chapter exercises, including
Ready for a Challenge Practice and Challenge Task solutions, chapter reinforce-
ment exercises, and extra case studies.
• Test Bank & Test Engine Test Banks include 112 questions for every chapter, and
feature objective-based and critical thinking question types, page number references,
and figure references when appropriate. The ExamView test engine is the ultimate
tool for your testing needs.
• Additional Activities for Students The forms that students can use to complete the
Case Studies are included. Two additional case studies are also provided for every
chapter, to be assigned as homework, extra credit, or assessment tools. Chapter
Reinforcement Exercises, which are true/false, multiple-choice, and short answer
questions that help students gain confidence in the material learned are included,
as are the Your Turn Practice Tasks and sample solutions.
• Additional Faculty Files A copy of the powerful CASE tool, Visible Analyst —
Student Edition, is provided for your evaluation. Several sample solutions to case
study tasks also are included. To install this program, you follow a simple regis-
tration process that entitles you to use the software and obtain support. Detailed
instructions are provided on the Instructor Resources disc. Also included are
Word document versions of the e-mail and voice mail messages posted for stu-
dents on the SCR Web site and the Interview Summaries for the New Century
Case Study.
xviii

xix
Course Cartridge Content
Course Technology has partnered with the leading distance learning solution providers
and class-management platforms today. To access this material, visit http://www.cengage.
com/coursecare/cartridge/ and search for your title. Instructor resources include the fol-
lowing: additional case projects, sample syllabus, PowerPoint presentations, and more. For
students to access this material, they must have purchased a Course Cartridge PIN-code
specific to this title and your campus platform. The resources for students might include
(based on instructor preferences): topic reviews, review questions, practice tests, and more.
For additional information, please contact your sales representative.
SOFTWARE BUNDLING OPPORTUNITIES Systems Analysis and Design, Ninth
Edition can be bundled with several popular software programs:
• Visible Analyst Student Edition Whether you are designing e-business applica-
tions, developing a data warehouse, or integrating legacy systems with new enter-
prise applications, Visible Analyst is a valuable software based learning tool that
helps students become more marketable with its advanced, affordable, and easy
to use modeling capabilities. Visible Analyst was recently awarded the “Best
Systems Analysis & Design Modeling Tool” by the Indian Education Ministry.
Key users include: Business Analysts who analyze the organization and design of
businesses or government departments and assess business models and their inte-
gration with technology; other professions that use systems analysis and design
methods and techniques include Systems Analysts, Database Engineers, Computer
Scientists, and Software Engineers. Visible Analyst is a separate software tool
available individually as a Student Edition or as a University Edition with concur-
rent floating licenses for college or university computer labs. For more informa-
tion about Visible Analyst, please visit: www.visible.com/Modeler/index.htm or
contact sales@visible.com.
• Microsoft Visio The advanced diagramming tools of Visio 2010 help you sim-
plify complexity with dynamic, data-driven visuals and new ways to share on the
Web in real time. Start by building your diagram with professional-looking tem-
plates and modern, pre-drawn shapes. Then, easily link your diagram to popular
data sources (such as Excel). You’ll see data automatically refresh right within
your diagram, reflected in vibrant visuals such as icons, symbols, colors, and bar
graphs. Finally, with just a few clicks, publish your data-linked diagram to
SharePoint, and provide access to others on the Web, even if they don’t have
Visio. Together, simplicity, data-driven shapes, and Web sharing make Visio 2010
one of the most powerful ways to see and understand important information.
• Microsoft Project Microsoft® Project 2010 delivers powerful, visually enhanced
ways to effectively manage a wide range of projects and programs. From meeting
crucial deadlines to selecting the right resources and empowering your teams,
Project 2010 offers easier and more intuitive experiences to help you simply be
more productive and realize amazing results.
ACKNOWLEDGMENTS
First, special thanks to Deb Kaufmann, our development editor, who made an enormous
contribution to this edition. Her insight and suggestions were extremely valuable.
Thanks to Larry Brock, Andrew Page, and Ron Savilla. As former students at Central
Piedmont Community College, their ideas were especially valuable, and helped shape
the new edition. Thanks also to David Rosenblatt, who contributed to an earlier edition
of Systems Analysis and Design, and returned to help with the Ninth Edition.
Preface

http://www.cengage.com/coursecare/cartridge/

http://www.cengage.com/coursecare/cartridge/

www.visible.com/Modeler/index.htm

xx
Finally, thanks to our students for their feedback and comments. They suggested that
we add additional Video Learning Sessions and interactive content such as Ready for a
Challenge and Your Turn. We hope they continue to offer suggestions, and we will cer-
tainly continue to listen to them.
ABOUT OUR COVERS
The Shelly Cashman Series is continually updating our approach and content to reflect the
way today’s students learn and experience new technology. This focus on student success
is reflected on our covers, which feature real students from Bryant University using the
Shelly Cashman Series in their courses, and reflect the varied ages and backgrounds of the
students learning with our books. When you use the Shelly Cashman Series, you can be
assured that you are learning computer skills using the most effective courseware
available.
Preface

1
PHASE
As the Dilbert cartoon suggests, it is always a good idea to know whether a project fits the
company’s overall strategy. You will learn more about the relationship between systems projects
and corporate strategies in the systems planning phase.
Systems planning is the first of five phases in the systems development life cycle. After an
introduction to systems analysis and design, you will learn how systems projects get started, how
to evaluate a project proposal to determine its feasibility, and how to use project management
tools and techniques. The deliverable for this phase is the preliminary investigation report.
1
DELIVERABLE
Preliminary investigation report
TOOLKIT SUPPORT
Communications and financial
analysis tools
VIDEO LEARNING SESSIONS
Project Management Concepts
SYSTEMS PLANNING

Chapter 1 Introduction to Systems Analysis and Design
1CHAPTER
Chapter 1 is the first of three chapters in the systems
planning phase. This chapter describes the role of
information technology in today’s dynamic business
environment. In this chapter, you will learn about the
development of information systems, systems analysis and
design concepts, and various systems development
methods. This chapter also describes the role of the
information technology department and its people.
Introduction to
Systems Analysis
and Design
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Describe the impact of information
technology on business strategy and success
• Define an information system and describe
its components
• Explain how profiles and models can
represent business functions and operations
• Explain how the Internet has affected
business strategies and relationships
• Identify various types of information systems
and explain who uses them
• Distinguish between structured analysis,
object-oriented analysis, and agile methods
• Compare the traditional waterfall model
with agile methods and models
• Apply five basic guidelines for systems
development
• Discuss the role of the information
technology department and the systems
analysts who work there
INTRODUCTION
The headlines in Figure 1-1 offer dramatic examples
of how information technology affects our society.
Companies use information as a weapon in the bat-
tle to increase productivity, deliver quality products
and services, maintain customer loyalty, and make
sound decisions. In a global economy with intense
competition, information technology can mean the
difference between success and failure.
FIGURE 1-1 These headlines show the enormous impact of
information technology in the twenty-first century.

Introduction 3
Phase 1 Systems Planning
FIGURE 1-2 Typical introductory tasks for systems projects
CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Mountain View College is located in New England. The school has grown rapidly
and now has 8,000 students at three campuses, each with a branch bookstore. Wendy Lee,
manager of college services, is responsible for all bookstore operations. Wendy wants a new
information system that will increase efficiency and improve customer service.
As the case begins, Tina Allen, a systems analyst in the college’s Information Technology
department, is talking with David Conroe. David is majoring in information systems at
Mountain View College and is earning credit toward his degree by working part-time as a
student intern.
Participants: Tina and David
Location: Tina’s office, 10 a.m. Monday morning, August 22, 2011
Project status: Initial discussion
Discussion topics: Basic systems development concepts
Tina: Welcome aboard, David.
David: I’m glad to be here. What’s on the agenda?
Tina: Well, there’s been some talk about a new bookstore information system. Wendy says nothing is definite
yet, but she suggested that we should get ready.
David: So we start by learning about the bookstore business?
Tina: Yes, the best system in the world isn’t worth much unless it supports business and information needs. But
let’s not get ahead of ourselves. First, we need to talk about business information systems in general. Then
we’ll build a business model so we can understand the specific operations and processes at the bookstore.
We’ll also discuss systems analysis and design tools and techniques. Let’s start with an overview of informa-
tion systems and their characteristics.
David: That makes sense. What about the basic systems analysis techniques you mentioned? Can you tell me a
bit more?
Tina: On this project, we’ll use what’s called a structured method, which is based on the concept of a systems
development life cycle, or SDLC for short. I’ll also explain object-oriented and agile methods, and you’ll
learn about modeling tools and techniques. We’ll follow a set of basic system development guidelines
as we go along.
David: How does the SDLC work?
Tina: The SDLC is like constructing a building. First, you would list specific objectives for the project. Then, you
might hire an architect to create drawings that show the finished building. Later, you’d need detailed blue-
prints for the construction workers. When the building is done, you would check everything, turn it over
to the new owners, and make sure they’re happy with the results.
David: And that’s how we’ll develop new information systems?
Tina: It sure is. We’ll use a program called Microsoft Project to create a list of tasks we can work on.

4
THE IMPACT OF INFORMATION TECHNOLOGY
Information technology (IT) refers to the combination of hardware, software, and
services that people use to manage, communicate, and share information. Although
fictitious, the bold headlines in Figure 1-1 show the huge impact of IT on our society.
More than ever, business success depends on information technology. IT is driving a
new digital economy, where advances in hardware, software, and connectivity can pro-
vide enormous benefits to businesses and individuals. Although economic trends affect
IT spending levels, most firms give IT budgets a high priority, in good times or bad. The
reason is simple — during periods of growth, companies cannot afford to lag behind
the IT curve. Conversely, when the economy slows down, firms often use IT to reduce
operating costs and improve efficiency.
The Future
If you ask a group of IT professionals to name a company that has been successful for
over 100 years, the answer probably would be IBM. As its name suggests, International
Business Machines was a major supplier of typewriters and data processing equipment
long before the computer era. As a longtime IT leader, IBM’s predictions deserve close
attention.
The company that became IBM was founded in 1896 by Herman Hollerith, who
invented the punched card system shown in Figure 1-3. Hollerith wanted to analyze
the 1890 census data, and his idea was brilliant. First, letters and numbers were coded
by being punched into specific locations on a card. His machines then used a simple
Chapter 1 Introduction to Systems Analysis and Design
The Impact of Information Technology
To learn more about
the future of IT, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate The Future of
IT link.
FIGURE 1-3 Several years before the Wright brothers made their first flight, Herman Hollerith devised a
machine that could manage data stored on punched cards.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

The Impact of Information Technology 5
Phase 1 Systems Planning
FIGURE 1-4 The 2009 IBM Annual Report points out three key issues that affect the company’s strategy and operational plans.
electrical circuit to detect the position of the holes and recognize the characters. This
concept transformed a set of punched cards into what we would call a database, which
could be sorted, queried, and printed. Punched card technology revolutionized data
storage, and was the main form of information management well into the 1960s and
beyond. The concept still is used with some types of voting forms and other documents.
Today, IBM is a global giant with a half-million employees, numerous patents, and
more Nobel Prize winners than any other IT firm. In its 2009 Annual Report, IBM chair-
man Samuel J. Palmisano noted three issues that will shape the future of IT and guide the
company’s strategy. As shown in Figure 1-4, these include changes in the world, changes in
technology, and changes in client demand. IT professionals should study these trends and
prepare for the future. The table in Figure 1-5 on the next page summarizes IBM’s vision
and how it might affect the IT industry and the people who work in it.

6
Chapter 1 Introduction to Systems Analysis and Design
The Impact of Information Technology
Systems Development
Business information systems are developed by people who are technically qualified,
business-oriented, and highly motivated. Successful developers also must be good
communicators with strong analytical and critical thinking skills.
TOPIC IBM’S VISION
HOW WILL THIS AFFECT
IT JOBS GENERALLY?
WHAT WILL BE THE
IMPACT ON FUTURE
SYSTEMS ANALYSTS?
Changes in the
World
IBM foresees a new kind
of corporation: a globally
integrated enterprise, driven
by the Internet and free of
traditional trade barriers.
Language skills will be
extremely important — the
more the better. Diversity
will open new opportunities,
and developing countries
will be able to compete
more effectively. Where the
physical work is done will be
less important than how the
virtual company deploys its
assets.
Systems analysts will be
affected by global trends.
They will probably work for
more firms in their careers,
be exposed to more
information, and see greater
change than at any time in
history.
Changes in
Technology
Powered by an enormous
increase in computing power,
new IT models will include
networks with smart,
interconnected devices such
as communication systems,
automobiles, entertainment,
highway infrastructure, and
power grids.
Technical skills will be in
demand, but so will the
ability to “think outside the
box.” New technology will
drive major changes in how
personal and business
services are provided. Firms
will compete in a global
marketplace that will reward
innovation, creativity, and
positive societal outcomes.
The systems analyst will
need to have both business
savvy and technical skills. He
or she will have a unique
opportunity to work at the
intersection of business
operations and information
technology. The synergy
between technology growth
and globalization will create
jobs and opportunities for
people with the right skills.
Changes in
Client Demand
In the face of worldwide
competition and enormous
technology change, firms will
stress innovation, vision, and
the ability to adapt rapidly.
Every aspect of their
business plans, processes, and
operations will be affected.
Successful IT workers must
be able to innovate, analyze,
and communicate effectively.
The winners will be those
who can adapt to change and
embrace new technology
and new ways of doing
business.
Students preparing for the
workplace of tomorrow
will need a strong skill set.
Systems analysts will be
expected to bring
communications, modeling,
problem-solving, decision-
making, and critical thinking
skills to the workplace —
and to be aware of ethical
issues that might affect them.
FIGURE 1-5 If IBM’s vision is accurate, what will it mean to IT professionals?

7
Phase 1 Systems Planning
Information System Components
Systems Analysis and Design
Systems analysis and design is a
step-by-step process for developing
high-quality information systems.
An information system combines
information technology, people, and
data to support business require-
ments. For example, information
systems handle daily business trans-
actions, improve company produc-
tivity, and help managers make
sound decisions. The IT department
team includes systems analysts who
plan, develop, and maintain infor-
mation systems.
With increasing demand for tal-
ented people, employment experts
predict a shortage of qualified appli-
cants to fill IT positions. Many com-
panies list employment opportunities
on their Web sites, as shown in Figure 1-6.
Who Develops Information Systems?
Traditionally, a company either developed its own information systems, called in-house
applications, or purchased systems called software packages from outside vendors.
Today, the choice is much more complex. Options include Internet-based application
services, outsourcing, custom solutions from IT consultants, and enterprise-wide soft-
ware strategies.
Regardless of the development method, launching a new information system involves
risks as well as benefits. The greatest risk occurs when a company tries to decide how the
system will be constructed before determining what the system needs to do. Instead of
putting the cart before the horse, a company must begin by outlining its business needs
and identifying possible IT solutions. Typically, this important work is performed by
systems analysts and other IT professionals. A firm should not consider implementa-
tion options until it has a clear set of objectives. Later on, as the system is developed,
a systems analyst’s role will vary depending on the implementation option selected.
INFORMATION SYSTEM COMPONENTS
A system is a set of related components that produces specific
results. For example, specialized systems route Internet traffic,
manufacture microchips, and control complex entities like the
Mars Rover shown in Figure 1-7. A mission-critical system is one
that is vital to a company’s operations. An order processing sys-
tem, for example, is mission-critical because the company can-
not do business without it.
Every system requires input data. For example, your computer
receives data when you press a key or click a menu command. In
an information system, data consists of basic facts that are the
system’s raw material. Information is data that has been trans-
formed into output that is valuable to users.
FIGURE 1-6 HP invites potential candidates to search for jobs on its Web site.
FIGURE 1-7 Imagine the complexity of the
systems used to launch and operate the Mars Rover.
Phase 1 Systems Planning

8
An information system has five key components, as shown in Figure 1-8: hardware,
software, data, processes, and people.
Hardware
Hardware consists of everything in the physical layer of the
information system. For example, hardware can include
servers, workstations, networks, telecommunications
equipment, fiber-optic cables, mobile devices, scanners, digital
capture devices, and other technology-based infrastructure.
As new technologies emerge, manufacturers race to market
the innovations and reap the rewards.
Hardware purchasers today face a wide array of technology
choices and decisions. In 1965, Gordon Moore, a cofounder of
Intel, predicted that the number of transistors on an integrated
circuit would double about every 24 months. His concept,
called Moore’s Law, has remained valid for more than
50 years. Fortunately, as hardware became more powerful,
it also became much less expensive. Large businesses with
thousands or millions of sales transactions require company-
wide information systems and powerful servers, such as those
shown in Figure 1-9.
Software
Software refers to the programs that control the
hardware and produce the desired information or results.
Software consists of system software and application
software.
System software manages the hardware components,
which can include a single workstation or a global network
with many thousands of clients. Either the hardware manu-
facturer supplies the system software or a company pur-
chases it from a vendor. Examples of system software
include the operating system, security software that protects
the computer from intrusion, device drivers that communi-
cate with hardware such as printers, and utility programs
that handle specific tasks such as data backup and disk
management. System software also controls the flow of data, provides data security,
and manages network operations. In today’s interconnected business world, network
software is vitally important.
Application software consists of programs that support day-to-day business func-
tions and provide users with the information they require. Application software can
serve one user or thousands of people throughout an organization. Examples of com-
pany-wide applications, called enterprise applications, include order processing systems,
payroll systems, and company communications networks. On a smaller scale, individual
users increase their productivity with tools such as spreadsheets, word processors, and
database management systems.
Application software includes horizontal and vertical systems. A horizontal system
is a system, such as an inventory or payroll application, that can be adapted for use in
many different types of companies. A vertical system is designed to meet the unique
requirements of a specific business or industry, such as a Web-based retailer, a medical
practice, or a video chain.
Chapter 1 Introduction to Systems Analysis and Design
Information System Components
FIGURE 1-9 Multiple servers provide the power
and speed that modern IT systems require.
People
Hardware
Software
Data
Processes
FIGURE 1-8 The five main components of
an information system.
To learn more about
Moore’s Law, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Moore’s
Law link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

9
Phase 1 Systems Planning
Information System Components
Most companies use a combination of software that is acquired at various times.
When planning an information system, a company must consider how a new system
will interface with older systems, which are called legacy systems. For example, a new
human resources system might need to exchange data with an older payroll application.
Data
Data is the raw material that an information system transforms into useful information.
An information system can store data in various locations, called tables. By linking the
tables, the system can extract specific information. Figure 1-10 shows a payroll system that
stores data in four separate tables. Notice that the linked tables work together to supply
19 different data items to the screen form. Users, who would not know or care where the
data is stored, see an integrated form, which is their window into the payroll system.
Phase 1 Systems Planning
FIGURE 1-10 In a typical payroll system, data is stored in separate tables, which are joined
together to form a database that contains all the information.
Processes
Processes describe the tasks and business functions that users, managers, and IT staff
members perform to achieve specific results. Processes are the building blocks of an
information system because they represent actual day-to-day business operations. To
build a successful information system, analysts must understand business processes and
document them carefully.

10
People
People who have an interest in an information system are called stakeholders.
Stakeholders include the management group responsible for the system, the users
(sometimes called end users) inside and outside the company who will interact with
the system, and IT staff members, such as systems analysts, programmers, and network
administrators who develop and support the system.
Each stakeholder group has a vital interest in the information system, but most
experienced IT professionals agree that the success or failure of a system usually
depends on whether it meets the needs of its users. For that reason, it is essential to
understand user requirements and expectations throughout the development process.
UNDERSTAND THE BUSINESS
IT professionals must understand a company’s operations to design successful systems.
Each business situation is different. For example, a retail store, a medical practice, and
a hotel chain all have unique information systems requirements. Systems analysts use a
process called business process modeling to represent company operations and informa-
tion needs. Business process modeling requires a business profile and a series of models
that document business processes.
As the business world changes, systems analysts can expect to work in new kinds of
companies that require innovative IT solutions, including Web-based systems that serve
customers and carry out online transactions with other businesses.
Business Profile
A business profile is an overview of a company’s mission, functions, organization,
products, services, customers, suppliers, competitors, constraints, and future direction.
Although much of this information is readily available, a systems analyst usually needs
to do additional research and fact-finding. A business profile is the starting point for the
modeling process.
Business Process
A business process is a specific set of transactions, events, and results that can be
described and documented. A business process model (BPM) graphically displays one
or more business processes, such as handling an airline reservation, filling a product
order, or updating a customer account. The example
in Figure 1-11 shows a simple model that includes
an event, three processes, and a result.
A rough sketch might be sufficient to document a
simple business process. For complex operations, how-
ever, analysts apply computer-based modeling tools that
use a standard language called business process modeling
notation (BPMN). BPMN includes various shapes and
symbols to represent events, processes, and workflows,
as shown in the example in Figure 1-12. Modeling tools
include multi-purpose graphical applications, such as
Microsoft Visio, and computer-aided software engineer-
ing programs such as Visible Analyst. Business process
modeling is described in more detail in Part B of the
Systems Analyst’s Toolkit that follows Chapter 12.
Chapter 1 Introduction to Systems Analysis and Design
Understand the Business
Event:
Receive Sales Order
BUSINESS MODEL: HANDLE SALES ORDER
Result:
Completed Sales Order
Process:
Enter Customer Order
Data
Process:
Check Customer Status
Process:
Verify Customer Credit
FIGURE 1-11 A simple business model might consist
of an event, three processes, and a result.
TOOLKIT TIME
Business process
modeling tools,
which are described
in Part B of the
System’s Analyst’s
Toolkit, can help you
document and
describe business
operations. To learn
more about these
tools, turn to Part B
of the four-part
Toolkit that follows
Chapter 12.

Understand the Business 11
Phase 1 Systems Planning
FIGURE 1-12 This sample uses business process modeling notation (BPMN) to represent events, processes,
and workflow.
FIGURE 1-14 IBM’s 2009 report shows a sharp increase in profitable
business segments such as software and services, and a decline in profit from
hardware sales.
Source: IBM Annual Report, 2009.
New Kinds of Companies
Traditionally, IT companies were identified as product-oriented or service-oriented.
Product-oriented firms manufactured computers, routers, or the microchips shown in
Figure 1-13, whereas service-oriented companies included vendors, software developers,
and service providers.
Today, those distinctions are gone. Most successful IT companies offer a mix of prod-
ucts, services, and support. Value-added services such as consulting, financing, and technical
support can be more profitable than hardware. In a striking example of this trend, IBM
stated in its 2009 annual report that software, services, and financing produced 93 percent
of pre-tax income, while hardware accounted for only 7 percent. Even more interesting is
the contrast shown in Figure 1-14. Over a nine-year period, hardware profits declined by
two-thirds, while software, services and financing income grew rapidly.
FIGURE 1-13 Intel is an example of a
product-oriented company that
manufactures technology products, such
as the microchip shown here.

12
Chapter 1 Introduction to Systems Analysis and Design
Understand the Business
The newest kind of company is the Internet-dependent firm, often described as a
dot-com (.com) company because its primary business depends on the Internet rather
than a traditional business channel. Google, Yahoo!, Amazon, and eBay are examples
of pure dot-com companies. At the other end of the scale are traditional firms, some-
times called brick-and-mortar companies because they conduct business primarily from
physical locations. Most successful brick-and-mortar firms — such as Lowe’s, Target,
and Wal-Mart — have expanded their Web-based marketing channels to increase sales
and serve customers better. This strategy combines the convenience of online shopping
and the alternative of hands-on purchasing for customers who prefer that option.
Today, with rising fuel prices and an eye on expenses, shopping at home is more popu-
lar than ever. In addition to physical products, consumers also buy many types of digital
content. As shown in Figure 1-15, Netflix is an example of a Web-based firm that has seen
a sharp increase in sales. Some of the growth came at the expense of brick-and-mortar
competitors. Perhaps more importantly, Netflix has been a leader in delivering stream-
ing Internet content that can displayed on large screen TV sets. The company claims to
provide maximum convenience and value to consumers of home-based entertainment.
FIGURE 1-15 Netflix offers an Internet portal for digital content that can be viewed on large screen TVs.
CASE IN POINT 1.1: CLOUD NINE FINANCIAL ADVISORS
Cloud Nine provides its clients with a monthly newsletter that offers recommendations
about stocks to buy or sell. Doug Layton, Cloud Nine’s president, has asked your opinion on
whether dot-com stocks might be good investments for the future. He specifically mentioned
Google, eBay, Amazon.com, and Yahoo!, but he said you could suggest other companies. Doug
wants you to do some Internet research to learn more about these Web-based companies
and their future prospects. You can use a search engine, or start by visiting the Web sites of
publications such as Forbes, Fortune Magazine, Business Week, or The Wall Street Journal,
among others.

13
Phase 1 Systems Planning
Impact of the Internet
IMPACT OF THE INTERNET
Internet-based commerce is called e-commerce (electronic commerce) or I-commerce
(Internet commerce).
Internet-based systems involve various hardware and software designs, but a typical
model is a series of Web pages that provides a user interface, which communicates with
database management software and a Web-based data server. As Internet-based com-
merce continues to grow, career opportunities will expand significantly for IT profes-
sionals such as Web designers, database developers, and systems analysts. The surge in
demand will come from dot-com companies large and small, and from mainstream
retailers.
E-commerce includes two main sectors: B2C (business-to-consumer) and B2B
(business-to-business).
B2C (Business-to-Consumer)
Using the Internet, consumers can go online to purchase an enormous variety of
products and services. This new shopping environment allows customers to do
research, compare prices and features, check availability, arrange delivery, and
choose payment methods in a single convenient session. Many companies, such as
airlines, offer incentives for online transactions because Web-based processing costs
are lower than traditional methods. By making flight information available online to
last-minute travelers, some airlines also offer special discounts on seats that might
otherwise go unfilled.
B2C commerce is changing traditional business models and creating new ones. For
example, a common business model is a retail store that sells a product to a customer.
To carry out that same transaction on the Internet, the company must develop an
online store and deal with a totally different set of marketing, advertising, and profit-
ability issues. Some
companies have found
new ways to use estab-
lished business models.
For example, eBay.com
has transformed a tradi-
tional auction concept
into a popular and suc-
cessful method of selling
goods and services.
In the e-commerce
battles, the real winners
will be online consumers,
who will have access to
more information, better
choices, and an enhanced
shopping experience. For
example, in addition to
the traditional offerings,
the Lowe’s Web site
shown in Figure 1-16
includes a gift advisor,
buying guides, how-to
clinics, and interactive
design tools.
Phase 1 Systems Planning
FIGURE 1-16 Lowe’s is an example of a mainstream retailer that effectively combines traditional
and online marketing strategies.
To learn more
about electronic
commerce, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Electronic
Commerce link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

14
B2B (Business-to-Business)
Although the business-to-consumer (B2C) sector is more familiar to retail customers,
the volume of business-to-business (B2B) transactions is many times greater. Industry
observers predict that B2B sales will increase sharply as more firms seek to improve
efficiency and reduce costs.
Initially, electronic commerce between two companies used a data sharing arrange-
ment called electronic data interchange (EDI). EDI enabled computer-to-computer data
transfer, usually over private telecommunications lines. Firms used EDI to plan produc-
tion, adjust inventory levels, or stock up on raw materials using data from another com-
pany’s information system. As B2B volume soared, the development of extensible markup
language (XML) enabled company-to-company traffic to migrate to the Internet, which
offered standard protocols, universal availability, and low communication costs. XML
is a flexible data description language that allows Web-based communication between
different hardware and software environments.
Because it allows companies to reach the global marketplace, B2B is especially
important to smaller suppliers and customers who need instant information about
market prices and availability. On an industry-wide scale, many B2B sites exist where
buyers, sellers, distributors, and manufacturers can offer products, submit specifica-
tions, and transact business. This popular form of online B2B interaction is called
supply chain management (SCM), or supplier relationship management (SRM).
Figure 1-17 shows a software vendor that offers SCM solutions designed to reduce
supply chain costs.
Chapter 1 Introduction to Systems Analysis and Design
Impact of the Internet
To learn more about
XML, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the
Extensible Markup
Language link.
FIGURE 1-17 Infor is a software vendor that offers SCM solutions based on real-time supplier collaboration.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

15
Phase 1 Systems Planning
Business Information Systems
BUSINESS INFORMATION SYSTEMS
In the past, IT managers divided systems into categories based on the user group the
system served. Categories and users included office systems (administrative staff), opera-
tional systems (operational personnel), decision support systems (middle-managers and
knowledge workers), and executive information systems (top managers).
Today, traditional labels no longer apply. For example, all employees, including top
managers, use office productivity systems. Similarly, operational users often require deci-
sion support systems. As business changes, information use also changes in most compa-
nies. Today, it makes more sense to identify a system by its functions and features, rather
than by its users. A new set of system definitions includes enterprise computing systems,
transaction processing systems, business support systems, knowledge management
systems, and user productivity systems.
Enterprise Computing
Enterprise computing refers to information systems that support company-wide
operations and data management requirements. Wal-Mart’s inventory control system,
Boeing’s production control system, and Hilton Hotels’ reservation system are examples
of enterprise computing systems. The main objective of enterprise computing is to
integrate a company’s primary functions (such as production, sales, services, inventory
control, and accounting) to improve efficiency, reduce costs, and help managers make
key decisions. Enterprise computing also improves data security and reliability by
imposing a company-wide framework for data access and storage.
In many large companies, applications called enterprise resource planning (ERP)
systems provide cost-effective support for users and managers throughout the company.
For example, a car rental company can use ERP to forecast customer demand for rental
cars at hundreds of locations.
By providing a company-wide computing environment, many firms have been able to
achieve dramatic cost reductions. Other companies have been disappointed in the time,
money, and commitment necessary to implement ERP successfully. A potential disadvantage
of ERP is that ERP systems generally impose an overall structure that might or might not
match the way a company oper-
ates. ERP is described in more
detail in Chapter 7, which discusses
system development strategies.
Because of its growth and
potential, many hardware and
software vendors target the
enterprise computing market and
offer a wide array of products
and services. Figure 1-18 shows
a Web site that is dedicated to
marketing enterprise computing
software and solutions.
Transaction Processing
Transaction processing (TP)
systems process data generated by
day-to-day business operations.
Examples of TP systems include
customer order processing,
accounts receivable, and
warranty claim processing.
Phase 1 Systems Planning
FIGURE 1-18 Ciber offers ERP applications and consulting, using software from leading
software providers.
To learn more about
enterprise resource
planning, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to On
the Web Links for
this chapter, and
locate the Enterprise
Resource Planning
link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

16
TP systems perform a series of tasks whenever a specific
transaction occurs. In the example shown in Figure 1-19,
a TP system verifies customer data, checks the customer’s
credit status, posts the invoice to the accounts receivable sys-
tem, checks to ensure that the item is in stock, adjusts inven-
tory data to reflect a sale, and updates the sales activity file.
TP systems typically involve large amounts of data and are
mission-critical systems because the enterprise cannot func-
tion without them.
TP systems are efficient because they process a set of
transaction-related commands as a group rather than individ-
ually. To protect data integrity, however, TP systems ensure
that if any single element of a transaction fails, the system
does not process the rest of the transaction.
Business Support
Business support systems provide job-related information
support to users at all levels of a company. These systems
can analyze transactional data, generate information
needed to manage and control business processes, and pro-
vide information that leads to better decision-making.
The earliest business computer systems replaced
manual tasks, such as payroll processing. Companies soon realized that computers
also could produce valuable information. The new systems were called management
information systems (MIS) because managers were the primary users. Today,
employees at all levels need information to perform their jobs, and they rely on
information systems for that support.
A business support system can work hand in hand with a TP system. For example,
when a company sells merchandise to a customer, a TP system records the sale, updates
the customer’s balance, and makes a deduction from inventory. A related business sup-
port system highlights slow- or fast-moving items, customers with past due balances,
and inventory levels that need adjustment.
To compete effectively, firms must collect production, sales, and ship-
ping data and update the company-wide business support system immedi-
ately. The newest development in data acquisition is called radio frequency
identification (RFID) technology, which uses high-frequency radio waves
to track physical objects, such as the item shown in Figure 1-20. RFID’s
dramatic growth has been fueled by companies like Wal-Mart, which
requires its suppliers to add RFID tags to all items.
An important feature of a business support system is decision support
capability. Decision support helps users make decisions by creating a
computer model and applying a set of variables. For example, a truck
fleet dispatcher might run a series of what-if scenarios to determine the
impact of increased shipments or bad weather. Alternatively, a retailer
might use what-if analysis to determine the price it must charge to
increase profits by a specific amount while volume and costs remain
unchanged.
Knowledge Management
Knowledge management systems are called expert systems because
they simulate human reasoning by combining a knowledge base
and inference rules that determine how the knowledge is applied.
Chapter 1 Introduction to Systems Analysis and Design
Business Information Systems
Update Sales
Activity File
Adjust
Inventory
Data
Check In-Stock
Status
Post to
Accounts
Receivable
Verify
Customer Data
Check Credit
Status
SALES
TRANSACTION
FIGURE 1-19 A single sales transaction consists of six
separate tasks, which the TP system processes as a group.
To learn more about
RFID, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the RFID link.
FIGURE 1-20 Retailers use RFID tags
for security and inventory control.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

17
Phase 1 Systems Planning
Business Information Systems
A knowledge base consists of a
large database that allows users
to find information by entering
keywords or questions in normal
English phrases. A knowledge
management system uses
inference rules, which are logical
rules that identify data patterns
and relationships.
Figure 1-21 shows a knowl-
edge management system that
Toshiba maintains for its custom-
ers and users. After a user enters
a symptom, problem, or question,
Toshiba’s Knowledge Base
searches for a solution and
displays the results.
Knowledge management systems do not use strict logical rules. Instead, many
knowledge management systems use a technique called fuzzy logic that allows infer-
ences to be drawn from imprecise relationships. Using fuzzy logic, values need not be
black and white, like binary logic, but can be many shades of gray. The results of a
fuzzy logic search will display in priority order, with the most relevant results at the
top of the list.
User Productivity
Companies provide employees at all levels with technology that improves productivity.
Examples of user productivity systems include e-mail, voice mail, fax, video and Web
conferencing, word processing, automated calendars, database management, spread-
sheets, desktop publishing, presentation graphics, company intranets, and high-speed
Internet access. User productivity systems also include groupware. Groupware programs
run on a company intranet and enable users to share data, collaborate on projects, and
work in teams. GroupWise, offered by Novell, is a popular example of groupware.
When companies first installed word processing systems, managers expected to reduce
the number of employees as office efficiency increased. That did not happen, primarily
because the basic nature of clerical work changed. With computers performing most of the
repetitive work, managers realized that office personnel could handle tasks that required
more judgment, decision-making, and access to information.
Computer-based office work expanded rapidly as companies assigned more
responsibility to employees at lower organizational levels. Relatively inexpensive hard-
ware, powerful networks, corporate downsizing, and a move toward employee empow-
erment also contributed to this trend. Today, administrative assistants and company
presidents alike are networked, use computer workstations, and need to share corporate
data to perform their jobs.
Information Systems Integration
Most large companies require systems that combine transaction processing, business
support, knowledge management, and user productivity features. For example, suppose
an international customer has a problem with a product and makes a warranty claim.
A customer service representative enters the claim into a TP system. The transaction
updates two other systems: a knowledge management system that tracks product
problems and warranty activity, and a quality control system with decision support
capabilities. A quality control engineer uses what-if analysis to determine if it would be
Phase 1 Systems Planning
To learn more about
knowledge manage-
ment systems, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Knowledge
Management
Systems link.
FIGURE 1-21 The interactive Toshiba Knowledge Base allows users to search for solutions.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

18
advantageous to make product design changes to reduce warranty claims. In this
example, a TP system is integrated with a knowledge management system and a business
support system with decision support features.
WHAT INFORMATION DO USERS NEED?
Corporate organizational structure has changed considerably in recent years. As part of
downsizing and business process reengineering, many companies reduced the number
of management levels and delegated responsibility to operational personnel. Although
modern organization charts tend to be flatter, an organizational hierarchy still exists in
most companies.
A typical organizational model identifies business functions and organizational
levels, as shown in Figure 1-22. Within the functional areas, operational personnel
report to supervisors and team leaders. The next level includes middle managers and
knowledge workers, who, in turn, report to top managers. In a corporate structure, the
top managers report to a board of directors elected by the company’s shareholders.
A systems analyst must understand the company’s organizational model to recognize
who is responsible for specific processes and decisions and to be aware of what
information is required by whom.
Top Managers
Top managers develop long-range plans,
called strategic plans, which define the com-
pany’s overall mission and goals. To plot a
future course, top managers ask questions
such as “How much should the company
invest in information technology?” or “How
much will Internet sales grow in the next
five years?” or “Should the company build
new factories or contract out the production
functions?”
Strategic planning affects the company’s
future survival and growth, including long-
term IT plans. Top managers focus on the
overall business enterprise and use IT to set
the company’s course and direction. To
develop a strategic plan, top managers also
need information from outside the company,
such as economic forecasts, technology trends,
competitive threats, and governmental
issues.
Middle Managers and Knowledge
Workers
Just below the top management level, most
companies have a layer of middle managers
and knowledge workers. Middle managers
provide direction, necessary resources, and
performance feedback to supervisors and team
leaders. Because they focus on a somewhat
Chapter 1 Introduction to Systems Analysis and Design
What Information Do Users Need?
Top Managers
Middle Managers and
Knowledge Workers
Supervisors and
Team Leaders
Operational
Employees
Organizational
Levels
Information
TechnologyHuman
Resources
Business Functions
ProductionMarketing
Accounting Sales
FIGURE 1-22 A typical organizational model identifies business functions
and organizational levels.

19
Phase 1 Systems Planning
Systems Development Tools
shorter time frame, middle managers need more detailed information than top
managers, but somewhat less than supervisors who oversee day-to-day operations.
For example, a middle manager might review a weekly sales summary for a three-state
area, whereas a local sales team leader would need a daily report on customer sales at
a single location.
In addition to middle managers, every company has people called knowledge
workers. Knowledge workers include professional staff members such as systems ana-
lysts, programmers, accountants, researchers, trainers, and human resource specialists.
Knowledge workers also use business support systems, knowledge management systems,
and user productivity systems. Knowledge workers provide support for the organiza-
tion’s basic functions. Just as a military unit requires logistical support, a successful
company needs knowledge workers to carry out its mission.
Supervisors and Team Leaders
Supervisors, often called team leaders, oversee operational employees and carry out
day-to-day functions. They coordinate operational tasks and people, make necessary
decisions, and ensure that the right tools, materials, and training are available. Like other
managers, supervisors and team leaders need decision support information, knowledge
management systems, and user productivity systems to carry out their responsibilities.
Operational Employees
Operational employees include users who rely on TP systems to enter and receive data
they need to perform their jobs. In many companies, operational users also need infor-
mation to handle tasks and make decisions that were assigned previously to supervisors.
This trend, called empowerment, gives employees more responsibility and accountability.
Many companies find that empowerment improves employee motivation and increases
customer satisfaction.
SYSTEMS DEVELOPMENT TOOLS
In addition to understanding business operations, systems analysts must know how to
use a variety of techniques, such as modeling, prototyping, and computer-aided systems
engineering tools to plan, design, and implement information systems. Systems analysts
work with these tools in a team environment, where input from users, managers, and IT
staff contributes to the system design.
Modeling
Modeling produces a graphical representation of a concept or process that systems
developers can analyze, test, and modify. A systems analyst can describe and simplify an
information system by using a set of business, data, object, network, and process models.
A business model, or requirements model, describes the information that a system must
provide. A data model describes data structures and design. An object model describes
objects, which combine data and processes. A network model describes the design and pro-
tocols of telecommunications links. A process model describes the logic that programmers
use to write code modules. Although the models might appear to overlap, they actually
work together to describe the same environment from different points of view.
System developers often use multipurpose charting tools such as Microsoft Visio to
display business-related models. Visio is a popular tool that systems analysts can use to
create business process diagrams, flowcharts, organization charts, network diagrams,
floor plans, project timelines, and work flow diagrams, among others.
Phase 1 Systems Planning
TOOLKIT TIME
The CASE tools
in Part B of the
Systems Analyst’s
Toolkit can help you
develop and main-
tain complex infor-
mation systems. To
learn more about
these tools, turn to
Part B of the four-
part Toolkit that fol-
lows Chapter 12.

20
Figure 1-23 shows how you can drag and
drop various symbols from the left pane into
the drawing on the right, and connect them
to show a business process.
You will learn about many types of mod-
els in this textbook, including data flow
diagrams, object diagrams, and entity-
relationship diagrams. Business process
modeling is explained in more detail in Part B
of the Systems Analyst’s Toolkit.
Prototyping
Prototyping tests system concepts and
provides an opportunity to examine input,
output, and user interfaces before final deci-
sions are made. A prototype is an early
working version of an information system.
Just as an aircraft manufacturer tests a new
design in a wind tunnel, systems analysts
construct and study information system pro-
totypes. A prototype can serve as an initial
model that is used as a benchmark to evaluate the finished system, or the prototype
itself can develop into the final version of the system. Either way, prototyping speeds up
the development process significantly.
A possible disadvantage of prototyping is that important decisions might be made too
early, before business or IT issues are understood thoroughly. A prototype based on care-
ful fact-finding and modeling techniques, however, can be an extremely valuable tool.
Computer-Aided Systems Engineering (CASE) Tools
Computer-aided systems engineering (CASE), also called computer-aided software
engineering, is a technique that uses powerful software, called CASE tools, to help
systems analysts develop and maintain
information systems. CASE tools provide
an overall framework for systems devel-
opment and support a wide variety of
design methodologies, including struc-
tured analysis and object-oriented
analysis.
Because CASE tools make it easier to
build an information system, they boost
IT productivity and improve the quality of
the finished product. Part B of the Systems
Analyst’s Toolkit explains how analysts
use CASE tools to create business profiles,
build business models, and document
complex processes. After developing a
model, many CASE tools can generate
program code, which speeds the imple-
mentation process. Figure 1-24 shows the
Web site for Visible Systems Corporation,
a leading vendor of CASE tools.
Chapter 1 Introduction to Systems Analysis and Design
Systems Development Tools
FIGURE 1-24 Visible Systems Corporation offers a wide array of software
engineering tools, including Visible Analyst, a popular CASE tool.
FIGURE 1-23 Microsoft Visio 2010 allows you to drag and drop various
symbols and connect them to show a business process.
To learn more about
CASE Tools, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the CASE
Tools link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

21
Phase 1 Systems Planning
FIGURE 1-25 Comparison of structured, object-oriented, and agile/adaptive development methods.
Systems Development Methods
SYSTEMS DEVELOPMENT METHODS
Many options exist for developing information systems, but the most popular
alternatives are structured analysis, which is a traditional method that still is widely
used, object-oriented (O-O) analysis, which is a more recent approach that many ana-
lysts prefer, and agile methods, also called adaptive methods, which include the latest
trends in software development. Figure 1-25 provides an overview of the three methods,
which are discussed in the following sections.
Phase 1 Systems Planning
STRUCTURED OBJECT-ORIENTED AGILE/ADAPTIVE
ANALYSIS ANALYSIS METHODS
Description Represents the system in terms Views the system in terms of Stresses intense
of data and the processes that objects that combine data and team-based effort, as
act upon that data. System processes. The objects shown in Figures 1-30 and
development is organized into represent actual people, things, 1-31. Breaks development
phases, with deliverables and transactions, and events, as process down into cycles,
milestones to measure progress. shown in Figure 1-28. or iterations that add
The SDLC waterfall model typically Compared to structured functionality. Each
consists of five phases. Iteration is analysis, O-O phases tend to iteration is designed,
possible among the phases, as be more interactive. Can use built, and tested in an
shown in Figure 1-27. the waterfall model or the ongoing process.
model that stresses greater Attempts to reduce
iteration, as shown in major risks by incremental
Figure 1-29. steps in short time
intervals. Typically uses a
spiral model, as shown in
Figure 1-32.
Modeling Data flow diagrams (DFDs) and Various object-oriented diagrams Tools that enhance
tools process descriptions, which are depict system actors, methods, communication, such as
described in Chapter 5. Also, and messages, which are collaborative software,
business process modeling, described in Chapter 6. Also, brainstorming, and
which is explained in Part B business process modeling, whiteboards. Business
of the Systems Analyst’s Toolkit. which is explained in Part B process modeling, which
of the Systems Analyst’s Toolkit. is explained in Part B
of the Systems Analyst’s
Toolkit, works well
with agile methods.
Pros Traditional method, which has been Integrates easily with Very flexible and efficient
very popular over time. Relies object-oriented programming in dealing with change.
heavily on written documentation. languages. Code is modular and Stresses team interaction
Frequent phase iteration can reusable, which can reduce cost and reflects a set of
provide flexibility comparable and development time. Easy to community-based values.
with other methods. Well-suited to maintain and expand as new Frequent deliverables
project management tools and objects can be cloned using constantly validate the
techniques. inherited properties. project and reduce risk.
Cons Changes can be costly, especially Somewhat newer method might Team members need a
in later phases. Requirements are be less familiar to development high level of technical and
defined early, and can change during team members. Interaction of communications skills.
development. Users might not be objects and classes can be Lack of structure and
able to describe their needs until complex in larger systems. documentation can
they can see examples of features introduce risk factors.
and functions. Overall project might be
subject to scope change as
user requirements change.

22
Although most projects utilize one of these approaches, it is not unusual for system
developers to mix and match methods to gain a better perspective. In addition to these
three main development methods, some organizations choose to develop their own in-
house approaches or use techniques offered by software suppliers, CASE tool vendors,
or consultants. Many alternatives exist, and most IT experts agree that no one system
development method is best in all cases. An approach that works well for one project
might have major disadvantages or risks in another situation. The important thing is for
a systems analyst to understand the various methods and the strengths and weaknesses
of each approach.
Regardless of the development strategy, people, tasks, timetables, and costs must be
managed effectively. Complex projects can involve dozens of people, hundreds of tasks,
and many thousands of dollars. Project management is the process of planning, schedul-
ing, monitoring, controlling, and reporting upon the development of an information
system. Chapter 3 describes project management tools and techniques in detail.
Structured Analysis
Structured analysis is a traditional systems development technique that is time-tested
and easy to understand. Structured analysis uses a series of phases, called the systems
development life cycle (SDLC), to plan, analyze, design, implement, and support an
information system. Although structured analysis evolved many years ago, it remains a
popular systems development method. Structured analysis is based on an overall plan,
similar to a blueprint for constructing a building, so it is called a predictive approach.
Structured analysis uses a set of process models to describe a system graphically.
Because it focuses on processes that transform data into useful information, structured
analysis is called a process-centered technique. In addition to modeling the processes,
structured analysis also addresses data organization and structure, relational database
design, and user interface issues.
A process model shows the data that flows in and out of system processes. Inside
each process, input data is transformed by business rules that generate the output.
Figure 1-26 shows a process model that was created with Visible Analyst, a popular
software development tool. The model, which represents a school registration system,
is a called a data flow diagram (DFD) because it uses various symbols and shapes
to represent data flow, processing, and storage. You will learn more about DFDs
in Chapter 5, and you can view a
Video Learning Session that explains
DFDs and how they are used as
modeling tools.
Structured analysis uses the SDLC to
plan and manage the systems develop-
ment process. The SDLC describes
activities and functions that all systems
developers perform, regardless of which
approach they use. In the waterfall
model, the result of each phase is called a
deliverable, or end product, which flows
into the next phase.
Some analysts see a disadvantage
in the built-in structure of the SDLC,
because the waterfall model does not
emphasize interactivity among the phases.
This criticism can be valid if the SDLC
phases are followed too rigidly. However,
adjacent phases usually interact, as shown
Chapter 1 Introduction to Systems Analysis and Design
Systems Development Methods
FIGURE 1-26 This Visible Analyst screen shows a process model for a school
registration system. The REGISTER STUDENTS process accepts input data from
two sources and transforms it into output data.
VIDEO
LEARNING
SESSIONS
To learn more
about DFD symbols
and diagrams, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate
to the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.
VIDEO
LEARNING
SESSIONS
To learn more
about project
management, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate
to the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

23
Phase 1 Systems Planning
by the dotted lines in Figure 1-27 and
interaction among several phases is not
uncommon. Other analysts regard the
waterfall model as a two-way water flow
model, with emphasis on iteration and user
input. Used in this manner, the traditional
model is not as different from agile methods
as it might appear to be.
The SDLC model usually includes five
steps, which are described in the following
sections: systems planning, systems analysis,
systems design, systems implementation,
and systems support and security.
SYSTEMS PLANNING The systems
planning phase usually begins with a formal
request to the IT department, called a
systems request, which describes problems
or desired changes in an information system
or a business process. In many companies,
IT systems planning is an integral part of
overall business planning. When managers
and users develop their business plans,
they usually include IT requirements that
generate systems requests. A systems
request can come from a top manager, a
planning team, a department head, or the
IT department itself. The request can be
very significant or relatively minor. A
major request might involve a new infor-
mation system or the upgrading of an
existing system. In contrast, a minor
request might ask for a new feature or
a change to the user interface.
The purpose of this phase is to perform a preliminary investigation to evaluate an
IT-related business opportunity or problem. The preliminary investigation is a critical step
because the outcome will affect the entire development process. A key part of the prelimi-
nary investigation is a feasibility study that reviews anticipated costs and benefits and rec-
ommends a course of action based on operational, technical, economic, and time factors.
Suppose you are a systems analyst and you receive a request for a system change or
improvement. Your first step is to determine whether it makes sense to launch a prelimi-
nary investigation at all. Often you will need to learn more about business operations
before you can reach a conclusion. After an investigation, you might find that the infor-
mation system functions properly, but users need more training. In some situations, you
might recommend a business process review, rather than an IT solution. In other cases,
you might conclude that a full-scale systems review is necessary. If the development
process continues, the next step is the systems analysis phase.
SYSTEMS ANALYSIS The purpose of the systems analysis phase is to build a logical
model of the new system. The first step is requirements modeling, where you investigate
business processes and document what the new system must do to satisfy users.
Requirements modeling continues the investigation that began during the systems plan-
ning phase. To understand the system, you perform fact-finding using techniques such
as interviews, surveys, document review, observation, and sampling. You use the fact-
finding results to build business models, data and process models, and object models.
Systems Development Methods
Phase 1 Systems Planning
FIGURE 1-27 The phases and deliverables
of the SDLC are shown in the waterfall model.

24
The deliverable for the systems analysis phase is the system requirements document.
The system requirements document describes management and user requirements, costs
and benefits, and outlines alternative development strategies.
SYSTEMS DESIGN The purpose of the systems design phase is to create a physical
model that will satisfy all documented requirements for the system. At this stage, you
design the user interface and identify necessary outputs, inputs, and processes. In addi-
tion, you design internal and external controls, including computer-based and manual
features to guarantee that the system will be reliable, accurate, maintainable, and secure.
During the systems design phase, you also determine the application architecture, which
programmers will use to transform the logical design into program modules and code.
The deliverable for this phase is the system design specification, which is presented to
management and users for review and approval. Management and user involvement is
critical to avoid any misunderstanding about what the new system will do, how it will
do it, and what it will cost.
SYSTEMS IMPLEMENTATION During the systems implementation phase, the new
system is constructed. Whether the developers use structured analysis or O-O methods,
the procedure is the same — programs are written, tested, and documented, and the
system is installed. If the system was purchased as a package, systems analysts config-
ure the software and perform any necessary modifications. The objective of the systems
implementation phase is to deliver a completely functioning and documented informa-
tion system. At the conclusion of this phase, the system is ready for use. Final prepara-
tions include converting data to the new system’s files, training users, and performing
the actual transition to the new system.
The systems implementation phase also includes an assessment, called a systems
evaluation, to determine whether the system operates properly and if costs and benefits
are within expectations.
SYSTEMS SUPPORT AND SECURITY During the systems support and security phase,
the IT staff maintains, enhances, and protects the system. Maintenance changes correct
errors and adapt to changes in the environment, such as new tax rates. Enhancements
provide new features and benefits. The objective during this phase is to maximize
return on the IT investment. Security controls safeguard the system from both external
and internal threats. A well-designed system must be secure, reliable, maintainable, and
scalable. A scalable design can expand to meet new business requirements and volumes.
Information systems development is always a work in progress. Business processes
change rapidly, and most information systems need to be updated significantly or
replaced after several years of operation.
Object-Oriented Analysis
Whereas structured analysis treats processes and data as separate components, object-
oriented analysis combines data and the processes that act on the data into things called
objects. Systems analysts use O-O to model real-world business processes and operations.
The result is a set of software objects that represent actual people, things, transactions,
and events. Using an O-O programming language, a programmer then writes the code
that creates the objects.
An object is a member of a class, which is a collection of similar objects. Objects
possess characteristics called properties, which the object inherits from its class or
possesses on its own. As shown in Figure 1-28, the class called PERSON includes
INSTRUCTOR and STUDENT. Because the PERSON class has a property called
Address, a STUDENT inherits the Address property. A STUDENT also has a property
called Major that is not shared by other members of the PERSON class.
Chapter 1 Introduction to Systems Analysis and Design
Systems Development Methods
VIDEO
LEARNING
SESSIONS
To learn more about
object modeling, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate to
the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

25
Phase 1 Systems Planning
Systems Development Methods
In O-O design, built-in processes called methods
can change an object’s properties. For example, in a
Web-based catalog store, an ORDER object might
have a property called STATUS that changes when a
CUSTOMER object clicks to place, confirm, or cancel
the order.
One object can send information to another object
by using a message. A message requests specific behavior
or information from another object. For example, an
ORDER object might send a message to a CUSTOMER
object that requests a shipping address. When it receives
the message, the CUSTOMER object supplies the infor-
mation. The ORDER object has the capability to send
the message, and the CUSTOMER object knows what
actions to perform when it receives the message. O-O
analysis uses object models to represent data and behav-
ior, and to show how objects affect other objects. By
describing the objects and methods needed to support a
business operation, a system developer can design reus-
able components that speed up system implementation
and reduce development cost.
Object-oriented methods usually follow a series of
analysis and design phases that are similar to the SDLC,
although there is less agreement on the number of phases and their
names. In an O-O model, the phases tend to be more interactive.
Figure 1-29 shows a system development model where planning,
analysis, and design tasks interact continuously to produce proto-
types that can be tested and implemented. The result is an interactive
model that can accurately depict real-world business processes.
O-O methodology is popular because it provides an easy transi-
tion to O-O programming languages such as Java, Smalltalk, C++,
Python, and Perl. Chapter 6 covers O-O analysis and design, with a
detailed description of O-O terms, concepts, tools, and techniques.
Agile Methods
Development techniques change over time. For example, structured
analysis is a traditional approach, and agile methods are the newest
development. Structured analysis builds an overall plan for the informa-
tion system, just as a contractor might use a blueprint for constructing a
building. Agile methods, in contrast, attempt to develop a system incre-
mentally, by building a series of prototypes and constantly adjusting
them to user requirements. As the agile process continues, developers revise, extend,
and merge earlier versions into the final product. An agile approach emphasizes
continuous feedback, and each incremental step is affected by what was learned in
the prior steps.
Although relatively new to software development, the notion of iterative
development can be traced back to Japanese auto firms that were able to boost
productivity by using a flexible manufacturing system, where team-based effort and
short-term milestones helped keep quality up and costs down. Agile methods have
attracted a wide following and an entire community of users, as shown in
Figure 1-30 on the next page.
PERSON
Inherited
Properties
Other
Properties
INSTRUCTOR STUDENT
Name
Address
Social Security Number
Name
Address
Social Security Number
Office Location
Office Telephone
Date Hired
Name
Address
Social Security Number
Major
GPA
Adviser
FIGURE 1-28 The PERSON class includes INSTRUCTOR
and STUDENT objects, which have their own properties and
inherited properties.
Phase 1 Systems Planning
Planning
Analysis
DesignD iDesign
Prototypes
Testing
PlanningPlanning
ysAnnalyAnna ysA alysA a sisis ssissisAnalysis
PPPrototypesPrototypes
DesignDesignDesign
TestingTesting
FIGURE 1-29 An interactive model often
is used with O-O development methods. In
this model, planning, analysis, and design tasks
interact continuously.
To learn more about
agile systems devel-
opment methods,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to On
the Web Links for
this chapter, and
locate the Agile
Methods link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

26
Agile methods typically use a spiral
model, which represents a series of itera-
tions, or revisions, based on user feedback.
As the process continues, the final product
gradually evolves. An agile approach
requires intense interactivity between devel-
opers and individual users, and does not
begin with an overall objective. Instead,
the agile process determines the end result.
Proponents of the spiral model believe that
this approach reduces risks and speeds up
software development.
Spiral models initially were suggested in
the 1990s by Barry Boehm, a noted software
engineering professor. He stated that each
iteration, or phase, of the model must have a
specific goal that is accepted, rejected, or
changed by the user, or client. Thus, each
iteration produces feedback and enhancements, which enable the team to reach the over-
all project goal. Typically, each iteration in a spiral model includes planning, risk analysis,
engineering, and evaluation, as shown in the table in Figure 1-31. The repeated iterations
produce a series of prototypes, which evolve into the finished system. Notice that these
phases resemble SDLC tasks, which also can be iterative.
Numerous other adap-
tive variations and related
methods exist, and most
IT developers expect this
trend to continue in the
future. Two examples are
Scrum and Extreme
Programming (XP), which
are discussed in detail in
Chapter 4, Requirements Modeling, and in Chapter 11, Application Development.
Although agile methods are becoming popular, analysts should recognize that these
approaches have advantages and disadvantages. By their nature, agile methods can
allow developers to be much more flexible and responsive, but can be riskier than more
traditional methods. For example, without a detailed set of system requirements, certain
features requested by some users might not be consistent with the company’s larger
game plan.
Other potential disadvantages of agile methods can include weak documentation,
blurred lines of accountability, and too little emphasis on the larger business picture.
Also, unless properly implemented, a long series of iterations might actually add
to project cost and
development time. The bottom line is that systems analysts should understand the pros
and cons of any approach before selecting a development method for a specific project.
Other Development Methods
IT professionals know that the key to success is user input — before, during, and after a
system is developed. Over time, many companies discovered that systems development
teams composed of IT staff, users, and managers could complete their work more rap-
idly and produce better results. Two methodologies became popular: joint application
development (JAD) and rapid application development (RAD).
Chapter 1 Introduction to Systems Analysis and Design
Systems Development Methods
FIGURE 1-30 Agile methods have attracted a wide following and an entire
community of users.
PHASE TASKS
Planning Define objectives, constraints, and deliverables
Risk analysis Identify risks and develop acceptable resolutions
Engineering Develop a prototype that includes all deliverables
Evaluation Perform assessment and testing to develop objectives for next iteration
FIGURE 1-31 Typical phases and tasks in a spiral model.

27
Phase 1 Systems Planning
Systems Development Guidelines
Both JAD and RAD use teams composed of users, managers, and IT staff. The
difference is that JAD focuses on team-based fact-finding, which is only one phase of
the development process, whereas RAD is more like a compressed version of the entire
process. JAD, RAD, and agile methods are described in more detail in Chapter 4.
In addition to the methods described in this chapter, you might encounter other
systems development techniques. If a systems analyst wants additional choices, he or
she can choose from an entire industry of IT software companies and consulting firms.
For example, a popular approach offered by the Rational group at IBM is called the
Rational Unified Process (RUP®). According to IBM, RUP® offers a flexible, iterative
process for managing software development projects that can minimize risk, ensure
predictable results, and deliver high-quality software on time.
Another option is what Microsoft calls Microsoft Solutions Framework (MSF),
which documents the experience of its own software development teams. Although the
Microsoft process differs from the SDLC phase-oriented approach, MSF developers
perform the same kind of planning, ask the same kinds of fact-finding questions, deal
with the same kinds of design and implementation issues, and resolve the same kinds of
problems. Using this approach, MSF examines a broader business and organizational
context that surrounds the development of an information system.
Companies often choose to follow their own methodology. Using CASE tools, an IT
team can apply a variety of techniques rather than being bound to a single, rigid meth-
odology. As shown in Part B of the Systems Analyst’s Toolkit, many CASE tools offer a
complete set of analysis and modeling tools that support various methods and strategies.
Regardless of the development model, it will be necessary to manage people, tasks,
timetables, and expenses by using various project management tools and techniques.
SYSTEMS DEVELOPMENT GUIDELINES
The basic principles in Figure 1-32 apply to any IT project, large or small. Although you will
develop your own methods and techniques, these guidelines will help you achieve success as a
systems analyst.
Phase 1 Systems Planning
To learn more about
Microsoft Solutions
Framework, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Microsoft
Solutions
Framework link.
FIVE BASIC SYSTEMS DEVELOPMENT GUIDELINES
Develop a Plan
Prepare an overall project plan and stick to it. Complete the tasks in a logical sequence.
Develop a clear set of ground rules and be sure that everyone on the team understands
them clearly.
Involve Users and
Listen Carefully
to Them
Ensure that users are involved in the development process, especially when identifying and
modeling system requirements. When you interact with users, listen closely to what they are
saying. Chapter 4 describes fact-finding and how to get the most out of face-to-face
communication.
Use Project
Management Tools
and Techniques
Try to keep the project on track and avoid surprises. Create a reasonable number of
checkpoints — too many can be burdensome, but too few will not provide adequate
control. In Chapter 3, you will learn how to use Microsoft Project to help you manage tasks,
allocate resources, and monitor progress.
Develop Accurate
Cost and Benefit
Information
Managers need to know the cost of developing and operating a system, and the value of the
benefits it will provide. You must provide accurate, realistic cost and benefit estimates, and
update them as necessary.
Remain Flexible
Be flexible within the framework of your plan. Systems development is a dynamic process,
and overlap often exists among tasks. The ability to react quickly is especially important
when you are working on a system that must be developed rapidly.
FIGURE 1-32 These basic guidelines apply throughout the systems development process.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

28
THE INFORMATION TECHNOLOGY DEPARTMENT
The IT department develops and maintains information systems. The structure of the IT
department varies among companies, as does its name and placement within the organi-
zation. In a small firm, one person might handle all computer support activities and ser-
vices, whereas a large corporation might require many people with specialized skills to
provide information systems support. Figure 1-33 shows a typical IT organization in a
company that has networked PCs, enterprise-wide databases, centralized processing, and
Web-based operations.
The IT group provides technical support, which includes six main functions: applica-
tion development, systems support and security, user support, database administration,
network administration, and Web support. These functions overlap considerably and
often have different names in different companies.
Chapter 1 Introduction to Systems Analysis and Design
The Information Technology Department
Director
Information Technology
Application
Development
Systems Support
and Security
User
Support
Database
Administration
Quality
Assurance (QA)
Web
Support
Network
Administration
IT Department
FIGURE 1-33 Depending on its size, an IT department might have separate organizational units for these functions, or they might be
combined into a smaller number of teams.
Application Development
The IT application development group typically provides leadership and overall
guidance, but the systems themselves are developed by teams consisting of users,
managers, and IT staff members. A popular model for information systems development
is a project-oriented team using RAD or JAD, with IT professionals providing overall
coordination, guidance, and technical support.
CASE IN POINT 1.2: GLOBAL HOTELS AND MOMMA’S MOTELS
Suppose you work in the IT department of Global Hotels, a multinational hotel chain. Global
Hotels runs several specialized business support systems, including a guest reservations
system that was developed in-house to meet the requirements of a large company with
worldwide operations. Guests can make one-stop online reservations by visiting Global’s Web
site, which has links to all major travel industry sites.
Global Hotels just acquired Momma’s, a regional chain of 20 motels in western Canada.
Momma’s uses a vertical reservations package suitable for small- to medium-sized businesses,
and a generic accounting and finance package. Should Momma’s use Global Hotels’ informa-
tion systems or continue with its own? In your answer, consider issues such as business pro-
files, business processes, system interactivity, EDI, XML, e-commerce, and the characteristics
of both information systems. What additional information would be helpful to you in making
a recommendation?

29
Phase 1 Systems Planning
The Information Technology Department
Systems Support and Security
Systems support and security provides vital protection and maintenance services for
system hardware and software, including enterprise computing systems, networks,
transaction processing systems, and corporate IT infrastructure. The systems support
and security group implements and monitors physical and electronic security hard-
ware, software, and procedures. This group also installs and supports operating
systems, telecommunications software, and centralized database management systems.
In addition, systems support and security technicians provide technical assistance to
other groups in the IT department. If a site has a large number of remote clients, the
systems support group often includes a deployment team that installs and configures
the workstations.
User Support
User support provides users with technical information, training, and productivity
support. The user support function usually is called a help desk or information center
(IC). A help desk’s staff trains users and managers on application software such as
e-mail, word processing spreadsheets, and graphics packages. User support specialists
answer questions, troubleshoot problems, and serve as a clearinghouse for user problems
and solutions.
Database Administration
Database administration involves data design, management, security, backup, and
access. In small- and medium-sized companies, an IT support person performs those
roles in addition to other duties. Regardless of company size, mission-critical database
applications require continuous attention and technical support.
Network Administration
Business operations depend on networks that enable company-wide information
systems. Network administration includes hardware and software maintenance,
support, and security. In addition to controlling user access, network administrators
install, configure, manage, monitor, and maintain network applications. Network
administration is discussed in more detail in Chapter 10.
Web Support
Web support is a vital technical support function. Web support specialists design
and construct Web pages, monitor traffic, manage hardware and software, and link
Web-based applications to the company’s information systems. Reliable, high-quality
Web support is especially critical for companies engaged in e-commerce.
Quality Assurance (QA)
Many large IT departments also use a quality assurance (QA) team that reviews and tests
all applications and systems changes to verify specifications and software quality standards.
The QA team usually is a separate unit that reports directly to IT management.
Phase 1 Systems Planning

30
Chapter 1 Introduction to Systems Analysis and Design
The Systems Analyst
CASE IN POINT 1.3: WHAT SHOULD LISA DO?
Lisa Jameson has two job offers. One is from Pembroke Boats, a boat manufacturer that employs
200 people in a small Ohio town. Pembroke does not have an IT department and wants her to
create one. The job position is called information coordinator, but she would be the only IT person.
The other offer, which pays about $7,500 more annually, is from Albemarle Express, a
nationwide trucking firm located in Detroit. At Albemarle Express, Lisa would be a program-
mer-analyst, with the promise that if she does well in her position, she eventually will move
into a systems analyst position and work on new systems development. Lisa has heard a
rumor that another company might acquire Albemarle Express, but that rumor has occurred
before and nothing has ever happened. What should Lisa do, and why?
THE SYSTEMS ANALYST
A systems analyst investigates, analyzes, designs, develops, installs, evaluates, and
maintains a company’s information systems. To perform those tasks, a systems analyst
constantly interacts with users and managers within and outside the company. On large
projects, the analyst works as a member of an IT department team; on smaller assign-
ments, he or she might work alone.
Most companies assign systems analysts to the IT department, but analysts also can
report to a specific user area such as marketing, sales, or accounting. As a member of a
functional team, an analyst is better able to understand the needs of that group and how
information systems support the department’s mission. Smaller companies often use
consultants to perform systems analysis work on an as-needed basis.
Responsibilities
The systems analyst’s job overlaps business and technical issues. Analysts help translate
business requirements into IT projects. When assigned to a systems development team,
an analyst might help document business profiles, review business processes, select
hardware and software packages, design information systems, train users, and plan
e-commerce Web sites.
A systems analyst plans projects, develops schedules, and estimates costs. To keep
managers and users informed, the analyst conducts meetings, delivers presentations, and
writes memos, reports, and documentation. The Systems Analyst’s Toolkit that follows
Chapter 12 includes various tools to help you with each of those important skills.
Knowledge, Skills, and Education
A successful systems analyst needs technical knowledge, oral and written communication
skills, an understanding of business operations, and critical thinking skills. Educational
requirements vary widely depending on the company and the position. In a rapidly chang-
ing IT marketplace, a systems analyst must manage his or her own career and have a plan
for professional development.
TECHNICAL KNOWLEDGE State-of-the-art knowledge is extremely important in a
rapidly changing business and technical environment. The Internet offers numerous
opportunities to update technical knowledge and skills. Many sites, such as the one
shown in Figure 1-34 offer a convenient way for IT professionals to learn about techni-
cal developments, exchange experiences, and get answers to questions. Analysts also
maintain their skills by attending training courses, both on-site and online. Networking
with colleagues is another way to keep up with new developments, and membership in
TOOLKIT TIME
The communications
tools in Part A of the
Systems Analyst’s
Toolkit can help you
develop better
reports and presen-
tations. To learn more
about these tools,
turn to Part A of the
four-part Toolkit that
follows Chapter 12.

31
Phase 1 Systems Planning
The Systems Analyst
professional associations also is
important.
COMMUNICATION SKILLS A
systems analyst needs strong oral
and written communication skills,
and the ability to interact with
people at all levels, from opera-
tional staff to senior executives.
Often, the analyst must work with
people outside the company, such
as software and hardware vendors,
customers, and government
officials. Analysts often coordinate
IT project teams, where they use
communication skills to guide
and motivate team members.
BUSINESS SKILLS A systems
analyst works closely with mana-
gers, supervisors, and operational
employees. To be effective, he or she
must understand business opera-
tions and processes, communicate
clearly, and translate business needs
into requirements that can be under-
stood by programmers and systems
developers. A successful analyst is
business-oriented, curious, comfort-
able with financial tools, and able
to see the big picture. Chapter 2,
Analyzing the Business Case,
describes some basic concepts,
including strategic planning, SWOT
analysis, and feasibility tests. In
addition, the Systems Analyst’s
Toolkit, which follows Chapter 12,
explains communication and finan-
cial tools that can help analysts
handle business-related tasks.
CRITICAL THINKING SKILLS
Although no standard definition
exists, most educators agree that
critical thinking skills include the
ability to compare, classify, evaluate, recognize patterns,
analyze cause-and-effect, and apply logic. Critical
thinkers often use a what-if approach, and they have the
ability to evaluate their own thinking and reasoning.
Critical thinking skills are valuable in the IT industry,
where employers seek job candidates who can demon-
strate these skills and bring them to the workplace.
Figure 1-35 shows the Foundation for Critical Thinking
site, which offers many resources to support the critical thinking community.
Phase 1 Systems Planning
FIGURE 1-34 The TechRepublic Web site offers support for IT professionals. Features
include newsletters, forums, product information, and a searchable knowledge base.
FIGURE 1-35 The Critical Thinking Community is a nonprofit
organization that provides encouragement and resources for
critical thinkers.

32
EDUCATION Companies typically require systems analysts to have a college degree
in information systems, computer science, or business, and some IT experience
usually is required. For higher-level positions, many companies require an advanced
degree. Sometimes, educational requirements can be waived if a candidate has
significant experience, skills, or professional certifications. Part D of the Systems
Analyst’s Toolkit describes many valuable IT resources for personal and
professional development.
Certification
Many hardware and software companies offer certification for IT professionals.
Certification verifies that an individual demonstrated a certain level of knowledge
and skill on a standardized test. Certification is an excellent way for IT professionals
to learn new skills and gain recognition for
their efforts. Although certification does not
guarantee competence or ability, many compa-
nies regard certification as an important cre-
dential for hiring or promotion. You can learn
more about certification in Chapter 12,
Managing Systems Support and Security, and
by visiting the Web sites of individual compa-
nies such as Microsoft, Cisco Systems, Sun
Microsystems, and Novell.
In addition to traditional hardware and
software certifications, some firms are
exploring ways to assess critical thinking
skills, as shown in Figure 1-3. These skills
include perception, organization, analysis,
problem-solving, and decision-making.
Whether or not formal certification is
involved, these skills are extremely valuable
to IT professionals and the
employers who hire them.
Career Opportunities
The demand for systems ana-
lysts is expected to remain
strong. Companies will need
systems analysts to apply new
information technology, and
the explosion in e-commerce
will fuel IT job growth. The
systems analyst position is a
challenging and rewarding one
that can lead to a top manage-
ment position. With an under-
standing of technical and
business issues, a systems ana-
lyst has an unlimited horizon. Many companies have presidents and senior managers who
started in IT departments as systems analysts.
Chapter 1 Introduction to Systems Analysis and Design
The Systems Analyst
FIGURE 1-36 Employers want to hire people who think logically and effectively. Some firms
are working on certification exams designed to measure these skills.

33
Phase 1 Systems Planning
The Systems Analyst
The responsibilities of a systems analyst at a small firm are different from those at
a large corporation. Would you be better off at a small or large company? Where will
you find the best opportunity for experience and professional growth? Each person
looks for different rewards in a job. What will be important to you?
JOB TITLES First, do not rely on job titles alone. Some positions are called systems
analysts, but involve only programming or technical support. In other cases, systems
analyst responsibilities are found in positions titled computer specialist, programmer,
programmer/analyst, systems designer, software engineer, and various others. Be sure
the responsibilities of the job are stated clearly when you consider a position.
COMPANY ORGANIZATION Find out all you can about the company and where the
IT department fits in the organization chart. Where are IT functions performed, and by
whom? A firm might have a central IT group, but decentralize the systems development
function. This situation sometimes occurs in large conglomerates, where the parent
company consolidates information that actually is developed and managed at the
subsidiary level. Where would you rather work?
COMPANY SIZE If you like more variety, a smaller firm might suit you best. If you
want to specialize, however, then consider a larger company with state-of-the-art sys-
tems. Although you might have more responsibility in a smaller company, the promo-
tional opportunities and financial rewards often are greater in larger companies. You
also might want to consider working as an independent consultant, either on your
own or with others. Many consulting firms have been successful in offering their ser-
vices to smaller business enterprises that do not have the expertise to handle systems
development on their own.
CORPORATE CULTURE In addition to having goals, methods, and information systems
requirements, every firm has an underlying corporate culture. A corporate culture is the
set of beliefs, rules, traditions, values, and attitudes that define a company and influence
its way of doing business. To be successful, a systems analyst must understand the cor-
porate culture and how it affects the way information is managed. Companies some-
times include statements about corporate culture in their mission statements, which are
explained in Chapter 2.
SALARY, LOCATION, AND FUTURE GROWTH Finally, consider salary, location, and
the company’s prospects for future growth and success. Think about your impressions
of the company and the people you met during your interviews. Most important, review
your short- and long-term goals very carefully before deciding which position is best
for you.
CASE IN POINT 1.4: JUST-IN-TIME AIRFREIGHT, INC.
Suppose you are the IT director at Just-in-Time Airfreight, and you have received authorization
to hire another systems analyst. This will be an entry-level position, and the person will assist
senior systems analysts on various projects involving the reservations and the human resources
systems. Using the information in this chapter, draft an ad that would appear in The Wall Street
Journal, local newspapers, and online. You can get some ideas by visiting monster.com, or a simi-
lar site. In your ad, be sure to list desired skills, experience, and educational requirements.
Phase 1 Systems Planning
TOOLKIT TIME
The information
technology
resource tools in
Part D of the
Systems Analyst’s
Toolkit can help you
obtain technical
data, advance your
career, and network
with other IT pro-
fessionals. To learn
more about these
tools, turn to Part D
of the four-part
Toolkit that follows
Chapter 12.

34
Chapter 1 Introduction to Systems Analysis and Design
Chapter Summary
A QUESTION OF ETHICS
You are enjoying your job as a summer intern in the IT department of a local company. At
lunch yesterday, several people were discussing ethical issues. You learned that some of them
belong to IT organizations that have ethical codes to guide members and set professional
standards. For example, Ann, your supervisor, belongs to the Association for Computing
Machinery (ACM), which has over 97,000 members and a Web site at acm.org. Ann said
that the ACM code of ethics is important to her, and would definitely influence her views.
On the other hand, Jack, a senior programmer, believes that his own personal standards
would be sufficient to guide him if ethical questions were to arise.
Because you are excited about your career as an IT professional, you decide to examine
the ACM code of ethics and make up your own mind. After you do so, would you tend to
agree more with Ann or with Jack?
CHAPTER SUMMARY
In this chapter, you learned that information technology (IT) refers to the combination
of hardware, software, and services that people use to manage, communicate, and share
information. Technology is changing rapidly, and IT professionals must prepare for the
future. IT supports business operations, improves productivity, and helps managers
make decisions. Systems analysis and design is the process of developing information
systems that transform data into useful information.
Traditionally, companies either developed in-house applications or purchased software
packages from vendors. Today, the choice is much more complex, but it is always impor-
tant for companies to plan the system carefully before considering implementation options.
The essential components of an information system are hardware, software, data,
processes, and people. Hardware consists of everything in the physical layer of the informa-
tion system. Software consists of system software, which manages the hardware compo-
nents, and application software, which supports day-to-day business operations. Data is
the raw material that an information system transforms into useful information. Processes
describe the tasks and functions that users, managers, and IT staff members perform. People
who interact with a system include users, from both within and outside the company.
A systems analyst starts with a business profile, which is an overview of company
functions, and then he or she creates a series of business models that represent business
processes, which describe specific transactions, events, tasks, and results. Analysts use
business process modeling tools to document complex operations.
Most successful companies offer a mix of products, technical and financial services,
consulting, and customer support. A rapidly growing business category is the Internet-
dependent (dot-com) firm, which relies solely on Internet-based operations. E-commerce
includes business-to-consumer (B2C) sales, and business-to-business (B2B) transactions
that use Internet-based digital marketplaces or private electronic data interchange (EDI)
systems.
Based on their functions and features, business information systems are identified as
enterprise computing systems, transaction processing systems, business support systems,
knowledge management systems, or user productivity systems. In most companies, signifi-
cant overlap and integration exists among the various types of information systems.
A typical organization structure includes top managers, middle managers and
knowledge workers, supervisors and team leaders, and operational employees. Top
managers develop strategic plans, which define an overall mission and goals. Middle
managers provide direction, resources, and feedback to supervisors and team leaders.

35
Phase 1 Systems Planning
Chapter Summary
Knowledge workers include various professionals who function as support staff.
Supervisors and team leaders oversee operational employees. Each organizational level
has a different set of responsibilities and information needs.
Systems analysts use modeling, prototyping, and computer-aided systems engineering
(CASE) tools. Modeling produces a graphical representation of a concept or process,
whereas prototyping involves the creation of an early working model of the information
or its components. A systems analyst uses CASE tools to perform various systems
development tasks.
Three popular system development approaches are structured analysis, which is a
traditional method that still is widely used, object-oriented analysis (O-O), which is a more
recent approach that many analysts prefer, and agile methods, also called adaptive methods,
which include the latest trends in software development.
Structured analysis uses a series of phases, called the systems development life cycle
(SDLC) that usually is shown as a waterfall model. Structured analysis uses an overall plan,
similar to a blueprint for constructing a building, so it is called a predictive approach. This
method uses a set of process models to describe a system graphically, and also addresses data
organization and structure, relational database design, and user interface issues.
Object-oriented analysis combines data and the processes that act on the data into things
called objects that represent people, things, transactions, and events. Objects have character-
istics called properties, built-in processes called methods, and can send information to other
objects by using messages. Using an O-O programming language, a programmer then writes
the code that creates the objects. Object-oriented methods usually follow a series of analysis
and design phases similar to the SDLC, but the phases are more interactive.
Agile methods are the newest development approach, and attempt to develop a system
incrementally by building a series of prototypes and constantly adjusting them to user
requirements. Agile methods typically use a spiral model, which represents a series of itera-
tions, or revisions, based on user feedback. The repeated iterations produce a series of
prototypes, which evolve into the finished system.
Regardless of the development strategy, people, tasks, timetables, and costs must be
managed effectively using project management tools and techniques, which are described
in detail in Chapter 3.
Some firms choose to develop their own in-house methods or adopt techniques
offered by software suppliers, CASE tool vendors, or consultants. Companies also use
team-based strategies called joint application development (JAD) and rapid application
development (RAD). JAD focuses on team-based fact-finding, whereas RAD is more like
a compressed version of the entire process. JAD and RAD are described in more detail
in Chapter 4.
The IT department develops, maintains, and operates a company’s information systems.
IT staff members provide technical support, including application development, systems
support, user support, database administration, network administration, and Web support.
These functions overlap considerably and often have different names in different companies.
In addition to technical knowledge, a systems analyst must understand the business,
think critically, and communicate effectively. Valuable credentials such as certifications are
available to systems analysts. A systems analyst’s responsibilities depend on a company’s
organization, size, and culture. Systems analysts need to consider salary, location, and future
growth potential when making a career decision.
Phase 1 Systems Planning

36
Chapter 1 Introduction to Systems Analysis and Design
Key Terms and Phrases
Key Terms and Phrases
adaptive methods 21
agile methods 21
application development 28
application software 8
B2B (business-to-business) 13
B2C (business-to-consumer) 13
brick-and-mortar 12
business model 19
business process 10
business process model (BPM) 10
business process modeling 10
business process modeling
notation (BPMN) 10
business process reengineering
(BPR) 18
business profile 10
business rules 22
business support systems 16
CASE tools 20
certification 32
class 24
computer-aided software
engineering (CASE) 20
computer-aided systems
engineering (CASE) 20
corporate culture 33
critical thinking skills 31
data 7
data flow diagram (DFD) 22
data model 19
database administration 29
deliverable 22
deployment team 29
dot-com (.com) 12
e-commerce (electronic
commerce) 13
electronic data interchange
(EDI) 14
empowerment 19
end product 22
end users 10
enterprise applications 8
enterprise computing 15
enterprise resource planning
(ERP) 15
expert systems 16
extensible markup language
(XML) 14
feasibility study 23
fuzzy logic 17
groupware 17
hardware 8
help desk 29
horizontal system 8
I-commerce (Internet
commerce) 13
inference rules 17
information 7
information center (IC) 29
information system 7
information technology (IT) 4
in-house applications 7
interactive model 25
Internet-dependent 12
iterative 25
joint application development
(JAD) 26
knowledge base 17
knowledge management
systems 16
knowledge workers 19
legacy systems 9
management information
systems (MIS) 16
message 25
methods 25
Microsoft Solutions
Framework (MSF) 27
mission-critical system 7
modeling 19
Moore’s Law 8
network administration 29
network model 19
object-oriented (O-O)
analysis 21
object model 19
objects 24
predictive 22
preliminary investigation 23
process model 19
process-centered 22
processes 9
product-oriented 11
project management 22
properties 24
prototype 20
quality assurance (QA) 29
radio frequency identification
(RFID) 16
rapid application development
(RAD) 26
Rational Unified Process
(RUP®) 27
requirements model 19
requirements modeling 23
scalable 24
service-oriented 11
software 8
software packages 7
spiral model 26
stakeholders 10
strategic plans 18
structured analysis 21
supplier relationship
management (SRM) 14
supply chain management
(SCM) 14
system 7
system design specification 24
system requirements
document 24
system software 8
systems analysis and design 7
systems analysis phase 23
systems analysts 7
systems design phase 24
systems development life cycle
(SDLC) 22
systems evaluation 24
systems implementation
phase 24
systems planning phase 23
systems request 23
systems support and security 29
systems support and security
phase 24
technical support 28
transaction processing (TP)
systems 15
user productivity systems 17
user support 29
users 10
vertical system 8
waterfall model 22
Web support 29
what-if 16

37
Phase 1 Systems Planning
Learn It Online
Instructions: To complete the Learn It Online exercises, visit the Management Information
Systems CourseMate Web site at www.cengagebrain.com, navigate to the resources for this
chapter, and click the link for the exercise you want to complete.
1 Chapter Reinforcement
TF, MC, and SA
Click the Chapter Reinforcement link. Print the quiz by clicking Print on the File menu
for each page. Answer each question.
2 Flash Cards
Click the Flash Cards link and read the instructions. Type 20 (or a number specified by
your instructor) in the Number of playing cards text box, type your name in the Enter
your Name text box, and then click the Flip Card button. When the flash card is dis-
played, read the question and then click the ANSWER box arrow to select an answer.
Flip through the Flash Cards. If your score is 15 (75%) correct or greater, click Print
on the File menu to print your results. If your score is less than 15 (75%) correct, then
redo this exercise by clicking the Replay button.
3 Practice Test
Click the Practice Test link. Answer each question, enter your first and last name at the
bottom of the page, and then click the Grade Test button. When the graded practice
test is displayed on your screen, click Print on the File menu to print a hard copy.
Continue to take practice tests until you score 80% or better.
4 Who Wants To Be a Computer Genius?
Click the Computer Genius link. Read the instructions, enter your first and last name
at the bottom of the page, and then click the Play button. When your score is dis-
played, click the PRINT RESULTS link to print a hard copy.
5 Wheel of Terms
Click the Wheel of Terms link. Read the instructions, and then enter your first and last
name and your school name. Click the PLAY button. When your score is displayed on
the screen, right-click the score and then click Print on the shortcut menu to print a
hard copy.
6 Crossword Puzzle Challenge
Click the Crossword Puzzle Challenge link. Read the instructions, and then enter your
first and last name. Click the SUBMIT button. Work the crossword puzzle. When you
are finished, click the Submit button. When the crossword puzzle is redisplayed, click the
Print Puzzle button to print a hard copy.
Phase 1 Systems Planning
Learn It Online

www.cengagebrain.com

38
Chapter 1 Introduction to Systems Analysis and Design
Case-Sim: SCR Associates
SCR Associates Case Simulation Session 1: Introduction
Overview
The SCR Associates case study is a
Web-based simulation that allows you to
practice your skills in a real-world environ-
ment. The case study transports you to SCR’s intranet, where you complete 12 work sessions,
each aligning with a chapter. As you work on the case, you will receive e-mail and voice mail
messages, obtain information from SCR’s online libraries, and perform various tasks.
Background
SCR Associates is an IT consulting firm that offers solutions and training. SCR has
decided to expand by opening a high-tech training center. The company needs to develop an
information system to support operations at the new training center. The new system will be
called TIMS (Training Information Management System).
As a newly hired systems analyst, you report to Jesse Baker, systems group manager. She
will expect you to apply the knowledge and skills you learn in each chapter. Your work
should be accurate, thorough, and have a professional appearance.
What’s in the textbook?
• A preview of each work session, to set the stage for your tasks.
• A list of the session tasks for easy reference.
What’s on the Web?
• A realistic simulation that includes the SCR Web site and a link to the company intranet.
The Web site contains public information about the company, including its organization,
mission, values, goals, and services.
• An intranet portal that asks you to enter your name and a password.
• Links for e-mail and voice mail that explain your tasks and add realism.
• A task list, with four specific tasks per session.
• Background information you will need, including a data library, a forms library, and
resources list.
How do I use the case?
• Review the background material.
• Read the preview for this session and study the Task List. You might need to review the
chapter material in order to perform the tasks.
• Visit the Management Information Systems CourseMate Web site at www.cengagebrain.
com, navigate to the SCR Case Simulation, and locate the intranet link.
• Enter your name and the password sad9e. An opening screen will display the
work sessions.
• Select a work session.
• Check your e-mail and voice mail messages carefully, and then begin working
on the task list.

www.cengagebrain.com

www.cengagebrain.com

39
Phase 1 Systems Planning
Case-Sim: SCR Associates
SCR Associates Case Simulation Session 1: Introduction (Continued)
Preview: Session 1
This is your second day on the job as a systems analyst at SCR Associates. You spent
most of yesterday filling out personnel forms and learning your way around the office. This
morning, you sit at your desk and examine SCR’s Internet site. You explore the entire site,
which reflects SCR’s history, purpose, and values. You especially are impressed with the
emphasis SCR puts on its relationships with clients. When you finish examining the site, you
are more convinced than ever that SCR will be a great career opportunity. You are excited
about your new job, and eager to get started.
Task List
FIGURE 1-37 Task list: Session 1.
1. Investigate SCR’s Internet site and learn about the company’s history, purpose, and values. Send Jesse
a brief memo with suggestions to expand or improve these sections.
2. On the SCR intranet, visit the data, forms, and resource libraries and review a sample of the information
in each library.
3. Using the SCR functions and organization listed in the data library, create an
organization chart using Microsoft Word, Visio, or a drawing program.
4. Jesse says that SCR has plenty of competition in the IT consulting field. Get on the Internet and find
three other IT consulting firms. She wants a brief description of each firm and the services it offers.

40 Chapter Exercises
Chapter 1 Introduction to Systems Analysis and Design
Review Questions
1. What is information technology, and why is it important to a business?
2. Define business profiles, processes, and modeling.
3. Identify the main components of an information system, and describe the system’s
stakeholders.
4. Explain the difference between vertical and horizontal systems packages.
5. How do companies use EDI? What are some advantages of using XML?
6. Describe five types of information systems, and give an example of each.
7. Describe four organizational levels of a typical business and their information
requirements.
8. Describe the phases of the systems development life cycle, and compare the SDLC
waterfall model with the spiral model.
9. Explain the use of models, prototypes, and CASE tools in the systems development
process. Also explain the pros and cons of agile development methods.
10. What is object-oriented analysis, and how does it differ from structured
analysis?
Discussion Topics
1. Some experts believe that the growth in e-commerce will cause states and local
governments to lose a significant amount of sales tax revenue, unless Internet
transactions are subject to sales tax. Do you agree? Why or why not?
2. Present an argument for and against the following proposition: Because IT
managers must understand all phases of the business, a company should fill top
management vacancies by promoting IT managers.
3. The head of the IT group in a company often is called the chief information officer
(CIO) or chief technology officer (CTO). Should the CIO or CTO report to the com-
pany president, to the finance department, where many of the information
systems are used, or to someone or somewhere else? Why would it matter?
4. Computers perform many jobs that previously were performed by people. Will
computer-based transactions and expanded e-commerce eventually replace person-
to-person contact? From a customer’s point of view, is this better? Why or why not?
Projects
1. Contact at least three people at your school or a nearby company who use information
systems. List the systems, the position titles of the users, and the business functions
that the systems support.
2. Research newspaper, business magazine articles, or the Web to find computer
companies whose stock is traded publicly. Choose a company and pretend to buy
$1,000 of its stock. What is the current price per share? Why did you choose that
company? Report each week to your class on how your stock is doing.
3. Do a search on the Web to learn more about agile system development approaches and
spiral models. Prepare a summary of the results and a list of the sites you visited.
4. Is it really possible to measure thinking skills? Before you decide, visit the Critical
Thinking Community site shown in Figure 1-35 on page 31. Prepare a brief memo
with your conclusion and reasons.
Chapter Exercises

41
Phase 1 Systems Planning
Apply Your Knowledge
The Apply Your Knowledge section contains four mini-cases. Each case describes a situation,
explains your role in the case, and asks you to respond to questions. You can answer the
questions by applying knowledge you learned in the chapter.
1 Low-Voltage Components
Situation:
You are the IT manager at Low-Voltage Components, a medium-sized firm that makes
specialized circuit boards. Low-Voltage’s largest customer, TX Industries, recently
installed a computerized purchasing system. If Low-Voltage connects to the TX
system, TX will be able to submit purchase orders electronically. Although Low-Voltage
has a computerized accounting system, that system is not capable of handling EDI.
1. Should Low-Voltage develop a system to connect with TX Industries’ purchasing
system? Why or why not?
2. What terms or concepts describe the proposed computer-to-computer relationship
between Low-Voltage and TX Industries?
3. Is Low-Voltage’s proposed new system a transaction processing system? Why or
why not?
4. Before Low-Voltage makes a final decision, should the company consider an ERP
system? Why or why not?
2 Systems Analyst Salaries
Situation:
As part of your job search, you decide to find out more about salaries and qualifications
for systems analysts in the area where you would like to work. To increase your
knowledge, search the Internet to perform the following research:
1. Find information about a career as a systems analyst.
2. Using the Internet, determine whether the Federal Bureau of Labor Statistics
lists salary information for systems analysts. If so, summarize the information you
find.
3. Find at least two online ads for systems analysts and list the employers, the
qualifications, and the salaries, if mentioned.
4. Find at least one ad for an IT position that specifically mentions e-commerce.
Apply Your Knowledge

42 Apply Your Knowledge
Chapter 1 Introduction to Systems Analysis and Design
3 MultiTech Interview
Situation:
You have an interview for an IT position with MultiTech, a large telecommunications
company, and you want to learn more about the firm and its organizational structure.
To prepare for the interview, you decide to review your knowledge about corporations,
including the following questions:
1. What are the four organizational levels in a typical company?
2. How can you classify companies based on their mix of products and services?
3. What is empowerment?
4. What types of information systems might a large company use?
4 Rainbow’s End Interview
Situation:
Your MultiTech interview seemed to go well, but you did not get the job. During the
meeting, the interviewer mentioned that MultiTech uses structured analysis and relies
heavily on modeling, prototyping, and CASE tools. Thinking back, you realize that
you did not fully understand those terms. As you prepare for an interview with
Rainbow’s End, a large retail chain, you decide to review some IT terms and concepts.
You want to be ready for the following questions:
1. What are the main differences between structured, O-O, and agile development
methods?
2. What is a CASE tool and what does it do?
3. What is business process modeling and how is it done?
4. What is prototyping and why is it important?

43
Phase 1 Systems Planning
Case Studies
Case studies allow you to practice specific skills learned in the chapter. Each chapter contains
several case studies that continue throughout the textbook, and a chapter capstone case.
New Century Health Clinic
New Century Health Clinic offers preventive medicine and traditional medical care. In your
role as an IT consultant, you will help New Century develop a new information system.
Background
Five years ago, cardiologists Timothy Jones and Dolores Garcia decided to combine their
individual practices in Brea, California, to form New Century Health Clinic. They wanted to
concentrate on preventive medicine by helping patients maintain health and fitness and by
providing traditional medical care. Dr. Jones recently asked you to work with him as an IT
consultant. He wants you to help New Century develop an information system that will
support the clinic’s operations and future growth. At your initial meeting, he provided you
with some background information and asked for your suggestions about how to begin.
At your desk, you begin to review New Century’s situation. The clinic is located near a
new shopping mall in a busy section of the city. New Century’s staff includes four doctors,
three registered nurses, four physical therapists, and six office staff workers. The clinic cur-
rently has a patient base of 3,500 patients from 275 different employers, many of which
provide insurance coverage for employee wellness and health maintenance. Currently, New
Century accepts 34 different insurance policies.
Anita Davenport, who has been with New Century since its inception, is the office manager.
She supervises the staff, including Fred Brown, Susan Gifford, Tom Capaletti, Lisa Sung, and
Carla Herrera. Fred Brown handles office payroll, tax reporting, and profit distribution among
the associates. Susan Gifford is responsible for the maintenance of patient records. Tom
Capaletti handles most of the paperwork concerning insurance reporting and accounting. Lisa
Sung has the primary responsibility for the appointment book, and her duties include making
reminder calls to patients and preparing daily appointment lists. Carla Herrera is concerned
primarily with ordering and organizing office and clinic supplies.
Each of the six office staff people has one or more primary responsibilities; however, all
members of the staff help out whenever necessary with patient records, insurance processing,
and appointment processing. In addition to their regular responsibilities, all six office work-
ers are involved in the preparation of patient statements at the end of each month.
Using this information, you begin to prepare for your next meeting with Dr. Jones.
Assignments
1. Create an organization chart of the office staff using Microsoft Word or a similar
program, or you can draw it by hand. In Word 2010 and Word 2007, click the Insert
tab on the Ribbon, then Smart Art, then Hierarchy.
2. Identify at least three business processes that New Century performs, and explain
who is responsible for the specific tasks.
3. Explain how New Century might use a transaction processing system, a business
support system, and a user productivity system. For each type of system, provide a
specific example, and explain how the system would benefit the clinic.
4. During the systems development process, should New Century consider any of
the following: B2B, vertical and horizontal system packages, or Internet-based
solutions? Explain your answers.
Case Studies

44 Case Studies
Chapter 1 Introduction to Systems Analysis and Design
PERSONAL TRAINER, INC.
Personal Trainer, Inc. owns and operates fitness centers in a dozen midwestern cities. The
centers have done well, and the company is planning an international expansion by opening
a new “supercenter” in the Toronto area.
Background
Cassia Umi, president, heads Personal Trainer’s management team. Three managers
report to her at the firm’s Chicago headquarters: Janet McDonald, manager, finance; Tai
Tranh, manager, sales and marketing; and Reed Cotter, manager, operations. The managers
who run the 12 existing centers all report to Reed.
Cassia wants the new supercenter to emphasize a wide variety of personal services and
special programs for members. If the supercenter approach is successful, it will become
the model for Personal Trainer’s future growth. Cassia personally selected Gray Lewis, a
manager with three years of fitness center experience, to run the new facility.
The new supercenter will feature a large exercise area with state-of-the-art equipment,
a swimming pool, a sporting goods shop, a health food store, and a snack bar. In addition,
the center will offer child care with special programs for various ages, a teen center, and a
computer café. Cassia also wants members to have online access to customized training
programs and progress reports.
Personal Trainer currently uses BumbleBee, a popular accounting package, to manage its
receivables, payables, and general ledger. Membership lists and word processing are handled
with Microsoft Office products.
Cassia believes the new supercenter will require additional data management capability,
and she decided to hire Patterson and Wilder, an IT consulting firm, to help Personal Trainer
develop an information system for the new operation. The firm assigned Susan Park, an
experienced consultant, to work with the Personal Trainer team.
Susan’s first task was to learn more about business operations at the new center, so she
requested a meeting with Gray. After some small talk, the discussion went like this:
Susan: Tell me about your plans for the new operation. I’m especially interested in what kind of
information management you’ll need.
Gray: Cassia thinks that we’ll need more information support because of the size and complexity of
the new operation. To tell the truth, I’m not so sure. We’ve had no problem with BumbleBee at
the other centers, and I don’t really want to reinvent the wheel.
Susan: Maybe we should start by looking at the similarities — and the differences — between
the new center and the existing ones.
Gray: Okay, let’s do that. First of all, we offer the same basic services everywhere. That includes the
exercise equipment, a pool, and, in most centers, a snack bar. Some centers also sell sporting
goods, and one offers child care — but not child-fitness programs. It is true that we’ve never put
all this together under one roof. And, I admit, we’ve never offered online access. To be honest,
I’m not absolutely sure what Cassia has in mind when she talks about 24/7 Web-based access.
One more feature — we plan to set up two levels of membership — let’s call them
silver and gold for now. Silver members can use all the basic services, but will pay additional fees
for some special programs, such as child fitness. Gold members will have
unlimited use of all services.
Susan: So, with all this going on, wouldn’t an overall system make your job easier?
Gray: Yes, but I don’t know where to start.
(continued)

45
Phase 1 Systems Planning
Case Studies
Susan: Gray, that’s why I’m here. I’ll work with you and the rest of the team to come up with a
solution that supports your business.
Gray: Sounds good to me. When can we start?
Susan: Let’s get together first thing tomorrow. Bring along an organization chart and think
about how you plan to run the new facility. We’ll try to build a model of the new opera-
tion so we can identify the business functions. When we know what the functions are,
we can figure out what kind of information is needed or generated by each function. That
will be our starting point.
Assignments
1. Develop a business profile for Personal Trainer, based on the facts provided. List at
least three of Personal Trainer’s business processes.
2. Create an organization chart for Personal Trainer using Microsoft Word or a similar
program, or you can draw it by hand. In Word 2010 and Word 2007, click the Insert
tab on the Ribbon, then Smart Art, then Hierarchy.
3. Review the conversation between Susan and Gray. In your opinion, is Gray totally
supportive of the new system? Why or why not? Do you agree with the way that
Susan responds to Gray’s comments? Why or why not?
4. Should Personal Trainer consider any of the following systems: enterprise computing,
transaction processing, business support, knowledge management, or user productiv-
ity? Why or why not? What opportunities might Personal Trainer have for Web-based
B2C transactions in the future? What about B2B?
Original Kayak Adventures
Original Kayak Adventures (OKA) offers guided eco-tours and kayak rentals along the
Hudson River.
Background
John and Edie Caputo, who are avid kayakers and amateur naturalists, founded OKA
two years ago. The Caputos spent many weekends and vacations exploring the Hudson’s
numerous creeks and tributaries. John was a sales representative and Edie worked for a
Web design firm. Two years ago, John’s division was purchased by a rival company, which
announced plans to move operations to another state. Rather than relocate, the Caputos
decided to launch OKA. They reasoned that Edie could leave her job and work as a free-
lance Web designer, which would provide some income while John tried to build OKA into a
profitable business. John and Edie are convinced that the ecotourism market will expand
greatly, and they look forward to sharing their experience and knowledge with others who
enjoy nature and kayaking.
Original Kayak Adventures advertises in regional magazines and maintains a Web site,
which Edie designed. Customers say that the site is attractive and informative, but the
Caputos are not sure of its effectiveness in attracting new business. At this time, no other
kayak rental firms operate within 20 miles of OKA’s location.
So far, the Caputos’ plan is working out well. OKA rents space at a nearby marina,
where Edie runs the office and operates her Web design business. She also handles rentals
when John is giving lessons or busy with a tour group. On summer weekends and holidays,
Janet Jacobs, a local college student, handles telephone inquiries and reservations.
OKA’s inventory includes 16 rental kayaks of various types, eight car-top carriers, and a
large assortment of accessories and safety equipment. Based on customer requests, Edie is
considering adding a selection of books and videos about kayaking and ecotourism.

46 Case Studies
Chapter 1 Introduction to Systems Analysis and Design
OKA has three main business segments: rentals, instruction, and guided tours. Most
customers make advance reservations for scheduled tours and instruction sessions, but
sometimes space is available for last-minute customers. Rentals are split evenly between
reservations and walk-in customers.
Reservations are entered in a loose-leaf binder, with separate tabs for each business activity.
Edie also created a Microsoft Access database to record reservations. When she has time, she
enters the reservation date, the reservation details and kayak type, and the customer informa-
tion into a table, which is sorted by reservation date. Each day, she prints a reservation list. For
quick reference, Edie also displays kayak availability on a wall-mounted board with color-
coded magnets that show the available or reserved status of each rental kayak. In addition to
the database, Edie uses an inexpensive accounting package to keep OKA’s books.
Although the OKA database handles the basic information, the Caputos have noticed
some drawbacks. For example, reservations for guided tours or instruction sessions some-
times conflict with John’s or Edie’s availability. The Caputos also would like to get more
information about rental patterns, customer profiles, advertising effectiveness, and future
business opportunities. John and Edie have talked about updating the system, but they have
been too busy to do so.
Assignments
1. Develop a business profile for Original Kayak Adventures. The profile should
include information about OKA’s business activities, organization, resources,
customers, and potential opportunity to engage in e-commerce.
2. List OKA’s main functions and business processes. Draw a model of an OKA
business process, including possible events, processes, and results.
3. What types of information systems does OKA use? Do these systems support its
current and future business objectives? Why or why not?
4. From an object-oriented viewpoint, OKA treats reservations as a class. Based on the
background information provided, what are some properties of reservation objects?

47
Phase 1 Systems Planning
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited
SoftWear, Limited (SWL) is a continuing case study that illustrates the knowledge and skills
described in each chapter. In this case study, the student acts as a member of the SWL
systems development team and performs various tasks.
Background
SoftWear, Limited, manufactures and sells casual and recreational clothing for men and
women. SWL was formed about 10 years ago when a national firm sold the division during a
corporate downsizing. A group of managers obtained financing and became owners of the
company. With clever marketing, competitive pricing, and efficient production, SWL has
grown to more than 450 employees, including the corporate headquarters and manufacturing
plants. Last year, SWL had sales of $700 million.
The company employs 90 people at its Raleigh, North Carolina, headquarters, including
officers, managers, and support staff. Another 30 salaried and 340 hourly people are
employed at production facilities in Haskell, California, and Florence, Texas. The company
also is considering new factories in Canada and Australia.
SWL maintains a Web site with information about the company and its products. SWL’s Web
site features text, graphics, and audio and allows customers to send e-mail, order products from
the SoftWear catalog, and request special promotional items, including beach umbrellas, hats,
and T-shirts customized with the purchaser’s logo. SWL also is studying other ways to use the
Internet to boost product sales and expand its marketing efforts, including a special European
promotion designed to increase awareness of SWL’s Web site.
Organization
SWL’s headquarters includes the executive, operations, marketing, finance, and human
resources departments. Figure 1-38 shows the organization chart of the management posi-
tions within SWL. Notice that the director of information technology, Ann Hon, reports
to Michael Jeremy, vice president of finance. The director of the payroll department, Amy
Calico, also reports to Mr. Jeremy.
FIGURE 1-38 Organization chart of SoftWear, Limited.

48 Chapter Capstone Case: SoftWear, Limited
Chapter 1 Introduction to Systems Analysis and Design
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
The IT department includes Ann Hon, the director; Jane Rossman, the systems support
manager; Zachary Ridgefield, the user support manager; and Ella Trung, the Web support
manager. Figure 1-39 shows the organization of the IT department. At SWL, the systems
support group also handles new systems development, network administration, and
database administration.
Director
Information Technology
Ann Hon
Manager
Systems Support and Security
Jane Rossman
Manager
User Support
Zachary Ridgefield
Manager
Web Support
Ella Trung
User Support
Specialist
Hana Rose
Web Support
Specialist
Emma Nelle
Database
Administrator
Mills Jacob
Network
Administrator
Sara M~y
Systems Analysts (2)
Programmers (2)
FIGURE 1-39 Organization chart of the IT department of SoftWear, Limited.
Systems analysts and programmers report to Jane Rossman, systems support manager.
Systems analysts primarily analyze and design information systems. Programmers
primarily develop, test, and implement code necessary for systems development, enhance-
ments, and maintenance. In addition to the current staff, SWL is planning to hire a
programmer-analyst who will divide his or her time between systems analysis and
programming duties.
The technical support staff members are responsible for the system software on all
SWL computers. They also provide technical advice and guidance to the other groups
within the IT department.
The operations staff is responsible for centralized IT functions, including SWL’s
mainframe computer, and provides network and database administration.
Current Systems
SWL uses a manufacturing and inventory control system at its factories, but the
system does not exchange data with SWL’s suppliers at this time. The company’s sales
processing system handles online and catalog transactions, and produces sales reports.
The marketing staff, however, wants even more information about sales trends and
marketing analysis data. A company intranet connects employees at all locations,
and provides e-mail, shared calendars, and a document library. Most administrative
employees have workstations with Microsoft Office applications, but SWL has not
provided company-wide training or help desk support.

49
Phase 1 Systems Planning
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
SWL Team Tasks
1. Write an employment advertisement for a new systems analyst position at SWL. Perform
Internet research to locate examples of advertisements for systems analysts, and consider
SWL’s business profile when you write the advertisement.
2. Should SWL consider any of the following systems: ERP, business support, or knowledge
management? Why or why not?
3. What opportunities might SWL have for Web-based B2B transactions in the future?
4. Should SWL consider ways to increase a sense of empowerment among its employees?
Why or why not? Could user productivity software play a role in that effort? How?
Manage the SWL Project
You have been asked to manage SWL’s new information system project. One of your
most important activities will be to identify project tasks and determine when they will be
performed. Before you begin, you should review the SWL case in this chapter. Then list and
analyze the tasks, as follows:
LIST THE TASKS Start by listing and numbering at least 10 tasks that the SWL team needs
to perform to fulfill the objectives of this chapter. Your list can include SWL Team Tasks
and any other tasks that are described in this chapter. For example, Task 3 might be to
Draw an SWL organization chart, and Task 6 might be to Identify the various levels of
SWL management.
ANALYZE THE TASKS Now study the tasks to determine the order in which they should be
performed. First identify all concurrent tasks, which are not dependent on other tasks. In
the example shown in Figure 1-40, Tasks 1, 2, 3, 4, and 5 are concurrent tasks, and could
begin at the same time if resources were available.
Other tasks are called dependent tasks, because they cannot be performed until one or
more earlier tasks have been completed. For each dependent task, you must identify specific
tasks that need to be completed before this task can begin. For example, you would want an
organization chart to help you identify the management levels, so Task 6 cannot begin until
Task 3 is completed, as Figure 1-40 shows.
FIGURE 1-40 Tasks 1, 2, 3, 4, and 5 are concurrent tasks that could be performed at the same
time. Task 6 is a dependent task that cannot be performed until Task 3 has been completed.
Chapter 3 describes project management tools, techniques, and software. To learn more,
you can use the Features section on your Student Study Tool CD-ROM, or visit the
Management Information Systems CourseMate Web site at www.cengagebrain.com and
locate the project management resources library for this book. On the Web, Microsoft offers
demo versions, training, and tips for using Project 2010. You also can visit the
OpenWorkbench.org site to learn more about this free, open-source software.

www.cengagebrain.com

50
Chapter 1 Introduction to Systems Analysis and Design
Ready for a Challenge?
Ready for a Challenge?
You are a summer intern in the IT department at Game Technology. You report to
the IT director, Mike McGee. Mike assigned you to work with two systems analysts:
Lauren Jacksina and Cathy Ross. Lauren and Cathy both report to Felesia Stukes,
manager — IT development, who reports to Mike. Joe Turner, manager — IT opera-
tions also reports to Mike. Dawn Rountree, database administrator, and Greg Wade,
network administrator, report to Joe.
As an intern, you are expected to keep a journal to record your day-to-day experiences
and things you learn. This week, you need to list some characteristics of various systems
development methods used by the IT team. Your journal should include the following topics:
• Which development method relies heavily on written documentation?
• Which development method depicts system actors using diagrams?
• Which development method uses a spiral model?
Practice Tasks
A. Draw an organization chart showing all IT department positions, You can use
Microsoft Word or a similar program, or you can draw it by hand. In Word 2010 and
Word 2007, click the Insert tab on the Ribbon, then click Smart Art, then Hierarchy.
B. Write a journal entry that answers the questions about development methods.
After you complete the Practice Tasks, to check your work and view sample answers,
visit the Management Information Systems CourseMate Web site at www.cengagebrain.
com, navigate to the resources for this chapter, and locate Ready for a Challenge?.
The Challenge
Three weeks ago, Mike McGee left to join a larger company, and management decided to
reorganize the IT department. Felesia Stukes was promoted to IT director, and to save
money, her old job was eliminated. You, Lauren, Cathy, and Joe will report to her. The rest
of the team is unchanged, except that a new programmer, Annie Edenton, has been hired,
reporting to Dawn Rountree. Dawn’s title has been changed to data design specialist.
To update your journal, you need to add three more pieces of information:
• Which development method uses a five-phase model?
• Which development method stresses intense team-based efforts?
• Which development method uses a waterfall model?
Challenge Tasks
A. Draw a new organization chart showing the changes, with full names and titles.
B. Write a journal entry that answers the new questions about development methods.
In additional to technical skills, IT professionals need critical thinking skills such as perception, organization, analysis,
problem-solving, and decision-making. The Ready for a Challenge feature can help you learn, practice, and apply
critical thinking skills that you can take to the workplace.

www.cengagebrain.com

www.cengagebrain.com

This page intentionally left blank

Chapter 2 explains how to analyze a business case. This
chapter also explains why it is important to understand
business operations and requirements, how IT projects
support a company’s overall strategic plan, how systems
projects get started, and how systems analysts conduct a
preliminary investigation and feasibility study.
Analyzing the
Business Case
CHAPTER
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Explain the concept of a business case and
how a business case affects an IT project
• Describe the strategic planning process and
why it is important to the IT team
• Conduct a SWOT analysis and describe the
four factors involved
• Explain the purpose of a mission statement
• Explain how the SDLC serves as a frame-
work for systems development
• List reasons for systems projects and factors
that affect such projects
• Describe systems requests and the role of the
systems review committee
• Define operational, technical, economic, and
schedule feasibility
• Describe the steps and the end product of a
preliminary investigation
INTRODUCTION
During the systems planning phase, the IT team
reviews a proposal to determine if it presents a
strong business case. The term business case refers
to the reasons, or justification, for a proposal. A
strong business case suggests that the company
should pursue the alternative, above other options,
because it would be in the firm’s best interest to do
so. To analyze the business case for a specific pro-
posal, the analyst must consider the company’s
overall mission, objectives, and IT needs.
This chapter begins with a discussion of strategic
planning, because the IT team must understand, sup-
port, and help plan long-term strategic goals. Along
with financial, marketing, and human resources,
companies need information technology to achieve
growth and success.
Systems development typically starts with a sys-
tems request, followed by a preliminary investiga-
tion, which includes a feasibility study. You will
learn how systems requests originate, how they are
evaluated, and how to conduct a preliminary inves-
tigation. You also will learn about fact-finding
techniques that begin at this point and carry over
into later development phases. Finally, you will
examine the report to management, which con-
cludes the systems planning phase.
2
Chapter 2 Analyzing the Business Case

FIGURE 2-1 Typical business case analysis task list.
Introduction
CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Wendy Lee, manager of college services at Mountain View College, wants
a new information system that will improve efficiency and service at the three college
bookstores.
In this part of the case, Tina Allen (systems analyst) and David Conroe (student intern) are
talking about justification for the new system and the project’s feasibility.
Participants: Tina and David
Location: Mountain View College cafeteria, Tuesday afternoon, September 6, 2011.
Project status: Tina has received a systems request from Wendy Lee for a new bookstore
information system.
Discussion topics: Analysis of business justification and project feasibility
Tina: Hi, David. Are you ready to get started?
David: Sure. What’s our next step?
Tina: Well, when we analyze a specific systems request, we need to see how the proposal fits into the overall
picture at the college. In other words, we have to analyze the business case for the request.
David: What’s a business case?
Tina: A business case is the justification for a project. A strong business case means that a proposal will add
substantial value to the organization and support our strategic plan.
David: What’s a strategic plan?
Tina: A strategic plan is like a road map for the future. Without a long-range plan, it’s hard to know if you’re
heading in the right direction. Our plan starts with a mission statement, which reflects our purpose, our
vision, and our values.
David: I see what you mean. I read the mission statement this morning. It says that we will strive to be an efficient,
customer-friendly bookstore that uses a mix of interpersonal skills and technology to serve our students and
support the overall objectives of the college. That says a lot in just one sentence.
Tina: It sure does. Now, let’s get to the specifics. I just received a systems request from the college business
manager. She wants us to develop a new information system for the bookstore.
David: Do we have a green light to get started?
Tina: Yes and no. Mountain View College doesn’t have a formal procedure for evaluating IT requests, and we
don’t have a systems review committee. Maybe that’s something we should consider for the future.
Meanwhile, we need to conduct a preliminary investigation to see whether this request is feasible.
David: What do you mean by “feasible”?
Tina: To see if a systems request is feasible, we have to look at four separate yardsticks: operational feasibility,
technical feasibility, economic feasibility, and schedule feasibility. If the request passes all the tests, we
continue working on the system. If not, we stop.
David: How will we know if the request passes the tests?
Tina: That’s our next step. Here’s a task list to get us started:
Phase 1 Systems Planning
53

54
STRATEGIC PLANNING — A FRAMEWORK FOR IT SYSTEMS
DEVELOPMENT
Companies develop and maintain IT systems to support their current and future business
operations. Some IT needs are immediate, such as fixing a logic problem in a payroll
system. Other needs might be on the horizon, such as planning IT support for a new
factory, a future merger, or a corporate restructuring. In most companies, the IT team
reviews each IT-related proposal, project, and systems request to determine if it presents
a strong business case, or justification.
Most successful IT managers engage in long-range planning, even as they handle day-
to-day maintenance and support. To carry out this task effectively, they must understand
and participate in the firm’s strategic planning process. Strategic planning is the process
of identifying long-term organizational goals, strategies, and resources. Strategic plan-
ning looks beyond day-to-day activities and focuses on a horizon that is 3, 5, 10, or
more years in the future.
Strategic Planning Overview
Why does a systems analyst need to know about strategic planning? The answer might
be found in an old story about two stonecutters who were hard at work when a pass-
erby asked them what they were doing. “I am cutting stones,” said the first worker.
The second worker replied, “I am building a cathedral.” So it is with information tech-
nology: One analyst might say, “I am using a CASE tool,” whereas another might say,
“I am helping the company succeed in a major new business venture.” Systems ana-
lysts should focus on the larger, strategic role of IT as they carry out their day-to-day
responsibilities.
Strategic planning starts with a management review called a SWOT analysis. The let-
ters stand for strengths, weaknesses, opportunities, and threats. A SWOT analysis usu-
ally starts with a broad overview. The first step is for top management to respond to
questions like these:
• What are our strengths, and how
can we use them to achieve our
business goals?
• What are our weaknesses, and how
can we reduce or eliminate them?
• What are our opportunities, and
how do we plan to take advantage
of them?
• What are our threats, and how can
we assess, manage, and respond to
the possible risks?
A SWOT analysis is a solid founda-
tion for the strategic planning process,
because it examines a firm’s technical,
human, and financial resources. In
Figure 2-2, the bulleted lists show sam-
ples of typical strengths, weaknesses,
opportunities, and threats.
As the SWOT process continues,
management reviews specific resources
and business operations. For example,
Chapter 2 Analyzing the Business Case
Strategic Planning — A Framework for IT Systems Development
To learn more about
strategic planning,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Strategic
Planning link.
FIGURE 2-2 A SWOT analysis might produce results similar to those shown here.
WEAKNESSES
• Still using several legacy
systems
• Budget increase was turned
down
• Documentation needs updating
STRENGTHS
• Excellent Web design staff
• Low systems analyst
turnover
• Recently upgraded network
OPPORTUNITIES
• Well-positioned for expansion
• Can be first with new
software
• High potential for B2B
growth
THREATS
• Aggressive new Web
competition
• Impact of new FCC rules
• Other firms offer better
benefits

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Strategic Planning — A Framework for IT Systems Development
There is no standard approach to strategic planning. Some managers believe that a
firm’s mission statement should contain an inspirational message to its stakeholders.
Others feel that unless a firm starts with a realistic SWOT assessment, it might develop a
mission statement that is unachievable. The majority of companies view the strategic
planning process as a dynamic interaction, similar to the diagram in Figure 2-4, where
the company’s mission statement reflects a long-term horizon, but sets forth goals that
are achievable and consistent with real-world conditions. Figure 2-5 on the next page
shows how purpose, vision, and values are revealed in one company’s Web site.
55
FIGURE 2-3 Sample SWOT analysis of a specific asset, such as a patent.
SWOT ANALYSIS
Strength Our patent covers valuable technology that we can use in many popular
products.
Weakness Our patent, like every patent, has a limited life, and when it expires, the
technology will no longer be protected.
Opportunity We might be able to use the patented technology in more products, license it
to other firms, or expand our research to develop new patents based on the
original technology.
Threat There is a chance that a competitor will develop technology that is similar to
ours, but does not technically infringe upon our patent.
US
PATENT
# 1234567890
US
PATENT
# 1234567890
FIGURE 2-4 Strategic planning is a dynamic process that identifies specific goals and objectives that
support the company’s mission.
Purpose
Goals and
Objectives
Business
Results
Stakeholders
Vision
Values
SWOT
Analysis
Mission
Statement
IT Resources
Human Resources
Financial Resources
Other Resources
suppose that during a SWOT analysis, a firm studies an important patent that the
company owns. The patent review might generate input like the examples shown in
Figure 2-3.
Phase 1 Systems Planning

56 Strategic Planning — A Framework for IT Systems Development
FIGURE 2-5 PepsiCo’s Web site presents a combination of values, mission, and vision.
A mission statement is just the starting point. Next, the company identifies a set of goals
that will accomplish the mission. For example, the company might establish one-year, three-
year, and five-year goals for expanding market share. To achieve those goals, the company
develops a list of shorter-term objectives. For example, if a goal is to increase Web-based
orders by 30% next year, a company might set quarterly objectives with monthly mile-
stones. Objectives also might include tactical plans, such as creating a new Web site and
training a special customer support group to answer e-mail inquiries. Finally, the objectives
translate into day-to-day business operations, supported by IT and other corporate
resources. The outcome is a set of business results that affect company stakeholders.
To learn more about
mission statements,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Mission
Statements link.
CASE IN POINT 2.1: LO CARB MEALS
Lo Carb is a successful new company that has published several cookbooks, and marketed its
own line of low-carbohydrate meals. Joe Turner, Lo Carb’s president, has asked your opinion.
He wants to know whether a mission statement really is necessary. After you review the
chapter material, write a brief memo with your views. Be sure to include good (and not-so-
good) examples of actual mission statements that you find on the Web.
Chapter 2 Analyzing the Business Case

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Strategic Planning — A Framework for IT Systems Development 57
A CASE Tool Example
You are a systems analyst working for Sally, the IT manager for a large hotel chain. Sally
is working with top management to develop a strategic plan, and she asked you to assist
her. The plan will guide future company goals and objectives, including IT projects.
Sally has experience with the Visible Analyst CASE tool, but she has never used it for
strategic planning, so she asked you to do some research. First, you navigate to the stra-
tegic planning section, where you can enter planning statements such as assumptions,
goals, objectives, critical success factors, and others. Planning statements also can docu-
ment strengths, weaknesses, opportunities, and threats, as shown in Figure 2-6. After
you visit the Help section to learn more about the strategic planning features, you feel
confident that you can work effectively with this powerful tool.
When you present your results to Sally, she seems pleased. Because the term is new to
you, you ask her what critical success factors are, and she replies that critical success
factors are vital objectives that must be achieved for the company to fulfill its mission.
FIGURE 2-6 The Visible Analyst CASE tool supports strategic planning and allows a user to enter many kinds of
information. Notice the four SWOT categories in the list.
Phase 1 Systems Planning

58
The Role of the IT Department in Project Evaluation
Management leadership and information technology are linked closely, and remarkable
changes have occurred in both areas. Ten years ago, a typical IT department handled all
aspects of systems development and consulted users only when, and if, the department
wanted user input. Today, systems development is much more team-oriented. New
approaches to systems development, such as joint application development (JAD) and
rapid application development (RAD), typically involve groups of users, managers, and
IT staff working together right from the start.
Although team-oriented development is the norm, some companies see the role of the
IT department as a gatekeeper, responsible for screening and evaluating systems requests.
Should the IT department perform the initial evaluation, or should a cross-functional
team do it? The answer depends on the company’s size and organization, and whether IT
is tightly integrated into business operations. In smaller companies or firms where only
one person has IT skills, that person acts as a coordinator and consults closely with
users and managers to evaluate systems requests. Larger firms are more likely to use an
evaluation team or systems review committee.
The Future
If you could look into the future, here is what you might see: new industries, products,
and services emerging from amazing advances in information technology, customers
who expect world-class IT support, a surge in Internet-based commerce, and a global
business environment that is dynamic and incredibly challenging. To some firms, these
changes will be threatening; other companies will see opportunities and take advantage
of them by creating and following a strategic plan.
What Is a Business Case?
CASE IN POINT 2.2: ATTAWAY AIRLINES, PART ONE
You are the IT director at Attaway Airlines, a small regional air carrier. You chair the company’s
systems review committee, and you currently are dealing with strong disagreements about two
key projects. Dan Esposito, the marketing manager, says it is vital to have a new computerized
reservation system that can provide better customer service and reduce operational costs.
Molly Kinnon, vice president of finance, is equally adamant that a new accounting system is
needed immediately, because it will be very expensive to adjust the current system to new fed-
eral reporting requirements. Molly outranks Dan, and she is your boss. The next meeting, which
promises to be a real showdown, is set for 9:00 a.m. tomorrow. How will you prepare for the
meeting? What questions and issues should be discussed?
WHAT IS A BUSINESS CASE?
As mentioned earlier, the term business case refers to the reasons, or justification, for a
proposal. A business case should be comprehensive, yet easy to understand. It should
describe the project clearly, provide the justification to proceed, and estimate the project’s
financial impact. ProSci’s BPR Online Learning Center, as shown in Figure 2-7, offers a
Business Case Tutorial Series. According to ProSci, the business case should answer ques-
tions such as the following:
• Why are we doing this project?
• What is the project about?
• How does this solution address key business issues?
Chapter 2 Analyzing the Business Case

Information Systems Projects
• How much will it cost and how
long will it take?
• Will we suffer a productivity loss
during the transition?
• What is the return on investment
and payback period?
• What are the risks of doing the
project? What are the risks of not
doing the project?
• How will we measure success?
• What alternatives exist?
INFORMATION SYSTEMS
PROJECTS
This section discusses reasons for systems
projects and the internal and external
factors that affect systems projects. The section also includes a preview of project man-
agement, which is discussed in detail in Chapter 3.
Main Reasons for Systems Projects
The starting point for most projects is called a systems request, which is a formal way of
asking for IT support. A systems request might propose enhancements for an existing sys-
tem, the correction of problems, the replacement of an older system, or the development
of an entirely new information system that is needed to support a company’s current and
future business needs.
As Figure 2-8 shows, the main reasons for systems requests are improved service to
customers, better performance, support for new products and services, more informa-
tion, stronger controls, and reduced cost.
59
FIGURE 2-7 ProSci’s BPR Online Learning Center offers a Business Case
Tutorial Series that focuses on how to write a business case.
FIGURE 2-8 Six main reasons for systems requests.
Improved Service
Better Performance
More Information
Support for New
Products and Services
Stronger Controls
Reduced Cost
Systems
Request
Phase 1 Systems Planning

60 Information Systems Projects
IMPROVED SERVICE Systems requests often are aimed at improving service to custom-
ers or users within the company. Allowing mutual fund investors to check their account
balances on a Web site, storing data on rental car customer preferences, or creating an
online college registration system are examples that provide valuable services and
increased customer satisfaction.
SUPPORT FOR NEW PRODUCTS AND SERVICES New products and services often
require new types or levels of IT support. For example, a software vendor might offer
an automatic upgrade service for subscribers; or a package delivery company might add
a special service for RFID-tagged shipments. In situations like these, it is most likely
that additional IT support will be required. At the other end of the spectrum, product
obsolescence can also be an important factor in IT planning. As new products enter the
marketplace, vendors often announce that they will no longer provide support for older
versions. A lack of vendor support would be an important consideration in deciding
whether or not to upgrade.
BETTER PERFORMANCE The current system might not meet performance requirements.
For example, it might respond slowly to data inquiries at certain times, or it might be
unable to support company growth. Performance limitations also result when a system
that was designed for a specific hardware configuration becomes obsolete when new
hardware is introduced.
MORE INFORMATION The system might produce information that is insufficient,
incomplete, or unable to support the company’s changing information needs. For exam-
ple, a system that tracks customer orders might not be capable of analyzing and pre-
dicting marketing trends. In the face of intense competition and rapid product develop-
ment cycles, managers need the best possible information to make major decisions on
planning, designing, and marketing new products and services.
STRONGER CONTROLS A system must have effective
controls to ensure that data is secure and accurate.
Some common security controls include passwords,
various levels of user access, and encryption, or coding
of data to keep it safe from unauthorized users.
Hardware-based security controls include biometric
devices that can identify a person by a retina scan or
by mapping a facial pattern. A new biometric tool
scans hands, rather than faces. The technology uses
infrared scanners that create images with thousands of
measurements of hand and finger characteristics, as
shown in Figure 2-9.
In addition to being secure, data also must be accu-
rate. Controls should minimize data entry errors when-
ever possible. For example, if a user enters an invalid
customer number, the order processing system should
reject the entry immediately and prompt the user to
enter a valid number. Data entry controls must be effec-
tive without being excessive. If a system requires users to
confirm every item with an “Are you sure? Y/N” message, internal users and customers
might complain that the system is not user-friendly.
To learn more about
biometric devices,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Biometric
Devices link.
FIGURE 2-9 Students at West Virginia University use a hand
scanning device to identify themselves.
Chapter 2 Analyzing the Business Case

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Information Systems Projects 61
REDUCED COST The current system could be expensive to operate or maintain as a
result of technical problems, design weaknesses, or the changing demands of the busi-
ness. It might be possible to adapt the system to newer technology or upgrade it. On
the other hand, cost-benefit analysis might show that a new system would be more cost
effective and provide better support for long-term objectives.
CASE IN POINT 2.3: TRENT COLLEGE
Trent College is a private school in a small Maryland town. The college has outgrown its
computerized registration system and is considering a new system. Althea Riddick, the col-
lege president, has asked you to list the reasons for systems projects, which are described on
pages 59–61, and assign a relative weight to each reason, using a scale of 1 – 10, low to high.
She said to use your best judgment, and support your conclusions in a brief memo to her.
She also wants you to create a Microsoft Excel spreadsheet that will calculate the weighted
values automatically for each reason.
Factors that Affect Systems Projects
Internal and external factors affect every business decision that a company makes, and
IT systems projects are no exception. Figure 2-10 shows the main internal and external
factors.
FIGURE 2-10 Internal and external factors that affect IT systems projects.
Strategic Plan
Top Managers
User Requests
Information
Technology
Department
Existing Systems
and Data
Government
The Economy
Competitors
Customers
Suppliers
Technology
Phase 1 Systems Planning

62 Information Systems Projects
Internal Factors
Internal factors include the strategic plan, top managers, user requests, information
technology department, and existing systems and data.
STRATEGIC PLAN A company’s strategic plan sets the overall direction for the firm
and has an important impact on IT projects. Company goals and objectives that need
IT support will generate systems requests and influence IT priorities. A strategic plan
that stresses technology tends to create a favorable climate for IT projects that extends
throughout the organization.
TOP MANAGERS Directives from top managers are a prime source of large-scale sys-
tems projects. Those directives often result from strategic business decisions that
require new IT systems, more information for decision making, or better support for
mission-critical information systems.
USER REQUESTS As users rely more heavily on information systems to perform their
jobs, they are likely to request even more IT services and support. For example, sales
reps might request improvements to the company’s Web site, a more powerful sales
analysis report, a network to link all sales locations, or an online system that allows
customers to obtain the status of their orders instantly. Or, users might not be satisfied
with the current system because it is difficult to learn or lacks flexibility. They might
want information systems support for business requirements that did not even exist
when the system was developed.
INFORMATION TECHNOLOGY DEPARTMENT Many systems project requests come
from the IT department. IT staff members often make recommendations based on
their knowledge of business operations and technology trends. IT proposals might be
strictly technical matters, such as replacement of certain network components, or sug-
gestions might be more business oriented, such as proposing a new reporting or data
collection system.
EXISTING SYSTEMS AND DATA Errors or problems in existing systems can trigger
requests for systems projects. When dealing with older systems, analysts sometimes spend
too much time reacting to day-to-day problems without looking at underlying causes. This
approach can turn an information system into a patchwork of corrections and changes that
cannot support the company’s overall business needs. This problem typically occurs with
legacy systems, which are older systems that are less technologically advanced. When
migrating to a new system, IT planners must plan the conversion of existing data, which is
described in detail in Chapter 11, Managing Systems Implementation.
External Factors
External factors include technology, suppliers, customers, competitors, the economy, and
government.
TECHNOLOGY Changing technology is a major force affecting business and society in
general. For example, the rapid growth of telecommunications has created entire new
industries and technologies. Technology also dramatically reshapes existing business
operations. The success of scanner technology resulted in universal bar coding that now
affects virtually all products.
Some industry experts predict that bar code technology will be overshadowed in the
future by electronic product code (EPC) technology that uses RFID tags to identify and
monitor the movement of each individual product, from the factory floor to the retail
checkout counter.
To learn more about
JIT systems, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the JIT
Systems link.
Chapter 2 Analyzing the Business Case

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Information Systems Projects
SUPPLIERS With the growth of elec-
tronic data interchange (EDI), rela-
tionships with suppliers are critically
important. For example, an automo-
bile company might require that sup-
pliers code their parts in a certain
manner to match the auto company’s
inventory control system. EDI also
enables just-in-time (JIT) inventory
systems, as shown in Figure 2-11,
which rely on computer-to-computer
data exchange to minimize unneces-
sary inventory. The purpose of a JIT
system is to provide the right prod-
uct at the right place at the right
time.
CUSTOMERS Customers are
vitally important to any business.
Information systems that interact
with customers usually receive top
priority. Many companies implement customer rela-
tionship management (CRM) systems that integrate
all customer-related events and transactions, includ-
ing marketing, sales, and customer service activities.
Vendor-oriented CRM systems often interconnect
with supplier relationship management (SRM) sys-
tems, which were discussed in Chapter 1. CRM com-
ponents can provide automated responses to sales
inquiries, Web-based order processing, and online
inventory tracking. Because an efficient warehouse is
just as important as a successful Web site, suppliers
use smart forklifts that can read RFID tags or UPC
numbers and transmit data to a CRM system, as
shown in Figure 2-12.
One of the newest RFID applications is called elec-
tronic proof of delivery (EPOD). Using EPOD, a sup-
plier uses RFID tags on each crate, case, or shipping
unit to create a digital shipping list. The customer
receives the list and scans the incoming shipment. If a
discrepancy is detected, it is reported and adjusted
automatically. Because they would be expensive to
investigate manually, small shipping inconsistencies
might not otherwise be traced. This is an example of
technology-related cost control.
COMPETITORS Competition drives many information
systems decisions. For example, if one cellular telephone
provider offers a new type of digital service, other firms
must match the plan in order to remain competitive.
New product research and development, marketing,
sales, and service all require IT support.
63
FIGURE 2-11 Just-in-time (JIT) inventory systems rely on computer-to-computer
data exchange to minimize unnecessary inventory.
FIGURE 2-12 In an efficient warehouse, smart forklifts can
read RFID tags or UPC numbers and transmit data to a CRM
system.
Phase 1 Systems Planning

64
THE ECONOMY Economic activity has a powerful influence on corporate information
management. In a period of economic expansion, firms need to be ready with scalable
systems that can handle additional volume and growth. Predicting the business cycle is
not an exact science, and careful research and planning is critically important.
GOVERNMENT Federal, state, and local government regulations affect the design of
corporate information systems. For example, income tax reporting requirements must
be designed into a payroll package. The debate about Internet sales tax issues could pro-
foundly affect e-commerce, as well as traditional retail businesses.
Project Management
As mentioned earlier, business case analysis involves consideration of project rea-
sons, costs, benefits, and risks. At the end of the preliminary investigation, if the
project is approved, it can be planned, scheduled, monitored and controlled, and
reported upon. Individual analysts or IT staff members often handle small projects,
but companies usually designate a project manager to coordinate the overall effort
for complex projects.
In Chapter 3, you will study project management concepts, skills, tools, and
techniques. You also will learn about project risk management, and how to perform
the following tasks:
• Develop a project risk management plan
• Identify the risks
• Analyze the risks
• Create a risk response plan
• Monitor and respond to risks
Figure 2-13 shows the latest version of Microsoft Project, a popular project management
tool. Using this program, a project manager can define project tasks, list activities and partic-
ipants, plan the sequence of work, estimate milestone dates, and track costs.
Information Systems Projects
VIDEO
LEARNING
SESSIONS
To learn more
about project
management, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate
to the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.
FIGURE 2-13 Microsoft Project is a powerful, popular software tool for project management.
Chapter 2 Analyzing the Business Case
To learn more about
CRM systems, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the CRM
Systems link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Evaluation of Systems Requests
EVALUATION OF SYSTEMS REQUESTS
In most organizations, the IT department receives more systems requests than it can
handle. Many organizations assign responsibility for evaluating systems requests to a
group of key managers and users. Many companies call this group a systems review
committee or a computer resources committee. Regardless of the name, the objective is
to use the combined judgment and experience of several managers to evaluate systems
projects.
Systems Request Forms
Many organizations use a special form for systems requests, similar to the online sample
shown in Figure 2-14. A properly designed form streamlines the request process and
ensures consistency. The form must be easy to understand and include clear instructions.
It should include enough space for all required information and should indicate what
supporting documents are needed. Many companies use online systems request forms
that can be filled in and submitted electronically.
When a systems request form is received, a systems analyst or IT manager examines
it to determine what IT resources are required for the preliminary investigation. A desig-
nated person or a committee then decides whether to proceed with a preliminary investi-
gation. Occasionally a situation will arise that requires an immediate response. For
example, if the problem involves a mission-critical system, an IT maintenance team
would attempt to restore normal operations. When the system is functioning properly,
the team conducts a review and prepares a systems request to cover the work that was
performed.
65
FIGURE 2-14 Example of an online systems request form.
Phase 1 Systems Planning

66 Overview of Feasibility
Systems Review Committee
Most large companies use a systems review committee to evaluate systems requests.
Instead of relying on a single individual, a committee approach provides a variety of expe-
rience and knowledge. With a broader viewpoint, a committee can establish priorities
more effectively than an individual, and one person’s bias is less likely to affect the deci-
sions. A typical committee consists of the IT director and several managers from other
departments. The IT director usually serves as a technical consultant to ensure that com-
mittee members are aware of crucial issues, problems, and opportunities.
Although a committee offers many advantages, some disadvantages exist. For
example, action on requests must wait until the committee meets. To avoid delay,
committee members typically use e-mail and teleconferencing to communicate.
Another potential disadvantage of a committee is that members might favor projects
requested by their own departments, and internal political differences could delay
important decisions.
Many smaller companies rely on one person to evaluate system requests instead of a
committee. If only one person has the necessary IT skills and experience, that person
must consult closely with users and managers throughout the company to ensure that
business and operational needs are considered carefully.
Whether one person or a committee is responsible, the goal is to evaluate the requests
and set priorities. Suppose four requests must be reviewed: the marketing group wants to
analyze current customer spending habits and forecast future trends; the technical support
group wants a cellular link so service representatives can download technical data instantly;
the accounting department wants to redesign customer statements and allow Internet access;
and the production staff wants an inventory control system that can exchange data with
major suppliers. Which projects should the firm pursue? What criteria should be applied?
How should priorities be determined? To answer those questions, the individual or the
committee must assess the feasibility of each request.
OVERVIEW OF FEASIBILITY
As you learned in Chapter 1,
a systems request must pass
several tests, called a feasibility
study, to see whether it is
worthwhile to proceed further.
As shown in Figure 2-15,
a feasibility study uses four
main yardsticks to measure a
proposal: operational feasibil-
ity, technical feasibility, eco-
nomic feasibility, and schedule
feasibility.
Sometimes a feasibility
study is quite simple and
can be done in a few hours.
If the request involves a new
system or a major change,
however, extensive fact-find-
ing and investigation is
required.
How much effort needs
to go into a feasibility
study? That depends on the
FIGURE 2-15 A feasibility study includes tests for operational, techni-
cal, economic, and schedule feasibility.
Economic
Feasibility Operational
Feasibility
Schedule
Feasibility
Technical
Feasibility
Feasibility
Chapter 2 Analyzing the Business Case

Overview of Feasibility
request. For example, if a department wants an existing report sorted in a different
order, the analyst can decide quickly whether the request is feasible. On the other
hand, a proposal by the marketing department for a new market research system to
predict sales trends requires more effort. In both cases, the systems analyst asks these
important questions:
• Is the proposal desirable in an operational sense? Is it a practical approach that will
solve a problem or take advantage of an opportunity to achieve company goals?
• Is the proposal technically feasible? Are the necessary technical resources and
people available for the project?
• Is the proposal economically desirable? What are the projected savings and costs? Are
other intangible factors involved, such as customer satisfaction or company image? Is
the problem worth solving, and will the request result in a sound business invest-
ment?
• Can the proposal be accomplished within an acceptable time frame?
To obtain more information about a systems request, you might perform initial fact-
finding by studying organization charts, performing interviews, reviewing current docu-
mentation, observing operations, and surveying users. If the systems request is approved,
more intensive fact-finding will continue during the systems analysis phase.
Operational Feasibility
Operational feasibility means that a proposed system will be used effectively after it has
been developed. If users have difficulty with a new system, it will not produce the
expected benefits. Operational feasibility depends on several vital issues. For example,
consider the following questions:
• Does management support the project? Do users support the project? Is the cur-
rent system well liked and effectively used? Do users see the need for change?
• Will the new system result in a workforce reduction? If so, what will happen to
affected employees?
• Will the new system require training for users? If so, is the company prepared to
provide the necessary resources for training current employees?
• Will users be involved in planning the new system right from the start?
• Will the new system place any new demands on users or require any operating
changes? For example, will any information be less accessible or produced less
frequently? Will performance decline in any way? If so, will an overall gain to the
organization outweigh individual losses?
• Will customers experience adverse effects in any way, either temporarily or per-
manently?
• Will any risk to the company’s image or goodwill result?
• Does the development schedule conflict with other company priorities?
• Do legal or ethical issues need to be considered?
Technical Feasibility
Technical feasibility refers to the technical resources needed to develop, purchase, install,
or operate the system. When assessing technical feasibility, an analyst must consider the
following points:
• Does the company have the necessary hardware, software, and network
resources? If not, can those resources be acquired without difficulty?
67
Phase 1 Systems Planning

68
• Does the company have the needed technical expertise? If not, can it be acquired?
• Does the proposed platform have sufficient capacity for future needs? If not, can
it be expanded?
• Will a prototype be required?
• Will the hardware and software environment be reliable? Will it integrate with
other company information systems, both now and in the future? Will it interface
properly with external systems operated by customers and suppliers?
• Will the combination of hardware and software supply adequate performance?
Do clear expectations and performance specifications exist?
• Will the system be able to handle future transaction volume and company growth?
Economic Feasibility
Economic feasibility means that the projected benefits of the proposed system outweigh
the estimated costs usually considered the total cost of ownership (TCO), which includes
ongoing support and maintenance costs, as well as acquisition costs. To determine TCO,
the analyst must estimate costs in each of the following areas:
• People, including IT staff and users
• Hardware and equipment
• Software, including in-house development as well as purchases from vendors
• Formal and informal training
• Licenses and fees
• Consulting expenses
• Facility costs
• The estimated cost of not developing the system or postponing the project
In addition to costs, you need to assess tangible and intangible benefits to the company.
The systems review committee will use those figures, along with your cost estimates, to
decide whether to pursue the project beyond the preliminary investigation phase.
Tangible benefits are benefits that can be measured in dollars. Tangible benefits result
from a decrease in expenses, an increase in revenues, or both. Examples of tangible ben-
efits include the following:
• A new scheduling system that reduces overtime
• An online package tracking system that improves service and decreases the need
for clerical staff
• A sophisticated inventory control system that cuts excess inventory and elimi-
nates production delays
Intangible benefits are advantages that are difficult to measure in dollars but are
important to the company. Examples of intangible benefits include the following:
• A user-friendly system that improves employee job satisfaction
• A sales tracking system that supplies better information for marketing decisions
• A new Web site that enhances the company’s image
You also must consider the development timetable, because some benefits might
occur as soon as the system is operational, but others might not take place until later.
Overview of Feasibility
To learn more about
TCO, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the TCO link.
TOOLKIT TIME
The Financial
Analysis tools in
Part C of the
Systems Analyst’s
Toolkit can help you
analyze project
costs, benefits, and
economic feasibility.
To learn more about
these tools, turn to
Part C of the four-
part Toolkit that fol-
lows Chapter 12.
Chapter 2 Analyzing the Business Case
VIDEO
LEARNING
SESSIONS
To learn more about
financial tools, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate
to the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Setting Priorities
Schedule Feasibility
Schedule feasibility means that a project can be implemented in an acceptable time
frame. When assessing schedule feasibility, a systems analyst must consider the interac-
tion between time and costs. For example, speeding up a project schedule might make a
project feasible, but much more expensive.
Other issues that relate to schedule feasibility include the following:
• Can the company or the IT team control the factors that affect schedule feasibility?
• Has management established a firm timetable for the project?
• What conditions must be satisfied during the development of the system?
• Will an accelerated schedule pose any risks? If so, are the risks acceptable?
• Will project management techniques be available to coordinate and control the
project?
• Will a project manager be appointed?
Chapter 3 describes various project management tools and techniques.
EVALUATING FEASIBILITY
The first step in evaluating feasibility is to identify and weed out systems requests that
are not feasible. For example, a request would not be feasible if it required hardware or
software that the company already had rejected.
Even if the request is feasible, it might not be necessary. For example, a request for
multiple versions of a report could require considerable design and programming effort.
A better alternative might be to download the server data to a personal computer-based
software package and show users how to produce their own reports. In this case, train-
ing users would be a better investment than producing reports for them.
Also keep in mind that systems requests that are not currently feasible can be resub-
mitted as new hardware, software, or expertise becomes available. Development costs
might decrease, or the value of benefits might increase enough that a systems request
eventually becomes feasible. Conversely, an initially feasible project can be rejected later.
As the project progresses, conditions often change. Acquisition costs might increase, and
the project might become more expensive than anticipated. In addition, managers and
users sometimes lose confidence in a project. For all those reasons, feasibility analysis is
an ongoing task that must be performed throughout the systems development process.
SETTING PRIORITIES
After rejecting systems requests that are not feasible, the systems review committee must
establish priorities for the remaining items. The highest priority goes to projects that
provide the greatest benefit, at the lowest cost, in the shortest period of time. Many fac-
tors, however, influence project evaluation.
69
Phase 1 Systems Planning

70
Factors that Affect Priority
When assessing a project’s priority, a systems analyst should consider the following:
• Will the proposed system reduce costs? Where? When? How? How much?
• Will the system increase revenue for the company? Where? When? How? How
much?
• Will the systems project result in more information or produce better results?
How? Are the results measurable?
• Will the system serve customers better?
• Will the system serve the organization better?
• Can the project be implemented in a reasonable time period? How long will the
results last?
• Are the necessary financial, human, and technical resources available?
Very few projects will score high in all areas. Some proposed systems might not
reduce costs but will provide important new features. Other systems might reduce oper-
ating costs substantially but require the purchase or lease of additional hardware. Some
systems might be very desirable but require several years of development before produc-
ing significant benefits.
Whenever possible, the analyst should evaluate a proposed project based on tangible
costs and benefits that represent actual (or approximate) dollar values. For example, a
reduction of $8,000 in network maintenance is an example of a tangible benefit.
Often, the evaluation involves intangible costs or benefits, as described in the section
on economic feasibility. In contrast to tangible benefits, such as the network cost reduc-
tion example, it is more difficult to assign dollar values to intangible benefits such as
enhancing the organization’s image, raising employee morale, or improving customer
service. Intangible costs and benefits often influence systems decisions and priorities and
must be considered carefully.
Discretionary and Nondiscretionary Projects
Is the project absolutely necessary? Projects where management has a choice in imple-
menting them are called discretionary projects. Projects where no choice exists are
called nondiscretionary projects. Creating a new report for a user is an example of a
discretionary project; adding a report required by a new federal law is an example of a
nondiscretionary project.
If a particular project is not discretionary, is it really necessary for the systems review
committee to evaluate it? Some people believe that waiting for committee approval
delays critical nondiscretionary projects unnecessarily. Others believe that by submitting
all systems requests to the systems review committee, the committee is kept aware of all
projects that compete for the resources of the IT department. As a result, the committee
assesses the priority of discretionary projects and can schedule them more realistically.
Additionally, the committee might need to prioritize nondiscretionary projects when
funds or staff are limited.
Many nondiscretionary projects are predictable. Examples include annual updates to
payroll, tax percentages, or quarterly changes in reporting requirements for an insurance
processing system. By planning ahead for predictable projects, the IT department man-
ages its resources better and keeps the systems review committee fully informed without
needing prior approval in every case.
Setting Priorities
Chapter 2 Analyzing the Business Case

Preliminary Investigation Overview
CASE IN POINT 2.4: ATTAWAY AIRLINES, PART TWO
Back at Attaway Airlines, the morning meeting ended with no agreement between Dan
Esposito and Molly Kinnon. In fact, a new issue arose. Molly now says that the new accounting
system is entitled to the highest priority because the federal government soon will require the
reporting of certain types of company-paid health insurance premiums. Because the current
system will not handle this report, she insists that the entire accounting system is a nondiscre-
tionary project. As you might expect, Dan is upset. Can part of a project be nondiscretionary?
What issues need to be discussed? The committee meets again tomorrow, and the members
will look to you, as the IT director, for guidance.
PRELIMINARY INVESTIGATION OVERVIEW
A systems analyst conducts a preliminary investigation to study the systems request and
recommend specific action. After obtaining an authorization to proceed, the analyst
interacts with managers and users, as shown in the model in Figure 2-16. The analyst
gathers facts about the problem or opportunity, project scope and constraints, project
benefits, and estimated development time and costs. The end product of the preliminary
investigation is a report to management.
Interaction with Managers and Users
Before beginning a preliminary investigation, a memo or an e-mail message should let
people know about the investigation and explain your role. You should meet with key
managers, users, and IT staff to describe the project, explain your responsibilities,
answer questions, and invite comments. This starts an important dialogue with users
that will continue throughout the entire development process.
A systems project often produces significant changes in company operations.
Employees may be curious, concerned, or even opposed to those changes. It is not sur-
prising to encounter some user resistance during a preliminary investigation. Employee
attitudes and reactions are important and must be considered.
When interacting with users, you should be careful in your use of the word problem,
because generally it has a negative meaning. When you ask users about problems, some
will stress current system limitations rather than desirable new features or enhancements.
Instead of focusing on difficulties, you should question users about additional capability
71
Project Scope
and Constraints
Development
Time and Cost
Problem or
Opportunity
Project
Benefits
Report to
ManagementFact-Finding
FIGURE 2-16 Model of a preliminary investigation.
Phase 1 Systems Planning

72 Preliminary Investigation Overview
they would like to have. Using this approach, you highlight ways to improve the user’s
job, you get a better understanding of operations, and you build better, more positive
relationships with users.
Planning the Preliminary Investigation
During a preliminary investigation, a systems analyst typically follows a series of steps,
as shown in Figure 2-17. The exact procedure depends on the nature of the request, the
size of the project, and the degree of urgency.
FIGURE 2-17 Six steps in a preliminary investigation.
Step Understand the problem or opportunity.
Define the project scope and constraints.
Analyze project usability, cost, benefit, and
schedule data.
Present results and recommendations to
management.
Step
Perform fact-finding.
Step
Evaluate feasibility
• Operational
• Technical
• Economic
• Schedule
Step

• Analyze organizational charts.
• Conduct interviews.
• Review documentation.
• Observe operations.
• Conduct a user survey.
6
4
2
1
Step
Step
3
5
Chapter 2 Analyzing the Business Case

Preliminary Investigation Overview
Figure 2-18 shows how a systems
analyst might use Microsoft Project to
plan and manage the preliminary
investigation. Notice that the analyst
has listed the tasks, estimated the
duration of each task, and designated
a specific order in which the tasks
must be performed.
Step 1: Understand the Problem
or Opportunity
If the systems request involves a new
information system or a substantial
change in an existing system, systems
analysts might need to develop a busi-
ness profile that describes business pro-
cesses and functions, as explained in
Chapter 1. Even where the request
involves relatively minor changes or
enhancements, you need to understand
how those modifications will affect
business operations and other informa-
tion systems. Often a change in one sys-
tem has an unexpected effect on
another system. When you analyze a
systems request, you need to determine
which departments, users, and business
processes are involved.
In many cases, the systems request
does not reveal the underlying problem,
but only a symptom. For example, a
request to investigate mainframe pro-
cessing delays might reveal improper
scheduling practices rather than hard-
ware problems. Similarly, a request for
analysis of customer complaints might
disclose a lack of sales representative
training, rather than problems with the
product.
A popular technique for investigat-
ing causes and effects is called a fish-
bone diagram, or Ishikawa diagram,
as shown in Figure 2-19. A fishbone
diagram is an analysis tool that repre-
sents the possible causes of a problem
as a graphical outline. When using a fishbone diagram, an analyst first states the prob-
lem and draws a main bone with sub-bones that represent possible causes of the prob-
lem. In the example shown in Figure 2-19, the problem is unhappy workers, and the
analyst has identified four areas to investigate: environment, workers, management,
and machines. In each area, the analyst identifies possible causes and draws them as
horizontal sub-bones. For example, too hot is a possible cause in the environment
bone. For each cause, the analyst must dig deeper and ask the question: What could
be causing this symptom to occur? For example, why is it too hot? If the answer is
73
FIGURE 2-18 An analyst could use Microsoft Project to plan and manage a
preliminary investigation.
FIGURE 2-19 A fishbone diagram displays the causes of a problem. Typically, you
must dig deeper to identify actual causes rather than just symptoms.
Phase 1 Systems Planning

74
insufficient air conditioning capacity, the analyst indicates this as a sub-bone to the too
hot cause. In this manner, the analyst adds additional sub-bones to the diagram, until
he or she uncovers root causes of a problem, rather than just the symptoms.
Step 2: Define the Project Scope and Constraints
Determining the project scope means defining the specific boundaries, or extent, of the
project. For example, a statement that, payroll is not being produced accurately is very
general, compared with the statement overtime pay is not being calculated correctly for
production workers on the second shift at the Yorktown plant. Similarly, the statement,
the project scope is to modify the accounts receivable system, is not as specific as the
statement, the project scope is to allow customers to inquire online about account
balances and recent transactions.
Some analysts find it helpful to define project scope by creating a list with sec-
tions called Must Do, Should Do, Could Do, and Won’t Do. This list can be
reviewed later, during the systems analysis phase, when the systems requirements
document is developed.
Projects with very general scope definitions are at risk of expanding gradually,
without specific authorization, in a process called project creep. To avoid this problem,
you should define project scope as clearly as possible. You might want to use a graphi-
cal model that shows the systems, people, and business processes that will be affected.
The scope of the project also establishes the boundaries of the preliminary investiga-
tion itself. A systems analyst should limit the focus to the problem at hand and avoid
unnecessary expenditure of time and money.
Along with defining the scope of the project, you need to identify any constraints on
the system. A constraint is a requirement or condition that the system must satisfy or an
outcome that the system must achieve. A constraint can involve hardware, software, time,
policy, law, or cost. System constraints also define project scope. For example, if the sys-
tem must operate with existing hardware, that is a constraint that affects potential solu-
tions. Other examples of constraints are: The order entry system must accept input from
15 remote sites; the human resources information system must produce statistics on hir-
ing practices; and the new Web site must be operational by March 1. When examining
constraints, you should identify their characteristics.
PRESENT VERSUS FUTURE Is the constraint something that must be met as soon as
the system is developed or modified, or is the constraint necessary at some future time?
INTERNAL VERSUS EXTERNAL Is the constraint due to a requirement within the
organization or does some external force, such as government regulation, impose it?
MANDATORY VERSUS DESIRABLE Is the constraint mandatory? Is it absolutely essen-
tial to meet the constraint, or is it merely desirable?
Figure 2-20 shows five examples of constraints. Notice that each constraint has
three characteristics, which are indicated by its position in the figure and by the sym-
bol that represents the constraint. The constraint in Example A is present, external,
and mandatory. The constraint in Example B is future, external, and mandatory. The
constraint in Example C is present, internal, and desirable. The constraint in Example
D is present, internal, and mandatory. The constraint in Example E is future, internal,
and desirable.
Preliminary Investigation Overview
Chapter 2 Analyzing the Business Case
To learn more about
fishbone diagrams,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to On
the Web Links for
this chapter, and
locate the Fishbone
Diagram link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Preliminary Investigation Overview 75
Regardless of the type, all constraints should be identified as early as possible to
avoid future problems and surprises. A clear definition of project scope and con-
straints avoids misunderstandings that arise when managers assume that the system
will have a certain feature or support for a project, but later find that the feature is
not included.
Step 3: Perform Fact-Finding
The objective of fact-finding is to gather data about project usability, costs, benefits, and
schedules. Fact-finding involves various techniques, which are described below. Depending
on what information is needed to investigate the systems request, fact-finding might con-
sume several hours, days, or weeks. For example, a change in a report format or data
entry screen might require a single telephone call or e-mail message to a user, whereas a
new inventory system would involve a series of interviews. During fact-finding, you might
analyze organization charts, conduct interviews, review current documentation, observe
operations, and carry out a user survey.
External
Mandatory
Example C: Management
prefers that the project be
completed now, rather
than next quarter.
Example D: Starting next
week, the marketing system
must track all repeat visits
to the Web site.
Example E: To reduce raw material
costs, we should build supply chain
management capability into the next
version of our purchasing system.
Example B: Sometime next
year, our largest customer will
require a security code for all
online transactions.
Example A: New IRS
data must be used in
the payroll system as
soon as possible.
Desirable
=
=
Internal
Present Future
Examples of
Constraints
FIGURE 2-20 Examples of various types of constraints. The constraint in Example A is present, external, and
mandatory. The constraint in Example B is future, external, and mandatory. The constraint in Example C is
present, internal, and desirable. The constraint in Example D is present, internal, and mandatory. The constraint
in Example E is future, internal, and desirable.
Phase 1 Systems Planning

76
ANALYZE ORGANIZATION CHARTS In many instances, you will not know the
organizational structure of departments involved in the study. You should obtain organi-
zation charts to understand how the department functions and identify individuals you
might want to interview. Organization charts often can be obtained from the company’s
human resources department. If such charts are unavailable, you should obtain the neces-
sary information directly from department personnel and then construct your own
charts, as shown in Figure 2-21.
Preliminary Investigation Overview
FIGURE 2-21 Microsoft Visio includes an organization chart drawing tool that is powerful and easy to use.
When organization charts are available, you should verify their accuracy. Keep in
mind that organization charts show formal reporting relationships but not the informal
alignment of a group, which also is important.
CONDUCT INTERVIEWS The primary method of obtaining information during the
preliminary investigation is the interview. The interviewing process involves a series
of steps:
1. Determine the people to interview.
2. Establish objectives for the interview.
3. Develop interview questions.
4. Prepare for the interview.
5. Conduct the interview.
6. Document the interview.
7. Evaluate the interview.
Chapter 2 Analyzing the Business Case

Preliminary Investigation Overview
These seven steps are discussed in detail in Chapter 4, which describes fact-finding
techniques that occur during the systems analysis phase of the SDLC.
Remember that the purpose of the interview, and of the preliminary investigation
itself, is to uncover facts, not to convince others that the project is justified. Your primary
role in an interview is to ask effective questions and listen carefully. If you plan to talk to
several people about the same topic, you should prepare a standard set of questions for
all the interviews. Also be sure to include open-ended questions, such as “What else do
you think I should know about the system?” or “Is there any other relevant information
that we have not discussed?”
When conducting interviews during the preliminary investigation, you should interview
managers and supervisors who have a broad knowledge of the system and can give you an
overview of the business processes involved. Depending on the situation, you might talk to
operational personnel to learn how the system functions on a day-to-day basis.
REVIEW DOCUMENTATION Although interviews are an extremely important method
of obtaining information, you also might want to investigate the current system docu-
mentation. The documentation might not be up to date, so you should check with users
to confirm that you are receiving accurate and complete information.
OBSERVE OPERATIONS Another fact-finding method is to observe the current system
in operation, as shown in Figure 2-22. You might see how workers carry out typical
tasks. You might choose to trace or follow the actual paths taken by input source docu-
ments or output reports. In addition to observing operations, you might want to sample
the inputs or outputs of the system. Using sampling techniques described in Chapter 4,
you can obtain valuable information about the nature and frequency of the problem.
77
FIGURE 2-22 Sometimes, an analyst can get a better understanding of a system by
watching actual operations.
Phase 1 Systems Planning

78
CONDUCT A USER SURVEY Interviews can be time consuming. Sometimes you can
obtain information from a larger group by conducting a user survey. In this case, you
design a form that users complete and return to you for tabulation. A survey is not as
flexible as a series of interviews, but it is less expensive, generally takes less time, and
can involve a broad cross-section of people.
ANALYZE THE DATA Systems analysts use many techniques to locate the source of a
problem. For example, the Pareto chart is a widely used tool for visualizing issues
that need attention. Named for a nineteenth century economist, a Pareto chart is
drawn as a vertical bar graph, as shown in Figure 2-23. The bars, which represent
various causes of a problem, are arranged in descending order, so the team can focus
on the most important causes. In the example shown, a systems analyst might use a
Pareto chart to learn more about the causes of inventory system problems, so that
necessary improvements can be made. Creating Pareto charts with Excel is a simple
process.
The XY chart, sometimes called a scatter diagram, is another problem-solving tool.
Often, an analyst looks for a correlation between two variables. For example, suppose
you are getting complaints about network response time, and you want to determine the
cause. You would try to identify variables, such as the number of users, to see whether
Preliminary Investigation Overview
FIGURE 2-23 A Pareto chart can display and prioritize the causes of a problem, enabling an analyst to focus on
the most important issues.
Chapter 2 Analyzing the Business Case

Preliminary Investigation Overview 79
there is a correlation, or pattern. Figure 2-24 shows two XY charts with data samples.
The first chart sample would suggest that there is no correlation between the delays and
the number of users, and you would look elsewhere for the source of the problem.
However, if the data resembles the second XY sample, it indicates a strong relationship
between the number of users and the longer response times. That information would be
extremely valuable in the problem-solving process.
FIGURE 2-24 An XY chart shows correlation between variables, which is very important in problem-solving. Conversely,
a lack of correlation suggests that the variables are independent, and that you should look elsewhere for the cause.
A random distribution suggests
there is no correlation between
the variables.
This pattern indicates a strong
correlation between the
variables.
Phase 1 Systems Planning

Step 4: Analyze Project Usability, Cost, Benefit, and Schedule Data
During fact-finding, you gathered data about the project’s predicted costs, anticipated
benefits, and schedule issues that could affect implementation. Before you can evaluate
feasibility, you must analyze this data carefully. If you conducted interviews or used
surveys, you should tabulate the data to make it easier to understand. If you observed
current operations, you should review the results and highlight key facts that will be
useful in the feasibility analysis. If you gathered cost and benefit data, you should be
able to prepare financial analysis and impact statements using spreadsheets and other
decision support tools.
Also, you should develop time and cost estimates for the requirements modeling
tasks for the next SDLC phase, systems analysis. Specifically, you should consider the
following:
• What information must you obtain, and how will you gather and analyze the
information?
• Will you conduct interviews? How many people will you interview, and how
much time will you need to meet with the people and summarize their responses?
• Will you conduct a survey? Who will be involved? How much time will it take
people to complete it? How much time will it take to tabulate the results?
• How much will it cost to analyze the information and prepare a report with find-
ings and recommendations?
Step 5: Evaluate Feasibility
You have analyzed the problem or opportunity, defined the project scope and con-
straints, and performed fact-finding to evaluate project usability, costs, benefits, and
time constraints. Now you are ready to evaluate the project’s feasibility. You should
start by reviewing the answers to the questions listed on pages 67–69. Also consider the
following guidelines:
OPERATIONAL FEASIBILITY Your fact-finding should have included a review of user
needs, requirements, and expectations. When you analyze this data, you should look
for areas that might present problems for system users and how they might be
resolved. Because operational feasibility means that a system will be used effectively,
this is a vital area of concern.
TECHNICAL FEASIBILITY The fact-finding data should identify the hardware, software,
and network resources needed to develop, install, and operate the system. With this data,
you can develop a checklist that will highlight technical costs and concerns, if any.
ECONOMIC FEASIBILITY Using the fact-finding data, you can apply the financial analy-
sis tools described in Part C of the Systems Analyst’s Toolkit to assess feasibility. The cost-
benefit data will be an important factor for management to consider. Also, a cost estimate
for the project development team will be built into the project management plan.
SCHEDULE FEASIBILITY The fact-finding data should include stakeholder expectations
regarding acceptable timing and completion dates. As mentioned previously, often a
trade-off exists between a project’s schedule and its costs. For example, compressing a
project schedule might be possible, but only if the budget is increased accordingly. The
schedule data will be incorporated into the project plan in the form of task durations
and milestones.
80 Preliminary Investigation Overview
Chapter 2 Analyzing the Business Case

Preliminary Investigation Overview
Step 6: Present Results and Recommendations to Management
At this stage, you have several alternatives. You might find that no action is necessary or
that some other strategy, such as additional training, is needed. To solve a minor prob-
lem, you might implement a simple solution without performing further analysis. In
other situations, you will recommend that the project proceed to the next development
phase, which is systems analysis.
The final task in the preliminary investigation is to prepare a report to management,
and possibly deliver a presentation, as shown in Figure 2-25. The report includes an evalua-
tion of the systems request, an estimate of costs and benefits, and a case for action, which is
a summary of the project request and a specific recommendation.
The format of a preliminary investigation report varies from one company to
another. A typical report might consist of the following sections:
• Introduction — the first section
is an overview of the report.
The introduction contains a
brief description of the system,
the name of the person or
group who performed the
investigation, and the name of
the person or group who initi-
ated the investigation.
• Systems Request Summary —
the summary describes the
basis of the systems request.
• Findings — the findings sec-
tion contains the results of
your preliminary investigation,
including a description of the
project’s scope, constraints,
and feasibility.
• Case for Action — a summary
of the project request and a
specific recommendation.
Management will make the
final decision, but the IT
department’s input is an
important factor.
• Project Roles — this section
lists the people who will par-
ticipate in the project, and describes each person’s role.
• Time and Cost Estimates — this section describes the cost of acquiring and install-
ing the system, and the total cost of ownership during the system’s useful life.
• Expected Benefits — this section includes anticipated tangible and intangible ben-
efits and a timetable that shows when they are to occur.
• Appendix — an appendix is included in the report if you need to attach sup-
porting information. For example, you might list the interviews you conducted,
the documentation you reviewed, and other sources for the information you
obtained. You do not need detailed reports of the interviews or other lengthy
documentation. It is critical that you retain those documents to support your
findings and for future reference.
81
FIGURE 2-25 Oral presentations often are required during systems development, and
systems analysts need to develop strong presentation skills.
TOOLKIT TIME
The Communication
Tools in Part A of
the Systems
Analyst’s Toolkit can
help you develop
better reports and
presentations. To
learn more about
these tools, turn to
Part A of the four-
part Toolkit that fol-
lows Chapter 12.
Phase 1 Systems Planning

82
A QUESTION OF ETHICS
As a new systems analyst at Premier Financial Services, you are getting quite an education. You
report to Mary, the IT manager, who also chairs the systems review committee. Several
months ago, the committee rejected a request from Jack, the finance director, for an expen-
sive new accounts payable system, because the benefits did not appear to outweigh the costs.
Yesterday, Mary’s boss called her in and asked her to reconsider Jack’s request, and to
persuade the other members to approve it. Mary wanted to discuss the merits of the
request, but he cut her off rather abruptly. Mary happens to know that Jack and her boss
are longtime friends.
Mary has confided in you. She is very uncomfortable about the meeting with her boss,
and she believes that his request would undermine the integrity of the systems review pro-
cess. Mary feels it would be unethical to grant preferred treatment just because a friendship
is involved. She is thinking of submitting a request to step down as review committee chair,
even though that might harm her career at the company.
Is this an ethical question, or just a matter of office politics? What would you say to Mary?
CHAPTER SUMMARY
Systems planning is the first phase of the systems development life cycle. Effective
information systems help an organization support its business processes, carry out its
mission, and serve its stakeholders. Strategic planning allows a company to examine
its purpose, vision, and values and develops a mission statement, which leads to goals,
objectives, day-to-day operations, and business results that affect company
stakeholders.
During the systems planning phase, an analyst reviews the business case, which is the
basis, or reason, for a proposed system. A business case should describe the project
clearly, provide the justification to proceed, and estimate the project’s financial impact.
Systems projects are initiated to improve performance, provide more information,
reduce costs, strengthen controls, or provide better service. Various internal and exter-
nal factors affect systems projects, such as user requests, top management directives,
existing systems, the IT department, software and hardware vendors, technology, cus-
tomers, competitors, the economy, and government.
During the preliminary investigation, the analyst evaluates the systems request and
determines whether the project is feasible from an operation, technical, economic, and
schedule standpoint. Analysts evaluate systems requests on the basis of their expected
costs and benefits, both tangible and intangible.
The steps in the preliminary investigation are to understand the problem or oppor-
tunity; define the project scope and constraints; perform fact-finding; analyze project
usability, cost, benefit, and schedule data; evaluate feasibility; and present results and
recommendations to management. During the preliminary investigation, analysts
often use investigative tools such as fishbone or Ishikawa diagrams, Pareto charts, and
XY charts. The last task in a preliminary investigation is to prepare a report to man-
agement. The report must include an estimate of time, staffing requirements, costs,
benefits, and expected results for the next phase of the SDLC.
Chapter Summary
Chapter 2 Analyzing the Business Case

Key Terms and Phrases 83
biometric devices 60
business case 52
case for action 81
computer resources committee 65
constraint 74
critical success factors 57
customer relationship management (CRM) 63
discretionary projects 70
economic feasibility 68
electronic product code (EPC) 62
electronic proof of delivery (EPOD) 63
encryption 60
fishbone diagram 73
intangible benefits 68
Ishikawa diagram 73
just-in-time (JIT) 63
mission statement 55
nondiscretionary projects 70
operational feasibility 67
Pareto chart 78
preliminary investigation 71
project creep 74
project scope 74
scatter diagram, 78
schedule feasibility 69
strategic planning 54
SWOT analysis 54
systems request 59
systems review committee 65
tangible benefits 68
technical feasibility 67
total cost of ownership (TCO) 68
XY chart 78
Key Terms and Phrases
Phase 1 Systems Planning

84 Learn It Online
Instructions: To complete the Learn It Online exercises, visit the Management Information
Systems CourseMate Web site at www.cengagebrain.com, navigate to the resources for this
chapter, and click the link for the exercise you want to complete.
1 Chapter Reinforcement
TF, MC, and SA
Click the Chapter Reinforcement link. Print the quiz by clicking Print on the File menu
for each page. Answer each question.
2 Flash Cards
Click the Flash Cards link and read the instructions. Type 20 (or a number specified by
your instructor) in the Number of playing cards text box, type your name in the Enter
your Name text box, and then click the Flip Card button. When the flash card is dis-
played, read the question and then click the ANSWER box arrow to select an answer.
Flip through the Flash Cards. If your score is 15 (75%) correct or greater, click Print
on the File menu to print your results. If your score is less than 15 (75%) correct, then
redo this exercise by clicking the Replay button.
3 Practice Test
Click the Practice Test link. Answer each question, enter your first and last name at the
bottom of the page, and then click the Grade Test button. When the graded practice
test is displayed on your screen, click Print on the File menu to print a hard copy.
Continue to take practice tests until you score 80% or better.
4 Who Wants To Be a Computer Genius?
Click the Computer Genius link. Read the instructions, enter your first and last name
at the bottom of the page, and then click the Play button. When your score is dis-
played, click the PRINT RESULTS link to print a hard copy.
5 Wheel of Terms
Click the Wheel of Terms link. Read the instructions, and then enter your first and last
name and your school name. Click the PLAY button. When your score is displayed on
the screen, right-click the score and then click Print on the shortcut menu to print a
hard copy.
6 Crossword Puzzle Challenge
Click the Crossword Puzzle Challenge link. Read the instructions, and then enter your
first and last name. Click the SUBMIT button. Work the crossword puzzle. When you
are finished, click the Submit button. When the crossword puzzle is displayed, click the
Print Puzzle button to print a hard copy.
Learn It Online
Chapter 2 Analyzing the Business Case

www.cengagebrain.com

Case-Sim: SCR Associates 85
Overview
The SCR Associates case study is a Web-based simulation that
allows you to practice your skills in a real-world environment. The
case study transports you to SCR’s intranet, where you complete
12 work sessions, each aligning with a chapter. As you work on the case, you will receive
e-mail and voice mail messages, obtain information from SCR’s online libraries, and perform
various tasks.
How do I use the case?
Review the SCR background material in Chapter 1.•
Read the Preview for this session and study the Task List•
Visit the Management Information Systems CourseMate Web site at • www.cengagebrain.
com, navigate to the SCR Case Simulation, and locate the intranet link.
Enter your name and the password • sad9e. An opening screen will display the 12 sessions.
Select this session. Check your e-mail and voice mail carefully, and then work on the •
tasks.
Preview: Session 2
During your orientation, you found your way around the office and had a chance to
explore the SCR Internet site. Now, after a week on the job, your supervisor, Jesse Baker, has
explained the new TIMS system and asked you to lead the systems development effort. She
suggested that you review SCR’s mission statement, think about a systems review committee,
draft a project scope statement, and prepare to interview people to learn more about the
new system.
Task List
SCR Associates Case Simulation Session 2: Analyzing the Business Case
FIGURE 2-26 Task list: Session 2.
Phase 1 Systems Planning
1. We need a corporate goal for SCR that refers to our new training activity.
Prepare a draft to show Jesse.
2. Jesse wants my opinion on whether or not SCR needs a system review committee. Need to
prepare a recommendation and reasons.
3. Draft a project scope statement for the TIMS system and describe the constraints. She said
be specific.
4. Need to identify the people I want to interview to learn more about the new training activity,
and prepare a list of the questions I will ask.

www.cengagebrain.com

www.cengagebrain.com

86 Chapter Exercises
Review Questions
1. What is a business case? How does a business case affect an IT project?
2. What is a SWOT analysis and why is it important?
3. What are five common reasons for systems projects?
4. What are some internal and external factors that affect systems projects?
5. What are some advantages and disadvantages of a systems review committee?
6. What is feasibility? List and briefly discuss four feasibility tests.
7. How do tangible benefits differ from intangible benefits?
8. What are the steps in a preliminary investigation?
9. What is project scope? What is a constraint? In what three ways are constraints
classified?
10. Explain how you might use fishbone diagrams, Pareto charts, and XY charts in
problem-solving. Be specific, and describe the advantages of each tool.
Discussion Topics
1. Directives from top management often trigger IT projects. Suppose that the vice
president of marketing tells you to write a program to create mailing labels for a
one-time advertising promotion. As the IT manager, you know that the labels can be
prepared more efficiently by simply exporting the data to a word processing pro-
gram with a mail merge feature. How would you handle this situation?
2. The vice president of accounting says to you, the IT director, “This systems develop-
ment life cycle stuff takes too long.” She tells you that her people know what they
are doing and that all systems requests coming from her department are necessary
and important to the organization. She suggests that the IT department bypass the
initial steps for any accounting department request and immediately get to work at
the solution. What would you say to her?
3. One of your coworkers says, “Mission statements are nice, but they really don’t
change things down here where the work gets done.” How would you reply?
4. Would you continue to work for a company if you disagreed with the firm’s mission
statement? Why or why not?
Projects
1. Use the Internet to find an example of a corporate mission statement.
2. Many articles have been written on how to develop, understand, and evaluate a
business case. Visit the Web sites for TechRepublic, CIO, or another IT magazine,
and find one or more articles that might be of interest to your class. For more infor-
mation, you can visit the Resources Library at the online SCR Associates case, which
lists more than a dozen IT news sources. To view these sources, go to the SCR Case
Simulation at the MIS CourseMate Web site at www.cengagebrain.com, log on to
the SCR intranet, and navigate to the library. When your research is done, write a
brief summary of what you learned.
3. Suppose you own a travel agency in a large city. You have many corporate clients,
but growth has slowed somewhat. Some long-term employees are getting discour-
aged, but you feel that there might be a way to make technology work in your favor.
Use your imagination and suggest at least one strength, weakness, opportunity, and
threat that your business faces.
4. Write a mission statement and at least three goals for the travel agency described in
Project 3.
Chapter Exercises
Chapter 2 Analyzing the Business Case

www.cengagebrain.com

Apply Your Knowledge 87
The section contains four mini-cases. Each case describes a situation, explains your role in the
case, and asks you to respond to questions. You can answer the questions by applying knowledge
you learned in the chapter.
1 Last Chance Securities
Situation:
The IT director opened the department staff meeting today by saying “I’ve got some
good news and some bad news. The good news is that management approved the pay-
roll system project this morning. The new system will reduce clerical time and errors,
improve morale in the payroll department, and avoid possible fines and penalties for
noncompliance. The bad news is that the system must be installed by the end of
December in order to meet new federal reporting rules, costs must be within the bud-
geted amount, the new system must interact with existing systems, and the vice presi-
dent of finance insists on approving the final design.”
1. Name the constraints and indicate whether each is present, future, internal,
external, mandatory, or desirable.
2. Explain why it is important to define the payroll project’s scope. Explain how to
define project scope.
3. Identify tangible and intangible benefits of the new payroll system.
4. What topics should be included in a report to management at the end of the pre-
liminary investigation?
2 Way Out Bikes
Situation:
The owner of Way Out Bikes asked you for advice about acquiring an information sys-
tem for her business. The company specializes in helping customers select exactly the
right bicycle for their needs and lifestyles. Way Out cannot compete on price with mass
merchandisers, but it seeks to offer value and expertise for which customers are willing
to pay. You ask the owner whether she has long-range plans for the company, and she
replies that she has not really thought beyond a one-year time frame.
1. Explain the concept of strategic planning to Way Out’s owner.
2. Decide what else you might want to know about Way Out. Consider the internal
and external factors described on pages 59 to 61, and make a list of questions to
ask the owner.
3. Draft a mission statement for Way Out.
4. Make a list of Way Out’s stakeholders.
Apply Your Knowledge
Phase 1 Systems Planning

3 The Monday IT Department Staff Meeting
Situation:
Your boss, the IT manager, was ready to explode. “Why can’t we get our priorities
straight?” he fumed. “Here we go again, working on a low-value project, just because
it’s a favorite of the marketing group. I wish we could get away from departmental
politics! I want you to draft a memo that proposes a systems review committee for
this company. Explain the advantages, but don’t step on anyone’s toes!”
1. Write a draft of the proposal, as your boss requested.
2. Write a memo to your boss explaining potential disadvantages of the committee
approach.
3. Draft a set of ground rules for committee meetings. Try to suggest rules that will
minimize political differences and focus on the overall benefit to the company.
4. Most people serve on a committee at some point in their lives. Write a brief
memo describing your committee experiences, good or bad.
4 The Friday IT Department Staff Meeting
Situation:
By the end of the week, things quieted down. The IT staff discussed how to prioritize
IT project requests, taking into account technical, operational, economic, and schedule
feasibility. The IT manager asked for suggestions from the group.
1. Provide three examples of why a project might lack technical feasibility.
2. Provide three examples of why a project might lack operational feasibility.
3. Provide three examples of why a project might lack economic feasibility.
4. Provide three examples of why a project might lack schedule feasibility.
88 Apply Your Knowledge
Chapter 2 Analyzing the Business Case

Case Studies 89
Case studies allow you to practice specific skills learned in the chapter. Each chapter contains
several case studies that continue throughout the textbook, and a chapter capstone case.
NEW CENTURY HEALTH CLINIC
New Century Health Clinic offers preventive medicine and traditional medical care. In your
role as an IT consultant, you will help New Century develop a new information system.
Background
New Century Health Clinic’s office manager, Anita Davenport, recently asked permission
to hire an additional office clerk because she feels the current staff can no longer handle the
growing workload. The associates discussed Anita’s request during a recent meeting. They
were not surprised that the office staff was feeling overwhelmed by the constantly growing
workload.
Because the clinic was busier and more profitable than ever, they all agreed that New
Century could afford to hire another office worker. Dr. Jones then came up with another
idea. He suggested that they investigate the possibility of computerizing New Century’s
office systems. Dr. Jones said that a computerized system could keep track of patients,
appointments, charges, and insurance claim processing and reduce paperwork. All the asso-
ciates were enthusiastic about the possibilities and voted to follow up on the suggestion.
Dr. Jones agreed to direct the project.
Because no member of the staff had computer experience, Dr. Jones decided to hire a
consultant to study the current office systems and recommend a course of action. Several
friends recommended you as a person who has considerable experience with computerized
business applications.
Assignments
1. Dr. Jones has arranged an introductory meeting between the associates of New
Century Health Clinic and you to determine if mutual interest exists in pursuing the
project. What should the associates try to learn about you? What should you try to
learn in this meeting?
2. Does the proposed system present a strong business case? Why or why not?
3. For each type of feasibility, prepare at least two questions that will help you reach a
feasibility determination.
4. You begin the preliminary investigation. What information is needed? From whom
will you obtain it? What techniques will you use in your fact-finding?
PERSONAL TRAINER, INC.
Personal Trainer, Inc., owns and operates fitness centers in a dozen midwestern cities. The
centers have done well, and the company is planning an international expansion by opening
a new “supercenter” in the Toronto area. Personal Trainer’s president, Cassia Umi, hired an
IT consultant, Susan Park, to help develop an information system for the new facility.
During the project, Susan will work closely with Gray Lewis, who will manage the new
operation.
Background
At their initial meeting, Susan and Gray discussed some initial steps in planning a new
information system for the new facility. The next morning, they worked together on a
business profile, drew an organization chart, discussed feasibility issues, and talked about
Case Studies
Phase 1 Systems Planning

various types of information systems that would provide the best support for the supercenter’s
operations. Their main objective was to carry out a preliminary investigation of the new sys-
tem and report their recommendations to Personal Trainer’s top managers.
After the working session with Gray, Susan returned to her office and reviewed her
notes. She knew that Personal Trainer’s president, Cassia Umi, wanted the supercenter to
become a model for the company’s future growth, but she did not remember any mention of
an overall strategic plan for the company. Susan also wondered whether the firm had done a
SWOT analysis or analyzed the internal and external factors that might affect an informa-
tion system for the supercenter.
Because the new operation would be so important to the company, Susan believed that
Personal Trainer should consider an enterprise resource planning strategy that could provide
a company-wide framework for information management. After she finished compiling her
notes, Susan listed several topics that might need more study and called Gray to arrange
another meeting the following day.
Assignments
1. Based on the background facts described in Chapter 1, draft a mission statement for
Personal Trainer. Consider the firm’s overall direction, and the services, products, and
experiences the company might want to offer its customers in the future. In your
statement, consider all the stakeholders affected by Personal Trainer’s operations.
2. Susan and Gray probably will need more information about the proposed system.
Make a list of people whom they might want to interview. Also, suggest other fact-
finding techniques they should consider.
3. Consider the internal and external factors that affect information systems. Which
factors, in your opinion, will have the greatest impact on the system proposed for
the new supercenter? Explain your answer.
4. At the conclusion of the preliminary investigation, Susan and Gray will deliver a
written summary of the results and deliver a brief presentation to Personal Trainer’s
management team. Prepare a list of recommendations that will help make their
written and oral communications more effective. Put your list in priority order,
starting with what you consider to be the most important suggestions. Before you
complete this task, you should review Part A of the Systems Analyst’s Toolkit, which
provides suggestions for oral and written presentations.
ORIGINAL KAYAK ADVENTURES
Original Kayak Adventures (OKA) offers guided eco-tours and kayak rentals along the
Hudson River.
Background
In Chapter 1, you learned that John and Edie Caputo founded OKA two years ago. Now
John and Edie are thinking about replacing their current system, which is a mix of manual
and computer-based techniques, with a new information system that would meet their cur-
rent and future needs. Before you answer the following questions, you should review the
fact statement in Chapter 1.
Assignments
1. Does a strong business case exist for developing an information system to support
the Caputos’ business? Explain your answer.
2. In a small- to medium-sized business, such as OKA, is it really important to use a
structured approach for information systems development? Why or why not?
3. Based on the facts provided, draft a mission statement for OKA. In your statement,
consider all the stakeholders who might be affected by OKA operations.
4. What internal and external factors might affect OKA’s business success?
90 Case Studies
Chapter 2 Analyzing the Business Case

Case Studies 91
TOWN OF EDEN BAY
The town of Eden Bay owns and maintains a fleet of vehicles. You are a systems analyst
reporting to Dawn, the town’s IT manager.
Background
Eden Bay is a medium-sized municipality. The town has grown rapidly, and so has the
demand for town services. Eden Bay currently owns 90 vehicles, which the town’s equip-
ment department maintains. The fleet includes police cars, sanitation trucks, fire trucks, and
other vehicles assigned to town employees. The maintenance budget has risen sharply in
recent years, and people are asking whether the town should continue to perform its own
maintenance or outsource it to private firms.
This morning, Dawn called you into her office to discuss the situation. A summary of her
comments follows.
Dawn (IT manager): When I came here two years ago, I was told that Eden Bay had a computer-
ized information system for vehicle maintenance. What I found was a spreadsheet applica-
tion designed by a part-time employee as a quick answer to a much more complex
problem. It’s probably better than no system at all, but I can’t justify spending any time on
it. The system should never have been designed as a spreadsheet in the first place.
I’ve discussed the situation with the equipment department people. Rather than tinker
with the current system, I think we should press for a new information system project, and
I’ve developed an initial proposal. I’ve code-named the new system RAVE, which stands for
Repair Analysis for Vehicular Equipment. I know that commercial fleet maintenance pack-
ages exist, but they are very expensive.
I did some fact-finding, and I want you to start by reading the interview summaries I
prepared.
Before You Begin …
Review the following interview summaries from Marie (town manager), Martin (equip-
ment department manager), Phil (maintenance supervisor), Alice (maintenance clerk), and
Joe (mechanic).
Marie (town manager): Maintenance costs have risen 14 to 16% annually. I’m not sure that we
have any real control over these costs. Some members of the town council think we should
get out of the maintenance business and contract it out to a private firm. That might mean
laying off current employees, and I’m not sure whether outsourcing is the right way to go.
Both the equipment department manager and the IT manager tell me that our current
record-keeping system is outdated, and I wonder if a new information system would give
us a better handle on the problem. My own view is that if there’s a way we can become
more efficient, we should continue to perform our own maintenance.
Dawn, our IT manager, tells me that she has developed a proposal for a maintenance
information system. I plan to bring it up at the next council meeting.
Martin (equipment department manager): I hear a lot of criticism about the maintenance
budget, but I’m doing the best I can. We operate from one budget year to the next, without
a long-term plan. I belong to a professional association of fleet maintenance managers, and I
know that we should be developing a strategic plan instead of juggling annual budget figures.
I’d like to build this department into a first-class organization. Our people are great,
but they could use more technical training. Our shop and equipment are generally ade-
quate for what we do, but we haven’t kept up with some of the newer diagnostic equip-
ment. We have a real problem in record keeping. Instead of a short-term solution, Eden
Bay should have developed a maintenance information system years ago. Prior to taking
this position, I was assistant maintenance manager in a medium-sized city, and they had
developed a system that handled scheduling and cost analysis, in addition to day-to-day
maintenance operations.
Phase 1 Systems Planning

Phil (maintenance supervisor): I’m in the middle — I get pressure from above to cut costs, and
I get complaints from below that management doesn’t know what it’s doing. One thing for
sure — short-term solutions are not the answer. I hope they don’t ask me to cut back on
preventive maintenance. The last time we did that, we extended routine oil changes and
servicing, and we ended up with even more repairs than we had previously.
My mechanics are capable people, and they’re doing the best they can. One problem I
see is that it’s hard to pull up a history for a particular vehicle. We keep the data on a
computer, but different people used different codes and procedures over the years, and
the system probably needs a good overhaul.
Alice (maintenance clerk): I’m in charge of maintenance record keeping. We use a spreadsheet
system that was designed by a part-time employee who is no longer around. Because we
work on a monthly budget, the spreadsheet has a separate page for each month. When the
year is over, we start a new set of monthly pages. The spreadsheet is supposed to record
labor and parts used, and assign the cost to a specific vehicle, but it doesn’t always work
out that way.
I also use a notebook to keep track of vehicle mileage and scheduled service intervals,
so I can let the department heads know when a vehicle needs to come in for service. I
write up work orders for scheduled service or necessary repairs, but often a mechanic
finds other problems and has to write up an additional charges form.
Each time a vehicle comes into the shop, I start a new row on the spreadsheet. I enter
the vehicle number, mileage, and date. Then I enter the rest of the data into the columns
for parts, labor hours, job code, shop supplies, and miscellaneous charges. At the end of the
month, I calculate total costs from the spreadsheet, and we compare these with actual pay-
roll and parts vouchers for the month. If the totals are close, everyone is happy. If not, we
try to figure out what work didn’t get reported and entered into the spreadsheet.
The labor codes also are a problem. Specific codes are assigned for certain types of
shop labor, but these were changed three years ago when the new Director arrived. Also,
about half the labor can be coded, but the rest has to be entered manually — and there
are no standards. Two mechanics might do the same job, and one records four specific
tasks, while the other calls it a tune-up.
I know the mechanics don’t like paperwork, but what can I do? I asked the IT manager
if she could do anything to help, but she says that it isn’t worthwhile to update the current
system. She says she has heard some talk about developing a new information system spe-
cifically designed for vehicle fleet maintenance. It can’t be soon enough for me.
Joe (mechanic): I love my job, but I hate the paperwork. We get a work order from the clerk for
all scheduled maintenance, but if we find other problems, we have to handwrite an addi-
tional work ticket. Personally, I think some of these vehicles should be retired before they
get too expensive to maintain.
I would hate to see the town contract out the maintenance. I’ve put in 17 years here,
and I don’t want to lose my job, but I know that some specialized repairs would be less
expensive on the outside. Most of the mechanics realize this, but let management figure it
out — they’re the ones with the fancy computer system.
Assignments
1. Upon investigation, you learn that the town does not have a strategic plan or a mis-
sion statement. In your view, does this affect the current situation? Why or why
not?
2. Based on the fact statements provided, summarize the maintenance department’s
most important strengths, weaknesses, opportunities, and threats.
3. Describe the specific steps you will follow during a preliminary investigation,
including any fact-finding techniques you will use. Be sure to include the tools
mentioned in this chapter.
4. Of the four tests of feasibility — operational, technical, economic, and schedule —
which would you perform first to measure the system project’s feasibility? Why?
92 Case Studies
Chapter 2 Analyzing the Business Case

Chapter Capstone Case: SoftWear, Limited 93
SoftWear, Limited (SWL), is a continuing case study that illustrates the knowledge and
skills described in each chapter. In this case study, the student acts as a member of the SWL
systems development team and performs various tasks.
Background
SWL outsources the company’s payroll processing to an outside firm called Business
Information Systems (BIS). SWL’s payroll department submits data to BIS, which uses its
own hardware and software to produce employee paychecks and generate payroll reports.
BIS performs payroll processing for dozens of companies. Contractual agreements between
BIS and its customers identify specific information processing services and prices.
SWL’s information technology department is located at the company headquarters in
Raleigh and reports to the vice president of finance. The IT staff is responsible for SWL’s
mainframe computer and supports the company’s Web site and the inventory, marketing,
customer order entry, and accounting systems.
Robert Lansing, SWL’s president, believes that IT support is vital to the company’s strate-
gic long-range plans and has approved increased IT budgets and expansion of the IT staff. In
addition to the mainframe, the company networked personal computers in all offices and
many shop floor locations and implemented a company intranet linking all SWL locations.
Even though it could handle its own payroll processing, SWL continues to use BIS for pay-
roll services because BIS does a good job at a reasonable cost, and it relieves SWL of this
responsibility. Recently, problems with the payroll system developed, and SWL’s payroll
department employees had to work overtime to correct errors involving employee deductions.
SWL employees can make two types of voluntary payroll deductions. Starting in 2007,
employees could contribute to the newly formed SWL credit union. To enroll or make
changes, an employee must complete a deduction form. In 2009, the company gave
employees an opportunity to purchase SWL company stock through payroll deductions.
Employees enroll in the stock purchase plan or change their deductions by visiting the
human resources department, which then sends a weekly list of transactions to SWL’s pay-
roll department.
In addition to the credit union and stock purchase deductions, SWL employees soon
may have other savings and investment choices. SWL’s top management, with strong sup-
port from the vice president of human resources, may consider a new Employee Savings
and Investment Plan (ESIP) that allows employees to purchase mutual funds, stocks, and
other investments through regular payroll deductions. Under this new 401(k) plan, an out-
side investment firm, Court Street Securities, manages tax-sheltered deductions and services
the individual accounts. Each employee maintains direct control over his or her investments
using a 24-hour toll-free number or accessing the Court Street Securities Web site.
Management expects to make a final decision about the new ESIP in several months.
Request for Information Technology Services
Rob King, vice president of human resources, learned that a number of SWL employees
had complained about improper paycheck deductions, and he became concerned about
employee morale. He decided to discuss the subject with Michael Jeremy, vice president of
finance. After the meeting, Mr. Jeremy met with Amy Calico, director of payroll, to ask her
about the problem — and a recent increase in overtime pay in her group. Amy stated that
the overtime became necessary because payroll operations recently required more time and
effort. She also noted that, because this workload increase came about recently, she lacked
the money in her budget to hire any additional people. She did not provide any specific
explanation for the payroll deduction errors.
CHAPTER CAPSTONE CASE: SoftWear, Limited
Phase 1 Systems Planning

94 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Mr. Jeremy then decided to ask the IT department to investigate the payroll system. He
prepared a systems request, as shown in Figure 2-27, and sent it to the IT department for
action. In the request, he mentioned problems with the payroll system and requested help
but did not identify the causes of the problems or propose a solution.
Jane Rossman, manager
of applications, normally
receives systems requests and
does an initial review. After a
quick look at Mr. Jeremy’s
request, Jane decided to
contact her boss, Ann Hon,
director of information tech-
nology. After discussing the
proposal, Jane and Ann
decided that a preliminary
investigation should start
right away. Given that the
system was eight years old
and had never received a
major update, it seemed likely
that they would find some
problems. Jane assigned Rick
Williams, a systems analyst,
to conduct the preliminary
investigation.
Payroll Department Organization
Rick’s first meeting was with Rob King, vice president of human resources. He gave Rick
copies of job descriptions for all payroll department positions but did not have a current
organization chart for that group.
After reviewing the descriptions, Rick visited Amy Calico, director of payroll. She
explained how the payroll department was organized. She explained that two people report
directly to her: Nelson White, payroll manager, and Nancy Farmer, administrative assistant.
Two payroll technicians, Britton Ellis and Debra Williams, report to Nelson White.
Interviews
Rick next decided to interview Michael Jeremy, Amy Calico, and Mike Feiner, director of
human resources.
Mr. Jeremy provided an overview of the recent problems within the payroll system,
including the costs of the current system. He had no specific data, but he thought that the
majority of the errors involved stock purchases rather than credit union deductions.
Later that day, in his meeting with Mike Feiner, Rick found out more about the reported
deduction errors. He learned that stock purchase enrollments and changes are handled dif-
ferently from credit union deductions. For legal reasons, Mike explained, employees must
complete a special form for stock purchase plan transactions. When enrolling or making
changes, an employee visits the human resources department for a brochure and an informa-
tion package called a prospectus, which also includes the form required to enroll. At the end
of each week, the human resources department prepares a summary of deduction requests
and sends it to the payroll department. Payroll clerks then file the changes with the employee’s
master record.
FIGURE 2-27 Michael Jeremy’s systems request.
Chapter 2 Analyzing the Business Case

Chapter Capstone Case: SoftWear, Limited 95
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
The next morning, Rick again met with Amy Calico. In the interview, Amy told Rick that
some problems with deductions existed, but she did not feel that the payroll clerks were at
fault. She suggested that he look elsewhere for the source of the problem. Amy stated that
the payroll process generally works well, although it requires a substantial amount of man-
ual effort. She said that if she could hire two additional clerks, it would resolve any remain-
ing problems. During the course of the meeting, Rick began to feel that Amy’s opinion might
be somewhat biased. As payroll director, she might not want to call attention to problems in
her department, and Rick guessed, that some other issues might be involved. He decided to
keep this possibility in mind as the investigation continued.
Current Documentation
After completing the three interviews, Rick reviewed his notes and decided to find out
more about the actual sequence of operations in the current system. He studied the docu-
mentation and found that it provided step-by-step procedures for preparing the payroll.
When he asked the payroll clerks about those procedures, he learned that some sections
were outdated. The actual sequence of events is shown in Figure 2-28.
Rick also discovered that the payroll department never sees a copy of the form that an
employee fills out in the human resources department when joining the stock purchase plan
or changing deductions. Rick obtained a copy of the SWL stock purchase form from the
human resources department and copies of several forms from the payroll department —
including employee master sheets, employee time sheets, and credit union deduction forms.
Rick put them in a file for later review.
During the preliminary investigation, Rick did not show concern with the detailed infor-
mation on each form. He would review that information only after management authorized
the IT department to continue with the systems analysis phase.
Step 1: A new SWL employee completes an employee master sheet and a W-4 form. The human
resources department then enters the employee’s status and pay rate. Copies of these
forms are sent to the payroll department. The payroll department updates the employee
master sheet whenever changes are received from the employee or the human resources
department. Updates are made with various forms, including forms for credit union and
employee stock purchase plan enrollment and changes.
Step 2: On the last day of a weekly pay period, the payroll department prepares and distributes
time sheets to all SWL departments. The time sheets list each employee, with codes for
various status items such as regular pay, overtime, sick leave, vacation, jury duty, and per-
sonal leave.
Step 3: Department heads complete the time sheets on the first business day after the end of a pay
period. The sheets then go to the payroll department, where they are reviewed. A payroll
clerk enters pay rates and deduction information and forwards the time sheets to the BIS
service bureau.
Step 4: BIS enters and processes the time sheet data, prints SWL paychecks, and prepares a payroll
register.
Step 5: The checks, time sheets, and payroll register are returned to SWL. The payroll department
distributes checks to each department, creates reports for credit union and stock purchase
plan deductions, and then transfers necessary funds.
FIGURE 2-28 Sequence of events in payroll processing at SoftWear, Limited.
Phase 1 Systems Planning

96 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Presentation to Management
After Rick finished his investigation, he analyzed his findings, prepared a preliminary
investigation report, and met with Jane and Ann to plan the presentation to management.
Ann sent an advance copy of the report to Mr. Jeremy with an e-mail that announced the
time and location of the presentation.
Figure 2-29 shows the preliminary investigation report. Following the presentation to
SWL’s top managers and department heads, a question-and-answer session took place. The
management group discussed the findings and recommendations and decided that the pay-
roll system needed further analysis. The group also wanted to know if the BIS service bureau
could handle the ESIP using their current arrangement. Ann replied that no clear answer
could be given, and everyone agreed that the project scope should be broadened to include
that question.
Preliminary Investigation Report: SWL Payroll System October 10, 2011
Introduction
The IT department completed a preliminary investigation of the payroll system on October 8. This investigation
was the result of a systems request submitted by Michael Jeremy, vice president, finance, on September 17.
Systems Request Summary
Two problems were mentioned in the request: incorrect deductions from employee paychecks, and excessive
payroll department overtime to perform manual processing tasks and make corrections.
Preliminary Investigation Findings
1. The human resources department sends a summary of employee stock purchase deductions to the pay-
roll department. It is likely that data errors occur during this process. Although the errors are corrected, we
believe that incorrect payroll information adversely affects employee morale.
2. The payroll processing arrangement with Business Information Systems (BIS) requires considerable manual
effort. BIS does not provide summary reports that SWL needs to verify and apply credit union and stock pur-
chase deductions. Currently, the payroll department handles these tasks manually at the end of each pay period.
3. Payroll department overtime averages about eight hours per week, plus an additional eight hours at the
end of the month, when stock purchase deductions are applied. Total annual overtime is about 512 hours. The
average hourly base rate for payroll staff is $16.00, with an overtime rate of $24.00 per hour. The additional
expense is about $12,288 per year.
4. SWL developed its current payroll procedures 10 years ago, when the company had only 75 employees.
At that time, the only payroll deductions were legally required tax items. Today, the payroll system handles over
450 people and many deduction options that must be verified and applied manually.
Recommendations
The current problems will intensify as SWL continues to grow. At this point, it is unclear whether the current
system can be modified to handle tasks that are being done manually. Accordingly, the IT department recom-
mends a full analysis of the current system and possible solutions. The project should focus on two main
areas: manual processing at SWL and computer-based payroll processing at BIS.
Time and Cost Estimates
We can perform a study during a two-week period. In addition to the time spent by IT staff, we will conduct
about 20 hours of interviews with people outside the IT department. The following is a rough estimate of
costs through the systems analysis phase:
Systems analyst 2.0 weeks @ $1,400 per week $2,800
Other SWL staff 0.5 weeks @ $1,000 per week (average) 500
Total: $3,300
If the project continues beyond the systems analysis phase, total cost will depend on what development strat-
egy is followed. If the current system can be modified, we estimate a total project effort of $20,000 to
$30,000 over a four-month period. If modification is not feasible, a revised cost estimate will be submitted.
Expected Benefits
A sharp reduction in overtime costs and processing errors will avoid unnecessary expense and improve employee
morale. During the systems analysis phase, the IT department will investigate various strategies and solutions to
address current problems and strengthen SWL’s ability to handle payroll-related IT issues in the future.
FIGURE 2-29 A typical preliminary investigation report includes findings, recommendations,
and estimated costs and benefits.
Chapter 2 Analyzing the Business Case

Chapter Capstone Case: SoftWear, Limited 97
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
SWL Team Tasks
1. You have been assigned to write a formal mission statement for SWL. Start by reviewing
SWL’s background in Chapter 1, then do Internet research to find mission statements that
seem clear, focused, and easy to understand. Pay special attention to Web-based and cata-
log retail firms to see how they approach the issue.
2. Review the preliminary investigation report to see whether all four feasibility tests were
discussed in the report. Write a brief summary of your findings.
3. Review the payroll department organization information on page nn. Using this infor-
mation, prepare an organization chart for this group. In Word 2010 and Word 2007,
click the Insert tab on the Ribbon, then SmartArt, then Hierarchy.
4. Rick asked you to investigate other firms that offer payroll processing services. Perform
an Internet search using the term “payroll processing services.” Try your search both
with and without placing quotes around the phrase and notice what happens. Based on
your search results, select an example of a payroll processing firm and write a brief
report to Rick. Include the firm’s name, Web address, and services offered.
Manage the SWL Project
You have been asked to manage SWL’s new information system project. One of your
most important activities will be to identify project tasks and determine when they will be
performed. Before you begin, you should review the SWL case in this chapter. Then list and
analyze the tasks, as follows:
LIST THE TASKS Start by listing and numbering at least 10 tasks that the SWL team needs
to perform to fulfill the objectives of this chapter. Your list can include SWL Team Tasks
and any other tasks that are described in this chapter. For example, Task 3 might be to
Prepare a payroll department organization chart, and Task 6 might be to Review payroll
department job descriptions.
ANALYZE THE TASKS Now study the tasks to determine the order in which they should be
performed. First identify all concurrent tasks, which are not dependent on other tasks. In the
example shown in Figure 2-30, Tasks 1, 2, 3, 4, and 5 are concurrent tasks, and could begin at
the same time if resources were available.
Other tasks are called dependent tasks, because they cannot be performed until one or
more earlier tasks have been completed. For each dependent task, you must identify specific
tasks that need to be completed before this task can begin. For example, you would want an
organization chart to help you identify the payroll department positions, so Task 6 cannot
begin until Task 3 is completed, as Figure 2-30 shows.
FIGURE 2-30 Tasks 1, 2, 3, 4, and 5 are concurrent tasks that could be performed at the same time.
Task 6 is a dependent task that cannot be performed until Task 3 has been completed.
Phase 1 Systems Planning

98 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Chapter 3 describes project management tools, techniques, and software. To learn more,
you can use the Features section on your Student Study Tool CD-ROM, or visit the
Management Information Systems CourseMate Web site at www.cengagebrain.com and
locate the project management resources library for this book. On the Web, Microsoft offers
demo versions, training, and tips for using Project 2010 and 2007. You also can visit the
OpenWorkbench.org site to learn more about this free, open-source software.
Chapter 2 Analyzing the Business Case

www.cengagebrain.com

Ready for a Challenge? 99
Ready for a Challenge?
As an IT intern at Game Technology, you often assist analysts with feasibility studies. The
work can include intense fact-finding and tight deadlines. You decide to add a new section
to your journal to describe the four different types of feasibility. In your journal, you want
to include a definition of each feasibility type, and a sample statement that would indicate
a lack of feasibility.
For example:
• The hardware has limited capacity for future needs.
• Our users will resist the new system because it is the third change in 18 months.
• The project will take too long to pay for itself.
• Development cannot begin until next year, which is too late.
You also want to learn more about project constraints. You know that constraints can be
grouped into various categories: present vs. future, internal vs. external, and mandatory vs.
desirable. You plan to use a grid chart like the one in Figure 2-20 on page 75 to show the
constraints. To get started, you come up with three sample constraints:
• The new IRS tax rates must go into effect as soon as possible.
• From now on, we should try to hire technicians with A+ certifications.
• Starting next year, government regulations will require a detailed security analysis.
Practice Tasks
A. Define each feasibility type and include an example that shows a lack of feasibility.
B. Create a grid chart that shows the sample constraints. Use Figure 2-20 as a model.
After you complete the Practice Tasks, to check your work and view sample answers, visit
the Management Information Systems CourseMate Web site at www.cengagebrain.com,
navigate to the resources for this chapter, and locate Ready for a Challenge?.
The Challenge
It’s fortunate that you studied various feasibility types. Felisia Stukes, the IT director, wants
you to review the following statements and decide which type of feasibility applies:
• Based on the future cost of support and maintenance, TCO will be very high.
• The network will not be ready until next year, which might be too late.
• Expensive training will be required.
• The current system is well liked and effective, and users see no need for change.
• The hardware is unreliable and will not integrate with other company systems.
• The new system will cause a workforce reduction, and employees are very concerned.
• The platform does not have capacity for future needs, and cannot be expanded.
• The project does not meet the company policy for acceptable return on investment.
• The projected benefits do not outweigh the estimated costs.
• The software will not be available until May, and that will cause an unacceptable delay.
Felesia wants to see a grid chart that will properly show the following constraints:
• Management told all departments to include “green” goals in next year’s plan.
• The inventory system would be more effective if we add RFID capability next year.
• Management just announced a change in travel policy: No more first class air travel!
• Effective immediately, our products must meet all government standards.
Challenge Tasks
A. Reply to Felesia and indicate the type of feasibility for each statement.
B. Draw a grid chart that shows the constraints. Use Figure 2–20 as a model.
Phase 1 Systems Planning
In additional to technical skills, IT professionals need critical thinking skills such as perception, organization, analysis,
problem-solving, and decision-making. The Ready for a Challenge feature can help you learn, practice, and apply
critical thinking skills that you can take to the workplace.

www.cengagebrain.com

Chapter 3 Managing Systems Projects
Chapter 3 is the final chapter in the systems planning
phase of the SDLC. In this chapter, you will learn about
project management and how to plan, schedule, monitor,
and report on IT projects.
CHAPTER
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Explain project planning, scheduling, moni-
toring, and reporting
• Describe work breakdown structures, task
patterns, and critical path analysis
• Explain techniques for estimating task com-
pletion times and costs
• Describe various scheduling tools, including
Gantt charts and PERT/CPM charts
• Analyze task dependencies, durations, start
dates, and end dates
• Describe project management software and
how it can assist you in project planning,
estimating, scheduling, monitoring, and
reporting
• Discuss the importance of project risk
management
• Understand why projects sometimes fail
INTRODUCTION
Chapter 3 explains project management for IT proj-
ects. You will learn about project planning, schedul-
ing, monitoring, reporting, and the use of project
management software. You will learn how to create
a work breakdown structure, identify task patterns,
and calculate a critical path. You will also learn
how to use Gantt charts and PERT/CPM techniques
to schedule and monitor projects. Finally, you will
learn how to control and manage project changes as
they occur.
In addition to the project management material
in this chapter, you can visit the Features section on
your Student Study Tool CD-ROM, where you can
learn more about Microsoft Project and Open
Workbench, an open-source project management
program that you can download and install. You
can also visit the MIS CourseMate Web site for this
book at www.cengagebrain.com and explore links
in the SWL project management resources library.
Chapter 3 includes three Video Learning
Sessions that show you how to create a work break-
down structure (WBS), how to identify task pat-
terns, and how to calculate a project’s critical path.
3 Managing Systems Projects

www.cengagebrain.com

101 Introduction
Phase 1 Systems Planning
CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Wendy Lee, manager of college services at Mountain View College, wants a new
information system that will improve efficiency and customer service at the three college
bookstores.
In this part of the case, Tina Allen, systems analyst, and David Conroe, student intern, are
talking about project management tools and techniques.
Participants: Tina and David
Location: Mountain View College Cafeteria, Wednesday afternoon, September 21, 2011
Discussion topics: Project planning, Gantt charts, PERT/CPM charts, Microsoft Project and Open Workbench
software, project monitoring, and risk management techniques.
Tina: Hi, David. Glad I ran into you. I’d like to talk with you about project management, which we’ll be using as we
plan and execute the bookstore information system project.
David: Sure. I’ve read a little about project management, but I don’t know the specifics.
Tina: Well, we manage business and personal projects every day, but we don’t always give it much thought. To
manage large-scale IT projects, you need specific tools and techniques. You also need a project manager, who
is responsible for planning, leading, organizing, and controlling all the tasks.
David: I guess that’s you?
Tina: Sure is. No matter which tools you use, the idea is to break the project down into individual tasks, determine
the order in which the tasks need to be performed, and figure out how long each task will take. With this
information, you can use Gantt charts or PERT/CPM charts to schedule and manage the work.
David: I’ve seen Gantt charts — they’re the ones that look like horizontal bar charts?
Tina: Right. In addition to Gantt charts, we’ll use PERT/CPM charts, which look like network diagrams that show
all the tasks, patterns, and calculations that we’ll need. We’ll learn how to create PERT/CPM charts manually,
and we’ll also experiment with Microsoft Project and Open Workbench, which are powerful project
management tools.
David: Anything else we need to know?
Tina: Yes. After we have a specific plan, we need to monitor it carefully, report the progress, and employ a process
called risk management. If you are ready, here’s a task list to get us started:
FIGURE 3-1 Typical project management tasks.

Overview of Project Management102
Chapter 3 Managing Systems Projects
OVERVIEW OF PROJECT MANAGEMENT
Whether you are developing an information system
or working on a construction project like the one in
Figure 3-2, the process is the same. The only differ-
ence is the nature of the project. Project management
for IT professionals includes planning, scheduling,
monitoring and controlling, and reporting on infor-
mation system development.
What Shapes a Project?
A successful project must be completed on time,
within budget, and deliver a quality product that sat-
isfies users and meets requirements. Project manage-
ment techniques can be used throughout the SDLC.
System developers can initiate a formal project as
early as the preliminary investigation stage, or later on, as analysis, design,
and implementation activities occur.
As the sign in Figure 3-3 suggests, sometimes you have to decide what is
most important. The same concept applies to systems development, where the
factors include budget limits, time constraints, and quality standards. As long
as everything is in balance, like the see-saw in Figure 3-4, the project will be
successful. However, if one factor changes, adjustments must be made.
Because the factors interact constantly, a project manager must respond
quickly. For example, if an extremely time-critical project starts to slip, the
project manager might have to trim some features, seek approval for a budget
increase, simplify the testing plan, or a combination of all three actions.
Unfortunately, many systems projects do fail. A report by The Standish
Group noted that only a third of all software development projects were suc-
cessful, in the sense that they met budget, schedule, and quality targets.
Standish chairman Jim Johnson said that improvement will require better
project management tools, more iterative methods, and better communication
between project developers and users.
FIGURE 3-2 Building construction and systems development
projects both need careful management and monitoring.
GARAGE
TOWING • REPAIRING • OVERHAULING
BUSTED KNUCKLE
FA
S
T C
H
E
A
P
GOOD
PICK ANY TWO
FIGURE 3-3 The sign at this
imaginary garage tells an old story,
which also applies to project
management. Sometimes, if you
can’t have all three, you must
choose the two you really need.
FIGURE 3-4 If one factor changes, adjustments must be made to keep things in balance.
Project
Success
Time
Budget
Quality

Overview of Project Management 103
Phase 1 Systems Planning
What Does a Project Manager Do?
Whether a project involves a new office building or an information system, good leader-
ship is essential. In a systems project, the project manager, or project leader, usually is a
senior systems analyst or an IT department manager if the project is large. An analyst or
a programmer/analyst might manage smaller projects. In addition to the project man-
ager, most large projects have a project coordinator. A project coordinator handles
administrative responsibilities for the team and negotiates with users who might have
conflicting requirements or want changes that would require additional time or expense.
Project managers typically perform four activities, or functions: planning, scheduling,
monitoring, and reporting.
• Project planning includes identifying all project tasks and estimating the comple-
tion time and cost of each.
• Project scheduling involves the creation of a specific timetable, usually in the form
of charts that show tasks, task dependencies, and critical tasks that might delay
the project. Scheduling also involves selecting and staffing the project team and
assigning specific tasks to team members. Project scheduling uses Gantt charts
and PERT/CPM charts, which are explained in the following sections.
• Project monitoring requires guiding, supervising, and coordinating the project
team’s workload. The project manager must monitor the progress, evaluate the
results, and take corrective action when necessary to control the project and stay
on target.
• Project reporting includes regular progress reports to management, users, and the
project team itself. Effective reporting requires strong communication skills and a
sense of what others want and need to know about the project.
CASE IN POINT 3.1: SPRING FORWARD PRODUCTS
After three years with the company, you recently were asked to manage several IT projects.
You are confident that you have the technical skills you need, but you are concerned about
morale at the company. There has been some downsizing, and many employees are worried
about the future.
As a longtime fan of the Dilbert cartoon strip, you know that maintaining morale can be a
real challenge. Your current project involves a team of a dozen people, several of whom
remind you of Dilbert and his coworkers. What are some techniques that you might use to
motivate the team and inspire its members? What are some things you might not want to do?
Project Activities and Planning Steps
On any given day, a project manager might perform one or more of the activities listed
above. However, as Figure 3-5 suggests, each activity is part of a larger framework,
which includes three key steps in project planning:
• Create a work breakdown structure.
• Identify task patterns.
• Calculate the critical path.
The matrix in Figure 3-5 on the next page shows typical activities that the project
leader performs as the project develops. When the project becomes operational, he or
she also manages the people, the schedule, the budget, and the progress.

Step 1: Create a Work Breakdown Structure104
Chapter 3 Managing Systems Projects
The following sections describe the three
project development steps. You can view a
Video Learning Session before, during, or after
you study each step.
STEP 1: CREATE A WORK
BREAKDOWN STRUCTURE
A work breakdown structure (WBS) involves
breaking a project down into a series of smaller
tasks. Before creating work breakdown struc-
tures, you should understand the two primary
chart types: Gantt charts and PERT/CPM charts.
What Is a Gantt Chart?
Gantt charts were developed almost 100 years
ago by Henry L. Gantt, a mechanical engineer
and management consultant. His goal was to design a chart that could show planned
and actual progress on a project. A Gantt chart is a horizontal bar chart that represents
a set of tasks. For example, the Gantt chart in Figure 3-6 displays five tasks in a vertical
array, with time shown on the horizontal axis. The position of the bar shows the
planned starting and ending time of each task, and the length of the bar indicates its
duration. On the horizontal axis, time can be shown as elapsed time from a fixed
starting point, or as actual calendar dates. A Gantt chart also can simplify a complex
project by combining several activities into a task group. For example, in Figure 3-6,
Task 4 might consist of five separate tasks, which are hidden in this view.
FIGURE 3-5 The matrix is a typical sample of management activities
performed while the project is being developed, and when it is launched.
Manage the
operational
project
Planning Scheduling Monitoring Reporting
STEP1: Create
a work
breakdown
structure
STEP 2:
Identify task
patterns
STEP 3:
Calculate the
critical path
To learn more about
Gantt charts, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Gantt
Charts link. FIGURE 3-6 In this Gantt chart, notice the task group represented by Task 4.
Also notice the yellow bars that show the percentage of task completion.
task group
VIDEO LEARNING SESSION: WORK BREAKDOWN STRUCTURES
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate
Web site at www.cengagebrain.com and navigate to the Video Learning Sessions for
this book. This session is about work breakdown structures. You’ll learn what a work break-
down is and why it is important, how to create a work breakdown structure, and how to use
Microsoft Project to display a work breakdown structure.
a complex
gure 3-6,

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Step 1: Create a Work Breakdown Structure 105
Phase 1 Systems Planning
A Gantt chart can show task status by adding a contrasting color to the horizontal bars.
For example, a vertical arrow marks the current date in Figure 3-6. With a fixed reference
point, it is easy to see that Task 1 is way behind schedule, Task 2 is only about 80 percent
done and is running behind schedule, Task 3 should have started, but no work has been
done, Task 4 actually is running ahead of schedule, and Task 5 will begin in several weeks.
Gantt charts can present an overview of the project’s status, but they do not provide
enough detailed information, which is necessary when managing a complex project.
Most project managers find that PERT/CPM charts, which are discussed in the following
section, are better tools for managing large projects.
What Is a PERT/CPM Chart?
The Program Evaluation Review Technique (PERT) was developed by the U.S. Navy to
manage very complex projects, such as the construction of nuclear submarines. At
approximately the same time, the Critical Path Method (CPM) was developed by private
industry to meet similar project management needs. The distinction between the two
methods has disappeared over time, and today the technique is called either PERT,
CPM, or PERT/CPM. The textbook will use the term PERT chart.
PERT is a bottom-up technique, because it analyzes a large, complex project as a series of
individual tasks. To create a PERT chart, you first identify all the project tasks and estimate
how much time each task will take to perform. Next, you must determine the logical order
in which the tasks must be performed. For example, some tasks cannot start until other tasks
have been completed. In other situations, several tasks can be performed at the same time.
Once you know the tasks, their durations, and the order in which they must be per-
formed, you can calculate the time that it will take to complete the project. You also can
identify the specific tasks that will be critical to the project’s on-time completion. An
example of a PERT chart, which Microsoft calls a network diagram, is shown in the
lower screen in Figure 3-7.
Which Type of Chart Is Better?
Although a Gantt chart offers a valuable
snapshot view of the project, PERT
charts are more useful for scheduling,
monitoring, and controlling the actual
work. With a PERT chart, a project man-
ager can convert task start and finish
times to actual dates by laying out the
entire project on a calendar. Then, on
any given day, the manager can compare
what should be happening with what is
taking place, and react accordingly. Also,
a PERT chart displays complex task pat-
terns and relationships. This information
is valuable to a manager who is trying to
address high priority issues. PERT and
Gantt charts are not mutually exclusive
techniques, and project managers often
use both methods.
Figure 3-7 shows both chart types. The
top screen is a Gantt chart with 11 tasks.
The PERT chart in the bottom screen
shows the same project, using a separate
box for each task instead of a horizontal
To learn more about
PERT/CPM, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the PERT/
CPM link.
FIGURE 3-7 The top screen is a Gantt chart with 11 tasks, and a PERT chart
in the bottom screen shows the same project. Although not visible in this
zoomed-out view, the PERT chart boxes provide detailed information about task
duration, start dates, and finish dates.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Step 1: Create a Work Breakdown Structure106
Chapter 3 Managing Systems Projects
bar. Although they both show the task patterns and flow, the PERT chart boxes can pro-
vide more detailed information, such as task duration, start date, and finish date. You
will learn how to create PERT charts in following sections.
Identifying Tasks in a Work Breakdown Structure
A work breakdown structure must clearly identify each task and include an estimated
duration. A task, or activity, is any work that has a beginning and an end and requires
the use of company resources such as people, time, or money. Examples of tasks include
conducting interviews, designing a report, selecting software, waiting for the delivery of
equipment, or training users. Tasks are basic units of work that the project manager
plans, schedules, and monitors — so they should be relatively small and manageable.
In addition to tasks, every project has
events, or milestones. An event, or mile-
stone, is a recognizable reference point
that you can use to monitor progress. For
example, an event might be the start of
user training, the conversion of system
data, or the completion of interviews. A
milestone such as Complete 50 percent of
program testing would not be useful infor-
mation unless you could determine exactly
when that event will occur.
Figure 3-8 shows tasks and events that
might be involved in the creation, distribu-
tion, and tabulation of a questionnaire.
Notice that the beginning and end of each
task is marked by a recognizable event. If you tried to manage a proj-
ect as one large task, it would be impossible. Instead, you break the
project down into smaller tasks, creating a work breakdown struc-
ture (WBS). The first step in creating a WBS is to list all the tasks.
LISTING THE TASKS While this step sounds simple, it can be
challenging, because the tasks might be embedded in a document,
such as the one shown in the first version of Figure 3-9. One trick
is to start by highlighting the individual tasks, as shown in the sec-
ond version. Adding bullets makes the tasks stand out more
clearly, as shown in the third version. The next step is to number
the tasks and create a table, similar to the one shown in Figure
3-10, with columns for task number, description, duration, and
predecessor tasks.
FIGURE 3-8 Using a questionnaire requires a series of tasks and events to
track the progress. The illustration shows the relationship between the tasks and
the events, or milestones, that mark the beginning and end of each task.
FIGURE 3-9 The three versions show how to
transform a task statement into a list of specific
tasks for a work breakdown structure.
Third version
Second version
First, reserve the meeting room. Then order
the marketing materials and brief the
managers. After the briefings, send out
customer e-mails and burn sample DVDs.
When the e-mails are sent and the DVDs are
ready, load the new software. When the
marketing materials have arrived and the
software is ready, do a dress rehearsal.
First version
First, reserve the meeting room. Then order
the marketing materials and brief the
managers. After the briefings, send out
customer e-mails and burn sample DVDs.
When the e-mails are sent and the DVDs are
ready, load the new software. When the
marketing materials have arrived and the
software is ready, do a dress rehearsal.
• First, reserve the meeting room.
• Then order the marketing materials and brief
the managers.
• After the briefings, send out customer e-mails
and burn sample DVDs.
• When the e-mails are sent and the DVDs are
ready, load the new software.
• When the marketing materials have arrived
and the software is ready, do a dress rehearsal.
FIGURE 3-10 In this table, columns have been added for task number, description,
duration, and predecessor tasks.
Task
No.
Description Duration
(Days)
Predecessor
Tasks
1 Reserve the meeting room
2 Order the marketing materials
3 Brief the managers
4 Send out customer e-mails
5 Burn sample DVDs
6 Load the new software
7 Do a dress rehearsal

Step 1: Create a Work Breakdown Structure 107
Phase 1 Systems Planning
ESTIMATING TASK DURATION Task duration can be hours, days, or weeks —
depending on the project. Because the following example uses days, the units of mea-
surement are called person-days. A person-day represents the work that one person can
complete in one day. This approach, however, can present some problems. For example,
if it will take one person 20 days to perform a particular task, it might not be true that
two people could complete the same task in 10 days or that 10 people could perform
the task in two days. Some tasks can be divided evenly so it is possible to use different
combinations of time and people, up to a point. For instance, if it takes two person-
days to install the cables for a new local area network, one person might do the task in
two days, two people in one day, or four people in half a day. In most systems analysis
tasks, however, time and people are not interchangeable. If one analyst needs two hours
to interview a user, two analysts also will need two hours to do the same interview.
Project managers often use a weighted formula for estimating the duration of each
task. The project manager first makes three time estimates for each task: an optimistic,
or best-case estimate (B), a probable-case estimate (P), and a pessimistic, or worst-case
estimate (W). The manager then assigns a weight, which is an importance value, to each
estimate. The weight can vary, but a common approach is to use a ratio of B = 1, P = 4,
and W = 1. The expected task duration is calculated as follows:
(B+4P+W)
6
For example, a project manager might estimate that a file-conversion task could be
completed in as few as 20 days or could take as many as 34 days, but most likely will
require 24 days. Using the formula, the expected task duration is 25 days, calculated as
follows:
(20+(4*24)+34) = 25 6
Factors Affecting Duration
When developing duration estimates, project managers consider four factors:
• Project size
• Human resources
• Experience with similar projects
• Constraints
CASE IN POINT 3.2: PARALLEL SERVICES
The project management team at Parallel Services is having a debate about how to define
tasks in the work breakdown structure (WBS). Ann, the project manager, wants to break
tasks down into the smallest possible units. For example, she objected to a broad task
statement called Develop a training schedule. Instead, she suggested three subtasks:
(1) Determine availability of training room, (2) Determine availability of attendees, and
(3) Select specific dates and training times.
Karen, another project team member, disagrees. She feels that the broader task statement
is better, because it allows more flexibility and will produce the same result. Karen says that if
you break tasks into pieces that are too small, you risk overmanaging the work and spending
more time on monitoring than actually performing the tasks. As a member of the team, would
you tend to agree more with Ann or Karen? What are the pros and cons of each approach?

Step 1: Create a Work Breakdown Structure108
Chapter 3 Managing Systems Projects
PROJECT SIZE You learned in Chapter 1 that information systems have various char-
acteristics that affect their complexity and cost. In addition to considering those factors,
a project manager must estimate the time required to complete each project phase. To
develop accurate estimates, a project manager must identify all project tasks, from ini-
tial fact-finding to system implementation. Regardless of the systems development
methodology used, the project manager must determine how much time will be needed
to perform each task. In developing an estimate, the project manager must allow time
for meetings, project reviews, training, and any other factors that could affect the pro-
ductivity of the development team.
HUMAN RESOURCES Companies must invest heavily in cutting-edge technology and
Web-based systems to remain competitive in a connected world. In many areas, skilled
IT professionals are in great demand, and firms must work hard to attract and retain
the talent they need. A project manager must assemble and guide a development team
that has the skill and experience to handle the project. If necessary, additional systems
analysts or programmers must be hired or trained, and this must be accomplished
within a specific time frame. After a project gets under way, the project manager must
deal with turnover, job vacancies, and escalating salaries in the technology sector — all
of which can affect whether the project can be completed on time and within budget.
EXPERIENCE WITH SIMILAR PROJECTS A project manager can develop time and
cost estimates based on the resources used for similar, previously developed information
systems. The experience method works best for small- or medium-sized projects where
the two systems are similar in size, basic content, and operating environment. In large
systems with more variables, the estimates are less reliable.
In addition, you might not be able to use experience from projects that were devel-
oped in a different environment. For example, when you use a new Web-based database
application, you might not have previous experience to measure in this environment. In
this situation, you could design a prototype or pilot system to gain technical and cost
estimating experience.
CONSTRAINTS You learned in Chapter 2 that constraints are defined during the pre-
liminary investigation. A constraint is a condition, restriction, or requirement that the
system must satisfy. For example, a constraint might involve maximums for one or
more resources, such as time, dollars, or people. A project manager must define system
requirements that can be achieved realistically within the required constraints. In the
CASE IN POINT 3.3: SUNRISE SOFTWARE
A lively discussion is under way at Sunrise Software, where you are a project manager. The main
question is whether the person-days concept has limitations. In other words, if a task will require
100 person-days, does it matter whether the work is performed by two people in 50 days, five
people in 20 days, 10 people in 10 days, or some other combination that adds up to 100?
Programmers Paula and Ethan seem to think it doesn’t matter. On the other hand,
Hector, a systems analyst, says it is ridiculous to think that any combination would work. To
support his point, he offers this extreme example: Could a task estimated at 100 person-days
be accomplished by 100 people in one day?
Is Hector correct? If so, what are the limits in the people versus days equation? Taking the
concept a step farther, is there an optimum number of people to be assigned to a task? If so,
how would that number be determined? You need to offer some guidance at the next project
team meeting. What will you say?

Step 1: Create a Work Breakdown Structure 109
Phase 1 Systems Planning
absence of constraints, the project manager simply calculates the resources needed.
However, if constraints are present, the project manager must adjust other resources or
change the scope of the project. This approach is similar to the what-if analysis that is
described in Chapter 12.
Displaying the Work Breakdown Structure
After you enter the task durations, the work breakdown structure will look like
Figure 3-11. If you are managing a complex project with many tasks, you can use task
groups, just as you would in a Gantt chart, to simplify the list. If you are using
Microsoft Project, the WBS might resemble Figure 3-12.
FIGURE 3-11 Task durations have been added, and the WBS is complete except for
predecessor task information. The predecessor tasks will determine task patterns and
sequence of performance.
Task
No.
Description Duration
(Days)
Predecessor
Tasks
1 Reserve the meeting room 1
2 Order the marketing materials 9
3 Brief the managers 2
4 Send out customer e-mails 3
5 Burn sample DVDs 3
6 Load the new software 2
7 Do a dress rehearsal 1
FIGURE 3-12 A Microsoft project screen displays the same WBS,
including task number, description, during, and predecessors.
VIDEO LEARNING SESSION: TASK PATTERNS
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate
Web site at www.cengagebrain.com and navigate to the Video Learning Sessions for
this book. This session is about task patterns. You’ll learn what task patterns are and why are
they important, how to identify and use task patterns, and how to use Microsoft Project to
show task patterns.

www.cengagebrain.com

Step 2: Identify Task Patterns110
Chapter 3 Managing Systems Projects
STEP 2: IDENTIFY TASK PATTERNS
Tasks in a work breakdown structure must be arranged in a logical
sequence called a task pattern. This section will show you how to under-
stand and create graphical models of these patterns.
What Are Task Patterns?
In any project, large or small, tasks depend on each other and must be per-
formed in a sequence, not unlike the commands in a software program. Task
patterns can involve dependent tasks, multiple successor tasks, and multiple
predecessor tasks. In larger projects, these patterns can be very complex, and
an analyst must study the logical flow carefully.
How Do I Use Task Boxes to Create a Model?
In a PERT/CPM chart, project tasks are shown as rectangular boxes, arranged in the
sequence in which they must be performed. Each rectangular box, called a task box, has
five sections, as shown in Figure 3-13. Each section of the task box contains important
information about the task, including the Task Name, Task ID, Task Duration, Start
Day/Date, and Finish Day/Date.
TASK NAME The task name should be brief and descriptive, but it does not have to
be unique in the project. For example, a task named Conduct Interviews might occur in
several phases of the project.
TASK ID The task ID can be a number or code that provides unique identification.
TASK DURATION The duration is the amount of time it will take to complete a task.
All tasks must use the same time units, which can be hours, days, weeks, or months,
depending on the project. An actual project starts on a specific date, but can also be
measured from a point in time, such as Day 1.
START DAY/DATE The start day/date is the time that a task is scheduled to begin.
For example, suppose that a simple project has two tasks: Task 1 and Task 2. Also
suppose that Task 2 cannot begin until Task 1 is finished. An analogy might be that
you cannot run a program until you turn on your computer. If Task 1 begins on
Day 1 and has a duration of three days, it will finish on Day 3. Because Task 2 cannot
begin until Task 1 is completed, the start time for Task 2 is Day 4, which is the day
after Task 1 is finished.
FINISH DAY/DATE The finish day/date is the time that a task is scheduled to be com-
pleted. To calculate the finish day or date, you add the duration to the start day or
date. When you do this, you must be very careful not to add too many days. For exam-
ple, if a task starts on Day 10 and has a duration of 5 days, then the finish would be
on Day 14 — not Day 15.
What Are the Main Types of Task Patterns?
A project is based on a pattern of tasks. In a large project the overall pattern would be
quite complex, but it can be broken down into three basic patterns: dependent tasks,
multiple successor tasks, and multiple predecessor tasks.
Task Name
Task ID
Task Duration
Start Day/Date
Finish Day/Date
TASK BOX FORMAT
FIGURE 3-13 Each section of the task
box contains important information about
the task, including the Task Name, Task ID,
Task Duration, Start Day/Date, and
Finish Day/Date.

Step 2: Identify Task Patterns 111
Phase 1 Systems Planning
DEPENDENT TASKS When tasks must be completed one after
another, like the relay race shown in Figure 3-14, they are called
dependent tasks, because one depends on the other. For exam-
ple, Figure 3-15 shows that Task 2 depends on Task 1, because
Task 2 cannot start until Task 1 is completed. In this example,
the finish time of Task 1, Day 5, controls the start date of Task
2, which is Day 6.
MULTIPLE SUCCESSOR TASKS When several tasks can start
at the same time, each is called a concurrent task. Often, two
or more concurrent tasks depend on a single prior task, which
is called a predecessor task. In this situation, each concurrent
task is called a successor task. In the example shown in
Figure 3-16, successor Tasks 2 and 3 both can begin as soon
as Task 1 is finished. Notice that the finish time for Task 1
determines the start time for both Tasks 2 and 3. In other
words, the earliest that Task 1 can finish is day 30, so day 31
is the earliest that Tasks 2 and 3 can start.
MULTIPLE PREDECESSOR TASKS Suppose that a task
requires two or more prior tasks to be completed before it can
start. Figure 3-17 on the next page shows that example, because
Task 3 cannot begin until Tasks 1 and 2 are both completed.
Since the two tasks might not finish at the same time, the longest
(latest) predecessor task becomes the controlling factor. Notice
that the start for Task 3 is Day 16, not Day 6. Why is this so?
Because Task 3 depends on two predecessor
tasks, Tasks 1 and 2, Task 3 cannot begin until
the later of those tasks is complete. Therefore,
the start time for a successor task must be the
latest (largest) finish time for any of its preced-
ing tasks. In the example shown, Task 1 ends
on Day 15, while Task 2 ends on Day 5, so
Task 1 controls the start time for Task 3.
How Do I Identify Task Patterns?
You can identify task patterns by looking
carefully at the wording of the task statement.
Words like then, when, or and are action
words that signal a sequence of events. Here
are three simple examples:
• Do Task 1, then do Task 2 describes
dependent tasks that must be com-
pleted one after the other.
• When Task 2 is finished, start two
tasks: Task 3 and Task 4 describes mul-
tiple successor tasks that can both start
as soon as Task 2 is finished.
• When Tasks 5 and 6 are done, start
Task 7 indicates that Task 7 is a
multiple predecessor task because it
can’t start until two or more previous
tasks all are completed.
FIGURE 3-14 In a relay race, each runner is
dependent on the preceding runner and cannot start
until the earlier runner finishes.
Design Survey
ID: 3
Dur: 10Finish: Day 40
Start: Day 31
Identify Needs
ID: 3
Dur: 5
Start: Day 31
Finish: Day 35
Develop Plan
ID: 1
Dur: 30
Start: Day 1
Finish: Day 30
Arrange Interviews
ID: 2
Dur: 30
Start: Day 31
Finish: Day 60
EXAMPLE OF MULTIPLE SUCCESSOR TASKS
FIGURE 3-16 This example of multiple successor tasks shows that the
finish time for Task 1 determines the start time for both Tasks 2 and 3.
Create Document
ID: 2
Dur: 9
Start: Day 6
Finish: Day 14
Prepare Outline
ID: 1
Dur: 5
Start: Day 1
Finish: Day 5
EXAMPLE OF A DEPENDENT TASK
FIGURE 3-15 This example of a dependent task shows that the finish
time of Task 1, Day 5, controls the start date of Task 2, which is Day 6.

Step 2: Identify Task Patterns112
Chapter 3 Managing Systems Projects
How Do I Work With Complex
Task Patterns?
When several task patterns combine, you
must study the facts very carefully to
understand the logic and sequence. A
project schedule will not be accurate if
the underlying task pattern is incorrect.
For example, consider the following
three fact statements and the task pat-
terns they represent. Examples of the
task patterns are shown Figures 3-18,
3-19, and 3-20.
DEPENDENT TASKS Perform Task 1.
When Task 1 is complete, perform
Task 2.
DEPENDENT TASKS AND MULTIPLE
SUCCESSOR TASKS Perform Task 1.
When Task 1 is complete, perform Task 2. When Task 2 is finished, start two tasks:
Task 3 and Task 4. When Task 3 is complete, start two more tasks: Task 5 and Task 6.
DEPENDENT TASKS, MULTIPLE SUCCESSOR TASKS, AND MULTIPLE
PREDECESSOR TASKS Perform Task 1. When Task 1 is complete, perform Task 2.
When Task 2 is finished, start two Tasks: Task 3 and Task 4. When Task 3 is complete,
start two more tasks: Task 5 and Task 6. When Tasks 5 and 6 are done, start Task 7.
Then, when Tasks 4 and 7 are finished, perform Task 8.
1 2
FIGURE 3-18 Dependent tasks.
2
3
4
6
5
1
FIGURE 3-19 Dependent tasks and multiple successor tasks.
1 2
3 7
8
4
6
5
FIGURE 3-20 Dependent tasks, multiple successor tasks, and multiple predecessor tasks.
Obtain Authorization
ID: 1
Dur: 15
Start: Day 1
Finish: Day 15
Create Job Description
ID: 2
Dur: 5Finish: Day 5
Start: Day 1
Conduct Interviews
ID: 3
Dur: 30
Start: Day 16
Finish: Day 45
EXAMPLE OF MULTIPLE PREDECESSOR TASKS
FIGURE 3-17 This example of multiple predecessor tasks shows that the start
time for a successor task must be the latest (largest) finish time for any of its
preceding tasks. In the example shown,Task 1 ends on Day 15,while Task 2 ends
on Day 5, so Task 1 controls the start time for Task 3.

Step 3: Calculate the Critical Path 113
Phase 1 Systems Planning
STEP 3: CALCULATE THE CRITICAL PATH
Task patterns determine the order in which the tasks are performed. Once the task sequence
has been defined, a project manager can schedule the tasks and calculate the critical path.
What Is a Critical Path?
A critical path is a series of tasks which, if delayed, would affect the completion date of
the overall project. If any task on the critical path falls behind schedule, the entire proj-
ect will be delayed. For example, suppose that you invite Joan and Jim to your home for
dinner. Joan arrives on time, but Jim arrives 30 minutes late. Jim’s arrival is part of the
critical path, because you do not want to start without him, so the meal will be served
30 minutes later than originally planned.
Project managers always must be aware of the critical path, so they can respond
quickly to keep the project on track. Microsoft Project and other project management
software can highlight the series of tasks that form the critical path.
How Do I Calculate the Critical Path?
Figure 3-21 shows a training project with five tasks. Notice that the analyst has arranged
the tasks and entered task names, IDs, and durations. First, you should review the task
patterns. In this example, Task 1 is followed by Task 2, which is a dependent task. Task 2
has two successor tasks: Task 3 and Task 4. Tasks 3 and 4 are predecessor tasks for Task 5.
The next step is to determine start and finish dates, which will determine the critical
path for the project. The following explanation will guide you through a step-by-step
process. The result is shown in Figure 3-22 on the next page.
Plan Training
ID: 3
Dur: 5
Arrange Logistics
ID: 4
Dur: 25
Hire Analyst
ID: 2
Dur: 30
Announce Training
ID: 5
Dur: 30
Obtain Authorization
ID: 1
Dur: 10
FIGURE 3-21 Example of a PERT/CPM chart with five tasks. Task 2 is a dependent task that has multiple successor tasks. Task 5 has
multiple predecessor tasks. In this figure, the analyst has arranged the tasks and entered task names, IDs, and durations.
VIDEO LEARNING SESSION: CRITICAL PATH ANALYSIS
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate
Web site at www.cengagebrain.com and navigate to the Video Learning Sessions for
this book. This session is about critical path analysis. You’ll learn what a critical path is and why
it is important, how to calculate task dates and identify the critical path, and how to use
Microsoft Project to analyze and display the critical path.

www.cengagebrain.com

Project Monitoring and Control114
Chapter 3 Managing Systems Projects
• Task 1 starts on Day 1 and has a duration of 10 days, so the finish date is Day 10.
• Task 2, which is dependent on Task 1, can start on Day 11 — the day after
Task 1 ends. With a duration of 30 days, Task 2 will end on Day 40.
• Tasks 3 and 4 are multiple successor tasks that can start after Task 2 is done.
Task 2 ends on Day 40, so Tasks 3 and 4 both can start on Day 41. Task 3 has a
duration of 5 days, and will end on Day 45. Task 4 has a duration of 25 days,
and will not end until Day 65.
• Task 5 depends on Tasks 3 and 4, which are multiple predecessors. Because
Task 5 depends on both tasks, it cannot start until the later of the two tasks is
complete. In this example, Task 3 ends earlier, but Task 4 will not be completed
until Day 65, so Task 5 cannot start until Day 66.
Recall that the critical path is a series of tasks which, if delayed, would affect the
final completion date of the overall project. In this example, Tasks 1 and 2 are the first
tasks on the critical path. Now look at Task 5, which cannot start until both Tasks 3
and 4 are done. In this case, Task 4 is the controlling factor, because Task 4 finishes on
Day 65, which is 20 days later than Task 3, which is completed on Day 45. Therefore,
the start date for Task 5 is determined by the finish date for Task 4. In contrast, Task 3
has slack time, and could be delayed up to 20 days without affecting Task 5. Slack time
is the amount of time that the task could be late without pushing back the completion
date of the entire project. Tasks 1, 2, 4, and 5 represent the critical path, which is high-
lighted with red arrows in Figure 3-22.
PROJECT MONITORING AND CONTROL
Regardless of whether the project was planned and scheduled with project management
software or in some other manner, the project manager must keep track of the tasks and
progress of team members, compare actual progress with the project plan, verify the
completion of project milestones, and set standards and ensure that they are followed.
Monitoring and Control Techniques
To help ensure that quality standards are met, many project managers institute structured
walk-throughs. A structured walk-through is a review of a project team member’s work by
other members of the team. Generally, systems analysts review the work of other systems
analysts, and programmers review the work of other programmers, as a form of peer
review. Structured walk-throughs take place throughout the SDLC and are called design
reviews, code reviews, or testing reviews, depending on the phase in which they occur.
Plan Training
ID: 3
Dur: 5
Arrange Logistics
ID: 4
Dur: 25Finish: Day 65
Start: Day 41
Hire Analyst
ID: 2
Dur: 30
Start: Day 11
Finish: Day 40
Announce Training
ID: 5
Dur: 30
Start: Day 66
Finish: Day 95
Obtain Authorization
ID: 1
Dur: 10
Start: Day 1
Finish: Day 10
CRITICAL PATH:1-2-4-5
Start: Day 41
Finish: Day 45
FIGURE 3-22 Now the analyst has entered the start and finish times, using the rules explained in this section. Notice that the
overall project has a duration of 95 days.

Reporting 115
Phase 1 Systems Planning
Maintaining a Schedule
Maintaining a project schedule can be challenging, and most projects run into at least
some problems or delays. By monitoring and controlling the work, the project manager
tries to anticipate problems, avoid them or minimize their impact, identify potential
solutions, and select the best way to solve the problem.
The better the original plan, the easier it will be to control the project. If clear, verifiable
milestones exist, it will be simple to determine if and when those targets are achieved. If
enough milestones and frequent checkpoints exist, problems will be detected rapidly. A
project that is planned and scheduled with PERT/CPM can be tracked and controlled
using these same techniques. As work continues, the project manager revises the plan to
record actual times for completed tasks and revises times for tasks that are not yet finished.
Project managers spend most of their time tracking the tasks along the critical path,
because delays in those tasks have the greatest potential to delay or jeopardize the project.
Other tasks cannot be ignored, however. For example, suppose that a task not on the criti-
cal path takes too long and depletes the allotted slack time. At that point, the task actually
becomes part of the critical path, and any further delay will push back the overall project.
REPORTING
Members of the project team regularly report their progress to the project manager, who
in turn reports to management and users. As shown in Figure 3-23, the project manager
collects, verifies, organizes, and evaluates the information he or she receives from the
team. Then the manager decides which information needs to be passed along, prepares a
summary that can be understood easily, adds comments and explanations if needed, and
submits it to management and users.
Project Status Meetings
Project managers, like the one shown in Figure 3-24, schedule regular meetings to
update the team and discuss project status, issues, problems, and opportunities.
Although meetings can be time consuming, most project managers believe they are
worth the effort. The sessions give team members an opportunity to share information,
discuss common problems, and explain new techniques. The meetings also give the proj-
ect manager an opportunity to seek input and conduct brainstorming sessions.
Project Status Reports
Before going further, you should read the Question of Ethics feature on
page 125, which describes an interesting conflict at Final Four Industries.
Team
members
Progress
reports
Summary
report
Users
Management
Project manager
collects, verifies,
organizes, and
evaluates information
FIGURE 3-23 Members of the project team regularly report their progress to the
project manager, who in turn reports to management and users.
FIGURE 3-24 Project managers sched-
ule regular meetings to update the project
team and discuss project status, issues,
problems, and opportunities.
TOOLKIT TIME
The Communication
Tools in Part A of
the Systems Analyst’s
Toolkit can help you
develop better
reports and presen-
tations. To learn
more about these
tools, turn to Part A
of the four-part
Toolkit that follows
Chapter 12.

Project Management Examples116
Chapter 3 Managing Systems Projects
A project is in trouble, but the project manager is reluctant to report the problems. The
case highlights important ethical issues that often arise in this situation.
A project manager must report regularly to his or her immediate supervisor, upper
management, and users. Although a progress report might be given verbally to an imme-
diate supervisor, reports to management and users usually are written. Gantt charts
often are included in progress reports to show project status graphically. Deciding how
to handle potential problems can be difficult. At what point should you inform manage-
ment about the possibility of cost overruns, schedule delays, or technical problems? At
one extreme is the overly cautious project manager who alerts management to every
potential snag and slight delay. The danger here is that the manager loses credibility
over a period of time, and management might ignore potentially serious situations. At
the other extreme is the project manager who tries to handle all situations single-hand-
edly and does not alert management until a problem is serious. By the time management
learns of the problem, little time might remain in which to react or devise a solution.
A project manager’s best course of action lies somewhere between the two extremes, but
is probably closer to the first. If you are unsure of the consequences, you should be cautious
and warn management about the possibility of a problem. When you report the situation,
you also should explain what you are doing to handle and monitor the problem. If you
believe the situation is beyond your control, you might want to suggest possible actions
that management can take to resolve the situation. Most managers recognize that problems
do occur on most projects; it is better to alert management sooner rather than later.
PROJECT MANAGEMENT EXAMPLES
You can use these examples to practice the skills you learned in this chapter. You will
also see how you can use project management software to help you manage and display
the tasks.
PERT/CPM Example
Figure 3-25 shows a list of 11 tasks. The example is more complex, but the same guide-
lines apply. Notice that each task has an ID, a description, a duration, and a reference to
predecessor tasks, if any, which must be completed before the task can begin. Also notice
that dependent tasks can have one predecessor task, or several. You construct a PERT/
CPM chart from this task list in a two-step process:
STEP 1: CREATE THE WORK BREAKDOWN
STRUCTURE In the first step, as shown in
Figure 3-26 on the next page, you identify the
tasks, determine task dependencies, and enter
the task name, ID, and duration. Notice that
this example includes dependent tasks, multiple
successor tasks, and multiple predecessor tasks.
STEP 2: ENTER START AND FINISH TIMES
In the second step, as shown in Figure 3-27,
you enter the start and finish times by apply-
ing the guidelines in this section. For example,
Task 1 has a one-day duration, so you enter
the start and finish times for Task 1 as Day 1.
Then you enter Day 2 as the start time for suc-
cessor Tasks 2 and 3. Continuing from left to
right, you add the task duration for each task
FIGURE 3-25 Example of a table listing 11 tasks, together with their
descriptions, durations, and predecessor tasks.
Task
No.
Description Duration
(Days)
Predecessor
Tasks
1 Develop Plan 1 –
2 Assign Tasks 4 1
3 Obtain Hardware 17 1
4 Programming 70 2
5 Install Hardware 10 3
6 Program Test 30 4
7 Write User Manual 25 5
8 Convert Files 20 5
9 System Test 25 6
10 User Training 20 7, 8
11 User Test 25 9,10

Project Management Examples 117
Phase 1 Systems Planning
to its start time to determine its finish time. As you proceed, there are three important
rules you must keep in mind:
• If a successor task has more than one predecessor task, use the latest finish time
of the predecessor tasks to determine the start time for the successor task.
• If a predecessor task has more than one successor task, use the predecessor task’s
finish time to determine the start time for all successor tasks.
• Continuing from left to right, add the task duration for each task to its start time
to determine and enter its finish time. Again, be very careful not to add too many
days. For example, if a task starts on Day 10 and has a duration of 5 days, then
the finish would be Day 14 — not Day 15.
When you enter all the start and finish times, you determine that the project will be
completed on Day 155. Also, you note that Tasks 1, 2, 4, 6, 9, and 11 represent the
critical path shown by the red arrows.
User Test
ID: 11
Dur: 25
Develop Plan
ID: 1
Dur: 1
Program Test
ID: 6
Dur: 30
Start: Day 76
Programming
ID: 4
Dur: 70
System Test
ID: 9
Dur: 25
Assign Tasks
ID: 2
Dur: 4
Write User Manual
ID: 7
Dur: 25
Convert Files
ID: 8
Dur: 20
Install Hardware
ID: 5
Dur: 10
User Training
ID: 10
Dur: 20
Obtain Hardware
ID: 3
Dur: 17
TRANSFORMING A TASK LIST: STEP 1
FIGURE 3-26 To transform a task list into a PERT/CPM chart, you first enter the task name, ID, duration, and predecessors for each
task. Notice that this example includes dependent tasks, tasks with multiple successors, and tasks with multiple predecessors.
Develop Plan
ID: 1
Dur: 1
User Test
ID: 11
Dur: 25
Program Test
ID: 6
Dur: 30
Start: Day 76
Finish: Day 105
Programming
ID: 4
Dur: 70
Start: Day 6
Finish: Day 75
System Test
ID: 9
Dur: 25
Start: Day 106
Finish: Day 130
Assign Tasks
ID: 2
Dur: 4
Start: Day 2
Finish: Day 5
Start: Day 1
Finish: Day 1
Write User Manual
ID: 7
Dur: 25
Convert Files
ID: 8
Dur: 20Finish: Day 48
Start: Day 29
Install Hardware
ID: 5
Dur: 10
Start: Day 19
Finish: Day 28
User Training
ID: 10
Dur: 20
Start: Day 54
Finish: Day 73
Obtain Hardware
ID: 3
Dur: 17
Start: Day 2
Finish: Day 18
CRITICAL PATH:1-2-4-6-9-11
Start: Day 131
Finish: Day 155
Start: Day 29
Finish: Day 53
TRANSFORMING A TASK LIST: STEP 2
FIGURE 3-27 To complete the PERT/CPM chart, you apply the guidelines explained in this section. For example, Task 1 has a one-day
duration, so you enter the start and finish for Task 1 as Day 1. Then you enter Day 2 as the start for successor Tasks 2 and 3.

Project Management Examples118
Chapter 3 Managing Systems Projects
Software-Driven Example
Project managers use powerful software to help plan, schedule, monitor, and report on a
project. Most project management programs offer features such as PERT/CPM, Gantt
charts, resource scheduling, project calendars, and cost tracking.
Microsoft Project is a full-featured project management program that holds the dom-
inant share of the market. On the Web, Microsoft offers demo versions, training, and
tips. Although Microsoft is the industry leader, many other vendors offer project man-
agement software, and you can explore these options by searching on the Web. One
product, Open Workbench, is available as free software, complete with manuals and
sample projects, as shown in Figure 3-28. You can download the latest version from the
Open Workbench site at openworkbench.org, or you can use the download link in the
Features section of the Student Study Tool CD-ROM, which also contains a user manual
for Open Workbench.
As the Web site explains, Open Workbench is open-source software that is sup-
ported by a large group of users and developers. Support options include community
forums that are open to all users, various training packages, and third-party support.
For many small to medium-sized projects,
Open Workbench would be a cost-effective
alternative that would compare favorably to
Microsoft Project. Open Workbench also
can exchange files with Microsoft Project by
importing and exporting the data in XML
file format.
When you use project management soft-
ware, you follow the same step-by-step pro-
cess to develop a WBS and create various
types of charts. The following sections focus
on some basic concepts, but most programs
include many powerful features, such as
automated reporting tools, and convenient
data import-export tools. You can sample
these features by reviewing the Open
Workbench User Guide, which is included in
your Student Study Tool CD-ROM.
WORK BREAKDOWN
STRUCTURE You already
know how to create a work
breakdown structure. If you are
using Microsoft Project or
Open Workbench, the process is
exactly the same. You must
identify the tasks, durations,
and task patterns. You might
have to develop this informa-
tion on your own, or you might
work with a task summary like
the one in Figure 3-29. Your
manager would like you to cre-
ate a Gantt chart and a PERT
chart that show all tasks,
dependencies, dates, and total
project duration. Your first step
FIGURE 3-28 Open Workbench is a free, open-source project
management program with powerful features and capabilities.
FIGURE 3-29 A sample task summary.
Please study the following task summary:
• First, we will review the systems request. That will take three days.
• Then, two tasks can begin at once: We can review the documentation, which will
take three days, and review the Internet access delays, which will take two days.
• When the documentation and the Internet access delays have been analyzed, we
can contact managers about the interviews, which will take two days.
• After we contact the managers, we can plan the interview schedule, which will take
two days.
• Next, we can prepare the preliminary investigation report, which will take two days.
• When the report is ready, we can deliver our presentation to the committee, which
will take two days.
• After the presentation, three tasks can begin at once: We plan the interview
questions, which will take one day; contact the interviewees, which will take one
day; and send out the questionnaire, which will be returned in five days.
• When the interview questions are ready and the interviewees have been contacted,
we can conduct the interviews, which will take three days.
• Finally, when the interviews have been conducted and the questionnaire results are
back, we can tabulate all results, which will take one day.
To learn more about
project management
software, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Project
Management
Software link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Project Management Examples 119
Phase 1 Systems Planning
is to create a Gantt chart showing the necessary information. You decide to use
Microsoft Project to construct the chart. As you enter each task, you also enter the
duration and the predecessor tasks, if any.
GANTT CHART As you enter
the tasks, durations, and prede-
cessor tasks, the program
automatically performs the
calculations, detects the task
patterns, and creates a Gantt
chart similar to the one shown
in Figure 3-30. The chart con-
sists of 12 horizontal bars,
connected with arrows that
indicate the task dependencies.
Notice that Saturdays and
Sundays are shown as shaded
columns, because no work will
be performed on those days. The
program makes these adjustments automatically. For example, Task 2, which has a
duration of three days, starts on Thursday and ends on Monday.
NETWORK DIAGRAM After you complete the Gantt chart, you decide to view the data
in the form of a Microsoft Project network diagram, which is similar to a PERT chart.
When you select the Network Diagram option on the View menu, you can see the project
tasks and dependencies, as shown in Figure 3-31. You study the diagram and see that the
program has calculated a start and finish date for each task. Notice that the diagram dis-
plays the same information as the Gantt chart, including task dependencies, and also
includes a red line that indicates the project’s critical path. According to the diagram, if the
FIGURE 3-30 Open Workbench can show the sample project as a Gantt chart, or as a
PERT chart that includes tasks, durations, dependencies, and a highlighted critical path.
Review systems request Review documentation
Review internet access
delays
Contact interviewees
Plan interview questions
Send questionnaire and
obtain results
Deliver presentation to
committee
Conduct interviews
Tabulate all results
Contact managers about
interviews
Plan the interview
schedule
Prepare preliminary
investigation report
1 2
8
11
7 10
12
3 days 5 days
3 2 days
2 days
9 1 day
1 day
1 day
3 days
6 days
2 days 5 days 2 days4 5 6
Mon 9/19/11 Wed 9/21/11 Thu 9/22/11 Mon 9/26/11
Thu 9/22/11 Fri 9/23/11
Fri 10/14/11Fri 10/7/11 Thu 10/13/11
Mon 10/10/11
Fri 10/7/11
Fri 10/7/11Wed 10/5/11 Thu 10/6/11 Fri 10/7/11
Fri 10/7/11
Wed 10/12/11
Fri 10/14/11
Tue 9/27/11 Wed 9/28/11 Mon 10/3/11Thu 9/29/11 Mon 10/3/11 Tue 10/4/11
FIGURE 3-31 Using Microsoft Project, you can display a network diagram, which is similar to a PERT chart. Notice that the critical
path appears as a red line.

Project Management Examples120
Chapter 3 Managing Systems Projects
project remains on schedule, the last task will be completed on Friday, October 14, 2011.
Notice that the task boxes in Microsoft Project are similar to PERT/CPM task boxes.
Using Microsoft Project, you can assign each task to one or more people, assign budget
targets, produce progress reports, and readjust schedules and deadlines as necessary.
The latest version of Project is Microsoft Project 2010. This release is offered in a
Standard version, a Professional version, and a Server version that includes support for
large, enterprise-wide projects. In addition to providing a full description, demos, and
training on its Web site, Microsoft also offers a free 60-day trial version that allows you
to install, use, and evaluate the program.
An alternative to Microsoft Project is the Open Workbench program, which is free.
Figure 3-32 shows the Open Workbench version of the same project shown in Figure
3-30 on the previous page. Using Open Workbench, you create tasks and durations, indi-
cate dependencies, and assign resources, just as you would in Microsoft Project. Notice
that the critical path is highlighted, both in the Gantt chart and the network diagram.
Regardless of which software you use, you can see from these examples that project
schedules, task estimates, and personnel assignments all are interrelated. Therefore, proj-
ect planning is a dynamic task and involves constant change. One significant advantage
of integrated interactive project management software is that it allows the project man-
ager to adjust schedules, estimates, and resource assignments rapidly to develop a work-
able plan.
FIGURE 3-32 Open Workbench can show the sample project as a Gantt chart, or as a PERT chart that includes tasks, durations,
dependencies, and a highlighted critical path.

Risk Management 121
Phase 1 Systems Planning
RISK MANAGEMENT
Every IT project involves risks that systems analysts and project managers must address.
A risk is an event that could affect the project negatively. Risk management is the pro-
cess of identifying, analyzing, anticipating, and monitoring risks to minimize their
impact on the project.
Steps in Risk Management
The first step in risk management is to develop a specific plan. Although project man-
agement experts differ with regard to the number of steps or phases, a basic list would
include the following tasks:
• Develop a risk management plan. A risk management plan includes a review of
the project’s scope, stakeholders, budget, schedule, and any other internal or
external factors that might affect the project. The plan should define project roles
and responsibilities, risk management methods and procedures, categories of
risks, and contingency plans.
• Identify the risks. Risk identification lists each risk and assesses the likelihood
that it could affect the project. The details would depend on the specific project,
but most lists would include a means of identification, and a brief description of
the risk, what might cause it to occur, who would be responsible for responding,
and the potential impact of the risk.
• Analyze the risks. This typically is a two-step process: Qualitative risk analysis and
quantitative risk analysis. Qualitative risk analysis evaluates each risk by estimating
the probability that it will occur and the degree of impact. Project managers can use a
formula to weigh risk and impact values, or they can display the results in a two-axis
grid. For example, a Microsoft Excel XY chart can be used to display the matrix, as
shown in Figure 3-33. In the chart, notice the various combinations of risk and
impact ratings for the five sample values. This tool can help a project manager focus
on the most critical areas, where risk probability and potential impact are high.
CASE IN POINT 3.4: CENSUS 2010
In April 2008, the U.S. Commerce Department canceled a plan to acquire 500,000 handheld
computers to tabulate data during the 2010 census. According to Commerce Secretary
Carlos Gutierrez, costs had skyrocketed. He blamed the problem on “a lack of effective
communications with one of our major suppliers.”
Apparently, there was plenty of blame to go around. Secretary Gutierrez noted that the
Census Bureau had submitted numerous technical changes to the vendor, Harris Corporation.
This greatly increased the cost and the complexity of the devices. Gutierrez stated, “The
Census Bureau was unaccustomed to working with an outside vendor on such a large
contract.” He also pointed out that the vendor had submitted an initial estimate of
$36 million to operate a help desk to assist census-takers, but that figure had jumped to
$217 million. “It was a bad estimate. I can’t think of a better way to say it. Harris gave us the
number. We accepted it. It was totally underestimated.”
What can be learned from the failure of this project, and could it have been prevented?
Suppose you were asked to head up a similar project. What would you do to prevent a similar
outcome?

Risk Management122
Chapter 3 Managing Systems Projects
The purpose of quantitative risk analysis is to
understand the actual impact in terms of dollars,
time, project scope, or quality. Quantitative risk
analysis can involve a modeling process called
what-if analysis, which allows a project manager
to vary one or more element(s) in a model to mea-
sure the effect on other elements. This topic is dis-
cussed in more detail in Chapter 12, Managing
Systems Support and Security.
• Create a risk response plan. A risk
response plan is a proactive effort to
anticipate a risk and describe an action
plan to deal with it. An effective risk
response plan can reduce the overall
impact by triggering timely and appro-
priate action.
• Monitor risks. This activity is ongoing
throughout the risk management process.
It is important to conduct a continuous
tracking process that can identify new
risks, notice changes in existing risks, and
update any other areas of the risk man-
agement plan.
Risk Management Software
Most project management software includes
powerful features that allow a project manager
to assign specific dates as constraints, align task
dependencies, note external factors that might
affect a task, track progress, and display tasks
that are behind schedule. In addition, some ven-
dors offer risk management add-ons, such as
the one shown in Figure 3-34.
The enterprise edition of Microsoft Project,
Microsoft Project Server 2010, has a built-in
risk management capability that can be used
for large, corporate-wide projects. Microsoft
claims that the software can link risks with spe-
cific tasks and projects, specify probability and
impact, assign ownership, and track progress to
manage projects more efficiently. Microsoft’s
risk management model includes the following factors:
• Probability, which represents the likelihood that the risk will happen, expressed as
a percentage
• Impact, which indicates the degree of adverse effect should the risk occur, on a
scale of 1 to 10
• Cost, which indicates the potential financial impact of the risk
• Category, which specifies the risk type
• Description, which specifies the nature of the risk
• Mitigation plan, which identifies plans to control or limit the risk
High impact
Low probability
Medium impact
Medium probability High impact
High probability
Low impact
High probability
Low impact
Low probability
FIGURE 3-33 You can use a Microsoft Excel XY chart type to display a
risk matrix that shows risk probability and potential impact.
FIGURE 3-34 Intaver Institute offers an add-on risk management
package for Microsoft Project.

Managing for Success 123
Phase 1 Systems Planning
• Contingency plan, which specifies actions to be taken if the risk occurs
• Trigger, which identifies a condition that would initiate the contingency plan
Armed with this information, the IT team can make a recommendation regarding the
risks associated with the project. Depending on the nature and magnitude of the risks,
the final decision might be made by management.
MANAGING FOR SUCCESS
To be successful, an information system must satisfy business requirements, stay within
budget, be completed on time, and — most important of all — be managed effectively.
When a project develops problems, the reasons typically involve business, budget, or
schedule issues, as explained in the following sections. In addition to planning and man-
aging the project, a project manager must be able to recognize problems and deal with
them effectively.
Business Issues
The major objective of every system is to provide a solution to a business problem or
opportunity. If the system does not do this, then it is a failure — regardless of positive
reaction from users, acceptable budget performance, or timely delivery. When the infor-
mation system does not meet business requirements, causes might include unidentified
or unclear requirements, inadequately defined scope, imprecise targets, shortcuts or
sloppy work during systems analysis, poor design choices, insufficient testing or inade-
quate testing procedures, and lack of change control procedures. Systems also fail
because of changes in the organization’s culture, funding, or objectives. A system that
falls short of business needs also produces problems for users and reduces employee
morale and productivity.
As you learned in Chapter 2, projects without clear scope definitions are risky,
because they tend to expand gradually, without specific authorization, in a process
called project creep. However, even when a project is clearly described, it must be man-
aged constantly.
Budget Issues
Cost overruns typically result from one or more of the following:
• Unrealistic estimates that are too optimistic or based on incomplete information
• Failure to develop an accurate forecast that considers all costs over the life of the
project
• Poor monitoring of progress and slow response to early warning signs of
problems
• Schedule delays due to factors that were not foreseen
• Human resource issues, including turnover, inadequate training, and motivation
Schedule Issues
Problems with timetables and project milestones can indicate a failure to recognize task
dependencies, confusion between effort and progress, poor monitoring and control
methods, personality conflicts among team members, or turnover of project personnel.
The failure of an IT project also can be caused by poor project management techniques.

The Bottom Line124
Chapter 3 Managing Systems Projects
If the project manager fails to plan, staff, organize, supervise, communicate, motivate,
evaluate, direct, and control properly, then the project is certain to fail. Even when fac-
tors outside his or her control contribute to the failure, the project manager is responsi-
ble for recognizing the early warning signs and handling them effectively.
THE BOTTOM LINE
Project management is a challenging task. Project managers must be alert, technically
competent, and highly resourceful. They also must be good communicators with strong
human resource skills. A project manager can be proud when he or she handles a suc-
cessful project that helps the company achieve its business objectives, such as the Apple
product launch shown in Figure 3-35.
Unfortunately, projects can and do get derailed for a wide variety of reasons. When
problems occur, the project manager’s ability to handle the situation becomes the critical
factor. When a project manager first recognizes that a project is in trouble, what options
are available? Alternatives can include trimming the project requirements, adding to the
project resources, delaying the project deadline, and improving management controls and
procedures. Sometimes, when a project experiences delays or cost overruns, the system
still can be delivered on time and within budget if several less critical requirements are
trimmed. The system can be delivered to satisfy the most necessary requirements, and
additional features can be added later as a part of a maintenance or enhancement project.
If a project is in trouble because of a lack of resources or organizational support,
management might be willing to give the project more commitment and higher priority.
For example, management might agree to add more people to a project that is behind
schedule. Adding staff, however, will reduce the project’s completion time only if the
additional people can be integrated effectively into the development team. If team mem-
bers lack experience with certain aspects of the required technology, temporary help
might be obtained from IT consultants or part-time staff. Adding staff can mean train-
ing and orienting the new people, however. In some situations, adding more people to a
project actually might increase the time necessary to complete the project because of a
principle called Brooks’ Law. This interesting concept was stated by Frederick Brooks,
Jr., an IBM engineer, who observed that adding manpower to a late software project
only makes it later. Brooks reached this conclusion when he saw that new workers on a
project first had to be educated and instructed by existing employees whose own pro-
ductivity was reduced accordingly.
FIGURE 3-35 When a complex project is successful, the project manager
has a right to be proud.

Chapter Summary 125
Phase 1 Systems Planning
CHAPTER SUMMARY
Project management is the process of planning, scheduling, monitoring, and reporting
on the development of an information system. A successful project must be completed
on time, within budget, and deliver a quality product that satisfies users and meets
requirements. Project management techniques can be used throughout the SDLC.
Project managers are responsible for project planning, scheduling, monitoring,
and reporting. Planning includes identifying all project tasks and estimating the com-
pletion time and cost of each. Project scheduling involves the creation of a specific
timetable, usually in the form of charts that show tasks, task dependencies, and criti-
cal tasks that might delay the project. Project monitoring requires guiding, supervis-
ing, and coordinating the project team’s workload. The project manager must
monitor the progress, evaluate the results, and take corrective action when necessary
to control the project and stay on target. Project reporting includes regular progress
reports to management, users, and the project team itself. Effective reporting requires
strong communication skills and a sense of what others want and need to know
about the project.
Planning, scheduling, monitoring and reporting all take place within a larger project
development framework, which includes three key steps: creating a work breakdown
structure, identifying task patterns, and calculating the critical path.
A work breakdown structure must clearly identify each task and include an esti-
mated duration. A task, or activity, is any work that has a beginning and an end and
requires the use of company resources such as people, time, or money. Time and cost
estimates for tasks usually are made in person-days. A person-day represents the
work that one person can accomplish in one day. Estimating the time for project
activities is more difficult with larger systems. Project managers must consider the
project size and scope, IT resources, prior experience with similar projects or systems,
and applicable constraints. In addition to tasks, every project has events, or mile-
stones. An event, or milestone, is a recognizable reference point that you can use to
monitor progress.
Task patterns establish the sequence of work in a project. Task patterns involve
dependent tasks, multiple successor tasks, and multiple predecessor tasks. In larger proj-
ects, these patterns can be very complex.
A critical path is a series of tasks which, if delayed, would affect the completion date
of the overall project. If any task on the critical path falls behind schedule, the entire
A QUESTION OF ETHICS
“Better blow the whistle,” says Roy, your friend and project teammate at Final Four Industries.
“The project is out of control, and you know it!” “Maybe so,” you respond, “But that’s not my
call — I’m not the project manager.” What you don’t say is that Stephanie, the project man-
ager, feels like her career is on the line and she is reluctant to bring bad news to management
at this time. She honestly believes that the project can catch up, and says that a bad report on
a major project could result in bad publicity for the firm and frighten potential customers.
To be fair, the next management progress report is scheduled in three weeks. It is possible
that the team could catch up, but you doubt it. You wonder if there is an ethical question here:
Even though the report isn’t due yet, should a significant problem be reported to management
as soon as possible? You are concerned about the issue, and you decide to discuss it with
Stephanie. What will you say to her?

Chapter Summary126
Chapter 3 Managing Systems Projects
project will be delayed. Tasks on the critical path cannot have slack time. To identify the
critical path, you calculate the start and finish date for each task, which will determine
the critical path for the project.
In project scheduling, the project manager develops a specific time for each task,
based on available resources and whether or not the task is dependent on other prede-
cessor tasks. The manager can use graphical tools such as Gantt charts and PERT charts
to assist in the scheduling process.
A Gantt chart is a horizontal bar chart that represents the project schedule with time
on the horizontal axis and tasks arranged vertically. It shows individual tasks and task
groups, which include several tasks. In a Gantt chart, the length of the bar indicates the
duration of the tasks. A Gantt chart can display progress, but does not show task depen-
dency details or resource assignment unless the chart was created with a project man-
agement program that supports dependency linking and the entry of other information.
A PERT/CPM chart shows the project as a network diagram with tasks connected by
arrows. Using a prescribed calculation method, the project manager uses a PERT chart
to determine the overall duration of the project and provide specific information for
each task, including the task IDs, their durations, start and finish times, and the order in
which they must be performed. With this information, the manager can determine the
critical path, which is the sequence of tasks that have no slack time and must be per-
formed on schedule in order to meet the overall project deadline.
Most project managers use powerful software such as Microsoft Project and Open
Workbench to plan, schedule, and monitor projects. Project managers are responsible
for risk management, which is the process of identifying, analyzing, anticipating, and
monitoring risks to minimize their impact on the project.
In the end, every successful information system must support business requirements,
stay within budget, and be completed on time. Sound project management involves the
same skills as any other management. The project manager must be perceptive, analyti-
cal, well-organized, and a good communicator. If the project manager senses that the
project is off-track, he or she must take immediate steps to diagnose and solve the prob-
lem. If the project manager fails to plan, staff, organize, supervise, communicate, moti-
vate, evaluate, direct, and control properly, then the project is certain to fail. Even when
factors outside his or her control contribute to the failure, the project manager is
responsible for recognizing the early warning signs and handling them effectively.

127
Phase 1 Systems Planning
Key Terms and Phrases
Key Terms and Phrases
activity 106
best-case estimate 107
bottom-up technique 105
Brooks’ Law 124
code review 114
concurrent tasks 111
critical path 113
Critical Path Method (CPM) 105
dependent task 111
design review 114
duration 110
event 106
finish day/date 110
Gantt chart 104
Microsoft Project 118
milestone 106
network diagram 105
Open Workbench 118
open-source software 118
person-day 107
PERT/CPM 105
predecessor task 111
probable-case estimate 107
Program Evaluation Review Technique (PERT) 105
project coordinator 103
project creep 123
project leader 103
project management 102
project management software 113
project manager 103
project monitoring 103
project planning 103
project reporting 103
project scheduling 103
qualitative risk analysis 121
quantitative risk analysis 122
risk 121
risk identification 121
risk management 121
risk management plan 121
risk response plan 122
slack time 114
start day/date 110
structured walk-through 114
successor task 111
task 105
task box 110
task group 104
task ID 110
task name 110
task pattern 110
testing review 114
weight 107
work breakdown structure (WBS) 104
worst-case estimate 107

128
Chapter 3 Managing Systems Projects
Learn It Online
Instructions: To complete the Learn It Online exercises, visit the Management Information
Systems CourseMate Web site at www.cengagebrain.com, navigate to the resources for this
chapter, and click the link for the exercise you want to complete.
1 Chapter Reinforcement
TF, MC, and SA
Click the Chapter Reinforcement link. Print the quiz by clicking Print on the File menu
for each page. Answer each question.
2 Flash Cards
Click the Flash Cards link and read the instructions. Type 20 (or a number specified by
your instructor) in the Number of playing cards text box, type your name in the Enter
your name text box, and then click the Flip Card button. When the flash card is dis-
played, read the question and then click the ANSWER box arrow to select an answer.
Flip through the Flash Cards. If your score is 15 (75%) correct or greater, click Print
on the File menu to print your results. If your score is less than 15 (75%) correct, then
redo this exercise by clicking the Replay button.
3 Practice Test
Click the Practice Test link. Answer each question, enter your first and last name at the
bottom of the page, and then click the Grade Test button. When the graded practice
test is displayed on your screen, click Print on the File menu to print a hard copy.
Continue to take practice tests until you score 80% or better.
4 Who Wants To Be a Computer Genius?
Click the Computer Genius link. Read the instructions, enter your first and last name
at the bottom of the page, and then click the Play button. When your score is dis-
played, click the PRINT RESULTS link to print a hard copy.
5 Wheel of Terms
Click the Wheel of Terms link. Read the instructions, and then enter your first and last
name and your school name. Click the PLAY button. When your score is displayed on
the screen, right-click the score and then click Print on the shortcut menu to print a
hard copy.
6 Crossword Puzzle Challenge
Click the Crossword Puzzle Challenge link. Read the instructions, and then enter your
first and last name. Click the SUBMIT button. Work the crossword puzzle. When you
are finished, click the SUBMIT button. When the crossword puzzle is redisplayed, click
the Print Puzzle button to print a hard copy.
Learn It Online

www.cengagebrain.com

129
Phase 1 Systems Planning
SCR Associates Case Simulation Session 3: Managing Systems Projects
Overview
The SCR Associates case study is a Web-based simulation that
allows you to practice your skills in a real-world environment. The
case study transports you to SCR’s intranet, where you complete
12 work sessions, each aligning with a chapter. As you work on the case, you will receive
e-mail and voice mail messages, obtain information from SCR’s online libraries, and perform
various tasks.
How do I use the case?
• Review the SCR background material in Chapter 1.
• Read the Preview for this session and study the Task List
• Visit the Management Information Systems CourseMate Web site at www.cengagebrain.
com, navigate to the SCR Case Simulation, and locate the intranet link.
• Enter your name and the password sad9e. An opening screen will display the
12 sessions.
• Select this session. Check your e-mail and voice mail carefully, and then work on the
tasks.
Preview: Session 3
The TIMS system was approved by top management. Jesse Baker, systems group man-
ager, has asked you to help her manage the project. She said it will be a great opportunity to
learn more about project management and practice your skills, so you’ll be able to handle a
future project on your own. She specifically suggested that you become familiar with work
breakdown structures, task patterns, and critical path calculations. To make sure that you
are prepared, you decide to study the project management chapter in your textbook before
starting the tasks.
Task List
Case-Sim: SCR Associates
FIGURE 3-36 Task list: Session 3.
1. Jesse wants me to investigate Open Workbench software to determine whether it
would be suitable for SCR. She asked me to prepare a summary of pros and cons, and a
sample of screen shots and information.
2. Jesse likes the idea of using task completion estimates with best-case,
probable-case, and worst-case estimates. She said that I should use typical formulas
and weight values to create a Microsoft Excel spreadsheet that would make it easier
to calculate expected task durations.
3. To practice my skills, Jesse asked me to create an imaginary project with 10 tasks,
which include dependent, multiple predecessor, and multiple successor tasks. She
wants me to create a list showing the tasks and dependencies, and then lay it out on
paper to show the logical flow, and the duration, start, and finish for each task.
4. I’m excited to be part of the project team, and Jesse wants me to prepare a brief handout
for the other team members with some do’s and don’ts regarding project management.
She said to make it look like a checklist of keys to project success.

www.cengagebrain.com

www.cengagebrain.com

130
Chapter 3 Managing Systems Projects
Chapter Exercises
Review Questions
1. What is project management, and what are its main objectives?
2. What is the relationship between tasks and events, or milestones?
3. What is a work breakdown structure? How do you create one?
4. What are task patterns, and how can you recognize them?
5. Compare the advantages and disadvantages of Gantt and PERT/CPM charts.
6. Define the following terms: best-case estimate, probable-case estimate, and worst-
case estimate, and describe how project managers use these concepts.
7. How does a project manager calculate start and finish times?
8. What is a critical path, and why is it important to project managers? How do you
identify the critical path?
9. What are some project reporting and communication techniques?
10. What is risk management, and why is it important?
Discussion Topics
1. In Poor Richard’s Almanac, Benjamin Franklin penned the familiar lines: “For the
want of a nail the shoe was lost, for the want of a shoe the horse was lost, for the
want of a horse the rider was lost, for the want of a rider the battle was lost, for the
want of a battle the kingdom was lost — and all for the want of a horseshoe nail.”
Looking at the outcome in hindsight, could project management concepts have
avoided the loss of the kingdom? Explain your answers.
2. Microsoft Project is an example of software that is very powerful, but quite expen-
sive. As a project manager, how would you justify the purchase of this software?
Also, would you consider using Open Workbench? Why or why not?
3. Suppose you want to manage a relatively small project, but you have no access to
project management software of any kind. How could you use a spreadsheet pro-
gram or a database program to manage the project? Share your ideas with the class.
4. Many managers claim to have “seat of the pants” intuition when it comes to project
management. In your view, does this kind of intuition actually exist? Can you think
of examples to support your views?
Projects
1. Think of all the tasks that you perform when you purchase a car. Include any
research, decisions, or financial issues that relate to the purchase. Draw a Gantt
chart that shows all the tasks and the estimated duration of each.
2. Perform Internet research to learn more about project risk management, and write a
summary of the results. Be sure to search for a book titled Waltzing with Bears:
Managing Risk on Software Projects, by Tom Demarco and Timothy Lister.
3. Go to Microsoft’s Web site and navigate to the Download and Trials area. Select
Microsoft Project Professional 2010, download the program, and install it. Then
create a project based on the five tasks shown in Figure 3-21 on page 113. When the
project is complete, click View, then click Network Diagram. Do the tasks resemble
Figure 3-22 on page 114? Is the critical path the same?
4. Describe three personal experiences where a project management approach would
have been helpful.
Chapter Exercises

131
Phase 1 Systems Planning
Apply Your Knowledge
The Apply Your Knowledge section contains four mini-cases. Each case describes a situation,
explains your role in the case, and asks you to respond to questions. You can answer the
questions by applying knowledge you learned in the chapter.
1 Countywide Construction
At Countywide Construction, you are trying to convince your boss that he should
consider modern project management techniques to manage a complex project. Your
boss says that he doesn’t need anything fancy, and that he can guess the total time by
the seat of his pants.
To prove your point, you decide to use a very simple example of a commercial con-
struction project, with eight tasks. You create a hypothetical work breakdown struc-
ture, as follows:
• Prepare the foundation (10 days). Then assemble the building (4 days).
• When the building is assembled, start two tasks at once: Finish the interior work
(4 days) and set up an appointment for the final building inspection (30 days).
• When the interior work is done, start two more tasks at once: landscaping (5 days)
and driveway paving (2 days).
• When the landscaping and driveway are done, do the painting (5 days).
• Finally, when the painting is done and the final inspection has occurred, arrange
the sale (3 days).
Now you ask your boss to estimate the total time and write his answer on a piece of
paper. You look at the paper and see that his guess is wrong.
1. What is the correct answer?
2. What is the critical path?
3. Create a Gantt chart that shows the WBS.
4. Create a PERT/CPM chart.
2 Pleasantville High School Class
The computer science instructor at Pleasantville High School has asked you to visit her
class and give a presentation about project management. You have just a few days to
prepare, and you need to develop a presentation that briefly describes project manage-
ment tools and techniques. You can be creative, and you might want to include exam-
ples of actual projects that you know about. In any case, try to describe how projects
are planned, scheduled, monitored, and reported upon. Your presentation can be in the
form of a Microsoft Word outline with notes, or as a set of PowerPoint slides.
1. Prepare opening comments that give the class an overview of project
management.
2. Provide the class with a glossary of the most important project management
terms and definitions.
3. Think of a common event like buying a new home, and show the class how a
project manager might handle the matter.
4. Create a short scenario with 4 – 6 tasks, some of which depend on each other.
You can use the two preceding cases as a model. Develop a sample answer that
you will show the students after you give them a chance to analyze the tasks.
Apply Your Knowledge

132
Chapter 3 Managing Systems Projects
Apply Your Knowledge
3 Lightfoot Industries
You have been asked to lead a training session for new employees at Lightfoot Industries.
You must develop a specific schedule for the tasks listed below (the estimated task
duration for each is shown in parentheses):
• First, you need to contact the participants and explain their roles (1 day). Then
you must obtain approval from their department managers (5 days).
• After you obtain the approval, two tasks can begin at the same time: You can
arrange the meeting room (4 days) and prepare an agenda for the initial session
(11 days).
• When the agenda is ready, you can start two more concurrent tasks: Prepare the
information packets (4 days) and create visual aids (8 days).
• When the meeting room is arranged and the information packets are ready, you
can send out an e-mail to participants (1 day).
• Finally, after the e-mail is sent to participants and the visual aids are ready, you
can conduct the JAD sessions (5 days).
1. Prepare a list showing all tasks and their durations.
2. Analyze the fact situation carefully to determine which tasks are concurrent and
which ones are dependent on other tasks.
3. Using PERT/CPM techniques, develop a chart that shows the project. Use a format
similar to Figure 3-27 on page 117. If project management software is available,
use it to develop the chart.
4. What is the critical path for this project? How do you know?
4 Riverside Financial
At Riverside Financial, where you work as a project manager, you have been asked to
conduct user training sessions during the implementation phase for a new information
system. You must develop a specific schedule for the tasks (the estimated task duration
for each is shown in parentheses):
• First, you need to send an e-mail message to all department managers announcing
the training sessions (1 day).
• After the e-mail message goes out, two tasks can begin at the same time: You can
develop the training material (4 days) and confirm arrangements for the training
facility you plan to use (11 days).
• As soon as the training material is complete, you can work on two tasks at once:
Arrange to have copies of handout material printed (3 days) and develop a set of
PowerPoint slides (4 days).
• When the PowerPoint slides are ready, you conduct a practice training session
with the instructor who will assist you (1 day).
• Finally, when the practice session is over, the handout material is ready, and the
training facility is confirmed, you conduct the user training sessions (3 days).
1. Prepare a list showing all tasks and their durations.
2. Analyze the fact situation carefully to determine which tasks are concurrent and
which ones are dependant on other tasks.
3. Using PERT/CPM techniques, develop a chart that shows the project. Use a for-
mat similar to Figure 3-27 on page 117. If project management software is avail-
able, use it to develop the chart.
4. What is the critical path for this project? How do you know?

133 Case Studies
Case studies allow you to practice specific skills learned in the chapter. Each chapter contains
several case studies that continue throughout the textbook, and a chapter capstone case.
NEW CENTURY HEALTH CLINIC
New Century Health Clinic offers preventive medicine and traditional medical care. In your
role as an IT consultant, you will help New Century develop a new information system.
Background
To ensure the quality, cost, and timeliness of the new information system, New Century
is considering a project management approach. To obtain a better understanding of project
management, Dr. Jones contacted Precision Planning, a consulting firm that specializes in
managing projects of this type. He invited the company to deliver a brief presentation on
project management concepts and advantages, and to submit a proposal for project man-
agement consulting services.
You joined Precision Planning two years ago as a project assistant, after working two
summers as a student intern. Your supervisor, Charlie West, asked you to develop the pre-
sentation for New Century and you are excited about the opportunity. Charlie said that the
main objective is to provide a clear, informative presentation.
Charlie wants you to include the following topics in your presentation: an overview of
project management and its history, a description of the process, and an explanation of the
most important terms and concepts. Charlie also wants you to describe task identification,
various types of relationships among tasks, and schedule development. He says you should
show how Gantt and PERT/CPM charts are developed, and how they can be used to plan,
track, and control projects. Charlie also said that your presentation should include a specific
example to illustrate all the main points.
Assignments
1. Create a Microsoft PowerPoint presentation that will meet the requirements that
Charlie outlined to you.
2. Create a Microsoft Word handout that will meet the requirements that Charlie out-
lined to you.
3. Create a project management example with at least six tasks. Assign durations and
task dependencies. At least three of the tasks should be dependent on other tasks.
Use this example to display a Gantt chart.
4. Use the same data as Assignment 3 to display a PERT/CPM chart.
PERSONAL TRAINER, INC.
Personal Trainer, Inc. owns and operates fitness centers in a dozen Midwestern cities. The
centers have done well, and the company is planning an international expansion by opening
a new “supercenter” in the Toronto area. Personal Trainer’s president, Cassia Umi, hired an
IT consultant, Susan Park, to help develop an information system for the new facility.
During the project, Susan will work closely with Gray Lewis, who will manage the new
operation.
Background
You are enjoying your job as a student intern at Personal Trainer. Last week, Susan
asked you to help her plan the new information system project. Susan knows that you
have completed several information systems courses at the local college, and that you have
studied project management tools and techniques.
Case Studies
Phase 1 Systems Planning

134
Chapter 3 Managing Systems Projects
Case Studies
Specifically, she wants you to get ready for the next set of systems development tasks,
which will be requirements modeling for the new system. Yesterday, Susan called you into
her office to discuss the specific tasks she wants you to perform. After meeting with Susan,
you sit down and review your notes. She wants you to treat the set of tasks as a project, and
to use project management skills to plan the tasks.
Here is what she suggested to you as a work breakdown structure, including the duration
she estimated for each task:
• First, you need to meet with fitness center managers at other Personal Trainer
locations (10 days).
• After these meetings, you can conduct a series of interviews (8 days).
• When the interviews are complete, two tasks can begin at the same time: You can
review company records (2 days) and observe business operations (7 days).
• When you have reviewed the records and observed business operations, you can
analyze the BumbleBee accounting software (3 days) and study a sample of sales
and billing transactions (1 day).
You are excited about the opportunity to practice your skills, and you start to work on
the following list.
Assignments
1. Create a table listing all tasks separately, with their duration.
2. Identify all dependent tasks, and indicate what predecessor tasks are required.
3. Construct a PERT/CPM chart similar to the one in Figure 3-27 on page 117. If you
have access to Microsoft Project or other project management software, you can use
it to help you create the chart.
4. Determine the overall duration of the project, and identify the critical path.

135 Chapter Capstone Case: SoftWear, Limited
SoftWear, Limited (SWL) is a continuing case study that illustrates the knowledge and
skills described in each chapter. In this case study, the student acts as a member of the SWL
systems development team and performs various tasks.
Background
At a recent management meeting, SWL’s president, Robert Lansing, announced a major
effort to control costs and improve quality. To help achieve this goal, Mr. Lansing stated
that SWL would use project management tools and techniques to plan and manage all
major corporate projects. He named several people who would work as an interdepart-
mental team to coordinate SWL’s project management efforts. Team members included
April Lane, director of planning; Mike Feiner, director of human resources; and Ann Hon,
director of information technology.
The Interdepartmental Team
At their first meeting, the team came up with three main goals: Establish a company-
wide understanding of project management concepts, identify suitable project management
software, and develop comprehensive training for all SWL managers. Since Ann Hon had
the most experience with project management, she agreed to serve as team leader. She also
agreed to develop a list of concepts that the team could use as a starting point.
Project Management Concepts
The team met again a week later, and Ann distributed a list of 10 key questions:
1. What is a project?
2. What are project characteristics, constraints, and risks?
3. What is a project stakeholder?
4. What is the role of a project manager?
5. What is project planning?
6. What is project scheduling?
7. What is project monitoring and controlling?
8. What is project reporting?
9. What is project risk management?
10. What are the indications of project success or failure?
As the team members reviewed the list, Ann said that a set of working definitions
would be a good first step in developing a company-wide approach for managing projects.
She suggested that the answers were available from various sources, including a consider-
able body of literature and numerous online links. She also pointed out that the answers
would be a key part of the proposed training program for SWL managers. The team
decided to split up the research tasks and share the results at the next meeting.
Project Management Software
Ann made arrangements for the other team members to obtain a copy of Microsoft
Project, which is the leading project management program. She also suggested that each of
them try the brief Project training courses that are available on the Microsoft Web site.
She then walked them though a two-hour session that demonstrated the software. She
showed examples of Gantt charts, PERT charts, milestones, task dependencies, and
resource assignments.
(continues)
CHAPTER CAPSTONE CASE: SoftWear, Limited
Phase 1 Systems Planning

136
Chapter 3 Managing Systems Projects
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Ann also pointed out that other software alternatives exist, including free, open-source
programs, such as Open Workbench, which is supported by a large user group. For now, the
team agreed to obtain pricing and licensing information for Microsoft Project, and to look
into other alternatives to determine whether the other programs could exchange data with
Microsoft Project.
Project Management Training
Ann suggested that the team compare the pros and cons of in-house training versus
vendor-supplied training options. Again, Ann suggested the Microsoft Web site as a good
starting point to evaluate third-party solutions. Using information on the site, the team was
able to identify three training providers. After contacting these firms, the team had some
realistic time and cost estimates for outside training solutions.
Ann suggested that the team should also consider a train-the-trainer approach where she
would instruct an initial group from all SWL departments, and the training team would then
provide training sessions within their respective departments. Meanwhile, Mike Feiner won-
dered whether any current SWL employees had listed project management experience and
skills in their applications or résumés.
SWL Team Tasks
1. Using the material in this chapter and other reference material if necessary, develop a set
of answers to the 10 questions that Ann presented to the team.
2. Suppose that Ann asked you to create an outline for her two-hour demo session. You
can use Microsoft Project if it is available to you, or you can download a free demo ver-
sion from the Microsoft Web site. In your outline, try to mention the basic information
that a user would need to get started with a simple project.
3. Visit the Web site for Open Workbench and write a description of the product. Try to
include as many features as possible, and list the pros and cons of the program.
Determine whether the program can exchange information with Microsoft Project, and
whether any special techniques are necessary to accomplish the transfer.
4. Microsoft has launched MPUG, which stands for Microsoft Project User Group.
MPUG’s stated mission is to deliver Microsoft Office Project content, resources, oppor-
tunities, and community networking worldwide. Explore the site at mpug.com and note
the various levels of membership. Should SWL encourage IT staff members to join this
group? Write up a recommendation with your reasons.
Manage the SWL Project
You have been asked to manage SWL’s new information system project. One of your
most important activities will be to identify project tasks and determine when they will be
performed. Before you begin, you should review the SWL case in this chapter. Then list and
analyze the tasks, as follows:
LIST THE TASKS Start by listing and numbering at least 10 tasks that the SWL team needs
to perform to fulfill the objectives of this chapter. Your list can include SWL Team Tasks and
any other tasks that are described in this chapter. For example, Task 3 might be to Identify
the project tasks and Task 6 might be to Analyze task relationships.

137
Phase 1 Systems Planning
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
ANALYZE THE TASKS Now study the tasks to determine the order in which they should
be performed. First identify all concurrent tasks, which are not dependent on other tasks. In
the example shown in Figure 3-37, Tasks 1, 2, 3, 4, and 5 are concurrent tasks, and could
begin at the same time if resources are available.
Other tasks are dependent tasks, because they cannot be performed until one or more
earlier tasks have been completed. For each dependent task, you must identify specific tasks
that need to be completed before these tasks can begin. For example, you need to identify
the project tasks before you can analyze the task relationships, so Task 6 cannot begin until
Task 3 is completed, as Figure 3-37 shows.
This chapter describes project management tools, techniques, and software. To learn
more, you can use the Features section on your Student Study Tool CD-ROM, or visit the
Management Information Systems CourseMate Web site at www.cengagebrain.com and
locate the project management resources library for this book. On the Web, Microsoft
offers demo versions, training, and tips for using Project 2010. You also can visit the
OpenWorkbench.org site to learn more about this free, open-source software.
FIGURE 3-37 Tasks 1, 2, 3, 4, and 5 are concurrent tasks that could be performed at the same time. Task 6
is a dependent task that cannot be performed until Task 3 has been completed.

www.cengagebrain.com

138
Chapter 3 Managing Systems Projects
Ready for a Challenge?
Ready for a Challenge?
The IT group at Game Technology has received approval to add a new entry-level systems
analyst position. You will help set up the hiring timetable and tasks. After speaking to
several people in the department, you identified seven tasks and the order in which they
should be performed.
Using your notes, you write up the following statement: First, review the applications (2
days). Then start three tasks: notify the IT team (2 days), reserve a conference room
(1 day), and set up an interview schedule (5 days). When the team has been notified and
the conference room reserved, prepare a set of interview questions (2 days). When the
questions are ready and the interview schedule has been developed, conduct the interviews
(5 days). After the interviews are done, meet with the hiring committee to select a candidate
(1 day).
Practice Tasks
A. Prepare a work breakdown structure showing tasks, durations, and predecessor tasks.
B. Calculate the start and finish date for each task, and determine the critical path.
After you complete the Practice Tasks, to check your work and view sample answers, visit the
Management Information Systems CourseMate Web site at www.cengagebrain.com, navigate
to the resources for this chapter, and locate Ready for a Challenge?.
The Challenge
The hiring committee made a job offer to Sharon Adams, and she accepted. She will
start her new job in three weeks. As IT department intern, you were asked to set up an
orientation for her, including meetings with human resources, users, and the IT team.
She also would go on a tour of the company, and confirm a security clearance. After
thinking about this, you come up with a suggested orientation schedule, as follows:
First, Sharon would meet with human resources to learn about company benefits and
policies (3 hours). When that meeting is over, she could handle three tasks at once: she
could tour the company offices (4 hours), meet with users (3 hours), and work on the
necessary paperwork (2 hours). After the tour and user meetings, she could meet with the
IT managers (1 hour). Then, after meeting the IT managers and with all the paperwork
completed, she would meet with the entire IT team for a brief introduction (1 hour).
Challenge Tasks
A. Prepare a work breakdown structure showing tasks, durations, and predecessor tasks.
B. Calculate the start and finish date for each task, and determine the critical path.
In additional to technical skills, IT professionals need critical thinking skills such as perception, organization, analysis,
problem-solving, and decision-making. The Ready for a Challenge feature can help you learn, practice, and apply critical
thinking skills that you can take to the workplace.

www.cengagebrain.com

PHASE
As the Dilbert cartoon suggests, a successful project manager must determine the requirements
before starting the design process, not the other way around. You will learn more about fact-
finding and modeling system requirements in the systems analysis phase.
Systems analysis is the second of five phases in the systems development life cycle. In the previ-
ous phase, systems planning, you conducted a preliminary investigation to determine the proj-
ect’s feasibility. Now you will use requirements modeling, data and process modeling, and object
modeling techniques to represent the new system. You also will consider various development
strategies for the new system, and plan for the transition to systems design tasks. The deliver-
able for this phase is the system requirements document.
2
DELIVERABLE
System requirements document
TOOLKIT SUPPORT
Communication, CASE, and financial
analysis tools
VIDEO LEARNING SESSIONS
Functional Decomposition Diagrams,
DFDs, Decision Tables, and Object Models
SYSTEMS ANALYSIS
139

Chapter 4 is the first of four chapters in the systems
analysis phase. This chapter describes the process of
gathering facts about a systems project, preparing
documentation, and creating models that will be used to
design and develop the system.
Chapter 4 Requirements Modeling
Requirements
Modeling
4CHAPTER
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Describe systems analysis phase activities
• Explain joint application development (JAD),
rapid application development (RAD), and
agile methods
• Use a functional decomposition diagram
(FDD) to model business functions and
processes
• Describe the Unified Modeling Language
(UML) and examples of UML diagrams
• List and describe system requirements,
including outputs, inputs, processes,
performance, and controls
• Explain the concept of scalability
• Use fact-finding techniques, including inter-
views, documentation review, observation,
questionnaires, sampling, and research
• Define total cost of ownership (TCO)
• Conduct a successful interview
• Develop effective documentation methods to
use during systems development
INTRODUCTION
After an overview of the systems analysis phase, this
chapter describes requirements modeling techniques
and team-based methods that systems analysts use
to visualize and document new systems. The chap-
ter then discusses system requirements and fact-
finding techniques, which include interviewing,
documentation review, observation, surveys and
questionnaires, sampling, and research.
Chapter 4 includes a Video Learning Session that
shows you how to use a functional decomposition
diagram (FDD) to model business functions and
processes.

Introduction
Phase 2 Systems Analysis
141
CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Wendy Lee, manager of college services at Mountain View College, wants a new
information system that will improve efficiency and customer service at the three college
bookstores.
In this part of the case, Tina Allen (systems analyst) and David Conroe (student intern)
are talking about requirements modeling tasks and concepts.
Participants: Tina and David
Location: Tina’s office, Monday morning, October 3, 2011
Project status: The project has advanced to the systems analysis phase. Now, Tina and David will work on
modeling, fact-finding, and the documentation they need to build a requirements model for
the proposed bookstore information system.
Discussion topics: Modeling, team-based development strategies, fact-finding techniques, and documentation
Tina: Before I tell you about the project,
look at this Dilbert cartoon. You’ll
like it!
David: It’s funny, but scary too. Hope it
doesn’t apply to us!
Tina: Me too. That’s why we have to
do a good job of requirements
modeling.
David: So, what do we do next?
Tina: We need to create a model of the
new system. We call this a require-
ments model, because it will
include all the outputs, inputs, pro-
cesses, and controls for the new
system. The model will consist of
various diagrams, charts, and doc-
umentation.
David: How will we use the model when
we’re done?
Tina: We’ll study it carefully and review it frequently with system users.
David: Who are the users?
Tina: Users might include bookstore staff, students, faculty members, and the college business office. External users
might include textbook publishers and suppliers of bookstore merchandise. The main thing is to work with
users every step of the way. We’ll perform fact-finding, and we’ll document everything carefully. Here’s a task
list to get us started:
DILBERT: © Scott Adams/Dist. by United Feature Syndicate, Inc.
FIGURE 4-1 Typical requirements modeling task list.

142
Chapter 4 Requirements Modeling
Systems Analysis Phase Overview
SYSTEMS ANALYSIS PHASE
OVERVIEW
The overall objective of the systems analysis
phase is to understand the proposed project,
ensure that it will support business require-
ments, and build a solid foundation for sys-
tem development. In this phase, you use
models and other documentation tools to
visualize and describe the proposed system.
Systems Analysis Activities
The systems analysis phase includes the four
main activities shown in Figure 4-2: require-
ments modeling, data and process modeling,
object modeling, and consideration of devel-
opment strategies.
Although the waterfall model shows
sequential SDLC phases, it is not uncommon
for several phases (or certain tasks within a
phase) to interact during the development pro-
cess, just as they would in an adaptive model.
For example, this occurs whenever new facts
are learned or system requirements change
during the modeling process. Figure 4-2 shows
typical interaction among the three modeling
tasks: requirements modeling, data and process
modeling, and object modeling.
REQUIREMENTS MODELING This chapter describes requirements modeling, which
involves fact-finding to describe the current system and identification of the require-
ments for the new system, such as outputs, inputs, processes, performance, and security.
Outputs refer to electronic or printed information produced by the system. Inputs refer
to necessary data that enters the system, either manually or in an automated manner.
Processes refer to the logical rules that are applied to transform the data into meaning-
ful information. Performance refers to system characteristics such as speed, volume,
capacity, availability, and reliability. Security refers to hardware, software, and proce-
dural controls that safeguard and protect the system and its data from internal or
external threats.
DATA AND PROCESS MODELING In Chapter 5, Data and Process Modeling, you will
continue the modeling process by learning how to represent graphically system data and
processes using traditional structured analysis techniques. As you learned in Chapter 1,
structured analysis identifies the data flowing into a process, the business rules that trans-
form the data, and the resulting output data flow.
OBJECT MODELING Chapter 6 discusses object modeling, which is another popu-
lar modeling technique. While structured analysis treats processes and data as sep-
arate components, object-oriented analysis (O-O) combines data and the processes
that act on the data into things called objects. These objects represent actual
people, things, transactions, and events that affect the system. During the system
FIGURE 4-2 The systems analysis phase consists of requirements modeling,
data and process modeling, object modeling, and consideration of development
strategies. Notice that the systems analysis tasks are interactive, even though
the waterfall model generally depicts sequential development.
Data and
Process
Modeling
Requirements
Modeling
Development
Strategies
Object
Modeling
Systems Analysis Phase Tasks
VIDEO
LEARNING
SESSIONS
To learn more about
data flow diagrams,
visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate to
the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Joint Application Development
Phase 2 Systems Analysis
143
development process, analysts often use both modeling methods to gain as much
information as possible.
DEVELOPMENT STRATEGIES In Chapter 7, Development Strategies, you will consider
various development options and prepare for the transition to the systems design phase
of the SDLC. You will learn about software trends, acquisition and development alter-
natives, outsourcing, and formally documenting requirements for the new system.
The deliverable, or end product, of the systems analysis phase is a system requirements
document, which is an overall design for the new system. In addition, each activity within
the systems analysis phase has an end product and one or more milestones. As you learned
in Chapter 3, project managers use various tools and techniques to coordinate people,
tasks, timetables, and budgets.
Systems Analysis Skills
You will need strong analytical and interpersonal skills to build an accurate model of the
new system. Analytical skills enable you to identify a problem, evaluate the key elements,
and develop a useful solution. Interpersonal skills are especially valuable to a systems
analyst who must work with people at all organizational levels, balance conflicting needs
of users, and communicate effectively.
Because information systems affect people throughout the company, you should con-
sider team-oriented strategies as you begin the systems analysis phase.
Team-Based Techniques: JAD, RAD, and Agile Methods
The IT department’s goal is to deliver the best possible information system, at the lowest
possible cost, in the shortest possible time. To achieve the best results, system developers
view users as partners in the development process. Greater user involvement usually
results in better communication, faster development times, and more satisfied users.
The traditional model for systems development was an IT department that used
structured analysis and consulted users only when their input or approval was needed.
Although the IT staff still has a central role, and structured analysis remains a popular
method of systems development, most IT managers invite system users to participate
actively in various development tasks.
As you learned in Chapter 1, team-based approaches have been around for some time.
A popular example is joint application development (JAD), which is a user-oriented tech-
nique for fact-finding and requirements modeling. Because it is not linked to a specific
development methodology, systems developers use JAD whenever group input and interac-
tion are desired.
Another popular user-oriented method is rapid application development (RAD).
RAD resembles a condensed version of the entire SDLC, with users involved every step
of the way. While JAD typically focuses only on fact-finding and requirements determi-
nation, RAD provides a fast-track approach to a full spectrum of system development
tasks, including planning, design, construction, and implementation.
Finally, as you learned in Chapter 1, agile methods represent a recent trend that
stresses intense interaction between system developers and users. JAD, RAD, and agile
methods are discussed in the following sections.
JOINT APPLICATION DEVELOPMENT
Joint application development (JAD) is a popular fact-finding technique that brings
users into the development process as active participants.
To learn more about
interpersonal skills,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to On
the Web Links for
this chapter, and
locate the
Interpersonal
Skills link.
VIDEO
LEARNING
SESSIONS
To learn more about
obect modeling, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate to
the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

144
Chapter 4 Requirements Modeling
Joint Application Development
User Involvement
Users have a vital stake in an information system, and they should participate fully in
the development process. Until recent years, the IT department usually had sole respon-
sibility for systems development, and users had a relatively passive role. During the
development process, the IT staff would collect information from users, define system
requirements, and construct the new system. At various stages of the process, the IT staff
might ask users to review the design, offer comments, and submit changes.
Today, users typically have a much more active role in systems development. IT pro-
fessionals now recognize that successful systems must be user-oriented, and users need
to be involved, formally or informally, at every stage of system development.
One popular strategy for user involvement is a JAD team approach, which involves a
task force of users, managers, and IT professionals that works together to gather infor-
mation, discuss business needs, and define the new system requirements.
JAD Participants and Roles
A JAD team usually meets over a period of days or weeks in a special conference room
or at an off-site location. Either way, JAD participants should be insulated from the dis-
traction of day-to-day operations. The objective is to analyze the existing system, obtain
user input and expectations, and document user requirements for the new system.
The JAD group usually has a project leader, who needs strong interpersonal and
organizational skills, and one or more members who document and record the results
and decisions. Figure 4-3 describes typical JAD participants and their roles. IT staff
members often serve as JAD project leaders, but that is not always the case. Systems
analysts on the JAD team participate in discussions, ask questions, take notes, and pro-
vide support to the team. If CASE tools are available, analysts can develop models and
enter documentation from the JAD session directly into the CASE tool.
A typical JAD session agenda is shown in Figure 4-4. The JAD process involves
intensive effort by all team members. Because of the wide range of input and constant
interaction among the participants, many companies believe that a JAD group produces
the best possible definition of the new system.
To learn more about
JAD, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the JAD link.
FIGURE 4-3 Typical JAD participants and roles.
JAD PARTICIPANT ROLE
JAD project leader Develops an agenda, acts as a facilitator, and leads the JAD session
Top management Provides enterprise-level authorization and support for the project
Managers Provide department-level support for the project and understanding
of how the project must support business functions and requirements
Users Provide operational-level input on current operations, desired changes,
input and output requirements, user interface issues, and how the proj-
ect will support day-to-day tasks
Systems analysts and Provide technical assistance and resources for JAD team members on
other IT staff members issues such as security, backup, hardware, software, and network
capability
Recorder Documents results of JAD sessions and works with systems analysts
to build system models and develop CASE tool documentation

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Rapid Application Development
Phase 2 Systems Analysis
145
JAD Advantages and Disadvantages
Compared with traditional methods, JAD is more expensive and can be cumbersome if
the group is too large relative to the size of the project. Many companies find, however,
that JAD allows key users to participate effectively in the requirements modeling process.
When users participate in the systems development process, they are more likely to feel a
sense of ownership in the results, and support for the new system. When properly used,
JAD can result in a more accurate statement of system requirements, a better understand-
ing of common goals, and a stronger commitment to the success of the new system.
RAPID APPLICATION DEVELOPMENT
Rapid application development (RAD) is a team-based technique that speeds up
information systems development and produces a functioning information system.
Like JAD, RAD uses a group approach, but goes much further. While the end product
of JAD is a requirements model, the end product of RAD is the new information sys-
tem. RAD is a complete methodology, with a four-phase life cycle that parallels the
traditional SDLC phases. Companies use RAD to reduce cost and development time,
and increase the probability of success.
Project leader • Introduce all JAD team members
• Discuss ground rules, goals, and objectives for the JAD sessions
• Explain methods of documentation and use of CASE tools, if any
Top management (sometimes • Explain the reason for the project and express top management
called the project owner or authorization and support
sponsor)
Project leader • Provide overview of the current system and proposed project
scope and constraints
• Present outline of specific topics and issues to be investigated
Open discussion session, • Review the main business processes, tasks, user roles, input, and
moderated by project leader output
• Identify specific areas of agreement or disagreement
• Break team into smaller groups to study specific issues and
assign group leaders
JAD team members working • Discuss and document all system requirements
in smaller group sessions, • Develop models and prototypes
supported by IT staff
Group leaders • Report on results and assigned tasks and topics
• Present issues that should be addressed by the overall JAD team
Open discussion session, • Review reports from small group sessions
moderated by project leader • Reach consensus on main issues
• Document all topics
Project leader • Present overall recap of JAD session
• Prepare report that will be sent to JAD team members
FIGURE 4-4 Typical agenda for a JAD session.

146
Chapter 4 Requirements Modeling
Rapid Application Development
RAD relies heavily on prototyping and user involvement. The RAD process allows
users to examine a working model as early as possible, determine if it meets their needs,
and suggest necessary changes. Based on user input, the prototype is modified and the
interactive process continues until the system is completely developed and users are satis-
fied. The project team uses CASE tools to build the prototypes and create a continuous
stream of documentation.
RAD Phases and Activities
The RAD model consists of four phases: requirements planning, user design, construc-
tion, and cutover, as shown in Figure 4-5. Notice the continuous interaction between the
user design and construction phases.
To learn more about
RAD, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the RAD link.
REQUIREMENTS PLANNING The requirements planning phase combines elements of
the systems planning and systems analysis phases of the SDLC. Users, managers, and IT
staff members discuss and agree on business needs, project scope, constraints, and sys-
tem requirements. The requirements planning phase ends when the team agrees on the
key issues and obtains management authorization to continue.
USER DESIGN During the user design phase, users interact with systems analysts and
develop models and prototypes that represent all system processes, outputs, and inputs.
The RAD group or subgroups typically use a combination of JAD techniques and
CASE tools to translate user needs into working models. User design is a continuous,
Requirements
Planning
User
Design Construction
Cutover
Cutover Tasks
• Data conversion
• Full-scale testing
• System changeover
• User training
Construction Tasks
• Program and
application
development
• Coding
• Unit, integration,
and system testing
Requirements Planning
Tasks
• Users, managers, and IT
staff agree upon business
needs, project scope, and
systems requirements
• Obtain approval to
continue
User Design Tasks
• Interact with users
• Build models and
prototypes
• Conduct intensive
JAD-type sessions
FIGURE 4-5 The four phases of the RAD model are requirements planning, user design, construction,
and cutover. Notice the continuous interaction between the user design and construction phases.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Agile Methods
Phase 2 Systems Analysis
147
interactive process that allows users to understand, modify, and eventually approve a
working model of the system that meets their needs.
CONSTRUCTION The construction phase focuses on program and application devel-
opment tasks similar to the SDLC. In RAD, however, users continue to participate and
still can suggest changes or improvements as actual screens or reports are developed.
CUTOVER The cutover phase resembles the final tasks in the SDLC implementation
phase, including data conversion, testing, changeover to the new system, and user train-
ing. Compared with traditional methods, the entire process is compressed. As a result,
the new system is built, delivered, and placed in operation much sooner.
RAD Objectives
The main objective of all RAD approaches is to cut development time and expense by
involving users in every phase of systems development. Because it is a continuous
process, RAD allows the development team to make necessary modifications quickly,
as the design evolves. In times of tight corporate budgets, it is especially important to
limit the cost of changes that typically occur in a long, drawn-out development
schedule.
In addition to user involvement, a successful RAD team must have IT resources, skills,
and management support. Because it is a dynamic, user-driven process, RAD is especially
valuable when a company needs an information system to support a new business function.
By obtaining user input from the beginning, RAD also helps a development team design a
system that requires a highly interactive or complex user interface.
RAD Advantages and Disadvantages
RAD has advantages and disadvantages compared with traditional structured analysis
methods. The primary advantage is that systems can be developed more quickly with signif-
icant cost savings. A disadvantage is that RAD stresses the mechanics of the system itself
and does not emphasize the company’s strategic business needs. The risk is that a system
might work well in the short term, but the corporate and long-term objectives for the sys-
tem might not be met. Another potential disadvantage is that the accelerated time cycle
might allow less time to develop quality, consistency, and design standards. RAD can be an
attractive alternative, however, if an organization understands the possible risks.
AGILE METHODS
In Chapter 1, you learned that agile methods attempt to develop a system incrementally,
by building a series of prototypes and constantly adjusting them to user requirements.
As the agile process continues, developers revise, extend, and merge earlier versions into
the final product. An agile approach emphasizes continuous feedback, and each incre-
mental step is affected by what was learned in the prior steps.
As agile methods become more popular, a large community of agile-related software
and services has evolved. For example, Visual Paradigm offers Agilian, which includes a
set of agile modeling tools, as shown in Figure 4-6 on the next page. The Agilian model-
ing toolset includes support for many modeling tools, such as the Unified Modeling
Language, entity-relationship diagrams, data flow diagrams, and business process
modeling, among others.

148
Chapter 4 Requirements Modeling
Agile Methods
Some agile developers prefer not to use CASE tools at all, and rely instead on white-
board displays and arrangements of movable sticky notes. This approach, they believe,
reinforces the agile strategy: simple, rapid, flexible, and user-oriented.
Scrum is another agile approach. The name is derived from the rugby term scrum
(Figure 4-7), where team members prepare to lunge at each other to achieve their objec-
tives. The systems development version of Scrum involves the same intense interaction,
though more mental than physical. In a Scrum session, agile team members play specific
roles, including colorful designations as pigs or chickens. These roles are based on the
old joke about the pig and chicken who discuss a restaurant where ham and eggs would
be served. However, the pig declines, because that role would require a total commit-
ment, while for the chicken, it would only be a contribution.
In the agile world, the pigs include the product owner, the facilitator, and the devel-
opment team; while the chickens include users, other stakeholders, and managers. Scrum
sessions have specific guidelines that emphasize time blocks, interaction, and team-based
activities that result in deliverable software.
To learn more
about agile methods,
visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web
Links for this chap-
ter, and locate the
Agile Methods link.
FIGURE 4-6 Visual Paradigm’s Agilian includes many types of agile modeling tools.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Modeling Tools and Techniques
Phase 2 Systems Analysis
149
Agile Method Advantages and Disadvantages
Agile, or adaptive, methods are very flexible and efficient in dealing with change. They
are popular because they stress team interaction and reflect a set of community-based
values. Also, frequent deliverables constantly validate the project and reduce risk.
However, some potential problems exist. For example, team members need a high
level of technical and interpersonal skills. Also, a lack of structure and documentation
can introduce risk factors. Finally, the overall project may be subject to significant
change in scope as user requirements continue to evolve during the project.
FIGURE 4-7 In a rugby scrum, team members prepare to lunge at each other to achieve their objectives.
CASE IN POINT 4.1: NORTH HILLS COLLEGE
North Hills College has decided to implement a new registration system that will allow
students to register online, as well as in person. As IT manager, you decide to set up a JAD
session to help define the requirements for the new system. The North Hills organization
is fairly typical, with administrative staff that includes a registrar, a student support and ser-
vices team, a business office, an IT group, and a number of academic departments. Using
this information, you start work on a plan to carry out the JAD session. Who would you
invite to the session, and why? What would be your agenda for the session, and what
would take place at each stage of the session?
MODELING TOOLS AND TECHNIQUES
Models help users, managers, and IT professionals understand the design of a system.
Modeling involves graphical methods and nontechnical language that represent the system
at various stages of development. During requirements modeling, you can use various tools
to describe business processes, requirements, and user interaction with the system.
In Chapter 1, you learned about CASE tools that offer powerful modeling features.
CASE tool modeling is discussed in detail in Part B of the Systems Analyst’s Toolkit.

150
Chapter 4 Requirements Modeling
Modeling Tools and Techniques
Systems analysts use modeling and fact-finding interactively — first they build fact-
finding results into models, then they study the models to determine whether additional
fact-finding is needed. To help them understand system requirements, analysts use func-
tional decomposition diagrams, business process models, data flow diagrams, and
Unified Modeling Language diagrams. Any of these diagrams can be created
with CASE tools or standalone drawing tools if desired.
Functional Decomposition Diagrams
A functional decomposition
diagram (FDD) is a top-
down representation of a
function or process. Using
an FDD, an analyst can
show business functions
and break them down into
lower-level functions and
processes. Creating an FDD
is similar to drawing an
organization chart — you
start at the top and work
your way down. Figure 4-8
shows an FDD of a library
system drawn with the
Visible Analyst CASE tool.
FDDs can be used at sev-
eral stages of systems devel-
opment. During
requirements modeling,
analysts use FDDs to model
business functions and show
how they are organized into
lower-level processes. Those processes translate into program modules during applica-
tion development.
Business Process Modeling
As you learned in Chapter 1, a business process model (BPM) describes one or more busi-
ness processes, such as handling an airline reservation, filling a product order, or updating
a customer account. During requirements modeling, analysts often create models that use
a standard language called business process modeling notation (BPMN). BPMN includes
various shapes and symbols to represent events, processes, and workflows.
FIGURE 4-8 FDD showing five top-level functions. The Library
Operations function includes two additional levels that show processes
and subprocesses.
VIDEO LEARNING SESSION: FUNCTIONAL DECOMPOSITION
DIAGRAMS (FDDS)
Video Learning Sessions can help you understand key concepts, practice your skills, and check your
work. To access the sessions, visit the Management Information Systems CourseMate Web site at
www.cengagebrain.com and navigate to the Video Learning Sessions for this book. This
session is about functional decomposition diagrams (FDDs). You’ll learn about FDDs and why they
are important, how to use FDDs to model business functions and processes, and how to use CASE
tools to create FDDs.
ms, and
ed
TOOLKIT TIME
The CASE tools in
Part B of the
Systems Analyst’s
Toolkit can help you
document business
functions and pro-
cesses, develop
graphical models,
and provide an over-
all framework for
information system
development. To
learn more about
these tools, turn to
Part B of the
four-part Toolkit that
follows Chapter 12.

www.cengagebrain.com

Modeling Tools and Techniques
Phase 2 Systems Analysis
151
When you create a business process model
using a CASE tool such as Visible Analyst, your
diagram automatically becomes part of the over-
all model. In the example shown in Figure 4-9,
using BPMN terminology, the overall diagram is
called a pool, and the designated customer areas
are called swim lanes. Integrating BPM into the
CASE development process leads to faster
results, fewer errors, and reduced cost. Part B of
the Systems Analyst’s Toolkit describes business
process modeling in more detail.
Data Flow Diagrams
Working from a functional decomposition
diagram, analysts can create data flow diagrams
(DFDs) to show how the system stores, pro-
cesses, and transforms data. The DFD in
Figure 4-10 describes adding and removing
books, which is a function shown in the Library
Management diagram in Figure 4-8. Notice that
the two shapes in the DFD represent processes,
each with various inputs and outputs. Additional levels
of information and detail are depicted in other, related
DFDs. Data and process modeling is described in detail
in Chapter 5.
Unified Modeling Language
The Unified Modeling Language (UML) is a widely used
method of visualizing and documenting software systems
design. UML uses object-oriented design concepts, but it is
independent of any specific programming language and
can be used to describe business processes and require-
ments generally.
UML provides various graphical tools, such as use case
diagrams and sequence diagrams. During requirements
modeling, a systems analyst can utilize the UML to repre-
sent the information system from a user’s viewpoint. Use
case diagrams, sequence diagrams, and other UML con-
cepts are discussed in more detail in Chapter 6, along with
other object-oriented analysis concepts. A brief description
of each technique follows.
USE CASE DIAGRAMS During requirements modeling, systems analysts and users
work together to document requirements and model system functions. A use case
diagram visually represents the interaction between users and the information
system. In a use case diagram, the user becomes an actor, with a specific role that
describes how he or she interacts with the system. Systems analysts can draw use
case diagrams freehand or use CASE tools that integrate the use cases into the
overall system design.
Figure 4-11 shows a simple use case diagram for a sales system where the actor is a
customer and the use case involves a credit card validation that is performed by the
system. Because use cases depict the system through the eyes of a user, common business
FIGURE 4-9 Using the Visible Analyst CASE tool, an analyst can create
a business process diagram. The overall diagram is called a pool, and the
two separate customer areas are called swim lanes.
FIGURE 4-10 A library system DFD shows how books
are added and removed.
To learn more about
the Unified Modeling
Language, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
The Unified Modeling
Language link.

www.cengagebrain.com

www.cengagebrain.com

152
Chapter 4 Requirements Modeling
Modeling Tools and Techniques
FIGURE 4-11 Use case diagram of a sales system,
where the actor is a customer and the use case involves
a credit card validation.
FIGURE 4-13 Use case diagram of a student records system.
FIGURE 4-12 A table documents the credit card validation use case shown in Figure 4-11.
Name of Use Case: Credit card validation process
Actor: Customer
Description: Describes the credit card validation process
Successful Completion: 1. Customer clicks the input selector and
enters credit card number and expiration date
2. System verifies card
3. System sends authorization message
Alternative: 1. Customer clicks the input selector and
enters credit card number and expiration date
2. System rejects card
3. System sends rejection message
Precondition: Customer has selected at least one item and
has proceeded to checkout area
Postcondition: Credit card information has been validated
Customer can continue with order
Assumptions: None
language can be used to describe the transac-
tions. For example, Figure 4-12 shows a table
that documents the credit card validation use
case, and Figure 4-13 shows a student records
system, with several use cases and actors.
SEQUENCE DIAGRAMS A sequence diagram
shows the timing of interactions between
objects as they occur. A systems analyst might
use a sequence diagram to show all possible
outcomes, or focus on a single scenario.
Figure 4-14 shows a simple sequence dia-
gram of a successful credit card validation.
The interaction proceeds from top to bottom
along a vertical timeline, while the horizontal
arrows represent messages from one object
to another.

System Requirements Checklist
Phase 2 Systems Analysis
153
SYSTEM REQUIREMENTS CHECKLIST
During requirements modeling, systems developers must identify and describe all system
requirements. A system requirement is a characteristic or feature that must be included
in an information system to satisfy business requirements and be acceptable to users.
System requirements serve as benchmarks to measure the overall acceptability of the fin-
ished system.
System requirements fall into five general categories: outputs, inputs, processes, per-
formance, and controls. Typical examples of system requirements for each category are
listed below.
Output Examples
✓ The Web site must report online volume statistics every four hours, and hourly
during peak periods.
✓ The inventory system must produce a daily report showing the part number,
description, quantity on hand, quantity allocated, quantity available, and unit
cost of all sorted by part number.
✓ The contact management system must generate a daily reminder list for all sales reps.
✓ The purchasing system must provide suppliers with up-to-date specifications.
✓ The sales tracking system must produce a daily fast-moving-item report, listing all
products that exceed the forecasted sales volume grouped by style, color, size, and
reorder status.
✓ The customer analysis system must produce a quarterly report that identifies
changes in ordering patterns or trends with statistical comparisons to the previous
four quarters.
FIGURE 4-14 Sequence diagram showing a credit card
validation process.

154
Chapter 4 Requirements Modeling
System Requirements Checklist
Input Examples
✓ Manufacturing employees must swipe their ID cards into online data collection
terminals that record labor costs and calculate production efficiency.
✓ The department head must enter overtime hours on a separate screen.
✓ Student grades must be entered on machine-scannable forms prepared by the
instructor.
✓ Each input form must include date, time, product code, customer number, and
quantity.
✓ Data entry screens must be uniform, except for background color, which can be
changed by the user.
✓ A data entry person at the medical group must input patient services into the
billing system.
Process Examples
✓ The student records system must calculate the GPA at the end of each semester.
✓ As the final step in year-end processing, the payroll system must update employee
salaries, bonuses, and benefits and produce tax data required by the IRS.
✓ The warehouse distribution system must analyze daily orders and create a routing
pattern for delivery trucks that maximizes efficiency and reduces unnecessary
mileage.
✓ The human resources system must interface properly with the existing payroll
system.
✓ The video rental system must not execute new rental transactions for customers
who have overdue videos.
✓ The prescription system must automatically generate an insurance claim form.
Performance Examples
✓ The system must support 25 users online simultaneously.
✓ Response time must not exceed four seconds.
✓ The system must be operational seven days a week, 365 days a year.
✓ The accounts receivable system must prepare customer statements by the third
business day of the following month.
✓ The student records system must produce class lists within five hours after the
end of registration.
✓ The online inventory control system must flag all low-stock items within one
hour after the quantity falls below a predetermined minimum.
Control Examples
✓ The system must provide logon security at the operating system level and at the
application level.
✓ An employee record must be added, changed, or deleted only by a member of the
human resources department.
✓ The system must maintain separate levels of security for users and the system
administrator.

Future Growth, Costs, and Benefits
Phase 2 Systems Analysis
155
✓ All transactions must have audit trails.
✓ The manager of the sales department must approve orders that exceed a customer’s
credit limit.
✓ The system must create an error log file that includes the error type, description,
and time.
FUTURE GROWTH, COSTS, AND BENEFITS
In addition to the system requirements, systems analysts must consider scalability, which
determines how a system will handle future growth and demands, and the total cost of
ownership, which includes all future operational and support costs.
Scalability
Scalability refers to a system’s ability to handle increased business volume and transactions
in the future. Because it will have a longer useful life, a scalable system offers a better
return on the initial investment.
To evaluate scalability, you need information about projected future volume for all
outputs, inputs, and processes. For example, for a Web-based order processing system,
you would need to know the maximum projected number of concurrent users, the peri-
ods of peak online activity, the number and types of data items required for each trans-
action, and the method of accessing and updating customer files.
Even to print customer statements, you need to know the number of active accounts
and have a forecast for one, two, or five years, because that information affects future hard-
ware decisions. In addition, with realistic volume projections, you can provide reliable cost
estimates for related expenses, such as postage and online charges.
Similarly, to ensure that a Web-based hotel reservation system is sufficiently scalable,
you would need to project activity levels for several years of operation. For example,
you might forecast the frequency of online queries about room availability and estimate
the time required for each query and the average response time. With that information,
you could estimate server transaction volume and network requirements.
Transaction volume has a significant impact on operating costs. When volume exceeds
a system’s limitations, maintenance costs increase sharply. Volume can change dramati-
cally if a company expands or enters a new line of business. For example, a new Internet-
based marketing effort might require an additional server and 24-hour technical support.
Data storage also is an important scalability issue. You need to determine how
much data storage is required currently and predict future needs based on system
activity and growth. Those requirements affect hardware, software, and network
bandwidth needed to maintain system performance. You also must consider data
retention requirements and determine whether data can be deleted or archived on a
specific timetable.
Total Cost of Ownership
In addition to direct costs, systems developers must identify and document indirect
expenses that contribute to the total cost of ownership (TCO). TCO is especially impor-
tant if the development team is assessing several alternatives. After considering the indi-
rect costs, which are not always apparent, a system that seems inexpensive initially
might actually turn out to be the most costly choice. One problem is that cost estimates
tend to understate indirect costs such as user support and downtime productivity losses.
Even if accurate figures are unavailable, systems analysts should try to identify indirect
costs and include them in TCO estimates.
TOOLKIT TIME
The financial analysis
tools in Part C of
the Systems Analyst’s
Toolkit can help you
analyze project
costs, benefits, and
economic feasibility.
To learn more about
these tools, turn to
Part C of the four-
part Toolkit that fol-
lows Chapter 12.

156
Chapter 4 Requirements Modeling
Fact-Finding
Microsoft has developed a method for measuring total costs and benefits, called
Rapid Economic Justification (REJ), which is described in Figure 4-15. According to
Microsoft, REJ is a framework to help IT professionals analyze and optimize IT invest-
ments. Notice that the primary emphasis is on business improvement, rather than opera-
tional efficiency. As the Web site points out, the strategic role of IT investments should
be included, even when the specific benefits are difficult to quantify.
FACT-FINDING
Now that you understand the categories of system requirements, scalability, and TCO,
the next step is to begin collecting information. Whether you are working on your own
or as a member of a JAD team, during requirements modeling you will use various fact-
finding techniques, including interviews, document review, observation, surveys and
questionnaires, sampling, and research.
Fact-Finding Overview
Although software can help you to gather and analyze facts, no program actually
performs fact-finding for you. First, you must identify the information you need.
Typically, you begin by asking a series of questions, such as these:
• What business functions are supported by the current system?
• What strategic objectives and business requirements must be supported by the
new system?
• What are the benefits and TCO of the proposed system?
• What transactions will the system process?
• What information do users and managers need from the system?
To learn more
about REJ, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web
Links for this
chapter, and locate
the REJ link.
FIGURE 4-15 Microsoft developed Rapid Economic Justification (REJ) as a
framework to help IT professionals analyze and optimize IT investments.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Fact-Finding
Phase 2 Systems Analysis
157
• Must the new system interface with legacy systems?
• What procedures could be eliminated by business process reengineering?
• What security issues exist?
• What risks are acceptable?
• What budget and timetable constraints will affect system development?
To obtain answers to these questions, you develop a fact-finding plan, which can
involve another series of questions (who, what, where, when, and how), or use a more
structured approach such as the Zachman Framework, which is explained in a following
section. Either way, you will develop a strategy, carry out fact-finding techniques, docu-
ment the results, and prepare a system requirements document, which is presented to
management.
Who, What, Where, When, How, and Why?
Fact-finding involves answers to five familiar questions: who, what, where, when, and
how. For each of those questions, you also must ask another very important question:
why. Some examples of these questions are:
1. Who? Who performs each of the procedures within the system? Why? Are the
correct people performing the activity? Could other people perform the tasks
more effectively?
2. What? What is being done? What procedures are being followed? Why is that
process necessary? Often, procedures are followed for many years and no one
knows why. You should question why a procedure is being followed at all.
3. Where? Where are operations being performed? Why? Where could they be per-
formed? Could they be performed more efficiently elsewhere?
4. When? When is a procedure performed? Why is it being performed at this time?
Is this the best time?
5. How? How is a procedure performed? Why is it performed in that manner?
Could it be performed better, more efficiently, or less expensively in some other
manner?
There is a difference between asking what is being done and what could or should be
done. The systems analyst first must understand the current situation. Only then can he
or she tackle the question of what should be done. Figure 4-16 lists the basic questions
and when they should be asked. Notice that the first two columns relate to the current
system, but the third column focuses on the proposed system.
FIGURE 4-16 Sample questions during requirements modeling as the focus shifts from the current system to
the proposed system.
CURRENT SYSTEM PROPOSED SYSTEM
Who does it? Why does this person do it? Who should do it?
What is done? Why is it done? What should be done?
Where is it done? Why is it done there? Where should it be done?
When is it done? Why is it done then? When should it be done?
How is it done? Why is it done this way? How should it be done?

158
Chapter 4 Requirements Modeling
Fact-Finding
The Zachman Framework
In the 1980s, John Zachman observed how industries such as architecture and
construction handled complex projects, and he suggested that the same ideas could be
applied to information systems development. His concept, the Zachman Framework for
Enterprise Architecture, is a model that asks the traditional fact-finding questions in a
systems development context, as shown in Figure 4-17. The Zachman Framework is a
popular approach, and the Visible Analyst CASE tool now includes a Zachman
Framework interface that allows users to view a systems project from different perspec-
tives and levels of detail. The Zachman Framework helps managers and users understand
the model and ensures that overall business goals translate into successful IT projects.
FIGURE 4-17 Visible Analyst uses the Zachman Framework for Enterprise Architecture. The Zachman concept
presents traditional fact-finding questions in a systems development context.
To learn more
about the Zachman
Framework, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web
Links for this
chapter, and locate
The Zachman
Framework link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Interviews
Phase 2 Systems Analysis
159
INTERVIEWS
Interviewing is an important fact-finding tool during the systems analysis phase. An
interview is a planned meeting during which you obtain information from another per-
son. You must have the skills needed to plan, conduct, document, and evaluate inter-
views successfully.
After you identify the information you need, as described earlier in the chapter, you
can begin the interviewing process, which consists of seven steps for each interview:
1. Determine the people to interview.
2. Establish objectives for the interview.
3. Develop interview questions.
4. Prepare for the interview.
5. Conduct the interview.
6. Document the interview.
7. Evaluate the interview.
Step 1: Determine the People to Interview
To get an accurate picture, you must select the right people to interview and ask them
the right questions. During the preliminary investigation, you talked mainly to middle
managers or department heads. Now, during the systems analysis phase, you might need
to interview people from all levels of the organization.
Although you can select your interview candidates from
the formal organization charts that you reviewed earlier, you
also must consider any informal structures that exist in the
organization. Informal structures usually are based on inter-
personal relationships and can develop from previous work
assignments, physical proximity, unofficial procedures, or per-
sonal relationships such as the informal gathering shown in
Figure 4-18. In an informal structure, some people have more
influence or knowledge than appears on an organization
chart. Your knowledge of the company’s formal and informal
structures helps you determine the people to interview during
the systems analysis phase.
Should you interview several people at the same time?
Group interviews can save time and provide an opportunity to
observe interaction among the participants. Group interviews
also can present problems. One person might dominate the
conversation, even when questions are addressed specifically
to others. Organization level also can present a problem, as
the presence of senior managers in an interview might prevent
lower-level employees from expressing themselves candidly.
Step 2: Establish Objectives for the Interview
After deciding on the people to interview, you must establish
objectives for the session. First, you should determine the gen-
eral areas to be discussed, and then list the facts you want to
gather. You also should try to solicit ideas, suggestions, and
opinions during the interview.
FIGURE 4-18 When setting up interviews, an analyst
should look outside a formal organization chart to
identify people who might provide valuable information.

160
Chapter 4 Requirements Modeling
Interviews
The objectives of an interview depend on the role of the person being interviewed.
Upper-level managers can provide the big picture and help you to understand the system
as a whole. Specific details about operations and business processes are best learned
from people who actually work with the system on a daily basis.
In the early stages of systems analysis, interviews usually are general. As the fact-
finding process continues, however, the interviews focus more on specific topics.
Interview objectives also vary at different stages of the investigation. By setting specific
objectives, you create a framework that helps you decide what questions to ask and how
to phrase the questions.
Step 3: Develop Interview Questions
Creating a standard list of interview questions helps to keep you on track and avoid
unnecessary tangents. Also, if you interview several people who perform the same job, a
standard question list allows you to compare their answers. Although you have a list of
specific questions, you might decide to depart from it because an answer to one question
leads to another topic that you want to pursue. That question or topic then should be
included in a revised set of questions used to conduct future interviews. If the question
proves to be extremely important, you may need to return to a previous interviewee to
query him or her on the topic.
The interview should consist of several different kinds of questions: open-ended,
closed-ended, or questions with a range of responses. When you phrase your questions,
you should avoid leading questions that suggest or favor a particular reply. For example,
rather than asking, “What advantages do you see in the proposed system?” you might
ask, “Do you see any advantages in the proposed system?”
OPEN-ENDED QUESTIONS Open-ended questions encourage spontaneous and
unstructured responses. Such questions are useful when you want to understand a
larger process or draw out the interviewee’s opinions, attitudes, or suggestions. Here
are some examples of open-ended questions: What are users saying about the new
system? How is this task performed? Why do you perform the task that way? How
are the checks reconciled? What added features would you like to have in the new
billing system? Also, you can use an open-ended question to probe further by ask-
ing: Is there anything else you can tell me about this topic?
CLOSED-ENDED QUESTIONS Closed-ended questions limit or restrict the response.
You use closed-ended questions when you want information that is more specific or
when you need to verify facts. Examples of closed-ended questions include the follow-
ing: How many personal computers do you have in this department? Do you review
the reports before they are sent out? How many hours of training does a clerk receive?
Is the calculation procedure described in the manual? How many customers ordered
products from the Web site last month?
RANGE-OF-RESPONSE QUESTIONS Range-of-response questions are closed-ended
questions that ask the person to evaluate something by providing limited answers
to specific responses or on a numeric scale. This method makes it easier to tabulate
the answers and interpret the results. Range-of-response questions might include
these: On a scale of 1 to 10, with 1 the lowest and 10 the highest, how effective
was your training? How would you rate the severity of the problem: low, medium,
or high? Is the system shutdown something that occurs never, sometimes, often,
usually, or always?

Interviews
Phase 2 Systems Analysis
161
Step 4: Prepare for the Interview
After setting the objectives and developing the questions, you must prepare for the
interview. Careful preparation is essential because an interview is an important meeting
and not just a casual chat. When you schedule the interview, suggest a specific day and
time and let the interviewee know how long you expect the meeting to last. It is also a
good idea to send an e-mail or place a reminder call the day before the interview.
Remember that the interview is an interruption of the other person’s routine, so you
should limit the interview to no more than one hour. If business pressures force a post-
ponement of the meeting, you should schedule another appointment as soon as it is
convenient. Remember to keep
department managers informed of
your meetings with their staff
members. Sending a message to
each department manager listing
your planned appointments is a
good way to keep them informed.
Figure 4-19 is an example of such
a message.
You should send a list of topics
to an interviewee several days before
the meeting, especially when
detailed information is needed, so
the person can prepare for the inter-
view and minimize the need for a
follow-up meeting. Figure 4-20
shows a sample message that lists
specific questions and confirms the
date, time, location, purpose, and
anticipated duration of the
interview.
If you have questions about docu-
ments, ask the interviewee to have
samples available at the meeting.
Your advance memo should
include a list of the documents you
want to discuss, if you know what
they are. Also, you can make a gen-
eral request for documents, as the
analyst did in her e-mail shown in
Figure 4-20.
Two schools of thought exist
about the best location for an
interview. Some analysts believe
that interviews should take place
in the interviewee’s office, whereas
other analysts feel that a neutral
location such as a conference
room is better.
Supporters of interviews in the
interviewee’s office believe that is
the best location because it makes
the interviewee feel comfortable
during the meeting. A second
FIGURE 4-19 Sample message to a department head about interviews.
FIGURE 4-20 Sample message to confirm an interview.

162
Chapter 4 Requirements Modeling
Interviews
argument in favor of the interviewee’s office is that the office is where he or she has the
easiest access to supporting material that might be needed during the discussion. If you
provide a complete list of topics in advance, however, the interviewee can bring the nec-
essary items to a conference room or other location.
Supporters of neutral locations stress the importance of keeping interruptions to a
minimum so both people can concentrate fully. In addition, an interview that is free of
interruptions takes less time. If the meeting does take place in the interviewee’s office,
you should suggest tactfully that all calls be held until the conclusion of the interview.
Step 5: Conduct the Interview
After determining the people to interview, setting your objectives, and preparing the
questions, you should develop a specific plan for the meeting. When conducting an
interview, you should begin by introducing yourself, describing the project, and explain-
ing your interview objectives.
During the interview, ask questions in the order in which you prepared them, and
give the interviewee sufficient time to provide thoughtful answers. Establishing a good
rapport with the interviewee is important, especially if this is your first meeting. If the
other person feels comfortable and at ease, you probably will receive more complete and
candid answers. Your primary responsibility during an interview is to listen carefully to
the answers. Analysts sometimes hear only what they expect to hear. You must concen-
trate on what is said and notice any nonverbal communication that takes place. This
process is called engaged listening.
After asking a question, allow the person enough time to think about the question
and arrive at an answer. Studies have shown that the maximum pause during a conver-
sation is usually three to five seconds. After that interval, one person will begin talking.
You will need to be patient and practice your skills in many actual interview situations
to be successful.
When you finish asking your questions, summarize the main points covered in the
interview and explain the next course of action. For example, mention that you will
send a follow-up memo or that the interviewee should get back to you with certain
information. When you conclude the interview, thank the person and encourage him or
her to contact you with any questions or additional comments. Also, when the interview
ends, it is a good idea to ask the interviewee whether he or she can suggest any addi-
tional topics that should be discussed.
After an interview, you should summarize the session and seek a confirmation from
the other person. By stating your understanding of the discussion, the interviewee can
respond and correct you, if necessary. One approach is to rephrase the interviewee’s
answers. For example, you can say, “If I understand you correctly, you are saying that …”
and then reiterate the information given by the interviewee.
Step 6: Document the Interview
Although taking notes during an interview has both advantages and disadvantages, the
accepted view is that note taking should be kept to a minimum. Although you should
write down a few notes to jog your memory after the interview, you should avoid writ-
ing everything that is said. Too much writing distracts the other person and makes it
harder to establish a good rapport.
After conducting the interview, you must record the information quickly. You
should set aside time right after the meeting to record the facts and evaluate the infor-
mation. For that reason, try not to schedule back-to-back interviews. Studies have
shown that 50 percent of a conversation is forgotten within 30 minutes. You, there-
fore, should use your notes to record the facts immediately so you will not forget

Interviews
Phase 2 Systems Analysis
163
CASE IN POINT 4.2: DEEP RIVER COLLEGE
Deep River College is a two-year school in Southern California. Twice a year, the fund-
raising office at Deep River mails requests for donations to the alumni. The staff uses a word
processing program and a personal information database to create personalized letters. Data
on past contributions and other alumni information, however, is stored manually. The dean,
Alexandra Ali, recently submitted a systems request asking the college’s IT department to
develop a computerized alumni information system. The school does not have a formal systems
review committee, and each department has an individual budget for information services.
Eddie Bateman, a systems analyst, performed a preliminary investigation and he concluded that
the system met all the feasibility tests. After reading his report, Alexandra asked him to proceed
with the systems analysis phase. Eddie has scheduled an interview with her, and he has asked you
to help him prepare for the meeting. Specifically, he wants you to list all the topics he should
cover during the interview. Eddie also wants you to prepare a list of specific questions that he
should ask. Be sure to include open-ended, closed-ended, and range-of-response questions.
them. You can summarize the facts by preparing a narrative describing what took
place or by recording the answers you received next to each question on your prepared
question list.
Tape recorders are effective tools for an interview; however, many people feel uncom-
fortable when recorders are present. Before using a recorder, you should discuss its use
with the interviewee. Assure the interviewee that you will erase the tape after you tran-
scribe your notes and that you will stop and rewind the tape anytime during the inter-
view at his or her request. If you ask sensitive questions or the interviewee wants to
answer a question without being recorded, explain that you will turn off the tape for a
period of time during the interview.
Even with a tape recorder in use, you should listen carefully to the interviewee’s
responses so you can ask good follow-up questions. Otherwise, you might have to
return for a second visit to ask the questions you missed the first time. Also, remember
that each recorded interview takes twice the amount of time, because you must listen to
or view the recorded meeting again after conducting the interview itself.
After the interview, send a memo to the interviewee expressing your appreciation for
his or her time and cooperation. In the memo, you should note the date, time, location,
purpose of the interview, and the main points you discussed so the interviewee has a
written summary and can offer additions or corrections.
Step 7: Evaluate the Interview
In addition to recording the facts obtained in an interview, try to identify any possible
biases. For example, an interviewee who tries to protect his or her own area or function
might give incomplete answers or refrain from volunteering information. Or, an intervie-
wee with strong opinions about the current or future system might distort the facts.
Some interviewees might answer your questions in an attempt to be helpful even though
they do not have the necessary experience to provide accurate information.
Unsuccessful Interviews
No matter how well you prepare for interviews, some are not successful. One of the
main reasons could be that you and the interviewee did not get along well. Such a situation
can be caused by several factors. For example, a misunderstanding or personality conflict

164
Chapter 4 Requirements Modeling
Other Fact-Finding Techniques
CASE IN POINT 4.3: FASTPAK OVERNIGHT PACKAGE SYSTEM
FastPak, the nation’s fourth-largest overnight package system, is headquartered in Los Angeles,
California. Jesse Evans is a systems analyst on an IT team that is studying ways to update
FastPak’s package tracking system. Jesse prepared well for her interview with Jason Tanya,
FastPak’s executive vice president. Mr. Tanya did not ask his assistant to hold his calls during
the meeting, however. After several interruptions, Jesse tactfully suggested that she could
come back another time, or perhaps that Mr. Tanya might ask his assistant to hold his calls.
“No way,” he replied. “I’m a very busy man and we’ll just have to fit this in as we can, even if it
takes all day.” Jesse was unprepared for his response. What are her options? Is an analyst
always in control of this kind of situation? Why or why not?
could affect the interview negatively, or the interviewee might be afraid that the new sys-
tem will eliminate or change his or her job.
In other cases, the interviewee might give only short or incomplete responses to your
open-ended questions. If so, you should switch to closed-ended questions or questions
with a range of responses, or try rephrasing your open-ended questions into those types
of questions. If that still does not help, you should find a tactful way to conclude the
meeting.
Continuing an unproductive interview is difficult. The interviewee could be more
cooperative later, or you might find the information you seek elsewhere. If failure to
obtain specific information will jeopardize the success of the project, inform your super-
visor, who can help you decide what action to take. Your supervisor might contact the
interviewee’s supervisor, ask another systems analyst to interview the person, or find
some other way to get the needed information.
OTHER FACT-FINDING TECHNIQUES
In addition to interviewing, systems analysts use other fact-finding techniques, including
document review, observation, questionnaires and surveys, sampling, and research. Such
techniques are used before interviewing begins to obtain a good overview and to help
develop better interview questions.
Document Review
Document review can help you understand how the current system is supposed to work.
Remember that system documentation sometimes is out of date. Forms can change or be
discontinued, and documented procedures often are modified or eliminated. You should
obtain copies of actual forms and operating documents currently in use. You also should
review blank copies of forms, as well as samples of actual completed forms. You usually
can obtain document samples during interviews with the people who perform that pro-
cedure. If the system uses a software package, you should review the documentation for
that software.
Observation
The observation of current operating procedures is another fact-finding technique.
Seeing the system in action gives you additional perspective and a better understanding
of system procedures. Personal observation also allows you to verify statements made in
interviews and determine whether procedures really operate as they are described.

Other Fact-Finding Techniques
Phase 2 Systems Analysis
165
Through observation, you might discover that neither the system documentation nor the
interview statements are accurate.
Personal observation also can provide important advantages as the development pro-
cess continues. For example, recommendations often are better accepted when they are
based on personal observation of actual operations. Observation also can provide the
knowledge needed to test or install future changes and can help build relationships with
the users who will work with the new system.
Plan your observations in advance by preparing a checklist of specific tasks you want
to observe and questions you want to ask. Consider the following issues when you pre-
pare your list:
1. Ask sufficient questions to ensure that you have a complete understanding of the
present system operation. A primary goal is to identify the methods of handling
situations that are not covered by standard operating procedures. For example,
what happens in a payroll system if an employee loses a time card? What is the
procedure if an employee starts a shift 10 minutes late but then works 20 minutes
overtime? Often, the rules for exceptions such as these are not written or formal-
ized; therefore, you must try to document any procedures for handling exceptions.
2. Observe all the steps in a transaction and note the documents, inputs, outputs, and
processes involved.
3. Examine each form, record, and report.
Determine the purpose each item of informa-
tion serves.
4. Consider each user who works with the system
and the following questions: What information
does that person receive from other people?
What information does this person generate?
How is the information communicated? How
often do interruptions occur? How much down-
time occurs? How much support does the user
require, and who provides it?
5. Talk to the people who receive current reports
to see whether the reports are complete, timely,
accurate, and in a useful form. Ask whether
information can be eliminated or improved and
whether people would like to receive additional
information.
As you observe people at work, as shown in
Figure 4-21, consider a factor called the Hawthorne
Effect. The name comes from a well-known study
performed in the Hawthorne plant of the Western
Electric Company in the 1920s. The purpose of the
study was to determine how various changes in the
work environment would affect employee productiv-
ity. The surprising result was that productivity
improved during observation whether the conditions
were made better or worse. Researchers concluded
that productivity seemed to improve whenever the
workers knew they were being observed.
Although some recent studies have raised questions
about the original findings, you should be aware that
observation can and does have an effect on normal
FIGURE 4-21 The Hawthorne study suggested that worker
productivity improves during observation. Always consider
the Hawthorne Effect when observing the operation of an
existing system.

166
Chapter 4 Requirements Modeling
Other Fact-Finding Techniques
operations. With this in mind, always give advance notice to the supervisor in that area.
In some situations, it might be helpful to explain the purpose of your visit to the people
being observed.
Questionnaires and Surveys
In projects where it is desirable to obtain input from a large number of people,
a questionnaire can be a valuable tool. A questionnaire, also called a survey, is a docu-
ment containing a number of standard questions that can be sent to many individuals.
Questionnaires can be used to obtain information about a wide range of topics,
including workloads, reports received, volumes of transactions handled, job duties,
difficulties, and opinions of how the job could be performed better or more efficiently.
Figure 4-22 shows a sample questionnaire that includes several different question and
response formats.
FIGURE 4-22 Sample questionnaire. Does it follow the suggested guidelines?

Other Fact-Finding Techniques
Phase 2 Systems Analysis
167
A typical questionnaire starts with a heading, which includes a title, a brief statement of
purpose, the name and telephone number of the contact person, the deadline date for com-
pletion, and how and where to return the form. The heading usually is followed by general
instructions that provide clear guidance on how to answer the questions. Headings also are
used to introduce each main section or portion of the survey and include instructions when
the type of question or response changes. A long questionnaire might end with a conclusion
that thanks the participants and reminds them how to return the form.
What about the issue of anonymity? Should people be asked to sign the question-
naire, or is it better to allow anonymous responses? The answer depends on two ques-
tions. First, does an analyst really need to know who the respondents are in order to
match or correlate information? For example, it might be important to know what per-
centage of users need a certain software feature, but specific usernames might not be rel-
evant. Second, does the questionnaire include any sensitive or controversial topics?
Many people do not want to be identified when answering a question such as “How
well has your supervisor explained the system to you?” In such cases, anonymous
responses might provide better information.
When designing a questionnaire, the most important rule of all is to make sure that your
questions collect the right data in a form that you can use to further your fact-finding. Here
are some additional ideas to keep in mind when designing your questionnaire:
• Keep the questionnaire brief and user-friendly.
• Provide clear instructions that will answer all anticipated questions.
• Arrange the questions in a logical order, going from simple to more complex topics.
• Phrase questions to avoid misunderstandings; use simple terms and wording.
• Try not to lead the response or use questions that give clues to expected answers.
• Limit the use of open-ended questions that are difficult to tabulate.
• Limit the use of questions that can raise concerns about job security or other
negative issues.
• Include a section at the end of the questionnaire for general comments.
• Test the questionnaire whenever possible on a small test group before finalizing it
and distributing to a large group.
A questionnaire can be a traditional paper
form, or you can create a fill-in form and collect
data on the Internet or a company intranet. For
example, you can use Microsoft Word, as
shown in Figure 4-23, to create form fields,
including text boxes, date pickers, and drop-
down lists where users can click selections.
Before you publish the form, you should protect
it so users can fill it in but cannot change the
layout or design. Forms also can be automated,
so if a user answers no to question three, he or
she goes directly to question eight, where the
form-filling resumes.
Sampling
When studying an information system, you
should collect examples of actual documents
using a process called sampling. The samples
might include records, reports, operational logs,
FIGURE 4-23 Using Microsoft Word, you can create a fill-in form
with text boxes, date pickers, and drop-down lists.

168
Chapter 4 Requirements Modeling
Other Fact-Finding Techniques
data entry documents, complaint summaries, work requests, and various types of forms.
Sampling techniques include systematic sampling, stratified sampling, and random sampling.
Suppose you have a list of 200 customers who complained about errors in their state-
ments, and you want to review a representative sample of 20 customers. A systematic
sample would select every tenth customer for review. If you want to ensure that the sam-
ple is balanced geographically, however, you could use a stratified sample to select five
customers from each of four zip codes. Another example of stratified sampling is to select
a certain percentage of transactions from each zip code, rather than a fixed number.
Finally, a random sample selects any 20 customers.
The main objective of a sample is to ensure that it represents the overall population
accurately. If you are analyzing inventory transactions, for example, you should select a
sample of transactions that are typical of actual inventory operations and do not include
unusual or unrelated examples. For instance, if a company performs special processing
on the last business day of the month, that day is not a good time to sample typical daily
operations. To be useful, a sample must be large enough to provide a fair representation
of the overall data.
You also should consider sampling when using interviews or questionnaires. Rather
than interviewing everyone or sending a questionnaire to the entire group, you can use a
sample of participants. You must use sound sampling techniques to reflect the overall
population and obtain an accurate picture.
Research
Research is another important fact-finding technique. Your research can include the
Internet, IT magazines, and books to obtain background information, technical material,
and news about industry trends and developments. In addition, you can attend profes-
sional meetings, seminars, and discussions with other IT professionals, which can be
very helpful in problem solving.
The Internet is an extremely valuable
resource. Part D of the Systems Analyst’s
Toolkit describes a variety of Internet
resource tools. Using the Internet, you also
can access information from federal and
state governments, as well as from publish-
ers, universities, and libraries around the
world. Online forums and newsgroups are
good resources for exchanging information
with other professionals, seeking answers
to questions, and monitoring discussions
that are of interest to you.
All major hardware and software ven-
dors maintain sites on the Web where you
can obtain information about products
and services offered by the company and
send e-mail with specific questions to com-
pany representatives. In addition to con-
tacting specific firms, you can access Web
sites maintained by publishers and inde-
pendent firms that provide links to hun-
dreds of hardware and software vendors,
as shown in Figure 4-24. Such sites are
one-stop information centers where IT
professionals can find information, share
ideas, and keep posted on developments in
technology.
To learn more about
sampling, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Sampling
link.
FIGURE 4-24 InfoWorld’s Web site offers many resources for IT professionals.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Other Fact-Finding Techniques
Phase 2 Systems Analysis
169
Research also can involve a visit to a physical location,
called a site visit, where the objective is to observe a system in
use at another location. If you are studying your firm’s
human resources information system, for example, you might
want to see how another company’s system works. Site visits
also are important when considering the purchase of a soft-
ware package. If the software vendor suggests possible sites
to visit, be aware that such sites might constitute a biased
sample. A single site visit seldom gives you true pictures, so
you should try to visit more than one installation.
Before a site visit such as the one shown in Figure 4-25,
prepare just as you would for an interview. Contact the
appropriate manager and explain the purpose of your visit.
Decide what questions you will ask and what processes you
will observe. During your visit, observe how the system works
and note any problems or limitations. You also will want to
learn about the support provided by the vendor, the quality of
the system documentation, and so on.
Interviews versus Questionnaires
When you seek input from a large group, a questionnaire is a very useful tool. On the
other hand, if you require detailed information from only a few people, then you proba-
bly should interview each person individually. Is it better to interview or use a question-
naire? Each situation is different, and you must consider the type of information, time
constraints, and expense factors.
The interview is more familiar and personal than a questionnaire. People who are
unwilling to put critical or controversial comments in writing might talk more freely in per-
son. Moreover, during a face-to-face interview, you can react immediately to anything the
interviewee says. If surprising or confusing statements are made, you can pursue the topic
with additional questions. In addition, during a personal interview, you can watch for clues
to help you determine if responses are knowledgeable and unbiased. Participation in inter-
views also can affect user attitudes, because people who are asked for their opinions often
view the project more favorably.
Interviewing, however, is a costly and time-consuming process. In addition to the
meeting itself, both people must prepare, and the interviewer has to do follow-up work.
When a number of interviews are planned, the total cost can be quite substantial. The
personal interview usually is the most expensive fact-finding technique.
In contrast, a questionnaire gives many people the opportunity to provide input and
suggestions. Questionnaire recipients can answer the questions at their convenience and do
not have to set aside a block of time for an interview. If the questionnaire allows anony-
mous responses, people might offer more candid responses than they would in an interview.
Preparing a good questionnaire, however, like a good interview, requires skill and
time. If a question is misinterpreted, you cannot clarify the meaning as you can in a
face-to-face interview. Furthermore, unless questionnaires are designed well, recipients
might view them as intrusive, time-consuming, and impersonal. As an analyst, you
should select the technique that will work best in a particular situation.
Another popular method of obtaining input is called brainstorming, which refers to a
small group discussion of a specific problem, opportunity, or issue. This technique
encourages new ideas, allows team participation, and enables participants to build on
each other’s inputs and thoughts. Brainstorming can be structured or unstructured. In
structured brainstorming, each participant speaks when it is his or her turn, or passes. In
unstructured brainstorming, anyone can speak at any time. At some point, the results
are recorded and made part of the fact-finding documentation process.
FIGURE 4-25 A site visit provides an opportunity to
observe a system in use.

170
Chapter 4 Requirements Modeling
Documentation
CASE IN POINT 4.4: CYBERSTUFF
Ann Ellis is a systems analyst at CyberStuff, a large company that sells computer hardware and
software via telephone, mail order, and the Internet. CyberStuff processes several thousand
transactions per week on a three-shift operation and employs 50 full-time and 125 part-time
employees. Lately, the billing department has experienced an increase in the number of cus-
tomer complaints about incorrect bills. During the preliminary investigation, Ann learned that
some CyberStuff representatives did not follow established order entry procedures. She feels
that with more information, she might find a pattern and identify a solution for the problem.
Ann is not sure how to proceed. She came to you, her supervisor, with two separate ques-
tions. First, is a questionnaire the best approach, or would interviews be better? Second,
whether she uses interviews, a questionnaire, or both techniques, should she select the partic-
ipants at random, include an equal number of people from each shift, or use some other
approach? As Ann’s supervisor, what would you suggest, and why?
DOCUMENTATION
Keeping accurate records of interviews, facts, ideas, and observations is essential to suc-
cessful systems development. The ability to manage information is the mark of a suc-
cessful systems analyst and an important skill for all IT professionals.
The Need for Recording the Facts
As you gather information, the importance of a single item can be overlooked or complex
system details can be forgotten. The basic rule is to write it down. You should document
your work according to the following principles:
• Record information as soon as you obtain it.
• Use the simplest recording method possible.
• Record your findings in such a way that they can be understood by someone else.
• Organize your documentation so related material is located easily.
Often, systems analysts use special forms for describing a system, recording inter-
views, and summarizing documents. One type of documentation is a narrative list with
simple statements about what is occurring, apparent problems, and suggestions for
improvement. Other forms of documentation that are described in Chapter 4 include
data flow diagrams, flowcharts, sample forms, and screen captures.
Software Tools
Many software programs are available to help you record and document information.
Some examples are described here.
CASE TOOLS You can use CASE tools at every stage of systems development. This
chapter contains several examples of CASE tools. Part B of the Systems Analyst’s
Toolkit describes other features and capabilities of CASE tools.
PRODUCTIVITY SOFTWARE Productivity software includes word processing,
spreadsheet, database management, presentation graphics, and collaboration software
programs. Although Microsoft Office is the best-known set of productivity software
programs, other vendors offer products in each of these categories.

Documentation
Phase 2 Systems Analysis
171
Using word processing software such as Microsoft Word, Corel WordPerfect, or
OpenOffice.org Writer, you can create reports, summaries, tables, and forms. In addi-
tion to standard document preparation, the program can help you organize a presenta-
tion with templates, bookmarks, annotations, revision control, and an index. You can
consult the program’s Help system for more information about those and other features.
You also can create fill-in forms to conduct surveys and questionnaires, as described
earlier in this chapter.
Spreadsheet software, such as Microsoft Excel, Corel Quattro Pro, or OpenOffice.org
Calc, can help you track and manage numeric data or financial information. You also
can generate graphs and charts that display the data and show possible patterns, and you
can use the statistical functions in a spreadsheet to tabulate and analyze questionnaire
data. A graphical format often is used in quality control analysis because it highlights
problems and their possible causes, and it is effective when presenting results to manage-
ment. A common tool for showing the distribution of questionnaire or sampling results
is a vertical bar chart called a histogram. Most spreadsheet programs can create histo-
grams and other charts that can display data you have collected. Figure 4-26 displays a
typical histogram that might have resulted from the questionnaire shown in Figure 4-22
on page 166.
FIGURE 4-26 This histogram displays results from Question 2 in the questionnaire shown in Figure 4-22 on page 166.

172
Chapter 4 Requirements Modeling
Documentation
Database management software allows you to document and organize fact-finding
results such as events, observations, and data samples. You can use a database program
such as Microsoft Access to manage the details of a complex project, create queries to
retrieve specific information, and generate custom reports.
Presentation graphics software, such as Microsoft PowerPoint, Apple Keynote, or
OpenOffice.org Impress, is a powerful tool for organizing and developing your formal
presentation. Presentation graphics programs enable you to create organization charts
that can be used in a preliminary investigation and later during requirements modeling.
These high-quality charts also can be included in written reports and management
presentations.
Collaboration software is the latest weapon in the struggle to boost productivity.
More than ever, people work in teams and use Web-based software such as Google
Docs and Microsoft Web Apps to access data and share files. Google and others are
betting that cloud computing will create a virtual workplace, where people will be able
to interact in real time, with all the benefits of a traditional face-to-face workplace, but
none of the limitations.
GRAPHIC MODELING SOFTWARE Microsoft Visio is a popular graphic modeling
tool that can produce a wide range of charts and diagrams. Visio includes a library of
templates, stencils, and shapes. An analyst can use Visio to create many types of visual
models, including business processes, flowcharts, network diagrams, organization
charts, and Web site maps, such as the one shown in Figure 4-27.
FIGURE 4-27 This Microsoft Visio screen shows shapes that can be used to create a Web site map.

Documentation
Phase 2 Systems Analysis
173
PERSONAL INFORMATION MANAGERS A busy analyst needs to keep track of
meetings, interviews, appointments, and deadlines. A personal information manager
(PIM), such as Microsoft Outlook or IBM’s Lotus Organizer, can help manage those
tasks using a personal calendar and a to-do list, with priorities and the capability to
check off completed items.
In addition to desktop-based organizers, handheld computers are popular. Some hand-
held computers, also called personal digital assistants (PDAs), accept handwritten input,
while others have small keyboards. These devices can handle calendars, schedules,
appointments, telephone lists, and calculations. A PDA can be standalone, Bluetooth-
capable to synchronize with a desktop, or fully wireless-enabled, such as the HP iPAQ
shown in Figure 4-28.
WIRELESS COMMUNICATION DEVICES Even in the dynamic world of IT, the recent
explosion in wireless technology is almost unprecedented. The latest wireless standard,
called 4G (fourth generation), is opening new frontiers in broadband Web access,
e-mail, social networking, file exchange, and streaming multimedia. Users enjoy new
hardware and software, easy synchronization with office networks, and innovative
services designed for a wired generation.
The rapid growth of wireless communication has resulted in a merger of various
technologies. Many people swear by all-in-one devices such as Research in Motion’s
BlackBerry or smart phones, such as the Apple iPhone. Others are devoted to products
that use Google’s Android operating system, which is a mobile device platform adopted
by many hardware vendors, including Motorola, Kyocera, and LG. Figure 4-29 on the
next page shows some examples of these products.
FIGURE 4-28 HP’s iPAQ is a powerful wireless device that HP describes as a mobile handheld computer.

174
Chapter 4 Requirements Modeling
Documentation
FIGURE 4-29 Three popular examples of current wireless technology.
Beyond hardware choices, users can select from literally thousands of portable
applications for business and personal use. No one can predict the future with certainty,
but it is apparent that portable wireless technology is having an enormous impact on
business practices, everyday communications, and social interaction.

Chapter Summary
Phase 2 Systems Analysis
175
PREVIEW OF LOGICAL MODELING
At the conclusion of requirements modeling, systems developers should have a clear
understanding of business processes and system requirements. The next step is to
construct a logical model of the system.
Data and process modeling, which is described in Chapter 5, uses a structured
analysis approach. Structured analysis is a popular, traditional technique that describes
the system in terms of data and the processes that act on that data.
An alternative to structured analysis modeling is object modeling, which is described
in Chapter 6. Object modeling is a methodology that combines data and processes into
things called objects that represent actual people, things, transactions, and events.
Systems analysts use object models to visualize and document real-world business pro-
cesses and operations.
IT professionals have differing views about systems development methodologies, and
no universally accepted approach exists. By studying both structured analysis and object-
oriented methods, you gain valuable knowledge, skills, and perspective. You then can use
that information to determine what method, or combination of methods, is best for the
different situations you will face in your career.
CHAPTER SUMMARY
The systems analysis phase includes three activities: requirements modeling, data and
process modeling, and consideration of development strategies. The main objective is to
understand the proposed project, ensure that it will support business requirements, and
build a solid foundation for the systems design phase.
During requirements modeling, you identify the business-related requirements for the
new information system, including outputs, inputs, processes, performance, and con-
trols. You consider scalability to ensure that the system can support future growth and
expansion. You also estimate total cost of ownership (TCO) to identify all costs, includ-
ing indirect costs.
Popular team-based approaches include JAD, RAD, and agile methods. Joint appli-
cation development (JAD) is a popular, team-based approach to fact-finding and
requirements modeling. JAD involves an interactive group of users, managers, and IT
professionals who participate in requirements modeling and develop a greater commit-
ment to the project and to their common goals.
A QUESTION OF ETHICS
Your supervisor manages the corporate office where you work as a systems analyst. Several
weeks ago, after hearing rumors of employee dissatisfaction, he asked you to create a survey
for all IT employees. After the responses were returned and tabulated, he was disappointed
to learn that many employees assigned low ratings to morale and management policies.
This morning he called you into his office and asked whether you could identify the
departments that submitted the lowest ratings. No names were used on the individual survey
forms. However, with a little analysis, you probably could identify the departments, because
several questions were department-related.
Now you are not sure how to respond. The expectation was that the survey would be
anonymous. Even though no individuals would be identified, would it be ethical to reveal
which departments sent in the low ratings? Would your supervisor’s motives for wanting this
information matter?

176
Chapter 4 Requirements Modeling
Chapter Summary
Rapid application development (RAD) is a team-based technique that speeds up
information systems development and produces a functioning information system.
RAD is a complete methodology, with a four-phase life cycle that parallels the tradi-
tional SDLC phases.
Agile methods attempt to develop a system incrementally, by building a series of
prototypes and constantly adjusting them to user requirements.
Systems analysts use various tools and techniques to model system requirements.
Unified Modeling Language (UML) is a widely used method of visualizing and docu-
menting software design through the eyes of the business user. UML tools include use
case diagrams and sequence diagrams to represent actors, their roles, and the sequence
of transactions that occurs.
A functional decomposition diagram (FDD) is a model of business functions and
processes. A CASE tool can generate a set of data flow diagrams directly from a FDD.
The fact-finding process includes interviewing, document review, observation, question-
naires, sampling, and research. Successful interviewing requires good planning and strong
interpersonal and communication skills. The systems analyst must decide on the people to
interview, set interview objectives, and prepare for, conduct, and analyze interviews. The
analyst also might find it helpful to use one or more software tools during fact-finding.
Systems analysts should carefully record and document factual information as it is
collected, and various software tools can help an analyst visualize and describe an infor-
mation system. The chapter concluded with a preview of logical modeling. Data and
process modeling is a structured analysis approach that views the system in terms of
data and the processes that act on that data. Object modeling is an approach that views
the system in terms of data and the processes that act on that data.

Phase 2 Systems Analysis
177 Key Terms and Phrases
4G (fourth generation) 173
actor 151
agile methods 143
analytical skills 143
brainstorming 169
business process model (BPM) 150
business process modeling notation (BPMN) 150
closed-ended questions 160
construction phase 147
cutover phase 147
data flow diagram (DFD) 151
document review 164
engaged listening 162
fill-in form 167
functional decomposition diagram (FDD) 150
Hawthorne Effect 165
histogram 171
informal structure 159
inputs 142
interpersonal skills 143
interview 159
joint application development (JAD) 143
leading questions 160
observation 164
open-ended questions 160
outputs 142
performance 142
personal digital assistant (PDA) 173
personal information manager (PIM) 173
pool 151
processes 142
productivity software 170
questionnaire 166
random sample 168
range-of-response questions 160
rapid application development (RAD) 143
Rapid Economic Justification (REJ) 156
requirements modeling 142
requirements planning phase 146
research 168
sampling 167
scalability 155
Scrum 148
security 142
sequence diagram 152
site visit 169
smart phone 173
stratified sample 168
structured brainstorming 169
survey 166
swim lanes 151
system requirement 153
system requirements document 143
systematic sample 168
total cost of ownership (TCO) 155
Unified Modeling Language (UML) 151
unstructured brainstorming 169
use case diagram 151
user design phase 146
Zachman Framework for Enterprise
Architecture 158
Key Terms and Phrases

178
Chapter 4 Requirements Modeling
Learn It Online
Instructions: To complete the Learn It Online exercises, visit the Management Information
Systems CourseMate Web site at www.cengagebrain.com, navigate to the resources for this
chapter, and click the link for the exercise you want to complete.
1 Chapter Reinforcement
TF, MC, and SA
Click one of the Chapter Reinforcement links for Multiple Choice, True/False, or Short
Answer. Answer each question and submit to your instructor.
2 Flash Cards
Click the Flash Cards link and read the instructions. Type 20 (or a number specified by
your instructor) in the Number of playing cards text box, type your name in the Enter
your Name text box, and then click the Flip Card button. When the flash card is dis-
played, read the question and then click the ANSWER box arrow to select an answer.
Flip through the Flash Cards. If your score is 15 (75%) correct or greater, click Print
on the File menu to print your results. If your score is less than 15 (75%) correct, then
redo this exercise by clicking the Replay button.
3 Practice Test
Click the Practice Test link. Answer each question, enter your first and last name at the
bottom of the page, and then click the Grade Test button. When the graded practice
test is displayed on your screen, click Print on the File menu to print a hard copy.
Continue to take practice tests until you score 80% or better.
4 Who Wants To Be a Computer Genius?
Click the Computer Genius link. Read the instructions, enter your first and last name
at the bottom of the page, and then click the Play button. When your score is dis-
played, click the PRINT RESULTS link to print a hard copy.
5 Wheel of Terms
Click the Wheel of Terms link. Read the instructions, and then enter your first and last
name and your school name. Click the PLAY button. When your score is displayed on
the screen, right-click the score and then click Print on the shortcut menu to print a
hard copy.
6 Crossword Puzzle Challenge
Click the Crossword Puzzle Challenge link. Read the instructions, and then click the
Continue button. Work the crossword puzzle. When you are finished, click the Submit
button. When the crossword puzzle is redisplayed, submit it to your instructor.
Learn It Online

www.cengagebrain.com

Phase 2 Systems Analysis
179 Case-Sim: SCR Associates
Overview
The SCR Associates case study is a
Web-based simulation that allows you to
practice your skills in a real-world environ-
ment. The case study transports you to SCR’s intranet, where you complete 12 work sessions,
each aligning with a chapter. As you work on the case, you will receive e-mail and voice mail
messages, obtain information from SCR’s online libraries, and perform various tasks.
How do I use the case?
• Review the SCR background material in Chapter 1.
• Read the Preview for this session and study the Task List.
• Visit the Management Information Systems CourseMate Web site at www.cengagebrain.
com, navigate to the SCR Case Simulation, and locate the intranet link.
• Enter your name and the password sad9e. An opening screen will display
the 12 sessions.
• Select this session. Check your e-mail and voice mail carefully, and then work
on the tasks.
Preview: Session 4
As you begin the requirements modeling process, you receive specific directions from
your supervisor, Jesse Baker. She wants you to conduct a survey of former and prospective
students, lead a JAD group session, and draft a list of system requirements based on the
results of the JAD session. She also wants to see a functional decomposition diagram show-
ing the main TIMS functions.
Task List
SCR Associates Case Simulation Session 4: Requirements Modeling
1. Group managers said it was OK for their people to attend a three-day JAD session
next week. Send a message to the JAD team members, with a brief explanation of
JAD methods and a proposed agenda.
2. Design a questionnaire for former and potential students in SCR’s
training classes. Also, reply to Jesse’s message about sampling. Give
her a recommendation and reasons.
3. Read the JAD session summary in the Data Library and put together a list
of system requirements, including outputs, inputs, processes, performance,
and controls.
4. Draw an FDD of the main functions for TIMS and send it to Jesse. Be sure to show
at least one or two levels of detail.
FIGURE 4-30 Task list: Session 4.

www.cengagebrain.com

www.cengagebrain.com

180
Chapter 4 Requirements Modeling
Chapter Exercises
Review Questions
1. What are the five questions typically used in fact-finding? What additional question
can be asked during this process?
2. What is a systems requirement, and how are systems requirements classified?
3. What are JAD and RAD, and how do they differ from traditional fact-finding
methods? What are their pros and cons?
4. What is total cost of ownership (TCO), and why is it important?
5. Provide examples of closed-ended, open-ended, and range-of-response questions.
6. What are three types of sampling, and why would you use them?
7. What is the Hawthorne Effect? Why is it significant?
8. What is a functional decomposition diagram (FDD) and why would you use one?
Explain how to create an FDD.
9. What are agile methods, and what are some pros and cons of this approach?
10. To what three different audiences might you have to give a presentation? How
would the presentation differ for each?
Discussion Topics
1. A group meeting sometimes is suggested as a useful compromise between interviews
and questionnaires. In such a group meeting, one systems analyst meets with and
asks questions of a number of users at one time. Discuss the advantages and disad-
vantages of such a group meeting.
2. JAD requires strong interpersonal and communication skills on the part of the sys-
tems analyst. Are those skills different from the ones that an analyst needs when
conducting one-to-one interviews? Explain your answer.
3. Research the Internet, magazines, or textbooks to find examples of each of the follow-
ing types of visual aids: bar chart, pie chart, line chart, table, diagram, and bulleted list
of key points. How effective do you think each aid is? Find at least one example that
you feel could be improved. Discuss its shortcomings and prepare an improved version.
4. Review the presentations section in Part A of the Systems Analyst’s Toolkit, then
attend a speech or presentation and analyze its effectiveness. Consider the speaker’s
delivery and how he or she organized the material, used visual aids, and handled
audience questions. Describe specifically how the speech or presentation was most
effective, as well as how it could have been improved.
Projects
1. Design a questionnaire to learn more about the registration process at your school
or how customers place orders at a local business. Apply the guidelines you learned
in this chapter.
2. Use Microsoft Word or another word processing program to design a simple form,
using the program’s form-filling feature.
3. Create a functional decomposition diagram similar to the one in Figure 4-8 on page 150,
but showing a typical U.S. post office.
4. Use the Internet to find a Web site that contains current IT industry news, information,
and links. Bookmark the site and print a copy of the initial screen.
Chapter Exercises
TOOLKIT TIME
Answer question 10
after you complete
the presentations
section in Part A of
the four-part
Systems Analyst’s
Toolkit that follows
Chapter 12.

Phase 2 Systems Analysis
181 Apply Your Knowledge
The Apply Your Knowledge section contains four mini-cases. Each case describes a situation,
explains your role in the case, and asks you to respond to questions. You can answer the ques-
tions by applying knowledge you learned in the chapter.
1 Elmwood College
Situation:
The school is considering a new system that will speed up the registration process. As a
systems analyst, you are asked to develop a plan for fact-finding.
1. List all the possible techniques that you might use.
2. Describe an advantage for each technique.
3. Suppose the development budget is tight. How might that affect the fact-finding
process?
4. What are five important questions to use during fact-finding?
2 JAD Session 1
Situation:
You are an IT advisor to a JAD team that is studying a new inventory system. The pro-
posed system will provide more information and faster updates, and automatically
monitor fast- or slow-moving items. Some controversy exists about whether to use an
on-site or off-site location for the JAD sessions.
1. How would you advise the project leader?
2. Who should be on the JAD team, and what would be their roles as team members?
3. The JAD project leader asked for advice about how to get the first session started.
How would you reply?
4. You invited the senior vice president to the opening JAD session, but she says she
is quite busy and might not be able to attend unless it is really important. What
would you say to her?
Apply Your Knowledge

182
Chapter 4 Requirements Modeling
Apply Your Knowledge
3 JAD Session 2
Situation:
The JAD team wants you to draw up a checklist of requirements for the new system.
1. List the five main categories of system requirements.
2. Use your imagination and provide at least one example per category of a system
requirement that might be appropriate for an inventory system.
3. The project leader wants you to explain the concept of scalability to the team.
How will you do that?
4. Several managers on the team have heard of TCO but are not quite sure what it
is. How will you explain it to them?
4 Better Hardware Marketing System
Situation:
Your boss, the IT director, wants you to explain the UML to a group of company man-
agers and users who will serve on a systems development team for the new
marketing system.
1. Describe the Unified Modeling Language (UML) and how it can be used during
systems development.
2. Explain use case diagrams to the group, and provide a simple example.
3. Explain sequence diagrams to the group, and provide a simple example.
4. During the meeting, a manager asks you to explain why it is desirable to describe
the system through the eyes of a user. How would you answer?

Phase 2 Systems Analysis
183 Case Studies
Case studies allow you to practice specific skills learned in the chapter. Each chapter contains several
case studies that continue throughout the textbook, and a chapter capstone case.
NEW CENTURY HEALTH CLINIC
New Century Health Clinic offers preventive medicine and traditional medical care. In your
role as an IT consultant, you will help New Century develop a new information system.
Background
New Century Health Clinic has decided to computerize its office systems. The associates
hired you, a local computer consultant, to perform a preliminary investigation. You had sev-
eral meetings with Dr. Tim Jones to discuss the various office records and accounting sys-
tems. Anita Davenport, New Century’s office manager, participated in those meetings.
In a report to the associates at the end of your investigation, you recommended conducting a
detailed analysis of the patient record system, the patient and insurance billing systems, and the
patient scheduling system. You believe that New Century would benefit most from implementing
those three systems. Although the systems could be developed independently, you recommended
analyzing all three systems together because of the significant interaction among them.
You presented your findings and recommendations at a late afternoon meeting of the
associates. After answering several questions, you left the meeting so they could discuss the
matter privately. Dr. Jones began the discussion by stating that he was impressed with your
knowledge and professionalism, as well as your report and presentation.
Dr. Jones recommended accepting your proposal and hiring you immediately to conduct
the systems analysis phase. Dr. Garcia, however, was not as enthusiastic and pointed out that
such a study would certainly disrupt office procedures. The staff already had more work than
they could handle, she argued, and taking time to answer your questions would only make the
situation worse. Dr. Jones countered that the office workload was going to increase in any
event, and that it was important to find a long-term solution to the problem. After some addi-
tional discussion, Dr. Garcia finally agreed with Dr. Jones’s assessment. The next morning, Dr.
Jones called you and asked you to go ahead with the systems analysis phase of the project.
Assignments
1. Review the office organization chart you prepared in Chapter 1 for New Century.
2. List the individuals you would like to interview during the systems analysis phase.
3. Prepare a list of objectives for each of the interviews you will conduct.
4. Prepare a list of specific questions for each individual you will interview.
5. Conduct the interviews. (Consult your instructor regarding how to accomplish this.
One possibility is through role-playing.)
6. Prepare a written summary of the information gained from each of the interviews.
(Your instructor may want you to use a standard set of interview results.)
7. Design a questionnaire that will go to a sample of New Century patients to find out
if they were satisfied with current insurance and scheduling procedures. Your ques-
tionnaire should follow the suggestions in this chapter. Also, decide what sampling
method you will use and explain the reason for your choice.
Case Studies

184
Chapter 4 Requirements Modeling
Case Studies
PERSONAL TRAINER, INC.
Personal Trainer, Inc., owns and operates fitness centers in a dozen Midwestern cities. The
centers have done well, and the company is planning an international expansion by opening a
new “supercenter” in the Toronto area. Personal Trainer’s president, Cassia Umi, hired an IT
consultant, Susan Park, to help develop an information system for the new facility. During the
project, Susan will work closely with Gray Lewis, who will manage the new operation.
Background
During requirements modeling for the new system, Susan Park met with fitness center
managers at several Personal Trainer locations. She conducted a series of interviews,
reviewed company records, observed business operations, analyzed the BumbleBee account-
ing software, and studied a sample of sales and billing transactions. Susan’s objective was to
develop a list of system requirements for the proposed system.
Fact-Finding Summary
• A typical center has 300–500 members, with two membership levels: full and limited.
Full members have access to all activities. Limited members are restricted to activities
they have selected, but they can participate in other activities by paying a usage fee. All
members have charge privileges. Charges for merchandise and services are recorded on
a charge slip, which is signed by the member. At the end of each day, cash sales and
charges are entered into the BumbleBee accounting software, which runs on a computer
workstation at each location. Daily cash receipts are deposited in a local bank and cred-
ited to the corporate Personal Trainer account. The BumbleBee program produces a
daily activity report with a listing of all sales transactions. At the end of the month, the
local manager uses BumbleBee to transmit an accounts receivable summary to the
Personal Trainer headquarters in Chicago, where member statements are prepared and
mailed. Members mail their payments to the Personal Trainer headquarters, where the
payment is applied to the member account.
• The BumbleBee program stores basic member information, but does not include infor-
mation about member preferences, activities, and history.
• Currently, the BumbleBee program produces one local report (the daily activity report)
and three reports that are prepared at the headquarters location: a monthly member sales
report, an exception report for inactive members and late payers, and a quarterly profit-
and-loss report that shows a breakdown of revenue and costs for each separate activity.
During the interviews, Susan received a number of “wish list” comments from local man-
agers and staff members. For example, many managers wanted more analytical features so
they could spot trends and experiment with what-if scenarios for special promotions and
discounts. The most frequent complaint was that managers wanted more frequent informa-
tion about the profitability of the business activities at their centers.
To enhance their business, managers wanted to offer a computerized activity and well-
ness log, a personal coach service, and e-mail communication with members. Managers also
wanted better ways to manage information about part-time instructors and staff. Several staff
members suggested a redesign for the charge slips or scannable ID cards.
Assignments
1. List the system requirements, with examples for each category. Review the
information that Susan gathered, and assume that she will add her own ideas to
achieve more effective outputs, inputs, processes, performance, and controls.
2. Are there scalability issues that Susan should consider? What are they?
3. If Susan wants to conduct a survey of current or prospective members to obtain
their input, what type of sampling should she use? Why?
4. Draw an FDD that shows the main operations described in the fact statement.

Phase 2 Systems Analysis
185 Case Studies
BAXTER COMMUNITY COLLEGE
Baxter Community College is a two-year school in New Jersey. Twice a year, the records
office at Baxter mails requests for donations to the alumni. The staff uses a word processing
merge file to create personalized letters, but the data on past contributions and other alumni
information is stored manually. The registrar, Mary Louise, recently submitted a systems
request asking the college’s IT department to develop a computerized alumni information
system. The school does not have a formal systems review committee, and each department
head has an individual budget for routine information services.
Todd Wagner, a systems analyst, was assigned to perform a preliminary investigation.
After reading his report, Mary asked him to proceed with the systems analysis phase, saying
that a formal presentation was unnecessary. Todd has scheduled an interview tomorrow with
her, and he asked you to help him prepare for the meeting.
Assignments
1. Make a list of the topics that you think Todd should cover during the interview.
2. Prepare a list of specific questions that Todd should ask. Include open-ended, closed-
ended, and range-of-response questions.
3. Conduct student-to-student interviews, with half the students assuming Todd’s role
and the other half playing the registrar.
4. Document the information covered during the interviews.
TOWN OF EDEN BAY
The town of Eden Bay owns and maintains a fleet of vehicles. You are a systems analyst
reporting to Dawn, the town’s IT manager.
Background
In Chapter 2, you learned that the town’s maintenance budget has risen sharply in recent
years. Based on a preliminary investigation, the town has decided to develop a new informa-
tion system to manage maintenance information and costs more effectively. The new system
will be named RAVE, which stands for Repair Analysis for Vehicular Equipment.
Dawn has asked you to perform additional fact-finding to document the requirements
for the new system.
Assignments
1. Review the interview summaries in Chapter 2. For each person (Marie, Martin, Phil,
Alice, and Joe), develop three additional questions: an open-ended question, a
closed-ended question, and a range-of-response question.
2. Based on what you know so far, list the system requirements for the new system. You
can use your imagination if the facts are insufficient. Consider outputs, inputs, pro-
cesses, performance, and controls. Include at least two examples for each category.
3. You decide to analyze a sample of vehicle records. What sampling methods are
available to you? Which one should you use, and why?
4. Dawn thinks it would be a good idea to conduct a JAD session to perform addi-
tional fact-finding. Draft a message to the participants, with a brief explanation of
JAD methods and a proposed agenda.

186
Chapter 4 Requirements Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited
SoftWear, Limited (SWL), is a continuing case study that illustrates the knowledge and skills
described in each chapter. In this case study, the student acts as a member of the SWL sys-
tems development team and performs various tasks.
Background
In Chapter 2, you learned that SWL’s vice president of finance, Michael Jeremy, requested
an investigation into problems with the company’s payroll system. Jane Rossman, applications
manager, assigned systems analyst Rick Williams to conduct a preliminary investigation.
Rick found several problems, including input errors and a need for manual preparation
of reports. The payroll department often required overtime to correct those errors and
produce the reports.
The IT department recommended an in-depth analysis of the problem areas and
Mr. Jeremy approved the study. Now, as the systems analysis phase begins, the next step
is requirements modeling.
Human Resources Department Interview
During the preliminary investigation phase, Rick prepared the organization chart of the
human resources department shown in Figure 4-31.
Rick learned that some errors involved employee stock purchase deductions, so he decided
to study that process. He knew that the human resources department initiates stock purchase
deductions, so he decided to interview Meredith Rider, manager of human resources adminis-
tration. Meredith is responsible for completing the paperwork for newly hired employees and
sending the forms to the payroll department.
Rick called Meredith to make an appointment and sent her the confirmation message
shown in Figure 4-32 that described the topics and requested copies of related forms.
FIGURE 4-31 Human resources department organization chart.

Phase 2 Systems Analysis
187 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
In the interview, Meredith explained that new employees fill in the top portion of a
Payroll Master Record Form (Form PR-1). The human resources department then adds the
pay rate and other data and sends a copy of the PR-1 form to the payroll department.
Meredith showed Rick a blank copy of an online PR-1 form shown in Figure 4-33. She
explained that because payroll and personnel information is confidential, she could not give
Rick a completed form.
FIGURE 4-32 Rick Williams’s message to Meredith Rider regarding preparation for the interview.
FIGURE 4-33 Payroll Master Record Form (Form PR-1).

188
Chapter 4 Requirements Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Meredith also explained that after a 90-day probationary period, employees can partici-
pate in the SWL Credit Union. An employee submits the Payroll Deduction Change Form
(Form PR-3) shown in Figure 4-35 to the human resources department, which forwards it
to the payroll department.
Also, when an employee’s pay rate or status changes, the human resources department
completes the online Payroll Status Change Form (Form PR-2) shown in Figure 4-34 and
sends a copy to the payroll department.
FIGURE 4-35 Payroll Deduction Change Form (Form PR-3).
FIGURE 4-34 Payroll Status Change Form (Form PR-2).

Phase 2 Systems Analysis
189 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
SWL also has an Employee Stock Purchase Plan, which an employee can join
after 180 days. To enroll, the employee completes an Employee Stock Purchase Plan
Enrollment and Change Form (Form PR-4). The human resources department pre-
pares a weekly report of all stock plan enrollments and changes on the Employee
Stock Purchase Plan Weekly Deduction Summary Report (Form PR-5) shown in
Figure 4-36 and sends a copy to the payroll department.
FIGURE 4-36 Employee Stock Purchase Plan Weekly Deduction Summary Report (Form PR-5).
FIGURE 4-37 Follow-up message from Rick Williams to Meredith Rider,
with a request for her comments on the interview summary.
After the interview with Meredith, Rick sent the follow-up message shown in
Figure 4-37 and attached a copy of the interview documentation shown in Figure 4-37.

190
Chapter 4 Requirements Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Payroll Department Interview
Rick’s next interview was with the lead payroll clerk, Nelson White. Nelson confirmed
that when an employee is hired, a PR-1 form is completed in the human resources depart-
ment, and a copy is sent to payroll. He also explained that each week, the payroll department
sends a time sheet to every SWL department manager. The time sheet lists the employees,
with space to record regular hours, vacation, sick leave, jury duty, and other codes.
After each pay period, SWL managers complete the time sheets and return them to the
payroll department. Payroll then enters the pay rates and deduction information, and deliv-
ers the sheets to Business Information Systems (BIS), the service bureau that prepares SWL’s
payroll.
After BIS runs the payroll, it returns the time sheets, paychecks, and the payroll register
to SWL. The director of payroll, Amy Calico, sends the paychecks to SWL department heads
for distribution to employees.
Nelson uses the weekly payroll register to prepare a report of credit union deductions
and a check to the credit union for the total amount deducted. Stock purchases, on the other
hand, are processed monthly, based on the stock’s closing price on the last business day of
FIGURE 4-38 Documentation of the interview with Meredith Rider.
Five basic forms are used by the human resources department that relate to the payroll system:
I. Payroll Master Record Form (Form PR-I)
2. Payroll Status Change Form (Form PR-2)
3. Payroll Deduction Change Form (Form PR-3)
4. Employee Stock Purchase Plan Enrollment and Change Form (Form PR-4)
S. Employee Stock Purchase Plan Weekly Deduction Summary Report (Form PR-S)
When an employee is hired, the following takes place:
I. The human resources department prepares a Payroll Master Record Form (Form PR-I) with employee
data, including Social Security number, name, address, telephone, emergency contact, and information
about the position, title, and initial pay rate.
2. A copy of this form is sent to the payroll department, where it is filed and maintained.
3. Subsequent pay rate or status changes are submitted by the human resources department to the payroll
department on a Payroll Status Change Form (Form PR-2). Payroll then files these change forms with
the employee’s PR-l form.
After 180 days of employment, the employee is eligible to enroll in the SWL Stock Purchase Plan.
1. To enroll, an employee completes an Employee Stock Purchase Plan Enrollment and Change Form
(Form PR-4).
2. The human resources department prepares an Employee Stock Purchase Plan Weekly Deduction
Summary Report Form (Form PR-S) and sends it to the payroll department with copies of the PR-4 forms,
which then are filed with the employee’s PR-I form.
I have identified several problems with the current procedures:
1. Data errors can occur when the human resources staff prepares the weekly summary of employee stock
purchase deductions, and no system verification takes place until incorrect deductions are reported.
2. The system performs no verification of employment dates, and it is possible that the 90- and 180-day
eligibility periods are applied incorrectly.
3. The filing of the PR-2, PR-3, and PR-4 forms with the Payroll Master Record Forms in the payroll
department could lead to problems. If any of the forms are lost or misfiled, incorrect data is entered into
the s stem.
Payroll
October 21, 2011
Rick Williams
Systems Analyst
Interview Summary: Meredith Rider, Manager of Human Resources Administration
Raleigh
Name of System:
Date:
Prepared by:
Title:
Purpose:
Location:

Phase 2 Systems Analysis
191 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
the month. Using the weekly payroll registers, Nelson manually prepares a monthly report
of employee stock purchases and forwards a copy of the report and a funds transfer authori-
zation to Carolina National Bank, which is SWL’s stock transfer agent.
Rick asked Nelson why BIS did not produce a report on employee stock purchase deduc-
tions. Nelson replied that although the payroll is run weekly, the stock deductions are
invested only once a month. Because the two cycles do not match, the BIS system could not
handle the task.
Nelson then referred Rick to the SWL Systems and Procedures Manual page that describes
how monthly Employee Stock Purchase Plan investment amounts are calculated, as shown in
Figure 4-39. After blanking out the employee’s name and Social Security number, Nelson also
gave Rick a sample of two monthly deduction registers, as shown in Figure 4-40.
To enroll in the SWL stock purchase plan, an employee submits a PR-4
form. Human resources sends a copy of the form to the payroll
department. At the end of the month, accumulated deductions for that
month are invested in shares of SWL stock at the current market price.
However, because weeks and months do not match up exactly, the
following calculation must be used:
a. Divide the weekly deduction by seven to get a daily deduction rate.
b. Then multiply the number of days in the month times the daily
deduction rate. The result is the total stock investment amount for
that month.
Here is an example for the month of January:
• Employee A authorizes a weekly stock plan deduction of $20.00.
• $20.00 divided by 7 5 a $2.857 daily deduction rate.
• January has 31 calendar days, so 31 3 $2.857 5 $88.57, which
will be the stock investment amount for January.
At the end of each month, the payroll department prepares a deduction
register (PR-6) that shows weekly deductions and monthly totals.
Procedures Manual
Employee Stock Purchase Plan
FIGURE 4-39 Sample page from SWL Systems and Procedures Manual.

192
Chapter 4 Requirements Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Rick began to see why it was taking so much effort to prepare the reports. The interview
with Nelson provided much more detail than the general description that Rick had received
during the preliminary investigation.
BIS Interview
Rick decided that he should talk with someone at the BIS service bureau to find out more
about its operations. He learned from Nelson that Linda DeMarco was BIS’s customer rela-
tions manager, so he scheduled an appointment with her.
When Rick arrived at BIS, Linda greeted him warmly. She explained that she had planned
to meet with members of SWL’s payroll department within the next month or two to discuss
the latest developments. Because Rick now was working on SWL’s payroll system, however,
this meeting would save her a trip. Rick temporarily abandoned his interview plan and
asked Linda what she had in mind.
FIGURE 4-40 Sample of the ESIP Monthly Deduction Register for
July and August, 2009.

Phase 2 Systems Analysis
193 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
“The payroll system that your company is using, which we call GAPP, for Generalized
Automated Payroll Program, originally was developed here at BIS about eight years ago,”
Linda began. “In fact, SoftWear, Limited was one of our very first customers. We’ve worked
together for a long time, and we are very committed to your firm. As you know, GAPP was
modified and updated many times. But let’s face it, even with the patches, GAPP is an
antique! Anyway, I have some exciting news. We decided to develop a new, state-of-the-art
payroll system. We are going to call it CHIPS, for Comprehensive High-powered Interactive
Payroll System. I’m looking forward to working with SWL when you switch over to
CHIPS,” Linda said.
Rick took a few moments to consider this surprising development. He then asked what
would happen with GAPP. Linda stated that GAPP would be available to customers for
another year or two, but that BIS would make no further enhancements to the system. Using
BIS resources to maintain an obsolete system would not make sense, she explained.
Before this meeting, Rick had hoped that BIS could make some minor changes to solve
SWL’s payroll problems. He now realized that was impossible, so he decided to learn more
about CHIPS.
Rick described the problem with the mismatched deduction cycles and asked if CHIPS
would handle that. Linda said that she already had looked into the matter. She pointed out
that SWL was their only customer with more than one deduction application cycle. From
BIS’s point of view, programming CHIPS to handle multiple cycle reports did not make
sense. Linda suggested that perhaps a special add-on module could be written, once CHIPS
was up and running. BIS could do that kind of job on a contract basis, she added.
Rick then asked when the new system would be available and what the cost would be.
Linda stated that current plans were to begin offering CHIPS sometime in the following year.
She explained that the system was still in development, and she could not be more specific
about timetables and costs. She was sure, however, that the monthly fee for CHIPS would not
increase more than 30 percent above the current GAPP charges.
As Rick was preparing to leave, Linda urged him to keep in touch. In the next few
months, she explained, plans for CHIPS would become more specific, and she would be able
to answer all his questions.
New Developments
When Rick returned from his meeting with Linda, he immediately went to his manager,
Jane Rossman. After he described his visit to BIS, Jane telephoned Ann Hon, director of
information technology. Within the hour, Jane and Rick held a meeting with Ann in her
office. Rick repeated the details of his visit, and Ann asked for his opinion on how the devel-
opments at BIS would affect SWL’s current systems analysis.
Rick explained that one of the problems — possible input errors when transferring data
from the human resources summary list — might be solved easily by developing a new form
or procedure. Nevertheless, he saw no obvious solutions for the stock purchase deduction
problems, except to change the scope of the payroll project.
Jane, Rick, and Ann then analyzed the situation. They all agreed that because of the
upcoming changes at BIS, the current payroll system project would produce very limited
results and should be expanded in scope. They totaled the costs of the SWL project to that
point and prepared estimates for a detailed investigation of the entire payroll system in
order to meet SWL’s current and future needs.
Later that week, Ann met with Michael Jeremy, vice president of finance, to discuss the
situation and present her proposal to expand the project. Before she even started, however,
Mr. Jeremy filled her in on the latest announcement from SWL’s top management: The com-
pany had decided to move forward with the new Employee Savings and Investment Plan (ESIP)

194
Chapter 4 Requirements Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
under consideration. He said that in December, Robert Lansing, SWL’s president, would
announce a target date of April 1, 2012, for the new ESIP plan. Mr. Jeremy explained that the
new plan would be a 401(k) plan with tax advantages for employees.
Facing the new constraints on top of the existing payroll system problems, it looked like
SWL would need a new payroll system after all.
The Revised Project
Jane Rossman assigned Carla Moore, a programmer-analyst, to work with Rick Williams
on the revised system project. Because they now had to determine the requirements for the
complete payroll system, Rick and Carla conducted follow-up interviews with Nelson White
and Meredith Rider, as well as Allison Friendly, a human resources representative, and both
payroll clerks, Britton Ellis and Debra Williams. During the payroll department interviews, the
payroll staff prepared samples of all the existing payroll reports. At the end of the fact-finding
process, Rick and Carla decided to prepare the functional decomposition diagram shown in
Figure 4-41. The diagram shows the main functions identified during the interviews.
The Payroll Register is shown in Figure 4-42. Each employee is listed on a separate line,
along with his or her earnings, deductions, and net pay. BIS creates three copies of this
report each week. One copy is sent to Michael Jeremy, and one copy goes to Amy Calico.
The third copy is used by the payroll department for determining SWL’s obligation for tax
withholding and FICA payments and for applying credit union and stock purchase plan
deductions.
FIGURE 4-41 A functional decomposition diagram (FDD) shows the main functions that were identified during
the interviews.

Phase 2 Systems Analysis
195 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Mr. Jeremy receives a weekly overtime report from BIS that lists every employee who
worked overtime that week. When Carla asked him about that report, he stated that he con-
sulted it occasionally but admitted that he did not need the report every week. He also
receives an accounting report, but he routinely forwards it to the accounting department.
He mentioned that an overall financial summary was more valuable to him.
SWL Team Tasks
1. When Rick Williams met with Meredith Rider in the human resources department, he
asked for copies of actual reports and forms that contained confidential information, but
Meredith declined to provide them. Rick has asked you to suggest a reasonable compro-
mise between confidentiality requirements and the need for analysts to review actual
records, instead of fictitious data. Think about this, and write a message to Rick with
your views.
2. Assume that you were with Rick at the meeting with Linda DeMarco. Review the fact
statement, then write an interview summary that documents the main topics that Rick
and Linda discussed.
3. Rick asked you to design a questionnaire that would measure employee satisfaction with
the current payroll deduction system. Review the sample questionnaire in the chapter,
and prepare a draft for Rick. Rick also wants you to suggest various sampling methods
so he can make a choice. Include a brief description of various methods, and be sure to
include your recommendation and reasons.
4. Rick wants you to interview several employees to learn more about their levels of satis-
faction with the current system. Prepare a set of interview questions, and be sure to
include at least examples of open-ended, closed-ended, and range-of-response questions.
If possible, conduct role-play interviews with other students.
Manage the SWL Project
You have been asked to manage SWL’s new information system project. One of your
most important activities will be to identify project tasks and determine when they will be
performed. Before you begin, you should review the SWL case in this chapter. Then list and
analyze the tasks, as follows:
LIST THE TASKS Start by listing and numbering at least 10 tasks that the SWL team needs
to perform to fulfill the objectives of this chapter. Your list can include SWL Team Tasks
and any other tasks that are described in this chapter. For example, Task 3 might be to
Identify people to interview, and Task 6 might be to Conduct interviews.
FIGURE 4-42 Sample page of SWL Payroll Register report.

196
Chapter 4 Requirements Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
ANALYZE THE TASKS Now study the tasks to determine the order in which they should be
performed. First identify all concurrent tasks, which are not dependent on other tasks. In
the example shown in Figure 4-43, Tasks 1, 2, 3, 4, and 5 are concurrent tasks, and could
begin at the same time if resources were available.
Other tasks are called dependent tasks, because they cannot be performed until one or
more earlier tasks have been completed. For each dependent task, you must identify specific
tasks that need to be completed before this task can begin. For example, you would need to
identify the people to interview before you conducted the interviews, so Task 6 cannot begin
until Task 3 is completed, as Figure 4-43 shows.
Chapter 3 describes project management tools, techniques, and software. To learn more,
you can use the Features section on your Student Study Tool CD-ROM, or visit the
Management Information Systems CourseMate Web site at www.cengagebrain.com and
locate the project management resources library for this book. On the Web, Microsoft offers
demo versions, training, and tips for using Project 2010. You also can visit the
OpenWorkbench.org site to learn more about this free, open-source software.
FIGURE 4-43 Tasks 1, 2, 3, 4, and 5 are concurrent tasks that could be performed at the same time. Task 6 is a dependent
task that cannot be performed until Task 3 has been completed.

www.cengagebrain.com

Phase 2 Systems Analysis
Ready for a Challenge?
As a leader in the game development field, Game Technology has many customers. The
company wants to add a customer contact management feature to the sales system, and you
will assist the IT team on this project. One of your first tasks is to interview users to find out
what functions they want. When you have this information, you can construct a functional
decomposition diagram (FDD) to list and organize the functions.
Before you talk to the users, you decide to practice your interviewing skills. Specifically,
you want to use a mix of open-ended, closed-ended, and range-of-response questions.
To test yourself, you ask a team member to develop some practice questions for you to
identify, as follows:
Question
Code: O = open-ended
C = closed-ended
R = range-of-response
Do you foresee any problems with this system?
On a scale of one (low) to five (high), how important is
the project?
Do you maintain current e-mail addresses for customers?
Who is responsible for entering these records?
What would be some benefits of the new feature?
After you finish the interviews, you study the following results before preparing the FDD.
Interview results
The starting point should be an overview screen that allows users to look up a customer, add
a customer, edit a customer, delete a customer, or get help. The Help option should allow a
user to search a knowledge base or contact the IT Help Desk. If users select the knowledge
base option, they can search by keyword or by topic. If they select the IT Help Desk, they
can either select e-mail or a telephone call-back option.
Practice Tasks
A. For each question listed, enter a code that correctly identifies the question.
B. Draw an FDD that follows the guidelines in the textbook.
After you complete the Practice Tasks, to check your work and view sample answers, visit
the Management Information Systems CourseMate Web site at www.cengagebrain.com,
navigate to the resources for this chapter, and locate Ready for a Challenge?.
The Challenge
The interviews were successful, but you want more details. Specifically, you want to learn more
about the user interface, built-in error checking, and reports that could be generated for users. Using
these topics, or others you think would be relevant, prepare two samples of each type of question.
Also, your FDD was good, but now you must add a Reports function to the overview
screen. By selecting that option, users should be able to list all reports by name or by type.
Users also should be able to view or print a report. If they select the Print option, they
should be able to print the full report, the current page, or selected pages.
Challenge Tasks
A. Prepare the six questions described above (two of each type), indicating the type for
each question.
B. Draw an FDD that shows the Reports function and subfunctions.
In additional to technical skills, IT professionals need critical thinking skills such as perception, organization, analysis,
problem-solving, and decision-making. The Ready for a Challenge feature can help you learn, practice, and apply critical
thinking skills that you can take to the workplace.
Ready for a Challenge? 197

www.cengagebrain.com

Chapter 5 is the second of four chapters in the
systems analysis phase of the SDLC. This chapter
discusses data and process modeling techniques that
analysts use to show how the system transforms data
into useful information. The deliverable, or end product,
of data and process modeling is a logical model that will
support business operations and meet user needs.
Data and
Process
Modeling
CHAPTER
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Describe data and process modeling concepts
and tools, including data flow diagrams, a
data dictionary, and process descriptions
• Describe the symbols used in data flow
diagrams and explain the rules for their use
• Draw data flow diagrams in a sequence,
from general to specific
• Explain how to level and balance a set of
data flow diagrams
• Describe how a data dictionary is used and
what it contains
• Use process description tools, including
structured English, decision tables, and
decision trees
• Describe the relationship between logical
and physical models
INTRODUCTION
During the requirements modeling process
described in Chapter 4, you used fact-finding tech-
niques to investigate the current system and iden-
tify user requirements. Now, in Chapters 5 and 6
you will use that information to develop a logical
model of the proposed system and document the
system requirements. A logical model shows what
the system must do, regardless of how it will be
implemented physically. Later, in the systems
design phase, you build a physical model that
describes how the system will be constructed. Data
and process modeling involves three main tools:
data flow diagrams, a data dictionary, and process
descriptions.
Chapter 5 includes four Video Learning Sessions
that show you how to work with DFD symbols
and diagrams, how to create a context diagram,
how to create a diagram 0 DFD, and how to use a
decision table.
5
Chapter 5 Data and Process Modeling

199
Phase 2 Systems Analysis
Introduction
FIGURE 5-1 Typical data and process modeling task list.
CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Wendy Lee, manager of college services at Mountain View College, wants a new
information system that will improve efficiency and customer service at the three college
bookstores.
In this part of the case, Tina Allen (systems analyst) and David Conroe (student intern)
are talking about data and process modeling tasks and concepts.
Participants: Tina and David
Location: Tina’s office, Monday afternoon, October 17, 2011.
Project status: Tina and David have completed fact-finding for the new system and are ready to develop
a requirements model using various diagrams and a data dictionary that will describe and
document the proposed system.
Discussion topics: Data flow diagrams, data dictionaries, and process description tools
Tina: Hi, David. Any questions about the fact-finding we did?
David: Well, I found out that fact-finding is hard work.
Tina: Yes, but it was worth it. Look at what we learned — now we understand how the current system operates,
and we know what users expect in the new system. This information will help us build a requirements
model that we can present to Wendy and her staff.
David: What’s the next step?
Tina: We need to draw a set of data flow diagrams, or DFDs for short.
David: Do we use a CASE tool to draw the DFDs?
Tina: We can draw the initial versions by hand. We’ll use a CASE tool to prepare the final version of the
diagrams.
David: What goes into a DFD?
Tina: DFDs use four basic symbols that represent processes, data flows, data stores, and entities. You’ll learn
about these as we go along. I’ll also show you how we use techniques called leveling and balancing to
develop accurate, consistent DFDs.
David: Apart from the diagrams, do we need to develop any other documentation?
Tina: Yes, we need to create a data dictionary and process descriptions. The data dictionary is an overall storehouse
of information about the system, and serves as a central clearinghouse for all documentation. We use process
descriptions to explain the logical steps that each process performs. To create these descriptions, we use three
tools: structured English statements, decision tables, and decision trees.
David: Sounds like a lot to do. Where do we begin?
Tina: Here’s a task list to get us started:

200
Chapter 5 Data and Process Modeling
Data Flow Diagrams
OVERVIEW OF DATA AND PROCESS MODELING TOOLS
Systems analysts use many graphical techniques to describe an information system. One
popular method is to draw a set of data flow diagrams. A data flow diagram (DFD) uses var-
ious symbols to show how the system transforms input data into useful information. Other
graphical tools include object models, which are explained in Chapter 6 (Object Modeling),
and entity-relationship diagrams, which are described in Chapter 9 (Data Design).
DATA FLOW DIAGRAMS
In Part A of the Systems Analyst’s Toolkit, you learn how to use visual aids to help
explain a concept, as shown in Figure 5-2. Similarly, during the systems analysis phase,
you learn how to create a
visual model of the informa-
tion system using a set of
data flow diagrams.
A data flow diagram
(DFD) shows how data
moves through an informa-
tion system but does not
show program logic or pro-
cessing steps. A set of DFDs
provides a logical model that
shows what the system does,
not how it does it. That dis-
tinction is important because
focusing on implementation
issues at this point would
restrict your search for the
most effective system design. FIGURE 5-2 Systems analysts often use visual aids during presentations.
TOOLKIT TIME
The CASE Tools in
Part B of the
Systems Analyst’s
Toolkit can help you
document business
functions and pro-
cesses, develop
graphical models,
and provide an over-
all framework for
information system
development. To
learn more about
these tools, turn to
Part B of the four-
part Toolkit that fol-
lows Chapter 12.
VIDEO LEARNING SESSION: DFD SYMBOLS AND DIAGRAMS
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate Web
site at www.cengagebrain.com and navigate to the Video Learning Sessions for this book.
This session is about DFD symbols and diagrams. You’ll learn why DFDs are important modeling
tools, how to use DFD symbols, and how you can use a CASE tool to create DFDs.
DFD Symbols
DFDs use four basic symbols that represent processes, data flows, data stores, and enti-
ties. Several different versions of DFD symbols exist, but they all serve the same pur-
pose. DFD examples in this textbook use the Gane and Sarson symbol set. Another
popular symbol set is the Yourdon symbol set. Figure 5-3 shows examples of both
versions. Symbols are referenced by using all capital letters for the symbol name.
PROCESS SYMBOL A process receives input data and produces output that has a differ-
ent content, form, or both. For instance, the process for calculating pay uses two inputs

www.cengagebrain.com

Data Flow Diagrams 201
Phase 2 Systems Analysis
(pay rate and hours worked) to produce one output (total pay). Processes can be very
simple or quite complex. In a typical company, processes might include calculating sales
trends, filing online insurance claims, ordering inventory from a supplier’s system, or
verifying e-mail addresses for Web customers. Processes contain the business logic, also
called business rules, that transform the data and produce the required results.
The symbol for a process is a rectangle with rounded corners. The name of the pro-
cess appears inside the rectangle. The process name identifies a specific function and
consists of a verb (and an adjective, if necessary) followed by a singular noun. Examples
of process names are APPLY RENT PAYMENT, CALCULATE COMMISSION, ASSIGN
FINAL GRADE, VERIFY ORDER, and FILL ORDER.
Processing details are not shown in a DFD. For example, you might have a process
named DEPOSIT PAYMENT. The process symbol does not reveal the business logic for
the DEPOSIT PAYMENT process. To document the logic, you create a process descrip-
tion, which is explained later in this chapter.
FIGURE 5-3 Data flow diagram symbols, symbol names, and examples of the Gane and
Sarson and Yourdon symbol sets.
In DFDs, a process symbol can be referred to as a black box, because the inputs,
outputs, and general functions of the process are known, but the underlying details
and logic of the process are hidden. By showing processes as black boxes, an analyst
can create DFDs that show how the system functions, but avoid unnecessary detail
and clutter. When the analyst wishes to show additional levels of detail, he or she can
zoom in on a process symbol and create a more in-depth DFD that shows the process’s
internal workings — which might reveal even more processes, data flows, and data
stores. In this manner, the information system can be modeled as a series of increas-
ingly detailed pictures.
To learn more about
Yourdon symbols,
visit the Management
Information Systems
CourseMate
Web site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Yourdon
Symbols link.

www.cengagebrain.com

www.cengagebrain.com

202
Chapter 5 Data and Process Modeling
Data Flow Diagrams
The network router shown in Figure 5-4 is an example of a black
box. An observer can see cables that carry data into and out of the
router, but the router’s internal operations are not revealed — only the
results are apparent.
DATA FLOW SYMBOL A data flow is a path for data to move from
one part of the information system to another. A data flow in a DFD
represents one or more data items. For example, a data flow could
consist of a single data item (such as a student ID number) or it could
include a set of data (such as a class roster with student ID numbers,
names, and registration dates for a specific class). Although the DFD
does not show the detailed contents of a data flow, that information is
included in the data dictionary, which is described later in this chapter.
The symbol for a data flow is a line with a single or double arrow-
head. The data flow name appears above, below, or alongside the line.
A data flow name consists of a singular noun and an adjective, if needed.
Examples of data flow names are DEPOSIT, INVOICE PAYMENT,
STUDENT GRADE, ORDER, and COMMISSION. Exceptions to the
singular name rule are data flow names, such as GRADING
PARAMETERS, where a singular name could mislead you into thinking
a single parameter or single item of data exists.
Figure 5-5 shows correct examples of data flow and process symbol
connections. Because a process changes the data’s content or form, at
least one data flow must enter and one data flow must exit each process
symbol, as they do in the CREATE INVOICE process. A process symbol
FIGURE 5-4 Networks use various
devices that act like black boxes. Cables
carry data in and out, but internal
operations are hidden inside the case.
C
O
R
R
E
C
T
FIGURE 5-5 Examples of correct combinations of data flow and process symbols.

Data Flow Diagrams 203
Phase 2 Systems Analysis
can have more than one outgoing data flow, as shown in the GRADE STUDENT WORK
process, or more than one incoming data flow, as shown in the CALCULATE GROSS
PAY process. A process also can connect to any other symbol, including another process
symbol, as shown by the connection between VERIFY ORDER and ASSEMBLE
ORDER in Figure 5-5. A data flow, therefore, must have a process symbol on at least
one end.
Figure 5-6 shows three data flow and process combinations that you must avoid:
• Spontaneous generation. The APPLY INSURANCE PREMIUM process, for
instance, produces output, but has no input data flow. Because it has no input, the
process is called a spontaneous generation process.
• Black hole. The CALCULATE GROSS PAY is called a black hole process, which
is a process that has input, but produces no output.
• Gray hole. A gray hole is a process that has at least one input and one output, but
the input obviously is insufficient to generate the output shown. For example, a
date of birth input is not sufficient to produce a final grade output in the
CALCULATE GRADE process.
IN
C
O
R
R
E
C
T
FIGURE 5-6 Examples of incorrect combinations of data flow and
process symbols. APPLY INSURANCE PREMIUM has no input and is
called a spontaneous generation process. CALCULATE GROSS PAY has
no outputs and is called a black hole process. CALCULATE GRADE
has an input that is obviously unable to produce the output. This
process is called a gray hole.
Spontaneous generation, black holes, and gray holes are impossible logically in a DFD
because a process must act on input, shown by an incoming data flow, and produce out-
put, represented by an outgoing data flow.
DATA STORE SYMBOL A data store is used in a DFD to represent data that the system
stores because one or more processes need to use the data at a later time. For instance,
instructors need to store student scores on tests and assignments during the semester
so they can assign final grades at the end of the term. Similarly, a company stores
employee salary and deduction data during the year in order to print W-2 forms with

204
Chapter 5 Data and Process Modeling
Data Flow Diagrams
total earnings and deductions at the end of the year. A DFD does not show the detailed
contents of a data store — the specific structure and data elements are defined in the
data dictionary, which is discussed later in this chapter.
The physical characteristics of a data store are unimportant because you are con-
cerned only with a logical model. Also, the length of time that the data is stored is unim-
portant — it can be a matter of seconds while a transaction is processed or a period of
months while data is accumulated for year-end processing. What is important is that a
process needs access to the data at some later time.
In a DFD, the Gane and Sarson symbol for a data store is a flat rectangle that is
open on the right side and closed on the left side. The name of the data store appears
between the lines and identifies the data it contains. A data store name is a plural name
consisting of a noun and adjectives, if needed. Examples of data store names are
STUDENTS, ACCOUNTS RECEIVABLE, PRODUCTS, DAILY PAYMENTS,
PURCHASE ORDERS,
OUTSTANDING
CHECKS, INSURANCE
POLICIES, and
EMPLOYEES. Exceptions
to the plural name rule
are collective nouns that
represent multiple occur-
rences of objects. For
example, GRADEBOOK
represents a group of stu-
dents and their scores.
A data store must be
connected to a process
with a data flow. Figure
5-7 illustrates typical
examples of data stores.
In each case, the data
store has at least one
incoming and one outgo-
ing data flow and is con-
nected to a process
symbol with a data flow.
Violations of the rule
that a data store must
have at least one incom-
ing and one outgoing
data flow are shown in
Figure 5-8. In the first
example, two data stores
are connected incorrectly
because no process is
between them. Also,
COURSES has no incom-
ing data flow and
STUDENTS has no out-
going data flow. In the
second and third exam-
ples, the data stores lack
either an outgoing or
incoming data flow.
C
O
R
R
E
C
T
FIGURE 5-7 Examples of correct uses of data store symbols in a data flow diagram.
IN
C
O
R
R
E
C
T
FIGURE 5-8 Examples of incorrect uses of data store symbols: Two data stores cannot be
connected by a data flow without an intervening process, and each data store should have an
outgoing and incoming data flow.

Data Flow Diagrams 205
Phase 2 Systems Analysis
There is an exception to the
requirement that a data store
must have at least one incoming
and one outgoing data flow. In
some situations, a data store has
no input data flow because it
contains fixed reference data
that is not updated by the sys-
tem. For example, consider a
data store called TAX TABLE,
which contains withholding tax
data that a company downloads
from the Internal Revenue
Service. When the company runs
its payroll, the CALCULATE
WITHHOLDING process
accesses data from this data
store. On a DFD, this would be
represented as a one-way outgo-
ing data flow from the TAX
TABLE data store into the
CALCULATE WITHHOLDING
process.
ENTITY SYMBOL The symbol
for an entity is a rectangle, which
may be shaded to make it look
three-dimensional. The name of
the entity appears inside the
symbol.
A DFD shows only external
entities that provide data to the
system or receive output from
the system. A DFD shows the
boundaries of the system and
how the system interfaces with
the outside world. For exam-
ple, a customer entity submits
an order to an order processing
system. Other examples of
entities include a patient who
supplies data to a medical
records system, a homeowner
who receives a bill from a city property tax system, or an accounts payable system
that receives data from the company’s purchasing system.
DFD entities also are called terminators, because they are data origins or final desti-
nations. Systems analysts call an entity that supplies data to the system a source, and an
entity that receives data from the system a sink. An entity name is the singular form of a
department, outside organization, other information system, or person. An external
entity can be a source or a sink or both, but each entity must be connected to a process
by a data flow. Figures 5-9 and 5-10 show correct and incorrect examples of this rule.
With an understanding of the proper use of DFD symbols, you are ready to construct
diagrams that use these symbols. Figure 5-11 on the next page shows a summary of the
rules for using DFD symbols.
C
O
R
R
E
C
T
FIGURE 5-9 Examples of correct uses of external entities in a data flow diagram.
IN
C
O
R
R
E
C
T
FIGURE 5-10 Examples of incorrect uses of external entities. An external entity must be
connected by a data flow to a process, and not directly to a data store or to another
external entity.

206
Chapter 5 Data and Process Modeling
Creating a Set of DFDs
CREATING A SET OF DFDS
During requirements modeling, you
used interviews, questionnaires,
and other techniques to gather
facts about the system, and you
learned how the various people,
departments, data, and processes
fit together to support business
operations. Now you are ready to
create a graphical model of the
information system based on your
fact-finding results.
To learn how to construct
DFDs, you will use examples of
two information systems. The first
example is a grading system that
instructors use to assign final
grades based on the scores that stu-
dents receive during the term. The
second example is an order system
that a company uses to enter orders
and apply payments against a cus-
tomer’s balance. First, you will
review a set of guidelines for draw-
ing DFDs. Then you will learn how
to apply these guidelines and create
a set of DFDs using a three-step
process.
Correct and Incorrect Examples of Data Flows
External Entity to External Entity
Process to Process
Process to External Entity
Process to Data Store
External Entity to Data Store
Data Store to Data Store
FIGURE 5-11 Examples of correct and incorrect uses of data flows.
VIDEO LEARNING SESSION: DFD CONTEXT DIAGRAMS
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate Web
site at www.cengagebrain.com and navigate to the Video Learning Sessions for this book.
This session is about DFD context diagrams, why they are important, how to construct a context
diagram, and how you can use a CASE tool to create a context diagram.
Guidelines for Drawing DFDs
When you draw a context diagram and other DFDs, you should follow several guidelines:
• Draw the context diagram so it fits on one page.
• Use the name of the information system as the process name in the context dia-
gram. For example, the process name in Figure 5-12 is GRADING SYSTEM.
Notice that the process name is the same as the system name. This is because the

www.cengagebrain.com

Creating a Set of DFDs 207
Phase 2 Systems Analysis
context diagram shows the entire information system as if it were a single
process. For processes in lower-level DFDs, you would use a verb followed by a
descriptive noun, such as ESTABLISH GRADEBOOK, ASSIGN FINAL GRADE,
or PRODUCE GRADE REPORT.
• Use unique names within each set of symbols. For instance, the diagram in
Figure 5-12 shows only one entity named STUDENT and only one data flow
named FINAL GRADE. Whenever you see the entity STUDENT on any other
DFD in the grading system, you know that you are dealing with the same entity.
Whenever the FINAL GRADE data flow appears, you know that you are dealing
with the same data flow. The naming convention also applies to data stores.
• Do not cross lines. One way to achieve that goal is to restrict the number of sym-
bols in any DFD. On lower-level diagrams with multiple processes, you should
not have more than nine process symbols. Including more than nine symbols
usually is a signal that your diagram is too complex and that you should recon-
sider your analysis. Another way to avoid crossing lines is to duplicate an entity
or data store. When duplicating a symbol on a diagram, make sure to document
the duplication to avoid possible confusion. A special notation, such as an aster-
isk, next to the symbol name and inside the duplicated symbols signifies that they
are duplicated on the diagram.
• Provide a unique name and reference number for each process. Because it is the
highest-level DFD, the context diagram contains process 0, which represents the
entire information system, but does not show the internal workings. To describe
the next level of detail inside process 0, you must create a DFD named diagram 0,
which will reveal additional processes that must be named and numbered. As you
continue to create lower-level DFDs, you assign unique names and reference num-
bers to all processes, until you complete the logical model.
• Obtain as much user input and feedback as possible. Your main objective is to ensure
that the model is accurate, easy to understand, and meets the needs of its users.
unique reference
number for
each process
process 0
represents the
entire grading system
FIGURE 5-12 Context diagram DFD for a grading system.

208
Chapter 5 Data and Process Modeling
Creating a Set of DFDs
Step 1: Draw a Context Diagram
The first step in constructing a set of DFDs is to draw a context diagram. A context
diagram is a top-level view of an information system that shows the system’s boundaries
and scope. To draw a context diagram, you start by placing a single process symbol in
the center of the page. The symbol represents the entire information system, and you
identify it as process 0 (the numeral zero, and not the letter O). Then you place the sys-
tem entities around the perimeter of the page and use data flows to connect the entities
to the central process. Data stores are not shown in the context diagram because they are
contained within the system and remain hidden until more detailed diagrams are created.
How do you know which entities and data flows to place in the context diagram?
You begin by reviewing the system requirements to identify all external data sources and
destinations. During that process, you identify the entities, the name and content of the
data flows, and the direction of the data flows. If you do that carefully, and you did a
good job of fact-finding in the previous stage, you should have no difficulty drawing the
context diagram. Now review the following context diagram examples.
EXAMPLE: CONTEXT DIAGRAM FOR A GRADING SYSTEM The context diagram for a
grading system is shown in Figure 5-12 on the previous page. The GRADING SYSTEM
process is at the center of the diagram. The three entities (STUDENT RECORDS SYSTEM,
STUDENT, and INSTRUCTOR) are placed around the central process. Interaction among
the central process and the entities involves six different data flows. The STUDENT
RECORDS SYSTEM entity supplies data through the CLASS ROSTER data flow and
receives data through the FINAL GRADE data flow. The STUDENT entity supplies data
through the SUBMITTED WORK data flow and receives data through the GRADED
WORK data flow. Finally, the INSTRUCTOR entity supplies data through the GRADING
PARAMETERS data flow and receives data through the GRADE REPORT data flow.
EXAMPLE: CONTEXT DIAGRAM FOR AN ORDER SYSTEM The context diagram
for an order system is shown in Figure 5-13. Notice that the ORDER SYSTEM process
is at the center of the diagram and five entities surround the process. Three of the
entities, SALES REP, BANK, and ACCOUNTING, have single incoming data flows for
FIGURE 5-13 Context diagram DFD for an order system.

Creating a Set of DFDs 209
Phase 2 Systems Analysis
COMMISSION, BANK DEPOSIT, and CASH RECEIPTS ENTRY, respectively. The
WAREHOUSE entity has one incoming data flow — PICKING LIST — that is, a report
that shows the items ordered and their quantity, location, and sequence to pick from the
warehouse. The WAREHOUSE entity has one outgoing data flow, COMPLETED
ORDER. Finally, the CUSTOMER entity has two outgoing data flows, ORDER and
PAYMENT, and two incoming data flows, ORDER REJECT NOTICE and INVOICE.
The context diagram for the order system appears more complex than the grading
system because it has two more entities and three more data flows. What makes one sys-
tem more complex than another is the number of components, the number of levels, and
the degree of interaction among its processes, entities, data stores, and data flows.
Step 2: Draw a Diagram 0 DFD
In the previous step, you learned that a con-
text diagram provides the most general view
of an information system and contains a sin-
gle process symbol, which is like a black
box. To show the detail inside the black box,
you create DFD diagram 0. Diagram 0 (the
numeral zero, and not the letter O) zooms in
on the system and shows major internal pro-
cesses, data flows, and data stores. Diagram 0
also repeats the entities and data flows that
appear in the context diagram. When you
expand the context diagram into DFD dia-
gram 0, you must retain all the connections
that flow into and out of process 0.
The real-life scene in Figure 5-14 repre-
sents a complex manufacturing system with
many interactive processes and data. In a
large system such as this, each process in
diagram 0 could represent a separate system such as inventory, production control, and
scheduling. Diagram 0 provides an overview of all the components that interact to form
the overall system. Now review the following diagram 0 examples.
EXAMPLE: DIAGRAM 0 DFD FOR A GRADING SYSTEM
Figure 5-15 on the next page shows a context diagram at the top and diagram 0 beneath
it. Notice that diagram 0 is an expansion of process 0. Also notice that the three same enti-
ties (STUDENT RECORDS SYSTEM, STUDENT, and INSTRUCTOR) and the same six
data flows (FINAL GRADE, CLASS ROSTER, SUBMITTED WORK, GRADED WORK,
GRADING PARAMETERS, and GRADE REPORT) appear in both diagrams. In addition,
diagram 0 expands process 0 to reveal four internal processes, one data store, and five
additional data flows.
VIDEO LEARNING SESSION: DFD DIAGRAM 0
Video Learning Sessions can help you understand key concepts, practice your skills, and check your
work. To access the sessions, visit the Management Information Systems CourseMate Web site at
www.cengagebrain.com and navigate to the Video Learning Sessions for this book. This
session is about DFD diagram 0. You’ll learn what a DFD diagram 0 is, how to create a diagram 0,
and how you can use a CASE tool to create a DFD diagram 0.
FIGURE 5-14 Complex manufacturing systems require many interactive
processes and data sources.

www.cengagebrain.com

210
Chapter 5 Data and Process Modeling
Creating a Set of DFDs
CONTEXT DIAGRAM FOR GRADING SYSTEM
DIAGRAM 0 FOR GRADING SYSTEM
FIGURE 5-15 Context diagram and diagram 0 for the grading system.

Creating a Set of DFDs 211
Phase 2 Systems Analysis
Notice that each process in diagram 0 has a reference number: ESTABLISH
GRADEBOOK is 1, ASSIGN FINAL GRADE is 2, GRADE STUDENT WORK is 3, and
PRODUCE GRADE REPORT is 4. These reference numbers are important because they
identify a series of DFDs. If more detail were needed for ESTABLISH GRADEBOOK, for
example, you would draw a diagram 1, because ESTABLISH GRADEBOOK is process 1.
The process numbers do not suggest that the processes are accomplished in a sequential
order. Each process always is considered to be available, active, and awaiting data to be
processed. If processes must be performed in a specific sequence, you document the infor-
mation in the process descriptions (discussed later in this chapter), not in the DFD.
The FINAL GRADE data flow output from the ASSIGN FINAL GRADE process is a
diverging data flow that becomes an input to the STUDENT RECORDS SYSTEM entity
and to the GRADEBOOK data store. A diverging data flow is a data flow in which the
same data travels to two or more different locations. In that situation, a diverging data
flow is the best way to show the flow rather than showing two identical data flows,
which could be misleading.
If the same data flows in both directions, you can use a double-headed arrow to con-
nect the symbols. To identify specific data flows into and out of a symbol, however, you
use separate data flow symbols with single arrowheads. For example, in Figure 5-15, the
separate data flows (SUBMITTED WORK and GRADED WORK) go into and out of
the GRADE STUDENT WORK process.
Because diagram 0 is an exploded version of process 0, it shows considerably more
detail than the context diagram. You also can refer to diagram 0 as a partitioned or
decomposed view of process 0. When you explode a DFD, the higher-level diagram is
called the parent diagram, and the lower-level diagram is referred to as the child
diagram. The grading system is simple enough that you do not need any additional
DFDs to model the system. At that point, the four processes, the one data store, and the
10 data flows can be documented in the data dictionary.
When you create a set of DFDs for a system, you break the processing logic down
into smaller units, called functional primitives, that programmers will use to develop
code. A functional primitive is a process that consists of a single function that is not
exploded further. For example, each of the four processes shown in the lower portion of
Figure 5-15 is a functional primitive. You document the logic for a functional primitive
by writing a process description in the data dictionary. Later, when the logical design is
implemented as a physical system, programmers will transform each functional primi-
tive into program code and modules that carry out the required steps. Deciding whether
to explode a process further or determine that it is a functional primitive is a matter of
experience, judgment, and interaction with programmers who must translate the logical
design into code.
EXAMPLE: DIAGRAM 0 DFD FOR AN ORDER SYSTEM Figure 5-16 on the next page
shows the diagram 0 for an order system. Process 0 on the order system’s context diagram
is exploded to reveal three processes (FILL ORDER, CREATE INVOICE, and APPLY
PAYMENT), one data store (ACCOUNTS RECEIVABLE), two additional data flows
(INVOICE DETAIL and PAYMENT DETAIL), and one diverging data flow (INVOICE).
The following walkthrough explains the DFD shown in Figure 5-16:
1. A CUSTOMER submits an ORDER. Depending on the processing logic, the FILL
ORDER process either sends an ORDER REJECT NOTICE back to the customer
or sends a PICKING LIST to the WAREHOUSE.
2. A COMPLETED ORDER from the WAREHOUSE is input to the CREATE
INVOICE process, which outputs an INVOICE to both the CUSTOMER process
and the ACCOUNTS RECEIVABLE data store.
3. A CUSTOMER makes a PAYMENT that is processed by APPLY PAYMENT.
APPLY PAYMENT requires INVOICE DETAIL input from the ACCOUNTS

212
Chapter 5 Data and Process Modeling
Creating a Set of DFDs
RECEIVABLE data store along with the PAYMENT. APPLY PAYMENT also out-
puts PAYMENT DETAIL back to the ACCOUNTS RECEIVABLE data store and
outputs COMMISSION to the SALES DEPT, BANK DEPOSIT to the BANK, and
CASH RECEIPTS ENTRY to ACCOUNTING.
The walkthrough of diagram 0 illustrates the basic requirements of the order system.
To learn more, you would examine the detailed description of each separate process.
Step 3: Draw the Lower-Level Diagrams
This set of lower-level DFDs is based on the order system. To create lower-level dia-
grams, you must use leveling and balancing techniques. Leveling is the process of draw-
ing a series of increasingly detailed diagrams, until all functional primitives are
identified. Balancing maintains consistency among a set of DFDs by ensuring that input
and output data flows align properly. Leveling and balancing are described in more
detail in the following sections.
LEVELING EXAMPLES Leveling uses a series of increasingly detailed DFDs to describe
an information system. For example, a system might consist of dozens, or even hun-
dreds, of separate processes. Using leveling, an analyst starts with an overall view,
which is a context diagram with a single process symbol. Next, the analyst creates dia-
gram 0, which shows more detail. The analyst continues to create lower-level DFDs
FIGURE 5-16 Diagram 0 DFD for the order system.

Creating a Set of DFDs 213
Phase 2 Systems Analysis
until all processes are identified as functional primitives, which represent single process-
ing functions. More complex systems have more processes, and analysts must work
through many levels to identify the functional primitives. Leveling also is called explod-
ing, partitioning, or decomposing.
Figures 5-16 and 5-17 provide an example of leveling. Figure 5-16 shows diagram
0 for an order system, with the FILL ORDER process labeled as process 1. Now con-
sider Figure 5-17, which provides an exploded view of the FILL ORDER process.
Notice that FILL ORDER (process 1) actually consists of three processes: VERIFY
ORDER (process 1.1), PREPARE REJECT NOTICE (process 1.2), and ASSEMBLE
ORDER (process 1.3).
CREDIT
HISTORY
FIGURE 5-17 Diagram 1 DFD shows details of the FILL ORDER process in the order system.
As Figure 5-17 shows, all processes are numbered using a decimal notation consist-
ing of the parent’s reference number, a decimal point, and a sequence number within the
new diagram. In Figure 5-17, the parent process of diagram 1 is process 1, so the pro-
cesses in diagram 1 have reference numbers of 1.1, 1.2, and 1.3. If process 1.3,
ASSEMBLE ORDER, is decomposed further, then it would appear in diagram 1.3 and
the processes in diagram 1.3 would be numbered as 1.3.1, 1.3.2, 1.3.3, and so on. This
numbering technique makes it easy to integrate and identify all DFDs.
When you compare Figures 5-16 and 5-17, you will notice that Figure 5-17 (the
exploded FILL ORDER process) shows two data stores (CUSTOMERS and PRODUCTS)
that do not appear on Figure 5-16, which is the parent DFD. Why not? The answer is
based on a simple rule: When drawing DFDs, you show a data store only when two or
more processes use that data store. The CUSTOMERS and PRODUCTS data stores were
internal to the FILL ORDER process, so the analyst did not show them on diagram 0,

214
Chapter 5 Data and Process Modeling
Creating a Set of DFDs
CREDIT
HISTORY
FIGURE 5-18 This diagram does not show the symbols that connect to data flows entering or leaving FILL
ORDER on the context diagram.
which is the parent. When you explode the FILL ORDER process into diagram 1 DFD,
however, you see that three processes (1.1, 1.2, and 1.3) interact with the two data stores,
which now are shown.
Now compare Figure 5-17 (on the previous page) and Figure 5-18. Notice that Figure
5-18 shows the same data flows as Figure 5-17, but does not show the CUSTOMER and
WAREHOUSE entities. Analysts often use this technique to simplify a DFD and reduce
unnecessary clutter. Because the missing symbols appear on the parent DFD, you can
refer to that diagram to identify the source or destination of the data flows.
BALANCING EXAMPLES Balancing ensures that the input and output data flows of
the parent DFD are maintained on the child DFD. For example, Figure 5-19 shows two
DFDs: The order system diagram 0 is shown at the top of the figure, and the exploded
diagram 3 DFD is shown at the bottom.
The two DFDs are balanced, because the child diagram at the bottom has the same
input and output flows as the parent process 3 shown at the top. To verify the balanc-
ing, notice that the parent process 3, APPLY PAYMENT, has one incoming data flow
from an external entity, and three outgoing data flows to external entities. Now examine
the child DFD, which is diagram 3. Now, ignore the internal data flows and count the
data flows to and from external entities. You will see that the three processes maintain
the same one incoming and three outgoing data flows as the parent process.

Creating a Set of DFDs 215
Phase 2 Systems Analysis
FIGURE 5-19 The order system diagram 0 is shown at the top of the figure, and exploded diagram
3 DFD (for the APPLY PAYMENT process) is shown at the bottom. The two DFDs are balanced,
because the child diagram at the bottom has the same input and output flows as the parent process 3
shown at the top.
Order System Diagram 0 DFD
Order System Diagram 3 DFD
Another example of balancing is shown in Figures 5-20 and 5-21 on the next page.
The DFDs in these figures were created using Visible Analyst, a popular CASE tool.

216
Chapter 5 Data and Process Modeling
Creating a Set of DFDs
Figure 5-20 shows a sample context diagram. The process 0 symbol has two input
flows and two output flows. Notice that process 0 can be considered as a black box,
with no internal detail shown. In Figure 5-21, process 0 (the parent DFD) is exploded
into the next level of detail. Now three processes, two data stores, and four internal data
flows are visible. Notice that the details of process 0 are shown inside a dashed line, just
as if you could see inside the process.
FIGURE 5-20 Example of a parent DFD diagram, showing process 0 as a black box.
FIGURE 5-21 In the next level of detail, the process 0 black box reveals three
processes, two data stores, and four internal data flows — all of which are shown
inside the dashed line.
The DFDs in Figures 5-20 and 5-21 are balanced, because the four data flows into
and out of process 0 are maintained on the child DFD. The DFDs also are leveled,
because each internal process is numbered to show that it is a child of the parent process.

Data Dictionary 217
Phase 2 Systems Analysis
CASE IN POINT 5.1: BIG TEN UNIVERSITY
You are the IT director at Big Ten University. As part of a training program, you decide to
draw a DFD that includes some obvious mistakes to see whether your newly hired junior
analysts can find them. You came up with the diagram 0 DFD shown in Figure 5-22. Based on
the rules explained in this chapter, how many problems should the analysts find?
DATA DICTIONARY
A set of DFDs produces a logical model of the system, but the details within those DFDs
are documented separately in a data dictionary, which is the second component of struc-
tured analysis.
A data dictionary, or data repository, is a central storehouse of information about
the system’s data. An analyst uses the data dictionary to collect, document, and organize
specific facts about the system, including the contents of data flows, data stores, entities,
and processes. The data dictionary also defines and describes all data elements and
meaningful combinations of data elements. A data element, also called a data item or
field, is the smallest piece of data that has meaning within an information system.
Examples of data elements are student grade, salary, Social Security number, account
balance, and company name. Data elements are combined into records, also called data
structures. A record is a meaningful combination of related data elements that is
included in a data flow or retained in a data store. For example, an auto parts store
inventory record might include part number, description, supplier code, minimum and
maximum stock levels, cost, and list price.
To learn more about
data dictionaries,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Data
Dictionaries link.
FIGURE 5-22 What are the mistakes in this diagram 0 DFD?

www.cengagebrain.com

www.cengagebrain.com

218
Chapter 5 Data and Process Modeling
Data Dictionary
Significant relationships exist among the items in a data dictionary. For example, data
stores and data flows are based on data structures, which in turn are composed of data
elements. Data flows are connected to data stores, entities, and processes. Accurately doc-
umenting these relationships is essential so the data dictionary is consistent with the
DFDs. You can use CASE software to help you document the design.
Using CASE Tools for Documentation
The more complex the system, the more difficult it is to maintain full and accurate docu-
mentation. Fortunately, modern CASE tools simplify the task. For example, in the Visible
Analyst CASE tool, documentation automatically flows from the modeling diagrams into
the central repository, along with information entered by the user. This section contains
several examples of Visible Analyst screens that show the data repository and its con-
tents.
A CASE repository ensures data consistency, which is especially important where mul-
tiple systems require the same data. In a large company, for example, the sales, account-
ing, and shipping systems all might use a data element called CUSTOMER NUMBER.
Once the CUSTOMER NUMBER element has been defined in the repository, it can be
accessed by other processes, data flows, and data stores. The result is that all systems
across the enterprise can share data that is up to date and consistent. You will learn more
about CASE tools in Part B of the Systems Analyst’s Toolkit.
Documenting the Data Elements
You must document every data element in the data dictionary. Some analysts like to
record their notes on online or manual forms. Others prefer to enter the information
directly into a CASE tool. Several of the DFDs and data dictionary entries that appear in
this chapter were created using a popular CASE tool called Visible Analyst. Although
other CASE tools might use other terms or display the information differently, the objec-
tive is the same: to provide clear, comprehensive information about the data and pro-
cesses that make up the system.
Figure 5-23 shows how the analyst used an online documentation form to record
information for the SOCIAL SECURITY NUMBER data element. Notice that the figure
caption identifies eight specific characteristics for this data element.
TOOLKIT TIME
The CASE tools in
Part B of the
Systems Analyst’s
Toolkit can help you
document business
functions and pro-
cesses. To learn
more about these
tools, turn to Part B
of the four-part
Toolkit that follows
Chapter 12.

Data Dictionary 219
Phase 2 Systems Analysis
Figure 5-24 shows a sample screen that illustrates
how the SOCIAL SECURITY NUMBER data element
might be recorded in the Visible Analyst data dictionary.
Regardless of the terminology or method, the follow-
ing attributes usually are recorded and described in the
data dictionary:
Data element name or label. The data element’s stan-
dard name, which should be meaningful to users.
Alias. Any name(s) other than the standard data ele-
ment name; this alternate name is called an alias. For
example, if you have a data element named CURRENT
BALANCE, various users might refer to it by alternate
names such as OUTSTANDING BALANCE,
CUSTOMER BALANCE, RECEIVABLE BALANCE, or
AMOUNT OWED.
Type and length. Type refers to whether the data ele-
ment contains numeric, alphabetic, or character values.
Length is the maximum number of characters for an
alphabetic or character data element or the maximum
number of digits and number of decimal positions for a
numeric data element. In addition to text and numeric
data, sounds and images also can be stored in digital
form. In some systems, these binary data objects are man-
aged and processed just as traditional data elements are.
For example, an employee record might include a digitized
photo image of the person.
Default value. The value for the data element if a value otherwise is not entered for
it. For example, all new customers might have a default value of $500 for the CREDIT
LIMIT data element.
FIGURE 5-23 Using an online documentation form, the analyst has recorded information for a data element named SOCIAL SECURITY
NUMBER. Later, the analyst will create a data dictionary entry using a CASE tool.
1. Online or manual documentation entries
often indicate which system is involved.
This is not necessary with a CASE tool
because all information is stored in one
file that is named for the system.
2. The data element has a standard label
that provides consistency throughout
the data dictionary.
3. The data element can have an
alternative name, or alias.
4. This entry indicates that the data
element consists of nine numeric
characters.
5. Depending on the data element, strict
limits might be placed on acceptable
values.
6. The data comes from the employee’s job
application.
7. This entry indicates that only the
payroll department has authority to
update or change this data.
8. This entry indicates the individual or
department responsible for entering and
changing data.
1
3
5
8
2
4
6
7
FIGURE 5-24 A Visible Analyst screen describes the data
element named SOCIAL SECURITY NUMBER. Notice that
many of the items were entered from the online form shown in
Figure 5-23.

220
Chapter 5 Data and Process Modeling
Data Dictionary
Acceptable values. Specification of the data element’s domain, which is the set of
values permitted for the data element; these values either can be specifically listed or
referenced in a table, or can be selected from a specified range of values. You also would
indicate if a value for the data element is optional. Some data elements have additional
validity rules. For example, an employee’s salary must be within the range defined for
the employee’s job classification.
Source. The specification for the origination point for the data element’s values. The
source could be a specific form, a department or outside organization, another informa-
tion system, or the result of a calculation.
Security. Identification for the individual or department that has access or update privi-
leges for each data element. For example, only a credit manager has the authority to
change a credit limit, while sales reps are authorized to access data in a read-only mode.
Responsible user(s). Identification of the user(s) responsible for entering and chang-
ing values for the data element.
Description and comments. This part of the documentation allows you to enter addi-
tional notes.
Documenting the Data Flows
In addition to documenting each data element, you must document all data flows in the
data dictionary. Figure 5-25 shows a definition for a data flow named COMMISSION.
The information on the manual form at the top was entered into the CASE tool data
dictionary at the bottom of Figure 5-25.
Although terms can vary, the typical attributes are as follows:
Data flow name or label. The data flow name as it appears on the DFDs.
Description. Describes the data flow and its purpose.
Alternate name(s). Aliases for the DFD data flow name(s).
Origin. The DFD beginning, or source, for the data flow; the origin can be a process,
a data store, or an entity.
Destination. The DFD ending point(s) for the data flow; the destination can be a pro-
cess, a data store, or an entity.
Record. Each data flow represents a group of related data elements called a record or
data structure. In most data dictionaries, records are defined separately from the data
flows and data stores. When records are defined, more than one data flow or data store
can use the same record, if necessary.
Volume and frequency. Describes the expected number of occurrences for the data
flow per unit of time. For example, if a company has 300 employees, a TIME CARD
data flow would involve 300 transactions and records each week, as employees submit
their work hour data.

Data Dictionary 221
Phase 2 Systems Analysis
FIGURE 5-25 In the upper screen, an analyst has entered four items of information in an online
documentation form. The lower screen shows the same four items entered into a Visible Analyst data
dictionary form.
1
2
Documenting the Data Stores
You must document every DFD data store in the data dictionary. Figure 5-26 on the
next page shows the definition of a data store named IN STOCK.
3
4

222
Chapter 5 Data and Process Modeling
Data Dictionary
1. This data store has an
alternative name, or
alias.
2. For consistency, data
flow names are stan-
dardized throughout
the data dictionary.
3. It is important to
document these
estimates, because
they will affect
design decisions in
subsequent SDLC
phases.
FIGURE 5-26 Visible Analyst screen that documents a
data store named IN STOCK.
1
2
3
FIGURE 5-27 Visible Analyst screen that describes a
process named VERIFY ORDER.
1. The process number
identifies this process.
Any subprocesses are
numbered 1.1, 1.2, 1.3,
and so on.
2. These data flows will
be described specifi-
cally elsewhere in
the data dictionary.
2
1
Typical characteristics of a
data store are as follows:
Data store name or label.
The data store name as it
appears on the DFDs.
Description. Describes the
data store and its purpose.
Alternate name(s). Aliases
for the DFD data store name.
Attributes. Standard DFD
names that enter or leave the
data store.
Volume and frequency.
Describes the estimated number
of records in the data store and
how frequently they are
updated.
Documenting the
Processes
You must document every
process, as shown in
Figure 5-27. Your documenta-
tion includes a description of
the process’s characteristics and,
for functional primitives, a pro-
cess description, which is a
model that documents the pro-
cessing steps and business logic.
The following are typical
characteristics of a process:
Process name or label. The
process name as it appears on
the DFDs.
Description. A brief state-
ment of the process’s purpose.
Process number. A reference
number that identifies the pro-
cess and indicates relationships
among various levels in the sys-
tem.
Process description. This
section includes the input and
output data flows. For func-
tional primitives, the process
description also documents the
processing steps and business
logic. You will learn how to
write process descriptions in
the next section.

Data Dictionary 223
Phase 2 Systems Analysis
Documenting the Entities
By documenting all entities, the data
dictionary can describe all external
entities that interact with the system.
Figure 5-28 shows a definition for an
external entity named
WAREHOUSE.
Typical characteristics of an entity
include the following:
Entity name. The entity name as it
appears on the DFDs.
Description. Describe the entity
and its purpose.
Alternate name(s). Any aliases for
the entity name.
Input data flows. The standard
DFD names for the input data flows
to the entity.
Output data flows. The standard
DFD names for the data flows leaving
the entity.
Documenting the Records
A record is a data structure that
contains a set of related data
elements that are stored and
processed together. Data flows and
data stores consist of records that you
must document in the data dictionary.
You define characteristics of each
record, as shown in Figure 5-29.
Typical characteristics of a record
include the following:
Record or data structure name.
The record name as it appears in the
related data flow and data store
entries in the data dictionary.
Definition or description. A brief
definition of the record.
Alternate name(s). Any aliases for
the record name.
Attributes. A list of all the data
elements included in the record. The
data element names must match
exactly what you entered in the data
dictionary.
FIGURE 5-28 Visible Analyst screen that documents an
external entity named WAREHOUSE.
1
1. The external entity
also can have an
alternative name, or
alias, if properly
documented.
2. For consistency,
these data flow
names are
standardized
throughout the data
dictionary.
FIGURE 5-29 Visible Analyst screen that documents a
record, or data structure named CREDIT STATUS.
1. This data structure is
named CREDIT
STATUS.
2. The CREDIT
STATUS data
structure consists of
two data elements:
CUSTOMER
NUMBER and
CUSTOMER
STATUS CODE.
1
2
2
Data Dictionary Reports
The data dictionary serves as a central storehouse of documentation for an information
system. A data dictionary is created when the system is developed, and is updated con-
stantly as the system is implemented, operated, and maintained. In addition to describing
each data element, data flow, data store, record, entity, and process, the data dictionary

224
Chapter 5 Data and Process Modeling
Process Description Tools
documents the relationships among these components. You can obtain many valuable
reports from a data dictionary, including the following:
• An alphabetized list of all data elements by name
• A report describing each data element and indicating the user or department that
is responsible for data entry, updating, or deletion
• A report of all data flows and data stores that use a particular data element
• Detailed reports showing all characteristics of data elements, records, data flows,
processes, or any other selected item stored in the data dictionary
PROCESS DESCRIPTION TOOLS
A process description documents the details of a functional primitive, and represents a
specific set of processing steps and business logic. Using a set of process description
tools, you create a model that is accurate, complete, and concise. Typical process
description tools include structured English, decision tables, and decision trees. When
you analyze a functional primitive, you break the processing steps down into smaller
units in a process called modular design.
It should be noted that this chapter deals with structured analysis, but the process
description tools also can be used in object-oriented development, which is described in
Chapter 6. You learned in Chapter 1 that O-O analysis combines data and the
processes that act on the data into things called objects, that similar objects can be
grouped together into classes, and that O-O processes are called methods. Although
O-O programmers use different terminology, they create the same kind of modular cod-
ing structures, except that the processes, or methods, are stored inside the objects, rather
than as separate components.
Modular Design
Modular design is based on combinations of three
logical structures, sometimes called control struc-
tures, which serve as building blocks for the pro-
cess. Each logical structure must have a single
entry and exit point. The three structures are
called sequence, selection, and iteration. A rectan-
gle represents a step or process, a diamond shape rep-
resents a condition or decision, and the logic follows
the lines in the direction indicated by the arrows.
1. Sequence. The completion of steps in sequential
order, one after another, as shown in Figure 5-30.
One or more of the steps might represent a sub-
process that contains additional logical structures.
2. Selection. The completion of one of two or more
process steps based on the results of a test or condi-
tion. In the example shown in Figure 5-31, the system
tests the input, and if the hours are greater than 40, it
performs the CALCULATE OVERTIME PAY process.
VERIFY
STOCK
LEVEL
VERIFY
PRICE
VERIFY
PRODUCT
CODE
FIGURE 5-30 Sequence structure.
CALCULATE
OVERTIME
PAY
HOURS
>40?
YES
NO
FIGURE 5-31 Selection structure.

Process Description Tools 225
Phase 2 Systems Analysis
3. Iteration. The completion of a process step that is
repeated until a specific condition changes, as
shown in Figure 5-32. An example of iteration is
a process that continues to print paychecks until
it reaches the end of the payroll file. Iteration also
is called looping.
Sequence, selection, and iteration structures can be
combined in various ways to describe processing logic.
Structured English
Structured English is a subset of standard English that
describes logical processes clearly and accurately. When
you use structured English, you must conform to the
following rules:
• Use only the three building blocks of sequence, selection, and iteration.
• Use indentation for readability.
• Use a limited vocabulary, including standard terms used in the data dictionary
and specific words that describe the processing rules.
An example of structured English
appears in Figure 5-33, which shows the
VERIFY ORDER process that was illus-
trated earlier. Notice that the structured
English version documents the actual logic
that will be coded into the system.
Structured English can help make your pro-
cess descriptions accurate and understand-
able to users and system developers.
Structured English might look familiar
to programming students because it
resembles pseudocode, which is used in
program design. Although the techniques
are similar, the primary purpose of struc-
tured English is to describe the underly-
ing business logic, while programmers,
who are concerned with coding, mainly
use pseudocode as a shorthand notation
for the actual code.
Figure 5-34 shows another example of
structured English. After you study the
sales promotion policy, notice that the
structured English version describes
the processing logic that the system must
apply. Following structured English rules
ensures that your process descriptions are
understandable to users who must confirm that the process is correct, as well as to
other analysts and programmers who must design the information system from your
descriptions.
PRINT
PAYCHECKNO
YES
END
OF
FILE?
FIGURE 5-32 Iteration structure.
FIGURE 5-33 The VERIFY ORDER process description
includes logical rules and a structured English version of
the policy. Notice the alignment and indentation of the
logic statements.
structured English
statements

226
Chapter 5 Data and Process Modeling
Process Description Tools
1. Place the name of
the process in a
heading at the top
left.
2. Enter the conditions
under the heading,
with one condition
per line, to repre-
sent the customer
status and availabil-
ity of products.
3. Enter all potential
combinations of Y/N
(for yes and no) for
the conditions. Each
column
represents a
numbered
possibility
called a rule.
4. Place an X
in the
action
entries area for each
rule to indicate
whether to accept
or reject the order.
To learn more about
structured English,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Structured
English link.
1 2 3 4
Credit status is OK Y Y N N
Product is in stock Y N Y N
Accept order X
Reject order X X X
2
1
4
3
VERIFY ORDER Process
FIGURE 5-35 Example of a simple decision table showing the processing logic of the VERIFY ORDER process.
FIGURE 5-34 The Verify Order business process has two conditions. For an order to be accepted, the product
must be in stock and the customer must have an acceptable credit status.
VERIFY ORDER Business Process with Two Conditions
• An order will be accepted only if the product is in stock and the customer’s credit status is OK.
• All other orders will be rejected.
Decision Tables
A decision table is a logical structure that shows every combination of conditions and
outcomes. Analysts often use decision tables to describe a process and ensure that they
have considered all possible situations. You can create decision tables using Microsoft
PowerPoint, Word, or Excel.
TABLES WITH ONE CONDITION If a process has a single condition, there only are
two possibilities – yes or no. Either the condition is present or it is not, so there are only
two rules. For example, to trigger an overtime calculation, the process condition might
be: Are the hours greater than 40? If so, the calculation is made. Otherwise, it is not.
TABLES WITH TWO CONDITIONS Suppose you want to create a decision table based
on the Verify Order business process shown in Figure 5-34. When documenting a pro-
cess, it is important to ensure that you list every possibility. In this example, the process
description contains two conditions: product stock status and customer credit status.
If both conditions are met, the order is accepted. Otherwise the order is rejected.
VIDEO LEARNING SESSION: DECISION TABLES
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate Web
site at www.cengagebrain.com and navigate to the Video Learning Sessions for this book.
This session is about decision tables, why they are important process description tools, how to
create decision tables, and how to analyze conditions and outcomes in a decision table.
After you identify all the conditions and outcomes, you are ready to create a decision
table similar to the one shown in Figure 5-35. To create the table, follow the four steps
listed in the margin.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Process Description Tools 227
Phase 2 Systems Analysis
To learn more about
decision tables, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Decision
Tables link.
1 2 3 4 5 6 7 8
Credit status is OK Y Y Y Y N N N N
Product is in stock Y Y N N Y Y N N
Waiver from credit manager Y N Y N Y N Y N
Accept order X X X
Reject order X X X X X
VERIFY ORDER Process with Credit Waiver (initial version)
FIGURE 5-37 This table is based on the Verify Order conditions shown in Figure 5-36. With three conditions,
there are eight possible combinations, or rules.
Notice that each condition has two possible values, so the number of rules doubles
each time you add another condition. For example, one condition creates two rules, two
conditions create four rules, three conditions create eight rules, and so on. In the two-
condition example in Figure 5-35, four possibilities exist, but Rule 1 is the only combi-
nation that will accept an order.
TABLES WITH THREE CONDITIONS Suppose the company now decides that the credit
manager can waive the customer credit requirement, as shown in Figure 5-36. That creates a
third condition, so there will be eight possible rules. The new decision table might resemble the
one shown in Figure 5-37.
FIGURE 5-36 A third condition has been added to the Verify Order business process. For an order to be
accepted, the product must be in stock and the customer must have an acceptable credit status. However, the
credit manager now has the authority to waive the credit status requirement.
VERIFY ORDER Business Process with Three Conditions
• An order will be accepted only if the product is in stock and the customer’s credit status is OK.
• The credit manager can waive the credit status requirement.
• All other orders will be rejected.
First, you must fill in the Y-N patterns, as shown in Figure 5-37. The best way to
assure that all combinations appear is to use patterns like these. The first condition uses
a pattern of Y-Y-Y-Y followed by N-N-N-N; the second condition uses a repeating Y-Y-
N-N pattern; and the pattern in the third condition is a series of Y-Ns.
The next step is very important, regardless of the number of conditions. Each num-
bered column, or rule, represents a different set of conditions. You must analyze the
logic carefully and show the outcome for each rule. Before going further, study the table
in Figure 5-37 and be sure you understand the logical outcome for each of the eight
rules.
When all the outcomes have been determined, you are ready to simplify the table. In
a multi-condition table, some rules might be duplicates, redundant, or unrealistic. To
simplify the table, follow these steps:
1. Study each combination of conditions and outcomes. When you have rules with
three conditions, only one or two of them may control the outcome, and the other
conditions simply do not matter.
2. If you identify conditions that do not affect the outcome, mark them with dashes (-)
as shown in the first table in Figure 5-38.
3. Now combine and renumber the rules, as shown in the second table in Figure 5-38.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

228
Chapter 5 Data and Process Modeling
Process Description Tools
FIGURE 5-39 A sales promotion policy with three conditions. Notice that the first statement contains two
separate conditions – one for the 5% discount, and another for the additional discount.
SALES PROMOTION POLICY – Holiday Season, 2011
• Preferred customers who order $1,000 or more are entitled to a 5% discount, and an additional
5% discount if they use our charge card.
• Preferred customers who do not order $1,000 or more will receive a $25 bonus coupon.
• All other customers will receive a $5 bonus coupon.
FIGURE 5-38 In the first table, dashes have been added to indicate that a condition is not relevant. In the
second version, rules have been combined. Notice that in final version, only four rules remain. These rules
document the logic, and will be transformed into program code when the system is developed.
1 2 3 4
(COMBINES (COMBINES
PREVIOUS 1, 2) (PREVIOUS 5) (PREVIOUS 6) PREVIOUS 3, 4, 7, 8)
Credit status is OK Y N N –
Product is in stock Y Y Y N
Waiver from credit manager – Y N –
Accept order X X
Reject order X X
VERIFY ORDER Process with Credit Waiver (after rule combination and
simplification)
1 2 3 4 5 6 7 8
Credit status is OK Y Y – – N N – –
Product is in stock Y Y N N Y Y N N
Waiver from credit manager – – – – Y N – –
Accept order X X X
Reject order X X X X X
1. Because the product
is not in stock, the
other conditions do
not matter.
2. Because the other
conditions are met,
the waiver does not
matter.
2
1
VERIFY ORDER Process with Credit Waiver (with rules marked for
combination)
If you follow these steps, you will see that Rules 1 and 2 can be combined because
credit status is OK in both rules, so the waiver would not matter. Rules 3, 4, 7, and 8
also can be combined because the product is not in stock, so other conditions do not
matter. The result is that instead of eight possibilities, only four logical rules control the
Verify Order process.
MULTIPLE OUTCOMES In addition to multiple conditions, decision tables can have
more than two possible outcomes. For example, the sales promotion policy shown in
Figure 5-39 includes three conditions: Was the customer a preferred customer, did the
customer order $1,000 or more, and did the customer use our company charge card?
Based on these conditions, four possible actions can occur, as shown in the decision
table in Figure 5-40.

Process Description Tools 229
Phase 2 Systems Analysis
1 2 3 4 5 6 7 8
Preferred customer Y Y Y Y N N N N
Ordered $1,000 or more Y Y N N – – – –
Used our charge card Y N – – – – – –
5% discount X X
Additional 5% discount X
$25 bonus coupon X X
$5 bonus coupon X X X X
FIGURE 5-41 In this version, dashes have been added to indicate that a condition is not relevant. At this point,
it appears that several rules can be combined.
FIGURE 5-40 This decision table is based on the sales promotion policy in Figure 5-39. This is the initial version
of the table, before simplification.
Sales Promotion Policy (initial version)
1 2 3 4 5 6 7 8
Preferred customer Y Y Y Y N N N N
Ordered $1,000 or more Y Y N N Y Y N N
Used our charge card Y N Y N Y N Y N
5% discount X X
Additional 5% discount X
$25 bonus coupon X X
$5 bonus coupon X X X X
As explained in the preceding section, most tables can be simplified, and this one is
no exception. When you study the conditions and outcomes, you realize that:
• In Rule 1, all three conditions are met, so both 5% discounts apply.
• In Rule 2, a preferred customer orders $1,000 or more, but does not use our
charge card, so only one 5% discount applies.
• Rules 3 and 4 can be combined into a single rule. Why? If preferred customers do
not order $1,000 or more, it does not matter whether they use our charge card –
either way, they only earn a $25 bonus coupon. Therefore, Rules 3 and 4 really
are a single rule.
• Rules 5, 6, 7, and 8 also can be combined into a single rule – because if the per-
son is not a preferred customer, he or she can only receive a $5 bonus coupon,
and the other conditions simply do not matter. So, you insert a dash if a condition
is irrelevant, as shown in Figure 5-41.
If you add dashes for rules that are not relevant, your table should resemble the one
shown in Figure 5-41. When you combine and simplify the results, only four rules
remain: Rule 1, Rule 2, Rule 3 (a combination of initial Rules 3 and 4), and Rule 4
(a combination of initial Rules 5, 6, 7, and 8).
Sales Promotion Policy (final version)
Decision tables often are the best way to describe a complex set of conditions. Many
analysts use decision tables because they are easy to construct and understand, and pro-
grammers find it easy to work from a decision table when developing code.

230
Chapter 5 Data and Process Modeling
Process Description Tools
Preferred
customer?
Ordered
$1,000 or
more?
Used our
charge card?
5% discount and
an additional 5%
discount
5% discount
$25 bonus coupon
$5 bonus coupon
Y
N
N
N
Y
Y
Decision Trees
A decision tree is a graphical representation of the conditions, actions, and rules found
in a decision table. Decision trees show the logic structure in a horizontal form that
resembles a tree with the roots at the left and the branches to the right. Like flowcharts,
decision trees are useful ways to present the system to management. Decision trees and
decision tables provide the same results, but in different forms. In many situations, a
graphic is the most effective means of communication.
Figure 5-42 is based on the sales promotion policy shown in Figure 5-39 on page 228.
A decision tree is read from left to right, with the conditions along the various branches
and the actions at the far right. Because the example has two conditions with four result-
ing sets of actions, the example has four terminating branches at the right side of the tree.
FIGURE 5-42 This example is based on the same Sales Promotion Policy shown in the decision tables in
Figures 5-40 and 5-41 on the previous page. Like a decision table, a decision tree shows all combinations of
conditions and outcomes. The main difference is the graphical format, which many viewers find easier to interpret.
CASE IN POINT 5.3: ROCK SOLID OUTFITTERS (PART 2)
Leah Jones, the IT manager at Rock Solid Outfitters, thinks you did a good job on the deci-
sion table task she assigned to you. Now she wants you to use the same data to develop a
decision tree that will show all the possibilities for the Web-based promotion described in
Part 1 of the case. She also wants you to discuss the pros and cons of decisions tables versus
decision trees.
CASE IN POINT 5.2: ROCK SOLID OUTFITTERS (PART 1)
Leah Jones is the IT manager at Rock Solid Outfitters, a medium-sized supplier of outdoor
climbing and camping gear. Steve Allen, the marketing director, has asked Leah to develop a
special Web-based promotion. As Steve described it to Leah, Rock Solid will provide free ship-
ping for any customer who either completes an online survey form or signs up for the Rock
Solid online newsletter. Additionally, if a customer completes the survey and signs up for the
newsletter, Rock Solid will provide a $10 merchandise credit for orders of $100 or more. Leah
has asked you to develop a decision table that will reflect the promotional rules that a pro-
grammer will use. She wants you to show all possibilities, then to simplify the results to elimi-
nate any combinations that would be unrealistic or redundant.
Whether to use a decision table or a decision tree often is a matter of personal pref-
erence. A decision table might be a better way to handle complex combinations of
conditions. On the other hand, a decision tree is an effective way to describe a relatively
simple process.

Logical Versus Physical Models 231
Phase 2 Systems Analysis
LOGICAL VERSUS PHYSICAL MODELS
While structured analysis tools are used to develop a logical model for a new information
system, such tools also can be used to develop physical models of an information system.
A physical model shows how the system’s requirements are implemented. During the sys-
tems design phase, you create a physical model of the new information system that follows
from the logical model and involves operational tasks and techniques.
Sequence of Models
What is the relationship between logical and physical models? Think back to the beginning
of the systems analysis phase, when you were trying to understand the existing system.
Rather than starting with a logical model, you first studied the physical operations of the
existing system to understand how the current tasks were carried out. Many systems ana-
lysts create a physical model of the current system and then develop a logical model of the
current system before tackling a logical model of the new system. Performing that extra
step allows them to understand the current system better.
Four-Model Approach
Many analysts follow a four-model approach, which means that they develop a physical
model of the current system, a logical model of the current system, a logical model of
the new system, and a physical model of the new system. The major benefit of the four-
model approach is that it gives you a clear picture of current system functions before
you make any modifications or improvements. That is important because mistakes made
early in systems development will affect later SDLC phases and can result in unhappy
users and additional costs. Taking additional steps to avoid these potentially costly mis-
takes can prove to be well worth the effort. Another advantage is that the requirements
of a new information system often are quite similar to those of the current information
system, especially where the proposal is based on new computer technology rather than a
large number of new requirements. Adapting the current system logical model to the
new system logical model in these cases is a straightforward process.
The only disadvantage of the four-model approach is the added time and cost needed
to develop a logical and physical model of the current system. Most projects have very
tight schedules that might not allow time to create the current system models.
Additionally, users and managers want to see progress on the new system — they are
much less concerned about documenting the current system. As a systems analyst, you
must stress the importance of careful documentation and resist the pressure to hurry the
development process at the risk of creating serious problems later.
CASE IN POINT 5.4: TIP TOP STAFFING
Tip Top Staffing supplies employees to hundreds of IT firms that require specialized skills for
specific projects. Systems analysts Lisa Nuevo and Bill Goodman are working on the logical
model of Tip Top’s billing and records system, using DFDs, a data dictionary, and process
descriptions. At some point while working on the logical model of the system, Lisa felt that
some improvements should be made in the data forms that Tip Top uses to obtain information
about job applicants. Was the subject of improving the forms a physical implementation issue?
Is Lisa going off on a tangent by considering how something will be done, instead of sticking to
what will be done?

232
Chapter 5 Data and Process Modeling
Chapter Summary
CHAPTER SUMMARY
During data and process modeling, a systems analyst develops graphical models to show
how the system transforms data into useful information. The end product of data and
process modeling is a logical model that will support business operations and meet user
needs. Data and process modeling involves three main tools: data flow diagrams, a data
dictionary, and process descriptions.
Data flow diagrams (DFDs) graphically show the movement and transformation of
data in the information system. DFDs use four symbols: The process symbol transforms
data; the data flow symbol shows data movement; the data store symbol shows data at
rest; and the external entity symbol represents someone or something connected to the
information system. Various rules and techniques are used to name, number, arrange,
and annotate the set of DFDs to make them consistent and understandable.
A set of DFDs is like a pyramid with the context diagram at the top. The context dia-
gram represents the information system’s scope and its external connections but not its
internal workings. Diagram 0 displays the information system’s major processes, data
stores, and data flows and is the exploded version of the context diagram’s process sym-
bol, which represents the entire information system. Lower-level DFDs show additional
detail of the information system through the leveling technique of numbering and parti-
tioning. Leveling continues until you reach the functional primitive processes, which are
not decomposed further and are documented with process descriptions. All diagrams
must be balanced to ensure their consistency and accuracy.
The data dictionary is the central documentation tool for structured analysis. All data
elements, data flows, data stores, processes, entities, and records are documented in the data
dictionary. Consolidating documentation in one location allows you to verify the informa-
tion system’s accuracy and consistency more easily and generate a variety of useful reports.
Each functional primitive process is documented using structured English, decision
tables, and decision trees. Structured English uses a subset of standard English that defines
each process with combinations of the basic building blocks of sequence, selection, and iter-
ation. You also can document the logic by using decision tables or decision trees.
Structured analysis tools can be used to develop a logical model during one systems
analysis phase, and a physical model during the systems design phase. Many analysts
use a four-model approach, which involves a physical model of the current system, a
logical model of the current system, a logical model of the new system, and a physical
model of the new system.
A QUESTION OF ETHICS
This is your first week in your new job at Safety Zone, a leading producer of IT modeling
software. Your prior experience with a smaller competitor gave you an edge in landing the
job, and you are excited about joining a larger company in the same field.
So far, all is going well and you are getting used to the new routine. However, you are con-
cerned about one issue. In your initial meeting with the IT manager, she seemed very inter-
ested in the details of your prior position, and some of her questions made you a little
uncomfortable. She did not actually ask you to reveal any proprietary information, but she
made it clear that Safety Zone likes to know as much as possible about its competitors.
Thinking about it some more, you try to draw a line between information that is OK to
discuss, and topics such as software specifics or strategy that should be considered private.
This is the first time you have ever been in a situation like this. How will you handle it?

233
Phase 2 Systems Analysis
alias 219
balancing 212
black box 201
black hole 203
business logic 201
business rules 201
child diagram 211
context diagram 208
control structures 224
data dictionary 217
data element 217
data flow 202
data flow diagram (DFD) 200
data item 217
data repository 217
data store 203
data structures 217
decision table 226
decision tree 230
decomposing 213
diagram 0 209
diverging data flow 211
domain 220
entity 205
exploding 213
field 217
four-model approach 231
functional primitive 211
Gane and Sarson 200
gray hole 203
iteration 225
length 219
leveling 212
logical model 198
logical structures 224
looping 225
modular design 224
parent diagram 211
partitioning 213
physical model 198
process 200
process 0 208
process description 224
pseudocode 225
records 217
selection 224
sequence 224
sink 205
source 205
spontaneous generation 203
structured English 225
terminators 205
type 219
validity rules 220
Yourdon 200
Key Terms and Phrases
Key Terms and Phrases

234
Chapter 5 Data and Process Modeling
Instructions: To complete the Learn It Online exercises, visit the Management Information
Systems CourseMate Web site at www.cengagebrain.com, navigate to the resources for this
chapter, and click the link for the exercise you want to complete.
1 Chapter Reinforcement
TF, MC, and SA
Click one of the Chapter Reinforcement links for Multiple Choice, True/False, or Short
Answer. Answer each question and submit to your instructor.
2 Flash Cards
Click the Flash Cards link and read the instructions. Type 20 (or a number specified by
your instructor) in the Number of playing cards text box, type your name in the Enter
your Name text box, and then click the Flip Card button. When the flash card is dis-
played, read the question and then click the ANSWER box arrow to select an answer.
Flip through the Flash Cards. If your score is 15 (75%) correct or greater, click Print
on the File menu to print your results. If your score is less than 15 (75%) correct, then
redo this exercise by clicking the Replay button.
3 Practice Test
Click the Practice Test link. Answer each question, enter your first and last name at the
bottom of the page, and then click the Grade Test button. When the graded practice
test is displayed on your screen, click Print on the File menu to print a hard copy.
Continue to take practice tests until you score 80% or better.
4 Who Wants To Be a Computer Genius?
Click the Computer Genius link. Read the instructions, enter your first and last name
at the bottom of the page, and then click the Play button. When your score is dis-
played, click the PRINT RESULTS link to print a hard copy.
5 Wheel of Terms
Click the Wheel of Terms link. Read the instructions, and then enter your first and last
name and your school name. Click the PLAY button. When your score is displayed on
the screen, right-click the score and then click Print on the shortcut menu to print a
hard copy.
6 Crossword Puzzle Challenge
Click the Crossword Puzzle Challenge link. Read the instructions, and then click the
Continue button. Work the crossword puzzle. When you are finished, click the Submit
button. When the crossword puzzle is redisplayed, submit it to your instructor.
Learn It Online
Learn It Online

www.cengagebrain.com

235
Phase 2 Systems Analysis
Overview
The SCR Associates case study is a Web-
based simulation that allows you to practice
your skills in a real-world environment. The
case study transports you to SCR’s intranet, where you complete 12 work sessions, each
aligning with a chapter. As you work on the case, you will receive e-mail and voice mail
messages, obtain information from SCR’s online libraries, and perform various tasks.
How do I use the case?
• Review the SCR background material in Chapter 1.
• Read the Preview for this session and study the Task List.
• Visit the Management Information Systems CourseMate Web site at www.cengagebrain.
com, navigate to the SCR Case Simulation, and locate the intranet link.
• Enter your name and the password sad9e. An opening screen will display the 12 sessions.
• Select this session. Check your e-mail and voice mail carefully, and then work on the tasks.
Preview: Session 5
You recently completed requirements modeling tasks for the new Training Information
Management System (TIMS). Now you are ready to begin data and process modeling, which
will produce a logical model of the new system. You will create DFDs, develop a data
dictionary, and use decision tables and trees.
Task List
SCR Associates Case Simulation Session 5: Data and Process Modeling
Case-Sim: SCR Associates
FIGURE 5-43 Task list: Session 5.
1. Jesse wants to see a context diagram and a diagram 0 DFD for TIMS.
2. Need to review the JAD session summary again! Try to identify four main TIMS functions
and draw a lower-level DFD for each process.
3. Prepare a reply to Jesse’s message about CASE tools. Search the Internet to find two
more alternatives.
4. Prepare a decision table and a decision tree that show the logical rules described in
Jesse’s message about fees and discounts.

www.cengagebrain.com

www.cengagebrain.com

236
Chapter 5 Data and Process Modeling
Chapter Exercises
Review Questions
1. Describe data and process modeling, and name the main data and process modeling
techniques.
2. Describe the Gane and Sarson symbols used for processes, data flows, data stores,
and entities. Give four examples of typical names for processes, data flows, data
stores, and entities.
3. What is the relationship between a context diagram and diagram 0, and which sym-
bol is not used in a context diagram?
4. What is meant by an exploded DFD?
5. Describe a data dictionary and give examples of how and when it is used.
6. Explain the DFD leveling technique.
7. What is a balanced DFD?
8. Describe the steps in creating a decision table.
9. Discuss the pros and cons of decision tables versus decision trees.
10. What is structured English?
Discussion Topics
1. Suppose you were assigned to develop a logical model of the registration system at a
school or college. Would you be better off using a top-down approach, or would a
bottom-up strategy be better? What would influence your decision?
2. Some systems analysts find it better to start with a decision table, then construct a
decision tree. Others believe it is easier to do it in the reverse order. Which do you
prefer? Why?
3. A systems analyst attended a weeklong workshop on structured analysis. When she
returned to her job, she told her boss that structured analysis was not worth the
time to learn and use on the job. Her view was that it was too academic and had too
much new terminology to be useful in a practical setting. Do you agree or disagree?
Defend your position.
4. This chapter describes a black box concept that allows more detail to be shown as a
process is exploded. Can the concept be applied in business management generally,
or is it limited to information systems design? Provide reasons and examples with
your answer.
Projects
1. Draw a context diagram and a diagram 0 DFD that represent the registration system
at your school or an imaginary school.
2. On the Internet, locate at least three firms that offer CASE tools. Write e-mail mes-
sages to the companies to find out whether they offer demonstration copies or stu-
dent versions of their products.
3. Suppose that you want to demonstrate a decision table to someone who has never
seen one. Think of an example, with two or three conditions, from everyday life.
Draw a decision table that captures all possible outcomes.
4. The data flow symbols shown on page 201 were designed by Ed Yourdon, a well-
known IT author, lecturer, and consultant. Many IT professionals consider him to be
among the most influential men and women in the software field. Learn more about
Mr. Yourdon by visiting his Web site at www.yourdon.com, and write a brief review
of his accomplishments.
Chapter Exercises

www.yourdon.com

237
Phase 2 Systems Analysis
Apply Your Knowledge
The Apply Your Knowledge section contains four mini-cases. Each case describes a situation,
explains your role in the case, and asks you to respond to questions. You can answer the ques-
tions by applying knowledge you learned in the chapter.
1 Digital Consulting
Situation:
You are a senior systems analyst at Digital Consulting, a growing IT consulting firm.
You are leading the development team for a major client. You need to explain struc-
tured analysis to your two newly hired junior analysts (Sara and Mike) before meeting
with the client tomorrow afternoon.
1. Describe the rules for creating a context diagram.
2. Make a basic list of dos and don’ts when developing DFDs.
3. Explain the importance of leveling and balancing.
4. Ask Sara and Mike to review the order system context diagram on page 208, and
compare it with the order system diagram 0 DFD on page 212. Then ask them to
answer the following questions: (a) How many external entities are shown in
each diagram? (b) In each diagram, how many data flows connect to the external
entities? (c) How many subprocesses are identified in the diagram 0 DFD? (d)
Could the data store have been shown in the context diagram? Why or why not?
2 Precision Tools
Situation:
Precision Tools sells a line of high-quality woodworking tools. When customers place
orders on the company’s Web site, the system checks to see if the items are in stock,
issues a status message to the customer, and generates a shipping order to the ware-
house, which fills the order. When the order is shipped, the customer is billed. The
system also produces various reports.
1. Draw a context diagram for the order system.
2. Draw a diagram 0 DFD for the order system.
3. Name four attributes that you can use to define a process in the order system.
4. Name four attributes that you can use to define an entity in the order system.
Apply Your Knowledge

238
Chapter 5 Data and Process Modeling
Apply Your Knowledge
3 Claremont School
Situation:
The Claremont School course catalog reads as follows: “To enroll in CIS 288, which is
an advanced course, a student must complete two prerequisites: CIS 110 and CIS 286.
A student who completes either one of these prerequisites and obtains the instructor’s
permission, however, will be allowed to take CIS 288.”
1. Create a decision table that describes the Claremont School course catalog
regarding eligibility for CIS 288. Show all possible rules.
2. Simplify the table you just created. Describe the results.
3. Draw a simplified decision tree to represent the Claremont School catalog.
Describe the results.
4. Why might you use a decision tree rather than a decision table?
4 City Bus Lines
Situation:
City Bus Lines is developing an information system that will monitor passenger
traffic, peak travel hours, and equipment requirements. The IT manager wants you
to document a process called BALANCE that determines whether extra buses cur-
rently are needed on a particular route. The BALANCE process automatically
assigns additional buses to that route, but only if all other routes are operating on
schedule. In any case, a supervisor can override the automatic BALANCE process if
he or she so desires.
1. Create a decision table that describes the bus transfer process.
2. Draw a decision tree that describes the bus transfer process.
3. Name four attributes that you can use to define a data flow in the bus informa-
tion system.
4. Name four attributes that you can use to define a data store in the bus
information system.

239
Phase 2 Systems Analysis
Case Studies
Case studies allow you to practice specific skills learned in the chapter. Each chapter contains
several case studies that continue throughout the textbook, and a chapter capstone case.
New Century Health Clinic
New Century Health Clinic offers preventive medicine and traditional medical care. In your
role as an IT consultant, you will help New Century develop a new information system.
Background
You began the systems analysis phase at New Century Health Clinic by completing a
series of interviews, reviewing existing reports, and observing office operations. (Your
instructor may provide you with a sample set of interview summaries.)
As you learned, the doctors, nurses, and physical therapists provide services and perform
various medical procedures. All procedures are coded according to Current Procedure
Terminology, which is published by the American Medical Association. The procedure codes
consist of five numeric digits and a two-digit suffix, and are used for all billing and insur-
ance claims.
From your fact-finding, you determined that seven reports are required at the clinic. The
first report is the daily appointment list for each provider. The list shows all scheduled
appointment times, patient names, and services to be performed, including the procedure
code and description. A second daily report is the call list, which shows the patients who are
to be reminded of their next day’s appointments. The call list includes the patient name, tele-
phone number, appointment time, and provider name. The third report is the weekly pro-
vider report that lists each of the providers and the weekly charges generated, plus a
month-to-date (MTD) and a year-to-date (YTD) summary.
The fourth report is the statement — a preprinted form that is produced monthly and
mailed in a window envelope. Statement header information includes the statement date,
head of household name and address, the previous month’s balance, the total household
charges MTD, the total payments MTD, and the current balance. The bottom section of the
statement lists all activity for the month in date order. For each service performed, a line
shows the patient’s name, the service date, the procedure code and description, and the
charge. The statement also shows the date and amount of all payments and insurance claims.
When an insurance payment is received, the source and amount are noted on the form. If the
claim is denied or only partially paid, a code is used to explain the reason. A running bal-
ance appears at the far right of each activity line.
The associates also require two insurance reports: the weekly Insurance Company Report
and the monthly Claim Status Summary. In addition to these six reports, the office staff
would like to have mailing labels and computer-generated postcards for sending reminders
to patients when it is time to schedule their next appointment. Reminders usually are mailed
twice monthly. Now you are ready to organize the facts you gathered and prepare a system
requirements document that represents a logical model of the proposed system. Your tools
will include DFDs, a data dictionary, and process descriptions.
Assignments
1. Prepare a context diagram for New Century’s information system.
2. Prepare a diagram 0 DFD for New Century. Be sure to show numbered processes
for handling appointment processing, payment and insurance processing, report
processing, and records maintenance. Also, prepare lower-level DFDs for each num-
bered process.
Case Studies

240
Chapter 5 Data and Process Modeling
Case Studies
3. Prepare a list of data stores and data flows needed for the system. Under each data
store, list the data elements required.
4. Prepare a data dictionary entry and process description for one of the system’s
functional primitives.
PERSONAL TRAINER, INC.
Personal Trainer, Inc., owns and operates fitness centers in a dozen Midwestern cities. The
centers have done well, and the company is planning an international expansion by opening
a new “supercenter” in the Toronto area. Personal Trainer’s president, Cassia Umi, hired an
IT consultant, Susan Park, to help develop an information system for the new facility.
During the project, Susan will work closely with Gray Lewis, who will manage the new
operation.
Background
Susan Park has completed a preliminary investigation and performed the fact-finding
tasks that were described in Chapters 2 and 4. Now, she will use the results to develop a
logical model of the proposed information system.
Assignments
Before you perform the following tasks, you should review the information provided in
Chapters 2 and 4 of the case.
1. Prepare a context diagram for the new system.
2. Prepare a diagram 0 DFD for the new system.
3. Write a brief memo that explains the importance of leveling a set of DFDs.
4. Write a brief memo that explains the importance of balancing a set of DFDs.

241
Phase 2 Systems Analysis
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited
SoftWear, Limited (SWL), is a continuing case study that illustrates the knowledge
and skills described in each chapter. In this case study, the student acts as a member
of the SWL systems development team and performs various tasks.
Background
Rick Williams, a systems analyst, and Carla Moore, a programmer/analyst, con-
tinued their work on the SWL payroll system project. After completing detailed
interviews and other fact-finding activities, Rick and Carla now understand how the
current system operates and the new requirements desired by users. They are ready
to organize and document their findings by preparing a logical model of the payroll
system.
Data Flow Diagrams
After they completed the preliminary investigation, Rick and Carla felt that they
knew more about the system entities and how they interacted.
The two analysts knew that the payroll department issues paychecks based on
timesheet data submitted by department heads, and that each employee receives a
W-2 form at the end of the year. They also knew that the human resources depart-
ment prepares employee status changes, and the payroll department enters the pay
data. The diagram also noted the output of state and federal government reports and
internal reports to SWL’s finance and payroll departments. The credit union and the
SWL stock transfer department reports and fund transfers also were included.
Using this information, Rick and Carla prepared a sketch of a context diagram
and scheduled a meeting for the next day with Amy Calico, director of the payroll
department, to discuss the diagram. At the meeting, Amy made several comments:
• The human resources department would be setting up additional ESIP deduc-
tion choices for employees under a new 401(k) plan. Human resources also
would receive ESIP reports from the payroll system.
• The payroll department enters timesheet data received from department
heads, who do not interact directly with the system. Rather than showing the
department head entity symbol on the context diagram, the input data flow
from the payroll department should be expanded and called PAY DETAIL.
• State and federal reporting requirements differ, so they should be treated as
two separate entities. Also, periodic changes in government tax rates should
be shown as inputs to the payroll system.
• All accounting reports, except for an overall financial summary, should be dis-
tributed to the accounting department instead of to the finance department.
The accounting department also should receive a copy of the payroll report.
• The bank returns cleared payroll checks to the payroll department once a
month. Amy reminded the analysts that the payroll system handles the recon-
ciliation of payroll checks.

242
Chapter 5 Data and Process Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
After discussing Amy’s comments, Rick and Carla prepared the final version of the payroll
system context diagram shown in Figure 5-44.
FIGURE 5-44 Final context diagram for SoftWear, Limited’s payroll system.

243
Phase 2 Systems Analysis
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
While their conversation with Amy Calico still was fresh in her mind, Carla proposed
that they construct the diagram 0 DFD. After going through several draft versions, they
completed the diagram 0 shown in Figure 5-45. They identified four processes: the check
reconciliation subsystem, the pay employee subsystem, the payroll accounting subsystem,
and a subsystem that would handle all voluntary deductions, which they called the ESIP
deduction subsystem.
–
FIGURE 5-45 Diagram 0 DFD for SoftWear, Limited’s payroll system.

244
Chapter 5 Data and Process Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Over the next few days, Rick concentrated on partitioning the pay employee subsystem
and the ESIP subsystem, while Carla developed the lower-level diagrams for the other two
subsystems.
At that point, Rick considered the problem of applying certain deductions on a monthly
cycle, even though the deductions were made weekly. To provide flexibility, he decided to
use two separate processes, as shown in Figure 5-46. When he finished, his diagram 4
DFD contained the two processes EXTRACT DEDUCTION and APPLY DEDUCTION,
as well as a local data store, UNAPPLIED DEDUCTIONS. Several local data flows also
were included. The first process, EXTRACT DEDUCTION, would deduct the proper
amount in each pay period. The deductions would be held in the temporary data store
FIGURE 5-46 Diagram 4 DFD for SoftWear, Limited’s payroll system shows the detail of
process 4, the ESIP DEDUCTION SUBSYSTEM.

245
Phase 2 Systems Analysis
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
and then applied in the APPLY DEDUCTION process on a weekly or monthly basis,
depending on the type of deduction. Rick decided that those processes were functional prim-
itives and he did not need to partition them further. That task completed the logical model
of the new SWL payroll system.
Rick and Carla also considered the physical design of the ESIP deduction subsystem that
would be completed later. They knew that it would be necessary to add some new forms and
to redesign others. They saw that the human resources department would need a new form
for enrollments or deduction changes for the credit union, SWL stock purchase plan, or any
new ESIP choices that might be offered in the future. The payroll department then could use
the form as its official notification. To provide for future expansion and add flexibility, the
human resources department also would need a form to notify payroll of any new type of
deduction, with a deduction code, the name of the deduction, and the payroll cycle involved.
Rick anticipated that the new system would eliminate problems with improper deductions,
while adding flexibility and reducing maintenance costs.
Data Dictionary and Process Descriptions
As they constructed the DFDs for the payroll system, Rick and Carla also developed the
data dictionary entries with supporting process descriptions. After completing the documen-
tation of the ESIP deduction subsystem, Carla and Rick met with Amy to review the logical
model for the subsystem. After a thorough discussion of all proposed changes and processing,
Amy approved the model.
Rick and Carla continued their analysis and documentation of the payroll system over
the next several days. As they completed a model of a portion of the information system,
they would meet with the appropriate users at SWL to review the model, obtain user input,
make necessary adjustments to the model, and obtain the users’ approval. After Rick and
Carla finished the complete payroll information system logical model, they turned their
attention to completing the rest of the system requirements document.
SWL Team Tasks
Suppose that you are working with Rick and Carla when a new systems request comes
in. SWL’s vice president of marketing, Amy Neal, wants to change the catalog mailing pro-
gram and provide a reward for customers who use the Internet.
Amy’s plan specifies that customers will remain on SWL’s mailing list if they either
requested a catalog, ordered from SWL in the last two years, or signed the guest register on
SWL’s new Web site. To encourage Internet visitors, customers who register on the Web site
also will receive a special discount certificate.
To document the requirements, Rick wants you to design a decision table. Initially, it
appears to have eight rules, but you notice that some of those rules are duplicates, or might
not be realistic combinations.
1. Design the decision table with all possibilities.
2. Simplify the table by combining rules where appropriate.
3. Draw a decision tree that reflects Amy Neal’s policy.
4. Create a set of structured English statements that accurately describes the policy.

246
Chapter 5 Data and Process Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Manage the SWL Project
You have been asked to manage SWL’s new information system project. One of
your most important activities will be to identify project tasks and determine when
they will be performed. Before you begin, you should review the SWL case in this
chapter. Then list and analyze the tasks, as follows:
LIST THE TASKS Start by listing and numbering at least 10 tasks that the SWL
team needs to perform to fulfill the objectives of this chapter. Your list can include
SWL Team Tasks and any other tasks that are described in this chapter. For exam-
ple, Task 3 might be to Identify the system entities, and Task 6 might be to Draw a
context diagram.
ANALYZE THE TASKS Now study the tasks to determine the order in which they
should be performed. First identify all concurrent tasks, which are not dependent
on other tasks. In the example shown in Figure 5-47, Tasks 1, 2, 3, 4, and 5 are
concurrent tasks, and could begin at the same time if resources were available.
Other tasks are called dependent tasks, because they cannot be performed until one
or more earlier tasks have been completed. For each dependent task, you must identify
specific tasks that need to be completed before this task can begin. For example, you
would want to identify the system entities before you could draw a context diagram,
so Task 6 cannot begin until Task 3 is completed, as Figure 5-47 shows.
Chapter 3 describes project management tools, techniques, and software.
To learn more, you can use the Features section on your Student Study Tool
CD-ROM, or visit the Management Information Systems CourseMate Web site at
www.cengagebrain.com and locate the project management resources library for this
book. On the Web, Microsoft offers demo versions, training, and tips for using
Project 2010. You also can visit the OpenWorkbench.org site to learn more about
this free, open-source software.
FIGURE 5-47 Tasks 1, 2, 3, 4, and 5 are concurrent tasks that could be performed at the same time. Task 6 is a dependent
task that cannot be performed until Task 3 has been completed.

www.cengagebrain.com

247
Phase 2 Systems Analysis
Ready for a Challenge?
In additional to technical skills, IT professionals need critical thinking skills such as perception, organization, analysis,
problem-solving, and decision-making. The Ready for a Challenge feature can help you learn, practice, and apply
critical thinking skills that you can take to the workplace.
Ready for a Challenge?
The IT team at Game Technology is moving forward with the new Customer Contact Care
information system, or C3.
Your next assignment is to develop a set of data flow diagrams (DFDs). To be sure you can
handle the tasks, you decide to review Chapter 5 of your systems analysis textbook. Based
on previous requirements modeling, you know that the new C3 system will have three exter-
nal entities, with the following data flows:
Entity Data Flow from the Entity Data Flow to the Entity
Customer Contact Information Sales Specials
Sales Records System Customer Sales History None
Marketing Rep Suggested Contact Plan Sales Feedback
You also know that the C3 system will have three subsystems: Analyze Customer
Data, Analyze Sales History, and Manage Contact Plan, and a data store called
Customer Profile. The data flows are as follows:
Data Flow From To
Contact Information Customer entity Analyze Customer Data process
Sales Specials Manage Contact Plan process Customer entity
Customer Sales History Sales Records System entity Analyze Sales History process
Suggested Contact Plan Marketing Rep entity Develop Contact Plan process
Sales Feedback Analyze Sales History process Marketing Rep entity
Customer Data
(two-way)
Analyze Customer Data
process
Customer Profile data store
Customer Data
(two-way)
Customer Profile data store Analyze Customer Data process
Profile Data Customer Profile data store Manage Contact Plan process
Sales Data Analyze Sales History process Customer Profile data store
Practice Tasks
A. Draw a context diagram for the new C3 system.
B. Draw a DFD diagram 0 that shows the three processes, the data store, and the data flows.
After you complete the Practice Tasks, to check your work and view sample answers, visit
the Management Information Systems CourseMate Web site at www.cengagebrain.com,
navigate to the resources for this chapter, and locate Ready for a Challenge?.
The Challenge
Your context diagram and DFD diagram 0 were accurate, but there have been some
design changes. Management has decided to connect the external Accounts Receivable
System directly to the C3 system as a fourth entity. A two-way data flow called AR Data
will connect this entity to the C3 system. Inside the C3 system, AR Data will connect to the
Analyze Sales History process.
Also, another new two-way data flow called Billing Data will connect to the Analyze
Sales History process and the Customer Profile data store.
Challenge Tasks
A. Draw a context diagram for the new C3 system that shows the revised design.
B. Draw a DFD diagram 0 that shows the revised design.

www.cengagebrain.com

Chapter 6 Object Modeling
Chapter 6 is the third of four chapters in the systems
analysis phase of the SDLC. This chapter discusses object
modeling techniques that analysts use to create a logical
model. In addition to structured analysis, object-oriented
analysis is another way to represent and design an informa-
tion system.
CHAPTER
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Explain how object-oriented analysis can be
used to describe an information system
• Define object modeling terms and concepts,
including objects, attributes, methods, mes-
sages, classes, and instances
• Explain relationships among objects and the
concept of inheritance
• Draw an object relationship diagram
• Describe Unified Modeling Language (UML)
tools and techniques, including use cases, use
case diagrams, class diagrams, sequence dia-
grams, state transition diagrams, and activity
diagrams
• Explain the advantages of using CASE tools
in developing the object model
• Explain how to organize an object model
INTRODUCTION
In Chapter 5, you learned how to use structured
analysis techniques to develop a data and process
model of the proposed system. Now, in Chapter 6,
you learn about object-oriented analysis, which is
another way to view and model system require-
ments. In this chapter, you use object-oriented
techniques to document, analyze, and model the
information system. In Chapter 7, which concludes
the systems analysis phase, you will evaluate
alternatives, develop the system requirements
document, learn about prototyping, and prepare
for the systems design phase of the SDLC.
6 Object Modeling

CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Wendy Lee, manager of college services at Mountain View College, wants a new
information system that will improve efficiency and customer service at the three college
bookstores.
In this part of the case, Tina Allen (systems analyst) and David Conroe (student intern)
are talking about object-oriented concepts, tools, and techniques.
Participants: Tina and David
Location: Mountain View College Cafeteria, Wednesday afternoon, November 2, 2011.
Project status: Tina and David have completed data and processing modeling, and are discussing object-
oriented techniques that they can use to develop an object model of the new system.
Discussion topics: Object-oriented concepts, tools, and techniques
Tina: Hi, David. I want to chat with you about object-oriented analysis before we finish the systems analysis
phase. Would this be a good time to talk?
David: Sure. I know that object-oriented analysis is another way of viewing the system, but I don’t know much about it.
Tina: Well, object-oriented analysis describes an information system by identifying things called objects. An
object represents a real person, place, event, or transaction. For example, in the bookstore, when a student
purchases a textbook, the student is an object, the textbook is an object, and the purchase transaction
itself is an object.
David: That sounds a little like the entities we identify in structured analysis.
Tina: Yes, but there’s a major difference! In structured analysis we treat data and the processes that affect the
data separately. Objects, on the other hand, contain the data and the processes, called methods, that can
add, modify, or change the data. To make it even more interesting, one object can send a message to
another object to request some action or response. For example, a driver object adjusts the cruise control,
which sends one or more messages to the car object telling it to maintain a steady speed.
David: I get it. So objects can be people, things, or events?
Tina: Yes. To show how the system works, we use a special modeling language called the UML. We even show
human actors as stick figures that interact with business functions called use cases.
David: I’d like to give it a try.
Tina: No problem. Although we’ll still use structured analysis, it will be interesting to model the system in
object-oriented terms. Let’s get started on our task list:
FIGURE 6-1 Typical object modeling task list.
Introduction 249
Phase 2 Systems Analysis

Overview of Object-Oriented Analysis250
Chapter 6 Object Modeling
OVERVIEW OF OBJECT-ORIENTED ANALYSIS
As you learned in Chapter 1, the most popular systems development options are struc-
tured analysis, object-oriented analysis (O-O), and agile methods, also called adaptive
methods. The table in Figure 1-25 on page 21 shows the three alternatives and describes
some pros and cons for each approach. As the table indicates, O-O methodology is pop-
ular because it integrates easily with object-oriented programming languages such as
Java, Smalltalk, C++, and Perl. Programmers also like O-O code because it is modular,
reusable, and easy to maintain.
Object-oriented (O-O) analysis describes an information system by identifying things
called objects. An object represents a real person, place, event, or transaction. For exam-
ple, when a patient makes an appointment to see a doctor, the patient is an object, the
doctor is an object, and the appointment itself is an object.
Object-oriented analysis is a popular approach that sees a system from the view-
point of the objects themselves as they function and interact. The end product of
object-oriented analysis is an object model, which represents the information system in
terms of objects and object-oriented concepts.
To learn more about
object-oriented
analysis, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Object-
Oriented Analysis
link.
To learn more about
the Unified Modeling
Language, visit the
Management
Information Systems
CourseMate Web
site at www.
c engagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Unified
Modeling Language
link.
VIDEO LEARNING SESSION: OBJECT-ORIENTED TERMS
AND CONCEPTS
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate
Web site at www.cengagebrain.com and navigate to the Video Learning Sessions for
this book. In this session you’ll learn basic object modeling terms and concepts, how to use
symbols to create object models, and how you can use a CASE tool to create object models.
Object-Oriented Terms and Concepts
In Chapter 4, you learned that the Unified Modeling Language (UML) is a widely
used method of visualizing and documenting an information system. In this chapter,
you use the UML to develop object models. Your first step is to understand basic
object-oriented terms, including objects, attributes, methods, messages, classes, and
instances. In this chapter, you will learn how systems analysts use those terms to
describe an information system.
An object represents a person, place, event, or transaction that is significant to the
information system. In Chapter 5, you created DFDs that treated data and processes
separately. An object, however, includes data and the processes that affect that data. For
example, a customer object has a name, an address, an account number, and a current
balance. Customer objects also can perform specific tasks, such as placing an order, pay-
ing a bill, and changing their address.
An object has certain attributes, which are characteristics that describe the object.
For example, if you own a car, it has attributes such as make, model, and color. An
object also has methods, which are tasks or functions that the object performs when it
receives a message, or command, to do so. For example, your car performs a method
called OPERATE WIPERS when you send a message by moving the proper control.
Figure 6-2 shows examples of attributes, methods, and messages for a car object.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Overview of Object-Oriented Analysis 251
Phase 2 Systems Analysis
A class is a group of similar objects.
For example, Ford Fiestas belong to a
class called CAR. An instance is a specific
member of a class. Your Ford Fiesta,
therefore, is an instance of the CAR class.
At an auto dealership, like the one shown
in Figure 6-3, you might observe many
instances of the CAR class, the TRUCK
class, the MINIVAN class, and the SPORT
UTILITY VEHICLE class, among others.
Although the term “object” usually refers
to a particular instance, systems analysts
sometimes use the term to refer to a class
of objects. Usually the meaning is under-
stood from the context and the way the
term is used.
Objects
Consider how the UML describes a family
with parents and children. The UML
represents an object as a rectangle with the
object name at the top, followed by the
object’s attributes and methods.
Figure 6-4 shows a PARENT object
with certain attributes such as name, age,
sex, and hair color. If there are two par-
ents, then there are two instances of the
PARENT object. The PARENT object can
perform methods, such as reading a bed-
time story, driving the car pool van, or pre-
paring a school lunch. When a PARENT
object receives a message, it performs an
action, or method.
Examples of Interaction Between Objects
Messages
The driver object
sends messages to
the car object, such
as Clean the windshield
or Slow down
Methods
Operate wipers
Apply brakes
Attributes
The car object has
characteristics called
attributes, such as
make, model, and color
FIGURE 6-2 Objects have attributes, can send and receive messages, and per-
form actions called methods.
PARENT
Attributes
Name
Age
Sex
Hair color
Methods
Read bedtime story
Drive in the car pool
Characteristics
that describe the
PARENT object
Tasks that the
PARENT object
can perform
Mary Smith
Age 25
Female
Red
Ahmed Ali
Age 34
Male
Brown
Anthony Greene
Age 42
Male
Brown
PARENT Object
Instances of
the PARENT Object
FIGURE 6-4 The PARENT object includes four attributes and two methods. Mary Smith, Ahmed
Ali, and Anthony Greene are instances of the PARENT object.
FIGURE 6-3 At an auto
dealership, you can observe
the CAR class, the TRUCK
class, the MINIVAN class,
and the SPORT UTILITY
VEHICLE class.

Overview of Object-Oriented Analysis252
Chapter 6 Object Modeling
For example, the message GOOD NIGHT from a child might tell the PARENT
object to read a bedtime story, while the message DRIVE from another parent signals
that it is the PARENT object’s turn to drive in the car pool.
Continuing with the family example, the CHILD object in Figure 6-5 possesses the
same attributes as the PARENT object and an additional attribute that shows the num-
ber of siblings. A CHILD object performs certain methods, such as picking up toys, eat-
ing dinner, playing, cooperating, and getting ready for bed. To signal the CHILD object
to perform those tasks, a parent can send certain messages that the CHILD object will
understand. For example, the DINNER’S READY message tells a CHILD object to come
to the table, while the SHARE WITH YOUR BROTHER/SISTER message tells a CHILD
object to cooperate with
other CHILD objects.
The family also might
have a DOG object, as
shown in Figure 6-6. That
object can have attributes
such as name, breed, age,
color, sex, and favorite
food. The DOG object can
perform methods such as
wagging its tail, eating,
fetching, and sleeping. The
message GOOD DOG,
when directed to the DOG
object, signals it to wag its
tail. Similarly, the
DINNER’S READY mes-
sage signals the DOG object
to run to its food bowl.
Now consider an exam-
ple of a fitness center, as
shown in Figure 6-7, and
the objects that interact
with the fitness center’s
enrollment system. A typi-
cal fitness center might
have students, instructors,
fitness-class schedules, and
a registration process.
STUDENT and
INSTRUCTOR objects are
shown in Figure 6-8. Each
STUDENT object has the
following attributes: stu-
dent number, name,
address, telephone, date of
birth, fitness record, and
status. In addition, a
STUDENT can add a
fitness-class; drop a fitness-
class; change an address,
telephone, or status; and
update his or her fitness
record.
DOG
Attributes
Name
Breed
Age
Color
Sex
Favorite food
Characteristics
that describe the
DOG object
Tasks that the
DOG object can
perform
Buddy
Terrier mix
Age 12
White
Male
Kibbles and Bits
Annie
West Highland Terrier
Age 1
White
Female
ProPlan
Megan
Poodle mix
Age 8
Tan
Female
Purina Dog Chow
DOG Object
Instances of
the DOG Object
Methods
Wag tail
Eat
Fetch
Sleep
FIGURE 6-6 The DOG object includes six attributes and four methods. Buddy, Annie, and Megan
are instances of the DOG object.
CHILD
Attributes
Name
Age
Sex
Hair color
Number of siblings
Methods
Pick up toys
Eat dinner
Play
Cooperate
Get ready for bed
Characteristics
that describe the
CHILD object
Tasks that the
CHILD object can
perform
James Smith
Age 3
Male
Red
Amelia Ali
Age 1
Female
Brown
Misty Greene
Age 12
Female
Blonde
CHILD Object
Instances of
the CHILD Object
FIGURE 6-5 The CHILD object includes five attributes and five methods. James Smith, Amelia Ali,
and Misty Greene are instances of the CHILD object.

Overview of Object-Oriented Analysis 253
Phase 2 Systems Analysis
The INSTRUCTOR object in
Figure 6-8 has the following attri-
butes: instructor number, name,
address, telephone, fitness-classes
taught, availability, private lesson fee,
and status. An INSTRUCTOR object
can teach a fitness-class, and change
his or her availability, address, tele-
phone, private lesson fee, or status.
The FITNESS-CLASS SCHEDULE
object shown in Figure 6-9 on the next
page includes data about fitness classes,
including fitness-class number, date,
time, type, location, instructor number,
and maximum enrollment. The
FITNESS-CLASS SCHEDULE object
includes the methods that can add or
delete a fitness class, or change a
fitness-class date, time, instructor,
location, or enrollment.
The REGISTRATION RECORD
object shown in Figure 6-10 on the
next page includes the student number,
fitness-class number, registration
date, fee, and status. The
REGISTRATION RECORD
object includes methods to add a REGISTRATION instance when a student enrolls,
or drop a REGISTRATION instance if the fitness class is canceled or for nonpay-
ment. Notice that if a student registers for three fitness classes, the result is three
instances of the REGISTRATION RECORD object. The REGISTRATION RECORD
object also includes a method of notifying students and instructors of information.
FIGURE 6-7 A typical fitness center might have students, instructors, fitness-class schedules, and a
registration process.
STUDENT
Attributes
Student number
Name
Address
Telephone
Date of birth
Fitness record
Status
Methods
Add fitness-class
Drop fitness-class
Change address
Change telephone
Change status
Update fitness record
STUDENT Object
INSTRUCTOR
Attributes
Instructor number
Name
Address
Telephone
Fitness-classes taught
Availability
Private lesson fee
Status
Methods
Teach fitness-class
Change availability
Change address
Change telephone
Change private lesson fee
Change status
INSTRUCTOR Object
FIGURE 6-8 The STUDENT object includes seven attributes and six methods. The
INSTRUCTOR object includes eight attributes and six methods.

Overview of Object-Oriented Analysis254
Chapter 6 Object Modeling
Attributes
If objects are similar to nouns, attributes are similar to adjectives that describe the
characteristics of an object. How many attributes are needed? The answer depends on the
business requirements of the information system and its users. Even a relatively simple
object, such as an inventory item, might have a part number, descrip-
tion, supplier, quantity on hand, minimum stock level, maximum
stock level, reorder time, and so on. Some objects might have a few
attributes; others might have dozens.
Systems analysts define an object’s attributes during the systems
design process. In an object-oriented system, objects can inherit, or
acquire, certain attributes from other objects. When you learn
about relationships between objects and classes, you will under-
stand how that occurs.
Objects can have a specific attribute called a state. The state of
an object is an adjective that describes the object’s current status.
For example, depending on the state, a student can be a future stu-
dent, a current student, or a past student. Similarly, a bank account
can be active, inactive, closed, or frozen.
Methods
A method defines specific tasks that an object can perform. Just as
objects are similar to nouns and attributes are similar to adjec-
tives, methods resemble verbs that describe what and how an
object does something.
Consider a server who prepares fries in a fast-food restaurant,
as shown in Figure 6-11. A systems analyst might describe the
operation as a method called MORE FRIES, as shown in
FIGURE 6-11 In a fast-food restaurant,
preparing more fries is a common task.
REGISTRATION RECORD
Student number
Fitness-class number
Registration date
Fee
Status
Add student
Drop student
Notify instructor of add
Notify instructor of drop
Notify all of fitness-class cancellations
REGISTRATION RECORD Object
Attributes
Methods
FIGURE 6-10 The REGISTRATION object
includes five attributes and five methods.
FITNESS-CLASS SCHEDULE
Fitness-class number
Date
Time
Type
Location
Instructor number
Maximum enrollment
Add fitness-class
Delete fitness-class
Change date
Change time
Change instructor
Change location
Change enrollment
FITNESS-CLASS SCHEDULE Object
Attributes
Methods
FIGURE 6-9 The FITNESS-CLASS SCHEDULE object
includes seven attributes and seven methods.

Overview of Object-Oriented Analysis 255
Phase 2 Systems Analysis
Figure 6-12. The MORE FRIES method
includes the steps required to heat the oil,
fill the fry basket with frozen potato
strips, lower it into the hot oil, check for
readiness, remove the basket when ready
and drain the oil, pour the fries into a
warming tray, and add salt.
Figure 6-13 shows another exam-
ple of a method. At the fitness center,
an ADD STUDENT method adds a
new instance of the STUDENT class.
Notice that nine steps are required to
add the new instance and record the
necessary data.
Messages
A message is a command that tells an
object to perform a certain method.
For example, the message ADD
STUDENT directs the STUDENT class
to add a STUDENT instance. The
STUDENT class understands that it
should add the student number, name,
and other data about that student, as
shown in Figure 6-14. Similarly, a mes-
sage named DELETE STUDENT tells
the STUDENT class to delete a STU-
DENT instance.
The same message to two different
objects can produce different results. The
concept that a message gives different
meanings to different objects is called
polymorphism. For example, in
Figure 6-15, the message GOOD
NIGHT signals the PARENT object to
Method:
MORE FRIES
Steps:
1. Heat oil
2. Fill fry basket with frozen
potato strips
3. Lower basket into hot oil
4. Check for readiness
5. When ready raise basket
and let drain
6. Pour fries into warming
tray
7. Add salt
FIGURE 6-12 The MORE FRIES method requires the
server to perform seven specific steps.
Method:
ADD STUDENT
Steps:
1. Add a new student instance
2. Record student number
3. Record student name
4. Record student address
5. Record student telephone number
6. Record student date of birth
7. Record sex of student
8. Record state of student
9. Save new student data
FIGURE 6-13 In the fitness center example, the ADD STUDENT method
requires the STUDENT object to perform nine specific steps.
Message: GOOD NIGHT
PARENT DOG CHILD
Causes the
PARENT object to
read a bedtime story
Causes the DOG
object to go to sleep
Causes the CHILD
object to get ready
for bed
FIGURE 6-15 In an example of polymorphism, the message GOOD NIGHT
produces different results, depending on which object receives it.
STUDENT
Attributes
Student number
Name
Address
Telephone
Date of birth
Fitness record
Status
Methods
Add student
Delete student
Add fitness-class
Drop fitness-class
Change address
Change telephone
Change status
Update fitness record
Message: ADD STUDENT
Tells the STUDENT class to
perform all the steps needed
to add a STUDENT instance.
Message: DELETE STUDENT
Tells the STUDENT class to
perform all the steps needed
to delete a STUDENT
instance.
FIGURE 6-14 The message ADD STUDENT signals the STUDENT class
to perform the ADD STUDENT method. The message DELETE STUDENT
signals the STUDENT class to perform the DELETE STUDENT method.

Overview of Object-Oriented Analysis256
Chapter 6 Object Modeling
read a bedtime story, but the same message to the DOG object tells the dog to sleep. The
GOOD NIGHT message to the CHILD object signals it to get ready for bed.
You can view an object as a black box, because a message to the object triggers changes
within the object without specifying how the changes must be carried out. A gas pump is
an example of a black box. When you select the economy grade at a pump, you do not
need to think about how the pump determines the correct price and selects the right fuel, as
long as it does so properly.
The black box concept is an example of encapsulation, which means that all data and
methods are self-contained. A black box does not want or need outside interference. By
limiting access to internal processes, an object prevents its internal code from being altered
by another object or process. Encapsulation allows objects to be used as modular compo-
nents anywhere in the system, because objects send and receive messages but do not alter
the internal methods of other objects.
Object-oriented designs typically are
implemented with object-oriented pro-
gramming languages. A major advantage
of O-O designs is that systems analysts
can save time and avoid errors by using
modular objects, and programmers can
translate the designs into code, working
with reusable program modules that
have been tested and verified.
For example, in Figure 6-16, an
INSTRUCTOR object sends an
ENTER GRADE message to an
instance of the STUDENT
RECORD class. Notice that the
INSTRUCTOR object and
STUDENT RECORD class
could be reused, with minor
modifications, in other school
information systems where many
of the attributes and methods
would be similar.
Classes
An object belongs to a group or
category called a class. All objects
within a class share common attri-
butes and methods, so a class is like
a blueprint, or template for all the
objects within the class. Objects
within a class can be grouped into
subclasses, which are more specific
categories within a class. For exam-
ple, TRUCK objects represent a
subclass within the VEHICLE class,
along with other subclasses called
CAR, MINIVAN, and SCHOOL
BUS, as shown in Figure 6-17.
Notice that all four subclasses
share common traits of the
VEHICLE class, such as make,
Common
attributes
Uncommon
attributes
Uncommon
attributes
Common
methods
VEHICLE
Attributes
Make
Model
Year
Weight
Color
Methods
Start
Stop
Park
Class
CAR
Attributes
MINIVAN
Attributes
TRUCK
Attributes
SCHOOL BUS
Attributes
Subclass
Load limit
Emergency exit location
FIGURE 6-17 The VEHICLE class includes common attributes and methods. CAR,
TRUCK, MINIVAN, and SCHOOL BUS are instances of the VEHICLE class.
Message:
ENTER GRADE
INSTRUCTOR
STUDENT
RECORD
FIGURE 6-16 In a school information system, an INSTRUCTOR object sends
an ENTER GRADE message to an instance of the STUDENT RECORD class.
To learn more about
polymorphism,
visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Polymor-
phism link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Overview of Object-Oriented Analysis 257
Phase 2 Systems Analysis
model, year, weight, and color.
Each subclass also can possess
traits that are uncommon, such as
a load limit for the TRUCK or an
emergency exit location for the
SCHOOL BUS.
In the fitness center example
shown in Figure 6-18,
INSTRUCTOR objects represent
a subclass within the EMPLOYEE
class. The EMPLOYEE class also
can contain MANAGER and
OFFICE STAFF subclasses,
because a manager and staff
members are employees. All
INSTRUCTOR, MANAGER,
and OFFICE STAFF objects
contain similar information (such
as employee name, title, and
pay rate) and perform similar
tasks (such as getting hired and
changing an address or telephone
number).
A class can belong to a more
general category called a
superclass. For example, a NOVEL
class belongs to a superclass called
BOOK, because all novels are books.
The NOVEL class can have subclasses called HARDCOVER and PAPERBACK. Similarly, as
shown in Figure 6-19, the EMPLOYEE class belongs to the PERSON superclass, because
every employee is a person, and the INSTRUCTOR class is a subclass of EMPLOYEE.
Class
name
Common
attributes
Common
methods
EMPLOYEE
Attributes
Name
Date of birth
Social Security number
Telephone number
Hire date
Title
Pay rate
Status
Methods
Get hired
Terminate
Change telephone
Change address
Class
MANAGER
Attributes
OFFICE STAFF
Attributes
INSTRUCTOR
Attributes
Subclass
Instructor type
AvailabilityUncommon
attributes
FIGURE 6-18 The fitness center EMPLOYEE class includes common attributes and
methods. INSTRUCTOR, MANAGER, and OFFICE STAFF are subclasses within the
EMPLOYEE class.
INSTRUCTOR
Attributes
Subclass
Instructor type
Availability
Methods
Teach fitness-class
PERSON
Attributes
Methods
Name
Date of birth
Breathe
Eat
Sleep
Superclass
name
Common
attributes
Common
methods
Superclass
EMPLOYEE
Attributes
Methods
Social Security number
Telephone number
Hire date
Title
Pay rate
Get hired
Terminate
Change telephone
Class
name
Subclass
name
Uncommon
attributes
Uncommon
methods
Class
Uncommon
attributes
Uncommon
methods
FIGURE 6-19 At the fitness center, the PERSON superclass includes common attributes and methods. EMPLOYEE is a class within the
PERSON superclass. INSTRUCTOR is a subclass within the EMPLOYEE class.

Relationships Among Objects and Classes258
Chapter 6 Object Modeling
RELATIONSHIPS AMONG OBJECTS
AND CLASSES
Relationships enable objects to communicate
and interact as they perform business func-
tions and transactions required by the system.
Relationships describe what objects need to
know about each other, how objects respond
to changes in other objects, and the effects of
membership in classes, superclasses, and sub-
classes. Some relationships are stronger than
others (just as a relationship between family
members is stronger than one between casual
acquaintances). The strongest relationship is
called inheritance. Inheritance enables an
object, called a child, to derive one or more of
its attributes from another object, called a
parent. In the example in Figure 6-20, the
INSTRUCTOR object (child) inherits many
traits from the EMPLOYEE object (parent),
including SOCIAL SECURITY NUMBER,
TELEPHONE NUMBER, and HIRE DATE.
The INSTRUCTOR object also can possess
additional attributes, such as TYPE OF
INSTRUCTOR. Because all employees share
certain attributes, those attributes are
assumed through inheritance and do not need
to be repeated in the INSTRUCTOR object.
Object Relationship
Diagram
After you identify the objects,
classes, and relationships, you
are ready to prepare an object
relationship diagram that will
provide an overview of the sys-
tem. You will use that model as
a guide as you continue to
develop additional diagrams
and documentation. Figure 6-21
shows an object relationship
diagram for a fitness center.
Notice that the model shows the
objects and how they interact to
perform business functions and
transactions.
EMPLOYEE
Is a
Determines Administers Indicates
availability
Teaches
Takes
Generates
roster
Adds
Lists open
fitness-classes
STUDENT
FITNESS-CLASS
SCHEDULE
OFFICE STAFF INSTRUCTORMANAGER
FITNESS-CLASS
REGISTRATION
RECORD
FIGURE 6-21 Object relationship diagram for the fitness center.
EMPLOYEE
Attributes
Methods
Social Security number
Telephone number
Hire date
Title
Pay rate
Get hired
Terminate
Change telephone
INSTRUCTOR
Attributes
Methods
Type of Instructor
Social Security number
Telephone number
Hire date
Title
Pay rate

Get hired
Terminate
Change telephone

Inheritance
Parent Child Inherits
FIGURE 6-20 An inheritance relationship exists between the INSTRUCTOR
and EMPLOYEE objects. The INSTRUCTOR (child) object inherits characteris-
tics from the EMPLOYEE (parent) class and can have additional attributes of
its own.

Object Modeling with the Unified Modeling Language 259
Phase 2 Systems Analysis
OBJECT MODELING WITH THE UNIFIED MODELING LANGUAGE
Just as structured analysis uses DFDs to model data and processes, systems analysts use
the Unified Modeling Language (UML) to describe object-oriented systems.
In Chapter 4, you learned that the UML is a popular technique for documenting and
modeling a system. The UML uses a set of symbols to represent graphically the various
components and relationships within a system. Although the UML can be used for busi-
ness process modeling and requirements modeling, it mainly is used to support object-
oriented system analysis and to develop object models.
VIDEO LEARNING SESSION: OBJECT-ORIENTED DIAGRAMS
AND MODELS
Video Learning Sessions can help you understand key concepts, practice your skills, and check
your work. To access the sessions, visit the Management Information Systems CourseMate
Web site at www.cengagebrain.com and navigate to the Video Learning Sessions for
this book. In this session you’ll learn how to create various types of object diagrams, including
use-case, class, sequence, state-transition, and activity diagrams, and how you can use a CASE
tool to create object models.
Use Case Modeling
A use case represents the steps in a specific business function or
process. An external entity, called an actor, initiates a use case
by requesting the system to perform a function or process. For
example, in a medical office system, a PATIENT (actor) can
MAKE APPOINTMENT (use case), as shown in Figure 6-22.
Notice that the UML symbol for a use case is an oval
with a label that describes the action or event. The actor is
shown as a stick figure, with a label that identifies the actor’s
role. The line from the actor to the use case is called an asso-
ciation, because it links a particular actor to a use case.
Figure 6-23 shows use case examples of a passenger making
an airline reservation, a customer placing an order, and a bus
dispatcher changing a student’s pickup address.
Use cases also can interact with other use cases. When the
outcome of one use case is incorporated by another use case,
we say that the second case uses the first case. The UML
MAKE APPOINTMENT
(Use Case)PATIENT
(Actor)
FIGURE 6-22 In a medical office system, a PATIENT
(actor) can MAKE APPOINTMENT (use case).
Make Airline Reservation
Passenger
Place Order
Customer
Change Pickup
AddressBus Dispatcher
FIGURE 6-23 Three use case examples. The UML
symbol for a use case is an oval. The actor is shown as
a stick figure.

www.cengagebrain.com

Object Modeling with the Unified Modeling Language260
Chapter 6 Object Modeling
indicates the relationship with a hollow-headed arrow that points at the use case being
used. Figure 6-24 shows an example where a student adds a fitness class and PRODUCE
FITNESS-CLASS ROSTER uses the results of ADD FITNESS-CLASS to generate a new
fitness-class roster. Similarly, if an instructor changes his or her availability, UPDATE
INSTRUCTOR INFORMATION uses the CHANGE AVAILABILITY use case to update
the instructor’s information.
To create use cases, you start
by reviewing the information
that you gathered during the
requirements modeling phase.
Your objective is to identify the
actors and the functions or
transactions they initiate. For
each use case, you also develop
a use case description in the
form of a table. A use case
description documents the
name of the use case, the actor,
a description of the use case, a
step-by-step list of the tasks
and actions required for suc-
cessful completion, a descrip-
tion of alternative courses of
action, preconditions, postcon-
ditions, and assumptions.
Figure 6-25 shows an example
of the ADD NEW STUDENT
use case.
Add Fitness-Class
<>
<>
Produce Fitness-Class
RosterStudent
Change Availability Update Instructor
InformationInstructor
FIGURE 6-24 When a student adds a class, PRODUCE FITNESS-CLASS ROSTER uses the
results of ADD CLASS to generate a new class roster. When an instructor changes his or her
availability, UPDATE INSTRUCTOR INFORMATION uses the CHANGE AVAILABILITY use
case to update the instructor’s information.
Add New StudentADD NEW STUDENT Use Case
Name: Add New Student
Actor: Student/Manager
Description: Describes the process used to add a student to a fitness-class
Successful 1. Manager checks FITNESS-CLASS SCHEDULE object for availability
completion: 2. Manager notifies student
3. Fitness-class is open and student pays fee
4. Manager registers student
Alternative: 1. Manager checks FITNESS-CLASS SCHEDULE object for availability
2. Fitness-class is full
3. Manager notifies student
Precondition: Student requests fitness-class
Postcondition: Student is enrolled in fitness-class and fees have been paid
Assumptions: None
FIGURE 6-25 The ADD NEW STUDENT use case description documents the process used to add a current
student into an existing class.
To learn more about
use case modeling,
visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Use Case
Modeling link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Object Modeling with the Unified Modeling Language 261
Phase 2 Systems Analysis
When you identify use cases, try to group all the related transactions into a single
use case. For example, when a hotel customer reserves a room, the reservation system
blocks a room, updates the occupancy forecast, and sends the customer a confirma-
tion. Those events are all part of a single use case called RESERVE ROOM, and the
specific actions are step-by-step tasks within the use case.
CASE IN POINT 6.1: HILLTOP MOTORS
You have been hired by Hilltop Motors as a consultant to help the company plan a new
information system. Hilltop is an old-line dealership, and the prior owner was slow to change.
A new management team has taken over, and they are eager to develop a first-class system.
Right now, you are reviewing the service department, which is going though a major expan-
sion. You decide to create a model of the service department in the form of a use case dia-
gram. The main actors in the service operation are customers, service writers who prepare
work orders and invoices, and mechanics who perform the work. You are meeting with the
management team tomorrow morning. Create an initial draft of the diagram to present to
them at that time.
Use Case Diagrams
A use case diagram is a visual summary of several related use cases within a system
or subsystem. Consider a typical auto service department, as shown in Figure 6-26.
The service department involves customers, service writers who prepare work orders
and invoices, and mechanics who perform the work. Figure 6-27 on the next page
shows a possible use case diagram for the auto service department.
FIGURE 6-26 A typical auto service department might involve customers, service writ-
ers who prepare work orders, and mechanics who perform the work.
To learn more about
use case diagrams,
visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Use Case
Diagrams link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Object Modeling with the Unified Modeling Language262
Chapter 6 Object Modeling
When you create a use case dia-
gram, the first step is to identify the
system boundary, which is repre-
sented by a rectangle. The system
boundary shows what is included in
the system (inside the rectangle) and
what is not included in the system
(outside the rectangle). After you
identify the system boundary, you
place the use cases on the diagram,
add the actors, and show the rela-
tionships. Figure 6-28 shows a use
case diagram for a school bus sys-
tem that creates a new bus route.
Class Diagrams
A class diagram shows the object
classes and relationships involved in
a use case. Like a DFD, a class dia-
gram is a logical model, which
evolves into a physical model and
finally becomes a functioning infor-
mation system. In structured analy-
sis, entities, data stores, and
processes are transformed into data
structures and program code.
Similarly, class diagrams evolve into
code modules, data objects, and
other system components.
In a class diagram, each class
appears as a rectangle, with the class
name at the top, followed by the
class’s attributes and methods. Lines
show relationships between classes
and have labels identifying the action
that relates the two classes. To create
a class diagram, you review the use
case and identify the classes that
participate in the underlying business
process.
Student Driver
Prepare
Route
Plan
Create
Requirements
Forecast
Use Case Diagram: Create Bus Route
Creates
Determines
Notifies
Notifies
Notifies
Initiates
Dispatcher
Develop Staffing Plan
FIGURE 6-28 A use case diagram to create a school bus route.
Customer Service
Writer
Update
Work
Schedule
Create
Work
Order
Use Case Diagram: Auto Service Department
UpdateUpdate
Writes
Checks
Performs
work
Notifies
Requests
service
Mechanic
Prepare
Invoice
FIGURE 6-27 A use case diagram to handle work at an auto service department.

Object Modeling with the Unified Modeling Language 263
Phase 2 Systems Analysis
The class diagram also includes a concept called cardinality, which describes how
instances of one class relate to instances of another class. For example, an employee
might have earned no vacation days or one vacation day or many vacation days.
Similarly, an employee might have no spouse or one spouse. Figure 6-29 shows vari-
ous UML notations and cardinality examples. Notice that in Figure 6-29, the first
column shows a UML notation symbol that identifies the relationship shown in the
second column. The third column provides a typical example of the relationship,
which is described in the last column. In the first row of the figure, the UML nota-
tion 0..* identifies a zero or many relation. The example is that an employee can
have no payroll deductions or many deductions.
Add Fitness-class
UML Nature of the Example Description
Notation Relationship
0..* Zero or many An employee can have no payroll
deductions or many deductions.
0..1 Zero or one An employee can have no spouse or
one spouse.
1 One and only one An office manager manages one and
only one office.
1..* One or many One order can include one or many
items ordered.
Employee
1 0..*
1 0..1
1 1
1 1..*
Employee Spouse
Payroll Deduction
Office Manager Sales Office
Order Item Ordered
FIGURE 6-29 Examples of UML notations that indicate the nature of the relationship between instances of one
class and instances of another class.
You will learn more about cardinality in Chapter 9, which discusses data design.
Figure 6-30 shows a class diagram for a sales order use case. Notice that the sales
office has one sales manager who can have anywhere from zero to many sales reps. Each
sales rep can have anywhere from zero to many customers, but each customer has only
one sales rep.
Attributes
Methods
Sales Manager
Attributes
Methods
Sales Office
Attributes
Methods
Order
Attributes
Methods
Sales Rep
Attributes
Methods
Customer
Attributes
Methods
Items Ordered
Manages
Manages
Assigned to
Assigned
Includes
Places
1
1
1
1 1
1
0..*
0..*
0..*
0..*
0..* 1..*
FIGURE 6-30 Class diagram for a sales order use case (attributes and
methods omitted for clarity).

Object Modeling with the Unified Modeling Language264
Chapter 6 Object Modeling
Sequence Diagrams
A sequence diagram is a dynamic model of a use case, showing the interaction among
classes during a specified time period. A sequence diagram graphically documents the
use case by showing the classes, the messages, and the timing of the messages. Sequence
diagrams include symbols that represent classes, lifelines, messages, and focuses. These
symbols are shown in Figure 6-31.
CASE IN POINT 6.2: TRAIN THE TRAINER, INC.
Train the Trainer develops seminars and workshops for corporate training managers, who in
turn train their employees. Your job at Train the Trainer is to put together the actual training
materials. Right now, you are up against a deadline. The new object modeling seminar has a
chapter on cardinality, and the client wants you to come up with at least three more examples
for each of the four cardinality categories listed in Figure 6-29 on the previous page. The four
categories are zero or many, zero or one, one and only one, and one or many. Even though you are
under pressure, you are determined to use examples that are realistic and familiar to the
students. What examples will you submit?
Lifeline
FocusFocus
Message 1
Lifeline
CLASS 1 CLASS 2
Message 2
FIGURE 6-31 A sequence diagram with two classes. Notice the X that
indicates the end of the CLASS 2 lifeline. Also notice that each message
is represented by a line with a label that describes the message, and
that each class has a focus that shows the period when messages are
sent or received.
CLASSES A class is identified by a rectangle with the name inside. Classes that send or
receive messages are shown at the top of the sequence diagram.
LIFELINES A lifeline is identified by a dashed line. The lifeline represents the time dur-
ing which the object above it is able to interact with the other objects in the use case. An
X marks the end of the lifeline.
MESSAGES A message is identified by a line showing direction that runs between two
objects. The label shows the name of the message and can include additional informa-
tion about the contents.

Object Modeling with the Unified Modeling Language 265
Phase 2 Systems Analysis
FOCUSES A focus is identified by a narrow vertical shape that covers the lifeline. The
focus indicates when an object sends or receives a message.
The fitness center example shown in Figure 6-32 shows a sequence diagram for the
ADD NEW STUDENT use case. Notice that the vertical position of each message indi-
cates the timing of the message.
Focus
Request
fitness-class
Pay
Notify
Check
Register
STUDENT MANAGER FITNESS-CLASS
SCHEDULE
REGISTRATION
RECORD
FIGURE 6-32 The sequence diagram for the ADD NEW STUDENT use case. The use case
description for ADD NEW STUDENT is shown in Figure 6-25 on page 260.
New
Frozen
Active/
Existing
Closed/
Former
Opens
account
Makes first
deposit Customer closes account
Bank closes account
Assets
released
Assets
attached
FIGURE 6-33 An example of a state transition diagram for a bank account.
State Transition Diagrams
Earlier in this chapter you learned that state refers to an object’s current status. A state
transition diagram shows how an object changes from one state to another, depending
on events that affect the object. All possible states must be documented in the state tran-
sition diagram, as shown in Figure 6-33. A bank account, for example, could be opened
as a NEW account, change to an ACTIVE or EXISTING account, and eventually
become a CLOSED or FORMER account. Another possible state for a bank account
could be FROZEN, if the account’s assets are legally attached.
In a state transition diagram, the states appear as rounded rectangles with the state
names inside. The small circle to the left is the initial state, or the point where the object
first interacts with the system. Reading from left to right, the lines show direction and
describe the action or event that causes a transition from one state to another. The circle
at the right with a hollow border is the final state.

Object Modeling with the Unified Modeling Language266
Chapter 6 Object Modeling
Activity Diagrams
An activity diagram resembles a horizontal flowchart that shows the actions and events
as they occur. Activity diagrams show the order in which the actions take place and
identify the outcomes. Figure 6-34 shows an activity diagram for a cash withdrawal at
an ATM machine. Notice that the customer initiates the activity by inserting an ATM
card and requesting cash. Activity diagrams also can display multiple use cases in the
form of a grid, where classes are shown as vertical bars and actions appear as horizon-
tal arrows.
Customer
inserts
ATM card
Customer
enters PIN
Customer
needs cash
Card is
accepted
PIN is
accepted Customer
requests
cash
ATM
adjusts
balance
ATM
notifies
customer
ATM
provides
cash
Sufficient funds available
Sufficient funds not available
Start
FIGURE 6-34 An activity diagram shows the actions and events involved in withdrawing cash from an ATM machine.
Sequence diagrams, state transition diagrams, and activity diagrams are dynamic
modeling tools that can help a systems analyst understand how objects behave and
interact with the system.
TOOLKIT TIME
The CASE tools in
Part B of the Systems
Analyst’s Toolkit can
help you develop and
maintain complex
information systems.
To learn more about
these tools, turn to
Part B of the four-
part Toolkit that fol-
lows Chapter 12.
CASE Tools
Object modeling requires many types of diagrams to represent the proposed system.
Creating the diagrams by hand is time consuming and tedious, so systems analysts rely
on CASE tools to speed up the process and provide an overall framework for document-
ing the system components. In addition, CASE tools ensure consistency and provide
common links so that once objects are described and used in one part of the design, they
can be reused multiple times without further effort.
CASE IN POINT 6.3: TRAVELBIZ
Jack Forester and Lisa Turner are systems analysts in the IT department of TravelBiz, a nation-
wide travel agency that specializes in business travel. TravelBiz has decided to expand into the
vacation travel market by launching a new business division called TravelFun. The IT director
assigned Jack and Lisa to create a flexible, efficient information system for the new division.
Jack wants to use traditional analysis and modeling techniques for the project. Lisa, on the
other hand, wants to use an object-oriented methodology. Which approach would you suggest
and why?

Organizing the Object Model 267
Phase 2 Systems Analysis
ORGANIZING THE OBJECT MODEL
In this chapter, you learned how to use object-oriented tools and techniques to build a
logical model of the information system. Now you are ready to organize your diagrams
and documentation so the object model is easily read and understood. If you used a
CASE tool to develop the design, much of this work will be performed automatically by
the CASE software.
There are many ways to proceed with the task of organizing the object model, and
experience will be your best teacher. After you identify the system’s objects, classes, and
relationships, you should develop an object relationship diagram that provides an over-
view of the system. If you do not use a CASE-generated model, each diagram or object
definition should be supported by clear, relevant documentation that can be accessed
easily by anyone who reviews the object model. For example, you should organize your
use cases and use case diagrams so they can be linked to the appropriate class, state
transition, sequence, and activity diagrams. Your diagrams and documentation are the
foundation for the system’s design, so accuracy is important. Remember that it is much
easier to repair a diagram now than to change the software later.
CASE IN POINT 6.4: CYBER ASSOCIATES
One of your responsibilities at Cyber Associates, an IT consulting firm, is to assign new sys-
tems analysts to various tasks and projects. Some of the senior people believe that inexperi-
enced analysts should start with object-oriented techniques, which are easier to learn and
apply. Others think that an analyst should learn structured analysis first, and then proceed to
object-oriented skills. What is your viewpoint, and why?
A QUESTION OF ETHICS
Last month, your company launched a peer review process for IT projects. At the end of each
project, team members rate the performance of the overall team, and his or her co-workers
individually. The stated goal was to obtain honest, peer-based feedback. Unfortunately, like
many good ideas, there was a downside. Although the input is anonymous, the results are sub-
mitted to the entire team. Some members, including you, are uncomfortable with the new
process because it could encourage cliques and actually undermine a team-based culture.
Others see it as an opportunity for honest input.
One team member, who is a close friend of yours, is not very popular with her teammates.
To make matters worse, she recently had some personal problems that affected her work,
and she is worried that her ratings will be quite negative. She has not specifically asked you
about your feedback, but you know she is hoping for a favorable review from you. Even
though her work was not great, you don’t want to see her get hurt by a process that you
yourself are not comfortable with.
Is this a question of ethics versus friendship? Would it be wrong to tilt the scales in her
favor just a bit?

268
Chapter 6 Object Modeling
Chapter Summary
CHAPTER SUMMARY
This chapter introduces object modeling, which is a popular technique that describes a
system in terms of objects. Objects represent real people, places, events, and transac-
tions. Unlike structured analysis, which treats data and processes separately, objects
include data and processes that can affect the data. During the implementation process,
systems analysts and programmers transform objects into program code modules that
can be optimized, tested, and reused as often as necessary.
Object-oriented terms include classes, attributes, instances, messages, and methods.
Classes include objects that have similar attributes, or characteristics. Individual mem-
bers of a class are called object instances. Objects within a class can be grouped into
subclasses, which are more specific categories within the class. A class also can belong to
a more general category called a superclass.
Objects can send messages, or commands, that require other objects to perform
certain methods, or tasks. The concept that a message gives different meanings to dif-
ferent objects is called polymorphism. An object resembles a black box, with encapsu-
lated, or self-contained, data and methods. The strongest relationship between objects
is inheritance.
After you identify the objects, classes, and relationships, you prepare an object rela-
tionship diagram that shows the objects and how they interact to perform business func-
tions and transactions.
The Unified Modeling Language (UML) is a widely used method of visualizing and doc-
umenting an information system. UML techniques include use cases, use case diagrams,
class diagrams, sequence diagrams, state transition diagrams, and activity diagrams.
A use case describes a business situation initiated by an actor, who interacts with the
information system. Each use case represents a specific transaction, or scenario. A use
case diagram is a visual summary of related use cases within a system or subsystem. A
class diagram represents a detailed view of a single use case, showing the classes that
participate in the underlying business transaction, and the relationship among class
instances, which is called cardinality. A sequence diagram is a dynamic model of a use
case, showing the interaction among classes during a specified time period. Sequence
diagrams include lifelines, messages, and focuses. A state transition diagram shows how
an object changes from one state to another, depending on events that affect the object.
An activity diagram resembles a horizontal flowchart that shows actions and events as
they occur in a system.
CASE tools provide an overall framework for system documentation. CASE tools can
speed up the development process, ensure consistency, and provide common links that
enable objects to be reused.
At the end of the object modeling process, you organize your use cases and use case
diagrams and create class, sequence, state transition, and activity diagrams.

269
Phase 2 Systems Analysis
Key Terms and Phrases
activity diagram 266
actor 259
attributes 250
black box 256
cardinality 263
child 258
class 251
class diagram 262
encapsulation 256
focus 265
inheritance 258
instance 251
lifeline 264
message 250
methods 250
object 250
object model 250
object-oriented (O-O) analysis 250
parent 258
polymorphism 255
relationships 258
sequence diagram 264
state 254
state transition diagram 265
subclass 256
superclass 257
system boundary 262
Unified Modeling Language (UML) 250
use case 259
use case description 260
use case diagram 261
Key Terms and Phrases

270
Chapter 6 Object Modeling
Learn It Online
Instructions: To complete the Learn It Online exercises, visit the Management Information
Systems CourseMate Web site at www. cengagebrain.com, navigate to the resources for this
chapter, and click the link for the exercise you want to complete.
1 Chapter Reinforcement
TF, MC, and SA
Click one of the Chapter Reinforcement links for Multiple Choice, True/False, or Short
Answer. Answer each question and submit to your instructor.
2 Flash Cards
Click the Flash Cards link and read the instructions. Type 20 (or a number specified by
your instructor) in the Number of Playing Cards text box, type your name in the Enter
your Name text box, and then click the Flip Card button. When the flash card is
displayed, read the question and then click the ANSWER box arrow to select an answer.
Flip through the Flash Cards. If your score is 15 (75%) correct or greater, click Print on
the File menu to print your results. If your score is less than 15 (75%) correct, then redo
this exercise by clicking the Replay button.
3 Practice Test
Click the Practice Test link. Answer each question, enter your first and last name at the
bottom of the page, and then click the Grade Test button. When the graded practice test
is displayed on your screen, click Print on the File menu to print a hard copy. Continue
to take practice tests until you score 80% or better.
4 Who Wants To Be a Computer Genius?
Click the Computer Genius link. Read the instructions, enter your first and last name at
the bottom of the page, and then click the Play button. When your score is displayed,
click the PRINT RESULTS link to print a hard copy.
5 Wheel of Terms
Click the Wheel of Terms link. Read the instructions, and then enter your first and last
name and your school name. Click the PLAY button. When your score is displayed on the
screen, right-click the score and then click Print on the shortcut menu to print a hard copy.
6 Crossword Puzzle Challenge
Click the Crossword Puzzle Challenge link. Read the instructions, and then click the
Continue button. Work the crossword puzzle. When you are finished, click the Submit
button. When the crossword puzzle is redisplayed, submit it to your instructor.
Learn It Online

www.cengagebrain.com

271
Phase 2 Systems Analysis
Case-Sim: SCR Associates
Overview
The SCR Associates case study is a Web-based simulation that
allows you to practice your skills in a real-world environment.
The case study transports you to SCR’s intranet, where you com-
plete 12 work sessions, each aligning with a chapter. As you work on the case, you will
receive e-mail and voice mail messages, obtain information from SCR’s online libraries,
and perform various tasks.
How do I use the case?
• Review the SCR background material in Chapter 1.
• Read the Preview for this session and study the Task List.
• Visit the Management Information Systems CourseMate Web site at
www.cengagebrain.com, navigate to the SCR Case Simulation, and
locate the intranet link.
• Enter your name and the password sad9e. An opening screen will display
the 12 sessions.
• Select this session. Check your e-mail and voice mail carefully, and then work
on the tasks.
Preview: Session 6
In the last session, you used data and process modeling techniques to develop a logical
model of the new system. Now you will apply your object modeling skills to create various
diagrams and documentation for the new TIMS system. You will review the background
material and develop an object-oriented model that includes several types of diagrams.
Task List
FIGURE 6-35 Task list: Session 6.
1. I need to review Jesse’s e-mail message regarding object modeling and the JAD session
summary. Then she wants me to identify possible use cases and actors, and create a
use case diagram for the TIMS system.
2. She also wants me to select one of the use cases and create a class diagram.
3. I will need a sequence diagram for the selected use case.
4. Jesse asked for a state transition diagram that describes typical student states
and how they change based on certain actions and events.
SCR Associates Case Simulation Session 6: Object Modeling

www.cengagebrain.com

272
Chapter 6 Object Modeling
Chapter Exercises
Review Questions
1. What is object-oriented analysis, and what are some advantages of using this technique?
2. Define an object, and give an example.
3. Define an attribute, and give an example.
4. Define a method, and give an example.
5. Define encapsulation, and explain the benefits it provides.
6. Define polymorphism, and give an example.
7. Define a class, subclass, and superclass, and give examples.
8. Define an actor, and give an example.
9. Define a use case and a use case diagram, and give examples.
10. Define the term black box, and explain why it is an important concept in
object-oriented analysis.
Discussion Topics
1. The chapter mentioned that systems analysts and programmers transform objects
into program code modules that can be optimized, tested, and reused. Modular
design is a very popular design concept in many industries. What other examples of
modular design can you suggest?
2. You are an IT consultant, and you are asked to create a new system for a small real
estate brokerage firm. Your only experience is with traditional data and process mod-
eling techniques. This time, you decide to try an object-oriented approach. How will
you begin? How are the tasks different from traditional structured analysis?
3. You are creating a system for a bowling alley to manage information about its leagues.
During the modeling process, you create a state transition diagram for an object called
LEAGUE BOWLERS. What are the possible states of a league bowler, and what hap-
pens to a bowler who quits the league and rejoins the following season?
4. A debate is raging at the IT consulting firm where you work. Some staff members
believe that it is harder for experienced analysts to learn object-modeling techniques,
because the analysts are accustomed to thinking about data and processes as sepa-
rate entities. Others believe that solid analytical skills are easily transferable and do
not see a problem in crossing over to the newer approach. What do you think, and
why?
Projects
1. Search the Internet for information about the history and development of UML.
2. Contact the IT staff at your school or at a local business to learn whether the orga-
nization uses object-oriented programming languages. If so, determine what lan-
guages and versions are used and why they were selected.
3. Search the Internet for information about groups and organizations that support
and discuss object-oriented methods and issues.
4. Search the Internet for information about CASE tools that provide UML support.
Chapter Exercises

273
Phase 2 Systems Analysis
Apply Your Knowledge
The Apply Your Knowledge section contains four mini-cases. Each case describes a situation,
explains your role in the case, and asks you to respond to questions. You can answer the ques-
tions by applying knowledge you learned in the chapter.
1 Hertford Post Office
Situation:
Hertford has a typical small town post office that sells stamps, rents post office boxes,
and delivers mail to postal customers.
1. Identify possible actors and use cases involved in the post office functions.
2. Create a use case diagram for the post office operation.
3. Select one of the use cases and create a class diagram.
4. Create a sequence diagram for the use case you selected.
2 New Branch School District
Situation:
The New Branch School District operates a fleet of 40 buses that serve approximately
1,000 students in grades K–12. The bus operation involves 30 regular routes, plus spe-
cial routes for activities, athletic events, and summer sessions. The district employs 12
full-time drivers and 25 to 30 part-time drivers. A dispatcher coordinates the staffing
and routes and relays messages to drivers regarding students and parents who call
about pickup and drop-off arrangements.
1. Identify possible actors and use cases involved in school bus operations.
2. Create a use case diagram for the school bus system.
3. Create a sequence diagram for the use case you selected.
4. Create a state transition diagram that describes typical student states and how
they change based on specific actions and events.
Apply Your Knowledge

274
Chapter 6 Object Modeling
Apply Your Knowledge
3 Pleasant Creek Community College Registration System
Situation:
Pleasant Creek Community College has a typical school registration process. Student
support services include faculty advisors and tutors. The administration has asked you,
as IT manager, to develop an object-oriented model for a new registration system.
1. List possible objects in the new registration system, including their attributes and
methods.
2. Identify possible use cases and actors.
3. Create a use case diagram that shows how students register.
4. Create a state transition diagram that describes typical student states and how
they change based on specific actions and events.
4 Student Bookstore at Pleasant Creek Community College
Situation:
The bookstore staff at Pleasant Creek Community College works hard to satisfy
students, instructors, and the school’s business office. Instructors specify textbooks for
particular courses, and the bookstore orders the books and sells them to students. The
bookstore wants you to develop an object-oriented model for a new bookstore
information management system.
1. List possible objects in the bookstore operation, including their attributes and
methods.
2. Identify possible use cases and actors.
3. Select one of the use cases that you identified in step 2 and create a sequence
diagram.
4. Create an object relationship diagram that provides an overview of the system,
including how textbooks are selected by instructors, approved by a department
head, and sold to students by the bookstore.

275
Phase 2 Systems Analysis
Case Studies
Case studies allow you to practice specific skills learned in the chapter. Each chapter contains sev-
eral case studies that continue throughout the textbook, and a chapter capstone case.
New Century Health Clinic
New Century Health Clinic offers preventive medicine and traditional medical care. In your
role as an IT consultant, you will help New Century develop a new information system.
Background
You began the systems analysis phase at New Century Health Clinic by completing a
series of interviews, reviewing existing reports, and observing office operations. Then, in
Chapter 5, you acquired more information and developed a set of DFDs, process descrip-
tions, and a data dictionary.
Now you decide to practice the object modeling skills you learned in this chapter. Before you
begin, go back to Chapter 5 and review the New Century background material and fact-finding
results. Also, your instructor may provide you with a complete set of interview summaries
that you can use to perform your assignments. Then complete the following tasks.
Assignments
1. Identify possible use cases and actors, and create a use case diagram for the New
Century Health Clinic system.
2. Select one of the use cases and create a class diagram.
3. Create a sequence diagram for the use case that you selected.
4. Create a state transition diagram that describes typical patient states and how they
change based on specific actions and events.
PERSONAL TRAINER, INC.
Personal Trainer, Inc., owns and operates fitness centers in a dozen Midwestern cities. The
centers have done well, and the company is planning an international expansion by opening
a new “supercenter” in the Toronto area. Personal Trainer’s president, Cassia Umi, hired an
IT consultant, Susan Park, to help develop an information system for the new facility.
During the project, Susan will work closely with Gray Lewis, who will manage the new
operation.
Background
Working as an IT consultant for Personal Trainer, Susan Park used data and process
modeling tools to create a logical model of the proposed information system. Now she
wants to build an object-oriented view of the system using O-O tools and techniques.
Assignments
Before you perform the following tasks, you should review the information and back-
ground in Chapters 1 and 2, and the fact-finding summary of the case provided in Chapter 4.
1. Identify possible use cases and actors, and create a use case diagram for the Personal
Trainer information system.
2. Select one of the use cases and create a class diagram.
3. Create an object relationship diagram for the system.
4. Create a state transition diagram that describes typical member states and how they
change based on specific actions and events.
Case Studies

276
Chapter 6 Object Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited
SoftWear, Limited (SWL), is a continuing case study that illustrates the knowledge and skills
described in each chapter. In this case study, the student acts as a member of the SWL sys-
tems development team and performs various tasks.
Background
Rick Williams, a systems analyst,
and Carla Moore, a programmer/
analyst, completed a set of DFDs
representing a data and process
model of the SWL payroll system
project. Rick had recently attended a
workshop on object modeling tech-
niques, and suggested that he and
Carla should experiment with
object-oriented analysis. After he
explained the concepts and tech-
niques to Carla, she agreed that it
was a good opportunity to gain
some experience, and they decided
to give it a try.
Rick and Carla began by review-
ing the data they had collected ear-
lier, during requirements modeling.
They studied the DFDs and the data
dictionary to identify the people,
events, and transactions that would
show as classes. They identified
employees, human resources transac-
tions, time sheet entries, payroll
actions, and stock transfers. They
defined attributes and methods for
each of those classes, as shown in
Figure 6-36. When they were fin-
ished, they reviewed the results. They
noticed that the structured DFDs did
not show a department head as an
entity. Rick remembered that depart-
ment heads submitted time sheets to
the payroll department, and the pay-
roll clerks actually entered the data
into the system. Because they were
looking at the system in a different
way, they decided to include depart-
ment heads as a subclass of the
EMPLOYEE class.
Use Cases
The next step was for Rick and Carla to define the use cases. They tried to think of all
the situations that involve an EMPLOYEE object. For example, employees might get hired,
promoted, receive a raise, terminate, retire, change their names, or change their payroll
contributions.
Employee number
Employee name
Address
Telephone number
Date of birth
Sex
Title, rate of pay
Deductions
State
Add new
Change name
Change address
Change telephone
Change deductions
Change state
EMPLOYEE
Employee number
Employee name
State
Add new
Change state
Notify
HR TRANSACTION
Employee number
Week ending date
Hours worked
Add new
Correct hours
Generate report
TIME SHEET ENTRY
Employee number
Hours worked
Overtime hours
Rate of pay
Overtime rate
Deductions
Contributions
Federal tax withheld
State tax withheld
Local tax withheld
Generate checks
Change deductions
Change contributions
Change federal rate
Change local rate
Change state rate
Change rate of pay
Generate W-2
Notify
Calculate
PAYROLL ACTION
Employee number
Stock holdings
Stock contribution
Purchase stock
Sell stock
Change contribution
Generate report
STOCK TRANSFER
Employee number
Employee name
Address
Telephone number
Date of birth
Sex
Title, rate of pay
Deductions
State
Add new
Change name
Change address
Change telephone
Change deductions
Change state
Manages work
Submits time sheets
DEPT HEAD
FIGURE 6-36 SWL payroll system classes.

277
Phase 2 Systems Analysis
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
They also decided to create use cases that involved the PAYROLL ACTION object. The
examples included these: Change an employee’s deductions, change an employee’s contribu-
tions, change the federal tax rate, change the state tax rate, change the local tax rate, calcu-
late weekly gross pay, calculate weekly taxes, calculate weekly contributions, generate
weekly paychecks, and notify the stock transfer department of change in contributions.
After they defined the use cases and the actors, they created a description for each use case
showing the use case name, actors, description, successful completion, alternatives, precondi-
tions, postconditions, and assumptions.
Creating use case descriptions was hard work, and they found that they had to return fre-
quently to their documentation and fact-finding results. First, they created descriptions for the
RECEIVE RAISE and RECEIVE PROMOTION use cases, as shown in Figure 6-37.
RECEIVE RAISE Use Case
Name: RECEIVE RAISE
Actor: Employee
Description: Describes the change to an employee’s pay rate
Successful 1. Employee gets a raise
completion: 2. Human resources department changes employee data to the
employee object and the human resources records
Alternative: None
Precondition: Employee has been approved for a raise
Postcondition: Employee’s pay rate is changed on all records
Assumptions: None
RECEIVE PROMOTION Use Case
Name: RECEIVE PROMOTION
Actor: Employee
Description: Describes the change to employee title
Successful 1. Employee gets promoted
completion: 2. Human resources department changes employee data and
completes HR transaction
Alternative: None
Precondition: Employee has been approved for promotion
Postcondition: Employee title is changed
Assumptions: Employee accepts position
FIGURE 6-37 Descriptions for the RECEIVE RAISE and RECEIVE PROMOTION use cases.

278
Chapter 6 Object Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Now they were ready to create a use case diagram to show several related use cases. To
keep it simple, Carla suggested that they show no more than three use cases per diagram.
They decided to create a use case diagram to describe how the payroll is generated.
The diagram, shown in Figure 6-38, includes three use cases: CREATE TIMESHEET,
CALCULATE PAYROLL, and GENERATE PAYCHECK. In the diagram, the DEPARTMENT
HEAD actor creates a new instance of the TIMESHEET ENTRY object, which notifies the
CALCULATE PAYROLL use case, which is initiated by the PAYROLL CLERK. The
GENERATE PAYCHECK use case then issues a paycheck to the EMPLOYEE actor.
Department
Head
Payroll Clerk Employee
Generate
Paycheck
Create
Timesheet
Entry
Use Case Diagram: GENERATE WEEKLY PAYROLL
Notifies
Notifies
Initiates
Initiates
Issues
Calculate Payroll
FIGURE 6-38 Use case diagram for the GENERATE WEEKLY PAYROLL
scenario.
Class Diagrams
The use case diagram gave Rick and Carla a valuable snapshot of the business processes
involved in GENERATE WEEKLY PAYROLL. To document the relationships and interac-
tion in more detail, they created the class diagram shown in Figure 6-39. The diagram
includes five different classes and various types of cardinality.

279
Phase 2 Systems Analysis
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Employee number
Employee name
Address
Telephone number
Date of birth
Sex
Title, rate of pay
Deductions
State
Add new
Change name
Change address
Change telephone
Change deductions
Change state
EMPLOYEE
Employee number
Employee name
State
Add new
Change state
Notify
HR TRANSACTION
Employee number
Week ending date
Hours worked
Add new
Correct hours
Generate report
TIMESHEET ENTRY
Employee number
Hours worked
Overtime hours
Rate of pay
Overtime rate
Deductions
Contributions
Federal tax withheld
State tax withheld
Local tax withheld
Generate checks
Change deductions
Change contributions
Change federal rate
Change local rate
Change state rate
Change rate of pay
Generate W-2
Notify
Calculate
PAYROLL ACTION
Employee number
Employee name
Address
Telephone number
Date of birth
Sex
Title, rate of pay
Deductions
State
Add new
Change name
Change address
Change telephone
Change deductions
Change state
Manages work
Submits timesheets
DEPT HEAD
1
1
1
0..*
0..*
0..*
0..*
1..* 1 1..* 1
Maintained for
Based on Submits
Manages
Notifies
FIGURE 6-39 The GENERATE WEEKLY PAYROLL class diagram includes five classes and various types
of relationships among the classes.

280
Chapter 6 Object Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Sequence Diagrams
Next, the pair decided to create a
sequence diagram. Carla was eager to see
how a sequence diagram would help them
visualize the time frame in which events
occur. They created a diagram for the
CHANGE CONTRIBUTIONS method in
the EMPLOYEE object. The sequence dia-
gram in Figure 6-40 shows the steps that
occur when an employee changes benefits
contributions. Notice that the diagram
includes the messages sent and the lifeline
of the objects. Rick and Carla were satisfied
that they could create sequence diagrams
easily, and they decided to move on to the
state transition diagram.
State Transition Diagram
Rick explained that a state transition
diagram shows how an object’s state, or
status, changes as a result of various actions or events. The state transition diagram they cre-
ated in Figure 6-41 shows the status of an employee from the time the employee is hired to
the time he or she quits, is fired, or retires. Notice that the employee is a PROSPECTIVE
employee until all physicals are passed and all paperwork is processed, and then he or she
becomes a CURRENT employee. Once employment ends for any reason, the individual
becomes a PAST employee. At this point, even if the employee returns to the company later
on he or she will come in as a new instance of the EMPLOYEE object. Rick and Carla were
surprised at how easy that was, and they decided to try an activity diagram.
Activity Diagram
Rick suggested that they create an activity diagram showing some of the situations they
had explored in detail. Their diagram showed the interaction between objects during
certain scenarios and enabled them to visualize system activity, as shown in Figure 6-42.
They agreed that the technique gave them additional object modeling experience that
would be valuable in the future. At that point, they packaged all the diagrams in a folder
and saved the overall object model for future reference.
FIGURE 6-40 Sequence diagram for the CHANGE
CONTRIBUTIONS scenario.
Change
contributions
Change
contributions
EMPLOYEE
STOCK
TRANSFER
PAYROLL
ACTION
Future Current Past
Meets
requirements
Prospective
hire
Gets fired
Retires
Quits
FIGURE 6-41 State transition diagram shows changes in employee status caused by actions and events.

281
Phase 2 Systems Analysis
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Team Tasks
1. Rick is interested in your views on the future of object-oriented analysis and design. He
is scheduled to make a presentation on the topic next week at a meeting of IT profes-
sionals. He asked you to do some research, using the Internet and industry publications,
and send him an e-mail message describing the current use of object-oriented analysis
and trends for the future.
2. As a team member, you know how important it can be to have a well-organized object
model. The team has asked you to handle this task. How will you go about it?
3. When you worked on the class diagrams, you had to understand and apply the concept
of cardinality. How would you explain this concept to a new team member?
4. List all the different types of diagrams you used to create the object model, with a brief
explanation of each diagram.
Manage the SWL Project
You have been asked to manage SWL’s new information system project. One of your most
important activities will be to identify project tasks and determine when they will be performed.
Before you begin, you should review the SWL case in this chapter. Then list and analyze the
tasks, as follows:
LIST THE TASKS Start by listing and numbering at least 10 tasks that the SWL team needs to
perform to fulfill the objectives of this chapter. Your list can include SWL Team Tasks and any
other tasks that are described in this chapter. For example, Task 3 might be to Identify the
actors, and Task 6 might be to Draw a use case diagram.
ANALYZE THE TASKS Now study the tasks to determine the order in which they should be
performed. First identify all concurrent tasks, which are not dependent on other tasks. In the
example shown in Figure 6-43 on the next page, Tasks 1, 2, 3, 4, and 5 are concurrent tasks,
and could begin at the same time if resources were available.
Other tasks are called dependent tasks, because they cannot be performed until one or more
earlier tasks have been completed. For each dependent task, you must identify specific tasks that
need to be completed before this task can begin. For example, you would want to identify the
actors before you could draw a use case diagram, so Task 6 cannot begin until Task 3 is com-
pleted, as Figure 6-43 shows.
Manager
promotes
employee
Change
employee
title
RECEIVE
PROMOTION
Employee HR
Transaction
Payroll
Action
Stock
Transfer
Start End
Employee
changes
contributions
CHANGE
CONTRIBUTIONS
Start End
Change
employee
deduction
Change
stock
purchase
deduction
FIGURE 6-42 Activity diagram shows the RECEIVE PROMOTION scenario and the CHANGE
CONTRIBUTIONS scenario.

282
Chapter 6 Object Modeling
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
Chapter 3 describes project management tools, techniques, and software. To learn more, you
can use the Features section on your Student Study Tool CD-ROM, or visit the Management
Information Systems CourseMate Web site at www.cengagebrain.com and locate the project
management resources library for this book. On the Web, Microsoft offers demo versions, train-
ing, and tips for using Project 2010. You also can visit the OpenWorkbench.org site to learn
more about this free, open-source software.
FIGURE 6-43 Tasks 1, 2, 3, 4, and 5 are concurrent tasks that could be performed at the same time. Task 6 is a
dependent task that cannot be performed until Task 3 has been completed.

www.cengagebrain.com

Phase 2 Systems Analysis
283 Ready for a Challenge?
Ready for a Challenge?
In additional to technical skills, IT professionals need critical thinking skills such as perception, organization, analysis,
problem-solving, and decision-making. The Ready for a Challenge feature can help you learn, practice, and apply critical
thinking skills that you can take to the workplace.
The IT team at Game Technology prepared DFDs for the new Customer Contact Care sys-
tem (C3). Now, you will help the team develop a set of object models. To be sure you can
handle the tasks you decide to review Chapter 6 of your systems analysis textbook.
The C3 system model will include use cases that represent various business processes and func-
tions. The customer and sales rep entities will be shown as actors, with the following methods:
Entity Methods
Customer Request product information•
Place order•
Respond to Web promotion•
Sign up on game blog•
Sales Rep Initiate sales call to customer•
Respond to customer inquiry•
Follow up after prior order•
Follow up after prior information request•
You also learned that customers will fall into one of four categories. Customers move
from one category to another when certain conditions occur, as shown:
Customer Category Conditions
Potential Has not placed an order in the last 24 months, but has
Responded to a Web promotion, or•
Requested product information, or•
Signed up on our game blog•
Active Placed at least one order in the last 24 months
Preferred Placed at least three orders in the last 24 months
Former Any Active or Preferred customer who placed no orders in the last
24 months
Practice Tasks
A. Draw a use case diagram that includes the entities and the use cases.
B. Draw a state transition diagram that shows the customer categories and the conditions
for each category.
After you complete the Practice Tasks, to check your work and view sample answers, visit
the Management Information Systems CourseMate Web site at www.cengagebrain.com, navi-
gate to the resources for this chapter, and locate Ready for a Challenge?.
The Challenge
The marketing group decided to add a new marketing technician position to provide IT support
for sales reps. Specifically, the marketing tech will track customer response times, prepare contact
management plans for sales reps, and develop surveys to measure customer satisfaction.
Marketing also decided to update the customer categories. The Potential and Former cat-
egories are not affected. The new categories are Silver, which replaces the Active category;
Gold, which replaces the Preferred category; and Platinum, which includes any customer
whose orders total at least $1,000 in the last 24 months.
Challenge Tasks
A. Draw a new version of the use case diagram that adds the new marketing technician.
B. Draw a state transition diagram that shows the new customer categories and the condi-
tions for each category.

www.cengagebrain.com

Chapter 7 Development Strategies
Chapter 7 is the final chapter in the systems analysis
phase of the SDLC. This chapter describes software trends,
acquisition and development strategies, traditional versus
Web-based development, outsourcing versus in-house
development, the system requirements document,
prototyping, and preparing for the transition to the next
SDLC phase — systems design.
Development
Strategies
7CHAPTER
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Describe the concept of Software as a Service
• Define Web 2.0 and cloud computing
• Explain software acquisition alternatives,
including traditional and Web-based
software development strategies
• Describe software outsourcing options,
including offshore outsourcing and the role
of service providers
• Explain advantages and disadvantages of
in-house software development
• Discuss cost-benefit analysis and financial
analysis tools
• Describe a request for proposal (RFP) and a
request for quotation (RFQ)
• Describe the system requirements document
• Explain the transition from systems analysis
to systems design
• Discuss systems design guidelines
• Describe software development trends
INTRODUCTION
The main objective of the systems analysis phase is
to build a logical model of the new information sys-
tem. In Chapters 4, 5, and 6, you learned about
requirements modeling, data and process modeling,
and object modeling. Chapter 7 describes the
remaining activities in the systems analysis phase,
which include evaluation of alternative solutions,
preparation of the system requirements document,
and presentation of the system requirements docu-
ment to management. The chapter also describes the
transition to systems design, prototyping, and sys-
tems design guidelines. The chapter concludes with a
discussion of trends in software development.

FIGURE 9-1
Introduction 285
Phase 2 Systems Analysis
FIGURE 7-1 Typical development strategies task list.
CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Wendy Lee, manager of college services at Mountain View College, wants a new
information system that will improve efficiency and customer service at the three college
bookstores.
In this part of the case, Tina Allen (systems analyst) and David Conroe (student intern) are
talking about development strategies for the new system.
Participants: Tina and David
Location: Tina’s office, Wednesday morning, November 16, 2011
Project status: Tina and David developed a logical model that includes data flow diagrams, a data dictionary,
and process descriptions. They also created an object model. Now they are ready to dis-
cuss development strategies for the new bookstore system.
Discussion topics: Web-based versus traditional development, cost-benefit analysis, steps in purchasing a
software package, transition to systems design, and systems design guidelines
Tina: Good morning, David. Are you ready for the next step?
David: Sure. Now that we have a logical model of the bookstore system, what comes next?
Tina: We’re at a transition point between the logical design, which describes what the new system will do, and
the physical design phase, which describes how it will be done, including the user interface and physical
components. Before we start the physical design, we have to study various systems development options
and make a recommendation to Wendy.
David: What are the options?
Tina: Well, some large organizations use Web-based systems hosted by outside vendors who supply and main-
tain the software. In a sense, the customer rents the application. I checked with our IT director, and she
feels we’re not ready for that approach. She wants us to implement a system on the college network and
migrate to a Web-based system later. That brings us to the next set of questions.
David: Such as?
Tina: We need to consider our role in the development process. We can build the system ourselves, which is
called in-house development. Or we can purchase a software package, which might need some degree of
modification to meet our needs. Or we could consider outsourcing options, including hiring an IT consul-
tant to help with development tasks. Either way, we need to do a cost-benefit study.
David: What about the transition from logical to physical design that you mentioned?
Tina: The idea is to take our logical design, which is similar to an architect’s proposal, and translate it into a phys-
ical design, which is more like a working blueprint. If we decide to develop the system in-house, we’ll prob-
ably build a prototype, or working model of the system. If we decide to purchase a package, we’ll follow a
series of steps that will help us select the best product. We’ll also talk about systems design guidelines.
David: When you mention the idea of a blueprint, it sounds like we’re getting ready to pick up our tools and go to work.
Tina: We sure are. Here’s a task list to get us started:

286
Chapter 7 Development Strategies
The Impact of the Internet
DEVELOPMENT STRATEGIES OVERVIEW
Just a few years ago, a typical company either developed software itself, purchased a
software package (which might need some modification), or hired consultants or outside
resources to perform the work. Today, a company has many more choices, including
application service providers, Web-hosted software options, and firms that offer a variety
of enterprise-wide software solutions.
Selecting the best development path is an important decision that requires companies
to consider three key topics: the impact of the Internet, software outsourcing options,
and in-house software development alternatives. These topics are reviewed in the
following sections.
THE IMPACT OF THE INTERNET
The Internet has triggered enormous changes in business methods and operations, and
software acquisition is no exception. This section examines a trend that views Software
as a Service, the changing marketplace for software, and how Web-based development
compares to traditional methods. The section concludes with a description of Internet-
related trends, including Web 2.0 and cloud computing.
Software as a Service
In the traditional model, software vendors develop and sell application packages to
customers. Typically, customers purchase licenses that give them the right to use the soft-
ware under the terms of the license agreement. Although this model still accounts for most
software acquisition, a new model, called Software as a Service (SaaS), is changing the
picture dramatically.
SaaS is a model of software deployment where an application is hosted as a service pro-
vided to customers over the Internet. SaaS reduces the customer’s need for software mainte-
nance, operation, and support.
In a highly competitive
marketplace, major ven-
dors constantly strive to
deliver new and better
solutions. For example, as
shown in Figure 7-2,
Microsoft claims that its
SaaS platform offers the
best solution and business
value. Microsoft also pro-
motes a broader vision,
called Software + Services.
The term refers to
Microsoft’s strategy for
cloud computing, which
integrates software appli-
cations, platforms and
infrastructure. According
to Microsoft, Software +
Services will allow seam-
less connection of smart
devices to the tremendous
power of the Web.
FIGURE 7-2 Microsoft’s SaaS platform promises better value and a new concept called
Software + Services.

The Impact of the Internet
Phase 2 Systems Analysis
287
The Web Host Industry
Review shown in Figure 7-3 is
an online source of informa-
tion about SaaS products,
trends, and events. In a pub-
lished report, the Review
quoted a Gartner, Inc. predic-
tion that 25% of all new busi-
ness software will be deployed
as a service by 2011, while the
value of the SaaS industry will
grow to $40 billion.
Traditional vs.
Web-Based Systems
Development
As a systems analyst, you
must consider whether development
will take place in a Web-centric framework,
or in a traditional environment. This section
provides an overview of some of the similarities and
differences.
In an Internet-based system, the Web becomes an integral part of the application,
rather than just a communication channel, and systems analysts need new application
development tools and solutions to handle the new systems. Two major Web-based devel-
opment environments are Microsoft’s .NET and IBM’s WebSphere, which are shown in
Figure 7-4 on the next page. Microsoft regards .NET as a platform-independent software
environment. IBM describes WebSphere as a set of products specifically designed to sup-
port e-business applications across multiple computing platforms.
Although there is a major trend toward Web-based architecture, many firms rely on tra-
ditional systems, either because they are legacy applications that are not easily replaced, or
because they do not require a Web component to satisfy user needs. If you need to choose,
you should consider some key differences between traditional and Web-based system devel-
opment. Building the application in a Web-based environment can offer greater benefits,
and sometimes greater risks, compared to a traditional environment. The following sections
list some characteristics of traditional versus Web-based development.
TRADITIONAL DEVELOPMENT In a traditional systems development environment:
• Systems design is influenced by compatibility issues, including existing hard-
ware and software platforms and legacy system requirements.
• Systems are designed to run on local and wide-area company networks.
• Systems often utilize Internet links and resources, but Web-based features are
treated as enhancements rather than core elements of the design.
• Development typically follows one of three main paths: in-house development,
purchase of a software package with possible modification, or use of outside
consultants.
FIGURE 7-3 The Web Host Industry Review (WHIR) is a
clearinghouse for SaaS information.

288
Chapter 7 Development Strategies
The Impact of the Internet
FIGURE 7-4 Microsoft’s .Net Framework and IBM’s WebSphere are comprehensive software development environments.
• Scalability can be affected by network limitations and constraints.
• Many applications require substantial desktop computing power and resources.
• Security issues usually are less complex than with Web-based systems, because the
system operates on a private company network, rather than the Internet.

The Impact of the Internet
Phase 2 Systems Analysis
289
WEB-BASED DEVELOPMENT In a Web-based systems development environment:
• Systems are developed and delivered in an Internet-based framework such as
.NET or WebSphere.
• Internet-based development treats the Web as the platform, rather than just a
communication channel.
• Web-based systems are easily scalable, and can run on multiple hardware
environments.
• Large firms tend to deploy Web-based systems as enterprise-wide software
solutions for applications such as customer relationship management, order
processing, and materials management.
• Web-based software treats the software application as a service that is less depen-
dent on desktop computing power and resources.
• When companies acquire Web-based software as a service rather than a product
they purchase, they can limit in-house involvement to a minimum and have the
vendor install, configure, and maintain the system by paying agreed-upon fees.
• Web-based software usually requires additional layers, called middleware, to com-
municate with existing software and legacy systems.
Looking to the Future: Web 2.0 and Cloud Computing
In the constantly changing world of IT, no area is more dynamic than Internet technology.
Two examples of evolving trends are Web 2.0 and cloud computing. Systems analysts
should be aware of these concepts and consider them as they plan large-scale systems.
Web 2.0 and cloud computing are discussed in
more detail in Chapter 10, System Architecture.
Many IT professionals use the term Web 2.0
to describe a second generation of the Web that
will enable people to collaborate, interact, and
share information much more effectively. This
new environment is based on continuously
available user applications rather than static
HTML Web pages, without limitations regard-
ing the number of users or how they will be able
to access, modify, and exchange data. The Web
2.0 platform will enhance interactive experi-
ences, including wikis and blogs, and social-net-
working applications such as Twitter, MySpace
and Facebook.
The term cloud computing refers to the
cloud symbol that indicates a network, or the
Internet. Some industry leaders predict that
cloud computing will offer an overall online
software and data environment supported by
supercomputer technology. If so, cloud comput-
ing would be an ultimate form of SaaS, deliver-
ing services and data to users who would need
only an Internet connection and a browser.
However, as the InfoWorld article shown in
Figure 7-5 points out, no standard definition of
cloud computing exists, and the concept means
different things to different people.
To learn more about
cloud computing,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Cloud
Computing link.
To learn more about
Web 2.0, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Web 2.0 link.
FIGURE 7-5 Cloud computing holds the promise of a new generation of
powerful Web applications and services. This is an evolving technology, and
at this point, the term means different things to different people.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

290
Chapter 7 Development Strategies
Outsourcing
OUTSOURCING
Outsourcing is the transfer of information systems development, operation, or maintenance
to an outside firm that provides these services, for a fee, on a temporary or long-term basis.
Outsourcing can refer to relatively minor
programming tasks, the rental of software
from a service provider, the outsourcing of
a basic business process (often called busi-
ness process outsourcing, or BPO), or the
handling of a company’s entire IT function.
Numerous firms and organizations offer
information about outsourcing topics and
issues. For example, the Outsourcing
Center, shown in Figure 7-6, provides free
research, case studies, database directories,
market intelligence, and updates on trends
and best practices in outsourcing as a stra-
tegic business solution.
The Growth of Outsourcing
Traditionally, firms outsourced IT tasks as
a way of controlling costs and dealing
with rapid technological change. While
those reasons still are valid, outsourcing
has become part of an overall IT strategy
for many organizations. The outsourcing
trend also has affected software vendors,
who have adjusted their marketing
accordingly. For example, Oracle
Corporation offers a service called Oracle
On Demand, which provides e-business
applications, as shown in Figure 7-7.
Oracle also cites data that shows that
businesses spend up to 80% of their IT
budgets maintaining existing software and
systems, which forces IT managers “… to
spend time managing tedious upgrades
instead of revenue-generating IT projects.”
A firm that offers outsourcing solu-
tions is called a service provider. Some
service providers concentrate on specific
software applications; others offer busi-
ness services such as order processing
and customer billing. Still others offer
enterprise-wide software solutions that
integrate and manage functions such as
accounting, manufacturing, and inven-
tory control.
Two popular outsourcing options
involve application service providers and
firms that offer Internet business ser-
vices. These terms are explained in the
following sections.FIGURE 7-7 Oracle Corporation offers a fixed-fee outsourcing plan called Oracle On Demand.
FIGURE 7-6 The Outsourcing Center is dedicated to providing information
about outsource trends and practices.

Outsourcing
Phase 2 Systems Analysis
291
APPLICATION SERVICE PROVIDERS An application service provider (ASP) is a firm
that delivers a software application, or access to an application, by charging a usage or
subscription fee. An ASP provides more than a license to use the software; it rents an
operational package to the customer. ASPs typically provide commercially available
software such as databases and accounting packages. If a company uses an ASP to sup-
ply a data management package, for example, the company does not have to design,
develop, implement, or maintain the package. ASPs represent a rapidly growing trend,
using the Internet as the primary delivery channel.
INTERNET BUSINESS SERVICES Some firms offer Internet business services (IBS),
which provide powerful Web-based support for transactions such as order processing,
billing, and customer relationship management. Another term for IBS is managed
hosting, because system opera-
tions are managed by the out-
side firm, or host.
An IBS solution is attractive
to customers because it offers
online data center support,
mainframe computing power
for mission-critical functions,
and universal access via the
Internet. Many firms, such as
Rackspace, compete in the man-
aged hosting market, as shown
in Figure 7-8.
Outsourcing Fees
Firms that offer Software as a
Service, rather than a product,
have developed fee structures
that are based on how the
application is used by custom-
ers during a specific time
period. Several models exist,
including fixed fee, subscription, and usage or transaction. A fixed fee model uses a set
fee based on a specified level of service and user support. An example of a fixed fee
model is Oracle’s On Demand service. A subscription model has a variable fee based on
the number of users or workstations that have access to the application. Finally, a usage
model or transaction model charges a variable fee based on the volume of transactions
or operations performed by the application.
When a company considers outsourcing, it should estimate usage characteristics to
determine which fee structure would be most desirable, and then attempt to negotiate a
service provider contract based on that model.
Outsourcing Issues and Concerns
When a company decides to outsource IT functions, it takes an important step that can
affect the firm’s resources, operations, and profitability. Mission-critical IT systems
should be outsourced only if the result is a cost-attractive, reliable, business solution
that fits the company’s long-term business strategy and involves an acceptable level of
risk. Moving IT work overseas raises even more issues, including potential concerns
about control, culture, communication, and security.
To learn more about
application service
providers, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter,
and locate the
Application Service
Providers link.
FIGURE 7-8 Rackspace Corporation offers multi-platform managed hosting and IBS services.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

292
Chapter 7 Development Strategies
Outsourcing
In addition to long-term strategic consequences, outsourcing also can raise some
concerns. For example, a company must turn over sensitive data to an external ser-
vice provider and trust the provider to maintain security, confidentiality, and quality.
Also, before outsourcing, a company must carefully review issues relating to insur-
ance, potential liability, licensing and information ownership, warranties, and disas-
ter recovery.
Most important, a company considering outsourcing must realize that the solution
can be only as good as the outsourcing firm that provides the service. A dynamic econ-
omy can give rise to business failures and uncertainty about the future. In this climate, it
is especially important to review the history and financial condition of an outsourcing
firm before making a commitment.
Mergers and acquisitions also can affect outsourcing clients. For example, after their
merger, Compaq and Hewlett-Packard restructured and streamlined the products and
services offered by the new company. Even with large, financially healthy firms such as
these, a merger or acquisition can have some impact on clients and customers. If stabil-
ity is important, an outsourcing client should consider these issues.
Outsourcing can be especially attractive to a company whose volume fluctuates
widely, such as a defense contractor. In other situations, a company might decide to out-
source application development tasks to an IT consulting firm if the company lacks the
time or expertise to handle the work on its own. Outsourcing relieves a company of the
responsibility of adding IT staff in busy times and downsizing when the workload light-
ens. A major disadvantage of outsourcing is that it raises employee concerns about job
security. Talented IT people usually prefer positions where the firm is committed to in-
house IT development — if they do not feel secure, they might decide to work directly for
the service provider.
Offshore Outsourcing
Offshore outsourcing, or global outsourcing, refers to the practice of shifting IT devel-
opment, support, and operations to other countries. In a trend similar to the outflow
of manufacturing jobs over a several-decade period, many firms are sending IT work
overseas at an increasing rate.
For example, Dartmouth professor Matthew Slaughter has noted that IT work
will move offshore even faster than manufacturing, because it is easier to ship work
across networks and telephone lines and put consultants on airplanes than it is to
ship bulky raw materials, build factories, and deal with tariffs and transportation
issues. Several years ago, the IT consulting firm Gartner, Inc., accurately forecast the
steady growth of offshore outsourcing, and predicted that outsourcing would evolve
from labor-intensive maintenance and support to higher-level systems development
and software design.
In addition to exporting IT jobs, many large multinational firms, including
Microsoft and IBM, have opened technical centers in India and other countries. Some
observers believe that India might gain as many as 2 million IT jobs in the next decade.
The main reason for offshore outsourcing is the same as domestic outsourcing:
lower bottom-line costs. Offshore outsourcing, however, involves some unique risks
and concerns. For example, workers, customers, and shareholders in some companies
have protested this trend, and have raised public awareness of possible economic
impact. Even more important, offshore outsourcing involves unique concerns regard-
ing project control, security issues, disparate cultures, and effective communication
with critical functions that might be located halfway around the globe.
To learn more about
outsourcing, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Outsourcing link.

www.cengagebrain.com

www.cengagebrain.com

In-House Software Development Options
Phase 2 Systems Analysis
293
IN-HOUSE SOFTWARE DEVELOPMENT OPTIONS
In addition to numerous outsourcing options, a company can choose to develop its own
systems, or purchase, possibly customize, and implement a software package. These
development alternatives are shown in Figure 7-9. Although many factors influence this
decision, the most important consideration is the total cost of ownership (TCO), which
was explained in Chapter 4. In addition to these options, companies also develop user
applications designed around commercial software packages, such as Microsoft Office,
to improve user productivity and efficiency.
Make or Buy Decision
The choice between developing versus purchasing software often is called a make or
buy, or build or buy decision. The company’s IT department makes, builds, and develops
in-house software. A software package is obtained from a vendor or application service
provider.
The package might be a standard commercial program or a customized package
designed specifically for the purchaser. Companies that develop software for sale are called
software vendors. A firm that enhances a commercial package by adding custom features
and configuring it for a particular industry is called a value-added reseller (VAR).
Software packages are available for every type of business activity. A software pack-
age that can be used by many different types of organizations is called a horizontal
application. An accounting package is a good example of a horizontal application
because it can be utilized by many different businesses, or separate divisions that exist in
large, diversified companies.
To learn more about
value-added resell-
ers, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to On
the Web Links for
this chapter, and
locate the Value-
Added Resellers link.
CASE IN POINT 7.1: TURNKEY SERVICES
Turnkey Services is an application service provider that offers payroll and tax preparation ser-
vices for hundreds of businesses in the Midwest. The firm is considering a major expansion
into accounting and financial services, and is looking into the possibility of supporting this
move by hiring IT subcontractors in several foreign countries. Peter Belmont, Turnkey’s presi-
dent, has asked you to help him reach a decision. Specifically, he wants you to cite the pros
and cons of offshore outsourcing. He expects you to perform Internet research on this topic,
and he wants you to present your views at a meeting of Turnkey managers next week.
FIGURE 7-9 Instead of outsourcing, a company can choose to develop a system in-house, or purchase and
possibly customize a commercial package.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

294
Chapter 7 Development Strategies
In-House Software Development Options
In contrast, a software package developed
to handle information requirements for a spe-
cific type of business is called a vertical appli-
cation. For example, organizations with
special system requirements include colleges,
banks, hospitals, insurance companies, con-
struction companies, real estate firms, and
airlines. A hotel chain might require a vertical
application for its guest reservation system,
as shown in Figure 7-10, and use horizontal
applications for basic business needs, such as
payroll processing and accounts payable.
Of the in-house software acquisition
options — developing a system, buying a
software package, or customizing a software
package — each has advantages, disadvan-
tages, and cost considerations, as shown in
Figure 7-11. These software acquisition
options are described in detail in the follow-
ing sections.
Developing Software In-House
With an enormous variety of software packages available to handle horizontal and verti-
cal business operations, why would a firm choose to develop its own software? Typically,
companies choose in-house development to satisfy unique business requirements, to min-
imize changes in business procedures and policies, to meet constraints of existing systems
and existing technology, and to develop internal resources and capabilities.
SATISFY UNIQUE BUSINESS REQUIREMENTS Companies often decide to develop
software in-house because no commercially available software package can meet their
unique business requirements. A college, for example, needs a course scheduling sys-
tem based on curriculum requirements, student demand, classroom space, and avail-
able instructors. A package delivery company needs a system to identify the best com-
bination of routes and loading patterns for the company’s fleet of delivery trucks. If
existing software packages cannot handle those requirements, then in-house developed
software might be the only choice.
FIGURE 7-10 Hotel chains require vertical applications to support reservation
systems and information needs that are unique to the hotel industry.
FIGURE 7-11 Companies consider various factors when comparing in-house development with the purchase of
a software package.
REASONS FOR IN-HOUSE REASONS FOR PURCHASING A SOFTWARE
DEVELOPMENT PACKAGE
Satisfy unique business requirements Lower costs
Minimize changes in business procedures Requires less time to implement
and policies
Meet constraints of existing systems Proven reliability and performance benchmarks
Meet constraints of existing technology Requires less technical development staff
Develop internal resources and capabilities Future upgrades provided by the vendor
Satisfy unique security requirements Obtain input from other companies

In-House Software Development Options
Phase 2 Systems Analysis
295
MINIMIZE CHANGES IN BUSINESS PROCEDURES AND POLICIES A company also
might choose to develop its own software if available packages will require changes in
current business operations or processes. Installing a new software package almost
always requires some degree of change in how a company does business; however, if
the installation of a purchased package will be too disruptive, the organization might
decide to develop its own software instead.
MEET CONSTRAINTS OF EXISTING SYSTEMS Any new software installed must work
with existing systems. For example, if a new budgeting system must interface with an
existing accounting system, finding a software package that works correctly with the
existing accounting system might prove difficult. If so, a company could develop its own
software to ensure that the new system will interface with the old system.
MEET CONSTRAINTS OF EXISTING TECHNOLOGY Another reason to develop soft-
ware in-house is that the new system must work with existing hardware and legacy sys-
tems. That could require a custom design not commercially available. Some companies
have older microcomputer workstations that cannot handle graphics-intensive software
or high-speed Internet access. In that situation, the company either must upgrade the
environment or must develop in-house software that can operate within the constraints
of the existing hardware. As a systems analyst, you addressed the issue of technical fea-
sibility during the preliminary investigation. Now, in the systems analysis phase, you
must examine the advantages and disadvantages of in-house software development to
decide whether it is justifiable.
DEVELOP INTERNAL RESOURCES AND CAPABILITIES By designing a system
in-house, companies can develop and train an IT staff that understands the organiza-
tion’s business functions and information support needs. Many firms feel that in-house
IT resources and capabilities provide a competitive advantage because an in-house team
can respond quickly when business problems or opportunities arise. For example, if a
company lacks internal resources, it must depend on an outside firm for vital business
support. Also, outsourcing options might be attractive, but a series of short-term solu-
tions would not necessarily translate into lower TCO over the long term. Top managers
often feel more comfortable with an internal IT team to provide overall guidance and
long-term stability.
Purchasing a Software Package
If a company decides not to outsource, a commercially available software package might
be an attractive alternative to developing its own software. Advantages of purchasing a
software package over developing software in-house include lower costs, less time to
implement a system, proven reliability and performance benchmarks, less technical
development staff, future upgrades that are provided by the vendor, and the ability to
obtain input from other companies who already have implemented the software.
LOWER COSTS Because many companies use software packages, software vendors
spread the development costs over many customers. Compared with software devel-
oped in-house, a software package almost always is less expensive, particularly in terms
of initial investment.
REQUIRES LESS TIME TO IMPLEMENT When you purchase a package, it already has
been designed, programmed, tested, and documented. The in-house time normally spent
on those tasks, therefore, is eliminated. Of course, you still must install the software and
integrate it into your systems environment, which can take a significant amount of time.

296
Chapter 7 Development Strategies
In-House Software Development Options
PROVEN RELIABILITY AND PERFORMANCE BENCHMARKS If the package has been
on the market for any length of time, any major problems probably have been detected
already and corrected by the vendor. If the product is popular, it almost certainly has
been rated and evaluated by independent reviewers.
REQUIRES LESS TECHNICAL DEVELOPMENT STAFF Companies that use commercial
software packages often are able to reduce the number of programmers and systems ana-
lysts on the IT staff. Using commercial software also means that the IT staff can concen-
trate on systems whose requirements cannot be satisfied by software packages.
FUTURE UPGRADES PROVIDED BY THE VENDOR Software vendors regularly
upgrade software packages by adding improvements and enhancements to create a new
version or release. A new release of a software package, for example, can include driv-
ers to support a new laser printer or a new type of data storage technology. In many
cases, the vendor receives input and suggestions from current users when planning
future upgrades.
INPUT FROM OTHER COMPANIES Using a commercial software package means
that you can contact users in other companies to obtain their input and impressions.
You might be able to try the package or make a site visit to observe the system in
operation before making a final decision.
Customizing a Software Package
If the standard version of a software product does not satisfy a company’s requirements,
the firm can consider adapting the package to meet its needs. Three ways to customize a
software package are:
1. You can purchase a basic package that vendors will customize to suit your
needs. Many vendors offer basic packages in a standard version with add-on
components that are con-
figured individually. A ven-
dor offers options when
the standard application
will not satisfy all
customers. A human
resources information sys-
tem is a typical example,
because each company
handles employee compen-
sation and benefits differ-
ently. If you need assistance
in making a determination,
firms such as Ideas
International offer services
to help you select and con-
figure a system, as shown
in Figure 7-12.
FIGURE 7-12 Firms such as Ideas International offer services to help customers select and
configure a system.

In-House Software Development Options
Phase 2 Systems Analysis
297
2. You can negotiate directly with the software vendor to make enhancements to
meet your needs by paying for the changes.
3. You can purchase the package and make your own modifications, if this is permis-
sible under the terms of the software license. A disadvantage of this approach is
that systems analysts and programmers might be unfamiliar with the software and
will need time to learn the package and make the modifications correctly.
Additionally, some advantages of purchasing a standard package disappear if the
product must be customized. If the vendor does the customizing, the modified package
probably will cost more and take longer to obtain. Another issue is future support:
Although vendors regularly upgrade their standard software packages, they might not
upgrade a customized version. In addition, if the modifications are done by the company
purchasing the software, when a new release of the package becomes available, the com-
pany might have to modify the new version.
Creating User Applications
Business requirements sometimes can be fulfilled by a user application, rather than a
formal information system or commercial package. User applications are examples of
user productivity systems, which were discussed in Chapter 1.
A user application utilizes standard business software, such as Microsoft Word or
Microsoft Excel, which has been configured in a specific manner to enhance user pro-
ductivity. For example, to help a sales rep respond rapidly to customer price requests, an
IT support person can set up a form letter with links to a spreadsheet that calculates
incentives and discounts. In addition to configuring the software, the IT staff can create
a user interface, which includes screens, commands, controls, and features that enable
users to interact more effectively with the application. User interface design is described
in Chapter 8.
In some situations, user applications offer a simple, low-cost solution. Most IT
departments have a backlog of projects, and IT solutions for individuals or small groups
do not always receive a high priority. At the same time, application software is more
powerful, flexible, and user-friendly than ever. Companies such as Microsoft and Corel
offer software suites and integrated applications that can exchange data with programs
that include tutorials, wizards, and Help features to guide less experienced users who
know what they need to do but do not know how to make it happen.
Many companies empower lower-level employees by providing more access to data
and more powerful data management tools. The main objective is to allow lower-level
employees more access to the data they require to perform their jobs, with no interven-
tion from the IT department. This can be accomplished by creating effective user inter-
faces for company-wide applications such as accounting, inventory, and sales systems.
Another technique is to customize standard productivity software, such as Microsoft
Word or Microsoft Excel, to create user applications. In either case, empowerment
makes the IT department more productive because it can spend less time responding to
the daily concerns and data needs of users and more time on high-impact systems
development projects that support strategic business goals.
Empowerment reduces costs and makes good business sense, but companies that
adopt this approach must provide the technical support that empowered users require.
In most large and medium-sized companies, a help desk, or information center (IC),
within the IT department is responsible for providing user support. The IC staff
offers services such as hotline assistance, training, and guidance to users who need
technical help.
Once they learn an application, many users can perform tasks that once required
a programmer. Some user applications have powerful screen generators and report
generators that allow users to design their own data entry forms and reports. For

298
Chapter 7 Development Strategies
Role of the Systems Analyst
example, as shown in Figure 7-13,
Microsoft Access includes a Form
Wizard and a Report Wizard, which are
menu-driven tools that can create screen
forms and reports. These design tools
allow users to design specific input and
output views that meet their operational
needs — with little or no assistance
required from the IT staff.
Users typically require spreadsheets,
database management programs, and
other software packages to meet their
information needs. If user applications
access corporate data, you must pro-
vide appropriate controls to ensure
data security and integrity. For exam-
ple, some files should be hidden totally
from view; others should have read-
only properties so users can view, but
not change, the data.
ROLE OF THE
SYSTEMS ANALYST
At some point in the systems
development process, the company must
decide whether to use an outsourcing
option, develop software in-house,
acquire a software package, develop
user applications, or select some com-
bination of these solutions. The deci-
sion will affect the remaining SDLC
phases and your involvement as a sys-
tems analyst. The decision to develop
software in-house, for example, will
require more participation from the
systems analyst than outsourcing or
choosing a commercial package.
Management usually makes a determi-
nation after receiving written recom-
mendations from the IT staff and a
formal presentation, which is described
later in this chapter.
Even a single system can use a mix
of software alternatives. For example,
a company might purchase a stan-
dard software package to process its payroll, and then develop its own software to han-
dle the interface between the payroll package and the company’s in-house
manufacturing cost analysis system.
The evaluation and selection of alternatives is not a simple process. The objective is
to obtain the product with the lowest total cost of ownership, but actual cost and per-
formance can be difficult to forecast. With a large number of choices, how do you select
the best alternative?
FIGURE 7-13 Microsoft Access includes Form Wizard and Report Wizard tools that
ask a series of questions, and then create the form or report.

Analyzing Cost and Benefits
Phase 2 Systems Analysis
299
When selecting hardware and software, systems analysts often work as an evaluation
and selection team. A team approach ensures that critical factors are not overlooked and
that a sound choice is made. The evaluation and selection team also must include users,
who will participate in the selection process and feel a sense of ownership in the
new system.
The primary objective of the evaluation and selection team is to eliminate system
alternatives that will not meet requirements, rank the alternatives that are feasible, and
present the viable alternatives to management for a final decision. The process begins
with a careful study of the costs and benefits of each alternative, as explained in the
following section.
ANALYZING COST AND BENEFITS
In Chapter 2, you learned that economic feasibility is one of the four feasibility
measurements that are made during the preliminary investigation of a systems request.
Now, at the end of the systems analysis phase of the SDLC, you must apply financial
analysis tools and techniques to evaluate development strategies and decide how the
project will move forward. Part C of the Systems Analyst’s Toolkit describes three pop-
ular tools, which are payback analysis, return on investment (ROI), and net present
value (NPV). These tools, and others, can be used to determine total cost of ownership
(TCO), which was described in Chapter 4. At this stage, you will identify specific sys-
tems development strategies and choose a course of action. For example, a company
might find that its total cost of ownership will be higher if it develops a system in-
house, compared with outsourcing the project or using an ASP.
An accurate forecast of TCO is critical, because nearly 80% of total costs occur after
the purchase of the hardware and software, according to Gartner, Inc. An IT department
can develop its own TCO estimates, or use TCO calculation tools offered by vendors.
For example, as shown in Figure 7-14 on the next page, HP and Oracle offer an online
TCO calculator that includes a questionnaire and a graphical display of results.
Financial Analysis Tools
Part C of the Systems Analyst’s Toolkit explains how to use three main cost analysis
tools: payback analysis, return on investment (ROI), and net present value (NPV).
Payback analysis determines how long it takes an information system to pay for itself
through reduced costs and increased benefits. Return on investment (ROI) is a percent-
age rate that compares the total net benefits (the return) received from a project to the
total costs (the investment) of the project. The net present value (NPV) of a project is the
total value of the benefits minus the total value of the costs, with both costs and benefits
adjusted to reflect the point in time at which they occur.
CASE IN POINT 7.2: STERLING ASSOCIATES
Joan Sterling is CEO and principal stockholder of Sterling Associates, which specializes in
advising clients on IT projects and information systems development. Joan is creating a bro-
chure for prospective new clients. She wants you to develop a section that describes payback
analysis, ROI, and NPV in simple terms, and mentions the pros and cons of each financial anal-
ysis tool. She suggested that you start by viewing the Video Learning Sessions on financial
analysis tools, and reviewing the material in Part C of the Systems Analyst’s Toolkit.
To learn more about
financial analysis
tools, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Financial
Analysis Tools link.
VIDEO
LEARNING
SESSIONS
To learn more about
financial analysis
tools, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com
and navigate to the
Video Learning
Sessions for this
book. These sessions
can help you
understand key
concepts, practice
your skills, and check
your work.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

300
Chapter 7 Development Strategies
Analyzing Cost and Benefits
Cost-Benefit Analysis Checklist
Companies use all three financial analysis tools to evaluate various development strategies.
The best way to apply the tools is to develop a cost-benefit checklist with the following steps:
• List each development strategy being considered.
• Identify all costs and benefits for each alternative. Be sure to indicate when costs
will be incurred and benefits realized.
• Consider future growth and the need for scalability.
• Include support costs for hardware and software.
• Analyze various software licensing options, including fixed fees and formulas
based on the number of users or transactions.
• Apply the financial analysis tools to each alternative.
• Study the results and prepare a report to management.
FIGURE 7-14 HP and Oracle offer an online TCO calculator.

The Software Acquisition Process
Phase 2 Systems Analysis
301
THE SOFTWARE ACQUISITION PROCESS
Although each situation is different, the following section describes a typical example of
the issues and tasks involved in software acquisition.
Step 1: Evaluate the Information System Requirements
Based on your analysis of the system requirements, you must identify the system’s key
features; consider network and Web-related issues; estimate volume and future growth;
specify any hardware, software, or personnel constraints; and prepare a request for
proposal or quotation.
IDENTIFY KEY FEATURES Whether you are considering in-house development or out-
sourcing options, you must develop a clear, detailed list of features that can serve as an
overall specification for the system. Using the data you gathered during fact-finding,
which was discussed in Chapter 4, you must list all system requirements and critical
features. This information will be included in the system requirements document, which
is the end product of the SDLC systems analysis phase.
CONSIDER NETWORK AND WEB-RELATED ISSUES As you evaluate the system
requirements, you must consider network and Web-related issues. You must decide
whether the system will run on a network, the Internet, or a company intranet, and
build these requirements into the design. Also, you must determine whether the system
will exchange data with vendor or customer systems, and ensure that the system will be
compatible.
ESTIMATE VOLUME AND FUTURE GROWTH You need to know the current volume
of transactions and forecast future growth. Figure 7-15 shows volume estimates for an
order processing system. In addition to current levels, the figure displays two forecasts,
one based on the existing order processing procedures and another that assumes a new
Web site is operational.
FUTURE GROWTH FUTURE GROWTH
(based on existing (assuming new
CURRENT LEVEL procedures) Web site is operational)
Customers 36,500 40,150 63,875
Daily Orders 1,435 1,579 2,811
Daily Order Lines 7,715 7,893 12,556
Sales Reps 29 32 12
Order Processing 2 4 3
Support Staff
Products 600 650 900
Online Order Processing System Estimated Activity During
Next 12-Month Period
FIGURE 7-15 Volume estimate for an order processing system showing current activity levels and two forecasts:
one based on the existing order processing procedures and another that assumes a new Web site is operational.

302
Chapter 7 Development Strategies
The Software Acquisition Process
A comparison of the two forecasts shows that the Web site will generate more new cus-
tomers, process almost 80% more orders, and substantially reduce the need for sales reps
and support staff. If you are considering in-house development, you must make sure that
your software and hardware can handle future transaction volumes and data storage
requirements. Conversely, if you are considering outsourcing, volume and usage data is
essential to analyze ASP fee structures and develop cost estimates for outsourcing options.
SPECIFY HARDWARE, SOFTWARE, OR PERSONNEL CONSTRAINTS You must
determine whether existing hardware, software, or personnel issues will affect the
acquisition decision. For example, if the firm has a large number of legacy systems or if
an ERP strategy has been adopted, these factors will have an impact on the decision.
Also, you must investigate the company’s policy regarding outsourcing IT functions,
and whether outsourcing is part of a long-term strategy. With regard to personnel
issues, you must define in-house staffing requirements to develop, acquire, implement,
and maintain the system — and determine whether the company is willing to commit
to those staffing levels versus an outsourcing option.
PREPARE A REQUEST FOR PROPOSAL OR QUOTATION To obtain the information
you need to make a decision, you should prepare a request for proposal or a request
for quotation. The two documents are similar but used in different situations, based on
whether or not you have selected a specific software product.
A request for proposal (RFP) is a document that describes your company, lists the IT
services or products you need, and specifies the features you require. An RFP helps ensure
that your organization’s business needs will be met. An RFP also spells out the service and
support levels you require. Based on the RFP, vendors can decide if they have a product
that will meet your needs. RFPs vary in size and complexity, just like the systems they
describe. An RFP for a large system can contain dozens of pages with unique requirements
and features. You can use an RFP to designate some features as essential and others as
desirable. An RFP also requests specific pricing and payment terms.
Figure 7-16 shows an example of a ready-made RFP template offered by Infotivity
Technologies. Notice that the vendor can choose from a range of responses, and also
add comments. Figure 7-17 shows the RFP Evaluation Centers site. This organization
offers samples of RFP templates, cover letters, and other resources.

The Software Acquisition Process
Phase 2 Systems Analysis
303
When you evaluate several responses to an RFP, you might find it helpful to use
an evaluation model. An evaluation model is a technique that uses a common yard-
stick to measure and compare vendor ratings.
Figure 7-18 on the next page shows two evaluation models for a network project.
The evaluation model at the top of the figure simply lists the key elements and each
vendor’s score. The model at the bottom of the figure adds a weight factor. In this
example, each element receives a rating based on its relative importance. Although the
initial scores are the same in both models, notice that vendor A has the highest point
total in the top example, but vendor C emerges as the best in the weighted model.
FIGURE 7-17 The RFP Evaluation Centers site offers samples of RFP templates,
cover letters, and other resources.
FIGURE 7-16 Infotivity Technologies offers a ready-made RFP template that allows a wide range of reponses
and comments.

304
Chapter 7 Development Strategies
The Software Acquisition Process
Evaluation models can be used throughout the SDLC, and you will find them a
valuable tool. You can use a spreadsheet program to build an evaluation model,
experiment with different weighting factors, and graph the results.
A request for quotation (RFQ) is more specific than an RFP. When you use an RFQ,
you already know the specific product or service you want and you need to obtain price
quotations or bids. RFQs can involve outright purchase or a variety of leasing options
and can include maintenance or technical support terms. Many vendors provide conve-
nient RFQ forms on their Web sites, as shown in Figure 7-19. RFPs and RFQs have the
same objective: to obtain vendor replies that are clear, comparable, and responsive so
you can make a well-informed selection decision.
In today’s fast-paced IT marketplace, traditional methods for obtaining RFPs often
are too slow. The Web site shown in Figure 7-20 offers an online meeting place where
customers can post RFPs and vendors can reply with solutions and bids.
Step 2: Identify Potential Vendors or Outsourcing Options
The next step is to identify potential vendors or outsourcing providers. The Internet is
a primary marketplace for all IT products and services, and you can find descriptive
information on the Web about all major products and acquisition alternatives.
The Software Acquisition Process
Instructions: Rate each vendor on a scale from 1(low) to 10 (high), then add vendor scores to
calculate total points.
VENDOR A VENDOR B VENDOR C
Price 6 5 9
Completion Date 2 5 8
Layout/Design 8 8 5
References 10 6 3
TOTAL POINTS 26 24 25
Instructions: Rate each vendor on a scale from 1(low) to 10 (high), then multiply the vendor’s
score by the weight factor. Add vendor scores to calculate total points.
WEIGHT
FACTOR VENDOR A VENDOR B VENDOR C
Price 25 6 * 25 = 150 5 * 25 = 125 9 * 25 = 225
Completion Date 25 2 * 25 = 50 5 * 25 = 125 8 * 25 = 200
Layout/Design 35 8 * 35 = 280 8 * 35 = 280 5 * 35 = 175
References 15 10 * 15 = 150 6 * 15 = 90 3 * 15 = 45
TOTAL POINTS 100 630 620 645
FIGURE 7-18 The three vendors have the same initial ratings, but the two evaluation models produce different
results. In the unweighted model at the top of the figure, vendor A has the highest total points. However, after
applying weight factors, vendor C is the winner, as shown in the model at the bottom of the figure.
Unweighted Evaluation Model for a Network Project
Weighted Evaluation Model for a Network Project

The Software Acquisition Process
Phase 2 Systems Analysis
305
If you need to locate
vertical applications for spe-
cific industries, you can
research industry trade jour-
nals or Web sites to find
reviews for industry-specific
software. Industry trade
groups often can direct you to
companies that offer specific
software solutions.
Another approach is to
work with a consulting firm.
Many IT consultants offer
specialized services that help
companies select software
packages. A major advantage
of using a consultant is that
you can tap into broad experi-
ence that is difficult for any
one company to acquire.
Consultants can be located by
contacting professional orga-
nizations or industry sources,
or simply by searching the
Internet. Using a consultant
involves additional expense
but can prevent even more
costly mistakes.
Another valuable resource
is the Internet bulletin board
system that contains thou-
sands of forums, called news-
groups, that cover every
imaginable topic. Newsgroups
are excellent sources of infor-
mation and good places to
exchange ideas with other
analysts and IT professionals.
You can search the Web for
newsgroups that interest you,
or you can visit the sites of
specific companies, such as
Microsoft, that provide a
valuable source of informa-
tion for IT professionals,
including blogs, technical
chats, newsgroups, Webcasts,
and other resources, as
shown in Figure 7-21 on the
next page.
FIGURE 7-19 Many vendors provide convenient RFQ forms on their Web sites, as shown in
this example.
FIGURE 7-20 The rfpDB site offers an online meeting place where customers post RFPs and
vendors can respond.

306
Chapter 7 Development Strategies
The Software Acquisition Process
Step 3: Evaluate the
Alternatives
After identifying the
alternatives, you must select the
one that best fits the company’s
needs. You should obtain infor-
mation about the options from
as many sources as possible,
including vendor presentations
and literature, product docu-
mentation, trade publications,
and companies that perform
software testing and evalua-
tion. To learn more about par-
ticular software packages,
search the Internet using key-
words that describe the appli-
cation. Web sites maintained by
consultants and software pub-
lishers often include product
references and links to vendors.
As part of the evaluation pro-
cess, you should try to obtain
information from existing
users, test the application, and
benchmark the package.
EXISTING USERS You can contact existing users to obtain feedback and learn about
their experiences. For large-scale software packages, ASPs and vendors typically supply
user references. User references are important because you need to know whether the
software package has worked well for companies like yours. Be aware that some ven-
dors limit their reference lists to satisfied clients, so you can expect mostly positive
feedback from those firms.
APPLICATION TESTING If a software package is one of the options, find out if it is
possible for users in your organization to try the product. For horizontal applications
or small systems, using a demo copy to enter a few sample transactions could be an
acceptable test. For vertical applications or large systems, a team of IT staff and users
might need several days or weeks to perform tests.
BENCHMARKING To determine whether a package can handle a certain transaction
volume efficiently, you can perform a benchmark test. A benchmark measures the time
a package takes to process a certain number of transactions. For example, a benchmark
test can measure the time needed to post 1,000 sales transactions.
If you use benchmarks, remember that a benchmark test is conducted in a controlled
environment, which might not resemble the actual day-to-day situation at your com-
pany. Although benchmarking cannot predict your specific results, benchmark testing is
a good way to measure relative performance of two or more competing products in a
standard environment.
Many IT publications publish regular reviews of individual packages, including
benchmark tests, and often have annual surveys covering various categories of software.
Some of the publications shown in Figure 7-22 also offer online versions and additional
Web-based features, search capability, and IT links.
FIGURE 7-21 Microsoft Communities is an excellent resource for IT professionals.
To learn more about
benchmark tests, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Benchmark Tests
link.

www.cengagebrain.com

www.cengagebrain.com

The Software Acquisition Process
Phase 2 Systems Analysis
307
You also can obtain information from independent
firms that benchmark various software packages and
sell comparative analyses of the results, as shown in
Figure 7-23 on the next page. The Transaction
Processing Performance Council (TPC) is an example
of a non-profit organization that publishes standards
and reports for its members and the general public,
while InfoSizing is an IT consulting firm that offers
analysis of performance benchmarks.
Finally, you should match each package against the
RFP features and rank the choices. If some features are
more important than others, give them a higher weight
using an evaluation model similar to the one shown in
Figure 7-18 on page 304.
Step 4: Perform Cost-Benefit Analysis
Review the suggestions in this chapter and in Part C of
the Systems Analyst’s Toolkit, and develop a spread-
sheet to identify and calculate TCO for each option
you are considering. Be sure to include all costs, using
the volume forecasts you prepared. If you are considering outsourcing options, carefully
study the alternative fee structure models described earlier. If possible, prepare charts to
show the results graphically, and build in what-if capability so you can gauge the impact
if one or more variables change.
If you are considering a software package, be sure to consider acquisition options.
When you purchase software, what you are buying is a software license that gives you
the right to use the software under certain terms and conditions. For example, the
license could allow you to use the software only on a single computer, a specified num-
ber of computers, a network, or an entire site, depending on the terms of the agreement.
Other license restrictions could prohibit you from making the software available to oth-
ers or modifying the program. For desktop applications, software license terms and con-
ditions usually cannot be modified. For large-scale systems, license agreement terms
often can be negotiated.
Also consider user support issues, which can account for a significant part of TCO. If
you select an outsourcing alternative, the arrangement probably will include certain
technical support and maintenance. If you choose in-house development, you must con-
sider the cost of providing these services on your own. If you purchase a software pack-
age, consider a supplemental maintenance agreement, which offers additional support
and assistance from the vendor. The agreement might provide full support for a period
of time or list specific charges for particular services. Some software packages provide
free technical support for a period of time. Afterward, support is offered with a charge
per occurrence, or per minute or hour of technical support time. Some software vendors
contact registered owners whenever a new release is available and usually offer the new
release at a reduced price.
Step 5: Prepare a Recommendation
You should prepare a recommendation that evaluates and describes the alternatives,
together with the costs, benefits, advantages, and disadvantages of each option. At
this point, you may be required to submit a formal system requirements document
and deliver a presentation. You should review the suggestions for presenting written
FIGURE 7-22 Many IT publications test and review software
packages. Although an enormous amount of information is available
on the Web, many IT professionals enjoy reading traditional
magazines like these.
TOOLKIT TIME
The Financial Analysis
tools in Part C of the
Systems Analyst’s
Toolkit can help you
analyze project costs,
benefits, and eco-
nomic feasibility. To
learn more about
these tools, turn to
Part C of the four-
part Toolkit that fol-
lows Chapter 12.

308
Chapter 7 Development Strategies
The Software Acquisition Process
proposals and oral
presentations in Part A of the
Systems Analyst’s Toolkit.
Additional suggestions about pre-
paring the system requirements
document and the management
presentation are contained in the
following section.
Step 6: Implement the
Solution
Implementation tasks will depend
on the solution selected. In-house
options will require more time and
effort than outsourcing alterna-
tives. For large systems or network
installations, the process can
require considerable time and
effort. Your installation strategy
should be planned well in advance,
especially if any disruption of nor-
mal business operations is
expected. If the software package
is customized, then the task will be
more complex and difficult.
Before the new software
becomes operational, you must
complete all implementation steps,
including loading, configuring, and
testing the software; training users;
and converting data files to the
new system’s format. Chapter 11
discusses implementation strategies
and techniques in more detail.
FIGURE 7-23 The Transaction Processing Performance Council is a non-profit
organization that publishes standards and reports for its members and the general public,
while InfoSizing is an IT consulting firm that offers analysis of performance benchmarks.
CASE IN POINT 7.3: DOUG’S SPORTING GOODS
Doug’s Sporting Goods sells hiking and camping supplies. The company has grown considerably
in the last two years. Doug Sawyer, the company’s founder and president, wants to develop a
customer order entry system and hired your IT consulting firm to advise him about software
alternatives. Doug is leaning toward in-house development because he does not want to depend
on outside vendors and suppliers for technical support and upgrades. Doug also says that he is
not interested in selling on the Web, but that could change in the future.
Doug wants to meet with you tomorrow to make a decision. What will you say to Doug at
the meeting?

Completion of Systems Analysis Tasks
Phase 2 Systems Analysis
309
COMPLETION OF SYSTEMS ANALYSIS TASKS
To complete the systems analysis phase, you must prepare the system requirements
document and your presentation to management.
System Requirements Document
The system requirements document, or software requirements specification, contains the
requirements for the new system, describes the alternatives that were considered, and
makes a specific recommendation to management. This important document is the start-
ing point for measuring the performance, accuracy, and completeness of the finished system
before entering the systems design phase.
The system requirements document is like a contract that identifies what the system
developers must deliver to users. Recall that system requirements are identified during
the fact-finding process, and a system requirements checklist is created at that time.
Various examples of system requirements are listed on pages 153–155 in Chapter 4. You
should write the system requirements document in language that users can understand
so they can offer input, suggest improvements, and approve the final version.
Because the system requirements document can be lengthy, you should format and
organize it so it is easy to read and use. The system requirements document should
include a cover page and a detailed table of contents. You also can add an index and a
glossary of terms to make the document easier to use. The content of the system require-
ments document will depend on the company and the complexity of the system.
Presentation to Management
The presentation to management at the end of the systems analysis phase is one of the
most critical milestones in the systems development process. At this point, managers
make key decisions that affect the future development of the system.
Prior to the management presentation, you might give two other presentations: one
to the principal individuals in the IT department to keep them posted, and another
presentation to users to answer their questions and invite feedback. The system
requirements document is the basis for all three presentations, and you should distrib-
ute the document (or a summary) in advance so the recipients can review it.
When preparing your presentation, you should review the suggestions in Part A of
the Systems Analyst’s Toolkit, which will help you design and deliver a successful
presentation. If you plan a slide presentation, you should review the Toolkit guide-
lines for effective presentations. In addition to the techniques found in the Toolkit,
also keep the following suggestions in mind:
• Begin your presentation with a brief overview of the purpose and primary objec-
tives of the system project, the objectives of this presentation, and what decisions
need to be made.
• Summarize the primary viable alternatives. For each alternative, describe the
costs, advantages, and disadvantages.
• Explain why the evaluation and selection team chose the recommended alternative.
• Allow time for discussion and for questions and answers.
• Obtain a final decision from management or agree on a timetable for the next
step in the process.
The object of the management presentation is to obtain approval for the development
of the system and to gain management’s full support, including necessary financial
resources. Management probably will choose one of five alternatives: develop an in-house
system, modify a current system, purchase or customize a software package, perform
TOOLKIT TIME
The Communication
Tools in Part A of
the Systems
Analyst’s Toolkit can
help you develop
better documents,
reports, and presen-
tations. To learn
more about these
tools, turn to Part A
of the four-part
Toolkit that follows
Chapter 12.

310
Chapter 7 Development Strategies
Transition to Systems Design
additional systems analysis work, or stop all further work. Depending on their decision,
your next task as a systems analyst will be one of the following:
1. Implement an outsourcing alternative. If outsourcing is selected, you will work
with representatives of the service provider to achieve a smooth transition to the
new environment.
2. Develop an in-house system. Begin systems design tasks, as described in
Chapters 8, 9, and 10.
3. Purchase or customize a software package. Negotiate the purchase terms with the
software vendor for management approval. Then, if the package will be used
without modification, you can begin planning the systems implementation phase.
If you must make modifications to the package, your next step is to start the sys-
tems design phase. If the vendor will make the modifications, then your next step
is to start planning the testing and documentation of the modifications as part of
the systems implementation phase, which is described in Chapter 11.
4. Perform additional systems analysis work. Management might want you to inves-
tigate certain alternatives further, explore alternatives not examined, develop a
prototype, reduce the project scope because of cost constraints, or expand the
project scope based on new developments. If necessary, you will perform the
additional work and schedule a follow-up presentation.
5. Stop all further work. The decision might be based on your recommendation,
a shift in priorities or costs, or for other reasons. Whatever the reason, if that is
management’s decision, then you have no additional tasks for the project other
than to file all your research in a logical location so it can be retrieved if the
project is reopened in the future.
After the presentation and management decision, you will begin a transition to the
systems design phase of the SDLC. If you are developing an in-house system or modify-
ing a package, you will build a model of the proposed system and start designing the
system’s output, input, files, and data structures. The following sections describe several
tools and techniques that can assist you in that process, including prototyping, CASE
tools, and alternative graphical tools.
TRANSITION TO SYSTEMS DESIGN
In a traditional SDLC environment, systems design usually started when the systems
analysis phase was done. Using the system requirements specification as a blueprint,
developers transformed the logical design into a working model that could be tested,
reviewed by users, and implemented. Today, the process is much more dynamic. In
general, systems development is faster, more flexible, and more user-oriented. The
introduction of adaptive methods such as agile development and extreme programming
has changed the landscape significantly. Depending on the project, system developers
often blend traditional and cutting-edge development methods, because what works in
one situation might not work in another.
This textbook discusses systems analysis in Chapters 4, 5, 6, and 7, and systems design
in Chapters 8, 9, and 10. However, in a typical IT workplace, all these tasks — and
more — are integrated and managed together.
This section discusses preparation for systems design and the relationship between
logical and physical design. The chapter concludes with a description of systems design
guidelines, prototyping methods, and software development trends.

Systems Design Guidelines
Phase 2 Systems Analysis
311
Preparing for Systems Design
Regardless of the development method, systems design requires accurate documentation.
Traditionally, a system requirements document provided detailed specifications for
output, input, data, processes, and whatever else was needed. Although agile methods do
not require a particular form of documentation, a successful development team must
understand and record user requirements as they evolve during the project.
Logical and Physical Design
A logical design defines what must take place, not how it will be accomplished. Logical
designs do not address the actual methods of implementation. In contrast, a physical
design is like a set of blueprints for the actual construction of a building. Typically, a
physical design describes the actual processes of entering, verifying, and storing data; the
physical layout of data files and sorting procedures, the format of reports, and so on.
Because logical and physical designs are related so closely, good systems design is
impossible without careful, accurate systems analysis. For example, you might return to
fact-finding if you discover that you overlooked an important issue, if users have
significant new needs, or if legal or governmental requirements change.
SYSTEMS DESIGN GUIDELINES
Because the components of a system are interdependent, the design phase is not a series
of clearly defined steps. Although you might start in one area, you could find yourself
working with several different elements at the same time. For example, a decision to
change a report format might require changes in data design or input screens. Your
design checklist will include the user interface, input and output procedures, data
design, and system architecture. As shown in Figure 7-24, the final steps are to prepare
a systems design specification and present the results to management.
FIGURE 7-24 Systems design tasks typically are performed in a four-step process.
STEP ACTIVITY DESCRIPTION
1 Review system requirements. Study the system requirements document
carefully to understand the logical design.
2 Design the system.
• User interface, output, and Design an overall user interface, including
input issues screens, commands, controls, and features that
enable users to interact with an application.
Determine how data will enter the system, and
design necessary source documents. Design the
physical layout for input and output forms and
reports, including screens and printed reports.
• Data issues Determine how data will be organized, stored,
maintained, updated, accessed, and used.
• System architecture issues Determine processing strategies and methods,
client/server interaction, network configuration,
and Internet/intranet interface issues.
3 Create a system design specification. Develop a systems design specification that
describes and documents the proposed design.
4 Deliver a management presentation. Include a progress report, a budget update, and
a timetable for system implementation and
operation.

312
Chapter 7 Development Strategies
Systems Design Guidelines
Overview
The goal of systems design is to build a system that satisfies business requirements.
A successful system must be effective, reliable, and maintainable:
• A system is effective if it supports business requirements and meets user needs.
• A system is reliable if it handles input errors, processing errors, hardware failures,
or human mistakes. A good design will anticipate errors, detect them as early as
possible, make it easy to correct them, and prevent them from damaging the
system itself.
• A system is maintainable if it is flexible, scalable, and easily modified. Changes
might be needed to correct problems, adapt to user requirements, or take advan-
tage of new technology.
Although each project is different, design considerations usually involve users, data, and
system architecture.
USER CONSIDERATIONS The most important goal is to make the system user-friendly.
Here are some suggestions to keep in mind:
• Carefully consider any point where users receive output or provide input. The
user interface must be easy to learn. Input processes should be easy to follow,
intuitive, and forgiving of errors. Output should be attractive and easy to under-
stand, with an appropriate level of detail.
• Anticipate future needs. Suppose that a parts inventory database contains a one-
character field for category, such as electrical, mechanical, or hydraulic. The
design works well, but what if the company decides to break these overall groups
down into more specific segments? Why should there be a limitation of just one
character? A better design would anticipate possible expansion to two or more
characters. For example, many people recall the concern called the Y2K issue,
when some older programs that used only two characters to store the year might
not adjust properly to the new century.
• Provide flexibility. Suppose that a user wants a screen display of all customer bal-
ances that exceed $5,000 in an accounts receivable system. How should you
design that feature? The program could be coded to check customer balances
against a fixed value of 5000, which is a simple solution for both the program-
mer and the user because no extra keystrokes are required to produce the dis-
play. However, that approach is inflexible. For instance, if a user later needs a list
of customers whose balances exceed $7,500 rather than $5,000, more program-
ming would be needed. A better approach might be to allow the user to enter the
amount. For example, if a user wants to display customers with balances of more
than $7,500, he or she can enter that figure in a parameter query. A parameter is
a value that the user enters whenever the query is run, which provides flexibility,
enables users to access information easily, and costs less. A good systems design
can combine both approaches. For example, you could design the program to
accept a variable amount entered by the user, but start with a default value of
5000 that the system displays automatically. Users can press the ENTER key to
accept the default value, or enter another value. Often the best design strategy is
to come up with several alternatives, so users can decide what will work best for
them.

Systems Design Guidelines
Phase 2 Systems Analysis
313
DATA CONSIDERATIONS Data entry and storage are important in every system. Here are
some suggestions to keep in mind:
• Enter data as soon as possible. For example, employees in the receiving depart-
ment should enter data about incoming shipments when the shipments arrive, and
sales clerks should enter data about new orders when they take the orders.
• Verify data as it is entered. The input design should specify a data type, such as
alphabetic, numeric, or alphanumeric, and a range of acceptable values for each
data item. If an incorrect value is entered, the system should recognize and flag it
immediately. The system also should allow corrections at any time. Some errors,
for example, can be easily corrected while the
original source documents are at hand or the
customer is on the phone. Other errors may
need further investigation, so users must be
able to correct errors at a later time.
• Use automated methods of data entry when-
ever possible. For example, receiving depart-
ment employees can use scanners to capture
data about merchandise received. Automated
data entry methods, such as the RFID scan-
ner shown in Figure 7-25, can reduce input
errors and improve employee productivity.
• Control data entry access and report all
entries or changes to critical values. Dollar
fields and volume fields are critical data fields.
Examples of critical volumes might include
the number of checks processed, the number
of medical prescriptions dispensed, or the
number of insurance premium payments
received. Reports that trace the data entry
and changes to critical data values are called
audit trails and are essential in every system.
• Log every instance of data entry and changes.
For example, the system should record when
a customer’s credit limit was established, by
whom, and any other information necessary
to construct the history of a transaction.
CASE IN POINT 7.4: DOWNTOWN!
Downtown! is a rapidly growing Web-based retailer with about 100 management and technical
support employees at its headquarters office in Florida. Mary Estrada, the firm’s IT manager, is
planning a new information system that will give users better access to sales and marketing
data and trends. She has a concern, however. She knows that users often request reports but
use only a small portion of the data. In many offices she sees inboxes filled with printed reports
gathering dust. Mary asked for your opinion: What if new system users could design most of
their own reports without assistance from the IT staff, by using a powerful, user-friendly report
writer program? Do you think they would request as many reports or the same types of
reports? What are the pros and cons of giving users total control over output?
FIGURE 7-25 Automated data entry methods, such as the RFID
scanner shown above, reduce input errors and improve employee
productivity.

314
Chapter 7 Development Strategies
Systems Design Guidelines
• Enter data once. If input data for a payroll system also is needed for a human
resources system, you should design a program interface between the systems so
data can be transferred automatically. For example, an employee’s date of birth
should be entered only once, but the data should be accessible by multiple sys-
tems or authorized users.
• Avoid data duplication. In an inventory database, vendor addresses should not
be stored with every part record. Otherwise, the address of a vendor who sup-
plies 100 different parts will be repeated 100 times. Additionally, if the vendor’s
address changes, all 100 parts records must be updated. Data duplication also
can produce inconsistencies. If the 100 stored addresses for the vendor are not
identical, how would a user know which version is correct? In Chapter 9, you
will learn about data design and a technique called normalization, which is a set
of rules that can help you identify and avoid data design problems when you
create a database.
ARCHITECTURE CONSIDERATIONS In addition to the issues affecting users and data,
you should consider the overall architecture. Here are some suggestions to keep in mind:
• Use a modular design. In a modular design, you create individual components,
called modules, which connect to a higher-level program or process. In a struc-
tured design, each module represents a specific process, which is shown on a DFD
and documented in a process description. If you are using an object-oriented
design, as described in Chapter 6, object classes are represented by code modules.
You will learn more about modular design in Chapter 11, which describes systems
implementation.
• Design modules that perform a single function. Independent modules provide
greater flexibility because they can be developed and tested individually, and then
combined or reused later in the development process. Modular design is especially
important in designing large-scale systems, because separate teams of analysts and
programmers can work on different areas and then integrate the results.
Design Trade-Offs
You will find that design goals often conflict, and you must consider alternatives and
trade-offs. To make a system easier to use, for example, programming requirements
might be more complex. Making a system more flexible might increase maintenance
requirements. Meeting one user’s requirements could make it harder to satisfy another
user’s needs.
Most design trade-off decisions that you will face come down to the basic issue of
quality versus cost. Although every project has budget and financial constraints, you
should avoid decisions that achieve short-term savings but might mean higher costs
later. For example, if you try to reduce implementation costs by cutting back on system
testing or user training, you can create higher operational costs in the future. If neces-
sary, you should document and explain the situations carefully to management and dis-
cuss the possible risks. Each trade-off must be considered individually, and the final
result must be acceptable to users, the systems staff, and company management.

Prototyping
Phase 2 Systems Analysis
315
PROTOTYPING
Prototyping produces an early, rapidly con-
structed working version of the proposed
information system, called a prototype.
Prototyping, which involves a repetitive
sequence of analysis, design, modeling, and
testing, is a common technique that can be
used to design anything from a new home to
a computer network. For example, engineers
use a prototype to evaluate an aircraft design
before production begins, as shown in the
wind tunnel testing in Figure 7-26.
User input and feedback is essential at every
stage of the systems development process.
Prototyping allows users to examine a model
that accurately represents system outputs,
inputs, interfaces, and processes. Users can
“test-drive” the model in a risk-free environment and either approve it or request
changes. In some situations, the prototype evolves into the final version of the informa-
tion system; in other cases, the prototype is intended only to validate user requirements
and is discarded afterward.
Perhaps the most intense form of prototyping occurs when agile methods are used.
As you learned in Chapter 1, agile methods build a system by creating a series of proto-
types and constantly adjusting them to user requirements. As the agile process continues,
developers revise, extend, and merge earlier versions into the final product. An agile
approach emphasizes continuous feedback, and each incremental step is affected by
what was learned in the prior steps.
Prototyping Methods
Systems analysts use two different prototyping methods: system prototyping and design
prototyping. System prototyping produces a full-featured, working model of the infor-
mation system. As Figure 7-27 shows, a system prototype is ready for the implementa-
tion phase of the SDLC.
While agile methods represent the latest approach to system prototyping, rapid
application development (RAD), which is described in Chapter 4, remains a popular
strategy. Using RAD methods, a team of users, managers, and IT staff members works
together to develop a model of the information system that evolves into the completed
system. The RAD team defines, analyzes, designs, and tests prototypes using a highly
interactive process, which is shown in Figure 4-5 on page 146.
Systems analysts also use prototyping to verify user requirements, after which the
prototype is discarded and implementation continues, as shown in Figure 7-28 on the
next page. The approach is called design prototyping, or throwaway prototyping. In this
case, the prototyping objectives are more limited, but no less important. The end prod-
uct of design prototyping is a user-approved model that documents and benchmarks the
features of the finished system.
ImplementationDesignAnalysisPlanning SYSTEM
PROTOTYPE
FIGURE 7-27 The end product of system prototyping is a working model of the information system, ready for implementation.
FIGURE 7-26 Wind tunnel testing is a typical example of prototyping.

316
Chapter 7 Development Strategies
Prototyping
Design prototyping makes it possible to capture user input and approval while
continuing to develop the system within the framework of the SDLC. Systems analysts
typically use design prototyping as they construct outputs, inputs, and user interfaces,
as discussed in Chapter 8.
Whenever possible, you should allow users to experiment with a prototype and provide
feedback on how well it meets their needs. This approach can increase development costs,
but the expense will be offset by lower costs during subsequent SDLC phases. Prototyping
offers many benefits, including the following:
• Users and systems developers can avoid misunderstandings.
• System developers can create accurate specifications for the finished system based
on the prototype.
• Managers can evaluate a working model more effectively than a paper specification.
• Systems analysts can use a prototype to develop testing and training procedures
before the finished system is available.
• Prototyping reduces the risk and potential financial exposure that occur when a
finished system fails to support business needs.
Although most systems analysts believe that the advantages of prototyping far
outweigh any disadvantages, you should consider the following potential problems:
• The rapid pace of development can create quality problems, which are not
discovered until the finished system is operational.
• Other system requirements, such as reliability and maintainability, cannot be
tested adequately using a prototype.
• In very complex systems, the prototype becomes unwieldy and difficult to manage.
Prototyping Tools
Systems analysts can use powerful tools to develop prototypes. Most prototyping is done
using CASE tools, application generators, report generators, screen generators, and fourth-
generation languages (4GLs). In a fourth-generation language (4GL), the commands tend
to resemble natural statements that people use. For example, a 4GL statement might be
PRINT ALL PRODUCTS WHERE CODE = IN STOCK AND STATUS = OK.
In combination, the tools provide a framework for rapid, efficient software
development, called a fourth-generation environment.
Part B of the Systems Analyst’s Toolkit describes CASE tools in more detail and
explains how systems analysts can use them to speed the development process, reduce
costs, and avoid design errors. In a fourth-generation environment, the development tools
are highly interactive. For example, systems analysts use CASE tools to create a series of
ImplementationDesignAnalysisPlanning
DESIGN
PROTOTYPE
FIGURE 7-28 The end product of design prototyping is a user-approved model that documents and
benchmarks the features of the finished system.
TOOLKIT TIME
The CASE Tools in
Part B of the
Systems Analyst’s
Toolkit can help you
document business
functions and pro-
cesses, develop
graphical models, and
provide an overall
framework for infor-
mation system devel-
opment. To learn
more about these
tools, turn to Part B
of the four-part
Toolkit that follows
Chapter 12.

Software Development Trends
Phase 2 Systems Analysis
317
diagrams and definitions, which generate a data dictionary automatically. The data
dictionary organizes and documents all data elements and interacts with application,
screen, and report generators to produce a system prototype.
Limitations of Prototypes
The final version of the system typically demands higher-level performance than the
prototype can provide. A prototype is a functioning system, but it is less efficient than a
fully developed system. Because it is a model, rather than a completed system, the pro-
totype will have slower processing speeds and response times. The prototype also might
lack security requirements, exception and error-handling procedures, and other required
functions. Despite those limitations, systems developers can upgrade the prototype into
the final information system by adding the necessary capability. Otherwise, the prototype
is discarded and the remaining SDLC phases are completed.
Even when it does not evolve into the finished system, a prototype helps to ensure
that the final product will meet all requirements. Satisfying system requirements is the
ultimate goal of systems development, and prototyping is an extremely valuable tool
during the process.
SOFTWARE DEVELOPMENT TRENDS
Whether you are a student, an entry-level IT pro-
fessional, or a seasoned veteran, you need to be
aware of technology trends and developments.
Because the digital world changes so rapidly, if
you have a personal development plan, you can
take advantage of future changes and opportuni-
ties. This section describes software development
trends to consider.
Views from the IT Community
As senior vice president of the Developer Division
at Microsoft, Dr. S. Somasegar supports software
developers and the technical computing commu-
nity. His team handles Visual Studio, Expression
Studio, the .NET Framework, Silverlight, and
related development technologies. Dr. Somasegar
mentions six key software development trends in
his February, 2010 blog, which are summarized in
Figure 7-29.
Many IT professionals try to stay in touch
with key issues and trends. For most people, this
is not a scientific research project, but rather an
effort to keep up with developments and avoid
surprises. A sampling of current articles and blogs
includes some predictions and forecasts for the
next few years:
• Software quality will be more important
than ever, and intense modeling will support
the quality assurance process. Software test-
ing also will receive more emphasis. In the
post-9/11 environment, many firms will
To learn more about
software develop-
ment trends, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Software
Development
Trends link.
FIGURE 7-29 In his blog, Dr. S. Somasegar mentions six key software
development trends.

www.cengagebrain.com

www.cengagebrain.com

318
Chapter 7 Development Strategies
Software Development Trends
need to do more testing to ensure that their systems are not vulnerable to physical
attack or electronic intrusion.
• Project management will be a major focus of IT managers. With increased pressure
for quality software that meets budget, schedule, and quality requirements, project
managers will be key players. In this environment, there will be even more emphasis
on project management training and credentials.
• Service-oriented architecture (SOA) will become an important factor in future devel-
opment. Service-oriented architecture (SOA) is an architectural style whose goal is to
achieve loose coupling among interacting software objects that provide services.
Loose coupling means that objects can interact, but are essentially independent. A
common example is a DVD and a DVD player— if you want to watch your DVD,
you put it into a DVD player and watch your video, because the player provides a
DVD playing service. But loose coupling allows you to you to replace your DVD
player with another, or to play your videos on more than one player.
• Growth in open-source software such as Linux has increased demand for powerful
open-source development tools, while traditional development languages such as
C and C++ are becoming less popular. There is a growing open-source community
that supports and promotes vendor-neutral open-source development.
• Developers will use more Web services, which are modular applications such as
currency converters or language translators. Most Web services are based on a
combination of HTML and XML. You learned in Chapter 1 that HTML is a plat-
form-independent language that controls the way information is presented on a
browser, and that Extensible Markup Language (XML) provides a common data
description language that allows easy Web-based communication between differ-
ent types of hardware and software.
• Programmers will continue to use dynamic languages such as Java, Python, Perl,
Ruby, and Visual Basic, among others, and new languages will evolve.
As a systems analyst, you will be affected by rapidly changing technology, and you
will want to know about IT trends and developments. Part D of the Systems Analyst’s
Toolkit contains tips and techniques that you can use to access Web-based information
and use it to help build your skills and success.
TOOLKIT TIME
The Internet
Resource tools in
Part D of the Systems
Analyst’s Toolkit can
help you in using the
Internet to stay
abreast of current IT
trends and to build
your systems analysis
skills. To learn more
about these tools,
turn to Part D of the
four-part Toolkit that
follows Chapter 12.
A QUESTION OF ETHICS
Sally works as a junior analyst for a medium-sized IT consulting firm. Her manager, Bob, has
asked her to draft a response to an RFP from a large company that is seeking IT consulting
services in connection with a new accounting system.
As Sally worked on the RFP, she noticed a specific question about her firm’s recent experi-
ence on this type of system. To the best of her knowledge, the firm has only worked on one
other accounting project in the last three years. When Bob saw Sally’s draft response, he was
upset about the way she answered the question. “You don’t have to be quite that candid,” he
said. “Even though we only had one formal project, we do have several people who worked on
accounting systems before they came here.”
“Yes,” Sally replied, “But that isn’t what the question is asking.” As he left her office, Bob’s
final comment was, “If we want that job, we’ll have to come up with a better answer.” Thinking
about it, Sally isn’t comfortable with anything but a straight answer. Is this an ethical question?
What are Sally’s options?

Chapter Summary
Phase 2 Systems Analysis
319
CHAPTER SUMMARY
This chapter describes system development strategies, the preparation and presentation of
the system requirements document, and the transition to the systems design phase of the
SDLC.
An important trend that views Software as a Service (SaaS), rather than a product,
has created new software acquisition options. Systems analysts must consider Web-
based development environments such as .NET and WebSphere, and various outsourc-
ing options, including application service providers and Internet business services.
Application service providers (ASPs) charge subscription fees for providing application
software packages. Internet business services (IBSs) offer powerful Web-based servers,
software hosting, and IT support services to customers.
Traditional systems must function in various hardware and software environments,
be compatible with legacy systems, and operate within the constraints of company
networks and desktop computing capability. Such systems utilize Internet links and
resources as enhancements. In contrast, Internet-based systems treat the Web as the plat-
form, rather than just a communication channel. Many large companies use Web-based
systems to handle enterprise-wide applications. Compared to traditional systems, Web-
based systems are more scalable, less dependent on specific hardware and software, and
more adaptable to outsourcing the operation and support of a software application.
The new Web generation is called Web 2.0, and it is fueling the expansion of
information sharing, user collaboration, and social-networking applications such as
Twitter, MySpace and Facebook. Another development, called cloud computing because
of the commonly used cloud symbol for the Internet, describes an overall online soft-
ware and data environment, powered by supercomputer technology, that will be an
ultimate form of Software as a Service.
If a company chooses to handle its own software development needs, it can create
in-house systems, or purchase (and possibly customize) commercially available software
packages from a software vendor or value-added reseller (VAR).
Compared with developing an in-house system, an existing commercial software
package can be an attractive alternative, because a package generally costs less, takes less
time to implement, has a proven track record, and is upgraded frequently. In-house devel-
opment or customizing a software package might be the best choice when a standard
software package cannot meet specific business requirements or constraints. In addition
to customizing software packages, companies can create user applications based on stan-
dard software that has been specially configured to enhance user productivity.
The systems analyst’s role in the software development process depends on the spe-
cific development strategy. In-house development requires much more involvement than
outsourcing or choosing a commercial package.
The most important factor in choosing a development strategy is total cost of owner-
ship (TCO). Financial analysis tools include payback analysis, which determines how
long it takes for a system to pay for itself through reduced costs and increased benefits;
return on investment (ROI), which compares a project’s total return with its total costs;
and net present value (NPV), which analyzes the value of a project by adjusting costs
and benefits to reflect the time that they occur.
The process of acquiring software involves a series of steps: evaluate the system
requirements, consider network and Web-related issues, identify potential software
vendors or outsourcing options, evaluate the alternatives, perform cost-benefit analysis,
prepare a recommendation, and implement the solution. During software acquisition, a
company can use a request for proposal (RFP) or a request for quotation (RFQ). An
RFP invites vendors to respond to a list of system requirements and features; an RFQ
seeks bids for a specific product or service.

320
Chapter 7 Development Strategies
Chapter Summary
The system requirements document is the deliverable, or end product, of the systems
analysis phase. The document details all system requirements and constraints, recom-
mends the best solution, and provides cost and time estimates for future development
work. The system requirements document is the basis for the management presentation.
At this point, the firm might decide to develop an in-house system, modify the current
system, purchase or customize a software package, perform additional systems analysis
work, or stop all further work.
As you prepared for the transition from the systems analysis to systems activities,
you learned that a prototype is a working model of the proposed system that you can
use to verify the system requirements with users or as a basis for the new system.
You learned that a set of interactive tools, called a fourth-generation environment, can
help you construct the prototype. A fourth-generation environment includes screen gener-
ators, report writers, application or code generators, and fourth-generation languages, all
of which interact with a data dictionary developed with CASE tools. You also reviewed a
set of systems design guidelines and suggestions, including user considerations, data con-
siderations, and processing considerations. Finally, you learned about trends in software
development, including outsourcing, agile development, and various other topics.

Phase 2 Systems Analysis
321
Key Terms and Phrases
Key Terms and Phrases
application service provider (ASP) 291
audit trail 313
benchmark 306
build or buy 293
business process outsourcing (BPO) 290
cloud computing 289
default 312
design prototyping 315
evaluation and selection team 299
evaluation model 303
fixed fee model 291
fourth-generation environment 316
fourth-generation language (4GL) 316
global outsourcing 292
help desk 297
horizontal application 293
in-house software 293
information center (IC) 297
Internet business services (IBS) 291
logical design 311
loose coupling 318
maintenance agreement 307
make or buy 293
managed hosting 291
middleware 289
.NET 287
net present value (NPV) 299
newsgroup 305
offshore outsourcing 292
outsourcing 290
parameter 312
payback analysis 299
physical design 311
prototype 315
prototyping 315
read-only properties 298
report generator 297
request for proposal (RFP) 302
request for quotation (RFQ) 304
return on investment (ROI) 299
screen generator 297
service-oriented architecture (SOA) 318
service provider 290
Software as a Service (SaaS) 286
software license 307
software package 293
software requirements specification 309
software vendor 293
subscription model 291
system prototyping 315
system requirements document 309
systems design 312
throwaway prototyping 315
transaction model 291
usage model 291
user application 297
user interface 297
value-added reseller (VAR) 293
vertical application 294
Web 2.0 289
WebSphere 287
Web services 318
Y2K issue 312

322
Chapter 7 Development Strategies
Learn It Online
Instructions: To complete the Learn It Online exercises, visit the Management Information
Systems CourseMate Web site at www. cengagebrain.com, navigate to the resources for
this chapter, and click the link for the exercise you want to complete.
1 Chapter Reinforcement
TF, MC, and SA
Click one of the Chapter Reinforcement links for Multiple Choice, True/False, or Short
Answer. Answer each question and submit to your instructor.
2 Flash Cards
Click the Flash Cards link and read the instructions. Type 20 (or a number specified by
your instructor) in the Number of playing cards text box, type your name in the Enter
your Name text box, and then click the Flip Card button. When the flash card is dis-
played, read the question and then click the ANSWER box arrow to select an answer.
Flip through the Flash Cards. If your score is 15 (75%)
correct or greater, click Print on the File menu to print your results. If your score is less
than 15 (75%) correct, then redo this exercise by clicking the Replay button.
3 Practice Test
Click the Practice Test link. Answer each question, enter your first and last name at the
bottom of the page, and then click the Grade Test button. When the graded practice
test is displayed on your screen, click Print on the File menu to print a hard copy.
Continue to take practice tests until you score 80% or better.
4 Who Wants To Be a Computer Genius?
Click the Computer Genius link. Read the instructions, enter your first and last name
at the bottom of the page, and then click the Play button. When your score is dis-
played, click the PRINT RESULTS link to print a hard copy.
5 Wheel of Terms
Click the Wheel of Terms link. Read the instructions, and then enter your first and last
name and your school name. Click the PLAY button. When your score is displayed on
the screen, right-click the score and then click Print on the shortcut menu to print a
hard copy.
6 Crossword Puzzle Challenge
Click the Crossword Puzzle Challenge link. Read the instructions, and then click the
Continue button. Work the crossword puzzle. When you are finished, click the Submit
button. When the crossword puzzle is redisplayed, submit it to your instructor.
Learn It Online

www.cengagebrain.com

Phase 2 Systems Analysis
323 Case-Sim: SCR Associates
Overview
The SCR Associates case study is a Web-
based simulation that allows you to practice
your skills in a real-world environment. The
case study transports you to SCR’s intranet, where you complete 12 work sessions, each
aligning with a chapter. As you work on the case, you will receive e-mail and voice mail
messages, obtain information from SCR’s online libraries, and perform various tasks.
How do I use the case?
• Review the SCR background material in Chapter 1.
• Read the Preview for this session and study the Task List.
• Visit the Management Information Systems CourseMate Web site at www.cengagebrain.
com, navigate to the SCR Case Simulation, and locate the intranet link.
• Enter your name and the password sad9e. An opening screen will display the 12 sessions.
• Select this session. Check your e-mail and voice mail carefully, and then work on the tasks.
Preview: Session 7
As you consider various development strategies for the TIMS system, you receive specific
directions from your supervisor, Jesse Baker. She wants you to determine whether vertical
software packages exist, and she wants you to explore outsourcing options for the new sys-
tem. She also expects you to conduct a cost-benefit analysis of developing TIMS in-house,
and she wants your input on outsourcing and prototyping.
Task List
SCR Associates Case Simulation Session 7: Development Strategies
1. Determine whether vertical software packages exist for training operations management.
Search the Internet and draft a message describing the results.
2. Investigate the possibility of outsourcing the TIMS system. List the options, together with
advantages and disadvantages of each.
3. Follow Jesse’s e-mail instructions about calculating payback, ROI, and NPV for the TIMS
system.
4. Jesse wants my thoughts on how we can use prototyping for TIMS. She also wants me to
prepare a system requirements document and a management presentation.
FIGURE 7-30 Task list: Session 7.

www.cengagebrain.com

www.cengagebrain.com

324
Chapter 7 Development Strategies
Review Questions
1. Describe the trend that views software as a service rather than a product. What
effect has this trend had on software acquisition options?
2. Explain the difference between horizontal and vertical application software.
3. What is the most common reason for a company to choose to develop its own
information system? Give two other reasons why a company might choose the
in-house approach.
4. What is an RFP, and how does it differ from an RFQ?
5. What is the purpose of a benchmark test?
6. Explain software licenses and maintenance agreements.
7. What decisions might management reach at the end of the systems analysis phase,
and what would be the next step in each case?
8. What is a prototype, and how do systems developers use prototyping?
9. What is a fourth-generation environment?
10. Explain the relationship between logical and physical design.
Discussion Topics
1. As more companies outsource systems development, will there be less need for in-
house systems analysts? Why or why not?
2. Suppose you tried to explain the concept of throwaway prototyping to a manager,
and she responded by asking, “So, is throwaway prototyping a waste of time and
money?” How would you reply?
3. Select a specific type of vertical application software to investigate. Visit local com-
puter stores and use the Internet to determine what software packages are available.
Describe the features of those packages.
4. Select a specific type of horizontal application software to investigate. Visit local com-
puter stores and use the Internet to determine what software packages are available.
Describe the features of those packages.
Projects
1. The text mentions several firms and organizations that offer IT benchmarking.
Locate another benchmarking firm on the Internet, and describe its services.
2. Turn to Part C of the Systems Analyst’s Toolkit and review the concept of net pres-
ent value (NPV). Determine the NPV for the following: An information system will
cost $95,000 to implement over a one-year period and will produce no savings dur-
ing that year. When the system goes online, the company will save $30,000 during
the first year of operation. For the next four years, the savings will be $20,000 per
year. Assuming a 12% discount rate, what is the NPV of the system?
3. Visit the IT department at your school or at a local company and determine whether
the information systems were developed in-house or purchased as software pack-
ages. If packages were acquired, determine what customizing was done, if any. Write
a brief memo describing the results of your visit.
4. To create user applications as described in this chapter, systems analysts often use
macros. Microsoft defines a macro as “a series of commands and instructions that
you group together as a single command to accomplish a task automatically.” Learn
more about macros by using the Help feature in Microsoft Word, and suggest three
tasks that might be performed by macros.
Chapter Exercises
Chapter Exercises

Phase 2 Systems Analysis
325
The Apply Your Knowledge section contains four mini-cases. Each case describes a situation,
explains your role in the case, and asks you to respond to questions. You can answer the
questions by applying knowledge you learned in the chapter.
1 Top Sail Realty
Situation:
Top Sail Realty is one of the largest time-sharing and rental brokers for vacation
cottages along the North Carolina coast. After 10 successful years of matching up
owners and renters, Top Sail decided to acquire a computerized reservation and
booking system. Top Sail’s owner read an article about software packages, and she
asked you, as an IT consultant, for your advice.
1. Should Top Sail implement a Web-based system? Why or why not?
2. What software acquisition options are available to Top Sail?
3. Do you consider the reservations system to be a horizontal or a vertical application?
Give reasons for your answer.
4. When you evaluate software packages, what steps will you follow?
2 One Way Movers, Inc.
Situation:
As IT manager at One Way, you scheduled a management presentation next week. You
prepared and distributed a system requirements document, and you anticipate some
intense questioning at the meeting.
1. When planning your presentation, what are some techniques you will use?
2. Based on the suggestions in Part A of the Systems Analyst’s Toolkit, what visual
aids could you use during your presentation?
3. In deciding on your proposal, what options does management have?
4. If management decides to purchase or customize a software package, what steps
will you take?
Apply Your Knowledge
Apply Your Knowledge

326
Chapter 7 Development Strategies
3 Tangible Investments Corporation
Situation:
Tangible Investments Corporation needs a new customer billing system. As project
leader, you decided to create a prototype that users can evaluate before the final design
is implemented. You plan to use a traditional structured analysis methodology. To pre-
pare for your meeting with top management tomorrow, you need to review the follow-
ing topics.
1. Explain the main purpose of prototyping.
2. Explain why a prototype might or might not evolve into the final version of
the system.
3. Describe the tools typically used in developing prototypes.
4. List three advantages and three disadvantages of prototyping.
4 IT Flash Magazine
Situation:
You are a staff writer at IT Flash Magazine, a popular online newsletter aimed at IT
professionals. Your editor has asked you to prepare a special report for next week’s
edition. Specifically, she wants you to research the subject of software outsourcing, and
other significant trends that might affect software development in the future. If possi-
ble, she wants you to cite specific sources for your information, including IT employ-
ment statistics and employment forecasts from the Bureau of Labor Statistics.
1. Search for information about software outsourcing generally, using the search
techniques described in Part D of the Systems Analyst’s Toolkit.
2. Visit the Bureau of Labor Statistics site at bls.gov and search for information
about employment trends affecting systems analysts, computer programmers, and
software engineers.
3. Does the Bureau of Labor Statistics offer any comments or insights into the
subject of outsourcing generally? What conclusions does it reach?
4. In your report, comment on whether the offshore outsourcing of IT jobs is just
another step in the progression that began with manufacturing jobs, or represents
a whole new trend. Be sure to cite Web research sources and your own reasons.
Apply Your Knowledge

Phase 2 Systems Analysis
327
Case studies allow you to practice specific skills learned in the chapter. Each chapter contains
several case studies that continue throughout the textbook, and a chapter capstone case.
New Century Health Clinic
New Century Health Clinic offers preventive medicine and traditional medical care. In your
role as an IT consultant, you will help New Century develop a new information system.
Background
Based on your earlier recommendations, New Century decided to continue the systems
development process for a new information system that would improve operations, decrease
costs, and provide better service to patients.
Now, at the end of the systems analysis phase, you are ready to prepare a system require-
ments document and give a presentation to the New Century associates. Many of the pro-
posed system’s advantages were described during the fact-finding process. Those include
smoother operation, better efficiency, and more user-friendly procedures for patients and
New Century staff.
You also must examine tangible costs and benefits to determine the economic feasibility
of several alternatives. If New Century decides to go ahead with the development process,
the main options are to develop the system in-house or purchase a vertical package and con-
figure it to meet New Century’s needs. You have studied those choices and put together
some preliminary figures.
You know that New Century’s current workload requires three hours of office staff
overtime per week at a base rate of $8.50 per hour. In addition, based on current projec-
tions, New Century will need to add another full-time clerical position in about six months.
Neither the overtime nor the additional job will be needed if New Century implements the
new system. The current manual system also causes an average of three errors per day, and
each error takes about 20 minutes to correct. The new system should eliminate those errors.
Based on your research, you estimate by working full-time you could complete the project
in about 12 weeks. Your consulting rate, which New Century agreed to, is $30 per hour. If you
design the new system as a database application, you can expect to spend about $2,500 for a
networked commercial package. After the system is operational and the staff is trained, New
Century should be able to handle routine maintenance tasks without your assistance.
As an alternative to in-house development, a vertical software package is available for
about $9,000. The vendor offers a lease-purchase package of $3,000 down, followed by two
annual installments of $3,000 each. If New Century buys the package, it would take you
about four weeks to install, configure, and test it, working full-time. The vendor provides
free support during the first year of operation, but then New Century must sign a technical
support agreement at an annual cost of $500. Although the package contains many of the
features that New Century wants, most of the reports are pre-designed and it would be diffi-
cult to modify their layouts.
No matter which approach is selected, New Century probably will need you to provide
about 10 hours of initial training and support each week for the first three months of opera-
tion. After the new system is operational, it will need routine maintenance, file backups, and
updating. These tasks will require about four hours per week and can be performed by a
clinic staff member. In both cases, the necessary hardware and network installation will cost
about $5,000.
In your view, the useful life of the system will be about five years, including the year in
which the system becomes operational.
Case Studies
Case Studies

328
Chapter 7 Development Strategies
Case Studies
Assignments
You scheduled a presentation to New Century in one week, and you must submit a
system requirements document during the presentation. Prepare both the written
documentation and the presentation. (To give a successful presentation, you will need to
learn the skills described in Part A of the Systems Analyst’s Toolkit.) Your oral and written
presentation must include the following tasks:
1. Provide an overview of the proposed system, including costs and benefits, with an
explanation of the various cost-and-benefit types and categories.
2. Develop an economic feasibility analysis, using payback analysis, ROI, and present
value (assume a discount rate of 10%).
3. Prepare a context diagram and diagram 0 for the new system.
4. Provide a brief explanation of the various alternatives that should be investigated if
development continues, including in-house development and any other possible
strategies.
You may wish to include other material to help your audience understand the new sys-
tem and make a decision on the next step.
Presentation Rules
The following presentation rules should be considered:
• Use suitable visual aids.
• Use presentation software, if possible.
• Distribute handouts before, during, or after the presentation.
• Follow the guidelines in Part A of the Systems Analyst’s Toolkit.
• Keep your presentation to 30 minutes, including 5 minutes for questions.
Rules for the System Requirements Document
Consider the following rules while preparing the system requirements document:
• Follow the guidelines in Part A of the Systems Analyst’s Toolkit.
• Include charts, graphs, or other helpful visual information in the document.
• Spell check and carefully proofread the entire document.
PERSONAL TRAINER, INC.
Personal Trainer, Inc., owns and operates fitness centers in a dozen Midwestern cities. The
centers have done well, and the company is planning an international expansion by opening
a new “supercenter” in the Toronto area. Personal Trainer’s president, Cassia Umi, hired an
IT consultant, Susan Park, to help develop an information system for the new facility.
During the project, Susan will work closely with Gray Lewis, who will manage the new
operation.
Background
During data and process modeling, Susan Park developed a logical model of the proposed
system. She drew an entity-relationship diagram and constructed a set of leveled and balanced
DFDs. Now Susan is ready to consider various development strategies for the new system. She
will investigate traditional and Web-based approaches and weigh the advantages and disadvan-
tages of in-house development versus other alternatives. As she moves ahead to the systems
design phase, she will review design guidelines, consider the use of prototypes, and analyze the
possible use of codes.

Phase 2 Systems Analysis
329 Case Studies
Before You Begin . . .
Review the facts presented in the Personal Trainer case study in Chapters 2, 4, and 5. Use
that information to complete the following tasks.
Assignments
1. Should the new system be designed as a Web-based system? Why or why not? What
are some specific issues and options that Susan should consider in making a decision?
2. Assume that Cassia Umi, Personal Trainer’s president, has asked Susan to prepare a
system requirements document and deliver a presentation to the management team.
What should be the main elements of the system requirements document? Also,
based on the suggestions in Part A of the Systems Analyst’s Toolkit, what visual aids
should Susan use during her presentation?
3. Should Susan use a prototype during systems design? What options does she have,
and how would you advise her?
4. Susan wants to prepare a presentation that will calculate the total cost of ownership
for the system. What financial analysis tools are available to her, and what are the
advantages (and possible disadvantages) of each tool?

330
Chapter 7 Development Strategies
Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited
SoftWear, Limited (SWL), is a continuing case study that illustrates the knowledge and
skills described in each chapter. In this case study, the student acts as a member of the SWL
systems development team and performs various tasks.
Background
Systems analyst Rick Williams and programmer/analyst Carla Moore continued to work
on a logical model of the payroll system. Meanwhile, the information systems department
recently purchased and installed Visible Analyst, a CASE toolkit that supports logical and
physical modeling. Rick and Carla traveled to Massachusetts to attend a one-week work-
shop to learn how to use the package.
After returning from their trip, Rick and Carla decided to create the logical model for
the payroll system with Visible Analyst. They felt that the time spent now would pay off in
later phases of the project. Rick and Carla used the manual DFDs they created in Chapter 5
to create computerized DFDs using Visible Analyst. Now all related items for the new sys-
tem are stored in the CASE tool.
Over the next month, Rick and Carla looked at various alternatives and spent their time
evaluating the potential solutions. They determined that the best solution was to purchase a
payroll package, but the ESIP processing was so unique that none of the available software
packages would handle SWL’s specific requirements. They concluded that SWL should pur-
chase a payroll package and develop the ESIP system in-house. Jane Rossman and Ann Hon
agreed with their recommendation.
The systems analysts completed work on the logical model, alternative evaluations, and
cost and time estimates and then prepared the system requirements document for the pay-
roll system. The document was printed and distributed and a management presentation was
scheduled at the end of the following week.
At this point, the IT team members were confident that they had done a good job. They had
worked closely with SWL users throughout the development process and received user approval
on important portions of the document as it was being prepared. They developed visual aids,
rehearsed the presentation, and then tried to anticipate questions that management might ask.
Carla gave the management presentation. She recommended that SWL purchase a pay-
roll package sold by Pacific Software Solutions and that ESIP processing be developed in-
house to interface with the payroll package.
During the presentation, Carla and Rick answered questions on several points, including
the economic analysis they had done. Michael Jeremy, vice president of finance, was espe-
cially interested in the method they used to calculate payback analysis, return on invest-
ment, and net present value for the new system.
Robert Lansing, SWL’s president, arrived for the last part of the presentation. When the
presentation ended, he asked the top managers how they felt about the project, and they
indicated support for the proposal made by the IT department. The next step was to negoti-
ate a contract with Pacific Software Solutions and for Rick and Carla to begin systems
design for the ESIP processing component.
SWL Team Tasks
1. Although the presentation was successful, Rick and Carla ask you to create a checklist of
presentation dos and don’ts that would be helpful for IT staff people who deliver
presentations.
2. Rick and Carla also want you to review the DFDs that they prepared to see if you have
any suggestions for improvement. If you have access to a copier, make a copy of the
DFDs shown in Chapter 5 and then write your notes directly on the diagrams.

Phase 2 Systems Analysis
331 Chapter Capstone Case: SoftWear, Limited
CHAPTER CAPSTONE CASE: SoftWear, Limited (continued)
3. Michael Jeremy, vice president of finance, was interested in the financial analysis tools
that Rick and Carla used in the presentation. Rick has asked you to write a memo to
Mr. Jeremy explaining each tool, with a specific description of how it is used, and what
results can be obtained. Before you do this, you should review the material in Part C of
the Systems Analyst’s Toolkit.
4. Although SWL decided to develop the ESIP system in-house, Ann Hon, director of infor-
mation technology, has requested a report on the trend toward outsourcing software
development. Perform Internet research to get up-to-date information about this topic,
and prepare a memo for Ms. Hon. Be sure to cite your sources of information.
Manage the SWL Project
You have been asked to manage SWL’s new information system project. One of your most
important activities will be to identify project tasks and determine when they will be per-
formed. Before you begin, you should review the SWL case in this chapter. Then list and
analyze the tasks, as follows:
LIST THE TASKS Start by listing and numbering at least ten tasks that the SWL team needs
to perform to fulfill the objectives of this chapter. Your list can include SWL Team Tasks
and any other tasks that are described in this chapter. For example, Task 3 might be to
Evaluate system requirements, and Task 6 might be to Prepare an RFP.
ANALYZE THE TASKS Now study the tasks to determine the order in which they should
be performed. First identify all concurrent tasks, which are not dependent on other tasks.
In the example shown in Figure 7-31, Tasks 1, 2, 3, 4, and 5 are concurrent tasks, and
could begin at the same time if resources were available.
Other tasks are called dependent tasks, because they cannot be performed until one or
more earlier tasks have been completed. For each dependent task, you must identify specific
tasks that need to be completed before this task can begin. For example, you would want to
evaluate system requirements before you could prepare an RFP, so Task 6 cannot begin until
Task 3 is completed, as Figure 7-31 shows.
Chapter 3 describes project management tools, techniques, and software. To learn
more, you can use the Features section on your Student Study Tool CD-ROM, or visit the
Management Information Systems CourseMate Web site at www.cengagebrain.com and
locate the project management resources library for this book. On the Web, Microsoft
offers demo versions, training, and tips for using Project 2010. You also can visit the
OpenWorkbench.org site to learn more about this free, open-source software.
FIGURE 7-31 Tasks 1, 2, 3, 4, and 5 are concurrent tasks that could be performed at the
same time. Task 6 is a dependent task that cannot be performed until Task 3 has been
completed.

www.cengagebrain.com

332
Chapter 7 Development Strategies
Ready for a Challenge?
Ready for a Challenge?
In additional to technical skills, IT professionals need critical thinking skills such as perception, organization,
analysis, problem-solving, and decision-making. The Ready for a Challenge feature can help you learn, practice,
and apply critical thinking skills that you can take to the workplace.
You are helping the IT team at Game Technology study several software acquisition options
for their Customer Contact Care system (C3). First, you review Chapter 7 of your systems
analysis textbook and the material on financial analysis tools, including the Video Learning
Sessions. The IT team is considering two commercial software packages and an in-house
development option. They prepared the following summary.
Option Description Costs Benefits
Software
Solutions,
Inc.
Software package
Four-year useful life
Less flexible than in-house
system
Some customizing needed
$8,000 to purchase
$1,500 to install and configure
$2,500 to load existing data
$1,000 additional hardware needed
$2,000 annual support fee after
first year free
$9,000/yr through positive
customer response. Cannot
predict other specific savings.
Increased sales, improved
customer care, and better
productivity are expected.
CRM
Corp.
Software package
Five-year useful life
Less flexible than in-house
system
Moderate customizing needed
Runs slower than other options
$7,000 to purchase
$2,500 to install and configure
$2,000 to load existing data
$4,000 additional hardware needed
$1,200 annual support fee in all
five years
Same as above
Develop
C3 system
in-house
In-house system
Six-year useful life, can use our
software and hardware
Easiest to update and maintain
$15,000 to develop, install, and
configure
$1,000 to load existing data
Existing staff can handle support
Same as above
Practice Tasks
Study the summary carefully and prepare spreadsheet templates, or navigate to the Forms
Library at the MIS CourseMate for this book at www.cengagebrain.com. You should
assume that all three options require a six-month period for acquisition or development,
installation, configuration, and data loading. This period is called Year 0. Actual operation
begins in Year 1. Now complete these tasks:
A. P erform ROI and NPV analysis of the Software Solutions package. Use an 8% discount
factor.
B. Perform ROI analysis of the in-house development option.
After you complete the Practice Tasks, to check your work and view sample answers, visit
the Management Information Systems CourseMate Web site at www.cengagebrain.com,
navigate to the resources for this chapter, and locate Ready for a Challenge?.
The Challenge
Now you will work on your own to finish up the remaining financial analysis tasks. Again,
you can prepare spreadsheet templates, or navigate to the Forms Library (see above).
Challenge Tasks
A. Perform ROI and NPV analysis of the CRM package. Use an 8% discount factor.
B. Perform NPV analysis of the in-house option. Use an 8% discount factor.

www.cengagebrain.com

www.cengagebrain.com

333
As the Dilbert cartoon suggests, you should understand a problem before you decide that a
database is the solution. You will learn more about systems design topics, including database
design, in the systems design phase.
Systems design is the third of five phases in the systems development life cycle. In the previous
phase, systems analysis, you developed a logical model of the new system. Now you will work on
a physical design that will meet the specifications described in the system requirements docu-
ment. Your tasks will include user interface design, data design, and system architecture. The deliv-
erable for this phase is the system design specification.
DELIVERABLE
System design specification
TOOLKIT SUPPORT
Primary tools: Communications
and CASE tools
VIDEO LEARNING SESSIONS
Entity Relationship Diagrams,
Data Normalization
3 SYSTEMS DESIGNPHASE

Chapter 8 User Interface Design
Chapter 8 is the first of three chapters in the systems
design phase of the SDLC. This chapter explains how to
design an effective user interface, and how to handle data
output, input, and security issues. The chapter stresses the
importance of user feedback and involvement in all design
decisions.
O B J E C T I V E S
When you finish this chapter, you will be
able to:
• Explain the concept of user interface design
and human-computer interaction, including
basic principles of user-centered design
• List user interface design guidelines
• Describe user interface components,
including screen elements and controls
• Discuss output design and technology issues
• Design effective source documents
• Explain input design and technology issues
• Discuss guidelines for data entry
screen design
• Use input masks and validation rules to
reduce input errors
• Describe output and input controls and
security
INTRODUCTION
User interface design is the first task in the systems
design phase of the SDLC. Designing the interface
is extremely important, because everyone wants a
system that is easy to learn and use.
After discussing user interface evolution, princi-
ples, and design techniques, the chapter describes
output design, input design, and data security
issues.
User Interface
Design
CHAPTER8

FIGURE 8-1 Typical user interface design tasks.
Introduction 335
CHAPTER INTRODUCTION CASE: Mountain View College Bookstore
Background: Wendy Lee, manager of college services at Mountain View College, wants a new
information system that will improve efficiency and customer service at the three college
bookstores.
In this part of the case, Tina Allen (systems analyst) and David Conroe (student intern) are
talking about user interface design issues.
Participants: Tina and David
Location: Mountain View College Cafeteria, Monday afternoon, November 28, 2011
Project status: Tina and David have examined development strategies for the new bookstore system. After
performing cost-benefit analysis, they recommended in-house development of the new
bookstore system. Now they are ready to begin the systems design phase by working on
user interface design for the new system.
Discussion topics: User interface design concepts and principles
Tina: Hi, David. Ready to start work on user interface design?
David: Sure. Will we start with output, because it’s important to users?
Tina: Output is very important, but the most important issue for users is the interface itself. For example, is it
easy to learn? Is it easy to work with? We’ll try to design everything — output, input, and all the other
elements — from a user’s point of view.
David: How do we do that?
Tina: Well, many sources of information about effective design concepts and principles are available. We’ll study
those, and then ask our own users for their input and suggestions.
David: What about input and data entry?
Tina: Good question. You’ve heard the old saying, “garbage in, garbage out.” User interface principles apply to
user input generally, but repetitive data entry deserves special attention. We need to create screen forms
that are logical and easy to understand, as well as input masks and data entry validation rules. We also need
to review any source documents that will be filled in manually.
David: Anything else?
Tina: Yes. The bookstore system probably will have some confidential data regarding budgets and markup
policies, so we’ll have to consider output and input control and security. If you’re ready, here’s a task list to
get us started:
Phase 3 Systems Design

336
Chapter 8 User Interface Design
What Is a User Interace?
FIGURE 8-2 IBM says that a user interface is what you see, hear, touch, or talk to when you use a computer.
To learn more about
user interface design,
visit the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the User Interface
Design link.
Evolution of the User Interface
When developing older systems, analysts typically designed all the printed and screen
output first, then worked on the inputs necessary to produce the results. Often, the user
interface mainly consisted of process-control screens that allowed the user to send com-
mands to the system. That approach worked well with traditional systems that simply
transformed input data into structured output.
As information management evolved from centralized data processing to dynamic,
enterprise-wide systems, the primary focus also shifted — from the IT department to
the users themselves. The IT group became a supplier of information technology,
WHAT IS A USER INTERFACE?
A user interface (UI) describes how users interact with a computer system, and consists
of all the hardware, software, screens, menus, functions, output, and features that affect
two-way communications between the user and the computer.
Figure 8-2 suggests an interesting viewpoint that interface designers should keep in
mind: Industry leader IBM believes that the best interfaces are the ones that users do
not even notice — they make sense because they do what users expect them to do.

www.cengagebrain.com

www.cengagebrain.com

337
Phase 3 Systems Design
What Is a User Interace?
rather than a supplier of information. Today, the main focus is on users within and
outside the company, how they communicate with the information system, and how
the system supports the firm’s business operations. Figure 8-3 compares a traditional,
processing-centered information system with a modern, user-centered system. Notice
that the IT department, which was the main interface for user information requests, has
become a system facilitator that maintains and supports the system for its users.
In a user-centered system, the distinction blurs between input, output, and the
interface itself. Most users work with a varied mix of input, screen output, and data
queries as they perform their day-to-day job functions. Because all those tasks require
interaction with the computer system, the user interface is a vital element in the sys-
tems design phase. Ergosoft laboratories is one of many firms that offer consulting
services and software solutions to help companies develop successful user interfaces,
as shown in Figure 8-4 on the next page.
User interface design requires an understanding of human-computer interaction and
user-centered design principles, which are discussed in the next section. Input and output
design topics are covered later in this chapter.
Internal Users
Customers Suppliers
Business
Transactions
IT DepartmentInformation
System
Data
Traditional, Processing-Centered Information System Model
Information
System
Data IT Department User Requests
for Information
Modern, User-Centered Information System Model
FIGURE 8-3 Compare the traditional, processing-centered system at the top of the figure with the
modern, user-centered information system at the bottom. Notice the change in the role of the IT
department.

338
Chapter 8 User Interface Design
FIGURE 8-4 Ergosoft laboratories is an example of a firm that offers consulting services and software
solutions to help companies develop successful user interfaces.
Human-Computer Interaction
A user interface is based on basic principles of human-computer interaction.
Human-computer interaction (HCI) describes the relationship between computers and
people who use them to perform their jobs, like the worker shown in Figure 8-5. HCI
concepts apply to everything from PC desktops to global networks. In its broadest sense,
a user interface includes all the communications and instructions necessary to enter input
to the system and to obtain output in the form of screen displays or printed reports.
The human-computer interface started in the 1980s with users typing complex com-
mands in green text on a black screen. Then came the graphical user interface (GUI),
which was a huge improvement, because it used icons, graphical objects, and pointing
devices. Today, designers strive to translate user
behavior, needs, and desires into an interface that
users don’t really notice. As IBM points out in
Figure 8-2 on page 336, the best user interfaces are
“almost transparent — you can see right though
the interface to your own work.”
As a systems analyst, you will design user
interfaces for in-house developed software and
customize interfaces for various commercial
packages and user productivity applications.
Your main objective is to create a user-friendly
design that is easy to learn and use.
Industry leaders Microsoft and IBM both
devote considerable resources to user interface
research. Figure 8-6 describes Microsoft’s
Redmond labs, where engineers observe volun-
teers who participate in software usability
studies.
FIGURE 8-5 HCI is essential to employee productivity, whether the
work is done in a traditional office setting, or on a construction site like
the one shown here.
What Is a User Interace?

339
Phase 3 Systems Design
FIGURE 8-6 Microsoft invites people to participate in software usability studies at its labs.
At its Almaden Research Center, IBM conducts usability testing and studies human-
computer interaction, as shown in Figure 8-7. According to IBM, its User Sciences &
Experience Research (USER) lab focuses on improving ease of use and exploring new
ways of using computers.
FIGURE 8-7 According to IBM, human-computer interaction (HCI) is one of the most extensive research areas
at the company.
What Is a User Interace?

340
Chapter 8 User Interface Design
To learn more about
human-computer
interaction, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Human-
Computer
Interaction link.
FIGURE 8-8 IBM’s logic is very simple: The user is the customer, and the customer is always right.
CASE IN POINT 8.1: CASUAL OBSERVER SOFTWARE
Casual Observer Software’s main product is a program that monitors and analyzes user key-
strokes and mouse clicks to learn more about the way employees use their computer sys-
tems. The problem is that some users feel this is an unwarranted intrusion into their privacy,
and they prefer not to be observed. Some even fear that the data would be used for other
reasons, including performance appraisal. You are a consultant who has been hired by a client
firm that is trying to decide whether or not to use this software.
Before you advise the client, go back and review the Microsoft usability lab shown in
Figure 8-6 on the previous page, where the users being studied in the Redmond labs were
willing participants. Then, refer to Chapter 4, Requirements Modeling, page 165, and consider
the Hawthorne Effect, which suggests that employees might behave differently when they
know they are being observed. Finally, think about the ethical issues that might be involved in
this situation. What will you advise your client, and why?
IBM believes that the user interface evolution will lead to computers that truly are
consumer products that are simple and natural for the general population to use. This
will occur, in IBM’s view, because computers will function in a friendlier, more predict-
able way — much like a telephone or video player. Most important, the interface will be
based on the perspective of a user rather than a computer engineer, programmer, or sys-
tems analyst. To understand the magnitude of this shift in thinking, consider the power-
ful statement shown in Figure 8-8, where IBM usability expert Dr. Clare-Marie Karat
notes that “in this new computer age, the customer is not only right, the customer has
rights.” Those rights are listed in Figure 8-9.
What Is a User Interace?

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Principles of User-Centered Design 341
Phase 3 Systems Design
FIGURE 8-9 User rights suggested by IBM’s Dr. Clare-Marie Karat.
User Rights
1. Perspective: The user always is right. If there is a problem with the use of the system, the system is
the problem, not the user.
2. Installation: The user has the right to install and uninstall software and hardware systems easily
without negative consequences.
3. Compliance: The user has the right to a system that performs exactly as promised.
4. Instruction: The user has the right to easy-to-use instructions (user guides, online or contextual help,
and error messages) for understanding and utilizing a system to achieve desired goals and recover
efficiently and gracefully from problem situations.
5. Control: The user has the right to be in control of the system and to be able to get the system to
respond to a request for attention.
6. Feedback: The user has the right to a systen that provides clear, understandable, and accurate
information regarding the task it is performing and the progress toward completion.
7. Dependencies: The user has the right to be informed clearly about all systems requirements for
successfully using software or hardware.
8. Scope: The user has the right to know the limits of the system’s capabilities.
9. Assistance: The user has the right to communicate with the technology provider and receive a
thoughtful and helpful response when raising concerns.
10. Usability: The user should be the master of software and hardware technology, not vice versa.
Products should be natural and intuitive to use.
PRINCIPLES OF USER-CENTERED DESIGN
Although IT professionals have different views about interface design, most would
agree that good design depends on seven basic principles, which are described in the
following sections.
Understand the Business
The interface designer must understand the underlying business functions and how the
system supports individual, departmental, and enterprise goals. The overall objective is
to design an interface that helps users to perform their jobs. A good starting point might
be to analyze a functional decomposition diagram (FDD). As you learned in Chapter 4,
an FDD is a graphical representation of business functions that starts with major func-
tions, and then breaks them down into several levels of detail. An FDD can provide a
checklist of user tasks that you must include in the interface design.
Maximize Graphical Effectiveness
Studies show that people learn better visually. The immense popularity of Apple Mac OS
and Microsoft Windows is largely the result of their graphical user interfaces that are
easy to learn and use. A well-designed interface can help users learn a new system rap-
idly, and be more productive. Also, in a graphical environment, a user can display and
work with multiple windows on a single screen and transfer data between programs. If
the interface supports data entry, it must follow the guidelines for data entry screen
design that are discussed later in this chapter.
Think Like a User
A systems analyst should understand user experience, knowledge, and skill levels. If a
wide range of capability exists, the interface should be flexible enough to accommodate
novices as well as experienced users.
To develop a user-centered interface, the designer must learn to think like a user and
see the system through a user’s eyes. The interface should use terms and metaphors that
are familiar to users. Users are likely to have real-world experience with many other
VIDEO
LEARNING
SESSIONS
To learn more
about FDDs,visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com and navigate
to the Video
Learning Sessions
for this book. These
sessions can help
you understand key
concepts, practice
your skills, and
check your work.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

342
Chapter 8 User Interface Design
Designing the User Interface
TOOLKIT TIME
The Communication
Tools in Part A of
the Systems Analyst’s
Toolkit can help you
communicate effec-
tively with users. To
learn more about
these tools, turn to
Part A of the four-
part Toolkit that
follows Chapter 12.
machines and devices that provide feedback, such as automobiles, ATM machines, and
microwave ovens. Based on that experience, users will expect useful, understandable
feedback from a computer system.
Use Models and Prototypes
From a user’s viewpoint, the interface is the most critical part of the system design
because it is where he or she interacts with the system — perhaps for many hours each
day. It is essential to construct models and prototypes for user approval. An interface
designer should obtain as much feedback as possible, as early as possible. You can pres-
ent initial screen designs to users in the form of a storyboard, which is a sketch that
shows the general screen layout and design. The storyboard can be created with soft-
ware, or drawn freehand. Users must test all aspects of the interface design and provide
feedback to the designers. User input can be obtained in interviews, via questionnaires,
and by observation. Interface designers also can obtain data, called usability metrics, by
using software that can record and measure user interaction with the system.
Focus on Usability
The user interface should include all tasks, commands, and communications between users
and the information system. The screen in Figure 8-10 shows the main options for a student
registration system. Each screen option leads to another screen, with more options. The
objective is to offer a reasonable number of choices that a user easily can comprehend. Too
many options on one screen can confuse a user — but too few options increase the number
of submenu levels and complicate the navigation process. Often, an effective strategy is to
present the most common choice as a default, but allow the user to select other options.
Invite Feedback
Even after the system is operational, it is important to monitor system usage and
solicit user suggestions. You can determine if system features are being used as
intended by observing and surveying users. Sometimes, full-scale operations high-
light problems that were not apparent when the prototype was tested. Based on user
feedback, Help screens might need revision and design changes to allow the system
to reach its full potential.
Document Everything
You should document all screen designs for later
use by programmers. If you are using a CASE tool
or screen generator, number the screen designs and
save them in a hierarchy similar to a menu tree.
User-approved sketches and storyboards also can
be used to document the user interface.
By applying basic user-centered design princi-
ples, a systems analyst can plan, design, and deliver
a successful user interface.
DESIGNING THE USER INTERFACE
It is important to design a user interface that is easy
to use, attractive, and efficient. When you create a
user interface, you should follow eight basic guide-
lines. These guidelines also apply to data entry screen
design, which is discussed later in this chapter.
FIGURE 8-10 The opening screen displays the main options for
a student registration system. A user can click an option to see
lower-level actions and menu choices.

Designing the User Interface 343
Phase 3 Systems Design
FIGURE 8-11 Cognetics Corporation offers user interface design services and training.
1. Design a transparent interface.
2. Create an interface that is easy to learn and use.
3. Enhance user productivity.
4. Make it easy for users to obtain help or correct errors.
5. Minimize input data problems.
6. Provide feedback to users.
7. Create an attractive layout and design.
8. Use familiar terms and images.
Good user interface design is based on a combination of ergonomics, aesthetics, and
interface technology. Ergonomics describes how people work, learn, and interact with
computers; aesthetics focuses on how an interface can be made attractive and easy to
use; and interface technology provides the operational structure required to carry out
the design objectives. As shown in Figure 8-11, Cognetics Corporation offers user inter-
face design services. Cognetics stresses that an interface must be effective, efficient,
engaging, error tolerant, and easy to learn.
The following sections provide examples of the basic user interface design guidelines.
As mentioned earlier, many of the specific points also apply to data entry screen design,
which is discussed later in this chapter.
Design a Transparent Interface
• Facilitate the system design objectives, rather than calling attention to the interface.
• Create a design that is easy to learn and remember.
• Design the interface to improve user efficiency and productivity.
• Write commands, actions, and system responses that are consistent and predictable.
• Minimize data entry problems.
• Allow users to correct errors easily.
• Create a logical and attractive layout.

344
Chapter 8 User Interface Design
Designing the User Interface
Create an Interface that Is Easy to Learn and Use
• Clearly label all controls, buttons, and icons.
• Select only those images that users can understand easily, and
provide on-screen instructions that are logical, concise, and
clear. Users become very frustrated when they see images or
messages that are confusing or misleading. For example, the
top screen in Figure 8-12 shows four control buttons, but
many of them do not have an obvious meaning. In the bottom
screen, notice the difference in the messages: The first five pro-
vide little or no information. The last message is the only one
that is easy to understand.
• Show all commands in a list of menu items, but dim any com-
mands that are not currently available.
• Make it easy to navigate or return to any level in the menu structure.
Enhance User Productivity
• Organize tasks, commands, and functions in groups that
resemble actual business operations. You should group func-
tions and submenu items in a multilevel menu hierarchy, or
tree, that is logical and reflects how users typically perform
the tasks. Figure 8-13 shows an example of a menu hierarchy
for an order tracking system.
• Create alphabetical menu lists or place the selections used fre-
quently at the top of the menu list. No universally accepted
approach to menu item placement exists. The best strategy is
to design a prototype and obtain feedback from users. Some
applications even allow menus to show recently used com-
mands first. Some users like that feature, but others might find
it distracting. The best approach is to offer a choice, and let
users decide.
• Provide shortcuts so experienced users can avoid multiple menu
levels. You can create shortcuts using hot keys that allow a user
to press the alt key + the underlined letter of a command.
• Use default values if the majority of values in a field are the same. For example, if
90% of the firm’s customers live in Albuquerque, use Albuquerque as the default
value in the City field.
• Use a duplicate value function that enables users to insert the value from the same
field in the previous record.
• Provide a fast-find feature that displays a list of possible values as soon as users
enter the first few letters.
• Use a natural language feature that allows users to type commands or requests in
normal English phrases. For example, many applications allow users to request Help
by typing a question into a dialog box. The software then uses natural language tech-
nology to retrieve a list of topics that match the request. Most users like natural lan-
guage features because they do not have to memorize a series of complex commands
and syntax. According to the American Association for Artificial Intelligence (AAAI),
the value of being able to communicate with computers in everyday “natural” lan-
guage cannot be overstated. Natural language technology is used in speech recogni-
tion systems, text-to-speech synthesizers, automated voice response systems, Web
search engines, text editors, and language instruction materials.
FIGURE 8-12 In the example at the top, the
icons do not have a clear message. In the Help
text examples at the bottom, only one
message is understandable. The others would
frustrate and annoy most users.

Designing the User Interface 345
Phase 3 Systems Design
Make It Easy for Users to
Obtain Help or Correct Errors
• Ensure that help is always
available. Help screens should
provide information about
menu choices, procedures,
shortcuts, and errors.
• Provide user-selected help
and context-sensitive help.
User-selected help displays
information when the user
requests it. By making appro-
priate choices through the
menus and submenus, the
user eventually reaches a
screen with the desired infor-
mation. Figure 8-14 shows the
main Help screen for the student registration system. Context-sensitive help
offers assistance for the task in progress. Figure 8-15 on the next page shows a
Help dialog box that is displayed if a user requests help while entering data
into the ADVISOR ASSIGNED field. Clicking the Close button returns the user
to the current task.
• Provide a direct route for users to return to the point from where help was
requested. Title every help screen
to identify the topic, and keep help
text simple and concise. Insert
blank lines between paragraphs to
make Help easier to read, and pro-
vide examples where appropriate.
• Include contact information, such as
a telephone extension or e-mail
address if a department or help desk
is responsible for assisting users.
• Require user confirmation before
data deletion (Are you sure?) and
provide a method of recovering
data that is deleted inadvertently.
Build in safeguards that prevent
critical data from being changed
or erased.
• Provide an Undo key or a menu
choice that allows the user to erad-
icate the results of the most recent
command or action.
• When a user-entered command
contains an error, highlight the
erroneous part and allow the user
to make the correction without
retyping the entire command.
• Use hypertext links to assist users as
they navigate through help topics.
Main Menu
Customer Order Tracking System
Orders ProductsCustomers
Add a New Customer
Update Customer Data
Delete a Customer
Enter a New Order
Modify Order Data
Cancel an Order
Enter a New Product
Update Product Data
Delete a Product
FIGURE 8-13 This menu hierarchy shows tasks, commands, and functions organized
into logical groups and sequences. The structure resembles a functional decomposition
diagram (FDD), which is a model of business functions and processes.
FIGURE 8-14 The main Help screen for a student registration system.

346
Chapter 8 User Interface Design
Designing the User Interface
Minimize Input Data Problems
• Create input masks, which are templates or pat-
terns that make it easier for users to enter data.
Also use data validation rules, which limit the
acceptable values that users can enter. More infor-
mation on input masks and data validation rules is
provided in the section on input design later in the
chapter.
• Display event-driven messages and reminders. Just
as context-sensitive help is important to users, it is
desirable to display an appropriate message when it
is time for the user to perform a certain task. For
example, when exiting the system, a message might
ask users if they want a printed report of the data
entered during the recent session.
• Establish a list of predefined values that users can click to select. Predefined val-
ues prevent spelling errors, avoid inappropriate data in a field, and make the
user’s job easier — the input screen displays a list of acceptable values and the
user simply points and clicks the choice.
• Build in rules that enforce data integrity. For example, if the user tries to enter an
order for a new customer, the customer must be added before the system will
accept the order data.
Provide Feedback to Users
• Display messages at a logical place on the screen, and be consistent.
• Alert users to lengthy processing times or delays. Give users an on-screen progress
report, especially if the delay is lengthy.
• Allow messages to remain on the screen long enough for users to read them. In
some cases, the screen should display messages until the user takes some action.
• Let the user know whether the task or operation was successful or not. For exam-
ple, use messages such as Update completed, All transactions have been posted, or
ID Number not found.
• Provide a text explanation if you use an icon or image on a control button. This
helps the user to identify the control button when moving the mouse pointer over
the icon or image.
• Use messages that are specific, understandable, and professional. Avoid messages
that are cute, cryptic, or vague, such as: ERROR — You have entered an unac-
ceptable value, or Error DE4-16. Better examples are: Enter a number between 1
and 5; Customer number must be numeric. Please re-enter a numeric value; or
Call the Accounting Department, Ext. 239 for assistance.
FIGURE 8-15 A context-sensitive dialog box displays if a
user requests help while entering data into the ADVISOR
ASSIGNED field. Clicking the Close button returns the user
to the task.

Designing the User Interface 347
Phase 3 Systems Design
Create an Attractive Layout and Design
• Use appropriate colors to highlight different areas of the screen; avoid gaudy and
bright colors.
• Use special effects sparingly. For example, animation and sound might be effective
in some situations, but too many special effects can be distracting and annoying
to a user, especially if he or she must view them repeatedly.
• Use hyperlinks that allow users to jump to related topics.
• Group related objects and information. Visualize the screen the way a user will
see it, and simulate the tasks that the user will perform.
• Screen density is important. Keep screen displays uncluttered, with enough white
space to create an attractive, readable design.
• Display titles, messages, and instructions in a consistent manner and in the same
general locations on all screens.
• Use consistent terminology. For example, do not use the terms delete, cancel, and
erase to indicate the same action. Similarly, the same sound always should signal
the same event.
• Ensure that commands always will have the same effect. For example, if the
BACK control button returns a user to the prior screen, the BACK command
always should perform that function throughout the application.
• Ensure that similar mouse actions will produce the same results throughout the
application. The results of pointing, clicking, and double-clicking should be con-
sistent and predictable.
• When the user enters data that completely fills the field, do not move automati-
cally to the next field. Instead, require the user to confirm the entry by pressing
the enter key or tab key at the end of every fill-in field.
Use Familiar Terms and Images
• Remember that users are accustomed to a pattern of red = stop, yellow = caution,
and green = go. Stick to that pattern and use it when appropriate to reinforce on-
screen instructions.
• Provide a keystroke alternative for each menu command, with easy-to-remember
letters, such as File, Exit, and Help.
• Use familiar commands if possible, such as Cut, Copy, and Paste.
• Provide a Windows look and feel in your interface design if users are familiar
with Windows-based applications.
• Avoid complex terms and technical jargon; instead, select terms that come from
everyday business processes and the vocabulary of a typical user.
Add Control Features
The designer can include many features, such as menu bars, toolbars, dialog boxes, text
boxes, toggle buttons, list boxes, scroll bars, drop-down list boxes, option buttons, check
boxes, command buttons, and calendar controls, among others. Figure 8-16 on the next
page shows a data entry screen for the student registration system. The screen design uses
several features that are described in the following section.

348
Chapter 8 User Interface Design
Designing the User Interface
The menu bar at the top of the screen displays the main menu options. Some software
packages allow you to create customized menu bars and toolbars. You can add a shortcut
feature that lets a user select a menu command either by clicking the desired choice or by
pressing the alt key + the underlined letter. Some forms also use a toolbar that contains
icons or buttons that represent shortcuts for executing common commands.
A command button initiates an action such as printing a form or requesting help. For
example, when a user clicks the Find Student command button in Figure 8-16, a dialog
box opens with instructions, as shown in Figure 8-17.
Other design features include dialog boxes, text boxes, toggle buttons, list boxes,
scroll bars, drop-down list boxes, option or radio buttons, check boxes, and calendar
controls. These features are described as follows:
• A dialog box allows a user to enter information about a task that the system will
perform.
• A text box can display messages or provide a place for a user to enter data.
• A toggle button is used to represent on or off status — clicking the toggle button
switches to the other status.
• A list box displays a list of choices
that the user can select. If the list
does not fit in the box, a scroll bar
allows the user to move through the
available choices.
• A drop-down list box displays the
current selection; when the user
clicks the arrow, a list of the avail-
able choices displays.
• An option button, or radio button,
represents one choice in a set of
options. The user can select only one
option at a time, and selected
options show a black dot.
• A check box is used to select one or
more choices from a group. Selected
options are represented by a check-
mark or an X.
• A calendar control allows the user to
select a date that the system will use
as a field value.
Screen design requires a sense of aesthet-
ics as well as technical skills. You should
design screens that are attractive, easy to
use, and workable. You also should obtain
user feedback early and often as the design
process continues.
The opening screen is especially impor-
tant because it introduces the application
and allows users to view the main options.
When designing an opening screen, you can
use a main form that functions as a switch-
board. A switchboard uses command but-
tons that enable users to navigate the
system and select from groups of related
FIGURE 8-17 When a user clicks the Find Student command button, a dialog
box is displayed with instructions.
FIGURE 8-16 A data entry screen for the student registration system.
This screen uses several design features that are described in the text.

Designing the User Interface 349
Phase 3 Systems Design
FIGURE 8-18 An example of a switchboard and data entry screen for a project management system.
drop-down
list box
tasks. Figure 8-18 shows the switchboard and a data entry screen for a project manage-
ment system. Notice the drop-down list box that allows users to enter a status code sim-
ply by clicking a selection.
CASE IN POINT 8.2: BOOLEAN TOYS
When should a systems analyst decide a design issue, and when should users be allowed to
select what works best for them? The field of ergonomics is concerned with improving the
work environment and studying how users interact with their environment.
Suppose you are a systems analyst studying the order processing system at Boolean Toys, a
fast-growing developer of software for preschool children. You know that many data entry
users have complained about the input screens. Some users would prefer to rearrange the
order of the fields; others would like to change the background color on their screens; still
others want shortcuts that would allow them to avoid a series of introductory screens.
What if Boolean’s users could customize their own data entry screens without assistance
from the IT staff by using a menu-driven utility program? What would be the pros and cons of
such an approach?

350
Chapter 8 User Interface Design
Output Design
OUTPUT DESIGN
Before designing output, ask yourself several questions:
• What is the purpose of the output?
• Who wants the information, why is it needed, and how will it be used?
• What specific information will be included?
• Will the output be printed, viewed on-screen, or both? What type of device will
the output go to?
• When will the information be provided, and how often must it be updated?
• Do security or confidentiality issues exist?
The design process should not begin until you have answered those questions. Some
of the information probably was gathered during the systems analysis phase. To com-
plete your understanding, you should meet with users to find out exactly what kind of
output is needed. You can use prototypes and mock-ups to obtain feedback throughout
the design process. Your answers will affect your output design strategies, as you will see
in the next section.
In today’s interconnected world, output from one system often becomes input for
another system. For example, within a company, production data from the manufactur-
ing system becomes input to the inventory system. The same company might transmit
employee W-2 tax data to the IRS system electronically. A company employee might
use tax preparation software to file a tax return online, receive a refund deposited
directly into his or her bank account, and see the deposit reflected on the bank’s infor-
mation system.
Although digital technology has opened new horizons in business communications,
printed material still is a common type of output, and specific considerations apply to
it. For those reasons, printed and screen reports are discussed in a separate section,
which follows.
Overview of Report Design
Although many organizations strive to reduce the flow of paper and printed reports, few
firms have been able to eliminate printed output totally. Because they are portable,
printed reports are convenient, and even necessary in some situations. Many users find it
handy to view screen output, then print the information they need for a discussion or
business meeting. Printed output also is used in turnaround documents, which are out-
put documents that are later entered back into the same or another information system.
In some areas, your telephone or utility bill, for example, might be a turnaround docu-
ment printed by the company’s billing system. When you return the required portion of
the bill with your check, the bill is scanned into the company’s accounts receivable sys-
tem to record the payment accurately.
Designers use a variety of styles, fonts, and images to produce reports that are attrac-
tive and user friendly. Whether printed or viewed on-screen, reports must be easy to read
and well organized. Rightly or wrongly, some managers judge an entire project by the
quality of the reports they receive.
Database programs such as Microsoft Access include a variety of report design
tools, including a Report Wizard, which is a menu-driven feature that designers can
use to create reports quickly and easily. Microsoft Access also provides a comprehen-
sive guide to designing reports, as shown in Figure 8-19.
In addition to built-in design tools, popular software packages such as Crystal
Reports offer powerful features that help designers deal with professional-level design
issues across the enterprise, as shown in Figure 8-20.

Output Design 351
Phase 3 Systems Design
FIGURE 8-19 Microsoft offers suggestions, tips, and a video that can help you design better
forms and reports.
FIGURE 8-20 Crystal Reports is a popular, powerful, report design package.

352
Chapter 8 User Interface Design
Output Design
Although the vast majority of reports are designed graphically, some systems still produce
one or more character-based reports that use a character set with fixed spacing. Printing
character-based reports on high-speed impact printers is a fast, inexpensive method for pro-
ducing large-scale reports, such as payroll or inventory reports, or registration rosters at a
school. This is especially true if multiple copies are required.
Types of Reports
To be useful, a report must include the information that a user needs. From a user’s point of
view, a report with too little information is of no value. Too much information, however,
can make a report confusing and difficult to understand. When designing reports, the essen-
tial goal is to match the report to the user’s specific information needs. Depending on their
job functions, users might need one or more of the reports described in the following
sections.
DETAIL REPORTS A detail report produces one or more lines of output for each
record processed. Each line of output printed is called a detail line. Figure 8-21 shows a
simple detail report of employee hours for a chain of retail stores. Notice that one
detail line prints for each employee. All the fields in the record do not have to be
printed, nor do the fields have to be printed in the sequence in which they appear in the
record. An employee paycheck that has multiple output lines for a single record is
another example of a detail report.
Because it contains one or more lines for each record, a detail report can be quite
lengthy. Consider, for example, a large auto parts business. If the firm stocks 3,000 parts,
then the detail report would include 3,000 detail lines on approximately 50 printed pages.
A user who wants to locate any part in short supply has to examine 3,000 detail lines to
find the critical items. A much better alternative is to produce an exception report.
Employee Hours
week ending date: 6/24/11
Store
Number
Employee
Name Position
Regular
Hours
Overtime
Hours
Total
Hours
Page 1
8
8
8
8
8
8
17
17
17
17
17
Andres, Marguerite
Bogema, Michelle
Davenport, Kim
Lemka, Susan
Ramirez, Rudy
Ullery, Ruth
De Martini, Jennifer
Haff, Lisa
Rittenbery, Sandra
Wyer, Elizabeth
Zeigler, Cecille
Clerk
Clerk
Asst Mgr
Clerk
Manager
Clerk
Clerk
Manager
Clerk
Clerk
Clerk
20.0
12.5
40.0
32.7
40.0
20.0
40.0
40.0
40.0
20.0
32.0
0.0
0.0
5.0
0.0
8.5
0.0
8.4
0.0
11.0
0.0
0.0
20.0
12.5
45.0
32.7
48.5
20.0
48.4
40.0
51.0
20.0
32.0
detail lines
FIGURE 8-21 A detail report with one printed line per employee.
EXCEPTION REPORTS An exception report displays only those records that meet a spe-
cific condition or conditions. Exception reports are useful when the user wants informa-
tion only on records that might require action, but does not need to know the details. For
example, a credit manager might use an exception report to identify only those customers
with past due accounts, or a customer service manager might want a report on all pack-
ages that were not delivered within a specified time period. Figure 8-22 shows an excep-
tion report that includes information only for those employees who worked overtime,
instead of listing information for all employees.
To learn more about
printed output, visit
the Management
Information Systems
CourseMate Web
site at www.
cengagebrain.
com, navigate to
On the Web Links
for this chapter, and
locate the Printed
Output link.

www.cengagebrain.com

www.cengagebrain.com

www.cengagebrain.com

Output Design 353
Phase 3 Systems Design
Overtime Report
week ending date: 6/24/11
Store
Number Position
Overtime
Hours
Page 1
8
17
Asst Mgr
Manager
Clerk
Clerk
5.0
8.5
13.5
8.4
11.0
19.4
32.9
Store 8 totals:
Store 17 totals:
Grand total:
Employee
Name
Davenport, Kim
Ramirez, Rudy
De Martini, Jennifer
Rittenbery, Sandra
FIGURE 8-22 An exception report that shows information only for employees who worked overtime.
SUMMARY REPORTS Upper-level managers often want to see total figures and do not
need supporting details. A sales manager, for example, might want to know total sales
for each sales representative, but not want a detail report listing every sale made by
them. In that case, a summary report is appropriate. Similarly, a personnel manager
might need to know the total regular and overtime hours worked by employees in each
store but might not be interested in the number of hours worked by each employee. For
the personnel manager, a summary report such as the one shown in Figure 8-23 would
be useful. Generally, reports used by individuals at higher levels in the organization
include less detail than reports used by lower-level employees.
Employee Hours Summary
week ending date: 6/24/11
Store
Number
Regular
Hours
Overtime
Hours
Total
Hours
Page 1
8
17
181.2
172.0
337.2
13.5
19.4
32.9
194.7
191.4
370.1Totals:
FIGURE 8-23 A summary report displays totals without showing details.
User Involvement in Report Design
Printed reports are an important way of delivering information, so users should approve
all report designs in advance. The best approach is to submit each design for approval as
you complete it, rather than waiting until you finish all report designs.
When designing a report, you should prepare a sample report, called a mock-up, or
prototype, for users to review. The sample should include typical field values and con-
tain enough records to show all the design features. Depending on the type of printed
output, you can create a Word document or use a report generator to create mock-up
reports. After a report design is approved, you should document the design by creating
a report analysis form, which contains information about the layout, fields, frequency,
distribution, data security considerations, and other issues.

354
Chapter 8 User Interface Design
Output Design
Report Design Principles
Printed reports must be attractive, professional, and easy to read. For example, a
well-designed detail report should provide totals for numeric fields. Notice that the
report shown in Figure 8-21 on page 352 lacked subtotals and grand totals for regular
hours, overtime hours, and total hours. Figure 8-24 shows the same report with subto-
tals and grand totals added. In the example, the Store Number field is called a control
field because it controls the output.
When the value of a control field changes, a control break occurs. A control break
usually causes specific actions, such as printing subtotals for a group of records. That
type of detail report is called a control break report. To produce a control break report,
the records must be arranged, or sorted, in control field order. The sorting can be done
by the report program itself, or in a previous procedure.
Good report design requires effort and attention to detail. To produce a well-
designed report, the analyst must consider design features such as report headers and
footers, page headers and footers, column headings and alignment, column spacing, field
order, and grouping of detail lines. The report shown in Figure 8-24 shows examples of
these design features.
REPORT HEADERS AND FOOTERS Every report should have a report header and a
report footer. The report header, which appears at the beginning of the report, identifies
the report, and contains the report title, date, and other necessary information. The
report footer, which appears at the end of the report, can include grand totals for
numeric fields and other end-of-report information, as shown in Figure 8-24.
Employee Hours
week ending date: 6/24/11
Store
Number
Employee
Name Position
Regular
Hours
Overtime
Hours
Total
Hours
Page 1
8
8
8
8
8
8
17
17
17
17
17
Andres, Marguerite
Bogema, Michelle
Davenport, Kim
Lemka, Susan
Ramirez, Rudy
Ullery, Ruth
De Martini, Jennifer
Haff, Lisa
Rittenbery, Sandra
Wyer, Elizabeth
Zeigler, Cecille
Clerk
Clerk
Asst Mgr
Clerk
Manager
Clerk
Clerk
Manager
Clerk
Clerk
Clerk
20.0
12.5
40.0
32.7
40.0
20.0
165.2
40.0
40.0
40.0
20.0
32.0
172.0
337.2
0.0
0.0
5.0
0.0
8.5
0.0
13.5
8.4
0.0
11.0
0.0
0.0
19.4
32.9
20.0
12.5
45.0
32.7
48.5
20.0
178.7
48.4
40.0
51.0
20.0
32.0
191.4
370.1
Store 8 totals:
Store 17 totals:
Grand totals:
page header
report header
group footer
report footer
page footer
identifying fields hours fields
control break
on Store
Number field
FIGURE 8-24 The Employee Hours report is a detail report with control breaks, subtotals, and grand totals. Notice that
a report header identifies the report, a page header contains column headings, a group footer contains subtotals for each
store, a report footer contains grand totals, and a page footer identifies the page number.

Output Design 355
Phase 3 Systems Design
PAGE HEADERS AND FOOTERS Every page should include a page header, which
appears at the top of the page and includes the column headings that identify the data.
The headings should be short but descriptive. Avoid abbreviations unless you know that
users will understand them clearly. Either a page header or a page footer, which appears
at the bottom of the page, is used to display the report title and the page number.
COLUMN HEADING ALIGNMENT Figure 8-25 shows several column heading
alignment options. In Example 1, the left-justified column headings do not work well
with numeric fields because the amount 1.25 would print past the right edge of the
AMOUNT heading. In Example 2, the right-justified headings cause a problem with
alphanumeric fields, because none of the characters in a short name would print under
any part of the NAME heading. Centering headings over maximum field widths, as
shown in Example 3, is not ideal when many of the actual values are shorter than the
maximum width. Many designers prefer Example 4, where headings are left-justified over
alphanumeric fields and right-justified over numeric fields.
NAME
XXXXXXXXXXXXXXXXXXXXXXXX
NAME
XXXXXXXXXXXXXXXXXXXXXXXX
NAME
XXXXXXXXXXXXXXXXXXXXXXXX
NAME
XXXXXXXXXXXXXXXXXXXXXXXX
NUMBER
ZZZ9
NUMBER
ZZZ9
NUMBER
ZZZ9
NUMBER
ZZZ9
AMOUNT
ZZZ,ZZ9.99
AMOUNT
ZZZ,ZZ9.99
AMOUNT
ZZZ,ZZ9.99
AMOUNT
ZZZ,ZZ9.99
FIGURE 8-25 Four different column heading alignment options.
COLUMN SPACING You should space columns of information carefully. A crowded
report is hard to read, and large gaps between columns make it difficult for the eye to
follow a line. Columns should stretch across the report, with uniform spacing and
suitable margins at top, bottom, right, and left. Some report designers use landscape
orientation when working with a large number of columns; others prefer to break the
information into more than one report. In some cases, a smaller point size will solve
the problem, but the report must remain readable and acceptable to users.
FIELD ORDER Fields should be displayed and grouped in a logical order. For example,
the report shown in Figure 8-24 shows the detail lines printed in alphabetical order
within store number, so the store number is in the left column, followed by the employee
name. The employee position relates to the employee’s name, so the items are adjacent.
The three hours fields also are placed together.
GROUPING DETAIL LINES Often, it is meaningful to arrange detail lines in groups,
based on a control field. For example, using the department number as a control field,
individual employees can be grouped by department. You can print a group header

356
Chapter 8 User Interface Design
Output Design
above the first detail line and a group footer after the last detail line in a group, as
shown in Figure 8-24.
Database programs such as Microsoft Access make it easy to create groups and sub-
groups based on particular fields. You also can have the report calculate and display
totals, averages, record counts, and other data for any group or subgroup. For example,
in a large company, you might want to see total sales and number of sales broken down
by product within each of the 50 states. The screen shown in Figure 8-26 is an Access
Help screen that refers to a step-by-step process for creating multilevel grouping.
FIGURE 8-26 Microsoft Access includes an easy-to-use tool for grouping data.
REPEATING FIELDS Report design is an art, not a science. User involvement is essen-
tial, but users often don’t know what they want without seeing samples. For example,
consider the issue of repeating fields. The sample report in Figure 8-21 on page 352
repeats the store number on every row. Is that a good thing? The best advice is to ask
users what they think, and be guided accordingly. A similar issue exists with regard to
the overtime hours column. Is it better to print the zero overtime data, or only print
actual hours, so the data stands out clearly? Again, the best answer is usually the one
that works best for users.
CONSISTENT DESIGN Look and feel are important to users, so reports should be
uniform and consistent. When a system produces multiple reports, each report should
share common design elements. For example, the date and page numbers should print in
the same place on each report page. Abbreviations used in reports also should be consis-
tent. For example, when indicating a numeric value, it is confusing for one report to use #,
another NO, and a third NUM. Items in a report also should be consistent. If one report
displays the inventory location as a shelf number column followed by a bin number col-
umn, that same layout should be used on all inventory location reports.

Output Design 357
Phase 3 Systems Design
CASE IN POINT 8.3: LAZY EDDIE
Lynn Jennings is the IT manager at Lazy Eddie, a chain that specializes in beanbag chairs and
recliners. She asked Jan Lauten, a senior systems analyst, to review the large number of printed
reports that are distributed to Lazy Eddie’s 35 store managers. “Jan, I just can’t believe that
our people really read all of those reports,” Lynn said. “We constantly add new reports, and
we never seem to eliminate the old ones. Sometimes I think all we’re doing is keeping the
paper companies in business!” Jan replied, “I agree, but what can we do? The managers say
they want the reports, but I always see them stacked on top of file cabinets. I’ve never seen
anyone read a report.”
“I have an idea,” Lynn said. “I want you to come up with a procedure that requires users to
review and justify their information needs to see if they really use the reports we send them.
You could design a form that asks if the information still is required, and why. Try to get users
to decide if a report is worth the cost of producing it. Do you think you can do it?”
“Sure I can,” Jan replied. When Jan returned to her office, she wondered where to begin.
What advice would you give to Jan?
Output Technology
Although business information systems still provide most output as screen displays and
printed matter, technology is having an enormous impact on how people communicate
and obtain information. This trend is especially important to firms that use information
technology to lower their costs, improve employee productivity, and communicate effec-
tively with their customers.
In addition to screen output and printed matter, output can take many forms. The
system requirements document probably identified user output needs. Now, in the sys-
tems design phase, you will create the actual forms, reports, documents, and other
types of output. During this process, you must consider the format and how it will be
delivered, stored, and retrieved. The following sections explain various output types
and the technologies that are available to systems developers.
INTERNET-BASED INFORMATION DELIVERY Millions of firms use the Internet to
reach new customers and markets around the world. To support the explosive growth
in e-commerce, Web designers must provide user-friendly screen interfaces that display
output and accept input from customers. For example, a business can link its inventory
system to its Web site so the output from the inventory system is displayed as an online
catalog. Customers visiting the site can review the items, obtain current prices, and
check product availability.
Another example of Web-based output is a system that provides customized responses
to product or technical questions. When a user enters a product inquiry or requests techni-
cal support, the system responds with appropriate information from an on-site knowledge
base. Web-based delivery allows users to download a universe of files and documents to
support their information needs. For example, the Web provides consumers with instant
access to brochures, product manuals, and parts lists; while prospective home buyers can
obtain instant quotes on mortgages, insurance, and other financial services.
To reach prospective customers and investors, companies also use a live or prerecorded
Webcast, which is an audio or video media file distributed over the Internet. Radio and TV
stations also use this technique to broadcast program material to their audiences.
E-MAIL E-mail is an essential means of internal and external business communication.
Employees send and receive e-mail on local or wide area networks, including the Internet.
Companies send new product information to customers via e-mail, and financial services
To learn more about
e-mail, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the E-Mail link.

www.cengagebrain.com

www.cengagebrain.com

358
Chapter 8 User Interface Design
Output Design
companies use e-mail messages to confirm online stock trades. Employees use e-mail to
exchange documents, data, and schedules and to share business-related information
they need to perform their jobs. In many firms, e-mail has virtually replaced traditional
memos and printed correspondence.
BLOGS Web-based logs, called blogs, are another form of Web-based output. Because
blogs are journals written from a particular point of view, they not only deliver facts to
Web readers, but also provide opinions. Blogs are useful for posting news, reviewing cur-
rent events, and promoting products.
INSTANT MESSAGING This popular form of communication is another way for
individuals and companies to communicate effectively over the Internet. Although some
users feel that it can be a distraction, others like the constant flow of communication,
especially as a team member in a collaborative situation.
WIRELESS DEVICES Messages and data can be transmitted to a wide array of mobile
devices, including PDAs, handheld computers, smart cell phones, and similar wireless prod-
ucts that combine portable computing power, multimedia capability, and Internet access.
DIGITAL AUDIO, IMAGES, AND VIDEO Sounds, images, and video clips can be
captured, stored in digital format, and transmitted as output to users who can
reproduce the content.
Audio or video output can be attached to an e-mail message or inserted as a clip in a
Microsoft Word document, as shown in Figure 8-27. Businesses also use automated sys-
tems to handle voice transactions and provide information to customers. For example,
using a telephone keypad, a customer can confirm an airline seat assignment, check a
credit card balance, or determine the current price of a mutual fund.
If a picture is worth a thousand words, then digital images and video clips certainly
are high-value output types that offer a whole new dimension. For example, an insur-
ance adjuster with a digital camera phone can take a picture, submit the image via a
wireless device, and receive immediate authorization to pay a claim on the spot. If
images are a valuable form of output, video clips are even better in some situations. For
example, video clips provide online virtual tours that allow realtors to show off the best
features of homes they are marketing. The user can zoom in or out, and rotate the
image in any direction.
PODCASTS A podcast is a specially formatted digital audio file that can be downloaded
by Internet users from a variety of content providers. Many firms use podcasts as sales
and marketing tools, and to communicate with their own employees. Using software such
as iTunes, you can receive a podcast, launch the file on your computer, and store it on
your portable player. Podcasts can include images, sounds, and video.
AUTOMATED FACSIMILE SYSTEMS An automated facsimile or faxback system allows
a customer to request a fax using e-mail, via the company Web site, or by telephone. The
response is transmitted in a matter of seconds back to the user’s fax machine. Although
most users prefer to download documents from the Web, many organizations, including
the U.S. Department of Transportation, still offer an automated faxback service as
another way to provide immediate response 24 hours a day.
COMPUTER OUTPUT TO MICROFILM (COM) Computer output to microfilm (COM)
is often used by large firms to scan and store images of original documents to provide
high-quality records management and archiving. COM systems are especially important
for legal reasons, or where it is necessary to display a signature, date stamp, or other
visual features of a document.

Output Design 359
Phase 3 Systems Design
COMPUTER OUTPUT TO DIGITAL MEDIA This process is used when many paper doc-
uments must be scanned, stored in digital format, and retrieved quickly. For example, if
an insurance company stores thousands of paper application forms, special software can
treat the documents as data and extract information from a particular column or area on
the form. Digital storage media can include magnetic tape, CDs, DVDs, and high-density
laser disks.
SPECIALIZED FORMS OF OUTPUT An incredibly diverse marketplace requires many
forms of specialized output and devices such as these:
• Portable, Web-connected devices that can run applications, handle multimedia
output, and provide powerful, multipurpose communication for users
• Retail point-of-sale terminals that handle computer-based credit card transac-
tions, print receipts, and update inventory records
• Automatic teller machines (ATMs) that can process bank transactions and print
deposit and withdrawal slips
• Special-purpose printers that can produce labels, employee ID cards, driver’s
licenses, gasoline pump receipts, and, in some states, lottery tickets
• Plotters that can produce high-quality images such as blueprints, maps, and
electronic circuit diagrams
• Electronic detection of data embedded in credit cards, bank cards, and employee
identification cards
FIGURE 8-27 Audio or video clips can be attached to an e-mail message or inserted in a document.
The recipient can double-click the link or icon and a media player opens the file.

360
Chapter 8 User Interface Design
Input Design
INPUT DESIGN
No matter how data enters an information system, the quality of the output is only as
good as the quality of the input. The term garbage in, garbage out (GIGO), is familiar to
IT professionals, who know that the best time to avoid problems is when the data is
entered. The objective of input design is to ensure the quality, accuracy, and timeliness of
input data.
Good input design requires attention to human factors as well as technology issues.
This section includes a discussion of source documents, data entry screen design, input
masks, and data validation rules. The final topic, input technology, examines devices
and techniques that can speed up the input process, reduce costs, and handle new forms
of data.
Source Documents and Forms
A source document collects input
data, triggers or authorizes an input
action, and provides a record of the
original transaction. During the
input design stage, you develop
source documents that are easy to
complete and use for data entry.
Source documents generally are
paper-based, but also can be pro-
vided online. Either way, the design
considerations are the same.
Consider a time when you strug-
gled to complete a poorly designed
form. You might have encountered
insufficient space, confusing instruc-
tions, or poor organization, all symp-
toms of incorrect form layout. Good
form layout makes the form easy to
complete and provides enough space,
both vertically and horizontally, for
users to enter the data. A form should
indicate data entry positions clearly
using blank lines or boxes and
descriptive captions. Figure 8-28
shows several techniques for using
line and boxed captions in source
documents, and an example of check
boxes, which are effective when a
user must select choices from a list.
The placement of information on
a form also is important. Source doc-
uments typically include most of the
zones shown in Figure 8-29. The
heading zone usually contains the
company name or logo and the title
and number of the form. The control
zone contains codes, identification
information, numbers, and dates that
are used for storing completed forms. FIGURE 8-28 Examples of caption techniques for source documents.

Input Design 361
Phase 3 Systems Design
The instruction zone contains instructions for completing the
form. The main part of the form, called the body zone, usually
takes up at least half of the space on the form and contains
captions and areas for entering variable data. If totals are
included on the form, they appear in the totals zone. Finally,
the authorization zone contains any required signatures.
Information should flow on a form from left to right and
top to bottom to match the way users read documents natu-
rally. That layout makes the form easy to use for the individ-
ual who completes the form, and for users who enter data
into the system using the completed form. You can review
samples of source document design that appear in the SWL
case study on pages 382–387.
The same user-friendly design principles also apply to printed
forms such as invoices and monthly statements, except that
heading information usually is preprinted. You should make col-
umn headings short but descriptive, avoid nonstandard abbrevia-
tions, and use reasonable spacing between columns for better
readability.
The order and placement of printed fields should be logi-
cal, and totals should be identified clearly. When designing a
preprinted form, you should contact the form’s vendor for
advice on paper sizes, type styles and sizes, paper and ink colors, field placement, and
other important form details. Your goal is to design a form that is attractive, readable,
and effective.
Layout and design also are important on Web-based forms, and you can find many
resources that will help you design efficient, user-friendly forms. For example, Figure 8-30
describes a book by Luke Wroblewski, a well-known author and consultant. His Web site
offers valuable suggestions, guidelines, and examples.
A major challenge of Web-based form design is that most people read and interact dif-
ferently with on-screen information compared to paper forms. In the view of Dr. Jakob
Nielsen, a pioneer in Web usability design, users simply do not read on the Web,
FIGURE 8-30 Luke Wroblewski’s Web site is a good source of information about form design.
Heading
Zone
Control
Zone
Instruction Zone
Body
Zone
Totals
Zone
FIGURE 8-29 Source document zones.

362
Chapter 8 User Interface Design
Input Design
as shown in Figure 8-31. Dr. Nielsen believes that users scan a page, picking out individ-
ual words and sentences. As a result, Web designers must use scannable text to capture
and hold a user’s attention. On his site, Dr. Nielson offers several suggestions for creating
scannable text. Also notice that Dr. Nielsen employs various usability metrics to measure
user responses, comprehension, and recall.
CASE IN POINT 8.4: TRUSTWORTHY INSURANCE COMPANY
Trustworthy Insurance maintains its headquarters in a large Midwestern city. Right now, a
debate is raging in the IT department. Several analysts want to use standard, company-wide
desktop screen layouts and icons. Others want to allow users to set up their screens any way
they choose. Those who argue for standardization point out that Trustworthy employs a num-
ber of part-time employees, who fill in for employees on vacation. Without a standard interface,
these people would have to reorient to every workstation, and the proponents of standardiza-
tion claim that would reduce productivity and increase costs. Those opposed to standardization
believe that employees are most productive when they have control over their workplace,
including the ability to design an interface they feel is attractive, even if no one else does.
You are on a committee that was charged with resolving this issue, and yours is the tie-breaking
vote. What will you decide, and why?
FIGURE 8-31 Dr. Jakob Nielsen believes that users scan Web material rather than reading it. He suggests that
Web designers must use scannable text and employ usability metrics to measure the results.

Input Design 363
Phase 3 Systems Design
Data Entry Screens
During input design, you determine how data will be captured and entered into the sys-
tem. Data capture uses an automated or manually operated device to identify source
data and convert it into computer-readable form. Examples of data capture devices
include credit card scanners and bar code readers. Data entry is the process of manually
entering data into the information system, usually in the form of keystrokes, mouse
clicks, touch screens, or spoken words.
Some users work with many features of the user interface; others spend most of their
time entering data. This section discusses design guidelines and concepts that primarily
relate to repetitive data entry. Notice that many of the guidelines are based on general
principles of interface design discussed in this chapter.
The most effective method of online data entry is form filling, in which a blank form
that duplicates or resembles the source document is completed on the screen. The user
enters the data and then moves to the next field. The following guidelines will help you
design data entry screens that are easy to learn and use.
1. Restrict user access to screen locations where data is entered. For example, when
the screen in Figure 8-32 appears, the system should position the insertion point
in the first data entry location. After the operator enters a Customer ID, the inser-
tion point should move automatically to the entry location for the next field
(Item). A user should be able to position the insertion point only in places where
data is entered on the form.
FIGURE 8-32 In this data screen for customer orders, the system generates an order number and logs the
current date and time.The user enters a customer ID. If the entry is valid, the system displays the customer
name so the user can verify it.The user then enters the item and quantity. Note that the description, price,
extended price, total price, sales tax, and grand total are retrieved automatically or calculated by the system.
To learn more about
data entry, visit the
Management
Information Systems
CourseMate Web
site at www.
cengagebrain.com,
navigate to On the
Web Links for this
chapter, and locate
the Data Entry link.

www.cengagebrain.com

www.cengagebrain.com

364
Chapter 8 User Interface Design
Input Design
2. Provide a descriptive caption for every field, and show the user where to enter the
data and the required or maximum field size. Typically, white boxes show the loca-
tion and length of each field. Other methods used to indicate field locations are
video highlighting, underscores, special symbols, or a combination of these features.
3. Display a sample format if a user must enter values in a field in a specific format.
For example, provide an on-screen instruction to let users know that the date
format is MMDDYY, and provide an example if the user must enter separators,
such as slashes. It is better to use an input mask, so users simply can enter 112711
to represent November 27, 2011.
4. Require an ending keystroke for every field. Pressing the enter key or the tab
key should signify the end of a field entry. Avoid a design that moves automati-
cally to the next item when the field is full. The latter approach requires an
ending keystroke only when the data entered is less than the maximum field
length. It is confusing to use two different data entry procedures.
5. Do not require users to type leading zeroes for numeric fields. For example, if a
three-digit project number is 045, the operator should be able to type 45 instead
of 045 before pressing the enter key. An exception to that rule might occur when
entering a date, where a leading zero is needed to identify single-digit months or
days, such as 06-04-2011.
6. Do not require users to type trailing zeroes for numbers that include decimals. For
example, when a user types a value of 98, the system should interpret the value as
98.00 if the field has been formatted to include numbers with two decimal places.
The decimal point is needed only to indicate nonzero decimal places, such as 98.76.
7. Display default values so operators can press the enter key to accept the sug-
gested value. If the default value is not appropriate, the operator can change it.
8. Use a default value when a field value will be constant for successive records or
throughout the data entry session. For example, if records are input in order by
date, the date used in the first transaction should be used as the default date until
a new date is entered, at which time the new date becomes the default value.
9. Display a list of acceptable values for fields, and provide meaningful error mes-
sages if the user enters an unacceptable value. An even better method, which was
described in the user interface design section, is to provide a drop-down list box
containing acceptable values that allows the user to select a value by clicking.
10. Provide a way to leave the data entry screen at any time without entering the
current record. This feature is available in the screen shown in Figure 8-33,
which is an enhanced version of the data entry screen shown in Figure 8-32 on
the previous page. Notice that the new version has command buttons that pro-
vide flexibility and allow the user to perform various functions. For example,
clicking the Cancel Order Without Entering button cancels the current order
and moves the insertion point back to the beginning of the form.
11. Provide users with an opportunity to confirm the accuracy of input data before
entering it by displaying a message such as, Add this record? (Y/N). A positive
response (Y) adds the record, clears the entry fields, and positions the insertion point
in the first field so the user can input another record. If the response is negative (N),
the current record is not added and the user can correct the errors.
12. Provide a means for users to move among fields on the form in a standard order or
in any order they choose. For example, when a user opens the form shown in Figure
8-33, the insertion point automatically will be in the first field. After the user fills in
each field and confirms the entry, the insertion point moves to the next field, in a

Input Design 365
Phase 3 Systems Design
command buttons
FIGURE 8-33 This is an enhanced version of the data entry screen shown in Figure 8-32. The new version has
command buttons that allow the user to perform various functions.
predetermined order. In a graphical user interface (GUI), the user can override the
standard field order and select field locations using the mouse or arrow keys.
13. Design the screen form layout to match the layout of the source document. If the
source document fields start at the top of the form and run down in a column, the
input screen should use the same design.
14. Allow users to add, change, delete, and view records. Figure 8-33 shows a screen
that can be used for entering orders, finding items, and finding customers. After
the operator enters a customer identification code, the order form displays cur-
rent values for all appropriate fields. Then the operator can view the data, make
changes, enter the order, or cancel without ordering. Messages such as: Apply
these changes? (Y/N) or Delete this record? (Y/N) should require users to confirm
the actions. Highlighting the letter N as a default response will avoid problems if
the user presses the enter key by mistake.
15. Provide a method to allow users to search for specific information, as shown in
Figure 8-33.
Input Masks
Use input masks, which are templates or patterns that restrict data entry and prevent
errors. Microsoft Access 2010 provides standard input masks for fields such as dates,
telephone numbers, postal codes, and Social Security numbers. In addition, you can cre-
ate custom input masks for any type of data, as shown in Figure 8-34 on the next page.
Notice that a mask can manipulate the input data and apply a specific format. For
example, if a user enters text in lowercase letters, the input mask >L