Information Technology

A. Graham Peace

Purpose What is the role of IT/MIS in the organization? What do IT people really do? How does technology work? What is eBusiness? How is it changing business? How does it impact you? What should we be doing?

The Role of MIS

Strategic

Planning

Managerial

Control

Operational

Control

Executive Support System

Decision Support System

Transaction Processing System

Database

Offi

ce A

utom

atio

n

What Do IT People Do? The key:

Meet the information needs of the business!

Systems Analysis Database Administration Programming Network Services Security Technical Infrastructure Planning

Strategic Planning

BusinessStrategy

TechnologyStrategy

Therefore, MIS folks must understand business, andManagement must understand MIS

Economic Effects of IT

ITCapitalCost

Labor

Production function

Q =1000

Q = 1000

Q2 Q1 Cost

Size

Transaction cost

T1

T2

Size

Agency administration cost

CostA1 A2

eBusiness: Trends and Definitions

“In the short run, all change is overestimated, but in the long run, the effects of change are

always underestimated.”

(Arthur C. Clarke)

Time to Reach 50Mil People

0

5

10

15

20

25

30

35

40

Radio TV Internet

Years

Facts and FiguresOnline Purchases

0

500

1000

1500

2000

2500

3000

1998 2001 2003 (proj) 2005 (proj)

$Billion

B2B: 80%

Facts and FiguresInternet Usage in Functional Areas

0%

10%20%

30%

40%50%

60%

70%80%

90%

100%

MIS Marketing Operations Exec.Mgt.

1996

1997

Small Businesses

0

10

20

30

40

50

60

70

80

1999 2000 2001 2002

Percent of US Small Businesses Conducting eBusiness

%

Web’s Impact on Small Business

General eBay

Non-eBay

Helped business grow 58% 82% 57%

Helped profitability 51% 79% 49%

Helped reduce costs 49% 78% 45%

Rely on Web to survive 15% 31% 14%

Web has had no impact 33% 15% 24%

(AC Nielsen, 2004)

B2B Bills Paid Via InternetIn Billions

0

1

2

3

4

5

6

7

8

1999 2009 (proj)(Gartner Group, 2000)

Facts and Figures

Global online population: 800M Web pages in existence: 9 Billion European net access by 12/2004: 250M European’s Banking By Net: 50M US Consumer Spending on Online

Content in 2002: $1.3 Billion

(Global Reach, 2004)

Global Web?

US

Non-US

84.7%

15.3%

US vs Non-US Web Sites

(Cyveillance, 2000)

(An Atlas of Cyberspace, 2004)

51%

25%

23%

1%

N.America

Asia/Pacific

Europe

Latin America

E-Commerce Worldwide: $6.8 Trillion (proj.)

(Forrester, 2004)

Average US User, Feb., 2004

(AC Nielsen, 2004)

Home Work

No. of Sessions/Visits 31 66

No. of Domains Visited 55 104

PC Time 27:52:29 78:00:30

Duration of Page View 00:53 00:59

Weekly US Online PurchasesThanksgiving Week, 2002

Travel: $575M Non-Travel Goods: $912M

TOTAL: $1.5 billion

(Media Metrix, eMarketer, 2002)

(20% of purchasers have used an online coupon)

History: Old vs New Pet Supplies:

Old: Petsmart up 152% New: Pets.com liquidated

Software: Old: E.Boutique up 100% New: Egghead.com Chapter 11

Food: Old: Albertson’s up 31% New: Webvan Chapter 11

Common Failure

010

20

3040

50

60

7080

90

100

B2C Dotcoms

Success

Failure

%

Success and Failure Rates of etail and Dotcom companies

(Merril Lynch, 2000; Gartner Group, 2000)

Book Value:Market Value

0

0.5

1

1.5

2

2.5

3

3.5

4

1980 Today

Book Value

Market Value

WHY???

"Within five years time, all companies will be Internet

companies, or they won't be companies at all.”

(Grove, 1999)

Definitions Internet Intranet Extranet World Wide Web Packet-Switching

What is the Internet?

CompanyNetworkYOU

PacketSwitchingNetwork

Customer/SupplierNetwork

EDI

Intranet

Internet

Extranet

Customer/SupplierNetwork

Customer/SupplierNetwork

eBusiness Myths Everyone is Doing It! It’s Easy! It’s Cheap! It’s Lucrative! The Internet Levels the Playing Field Intermediaries Go Away

eBusiness Myths Mass Marketing is Over It’s the Domain of Computers Product Commoditization is Key It’s a Fad (the NASDAQ collapse proves it!) It’s ordering on the Web (B2C) One World, One Web

What Does a Modem Do?

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%

100.00%

6th Graders Executives

Nine eBusiness Rules

1. Technology is now a driver of business strategy

2. Controlling information flows is more powerful than controlling product flows

3. Inability to overthrow outdated business designs leads to failure

Nine eBusiness Rules

4. New business designs must create flexibility

5. eBusiness enables organizations to listen to customers

6. Use technology to innovate and enhance the product experience

Nine eBusiness Rules

7. Reconfigurable ebusiness communities will be used to meet customer needs

8. Strong leadership is imperative!

9. Long-Term Success is a thing of the past(adapted from Kalakota and Robinson, 1999)

eBusiness Trends Increased Speed of Service Self-Service Integrated Solutions Sales and Service Convergence Ease of Use

eBusiness Trends

Flexible Fulfillment Effective Outsourcing Process Visibility

eBusiness Trends

Integration, Integration, Integration!

Trend Commonalities

Efficiency Effectiveness Relationship Management Integration Opportunities for Creativity!

Traditional vs New Economy

Traditional New Economy

Organization Pyramid Network

Strategy Predict Invent

Style Structured Flexible

Management Regulators Coordinators

Products Mass Production Mass Customization

InnovationCustomer

ComplaintsMarket Opportunities

Traditional vs New Economy

Traditional New Economy

Financials Quarterly Realtime

Inventories Months Hours

Strategy Top-Down Bottom-Up

Leadership Dogmatic Inspirational

Motivation To Compete To Build

Improvements Incremental Revolutionary

Quality Affordable Best No Compromise

(Adapted from BusinessWeek, Aug.21, 2000)

Definitions B2C (Amazon) B2B (Freemarkets) C2B (Priceline) C2C (eBay, eBid, Napster) B2E (Mellon) E2E G2B, B2G, C2G

B2C vs B2B

B2C B2B

Switching Costs LowHigh, when integrated

Relationship Transactional Mission Critical

Revenue Model VolumeThe Right Customers

(A.H. Segars)

Agility & Flexibility

Flexibility Planned responsiveness to anticipated

contingencies Agility

The ability to change maneuver states, the time dependence of maneuverability

See apenny……

OODA

Observe Orient Decide Act

What Really Is eBusiness??

eBusiness vs eCommerce eCommerce:

"Buying and selling over digital media“ eBusiness:"e-Business is the complex fusion of business

processes, enterprise applications, and organizational structure necessary to create

a high-performance business model."(Kalakota and Robinson, 1999)

The Dimensions of E-Commerce

Source: Choi et al. (1997), p. 18.

eBusiness Opportunities Supply Chain Efficiency

Decreased Overhead Reduced Transaction Costs Market Efficiencies Increased Inventory Turns New Markets Increased Revenues

eBusiness Opportunities

Better Customer Experiences Community Customization Personalization Entertainment Access

eBusiness Opportunities

Efficient Markets Perfect Information Economic Efficiency Elimination of Boundaries Reduced Transaction Costs

eBusiness Is:

Supply Chain Integration

Suppliers

Customers

E R P

The Organization

Internet

ExtranetEDI EDI

Intranet

Model of Internet Consumer SatisfactionThird Party

Seal of ApprovalVendor

Reputation

Trust inWeb Shopping

Legal Support

Customer Service

Pricing Attractiveness

Web Site Store Front CustomerSatisfaction

Repeat Web Purchase(Brand Loyalty)

Security

TransactionSafety

Privacy

Authentication Integrity Non-repudiation

SystemReliability

Speed ofOperation

Ease of Use

Content,Quality

Format

ReliabilityTimeliness

Completeness

CRM Integrated Sales, Marketing and Service Consistent, Dependable and

Convenient Interactions 360 Degree Customer View

CRM Integration

Customer Content Customer Contact Info End-To-End Business Processes Interenterprise Customer Care Systems

CRM Core Competencies

Cross-Selling, Up-Selling Direct Marketing & Fulfillment Customer Service & Support Field Service Operations Retention Management

Delivering Customer Service in Cyberspace

Traditional: do the work for the customer E-commerce delivered: gives tools to the customer to do the

work for him/herself (log: tracking, troubleshooting, FAQ) with: Improved communication Automated process Speedier resolution of problems

E-service—online help for online transactions Foundation of service—responsible and effective order fulfillment Customer-centered services—order tracing, configuration,

customization, security/trust Value-added services--dynamic brokering, online auctions,

online training and education

Product Life Cycle and Customer Service

Requirements: assisting the customer to determine needs

Acquisition: helping the customer to acquire a product or service

Ownership: supporting the customer on an ongoing basis

Retirement: helping the client to dispose of a service or product

Service must be provided in all of them

CRM CRM in action—customer-focused e-commerce Make it easy for customers to do business online Business processes redesigned from customer’s point of view Design a comprehensive, evolving e-commerce architecture Foster customer loyalty by:

Personalized service Streamline business processes Own customer’s total experience

Customer Service Functions

Provide search and comparison capabilities Provide free products and services Provide specialized information and services Allow customers to order customized products and

services Enable customers to track accounts or order status

Customer Service Tools Personalized Web pages

Used to record purchases and preference Direct customized information to customers efficiently

FAQs Customers find answers quickly Not customized, no personalized feeling and no contribution to

relationship marketing Tracking tools

Customers track their orders saving time and money for all Example: FedEx’s package tracking

Other Customer Support Tools Chat rooms—discuss issues with company experts and with other

customers E-mail and automated response

Disseminate general information Send specific product information Conduct correspondence regarding any topic (mostly inquiries from

customers) Help desks and call centers

A comprehensive customer service entity E-commerce vendors take care of customer service issues

communicated through various contact channels Web channels (automated e-mail reply) Web knowledge bases (portal-like self service) Call center agents or field service personnel

Troubleshooting tools—assist customers in solving their own problems

Justifying Customer Service and CRM Programs

Two problems— Most of the benefits are intangible Substantial benefits reaped only from loyal customers, after

several years Need for metrics—standards to determine

appropriate level of customer support Response and download times Up-to-date site and availability of relevant content Others

CRM Business DriversSurvey of 509 companies

0 5 10 15 20 25 30 35

Tracking

Speed

Price Reduction

Increased Rev.

Cust. Demands

Comp. Adv.

Efficiency

(AMR Research, 2002)% Respondents

Web Pages

“Stickiness” Design Technical Aspects Local vs Global

ERP Unifies the “back-office” functions Finance, HR, Marketing, Sales,

Logistics, Manufacturing, etc., etc. Creates Information Efficiency Baan, SAP, JD Edwards, Oracle

Current State of SCM

Majority of companies do not see SCM as strategic

SCM software is usually modular <25% of users use more than one module

12% gather data from more than 5% of their customers and suppliers Collaboration is a buzzword

Security Quick response to emergencies

Disruption in supply chain Customers Suppliers Internal

eTerrorism Information is a key!

Visibility Identification of materials as they move

through the system Visibility of suppliers’ production processes Visibility through to the customer Identification of where the information is!

SC Software SCM software

Help to plan efficient supply chains Does not necessarily improve visibility

SC Event Management software Specifically designed to improve visibility Do not replace traditional SCM software e.g. Celarix, Manugistics, Optum, Saltare

Agility

Ability to restructure Supply Chain quickly Difficult with multiple systems

Especially after mergers and acquisitions Difficult with ASPs and outsourcing

eProcurement

EDI Intermediaries Markets Electronic Payment

Markets

Supplier Side Buyer Side Intermediary

Why Do Firms Use B2B Markets to Buy Indirect Materials?

Improve Process Efficiency 71% Reduce Product Costs 59% Improve Information 51% Reduce Rogue Purchasing 37% Streamline Supply Chain 16% Improve Service 14%

(Forrester Research, 2000)

The Value Chain

Disintermediation Breaking Apart

Reintermediation Putting back together

Opportunities

Communicate Collaborate Coordinate

Inter-Enterprise

Coalitions

EDI

Inter-Ent. Email

Elect.Mkts

Alliances

Communities

Channel Int.

SC Integration

eBusiness

Enterprise Integration

Corp.Email

Scheduling

KM

Communities

Order Mgt.

Purchasing

Work GroupDept.Email

Scheduling

Teams

eDiscussion

Sales Auto.

Internal Ops.

Book Value:Market Value

0

0.5

1

1.5

2

2.5

3

3.5

4

1980 Today

Book Value

Market Value

WHY???

Leadership Traits Passion

Make the dream clear Speed

Stay ahead of the curve Humility

You must be willing to explain yourself Discovery

The future path must be defined

(Citrin & Neff, 2000)

Leadership Capabilities

Lead By Example Develop Solid Business Strategies Build Great Management Teams Inspire Employees Flexibility and Proactive Management Reward Performance

(Citrin & Neff, 2000)

New Leadership Capabilities Obsessive Focus on Customers Build Cross-Functional Organizations Manage with a Business Model (not a

Strategic Plan) Promote the Business Model Foster Risk-Takers in the Company Work Extremely Hard

(Citrin & Neff, 2000)

Mastering Value

Design Your Business Model Master The Risks Manage Your Asset Portfolio Measure and Report

Moving to eBusiness

Knowledge Building Capability Evaluation eBusiness Design

The eBusiness Panorama

ChannelEnhancement

Value-ChainIntegration

IndustryTransformation

Convergence

Leverage of eBusiness

BusinessValue

(Deise et al, 2000)

Guidelines for Transformation

Create a Sense of Urgency Create a Vision Communicate the Vision Empower People to Act Form a Guiding Coalition Institutionalize New Processes

Strategy – The Vision

Where Should We Be in Five Years? What Will Be Our Business Model? How Will Our Processes Support This? What Skills and People Will We Need? How Will We Be Organized? What Will Be Our Infostructure?

(Shaw, 2000)

ChangeManagement!

Application Service Providers

Use the Web Deliver and Manage Applications Multiple Customers ERP, CRM, SCM, groupware, etc. Cost Savings: 50% (Gartner Group)

Outsourcing!

ASP Growth (projected)

0

5000

10000

15000

20000

25000

30000

2000 2004

Thousands of Users

(Cahners In-Stat)

ASPs Benefits to the ASP vendor

Companies generate revenues from sources other than connectivity and transport Lucrative Web site hosting Web design consulting Hosted applications with access charges

Benefits to the leasing companies Saves time and various expenses in the initial development stage

(i.e., labor costs) Reduces software maintenance, upgrading applications, and

training time Reduces time-too-market Enhances ability to adapt to changing market conditions

Security

0

2

4

6

8

10

12

14

16

1999 2003(est.)

Security Consulting Expenditures (in billions)

$6.2B

$14.8B

Reported Security Incidents

0

20000

40000

60000

80000

100000

120000

140000

1997 1999 2001 2003

IncidentsVulnerabilities

(CERT, 2004)

Ethical Issues

Privacy Databases Cookies

Intellectual Property Rights Copyright Infringement Software/Music Piracy

Digital Divide (Accessibility)

Privacy

Sites Tracking Visitors:

97% Sites Informing Visitors of Tracking:

62% Sites Allowing Third Party Tracking:

57%

Privacy

0

10

20

30

40

50

60

70

80

90

Yes No

Survey: Is online security a major concern?

%

(Wright, 2000)

The Digital Divide

0

5

10

15

20

25

30

35

40

45

African-Americans

Hispanics National Average

1998

2000

Percentage of US Households with Internet Access

(US Dept of Commerce, 2000)

But….

0

2

4

6

8

10

12

Hunters who attend tractor pulls and

earn less than $30,000

Surfers who earn over $136,000 and live in the

suburbs

Online Hours

per Month

Legal Issues

Taxes eSignatures (10/1) Biometrics eContract Law

UCITA International

Tariffs, Regulations, Jurisdiction

Successes

Failures

Who Knows???

The Future Wireless

PDAs XML Positioning Systems Digital Convergence (HDTV!) Digital Ink/Literature Open Source?

Wireless Users (in Millions)

0

50

100

150

200

250

300

350

Europe USA Japan Africa

Mobile Telephones

0

20

40

60

80

100

120

Tawian UK Hungary Japan USA

Mobiles

Per 100 inhabitants

(ITU, 2003)

Worldwide Wireless Web Users(in Millions)

050

100

150

200

250

300

350

400450

500

2000 2001 2002 2003 2004 2005

(The Industry Standard, 2000)

2nd Generation Wireless

CDMA Developed by Qualcomm Used by Sprint and Verizon in US Used by IDO and DDI in Japan

GSM Developed by European consortium Globally dominant (but not in US)

TDMA AT&T, BellSouth, Southwestern Bell Used in US but not globally compatible

Intermediate Technologies

CDMA Upgrading to faster interim service (64kbps)

GSM Upgrading to faster interim service (64kbps)

EDGE Built on GSM and TDMA by AT&T Meets 3G standards May not fully implemented by all TDMA operators

3G Wireless

ITU has established performance requirements W-CDMA

Europe’s GSM 3G technology cdma2000

3G technology for US 2G CDMA operators AT&T

Expects many GSM operators to adopt EDGE Could create global compatibility for TDMA/EDGE users

Short-Range Wireless Bluetooth

Cable replacement technology File sharing Shorter range (10m)

802.11 (Wi-Fi) Wireless LAN Faster Greater range (100m) Moxi

Farther Out Biometrics

Iris Scanning, Fingerprint Biotechnology 3D Virtual Reality Chat Rooms

Nanobot Reality (50 years out) Voice Synthesis Speech Recognition Robotics Translation RF

Farther Out (cont.) Artificial Intelligence

Machines will equal the capacity of the human brain in 2020

“Before the next century is over, human beings will no longer be the most intelligent entity on this planet.”

(Kurzweil, 1999)