3 ^" EDrrroN\ q.\

Managing and UsingInf ormation SystemsA Strategic Approach

KERI E. PEARTSONW Partners

GAROT S. SAUNDERSUnioersity of Central Florida

@WItEYwww.wiley. com/college/pearlson

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3o,L'P+2*oo 6

To Yale d.s Hana

To Rusty, Russell b Kristin

Acquisitions Editor Beth Lang C,olub

Assistant Editor Lotraina Racatia

Editorial Assistant Jennifur Snyder

Marketing Manager Jillian Nce

Managing Editor lQoin Dodds

Senior Production Editor Suiin Hong

Illustration E&tor Jaye JosePhCover Photo Steoe Raulings/Digital Yision

This book was set in New Caledonia by Matrix Publishing Services and printed and

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rsBN- 13 97 8-0-47 r-7 1538-2rsBN-I0 0-471-71538-7

Printed in the United States of America

1 0 9 8 7 6 5 4 3 2 r

C o nte nts

Preface viii

Acknowledgments xi

About the Authors xii

Introduction I

The Case for Participating in Decisions about Information Systems zWhat If a Manager Doesn't Participate? 4What Skills Are Needed to Participate Effectively in Information

Technolog;rDecisions? 6Basic Assumptions 8Summary 15Key Terms 16Discussion Questions 16Case Study I-1: Terry Cannon, MBA 16Case Study I-2: Anyglobal Company Inc. t8

> cHAprER r The Information Systems Strategy Triangle l9Brief Overview of Business Strategy FrameworksBrief'Overview of Organizational Strategies 28Brief Overview of Information Systems btrategyFood for Thought: Economics of Informationis.Summary 33Key Terms 34DiscussionQuestions 34Case Study l-1: Roche's New Scientiftc MethodCase Study l-2: Comair Airlines g7

2 l

30Economics of Things 32

34

> cHAprER z Strategic Use of Information Resources 3gEvolution of Information Resources 39Information Resources as Strategic Tools 40

iv & Contents

How Can Information Resources Be Used Strategically?

Strategic Alliances 52Risks 54Food for Thought: Time-Based Competitive Advantage

Summary 56Key Terms 56Discussion Questions 56

Case Study 2-I: Lear Won't Take a Backseat 57

Case Study 2-2: Tesco UK 59

> CHAPTER s 0rganizational lmpacts of Information Systems Use 60

42

DD

Information Age Organizations 6l

Information Technologr and Organizational Design 63

Information Technologr and Management Control Systems 68

VirtualOrganizations 72Virtual Teams 74Food for Thought: Immediately Responsive Organizations 77

Snmmary 79Key Terms 79Discussion Questions 80Case Study 3-1: Virtually There? 80

Case Study 3-2: The FBI? 82

> cHAprER + lnformation Technology and the Design of Work 84

Job Design Framework 85

How Information Technology Changes the Nature of Work 86

How Information Technolog' Changes Where Work Is Done 93

Information Systems Enable More Group Work fOO

Gaining Acceptance for IT-Induced Change l0l

Food for Thought: The Productivity Paradox 102

Summary lO4Key Terms 105Discussion Questions 105

Case Study 4-1: Baseball in the United States fOG

Case Study 4-2: Automated Waste Disposal, Inc. tO7

> cxaprea s Information Technology and Changing Business Processes tOg

Silo Perspective vs. Business Process Perspective ll0

The Tools for Change ll4Integrated Supply Chains ll9

Contents "{ v

Entelprise Systems fzOFood for Thought: The Risks of Radical Redesign Alone lZ7Summary 129Key Terms 129Discussion Questions l30Case Study 5-1: Coca-Cola Vending Machines fgOCase Study 5-2: Nestl6 l3l

> cHAprER e Architecture and Infrastructure lgg

From Vision to Implementation lg5The Leap from Strateglr to Architecture to Infrastructure f36Other Managerial Considerations 144From

^Strategy to Architecture to Infrastructure: An Example fEOFood for Thought: Business Continuity planning LiczSummary 156Key Terms 156Discussion Questions f56Case Study 6-1: Bush Intercontinental Airport in Houston lS7Case Study 6-2: Johnson & Johnson Enterprise IT Architecture l5g

> cHAprER z Doing Business on the Internet 16rOverview of the Internet 162Framework of Electronic Commerce l7OThreats on the Internet I8fFood for Thought I: E-learning l8SFood for Thought II: Web t-ogi (Blogs) 185Summary 187Key Terms I88DiscussionQuestions f88Case Study 7-1: Amazon.com f 89Case Study 7-2: Apple Worms Its Way into the Music Industry lgf

> cHAprER a Using Information Ethically 192

Control of Information lg4Normative Theories of Business Ethics tg8Emerging Issues in the Ethical Governance of Information Systems zozSecurity and Controls 2O4Sarbanes-OxleyAct of 2002 ZO7Food for Thought: Ethics and the Internet 20gSummary 2OgKey Terms 2lO

vi * Contents

DiscussionQuestions 2lO

Case Study 8-l: Ethical Decision Making zLl

> CHAPTER g The Management lnformation Systems Organization 2L4

Understanding the MIS Organization zls

Information Systems Organization Processes 2tg

What a Manager Can Expect from the IS Department 224

What the IS Organization Does Not Do 228

Organizing and Controlling IS Processes 229pood for Thought: Going Offshore for IS Development 242

Summary 244Key Terms 245DiscussionQuestions 245

Case Study 9-1: Hostile IS Outsourcing: The Story of ManuFact 246

Case Study 9-2: The Big Fix at Toyota Motor Sales (TMS) 248

> cHAPTER 1o Funding lT 251

Funding the IT Department 251

How Much Does IT Cost? 254

IT Portfolio Management 259Valuing IT Investments 262

Monitoring IT Investments 263

Food For Thought: Options Pricing 269

Summary 272Key Terms 272Discussion Questions 273

Case Study 10-I: DaimlerChrysler 273

Case Study 10-2: Valuing IT 274

> cHAprER 11 Proiect Management 276

What Defines a Project? 277

What Is Project Management? 278

ProjectMeasurement 279

Proiect Elements 28O

IT iroject Development Methodologies 290

Manageriallnfluences 297

Managing Project Risk 299

Food for Thought: Open Sourcing 306

Summary 3O8

contents 4 vii

Key Terms 308Discussion Questions 308Case Study 11-1: Avon Products, Inc., Financial Systems g0gCase Study 1t-2: Dealing with Traffic Jams in London gll

> cHAprER r2 Knowledge Management gl3

Data, Information, and Knowledge gl5An Evolving Concept 3f8Why Manage KnowledgeP 3lgKnowledge ManagementProcesses g2BTypes of Knowledge Management Projects gg4Measuring the Value of Knowledge Management 936Caveats for Managing Knowledge 34OFood for Thought: Digital Millennium Copyright Act S4OSummary 342Key Terms 342Discussion Questions 342Case Study l2-1: McKinsey and Company B4BCase Study I2-2:The Brain Behind the Big, Bad Burger 946

Glossary 948

Index 359