Management Information Systems - Managing the Digital Firm

Chapter 15 Managing Global Systems 15-9

15.2 ORGANIZING INTERNATIONAL INFORMATION
SYSTEMS

Three organizational issues face corporations seeking a global position: choosing
a strategy, organizing the business, and organizing the systems management
area. The first two are closely connected, so we discuss them together.

GLOBAL STRATEGIES AND BUSINESS ORGANIZATION

Four main global strategies form the basis for global firms’ organizational
structure. These are domestic exporter, multinational, franchiser, and
transnational. Each of these strategies is pursued with a specific business
organizational structure (see Table 15.3). For simplicity’s sake, we describe three
kinds of organizational structure or governance: centralized (in the home coun-
try), decentralized (to local foreign units), and coordinated (all units participate
as equals). Other types of governance patterns can be observed in specific
companies (e.g., authoritarian dominance by one unit, a confederacy of equals,
a federal structure balancing power among strategic units, and so forth).

The domestic exporter strategy is characterized by heavy centralization
of corporate activities in the home country of origin. Nearly all international
companies begin this way, and some move on to other forms. Production,
finance/accounting, sales/marketing, human resources, and strategic
management are set up to optimize resources in the home country. International
sales are sometimes dispersed using agency agreements or subsidiaries, but
even here, foreign marketing relies on the domestic home base for market-
ing themes and strategies. Caterpillar Corporation and other heavy capital-
equipment manufacturers fall into this category of firm.

The multinational strategy concentrates financial management and
control out of a central home base while decentralizing production, sales, and
marketing operations to units in other countries. The products and services
on sale in different countries are adapted to suit local market conditions. The
organization becomes a far-flung confederation of production and marketing
facilities in different countries. Many financial service firms, along with a
host of manufacturers, such as General Motors, Chrysler, and Intel, fit this
pattern.

Franchisers are an interesting mix of old and new. On the one hand, the
product is created, designed, financed, and initially produced in the home coun-
try, but for product-specific reasons must rely heavily on foreign personnel for
further production, marketing, and human resources. Food franchisers such as

TABLE 15.3 GLOBAL BUSINESS STRATEGY AND STRUCTURE

BUSINESS FUNCTION DOMESTIC EXPORTER MULTINATIONAL FRANCHISER TRANSNATIONAL
Coordinated
Production Centralized Dispersed Coordinated Coordinated
Coordinated
Finance/Accounting Centralized Centralized Centralized Coordinated
Coordinated
Sales/Marketing Mixed Dispersed Coordinated

Human Resources Centralized Centralized Coordinated
Strategic Management Centralized Centralized Centralized

15-10 Part Four Building and Managing Systems

McDonald’s, Mrs. Fields Cookies, and KFC fit this pattern. McDonald’s created
a new form of fast-food chain in the United States and continues to rely largely
on the United States for inspiration of new products, strategic management,
and financing. Nevertheless, because the product must be produced locally—it
is perishable—extensive coordination and dispersal of production, local market-
ing, and local recruitment of personnel are required.

Generally, foreign franchisees are clones of the mother country units, but
fully coordinated worldwide production that could optimize factors of produc-
tion is not possible. For instance, potatoes and beef can generally not be bought
where they are cheapest on world markets but must be produced reasonably
close to the area of consumption.

Transnational firms are the stateless, truly globally managed firms that may
represent a larger part of international business in the future. Transnational
firms have no single national headquarters but instead have many regional
headquarters and perhaps a world headquarters. In a transnational strat-
egy, nearly all the value-adding activities are managed from a global perspec-
tive without reference to national borders, optimizing sources of supply and
demand wherever they appear, and taking advantage of any local competi-
tive advantages. Transnational firms take the globe, not the home country,
as their management frame of reference. The governance of these firms has
been likened to a federal structure in which there is a strong central man-
agement core of decision making, but considerable dispersal of power and
financial muscle throughout the global divisions. Few companies have actu-
ally attained transnational status, but Citigroup, Sony, Ford, and others are
attempting this transition.

Information technology and improvements in global telecommunications
are giving international firms more flexibility to shape their global strategies.
Protectionism and a need to serve local markets better encourage companies
to disperse production facilities and at least become multinational. At the same
time, the drive to achieve economies of scale and take advantage of short-term
local advantage moves transnationals toward a global management perspec-
tive and a concentration of power and authority. Hence, there are forces of
decentralization and dispersal, as well as forces of centralization and global
coordination.

GLOBAL SYSTEMS TO FIT THE STRATEGY

Information technology and improvements in global telecommunications are
giving international firms more flexibility to shape their global strategies. The
configuration, management, and development of systems tend to follow the
global strategy chosen. Figure 15.3 depicts the typical arrangements. By systems
we mean the full range of activities involved in building and operating infor-
mation systems: conception and alignment with the strategic business plan,
systems development, and ongoing operation and maintenance. For the sake
of simplicity, we consider four types of systems configuration. Centralized sys-
tems are those in which systems development and operation occur totally at
the domestic home base. Duplicated systems are those in which development
occurs at the home base but operations are handed over to autonomous units
in foreign locations. Decentralized systems are those in which each foreign unit
designs its own unique solutions and systems. Networked systems are those in
which systems development and operations occur in an integrated and coordi-
nated fashion across all units.

Chapter 15 Managing Global Systems 15-11

FIGURE 15.3 GLOBAL STRATEGY AND SYSTEMS CONFIGURATIONS

The large Xs show the dominant patterns, and the small Xs show the emerging patterns. For instance,
domestic exporters rely predominantly on centralized systems, but there is continual pressure and
some development of decentralized systems in local marketing regions.

As can be seen in Figure 15.3, domestic exporters tend to have highly
centralized systems in which a single domestic systems development staff
develops worldwide applications. Multinationals offer a direct and striking
contrast: Here, foreign units devise their own systems solutions based on
local needs with few if any applications in common with headquarters (the
exceptions being financial reporting and some telecommunications applica-
tions). Franchisers have the simplest systems structure: Like the products they
sell, franchisers develop a single system usually at the home base and then
replicate it around the world. Each unit, no matter where it is located, has
identical applications. Last, the most ambitious form of systems development
is found in transnational firms: Networked systems are those in which there
is a solid, singular global environment for developing and operating systems.
This usually presupposes a powerful telecommunications backbone, a culture
of shared applications development, and a shared management culture that
crosses cultural barriers. The networked systems structure is the most visible in
financial services where the homogeneity of the product—money and money
instruments—seems to overcome cultural barriers.

REORGANIZING THE BUSINESS

How should a firm organize itself for doing business on an international scale?
To develop a global company and information systems support structure, a firm
needs to follow these principles:
1. Organize value-adding activities along lines of comparative advantage.

For instance, marketing/sales functions should be located where they can best
be performed, for least cost and maximum impact; likewise with production,
finance, human resources, and information systems.
2. Develop and operate systems units at each level of corporate activity—regional,
national, and international. To serve local needs, there should be host country
systems units of some magnitude. Regional systems units should handle telecom-
munications and systems development across national boundaries that take
place within major geographic regions (European, Asian, American).
Transnational systems units should be established to create the linkages across
major regional areas and coordinate the development and operation of interna-
tional telecommunications and systems development (Roche, 1992).

15-12 Part Four Building and Managing Systems

3. Establish at world headquarters a single office responsible for development of
international systems—a global chief information officer (CIO) position.

Many successful companies have devised organizational systems structures
along these principles. The success of these companies relies not only on the
proper organization of activities, but also on a key ingredient—a management
team that can understand the risks and benefits of international systems and that
can devise strategies for overcoming the risks. We turn to these management
topics next.

15.3 MANAGING GLOBAL SYSTEMS

Table 15.4 lists the principal management problems posed by developing
international systems. It is interesting to note that these problems are the chief
difficulties managers experience in developing ordinary domestic systems as
well. But these are enormously complicated in the international environment.

A TYPICAL SCENARIO: DISORGANIZATION ON A
GLOBAL SCALE

Let’s look at a common scenario. A traditional multinational consumer-goods
company based in the United States and operating in Europe would like to
expand into Asian markets and knows that it must develop a transnational
strategy and a supportive information systems structure. Like most multina-
tionals, it has dispersed production and marketing to regional and national
centers while maintaining a world headquarters and strategic management in
the United States. Historically, it has allowed each of the subsidiary foreign
divisions to develop its own systems. The only centrally coordinated system is
financial controls and reporting. The central systems group in the United States
focuses only on domestic functions and production.

The result is a hodgepodge of hardware, software, and telecommunications.
The e-mail systems between Europe and the United States are incompatible.
Each production facility uses a different manufacturing resources planning
system (or a different version of the same ERP system), and different
marketing, sales, and human resource systems. Hardware and database
platforms are wildly different. Communications between different sites are
poor, given the high cost of European intercountry communications. The
central systems group at headquarters in the United States recently was

TABLE 15.4 MANAGEMENT CHALLENGES IN DEVELOPING GLOBAL
SYSTEMS

Agreeing on common user requirements

Introducing changes in business processes

Coordinating applications development

Coordinating software releases

Encouraging local users to support global systems

Chapter 15 Managing Global Systems 15-13
decimated and dispersed to the U.S. local sites in the hope of serving local
needs better and reducing costs.

What do you recommend to the senior management leaders of this
company, who now want to pursue a transnational strategy and develop an
information systems architecture to support a highly coordinated global
systems environment? Consider the problems you face by reexamining
Table 15.4. The foreign divisions will resist efforts to agree on common user
requirements; they have never thought about much other than their own units’
needs. The systems groups in American local sites, which have been enlarged
recently and told to focus on local needs, will not easily accept guidance from
anyone recommending a transnational strategy. It will be difficult to convince
local managers anywhere in the world that they should change their business
procedures to align with other units in the world, especially if this might inter-
fere with their local performance. After all, local managers are rewarded in
this company for meeting local objectives of their division or plant. Finally, it
will be difficult to coordinate development of projects around the world in the
absence of a powerful telecommunications network and, therefore, difficult to
encourage local users to take on ownership in the systems developed.

GLOBAL SYSTEMS STRATEGY

Figure 15.4 lays out the main dimensions of a solution. First, consider that
not all systems should be coordinated on a transnational basis; only some

FIGURE 15.4 LOCAL, REGIONAL, AND GLOBAL SYSTEMS

Agency and other coordination costs increase as the firm moves from local option systems toward
regional and global systems. However, transaction costs of participating in global markets probably
decrease as firms develop global systems. A sensible strategy is to reduce agency costs by developing
only a few core global systems that are vital for global operations, leaving other systems in the hands
of regional and local units.

15-14 Part Four Building and Managing Systems

core systems are truly worth sharing from a cost and feasibility point of view.
Core systems support functions that are absolutely critical to the organiza-
tion. Other systems should be partially coordinated because they share key
elements, but they do not have to be totally common across national boundar-
ies. For such systems, a good deal of local variation is possible and desirable.
A final group of systems is peripheral, truly provincial, and needed to suit local
requirements only.

Define the Core Business Processes

How do you identify core systems? The first step is to define a short list of
critical core business processes. Business processes are defined and described
in Chapter 2, which you should review. Briefly, business processes are sets of
logically related tasks to produce specific business results, such as shipping out
correct orders to customers or delivering innovative products to the market.
Each business process typically involves many functional areas, communicat-
ing and coordinating work, information, and knowledge.

The way to identify these core business processes is to conduct a business
process analysis. How are customer orders taken, what happens to them once
they are taken, who fills the orders, and how are they shipped to the customers?
What about suppliers? Do they have access to manufacturing resource planning
systems so that supply is automatic? You should be able to identify and set
priorities in a short list of ten business processes that are absolutely critical for
the firm.

Next, can you identify centers of excellence for these processes? Is the
customer order fulfillment superior in the United States, manufacturing
process control superior in Germany, and human resources superior in Asia?
You should be able to identify some areas of the company, for some lines of
business, where a division or unit stands out in the performance of one or
several business functions.

When you understand the business processes of a firm, you can rank-order
them. You then can decide which processes should be core applications,
centrally coordinated, designed, and implemented around the globe,
and which should be regional and local. At the same time, by identifying
the critical business processes, the really important ones, you have gone a long
way to defining a vision of the future that you should be working toward.

Identify the Core Systems to Coordinate Centrally

By identifying the critical core business processes, you begin to see opportu-
nities for transnational systems. The second strategic step is to conquer the
core systems and define these systems as truly transnational. The financial
and political costs of defining and implementing transnational systems are
extremely high. Therefore, keep the list to an absolute minimum, letting expe-
rience be the guide and erring on the side of minimalism. By dividing off a
small group of systems as absolutely critical, you divide opposition to a trans-
national strategy. At the same time, you can appease those who oppose the
central worldwide coordination implied by transnational systems by permitting
peripheral systems development to progress unabated, with the exception of
some technical platform requirements.

Choose an Approach: Incremental, Grand Design, Evolutionary

A third step is to choose an approach. Avoid piecemeal approaches. These
surely will fail for lack of visibility, opposition from all who stand to lose from

Chapter 15 Managing Global Systems 15-15

transnational development, and lack of power to convince senior manage-
ment that the transnational systems are worth it. Likewise, avoid grand design
approaches that try to do everything at once. These also tend to fail, because
of an inability to focus resources. Nothing gets done properly, and opposition
to organizational change is needlessly strengthened because the effort requires
huge resources. An alternative approach is to evolve transnational applications
incrementally from existing applications with a precise and clear vision of the
transnational capabilities the organization should have in five years. This is
sometimes referred to as the “salami strategy,” or one slice at a time.

Make the Benefits Clear

What is in it for the company? One of the worst situations to avoid is to build
global systems for the sake of building global systems. From the beginning, it
is crucial that senior management at headquarters and foreign division manag-
ers clearly understand the benefits that will come to the company as well as to
individual units. Although each system offers unique benefits to a particular
budget, the overall contribution of global systems lies in four areas.

Global systems—truly integrated, distributed, and transnational systems—
contribute to superior management and coordination. A simple price tag cannot
be put on the value of this contribution, and the benefit will not show up in any
capital budgeting model. It is the ability to switch suppliers on a moment’s
notice from one region to another in a crisis, the ability to move production
in response to natural disasters, and the ability to use excess capacity in one
region to meet raging demand in another.

A second major contribution is vast improvement in production, operation,
and supply and distribution. Imagine a global value chain, with global suppli-
ers and a global distribution network. For the first time, senior managers can
locate value-adding activities in regions where they are most economically
performed.

Third, global systems mean global customers and global marketing. Fixed
costs around the world can be amortized over a much larger customer base.
This will unleash new economies of scale at production facilities.

Last, global systems mean the ability to optimize the use of corporate funds
over a much larger capital base. This means, for instance, that capital in a
surplus region can be moved efficiently to expand production of capital-starved
regions; that cash can be managed more effectively within the company and
put to use more effectively.

These strategies will not by themselves create global systems. You will have
to implement what you strategize.

THE MANAGEMENT SOLUTION: IMPLEMENTATION

We now can reconsider how to handle the most vexing problems facing
managers developing the global information systems architectures that were
described in Table 15.4.

Agreeing on Common User Requirements

Establishing a short list of the core business processes and core support systems
will begin a process of rational comparison across the many divisions of
the company, develop a common language for discussing the business, and
naturally lead to an understanding of common elements (as well as the unique
qualities that must remain local).

15-16 Part Four Building and Managing Systems

Introducing Changes in Business Processes

Your success as a change agent will depend on your legitimacy, your authority,
and your ability to involve users in the change design process. Legitimacy is
defined as the extent to which your authority is accepted on grounds of com-
petence, vision, or other qualities. The selection of a viable change strategy,
which we have defined as evolutionary but with a vision, should assist you in
convincing others that change is feasible and desirable. Involving people in
change, assuring them that change is in the best interests of the company and
their local units, is a key tactic.

Coordinating Applications Development

Choice of change strategy is critical for this problem. At the global level there is
far too much complexity to attempt a grand design strategy of change. It is far
easier to coordinate change by making small incremental steps toward a larger
vision. Imagine a five-year plan of action rather than a two-year plan of action,
and reduce the set of transnational systems to a bare minimum to reduce coor-
dination costs.

Coordinating Software Releases

Firms can institute procedures to ensure that all operating units convert to new
software updates at the same time so that everyone’s software is compatible.

Encouraging Local Users to Support Global Systems

The key to this problem is to involve users in the creation of the design without
giving up control over the development of the project to parochial interests.
The overall tactic for dealing with resistant local units in a transnational com-
pany is cooptation. Cooptation is defined as bringing the opposition into the
process of designing and implementing the solution without giving up control
over the direction and nature of the change. As much as possible, raw power
should be avoided. Minimally, however, local units must agree on a short list of
transnational systems, and raw power may be required to solidify the idea that
transnational systems of some sort are truly required.

How should cooptation proceed? Several alternatives are possible. One alter-
native is to permit each country unit the opportunity to develop one transna-
tional application first in its home territory, and then throughout the world. In
this manner, each major country systems group is given a piece of the action
in developing a transnational system, and local units feel a sense of owner-
ship in the transnational effort. On the downside, this assumes the ability to
develop high-quality systems is widely distributed, and that, a German team,
for example, can successfully implement systems in France and Italy. This will
not always be the case.

A second tactic is to develop new transnational centers of excellence, or a single
center of excellence. There may be several centers around the globe that focus
on specific business processes. These centers draw heavily from local national
units, are based on multinational teams, and must report to worldwide manage-
ment. Centers of excellence perform the initial identification and specification of
business processes, define the information requirements, perform the business
and systems analysis, and accomplish all design and testing. Implementation,
however, and pilot testing are rolled out to other parts of the globe. Recruiting a
wide range of local groups to transnational centers of excellence helps send the
message that all significant groups are involved in the design and will have an
influence. The Interactive Session on Organizations describes how Hasbro dealt
with these issues as it implemented a new global systems strategy.

Chapter 15 Managing Global Systems 15-17

INTERACTIVE SESSION: ORGANIZATIONS

HASBRO DEVELOPS A GLOBAL SYSTEMS STRATEGY

If you’ve ever played in a sandbox with a Tonka forms or process divisions. The lack of centraliza-
dump truck, accessorized a My Little Pony, manipu- tion and standardization was inefficient, hampering
lated a Transformer, or engaged in mock combat coordination between business units. In addition, it
with a G.I. Joe, you have experienced a piece of the stifled new IT initiatives because services and busi-
Hasbro Inc. juggernaut. Begun by brothers Henry, ness processes that should have been shared were
Hilal, and Herman Hassenfeld in 1923 as a pencil not, necessitating avoidable modifications.
box and school supplies company, Hasbro transi-
tioned to toys in the 1940s. Acquisitions, including When Hasbro decided to move to a unified SAP
Milton Bradley, Tonka, and Wizards of the Coast implementation in 2007, it upgraded its enterprise
helped drive growth in the second half of the 20th resource planning software to SAP ERP (ECC6) in
century. its mature markets. But the “Way to Work” initiative
aimed to do much more. Hasbro wanted to create a
Today Hasbro, based in Pawtucket, RI, is a mul- shared-services structure that would foster corporate
tinational entertainment giant. It has licensing efficiency while still delivering individualized sup-
partnerships with Lucas film’s Star Wars franchise port to local offices, particularly those in emerging
and Marvel Entertainment to produce action fig- markets.
ures based on some of their films and will release
its own productions of a second G.I. Joe, fourth Assimilation of emerging market offices onto
Transformers, and first Stretch Armstrong film in the global team was paramount. Hasbro knew that
2014. With Hasbro Studios’ television programs it could expect its largest growth beyond 2010 to
climbing the ratings, numerous digital game come from outside the United States. The 60%:40%
licensing deals, and a newly opened adventure ratio of U.S. to foreign revenue would shift to favor
park ride, Hasbro’s self-description as a “branded its global operations. The new sales and market-
play” company is strikingly appropriate. ing offices needed to be integrated into the SAP
With nearly 6,000 employees, two manufacturing environment quickly and efficiently in order to
plants (Waterford, Ireland and Springfield, MA), maximize this opportunity. To reduce implementa-
offices in 40 countries, and recent expansion to tion time and the learning curve, SAP Business One,
Korea, Russia, China, Czech Republic, Romania, an ERP system designed for small businesses, was
and Latin America, Hasbro requires state-of-the- implemented as an interim solution in these emerg-
art management information systems to bolster ing markets. After these markets had matured, they
its global core-brand strategy and $400 million net could be incorporated into the larger enterprise SAP
earnings. infrastructure, which was undergoing a thorough
overhaul.
In the 1990s, Hasbro chose SAP, a German enter-
prise application software corporation, to provide its The Way to Work initiative for the mature mar-
enterprise resource planning (ERP) system. Hasbro kets first tackled a standardized approach to busi-
implemented SAP/R3 and supporting business pro- ness processes. Step one was to meet with leaders to
cesses on a broad scale in 27 business units. This outline how their business processes were currently
sweeping deployment, however, was tempered with being performed. Face-to-face meetings were also
customization to suit local needs. If not immediately employed to smooth the transition to uniform busi-
a drawback, as time went on this became a strategic ness intelligence (BI) and data management. Hasbro
liability. found that this technique not only promoted a team
atmosphere, encouraging people to get onboard, but
There were many different implementations of also motivated leaders to push for consistency in
standard business processes containing only minor additional areas. The result was a comprehensive
variations, such as Hasbro’s order-to-cash process. reduction in the complexity of Hasbro’s systems.
The order-to-cash process entails order placement, Business processes became globally consistent and
fulfillment, shipment, invoicing, and payment. integrated with the SAP ERP system. A new global
Rather than a standardized process, different Hasbro demand and supply system was instituted, and a
offices used different terminology for the same step, master data management solution was customized
included unnecessary steps, or contained needless to suit Hasbro’s material master data needs. Now all

15-18 Part Four Building and Managing Systems stage, the IT project team chose an agile develop-
ment approach with 30-day development cycles.
materials Hasbro purchased, produced, and kept in This way it could rapidly roll out a series of small
stock had consistent part numbers, stock codes, and subprojects to an IT test team and select employ-
descriptions. Consistency in material master data ees, receive immediate feedback on any faulty or
management (MMDM) allows the seamless flow of missing functionality, make any necessary modifi-
data into purchasing, accounting, sales, distribution, cations, and then allow all employees to experience
warehousing, and materials planning and control a facet of the new functionality. In addition to the
operations. ability to stick to an aggressive time table, the agile
development method fostered employee acceptance
Business intelligence and reporting was another and according to CIO Clark, “allowed users to learn
key focus of the Way to Work initiative. With busi- the new system quickly and efficiently.” Moreover,
ness units in different locales choosing their it created a core group of power users prepared to
own reporting tools, including Microsoft Access, train their coworkers and respond to concerns as
Microsoft Excel, Cognos, and SAP BusinessObjects, they surfaced.
one office would devise an innovative method for
querying and analyzing data that could not be rep- Deployment of the revamped systems land-
licated by other divisions. The logical solution was scape began in the United States and Canada in
to capitalize on the SAP infrastructure by imple- 2009. European operations instituted Way to Work
menting SAP BusinessObjects globally. This BI and in 2011, and adoption by Hasbro’s Mexican and
Enterprise Performance Management (EPM) tool Latin American units began in 2012. The final
is particularly adept at providing key performance regions to be incorporated are the Far East and
metrics. Hasbro knew that to continue to expand Asia Pacific.
globally it would need the best tools available for
quickly accessing and analyzing trending and sales Business benefits are already flowing. The com-
data. According to Denise Clark, CIO and Senior mon data warehouse in an SQL Server database
Vice President, improved analysis of Hasbro’s point- and revamped materials master data provide data
of-sale data was a key goal so that Hasbro would consistency across all business processes. Reliable
have a clearer understanding of who its customers data passes to SAP BusinessObjects, improving data
were and how their spending patterns might be analysis. A global accounts payable workflow pro-
influenced. cess promotes information sharing and collaboration
between business units. Most importantly, a unified
With the multiple project goals including unify- vision for the future has been provided to Hasbro’s
ing two ERP systems, standardizing business pro- planning teams.
cesses, combining multiple BI and reporting sys-
tems into one, adopting a standard global MMDM Sources: David Hannon, “Mr. Potato Head Meets New Markets in
system, instituting a new global demand and supply the Wake of Hasbro’s SAP Upgrade,” SAP InsiderPROFILES, January,
system, and consolidating four planning systems, 2012; Gregory Schmidt, “Hasbro, Intent on Expanding Its Toy
Hasbro’s IT department had its work cut out for it. Brands, Is Playing All the Angles,” The New York Times, February
Because it enjoyed vigorous support from Hasbro 12, 2012, “Hasbro, Inc. History,” www.fundinguniverse.com,
management, the department decided the tradi- accessed June 24, 2012; “Hasbro Investor Fact Sheet,” September
tional systems life cycle waterfall approach could 2012; and “Hasbro run SAP Business One as part of their 2 Tier ERP
be bypassed. Rather than methodically completing Deployment,” www.youtube.com/watch?v=ywelVm0oFNY&nore
each stage of the life cycle before starting the next direct=1.

CASE STUDY QUESTIONS

1. What problems was Hasbro having with its legacy 3. Describe Hasbro’s new global systems and the
SAP/R3 enterprise resource planning (ERP) problems they solved. How did they improve
system installed in the 1990s and how did it affect operations and management decision making?
its operations and global strategy?

2. What management, organization, and technology
issues did Hasbro address in order to implement a
new global systems strategy?

Chapter 15 Managing Global Systems 15-19

Even with the proper organizational structure and appropriate manage-
ment choices, it is still possible to stumble over technology issues. Choices of
technology platforms, networks, hardware, and software are the final element
in building transnational information systems architectures.

15.4 TECHNOLOGY ISSUES AND OPPORTUNITIES FOR
GLOBAL VALUE CHAINS

Once firms have defined a global business model and systems strategy,
they must select hardware, software, and networking standards along with
key system applications to support global business processes. Hardware,
software, and networking pose special technical challenges in an interna-
tional setting.

One major challenge is finding some way to standardize a global computing
platform when there is so much variation from operating unit to operating
unit and from country to country. Another major challenge is finding
specific software applications that are user friendly and that truly enhance
the productivity of international work teams. The universal acceptance of
the Internet around the globe has greatly reduced networking problems. But
the mere presence of the Internet does not guarantee that information will
flow seamlessly throughout the global organization because not all business
units use the same applications, and the quality of Internet service can be
highly variable (just as with the telephone service). For instance, German
business units may use an open source collaboration tool to share documents
and communicate, which is incompatible with American headquarters teams,
which use Lotus Notes. Overcoming these challenges requires systems
integration and connectivity on a global basis.

COMPUTING PLATFORMS AND SYSTEMS INTEGRATION

The development of a transnational information systems architecture based on
the concept of core systems raises questions about how the new core systems
will fit in with the existing suite of applications developed around the globe
by different divisions, different people, and for different kinds of computing
hardware. The goal is to develop global, distributed, and integrated systems
to support digital business processes spanning national boundaries. Briefly,
these are the same problems faced by any large domestic systems develop-
ment effort. However, the problems are magnified in an international environ-
ment. Just imagine the challenge of integrating systems based on the Windows,
Linux, Unix, or proprietary operating systems running on IBM, Sun, HP, and
other hardware in many different operating units in many different countries!

Moreover, having all sites use the same hardware and operating system does
not guarantee integration. Some central authority in the firm must establish
data standards, as well as other technical standards with which sites are to
comply. For instance, technical accounting terms such as the beginning and
end of the fiscal year must be standardized (review the earlier discussion of
the cultural challenges to building global businesses), as well as the acceptable
interfaces between systems, communication speeds and architectures, and
network software.

15-20 Part Four Building and Managing Systems

CONNECTIVITY

Truly integrated global systems must have connectivity—the ability to link
together the systems and people of a global firm into a single integrated network
just like the phone system but capable of voice, data, and image transmissions.
The Internet has provided an enormously powerful foundation for providing
connectivity among the dispersed units of global firms. However, many issues
remain. The public Internet does not guarantee any level of service (even in
the United States). Few global corporations trust the security of the Internet
and generally use private networks to communicate sensitive data, and Internet
virtual private networks (VPNs) for communications that require less security.
Not all countries support even basic Internet service that requires obtaining
reliable circuits, coordinating among different carriers and the regional tele-
communications authority, and obtaining standard agreements for the level
of telecommunications service provided. Table 15.5 lists the major challenges
posed by international networks.

While private networks have guaranteed service levels and better security
than the Internet, the Internet is the primary foundation for global corporate
networks when lower security and service levels are acceptable. Companies
can create global intranets for internal communication or extranets to exchange
information more rapidly with business partners in their supply chains. They
can use the public Internet to create global networks using VPNs from Internet
service providers, which provide many features of a private network using the
public Internet (see Chapter 7). However, VPNs may not provide the same level
of quick and predictable response as private networks, especially during times
of the day when Internet traffic is very congested, and they may not be able to
support large numbers of remote users.

The high cost of PCs, and low incomes, limit access to Internet service in
many developing countries (see Figure 15.5). Where an Internet infrastruc-
ture exists in less-developed countries, it often lacks bandwidth capacity, and
is unreliable in part due to power grid issues. The purchasing power of most
people in developing countries makes access to Internet services very expen-
sive in local currencies. In addition, many countries monitor transmissions.
Governments in China, Singapore, Iran, and Saudi Arabia monitor Internet
traffic and block access to Web sites considered morally or politically offensive.
On the other hand, the rate of growth in the Internet population is far faster
in Asia, Africa, and the Middle East than in North America and Europe, where

TABLE 15.5 PROBLEMS OF INTERNATIONAL NETWORKS

Quality of service

Security

Costs and tariffs

Network management

Installation delays

Poor quality of international service

Regulatory constraints

Network capacity

Chapter 15 Managing Global Systems 15-21

FIGURE 15.5 INTERNET POPULATION IN SELECTED COUNTRIES

The percentage of the total population using the Internet in developing countries is much smaller than
in the United States and Europe, but it is growing rapidly.

Source: Based on data from CIA World Factbook, 2011, Internetworldstats.com, 2012, and authors..

the Internet population is growing slowly if at all. In 2012, China, for instance,
had more than 537 million Internet users compared to the United States with
about 245 million. Therefore, in the future, Internet connectivity will be much
more widely available and reliable in less-developed regions of the world, and
it will play a significant role in integrating these economies with the world
economy.

SOFTWARE LOCALIZATION

The development of core systems poses unique challenges for application
software: How will the old systems interface with the new? Entirely new
interfaces must be built and tested if old systems are kept in local areas
(which is common). These interfaces can be costly and messy to build. If new
software must be created, another challenge is to build software that can be
realistically used by multiple business units from different countries given
that business units are accustomed to their unique business processes and
definitions of data.

Aside from integrating the new with the old systems, there are problems of
human interface design and functionality of systems. For instance, to be truly
useful for enhancing productivity of a global workforce, software interfaces
must be easily understood and mastered quickly. Graphical user interfaces
are ideal for this but presuppose a common language—often English. When
international systems involve knowledge workers only, English may be the
assumed international standard. But as international systems penetrate deeper
into management and clerical groups, a common language may not be assumed
and human interfaces must be built to accommodate different languages and
even conventions. The entire process of converting software to operate in a
second language is called software localization.

What are the most important software applications? Many international systems
focus on basic transaction and management reporting systems. Increasingly, firms
are turning to supply chain management and enterprise systems to standardize

15-22 Part Four Building and Managing Systems
Web sites and software
interfaces for global systems
may have to be translated
into multiple languages to
accommodate users in other
parts of the world.

© Maurice Savage/Alamy

their business processes on a global basis and to create coordinated global supply
chains. However, these cross-functional systems are not always compatible with
differences in languages, cultural heritages, and business processes in other
countries (Martinons, 2004; Liang et al., 2004; Davison, 2002). Company units in
countries that are not technically sophisticated may also encounter problems
trying to manage the technical complexities of enterprise applications.

Electronic Data Interchange (EDI) systems and supply chain manage-
ment systems are widely used by manufacturing and distribution firms
to connect to suppliers on a global basis (see the Interactive Session on
Management). Collaboration systems, e-mail, and videoconferencing are
especially important worldwide collaboration tools for knowledge- and
data-based firms, such as advertising firms, research-based firms in medicine
and engineering, and graphics and publishing firms. Internet-based tools will
be increasingly employed for such purposes.

Chapter 15 Managing Global Systems 15-23

INTERACTIVE SESSION: MANAGEMENT

COMBINENET ASAP HELPS PRIMARK MANAGE ITS GLOBAL SUPPLY
CHAIN

If you’re shopping for budget fashion or “cheap between competing shippers, and it could not help
chic” in Great Britain today, Primark is your likely Primark with optimization scenarios. The result was
destination. Primark currently has nearly 40,000 ineffective allocation of TEUs and occasions when
employees for its 237 bricks-and-mortar outlets, TEUs had been delivered to the dock by the seller
the bulk of which (156) are in the United Kingdom. with no carrier available on which to load them.
With 38 stores in Ireland (where it is headquar- Primark needed to optimize distribution of its TEUs
tered), 27 in Spain, 7 in Germany, 5 in Portugal, 3 in and the shipping rates between each origination and
the Netherlands, and one in Belgium, Primark has destination port. It also needed to determine which
quickly prospered with its high volume, low-cost shipper provided the most cost-effective service
retail model. Primark keeps costs low by forgoing over a specific time period, be it a week, month,
advertising outlays for a pure word-of-mouth strategy or the entire year. By chance, Martin White, the
and using its bulk purchasing power as one of the company's supply chain director, spoke to a manager
top 200 retail companies in the world. By volume, at ABF who had been using CombineNet’s Advanced-
it is now the second largest clothing retailer in the Sourcing Application Platform (ASAP) for overland
United Kingdom and leads the value clothing market shipping.
segment by targeting fashion-conscious young people
under 35. CombineNet’s ASAP is a SaaS (Software as a
Service) Web-based supply chain execution system
In the recent economic downturn, Primark used to optimize all supply chain processes includ-
continued to thrive as shoppers with diminished dis- ing for direct materials, indirect materials, and
posable incomes turned to lower priced alternatives. transportation services. It can process requests for
However, the increased pressure on Primark to main- information (RFIs), requests for proposals (RFPs),
tain ultra-low prices was coupled with a January 2011 and E-auction bidding. A key element of the platform
increase in the value added tax (VAT) in the UK,rising is that it uses an algorithm to incorporate “if-then”
labor costs in China, and unpredictable spikes in ship- conditions into the bidding process, a feature called
ping rates. Switching some of Primark’s manufactur- Expressive Bidding. For example, if a carrier is
ing to cheaper labor markets in Vietnam, Bangladesh, awarded a certain number of TEUs in the first half of
and India alleviated one problem while compounding a particular shipment, it will reduce the price for the
another: How to keep freight costs low when shipping second half by an additional percentage. Expressive
huge amounts of cargo from multiple sites in Asia to Bidding is beneficial to both parties, encouraging
Europe for distribution to hundreds of stores. buyer-supplier collaboration and savings. It enables
the carrier to engage in price differentiation to
Primark ships Free On Board (FOB), which in optimize its business opportunities, and it enables
Europe means the seller pays the transportation the transportation purchaser to calculate the savings
costs to the port of shipment, including loading that can be achieved based on different shipping
the goods onboard the ship. From there, all costs scenarios.
including ocean freight, insurance, unloading, and
transportation to its European distribution centers Primark took CombineNet ASAP for a trial run
are Primark’s obligation. Ocean carriers bid in and discovered that it could create what-if scenarios
units of cargo capacity called twenty-foot equiva- that would optimize allocation by providing shippers
lents (TEU) based on the standard container size of with precise data on the number of TEUs needed
20 feet long by 8 feet wide. With more origination per week. Even more crucially, it could coordinate
ports now shipping to Primark’s already multiple with carriers to optimize August shipping in order
destination ports, supply chain logistics increased to accurately stock holiday shopping. By commit-
in complexity. ting to a specific number of TEUs per week during
the remainder of the year, reciprocal arrangements
Primark’s third-party logistics service provider could be fashioned so that Primark properly sourced
had always provided effective service; however, its during its peak shipping period.
usefulness did not extend beyond comparing bids

15-24 Part Four Building and Managing Systems percent already, amounting to nearly $2.5 million. In
addition, Primark achieved increased visibility into
The inadequacy of Primark’s former supply chain its supply chain that had not previously been readily
management software was laid bare when it was available.
run side-by-side with CombineNet ASAP. The old
system included internal spreadsheets to determine Future plans include taking the use of
the best route at the best rate and could gather CombineNet ASAP to the next level. So far, Primark
quotes from the market. However, it was unable to has been able to add the correct variables to the
handle Primark’s complex allocation to its carriers. “if-then” capabilities of the software to optimize its
Even when Supply Chain Director White and his transportation procurement. Next, the company
team concocted complex scenarios, CombineNet wants to add additional variables to take it into the
ASAP was able to promptly pinpoint the lowest cost operations realm, for example, helping Primark to
carrier with space available from any given port and optimize the costs of storing and moving inventory.
for any given route.
Sources: Russell Goodman, “Retailer Dresses up Its Process
White and his team were so enthusiastic about for Buying Ocean Transportation,” SupplyChainBrain,
the optimization engine’s processing speed, which http://www.supplychainbrain.com, June 12, 2012; Andrew
94% of the time is less than 10 seconds, that their McCormack, “Primark to unveil first transactional website,”
initial mistake was layering on too many variables. Marketing Magazine, http://www.marketingmagazine.co.uk/
White soon realized that by restricting the variables news/1086054/, August 23, 2011; ThePressman, “CombineNet
to just the three or four most important, the com- Finds that Greater Than 70% of its Customers Use CombineNet
pany would be able to isolate transportation pro- Advanced Sourcing Product to Complement SAP®, Ariba®,
curement and get better insight into that specific Oracle®,” Techburgher, http://www.techburgher.com, June 18,
level of supply chain execution. Since implementing 2012; “Research and Markets: Primark - Retail Company Briefing
CombineNet ASAP, Primark has been able to reduce – 2012,” Business Wire, http://www.businesswire.com/, May 10,
its total transportation costs about two and a half 2012; www.primark.co.uk,accessed June 20, 2012; http://www.
combinenet.com/, accessed June 20, 2012.

CASE STUDY QUESTIONS

1. Why is supply chain management so important at 4. How did the CombineNet ASAP software provide a
a company such as Primark? solution to these problems?

2. What set of business conditions prompted Primark 5. How does the CombineNet ASAP software
to look into upgrading its supply chain manage- improve supply chain execution for Primark?
ment system?

3. What problems was Primark having managing its
suppliers and global supply chain?

Chapter 15 Managing Global Systems 15-25

Review Summary

1. What major factors are driving the internationalization of business?
The growth of inexpensive international communication and transportation has created a world

culture with stable expectations or norms. Political stability and a growing global knowledge base that
is widely shared also contribute to the world culture. These general factors create the conditions for
global markets, global production, coordination, distribution, and global economies of scale.

2. What are the alternative strategies for developing global businesses?
There are four basic international strategies: domestic exporter, multinational, franchiser, and

transnational. In a transnational strategy, all factors of production are coordinated on a global scale.
However, the choice of strategy is a function of the type of business and product.

3. How can information systems support different global business strategies?
There is a connection between firm strategy and information systems design. Transnational firms

must develop networked system configurations and permit considerable decentralization of
development and operations. Franchisers almost always duplicate systems across many countries and
use centralized financial controls. Multinationals typically rely on decentralized independence among
foreign units with some movement toward development of networks. Domestic exporters typically are
centralized in domestic headquarters with some decentralized operations permitted.

4. What are the challenges posed by global information systems and management solutions for these
challenges?
Global information systems pose challenges because cultural, political, and language diversity
magnifies differences in organizational culture and business processes and encourages proliferation of
disparate local information systems that are difficult to integrate. Typically, international systems have
evolved without a conscious plan. The remedy is to define a small subset of core business processes and
focus on building systems to support these processes. Tactically, managers will have to coopt widely
dispersed foreign units to participate in the development and operation of these systems, being careful to
maintain overall control.

5. What are the issues and technical alternatives to be considered when developing international
information systems?
Implementing a global system requires an implementation strategy that considers both business
design and technology platforms. The main hardware and telecommunications issues are systems
integration and connectivity. The choices for integration are to go either with a proprietary architecture
or with open systems technology. Global networks are extremely difficult to build and operate. Firms
can build their own global networks or they can create global networks based on the Internet (intranets
or virtual private networks). The main software issues concern building interfaces to existing systems
and selecting applications that can work with multiple cultural, language, and organizational
frameworks.

Key Terms Legitimacy, 15-16
Multinational, 15-9
Business driver, 15-4 Particularism, 15-7
Cooptation, 15-16 Software localization, 15-21
Core systems, 15-14 Transborder data flow, 15-7
Domestic exporter, 15-9 Transnational, 15-10
Franchisers, 15-9
Global culture, 15-5
International information systems architecture, 15-4

15-26 Part Four Building and Managing Systems 4. What are the challenges posed by global informa-
tion systems and management solutions for these
Review Questions challenges?

1. What major factors are driving the international- • List and describe the major management
ization of business? issues in developing international systems.
• List and describe the five major dimensions
for developing an international information • Identify and describe three principles to
systems architecture. follow when organizing the firm for global
• Describe the five general cultural factors business.
leading toward growth in global business and
the four specific business factors. Describe the • Identify and describe three steps of a manage-
interconnection among these factors. ment strategy for developing and implement-
• List and describe the major challenges to the ing global systems.
development of global systems.
• Explain why some firms have not planned for • Define cooptation and explain how can it be
the development of international systems. used in building global systems.

2. What are the alternative strategies for developing 5. What are the issues and technical alternatives to
global businesses? be considered when developing international
• Describe the four main strategies for global information systems?
business and organizational structure.
• Describe the main technical issues facing
3. How can information systems support different global systems.
global business strategies?
• Describe the four different system configura- • Identify some technologies that will help
tions that can be used to support different firms develop global systems.
global strategies.

Discussion Questions 2. Describe ways the Internet can be used in
international information systems.
1. If you were a manager in a company that operates
in many countries, what criteria would you use
to determine whether an application should be
developed as a global application or as a local
application?

Hands-On MIS Projects

The projects in this section give you hands-on experience conducting international market research,
analyzing international systems issues for an expanding business, and building a job posting database and
Web page for an international company.

Management Decision Problems

1. United Parcel Service (UPS) has been expanding its package delivery and logistics services in China, serving
both multinational companies and local businesses. UPS drivers in China need to use UPS systems and tools
such as its handheld Driver Information and Delivery Acquisition Device for capturing package delivery
data. UPS wants to make its WorldShip, CampusShip, and other shipping-management services accessible to

Chapter 15 Managing Global Systems 15-27

Chinese and multinational customers via the Web. What are some of the international systems issues UPS
must consider in order to operate successfully in China?
2. Your company manufactures and sells tennis rackets and would like to start selling outside the United States.
You are in charge of developing a global Web strategy and the first countries you are thinking of targeting are
Brazil, China, Germany, Italy, and Japan. Using the statistics in the CIA World Factbook, which of these
countries would you target first? What criteria did you use? What other considerations should you address in
your Web strategy? What features would you put on your Web site to attract buyers from the countries you
target?

Achieving Operational Excellence: Building a Job Database and Web Page
for an International Consulting Firm

Software skills: Database and Web page design
Business skills: Human resources internal job postings

Companies with many overseas locations need a way to inform employees about available job openings
in these locations. In this project you’ll use database software to design a database for posting internal job
openings and a Web page for displaying this information.

KTP Consulting operates in various locations around the world. KTP specializes in designing, developing,
and implementing enterprise systems for medium- to large-size companies. KTP offers its employees
opportunities to travel, live, and work in various locations throughout the United States, Europe, and Asia. The
firm’s human resources department has a simple database that enables its staff to track job vacancies. When
an employee is interested in relocating, she or he contacts the human resources department for a list of KTP
job vacancies. KTP also posts its employment opportunities on the company Web site.

What type of data should be included in the KTP job vacancies database? What information should not be
included in this database? Based on your answers to these questions, build a job vacancies database for KTP.
Populate the database with at least 20 records. You should also build a simple Web page that incorporates job
vacancy data from your newly created database. Submit a copy of the KTP database and Web page to your
professor.

Improving Decision Making: Conducting International Marketing and
Pricing Research

Software skills: Internet-based software
Business skills: International pricing and marketing

In this project you’ll use the Web to research overseas distributors and customs regulations and use Internet-
based software to calculate prices in foreign currencies.

You are in charge of marketing for a U.S. manufacturer of office furniture that has decided to enter the
international market. You have been given the name of Sorin SRL, a major Italian office furniture retailer,
but your source had no other information. You want to test the market by contacting this firm to offer it
a specific desk chair that you have to sell at about $125. Using the Web, locate the information needed
to contact this firm and to find out how many European euros you would need to get for the chair in
the current market. One source for locating European companies is the Europages Business Directory. In
addition, consider using the Universal Currency Converter Web site, which determines the value of one
currency expressed in other currencies. Obtain both the information needed to contact the firm and the
price of your chair in their local currency. Then locate and obtain customs and legal restrictions on the
products you will export from the United States and import into Italy. Finally, locate a company that will
represent you as a customs agent and gather information on shipping costs.

15-28 Part Four Building and Managing Systems

Video Cases

Video cases and Instructional Videos illustrating some of the concepts in this chapter are available. Contact your
instructor.

Collaboration and Teamwork Project

In MyMISLab, you will find a Collaboration and Teamwork Project dealing with the concepts in this chapter.
You will be able to use Google Sites, Google Docs, and other open source collaboration tools to complete the
assignment.

Chapter 15 Managing Global Systems 15-29

Sherwin-Williams Paints the World

CASE STUDY

Sherwin-Williams is the United States front- enters a market it must either have available or
runner and world’s third-largest producer establish local supply chains, retail outlets, and
of paints, varnishes, and specialty coatings. customer service operations. Enterprise resource
It also develops and produces refinishing planning (ERP) systems must include multi-language
products, motor vehicle and airplane finishes, and support as well as support for international tax law,
industrial finishes for metal, wood, and plastic. A differences in accounting procedures, and variations
network of exclusive wholesale dealers and agents set in environmental, financial, and other regulations.
up more than a hundred years ago has blossomed into According to Tom Lucas, Sherwin-Williams’ CIO,
3,390 company-operated stores, the only authorized in order to become an effective global player, a dif-
outlets for Sherwin-Williams branded products. Mass ferent application set was necessary, and the com-
merchandisers, home centers, independent paint pany’s existing domestic ERP lacked the necessary
dealers, hardware stores, automotive retailers, and capabilities.
industrial distributors market its other brands. Major
brands in the Sherwin-Williams portfolio include An additional challenge was that outdated, rudi-
Dutch Boy, Krylon, Minwax, Thompson's Water Seal, mentary, and even nonfunctional IT systems at
Ronseal, Becker Acroma, Pratt & Lambert, Sayerlack, newly acquired companies were common. Only a
Red Devil, Euronavy, Martin-Senour, and Altax. With few had serviceable ERP systems, and a standard
over 32,000 employees, $7.78 billion in annual sales, implementation was needed across all business
and operations in 109 countries, Sherwin-Williams is units. Moreover, a future ERP system needed to
truly a global presence. The company logo adopted centralize data to improve global decision-making
in 1905, “Sherwin-Williams Covers the Earth” (a paint while still supporting local differences and avoid-
can pouring paint over the globe), reflects Sherwin- ing damage to existing local business relationships.
Williams’ long-term global aspirations. Sherwin-Williams chose the Oracle E-Business Suite,
which includes dozens of applications that encom-
Nevertheless, international profits still accounted pass ERP, customer relationship management (CRM),
for less than 20% of Sherwin-Williams’s revenues and supply chain management functions.
in 2010. Sherwin-Williams needed to broaden its
revenue base by entering new overseas markets. Implementation began in Mexico in 2005, with
Additional market forces compounded the need for solutions deployed for manufacturing, operations,
globalization. Raw materials providers in Sherwin- customer service, and financials. Each year since,
Williams’ supply chain had shifted their operations additional countries and functionality have been
overseas. Many of Sherwin-Williams’ suppliers and brought online. The philosophy pursued by
industrial customers had also expanded globally, and Chandrasekhar A. Yadati, manager of Sherwin-
international OEMs (original equipment manufactur- Williams’ global ERP team, was to complete an
ers) needed the industrial finishes Sherwin-Williams implementation, get feedback, make any neces-
could provide. Thus, global acquisitions were vigor- sary changes, and learn from the experience before
ously pursued during the past decade, most recently moving on to the next country or application. This
Becker Acroma, a Stockholm, Sweden manufacturer way, best practices could be gleaned and applied in
of industrial wood coatings in 2010, and Leighs Paints the next phase. The key goals in each country were
LTD, a Bolton, UK paint manufacturer and whole- to gain as much familiarity with the customer as
saler in 2011. When current CEO Christopher Connor possible and to gain acceptance from local employ-
began his tenure in 1999, Sherwin-Williams had ees and supply chain partners. Yadati and the 40
no presence in Asia and only its London office in members of his Oracle team understood that the
Europe. Now it has 13 factories in both regions. benefits of ERP would only be realized if it was
accepted and correctly used. Following this slow
In order to continue its global expansion, Sherwin- but steady approach, the Oracle software suite was
Williams knew that more IT investment was vital. extended to South America, China, and Southeast
Because shipping both its raw materials and finished Asia. Two distinct instances of the Oracle E-Business
products is cost prohibitive, when Sherwin-Williams Suite were deployed, one specifically adapted for

15-30 Part Four Building and Managing Systems costs of production (assuming normal operating
conditions), calculates the difference between the
Asia and one for the Americas. ERP users encompass actual cost and the standard cost, and charges the
more than 2,000 employees spread throughout the variance to the cost of goods sold. However, using
United States, Canada, Mexico, Argentina, Chile, the Oracle E-Business Suite, the company can easily
China, Malaysia, Singapore, and Vietnam. transfer data to a different accounting method such
as LIFO (last in, first out), FIFO (first in, first out),
Oracle Product Information Management Data or average costing if prescribed by local government
Hub, an enterprise data management (EDM) sys- regulation or market conditions.
tem, was added in 2008. This defined, centralized,
and coordinated Sherwin-Williams’s product, ven- Accounting, manufacturing, logistics, and supply
dor, and customer data, enabling non-conflicting chain business processes are delivered as shared
data to flow from one business process to another. services to either the Asian region or the United
The company’s data center, located in the United States/Latin American region. The benefits have
States, is managed by a team in Cleveland. Both included decreased invoice processing time, the
the Oracle E-Business Suite for the Americas and ability to negotiate discounted paperless transac-
the Asian adaptation along with a global human tions, and knowledge sharing. If one geographic
resources management system are administered region revises a manufacturing or accounting process
from corporate headquarters. For Sherwin-Williams, to improve efficiency, it can be readily adopted in
this centralized approach team is both cost and other areas. Knowledge sharing is actively encour-
operationally efficient. aged at Sherwin-Williams, and in fact, played a large
role in the deployment of the enterprise system.
The centralized data hub has enabled Sherwin- Employees from recently converted locations were
Williams to deploy detailed standard business temporarily relocated to help other regions through
processes organized into five key areas entitled the process, and they were encouraged to find and
Forecast to Plan, Procure to Pay, Order to Cash, adopt best practices with the assurance that the
Accounting to Reporting, and Formulate to Build. Sherwin-Williams Oracle team would be there to
Formulate to Build is built on Oracle Process support their efforts. The Oracle team is likewise
Manufacturing 12.1.2 but encompasses six additional highly mobile, visiting manufacturing plants and
Oracle E-Business Suite modules that handle product offices during rollouts and upgrades to make sure
information management and inventory, product that the solutions they are installing will fulfill the
development, advanced supply chain planning, needs of all stakeholders.
process execution, quality control, and process
manufacturing financials. After data integrity had been achieved and
reliable data was populating business processes,
The manufacturing process, particularly con- Sherwin-Williams was ready to implement a BI
sistent paint recipes, is obviously of the utmost solution. Oracle Business Intelligence Enterprise
importance to Sherwin-Williams. Formulate to Build Edition was deployed in 2009 to expand data que-
enables paint that meets company quality stipula- rying and analysis capabilities. Planning team
tions and local volatile organic compound (VOC) and members in Cleveland now have instant access to
other environmental regulations to be manufactured daily sales and margin data as well as the ability to
and sold locally using raw materials, such as resins monitor sales trends. End-of-month reporting is a
and solvents, which vary with the locale. Although thing of the past. Both CIO Lucas and Alberto Elli,
the paint recipe is developed independently, the for- vice president and controller for Sherwin-Williams’
mula is then input to Oracle E-Business Suite work- Global Finishes Group, agree that the ability to
flows where it is instantly customized for a location, instantly view accurate product margins and
a process that previously took up to two months. In compare profitability between divisions has dramati-
addition to the quality control benefits, Formulate to cally improved decision making.
Build provides detailed records for each paint batch,
including which version of a recipe was used, the Sherwin-Williams is organized into three business
amounts of each raw material, and the date com- units: the Paint Stores Group, the Consumer Group,
pleted, allowing lots to be easily traced should it ever and the Global Finishes group. Some shared ser-
become necessary. vices are organized among and between these major
groups rather than regionally. According to global
Integration with the Oracle E-Business Suite ERP team manager Yadati, this is how the data
enables efficient data distribution to accounting and
financial processes. Sherwin-Williams uses standard
costing and variance reporting, which estimates

warehouse and BI solutions are implemented so Chapter 15 Managing Global Systems 15-31
that regional data can be aggregated. For example,
managers can now total all purchases from a par- Lucas firmly believes that Sherwin-Williams’ Oracle
ticular global supplier. Recently, rising raw material infrastructure will continue to present opportunities
costs have squeezed profit margins, making this for innovation. Henry Sherwin would undoubtedly
capability particularly valuable to decision makers. be proud that the legacy of technological innovation
and market flexibility on which he built his company
Maintaining cash flow is the driving force behind continues to propel it towards the future.
each new module added to the Oracle software suite,
for example, the global product and customer hubs Sources: Fred Sandsmark, “Covering the Earth with Data,” Profit
adopted in 2011. According to CIO Lucas, each new Magazine, November 2011; “Sherwin-Williams Upgrades to Oracle
addition is guided by boosting sales, expanding mar- E-Business Suite 12.1 to Support Global Business Operations,”
gins, and enhancing efficiency. And these decisions Sherwin-Williams press release, Sept. 21, 2011; Keith Berr, “Chris
are not only top-down. The Sherwin-Williams corpo- Connor, CEO of Sherwin-Williams, Photographed by Keith Berr,”
rate culture, which encourages employee familiarity Keith Berr Blog, April 29, 2012; Reuben Gregg Brewer, “Company
with all aspects of the business, has resulted in an Profile: Sherwin-Williams,” Value Line, September 6, 2011; “The
innovative program called “A Day in the Life.” IT Long Case for Sherwin Williams: Healthy Cash Flow Despite
professionals are sent to staff manufacturing plants Recession,” Seeking Alpha, March 8, 2011, Sherwin-Williams
and retail stores where they unload trucks, stock Center of Excellence Timeline, http://excellence.sherwin.com/
shelves, serve customers, and mix paint. The idea is history_timeline.html; accessed July 2, 2012; www.oracle.com,
that familiarity with the endpoint, where the dollars accessed July 5th, 2012.
are actually generated, imparts an appreciation for
how difficult that job actually is as well as an under- CASE STUDY QUESTIONS
standing of the supporting tasks that will maximize
its efficacy. What’s more, it further contributes to an 1. What management problems and challenges
atmosphere conducive to ideas percolating up from typical of global companies was Sherwin-Williams
the bottom. Lucas reiterates that the role of the IT experiencing? What management, organization,
department is to take the Oracle system to the next and technology factors were responsible for those
level based on input from stakeholders. Learning problems?
the business from the ground up and listening to
supply chain partners maximizes the collaboration. 2. How did Sherwin-Williams’ new global systems
support its business strategy? How effective was
the solution chosen by the company?

3. What steps did Sherwin-Williams take to make
sure that its global systems implementation was
successful?

References

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606 References

Glossary

3-D printing Uses machines to make solid objects, layer by layer, languages, accomplish physical tasks, use a perceptual apparatus,
from specifications in a digital file. Also known as additive and emulate human expertise and decision making.
manufacturing. attribute A piece of information describing a particular entity.
augmented reality A technology for enhancing visualization.
3G networks Cellular networks based on packet-switched Provides a live direct or indirect view of a physical real-world
technology with speeds ranging from 144 Kbps for mobile users environment whose elements are augmented by virtual
to over 2 Mbps for stationary users, enabling users to transmit computer-generated imagery.
video, graphics, and other rich media, in addition to voice. authentication The ability of each party in a transaction to
ascertain the identity of the other party.
4G networks The next evolution in wireless communication is automation Using the computer to speed up the performance of
entirely packet switched and capable of providing between 1 existing tasks.
Mbps and 1 Gbps speeds; up to ten times faster than 3G autonomic computing Effort to develop systems that can manage
networks. Not widely deployed in 2010. themselves without user intervention.

acceptable use policy (AUP) Defines acceptable uses of the backward chaining A strategy for searching the rule base in an
firm’s information resources and computing equipment, expert system that acts like a problem solver by beginning with a
including desktop and laptop computers, wireless devices, hypothesis and seeking out more information until the
telephones, and the Internet, and specifies consequences for hypothesis is either proved or disproved.
noncompliance.
balanced scorecard method Framework for operationalizing a
acceptance testing Provides the final certification that the system firms strategic plan by focusing on measurable financial, business
is ready to be used in a production setting. process, customer, and learning and growth outcomes of firm
performance.
accountability The mechanisms for assessing responsibility for
decisions made and actions taken. bandwidth The capacity of a communications channel as measured
by the difference between the highest and lowest frequencies
advertising revenue model Web site generating revenue by that can be transmitted by that channel.
attracting a large audience
behavioral models Descriptions of management based on
affiliate revenue model an e-commerce revenue model in which behavioral scientists’ observations of what managers actually do
Web sites are paid as "affiliates" for sending their visitors to other in their jobs.
sites in return for a referral fee.
behavioral targeting Tracking the click-streams (history of clicking
agency theory Economic theory that views the firm as a nexus of behavior) of individuals across multiple Web sites for the purpose
contracts among self-interested individuals who must be of understanding their interests and intentions, and exposing
supervised and managed. them to advertisements which are uniquely suited to their
interests.
agent-based modeling Modeling complex phenomena as systems
of autonomous agents that follow relatively simple rules for benchmarking Setting strict standards for products, services, or
interaction. activities and measuring organizational performance against
those standards.
agile development Rapid delivery of working software by breaking
a large project into a series of small sub-projects that are best practices The most successful solutions or problem-solving
completed in short periods of time using iteration and continuous methods that have been developed by a specific organization or
feedback. industry.

analytic platform Preconfigured hardware-software system that is big data Datasets with volumes so huge that they are beyond the
specifically designed high-speed analysis of large datasets. ability of typical relational DBMS to capture, store, and analyze.
The data are often unstructured or semi-structured.
analytical CRM Customer relationship management applications
dealing with the analysis of customer data to provide information biometric authentication Technology for authenticating system
for improving business performance. users that compares a person’s unique characteristics such as
fingerprints, face, or retinal image, against a stored set profile of
Android A mobile operating system developed by Android, Inc. these characteristics.
(purchased by Google) and later the Open Handset Alliance as a
flexible, upgradeable mobile device platform. bit A binary digit representing the smallest unit of data in a
computer system. It can only have one of two states, representing
antivirus software Software designed to detect, and often 0 or 1.
eliminate, computer viruses from an information system.
blade server Entire computer that fits on a single, thin card (or
application controls: Specific controls unique to each blade) and that is plugged into a single chassis to save space,
computerized application that ensure that only authorized data power and complexity.
are completely and accurately processed by that application.
blog Popular term for Weblog, designating an informal yet structured
application server Software that handles all application operations Web site where individuals can publish stories, opinions, and
between browser-based computers and a company’s back-end links to other Web sites of interest.
business applications or databases.
blogosphere Totality of blog-related Web sites.
apps Small pieces of software that run on the Internet, on your Bluetooth Standard for wireless personal area networks that can
computer, or on your cell phone and are generally delivered over
the Internet. transmit up to 722 Kbps within a 10-meter area.

artificial intelligence (AI) The effort to develop computer-based 607
systems that can behave like humans, with the ability to learn

608 Glossary chief information officer (CIO) Senior manager in charge of the
information systems function in the firm.
botnet A group of computers that have been infected with bot
malware without users’ knowledge, enabling a hacker to use the chief knowledge officer (CKO) Senior executive in charge of the
amassed resources of the computers to launch distributed denial- organization’s knowledge management program.
of-service attacks, phishing campaigns or spam.
chief privacy officer (CPO) Responsible for ensuring the
broadband High-speed transmission technology. Also designates a company complies with existing data privacy laws.
single communications medium that can transmit multiple
channels of data simultaneously. chief security officer (CSO) Heads a formal security function for
the organization and is responsible for enforcing the firm’s
bugs Software program code defects. security policy.
bullwhip effect Distortion of information about the demand for a
choice Simon’s third stage of decision making, when the individual
product as it passes from one entity to the next across the supply selects among the various solution alternatives.
chain.
business continuity planning Planning that focuses on how the Chrome OS Google's lightweight computer operating system for
company can restore business operations after a disaster strikes. users who do most of their computing on the Internet; runs on
business driver A force in the environment to which businesses computers ranging from netbooks to desktop computers.
must respond and that influences the direction of business.
business ecosystem Loosely coupled but interdependent networks churn rate Measurement of the number of customers who stop
of suppliers, distributors, outsourcing firms, transportation using or purchasing products or services from a company. Used
service firms, and technology manufacturers as an indicator of the growth or decline of a firm’s customer base.
business functions Specialized tasks performed in a business
organization, including manufacturing and production, sales and classical model of management Traditional description of
marketing, finance and accounting, and human resources. management that focused on its formal functions of planning,
business intelligence Applications and technologies to help users organizing, coordinating, deciding, and controlling.
make better business decisions.
business model An abstraction of what an enterprise is and how click fraud Fraudulently clicking on an online ad in pay
the enterprise delivers a product or service, showing how the per click advertising to generate an improper charge per click.
enterprise creates wealth.
business performance management Attempts to systematically client The user point-of-entry for the required function in client/
translate a firm’s strategies (e.g., differentiation, low-cost server computing. Normally a desktop computer, workstation, or
producer, market share growth, and scope of operation) into laptop computer.
operational targets.
business process management Business process management client/server computing A model for computing that splits
(BPM) is an approach to business which aims to continuously processing between clients and servers on a network, assigning
improve and manage business processes. functions to the machine most able to perform the function.
business process redesign Type of organizational change in
which business processes are analyzed, simplified, and cloud computing Web-based applications that are stored on
redesigned. remote servers and accessed via the "cloud" of the Internet using
business processes The unique ways in which organizations a standard Web browser.
coordinate and organize work activities, information, and
knowledge to produce a product or service. collaboration Working with others to achieve shared and explicit
business-to-business (B2B) electronic commerce Electronic goals.
sales of goods and services among businesses.
business-to-consumer (B2C) electronic commerce Electronic co-location a kind of Web site hosting in which firm purchase or
retailing of products and services directly to individual rent a physical server computer at a hosting company's location
consumers. in order to operate a Web site.
byte A string of bits, usually eight, used to store one number or
character in a computer system. community provider a Web site business model that creates a
digital online environment where people with similar interests
cable Internet connections Internet connections that use digital can transact (buy and sell goods); share interests, photos, videos;
cable lines to deliver high-speed Internet access to homes and communicate with like-minded people; receive interest-related
businesses. information; and even play out fantasies by adopting online
personalities called avatars.
capital budgeting The process of analyzing and selecting various
proposals for capital expenditures. communities of practice (COPs) Informal social networks of
professionals and employees within and outside the firm who
carpal tunnel syndrome (CTS) Type of RSI in which pressure on have similar work-related activities and interests and share
the median nerve through the wrist’s bony carpal tunnel their knowledge.
structure produces pain.
competitive forces model Model used to describe the interaction
case-based reasoning (CBR) Artificial intelligence technology of external influences, specifically threats and opportunities, that
that represents knowledge as a database of cases and solutions. affect an organization’s strategy and ability to compete.

cell phone A device that transmits voice or data, using radio waves complementary assets Additional assets required to derive value
to communicate with radio antennas placed within adjacent from a primary investment.
geographic areas called cells.
component-based development Building large software systems
change agent In the context of implementation, the individual by combining pre-existing software components.
acting as the catalyst during the change process to ensure
successful organizational adaptation to a new system or computer abuse The commission of acts involving a computer
innovation. that may not be illegal but are considered unethical.

change management Managing the impact of organizational computer crime The commission of illegal acts through the use of
change associated with an innovation, such as a new information a computer or against a computer system.
system.
computer forensics The scientific collection, examination,
chat Live, interactive conversations over a public network. authentication, preservation, and analysis of data held on or
retrieved from computer storage media in such a way that the
information can be used as evidence in a court of law.

computer hardware Physical equipment used for input,
processing, and output activities in an information system.

computer literacy Knowledge about information technology,
focusing on understanding of how computer-based technologies
work.

computer software Detailed, preprogrammed instructions that
control and coordinate the work of computer hardware
components in an information system.

computer virus Rogue software program that attaches itself to Glossary 609
other software programs or data files in order to be executed,
often causing hardware and software malfunctions. cybervandalism Intentional disruption, defacement, or destruction
of a Web site or corporate information system.
computer vision syndrome (CVS) Eyestrain condition related to
computer display screen use; symptoms include headaches, cyberwarfare State-sponsored activity designed to cripple and
blurred vision, and dry and irritated eyes. defeat another state or nation by damaging or disrupting its
computers or networks.
computer-aided design (CAD) Information system that
automates the creation and revision of designs using data Streams of raw facts representing events occurring in
sophisticated graphics software. organizations or the physical environment before they have been
organized and arranged into a form that people can understand
computer-aided software engineering (CASE) Automation of and use.
step-by-step methodologies for software and systems
development to reduce the amounts of repetitive work the data administration A special organizational function for
developer needs to do. managing the organization’s data resources, concerned with
information policy, data planning, maintenance of data
consumer-to-consumer (C2C) electronic commerce Consumers dictionaries, and data quality standards.
selling goods and services electronically to other consumers.
data cleansing Activities for detecting and correcting data in a
consumerization of IT New information technology originating in database or file that are incorrect, incomplete, improperly
the consumer market that spreads to business organizations. formatted, or redundant. Also known as data scrubbing.

controls All of the methods, policies, and procedures that ensure data definition DBMS capability that specifies the structure and
protection of the organization’s assets, accuracy and reliability of content of the database.
its records, and operational adherence to management standards.
data dictionary An automated or manual tool for storing and
conversion The process of changing from the old system to the organizing information about the data maintained in a database.
new system.
data element A field.
cookies Tiny file deposited on a computer hard drive when an data flow diagram (DFD) Primary tool for structured analysis
individual visits certain Web sites. Used to identify the visitor and
track visits to the Web site. that graphically illustrates a system’s component process and the
flow of data between them.
cooptation Bringing the opposition into the process of designing data governance Policies and processes for managing the
and implementing a solution without giving up control of the availability, usability, integrity, and security of the firm’s data.
direction and nature of the change. data inconsistency The presence of different values for same
attribute when the same data are stored in multiple locations.
copyright A statutory grant that protects creators of intellectual data management technology Software governing the
property against copying by others for any purpose for a organization of data on physical storage media.
minimum of 70 years. data manipulation language A language associated with a
database management system that end users and programmers
core competency Activity at which a firm excels as a world-class use to manipulate data in the database.
leader. data mart A small data warehouse containing only a portion of the
organization’s data for a specified function or population of users.
core systems Systems that support functions that are absolutely data mining Analysis of large pools of data to find patterns and
critical to the organization. rules that can be used to guide decision making and predict
future behavior.
cost transparency the ability of consumers to discover the actual data quality audit A survey and/or sample of files to determine
costs merchants pay for products. accuracy and completeness of data in an information system.
data redundancy The presence of duplicate data in multiple data
counterimplementation A deliberate strategy to thwart the files.
implementation of an information system or an innovation in an data visualization Technology for helping users see patterns and
organization. relationships in large amounts of data by presenting the data in
graphical form.
cross-selling Marketing complementary products to customers. data warehouse A database, with reporting and query tools, that
crowdsourcing Using large Internet audiences for advice, market stores current and historical data extracted from various
operational systems and consolidated for management reporting
feedback, new ideas and solutions to business problems. Related and analysis.
to the 'wisdom of crowds' theory. data workers People such as secretaries or bookkeepers who
culture The set of fundamental assumptions about what products process the organization’s paperwork.
the organization should produce, how and where it should database A group of related files.
produce them, and for whom they should be produced. database (rigorous definition) A collection of data organized to
customer lifetime value (CLTV) Difference between revenues service many applications at the same time by storing and
produced by a specific customer and the expenses for acquiring managing data so that they appear to be in one location.
and servicing that customer minus the cost of promotional database administration Refers to the more technical and
marketing over the lifetime of the customer relationship, operational aspects of managing data, including physical database
expressed in today’s dollars. design and maintenance.
customer relationship management (CRM) Business and database management system (DBMS) Special software to
technology discipline that uses information systems to coordinate create and maintain a database and enable individual business
all of the business processes surrounding the firm’s interactions applications to extract the data they need without having to
with its customers in sales, marketing, and service. create separate files or data definitions in their computer
customer relationship management systems Information programs.
systems that track all the ways in which a company interacts database server A computer in a client/server environment that is
with its customers and analyze these interactions to optimize responsible for running a DBMS to process SQL statements and
revenue, profitability, customer satisfaction, and customer perform database management tasks.
retention.
customization The modification of a software package to meet an
organization’s unique requirements without destroying the
package software’s integrity.
customization In e-commerce, changing a delivered product or
service based on a user’s preferences or prior behavior.
cyberlocker Online file-sharing service that allows users to upload
files to a secure online storage site from which the files can be
synchronized and shared with others.

610 Glossary domestic exporter Form of business organization characterized by
heavy centralization of corporate activities in the home county of
decisional roles Mintzberg’s classification for managerial roles origin.
where managers initiate activities, handle disturbances, allocate
resources, and negotiate conflicts. downtime Period of time in which an information system is not
operational.
decision-support systems (DSS) Information systems at the
organization’s management level that combine data and drill down The ability to move from summary data to lower and
sophisticated analytical models or data analysis tools to support lower levels of detail.
semistructured and unstructured decision making.
drive-by download Malware that comes with a downloaded file a
deep packet inspection (DPI) Technology for managing user intentionally or unintentionally requests.
network traffic by examining data packets, sorting out low-
priority data from higher priority business-critical data, and due process A process in which laws are well-known and
sending packets in order of priority. understood and there is an ability to appeal to higher authorities
to ensure that laws are applied correctly.
demand planning Determining how much product a business
needs to make to satisfy all its customers’ demands. dynamic pricing Pricing of items based on real-time interactions
between buyers and sellers that determine what a item is worth
denial of service (DoS) attack Flooding a network server or Web at any particular moment.
server with false communications or requests for services in
order to crash the network. e-government Use of the Internet and related technologies to
digitally enable government and public sector agencies’
Descartes’ rule of change A principle that states that if an action relationships with citizens, businesses, and other arms of
cannot be taken repeatedly, then it is not right to be taken at any government.
time.
efficient customer response system System that directly links
design Simon’s second stage of decision making, when the consumer behavior back to distribution, production, and supply
individual conceives of possible alternative solutions to a chains.
problem.
electronic business (e-business) The use of the Internet and
digital asset management systems Classify, store, and distribute digital technology to execute all the business processes in the
digital objects such as photographs, graphic images, video, and enterprise. Includes e-commerce as well as processes for the
audio content. internal management of the firm and for coordination with
suppliers and other business partners.
digital certificate An attachment to an electronic message to
verify the identity of the sender and to provide the receiver with electronic commerce The process of buying and selling goods and
the means to encode a reply. services electronically involving transactions using the Internet,
networks, and other digital technologies.
digital dashboard Displays all of a firm’s key performance
indicators as graphs and charts on a single screen to provide one- electronic data interchange (EDI) The direct computer-to-
page overview of all the critical measurements necessary to make computer exchange between two organizations of standard
key executive decisions. business transactions, such as orders, shipment instructions, or
payments.
digital divide Large disparities in access to computers and the
Internet among different social groups and different locations. e-mail The computer-to-computer exchange of messages.
employee relationship management (ERM) Software dealing
digital firm Organization where nearly all significant business
processes and relationships with customers, suppliers, and with employee issues that are closely related to CRM, such as
employees are digitally enabled, and key corporate assets are setting objectives, employee performance management,
managed through digital means. performance-based compensation, and employee training.
encryption The coding and scrambling of messages to prevent
digital goods Goods that can be delivered over a digital network. their being read or accessed without authorization.
Digital Millennium Copyright Act (DMCA) Adjusts copyright end-user development The development of information systems
by end users with little or no formal assistance from technical
laws to the Internet Age by making it illegal to make, distribute, specialists.
or use devices that circumvent technology-based protections of end-user interface The part of an information system through
copy-righted materials. which the end user interacts with the system, such as on-line
digital subscriber line (DSL) A group of technologies providing screens and commands.
high-capacity transmission over existing copper telephone lines. end users Representatives of departments outside the information
direct cutover A risky conversion approach where the new system systems group for whom applications are developed.
completely replaces the old one on an appointed day. enterprise applications Systems that can coordinate activities,
disaster recovery planning Planning for the restoration of decisions, and knowledge across many different functions, levels,
computing and communications services after they have been and business units in a firm. Include enterprise systems, supply
disrupted. chain management systems, and knowledge management
disintermediation The removal of organizations or business systems.
process layers responsible for certain intermediary steps in a enterprise content management systems Help organizations
value chain. manage structured and semistructured knowledge, providing
disruptive technologies Technologies with disruptive impact on corporate repositories of documents, reports, presentations, and
industries and businesses, rendering existing products, services best practices and capabilities for collecting and organizing e-mail
and business models obsolete. and graphic objects.
distributed denial-of-service (DDoS) attack Numerous enterprise software Set of integrated modules for applications
computers inundating and overwhelming a network from such as sales and distribution, financial accounting, investment
numerous launch points. management, materials management, production planning, plant
documentation Descriptions of how an information system works maintenance, and human resources that allow data to be used by
from either a technical or end-user standpoint. multiple functions and business processes.
domain name English-like name that corresponds to the unique enterprise systems Integrated enterprise-wide information
32-bit numeric Internet Protocol (IP) address for each computer systems that coordinate key internal processes of the firm.
connected to the Internet
Domain Name System (DNS) A hierarchical system of servers
maintaining a database enabling the conversion of domain names
to their numeric IP addresses.

enterprise-wide knowledge management systems General- Glossary 611
purpose, firmwide systems that collect, store, distribute, and
apply digital content and knowledge. formal control tools Project management technique that helps
monitor the progress toward completion of a task and fulfillment
entity A person, place, thing, or event about which information of goals.
must be kept.
formal planning tools Project management technique that
entity-relationship diagram A methodology for documenting structures and sequences tasks, budgeting time, money, and
databases illustrating the relationship between various entities in technical resources required to complete the tasks.
the database.
forward chaining A strategy for searching the rule base in an
ergonomics The interaction of people and machines in the work expert system that begins with the information entered by the
environment, including the design of jobs, health issues, and the user and searches the rule base to arrive at a conclusion.
end-user interface of information systems.
fourth-generation language A programming language that can be
e-tailer Online retail stores from the giant Amazon to tiny local employed directly by end users or less-skilled programmers to
stores that have Web sites where retail goods are sold. develop computer applications more rapidly than conventional
programming languages.
ethical “no free lunch” rule Assumption that all tangible and
intangible objects are owned by someone else, unless there is a franchiser Form of business organization in which a product is
specific declaration otherwise, and that the creator wants created, designed, financed, and initially produced in the home
compensation for this work. country, but for product-specific reasons relies heavily on foreign
personnel for further production, marketing, and human
ethics Principles of right and wrong that can be used by individuals resources.
acting as free moral agents to make choices to guide their
behavior. free/fremium revenue model an e-commerce revenue model in
which a firm offers basic services or content for free, while
evil twins Wireless networks that pretend to be legitimate to entice charging a premium for advanced or high value features.
participants to log on and reveal passwords or credit card
numbers. fuzzy logic Rule-based AI that tolerates imprecision by using
nonspecific terms called membership functions to solve
exchange Third-party Net marketplace that is primarily transaction problems.
oriented and that connects many buyers and suppliers for spot
purchasing. Gantt chart Visually representats the timing, duration, and
resource requirements of project tasks.
executive support systems (ESS) Information systems at the
organization’s strategic level designed to address unstructured general controls Overall control environment governing the
decision making through advanced graphics and design, security, and use of computer programs and the security
communications. of data files in general throughout the organization's information
technology infrastructure.
expert system Knowledge-intensive computer program that
captures the expertise of a human in limited domains of genetic algorithms Problem-solving methods that promote the
knowledge. evolution of solutions to specified problems using the model of
living organisms adapting to their environment.
explicit knowledge Knowledge that has been documented.
Extensible Markup Language (XML) General purpose language geoadvertising Delivering ads to users based on their GPS location.
geographic information system (GIS) System with software
that describes the structure of a document and XML can
perform presentation, communication, and storage of data, that can analyze and display data using digitized maps to enhance
allowing data to be manipulated by the computer. planning and decision-making.
external integration tools Project management technique that geoinformation services Information on local places and things
links the work of the implementation team to that of users at all based on the GPS position of the user.
organizational levels. geosocial services Social networking based on the GPS location of
extranet Private intranet that is accessible to authorized outsiders. users.
global culture The development of common expectations, shared
Fair Information Practices (FIP) A set of principles originally artifacts, and social norms among different cultures and peoples
set forth in 1973 that governs the collection and use of Golden Rule Putting oneself in the place of others as the object
information about individuals and forms the basis of most U.S. of a decision.
and European privacy laws. Gramm-Leach-Bliley Act Requires financial institutions to ensure
the security and confidentiality of customer data.
fault-tolerant computer systems Systems that contain extra green computing Refers to practices and technologies for
hardware, software, and power supply components that can back designing, manufacturing, using, and disposing of computers,
a system up and keep it running to prevent system failure. servers, and associated devices such as monitors, printers, storage
devices, and networking and communications systems to
feasibility study As part of the systems analysis process, the way minimize impact on the environment.
to determine whether the solution is achievable, given the grid computing Applying the resources of many computers in a
organization’s resources and constraints. network to a single problem.
group decision-support system (GDSS) An interactive
feedback Output that is returned to the appropriate members of the computer-based system to facilitate the solution to unstructured
organization to help them evaluate or correct input. problems by a set of decision makers working together as a
group.
field A grouping of characters into a word, a group of words, or a
complete number, such as a person’s name or age. hacker A person who gains unauthorized access to a computer
network for profit, criminal mischief, or personal pleasure.
file transfer protocol (FTP) Tool for retrieving and transferring
files from a remote computer. Hadoop Open-source software framework that enables distributed
parallel processing of huge amounts of data across many
file A group of records of the same type. inexpensive computers.
firewall Hardware and software placed between an organization’s
hertz Measure of frequency of electrical impulses per second, with 1
internal network and an external network to prevent outsiders Hertz equivalent to 1 cycle per second.
from invading private networks.
folksonomies User-created taxonomies for classifying and sharing
information.
foreign key Field in a database table that enables users find related
information in another database table.

612 Glossary information systems managers Leaders of the various specialists
in the information systems department.
high-availability computing Tools and technologies ,including
backup hardware resources, to enable a system to recover quickly information systems plan A road map indicating the direction of
from a crash. systems development: the rationale, the current situation, the
management strategy, the implementation plan, and the budget.
HIPAA Law outlining rules for medical security, privacy, and the
management of health care records. information technology (IT) All the hardware and software
technologies a firm needs to achieve its business objectives.
hotspot A specific geographic location in which an access point
provides public Wi-Fi network service. information technology (IT) infrastructure Computer
hardware, software, data, storage technology, and networks
HTML (Hypertext Markup Language) Page description providing a portfolio of shared IT resources for the organization.
language for creating Web pages.
informational roles Mintzberg’s classification for managerial roles
HTML5 Next evolution of HTML, which will make it possible to where managers act as the nerve centers of their organizations,
embed images, video, and audio directly into a document without receiving and disseminating critical information.
add-on software.
informed consent Consent given with knowledge of all the facts
hubs Very simple devices that connect network components, needed to make a rational decision.
sending a packet of data to all other connected devices.
input The capture or collection of raw data from within the
hybrid AI systems Integration of multiple AI technologies into a organization or from its external environment for processing in
single application to take advantage of the best features of these an information system.
technologies.
instant messaging Chat service that allows participants to create
hybrid cloud Computing model where firms use both their own IT their own private chat channels so that a person can be alerted
infrastructure and also public cloud computing services. whenever someone on his or her private list is on-line to initiate
a chat session with that particular individual.
hypertext transfer protocol (HTTP) The communications
standard used to transfer pages on the Web. Defines how intangible benefits Benefits that are not easily quantified; they
messages are formatted and transmitted. include more efficient customer service or enhanced decision
making.
identity management Business processes and software tools for
identifying the valid users of a system and controlling their intellectual property Intangible property created by individuals
access to system resources. or corporations that is subject to protections under trade secret,
copyright, and patent law.
identity theft Theft of key pieces of personal information, such as
credit card or Social Security numbers, in order to obtain intelligence The first of Simon’s four stages of decision making,
merchandise and services in the name of the victim or to obtain when the individual collects information to identify problems
false credentials. occurring in the organization.

Immanuel Kant’s Categorical Imperative A principle that intelligent agent Software program that uses a built-in or learned
states that if an action is not right for everyone to take it is not knowledge base to carry out specific, repetitive, and predictable
right for anyone. tasks for an individual user, business process, or software
application.
implementation All the organizational activities surrounding
the adoption, management, and routinization of an intelligent techniques Technologies that aid human decision
innovation, such as a new information system. makers by capturing individual and collective knowledge,
discovering patterns and behaviors in large quantities of data,
in-memory computing Technology for very rapid analysis and and generating solutions to problems that are too large and
processing of large quantities of data by storing the data in the complex for human beings to solve on their own.
computer’s main memory rather than in secondary storage.
internal integration tools Project management technique that
inference engine The strategy used to search through the rule ensures that the implementation team operates as a cohesive
base in an expert system; can be forward or backward chaining. unit.

information Data that have been shaped into a form that is international information systems architecture The basic
meaningful and useful to human beings. information systems required by organizations to coordinate
worldwide trade and other activities.
information asymmetry Situation where the relative bargaining
power of two parties in a transaction is determined by one party Internet Global network of networks using universal standards to
in the transaction possessing more information essential to the connect millions of different networks.
transaction than the other party.
Internet Protocol (IP) address Four-part numeric address
information density The total amount and quality of information indicating a unique computer location on the Internet.
available to all market participants, consumers, and merchants.
Internet Service Provider (ISP) A commercial organization with
information policy Formal rules governing the maintenance, a permanent connection to the Internet that sells temporary
distribution, and use of information in an organization. connections to subscribers.

information requirements A detailed statement of the Internet2 Research network with new protocols and transmission
information needs that a new system must satisfy; identifies who speeds that provides an infrastructure for supporting high-
needs what information, and when, where, and how the bandwidth Internet applications.
information is needed.
interorganizational systems Information systems that automate
information rights The rights that individuals and organizations the flow of information across organizational boundaries and link
have with respect to information that pertains to themselves. a company to its customers, distributors, or suppliers.

information system Interrelated components working together to interpersonal roles Mintzberg’s classification for managerial roles
collect, process, store, and disseminate information to support where managers act as figureheads and leaders for the
decision making, coordination, control, analysis, and organization.
visualization in an organization.
intranet An internal network based on Internet and World Wide
information systems department The formal organizational Web technology and standards.
unit that is responsible for the information systems function in
the organization. intrusion detection system Tools to monitor the most vulnerable
points in a network to detect and deter unauthorized intruders.
information systems literacy Broad-based understanding of
information systems that includes behavioral knowledge about investment workstation Powerful desktop computer for financial
organizations and individuals using information systems as well specialists, which is optimized to access and manipulate massive
as technical knowledge about computers. amounts of financial data.

iOS Operating system for the Apple iPad, iPhone, and iPod Touch. Glossary 613
IPv6 New IP addressing system using 128-bit IP addresses. Stands
limited distance, usually one building or several buildings in
for Internet Protocol version 6. close proximity.
IT governance Strategy and policies for using information location-based services GPS map services available on
smartphones.
technology within an organization, specifying the decision rights long tail marketing Refers to the ability of firms to profitably
and accountabilities to ensure that information technology market goods to very small online audiences, largely because of
supports the organization's strategies and objectives. the lower costs of reaching very small market segements (people
iterative A process of repeating over and over again the steps to who fall into the long tail ends of a Bell curve).
build a system.
machine learning Study of how computer programs can
Java Programming language that can deliver only the software improve their performance without explicit programming.
functionality needed for a particular task, such as a small applet
downloaded from a network; can run on any computer and mainframe Largest category of computer, used for major business
operating system. processing.

Joint Application Design (JAD) Process to accelerate the maintenance Changes in hardware, software, documentation, or
generation of information requirements by having end users and procedures to a production system to correct errors, meet new
information systems specialists work together in intensive requirements, or improve processing efficiency.
interactive design sessions.
malware Malicious software programs such as computer viruses,
just-in-time Scheduling system for minimizing inventory by having worms, and Trojan horses.
components arrive exactly at the moment they are needed and
finished goods shipped as soon as they leave the assembly line. managed security service provider (MSSP) Company that
provides security management services for subscribing clients.
key field A field in a record that uniquely identifies instances of
that record so that it can be retrieved, updated, or sorted. management information systems (MIS) Specific category of
information system providing reports on organizational
key performance indicators Measures proposed by senior performance to help middle management monitor and
management for understanding how well the firm is performing control the business.
along specified dimensions.
managerial roles Expectations of the activities that managers
keylogger Spyware that records every keystroke made on a should perform in an organization.
computer to steal personal information or passwords or to launch
Internet attacks. market creator An e-commerce business model in which firms
provide a digital online environment where buyers and sellers
knowledge Concepts, experience, and insight that provide a can meet, search for products, and engage in transactions.
framework for creating, evaluating, and using information.
market entry costs The cost merchants must pay to bring their
knowledge base Model of human knowledge that is used by expert goods to market.
systems.
marketspace A marketplace extended beyond traditional
knowledge discovery Identification of novel and valuable patterns boundaries and removed from a temporal and geographic
in large databases. location.

knowledge management The set of processes developed in an mashups Composite software applications that depend on
organization to create, gather, store, maintain, and disseminate high-speed networks, universal communication standards, and
the firm’s knowledge. open-source code.

knowledge management systems Systems that support the mass customization The capacity to offer individually tailored
creation, capture, storage, and dissemination of firm expertise products or services using mass production resources..
and knowledge.
menu costs Merchants’ costs of changing prices.
knowledge network system Online directory for locating metric A standard measurement of performance.
corporate experts in well-defined knowledge domains. metropolitan area network (MAN) Network that spans a

knowledge workers People such as engineers or architects who metropolitan area, usually a city and its major suburbs. Its
design products or services and create knowledge for the geographic scope falls between a WAN and a LAN.
organization. microblogging Blogging featuring very short posts, such as using
Twitter.
knowledge work systems Information systems that aid micropayment Payment for a very small sum of money, often less
knowledge workers in the creation and integration of new than $10.
knowledge into the organization. middle management People in the middle of the organizational
hierarchy who are responsible for carrying out the plans and
learning management system (LMS) Tools for the goals of senior management.
management, delivery, tracking, and assessment of various types minicomputer Middle-range computer used in systems for
of employee learning. universities, factories, or research laboratories.
MIS audit Identifies all the controls that govern individual
legacy system A system that has been in existence for a long time information systems and assesses their effectiveness.
and that continues to be used to avoid the high cost of replacing mobile commerce (m-commerce) The use of wireless devices,
or redesigning it. such as cell phones or handheld digital information appliances, to
conduct both business-to-consumer and business-to-business
legitimacy The extent to which one’s authority is accepted on e-commerce transactions over the Internet.
grounds of competence, vision, or other qualities. Making modem A device for translating a computer’s digital signals into
judgments and taking actions on the basis of narrow or personal analog form for transmission over ordinary telephone lines, or for
characteristics. translating analog signals back into digital form for reception by a
computer.
liability The existence of laws that permit individuals to recover the Moore’s Law Assertion that the number of components on a chip
damages done to them by other actors, systems, or organizations. doubles each year
multicore processor Integrated circuit to which two or more
Linux Reliable and compactly designed operating system that is an processors have been attached for enhanced performance,
offshoot of UNIX and that can run on many different hardware reduced power consumption and more efficient simultaneous
platforms and is available free or at very low cost. Used as processing of multiple tasks.
alternative to UNIX and Windows NT.

local area network (LAN) A telecommunications network that
requires its own dedicated channels and that encompasses a

614 Glossary operational management People who monitor the day-to-day
activities of the organization.
multinational Form of business organization that concentrates
financial management and control out of a central home base opt-in Model of informed consent permitting prohibiting an
while decentralizing organization from collecting any personal information unless the
individual specifically takes action to approve information
multitiered (N-tier) client/server architecture Client/server collection and use.
network which the work of the entire network is balanced over
several different levels of servers. opt-out Model of informed consent permitting the collection of
personal information until the consumer specifically requests
multitouch Interface that features the use of one or more finger that the data not be collected.
gestures to manipulate lists or objects on a screen without
using a mouse or keyboard. organization (behavioral definition) A collection of rights,
privileges, obligations, and responsibilities that are delicately
nanotechnology Technology that builds structures and processes balanced over a period of time through conflict and conflict
based on the manipulation of individual atoms and molecules. resolution.

net marketplace A single digital marketplace based on Internet organization (technical definition) A stable, formal, social
technology linking many buyers to many sellers. structure that takes resources from the environment and
processes them to produce outputs.
network The linking of two or more computers to share data or
resources, such as a printer. organizational and management capital Investments in
organization and management such as new business processes,
network economics Model of strategic systems at the industry management behavior, organizational culture, or training.
level based on the concept of a network where adding another
participant entails zero marginal costs but can create much larger organizational impact analysis Study of the way a proposed
marginal gains. system will affect organizational structure, attitudes, decision
making, and operations.
network operating system (NOS) Special software that routes
and manages communications on the network and coordinates organizational learning Creation of new standard operating
network resources. procedures and business processes that reflect organizations’
experience.
networking and telecommunications technology Physical
devices and software that link various computer hardware output The distribution of processed information to the people who
components and transfer data from one physical location to will use it or to the activities for which it will be used.
another.
outsourcing The practice of contracting computer center
neural network Hardware or software that attempts to emulate the operations, telecommunications networks, or applications
processing patterns of the biological brain. development to external vendors.

non-relational database management system Database packet switching Technology that breaks messages into small,
management system for working with large quantities of fixed bundles of data and routes them in the most economical
structured and unstructured data that would be difficult to way through any available communications channel..
analyze with a relational model.
paradigm shift Radical reconceptualization of the nature of the
nonobvious relationship awareness (NORA) Technology that business and the nature of the organization.
can find obscure hidden connections between people or other
entities by analyzing information from many different sources to parallel strategy A safe and conservative conversion approach
correlate relationships. where both the old system and its potential replacement are run
together for a time until everyone is assured that the new one
normalization The process of creating small stable data structures functions correctly.
from complex groups of data when designing a relational
database. particularism Making judgments and taking action on the basis of
narrow or personal characteristics, in all its forms (religious,
object Software building block that combines data and the nationalistic, ethnic, regionalism, geopolitical position).
procedures acting on the data.
partner relationship management (PRM) Automation of the
object-oriented development Approach to systems development firm’s relationships with its selling partners using customer data
that uses the object as the basic unit of systems analysis and and analytical tools to improve coordination and customer sales.
design. The system is modeled as a collection o objects and the
relationship between them. password Secret word or string of characters for authenticating
users so they can access a resource such as a computer
offshore outsourcing Outsourcing systems development work or system.
maintenance of existing systems to external vendors in another
country. patch Small pieces of software to repair the software flaws without
disturbing the proper operation of the software.
on-demand computing Firms off-loading peak demand for
computing power to remote, large-scale data processing centers, patent A legal document that grants the owner an exclusive
investing just enough to handle average processing loads and monopoly on the ideas behind an invention for 17 years;
paying for only as much additional computing power as the designed to ensure that inventors of new machines or methods
market demands. Also called utility computing. are rewarded for their labor while making widespread use of their
inventions.
on-line analytical processing (OLAP) Capability for
manipulating and analyzing large volumes of data from multiple peer-to-peer Network architecture that gives equal power to all
perspectives. computers on the network; used primarily in small networks.

online transaction processing Transaction processing mode in personal area network (PAN) Computer network used for
which transactions entered on-line are immediately processed by communication among digital devices (including telephones and
the computer. PDAs) that are close to one person.

open-source software Software that provides free access to its personalization Ability of merchants to target marketing messages
program code, allowing users to modify the program code to to specific individuals by adjusting the message for a person’s
make improvements or fix errors. name, interests, and past purchases.

operating system Software that manages the resources and PERT chart Network diagram depicting project tasks and their
activities of the computer. interrelationships.

operational CRM Customer-facing applications, such as sales force pharming Phishing technique that redirects users to a bogus Web
automation, call center and customer service support, and page, even when an individual enters the correct Web page
marketing automation. address.

phased approach Introduces the new system in stages either by Glossary 615
functions or by organizational units.
programmers Highly trained technical specialists who write
phishing Form of spoofing involving setting up fake Web sites or computer software instructions.
sending e-mail messages that resemble those of legitimate
businesses that ask users for confidential personal data. programming The process of translating the system specifications
prepared during the design stage into program code.
pilot study A strategy to introduce the new system to a limited area
of the organization until it is proven to be fully functional; only project Planned series of related activities for achieving a specific
then can the conversion to the new system across the entire business objective.
organization take place.
project management Application of knowledge, tools, and
pivot table Spreadsheet tool for reorganizing and summarizing two techniques to achieve specific targets within a specified budget
or more dimensions of data in a tabular format. and time period.

podcasting Publishing audio broadcasts via the Internet so that project portfolio management software Helps organizations
subscribing users can download audio files onto their personal evaluate and manage portfolios of projects and dependencies
computers or portable music players. among them.

portal Web interface for presenting integrated personalized content protocol A set of rules and procedures that govern transmission
from a variety of sources. Also refers to a Web site service that between the components in a network.
provides an initial point of entry to the Web.
prototype The preliminary working version of an information
portfolio analysis An analysis of the portfolio of potential system for demonstration and evaluation purposes.
applications within a firm to determine the risks and benefits,
and to select among alternatives for information systems. prototyping The process of building an experimental system
quickly and inexpensively for demonstration and
post-implementation audit Formal review process conducted evaluation so that users can better determine information
after a system has been placed in production to determine how requirements.
well the system has met its original objectives.
public cloud A cloud maintained by an external service provider,
prediction markets An analysis of the portfolio of potential accessed through the Internet, and available to the general
applications within a firm to determine the risks and benefits, public.
and to select among alternatives for information systems.
public key encryption Uses two keys: one shared (or public) and
predictive analytics The use of data mining techniques, historical one private.
data, and assumptions about future conditions to predict
outcomes of events, such as the probability a customer will public key infrastructure(PKI) System for creating public and
respond to an offer or purchase a specific product. private keys using a certificate authority (CA) and digital
certificates for authentication.
price discrimination Selling the same goods, or nearly the same
goods, to different targeted groups at different prices. pull-based model Supply chain driven by actual customer orders
or purchases so that members of the supply chain produce and
price transparency The ease with which consumers can find out deliver only what customers have ordered.
the variety of prices in a market.
push-based model Supply chain driven by production master
primary activities Activities most directly related to the schedules based on forecasts or best guesses of demand for
production and distribution of a firm’s products or services. products, and products are “pushed” to customers.

primary key Unique identifier for all the information in any row of query language Software tool that provides immediate online
a database table. answers to requests for information that are not predefined.

privacy The claim of individuals to be left alone, free from radio-frequency identification (RFID) Technology using tiny
surveillance or interference from other individuals, organizations, tags with embedded microchips containing data about an item
or the state. and its location to transmit short-distance radio signals to special
RFID readers that then pass the data on to a computer for
private cloud A proprietary network or a data center that ties processing.
together servers, storage, networks, data, and applications as a set
of virtualized services that are shared by users inside a company. Rapid Application Development (RAD) Process for
developing systems in a very short time period by using
private exchange Another term for a private industrial network. prototyping, fourth-generation tools, and close teamwork among
private industrial networks Web-enabled networks linking users and systems specialists.

systems of multiple firms in an industry for the coordination of rationalization of procedures The streamlining of standard
trans-organizational business processes. operating procedures, eliminating obvious bottlenecks, so that
process specifications Describe the logic of the processes automation makes operating procedures more efficient.
occurring within the lowest levels of a data flow diagram.
processing The conversion, manipulation, and analysis of raw real options pricing models Models for evaluating information
input into a form that is more meaningful to humans. technology investments with uncertain returns by using
product differentiation Competitive strategy for creating brand techniques for valuing financial options.
loyalty by developing new and unique products and services that
are not easily duplicated by competitors. record A group of related fields.
production The stage after the new system is installed and the recovery-oriented computing Computer systems designed to
conversion is complete; during this time the system is reviewed
by users and technical specialists to determine how well it has recover rapidly when mishaps occur.
met its original goals. referential integrity Rules to ensure that relationships between
production or service workers People who actually produce the
products or services of the organization. coupled database tables remain consistent.
profiling The use of computers to combine data from multiple relational DBMS A type of logical database model that treats data
sources and create electronic dossiers of detailed information on
individuals. as if they were stored in two-dimensional tables. It can relate data
program-data dependence The close relationship between stored in one table to data in another as long as the two tables
data stored in files and the software programs that update and share a common data element.
maintain those files. Any change in data organization or Repetitive Stress Injury (RSI) Occupational disease that occurs
format requires a change in all the programs associated with when muscle groups are forced through repetitive actions with
those files. high-impact loads or thousands of repetitions with
low-impact loads.
Request for Proposal (RFP) A detailed list of questions
submitted to vendors of software or other services to determine

616 Glossary semistructured decisions Decisions in which only part of the
problem has a clear-cut answer provided by an accepted
how well the vendor’s product can meet the organization’s procedure.
specific requirements.
responsibility Accepting the potential costs, duties, and obligations senior management People occupying the topmost hierarchy in
for the decisions one makes. an organization who are responsible for making long-range
responsive Web design Ability of a Web site to automatically decisions.
change screen resolution and image size as a user switches to
devices of different sizes, such as a laptop, tablet computer, or sensitivity analysis Models that ask “what-if” questions repeatedly
smartphone. Eliminates the need for separate design and to determine the impact of changes in one or more factors on the
development work for each new device. outcomes.
revenue model A description of how a firm will earn revenue,
generate profits, and produce a return on investment. sentiment analysis Mining text comments in an e-mail message,
richness Measurement of the depth and detail of information that a blog, social media conversation, or survey form to detect
business can supply to the customer as well as information the favorable and unfavorable opinions about specific subjects.
business collects about the customer.
risk assessment Determining the potential frequency of the server Computer specifically optimized to provide software and
occurrence of a problem and the potential damage if the other resources to other computers over a network.
problem were to occur. Used to determine the cost/benefit of a
control. service level agreement (SLA) Formal contract between
Risk Aversion Principle Principle that one should take the action customers and their service providers that defines the specific
that produces the least harm or incurs the least cost. responsibilities of the service provider and the level of service
router Specialized communications processor that forwards packets expected by the customer.
of data from one network to another network.
routines Precise rules, procedures and practices that have been service-oriented architecture Software architecture of a firm
developed to cope with expected situations. built on a collection of software programs that communicate with
RSS Technology using aggregator software to pull content from Web each other to perform assigned tasks to create a working software
sites and feed it automatically to subscribers’ computers. application

SaaS (Software as a Service) Services for delivering and shopping bot Software with varying levels of built-in intelligence to
providing access to software remotely as a Web-based service. help electronic commerce shoppers locate and evaluate products
or service they might wish to purchase.
safe harbor Private self-regulating policy and enforcement
mechanism that meets the objectives of government regulations six sigma A specific measure of quality, representing 3.4 defects
but does not involve government regulation or enforcement. per million opportunities; used to designate a set of
methodologies and techniques for improving quality and
sales revenue model Selling goods, information, or services to reducing costs.
customers as the main source of revenue for a company.
smart card A credit-card-size plastic card that stores digital
Sarbanes-Oxley Act Law passed in 2002 that imposes information and that can be used for electronic payments in
responsibility on companies and their management to protect place of cash.
investors by safeguarding the accuracy and integrity of financial
information that is used internally and released externally. smartphone Wireless phone with voice, text, and Internet
capabilities.
scalability The ability of a computer, product, or system to expand
to serve a larger number of users without breaking down. sniffer Type of eavesdropping program that monitors information
traveling over a network.
scope Defines what work is and is not included in a project.
scoring model A quick method for deciding among alternative social bookmarking Capability for users to save their bookmarks
to Web pages on a public Web site and tag these bookmarks with
systems based on a system of ratings for selected objectives. keywords to organize documents and share information with
search costs The time and money spent locating a suitable product others.

and determining the best price for that product. social business Use of social networking platforms, including
search engine A tool for locating specific sites or information on Facebook, Twitter, and internal corporate social tools, to engage
employees, customers, and suppliers.
the Internet.
search engine marketing Use of search engines to deliver in their social CRM Tools enabling a business to link customer conversatins,
data, and relationships from social networking sites to CRM
results sponsored links, for which advertisers have paid. processes.
search engine optimization (SEO) the process of changing a
social engineering Tricking people into revealing their passwords
Web site's content, layout, and format in order to increase the by pretending to rrbe legitimate users or members of a company
ranking of the site on popular search engines, and to generate in need of information.
more site visitors.
Secure Hypertext Transfer Protocol (S-HTTP) Protocol used social graph Map of all significant online social relationships,
for encrypting data flowing over the Internet; limited to comparable to a social network describing offline relationships.
individual messages.
Secure Sockets Layer (SSL) Enables client and server computers social networking sites Online community for expanding users’
to manage encryption and decryption activities as they business or social contacts by making connections through their
communicate with each other during a secure Web session. mutual business or personal connections.
security Policies, procedures, and technical measures used to
prevent unauthorized access, alteration, theft, or physical damage social search Effort to provide more relevant and trustworthy
to information systems. search results based on a person’s network of social contacts.
security policy Statements ranking information risks, identifying
acceptable security goals, and identifying the mechanisms for social shopping Use of Web sites featuring user-created Web pages
achieving these goals. to share knowledge about items of interest to other shoppers.
Semantic Web Ways of making the Web more "intelligent," with
machine-facilitated understanding of information so that searches sociotechnical design Design to produce information systems that
can be more intuitive, effective, and executed using intelligent blend technical efficiency with sensitivity to organizational and
software agents. human needs.

sociotechnical view Seeing systems as composed of both technical
and social elements.

software-defined networking (SDN) Using a central control
program separate from network devices to manage the flow of
data on a network.

software localization Process of converting software to operate in
a second language.

software package A prewritten, precoded, commercially available Glossary 617
set of programs that eliminates the need to write software
programs for certain functions. system testing Tests the functioning of the information system as a
whole in order to determine if discrete modules will function
spam Unsolicited commercial e-mail. together as planned.
spoofing Tricking or deceiving computer systems or other
systems analysis The analysis of a problem that the organization
computer users by hiding one's identity or faking the identity will try to solve with an information system.
of another user on the Internet.
spyware Technology that aids in gathering information about a systems analysts Specialists who translate business problems and
person or organization without their knowledge. requirements into information requirements and systems, acting
SQL injection attack Attacks against a Web site that take as liaison between the information systems department and the
advantage of vulnerabilities in poorly coded SQL (a standard and rest of the organization.
common database software application) applications in order to
introduce malicious program code into a company's systems and systems design Details how a system will meet the information
networks. requirements as determined by the systems analysis.
storage area network (SAN) A high-speed network dedicated to
storage that connects different kinds of storage devices, such as systems development The activities that go into producing an
tape libraries and disk arrays so they can be shared by multiple information systems solution to an organizational problem or
servers. opportunity.
strategic information system Information system that changes
the goals, operations, products, services, or environmental systems life cycle A traditional methodology for developing an
relationships of an organization to help gain a competitive information system that partitions the systems development
advantage. process into formal stages that must be completed sequentially
strategic transitions A movement from one level of sociotechnical with a very formal division of labor between end users and
system to another. Often required when adopting strategic information systems specialists.
systems that demand changes in the social and technical
elements of an organization. T lines High-speed data lines leased from communications
streaming A publishing method for music and video files that flows providers, such as T-1 lines (with a transmission capacity of 1.544
a continuous stream of content to a user’s device without being Mbps).
stored locally on the device.
structure chart System documentation showing each level of tablet computer Mobile handheld computer that is larger than a
design, the relationship among the levels, and the overall place in mobile phone and operated primarily by touching a flat screen.
the design structure; can document one program, one system, or
part of one program. tacit knowledge Expertise and experience of organizational
structured Refers to the fact that techniques are carefully drawn members that has not been formally documented.
up, step by step, with each step building on a previous one.
structured decisions Decisions that are repetitive, routine, and tangible benefits Benefits that can be quantified and assigned a
have a definite procedure for handling them. monetary value; they include lower operational costs and
structured knowledge Knowledge in the form of structured increased cash flows.
documents and reports.
Structured Query Language (SQL) The standard data taxonomy Method of classifying things according to a
manipulation language for relational database management predetermined system.
systems.
subscription revenue model Web site charging a subscription teams Teams are formal groups whose members collaborate to
fee for access to some or all of its content or services on an achieve specific goals.
ongoing basis.
supply chain Network of organizations and business processes for teamware Group collaboration software that is customized for
procuring materials, transforming raw materials into teamwork.
intermediate and finished products, and distributing the finished
products to customers. technology standards Specifications that establish the
supply chain execution systems Systems to manage the flow of compatibility of products and the ability to communicate in a
products through distribution centers and warehouses to ensure network.
that products are delivered to the right locations in the most
efficient manner. technostress Stress induced by computer use; symptoms include
supply chain management systems Information systems that aggravation, hostility toward humans, impatience, and
automate the flow of information between a firm and its enervation.
suppliers in order to optimize the planning, sourcing,
manufacturing, and delivery of products and services. telepresence Telepresence is a technology that allows a person to
supply chain planning systems Systems that enable a firm to give the appearance of being present at a location other than his
generate demand forecasts for a product and to develop sourcing or her true physical location.
and manufacturing plans for that product.
support activities Activities that make the delivery of a firm’s Telnet Network tool that allows someone to log on to one computer
primary activities possible. Consist of the organization’s system while doing work on another.
infrastructure, human resources, technology, and procurement.
switch Device to connect network components that has more test plan Prepared by the development team in conjunction with
intelligence than a hub and can filter and forward data to a the users; it includes all of the preparations for the series of tests
specified destination. to be performed on the system.
switching costs The expense a customer or company incurs in lost
time and expenditure of resources when changing from one testing The exhaustive and thorough process that determines
supplier or system to a competing supplier or system. whether the system produces the desired results under known
conditions.

text mining Discovery of patterns and relatio nships from large
sets of unstructured data.

token Physical device similar to an identification card that is
designed to prove the identity of a single user.

Total Cost of Ownership (TCO) Designates the total cost of
owning technology resources, including initial purchase costs,
the cost of hardware and software upgrades, maintenance,
technical support, and training.

Total Quality Management (TQM) A concept that makes quality
control a responsibility to be shared by all people in an
organization.

touch point Method of firm interaction with a customer, such as
telephone, e-mail, customer service desk, conventional mail, or
point-of-purchase.