Moving Towards E-Business. Information Systems and IT Audit. Shakeel Ahmad

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1 Moving Towards E-Business Information Systems and IT Audit Shakeel Ahmad

2 Information Recommended Study Material: Information Systems: The foundation of E-Business by Stevent Alter CISA Review Manual Course Website

3 Schedule Class/Week Topic Reading 1,2 Moving Toward E-Business Chapter 01 3,4 Understanding Systems from a Business view Point Chapter 02 5,6 Business Process Chapter 03 7,8 Information and Data-bases 9,10 Customer, product and E- commerce 11,12 Building and Maintaining information Systems 13,14 Security and Ethical Challenges 15 Presentations 10 Hours Lab Session

4 Course Evaluation Description %age Marks Theory 70% 70 Lab 10% 10 Presentation 10% 10 Report 10% 10 Total 100% 100

5 Moving Towards E-Business As Usual 5

6 Opening Case - Dell Computer Business insight: What is the point of this case? What are the two management concepts are applied in this case? 6

7 Opening Case - Dell Computer Business insight: Sell directly to customers Decide how much to produce based on demand estimates & contracts produce on demand What makes this approach possible? Outsourcing Negative holding costs! Mass customization Powerful order fulfillment system 7

8 Opening Case - Dell Computer Dell: Debate: What is more important to Dell, the fact that it sells computers over the Web, or the fact that its manufacturing process permits it to build and deliver customized computers efficiently? 8

9 What is Business 9 Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants.

10 Work Systems, Information Systems, and E-Business E-business = the practice of performing & coordinating business processes through the extensive use of information technology (IT) IT = computer and communication technologies E-business does NOT equal the Internet, though the growth of the Internet acted as a very powerful catalyst 10

11 11 Work System = a system in which people and/or machines perform a business process using resources (e.g., information, technology) to create products/services for internal or external customers

12 12 Information System = a work system that processes information, thereby supporting other work systems Capture Transmit Store Retrieve Manipulate Display

13 Four Main Themes: Businesses operate through systems Business professionals are part of all phases of building & maintaining information systems Technological advances drive business innovation The success of IT-based systems is NOT guaranteed 13

14 1. Businesses Operate Through Systems 14

15 Systems & Subsystems System = a set of interacting components that operate together to accomplish a purpose Subsystem = a system component Has all the features of a system, but it is part of a larger system 15

16 Viewing a Firm as a System 16

17 System Terminology: Purpose The reason for the system s existence The reference for measuring the system s success Boundary Separates the system from its environment Environment Everything pertinent to the system that is outside the boundary 17

18 Inputs Objects & information that enter the system from the environment Outputs Objects & information that enter the environment from the system 18

19 Alter s Work System Framework 19

20 The Work System Framework The concept of a work system can be used to visualize almost any system that operates in an organization. The Work System Framework helps you think about business processes and the information systems that support them. It focuses on the work being done. Work is the application of human and physical resources such as people, equipment, time, effort, and money to generate outputs used by internal or external customers. It ideas from several prominent management theories including Total Quality Management, 20 business process reengineering, and systems theory.

21 Examples of Information Systems Supporting Business Processes Bar-code scanners and computers identify items sold and calculate the bill (Performing customer checkout). Airline reservation system keeps track of flights and accepts reservations for customers (making airline reservations). System that identifies people by scanning and analyzing voice prints (preventing unauthorized access to restricted areas). Word processing system for typing and revising book chapters (Writing a book). 21

22 22 Elements of the Work System Framework: The internal or external customers of the business process The products and/or services generated by the business process. The steps in the business process. The participants in the business process. The information the business process uses or creates. The technology (if any) the business process uses. (Context and Infrastructure discussed later.)

23 23

24 The Work System Framework The Work System framework implies that although people sometimes speak of computers as systems, the system business professionals should focus on is the system performing the work. The system performing the work is much broader than the technology. It includes the business processes, the participants, any information used, and any technology used. The links are two-way, implying that the elements should be in balance. Also, changes in one place may result in changes in other elements. 24

25 Consider Some Work Systems Ordering a Pizza Use of an Automated Teller Machine Hiring a New employee 25

26 Business Processes & the Value Chain Business process A related group of steps (subprocesses) and/or activities that use resources (including information) to create value for internal or external customers Design Process creates the Product design to that goes to internal customers. 26

27 Business Processes & the Value Chain Subprocess = a well-defined part of a process that are processes in their own right because they consist of well-defined steps related in time and place, have a beginning and end, and have inputs and outputs. Process is Text Book Designing and subprocesses are writing, revising the manuscript, designing book s layout, producing artwork and printing the book. 27

28 Business Processes & the Value Chain 28 Value added:a porcesse s value added is the amount of value it creates for its eternal and external customers. A process is Assemble a computer, The value added is the difference between the value of the components and the value of the assembled components. General Electric Plan Process. Activity = less well-defined process component E.g communication with others Often an important role of IT is to transform an activity into a better-defined subprocess E.g Voice mail

29 A process must add value for its customers Always analyze whether a process or subprocess adds value or not An obvious but surprisingly often overlooked point 29

30 Business Processes & Functional Areas Traditional organizational structure is centered around functional areas May reinforce an inward-looking orientation Functional silos Current trend: reorganize around customer-oriented processes 30

31 Business processes and functional areas of business 31 Alter Information Systems 4th ed Prentice Hall

32 Three Types of Processes Processes that cross functional areas 32 e.g. Creating a new product. Processes related to a specific functional area Paying texes Activities & subprocesses occurring in every functional area Common activities Possible problems when functional areas are overemphasized

33 Question: What are some typical functional areas in a college of university? 33

34 Some Functional Areas in a Typical College or University Admissions Records and Registration Financial Aid Bursar Human Resources Accounts Payable Budget, Finance, and Accounting Parking Services Academic Department University Advancement Student Services Residence Life Public Safety Physical Plant Student Career Development Health Services 34

35 The Value Chain The set of processes used by a firm to create value for its customers. Includes: Primary processes directly create the value as perceived by the customers Support processes indirectly create value by supporting the primary processes 35

36 Primary processes for a hypothetical restaurant Question: Give some examples of restaurants that follow this value chain. 36

37 The Supply Chain & the Customer Experience 37 Note: Opportunities to increase value for the customer may exist Outside the company.

38 Supply chain the transactions, coordination, and movement of goods between the firm and its suppliers Each layer provides an opportunity to increase value to the customer and/or improve efficiency Basic approach: Standardized electronic links Long-term agreements 38

39 The Trend Toward E-Business Much more than a cool Web site! E-commerce the part of e-business that the customer experiences directly B2B (business-to-business) vs. B2C (business-to-consumer) 39

40 2. Phases in Building & Maintaining Systems 40

41 Figure 1.7 Business Professionals Play an Important Role in All 4 Phases 41

42 1. Initiation Defining the need for a new work system or for the change of an existing one May occur as result of a known problem, or as part of a planning process 42

43 2. Development Acquiring & configuring hardware, software, and other resources Decide how the different parts of the system will operate Acquire the resources Create the documentation Testing 43

44 3. Implementation Making the new process operational Planning User training Conversion to the new system Follow-up 44

45 4. Operation & Maintenance Supporting the ongoing operation of the system + efforts to enhance it and correct possible problems 45

46 Table

47 3. IT As a Driving Force for Innovation 47

48 Main Trends Greater miniaturization, speed, and portability Greater connectivity + continuing convergence of computing and communications Greater use of digitized information & multimedia Better software and user interfaces Growth of Telecommuting 48

49 IT Based Innovations in Every Business Function Product Design Procurement Systems Manufacturing Systems Sales and Marketing Delivery Systems Customer Service Systems Finance Systems 49

50 Computer-Aided Design Enable designers to visualize how a product will look. The need to produce physical mock-ups has been significantly reduced. Originally applied in engineering and architecture, it is now being applied in other areas such as surgery, clothes design, and hairdressing. 50

51 CAD in unexpected places 51

52 Supply Chain Management EDI (Electronic Data Interchange) is changing the entire model of supply chain management in businesses. The cost of processing simple transactions can be reduced by more than an order of magnitude (e.g. purchase orders from $55 ea. To $2.50 ea.). SCM and EDI are essential ingredients to the transformation of relationships between suppliers and customers. Among the most notable initial applications was Baxter Healthcare where hospital supplies were ordered directly with computer terminals in hospital stock rooms. 52

53 The Basic Supply Chain Management Process

54 Customers link to suppliers using EDI 54

55 Manufacturing Computer-integrated manufacturing (CIM) integrates the use of technology across the manufacturing process, not just the design phases. The information content of a product is the value that is added through use of information systems rather than not using them. Mass production techniques allows for mass customization. 55

56 Mass Customization: Building a customized bicycle 56

57 Sales and Marketing 57 IT has drastically changed the approach to marketing. Amazon.com capitalizes on electronic commerce. Point of Sales (POS) systems provide new ways to affect marketing - e.g. linking information about the customer with the sale. Loyalty Cards at Supermarkets Ask for your Home Zip code Discreet observation and collection. BJ s Wholesale Club product recall. All to better improve the addressability in marketing.

58 Delivery and Logistics Systems Delivery (logistics) Systems transport materials where they are needed. The need for accurate and accessible information on where a product is located. U.S. Army experience in Gulf War Federal Express New products are being developed: Instead of delivering physical goods such as paper and forms, consider what can be delivered over the network. Consider impact of Global Positioning Systems. 58

59 Customer Service The need for information on a customer s current status. Work is still needed to integrate some voiceresponse systems with customer databases (e.g. Bank Help Centers). Have the right information available when you need it. Optical Scan relevant documents Be able to initiate transactions and process them immediately. 59 E.g. Car Rental Returns

60 Finance Systems Consider how technology is being used to replace currency as a form of barter. Direct Deposit Payroll. Smart cards. Electronic stock trading. Web-Based Real Estate Marketing (2% vs. 6%). Eliminate the middleman and commissions. 60

61 Question? How have any of these innovations affected you? Can you identify any IT-based innovations that have affected business functions? Why does the technology provide such innovation? 61

62 62 Data Processing Progress

63 Dramatic Progress in Processing Data Data Processing functions: capture, transmit, store, retrieve, manipulate, display Greater Miniaturization, Speed, and Portability Greater Connectivity and Convergence of Computing and Communications Greater Use of Digitization and Multimedia Better Software Techniques and Interfaces with People 63

64 Six Data Processing Functions Performed by IT FUNCTION: CAPTURE Definition: Obtain a representation of information in a form permitting it to be transmitted or stored Example: Keyboard, bar code scanner, document scanner, optical character recognition, sound recorder, video camera, voice recognition software FUNCTION: TRANSMIT Definition: Move information from one place to another Example: Broadcast radio, broadcast television via regional transmitters, cable TV, satellite broadcasts, telephone networks, data transmission networks for moving business data, fiber optic cable, fax machine, electronic mail, voice mail, internet FUNCTION: STORE Definition: Move information to a specific place for later retrieval Example: Paper, computer tape, floppy disk, hard disk, optical disk, CD-ROM, flash memory 64

65 Six Data Processing Functions Performed by IT FUNCTION: RETRIEVE Definition: Find the specific information that is currently needed Example: Paper, computer tape, floppy disk, hard disk, optical disk, CD-ROM, flash memory FUNCTION: MANIPULATE Definition: Create new information from existing information through summarizing, sorting, rearranging, reformatting, or other types of calculations Example: Computer (plus software) FUNCTION: DISPLAY Definition: Show information to a person Example: Laser printer, computer screen 65

66 Miniaturization: Comparison of a vacuum tube and an integrated circuit 66

67 Progress in Memory Chip Capacity Since 1973 Approximate date of widespread commercial availability Type of chip 1 kilobit 4 kilobit 16 kilobit 64 kilobit 256 kilobit 1 megabit 4 megabit 16 megabit 64 megabit 256 megabit Capacity in number of bits 1,024 4,096 16,384 65, ,144 1,048,576 4,194,304 16,777,216 67,108, ,435,456 67

68 Using a portable computer to give parking tickets 68

69 Important Concept: Convergence of computing and communications. 69

71 Convergence: GPS

72 72 A leading edge flat panel monitor and a computer terminal from the 1980s

73 The positive and negative impacts of technical change 73

74 4. Obstacles When Applying IT in the Real World 74

75 Unrealistic Expectations & Techno-hype Technology is almost never a solution by itself Often vendors claim to sell solutions Be skeptical about the Internet hype 75

76 Difficulty Building & Modifying IT Systems Factors most often associated with success: User involvement Executive support Clear statement of requirements Proper planning Realistic expectations 76

77 Difficulty Integrating IT Systems One of the most difficult issues examples: Medicare s insurance claims (aborted) system A unified system would have had to integrate 72 existing systems, built & operated by different insurance companies Y2K problem Integrated supply chains 77

78 Organizational Inertia Often a change that has a positive impact in some areas, may also have a negative impact in other areas Natural tendency of both organizations & individuals to resist change Overcoming inertia may require a consistent effort across all phases of the system life cycle 78

79 Genuine Difficulty Anticipating What Will Happen No one really knows how a particular innovation will develop in time Eye-opening examples in table

80 Reality Check! What are some examples of techno-hype you have encountered? Have you experienced any of these obstacles when applying IT? 80

FACTFILE: GCE DIGITAL TECHNOLOGY

FACTFILE: GCE DIGITAL TECHNOLOGY AS2: FUNDAMENTALS OF DIGITAL TECHNOLOGY PROCESSING SYSTEMS Learning Outcomes Students should be able to: describe batch processing and real-time processing; and evaluate