Chapter 2: Information systems defined.

Information systems are formal, socio-technical theory: the interplay of technology with other aspects, or components of the work system. designed to collect process, store, and distribute information. This can also be without computers, example: guest list in hotels 100 years ago. Information technology (IT) is a fundamental component of a modern information system (IS) Four components of IT based IS Information technology: hardware, software and telecommunication equipment. Process: series of steps necessary to complete a business activity: example, restocking inventory, check, call suppliers, compare suppliers, order, receive, pay. ( If the IS process design is not used in the manner of which it is designed will lead to failures of IS ) People: those people who are involved in the information system. A good understanding of their skills, motivations, interest is necessary to implement a new IS. Structure: organizational structure of the organization. Hierarchy, decentralized, reporting relationships, reward systems ect. The IS design should keep these structures in mind.

For an IS to be successful it should be build around an explicit goal fulfilling the specific needs of the organization every organization is unique: Strategy: How does the organization want to achieve its intentions Culture: beliefs, values, language of members of the organzition. How do they do business. Infrastructure: IT infrastructure, the technological backbone of the firm, this constrains/ enables new information systems. External environment: regulations, competitive landscape, outsourced functions etc.

These factors lead to the INFORMATION SYSTEM which is used to increase effectiveness and financial improvements of the firm. Information systems do not only have effectiveness and financial improvements for the organization, but also effects on people within and without the firm. Positive ( empowerment employees and widening scope of responsibility) negative: reduction of scope or loss of responsibility and creation of a monotonous working environment.

There are 3 levels of organizational change brought about the introduction of a new IT: 1. First-order change: Automate: affects only technical system, new technologies, internet banking for example: Most easy to manage because mangers understand this changes and see the economical benefits easily 2. Second-order change: Informate: Not only the manner of how the process is performed but also the inidvivuals who performed the process are affected, their role changes for example customer self-service at ryan air self online check-in. 3. Thirt order change: Transform: most radical form. The technology affect people, technology and which together have affects on the structure of the company. This requires significant managerial and executive involvement.

Chapter 4: The changing competitive environment. The internet: worldwide, publicly accessible system of interconnected computer networks that transmit data by packet switching using the standard internet protocol (IP). The WWW(world wide web) and internet are not the same. Internet is the infrastructure. The web is a service available on the internet. Other services: VoIP, Real simple syndication feeds RSS, file transfer protocol FTP. The internet is for everyone and a lot of people own it main strength limited regulation, experimentation and widespread access growth of the internet. Each small node is part of the internet. Nodes: home networks, GPS device The internet relies on open technology standard and protocols agreed-on set of rules or conventions governing communication among elements of a network. (HTML for writing a webpage, TCP/IP protocol for the internet. How is value created in networks?: Scarcity: the value is proportional to its rarity, being unique. ( EBAY, facebook) Networks are value if they are in plentitude: if only 1 person has telephone the telephone network technology and telephones is worthless, if a lot of people have it its useful.

Virtual network: intangible and invisible, the nodes are people connected to each other, for example a user network of forum.

Positive feedback: The adoption of a new technology product/service follows according to the S cure over time in market penetration. In positive feedback, the stronger gets stronger ( economies of scale, fixed costs spreading) the weaker gets weaker ( loss of market share). Negative feedback: stronger gets weaker and the weaker gets stronger, the dominant firm has reached such a size that there are no more economies of scale so overhead costs increase if the firm gets more market share growth is hampered.

Network effects: (evangelist effect): members of the network spread the word and convince others to join it (Facebook). Postive feedback and network effects can lead to 1 dominant firm in the market winner takes all. Tippy market: A market that is subject to strong positive feedback, such that the market will tip in favor of a firm that is able to reach critical mass and dominate it, there is no point of return there will be 1 winner and 1 loser in the end. Ex, Skype. Not all markets (internet markets) tip. Factors that a market will tip: The presence and strength of economies of scale The variety of customer needs, creates potential of distinct market niches that the dominant player may be unable to fulfill.

Highest when there are economies of scale and customers needs are standard and in-line. Network effects can also occur in two-sided networks: 2 types of members which create value for each other. For example. Adobe makes its software free to read the files to create pdf as a standard for the document maker market. But people who want to make pdf files need to pay for the package. Network effects are not only restricted to the technology. They also depend on the users, do they select the network or not, do you use MAC or Windows(networks) on your computer(product). Controlling the network provides competitive advantage The importance of mutual exclusivity the steeper the set up costs the more important it is retain and control ownership of a network

Data: codified raw facts, things that happened, coded as letters or numbers Information: data in context, if data has a meaning which can be interpreted by individuals or technology. Classic information goods: producst that give you acces to the information they contain: studybooks, TV, website stock market. Information goods are products which can be digitalized.

Economic characteristics of information: Information has high production costs, producing the first one is costly. Neglibible replication costs: they are not physical so its cheap and easy to duplicate. The information is not the carrier: carriers are CD,DVD, internet download Negligible distribution costs: digital distribution for example Costs are sunk: the costs to create the product cannot be recuperated. No natural capacity limits: almost no constraints in reproduction. Not consumed by use: can be reused multiple times Experience goods: products or services that need to be tried before their quality can be assessed.

Implications for managers: Information is customizable: can be modified with relative ease Information is reusable: reasable and customizable in multiple forms Information is often time valued: stock quotes for example Information goods can achieve significant gross profit margins: High set up costs, low production costs

Information delivery is a trade off between richness ( the depth of the message) and reach (the number of possible recipients of a message). Nowadays, the reach is broadened because of easily accessible information infrastructure, internet etc. No physical carriers ( salespersons , consultants at traveling agencies) Implications it is important for customers to have a good interface. The emergence of technologies who make information more available for everyone also reduce asymmetric information in the market.

For a new technologie to succeed it must be in line with a few things: New technology must replace all characteristics of the old one: newspapers for example (most easy to carry and read etc) Retaliotion from incumbents: legal mean, legislative means, hybrid offers, heightened competition ( dont ignore these retaliations) Human resistance to change: people need to learn/accept new ways of doing business Attention challenges: educate customers about the advantages ect.

Sustaining technologies: are those new technologies that enable a products performance to continue to grow extend the useful life of the product as the market demand further improvements ( electrical cars) S-curve growth you get a new S curve after the old technologie Scurve so SS curve

Disruptive technologies: The technology offers a different set of attributes than the technology the firm currently uses in its products. The performance improvement rate of the technology is higher than the rate of improvement demanded by the market. ( hard dist of 1million GB?)

Chapter 5: Electronic commerce, new ways of doing business.

Electronic commerce: an online exchange of value the process of distributing, buying, selling, marketing and servicing products and services over computer networks such as the internet. Electronic business use of internet technologies and other advanced IT to enable business processes and operations. Why is e-commerce so boomed the last years if it was around already such a long time: Affordable computing equipment Access to the internet Ease of use Open standards: technology standards that are freely available and can be used for free.

Catogorizing electronic commerce initiatives Categorizing ventures by transaction types: to indentify the parties involved in the transaction: o Business to consumer (B2C): online retailers like amazon, organization end product to consumers, this can also be without physical goods o Business to Business (B2B): transactions in which more business entities take part. Dell website for other organizations who want to retail and buy large packages s of dell computers o Consumer to Consumer (C2C): for example Ebay o Consumer to Business (C2B) o Egovernment: all transactions involving legislative and administrative institutions electronic filling out of tax forms

Catogorizing ventures by company structure: to categorize the companies involved in ecommerce on the basis of their structure: Bricks and mortar: traditional organizations have physical operations and locations and dont provide their services exclusively through the internet. Bricks and clicks: hybrid operations have physical locations but also sell their products via internet example bookstores, music stores. Or via co-opetititon ( coopereation and competition) competitors strike beneficial partnerships. Amazon and Borders bookshops. Pure play: organizations born online like eBay., google only provide services via the internet. Not having stores does not mean not having physical operations, Amazon has distributions centres etc.

Business model: what the firm does for its customers, how it does it , and how it is going to be compensated for what it does. For businesses doing business online it is important what revenue model they choose:

Pay for service: like a store, you buy for a book etc Subscription: similar as pay for service, you pay for the service you get in forms off news, sport highlights. Advertisement support: firm sells access to its audience, advertisements on Google for ex. Affiliate: generates money from a third party based on customer traffic to that firms website. Like a commission if the visitor buys the product on the other linked site.

Dominant business models in business: Online retailing: pure play and brick and click organizations and a pay for service revenue model Infomediaries: organizations that use the internet to provide specialized information on the behalf of product or service providers they do not sell these goods only review them. Content providers: organizations that develop and publish content, like news, travel information, historic etc. Revenue model can be subscription, advertisement supported, or pay per download. Online communities: group of people brought together by common interests they get rid of physical constraints like distances. For surfing freaks etc.lead to virtual communities of interests Exchanges: organizations that create a marketplace for buyers and sellers to come together and transact, eBay Infrastructure providers: developing and managing the infrastructure of e commerce. Specialized networking equipment, secure transactions on the internet. PayPal etc.

The internet has caused disintermediation: shortening of the distribution chain by eliminating intermediaries The internet has also caused reintermediation new business opportunities for intermediaries for example an online website for insurance brokers so they need less personnel to inform their potential clients about their products. The internet reduced search cost on information making the market more efficient.

Channel conflict: they way you put your products on the market can cause a conflict. Compaq first sold its computers via retailers if it does now via internet the retailers will be unhappy.

Ecommerce and e-business trends: Web2.0 tools: they are able to enable services that are free and essy to use, less structured and more interactive than traditional internet services: Wiki: coauthoring and editing of web content to conducive online collaboration. Wikipedia Blogs: online journals, reports. RSS: Real simple syndication, create web feeds, short summaries of content with a link to the full fledged versions that are broadcast to all those who subscribe to the feed once a trigger event occurs. Tags: short descripotros associated with an object

M-commerce: mobile commerce, the ability to complete commercial transactions using mobile devices such as cellular phones of PDAs personal digital assistants. U-commerce: Ultimate commerce, support personalized and uninterrupted communications and transactions. U commererce is predicated on four requirements: 1. 2. 3. 4. Ubiquity; enables users to access resources anywhere at anytime Uniqueness; can always use the resource also if someone else wants to use it. Universality; use their devices anywhere using commonly accepted standards Unison; enables consistent cross-platform, device independent view of available resources

Chapter 7: Value creation and strategic information systems

Economic value is generated when worthwhile things that did not excist before are created The transformation process is like this a good which cost $x is sold for $x+$v The components of value created: Supplier of opportunity cost (SOC): minimum amount of money suppliers are willing to accept to provide the firm with the needed resources. Negotiation process, suppliers will supply if the amount of money paid for it exceeds their opportunity costs to use the supplies for something else. Firm cost (FC): The actual amount of money the firm disbursed to acquire the resources needed to create its product or service. Customer willingness to pay(CWP): the maximum amount customers are willing to spend in order to obtain the product. The products is only useful if customers see the point in it and are willing to spend something on it. Total Value created (TVC): The difference between customer willingness to pay and supplier opportunity costs so TVC = CWS SOC This is the value you create to society by transforming resources in a product usefull for customers.

A firms added value is defined as that portion of the total value created that would be lost if the firm did not take part in the exchange. If you cant be unique you can add value but you are not able to because of competition lowering the price down equal to the price of SOC giving you a TVC of 0 Two ways to create new value: Increase customer willingness to pay: by doing something more valuable for customers you increase their willingness to pay for it, example good after services Decreasing supplier opportunity cost: reduce this by for example better relations so you can better fine tune your orders in a more economical size for the supplier. Wall-marts continuous replenishment: pulled logistics supplier( P&G) is in charge of managing the inventory at the customer (wall-mart) wall-mart give P&G real time inventory knowledge of its consumer demand enabling P&G to optimize its production schedules leading to cheaper product offering to wall-mart.

* Tangible as intangible outcomes provide value for a product * Competitive advantage and added value are closely related.

Strategic information systems: those information systems used to support or shape the competitive strategy of an organization. Those that enable the creation and appropriation of value. IT investments are only appropriate within a larger IS design, as a component of the IS. With only IT investments you cant be competitive . Strategic information systems are important/crucial for businesss operations but do not ad value. Like HR systems, e-mail systems. IT dependent strategic initiatives: projects that enable added value and rely heavily on the use of IT to e successfully implemented. They rely on 3 characteristics: 1. Initiative specific projects and goals 2. Strategic objective of producing new value, seek competitive advantage 3. IT-dependent use of IT at their core. Examples : internet cafes on cruise ships, FED-ex package tracking.

Chapter 8: Value creation with information systems. There are 3 analytical tools to look for what strategy can make the most value for a firm: Industry Analysis Value chain analysis Customer service life cycle analysis

Industry analysis: Grounded in the basic notion that different industries offer different potential for profitability. Industry analysis along Porters five forces: Can the use of IT increase/decrease these barriers ? 1. Threat of new entrants IT can increase this by ATM networks needed for banks for ex. 2. The threat of substitute products or services 3. The bargaining power of buyers high concentrated buyers and low switching costs increase this power of buyers IT can increase this power because more information available. 4. The bargaining power of suppliers IT can decrease this barrier by making more information available for the form on products via internet etc. 5. The rivalry among existing competitors can change the basis of industry competition, for example for any retailer online distribution channel is necessary.

Value chain analysis: looks at the intra-industry, look to create added value and a competitive advantage by deploying strategic information systems within the company. To identify opportunities to change the transformation process your organization engages in and uncover ways to create value. The value chain model maps the set of economic activities that a firm engages in and groups them in 2 sets: 1. Primary activities: firms actions that are directly related to value creation. Classic 5 activities inbound logistics, operations, outbound logistics, marketing and sales, service. 2. Support activities: are not directly related to the transformation process (value). But are necessary to enable it. Like firm infrastructure, HR management, technology development procurement. The role of IT in this IT can transform some of the activities like RFID (radiofrequency identification) chips in goods. The value chain also gives new insights in recognizing relationships upstream and downstream the firm.

The CSLC( customer service life cycle): looks at the firm-customer relationships, to look for potential value creation through superior customer service. CSLS looks if customers are dissatisfied at some stages of the transaction with the firm etc. The CSLS consists of 4 phases of the buying process with 13 stages evaluation of firms relationships with customers, benchmarking against competitors and uncovering opportunities to use the internet and IT to improve customer willingness to pay through outstanding customer service.
Requirements establish requirements specify Acquisition Select source Order Authorize and pay for Acquire Evaluate and accpet Ownership Integrate Monitor Upgrade Maintain Retirement Transfer or dispose Account for move, return or dispose of products/service // help them with it if it's difficult (legal) monitor expenses related to product/service. add to an existing inventory or integrate with existing internal business processes control access and use of the product or service// make sure resources remain in state upgrade the product or service if conditions change// to better fit their unique needs repair the product as necessary//help them with problems etc. Determine where to obtain the product or service// are visible to customers(internet) order the products or service from a supplier // make it easy to order transfer funds or extend credit//convenience and security are important for customers take possession of the product or receive service ensure that the product or service meets specifications// give them try-out period? Demo? establish a need or the product/service,//each and communicate with customers Determine the product or service attributes,//customers select the product they want

Virtual value chain (VVC) to enable a firm to transform data in input into some output information that, once distributed to the appropriate user has higher value than the original data. This is done by: Gather, Organize, Select, Synthesize, Distribute the information. This output can give them 3 classes of strategic initiatives: 1. Visibility get insight in process that first were unknown, consumer buying patterns etc 2. Mirroring capabilities moving economic activities from physical to virtual computer simulations 3. New digital value concerned with the organizations relationship with the customer and the firms ability to increase customers wiliness to pay, using the info via the VVC.

Degree

of

customizability High Low Rewards strategy Personalization Low payoff Acquisition strategy

Theoretical High repurchase Frequence Low

Personalization strategy: has a lot of customer data because of repeated interactions, offer customized products Rewards strategy: standard products but high repurchases use data to evaluate different customers Acquisition strategy: collect customer data to profile them en develop predictive models to attract new customers while avoiding the non -profitable ones. No potential(low payoff): nog potential for crafting a strategy around customer data because of low profits. Keep in mind that firms are sometimes constrained in collecting customer data (legal, small base etc) How to extract the correct data out of a big stock of data? 1. Indentify relevant transaction processing systems : which ones hold relevant data on the area you are focusing on? 2. Inventory data currently available in these systems: 3. Conceptualize initiatives: given what I have, what would I Like to now 4. Prioritize among selected initiatives: a. Upside potential: assessment of financial benefits of the initiative depending on: i. Time sensitivity, impact immediacy, aggregation requirements, trending requirements. b. Data availability: how quickly and costly can the initiative be implemented. Depending on i. Accuracy and comprehensiveness (without errors ,missing values) upside potential High trade-offs imperatives Low Losing causes quick wins Low High Data availability Imperatives: can be implemented quickly and rely on available info and have upside potential. Scanners for grocery stores Quick wins: low upside potential, lot o f info, implemented quickly without much costs. Trade-offs: are not sure because you dont have much info on it, is it profitable?

Chapter 10: Funding information systems. If you want to be more effective with information systems and seek funding for projects you need to master the following concepts TCO= total cost of ownership, the full life cycle costs of IT assets. (selection, licensing, implementing, maintaining). The business case= is a formal document about the project to attract investors/sponsors with ROI, IRR NPV etc. downsides = all lot of estimates and speculations. to overcome this Heuristics: a simple rule is good enough to make decisions by recognizing that you will need to make adjustments along the way. Steering committee: All representatives in a committee (CEO, IS professionals CIO). 3 ways to fund information systems 1. Chargeback: direct billing of the IS resources and services tot the organizational function or department which uses them. + fairness of allocating costs and accountability - costly, detailed. 2. Allocation: also direct billing to departments but not on the base of use but based on the size revenues and numbers of users in that department. 3. Overhead: treats IS as overall expense and its costs are withdrawn from the overall organizational budget. lack of accountability, people dont care about economic usage. The budget is set up to allocate and asses where capital flows come from and are most needed, what projects have more priority etc. Individual IS project risk is based on : Projects size(monetary), experience with the technology, organizational change. Some organizations choose to outsource services to other more experienced organizations Drivers: Reduce costs, access to superior talent/skills, improve control( get control over the IT again), improve strategic focus(now have time to focus on its strengths, weakness is outsourced), Financial appeal( liquidate assets in the IT infrastructure) Risks: Outsourcing paradox( if you cant do it well, how can another organization do it well?) , dark side of partnerships (they both work in their own interest), changing requirements(length of contract changing technologies), hidden coordination costs (communications), deceptive role of IS (IS is one of the most critical functions of an organization) Always keep inhouse IT experts when you outsource IT functions and also keep a group of internal employees who know the core values and services the organization stands for.

Chapter 11: Do you make or buy an information processing functionalities / systems? There are 3 approaches: 1. Custom design and development: Fits the unique needs of the firm. a. Advantages: designs perfectly for the unique needs of the form, has high flexibility and control because its build from scratch. 2. System selection and acquisition: buy an off the shelf software application. a. Advantages: fast roll-out quickly implemented and acquire new knowledge by buying it knowledge infusion. Cheaper/ higher quality because the vendors achieve economies of scale. 3. End-user development: software application build by its end users rather than the firms IS professionals. 4. Blended: buy a system and then modify them yourself extensively. The systems development lifecycle (SDLC): reduce risk and uncertainty in systems designs by planning upfront and justification. This is done step by step each next step relying on the output of the previous one. 3 phases: 1. Definition: identifying the features of the proposed information system(by end users, managers, stakeholders) a. Investigation: formulate main goals, scope and value proposition of new system b. Feasibility analysis: i. Technical feasibility: will the hardware, software etc work as intended? ii. Operational feasibility: is the whole IS feasible, do employees have the skills to handle it? iii. Economic feasibility: What is the ROI, NPV, payback etc of the proposal. c. System analysis: once proposal accepted the system requirements need to be articulated. What inputs to accept, what outputs to produce, who has access? 2. Build: domain of systems architects and programmers. a. System design: structure of system, what application will perform its tasks, what hardware to use, languages etc. b. Programming: translating abstract software design into a set of command /instructions that can be executed by the hardware. c. Testing: alpha testing: developers themselves test the new system. Beta testing: some actual users test the new system. check performance and correcting errors. 3. Implementation: integrate it with the other components of the IS a. Installation: system is loaded on the production hardware and databases populated. i. Parallel: Old and new system run together for a time ii. Direct: New replaces old at one stage iii. Phased: New replaces old in phased stages till 100% over a period of time iv. Pilot: the new system Is run for a time in one business unit before it gets implemented in all units/departments. b. Operations: the system is up and running and the firm begins to use it.

c. Maintenance: errors / bugs information, prioritizing this and implementing the fixes and improvements. Advantages SDLC: reducing uncertainty and risk, well suited for large-scale projects, good communication and negotiation in the project time because of many evaluations. Limitations SDLC: takes a lot of time and associated costs with it.

Prototyping lifecycle: Requirements definitions, Initial prototype, Evaluation, Revision, Completion Advantages: more quickly implemented, closer to users expectations because it is real, better for small-scale projects Limitations: because its done quickly it can lack security and robustness and reliability. Buying of the shelf applications: a system selection process 1. Definition: investigation and feasibility analysis are similar to the SDLC a. Investigation, feasibility analysis, system analysis formulate evaluation criteria. request for proposal process. Appropriate applications should have: b. Essential features capabilities the system must have c. Value adding features advantages that others dont have d. Nonessential features nice to have things, firms are willing to pay a premium. 2. Compile a shortlist of vendors: seek information on the internet, brochers. a. Create targeted RFP that yield high-quality responses and evaluate them. b. Evaluate all the alternatives and responses on the RFPs c. Negotiate with some of them and pick one. 3. Build a. System design (customizations), programming (customizations), testing 4. Implementation: a. Installation, operations, maintenance.

Chapter 12: Information system trends Enterprise systems: a modular, integrated software application that spans all organizational functions and relies on one database at the core. With the following principal characteristics: 1. Modularity: purchaser can decide which functionalities to enable or not 2. Application and data integration: application entegration, an event in 1 module triggers another event in one or more separate modules. Sales&marketing to operations and logistics and financials etc. 3. Configurable: there are configuration tables that enable the adopting firm to choose among a predefined set of options during the implementation of the application further tailoring of the ES Advantages of an ES Efficiency: data integration saves time and reduces direct costs Responsiveness: up to date information you can respond quicker to changing market demands Knowledge infusion: you buy in knowledge with an professional system Adaptability: you can alter the ES with the configuration tables etc.

Limitations of an ES: Standardization and flexibility: in the beginning you can change easily, once implemented you can only follow this course. Is the best practive embedded in the ES really best?: your own best practice may not be supported by the ES, how are the best practices identified?, it is not enough to implement a software program to enact a new practice. Strategic clash: are the established business processes supported enough by the new ES? High costs and risks: consulting and gathering all the information is costly. o Hype cycle: Technology trigger new technology comes available Peak of inflated expectations over enthusiasm rapid adoption Trough of disillusionment failure becomes public Slop of enlightenment true benefits of technology become apparent Plateau of productivity benefits and risks of technology become widely understood and accepted.

Supply chain management: the set of logistic and financial processes associated with the planning, executing and monitoring of supply chain operations. (upstream: suppliers)(downstream: customers) Radiofrequency identification: promise substantial efficiency improvements in the supply chain, from speeding the process of receiving and warehousing products to improving the monitoring and control of inventories. On RFID you can store info(digital), rewrite the tags, embed them in products and you can see them everywhere. Best of breed integration: enables a firm to choose the module or application that best suits its information processing need. Integration by the use of different applications.

A service oriented architecture(SOA): focuses on the reusability of software components, interoperability and ongoing optimization of business processes. Knowledge is categorized in 3 objects: 1. Knowing what: ability to collect, categorize and assimilate information 2. Knowing how: sequence of steps that are needed to complete a task/activity 3. Knowing why: understanding of cause-effect relationships and the laws that govern a given phenomenon We have two categories of knowledge: Explicit knowledge can be articulated, codified and transferred with relative ease (manuals) and tacit knowledge knowledge an individual possesses (instinct), which is harder to identify. Knowledge management: enacts organizations to manage the wealth of knowledge it possesses and ensure that it is properly safeguarded and put to use to help the firm achieve its objectives. By: 1. Creating knowledge: generate new info, devise solutions to handle problems, identify explanations 2. Capturing and storing knowledge: codify new knowledge store it in the memory of the firm 3. Disseminating knowledge: usable knowledge for new problems which can be found easily. DBMS (database management systems): tool to manage date Business intelligence : low cost of computing and storage of data gives the organizations more access to data than ever . the ability of gathering and making sense of information about your business with IT as necessary component. With the use of a Data warehouse: large is size, scope(wide variety of sources), enabling data integration, designed for analytics. Transactional database uses current data at individual level. Analytical database uses historical data at multiple levels. Analytical databases are optimized for enabling complex querying and the analysis of large amounts of data with a response time of a few seconds. They use the following: 1. Data mining: scaled down version of data warehouse focused on specific audience 2. Online analytical processing: (OLAP) easily and selectively extracting and view data from analytical databases by issuing a query that specifies what data you are interested in 3. Data mining: automatically discovering non obvious relationships in large databases analyzing historical data used to identify: associations (buying patterns in certain events), sequences(one event leads to another), classifications(customer profiles), forecasting. CRM(customer relationship management) is a strategic initiative that relies on customers personal transactional data and used to identify buying patterns, values and preferences of customers. maintain relationships, gives insights which customers are profitable or not. Limitations CRM: relies only on transactional and behavioral customer data, not all products bought are for customers themselves. Only has access to transactions with your own company, some events

are unforeseeable. CMI (cust mang interactions: collection and control of data is done by customer XML Open source software is not free software, but is accessible for everyone. It is: Free redistributable Available source code Derived works you can modify the software No discrimination available to any entity also for commercial uses Technology neutrality free of restrictions tied to the use of the technology or type of interface.

Nowadays there are 3 models of open source: 1. Sponsored open source: non for profit foundations provide support and coordination to open source efforts 2. Open source service: Linux 3. Professional open source: being part of an open source license which is tightly controlled. Advantages: Robustnes: high quality and realiable because more matured projects Creativity: a lot of people worked on it around the world Limited lock-in. lower switching costs that proprietary software like windows Simplified licensing: no complex legal constraints Free license: costs are lower than proprietary software.

Disadvantages: Unpredictable costs: unplanned costs along the way? Support varies widely Security: everyone can break it because of open source code Compatibility: they may not be compatible with proprietary software like windows The legal landscape: not protected by copyrights.

Software as a service (SAAS): a provider hosts the application in its data centers and the customer can access the needed applications. Like web based e-mail. Business process outsourcing (BPO) Application sevice providers (ASP) office online etc Quick implementation of new applications but relies on the internet so if internet falls out its useless.

Chapter 13: Security, privacy and ethics. Securities dont gain any money they just can prevent losses, thats why its hard to gain funds for security of the IT infrastructure of a firm. Managers must get involved and understand the threats and asses the degree of risk that the firm should be allowed to take Risk assessment: process consists of auditing the current resources, technological as well as human to map the current state of IS security to provide an idea of the current set of vulnerabilities the firm is facing. Risk mitigation is the process of matching the appropriate response to the security threats your firm identifies. There are 3 mitigation strategies: 1. Risk acceptance: not investing in countermeasures 2. Risk reduction: investing in safeguards to mitigate security threats 3. Risk transference: passing risks to a third party outsourcing security or insurance. 2 types of threats: 1. Internal by malicious behavior someone gives valuable information/access to third parties by purpose for money. careless behavior, by Ignorance or disinterests in security policies. 2. External because of widespread connectivity via the internet we have more and more threats: a. Intrusion threat: someone gains access to the organizational IT resources encounter by passwords, biometrics (fingerprints), encryption. b. Social engineering: obtaining restricted or private information by lying to legitimate users by telephone or false names. c. Phishing: spamming and asking by sensitive information via e-mail like passwords. d. Backdoors and security weaknesses: backdoor is a code build into a software program to allow access to the application by circumventing password protection. e. Threat of malicious code: malware, software programs that are designed to cause damage to individuals or organizations IT assets. encounter by detection software like antivirus, spyware sweepers. i. Viruses: attaches itself to software with a payload, harmful set of actions ii. Trojan horses: does not self-replicate like virus but is passed on by those who share it with others. iii. Worms: exploits security holes in network software to replicate itself, has no payload but infects more and more machines on the network. iv. Spyware software that collects user behavior and transfers this to a 3th party. f. Denial of service attack: digital assault to force a online service offline b overwhelming it with demands. very hard to encouter Total cost of security= costs of anticipation costs (anti-virus software etc) and failure costs in case of a breach of security

To protect themselves from internal threats firms write down security policies in which is stated how the behavior of employees should be in an organization. Different rights the users have. What can be downloaded and shared with outside people or not. Privacy is the ability of individuals to control the terms and conditions under which their personal information is collected, managed, an utilized. It is taken for sure that companies deal well with this private information in terms of ethics. Because of information technology firms have a lot of privacy now a days. All this customer information creates high potential for privacy violations by: Function creep you use collected date for other purposes than intended. Proliferating data sources proliferation (snel toename) of data sources and technologies that generate customer data, like cell phones who give exact physical location of someone. Improving data management technologies merging of different databases to get an exact profile of customers, this because of a lot of opportunities of data driven strategies, so firms are willing to take more risks. The legal landscape it is hard for legislations to enter the internet because of world wide acces so different governments etc.

Fair information practices are based on the following five principles: 1. 2. 3. 4. 5. Notice be noticed when your personal is used for something Choice you must be able to choose where your information is used for Access must be able to acces your information to change things Security organizations must ensure your information is kept safe Enforcements organizations who use the information for enforceable procedures must keep the 4 points above in mind.

Ethics: the discipline dealing with what is good and bad and with moral duty obligations. Information system ethics. new ways of doing business give potential for new ethical dilemmas. Like downloading dvds , cds. all because of new technologies. What is right or wrong?