List and discuss at least three positive and three negative impacts of information systems.
Information systems (IS) have enhanced communication significantly. Effective communication is important for all organizations, societies and even individuals. Data and information can be distributed to millions of people around the world despite geographical locations in real time using IS (Kenneth, Jane 1997). This saves on costs, allows quick response to changes, better customer service and exploitation of new opportunities. IS have made it possible to access new service efficiencies. Automation of some services has lead to more effective and satisfactory services, for example ATMs, and telephone systems. IS have supported advances in research in various fields, for example in medicine IS are used in surgery, radiology and patient monitoring. The ability for IS to perform certain processes faster and with great accuracy has lead to great advancements.
IS have had some negative impacts, such as eliminating jobs (Benson, Davis 2008). When activities that were previously performed manually by people are automated, efficiency is achieved but jobs are lost in the process. Job loss also results when IS makes it possible to export jobs, or a smaller number of people replaces multiple workers. Job loss results in economic and social consequences. IS have always had their fair share of security concerns. Data and information in the system must be kept secure and protected from attacks such as viruses, hackers and other forms of malwares. System shutdowns may bring the whole organization to a standstill and paralyze all operations resulting in huge losses. IS are expensive to install and to maintain. The initial expenses for the software and the hardware required to set up an effective Information System are high. Maintaining the system also comes with its cost including specialist staff to run it, as well as updates or new systems to keep up with the ever-changing technologies.
Distinguish between the transaction cost theory of the impact of information technology on the organization and the agency cost theory of the impact of information technology on the organization. Are these theories contradictory or complementary? Support your answer.
In transaction cost theory firms seek to lower their cost of market participation. Economics, where transaction cost theory stems from depicts information technology as a factor of production in organizations. In this theory information technology can be freely substituted for labor and capital as factors of production. This is clearly seen where less capital and labor are required to produce a specific output because information technology has automated the production process. Transaction cost theory therefore supports that because firms can access products and services internally at lower cost as compared to sourcing from external firms in the market place they can increase in size
In agency cost theory firms are viewed as having a nexus of contracts among self-interested employees who require supervision if the interest of the firm are to be achieved. Agency costs in firms arise in the form of managing and supervising costs. Information technology reduces the agency cost without increasing the number of employees because it allows each manager to oversee and coordinate different people and activities.
The transaction cost theory is complementary to the agency cost theory when used together in any organization. This is because in the transaction cost theory firms can shrink in size (reduce the number of employees) while increasing their revenue because they can obtain goods and services cheaply from outside sources. While in the agency cost theory, firms can grow without adding to the costs of management and supervision.
Define and distinguish between the terms organizational learning, tacit knowledge, best practices, and organizational memory. Which do you think would be most difficult to pin down in a knowledge system? Support your answer.
Organizational learning is the change that is experienced in the organization’s knowledge. It constitutes of a continuous process that enhances the organizations ability to receive, accept, make sense of and respond appropriately to external or internal change (Martin 2001). Organization learning in any organization requires systematic integration of the new knowledge, followed by collective interpolation and action by the concerned employees. Tacit knowledge is knowledge that is informal, unwritten and unspoken (Carla 2007). Tacit knowledge is acquired through associations with one another, when performing joint or shared activities. Tacit knowledge is based on a person’s insights, experiences, observations, emotions and how they internalize information from different sources (Ichijo, Nonaka 2007).
Best practices are techniques or methods that have been perfected over time and have been proven consistently to yield superior results as compared to those achieved through alternative means. Best practices are used as a benchmark necessary to maintain quality (William 2009). Organizational memory is knowledge, data and information that has been accumulated in the course of the organizations existence. It consists of undocumented insights, skills, and experiences acquired over many years which is kept alive by being passed on to newcomers (Dan 2003).
Tacit knowledge would be the most difficult to pin down in the system because it cannot be documented unlike best practices and organizational learning. Although organizational memory can be destroyed through frequent layoffs and excessive downsizing it can be pooled and recorded for future reference. Tacit knowledge is unspoken and unwritten making it hard to pin down.
Discuss the limitations of the financial models described in your textbook. Why is the use of these models not always indicated for investments involving information technology?
Financial models have limitations in that most of the time they utilize criteria that are based on financial returns to be received from the investment. This means that projects that yield high profits but poor returns in other areas might be preferred over those that have relatively low profits but provide other benefits. Financial models are also limited because they do not account for intangible value that will be created by an investment. This is because it is impossible to account for every possible variable in the model. Even in cases where the variables can be modeled, it is impossible to know the exact effect that the variable will have in real life situations.
Financial models are also limited in that some of them are too simple to provide any useful results (Elizabeth 2011). Even where the models have been developed to include the consideration of many variables, it is still easy to miss aspects that cause huge variations in the end results. The financial models are not able to effectively consider multiple gating decision points which are necessary for realizing results that are not misleading.
Financial models are not always indicated in Information Technology investments because most models are biased towards short-term investments. Information Technology investments are mostly long-term, and substantial returns only realized in the long-term. Information Technology investments do not necessarily result in direct profits; this makes the use of financial models difficult because they focus on profitability. Finally it is expensive, and time consuming to produce an effective model that can be used in Information Technology investment.
What steps do the authors recommend be taken to develop an international information systems architecture?
The firm must begin by identifying the major reasons driving their need to be a global firm and their motivation to enter into the international market. In order to do this, the firm must develop a thoroughly thought out and clear understanding of why they exist. It is important to consider cultural factors which create conditions for global markets, global production, distribution and coordination (Hans 2003). They also affect the global economies of scale in the international market. The firm has to consider specific business factors that affect the business in its area of operation.
The firm will then compare the different strategies used to develop global business and select the one that is most appropriate for the firm. The firm can embrace the strategy of a domestic exporter, a transnational, a franchise or a multinational. The choice is usually reached after considering the type of business, products or services the firm is involved in. The strategy should allow the firm to compete effectively in the global market. The firm should thoroughly evaluate and examine any inhibitors and factors that could negatively affect the firm when it is operating in the global market.
The firm should examine how the information system will support their strategy. The strategy leads to the building of the structure that governs corporate behavior in the firm. The organizations structure is important because it defines the functions and the processes that the firm will be undertaking in its operations. The structure clearly shows how the functions operate both independently and dependently and how the information system will support each of them. The information system has to be designed in a way that it will support the structure in the firm if it is to be effective. The structure is entirely dependent on the international strategy the firm adopts
The firm then identifies any challenges that the global information system will face (Bryan, Robert 2010).The information system will operate in areas with different cultural orientations, politics and language diversities which pose many challenges. The culture of the firm and that of the places they operate in may not be in agreement causing challenges. In a global market where the firm operates in, there are different information systems which might be difficult to integrate with the firms system. The firm therefore, has to develop systems that support the core business processes, and simultaneously ensure they do not lose control over the large process.
The firm then has to consider the technical alternatives that are necessary when developing an international information system (Benson, Davis 2008). The firm will evaluate their business design and their technological platforms. The firm has to evaluate issues related to the development of the system. These issues include how the system will be integrated into the firm’s operations. The firm can either choose to operate an open systems technology or adopt a proprietary architecture for their system.
The firm also makes considerations on how they will achieve connectivity from the information system adopted. The firm then makes the decision whether they will create their global networks based on the internet, or they will build their own global network. The choice largely depends on the capability of the firm because global networks are difficult to build and operate. Finally the firm considers software issues. Software is important because they are needed to run the system effectively. The selected software should be able to build interfaces between systems, as well as work in multiple cultures, setting and frameworks where the firm will be operating in.
- Kenneth, L., Jane, P. (1997) Management information systems: New Approaches to Organization & Technology (5th ed) New Jersey: Prentice Hall College
- Martin, S. (2001) Organizational Learning. Retrieved from http://www.unc.edu/~healdric/Classes/Soci245/Schulz.pdf 27 June, 2014.
- Dan, K. (2003) Knowledge Management and Organizational memory- Remembrance and recollection in knowledge – intensive firm. Retrieved from http://www2.warwick.ac.uk/fac/soc/wbs/conf/olkc/archive/oklc3/papers/id312.pdf on 27 June, 2014.
- Bryan, M., Robert, H. (2010) IT Portfolio Management Step-by-step: Unlocking The Business Value of Technology. John Wiley & Sons.
- Carla, C. (2007) Organizational Learning and Organizational Design. International Journal of Knowledge and Learning, 3(2/3)
- William, K. (2009) Knowledge Management and Organizational Learning. Annuals of Information Systems, 3(575).
- Hans, L. (2003) An Object – Oriented Architecture Model for International Information Systems. Journal of Global Information Management, 11(3).
- Elizabeth, H. (2011) Business Information Systems. London: Elizabeth Hardcastle & Ventus Publishing.
- Benson V., Davis K., (2008) Business Information Management. London: Benson V., Tribe K. & Ventus Publishers.
- Ichijo, K., Nonaka I. (2007) Knowledge Creation and Management: New Challenges for managers. Oxford: Oxford University Press.