# Distributing and Promoting Products and Services

## Trends in E-Commerce

1. What is e-commerce, and how has it affected the retail sector?
E-commerce is related to social media and other new online platforms because it utilizes the internet for marketing communication. E-commerce refers to the development and maintenance of a company’s website and the facilitation of commerce on the website, such as the ability for customers to order products online, to get questions answered about products, and for the company to introduce new products and ideas. E-commerce can include special components designed specifically for separate target market segments, such as information boxes or games. Anything associated with an actual company website related to marketing can be considered e-commerce.
Estimates by various researchers say that more than half of all retail sales involve an online component; direct internet purchases in 2016 were more than 13 percent of all retail sales, and that percentage will continue to grow. Why? One reason is the economics of shopping. Think about time spent engaged in making a purchase in a brick-and-mortar location: the cost of fuel, finding a parking spot, locating your intended store, deciding on a purchase, and then driving home. Now think about the time spent reviewing products on a website, deciding what to purchase, and clicking a mouse or swiping a mobile device screen—it takes no time at all!
Countless small businesses have taken the plunge to serve the growing army of online shoppers. Many e-commerce businesses, including e-jeweler Blue Nile, luggage site eBags, and shoe and accessory retailer Zappos, are experiencing sales of $100 million a year or more. The increasing sophistication of search technology and comparison-shopping sites have allowed online businesses to market their products to millions of potential customers cheaply and effectively. Often, these innovations are bringing less-well-known brands and merchants to consumers’ attention.
Online merchants can offer a far broader array of merchandise than specialty brick-and-mortar retailers because they don’t have to keep the products on store shelves. In response to this challenge, traditional retailers are turning to technology to gain an advantage, outfitting their sales associates with voice headgear so they can look up prices and product information to assist customers.
After a slow start, the world’s largest retailer, Walmart, has begun moving into e-retailing in a big way. It is now in almost every major category of web-related consumer commerce. It is estimated that Walmart has approximately 200 million items across all of its outlets, compared to 300 million items available through Amazon. The company has taken some innovative steps to leverage the web to drive people to its stores. In 2016, CEO Doug McMillon purchased Jet.com for $3.3 billion and put Jet.com’s CEO Mark Lore in charge of running Walmart’s online business. A case in point is the company’s online tire service, which allows you to order automobile tires to be picked up and mounted at a Walmart tire center. Customers can order prescription refills for delivery by mail or for pickup at a Walmart pharmacy department. Walmart’s online photo service, in addition to providing a way to store pictures on the web, allows customers to send digital pictures to be printed in a Walmart store of their choice, with a one-hour turnaround.

### Summary of Learning Outcomes

1. What is e-commerce, and how does it affect promotion?
E-commerce refers to the development and maintenance of a company’s website and the facilitation of commerce on the website, such as the ability for customers to order products on line, to get questions answered about products, and for the company to introduce new products and ideas. E-commerce can include special components designed specifically for separate target market segments, such as information boxes or games.
The ease of use and ability to comparison-shop is driving millions of people to the internet to purchase goods and services. Major retailers such as Walmart are quickly increasing their web presence in an effort to stay relevant in this ever-changing business environment and to attract even more loyal customers who have made the switch to doing most of their shopping on line.

### Preparing for Tomorrow’s Workplace Skills

1. Team Activity Divide the class into two groups with one taking the “pro” position and the other the “con” position on the following issue: “The only thing marketing intermediaries really do is increase prices for consumers. It is always best to buy direct from the producer.” (Interpersonal)
2. Trace the distribution channel for some familiar product. Compose an e-mail that explains why the channel has evolved as it has and how it is likely to change in the future. (Systems)
3. You work for a small chain of department stores (six stores total) located within a single state. Write a memo to the president explaining how e-retailing may affect the chain’s business. (Technology)
4. How does supply-chain management increase customer value? (Systems)
5. Think of a product that you use regularly. Find several examples of how the manufacturer markets this product, such as ads in different media, sales promotions, and publicity. Assess each example for effectiveness in meeting one or more of the six promotional goals described in the chapter. Then analyze them for effectiveness in reaching you as a target consumer. Consider such factors as the media used, the style of the ad, and ad content. Present your findings to the class. (Information)
6. Go to the blogging search sites listed in the text and find personal blogs, both positive and negative, for a brand. Also report on a consumer good manufacturer’s blogging site. Was it appealing? Why or why not? (Technology)
7. The internet and technology has changed the world of promotion forever. Explain the meaning of this sentence. (Technology)
8. What advantages does personal selling offer over types of promotion? (Information)
9. Choose a current advertising campaign for a beverage product. Describe how the campaign uses different media to promote the product. Which media is used the most, and why? What other promotional strategies does the company use for the product? Evaluate the effectiveness of the campaign. Present your results to the class. (Information)
10. The Promotional Products Association International is a trade association of the promotional-products industry. Its website, http://www.ppai.org, provides an introduction to promotional products and how they are used in marketing. Read its FAQ page and the Industry Sales Volume statistics (both reached through the Education link). Then go to the Resources and Technology section, then case studies, and link to the most recent Golden Pyramid Competition. Choose three to four winners from different categories. Now prepare a short report on the role of promotional products in the promotional mix. Include the examples you selected, and explain how the products helped the company reach its objective. (Technology)

### Working the Net

1. Visit Industry Week’s website at http://www.industryweek.com. Under Archives, do a search using the search term “supply-chain management.” Choose an article from the results that describes how a company has used supply-chain management to improve customer satisfaction, performance, or profitability. Give a brief presentation to your class on your findings.
2. What are some of the logistics problems facing firms that operate internationally? Visit the Logistics Management magazine website at http://www.logisticsmgmt.com, and see if you can find information about how firms manage global logistics. Summarize the results.
3. Go to http://www.woot.com. Why do you think that this e-retailer is successful? How can it expand its market? Why do you think that the site has such a cult following?
4. A competitive advantage of the internet is the ability to comparison-shop like never before. To compare brands, features, and prices of products, go to two of these sites: http://www.pricegrabber.com or http://mysimon.com, or, for the best bargains, http://www.overstock.com, http://www.smartbargains.com, http://www.bluefly.com, http://www.nextag.com, or http://www.shopzilla.com. Which is the easiest site to use? The most difficult? Which site provides the most information?
5. The Zenith Media site at http://www.zenithmedia.com is a good place to find links to internet resources on advertising. Research the leading brands listed on the site. Pick three of the company sites listed, and review them using the concepts in this chapter.
6. Go to the Sales and Marketing magazine site at http://www.salesandmarketing.com. Read several of the free recent articles from the magazine as well as online exclusives, and prepare a brief report on current trends in one of the following topics: sales strategies, marketing strategies, customer relationships, or training. Also check out their new blog, “Closers.” What is your opinion of this blog?
7. Entrepreneurs and small businesses don’t always have big sales promotion budgets. The Guerrilla Marketing page at http://www.gmarketing.com has many practical ideas for those with big ideas but small budgets. After exploring the site, explain the concept of guerrilla marketing. Then list five ideas or tips that appeal to you, and summarize why they are good marketing strategies.
8. Press releases are a way to get free publicity for your company and products. Visit the following site to learn how to write a press release: http://www.press-release-examples.com. Was this helpful, and why? Develop a short “how-to” guide on press releases for your classmates. Then write a press release that announces the opening of your new health food restaurant, Zen Foods, located just two blocks from campus.

### Ethics Activity

After working really hard to distinguish yourself, you’ve finally been promoted to senior account executive at a major advertising agency and placed in charge of the agency’s newest account, a nationally known cereal company. Their product is one you know contains excessive amounts of sugar as well as artificial colorings and lacks any nutritional value whatsoever. In fact, you have never allowed your own children to eat it.
Your boss has indicated that the cereal company would like to use the slogan “It’s good for you” in their new television and print advertising campaign. You know that a $2 billion lawsuit has been filed against the Kellogg and Viacom corporations for marketing junk food to young children. The suit cited “alluring product packaging, toy giveaways, contests, collectibles, kid-oriented websites, magazine ads, and branded toys and clothes.” In addition, two consumer groups have brought suit against children’s television network Nickelodeon for “unfair and deceptive junk-food marketing.”
Your new role at the agency will be tested with this campaign. Doing a good job on it will cement your position and put you in line for a promotion to vice president. But as a responsible parent, you have strong feelings about misleading advertising targeted at susceptible children.
Using a web search tool, locate articles about this topic and then write responses to the following questions. Be sure to support your arguments and cite your sources.
Ethical Dilemma: Do you follow your principles and ask to be transferred to another account? Or do you help promote a cereal you know may be harmful to children in order to secure your career?
Sources: James Schroeder, “To the Heart of the Matter: We Are What We Eat,” Evansville Courier & Press, http://www.courierpress.com, September 11, 2017; Lizzie Parry, “Popular Cereals Contain Up to a Third of Your Kids’ Sugar Intake,” The Sun, https://www.thesun.co.uk, February 8, 2017; Stephanie Thompson, “Kellogg Co. Might as Well Have Painted a Bull’s-eye on Itself,” Advertising Age, January 23, 2006; and Abbey Klaassen, “Viacom Gets Nicked,” Advertising Age, January 23, 2006.

### Creative Thinking Case

### Advertisers Score with the Super Bowl

What sporting event is televised in 170 countries and has created a quasi–national holiday in the United States? The Super Bowl is considered by football fans as the ultimate game and known as the largest advertising opportunity for media companies that broadcast the game and companies that want to reach a large audience. The history of impactful advertising shown as part of Super Bowl viewing includes the famous 1984 Apple advertisement that “breaks” the PC wall. The ad was only shown once, but it is recognized as one of the most iconic moments in the history of advertising.
In recent years companies have used football’s popularity and the Super Bowl as a global program to get their message out to a worldwide audience. While the high cost of advertising during the Super Bowl may deter some advertisers, the impact of an ad like Clint Eastwood’s 2012 “Halftime in America” for Chrysler or the 2017 Heinz “Dachhund” ad has been hailed as dramatic and created buzz that ads running in traditional spots do not generate.
One additional thing that advertisers have to consider is the infusion of politics into more aspects of life and how players or outside groups might create a diversion that could impact advertisers, and the amount that the networks pay the NFL for the right to air the Super Bowl. NFL games, and the Super Bowl in particular, provide a large audience for players to voice their concerns with issues such as race, or a newsworthy protest of kneeling for the National Anthem prior to the game. Likewise, controversy can occur during a halftime show or by protesters unfurling a banner, as occurred at a Minnesota Vikings game in 2017. Just as advertisers would rather not show their ads during natural disasters or live coverage of a plane crash or terrorist attack, a large-scale live event always provides the possibility of something happening that could not be anticipated. Companies with creative and adept social media departments can, however, make a positive impact by reacting to events as they occur. For example, during the 2013 Super Bowl in New Orleans, a faulty transformer caused a power outage just before halftime, which caused a 30-minute delay. A clever worker in the Oreo’s social media department sent out a Tweet saying, “Power out? No problem. You can still dunk in the dark,” with a picture of an Oreo cookie on a dark background.
2. Name some of the challenges marketers encounter when developing advertising and promotional campaigns. How does the type of product affect the promotional strategies?
3. You work for an ad agency that has a Super Bowl sponsor as a client. What approach would you recommend for your agency as it develops a campaign—universal, customized for each geographical region, or something else, and why?
4. What types of companies could benefit from placing ads on the NFL website, and how can they use the internet effectively to promote their products?
Sources: Benjamin Hoffman, Victor Mather, and Jacey Fortin, “After Trump Blasts N.F.L., Players Kneel and Lock Arms in Solidarity,” The New York Times, http://www.nytimes.com, September 25, 2017; Jason Notte, “How NFL Sponsors Get Ambushed at the Super Bowl," The Street, https://www.thestreet.com, January 24, 2017; Rochelle Olsen and Andrew Krammer, “Two Pipeline Protesters Arrested after Hanging Banner in U.S. Bank Stadium during Vikings Game," Star Tribune, http://www.startribune.com, January 2, 2017; Rick Porter, “The 100 Most-Watched TV Programs of 2016: Super Bowl 50 Leads by a Mile,” TV by the Numbers, http://tvbythenumbers.zap2it.com, December 27, 2016; Angele Watercutter, “How Oreo Won the Marketing Super Bowl with a Timely Blackout Ad on Twitter,” Wired, https://www.wired.com, February 4, 2013; “Super Bowl XLVI: Most Watched TV Show Ever!” http://www.justjared.com, February 6, 2012.

### Hot Links Address Book

1. Consumers can now comparison-shop like never before. To compare brands, features, and prices of products, go to one of these sites: http://www.pricegrabber.com, http://www.mysimon.com, or http://www.compare.net.http://www.bottomdollar.com
2. At the National Retail Federation’s website, you’ll find current retail statistics, links to retailing resources, and information about retailing careers: http://www.nrf.com.
3. The American Wholesale Marketers Association is an international trade organization for distributors of convenience products in the United States. Visit its website to browse the latest issue of Distribution Channels magazine and learn more about this field: http://www.awmanet.org.
4. Stores magazine offers hundreds of ideas for putting together a successful retail strategy: http://www.stores.org.
5. Freightworld offers detailed information on various modes of transportation and links to transportation companies: http://www.freightworld.com.
6. For articles on supply-chain management along with information on the latest technology in the field, check out Supply Chain Management Review: http://scmr.com.
7. A good site for the latest on interactive and internet marketing is ClickZ network, where you’ll find news, advice from experts, statistics, feature articles, and more: http://www.clickz.com.
8. How can you find the right magazine in which to advertise? The Media Finder website has a searchable database of thousands of magazines: http://www.mediafinder.com.
9. What should a media kit for the press include? 101 Public Relations provides the answer, along with other good information about getting publicity for your company: http://www.101publicrelations.com.
10. Advertising Age magazine has a wealth of information about the latest in advertising, including videos and ratings of new ads: http://www.adage.com.


# Using Technology to Manage Information

## Introduction

### Learning Outcomes

After reading this chapter, you should be able to answer these questions:
1. How has information technology transformed business and managerial decision-making?
2. Why are computer networks an important part of today’s information technology systems?
3. What types of systems make up a typical company’s management information system?
4. How can technology management and planning help companies optimize their information technology systems?
5. What are the best ways to protect computers and the information they contain?
6. What are the leading trends in information technology?
This chapter focuses on the role of information technology (IT) in business, examining the details of MIS organization, as well as the challenges companies encounter in an increasingly technological world. As John Daly learned, harnessing the power of information technology gives a company a significant competitive advantage.


# Using Technology to Manage Information

## Transforming Businesses through Information

1. How has information technology transformed business and managerial decision-making?
Information technology (IT) includes the equipment and techniques used to manage and process information. Information is at the heart of all organizations. Without information about the processes of and participants in an organization—including orders, products, inventory, scheduling, shipping, customers, suppliers, and employees—a business cannot operate.
In less than 70 years, we have shifted from an industrial society to a knowledge-based economy driven by information. Businesses depend on information technology for everything from running daily operations to making strategic decisions. Computers are the tools of this information age, performing extremely complex operations as well as everyday jobs such as word processing and creating spreadsheets. The pace of change has been rapid since the personal computer became a fixture on most office desks. Individual units became part of small networks, followed by more sophisticated enterprise-wide networks.  and  summarize the types of computer equipment and software, respectively, most commonly used in business management information systems today.
Although most workers spend their days at powerful desktop computers, other groups tackle massive computational problems at specialized supercomputer centers. Tasks that would take years on a PC can be completed in just hours on a supercomputer. With their ability to perform complex calculations quickly, supercomputers play a critical role in national security research, such as analysis of defense intelligence; scientific research, from biomedical experiments and drug development to simulations of earthquakes and star formations; demographic studies such as analyzing and predicting voting patterns; and weather and environmental studies. Businesses, too, put supercomputers to work by analyzing big data to gain insights into customer behavior, improving inventory and production management and for product design. The speed of these special machines has been rising steadily to meet increasing demands for greater computational capabilities, and the next goal is quadrillions of computations per second, or petaflops. Achieving these incredible speeds is critical to future scientific, medical, and business discoveries. Many countries, among them the United States, China, France, and Japan, have made petascale computing a priority.
In addition to a business’s own computers and internal networks, the internet makes it effortless to connect quickly to almost anyplace in the world. As Thomas Friedman points out in his book  “We are now connecting all of the knowledge centers on the planet together into a single global network, which . . . could usher in an amazing era of prosperity and innovation.” The opportunities for collaboration on a global scale increase daily. A manager can share information with hundreds of thousands of people worldwide as easily as with a colleague on another floor of the same office building. The internet and the web have become indispensable business tools that facilitate communication within companies as well as with customers.
The rise of electronic trading hubs is just one example of how technology is facilitating the global economy. Electronic trading hubs are not reserved for large companies of developed economies, however. Alibaba is piloting an e-hub called eWTP in Malaysia that will provide access to small businesses. As Jack Ma, Alibaba co-founder, said at eWTP’s launch, “There are a lot of free-trade zones for efficient trade facilitation, but only for big companies. There is no free-trade zone designed for small companies. I have been shouting everywhere, screaming, that every government should do it.”
Many companies entrust an executive called the chief information officer (CIO) with the responsibility of managing all information resources. The importance of this responsibility is immense. In addition to the massive expansion of information gathered by today’s businesses, most of us are knowledge workers who develop or use knowledge. Knowledge workers contribute to and benefit from information they use to perform planning, acquiring, searching, analyzing, organizing, storing, programming, producing, distributing, marketing, or selling functions. We must know how to gather and use information from the many resources available to us.
Because most jobs today depend on information—obtaining, using, creating, managing, and sharing it—this chapter begins with the role of information in decision-making and goes on to discuss computer networks and management information systems. The management of information technology—planning and protection—follows. Finally, we’ll look at the latest trends in information technology. Throughout the chapter, examples show how managers and their companies are using computers to make better decisions in a highly competitive world.

### Data and Information Systems

Information systems and the computers that support them are so much a part of our lives that we almost take them for granted. These management information systems methods and equipment that provide information about all aspects of a firm’s operations provide managers with the information they need to make decisions. They help managers properly categorize and identify ideas that result in substantial operational and cost benefits.
Businesses collect a great deal of data—raw, unorganized facts that can be moved and stored—in their daily operations. Only through well-designed IT systems and the power of computers can managers process these data into meaningful and useful information and use it for specific purposes, such as making business decisions. One such form of business information is the database, an electronic filing system that collects and organizes data and information. Using software called a database management system (DBMS), you can quickly and easily enter, store, organize, select, and retrieve data in a database. These data are then turned into information to run the business and to perform business analysis.
Databases are at the core of business information systems. For example, a customer database containing name, address, payment method, products ordered, price, order history, and similar data provides information to many departments. Marketing can track new orders and determine what products are selling best; sales can identify high-volume customers or contact customers about new or related products; operations managers use order information to obtain inventory and schedule production of the ordered products; and finance uses sales data to prepare financial statements. Later in the chapter, we will see how companies use very large databases called data warehouses and data marts.
Companies are discovering that they can’t operate well with a series of separate information systems geared to solving specific departmental problems. It takes a team effort to integrate the systems described and involves employees throughout the firm. Company-wide enterprise resource planning (ERP) systems that bring together human resources, operations, and technology are becoming an integral part of business strategy. So is managing the collective knowledge contained in an organization, using data warehouses and other technology tools. Technology experts are learning more about the way the business operates, and business managers are learning to use information systems technology effectively to create new opportunities and reach their goals.

### Summary of Learning Outcomes

1. How has information technology transformed business and managerial decision-making?
Businesses depend on information technology for everything from running daily operations to making strategic decisions. Companies must have management information systems that gather, analyze, and distribute information to the appropriate parties, including employees, suppliers, and customers. These systems are comprised of different types of computers that collect data and process it into usable information for decision-making. Managers tap into databases to access the information they need, whether for placing inventory orders, scheduling production, or preparing long-range forecasts. They can compare information about the company’s current status to its goals and standards. Company-wide enterprise resource planning systems that bring together human resources, operations, and technology are becoming an integral part of business strategy.


# Using Technology to Manage Information

## Linking Up: Computer Networks

1. Why are computer networks an important part of today’s information technology systems?
Today most businesses use networks to deliver information to employees, suppliers, and customers. A computer network is a group of two or more computer systems linked together by communications channels to share data and information. Today’s networks often link thousands of users and can transmit audio and video as well as data.
Networks include clients and servers. The client is the application that runs on a personal computer or workstation. It relies on a server that manages network resources or performs special tasks such as storing files, managing one or more printers, or processing database queries. Any user on the network can access the server’s capabilities.
By making it easy and fast to share information, networks have created new ways to work and increase productivity. They provide more efficient use of resources, permitting communication and collaboration across distance and time. With file-sharing, all employees, regardless of location, have access to the same information. Shared databases also eliminate duplication of effort. Employees at different sites can “screen-share” computer files, working on data as if they were in the same room. Their computers are connected by phone or cable lines, they all see the same thing on their display, and anyone can make changes that are seen by the other participants. The employees can also use the networks for videoconferencing.
Networks make it possible for companies to run enterprise software, large programs with integrated modules that manage all of the corporation’s internal operations. Enterprise resource planning systems run on networks. Typical subsystems include finance, human resources, engineering, sales and order distribution, and order management and procurement. These modules work independently and then automatically exchange information, creating a company-wide system that includes current delivery dates, inventory status, quality control, and other critical information. Let’s now look at the basic types of networks companies use to transmit data—local area networks and wide area networks—and popular networking applications such as intranets and virtual private networks.

### Connecting Near and Far with Networks

Two basic types of networks are distinguished by the area they cover. A local area network (LAN) lets people at one site exchange data and share the use of hardware and software from a variety of computer manufacturers. LANs offer companies a more cost-effective way to link computers than linking terminals to a mainframe computer. The most common uses of LANs at small businesses, for example, are office automation, accounting, and information management. LANs can help companies reduce staff, streamline operations, and cut processing costs. LANs can be set up with wired or wireless connections.
A wide area network (WAN) connects computers at different sites via telecommunications media such as phone lines, satellites, and microwaves. A modem connects the computer or a terminal to the telephone line and transmits data almost instantly, in less than a second. The internet is essentially a worldwide WAN. Communications companies, such as AT&T, Verizon, and Sprint, operate very large WANs. Companies also connect LANs at various locations into WANs. WANs make it possible for companies to work on critical projects around the clock by using teams in different time zones.
Several forms of WANs—intranets, virtual private networks (VPN), and extranets—use internet technology. Here we’ll look at intranets, internal corporate networks that are widely available in the corporate world, and VPNs. Although wireless networks have been around for more than a decade, they are increasing in use because of falling costs, faster and more reliable technology, and improved standards. They are similar to their wired LAN and WAN cousins, except they use radio frequency signals to transmit data. You use a wireless WAN (WWAN) regularly when you use your cellular phone. WANs’ coverage can span several countries. Telecommunications carriers operate using wireless WANs.
Wireless LANs (WLAN) that transmit data at one site offer an alternative to traditional wired systems. WLANs’ reach is a radius of 500 feet indoors and 1,000 feet outdoors and can be extended with antennas, transmitters, and other devices. The wireless devices communicate with a wired access point into the wired network. WLANs are convenient for specialized applications where wires are in the way or when employees are in different locations in a building. Hotels, airports, restaurants, hospitals, retail establishments, universities, and warehouses are among the largest users of WLANs, also known as Wi-Fi. For example, the Veterans Administration Hospital in West Haven, Connecticut, recently added Wi-Fi access in all patient rooms to upgrade its existing WLAN to improve patient access, quality, and reliability. The new WLAN supports many different functions, from better on-site communication among doctors and nurses through both data transmission and voice-over-internet phone systems to data-centric applications such as its Meditech clinical information system and pharmacy management.

### An Inside Job: Intranets

Like LANs, intranets are private corporate networks. Many companies use both types of internal networks. However, because they use internet technology to connect computers, intranets are WANs that link employees in many locations and with different types of computers. Essentially mini-internets that serve only the company’s employees, intranets operate behind a firewall that prevents unauthorized access. Employees navigate using a standard web browser, which makes the intranet easy to use. They are also considerably less expensive to install and maintain than other network types and take advantage of the internet’s interactive features such as chat rooms and team workspaces. Many software providers now offer off-the-shelf intranet packages so that companies of all sizes can benefit from the increased access to and distribution of information.
Companies now recognize the power of intranets to connect employers and employees in many ways, promoting teamwork and knowledge-sharing. Intranets have many applications, from human resource (HR) administration to logistics. For instance, a benefits administration intranet can become a favorite with employees. Instead of having to contact an HR representative to make any changes in personnel records or retirement plan contributions or to submit time sheets, staff members simply log on to the intranet and update the information themselves. Managers can also process staffing updates, performance reviews, and incentive payments without filing paperwork with human resources. Employees can regularly check an online job board for new positions. Shifting routine administrative tasks to the intranet can bring additional benefits such as reducing the size of the HR department by 30 percent and allowing HR staff members to turn their attention to more substantive projects.

### Enterprise Portals Open the Door to Productivity

Intranets that take a broader view serve as sophisticated knowledge management tools.
One such intranet is the enterprise portal, an internal website that provides proprietary corporate information to a defined user group. Portals can take one of three forms: business to employee (B2E), business to business (B2B), and business to consumer (B2C). Unlike a standard intranet, enterprise portals allow individuals or user groups to customize the portal home page to gather just the information they need for their particular job situations and deliver it through a single web page. Because of their complexity, enterprise portals are typically the result of a collaborative project that brings together designs developed and perfected through the effort of HR, corporate communications, and information technology departments.
More companies use portal technology to provide:
1. A consistent, simple user interface across the company
2. Integration of disparate systems and multiple sets of data and information
3. A single source for accurate and timely information that integrates internal and external information
4. A shorter time to perform tasks and processes
5. Cost savings through the elimination of information intermediaries
6. Improved communications within the company and with customers, suppliers, dealers, and distributors

### No More Tangles: Wireless Technologies

Wireless technology has become commonplace today. We routinely use devices such as cellular phones, mobile devices, garage door openers, and television remote controls—without thinking of them as examples of wireless technology. Businesses use wireless technologies to improve communications with customers, suppliers, and employees.
Companies in the package delivery industry, such as UPS and FedEx, were among the first users of wireless technology. Delivery personnel use handheld computers to send immediate confirmation of package receipt. You may also have seen meter readers and repair personnel from utility and energy companies send data from remote locations back to central computers.
Bluetooth short-range wireless technology is a global standard that improves personal connectivity for users of mobile phones, portable computers, and stereo headsets, and Bluetooth wirelessly connects keyboards and mice to computers and headsets to phones and music players. A Bluetooth-enabled mobile phone, for example, provides safer hands-free phone use while driving. The technology is finding many applications in the auto industry as well. Bluetooth wireless technology is now standard in many vehicles today. Many car, technology, and cell phone companies—among them Amazon, Apple, Audi, BMW, DaimlerChrysler, Google, Honda, Saab, Toyota, and Volkswagen—already offer Bluetooth hands-free solutions. Other uses include simplifying the connection of portable digital music players to the car’s audio system and transferring downloaded music to the system.

### Private Lines: Virtual Private Networks

Many companies use virtual private networks to connect two or more private networks (such as LANs) over a public network, such as the internet. VPNs include strong security measures to allow only authorized users to access the network and its sensitive corporate information. Companies with widespread offices may find that a VPN is a more cost-effective option than creating a network using purchased networking equipment and leasing expensive private lines. This type of private network is more limited than a VPN, because it doesn’t allow authorized users to connect to the corporate network when they are at home or traveling.
As  shows, the VPN uses existing internet infrastructure and equipment to connect remote users and offices almost anywhere in the world—without long-distance charges. In addition to saving on telecommunications costs, companies using VPNs don’t have to buy or maintain special networking equipment and can outsource management of remote access equipment. VPNs are useful for salespeople and telecommuters, who can access the company’s network as if they were on-site at the company’s office. On the downside, the VPN’s availability and performance, especially when it uses the internet, depends on factors largely outside of an organization’s control.
VPNs are popular with many different types of organizations. Why? Security is one of the main reasons to always use a VPN to access the internet. Because all your data is encrypted once tunneled, if a hacker were trying to intercept your browsing activity, say, while you were entering your credit card number to make an online purchase, the encryption would stymie their efforts. That’s why it’s a particularly good idea to use VPNs in public settings such as coffee shops and airports.

### Software on Demand: Application Service Providers

As software developers release new types of application programs and updated versions of existing ones every year or two, companies have to analyze whether they can justify buying or upgrading to the new software—in terms of both cost and implementation time. Application service providers (ASP) offer a different approach to this problem. Companies subscribe, usually on a monthly basis, to an ASP and use the applications much like you’d use telephone voice mail, the technology for which resides at the phone company. Other names for ASPs include on-demand software, hosted applications, and software-as-a-service.  shows how the ASP interfaces with software and hardware vendors and developers, the IT department, and users.
The simplest ASP applications are automated—for example, a user might use one to build a simple e-commerce site. ASPs provide three major categories of applications to users:
1. Enterprise applications, including customer relationship management (CRM), enterprise resource planning, e-commerce, and data warehousing
2. Collaborative applications for internal communications, e-mail, groupware, document creation, and management messaging
3. Applications for personal use—for example, games, entertainment software, and home-office applications
According to recent surveys, more companies are currently using an ASP, and even moving their legacy systems to the cloud. Estimates suggest revenues from subscriptions to on-demand cloud services were about $180 billion in 2017. This sector is growing much more rapidly—three times faster—than traditional hardware and software. As this market grows, more companies are adding on-demand offerings to their traditional software packages. Amazon (Amazon Web Services), IBM, Microsoft, and Salesforce.com are among the leading cloud service providers.
Until recently, many companies were reluctant to outsource critical enterprise applications to third-party providers. As ASPs improved their technologies and proved to be reliable and cost-effective, attitudes have changed. Companies, both large and small, seek cost advantages such as the convenience ASPs provide. The basic idea behind subscribing to an ASP is compelling. Users can access any of their applications and data from any computer, and IT can avoid purchasing, installing, supporting, and upgrading expensive software applications. ASPs buy and maintain the software on their servers and distribute it through high-speed networks. Subscribers rent the applications they want for a set period of time and price. The savings in licensing fees, infrastructure, time, and staff are significant.
Managed service providers (MSP) represent the next generation of ASPs, offering greater customization and expanded capabilities that include business processes and complete management of the network servers. The global market for managed IT services reached $149.1 billion in 2016. This market is estimated to reach $256.5 billion in 2021, from $166.7 billion in 2017, at a compound annual growth rate of 11.5 percent for the period 2018 through 2021.

### Summary of Learning Outcomes

1. Why are computer networks an important part of today’s information technology systems?
Today companies use networks of linked computers that share data and expensive hardware to improve operating efficiency. Types of networks include local area networks, wide area networks, and wireless local area networks. Intranets are private WANs that allow a company’s employees to communicate quickly with one other and work on joint projects, regardless of their location. Companies are finding new uses for wireless technologies such as tablets, cell phones, and other mobile devices. Virtual private networks give companies a cost-effective secure connection between remote locations by using public networks such as the internet.


# Using Technology to Manage Information

## Management Information Systems

1. What types of systems make up a typical company’s management information system?
Whereas individuals use business productivity software such as word processing, spreadsheet, and graphics programs to accomplish a variety of tasks, the job of managing a company’s information needs falls to management information systems: users, hardware, and software that support decision-making. Information systems collect and store the company’s key data and produce the information managers need for analysis, control, and decision-making.
Factories use computer-based information systems to automate production processes and order and monitor inventory. Most companies use them to process customer orders and handle billing and vendor payments. Banks use a variety of information systems to process transactions such as deposits, ATM withdrawals, and loan payments. Most consumer transactions also involve information systems. When you check out at the supermarket, book a hotel room online, or download music over the internet, information systems record and track the transaction and transmit the data to the necessary places.
Companies typically have several types of information systems, starting with systems to process transactions. Management support systems are dynamic systems that allow users to analyze data to make forecasts, identify business trends, and model business strategies. Office automation systems improve the flow of communication throughout the organization. Each type of information system serves a particular level of decision-making: operational, tactical, and strategic.  shows the relationship between transaction processing and management support systems as well as the management levels they serve. Let’s take a more detailed look at how companies and managers use transaction processing and management support systems to manage information.

### Transaction Processing Systems

A firm’s integrated information system starts with its transaction processing system (TPS). The TPS receives raw data from internal and external sources and prepares these data for storage in a database similar to a microcomputer database but vastly larger. In fact, all the company’s key data are stored in a single huge database that becomes the company’s central information resource. As noted earlier, the database management system tracks the data and allows users to query the database for the information they need.
The database can be updated in two ways: batch processing, where data are collected over some time period and processed together, and online, or real-time, processing, which processes data as they become available. Batch processing uses computer resources very efficiently and is well-suited to applications such as payroll processing that require periodic rather than continuous processing. Online processing keeps the company’s data current. When you make an airline reservation, the information is entered into the airline’s information system, and you quickly receive confirmation, typically through an e-mail. Online processing is more expensive than batch processing, so companies must weigh the cost versus the benefit. For example, a factory that operates around the clock may use real-time processing for inventory and other time-sensitive requirements but process accounting data in batches overnight.

### Decisions, Decisions: Management Support Systems

Transaction processing systems automate routine and tedious back-office processes such as accounting, order processing, and financial reporting. They reduce clerical expenses and provide basic operational information quickly. Management support systems (MSS) use the internal master database to perform high-level analyses that help managers make better decisions.
Information technologies such as data warehousing are part of more advanced MSSs. A data warehouse combines many databases across the whole company into one central database that supports management decision-making. With a data warehouse, managers can easily access and share data across the enterprise to get a broad overview rather than just isolated segments of information. Data warehouses include software to extract data from operational databases, maintain the data in the warehouse, and provide data to users. They can analyze data much faster than transaction-processing systems. Data warehouses may contain many data marts, special subsets of a data warehouse that each deal with a single area of data. Data marts are organized for quick analysis.
Companies use data warehouses to gather, secure, and analyze data for many purposes, including customer relationship management systems, fraud detection, product-line analysis, and corporate asset management. Retailers might wish to identify customer demographic characteristics and shopping patterns to improve direct-mailing responses. Banks can more easily spot credit-card fraud, as well as analyze customer usage patterns.
According to Forrester Research, about 60 percent of companies with $1 billion or more in revenues use data warehouses as a management tool. Union Pacific (UP), a $19 billion railroad, turned to data warehouse technology to streamline its business operations. By consolidating multiple separate systems, UP achieved a unified supply-chain system that also enhanced its customer service. “Before our data warehouse came into being we had stovepipe systems,” says Roger Bresnahan, principal engineer. “None of them talked to each other. . . . We couldn’t get a whole picture of the railroad.”
UP’s data warehouse system took many years and the involvement of 26 departments to create. The results were well worth the effort: UP can now make more accurate forecasts, identify the best traffic routes, and determine the most profitable market segments. The ability to predict seasonal patterns and manage fuel costs more closely has saved UP millions of dollars by optimizing locomotive and other asset utilization and through more efficient crew management. In just three years, Bresnahan reports, the data warehouse system had paid for itself.
At the first level of an MSS is an information-reporting system, which uses summary data collected by the TPS to produce both regularly scheduled and special reports. The level of detail would depend on the user. A company’s payroll personnel might get a weekly payroll report showing how each employee’s paycheck was determined. Higher-level mangers might receive a payroll summary report that shows total labor cost and overtime by department and a comparison of current labor costs with those in the prior year. Exception reports show cases that fail to meet some standard. An accounts receivable exception report that lists all customers with overdue accounts would help collection personnel focus their work. Special reports are generated only when a manager requests them; for example, a report showing sales by region and type of customer can highlight reasons for a sales decline.

### Decision Support Systems

A decision support system (DSS) helps managers make decisions using interactive computer models that describe real-world processes. The DSS also uses data from the internal database but looks for specific data that relate to the problems at hand. It is a tool for answering “what if” questions about what would happen if the manager made certain changes. In simple cases, a manager can create a spreadsheet and try changing some of the numbers. For instance, a manager could create a spreadsheet to show the amount of overtime required if the number of workers increases or decreases. With models, the manager enters into the computer the values that describe a particular situation, and the program computes the results. Marketing executives at a furniture company could run DSS models that use sales data and demographic assumptions to develop forecasts of the types of furniture that would appeal to the fastest-growing population groups.
Companies can use a predictive analytics program to improve their inventory management system and use big data to target customer segments for new products and line extensions.

### Executive Information Systems

Although similar to a DSS, an executive information system (EIS) is customized for an individual executive. These systems provide specific information for strategic decisions. For example, a CEO’s EIS may include special spreadsheets that present financial data comparing the company to its principal competitors and graphs showing current economic and industry trends.

### Expert Systems

An expert system gives managers advice similar to what they would get from a human consultant. Artificial intelligence enables computers to reason and learn to solve problems in much the same way humans do, using what-if reasoning. Although they are expensive and difficult to create, expert systems are finding their way into more companies as more applications are found. Lower-end expert systems can even run on mobile devices. Top-of-the-line systems help airlines appropriately deploy aircraft and crews, critical to the carriers’ efficient operations. The cost of hiring enough people to do these ongoing analytical tasks would be prohibitively expensive. Expert systems have also been used to help explore for oil, schedule employee work shifts, and diagnose illnesses. Some expert systems take the place of human experts, whereas others assist them.

### Summary of Learning Outcomes

1. What types of systems make up a typical company’s management information system?
A management information system consists of a transaction processing system, management support systems, and an office automation system. The transaction processing system collects and organizes operational data on the firm’s activities. Management support systems help managers make better decisions. They include an information-reporting system that provides information based on the data collected by the TPS to the managers who need it; decision support systems that use models to assist in answering “what if” types of questions; and expert systems that give managers advice similar to what they would get from a human consultant. Executive information systems are customized to the needs of top management.


# Using Technology to Manage Information

## Technology Management and Planning

1. How can technology management and planning help companies optimize their information technology systems?
With the help of computers, people have produced more data in the last 30 years than in the previous 5,000 years combined. Companies today make sizable investments in information technology to help them manage this overwhelming amount of data, convert the data into knowledge, and deliver it to the people who need it. In many cases, however, the companies do not reap the desired benefits from these expenditures. Among the typical complaints from senior executives are that the company is spending too much and not getting adequate performance and payoff from IT investments, these investments do not relate to business strategy, the firm seems to be buying the latest technology for technology’s sake, and communications between IT specialists and IT users are poor.

### Optimize IT!

Managing a company’s enterprise-wide IT operations, especially when those often stretch across multiple locations, software applications, and systems, is no easy task. IT managers must deal not only with on-site systems; they must also oversee the networks and other technology, such as mobile devices that handle e-mail messaging, that connect staff working at locations ranging from the next town to another continent. At the same time, IT managers face time constraints and budget restrictions, making their jobs even more challenging.
Growing companies may find themselves with a decentralized IT structure that includes many separate systems and duplication of efforts. A company that wants to enter or expand into e-commerce needs systems flexible enough to adapt to this changing marketplace. Security for equipment and data is another critical area, which we will cover later in the chapter.
The goal is to develop an integrated, company-wide technology plan that balances business judgment, technology expertise, and technology investment. IT planning requires a coordinated effort among a firm’s top executives, IT managers, and business-unit managers to develop a comprehensive plan. Such plans must take into account the company’s strategic objectives and how the right technology will help managers reach those goals.
Technology management and planning go beyond buying new technology. Today companies are cutting IT budgets so that managers are being asked to do more with less. They are implementing projects that leverage their investment in the technology they already have, finding ways to maximize efficiency and optimize utilization.

### Managing Knowledge Resources

As a result of the proliferation of information, we are also seeing a major shift from information management to a broader view that focuses on finding opportunities in and unlocking the value of intellectual rather than physical assets. Whereas information management involves collecting, processing, and condensing information, the more difficult task of knowledge management (KM) focuses on researching, gathering, organizing, and sharing an organization’s collective knowledge to improve productivity, foster innovation, and gain competitive advantage. Some companies are even creating a new position, chief knowledge officer, to head up this effort.
Companies use their IT systems to facilitate the physical sharing of knowledge. But better hardware and software are not the answer to KM. KM is not technology-based, but rather a business practice that uses technology. Technology alone does not constitute KM, nor is it the solution to KM. Rather, it facilitates KM. Executives with successful KM initiatives understand that KM is not a matter of buying a major software application that serves as a data depository and coordinates all of a company’s intellectual capital. According to Melinda Bickerstaff, vice president of knowledge management at Bristol-Myers Squibb (BMS), any such “leading with technology” approach is a sure path to failure. “Knowledge management has to be perceived as a business problem solver, not as an abstract concept,” Bickerstaff explains.
Effective KM calls for an interdisciplinary approach that coordinates all aspects of an organization’s knowledge. It requires a major change in behavior as well as technology to leverage the power of information systems, especially the internet, and a company’s human capital resources. The first step is creating an information culture through organizational structure and rewards that promotes a more flexible, collaborative way of working and communicating. Moving an organization toward KM is no easy task, but it is well worth the effort in terms of creating a more collaborative environment, reducing duplication of effort, and increasing shared knowledge. The benefits can be significant in terms of growth, time, and money.
At Bristol-Meyers Squibb, a major pharmaceutical company, Bickerstaff began the KM implementation by looking for specific information-related problems to solve so that the company would save time and/or money. For example, she learned that company scientists were spending about 18 percent of their time searching multiple databases to find patents and other information. Simply integrating the relevant databases gave researchers the ability to perform faster searches. A more complex project involved compiling the best practices of drug-development teams with the best FDA approval rates so that other groups could benefit. Rather than send forms that could be easily set aside, Bickenstaff arranged to conduct interviews and lessons-learned sessions. The information was then developed into interesting articles rather than dry corporate reports.

### Technology Planning

A good technology plan provides employees with the tools they need to perform their jobs at the highest levels of efficiency. The first step is a general needs assessment, followed by ranking of projects and the specific choices of hardware and software.  poses some basic questions departmental managers and IT specialists should ask when planning technology purchases.
Once managers identify the projects that make business sense, they can choose the best products for the company’s needs. The final step is to evaluate the potential benefits of the technology in terms of efficiency and effectiveness. For a successful project, you must evaluate and restructure business processes, choose technology, develop and implement the system, and manage the change processes to best serve your organizational needs. Installing a new IT system on top of inefficient business processes is a waste of time and money!

### Summary of Learning Outcomes

1. How can technology management and planning help companies optimize their information technology systems?
To get the most value from IT, companies must go beyond simply collecting and summarizing information. Technology planning involves evaluating the company’s goals and objectives and using the right technology to reach them. IT managers must also evaluate the existing infrastructure to get the best return on the company’s investment in IT assets. Knowledge management focuses on sharing an organization’s collective knowledge to improve productivity and foster innovation. Some companies establish the position of chief knowledge officer to head up KM activities.


# Using Technology to Manage Information

## Protecting Computers and Information

1. What are the best ways to protect computers and the information they contain?
Have you ever lost a term paper you worked on for weeks because your hard drive crashed or you deleted the wrong file? You were upset, angry, and frustrated. Multiply that paper and your feelings hundreds of times over, and you can understand why companies must protect computers, networks, and the information they store and transmit from a variety of potential threats. For example, security breaches of corporate information systems—from human hackers or electronic versions such as viruses and worms—are increasing at an alarming rate. The ever-increasing dependence on computers requires plans that cover human error, power outages, equipment failure, hacking, and terrorist attacks. To withstand natural disasters such as major fires, earthquakes, and floods, many companies install specialized fault-tolerant computer systems.
Disasters are not the only threat to data. A great deal of data, much of it confidential, can easily be tapped or destroyed by anyone who knows about computers. Keeping your networks secure from unauthorized access—from internal as well as external sources—requires formal security policies and enforcement procedures. The increasing popularity of mobile devices—laptops, tablets, and cell phones—and wireless networks requires new types of security provisions.
In response to mounting security concerns, companies have increased spending on technology to protect their IT infrastructure and data. Along with specialized hardware and software, companies need to develop specific security strategies that take a proactive approach to prevent security and technical problems before they start. However, a recent CIO article lamented the lack of basic security policies that companies only implement after a hack or data crisis.

### Data Security Issues

Unauthorized access into a company’s computer systems can be expensive, and not just in monetary terms. Juniper Networks estimates that cybercrime will cost businesses more than $2 trillion in 2019, compared to just $450 million in 2001. The most costly categories of threats include worms, viruses, and Trojan horses (defined later in this section); computer theft; financial fraud; and unauthorized network access. The report also states that almost all U.S. businesses report at least one security issue, and almost 20 percent have experienced multiple security incidents.
Computer crooks are becoming more sophisticated all the time, finding new ways to get into ultra-secure sites. “As companies and consumers continue to move towards a networked and information economy, more opportunity exists for cybercriminals to take advantage of vulnerabilities on networks and computers,” says Chris Christiansen, program vice president at technology research firm IDC. Whereas early cybercrooks were typically amateur hackers working alone, the new ones are more professional and often work in gangs to commit large-scale internet crimes for large financial rewards. The internet, where criminals can hide behind anonymous screen names, has increased the stakes and expanded the realm of opportunities to commit identity theft and similar crimes. Catching such cybercriminals is difficult, and fewer than 5 percent are caught.
Firms are taking steps to prevent these costly computer crimes and problems, which fall into several major categories:
1. Unauthorized access and security breaches. Whether from internal or external sources, unauthorized access and security breaches are a top concern of IT managers. These can create havoc with a company’s systems and damage customer relationships. Unauthorized access also includes employees, who can copy confidential new-product information and provide it to competitors or use company systems for personal business that may interfere with systems operation. Networking links also make it easier for someone outside the organization to gain access to a company’s computers.
One of the latest forms of cybercrime involves secretly installing keylogging software via software downloads, e-mail attachments, or shared files. This software then copies and transmits a user’s keystrokes—passwords, PINs, and other personal information—from selected sites, such as banking and credit card sites, to thieves.
2. Computer viruses, worms, and Trojan horses. Computer viruses and related security problems such as worms and Trojan horses are among the top threats to business and personal computer security. A computer program that copies itself into other software and can spread to other computer systems, a computer virus can destroy the contents of a computer’s hard drive or damage files. Another form is called a worm because it spreads itself automatically from computer to computer. Unlike a virus, a worm doesn’t require e-mail to replicate and transmit itself into other systems. It can enter through valid access points.

Viruses can hide for weeks, months, or even years before starting to damage information. A virus that “infects” one computer or network can be spread to another computer by sharing disks or by downloading infected files over the internet. To protect data from virus damage, virus protection software automatically monitors computers to detect and remove viruses. Program developers make regular updates available to guard against newly created viruses. In addition, experts are becoming more proficient at tracking down virus authors, who are subject to criminal charges.
3. Deliberate damage to equipment or information. For example, an unhappy employee in the purchasing department could get into the company’s computer system and delete information on past orders and future inventory needs. The sabotage could severely disrupt production and the accounts payable system. Willful acts to destroy or change the data in computers are hard to prevent. To lessen the damage, companies should back up critical information.
4. Spam. Although you might think that spam, or unsolicited and unwanted e-mail, is just a nuisance, it also poses a security threat to companies. Viruses spread through e-mail attachments that can accompany spam e-mails. Spam is now clogging blogs, instant messages, and cell phone text messages as well as e-mail inboxes. Spam presents other threats to a corporation: lost productivity and expenses from dealing with spam, such as opening the messages and searching for legitimate messages that special spam filters keep out.
5. Software and media piracy. The copying of copyrighted software programs, games, and movies by people who haven’t paid for them is another form of unauthorized use. Piracy, defined as using software without a license, takes revenue away from the company that developed the program—usually at great cost. It includes making counterfeit CDs to sell as well as personal copying of software to share with friends.

### Preventing Problems

Creating formal written information security policies to set standards and provide the basis for enforcement is the first step in a company’s security strategy. Unfortunately, a recent survey of IT executives worldwide revealed that over two-thirds expect a cyberattack in the near future. Stephanie Ewing, a data security expert, states, “Having a documented, tested process brings order to chaotic situations and keeps everyone focused on solving the most pressing issues.” Without information security strategies in place, companies spend too much time in a reactive mode—responding to crises—and don’t focus enough on prevention.
Security plans should have the support of top management, and then follow with procedures to implement the security policies. Because IT is a dynamic field with ongoing changes to equipment and processes, it’s important to review security policies often. Some security policies can be handled automatically, by technical measures, whereas others involve administrative policies that rely on humans to perform them. Examples of administrative policies are “Users must change their passwords every 90 days” and “End users will update their virus signatures at least once a week.”  shows the types of security measures companies use to protect data.
Preventing costly problems can be as simple as regularly backing up applications and data. Companies should have systems in place that automatically back up the company’s data every day and store copies of the backups off-site. In addition, employees should back up their own work regularly. Another good policy is to maintain a complete and current database of all IT hardware, software, and user details to make it easier to manage software licenses and updates and diagnose problems. In many cases, IT staff can use remote access technology to automatically monitor and fix problems, as well as update applications and services.
Companies should never overlook the human factor in the security equation. One of the most common ways that outsiders get into company systems is by posing as an employee, first getting the staffer’s full name and username from an e-mail message and then calling the help desk to ask for a forgotten password. Crooks can also get passwords by viewing them on notes attached to a desk or computer monitor, using machines that employees leave logged on when they leave their desks, and leaving laptop computers with sensitive information unsecured in public places.
Portable devices, from handheld computers to tiny plug-and-play flash drives and other storage devices (including mobile phones), pose security risks as well. They are often used to store sensitive data such as passwords, bank details, and calendars. Mobile devices can spread viruses when users download virus-infected documents to their company computers.
Imagine the problems that could arise if an employee saw a calendar entry on a mobile device like “meeting re: layoffs,” an outsider saw “meeting about merger with ABC Company,” or an employee lost a flash drive containing files about marketing plans for a new product. Manufacturers are responding to IT managers’ concerns about security by adding password protection and encryption to flash drives. Companies can also use flash drive monitoring software that prevents unauthorized access on PCs and laptops.
Companies have many ways to avoid an IT meltdown, as  describes.

### Keep IT Confidential: Privacy Concerns

The very existence of huge electronic file cabinets full of personal information presents a threat to our personal privacy. Until recently, our financial, medical, tax, and other records were stored in separate computer systems. Computer networks make it easy to pool these data into data warehouses. Companies also sell the information they collect about you from sources like warranty registration cards, credit-card records, registration at websites, personal data forms required to purchase online, and grocery store discount club cards. Telemarketers can combine data from different sources to create fairly detailed profiles of consumers.
The September 11, 2001, tragedy and other massive security breaches have raised additional privacy concerns. As a result, the government began looking for ways to improve domestic-intelligence collection and analyze terrorist threats within the United States. Sophisticated database applications that look for hidden patterns in a group of data, a process called data mining, increase the potential for tracking and predicting people’s daily activities. Legislators and privacy activists worry that such programs as this and ones that eavesdrop electronically could lead to excessive government surveillance that encroaches on personal privacy. The stakes are much higher as well: errors in data mining by companies in business may result in a consumer being targeted with inappropriate advertising, whereas a governmental mistake in tracking suspected terrorists could do untold damage to an unjustly targeted person.
Increasingly, consumers are fighting to regain control of personal data and how that information is used. Privacy advocates are working to block sales of information collected by governments and corporations. For example, they want to prevent state governments from selling driver’s license information and supermarkets from collecting and selling information gathered when shoppers use barcoded plastic discount cards. With information about their buying habits, advertisers can target consumers for specific marketing programs.
The challenge to companies is to find a balance between collecting the information they need while at the same time protecting individual consumer rights. Most registration and warranty forms that ask questions about income and interests have a box for consumers to check to prevent the company from selling their names. Many companies now state in their privacy policies that they will not abuse the information they collect. Regulators are taking action against companies that fail to respect consumer privacy.

### Summary of Learning Outcomes

1. What are the best ways to protect computers and the information they contain?
Because companies are more dependent on computers than ever before, they need to protect data and equipment from natural disasters and computer crime. Types of computer crime include unauthorized use and access, software piracy, malicious damage, and computer viruses. To protect IT assets, companies should prepare written security policies. They can use technology such as virus protection, firewalls, and employee training in proper security procedures. They must also take steps to protect customers’ personal privacy rights.


# Using Technology to Manage Information

## Trends in Information Technology

1. What are the leading trends in information technology?
Information technology is a continually evolving field. The fast pace and amount of change, coupled with IT’s broad reach, make it especially challenging to isolate industry trends. From the time we write this chapter to the time you read it—as little as six months—new trends will appear, and those that seemed important may fade. However, some trends that are reshaping today’s IT landscape are digital forensics, the shift to a distributed workforce, and the increasing use of grid computing.

### Cyber Sleuthing: A New Style of Crime Busting

What helped investigators bring suit against Enron, Merck’s Vioxx medication, and the BTK serial killer? Digital evidence taken from an individual’s computer or corporate network—web pages, pictures, documents, and e-mails are part of a relatively new science called digital forensics. Digital-forensics software safeguards electronic evidence used in investigations by creating a duplicate of a hard drive that an investigator can search by keyword, file type, or access date. Digital forensics is also evolving into areas such as cloud computing and blockchain technology. For instance, it is estimated that as much as 3.9 million of the original 21 million bitcoins are “lost” on hard drives confined to landfills and flash drives located in the back of old office desks.
But nowadays digital sleuthing is not limited to law enforcement. Companies such as Walmart, Target, and American Express have their own secret in-house digital forensics teams. And what if you’re in New York and need to seize a hard drive in Hong Kong? No problem. Over 75 members of the Fortune 500 now use technology that allows them to search hard drives remotely over their corporate networks. Digital forensics makes it possible to track down those who steal corporate data and intellectual property. Broadcom, a semiconductor chip designer, used computer forensics to investigate and apprehend former employees who were attempting to steal trade secrets. In the process, Broadcom gathered incriminating e-mails, including deleted documents, that gave it solid evidence to use the 2013 Federal Computer Fraud and Abuse Act to stop the former employees from starting up a rival firm.
However, there is a downside to having these advanced capabilities. If this kind of software falls into the wrong hands, sophisticated hackers could access corporate networks and individual computers as easily as taking candy from a baby—and the victims would not even know it was happening. In an age of corporate wrongdoing, sexual predators, and computer porn, your hard drive will tell investigators everything they need to know about your behavior and interests, good and bad. Cybersleuthing means we are all potential targets of digital forensics. As evidenced by the huge increase in identity theft, personal privacy—once an unassailable right—is no longer as sacred as it once was.

### The Distributed Workforce

Insurance company Aetna shuttered 2.7 million square feet of office space, saving the company $78 million, while American Express estimates it saved between $10 to $15 million dollars per year by expanding its distributed workforce. Was this a sign that these company were in trouble? Far from it. Instead of maintaining expensive offices in multiple locations, they sent employees home to work and adopted a new model for employees: the distributed workforce. Employees have no permanent office space and work from home or on the road. The shift to virtual workers has been a huge success, and not only do companies save on their personnel and related costs, but they also have happier, more productive employees.
Aetna and American Express are not alone in recognizing the benefits of distributed workers, especially in companies that depend on knowledge workers. Work Design Collaborative LLC in Prescott, Arizona, estimates that about 12 percent of all workers in the United States fall into this category, and in urban areas the number could be as high as 15 percent. There are estimates that this trend could eventually reach 40 percent over the next decade, as long commutes, high gas costs, and better connecting tools and technologies make this an attractive option for many workers who like the flexibility of not working in an office. Already, employees use the internet to conduct video-conferenced meetings and collaborate on teams that span the globe. On the downside, working from home can also mean being available 24/7—although most workers consider the trade-off well worth it.
According to recent statistics, close to four million U.S. workers work from home at least half of the time. Remote workers continue to be recruited by companies of all sizes, including Amazon, Dell, Salesforce, and others. Intel has a successful virtual-work program that has been popular with working parents. “Technology allows working remotely to be completely invisible,” says Laura Dionne, the company’s director of supply-chain transformation. At Boeing, thousands of employees participate in the virtual-work program, and it has been a critical factor in attracting and retaining younger workers. Almost half of Sun Microsystems’ employees are “location-independent,” reducing real estate costs by $300 million. Additional benefits for Sun are higher productivity from these workers and the ability to hire the best talent. “Our people working these remote schedules are the happiest employees we have, and they have the lowest attrition rates,” says Bill MacGowan, senior vice president for human resources at Sun. “Would I rather settle on someone mediocre in the Bay Area, or get the best person in the country who is willing to work remotely?”

### Grid and Cloud Computing Offer Powerful Solutions

How can smaller companies that occasionally need to perform difficult and large-scale computational tasks find a way to accomplish their projects? They can turn to grid or cloud computing, also called utility computing or peer-to-peer computing. Cloud and grid technology provides a way to divide the job into many smaller tasks and distribute them to a virtual supercomputer consisting of many small computers linked into a common network. Combining multiple desktop machines results in computing power that exceeds supercomputer speeds. A hardware and software infrastructure clusters and integrates computers and applications from multiple sources, harnessing unused power in existing PCs and networks. This structure distributes computational resources but maintains central control of the process. A central server acts as a team leader and traffic monitor. The controlling cluster server divides a task into subtasks, assigns the work to computers on the grid with surplus processing power, combines the results, and moves on to the next task until the job is finished.  shows how typical grid and cloud setups work, and the differences between the two.
With utility computing, any company—large or small—can access the software and computer capacity on an as-needed basis. One of the big advantages of cloud computing is that companies can update their inventory in real time across their entire organization. For example, suppose you are an appliance retailer and have several outlets throughout the Midwest. If you have one model of a Whirlpool washing machine in your Des Moines, Iowa, store, and a salesperson in your Chicago location can sell that model in Chicago, the sale can be accomplished pretty easily. They can finalize the sale, create the shipping instructions, and update the inventory record automatically—and the Chicago consumer’s needs will be met.
Amazon, Google, IBM, Salesforce.com, Oracle, and Hewlett-Packard Enterprise are among the companies providing as-needed cloud and grid services. Although cloud and grid computing appears similar to outsourcing or on-demand software from ASPs, it has two key differences:
1. Pricing is set per-use, whereas outsourcing involves fixed-price contracts.
2. Cloud and grid computing goes beyond hosted software and includes computer and networking equipment as well as services.
The cloud and grids provide a very cost-effective way to provide computing power for complex projects in areas such as weather research and financial and biomedical modeling. Because the computing infrastructure already exists—they tap into computer capacity that is otherwise unused—the cost is quite low. The increased interest in cloud and grid technology will continue to contribute to high growth.

### Summary of Learning Outcomes

1. What are the leading trends in information technology?
IT is a dynamic industry, and companies must stay current on the latest trends to identify ones that help them maintain their competitive edge, such as digital forensics, the distributed workforce, and grid computing. With digital forensics techniques, corporations, government agencies, attorneys, and lawmakers can obtain evidence from computers and corporate networks—web pages, pictures, documents, and e-mails. Many knowledge workers now work remotely rather than from an office. Companies adopting the distributed workforce model gain many benefits, such as cost savings, more satisfied and productive employees, and increased employee retention. Cloud computing harnesses the power of computers, online software, and data storage to create a virtual computing environment that is invisible to the user. A company can access the cloud on an as-needed basis instead of investing in its own supercomputer equipment. Outsourcing a portion of the company’s computing needs provides additional flexibility and cost advantages. Companies can also set up internal grids.

### Preparing for Tomorrow’s Workplace Skills

1. How has information technology changed your life? Describe at least three areas (both personal and school- or work-related) where having access to better information has improved your decisions. Are there any negative effects? What steps can you take to manage information better? (Information, Technology)
2. Visit or conduct a phone interview with a local small-business owner about the different ways her or his firm uses information technology. Prepare a brief report on your findings that includes the hardware and software used, how it was selected, benefits of technology for the company, and any problems in implementing or using it. (Interpersonal, Information)
3. Your school wants to automate the class-registration process. Prepare a memo to the dean of information systems describing an integrated information system that would help a student choose and register for courses. Make a list of the different groups that should be involved and questions to ask during the planning process. Include a graphic representation of the system that shows how the data become useful information. Indicate the information a student needs to choose courses and its sources. Explain how several types of management support systems could help students make better course decisions. Include ways the school could use the information it collects from this system. Have several students present their plans to the class, which will take the role of university management in evaluating them. (Resources, Systems, Technology)
4. You recently joined the IT staff of a midsized consumer products firm. After a malicious virus destroys some critical files, you realize that the company lacks a security strategy and policies. Outline the steps you’d take to develop a program to protect data and the types of policies you’d recommend. How would you present the plan to management and employees to encourage acceptance? (Resources, Technology)
5. Team Activity Should companies outsource IT? Some executives believe that IT is too important to outsource and that application service providers don’t have a future. Yet spending for ASP subscriptions, MSPs, and other forms of IT outsourcing such as cloud computing continue to grow. What’s your position? Divide the class into groups designated “for” or “against” outsourcing and/or ASPs. Have them research the current status of ASPs using publications such as CIO and Computerworld and websites such as Enterprise Apps Today, http://www.enterpriseappstoday.com. (Interpersonal, Information)

### Ethics Activity

As the owner of a small but growing business, you are concerned about employees misusing company computers for personal matters. Not only does this cost the company in terms of employee productivity, but it also ties up bandwidth that may be required for company operations and exposes the firm’s networks to increased risks of attacks from viruses, spyware, and other malicious programs. Installing e-mail monitoring and web security and filtering software programs would allow you to track e-mail and internet use, develop use policies, block access to inappropriate sites, and limit the time employees can conduct personal online business. At the same time, the software will protect your IT networks from many types of security concerns, from viruses to internet fraud. You are concerned, however, that employees will take offense and consider such software an invasion of privacy.
Using a web search tool, locate articles about this topic and then write responses to the following questions. Be sure to support your arguments and cite your sources.
Ethical Dilemma: Should you purchase employee-monitoring software for your company, and on what do you base your decision? If you install the software, do you have an obligation to tell employees about it? Explain your answers and suggest ways to help employees understand your rationale.
Sources: KC Agu, “6 Software Tools for Monitoring Employee Productivity,” Huffington Post, https://www.huffingtonpost.com, December 6, 2017; Marissa Lang, “Electronic Tracking Spurs Workplace Privacy Debate,” Government Technology, http://www.govtech.com, October 18, 2017; Mike Rogoway, “Jive’s Buyer Responds to Employee Anxiety over Workplace Monitoring Tool,” The Oregonian, http://www.oregonlive.com.

### Working the Net

1. Enterprise resource planning is a major category of business software. Visit the site of one of the following companies: SAP (http://www.sap.com), or Oracle (http://www.oracle.com). Prepare a short presentation for the class about the company’s ERP product offerings and capabilities. Include examples of how companies use the ERP software. What are the latest trends in ERP?
2. What can intranets and enterprise portals accomplish for a company? Find out by using such resources as Brint.com’s Intranet Portal, http://www.brint.com/Intranets.htm. Look for case studies that show how companies apply this technology. Summarize the different features an intranet or enterprise portal provides.
3. Learn more about the CERT Coordination Center (CERT/CC), which serves as a center of internet security expertise. Explore its website, https://www.cert.org/index.cfm. What are the latest statistics on incidents reported, vulnerabilities, security alerts, security notes, mail messages, and hotline calls? What other useful information does the site provide to help a company protect IT assets?
4. Research the latest developments in computer security at Computerworld’s site, http://computerworld.com/. What types of information can you find here? Pick one of the categories in this area (Cybercrime, Encryption, Disaster Recovery, Firewalls, Hacking, Privacy, Security Holes, Viruses and Worms, and VPN), and summarize your findings.
5. How can someone steal your identity? Using information at the Federal Trade Commission’s central website for information about identity theft, https://www.consumer.ftc.gov/features/feature-0014-identity-theft, compile a list of the ways thieves can access key information to use your identity. What steps should you take if you’ve been a victim of identity theft? Summarize key provisions of federal laws dealing with this crime and the laws in your state.

### Creative Thinking Case

### Novartis’s Prescription for Invoice Processing

What do you do when you have more than 600 business units operating through 360 independent affiliates in 140 countries around the world—processing complex invoices in various languages and currencies? You seek out the best technology solution to make the job easier.
At global pharmaceutical giant Novartis, the IT department is a strategic resource, a community of 2,000 people serving 63,000 customers in 200 locations and 25 data centers. Because most of the company’s invoices come from international suppliers, they have differences in design, language, taxes, and currency. Consequently, many ended up as “query items” requiring manual resolution by Novartis accounting staff—which delayed payments and made those invoices extremely costly to process. In fact, finance personnel spent so much of their time resolving queried invoices that other work suffered. A solution was badly needed.
To maximize its investment, Novartis needed a flexible solution that would meet its current and future needs and function in other business departments in a variety of geographic locations. It should provide fast, accurate document capture and multi-language support, and should extend to other types of information—such as faxes and electronic data—in addition to paper documents. Finally, in order to obtain financing for the project, return on investment (ROI) was required within nine months of project implementation.
InputAccel for Invoices from EMC/Captiva was the answer. The software extracts data from paper documents, applies intelligent document recognition (IDR) technology to convert them to digital images, and sends relevant data to enterprise resource planning, accounts payable (A/P), and other back-end management systems. The specialized InputAccel server manages output by recognizing and avoiding holdups in the workflow process. It also ensures if a server goes offline, others will carry on functioning, thus avoiding downtime.
Now Novartis scans incoming invoices at a centrally located site, and the images are transmitted to the InputAccel for Invoices server for image improvement. Invoice data is then extracted and validated against supplier information. Most invoices are transferred directly for payment, with relatively few invoices requiring transfer to one of three accounts payable clerks who deal with queries manually. Novartis is a global leader in research and development of products that improve health issues. InputAccel was selected by Novartis to be part of its accounting system.
Thanks to IT, overall efficiency has increased, processing errors are reduced, and accounting personnel can use their time and expert knowledge for more meaningful tasks than resolving invoice errors. For Novartis, it is “mission accomplished.”
2. What factors contributed to Novartis’s invoice processing being so complex?
3. How did IT help the company solve that problem?
4. What other uses and functions does InputAccel serve, and how will this be useful to Novartis over the long term? (You may want to visit the EMC/Captiva website, https://www.emc.com, for more information on InputAccel’s capabilities.)
Sources: “OpenText Acquires EMC Enterprise Division,” MetaSource, http://www.metasource.com, September 20, 2016; Novartis corporate website, http://www.novartis.com, March 20, 2006; “Processing Invoices From Around the World,” ECM Connection, https://www.ecmconnection, February 2, 2006; Kathryn Balint, “Captiva’s Paper Chase Paying Off,” San Diego Union-Tribune, December 9, 2005, pp. C1, C5.

### Hot Links Address Book

1. If you want to know the definition of a computer term or more about a particular topic, Webopedia has the answer: http://www.webopedia.com.
2. Can’t tell a LAN from a WAN? Learn more about networking at Lifewire’s Internet & Networking pages, https://www.lifewire.com.
3. To find out if that e-mail alerting you to another virus threat is real or a hoax, check out the latest information at http://www.snopes.com.
4. How can you “inoculate” your computer against viruses? Symantec’s Security Center has the latest details on virus threats and security issues: http://www.symantec.com.
5. The CIO digital magazine offers helpful articles that provide a good introduction to key IT topics: http://www.cio.com.
6. Curious about how companies are using on-demand grid computing? Read the Grid FAQ at the Grid Computing Technology Centre, http://www.gridcomputing.com, and then check out some of the many links to other resources.


# Using Financial Information and Accounting

## Introduction

### Learning Outcomes

After reading this chapter, you should be able to answer these questions:
1. Why are financial reports and accounting information important, and who uses them?
2. What are the differences between public and private accountants, and how has federal legislation affected their work?
3. What are the six steps in the accounting cycle?
4. In what terms does the balance sheet describe the financial condition of an organization?
5. How does the income statement report a firm’s profitability?
6. Why is the statement of cash flows an important source of information?
7. How can ratio analysis be used to identify a firm’s financial strengths and weaknesses?
8. What major trends affect the accounting industry today?
Financial information is central to every organization. To operate effectively, businesses must have a way to track income, expenses, assets, and liabilities in an organized manner. Financial information is also essential for decision-making. Managers prepare financial reports using accounting, a set of procedures and guidelines for companies to follow when preparing financial reports. Unless you understand basic accounting concepts, you will not be able to “speak” the standard financial language of businesses. This module examines the role of accounting in business, how accounting contributes to a company’s overall success, the three primary financial statements, and careers in accounting.